Papa Johns 2003 Annual Report Download - page 60

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59
13. Income Taxes (continued)
The reconciliation of income tax computed at the U.S. federal statutory rate to income tax expense,
exclusive of the tax effect related to the cumulative effect of accounting change, for the years ended
December 28, 2003, December 29, 2002 and December 30, 2001 is as follows (in thousands):
2003
2002
2001
Tax at U.S. federal statutory rate
19,026
$
26,207
$
26,559
$
State and local income taxes
1,424
2,089
2,035
Other
(65)
(217)
45
Total
20,385
$
28,079
$
28,639
$
Income taxes paid were $23.2 million in 2003, $26.3 million in 2002 and $16.5 million in 2001.
14. Related Party Transactions
Certain of our officers and directors own equity interests in entities that operate and/or have rights to
develop franchised restaurants. During 2003, in connection with the Company’s recruitment of directors
deemed independent under new Securities and Exchange Commission and NASDAQ rules, one director
retired from our Board and three resigned. One of the directors who resigned was paid $144,000 annually
in 2003, 2002 and 2001 under a consulting agreement. This director also received $112,500 in 2003 for
his years of service under a director severance program. We paid $60,000 to each of the two additional
non-management directors who retired or resigned from the Board during 2003 for their years of service
under a director severance program. The remaining director who resigned continues to serve as an
executive officer of the Company. We have an employment agreement with another director, who
continues to serve on the Board, under which $75,000 was paid annually in 2003, 2002 and 2001.
As more fully described in Note 2, the Papa John’s Marketing Fund, Inc. (the “Marketing Fund”), a non-
profit corporation, is responsible for developing and conducting marketing and advertising for the Papa
John’s system. The Company made a loan to the Marketing Fund at December 28, 2003 in the amount of
$1.2 million, which was repaid in January 2004. There were no outstanding loans to the Marketing Fund
at the end of 2002 and 2001. Additionally, during 2003, we made a $1.0 million contribution to the
Marketing Fund, included in other general expenses in the accompanying consolidated statements of
income, to assist the system with costs incurred for national advertising.
During 2003, Papa Card, Inc. was formed, which is a non-profit corporation affiliated with the Marketing
Fund. Papa Card, Inc. is responsible for developing and marketing to our customers a gift card (“Papa
Card”), and for maintaining the systems and other support infrastructure for the Papa Card program. We
advanced certain start-up costs and working capital to Papa Card, Inc. and we have recorded a receivable
of $972,000, which is included in accounts receivable – affiliates at December 28, 2003.