Papa Johns 2014 Annual Report Download - page 52

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39
Other general expenses reflected net expense of $8.2 million in 2014, as compared to $6.7 million in 2013
as detailed below (in thousands):
Increase
2014 2013 (Decrease)
Franchise and development incentives (a) 5,143$ 4,645$ 498$
Disposition and impairment losses (b) 1,870 804 1,066
Provision for uncollectible accounts and notes receivable 1,113 604 509
Pre-opening restaurant costs 122 458 (336)
Perfect Pizza lease obligation (c) 95 305 (210)
Supplier marketing payment (d) (1,000) (1,000) -
Other expense 880 857 23
Total other general expenses 8,223$ 6,673$ 1,550$
(a) Incentives provided to franchisees for opening restaurants.
(b) Includes higher disposition related costs of approximately $700,000 for China Company-owned
restaurant closures and divestitures.
(c) The Perfect Pizza lease obligation relates to rents, taxes, insurance and other costs associated with
the former Perfect Pizza operations in the United Kingdom.
(d) See “Items Impacting Comparability; Non-GAAP Measures” above for further information about the
Incentive Contribution.
Depreciation and amortization was $40.0 million, or 2.5% of revenues for 2014, as compared to $35.1
million, or 2.4% of revenues for 2013. The increase of $4.9 million is primarily due to incremental
depreciation related to both our New Jersey commissary dough production capital expenditures and our
FOCUS capitalized software costs and equipment costs at Company-owned restaurants.
Net interest. Net interest expense consisted of the following (in thousands):
Dec. 28, Dec. 29, (Increase)
2014 2013 Decrease
Interest expense - line of credit (a) (4,073)$ (2,131)$ (1,942)$
Investment income 702 589 113
Change in redemption value of mandatorily redeemable
noncontrolling interest in a joint venture (b) (4) 1,148 (1,152)
Net interest (expense) income (3,375)$ (394)$ (2,981)$
Year Ended
(a) The increase in interest expense was due to a higher average outstanding debt balance and a higher
effective interest rate.
(b) See “Notes 2 and 6” of “Notes to Consolidated Financial Statements” for additional information.
Income Tax Expense. Our effective income tax rate was 32.0% in 2014 compared to 31.2% in 2013. The
higher tax rate in 2014 was primarily due to the prior year including favorable state tax settlements. See
“Note 15” of “Notes to Consolidated Financial Statements” for additional information.
2013 Compared to 2012
Discussion of Revenues. Consolidated revenues increased $96.4 million, or 7.2%, to $1.44 billion in
2013, compared to $1.34 billion in 2012. Revenues are summarized in the following table on a reporting
segment basis. Alongside the GAAP financial statement data, we have included certain additional “non-
GAAP” financial measures that the Company believes are important for purposes of comparing to prior