Papa Johns 2008 Annual Report Download - page 52

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Other operating expenses increased approximately $2.0 million in 2008 as compared to 2007, reflecting
increases in distribution costs due to higher fuel prices.
We recorded pre-tax losses from the franchise cheese-purchasing program, net of minority interest, of
$6.3 million and $22.9 million in 2008 and 2007, respectively. These results only represent the portion of
BIBP’s operating income or loss related to the proportion of BIBP cheese sales to franchisees. The total
impact of the consolidation of BIBP on Papa John’s pre-tax income from continuing operations was
losses of $10.5 million and $31.7 million in 2008 and 2007, respectively (see the previous table which
summarizes BIBP’s operating results for 2008 and 2007).
General and administrative expenses were $99.7 million, or 8.8% of revenues for 2008, as compared to
$101.3 million or 9.5% of revenues for 2007. The decrease of $1.6 million in 2008 was primarily due to
our initiative to reduce administrative costs in 2008, including travel expenses and employee benefits, in
response to the economic environment. Additionally, incentive compensation expense decreased due to
non-vested awards forfeited upon resignation by our former CEO and other former members of
management and a reduction in the expected payments under certain cash and equity-based compensation
programs.
Minority interests and other general expenses reflected net expense of $21.0 million in 2008, as
compared to $7.9 million in 2007 as detailed below (in thousands):
Increase
2008 2007 (Decrease)
Minority interests income 1,933$ 1,268$ 665$
Disposition and valuation-related costs of other assets 1,381 2,981 (1,600)
Restaurant closure, impairment and disposition losses (a) 8,818 1,807 7,011
Provisions for uncollectible accounts and notes receivable (b) 4,511 218 4,293
Pre-opening costs 250 371 (121)
Marketing contributions (c) 4,267 1,000 3,267
Other (138) 294 (432)
Total minority interests and other general expenses 21,022$ 7,939$ 13,083$
(a) Represents losses associated with the divestiture of 62 Company-owned domestic units during 2008
and our plans to divest 17 restaurants in two markets in 2009. In addition, we recorded a goodwill
impairment charge of $2.3 million during 2008 associated with our United Kingdom operations.
(b) The increase in the provisions for uncollectible accounts and notes receivable was primarily due to
our evaluation of the collectibility of our loan issued in connection with the 2006 sale of the Perfect
Pizza operations and a loan issued to one domestic franchisee.
(c) We contributed discretionary contributions to the national marketing fund and other local advertising
cooperatives in both 2007 and 2008. The majority of the 2008 contributions were in response to our
previously mentioned domestic franchise system support initiatives.
Depreciation and amortization was $32.8 million (2.9% of revenues) for 2008, as compared to $31.9
million (3.0% of revenues) for 2007. The primary reason for the increase in depreciation and
amortization in 2008, as compared to 2007, was due to the acquisition of 42 domestic franchised
restaurants during the third quarter of 2007, capital additions we made within our restaurant operations
and the addition of certain information technology assets.