Papa Johns 2008 Annual Report Download - page 49

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42
which the Company expects to recognize $2.3 million in 2009, $1.0 in 2010 and
$200,000 in 2011.
(2) Performance units were awarded in 2005 and 2006 to certain members of management,
with each award having a three-year performance period; no such awards were made
prior to 2005 or after 2006. The ultimate cost associated with the performance units was
based on the Company’s ending stock price and total shareholder return relative to a peer
group over the three-year performance period ending in December 2007 for the 2005
program and December 2008 for the 2006 program, with the award value paid in cash
following the end of the respective performance periods. A 2007 change in employment
status of our Founder Chairman impacted the cost associated with this incentive program
in that year.
(3) The annual management incentive bonus plan is based on the Company’s annual
operating income performance and certain sales and cost control measures as compared
to pre-established targets.
(b) The Company contributed discretionary contributions to the national marketing fund and
other local advertising cooperatives in both 2007 and 2008. The majority of the 2008
contributions were in response to our previously mentioned domestic franchise system
support initiatives.
(c) The increases in the provisions for uncollectible accounts and notes receivable were
primarily due to our evaluation of the collectibility of our loan issued in connection with the
2006 sale of the Perfect Pizza operations and a loan issued to one domestic franchisee.
(d) The 2007 results included the write-off of certain obsolete corporate equipment and
software.
• Variable Interest Entities. BIBP incurred an operating loss of $10.5 million in 2008, which was
composed of losses associated with cheese sold to domestic Company-owned restaurants and
franchise restaurants of $2.1 million and $6.3 million, respectively. For 2007, BIBP reported an
operating loss of $31.7 million, which was primarily composed of losses associated with cheese
sold to domestic Company-owned restaurants and franchise restaurants of $8.0 million and $22.9
million, respectively. The remainder of the loss in both 2008 and 2007 was primarily composed
of interest expense on outstanding debt with a third-party bank and Papa John’s. See Item 7A.
“Quantitative and Qualitative Disclosures About Market Risk” for additional information
regarding BIBP and the movement in cheese prices.
Diluted earnings per share were $1.30 in 2008 (including a $0.24 loss from the consolidation of BIBP, a
$0.06 gain from the finalization of certain income tax issues and a $0.20 loss from restaurant closure,
impairment and disposition losses) compared to $1.09 per diluted share in 2007 (including a $0.68 loss
from the consolidation of BIBP, an $0.11 gain from the finalization of certain income tax issues and a
$0.04 loss from restaurant closure, impairment and disposition losses). Since the inception of the share
repurchase program in 1999 through the end of 2008, an aggregate of $712.7 million of shares have been
repurchased (representing 42.2 million shares, at an average price of $16.89 per share). Share repurchase
activity during 2008 increased earnings per diluted share from continuing operations by approximately
$0.01 ($0.02 excluding the impact of the consolidation of BIBP).