Papa Johns 2013 Annual Report Download - page 34

Download and view the complete annual report

Please find page 34 of the 2013 Papa Johns annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 103

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103

฀
26
Approximately฀43%฀to฀47%฀of฀our฀domestic฀revenues฀for฀the฀last฀three฀years฀were฀derived฀from฀sales฀to฀
franchisees฀ of฀ various฀ items฀ including฀ food฀ and฀ paper฀ products,฀ printing฀ and฀ promotional฀ items,฀ risk฀
management฀services฀and฀information฀systems฀equipment฀and฀software฀and฀related฀services.฀We฀believe฀
that฀ in฀ addition฀ to฀ supporting฀ both฀ Company฀ and฀ franchised฀ profitability฀ and฀ growth,฀ these฀ activities฀
contribute฀to฀product฀quality฀and฀consistency฀throughout฀the฀Papa฀John’s฀system.฀
฀
Critical฀Accounting฀Policies฀and฀Estimates฀
฀
The฀ results฀ of฀ operations฀ are฀ based฀ on฀ our฀ consolidated฀ financial฀ statements,฀ which฀ were฀ prepared฀ in฀
conformity฀with฀accounting฀principles฀generally฀accepted฀in฀the฀United฀States฀(“GAAP”).฀The฀preparation฀
of฀ consolidated฀ financial฀ statements฀ requires฀ management฀ to฀ select฀ accounting฀ policies฀ for฀ critical฀
accounting฀areas฀as฀well฀as฀estimates฀and฀assumptions฀that฀affect฀the฀amounts฀reported฀in฀the฀consolidated฀
financial฀statements.฀The฀Company’s฀significant฀accounting฀policies฀are฀more฀fully฀described฀in฀“Note฀2”฀
of฀“Notes฀to฀Consolidated฀Financial฀Statements.”฀Significant฀changes฀in฀assumptions฀and/or฀conditions฀in฀
our฀ critical฀ accounting฀ policies฀ could฀ materially฀ impact฀ the฀ operating฀ results.฀ We฀ have฀ identified฀ the฀
following฀ accounting฀ policies฀ and฀ related฀ judgments฀ as฀ critical฀ to฀ understanding฀ the฀ results฀ of฀ our฀
operations:฀
฀
Allowance฀for฀Doubtful฀Accounts฀and฀Notes฀Receivable฀฀
฀
We฀ establish฀reserves฀for฀uncollectible฀ accounts฀and฀notes฀receivable฀based฀ on฀overall฀receivable฀aging฀
levels฀and฀a฀ specific฀evaluation฀ of฀ accounts฀ and฀ notes฀for฀ franchisees฀ and฀ other฀ customers฀with฀known฀
financial฀difficulties.฀Balances฀are฀charged฀off฀against฀the฀allowance฀after฀recovery฀efforts฀have฀ceased.฀
฀
Noncontrolling฀Interests฀
฀
The฀ Company฀ had฀ the฀ following฀ four฀ joint฀ ventures฀ in฀ which฀ there฀ are฀ noncontrolling฀ interests฀ as฀ of฀
December฀29,฀2013:฀฀
฀
฀
Joint฀Venture฀
฀
฀
Redemption฀Feature฀
฀
Location฀within฀the฀฀
Consolidated฀Balance฀Sheet฀
฀
฀
Recorded฀value฀
฀ ฀ ฀ ฀
Colonel’s฀Limited,฀LLC฀ Mandatorily฀redeemable฀ Other฀long-term฀liabilities฀ Redemption฀value฀
Star฀Papa,฀LP฀ Redeemable฀ Temporary฀equity฀ Carrying฀value฀
PJ฀Denver,฀LLC฀ Redeemable฀ Temporary฀equity฀ Redemption฀value฀
PJ฀Minnesota,฀LLC฀ No฀redemption฀feature฀ Permanent฀equity฀ Carrying฀value฀
฀
Consolidated฀net฀income฀is฀required฀to฀be฀reported฀separately฀at฀amounts฀attributable฀to฀both฀to฀the฀parent฀
and฀the฀noncontrolling฀interest.฀Disclosures฀are฀required฀to฀ clearly฀identify฀and฀distinguish฀between฀the฀
interests฀of฀the฀parent฀company฀and฀the฀interests฀of฀the฀noncontrolling฀owners,฀including฀a฀disclosure฀on฀
the฀face฀of฀the฀consolidated฀statements฀of฀income฀attributable฀to฀the฀noncontrolling฀interest฀holder.฀
฀
See฀“Note฀6”฀of฀“Notes฀to฀Consolidated฀Financial฀Statements”฀for฀additional฀information.฀
฀
Stock฀Based฀Compensation฀
฀
Compensation฀expense฀for฀equity฀grants฀is฀estimated฀on฀the฀grant฀date,฀net฀of฀projected฀forfeitures฀and฀is฀
recognized฀over฀the฀vesting฀period฀(generally฀in฀equal฀installments฀over฀three฀years).฀Restricted฀stock฀is฀
valued฀based฀on฀the฀market฀price฀of฀the฀Company’s฀shares฀on฀the฀date฀of฀grant.฀Stock฀options฀are฀valued฀
using฀a฀Black-Scholes฀option฀pricing฀model.฀฀
฀
฀ ฀