Papa Johns 2011 Annual Report Download - page 46

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41
Discussion of Operating Results
Our income before income taxes totaled $82.3 million in 2010, as compared to $90.2 million in 2009 as
summarized in the following table on an operating segment basis (in thousands):
Increase
2010 2009 (Decrease)
Domestic Company-owned restaurants 31,619$ 34,894$ (3,275)$
Domestic commissaries * 14,188 29,393 (15,205)
North America franchising 62,229 55,008 7,221
International (4,771) (4,368) (403)
All others 1,847 2,697 (850)
Unallocated corporate expenses (43,266) (49,755) 6,489
Elimination of intersegment profits (519) (218) (301)
Income before income taxes, excluding BIBP 61,327 67,651 (6,324)
BIBP, a variable interest entity * 20,954 22,543 (1,589)
Total income before income taxes
82,281
$
90,194
$
(7,913)
$
* The full-year 2010 results for domestic commissaries were reduced by the BIBP Settlement and the
full-year 2010 results for BIBP were increased by the BIBP Settlement. There was no impact on the
consolidated results of operations since PJFS and BIBP are fully consolidated into the Company’s
results.
Excluding the impact of the consolidation of BIBP (income before income taxes of $6.8 million,
excluding the BIBP Settlement, or $0.16 per diluted share in 2010, and income before income taxes of
$22.5 million or $0.52 per diluted share in 2009), 2010 income before income taxes was $75.5 million
(6.7% of total revenues), compared to $67.7 million (6.3% of total revenues) in 2009. The $7.8 million
increase in income before income taxes, excluding the consolidation of BIBP, was principally due to the
following:
• Domestic Company-owned Restaurant Segment. Domestic Company-owned restaurants’
income before income taxes decreased $3.3 million from the prior comparable period. The
decrease was primarily due to a decline in operating margin from lower average ticket prices due
to increased levels of discounting, partially offset by increased customer traffic and reductions in
labor costs as a result of labor efficiencies from implemented initiatives. The 2009 period
included restaurant closure costs of approximately $700,000. There were no significant closure
costs in 2010.
• Domestic Commissary Segment. Domestic commissaries’ income before income taxes
decreased $15.2 million in 2010 over the prior year, comprised of the following (in thousands):
Year Ended
December 26,
2010
Year Ended
December 27,
2009 Decrease
Income before income taxes, excluding the
BIBP Settlement 28,338$ 29,393$ (1,055)$
BIBP Settlement (14,150) - (14,150)
Total segment income before income taxes
14,188
$
29,393
$
(15,205)
$