Papa Johns 2010 Annual Report Download - page 84

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77
7. Debt and Credit Arrangements
Debt and credit arrangements consist of the following (in thousands):
2010 2009
Revolving line of credit 99,000$ 99,000$
Other 17 50
Total long-term debt 99,017$ 99,050$
In September 2010, we entered into a five-year, unsecured Revolving Credit Facility (“New Credit
Facility”) totaling $175.0 million that replaced a $175.0 million unsecured Revolving Credit Facility
(“Old Credit Facility”). Under the New Credit Facility, outstanding balances accrue interest at 100.0 to
175.0 basis points over the London Interbank Offered Rate (LIBOR) or other bank-developed rates, at
our option. The commitment fee on the unused balance ranges from 17.5 to 25.0 basis points. The
increment over LIBOR and the commitment fee are determined quarterly based upon the ratio of total
indebtedness to earnings before interest, taxes, depreciation and amortization (EBITDA), as defined by
the New Credit Facility. Outstanding balances under the Old Credit Facility accrued interest at 50.0 to
100.0 basis points over LIBOR or other bank developed rates, at our option. The commitment fee on the
unused balance ranged from 12.5 to 20.0 basis points. The remaining availability under our line of credit,
reduced for certain outstanding letters of credit, approximated $59.1 million and $58.0 million as of
December 26, 2010 and December 27, 2009, respectively. The fair value of our outstanding debt
approximates the carrying value since our debt agreements are variable-rate instruments.
The New Credit Facility contains customary affirmative and negative covenants, including financial
covenants requiring the maintenance of specified fixed charges and leverage ratios. At December 26,
2010 and December 27, 2009, we were in compliance with these covenants.
We had two interest rate swap agreements that expired in January 2011 that provided for fixed interest
rates, as compared to LIBOR, as follows:
Floating
Rate Debt
Fixed
Rates
The first interest rate swap agreement:
January 16, 2007 to January 15, 2009 $60 million 4.98%
January 15, 2009 to January 15, 2011 $50 million 4.98%
The second interest rate swap agreement:
January 31, 2009 to January 31, 2011 $50 million 3.74%
Our swaps are derivative instruments that are designated as cash flow hedges because the swaps provide
a hedge against the effects of rising interest rates on present and/or forecasted future borrowings. The
effective portion of the gain or loss on the swaps is reported as a component of accumulated other
comprehensive income (loss) and reclassified into earnings in the same period or periods during which
the swaps affect earnings. Gains or losses on the swaps representing either hedge ineffectiveness or
hedge components excluded from the assessment of effectiveness are recognized in current earnings.
Amounts payable or receivable under the swaps are accounted for as adjustments to interest expense.