Popeye's 2013 Annual Report Download - page 42

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26
Income Tax Expense
Income tax expense was $17.3 million, yielding an effective tax rate of 36.3%, compared to an effective tax rate of
34.6% in 2011. In 2011, income tax expense included atax benefit of $0.8 million, or 2.2%, for work opportunity tax
credits related to prior years. Excluding the impact of these tax credits, the 2012 effective rate was lower than 2011
due to favorable adjustments to foreign income tax credit reserves partially offset by higher state income taxes. The
effective rates differ from statutory rates due to adjustments in estimated tax reserves, tax credits and permanent
differences between reported income and taxable income for tax purposes. See Note 18 to our Consolidated Financial
Statements included in this Form 10-K for the reconciliation of the statutory rates to the Company's effective tax rates.
Liquidity and Capital Resources
On December 18, 2013, the Company entered into afive year $125.0 million secured revolving credit facility
(“2013 Credit Facility”) that replaced its former credit facility that consisted of afive year $60 million revolving credit
facility and a five year $40 million term loan (“2010 Credit Facility”).
Key terms in the 2013 Credit Facility include the following:
•The Company must maintain aConsolidated Total Leverage Ratio of <3.50 to 1.0.
•The Company must maintain aConsolidated Minimum Fixed Charge Coverage Ratio of >1.25 to 1.0.
•The Company may repurchase and retire its common shares at any time the Total Leverage Ratio is less than
3.00 to 1.0.
•The Company may obtain other short-term borrowings of up to $10.0 million and letters of credit up to
$20.0 million. Collectively,these other borrowings and letters of credit may not exceed the amount of unused
borrowings under the facility.
•The Company can request incremental revolving credit commitments up to an additional $125 million.
• No principal payments will be due until the maturity date December 18, 2018.
See Note 9to our Consolidated Financial Statements included in this Form 10-K for adescription of the 2013
Credit Facility.
Consolidated Total Leverage Ratio, as defined in the 2013 Credit Facility,is the ratio of the Company’sConsolidated
Total Indebtedness to Consolidated EBITDA for the four immediately preceding fiscal quarters. Consolidated Total
Indebtedness means, as of any date of determination, the aggregate principal amount of indebtedness of the Company.
Consolidated Minimum Fixed Charge Coverage Ratio, as defined in the 2013 Credit Facility,is the ratio of the
Company’sConsolidated EBITDAR less provisions for current taxes less Consolidated Maintenance Capital
Expenditures to Consolidated Fixed Charges. Consolidated Fixed Charges is defined as the sum of aggregate amounts
of scheduled principal payments made during such period on Indebtedness, including Capital Lease Obligations,
Consolidated Cash Interest, and Consolidated Rental Expense.
At December 29, 2013 the Company was compliant with all debt covenant requirements. The Company’s Total
Leverage Ratio was 0.97 to 1.0 compared to a covenant requirement of less than 3.50 to 1.0 and the Minimum Fixed
Charge Coverage Ratio was 3.80 to 1.0 compared to a covenant requirement of greater than 1.25 to 1.0.
Outstanding balances accrue interest at a margin of 125 to 250 basis points over the London Interbank Offered
Rate (“LIBOR”) or other alternative indices plus an applicable margin as specified in the facility.The commitment fee
on the unused balance under the facility ranges from 15 to 40 basis points. The increment over LIBOR and the
commitment fee are determined quarterly based upon the Consolidated Total Leverage Ratio. As of December 29,
2013 and December 30, 2012, the Company’s weighted average interest rates for all outstanding indebtedness under
its credit facilities were 1.5% and 3.7% respectively. The Company had $61.1 million available for short-term
borrowings and letter of credit under its 2013 Credit Facility as of December 29, 2013.
We finance our business activities primarily with cash flows generated from our operating activities and borrowings
under our 2013 Credit Facility.