Papa Johns 2004 Annual Report Download - page 54

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53
4. Accounting for Variable Interest Entities (continued)
In addition, Papa John’s has extended loans to certain franchises. Under FIN 46, Papa John’s is deemed
the primary beneficiary of four of these franchise entities even though we have no ownership interest in
them. These entities operate a total of 33 restaurants with annual revenues approximating $20.0 million.
Our net loan balance receivable from these four entities is $3.6 million at December 26, 2004, with no
further funding commitments. The consolidation of these entities resulted in goodwill approximating
$2.8 million and the elimination of the $3.6 million net loan balance receivable. The consolidation of
these four franchise entities had no significant impact on Papa John’s operating results for fiscal 2004.
The impact on future operating income from the consolidation of these entities is not expected to be
significant.
The following table summarizes the balance sheets for our consolidated VIEs as of December 26, 2004
and December 28, 2003:
(In thousands)
BIBP
Franchisees
Total
BIBP
Franchisees
Total
Assets:
Cash and cash equivalents 1,666$ 115$ 1,781$ 4,246$ -$ 4,246$
Accounts receivable - 59 59 - - -
Accounts receivable - Papa John's 6,484 - 6,484 3,642 - 3,642
Other assets 193 594 787 1,043 - 1,043
Net property and equipment - 3,794 3,794 - - -
Goodwill - 2,752 2,752 - - -
Deferred income taxes 8,817 - 8,817 - - -
Total assets
17,160
$
7,314
$
24,474
$
8,931
$
-
$
8,931
$
Liabilities and stockholders' equity (deficit):
Accounts payable and accrued
expenses 7,777$ 1,260$ 9,037$ 5,246$ -$ 5,246$
Short-term debt - third party 14,075 1,634 15,709 - - -
Short-term debt - Papa John's 10,000 3,575 13,575 - - -
Income tax payable - - - 1,257 - 1,257
Total liabilities 31,852$ 6,469$ 38,321$ 6,503$ -$ 6,503$
Stockholders' equity (deficit) (14,692) 845 (13,847) 2,428 - 2,428
Total liabilities and stockholders'
equity (deficit)
17,160
$
7,314
$
24,474
$
8,931
$
-
$
8,931
$
December 26, 2004 December 28, 2003
5. Acquisitions
During 2003, our wholly-owned subsidiary in the United Kingdom purchased one restaurant from a
franchisee for $150,000.
During 2002, our 70% owned and consolidated subsidiary, Colonel’s Limited, LLC, acquired three Papa
John’s restaurants from a franchisee for $881,000 ($781,000 in cash and forgiveness of $100,000 of
notes payable to us). The allocation for this acquisition resulted in goodwill of $648,000.
The business combinations in the previous paragraphs were each accounted for by the purchase method
of accounting, whereby operating results subsequent to the acquisition date are included in our
consolidated financial statements.