Papa Johns 2006 Annual Report Download - page 76

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73
9. Debt and Credit Arrangements
Debt and credit arrangements consist of the following (in thousands):
2006 2005
Revolving line of credit 96,500$ 49,000$
Debt associated with VIEs * 525 6,100
Other 11 16
Total debt 97,036 55,116
Less: current portion of debt (525) (6,100)
Long-term debt 96,511$ 49,016$
*The VIEs' third-party creditors do not have any recourse to Papa John's.
In January 2006, we executed a five-year, unsecured Revolving Credit Facility (“New Credit Facility”)
totaling $175.0 million that replaced a $175.0 million Revolving Credit Facility (“Old Credit Facility”).
Under the New Credit Facility, outstanding balances accrue interest at 50.0 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 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), as defined. Outstanding balances under the Old
Credit Facility accrued interest at 62.5 to 100.0 basis points over LIBOR or other bank developed rates at
our option. The commitment fee on the unused balance ranged from 15.0 to 20.0 basis points. The
remaining availability under our line of credit, reduced for certain outstanding letters of credit,
approximated $51.0 million and $101.0 million as of December 31, 2006 and December 25, 2005,
respectively. The fair value of our outstanding debt approximates the carrying value since our debt
agreements are variable-rate instruments.
The new credit facility contains customary affirmative and negative covenants, including financial
covenants requiring the maintenance of specified fixed charges and leverage ratios. At December 31,
2006, we were in compliance with these covenants.
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. During the fourth
quarter of 2005, we entered into a new interest rate swap agreement that provides for a fixed rate of
4.98%, as compared to LIBOR, on the following amount of floating rate debt:
March 15, 2006 to January 16, 2007 $50 million
January 16, 2007 to January 15, 2009 $60 million
January 15, 2009 to January 15, 2011 $50 million
The purpose of the Swap is to provide a hedge against the effects of rising interest rates on forecasted
future borrowings. Amounts payable or receivable under the Swap are accounted for as adjustments to
interest expense.