Papa Johns 2010 Annual Report Download - page 44

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37
•
Providing food cost relief by lowering the commissary margin on certain commodities sold by
PJFS to the franchise system and by providing incentive rebate opportunities in 2010 to the
franchise system;
•
Providing additional system-wide national marketing contributions that amounted to $6.0 million
in 2010 and $7.7 million in 2009;
•
Providing additional system-wide local print marketing contributions and certain system-wide
incentives totaling $500,000 in 2010 and $1.9 million in 2009;
•
Providing targeted royalty relief and local marketing support to assist certain identified
franchisees or markets, which amounted to $5.1 million in 2010 and $4.7 million in 2009;
•
Providing restaurant opening incentives of $1.0 million in 2010 and $400,000 in 2009; and
•
Providing financing on a selected basis to assist new or existing franchisees with the acquisition
of troubled franchise restaurants.
For 2011, we plan to continue certain domestic franchise support initiatives such as offering incentive
programs to franchisees to increase comparable sales, comparable transactions and online sales, make
certain re-image improvements to their restaurants and provide targeted royalty relief and local marketing
support to assist certain identified franchisees or markets, although our expectation is that the amount of
such support initiatives will be reduced from 2010 levels.
We believe the support program will mitigate potential unit closures and strengthen our brand during this
challenging economic environment. In addition to reducing unit closures, other important objectives of
the support program include growing market share in a consolidating category and stabilizing transaction
levels.
Our income before income taxes, net of noncontrolling interests, totaled $78.8 million in 2010, as
compared to $86.4 million in 2009 as summarized in the following table on an operating segment basis
(in thousands):
Increase
2010 2009 (Decrease)
Domestic Company-owned restaurants 31,619$ 34,894$ (3,275)$
Domestic commissaries* 14,188 29,393 (15,205)
Domestic franchising 60,908 53,690 7,218
International (3,450) (3,050) (400)
All others 1,847 2,697 (850)
Unallocated corporate expenses (43,266) (49,755) 6,489
Elimination of intersegment profits (519) (218) (301)
Income before income taxes, excluding variable interest entity * 61,327 67,651 (6,324)
BIBP, a variable interest entity * 20,954 22,543 (1,589)
Total income before income taxes 82,281 90,194 (7,913)
Income attributable to noncontrolling interests (3,485) (3,756) 271
Total income before income taxes, net of noncontrolling interests
78,796
$
86,438
$
(7,642)
$
*The full-year 2010 results for domestic commissaries were reduced by $14.2 million and the full-year
2010 results for BIBP were increased by $14.2 million associated with PJFS’s agreement to pay to BIBP
for past cheese purchases an amount equal to its accumulated deficit at December 26, 2010. There was no
impact on the consolidated results of operations since PJFS and BIBP are fully consolidated into the
Company’s results.