Papa John's International (PZZA) 8-K 9 Mar 09 Other Events Financial data

0001 - Document and Entity Info

0001 - Document and Entity Information (USD $)
	12 Months Ended Dec. 28, 2008
Document and Entity Information
Entity Registrant Name	PAPA JOHNS INTERNATIONAL INC
Entity Central Index Key	0000901491
Document Type	10-K
Document Period End Date	2008-12-28
Amendment Flag	false
Current Fiscal Year End Date	--12-28
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Public Float	$574,220,073
Entity Common Stock, Shares Outstanding	27,832,557

0010 - Consolidated Statements

0010 - Consolidated Statements of Income (USD $)
In Thousands, except Per Share data	12 Months Ended Dec. 28, 2008	12 Months Ended Dec. 30, 2007	12 Months Ended Dec. 31, 2006
Domestic revenues:
Company-owned restaurant sales - domestic revenues	$533,255	$504,330	$447,938
Variable interest entities restaurant sales - domestic revenues	8,328	7,131	7,859
Franchise royalties - domestic revenues	59,704	55,283	56,374
Franchise and development fees - domestic revenues	1,600	4,758	2,597
Commissary sales - domestic revenues	429,068	399,099	413,075
Other sales - domestic revenues	61,415	61,820	50,505
International revenues:
Royalties and franchise and development fees - international revenues	12,868	10,314	7,551
Restaurant and commissary sales - international revenues	25,849	20,860	15,658
Total revenues	1,132,087	1,063,595	1,001,557
Domestic Company-owned restaurant expenses:
Cost of sales - domestic Company-owned restaurant expenses	120,545	112,773	88,311
Salaries and benefits - domestic Company-owned restaurant expenses	158,276	152,043	131,946
Advertising and related costs - domestic Company-owned restaurant expenses	48,547	47,121	41,279
Occupancy costs - domestic Company-owned restaurant expenses	34,973	31,866	27,245
Other operating expenses - domestic Company-owned restaurant expenses	72,349	68,460	58,824
Total domestic Company-owned restaurant expenses	434,690	412,263	347,605
Variable interest entities restaurant expenses	7,360	6,018	6,708
Domestic commissary and other expenses:
Cost of sales - domestic commissary and other expenses	363,042	332,163	336,659
Salaries and benefits - domestic commissary and other expenses	35,090	34,622	32,363
Other operating expenses - domestic commissary and other expenses	45,732	43,766	45,153
Total domestic commissary and other expenses	443,864	410,551	414,175
Loss (income) from the franchise cheese-purchasing program, net of minority interest	6,296	22,853	(15,247)
International operating expenses	22,822	18,718	15,824
General and administrative expenses	99,723	101,340	102,920
Minority interests and other general expenses	21,022	7,939	4,409
Depreciation and amortization	32,846	31,866	27,208
Total costs and expenses	1,068,623	1,011,548	903,602
Operating income from continuing operations	63,464	52,047	97,955
Investment income	848	1,446	1,682
Interest expense	(7,536)	(7,465)	(3,480)
Income from continuing operations before income taxes	56,776	46,028	96,157
Income tax expense	19,980	13,293	33,171
Income from continuing operations	36,796	32,735	62,986
Income from discontinued operations, net of tax			389
Net income	36,796	32,735	63,375
Basic earnings per common share:
Basic earnings per common share: Income from continuing operations	1.31	1.1	1.95
Basic earnings per common share: Income from discontinued operations, net of tax			0.01
Basic earnings per common share	1.31	1.1	1.96
Earnings per common share - assuming dilution
Earnings per common share - assuming dilution: Income from continuing operations	1.3	1.09	1.91
Earnings per common share - assuming dilution: Income from discontinued operations, net of tax			0.01
Earnings per common share - assuming dilution	1.3	1.09	1.92
Basic weighted average shares outstanding	28,124	29,666	32,312
Diluted weighted average shares outstanding	28,264	30,017	33,046
Supplemental data (see Note 15):
Revenues - affiliates	25,070	24,250	57,140
Other income - affiliates		$61	$66

