Papa Johns 2000 Annual Report Download - page 38

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quarter 2000 related to these liabilities. We anticipate paying a majority of the remaining liabilities
associated with this special charge during 2001. The payments are expected to be made from operating
cash flow.
The impairment of the restaurant and other corporate assets in 2000 will reduce deprecia tion and
amortization in 2001 approximately $2.1 million as compared to 2000. The closing of the 20 field offices
and the severance and exit costs will reduce salaries and operating expenses approximately $900,000 in
2001 as compared to 2000.
Pre-opening and other general expenses decreased to $2.2 million in 2000 from $3.4 million in 1999. Pre-
opening costs of $1.1 million, relocation costs of $1.3 million and net gains on restaurant and other asset
dispositions of $200,000 were included in the 2000 amount, as compared to pre-opening costs of $759,000,
relocation costs of $1.3 million and net losses on restaurant and other asset dispositions of $1.4 million in
1999.
Depreciation and amortization was 3.6% of revenues in 2000 compared to 3.1% for 1999, due primarily to
a full year of depreciation on the corporate headquarters facility, a full year of goodwill amortization on the
Perfect Pizza acquisition in 2000 as compared to only a partial year impact of each of these items in 1999,
as well as the goodwill amortization related to restaurants purchased during 2000. The purchase of
Perfect Pizza in November 1999 resulted in $30.9 million of goodwill. Total goodwill amortization for the
Company was $2.6 million in 2000 compared to $1.1 million in 1999.
Net Interest. Net interest expense was $5.8 million in 2000 compared to net interest income of $3.2
million in 1999, due to the cash used and debt incurred to fund the stock repurchase program.
Income Tax Expense. The effective income tax rate increased to 38.3% in 2000 compared to 37.6% for
1999, due primarily to the sale of certain tax-exempt investments during the fourth quarter of 1999 to fund
the Perfect Pizza acquisition and to begin funding of the stock repurchase program.
Operating Income and Earnings Per Common Share. Operating income in 2000 was $57.4 million, or
6.1% of total revenues, as compared to $72.5 million or 9.0% of total revenues. Excluding the special
charge in 2000 and the advertising litigation expense in both years, operating income in 2000 was $82.5
million, or 8.7% of total revenues, compared to $78.6 million, or 9.8% of total revenues, in 1999. The
decline in 2000 operating income as a percentage of sales as compared to 1999 was principally due to a
decrease in the restaurant operating margin and the previously mentioned increase in general and
administrative expenses.
Diluted earnings per share in 2000 was $1.28 compared to $1.52 in 1999. Excluding the special charge
and advertising litigation, diluted earnings per share in 2000 was $1.90 compared to $1.64 in 1999. In
December 1999, the Company began a repurchase program of its common stock. Through December 31,
2000, a total of 7.6 million shares were repurchased under this program. The repurchase of the
Company's common shares resulted in a $0.11 increase in the diluted earnings per share for 2000 as
compared to 1999.
1999 Compared to 1998
Revenues. Total revenues increased 18.1% to $805.3 million in 1999, from $682.2 million in 1998.