Segment Information

6 Months Ended

Jun. 30, 2019

Segment Information

Segment Information

15. Segment Information

We have four reportable segments: domestic Company-owned restaurants, North America commissaries, North America franchising and international operations. 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, including breadsticks, cheesesticks, chicken poppers and wings, dessert items and canned or bottled beverages. The North America 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 in the United States and Canada. 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 segment principally consists of distribution sales to franchised Papa John’s restaurants located in the United Kingdom and our franchise sales, marketing and other 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. All other business units that do not meet the quantitative thresholds for determining reportable segments, which are not operating segments, we refer to as “all other,” which consists of operations that derive revenues from the sale, principally to Company-owned and franchised restaurants, of printing and promotional items, franchise contributions to North America marketing funds including PJMF and information systems and related services used in restaurant operations, including our point-of-sale system, 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 intercompany 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.

Our segment information is as follows:

	Three Months Ended				Six Months Ended
	June 30,		July 1,		June 30,		July 1,
(In thousands)	2019		2018		2019		2018
Revenues
Domestic Company-owned restaurants	$	163,656	$	181,379	$	325,459	$	371,621
North America commissaries		147,128		153,455		296,032		315,168
North America franchising		19,761		23,912		37,291		48,718
International		31,420		34,652		62,920		70,184
All others		37,658		36,554		76,326		74,383
Total revenues	$	399,623	$	429,952	$	798,028	$	880,074
Intersegment revenues:
North America commissaries	$	46,962	$	51,492	$	92,517	$	107,366
North America franchising		787		1,016		1,460		2,035
International		94		73		191		143
All others		17,985		15,800		33,396		32,477
Total intersegment revenues	$	65,828	$	68,381	$	127,564	$	142,021
Income (loss) before income taxes:
Domestic Company-owned restaurants	$	7,712	$	8,304	$	12,309	$	15,533
North America commissaries		7,792		8,730		15,304		17,340
North America franchising (1)		17,910		21,380		33,601		43,739
International (2)		5,403		2,278		10,720		5,815
All others		(1,209)		(2,843)		(1,715)		(2,528)
Unallocated corporate expenses (3)		(27,891)		(19,324)		(60,356)		(37,454)
Elimination of intersegment (profits) losses		242		588		(671)		(268)
Total (loss) income before income taxes	$	9,959	$	19,113	$	9,192	$	42,177
Property and equipment:
Domestic Company-owned restaurants	$	217,340
North America commissaries		140,395
International		15,946
All others		77,868
Unallocated corporate assets		205,470
Accumulated depreciation and amortization		(444,762)
Property and equipment, net	$	212,257

(1) Includes Special charges of $2.5 million and $7.7 million in North America franchising for the three and six months ended June 30, 2019, respectively.   

(2) Includes refranchising losses of $1.9 million in the three and six months ended July 1, 2018.

(3)Includes Special charges of $2.9 million and $13.5 million in Unallocated corporate expenses for the three and six months ended June 30, 2019, respectively.

Disaggregation of Revenue

In the following tables, revenues are disaggregated by major product line. The tables also include a reconciliation of the disaggregated revenues by the reportable segment (in thousands):

		Reportable Segments
		Three Months Ended June 30, 2019
Major Products/Services Lines		Domestic Company-owned restaurants		North America commissaries		North America franchising		International		All others		Total
Company-owned restaurant sales	$	163,656	$	-	$	-	$	-	$	-	$	163,656
Commissary sales		-		194,090		-		15,948		-		210,038
Franchise royalties and fees		-		-		20,548		9,549		-		30,097
Other revenues		-		-		-		6,017		55,643		61,660
Eliminations		-		(46,962)		(787)		(94)		(17,985)		(65,828)
Total segment revenues	$	163,656	$	147,128	$	19,761	$	31,420	$	37,658	$	399,623
International other revenues (1)		-		-		-		(6,017)		6,017		-
International eliminations (1)		-		-		-		94		(94)		-
Total revenues	$	163,656	$	147,128	$	19,761	$	25,497	$	43,581	$	399,623
		Reportable Segments
		Three Months Ended July 1, 2018
Major Products/Services Lines		Domestic Company-owned restaurants		North America commissaries		North America franchising		International		All others		Total
Company-owned restaurant sales	$	181,379	$	-	$	-	$	2,783	$	-	$	184,162
Commissary sales		-		204,947		-		17,299		-		222,246
Franchise royalties and fees		-		-		24,928		8,987		-		33,915
Other revenues		-		-		-		5,656		52,354		58,010
Eliminations		-		(51,492)		(1,016)		(73)		(15,800)		(68,381)
Total segment revenues	$	181,379	$	153,455	$	23,912	$	34,652	$	36,554	$	429,952
International other revenues (1)		-		-		-		(5,656)		5,656		-
International eliminations (1)		-		-		-		73		(73)		-
Total revenues	$	181,379	$	153,455	$	23,912	$	29,069	$	42,137	$	429,952
		Reportable Segments
		Six Months Ended June 30, 2019
Major Products/Services Lines		Domestic Company-owned restaurants		North America commissaries		North America franchising		International		All others		Total
Company-owned restaurant sales	$	325,459	$	-	$	-	$	-	$	-	$	325,459
Commissary sales		-		388,549		-		31,814		-		420,363
Franchise royalties and fees		-		-		38,751		19,350		-		58,101
Other revenues		-		-		-		11,947		109,722		121,669
Eliminations		-		(92,517)		(1,460)		(191)		(33,396)		(127,564)
Total segment revenues	$	325,459	$	296,032	$	37,291	$	62,920	$	76,326	$	798,028
International other revenues (1)		-		-		-		(11,947)		11,947		-
International eliminations (1)		-		-		-		191		(191)		-
Total revenues	$	325,459	$	296,032	$	37,291	$	51,164	$	88,082	$	798,028

		Reportable Segments
		Six Months Ended July 1, 2018
Major Products/Services Lines		Domestic Company-owned restaurants		North America commissaries		North America franchising		International		All others		Total
Company-owned restaurant sales	$	371,621	$	-	$	-	$	6,237	$	-	$	377,858
Commissary sales		-		422,534		-		34,978		-		457,512
Franchise royalties and fees		-		-		50,753		17,968		-		68,721
Other revenues		-		-		-		11,144		106,860		118,004
Eliminations		-		(107,366)		(2,035)		(143)		(32,477)		(142,021)
Total segment revenues	$	371,621	$	315,168	$	48,718	$	70,184	$	74,383	$	880,074
International other revenues (1)		-		-		-		(11,144)		11,144		-
International eliminations (1)		-		-		-		143		(143)		-
Total revenues	$	371,621	$	315,168	$	48,718	$	59,183	$	85,384	$	880,074

(1) Other revenues as reported in the Condensed Consolidated Statements of Operations include $5.9 million and $11.8 million of revenue for the three and six months ended June 30, 2019, respectively, and $5.6 million and $11.0 million for the three and six months ended July 1, 2018, respectively, that are part of the international reporting segment. These amounts include marketing fund contributions and sublease rental income from international franchisees in the United Kingdom that provide no significant contribution to income before income taxes but must be reported on a gross basis under accounting requirements. The related expenses for these Other revenues are reported in Other expenses in the Condensed Consolidated Statements of Operations.