How much franchise royalties attributable to the acquiree is included in Management Recruiters' consolidated statement of income for the year ended December 31, 2022?
Management_Recruiters Franchise · 2024 FDDAnswer from 2024 FDD Document
of the seller and because there were few suitable potential buyers. This gain is included in the line item, "Other miscellaneous income," in our consolidated statement of income. The following table presents unaudited pro forma information (in thousands, except per share data) assuming (a) the acquisition of Snelling had occurred on January 1, 2020, (b) all of Snelling's operations had been converted to franchises on such date, and (c) none of the other acquisitions discussed in this Note 2 had occurred. The unaudited pro forma information is not necessarily indicative of the results of operations that would have been achieved if the acquisition had in fact taken place on that date. Franchise royalties attributable to the acquiree of approximately $3.1 million and approximately $2.4 million is included in our consolidated statement of income for the year ended December 31, 2022, and December 31, 2021, respectively.
| | | Year ended | | | | | |---------------------------------------------|----|--------------|----|--------|--|--------------| | | | December 31, 2022 | | 2021 | | December 31, | | Total revenue | $ | 30,952 | $ | 22,128 | | | | Net income | | 12,458 | | 8,698 | | | | Basic earnings per share | $ | 0.93 | $ | 0.65 | | | | Basic weighted average shares outstanding | | 13,654 | | 13,482 | | | | Diluted earnings per share | $ | 0.91 | $ | 0.64 | | | | Diluted weighted average shares outstanding | | 13,721 | | 13,622 | | | These calculations reflect increased amortization expense, increased payroll expense, the elimination of gains associated with the transaction, the elimination of transaction related costs, and the consequential tax effects that would have resulted had the acquisition closed on January 1, 2020.
In connection with the acquisition, we sold the 10 locations that had been company-owned by Snelling located in Bakersfield, CA; Albany, NY; Arlington Heights, IL; Amherst, NY; Dallas, TX; Hayward, CA; Hoffman Estates, IL; Lathrop, CA; Ontario, CA; and Tracy, CA. Two of these locations were sold to franchisees. Four locations were sold to a third-party purchaser. Four offices were sold to a California purchaser (the "California Purchaser") and operate under the Snelling name pursuant to a license agreement with us.
Source: Item 21 — FINANCIAL STATEMENTS (FDD pages 65–66)
What This Means (2024 FDD)
According to Management Recruiters' 2024 Franchise Disclosure Document, franchise royalties attributable to the acquiree are included in their consolidated statement of income. Specifically, $3.1 million in franchise royalties attributable to Snelling, $133 thousand attributable to Dubin, and $469 thousand attributable to MRI are included in Management Recruiters' consolidated statement of income for the year ended December 31, 2022.
These figures are based on unaudited pro forma information, which means they are hypothetical and assume that the acquisitions of Snelling, Dubin and MRI had occurred on January 1, 2021, and that all of their operations had been converted to franchises by that date. The pro forma information also assumes that none of the other acquisitions discussed in Note 2 of the financial statements had occurred. This hypothetical scenario is not necessarily indicative of the actual results of operations that would have occurred if the acquisitions had taken place on that date.
For a prospective Management Recruiters franchisee, this information provides insight into how acquisitions can impact the company's financial statements. It shows how Management Recruiters accounts for franchise royalties from acquired entities and how these royalties are reflected in their consolidated statement of income. Understanding these accounting practices can help a franchisee assess the financial stability and growth potential of Management Recruiters.