Papa Johns 2009 Annual Report Download - page 60

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53
Other general expenses reflected net expense of $19.0 million in 2008, as compared to $6.9 million in
2007 as detailed below (in thousands):
Increase
2008 2007 (Decrease)
Restaurant impairment and disposition losses (a) 8,818$ 1,807$ 7,011$
Disposition and valuation-related costs 1,381 2,981 (1,600)
Provisions for uncollectible accounts and notes receivable (b) 4,511 218 4,293
Pre-opening restaurant costs 250 371 (121)
Marketing contributions (c) 4,267 1,000 3,267
Other (227) 537 (764)
Total other general expenses 19,000$ 6,914$ 12,086$
(a) Primarily represents losses associated with the divestiture of 62 Company-owned domestic units
during 2008. In addition, we recorded a goodwill impairment charge of $2.3 million during 2008
associated with our United Kingdom operations.
(b) The increase in the provisions for uncollectible accounts and notes receivable was primarily due to
our evaluation of the collectability of our loan issued in connection with the 2006 sale of the Perfect
Pizza operations and a loan issued to one domestic franchisee.
(c) We 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.
Depreciation and amortization was $32.8 million (2.9% of revenues) for 2008, as compared to $31.9
million (3.0% of revenues) for 2007. The primary reason for the dollar increase in depreciation and
amortization in 2008, as compared to 2007, was due to the acquisition of 42 domestic franchised
restaurants during the third quarter of 2007, capital additions we made within our restaurant operations
and the addition of certain information technology assets.
Net interest.
Net interest expense was $6.7 million in 2008, compared to $6.0 million in 2007. The
interest expense for 2008 and 2007 included approximately $700,000 and $500,000, respectively, related
to BIBP’s debt with a third-party bank. The increase in our 2008 net interest expense reflected lower
investment income than in the 2007 period.
Income Tax Expense.
We recognized reductions of $1.7 million and $3.4 million in our customary
income tax expense associated with the finalization of certain income tax issues in 2008 and 2007,
respectively. Our effective income tax rate was 34.0% in 2008 compared to 28.3% in 2007.