Papa Johns 2012 Annual Report Download - page 48

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42
Variable Interest Entities. BIBP generated income before income taxes of $21.0 million in
2010, which primarily consisted of the BIBP Settlement and income associated with cheese sold
to domestic Company-owned and franchise restaurants of $1.7 million and $5.6 million,
respectively. BIBP reported break-even results for the first two months of 2011, at which time we
terminated the purchasing arrangement with BIBP. The following table summarizes the impact of
BIBP prior to the required consolidating eliminations on our consolidated statements of income
for the years ended December 25, 2011 and December 26, 2010 (in thousands):
Year Ended
December 25,
2011
December 26,
2010
BIBP sales 25,117$ 153,014$
Cost of sales 25,100 131,549
General and administrative expenses 17 91
Total costs and expenses 25,117 131,640
Operating income - 21,374
Interest expense - (420)
Income before income taxes (a) -$ 20,954$
(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 $2.16 in 2011, compared to $1.99 per diluted share in 2010 (including a
$0.16 per share gain from the consolidation of BIBP). Excluding the impact of BIBP in 2010, diluted
earnings per share increased $0.33, or 18.0% ($2.16 in 2011 compared to $1.83 in 2010). Diluted
weighted average shares outstanding decreased 4.4% in 2011 from the prior year period. Diluted earnings
per share increased $0.09 due to the reduction in shares outstanding.
Review of Consolidated Operating Results
Revenues. Domestic Company-owned restaurant sales were $525.8 million for 2011 compared to $503.3
million for 2010. The 4.5% increase was primarily due to a 4.1% increase in comparable sales.
North America franchise sales increased 6.1% to $1.71 billion, from $1.62 billion in 2010, as domestic
franchise comparable sales increased 3.1% and equivalent units increased 4.5%. North America franchise
royalties were $73.7 million, representing an increase of 5.8% from the comparable period. The increase
in royalties was primarily due to the previously noted increase in franchise sales. The impact of the
royalty rate increase to 5.0% (0.25% increase over 2010) was substantially offset by the franchisees’
ability to earn up to a 0.25% royalty rebate by meeting certain sales growth targets and an additional
0.20% royalty rebate by making specified re-imaging restaurant lobby investments.