Papa Johns 2014 Annual Report Download - page 59

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Net interest. Net interest expense consisted of the following (in thousands):
Dec. 29, Dec. 30, (Increase)
2013 2012 Decrease
Interest expense - line of credit (a) (2,131)$ (1,114)$ (1,017)$
Investment income 589 750 (161)
Change in redemption value of mandatorily redeemable
noncontrolling interest in a joint venture (b) 1,148 (1,048) 2,196
Net interest (expense) income (394)$ (1,412)$ 1,018$
Year Ended
(a) The increase in interest expense was due to a higher average outstanding debt balance and a
higher effective interest rate.
(b) See “Notes 2 and 6” of “Notes to Consolidated Financial Statements” for additional
information.
Income Tax Expense. Our effective income tax rate was 31.2% in 2013 compared to 32.9% in 2012. The
lower tax rate in 2013 includes both higher levels of tax credits, including Work Opportunity Tax Credit
and state and federal research and experimentation credits, as well as favorable nonrecurring settlements
of specific state tax matters. We recognized a decrease of $909,000 in our 2013 income tax expense
associated with the finalization of certain income tax matters while we recognized additional income tax
expense in 2012 of approximately $305,000. See “Note 15” of “Notes to Consolidated Financial
Statements” for additional information.
Liquidity and Capital Resources
Our debt is comprised entirely of an unsecured revolving credit facility with outstanding balances of
$230.5 million as of December 28, 2014 and $157.9 million as of December 29, 2013. The increase in the
outstanding balance was primarily due to borrowings to fund increased share repurchases and to pay
dividends.
On October 31, 2014, we amended our unsecured revolving line of credit facility (“Amended Line”) to
increase the amount available from $300 million to $400 million and extend the maturity date from April
30, 2018 to October 31, 2019. Additionally, we have the option to increase the Amended Line an
additional $100 million. The interest rate charged on outstanding balances is LIBOR plus 75 to 175 basis
points. The commitment fee on the unused balance ranges from 15 to 25 basis points. The increment over
LIBOR and the commitment fee are determined quarterly based upon the ratio of total indebtedness to
consolidated earnings before interest, taxes, depreciation and amortization (“EBITDA”), as defined by the
Amended Line. The remaining availability under the Amended Line, reduced for outstanding letters of
credit approximates $148.2 million.
We use interest rate swaps to hedge against the effects of potential interest rate increases on borrowings
under our revolving credit facility. On July 30, 2013, we terminated our $50 million interest rate swap
agreement, which had a fixed rate of 0.56%. Upon termination of the $50 million swap, we entered into a
$75 million swap with an interest rate of 1.42% and a maturity date of April 30, 2018. In May 2014, we
entered into a $50 million forward interest rate swap with an interest rate of 1.36%, an effective date of
December 30, 2014 and a maturity date of April 30, 2018. See “Note 9” of “Notes to Consolidated
Financial Statements” for additional information.