Popeye's 2014 Annual Report Download - page 74

Popeyes Louisiana Kitchen, Inc.
Notes to Consolidated Financial Statements
For Fiscal Years 2014, 2013, and 2012 — (Continued)
56
Under the terms of the revolving credit facility, 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 2013 Credit Facility. As of December 28, 2014, the Company had $0.1 million of outstanding letters
of credit. The Company had $28.9 million available for short-term borrowings and letter of credit under its 2013 Credit Facility
as of December 28, 2014.
The 2013 Credit Facility is secured by a first priority security interest in substantially all of the Company’s assets, excluding
real estate. The 2013 Credit Facility contains financial and other covenants, including covenants requiring the Company to maintain
various financial ratios, limiting its ability to incur additional indebtedness, restricting the amount of capital expenditures that may
be incurred, restricting the payment of cash dividends, and limiting the amount of debt which can be loaned to the Company’s
franchisees or guaranteed on their behalf. This facility also limits the Company’s ability to engage in mergers or acquisitions, sell
certain assets, repurchase its common stock and enter into certain lease transactions. The 2013 Credit Facility includes customary
events of default, including, but not limited to, the failure to pay any interest, principal or fees when due, the failure to perform
certain covenant agreements, inaccurate or false representations or warranties, insolvency or bankruptcy, change of control, the
occurrence of certain ERISA events and judgment defaults. At December 28, 2014, the Company was compliant with all debt
covenant requirements.
In 2013, the Company expensed $0.4 million associated with the extinguishment of the 2010 Credit Facility, which is reported
as a component of “Interest expense, net.” Additionally, the Company capitalized approximately $0.7 million of fees related to
the new facility as debt issuance costs which will be amortized over the remaining life of the facility utilizing the straight-line
method for the revolving credit facility.
Future Debt Maturities. At December 28, 2014, aggregate future debt maturities, excluding capital lease obligations, were as
follows:
(in millions)
2015 $ 0.3
2016 0.3
2017 0.3
2018 106.4
2019 0.4
Thereafter —
$ 107.7
Interest Rate Swap Agreements. On December 16, 2014, the Company entered an interest rate swap contract effective January
5, 2015 under the 2013 facility. The Company used this interest rate swap agreement to fix the interest rate exposure on a portion
of its outstanding revolving debt. The Company's interest rate swap agreement limits the interest rate exposure on $53 million of
floating rate debt to a fixed rate of 2.69%. The original term of the swap agreement is scheduled to expire January 5, 2018. The
previous interest rate swap agreements were terminated on December 16, 2013.
The fair value of the Company’s interest rate swap agreements as of December 28, 2014 and December 29, 2013 were
insignificant.
The Effect of Derivative Instruments on the Statement of Operations
Amount of Gain (Loss)
recognized into
AOCI
Amount of Gain (Loss)
Reclassified from AOCI to
Income
(In millions) 2014 2013 2012 2014 2013 2012
Interest rate swap
agreements, net of tax $ — $ 0.2 $ — Interest expense, net $ 0.8 $ — $ —
Net interest expense associated with these agreements was approximately $0.0 million, $0.5 million, and $0.6 million in 2014,
2013, and 2012, respectively.