Papa Johns 2000 Annual Report Download - page 53

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48
2. Significant Accounting Policies (continued)
In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting
Standards No. 133 (SFAS 133), “Accounting for Derivative Instruments and Hedging Activities,” which is
required to be adopted in years beginning after June 15, 2000. The Statement requires the Company to
recognize all derivatives on the balance sheet at fair value. Derivatives that are not hedges must be
adjusted to fair value through income. If the derivative is a hedge, depending on the nature of the hedge,
changes in the fair value of derivatives are either offset against the change in fair value of assets,
liabilities, or firm commitments through earnings or recognized in other comprehensive income until the
hedged item is recognized in earnings. The ineffective portion of derivatives change in fair value will be
immediately recognized in earnings. The adoption of Statement No. 133 on January 1, 2001 will result in a
charge approximating $1.7 million in accumulated other comprehensive income (no impact on income) due
to our no-fee interest rate collar (see Note 5).
Prior Year Data
Certain prior year data has been reclassified to conform to the 2000 presentation.
3. Business Combinations
In early fiscal 2000, we acquired PJNJ Foods, Inc., a franchisee of 19 Papa John’ s restaurants in New
Jersey, for $7.4 million ($5.8 million in cash, net of cash acquired, and $1.6 million of assumed net
liabilities).
During 2000, we also acquired five additional Papa John’ s restaurants from franchisees for $1.2 million
($800,000 in cash and forgiveness of $400,000 of notes payable to us).
On August 23, 1999, we acquired Great American Pizza, Inc., a franchisee which operated 18 Papa
John’ s restaurants in the Cleveland, Ohio market for total consideration of $6.5 million, consisting of $1.5
million in cash and a $5.0 million short-term note payable which was paid in 2000.
On November 29, 1999, we acquired Perfect Pizza Holdings Limited (“Perfect Pizza”), a company
which operated and franchised 206 restaurants (12 Company-owned and 194 franchised) in the United
Kingdom, for $32.3 million in cash. The allocation for this acquisition resulted in goodwill of $30.9 million,
which is being amortized over 20 years.
During 1999, we acquired an additional 10 Papa John’ s restaurants from franchisees for $4.5 million in
cash.
The business combinations in the previous paragraphs were each accounted for by the purchase method
of accounting, whereby operating results subsequent to the acquisition date are included in our
consolidated financial statements.
On March 28, 1999, we acquired Minnesota Pizza Company, LLC (“Minnesota Pizza”), a franchisee that
operated 37 Papa John’ s restaurants in the Minneapolis/St. Paul, Minnesota market. We issued 128,119
shares of our common stock having a value of $5.4 million in exchange for all of the issued and
outstanding ownership interests of Minnesota Pizza. The transaction was accounted for as a pooling of
interests for financial reporting purposes and as a taxable transaction for income tax purposes.