Papa Johns 2011 Annual Report Download - page 45

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40
domestic franchisees for meeting certain sales targets, including driving comparable sales,
transactions and online sales in 2011 and $1.7 million in incentives to franchisees for opening new
restaurants.
(c) The Perfect Pizza lease obligation relates to rents, taxes and insurance associated with the former
Perfect Pizza operations in the United Kingdom.
(d) Other expense increased primarily due to costs associated with our online customer loyalty program.
Depreciation and amortization was $32.7 million, or 2.7% of revenues, for 2011 as compared to $32.4
million, or 2.9% of revenues, for 2010.
Net interest. Net interest expense was approximately $740,000 in 2011, compared to $4.5 million in 2010.
The decrease in net interest costs reflects a lower average outstanding debt balance and lower effective
interest rates.
Income Tax Expense. We recognized reductions of $1.9 million and $550,000 in our income tax expense
associated with the finalization of certain income tax issues in 2011 and 2010, respectively. Our effective
income tax rate was 31.2% in 2011 compared to 32.6% in 2010 (32.3% in 2010, excluding BIBP). Our
effective income tax rate may fluctuate for various reasons, including the settlement or resolution of
specific federal and state issues.
2010 Compared to 2009
Discussion of Revenues
Total revenues, which increased 4.4% to $1.13 billion in 2010 compared to $1.08 billion in 2009,
primarily consisted of the following:
• Franchise royalties revenue increased $7.5 million primarily due to an increase in the royalty rate
(the standard royalty rate for the majority of domestic franchise restaurants increased from 4.25%
at the beginning of 2009 to 4.50% in September 2009 and increased to 4.75% in the first quarter
of 2010).
• Domestic commissary sales increased $36.8 million primarily due to an increase in sales
volumes.
• International revenues increased $6.4 million primarily due to an increase in the number of our
franchised international restaurants.
The increases noted above were partially offset by a $2.1 million decline in domestic other sales primarily
due to a decline in sales at Preferred. Additionally, domestic Company-owned restaurant sales decreased
approximately $550,000 primarily due to a decrease of 0.6% in comparable sales for domestic Company-
owned restaurants for the year.