0020 - Consolidated Balance She

0020 - Consolidated Balance Sheets (USD $)
In Thousands	Dec. 28, 2008	Dec. 30, 2007
Current Assets:
Cash and cash equivalents	$10,987	$8,877
Accounts receivable (less allowance for doubtful accounts of $3,003 in 2008 and $4,431 in 2007)	22,921	21,675
Accounts receivable-affiliates (no allowance for doubtful accounts in 2008 and 2007)	854	864
Inventories	16,872	18,806
Prepaid expenses	9,797	10,711
Other current assets	5,275	5,581
Assets held for sale	1,540
Deferred income taxes, current	7,102	7,147
Total current assets	75,348	73,661
Investments	530	825
Net property and equipment	189,992	198,957
Notes receivable (less allowance for doubtful accounts of $5,445 in 2008 and $1,061 in 2007)	7,594	11,804
Deferred income taxes, noncurrent	17,518	12,384
Goodwill	76,914	86,505
Other assets	18,572	17,681
Total assets	386,468	401,817
Current liabilities:
Accounts payable	29,148	31,157
Income and other taxes	9,685	10,866
Accrued expenses	54,220	56,466
Current portion of debt	7,075	8,700
Total current liabilities	100,128	107,189
Unearned franchise and development fees	5,916	6,284
Long-term debt, net of current portion	123,579	134,006
Other long-term liabilities	26,859	27,435
Stockholders' equity:
Preferred stock ($.01 par value per share; no shares issued)	0	0
Common stock ($.01 par value per share; issued 35,126 in 2008 and 34,866 in 2007)	352	349
Additional paid-in capital	216,553	208,598
Accumulated other comprehensive income (loss)	(3,818)	156
Retained earnings	133,759	96,963
Treasury stock (7,489 shares in 2008 and 6,089 shares in 2007, at cost)	(216,860)	(179,163)
Total stockholders' equity	129,986	126,903
Total liabilities and stockholders' equity	$386,468	$401,817

0021 - Consolidated Balance She

0021 - Consolidated Balance Sheets (Parenthetical) (USD $)
In Thousands, except Per Share data	Dec. 28, 2008	Dec. 30, 2007
Consolidated Balance Sheets
Allowance for doubtful accounts, Accounts receivable	$3,003	$4,431
Allowance for doubtful accounts, Accounts receivable-affiliates	0	0
Allowance for doubtful accounts, Notes receivable	$5,445	$1,061
Preferred stock, par value per share	0.01	0.01
Preferred stock, shares issued	0	0
Common stock, par value per share	0.01	0.01
Common stock, shares issued	35,126	34,866
Treasury stock, shares	7,489	6,089

0030 - Consolidated Statements

0030 - Consolidated Statements of Stockholders' Equity (USD $)
In Thousands	Common Stock	Additional Paid-In Capital	Accumulated Other Comprehensive Income (Loss)		Retained Earnings	Retained Earnings Scenario, Adjustment	Treasury Stock	Scenario, Adjustment	Total
Balance at beginning at Dec. 25, 2005	$331	$160,999	($290)		$239				$161,279
Shares, Balance at beginning at Dec. 25, 2005	33,081
Comprehensive Income:
Net income					63,375				63,375
Change in valuation of interest rate swap agreement(s), net of tax of $1,474, $744, and $212, respectively			360						360
Comprehensive Income: Other, net			445						445
Exercise of stock options, value	10	15,204							15,214
Exercise of stock options, shares	1,020
Tax benefit related to exercise of non-qualified stock options		7,216							7,216
Acquisition of Company common stock, value							(106,292)		(106,292)
Acquisition of Company common stock, shares	(3,405)
Other, adjustments to additional paid-in capital		4,571							4,571
Balance at end at Dec. 31, 2006	341	187,990	515	[3]	63,614		(106,292)		146,168
Shares, Balance at end at Dec. 31, 2006	30,696
Increase (Decrease) in Stockholders' Equity
Cumulative effect of adoption of FIN 48						614		614
Comprehensive Income:
Net income					32,735				32,735
Change in valuation of interest rate swap agreement(s), net of tax of $1,474, $744, and $212, respectively			(1,294)						(1,294)
Comprehensive Income: Other, net			935						935
Exercise of stock options, value	8	12,211							12,219
Exercise of stock options, shares	765
Tax benefit related to exercise of non-qualified stock options		3,325							3,325
Acquisition of Company common stock, value							(72,871)		(72,871)
Acquisition of Company common stock, shares	(2,684)
Other, adjustments to additional paid-in capital		5,072							5,072
Balance at end at Dec. 30, 2007	349	208,598	156	[2]	96,963	64,228	(179,163)	146,782	126,903
Shares, Balance at end at Dec. 30, 2007	28,777
Comprehensive Income:
Net income					36,796				36,796
Change in valuation of interest rate swap agreement(s), net of tax of $1,474, $744, and $212, respectively			(2,650)						(2,650)
Comprehensive Income: Other, net			(1,324)						(1,324)
Exercise of stock options, value	3	4,620							4,623
Exercise of stock options, shares	260
Tax benefit related to exercise of non-qualified stock options		771							771
Acquisition of Company common stock, value							(37,697)		(37,697)
Acquisition of Company common stock, shares	(1,400)
Other, adjustments to additional paid-in capital		2,564							2,564
Balance at end at Dec. 28, 2008	$352	$216,553	($3,818)	[1]	$133,759		($216,860)		$129,986
Shares, Balance at end at Dec. 28, 2008	27,637
[1]At December 28, 2008, the accumulated other comprehensive loss of $3,818 was comprised of a net unrealized loss on the interest rate swap agreements of $3,950 and an $88 pension plan liability for PJUK , offset by unrealized foreign currency translation gains of $220.
[2]At December 30, 2007, the accumulated other comprehensive income of $156 was comprised of unrealized foreign currency translation gains of $1,450 and a net unrealized gain on investments of $7, offset by a net unrealized loss on the interest rate swap agreements of $1,301.
[3]At December 31, 2006, the accumulated other comprehensive income of $515 was comprised of unrealized foreign currency translation gains of $1,100 and a net unrealized gain on investments of $6, partially offset by a $584 pension plan liability for PJUK and a net unrealized loss on the interest rate swap agreement of $7.

