Papa Johns 2008 Annual Report Download - page 46

Download and view the complete annual report

Please find page 46 of the 2008 Papa Johns annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 114

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114

39
Total revenues, which increased 6.4% to $1.13 billion in 2008 compared to $1.06 billion in 2007,
primarily consisted of the following:
• Domestic Company-owned restaurant revenues increased $28.9 million reflecting an increase in
comparable sales results of 1.7% and a 3.4% increase in equivalent units as compared to 2007.
The increase in equivalent units was due to the acquisition of restaurants from franchisees during
the third quarter of 2007, partially offset by the divestiture of restaurants to franchisees during
the fourth quarter of 2008. “Comparable sales” represents sales generated by restaurants open for
the entire twelve-month period reported. “Equivalent units” represents the number of restaurants
open at the beginning of a given period, adjusted for restaurants opened, closed, acquired or sold
during the period on a weighted average basis.
• Franchise royalties increased $4.4 million, or 8.0%, in 2008 primarily due to the increase in the
royalty rate from 4.0% to 4.25% for the majority of domestic franchise restaurants effective at
the beginning of 2008. Comparable sales increased 0.6% in 2008.
• Franchise and development fees decreased $3.2 million resulting from fees collected from the
franchise renewal program in the fourth quarter of 2007. Additionally, there were fewer
franchise openings during 2008 and a lower average fee per opening due to the existence of
certain development incentive programs.
• Domestic commissary sales increased $30.0 million, or 7.5%, due to increases in the prices of
certain commodities, including cheese and wheat. The commissary charges a fixed dollar mark-
up on its cost of cheese, and cheese cost is based upon the BIBP block price, which increased
from an average of $1.45 per pound in 2007 to an average of $1.81 per pound in 2008 or a 24.8%
increase. The cost of wheat, as measured on domestic commodity markets, increased
approximately 43% in 2008 as compared to 2007.
• International revenues increased $7.5 million, or 24.2%, reflecting the increase in both the
number and average unit volumes of our Company-owned and franchised restaurants over the
past year.
Our income from continuing operations before income taxes totaled $56.8 million in 2008, as compared
to $46.0 million in 2007 as summarized in the following table on an operating segment basis (in
thousands):
Increase
2008 2007 (Decrease)
Domestic Company-owned restaurants 19,997$ 25,407$ (5,410)$
Domestic commissaries 30,235 35,847 (5,612)
Domestic franchising 53,610 51,466 2,144
International (7,193) (8,734) 1,541
All others 9,175 6,348 2,827
Unallocated corporate expenses (36,154) (31,454) (4,700)
Minority interests and other (2,354) (1,143) (1,211)
Total income from continuing operations before income taxes
(excluding variable interest entities) 67,316 77,737 (10,421)
Variable interest entities (10,540) (31,709) 21,169
Total income from continuing operations before income taxes 56,776$ 46,028$ 10,748$