Papa Johns 2005 Annual Report Download - page 62

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60
4. Discontinued Operations
Recently, the Company developed a plan to sell its Perfect Pizza operations, consisting of the franchised
units and related distribution operations. We have classified our Perfect Pizza operations as discontinued
since we expect to sell this business in the next 12 months. The following summarizes the results of the
discontinued operations for the last three years (in thousands):
2005 2004 2003
Net sales 13,632$ 17,080$ 17,255$
Operating expenses 8,837 10,392 10,659
G&A expenses 1,658 1,411 1,245
Other expenses 299 182 164
Income before income taxes 2,838 5,095 5,187
Income tax expense 1,050 1,911 1,945
Net income from discontinued operations 1,788$ 3,184$ 3,242$
Basic earnings per common share 0.05$ 0.09$ 0.09$
Earnings per common share - assuming dilution 0.05$ 0.09$ 0.09$
The associated assets of the Perfect Pizza operations, which are reflected as assets of the discontinued
operations held for sale on the Consolidated Balance Sheets, are as follows (in thousands):
2005 2004
Accounts Receivable 1,735$ 1,924$
Inventories 304 379
Net Property and Equipment 165 308
Goodwill 8,444 8,444
Total 10,648$ 11,055$
5. Accounting for Variable Interest Entities
In January 2003, the FASB issued Interpretation No. 46, Consolidation of Variable Interest Entities, an
Interpretation of Accounting Research Bulletin No. 51 (FIN 46). In December 2003, the FASB modified
FIN 46 to make certain technical corrections and address certain implementation issues that had arisen.
FIN 46 provides a new framework for identifying variable interest entities (“VIEs”) and determining
when a company should include the assets, liabilities, noncontrolling interests and results of activities of
a VIE in its consolidated financial statements.
In general, a VIE is a corporation, partnership, limited liability company, trust, or any other legal
structure used to conduct activities or hold assets that either (1) has an insufficient amount of equity to
carry out its principal activities without additional subordinated financial support, (2) has a group of
equity owners that are unable to make significant decisions about its activities, or (3) has a group of
equity owners that do not have the obligation to absorb losses or the right to receive returns generated by
its operations.