Papa Johns 2000 Annual Report Download - page 56

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51
4. Special Charge (continued)
The impairment or write-off of certain assets was principally comprised of technology assets, including the
development of our on-line ordering capabilities. The Company reviewed the future use of certain
technological and other assets and determined that the assets were no longer beneficial to the Company or
the carrying value of the assets was impaired due to lower future cash flows based on our updated
strategy to focus on our primary business activities. Based on an asset analysis and an analysis of
estimated future cash flows in accordance with SFAS No. 121, a charge of $6.7 million was recorded.
We established a reserve of $4.2 million for franchisee notes receivable. We concluded the reserve was
necessary due to certain franchisees' deteriorating economic performance and underlying collateral value.
Substantially all of the reserve, approximately $4.1 million, relates to notes receivable with a related party
franchisee.
Prior to year-end, we identified and committed to close 13 restaurants in 2001 due to deteriorating
economic performance and poor outlook for improvement. A charge of $3.1 million was recorded.
During the fourth quarter of 2000, the Company decided to close 20 field offices to reduce future costs
and to allow our operations area supervisors and district managers to spend more time in our restaurants.
We also eliminated certain positions in the fourth quarter to reduce future administrative costs. These
actions resulted in a charge of $2.6 million in the fourth quarter.
In December 2000, the Company agreed to pay $750,000 to settle a lawsuit with a vendor.
The special charge resulted in a write-down of asset carrying value of $20.2 million and the establishment
of accrued liabilities for cash payments of $3.9 million. We paid approximately $200,000 during the fourth
quarter 2000 related to these liabilities. We anticipate paying a majority of the remaining liabilities
associated with this special charge during 2001. The payments are expected to be made from operating
cash flow.
5. Debt and Credit Arrangements
Debt and credit arrangements consist of the following:
(in thousands) 2000 1999
Revolving line of credit 145,000$ -$
Note payable from acquisition - 5,103
Other 1,607 1,130
146,607 6,233
Current portion of debt (897) (5,308)
Long-term debt 145,710$ 925$