0031 - Consolidated Statements

0031 - Consolidated Statements of Stockholders' Equity (Parenthetical) (Accumulated Other Comprehensive Income (Loss), USD $)
In Thousands	Total
Change in valuation of interest rate swap agreement(s), tax	$212
Change in valuation of interest rate swap agreement(s), tax	744
Change in valuation of interest rate swap agreement(s), tax	$1,474

0040 - Consolidated Statements

0040 - Consolidated Statements of Cash Flows (USD $)
In Thousands	12 Months Ended Dec. 28, 2008	12 Months Ended Dec. 30, 2007	12 Months Ended Dec. 31, 2006
Net cash provided by operating activities from continuing operations
Net income	$36,796	$32,735	$63,375
Income from discontinued operations (net of income taxes)			(389)
Adjustments to reconcile net income to net cash provided by operating activities:
Restaurant closure, impairment and disposition losses (gains)	8,818	1,807	(260)
Provision for uncollectible accounts and notes receivable	5,769	1,718	3,445
Depreciation and amortization	32,846	31,866	27,208
Deferred income taxes	(3,608)	(10,779)	3,191
Stock-based compensation expense	2,564	4,883	4,707
Excess tax benefit related to exercise of non-qualified stock options, operating activities	(771)	(3,325)	(6,533)
Adjustments to reconcile net income to net cash provided by operating activities, other	1,255	5,564	5,158
Changes in operating assets and liabilities, net of acquisitions:
Changes in operating assets and liabilities, net of acquisitions: Accounts receivable	(5,162)	(183)	(6,020)
Changes in operating assets and liabilities, net of acquisitions: Inventories	1,833	7,915	(583)
Changes in operating assets and liabilities, net of acquisitions: Prepaid expenses	914	(3,402)	(2,148)
Changes in operating assets and liabilities, net of acquisitions: Other current assets	446	2,468	(630)
Changes in operating assets and liabilities, net of acquisitions: Other assets and liabilities	(2,913)	(7,092)	(7,211)
Changes in operating assets and liabilities, net of acquisitions: Accounts payable	(2,009)	1,893	(2,168)
Changes in operating assets and liabilities, net of acquisitions: Income and other taxes	(1,181)	(3,656)	(1,726)
Changes in operating assets and liabilities, net of acquisitions: Accrued expenses	(2,166)	457	5,465
Changes in operating assets and liabilities, net of acquisitions: Unearned franchise and development fees	(368)	(1,278)	306
Net cash provided by operating activities from continuing operations	73,063	61,591	85,187
Operating cash flows from discontinued operations			414
Net cash provided by operating activities	73,063	61,591	85,601
Net cash from continuing operations used in investing activities
Purchase of property and equipment	(29,271)	(31,148)	(39,352)
Purchase of investments	(632)	(303)	(2,014)
Proceeds from sale or maturity of investments	927	731	6,983
Loans issued	(1,468)	(6,541)	(6,181)
Loan repayments	2,017	6,257	9,339
Acquisitions	(183)	(24,983)	(31,943)
Proceeds from divestitures of restaurants	2,145	632	1,300
Investing activities, other	233	32	286
Net cash from continuing operations used in investing activities	(26,232)	(55,323)	(61,582)
Proceeds from divestiture of discontinued operations			8,020
Net cash used in investing activities	(26,232)	(55,323)	(53,562)
Financing activities:
Net proceeds (repayments) from line of credit facility	(10,500)	37,500	47,500
Net proceeds (repayments) from short-term debt - variable interest entities	(1,625)	8,175	(5,575)
Excess tax benefit related to exercise of non-qualified stock options, financing activities	771	3,325	6,533
Proceeds from exercise of stock options	4,623	12,219	15,214
Acquisition of Company common stock	(37,697)	(72,871)	(106,292)
Financing activities, other	299	1,035	1,293
Net cash used in financing activities	(44,129)	(10,617)	(41,327)
Effect of exchange rate changes on cash and cash equivalents	(592)	247	169
Change in cash and cash equivalents	2,110	(4,102)	(9,119)
Cash and cash equivalents at beginning of period	8,877	12,979	22,098
Cash and cash equivalents at end of period	$10,987	$8,877	$12,979

