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฀
35
bringing฀ distribution฀ in฀ house฀ at฀ certain฀ of฀ our฀ commissaries฀ from฀ a฀ third฀ party฀ provider.฀ ฀ In฀
addition,฀ we฀ had฀ one-time฀ dough฀ production฀ start฀ up฀ costs฀ at฀ our฀ New฀ Jersey฀ commissary฀ of฀
approximately฀$700,000฀in฀2013.
฀
•
North฀America฀Franchising฀Segment.฀North฀America฀franchising฀income฀before฀income฀taxes฀
increased฀ approximately฀ $900,000฀ in฀ 2013.฀ Excluding฀ the฀ impact฀ of฀ the฀ 53
rd
฀ week฀ in฀ 2012฀ of฀
approximately฀$1.4฀million,฀ income฀increased฀approximately฀$2.3฀million฀due฀ to฀the฀previously฀
mentioned฀ royalty฀ revenue฀ increase,฀ partially฀ offset฀ by฀ both฀ an฀ increase฀ in฀ incentives฀ and฀ a฀
reduction฀ in฀ royalties฀ attributable฀ to฀ the฀ Company’s฀ net฀ acquisition฀ of฀ the฀ 50฀ Denver฀ and฀
Minneapolis฀restaurants.฀
฀
•
International฀ Segment.฀ The฀ international฀ segment฀ reported฀ income฀ before฀ income฀ taxes฀ of฀
approximately฀ $2.8฀ million฀ in฀ 2013฀ compared฀ to฀ $3.1฀ million฀ in฀ 2012,฀ a฀ decrease฀ of฀
approximately฀$300,000.฀Excluding฀the฀2012฀impact฀of฀the฀53
rd
฀week฀of฀approximately฀$400,000,฀
income฀ increased฀ approximately฀ $150,000.฀ This฀ increase฀ was฀ primarily฀ due฀ to฀ the฀ increase฀ in฀
units฀ and฀ comparable฀ sales฀ of฀ 7.5%,฀ which฀ provided฀ higher฀ royalties.฀ Additionally,฀ United฀
Kingdom฀ results฀ improved฀ by฀ approximately฀ $1.0฀ million฀ due฀ to฀ increased฀ units฀ and฀ higher฀
comparable฀ sales.฀ These฀ increases฀ were฀ substantially฀ offset฀ by฀ higher฀ operating฀ losses฀ in฀ our฀
Company-owned฀China฀market฀of฀approximately฀$2.1฀million,฀including฀$215,000฀of฀incremental฀
losses฀ associated฀ with฀ the฀ additional฀ month฀ of฀ operations฀ in฀ the฀ fourth฀ quarter฀ of฀ 2013,฀ as฀
previously฀discussed.฀The฀losses฀in฀the฀China฀market฀include฀a฀reduction฀in฀operating฀results฀at฀
our฀Company-owned฀restaurants,฀primarily฀associated฀with฀new฀stores,฀as฀well฀as฀write฀off฀costs฀
associated฀with฀closing฀one฀location฀and฀the฀disposition฀of฀certain฀other฀assets.฀Additionally,฀2013฀
reflects฀higher฀infrastructure฀and฀support฀costs฀to฀expand฀in฀this฀ underpenetrated฀market.฀Based฀
on฀prior฀experience฀in฀underpenetrated฀markets,฀some฀operating฀losses฀can฀occur฀as฀the฀business฀
is฀being฀established.
฀
•
All฀ Others฀ Segment.฀ The฀ “All฀ others”฀ segment฀ income฀ increased฀ approximately฀ $600,000.฀
Excluding฀ the฀ impact฀ of฀ the฀ 53
rd
฀ week฀ in฀ 2012฀ of฀ approximately฀ $200,000,฀ income฀ increased฀
approximately฀ $800,000.฀ The฀ increase฀ was฀ primarily฀ due฀ to฀ an฀ improvement฀ in฀ our฀ online฀ and฀
mobile฀ ordering฀ (“eCommerce”)฀ business฀ due฀ to฀ higher฀ online฀ volumes.฀ This฀ increase฀ was฀
somewhat฀ offset฀ by฀ reduced฀ operating฀ results฀ at฀ our฀ wholly-owned฀ print฀ and฀ promotions฀
subsidiary,฀ Preferred฀ Marketing฀ Solutions฀ (“Preferred”),฀ due฀ to฀ reduced฀ cost฀ direct฀ mail฀
campaigns฀offered฀to฀our฀domestic฀franchised฀restaurants.
฀฀
•
Unallocated฀ Corporate฀ Segment.฀ ฀ Unallocated฀ corporate฀ expenses฀ decreased฀ $7.9฀ million.฀
Excluding฀ the฀ impact฀ of฀the฀ 53
rd
฀ week฀ and฀the฀ Incentive฀ Contribution฀ in฀ 2012฀ of฀ $5.7฀ million,฀
expenses฀ decreased฀ $2.2฀ million.฀ The฀ components฀ of฀ unallocated฀ corporate฀ expenses฀ excluding฀
the฀53
rd
฀week฀and฀the฀Incentive฀Contribution฀were฀as฀follows฀(in฀thousands):฀
฀฀
Year฀Ended Year฀Ended
December฀29, December฀30, Increase
2013 2012 (Decrease)
General฀and฀administrative฀(a) 34,819$฀฀฀฀฀฀฀฀฀฀฀฀ 36,911$฀฀฀฀฀฀฀฀฀฀฀฀ (2,092)$฀฀฀฀฀฀
Net฀interest฀expense฀(b) 482฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ 1,476฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ (994)฀฀฀฀฀฀฀฀฀฀฀
Depreciation฀expense 6,845฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ 7,193฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ (348)฀฀฀฀฀฀฀฀฀฀฀
Perfect฀Pizza฀lease฀obligation฀(c) 305฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ (135)฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ 440฀฀฀฀฀฀฀฀฀฀฀฀
Other฀(income)฀(d) (426)฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ (1,194)฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ 768฀฀฀฀฀฀฀฀฀฀฀฀
Total฀unallocated฀corporate฀expenses 42,025$฀฀฀฀฀฀฀฀฀฀฀฀ 44,251$฀฀฀฀฀฀฀฀฀฀฀฀ (2,226)$฀฀฀฀฀฀
฀
(a)
The฀ decrease฀ in฀ unallocated฀ general฀ and฀ administrative฀ costs฀ was฀ primarily฀ due฀ to฀ 2012฀
including฀ higher฀ legal฀ and฀ professional฀ fees฀ of฀ approximately฀ $3.2฀ million,฀ primarily฀
associated฀ with฀ the฀ Agne฀ litigation฀ reserves฀ (see฀ “Note฀ 17”฀ of฀ “Notes฀ to฀ Consolidated฀
Financial฀Statements”฀for฀additional฀information).฀In฀addition,฀management฀incentives,฀net฀of฀
salary฀ increases,฀ were฀ lower฀ in฀ 2013฀ by฀ approximately฀ $1.5฀ million.฀ This฀ was฀ offset฀ by฀