Sonic 2003 Annual Report Download - page 38

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p.36
Notes to Consolidated Financial Statements
August 31, 2003, 2002 and 2001 (In thousands, except share data)
The company collects royalties from franchisees and provides for estimated losses for receivables that are not likely to
be collected. General allowances for uncollectible receivables are estimated based on historical trends.
Most supervisors and managers of company-owned restaurants own an equity interest in the restaurant, which is
financed by the company. These notes are typically financed for a term of five years, bear interest at market rates, and are
secured by the partner’s equity interest. The company evaluates whether the partner notes are collectible and makes
estimates of bad debts based on the restaurant’s financial performance and collection history with individual partners.
As of August 31, 2003 and 2002, notes receivable from one franchisee totaled $3,370 and $3,420 respectively. The
underlying restaurant assets collateralize these notes.
5. Goodwill, Intangibles and Other Assets
The gross carrying amount of franchise agreements, franchise fees and other intangibles subject to amortization was
$2,399 and $2,749 at August 31, 2003 and 2002, respectively. Accumulated amortization related to these intangible
assets was $1,962 and $2,038 at August 31, 2003 and 2002, respectively. The carrying amount of trademarks and trade
names not subject to amortization was $6,044 at August 31, 2003 and 2002.
The following tables disclose what reported net income would have been for fiscal years ending August 31, 2003 and
2002 exclusive of amortization expense (including any related tax effects) recognized in those periods related to goodwill
and intangible assets that are no longer being amortized. Similarly adjusted per-share amounts have also been presented.
2003 2002 2001
Reported net income $ 52,261 $ 47,692 $ 38,956
Add back: Goodwill amortization –– 1,266
Add back: Trademarks and trade names amortization –– 139
Adjusted net income $ 52,261 $ 47,692 $ 40,361
Net income per share – basic:
Reported net income $ 1.34 $ 1.19 $ .98
Goodwill amortization –– .03
Trademarks and trade names amortization –––
Adjusted net income $ 1.34 $ 1.19 $ 1.01
Net income per share – diluted:
Reported net income $ 1.29 $ 1.13 $ .93
Goodwill amortization –– .03
Trademarks and trade names amortization –––
Adjusted net income $ 1.29 $ 1.13 $ .96
Aggregate amortization expense related to intangible assets was $420 and $319 in fiscal years 2003 and 2002,
respectively. Estimated amortization expense for the next five fiscal years beginning with fiscal year 2004 is as follows:
For the year ending August 31, 2004 $ 278
For the year ending August 31, 2005 $ 202
For the year ending August 31, 2006 $ 193
For the year ending August 31, 2007 $ 209
For the year ending August 31, 2008 $ 190