Papa Johns 2011 Annual Report Download - page 47

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42
Domestic commissaries’ income before income taxes, excluding the BIBP Settlement, was $28.3
million in 2010, as compared to $29.4 million in 2009. The decrease of $1.1 million in income
before income taxes was primarily due to increased fuel costs, partially offset by an increase in
sales volumes, although at a lower gross margin percentage. The full-year 2010 gross margin
percentage included the impact of commodities cost increases we absorbed for certain vegetable
products resulting from harsh Florida winter weather and various rebate programs available to
restaurants for achieving certain sales improvement targets. Full-year 2009 included
approximately $800,000 of management transition costs and $400,000 of costs associated with
the closure of one of our commissaries.
• North America Franchising Segment. North America franchising income before income taxes
increased approximately $7.2 million to $62.2 million in 2010, from $55.0 million in 2009. The
increase was primarily due to an increase in franchise royalties (the standard royalty rate
increased from 4.25% to 4.50% in September 2009, and increased to 4.75% in the first quarter of
2010). The impact of the royalty rate increase was partially offset by the impact of development
incentive programs offered by the Company in 2009 and 2010. Franchise and development fees
were approximately $200,000 lower in 2010 than in the corresponding period, despite an increase
of 90 domestic unit openings during 2010 due to development incentive programs in place.
Additionally, we incurred incentive costs of $1.0 million in 2010, compared to $440,000 in 2009.
• International Segment. The international segment reported operating losses of approximately
$4.8 million in 2010 and $4.4 million in 2009. The increase in operating losses was due to
increased personnel and franchise support costs as well as from costs associated with the opening
of our new commissary in the United Kingdom, partially offset by increased revenues due to
growth in the number of international units.
• All Others Segment. Income before income taxes for the “All others” reporting segment
decreased approximately $850,000 in 2010 as compared to 2009. The decrease was primarily due
to increased costs in our online ordering business due to increased infrastructure and support
attributable to the new online ordering system introduced in October 2010. This decline was
partially offset by an improvement in operating results at Preferred, primarily due to cost
reductions implemented in 2009 and 2010.
• Unallocated Corporate Segment. Unallocated corporate expenses decreased approximately
$6.5 million in 2010 as compared to 2009. The components of unallocated corporate expenses
were as follows (in thousands):
Year Ended Year Ended
December 26,
2010
December 27,
2009
Increase
(Decrease)
General and administrative (a) 25,823$ 26,893$ (1,070)$
Net interest 4,120 4,251 (131)
Depreciation 8,873 8,684 189
Franchise support initiatives (b) 6,489 9,556 (3,067)
Provision (credit) for uncollectible
accounts and notes receivable (c) (340) 1,172 (1,512)
Other income (d) (1,699) (801) (898)
Total unallocated corporate expenses
43,266
$
49,755
$
(6,489)
$