Papa Johns 2006 Annual Report Download - page 44

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41
operating loss of $4.3 million in 2004. The decrease in operating results was principally due to
the $1.1 million impairment charge associated with the United Kingdom subsidiary.
• All Others Segment. The operating income for the “All others” reporting segment increased
approximately $1.7 million, primarily due to increased sales from our print and promotions
operations and an incremental $1.0 million charge incurred by the franchise insurance program
during 2004 related to claims loss reserves.
• Unallocated Corporate Segment. The increase in unallocated corporate expenses of $20.1
million occurred primarily due to the following (in millions):
Increase
(Decrease)
Business unit and corporate management bonuses 7.3$
Equity compensation and executive performance
unit incentive plan 2.1
Professional fees 3.7
Employee benefits costs 1.6
Contribution to the Marketing Fund 1.8
Reduced allocation to operating units and other 5.5
Lease accounting adjustments recorded in 2004 (1.9)
Total increase 20.1$
The increase in business unit and corporate management bonuses was the result of meeting pre-
established performance goals in 2005 as compared to minimal bonuses earned in 2004. The increased
equity compensation charge was primarily related to the performance unit component of the 2005
executive incentive compensation program. The ultimate cost associated with the performance units is
based on the Company’s ending stock price and total shareholder return relative to a peer group over a
three-year performance period ending in December 2007, with the awards paid in cash at the end of the
performance period. There were no such performance units outstanding in 2004.
The increased professional fees were primarily related to consulting expenses associated with certain
marketing and franchisee effectiveness projects. The increase in employee benefits costs consisted
primarily of payroll taxes associated with an increased level of stock option exercises and an increase in
the employer portion of FICA taxes paid on employee tips and increased health insurance costs. The
Company made a discretionary contribution of $1.8 million to the Papa John’s Marketing Fund to fund
an additional national television advertising flight in 2005 related to the launch of Papa’s Perfect Pan
Pizza. The 2004 results included certain lease and leasehold accounting adjustments amounting to $1.9
million.
Diluted earnings per share from continuing operations were $1.29 (including an $0.08 per diluted share
gain from the consolidation of BIBP) in 2005, compared to $0.58 (including a $0.42 per diluted share
loss from the consolidation of BIBP) in 2004. In December 1999, we began a repurchase program for our
common stock. Since the inception of the share repurchase program in 1999 through the end of 2005, an
aggregate of $495.9 million of shares had been repurchased (representing 34.7 million shares, at an
average price of $14.29 per share. The share repurchases activity during 2005 increased earnings per
diluted share from continuing operations by approximately $0.04.