Papa Johns 2007 Annual Report Download - page 47

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40
and Qualitative Disclosures About Market Risk for additional information regarding BIBP and
movement in the cheese price during the years.
We recognized reductions of $3.4 million and $2.5 million in our customary income tax expense
associated with the finalization of certain income tax issues in 2007 and 2006, respectively. The effective
income tax rate was 28.9% for the year ended December 30, 2007, compared to 34.5% for the
corresponding 2006 period.
Diluted earnings per share from continuing operations were $1.09 (including a $0.68 per diluted share
loss from the consolidation of BIBP and an $0.11 gain from the finalization of certain income tax issues)
in 2007, compared to $1.91 (including a $0.36 per diluted share gain from the consolidation of BIBP, an
$0.08 gain from the finalization of certain income tax issues and a $0.07 benefit from the 53rd week of
operations) in 2006. Since the inception of the share repurchase program in 1999 through the end of
2007, an aggregate of $675.0 million of shares have been repurchased (representing 40.8 million shares,
at an average price of $16.55 per share). Share repurchase activity during 2007 increased earnings per
diluted share from continuing operations by approximately $0.02 ($0.09 excluding the impact of the
consolidation of BIBP).
Review of Operating Results
Revenues. Domestic Company-owned restaurant sales were $504.3 million for 2007 compared to $447.9
million for 2006. The 12.6% increase was primarily due to an increase of 16.5% in equivalent Company-
owned units, reflecting the acquisition of 54 restaurants during the last five months of 2006 and 61
restaurants during 2007, partially offset by the impact of the 53rd week of operations in 2006 ($9.0
million). Our Company-owned restaurants reported an increase in comparable sales of 0.5% and 3.6% in
2007 and 2006, respectively.
Variable interest entities restaurant sales include restaurant sales for franchise entities to which we have
extended loans that qualify as VIEs. Revenues from these restaurants totaled $7.1 million in 2007 as
compared to $7.9 million in 2006.
Domestic system-wide franchise sales decreased 3.0% to $1.46 billion in 2007, from $1.51 billion for the
comparable period in 2006, primarily resulting from a 1.6% decrease in equivalent units during 2007
from the purchase of restaurants by the Company and the impact of the 53rd week of operations in 2006.
Domestic franchise royalties decreased 1.9% to $55.3 million in 2007 from $56.4 million for the
comparable period in 2006 primarily due to a decrease in franchise sales resulting from the decrease in
equivalent units and the impact of the 53rd week of operations in 2006. Comparable sales increased 0.3%
and 2.9% in 2007 and 2006, respectively.