Papa Johns 2001 Annual Report Download - page 52

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5. Debt and Credit Arrangements (continued)
In connection with the authorization of a common stock share repurchase program (see Note 13), we
entered into a $200.0 million revolving line of credit facility with an expiration date of March 17, 2003.
Outstanding balances for this facility accrue interest at 50.0 to 87.5 basis points over LIBOR or other
bank developed rates at our option. The commitment fee on the unused balance ranges from 12.5 to 20.0
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). At
December 30, 2001, $104.6 million was outstanding under this facility and the average effective interest
rate for borrowing under this facility during 2001, after considering the impact of the interest rate collar
described below, was 6.59%. The fair value of our outstanding debt approximates carrying value. We do
not expect any problems in renewing this line of credit for periods subsequent to March 2003. This
facility agreement contains customary affirmative and negative covenants, including financial covenants
requiring the maintenance of specified fixed charge and leverage ratios and minimum levels of net worth.
At December 30, 2001, we were in compliance with these covenants.
In connection with the line of credit facility, Papa John’s entered into a no-fee interest rate collar
(“Collar”) with a notional amount of $100.0 million, a 30-day LIBOR rate range of 6.36% (floor) to
9.50% (ceiling) and an expiration date of March, 2003. The purpose of the Collar is to provide a hedge
against the effects of rising interest rates. Papa John’s makes payments under the terms of the Collar when
the 30-day LIBOR rate is below the floor to raise the effective rate to 6.36%, and receives payments when
the 30-day LIBOR rate is above the ceiling, to lower the effective rate to 9.50%, thus assuring that Papa
John’s effective 30-day LIBOR rate is always within the above-stated range. When the 30-day LIBOR
rate is within the range, no payments are made or received under the Collar. Amounts payable or
receivable under the Collar are accounted for as adjustments to interest expense.
During 2001, the Company entered into an interest rate swap agreement (“Swap”) that provides for a
fixed rate of 5.31%, as compared to LIBOR, on $100.0 million of floating rate debt from March 2003 to
March 2004, reducing to a notional value of $80.0 million from March 2004 to March 2005, and reducing
to a notional value of $60.0 million in March 2005 with an expiration date of March 2006. The purpose of
the Swap is to provide a hedge against the effects of rising interest rates on forecasted future borrowings.
The net fair value of the Collar and Swap was $3.8 million ($2.4 million, net of tax) at December 30,
2001, and is included in other long-term liabilities in the accompanying consolidated balance sheet (offset
by a corresponding amount representing the net unrealized loss included in accumulated other
comprehensive loss).
Interest paid, net of amounts capitalized, during fiscal 2001, 2000 and 1999 was $9.4 million, $6.9
million and $93,000, respectively.