Papa Johns 1999 Annual Report Download - page 41

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Quantitative and Qualitative Disclosures about Market Risk
We had no significant holdings of derivative financial or commodity instruments at December 26, 1999.
Our principal exposure to financial market risks in the past has been the impact that interest rate changes could have on the income
from our investment portfolio. Going forward, our principal exposure is the impact that interest rate changes could have on the
interest expense incurred on borrowings under our revolving credit agreement (see “Note 8”of “Notes to Consolidated Financial
Statements”). All such borrowings (none at December 26, 1999) bear interest at a variable rate based on the prime rate, the London
Interbank Offered Rate (LIBOR), or certain alternative short-term rates. A change in interest rates of 100 basis points would not
significantly affect our net income. Furthermore, in connection with our $150.0 million three-year revolving credit agreement, we
entered into a $100.0 million three-year interest rate collar effective March 2000. The collar establishes a 6.36% floor and 9.50%
ceiling on the LIBOR base rate on a no-fee basis. Substantially all of our business is transacted in U.S. dollars. Accordingly,
foreign exchange rate fluctuations have not had a significant impact on us, and are not expected to during 2000
Cheese, representing approximately 40% of our food cost, is subject to seasonal fluctuations, weather, demand and other factors
that are beyond our control. Effective December 27, 1999, the commissary entered into a purchasing arrangement with a third-party
entity formed at the direction of the Franchise Advisory Council for the sole purpose of reducing cheese price volatility. Under this
arrangement, the commissary will purchase cheese at a fixed quarterly price based, in part, on historical average cheese prices. Gains
and losses incurred by the selling entity will be passed to the commissary via adjustments to the selling price over time. Ultimately
the commissary will purchase cheese at a price approximating the actual average market price, but with more predictability and less
volatility than the previous purchasing method.
Selected Consolidated Financial Data
The selected financial data presented below for each of the years in the five-year period ended December 26, 1999 was derived from
our audited consolidated financial statements, restated for the acquisition of Minnesota Pizza (see “Note 3”of “Notes to
Consolidated Financial Statements”). The selected financial data should be read in conjunction with Management’s Discussion and
Analysis of Financial Condition and Results of Operations and the Consolidated Financial Statements and Notes thereto included
elsewhere in this annual report.
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