Papa Johns 2007 Annual Report Download - page 86

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79
9. Debt and Credit Arrangements (continued)
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 $20.6 million and $51.0 million as of December 30, 2007 and December 31, 2006,
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 30,
2007 and 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 an interest rate swap agreement that provides for a fixed rate of 4.98%
and in March 2007, we entered into an additional interest rate swap agreement that provides for a fixed
rate of 5.18%, as compared to LIBOR, on the following amount of floating rate debt:
Floating
Rate Debt
Fixed
Rates
The first interest rate swap agreement:
March 15, 2006 to January 16, 2007 $50 million 4.98%
January 16, 2007 to January 15, 2009 $60 million 4.98%
January 15, 2009 to January 15, 2011 $50 million 4.98%
The second interest rate swap agreement:
March 1, 2007 to January 31, 2009 $30 million 5.18%
The purpose of the Swaps is to provide a hedge against the effects of rising interest rates on forecasted
future borrowings. Amounts payable or receivable under the Swaps are accounted for as adjustments to
interest expense.
The net fair value of the Swaps was a liability balance of $2.0 million ($1.3 million net of tax) at
December 30, 2007 and $11,000 ($7,000 net of tax) at December 31, 2006. The liabilities are included in
other long-term liabilities in the accompanying consolidated balance sheets (offset by corresponding
amounts in stockholders’ equity, representing the net unrealized losses included in accumulated other
comprehensive income (loss)).