Papa Johns 2008 Annual Report Download - page 94

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87
14. Income Taxes (continued)
The Company recognizes interest accrued and penalties related to unrecognized tax benefits as a part of
income tax expense. The Company’s 2008 and 2007 income tax expense includes an interest benefit of
$380,000 and $253,000, respectively, while income tax expense for 2006 includes interest expense of
$721,000. The Company had approximately $1.5 million and $1.9 million for the payment of interest and
penalties accrued at December 28, 2008 and December 30, 2007, respectively.
15. Related Party Transactions
Certain of our officers and directors own equity interests in entities that generate and/or have rights to
develop franchised restaurants. Following is a summary of full-year transactions and year-end balances
with franchisees owned by related parties, the Marketing Fund and Papa Card, Inc. (in thousands):
2008
2007
2006
Revenues from affiliates:
Commissary sales 18,280$ 17,656$ 47,124$
Other sales 4,240 4,103 3,696
Franchise royalties 2,500 2,426 6,305
Franchise and development fees 50 65 15
Total 25,070$ 24,250$ 57,140$
Other income from affiliates -$ 61$ 66$
Accounts receivable-affiliates 854$ 864$ 783$
The above table excludes transactions and balances related to former non-management directors for the
time period subsequent to their retirement or resignation from our Board.
We paid $355,000 in 2008, $251,000 in 2007 and $80,000 in 2006 for charter aircraft services provided
by an entity owned by our Founder Chairman and Interim Chief Executive Officer. We believe the rates
charged to the Company were at the market rates that could have been obtained from independent third
parties for similar aircraft.
We sold approximately $55,000 of print and promotional materials to a company partially owned by our
Founder Chairman and Interim Chief Executive Officer during 2008 (none in 2007 and 2006). We
charged fair market value for these print and promotional materials.
During 2008, a franchise entity that is owned by one executive officer and two former executive officers
of Papa John's sold two restaurants for $415,000 to an unrelated third-party franchise entity. In addition,
a franchise entity that is owned by a member of our Board of Directors sold three restaurants in two
separate transactions for a total of $470,000 to unrelated third-party franchise entities.
A former member of our Board of Directors had a minority interest (less than 20%) in a franchisee during
2005. This franchise entity entered into an agreement to sell an additional 14 restaurants to a new
unaffiliated third-party franchise for $2.4 million in a separate market. Papa John’s agreed to receive
reduced royalties from the purchaser for 12 months from the date of purchase, which amounted to
$70,000 in 2006.
See Note 4 for information related to our purchasing arrangement with BIBP.