Papa Johns 2010 Annual Report Download - page 86

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79
8. Net Property and Equipment
Net property and equipment consists of the following (in thousands):
2010 2009
Land 32,701$ 32,876$
Buildings and improvements 84,960 83,765
Leasehold improvements 85,230 82,907
Equipment and other 218,650 196,184
Construction in progress 4,599 6,330
426,140 402,062
Less accumulated depreciation and amortization (239,546) (214,091)
Net property and equipment 186,594$ 187,971$
9. Notes Receivable
Selected franchisees have borrowed funds from our wholly-owned subsidiary, Capital Delivery, Ltd.,
principally for use in the acquisition, construction and development of their restaurants. We have also
entered into loan agreements with certain franchisees that purchased restaurants from us or from other
franchisees. Loans outstanding were approximately $17.4 million on a consolidated basis as of December
26, 2010, net of allowance for doubtful accounts and $16.4 million as of December 27, 2009, net of
allowance for doubtful accounts.
Notes receivable bear interest at fixed or floating rates (with an average stated rate of 5.9% at December
26, 2010), and are generally secured by the fixtures, equipment, signage and, where applicable, land of
each restaurant and the ownership interests in the franchisee. The carrying amounts of the loans
approximate fair value. Interest income recorded on franchisee loans was approximately $794,000 in
2010, $535,000 in 2009 and $349,000 in 2008 and is reported in investment income in the accompanying
consolidated statements of income.
We established reserves of $10.0 million and $10.9 million as of December 26, 2010 and December 27,
2009, respectively, for potentially uncollectible notes receivable. We concluded the reserves were
necessary due to certain borrowers’ economic performance and underlying collateral value.
10. Insurance Reserves
Our insurance programs for workers’ compensation, general liability, owned and non-owned automobiles
and health insurance coverage provided to our employees are self-insured up to certain individual and
aggregate reinsurance levels. Losses are accrued based upon undiscounted estimates of the aggregate
retained liability for claims incurred using certain third-party actuarial projections and our claims loss
experience. The estimated insurance claims losses could be significantly affected should the frequency or
ultimate cost of claims significantly differ from historical trends used to estimate the insurance reserves
recorded by the Company. Our estimated corporate insurance reserves totaled $19.0 million in 2010 and
$18.6 million in 2009.