Papa Johns 2001 Annual Report Download - page 45

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41
Cash Equivalents
Cash equivalents consist of highly liquid investments with a maturity of three months or less at date of
purchase. These investments are carried at cost, which approximates fair value.
Investments
We determine the appropriate classification of investment securities at the time of purchase and
reevaluate such designation as of each balance sheet date.
Investments held at December 30, 2001 consist of investments held by our captive insurance subsidiary.
These investments are classified as available for sale securities and are stated at fair value, which
approximates carrying value, based upon quoted market prices.
Substantially all investment securities held at December 31, 2000, were classified as trading securities
since the investments were planned for liquidation in early 2001. Trading securities are stated at fair value
as determined primarily through quoted market prices. Unrealized gains and losses for trading securities
were included in the accompanying consolidated statements of income. The cost of securities sold is
based on the specific identification method.
Accounts Receivable
Substantially all accounts receivable are due from franchisees for purchases of food and paper products,
restaurant equipment, printing and promotional items, risk management services, information systems and
related services, and for royalties from December sales. Credit is extended based on an evaluation of the
franchisee’s financial condition and, generally, collateral is not required. We consider substantially all
accounts receivable collectible; however, a reserve for uncollectible accounts is established as deemed
necessary based upon overall accounts receivable aging levels and a specific review of accounts for
franchisees with known financial difficulties.
Inventories
Inventories, which consist of food products, paper goods and supplies, smallwares, store equipment and
printing and promotional items, are stated at the lower of cost, determined under the first-in, first-out
(FIFO) method, or market.
Property and Equipment
Property and equipment are stated at cost. Depreciation is provided using the straight-line method over
the estimated useful lives of the assets (generally five to ten years for restaurant, commissary and other
equipment, and 20 to 40 years for buildings and improvements). Leasehold improvements are amortized
over the terms of the respective leases, including the first renewal period (generally five to ten years).
Depreciation expense was $31.7 million in 2001, $30.1 million in 2000 and $22.3 million in 1999.