Papa Johns 2010 Annual Report Download - page 53

Download and view the complete annual report

Please find page 53 of the 2010 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 110

  • 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

46
The restaurant impairment and disposition losses recorded in 2008 primarily relate to the above-
mentioned sale of restaurants.
•
Domestic Commissary Segment. Domestic commissaries’ operating income decreased
approximately $800,000 in 2009 as compared to 2008. The decline in operating income was
primarily due to pricing reductions, $800,000 of management transition costs and $400,000 of
costs associated with the closing of one of our commissaries. The decline in our operating
income due to these factors was substantially offset by a decline in fuel costs for 2009.
•
Domestic Franchising Segment. Domestic franchising operating income increased
approximately $100,000 to $53.7 million for the year ended December 27, 2009, from $53.6
million in the prior comparable period. The increase was primarily due to an increase in
franchise royalties resulting from a 0.25% increase in the royalty rate effective in the last four
months of 2009.
The increase associated with royalties was substantially offset by lower franchise and
development fees due to fewer unit openings in 2009 and $500,000 in franchise renewal fees
collected in 2008 in connection with the domestic franchise renewal program that were not
replicated in 2009. The impact of the increased royalty rate for 2009 was also offset partially by
additional development incentive programs offered by the Company in 2009. During 2009,
incentive payments of $440,000 were made to certain franchisees under our 25
th
Anniversary
development incentive program for opening new units in advance of previously scheduled dates.
•
International Segment. The international segment reported an operating loss of $3.1 million in
2009 as compared to a loss of $7.2 million in 2008, comprised of the following (in thousands):
Year Ended Year Ended
December 27, December 28, Increase
2009 2008 (Decrease)
Operating income, excluding goodwill
impairment and other charges (2,586)$ (4,893)$ 2,307$
Goodwill impairment (a) - (2,300) 2,300
Other (b) (464) - (464)
Total segment operating loss
(3,050)
$
(7,193)
$
4,143
$
(a) The goodwill impairment charge was associated with our United Kingdom
operations.
(b) Included pre-opening costs in 2009 associated with our commissary in the
United Kingdom that was under construction and costs associated with the
closure of a Company-owned restaurant in China.
The improvement in operating losses, excluding goodwill impairment and other charges, reflects
increased revenues due to growth in number of units and unit volumes.
•
All Others Segment. Operating income for the “All others” reporting segment decreased
approximately $6.5 million for the year ended December 27, 2009, as compared to the
corresponding 2008 period. The decrease was primarily due to a $3.9 million decline in
profitability in our online ordering system business, a $1.3 million decline at Preferred, and due
to the 2008 period including more favorable adjustments in claims loss reserves associated with