Papa Johns 2009 Annual Report Download - page 89

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82
7. Debt and Credit Arrangements (continued)
In January 2006, we executed a five-year, unsecured Revolving Credit Facility ("Credit Facility”)
totaling $175.0 million. Under the 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. The remaining
availability under our line of credit, reduced for certain outstanding letters of credit, approximated $58.0
million and $31.1 million as of December 27, 2009 and December 28, 2008, respectively. The fair value
of our outstanding debt approximates the carrying value since our debt agreements are variable-rate
instruments.
The Credit Facility contains customary affirmative and negative covenants, including financial covenants
requiring the maintenance of specified fixed charges and leverage ratios. At December 27, 2009 and
December 28, 2008, we were in compliance with these covenants.
We presently have two interest rate swap agreements that provide for fixed interest rates, as compared to
LIBOR, as follows:
Floating
Rate Debt
Fixed
Rates
The first interest rate swap agreement:
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:
January 31, 2009 to January 31, 2011 $50 million 3.74%
Our swaps are derivative instruments that are designated as cash flow hedges because the swaps provide
a hedge against the effects of rising interest rates on present and/or forecasted future borrowings. The
effective portion of the gain or loss on the swaps is reported as a component of other comprehensive
income and reclassified into earnings in the same period or periods during which the swaps affect
earnings. Gains or losses on the swaps representing either hedge ineffectiveness or hedge components
excluded from the assessment of effectiveness are recognized in current earnings. Amounts payable or
receivable under the swaps are accounted for as adjustments to interest expense.