Papa Johns 2015 Annual Report Download - page 63

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50
As of December 27, 2015, we have the following interest rate swap agreements, including three forward
starting swaps executed in 2015 that become effective in 2018 upon expiration of the two existing swaps
for $125 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%
The weighted average interest rate on the revolving line of credit, including the impact of the interest rate
swap agreements, was 2.0% for the year ended December 27, 2015. An increase in the present interest
rate of 100 basis points on the line of credit balance outstanding as of December 27, 2015, including the
impact of the interest rate swaps, would increase annual interest expense by $1.3 million.
Foreign Currency Exchange Rate Risk
We are exposed to foreign currency exchange rate fluctuations from our operations outside of the United
States, which can adversely impact our revenues, net income and cash flows. Our international operations
principally consist of Company-owned restaurants in China and distribution sales to franchised Papa
John’s restaurants located in the United Kingdom, Mexico and China and our franchise sales and support
activities, which derive revenues from sales of franchise and development rights and the collection of
royalties from our international franchisees. Approximately 6.4% of our revenues for 2015 and 2014 and
6.2% for 2013 were derived from these operations.
We have not historically hedged our exposure to foreign currency fluctuations. Foreign currency
exchange rate fluctuations had a negative impact on our revenues of $7.5 million in 2015 and a negative
impact on our income before income taxes of $2.8 million in 2015. An additional 10% adverse change in
the foreign currency rates for our international markets would result in an additional negative impact on
annual revenue and income before income taxes of approximately $9.0 million and $2.0 million,
respectively.
Commodity Price Risk
In the ordinary course of business, the food and paper products we purchase, including cheese (our largest
food cost), are subject to seasonal fluctuations, weather, availability, demand and other factors that are
beyond our control. We have pricing agreements with some of our vendors, including forward pricing
agreements for a portion of our cheese purchases for our domestic Company-owned restaurants, which
are accounted for as normal purchases; however, we still remain exposed to on-going commodity
volatility.