Cracker Barrel 2012 Annual Report Download - page 45

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immediately preceding scal year. In any event, as long as the
liquidity requirements are met, dividends may be declared
and paid in any scal year up to the amount of dividends
permied and paid in the preceding scal year without
regard to the 20% limitation.
6 DERIVATIVE INSTRUMENTS AND
HEDGING ACTIVITIES
For each of the Company’s interest rate swaps, the Company
has agreed to exchange with a counterparty the dierence
between xed and variable interest amounts calculated by
reference to an agreed-upon notional principal amount. e
interest rates on the portion of the Company’s outstanding
debt covered by its interest rate swaps is xed at the rates in
the table below plus the Company’s credit spread. e
Company’s weighted average credit spread at August 3, 2012
and July 29, 2011 was 2.00%. All of the Company’s interest
rate swaps are accounted for as cash ow hedges.
A summary of the Company’s interest rate swaps is as
follows:
Term Notional Fixed
Trade Date Eective Date (in Years) Amount Rate
May 4, 2006 August 3, 2006 7 $525,000 5.57%
August 10, 2010 May 3, 2013 2 200,000 2.73%
July 25, 2011 May 3, 2013 2 50,000 2.00%
July 25, 2011 May 3, 2013 3 50,000 2.45%
September 19, 2011 May 3, 2013 2 25,000 1.05%
September 19, 2011 May 3, 2013 2 25,000 1.05%
December 7, 2011 May 3, 2013 3 50,000 1.40%
e notional amount of the Company’s interest rate swap
entered into on May 4, 2006 was $575,000 and $550,000 at
July 30, 2010 and July 29, 2011, respectively. At August 3,
2012, the notional amount was $525,000 and will remain at
this amount throughout the remainder of its term.
e estimated fair values of the Company’s derivative
instruments were as follows:
Balance Sheet Location August 3, 2012 July 29, 2011
Interest rate swap Current interest rate $ 20,215 $ —
swap liability
Interest rate swaps Long-term interest rate
swap liability 14,166 51,604
Total (See Note 3) $ 34,381 $ 51,604
e estimated fair value of the Company’s interest rate
swap liabilities incorporates the Company’s non-performance
risk. e adjustment related to the Company’s non-
performance risk at August 3, 2012 and July 29, 2011 resulted
in reductions of $851 and $1,546, respectively, in the total
fair value of the interest rate swap liabilities. e oset to the
interest rate swap liabilities is recorded in accumulated other
comprehensive loss (“AOCL”), net of the deferred tax assets,
and will be reclassied into earnings over the term of the
underlying debt. As of August 3, 2012, the estimated pre-tax
portion of AOCL that is expected to be reclassied into
earnings over the next twelve months is $20,539. Cash ows
related to the interest rate swaps are included in interest
expense and in operating activities.
e following table summarizes the pre-tax eects of the
Company’s derivative instruments on AOCL at:
Amount of Income (Loss) Recognized in
AOCL on Derivative (Eective Portion)
2012 2011 2010
Cash ow hedges:
Interest rate swaps $ 17,223 $ 14,677 $ (5,049)
e following table summarizes the pre-tax eects of the
Company’s derivative instruments on income at:
Location of Loss
Reclassied from Amount of Loss Reclassied from
AOCL into Income AOCL into Income (Eective Portion)
(Eective Portion) 2012 2011 2010
Cash ow hedges:
Interest rate swaps Interest expense $35,903 $ 30,355 $ 30,722
Any portion of the fair value of the interest rate swaps
determined to be ineective will be recognized currently in
earnings. No ineectiveness has been recorded in 2012,
2011 and 2010.
7 SHARE REPURCHASES
In 2012, the Company was authorized to repurchase shares
at management’s discretion up to a maximum aggregate
purchase price of $65,000. In 2011 and 2010, the Company
was authorized to repurchase shares to oset share dilution
that resulted from the issuance of shares under its equity
compensation plans up to the same maximum aggregate
purchase price amount. In 2013, the Company has been
authorized to repurchase shares at management’s discretion
up to a maximum aggregate purchase price of $100,000.