Papa Johns 2010 Annual Report Download - page 43

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36
Non-GAAP Measures
The financial measures we present in this report excluding the impact of the consolidation of BIBP are
not measures defined within accounting principles generally accepted in the United States (“GAAP”).
These non-GAAP measures should not be construed as a substitute for or a better indicator of the
Company’s performance than the Company’s GAAP measures. We believe the financial information
excluding the impact of the consolidation of BIBP is important for purposes of comparison to prior
periods and development of future projections and earnings growth prospects. We analyze our business
performance and trends excluding the impact of the consolidation of BIBP because the results of BIBP
are not indicative of the principal operating activities of the Company. In addition, annual cash bonuses,
and certain long-term incentive programs for various levels of management, are based on financial
measures that exclude BIBP. The presentation of the non-GAAP measures in this report is made
alongside the most directly comparable GAAP measures.
Summary of Operating Results
The Company follows a fiscal year ending on the last Sunday of December, generally consisting of 52
weeks made up of four 13-week quarters. The 13-week quarters consist of two four-week periods
followed by one five-week period.
Discussion of Revenues
Total revenues, which increased 4.4% to $1.13 billion in 2010 compared to $1.08 billion in 2009,
primarily consisted of the following:
•
Franchise royalties revenue increased $7.3 million primarily due to an increase in the royalty rate
(the standard royalty rate for the majority of domestic franchise restaurants increased from
4.25% at the beginning of 2009 to 4.50% in September 2009 and increased to 4.75% in the first
quarter of 2010).
•
Domestic commissary sales increased $36.8 million primarily due to an increase in sales
volumes.
•
International revenues increased $6.5 million primarily due to an increase in the number of our
franchised international restaurants.
The increases noted above were partially offset by a $2.1 million decline in domestic other sales
primarily due to a decline in sales at our wholly-owned print and promotions subsidiary, Preferred
Marketing Solutions, Inc. (“Preferred”). Additionally, domestic Company-owned restaurant sales
decreased approximately $550,000 primarily due to a decrease of 0.6% in comparable sales for domestic
Company-owned restaurants for the year. “Comparable sales” represents sales generated by restaurants
open for the entire twelve-month period reported.
Discussion of Operating Results
Franchise Support Initiatives
The Company provided domestic franchise system support initiatives in response to the difficult
economic environment in both 2009 and 2010. The initiatives included:
•
Providing cheese cost relief by modifying the cheese pricing formula used by BIBP beginning in
2009;