Papa Johns 2000 Annual Report Download - page 60

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55
11. PJ America, Inc. Stock Warrant
PJ America, Inc. (“PJ America”), a franchisee of Papa John’ s, completed an initial public offering
(“IPO”) of its common stock in October, 1996. In connection with the IPO, PJ America issued a warrant
to us to purchase 225,000 shares of its common stock. The warrant is exercisable in whole or in part at
any time within five years from the closing date of the IPO, and the purchase price of each share of
common stock pursuant to the warrant is $11.25 per share (90% of the IPO price of $12.50 per share).
The warrant was issued by PJ America to Papa John’ s in consideration for the grant of rights to enter into
development agreements for certain specified territories and the waiver by us of certain market transfer
fees. Our agreement with PJ America anticipates that PJ America will pay standard development and
franchise fees in connection with opening restaurants in the specified territories.
We did not recognize income in connection with receipt of the warrant. The warrant is classified as an
available -for-sale security, and accordingly, is stated at fair value in the consolidated balance sheets, with
unrealized gains, net of tax, reported within comprehensive income.
The fair value of the warrant was zero on December 31, 2000 and $956,000 on December 26, 1999, based
upon the closing price per share of $5.56 and $15.50 for PJ America common stock on those respective
dates, and is reported in investments in the accompanying consolidated balance sheets. The intrinsic value
of the warrant (market value of PJ America common stock less the exercise price of the warrant) is
considered a reasonable approximation of the fair value of the warrant. The warrant expires in October
2001.
One of our directors is also a director of PJ America.
12. Related Party Transactions
Certain of our officers and directors own equity interests in entities that operate and/or have rights to
develop franchised restaurants. Certain of these affiliated entities have agreements to acquire area
development rights at reduced development fees and also pay reduced initial franchise fees when
restaurants are opened. Following is a summary of transactions and balances with affiliated entities (in
thousands):
2000 1999 1998
Revenues from affiliates:
Commissary sales 91,237$ 80,336$ 64,977$
Equipment and other sales 12,085 10,423 10,721
Franchise royalties 12,493 10,530 8,067
Franchise and development fees 955 1,574 1,372
Total 116,770$ 102,863$ 85,137$
Other income from affiliates 920$ 314$ 570$
Accounts receivable-affiliates 2,805$ 3,302$ 2,273$
Notes receivable-affiliates 6,813$ 3,590$ 4,741$