Papa Johns 2007 Annual Report Download - page 44

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37
Our income from continuing operations before income taxes totaled $46.0 million in 2007, as compared
to $96.2 million in 2006 as summarized in the following table on an operating segment basis (in
thousands):
Increase
2007 2006 (Decrease)
Domestic Company-owned restaurants 25,407$ 33,176$ (7,769)$
Domestic commissaries 35,847 34,690 1,157
Domestic franchising 51,466 51,543 (77)
International (8,734) (8,874) 140
All others 6,348 5,628 720
Unallocated corporate expenses (31,454) (37,523) 6,069
Elimination of intersegment profits, including minority interest income (1,143) (1,470) 327
Total income from continuing operations before income taxes
(excluding Variable interest entities) 77,737 77,170 567
Variable interest entities (31,709) 18,987 (50,696)
Total income from continuing operations before income taxes 46,028$ 96,157$ (50,129)$
Excluding the impact of the consolidation of BIBP (pre-tax loss of $31.7 million or $0.68 per diluted
share in 2007 and a pre-tax gain of $19.0 million or $0.36 per diluted share in 2006), 2007 income from
continuing operations before income taxes was $77.7 million (7.3% of total revenues), compared to $77.2
million (7.7% of total revenues) in 2006. Our fiscal year 2007 includes 52 weeks of operations, compared
to 53 weeks in fiscal year 2006. The additional week of operations in 2006 increased our pre-tax income
by approximately $3.5 million, or $0.07 per diluted share. The $567,000 increase in income from
continuing operations before income taxes (including the 53rd week in 2006 and excluding the
consolidation of BIBP) was principally due to the following:
• Domestic Company-owned Restaurant Segment. Domestic Company-owned restaurants’
operating income decreased $7.8 million in 2007 as compared to 2006. Approximately $1.6
million of the decrease was related to the 53rd week of operations in 2006. The remaining decline
in operating income was primarily due to an increase in labor costs (including the impact of a
federal minimum wage increase in July 2007 and certain other minimum wage increases in
various states), increased commodity costs and other operating costs. In addition, the 2007 results
include a charge of $1.5 million associated with the closure or impairment of certain restaurants
and a $594,000 pre-tax gain associated with the termination of a lease agreement in 2007.
• Domestic Commissary Segment. Domestic commissaries’ operating income increased
approximately $1.2 million (the increase in 2007 was $2.4 million, excluding the $1.2 million
impact of the 53rd week on 2006 operating results). The increase in operating income was due to
increased volumes of higher margin fresh dough products and improved margin from other
commodities, partially offset by a $600,000 contribution to the Papa John’s Marketing Fund.
• Domestic Franchising Segment. Domestic franchising operating income was relatively flat
year-over-year, 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.
• International Segment. The international operating results, which exclude the Perfect Pizza
operations in the United Kingdom that were sold in March 2006, reported operating losses of