Papa Johns 2008 Annual Report Download - page 101

Download and view the complete annual report

Please find page 101 of the 2008 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 114

  • 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
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114

94
21. Segment Information (continued)
(in thousands) 2008 2007 2006
Property and equipment:
Domestic Company-owned restaurants 156,171$ 162,828$ 149,548$
Domestic commissaries 78,808 76,898 74,526
International 10,706 7,418 6,272
Variable interest entities 5,315 1,714 1,386
All others 22,167 23,753 20,881
Unallocated corporate assets 114,913 135,463 133,784
Accumulated depreciation and amortization (198,088) (209,117) (188,675)
Net property and equipment
189,992
$
198,957
$
197,722
$
Expenditures for property and equipment:
Domestic restaurants 14,669$ 18,399$ 21,034$
Domestic commissaries 2,284 2,509 1,721
International 3,490 1,656 312
All others 701 1,280 6,705
Unallocated corporate 8,127 7,304 9,580
Total expenditures for property and equipment
29,271
$
31,148
$
39,352
$
(1) The revenues from external customers for variable interest entities are attributable to the franchise
entities to which we have extended loans that qualify as consolidated VIEs. The intersegment
revenues for variable interest entities of $165.4 million in 2008, $138.2 million in 2007 and $144.1
million in 2006 are attributable to BIBP.
(2) The operating results for domestic Company-owned restaurants decreased approximately $5.4
million in 2008, as compared to 2007. The decline in the operating results was principally due to a
$6.5 million charge in 2008 as compared to a charge of $1.8 million in 2007, associated with the
divestiture, impairment, or closing of units. In addition, a significant increase in commodities costs
(specifically cheese and wheat) negatively impacted 2008 operating results. Restaurant operating
margin on an external basis, excluding the impact of the consolidation of BIBP, decreased as a
percentage of sales 1.0% in 2008 as compared to 2007. The 2007 decline in operating income, as
compared to 2006, was primarily due to an increase in wages (including the impact of a federal
minimum wage increase in July 2007 and certain other minimum wage increases in various states),
increased commodities costs and other operating costs. In addition, the 2007 results included a
charge of $1.5 million associated with the closure or impairment of certain restaurants and a
$594,000 pre-tax gain associated with the termination of a lease agreement in 2007.
(3) Domestic commissaries’ operating income decreased approximately $5.6 million in 2008 and
increased approximately $1.2 million in 2007 as compared to 2006. The 2008 decline of $5.6 million
is due to a decline in sales volumes, increases in distribution costs due to higher fuel prices and a
reduction in gross margin resulting from increases in the cost of certain commodities that were not
passed along via price increases to domestic restaurants. The 2007 increase of $1.2 million (the
increase in 2007 was $2.4 million, excluding the $1.2 million impact of the 53rd week on 2006
operating results) was principally due to increased volumes of higher margin fresh dough products
and improved margin from other commodities, partially offset by a $600,000 contribution to the Papa
John’s Marketing Fund.