Papa Johns 2003 Annual Report Download - page 49

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48
2. Significant Accounting Policies (continued)
The adoption of SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, during
2001, as amended by SFAS No. 137 and SFAS No. 138, resulted in the cumulative effect of an
accounting change of $1.7 million ($1.1 million after tax) charged against accumulated other
comprehensive income (loss) to reflect the fair value of the Collar as of the date of adoption. The
adoption of SFAS No. 133, as amended by SFAS No. 137 and SFAS No. 138, had no impact on earnings.
We recognized income of $3.0 million ($1.8 million after tax) in 2003 and charges of $4.3 million ($2.7
million after tax) and $2.1 million ($1.3 million after tax) in 2002 and 2001, respectively, in accumulated
other comprehensive income (loss) for the net change in fair value of our derivatives associated with our
debt agreements. Fair value is based on quoted market prices. See Note 7 for additional information on
our debt and credit arrangements.
Earnings per Share
The calculation of basic earnings per common share and earnings per common share – assuming dilution,
before the cumulative effect of a change in accounting principle, for the years ended December 28, 2003,
December 29, 2002 and December 30, 2001 are as follows (in thousands, except per share data):
2003
2002
2001
Basic earnings per common share:
Income before cumulative effect of a change in accounting principle
33,976
$
46,797
$
47,245
$
Weighted average shares outstanding
17,938
20,068
22,600
Basic earnings per common share
1.89
$
2.33
$
2.09
$
Earnings per common share - assuming dilution:
Income before cumulative effect of a change in accounting principle
33,976
$
46,797
$
47,245
$
Weighted average shares outstanding
17,938
20,068
22,600
Dilutive effect of outstanding common stock options
99
232
153
Diluted weighted average shares outstanding
18,037
20,300
22,753
Earnings per common share - assuming dilution
1.88
$
2.31
$
2.08
$
Options to purchase common stock with an exercise price greater than the average market price were not
included in the computation of the dilutive effect of common stock options because the effect would have
been antidilutive. The number of antidilutive options was 2.2 million in 2003, 1.8 million in 2002 and 3.0
million in 2001.
Accounting Changes
SFAS No. 142
In June 2001, the Financial Accounting Standards Board (“FASB”) issued SFAS No.142, Goodwill and
Other Intangible Assets, effective for fiscal years beginning after December 15, 2001. With the adoption
of SFAS No. 142, companies no longer amortize goodwill and intangible assets with indefinite useful
lives. Instead, goodwill and intangible assets with indefinite useful lives are subject to an annual review
for impairment. Other intangible assets will continue to be amortized over their useful lives and reviewed
for impairment. See Note 5 for additional information.