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Segment Information

9 Months Ended

Sep. 29, 2019

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				Nine Months Ended
	September 29,		September 30,		September 29,		September 30,
(In thousands)	2019		2018		2019		2018
Revenues:
Domestic Company-owned restaurants	$	165,135	$	158,285	$	490,594	$	529,906
North America commissaries		154,703		146,240		450,735		461,408
North America franchising		15,924		12,806		53,215		61,524
International		29,888		30,793		92,808		100,977
All others		38,056		37,107		114,382		111,490
Total revenues	$	403,706	$	385,231	$	1,201,734	$	1,265,305

Intersegment revenues:
North America commissaries	$	47,599	$	46,023	$	140,116	$	153,389
North America franchising		612		464		2,072		2,499
International		—		70		191		213
All others		19,362		14,122		52,758		46,599
Total intersegment revenues	$	67,573	$	60,679	$	195,137	$	202,700

Income (loss) before income taxes:
Domestic Company-owned restaurants (1)	$	9,162	$	(183)	$	21,471	$	15,350
North America commissaries		6,790		6,195		22,094		23,535
North America franchising (2)		14,092		9,394		47,693		53,133
International (3)		4,195		4,519		14,915		10,334
All others		(866)		(2,776)		(2,581)		(5,304)
Unallocated corporate expenses (4)		(32,329)		(37,046)		(92,685)		(74,500)
Elimination of intersegment (profits)		(366)		(331)		(1,037)		(599)
Total income (loss) before income taxes	$	678	$	(20,228)	$	9,870	$	21,949

Property and equipment:
Domestic Company-owned restaurants	$	221,320
North America commissaries		141,105
International		15,737
All others		80,980
Unallocated corporate assets		208,274
Accumulated depreciation and amortization		(455,103)
Property and equipment, net	$	212,313

(1)	Includes refranchising gains of $1.7 million and $1.9 million for the three and nine months ended September 29, 2019, respectively.

(2)	Includes Special charges of $6.4 million and $14.0 million in North America franchising for the three and nine months ended September 29, 2019, respectively. Includes Special charges of $9.9 million in North America franchising for the three and nine months ended September 30, 2018.

(3)	Includes refranchising losses of $1.9 million for the nine months ended September 30, 2018.

(4)Includes Special charges of $7.8 million and $21.4 million in Unallocated corporate expenses for the three and nine months ended September 29, 2019, respectively. Includes Special charges of $14.9 million in Unallocated corporate expenses for the three and nine months ended September 30, 2018.

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 September 29, 2019
Major Products/Services Lines		Domestic Company-owned restaurants		North America commissaries		North America franchising		International		All others		Total
Company-owned restaurant sales	$	165,135	$	-	$	-	$	-	$	-	$	165,135
Commissary sales		-		202,302		-		15,195		-		217,497
Franchise royalties and fees		-		-		16,536		9,484		-		26,020
Other revenues		-		-		-		5,209		57,418		62,627
Eliminations		-		(47,599)		(612)		-		(19,362)		(67,573)
Total segment revenues	$	165,135	$	154,703	$	15,924	$	29,888	$	38,056	$	403,706
International other revenues (1)		-		-		-		(5,209)		5,209		-
International eliminations (1)		-		-		-		-		-		-
Total revenues	$	165,135	$	154,703	$	15,924	$	24,679	$	43,265	$	403,706

		Reportable Segments
		Three Months Ended September 30, 2018
Major Products/Services Lines		Domestic Company-owned restaurants		North America commissaries		North America franchising		International		All others		Total
Company-owned restaurant sales	$	158,285	$	-	$	-	$	-	$	-	$	158,285
Commissary sales		-		192,263		-		16,512		-		208,775
Franchise royalties and fees		-		-		13,270		9,141		-		22,411
Other revenues		-		-		-		5,210		51,229		56,439
Eliminations		-		(46,023)		(464)		(70)		(14,122)		(60,679)
Total segment revenues	$	158,285	$	146,240	$	12,806	$	30,793	$	37,107	$	385,231
International other revenues (1)		-		-		-		(5,210)		5,210		-
International eliminations (1)		-		-		-		70		(70)		-
Total revenues	$	158,285	$	146,240	$	12,806	$	25,653	$	42,247	$	385,231

		Reportable Segments
		Nine Months Ended September 29, 2019
Major Products/Services Lines		Domestic Company-owned restaurants		North America commissaries		North America franchising		International		All others		Total
Company-owned restaurant sales	$	490,594	$	-	$	-	$	-	$	-	$	490,594
Commissary sales		-		590,851		-		47,009		-		637,860
Franchise royalties and fees		-		-		55,287		28,834		-		84,121
Other revenues		-		-		-		17,156		167,140		184,296
Eliminations		-		(140,116)		(2,072)		(191)		(52,758)		(195,137)
Total segment revenues	$	490,594	$	450,735	$	53,215	$	92,808	$	114,382	$	1,201,734
International other revenues (1)		-		-		-		(17,156)		17,156		-
International eliminations (1)		-		-		-		191		(191)		-
Total revenues	$	490,594	$	450,735	$	53,215	$	75,843	$	131,347	$	1,201,734

		Reportable Segments
		Nine Months Ended September 30, 2018
Major Products/Services Lines		Domestic Company-owned restaurants		North America commissaries		North America franchising		International		All others		Total
Company-owned restaurant sales	$	529,906	$	-	$	-	$	6,237	$	-	$	536,143
Commissary sales		-		614,797		-		51,490		-		666,287
Franchise royalties and fees		-		-		64,023		27,109		-		91,132
Other revenues		-		-		-		16,354		158,089		174,443
Eliminations		-		(153,389)		(2,499)		(213)		(46,599)		(202,700)
Total segment revenues	$	529,906	$	461,408	$	61,524	$	100,977	$	111,490	$	1,265,305
International other revenues (1)		-		-		-		(16,354)		16,354		-
International eliminations (1)		-		-		-		213		(213)		-
Total revenues	$	529,906	$	461,408	$	61,524	$	84,836	$	127,631	$	1,265,305

(1)

Other revenues as reported in the Condensed Consolidated Statements of Operations include $5.2 million and $17.0 million of revenue for the three and nine months ended September 29, 2019, respectively, and $5.1 million and $16.1 million for the three and nine months ended September 30, 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.