Papa Johns 2006 Annual Report Download - page 41

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38
Minority interests and other general expenses reflected net expense of $4.4 million in 2006, as compared
to $6.9 million in 2005 as detailed below (in millions): Increase
2006 2005 (Decrease)
Minority interests income 1.6$ 0.7$ 0.9$
Disposition and valuation-related costs of other assets 1.7 2.1 (0.4)
Provision for uncollectible accounts and notes receivable 0.9 2.4 (1.5)
Pre-opening costs 0.5 0.1 0.4
Contribution to Marketing Fund - 1.8 (1.8)
Goodwill impairment - 1.1 (1.1)
Closing of the Jackson, MS commissary - 0.9 (0.9)
Gain on sale of domestic Company-owned restaurants - (2.2) 2.2
Other (0.3) - (0.3)
Total minority interests and other general expenses 4.4$ 6.9$ (2.5)$
Depreciation and amortization was $27.2 million (2.7% of revenues) for 2006, as compared to $28.8
million (3.0% of revenues) for 2005. The primary reasons for the decline in depreciation and
amortization in 2006, as compared to corresponding 2005 period, were due to the sale of the 84
Company-owned restaurants at the beginning of the fourth quarter of 2005 and certain assets becoming
fully depreciated in late 2005.
Net interest. Net interest expense was $1.8 million in 2006, compared to $3.1 million in 2005. The
interest expense for 2006 and 2005 includes approximately $635,000 and $772,000, respectively, related
to BIBP’s debt with a third-party bank. The decrease in our 2006 net interest expense reflects a lower
average outstanding debt balance in 2006 and an increase in investment income.
Income Tax Expense. The effective income tax rate was 34.5% for 2006 compared to 36.4% for 2005.
The decrease in the effective tax rate in 2006 is primarily due to the settlement of certain income tax
issues in 2006, which reduced income tax expense approximately $2.5 million.
2005 Compared to 2004
Variable Interest Entities
The consolidation of BIBP had a significant impact on our operating results in both 2005 and 2004. BIBP
reported pre-tax income of $4.5 million in 2005 as compared to a pre-tax loss of $23.5 million in 2004.