Papa Johns 2004 Annual Report Download - page 51

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50
2. Significant Accounting Policies (continued)
In connection with our line of credit facility, in March 2000, we 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 9.5%
(ceiling) and an expiration date of March 2003. In November 2001, we 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 Collar and Swap is to provide a hedge against the
effects of rising interest rates on the forecasted future borrowings.
We recognized income of $3.6 million ($2.2 million after tax) and $3.0 million ($1.8 million after tax) in
2004 and 2003, respectively, and a charge of $4.3 million ($2.7 million after tax) in 2002, respectively, in
accumulated other comprehensive income (loss) for the net change in fair value of our derivatives
associated with our debt agreements. Fair value is based on quoted market prices. See Note 8 for
additional information on our debt and credit arrangements.
Earnings per Share
The calculations of basic earnings per common share and earnings per common share – assuming
dilution, before the cumulative effect of a change in accounting principle, for the years ended December
26, 2004, December 28, 2003 and December 29, 2002 are as follows (in thousands, except per share
data):
2004 2003 2002
Basic earnings per common share:
Income before cumulative effect of a change in
accounting principle
23,221
$
33,976
$
46,797
$
Weighted average shares outstanding 17,207 17,938 20,068
Basic earnings per common share 1.35$ 1.89$ 2.33$
Earnings per common share - assuming dilution:
Income before cumulative effect of a change in
accounting principle
23,221
$
33,976
$
46,797
$
Weighted average shares outstanding 17,207 17,938 20,068
Dilutive effect of outstanding common stock options 198 99 232
Diluted weighted average shares outstanding 17,405 18,037 20,300
Earnings per common share - assuming dilution 1.33$ 1.88$ 2.31$
Options to purchase common stock with an exercise price greater than the average market price were not
included in the computation of the dilutive effect of common stock options because the effect would have
been antidilutive. The number of antidilutive options was 773,000 in 2004, 2.2 million in 2003 and 1.8
million in 2002.