Papa Johns 2015 Annual Report Download - page 49

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36
Discussion of Operating Results
Our income before income taxes totaled $119.1 million in 2015, as compared to $114.3 million in 2014,
an increase of approximately $4.9 million. Excluding the previously discussed legal settlement, income
before income taxes was $131.4 million in 2015, or an increase of 15.0%. Income before income taxes is
summarized in the following table on a reporting segment basis. Alongside the GAAP income before
income taxes data, we have included “adjusted” income before income taxes for 2015 to exclude the legal
settlement expense. We believe this non-GAAP measure is important for purposes of comparing to prior
year results.
As Reported Legal Adjusted
Dec. 27, Settlement Dec. 27, Dec. 28, Increase
(In thousands) 2015 Expense 2015 2014 (Decrease)
Domestic Company-owned restaurants 56,452$ -$ 56,452$ 40,969$ 15,483$
Domestic commissaries 44,721 - 44,721 39,317 5,404
North America franchising 83,315 - 83,315 77,009 6,306
International 10,891 - 10,891 7,250 3,641
All others 845 - 845 (9) 854
Unallocated corporate expenses (75,896) 12,278 (63,618) (49,440) (14,178)
Elimination of intersegment profits (1,181) - (1,181) (841) (340)
Total income before income taxes (a) 119,147$ 12,278$ 131,425$ 114,255$ 17,170$
Year Ended
(a) Includes FOCUS system rollout costs of approximately $7.5 million in 2015 and $3.7 million in
2014. See the “FOCUS System” section above for additional information.
Changes in income before income taxes for 2015 in comparison to 2014 are summarized on a segment
basis as follows:
• Domestic Company-owned Restaurants Segment. Domestic Company-owned restaurants
income before income taxes increased $15.5 million primarily due to higher profits from the 5.9%
increase in comparable sales and lower commodity costs. These increases were partially offset by
higher depreciation expense of $1.1 million associated with FOCUS equipment. The market price
for cheese averaged $1.61 per pound in 2015, compared to $2.12 per pound in the prior year.
• Domestic Commissaries Segment. Domestic commissaries’ income before income taxes
increased $5.4 million primarily due to incremental profits from higher restaurant volumes and a
higher margin, partially offset by incremental insurance expense from higher automobile claims
costs of approximately $1.5 million.
• North America Franchising Segment. North America franchising income before income taxes
increased $6.3 million primarily due to higher royalties from increases of 3.6% and 1.0% in
comparable sales and equivalent units, respectively, and lower royalty incentives.
• International Segment. The international segment reported income before income taxes of
approximately $10.9 million in 2015 compared to $7.3 million in 2014. The increase of $3.6
million was primarily due to an increase in units and comparable sales of 6.9%, which resulted in
both higher royalties and an increase of approximately $2.4 million in United Kingdom results.
Additionally, our Company-owned China results improved approximately $2.2 million (losses of
approximately $1.2 million in 2015 and $3.4 million in 2014). The improvement in China
Company-owned results was primarily due to lower non-operating costs of $1.5 million for
impairment, disposition and depreciation. The international segment improvement was somewhat
offset by the negative impact of foreign currency exchange rates of approximately $2.8 million.
• All Others Segment. The “All others” reporting segment, which primarily includes our online
and mobile ordering business and our wholly-owned print and promotions subsidiary, Preferred