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14. Segment Information
ASC Topic 280 establishes annual and interim reporting standards for an enterprise’s operating segments. Operating segments
are generally defined as components of an enterprise about which separate discrete financial information is available as the basis
for management to allocate resources and assess performance.
Based on internal reporting and management structure, the company has determined that it has two reportable segments:
Company-owned Drive-Ins and Franchise Operations. The Company-owned Drive-Ins segment consists of the drive-in operations
in which the company owns a controlling ownership interest and derives its revenues from operating drive-in restaurants. The
Franchise Operations segment consists of franchising activities and derives its revenues from royalties and initial franchise fees
received from franchisees. The accounting policies of the segments are described in the Summary of Significant Accounting
Policies. Segment information for total assets and capital expenditures is not presented as such information is not used in
measuring segment performance or allocating resources between segments.
The following table presents the revenues and income from operations for each reportable segment, along with reconciliation
to reported revenue and income from operations:
2010 2009 2008
Revenues:
Company-owned Drive-Ins $ 414,369 $ 567,436 $ 671,151
Franchise Operations 132,016 135,697 128,630
Unallocated revenues 4,541 3,148 1,978
$ 550,926 $ 706,281 $ 801,759
Income from Operations:
Company-owned Drive-Ins $ 59,710 $ 102,560 $ 144,971
Franchise Operations 132,016 135,698 128,630
Unallocated income 3,778 15,656 4,932
Unallocated expenses:
Selling, general and administrative (66,847) (63,358) (61,179)
Depreciation and amortization (42,615) (48,064) (50,653)
Provision for impairment of long-lived assets (15,161) (11,163) (571)
$ 70,881 $ 131,329 $ 166,130
15. Net Revenue Incentive Plan
The company has a Net Revenue Incentive Plan (the “Incentive Plan”), as amended, which applies to certain members of
management and is at all times discretionary with the company’s Board of Directors. If certain predetermined earnings goals are met,
the Incentive Plan provides that a predetermined percentage of the employee’s salary may be paid in the form of a bonus. The
company recognized as expense incentive bonuses of $828, $1,187, and $1,324 during fiscal years 2010, 2009 and 2008, respectively.
16. Employment Agreements
The company has employment contracts with its Chairman and Chief Executive Officer and certain of its officers.These contracts
provide for use of company automobiles or related allowances, medical, life and disability insurance, annual base salaries, as well
as incentive bonuses. These contracts also contain provisions for payments in the event of the termination of employment and
provide for payments aggregating $10,249 at August 31, 2010 due to loss of employment in the event of a change in control (as
defined in the contracts).
Notes to Consolidated Financial Statements
August 31, 2010, 2009 and 2008 (In thousands, except per share data)
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