Papa Johns 2015 Annual Report Download - page 58

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45
Net interest expense. Net interest expense consisted of the following (in thousands):
Dec. 28, Dec. 29, (Increase)
2014 2013 Decrease
Interest expense on long-term debt (a) (4,073)$ (2,131)$ (1,942)$
Investment income 702 589 113
Change in redemption value of mandatorily redeemable
noncontrolling interest in a joint venture (b) (4) 1,148 (1,152)
Net interest (expense) income (3,375)$ (394)$ (2,981)$
Year Ended
(a) The increase in interest expense was due to a higher average outstanding debt balance and a higher
effective interest rate.
(b) 2013 represents the change in redemption value based on the mandatory redemption feature we
previously had for this noncontrolling interest. We eliminated that feature in 2014.
Income Tax Expense. Our effective income tax rate was 32.0% in 2014 compared to 31.2% in 2013. The
higher tax rate in 2014 was primarily due to the prior year including favorable state tax settlements. See
“Note 15” of “Notes to Consolidated Financial Statements” for additional information.
Liquidity and Capital Resources
Debt
Our debt is comprised entirely of an unsecured revolving credit facility with outstanding balances of
$256.0 million as of December 27, 2015 and $230.5 million as of December 28, 2014. The increase in the
outstanding balance was primarily due to borrowings to fund share repurchases and to pay dividends.
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 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 by the Credit Facility. The
remaining availability under the Credit Facility, reduced for outstanding letters of credit, was
approximately $120.2 million as of December 27, 2015.
We use interest rate swaps to hedge against the effects of potential interest rate increases on borrowings
under our Credit Facility. As of December 27, 2015, we have the following interest rate swap agreements,
including three forward starting swaps for $125.0 million that become effective in 2018 upon expiration
of the two existing swaps for $125.0 million:
Effective Dates
Debt Amount
Fixed Rates
July 30, 2013 through April 30, 2018
$75 million
1.42%
December 30, 2014 through April 30, 2018 $50 million 1.36%
April 30, 2018 through April 30, 2023 $55 million 2.33%
April 30, 2018 through April 30, 2023 $35 million 2.36%
April 30, 2018 through April 30, 2023 $35 million 2.34%