Papa Johns 2003 Annual Report Download - page 36

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primarily due to increased general and administrative and other general expenses, partially offset by an
increased restaurant operating margin.
Liquidity and Capital Resources
Cash flow from operations decreased to $84.8 million in 2003 compared to $95.6 million in 2002
primarily reflecting our reduced restaurant sales volumes and operating margins for 2003.
Cash flow from operations was relatively consistent at $95.6 million in 2002 compared to $96.4 million
in 2001, as unfavorable changes in inventory levels, due primarily to heated delivery bags, and deferred
income taxes were substantially offset by favorable changes in accrued expenses, due primarily to
insurance claims reserves, and other components of working capital.
We have a revolving line of credit facility, which allows us to borrow up to $175.0 million with an
expiration date in January 2006. Outstanding balances for the line of credit accrue interest at 62.5 to
100.0 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 15.0 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).
We require capital primarily for the development, acquisition and maintenance of restaurants, new or
replacement QC Centers and Support Services facilities, the enhancement of corporate systems and
facilities and the funding of franchisee loans. Additionally, we began a common stock repurchase
program in December 1999. During 2003, net loan repayments on our revolving line of credit of $78.6
million, common stock repurchases of $5.9 million and capital expenditures of $16.3 million were
primarily funded by cash flow from operations, proceeds from stock option exercises and available cash
and cash equivalents.
Total 2004 capital expenditures are expected to be approximately $25.0 million to $30.0 million, about
one-half of which is for the development, relocation or remodeling of restaurants, including routine
replacement of equipment, and about one-half of which is for QC Centers, Support Services and
corporate requirements. During 2004, we plan to relocate the Raleigh, North Carolina commissary and
open approximately six new domestic Company-owned restaurants.
As of December 28, 2003, we had loans to franchisees of $11.6 million (including a loan to the
Marketing Fund of $1.2 million), net of allowance for doubtful accounts of $6.4 million. We do not have
any additional loan funding commitments related to existing franchisee loans at December 28, 2003. We
do not plan to extend loans of any significance to franchisees in the future.
The Board of Directors has authorized up to $400 million for the share repurchase program through
December 26, 2004. At December 28, 2003, a total of 13.6 million shares have been repurchased for
$351.6 million at an average price of $25.92 per share since the repurchase program started in 1999
(approximately 206,000 shares in 2003, 4.5 million shares in 2002, 1.2 million shares in 2001, 6.4
million shares in 2000 and 1.3 million shares in 1999). Subsequent to year-end (through March 1, 2004),
we acquired an additional 713,000 shares at an aggregate cost of $24.0 million. As of March 1, 2004,
approximately $24.3 million of common stock remains available for repurchase under this authorization.
We expect to fund the planned capital expenditures and any additional share repurchases for the next
twelve months from operating cash flow and remaining availability under our line of credit, reduced for
certain outstanding letters of credit amounting to $18.6 million. Our debt, which is primarily due to the