Papa Johns 2005 Annual Report Download - page 66

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64
7. Goodwill and Other Intangible Assets (continued)
The reduction in International goodwill is a result of the $1.1 million impairment charge associated with
our United Kingdom subsidiary.
8. Restaurant Closure, Impairment and Dispositions
The following table summarizes restaurant closure, impairment and disposition gains (losses) included
in other general expenses in the accompanying consolidated statements of income during 2005, 2004
and 2003:
(in thousands) 2005 2004 2003
Cash proceeds received (1)
11,000
$
78
$
910
$
Notes receivable from franchisees
1,300
73
46
Total consideration (1) 12,300 151 956
Net book value 10,137 151 681
Gain (loss) on restaurants sold 2,163 - 275
Gain (loss) on domestic restaurant closures (2) - (77) (3,239)
Gain on sale of 49% interest in Texas restaurants - 280 -
Restaurant long-lived asset impairment (3) (124) - (2,505)
Total restaurant closure, impairment and disposition
gains (losses) 2,039$ 203$ (5,469)$
(1) During the fourth quarter of 2005, we completed the sale of 84 Company-owned restaurants, with
annual revenues approximating $53.0 million, in Colorado and Minnesota to a new franchise group,
PJCOMN Acquisition Corporation (“PJCOMN”), an affiliate of Washington, DC-based private
equity firm Milestone Capital Management, LLC, pursuant to an agreement announced in August
2005. The total consideration was $12.0 million, including $1.0 million for prepaid royalties, and
was received in cash at closing. The sale of the restaurants resulted in a $1.1 million gain in the
fourth quarter of 2005. The recorded gain on the sale is net of a $760,000 reserve for lease payments
we expect to make in the future for certain under-performing units that were sold to PJCOMN.
On December 25, 2005, we sold five Company-owned restaurants located in Florida to one of our
operations vice presidents. This employee resigned from the Company concurrently with the sale of
the five restaurants. Total consideration from the sale consists of a note from the buyer totaling $1.3
million. The annual revenues for these five restaurants approximated $4.0 million. The sale of these
restaurants resulted in a gain of approximately $1.0 million. The $1.3 million note from the buyer is
expected to be collected during 2006.
(2) 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.