Papa Johns 2003 Annual Report Download - page 54

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53
5. Goodwill and Other Intangible Assets (continued)
The $648,000 addition of goodwill is due to the acquisition of three restaurants during 2002 (see Note
4). Amortization expense was reduced by approximately $2.8 million ($1.7 million, net of tax) or $0.09
per common share on a fully diluted basis in 2002 due to the adoption of SFAS No. 142. The following
reconciles income for the years ended December 28, 2003, December 29, 2002 and December 30, 2001,
reported in the accompanying consolidated statements of income to earnings as adjusted for the impact
of the elimination of goodwill amortization:
2003
2002
2001
Income before cumulative effect of a change in
accounting principle (in thousands):
Reported income before cumulative effect of a change
in accounting principle
33,976
$
46,797
$
47,245
$
Goodwill amortization, net of tax
-
-
1,743
Adjusted income before cumulative effect of a change
in accounting principle
33,976
$
46,797
$
48,988
$
Basic earnings per common share:
Reported basic earnings per common share before
cumulative effect of a change in accounting principle
1.89
$
2.33
$
2.09
$
Goodwill amortization, net of tax
-
-
0.08
Adjusted basic earnings per common share before
cumulative effect of a change in accounting principle
1.89
$
2.33
$
2.17
$
Earnings per common share - assuming dilution:
Reported earnings per common share before cumulative
effect of a change in accounting principle
1.88
$
2.31
$
2.08
$
Goodwill amortization, net of tax
-
-
0.07
Adjusted earnings per common share before cumulative
effect of a change in accounting principle
1.88
$
2.31
$
2.15
$
6. Restaurant Closure, Impairment and Dispositions
We recorded charges of $3.2 million, $740,000 and $2.9 million in 2003, 2002 and 2001 for restaurants
we decided to close. The charges are included in Restaurant closure, impairment and disposition losses
(gains) in the accompanying consolidated statements of income.
During 2003, we decided to close 27 domestic restaurants, which were primarily located in three of the
21 markets with Company-owned units, due to deteriorating economic performance and an insufficient
outlook for improvement. We recorded a pre-tax impairment closure charge of $2.1 million in the third
quarter of 2003 related to the closure of these restaurants and an additional charge of $1.1 million at the
time of closure in the fourth quarter related to the remaining lease expense.
We also identified an additional 25 under-performing restaurants that were subject to impairment charges
due to the restaurants’ declining performance during 2003, which was a result of increased competition,
increased operating expenses, and deteriorating economic conditions in these markets.