Papa Johns 2010 Annual Report Download - page 77

Download and view the complete annual report

Please find page 77 of the 2010 Papa Johns annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 110

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110

70
2. Significant Accounting Policies (continued)
Our financial assets and liabilities that were measured at fair value on a recurring basis as of December
26, 2010 and December 27, 2009 are as follows:
Carrying
(In thousands) Value Level 1 Level 2 Level 3
December 26, 2010
Financial assets:
Investments 1,604$ 1,604$ -$ -$
Non-qualified deferred compensation plan 12,455 12,455 - -
Financial liabilities:
Interest rate swaps 313 - 313 -
December 27, 2009
Financial assets:
Investments 1,382$ 1,382$ -$ -$
Non-qualified deferred compensation plan 11,754 11,754 - -
Financial liabilities:
Interest rate swaps 4,044 - 4,044 -
Fair Value Measurements
Derivative Financial Instruments
We recognize all derivatives on the balance sheet at fair value. Derivatives that are not hedges must be
adjusted to fair value through income. At inception and on an ongoing basis, we assess whether each
derivative that qualifies for hedge accounting continues to be highly effective in offsetting changes in
the cash flows of the hedged item. If the derivative meets the hedge criteria as defined by certain
accounting standards, depending on the nature of the hedge, changes in the fair value of the derivative
are either offset against the change in fair value of assets, liabilities or firm commitments through
earnings or recognized in accumulated other comprehensive income (loss) until the hedged item is
recognized in earnings. The ineffective portion of a derivative’s change in fair value, if any, is
immediately recognized in earnings.
We recognized income of $3.8 million ($2.4 million after tax) in accumulated other comprehensive
income (loss) in 2010 and income of $2.2 million ($1.4 million after tax) in 2009 and a loss of $4.1
million ($2.7 million after tax) in 2008 for the net change in fair value of our derivatives associated with
our debt agreements. The ineffective portion of our hedge was $25,000 in 2010 and $40,000 in 2009
(none in 2008). Fair value is based on quoted market prices. See Note 7 for additional information on
our debt and credit arrangements.