Segment Information

12 Months Ended

Dec. 25, 2011

Segment Information

19.  Segment Information

We have defined six reportable segments: domestic Company-owned restaurants, domestic commissaries, North America franchising, international operations, variable interest entities (“VIEs”) and “all other” units.

The domestic Company-owned restaurant segment consists of the operations of all domestic (“domestic” is defined as contiguous United States) Company-owned restaurants and derives its revenues principally from retail sales of pizza and side items, such as breadsticks, cheesesticks, chicken strips, chicken wings, dessert pizza and soft drinks to the general public. The domestic commissary segment consists of the operations of our regional dough production and product distribution centers and derives its revenues principally from the sale and distribution of food and paper products to domestic Company-owned and franchised restaurants. The North America franchising segment consists of our franchise sales and support activities and derives its revenues from sales of franchise and development rights and collection of royalties from our franchisees located in the United States and Canada. The international operations segment principally consists of our Company-owned restaurants and distribution sales to franchised Papa John’s restaurants located in the United Kingdom, Mexico and China and our franchise sales and support activities, which derive revenues from sales of franchise and development rights and the collection of royalties from our international franchisees. International franchisees are defined as all franchise operations outside of the United States and Canada. BIBP, which operated through February 2011, was a VIE in which we were deemed the primary beneficiary, as defined in Note 3, and is the only activity reflected in the VIE segment. All other business units that do not meet the quantitative thresholds for determining reportable segments, which are not operating segments, we refer to as our “all other” segment, which consists of operations that derive revenues from the sale, principally to Company-owned and franchised restaurants, of printing and promotional items, risk management services, and information systems and related services used in restaurant operations, including our online and other technology-based ordering platforms.

Generally, we evaluate performance and allocate resources based on profit or loss from operations before income taxes and eliminations. Certain administrative and capital costs are allocated to segments based upon predetermined rates or actual estimated resource usage. We account for intercompany sales and transfers as if the sales or transfers were to third parties and eliminate the activity in consolidation.

Our reportable segments are business units that provide different products or services. Separate management of each segment is required because each business unit is subject to different operational issues and strategies. No single external customer accounted for 10% or more of our consolidated revenues. The accounting policies of the segments are the same as those described in the summary of significant accounting policies (see Note 2).

As previously noted, beginning in 2011, we realigned management responsibility for Hawaii, Alaska and Canada from the international segment to the domestic franchising segment in order to better leverage existing infrastructure and systems. As a result, we renamed the domestic franchising segment “North America franchising” in the first quarter of 2011. The prior year data has been reclassified from the international segment to the North America franchising segment to conform to the current year presentation.

Our segment information is as follows:

(in thousands)	2011			2010			2009
Revenues from external customers:
Domestic Company-owned restaurants	$	525,841		$	503,272		$	503,818
Domestic commissaries		508,155			454,506			417,689
North America franchising		74,416			70,241			62,995
International		58,558			46,427			40,003
All others		50,912			51,951			54,045
Total revenues from external customers	$	1,217,882		$	1,126,397		$	1,078,550
Intersegment revenues:
Domestic commissaries	$	151,423		$	135,005		$	133,999
North America franchising		2,163			2,045			2,019
International		215			909			1,093
Variable interest entities (1)		25,117			153,014			142,407
All others		10,468			12,061			11,751
Total intersegment revenues	$	189,386		$	303,034		$	291,269
Depreciation and amortization:
Domestic Company-owned restaurants	$	12,965		$	13,155		$	12,993
Domestic commissaries		4,633			4,522			4,819
International		2,398			2,368			2,207
All others		4,663			3,489			2,743
Unallocated corporate expenses		8,022			8,873			8,684
Total depreciation and amortization	$	32,681		$	32,407		$	31,446
Income (loss) before income taxes:
Domestic Company-owned restaurants	$	28,980		$	31,619		$	34,894
Domestic commissaries		30,532			14,188			29,393
North America franchising		66,222			62,229			55,008
International		(165	)		(4,771	)		(4,368	)
Variable interest entities (2)		-			20,954			22,543
All others		(441	)		1,847			2,697
Unallocated corporate expenses		(38,243	)		(43,266	)		(49,755	)
Elimination of intersegment profits		(610	)		(519	)		(218	)
Total income before income taxes	$	86,275		$	82,281		$	90,194

(in thousands)	2011			2010			2009
Property and equipment:
Domestic Company-owned restaurants	$	176,506		$	165,434		$	158,884
Domestic commissaries		85,714			82,162			80,180
International		17,413			17,574			16,587
All others		38,746			33,786			25,526
Unallocated corporate assets		132,098			127,184			120,885
Accumulated depreciation and amortization		(265,345	)		(239,546	)		(214,091	)
Net property and equipment	$	185,132		$	186,594		$	187,971
Expenditures for property and equipment:
Domestic Company-owned restaurants	$	14,094		$	9,124		$	8,300
Domestic commissaries		5,612			2,795			6,029
International		1,733			4,835			7,277
All others		1,792			8,151			313
Unallocated corporate		6,088			6,220			11,619
Total expenditures for property and equipment	$	29,319		$	31,125		$	33,538

(1)	The intersegment revenues for variable interest entities of $25.1 million in 2011, $153.0 million in 2010 and $142.4 million in 2009 are attributable to BIBP.
(2)	Represents BIBP’s operating income, net of noncontrolling interest income, for each year. The 2010 operating income for BIBP includes a reduction in BIBP’s cost of sales of $14.2 million associated with PJFS’s agreement to pay to BIBP for past cheese purchases an amount equal to its accumulated deficit.