Papa Johns 1999 Annual Report Download - page 36

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Investment Income. Investment income decreased to $3.4 million in 1999 from $4.1 million in 1998 due to a lower average balance
of franchise loans and a decrease in our average investment portfolio balance.
Income Tax Expense. Income tax expense (exclusive of the cumulative effect of accounting change and related taxes) reflects a
combined federal, state and local effective tax rate of 37.6% for 1999, compared to 38.8% in 1998. The effective income tax rate
for 1998, including an income tax benefit for the treatment of Minnesota Pizza as a C Corporation (see “Note 3”of “Notes to
Consolidated Financial Statements”), was 37.0%. The effective tax rate in 1999 increased as compared to the 1998 pro forma rate
as a result of a continued relative level of tax-exempt investment income to total pre-tax income.
1998 Compared to 1997
As noted above, our previously reported results of operations and balance sheets have been restated to include Minnesota Pizza, and
the following discussion reflects this restatement.
Revenues. Total revenues increased 32.3% to $682.2 million in 1998, from $515.7 million in 1997.
Restaurant sales increased 31.2% to $344.1 million in 1998, from $262.3 million in 1997. This increase was primarily due to a
24.0% increase in the number of equivalent Company-owned restaurants open during 1998 as compared to 1997. “Equivalent restau-
rants”represents the number of restaurants open at the beginning of a given period, adjusted for restaurants opened or acquired dur-
ing the period on a weighted average basis. Also, comparable sales increased 9.0% in 1998 over 1997 for Company-owned restau-
rants open throughout both years.
Franchise royalties increased 34.6% to $32.1 million in 1998, from $23.9 million in 1997. This increase was primarily due to a
26.9% increase in the number of equivalent franchised restaurants open during 1998 as compared to 1997. Also, comparable sales
increased 10.1% in 1998 over 1997 for franchised restaurants open throughout both years.
Franchise and development fees increased 5.6% to $5.5 million in 1998, from $5.2 million in 1997. This increase was primarily due
to the 302 franchised restaurants opened during 1998, as compared to 277 opened during 1997, an increase of 9.0%. The average
dollar amount of fees per franchised restaurant may vary from period to period, depending on the mix of restaurants opened
pursuant to older development agreements including “Hometown restaurants.”
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