Papa Johns 2004 Annual Report Download - page 29

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28
Year Ended
Dec. 26, Dec. 28, Dec. 29,
2004 2003 2002
Perfect Pizza Restaurant Progression:
Company-owned
Beginning of period - - 3
Converted (9) - - (3)
End of period - - -
Franchised
Beginning of period 135 144 190
Opened 2 2 2
Closed (18) (11) (6)
Converted (9) (1) - (42)
End of period 118 135 144
Total restaurants - end of period 118 135 144
(1) As a percentage of Domestic Company-owned Restaurant sales.
(2) As a percentage of Domestic Variable interest entities restaurant sales.
(3) As a percentage of Domestic Commissary sales and Other sales on a combined basis.
(4) The loss is a result of the consolidation of BIBP, a VIE. The sales reported by BIBP are eliminated
in consolidation.
(5) As a percentage of International Restaurant and commissary sales.
(6) See “Note 10” of “Notes to Consolidated Financial Statements.”
(7) See “Note 7” of “Notes to Consolidated Financial Statements.”
(8) Includes only Company-owned restaurants open throughout the periods being compared.
(9) Represents Perfect Pizza restaurants converted to Papa John’s restaurants.
2004 Compared to 2003
Variable Interest Entities
As required by FIN 46, our 2004 operating results include BIBP’s operating results. The consolidation of
BIBP had a significant impact on our operating results in 2004 and is expected to have a significant
ongoing impact on our future operating results and income statement presentation as described below.
Consolidation accounting requires the net impact from the consolidation of BIBP to be reflected
primarily in two separate components of our statement of income. The first component is the portion of
BIBP operating income or loss attributable to the amount of cheese purchased by Company-owned
restaurants during the period. This portion of BIBP operating income (loss) is reflected as a reduction
(increase) in the “Domestic Company-owned restaurant expenses - cost of sales” line item. This
approach effectively reports cost of sales for Company-owned restaurants as if the purchasing
arrangement with BIBP did not exist and such restaurants were purchasing cheese at the spot market
prices (i.e., the impact of BIBP is eliminated in consolidation).
The second component of the net impact from the consolidation of BIBP is reflected in the caption “Loss
from the franchise cheese-purchasing program, net of minority interest”. This line item represents BIBP’s
income or loss from purchasing cheese at the spot market price and selling to franchised restaurants at a
fixed quarterly price, net of any income or loss attributable to the minority interest BIBP shareholders.