Papa Johns 2003 Annual Report Download - page 61

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60
14. Related Party Transactions (continued)
Following is a summary of full-year transactions and year-end balances with franchisees owned by
related parties and outstanding amounts due from the Marketing Fund and Papa Card, Inc. (in thousands):
2003
2002
2001
Revenues from affiliates:
Commissary sales
68,964
$
86,959
$
90,970
$
Other sales
9,140
9,473
11,137
Franchise royalties
9,892
12,200
12,254
Franchise and development fees
60
123
255
Total
88,056
$
108,755
$
114,616
$
Other income from affiliates
285
$
264
$
660
$
Accounts receivable-affiliates
2,395
$
2,276
$
4,347
$
Notes receivable-affiliates
1,200
$
335
$
661
$
The above table excludes transactions and balances related to former non-management directors for the
time period subsequent to their retirement or resignation from our Board.
We paid $508,000 in 2003, $469,000 in 2002 and $418,000 in 2001 for charter aircraft services provided
by an entity owned by the Chief Executive Officer (CEO) of Papa John’s. During 2001, we also paid
$25,000 for charter aircraft services provided by an entity owned by a former director.
We advanced $4,000 in 2002 and $394,000 in 2001 (of which $194,000 related to 2002) in premiums for
split-dollar life insurance coverage on the CEO and another executive officer of the Company for the
purpose of funding estate tax obligations. No such advances were made during 2003. Papa John’s and the
officers shared the cost of the premiums. The premiums advanced by us as of December 29, 2002 totaled
approximately $2.0 million and were included in other long-term assets. During 2003, the Internal
Revenue Service (“IRS”) issued new regulations concerning split-dollar life insurance premiums. As a
result of these new IRS regulations, in December 2003, the CEO repaid the $1.9 million of company
advances, which represented the accumulated premium payments the Company made toward the policy
since inception. In January 2004, the other executive officer repaid the Company $74,000 for the
accumulated premium payments made on his behalf.
The CEO paid the Company $460,000 in 2003, $385,000 in 2002 and $493,000 in 2001 for the salaries,
bonuses and benefits of certain employees who perform work for both the Company and the CEO based
upon an assessment of their responsibilities to each (on average, approximately 35% of the total costs
were paid by the Company and 65% were paid by the CEO). Additionally, the Company charged the
CEO $11,410 in 2003 related to approximately 800 square feet of Company office space utilized by these
employees.
The CEO indirectly received payments from the Marketing Fund through advertising agencies for the use
of his image and services in the production and use of certain electronic and print advertisements. The
CEO earned $60,000 in 2001 for the services (none in 2003 and 2002).
During 2003, a franchise entity that is 64% owned by two executive officers of Papa John’s purchased a
total of five restaurants for $1.8 million in two separate transactions with unrelated third-party franchise
entities.