Papa Johns 2006 Annual Report Download - page 40

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37
• Salaries and benefits were 0.8% lower as a percentage of sales in 2006, due to staffing efficiencies
and the benefit of pricing increases.
• Advertising and related costs as a percentage of sales were 0.5% higher in 2006, as compared to the
corresponding 2005 period.
• Occupancy and other operating costs, on a combined basis, as a percentage of sales were
substantially flat year-over-year, as increases in utilities and mileage reimbursement to our team
members were offset from the benefit obtained from the leverage of increased sales.
Domestic commissary and other margin was 10.7% in 2006, compared to 9.1% in 2005. Cost of sales
were 72.6% of revenues in 2006, compared to 73.6% for the same period in 2005, primarily due to lower
cheese costs incurred by our commissaries (cheese has a fixed-dollar as opposed to fixed-percentage
mark-up). Salaries and benefits as a percentage of sales were 7.0% in 2006, compared to 6.4% in 2005.
Other operating expenses decreased to 9.7% in 2006, compared to 10.9% in 2005, primarily as a result of
a decrease in claims loss reserves related to the franchise insurance program recorded during 2006 as
compared to 2005.
We recorded income from the franchise cheese-purchasing program, net of minority interest, of $15.2
million in 2006, compared to income of $4.7 million for the comparable period in 2005. These results
only represent the portion of BIBP’s operating income or loss related to the proportion of BIBP cheese
sales to franchisees. The total impact of the consolidation of BIBP on Papa John’s pre-tax income from
continuing operations was income of $19.0 million in 2006, compared to income of $4.5 million in 2005
(see the previous table which summarizes BIBP’s operating results for 2006 and 2005).
General and administrative expenses were $102.9 million, or 10.3% of revenues for 2006, as compared to
$88.5 million or 9.1% of revenues for 2005. The increase of $14.4 million in 2006 was primarily
attributable to the following:
Increase
(Decrease)
Equity compensation and executive performance
unit incentive plan 3.0$
Employee benefits costs 2.0
Marketing for non-traditional restaurant initiatives 2.4
Development of international support infrastructure 3.3
Domestic operations field organization restructuring 2.0
Other 1.7
Total increase
14.4
$