Papa Johns 2010 Annual Report Download - page 35

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28
(1)
We operate on a 52-53 week fiscal year ending on the last Sunday of December of each year. The
2010, 2009, 2008 and 2007 fiscal years consisted of 52 weeks, and the 2006 fiscal year consisted of
53 weeks. The additional week in 2006 resulted in additional revenues of approximately $20.0
million and additional pre-tax income of approximately $3.5 million, or $0.07 per diluted share for
2006.
(2)
Prior years’ financial data has been adjusted for the retrospective application of consolidation
principles associated with variable interest entities (“VIEs”) accounting. See “Note 2” of “Notes to
Consolidated Financial Statements” for additional information.
(3)
Domestic Franchise royalties were derived from franchised restaurant sales of $1.58 billion in 2010,
$1.55 billion in 2009, $1.50 billion in 2008, $1.46 billion in 2007 and $1.51 billion in 2006.
(4)
International Royalties were derived from franchised restaurant sales of $295.9 million in 2010,
$251.8 million in 2009, $221.0 million in 2008, $176.2 million in 2007 and $139.3 million in 2006.
(5)
Restaurant sales for International Company-owned restaurants were $11.0 million in 2010, $10.3
million in 2009, $8.1 million in 2008, $4.0 million in 2007 and $1.7 million in 2006.
(6)
The operating results include the consolidation of BIBP, which increased operating income
approximately $21.4 million in 2010 (including a reduction in BIBP’s cost of sales of $14.2 million
associated with PJFS’s agreement to pay to BIBP for past cheese purchases an amount equal to its
accumulated deficit), $23.3 million in 2009 and $19.7 million in 2006 and reduced operating income
by $8.6 million in 2008 and $31.0 million in 2007. The 2006 operating results include the benefit of
the 53
rd
week, which increased operating income approximately $3.5 million. Operating income
includes domestic and international restaurant closure, impairment and disposition losses of
$253,000 in 2010, $657,000 in 2009, $8.8 million in 2008 and $1.8 million in 2007, and a gain of
$260,000 in 2006. See “Notes 3 and 6” of “Notes to Consolidated Financial Statements” for
additional information.
(7)
Represents the noncontrolling interests’ ownership in two joint venture arrangements.
(8)
The Perfect Pizza operations, which were sold in March 2006, are classified as “discontinued
operations.”
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Introduction
Papa John’s International, Inc. (referred to as the “Company,” “Papa John’s” or in the first person
notations of “we,” “us” and “our”) began operations in 1985 with the opening of the first Papa John’s
restaurant in Jeffersonville, Indiana. At December 26, 2010, there were 3,646 Papa John’s restaurants in
operation, consisting of 612 Company-owned and 3,034 franchised restaurants. Our revenues are
principally derived from retail sales of pizza and other food and beverage products to the general public
by Company-owned restaurants, franchise royalties, sales of franchise and development rights, sales to
franchisees of food and paper products, printing and promotional items, risk management services, and
information systems and related services used in their operations.
New unit openings in 2010 were 325 as compared to 216 in 2009 and 267 in 2008 and unit closings in
2010 were 148 as compared to 127 in 2009 and 95 in 2008. We expect net unit growth of approximately
190 to 220 units during 2011.
We have continued to produce strong average sales from our domestic Company-owned restaurants even
in a very competitive market environment. Our expansion strategy is to cluster restaurants in targeted
markets, thereby increasing consumer awareness and enabling us to take advantage of operational,
distribution and advertising efficiencies. Average annual Company-owned sales for our most recent
comparable restaurant base were $863,000 for 2010, compared to $869,000 for 2009 and $867,000 for