Papa Johns 2007 Annual Report Download - page 100

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93
22. Segment Information (continued)
(4) The operating results for the domestic franchising segment were relatively flat in 2007 compared to
2006, as an increase in our field organizational support staff in 2007 to improve the support of our
domestic franchise operations and the inclusion of $1.0 million of additional royalty revenue in 2006
related to the 53rd week of operations, was substantially offset by the collection of fees of $2.0
million in the fourth quarter of 2007 associated with our franchise renewal program. The 2006
increase of $1.7 million in domestic franchising operating income included approximately $1.0
million related to the 53rd week of operations. The increase reflected an increase in royalties of $4.1
million due to an increase of 2.9% in comparable sales for domestic franchisees and an increase in
equivalent units during 2006. The increase in royalties during 2006 was partially offset by an
increase in administrative costs related to the field organizational restructuring implemented in late
2005 to better drive the performance of our domestic franchise operations.
(5) The international segment, which excludes the Perfect Pizza operations that were sold in March
2006, reported operating losses of $8.7 million in 2007 as compared to a loss of $8.9 million in 2006.
Increased current year revenues due to growth in number of units and unit volumes were
substantially offset by increased personnel and infrastructure investment costs. The decline in
operating results in 2006, as compared to 2005, was principally due to increased costs related to the
development of our support infrastructure throughout the international segment, including the United
Kingdom, to support the accelerated development of both Company-owned and franchised Papa
John’s branded restaurants in our international markets. In addition, the Company incurred a
$470,000 charge in 2006 related to the reorganization of one of our international operating units.
During 2005, the international segment recorded a $1.1 million impairment charge associated with
the United Kingdom subsidiary. The 53rd week of operations in 2006 did not have a significant
impact on this segment.
(6) Represents BIBP’s operating income (loss), net of minority interest income for each year.
(7) Unallocated corporate expenses decreased approximately $6.1 million in 2007 as compared to 2006
and increased $3.4 million in 2006 as compared to 2005. The 2007 decrease is primarily due to lower
general and administrative costs, including management incentives, workers’ compensation, non-
owned automobile and health insurance programs, offset by an increase in interest expense. The 2006
increase is due to a $3.0 million increase in equity compensation and executive performance unit
incentive compensation, increased marketing efforts of $2.4 million, primarily related to non-
traditional initiatives, partially offset by a $1.8 million contribution to the Papa John’s Marketing
Fund during 2005 to fund additional flights related to the launch of Papa’s Perfect Pan Pizza.