Papa Johns 2007 Annual Report Download - page 58

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51
Cash flow provided by operating activities from continuing operations decreased to $61.6 million in 2007
from $85.2 million in 2006. The consolidation of BIBP decreased cash flow from operations by
approximately $31.7 million in 2007 and increased cash flow from operations approximately $19.0
million in 2006 (as reflected in the net income and deferred income taxes captions in the accompanying
“Consolidated Statements of Cash Flows”). Excluding the impact of the consolidation of BIBP, cash
flow from continuing operations was $93.3 million in 2007, as compared to $66.2 million in the
corresponding 2006 period. The $27.1 million increase was primarily due to an increase in net income
and an improvement in working capital including accounts receivable, inventories and accounts payable.
Cash flow provided by operating activities from continuing operations increased to $85.2 million in 2006
from $82.1 million in 2005. The consolidation of BIBP increased cash flow from operations by
approximately $19.0 million in 2006 and $4.5 million in 2005. Excluding the impact of the consolidation
of BIBP, cash flow from continuing operations decreased $11.4 million in 2006 as compared to 2005,
primarily due to unfavorable working capital changes with accounts receivable and other liabilities. The
2006 operating cash flows were negatively impacted by increased payments of claim liabilities related to
insurance policies issued by the Company’s captive insurance subsidiary in 2000 through 2004. The 2005
operating cash flows were favorably impacted by the collection of unusually high prior year accounts
receivable balances. In addition, a decrease in cash flow from continuing operations occurred due to the
classification in 2006 of $6.5 million of excess tax benefits related to the exercise of non-qualified stock
options from operating activities to financing activities as required by SFAS No. 123(R).
During 2007 and 2006, we acquired 63 and 65 Papa John’s restaurants, respectively, as summarized
below (dollars in thousands).
Acquistion Number of Cash Recorded
Month Location Restaurants Paid Goodwill
2007
Period 2 Pennsylvania 4 1,000$ 779$
Period 4 Georgia 13 7,400 6,465
Period 7 Missouri and Kansas 31 10,306 7,266
Period 8 Maryland 11 6,062 4,663
Other 4 215 -
Total 2007* 63 24,983$ 19,173$
2006
Period 2 Pennsylvania 3 568$ 361$
Period 6 Mexico City, Mexico 3 632 -
Period 8 Arizona 43 17,658 14,190
Period 10 North Carolina 11 8,800 7,995
Period 12 Beijing, China 5 4,285 3,592
Total 2006* 65 31,943$ 26,138$
*Substantially all of the remaining purchase price was allocated to acquired property and equipment.
The restaurant acquisitions for 2007 and 2006 were accounted for by the purchase method of accounting,
whereby operating results subsequent to the acquisition are included in our consolidated financial results.
We do not expect to have any significant acquisitions of domestic restaurants during 2008. The Company
plans to implement a formal refranchising initiative during 2008, the goal of which is to increase the
percentage of franchised units in the domestic restaurant portfolio over time. The Company believes