Papa Johns 2001 Annual Report Download - page 53

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49
6. Net Property and Equipment
Net property and equipment consists of the following (in thousands):
2001 2000
Land 33,733$ 30,449$
Buildings and improvements 82,164 78,970
Leasehold improvements 72,018 70,838
Equipment and other 147,948 136,410
Construction in progress 4,296 12,642
340,159 329,309
Less accumulated depreciation and amortization (101,214) (83,435)
Net property and equipment 238,945$ 245,874$
We capitalized interest costs of $507,000 in 2000 and $169,000 in 1999 (none in 2001).
7. Franchisee Loan Program
We have a program under which selected franchisees may borrow funds principally for use in the
construction and development of their restaurants. Loans outstanding to franchisees were approximately
$17.6 million as of December 30, 2001, and $16.7 million as of December 31, 2000, net of allowance for
doubtful accounts. The outstanding franchisee loan balance as of December 31, 2000 includes a loan of
$3.4 million to the Marketing Fund (see Note 2). There are no commitments to lend additional amounts
to franchisees as of December 30, 2001.
Such loans bear interest at fixed or floating rates (ranging from 4.5% to 9.5% at December 30, 2001), 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 market
value. Interest earned on franchisee loans was approximately $1.4 million in 2001, $1.5 million in 2000
and $762,000 in 1999, and is reported in investment income in the accompanying consolidated statements
of income.
We established a reserve of $469,000 in 2001 and $4.2 million in 2000 for potentially uncollectible
franchisee notes receivable. We concluded the reserve was necessary due to certain franchisees’
deteriorating economic performance and underlying collateral value. The reserve at December 31, 2000,
related to a note receivable with a related party franchisee. This note was written off during 2001 without
any impact on 2001 earnings.
Approximately $661,000 of the loans outstanding as of December 30, 2001 and $6.8 million as of
December 31, 2000, were to franchisees in which we or certain of our directors or officers had an
ownership interest (see Note 11).