Papa Johns 2001 Annual Report Download - page 34

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amortization expense beginning in 2002 (see “Note 2” of the “Notes to Consolidated Financial
Statements”).
Net Interest. Net interest expense was $6.9 million in 2001 compared to $5.8 million in 2000 due to an
increase in the average debt balance outstanding for 2001 incurred by the Company to fund our share
repurchase program, partially offset by lower effective interest rates. The average interest rate on our debt
was 6.6% in 2001 compared to 7.1% in 2000.
Income Tax Expense. The effective income tax rate was 37.7% in 2001 compared to 38.3% in 2000 due
primarily to effective state and local tax planning strategies.
Operating Income and Earnings per Common Share. Operating income in 2001 was $82.8 million, or
8.5% of total revenues, compared to $57.4 million, or 6.1% of total revenues in 2000. The increase in
2001 operating income as a percentage of sales was principally due to the impact of the special charges
recorded in 2000 ($20.9 million), a decrease in the provision for uncollectible notes receivable ($3.7
million), and a decrease in general and administrative expenses ($2.9 million). These increases in
operating income were partially offset by a decrease in restaurant operating margin.
Diluted earnings per share were $2.08 in 2001 compared to $1.28 in 2000. In December 1999, the
Company began a repurchase program for its common stock. Through December 30, 2001, a total of 8.9
million shares were repurchased under this program. The repurchase of the Company’s common shares
resulted in an increase in diluted earnings per share of approximately $0.11 in 2001 as compared to 2000.
2000 Compared to 1999
On November 29, 1999, our wholly owned subsidiary, Papa John’s UK, acquired Perfect Pizza Holdings
Limited, which, at the time of acquisition, operated and franchised 206 restaurants in the United Kingdom
(see “Note 3” of “Notes to Consolidated Financial Statements”). The Consolidated Statements of Income
contain financial results for Papa John’s UK for the full year in 2000 (reflecting total revenues of $28.7
million and operating income of $1.4 million) and financial results only for the month of December in
1999 (reflecting total revenues of $2.9 million and operating income of $332,000).
Revenues. Total revenues increased 17.3% to $944.7 million in 2000, from $805.3 million in 1999.
Domestic Company-owned restaurant sales increased 15.7% to $456.6 million in 2000, from $394.6
million in 1999. This increase was primarily due to a 13.2% increase in the number of equivalent
Company-owned restaurants open during 2000 as compared to 1999. Also, comparable sales increased
3.0% over 1999 and 2000 contained 53 weeks as compared to 52 weeks in 1999 (a 1.9% increase in
operating weeks).
Domestic franchise sales increased 17.6% to $1.21 billion in 2000, from $1.03 billion in 1999. This
increase primarily resulted from a 16.9% increase in the number of equivalent franchised domestic
restaurants open during 2000 compared to 1999. Also, comparable sales for franchised restaurants
increased 2.1% in 2000 and 2000 included the favorable impact of the above noted increase in operating
weeks. Domestic franchise royalties increased 16.2% to $47.1 million in 2000, from $40.6 million in
1999. This increase resulted from the increase in domestic franchise sales previously described.