Papa Johns 2008 Annual Report Download - page 44

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37
(1) We operate on a 52-53 week fiscal year ending on the last Sunday of December of each year. The
2008 and 2007 fiscal years consisted of 52 weeks, and the 2006 fiscal year consisted of 53 weeks.
The additional week resulted in additional revenues of approximately $20.0 million and additional
pre-tax income of approximately $3.5 million, or $0.07 per diluted share for 2006.
(2) As a percentage of domestic Company-owned restaurant sales.
(3) As a percentage of domestic variable interest entities restaurant sales.
(4) As a percentage of domestic commissary sales and other sales on a combined basis.
(5) As a percentage of total Company revenues; the loss (income) is a result of the consolidation of
BIBP, a VIE. The sales reported by BIBP are eliminated in consolidation.
(6) As a percentage of international restaurant and commissary sales.
(7) Includes only Company-owned restaurants open throughout the periods being compared.
(8) The Perfect Pizza operations are classified as “discontinued operations,” as the operations were
sold in March 2006. See “Note 3” of “Notes to Consolidated Financial Statements.”
2008 Compared to 2007
Variable Interest Entities
As required by FIN 46, Papa John’s is deemed the primary beneficiary of BIBP; accordingly, our
operating results include BIBP’s operating results. The consolidation of BIBP had a significant impact on
our operating results in both 2008 and 2007 (pre-tax loss of $10.5 million in 2008 and pre-tax loss of
$31.7 million in 2007) and is expected to have a significant ongoing impact on our future operating
results and income statement presentation as described below.
Consolidation accounting requires the net impact from the consolidation of BIBP to be reflected
primarily in three separate components of our statement of income. The first component is the portion of
BIBP operating income or loss attributable to the amount of cheese purchased by Company-owned
restaurants during the period. This portion of BIBP operating income (loss) is reflected as a reduction
(increase) in the “Domestic Company-owned restaurant expenses - cost of sales” line item. This approach
effectively reports cost of sales for Company-owned restaurants as if the purchasing arrangement with
BIBP did not exist and such restaurants were purchasing cheese at the spot market prices (i.e., the impact
of BIBP is eliminated in consolidation).
The second component of the net impact from the consolidation of BIBP is reflected in the caption “Loss
(income) from the franchise cheese-purchasing program, net of minority interest.” This line item
represents BIBP’s income or loss from purchasing cheese at the spot market price and selling to
franchised restaurants at a fixed quarterly price, net of any income or loss attributable to the minority
interest BIBP shareholders. The amount of income or loss attributable to the BIBP shareholders depends
on its cumulative shareholders’ equity balance and the change in such balance during the reporting
period. The third component is reflected as investment income or interest expense, depending upon
whether BIBP is in a net investment or net borrowing position during the reporting period.
In addition, Papa John’s has extended loans to certain franchisees. Under FIN 46, Papa John’s is deemed
the primary beneficiary of certain franchisees even though we have no ownership interest in them.