Papa Johns 2013 Annual Report Download - page 53

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฀
45
(b)
Includes฀ incentives฀ provided฀ to฀ domestic฀ franchisees฀ for฀ opening฀ restaurants.฀ The฀ 2011฀ amount฀
includes฀approximately฀$3.2฀million฀in฀incentives฀offered฀to฀domestic฀franchisees฀for฀meeting฀certain฀
sales฀ targets,฀ including฀ driving฀ comparable฀ sales,฀ transactions฀ and฀ online฀ sales,฀ which฀ were฀ not฀
offered฀in฀2012.฀
(c)
Disposition฀and฀impairment฀ losses฀ include฀ costs฀ associated฀ with฀the฀disposition฀ of฀ certain฀systems฀
and฀other฀equipment,฀which฀were฀higher฀in฀2011.฀
(d)
The฀ Perfect฀ Pizza฀ lease฀ obligation฀ relates฀ to฀ rents,฀ taxes฀ and฀ insurance฀ associated฀ with฀ the฀ former฀
Perfect฀Pizza฀operations฀in฀the฀United฀Kingdom.฀
(e)
The฀ decrease฀ is฀ primarily฀ a฀ result฀ of฀ 2011฀ including฀ higher฀ costs฀ related฀ to฀ our฀ online฀ customer฀
loyalty฀program.฀฀
฀
Depreciation฀and฀amortization฀ was฀ $32.8฀ million,฀ or฀2.4%฀of฀revenues฀for฀2012,฀as฀compared฀to฀$32.7฀
million,฀or฀2.7%฀of฀revenues,฀for฀2011.฀฀
฀
Net฀interest.฀
Net฀interest฀expense฀was฀approximately฀$1.4฀million฀in฀2012,฀compared฀to฀$2.2฀million฀in฀
2011.฀฀The฀decrease฀in฀net฀interest฀costs฀reflects฀a฀lower฀effective฀interest฀rate฀and฀a฀reduction฀in฀interest฀
expense฀associated฀with฀a฀change฀in฀redemption฀value฀of฀noncontrolling฀interest฀in฀a฀joint฀venture฀whose฀
noncontrolling฀ interest฀ is฀ deemed฀ mandatorily฀ redeemable.฀ See฀ “Notes฀ 2฀ and฀ 6”฀ of฀ “Notes฀ to฀
Consolidated฀Financial฀Statements”฀for฀additional฀information.฀฀฀
฀
Income฀Tax฀Expense.
฀฀Our฀effective฀income฀tax฀rate฀was฀32.9%฀in฀2012฀compared฀to฀31.0%฀in฀2011.฀Our฀
effective฀ income฀ tax฀ rate฀ may฀ fluctuate฀ for฀ various฀ reasons,฀ including฀ the฀ settlement฀ or฀ resolution฀ of฀
specific฀federal฀and฀state฀issues.฀We฀recognized฀additional฀income฀tax฀expense฀in฀2012฀of฀approximately฀
$305,000,฀associated฀with฀the฀reserving฀of฀certain฀income฀tax฀issues฀while฀we฀recognized฀a฀decrease฀of฀
$711,000฀ in฀ our฀ 2011฀ income฀ tax฀ expense.฀ See฀ “Note฀ 15”฀ of฀ “Notes฀ to฀ Consolidated฀ Financial฀
Statements”฀for฀additional฀information.฀
฀
Liquidity฀and฀Capital฀Resources฀
฀
Our฀debt฀is฀comprised฀entirely฀of฀a฀revolving฀credit฀facility.฀The฀outstanding฀balance฀under฀this฀facility฀
was฀$157.9฀million฀as฀of฀December฀29,฀2013,฀$88.3฀million฀as฀of฀December฀30,฀2012,฀and฀$51.5฀million฀
as฀of฀December฀25,฀2011.฀The฀increase฀in฀2013฀was฀primarily฀due฀to฀increased฀share฀repurchases.฀
฀
In฀September฀2010,฀we฀entered฀into฀a฀five-year,฀$175฀million฀unsecured฀revolving฀credit฀facility,฀which฀
was฀amended฀in฀November฀2011฀to฀extend฀the฀maturity฀date฀to฀November฀30,฀2016.฀On฀April฀30,฀2013,฀
we฀ amended฀ and฀ restated฀ our฀ revolving฀ credit฀ facility฀ to฀ increase฀ the฀ amount฀ available฀ for฀ borrowing฀
thereunder฀to฀$300฀million฀and฀extend฀the฀maturity฀date฀to฀April฀30,฀2018.฀The฀interest฀rate฀charged฀on฀
outstanding฀balances฀is฀LIBOR฀plus฀75฀to฀175฀basis฀points.฀The฀commitment฀fee฀on฀the฀unused฀balance฀
ranges฀from฀15฀to฀25฀basis฀points.฀The฀remaining฀availability฀under฀the฀revolving฀credit฀facility,฀reduced฀
for฀outstanding฀letters฀of฀credit,฀was฀approximately฀$121.4฀million฀as฀of฀December฀29,฀2013.฀
฀
In฀August฀2011,฀we฀entered฀into฀an฀interest฀rate฀swap฀agreement฀that฀resulted฀in฀ a฀fixed฀rate฀of฀0.53%,฀
instead฀ of฀ the฀ variable฀ rate฀ of฀ LIBOR,฀ with฀ a฀ notional฀ amount฀ of฀ $50.0฀ million฀and฀ a฀ maturity฀ date฀ of฀
August฀ 2013.฀ On฀ December฀ 31,฀ 2012,฀ we฀ amended฀ our฀ interest฀ rate฀ swap฀ agreement฀ to฀ extend฀ the฀
maturity฀ date฀ to฀ December฀ 30,฀ 2015.฀ The฀ amendment฀ resulted฀ in฀ a฀ change฀ to฀ the฀ fixed฀ rate฀ (to฀ 0.56%฀
from฀ 0.53%)฀ but฀ did฀ not฀ impact฀ the฀ notional฀ amount฀ of฀ the฀ interest฀ rate฀ swap฀agreement.฀ On฀ July฀ 30,฀
2013,฀we฀terminated฀the฀$50฀million฀swap฀and฀entered฀into฀a฀new฀$75฀million฀swap.฀The฀new฀swap฀has฀an฀
interest฀rate฀of฀1.42%฀and฀a฀maturity฀date฀of฀April฀30,฀2018,฀which฀coincides฀with฀the฀maturity฀date฀of฀our฀
revolving฀credit฀facility.฀The฀termination฀of฀the฀previous฀swap฀did฀not฀have฀a฀material฀impact฀on฀our฀2013฀
results.฀See฀“Note฀9”฀of฀“Notes฀to฀Consolidated฀Financial฀Statements”฀for฀additional฀information.฀
฀ ฀