Papa Johns 2011 Annual Report Download - page 48

Download and view the complete annual report

Please find page 48 of the 2011 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 100

  • 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

43
(a) Unallocated general and administrative costs decreased in 2010 due to lower salaries and
benefits, resulting from fewer employees and the fact that the prior year included $800,000 in
litigation settlement costs. Severance costs, net of forfeitures of unvested stock awards, were
also approximately $400,000 lower in 2010. These reductions were partially offset by an
increase in short-term incentive compensation expense.
(b) Franchise support initiatives primarily consist of discretionary contributions to the Marketing
Fund and other local advertising cooperatives.
(c) The reduction in the provision for uncollectible accounts and notes receivable was primarily
due to the collection of certain accounts that were previously reserved.
(d) The increase in other income was primarily due to sales of point-of-sale systems associated
with additional domestic openings.
• Variable Interest Entities. BIBP generated income before income taxes of $21.0 million in
2010, compared to $22.5 million in 2009. The following table summarizes the impact of BIBP
prior to the required consolidating eliminations on our consolidated statements of income for the
years ended December 26, 2010 and December 27, 2009 (in thousands):
Year Ended
December 26,
2010
December 27,
2009
BIBP sales 153,014$ 142,407$
Cost of sales 131,549 118,825
General and administrative expenses 91 233
Total costs and expenses 131,640 119,058
Operating income 21,374 23,349
Interest expense (420) (806)
Income before income taxes (a)
20,954
$
22,543
$
(a) Income before income taxes for the year ended December 26, 2010, was $6.8 million,
excluding the BIBP Settlement.
Diluted earnings per share were $1.96 in 2010 (including a $0.16 per share gain from the consolidation of
BIBP, excluding the BIBP Settlement), compared to $2.06 per diluted share in 2009 (including a $0.52
gain from the consolidation of BIBP and a $0.04 gain from the finalization of certain income tax issues).
Diluted weighted average shares outstanding decreased 5.2% in 2010 from the prior year period. Diluted
earnings per share, excluding BIBP, increased $0.09 due to the reduction in shares outstanding.
Review of Consolidated Operating Results
Revenues. Domestic Company-owned restaurant sales were $503.3 million for 2010 compared to $503.8
million for 2009. The 0.1% decrease was primarily due to a 0.6% decrease in comparable sales.
North America franchise sales increased 2.1% to $1.62 billion, from $1.58 billion in 2009, as comparable
sales increased 0.3% and equivalent units increased 4.3%. North America franchise royalties were $69.6
million, representing an increase of 12.2% from the comparable period. The increase in royalties was
primarily due to the previously mentioned increase in the standard royalty rate.