0050 - Notes to Consolidated Fi

0050 - Notes to Consolidated Financial Statements
	12 Months Ended Dec. 28, 2008 USD / shares
Notes to Financial Statements
Description of Business	1. Description of Business Papa Johns International,Inc. (referred to as the Company, Papa Johns or in the first person notations of we, us and our) operates and franchises pizza delivery and carryout restaurants under the trademark Papa Johns, currently in all 50 states, the District of Columbia, Puerto Rico and 29 countries. We also operated and franchised pizza delivery and carryout restaurants under the trademark Perfect Pizza in the United Kingdom until March2006, when we sold our Perfect Pizza operations, consisting of the franchised units and related distribution operations. Substantially all revenues are derived from retail sales of pizza and other food and beverage products to the general public by Company-owned restaurants, franchise royalties, sales of franchise and development rights, and sales to franchisees of food and paper products, printing and promotional items, risk management services, and information systems and related services used in their operations.
Significant Accounting Policies	2. Significant Accounting Policies Principles of Consolidation The accompanying consolidated financial statements include the accounts of Papa Johns and its subsidiaries. Our financial results include BIBP Commodities,Inc. (BIBP), a variable interest entity (VIE) and the financial results of franchise entities deemed VIEs. The results of our Company-owned operations in Mexico and China are consolidated one month in arrears. The results of our captive insurance subsidiary, RSC Insurance Services, Ltd. (RSC), are consolidated one quarter in arrears. All significant intercompany balances and transactions have been eliminated. Fiscal Year Our fiscal year ends on the last Sunday in Decemberof each year. All fiscal years presented consist of 52 weeks except for the 2006 fiscal year, which consists of 53 weeks. Use of Estimates The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Significant items that are subject to such estimates and assumptions include allowance for doubtful accounts and notes receivable, long-lived and intangible assets, insurance reserves and income tax reserves. Although management bases its estimates on historical experience and assumptions that are believed to be reasonable under the circumstances, actual results could significantly differ from these estimates. Revenue Recognition Franchise fees are recognized when a franchised restaurant begins operations, at which time we have performed our obligations related to such fees. Fees received pursuant to development agreements that grant the right to develop franchised restaurants in future periods in specific geographic areas are deferred and recognized on a pro rata basis as the franchised restaurants subject to the development agreements begin operations. Both franchise and development fees are nonrefundable. Retail sales from Company-owned restaurants and franchise royalties, which are based on a percentage of franchise restaurant sales, are recognized as revenues when the products are delivered to or carried out by customers. Domestic production and distribution revenues are comprised of food, promotional items, and supplies sales to franchised restaurants located in the United States and are recognized as revenue upon shipment of the related products to the franchisees. Information services, including software maintenance fees, help desk fees and online ordering fees are recognized as revenue as the related services are provided. Insurance premiums and commissions are recognized as revenue over the term of the policy period. International revenues are comprised of restaurant sales, royalties and fees received from foreign franchisees and the sale and distribution of food to foreign franchisees, and are recognized consistently with the policies applied for revenues generated in the United States. Cash Equivalents Cash equivalents consist of highly liquid investments with maturity of three months or les
Discontinued Operations	3. Discontinued Operations The Company sold its Perfect Pizza operations, consisting of the franchised units and related distribution operations in March2006. Total proceeds from the sale were approximately $13.0 million ($8.0 million received in cash and $5.0 million as a note payable to Papa Johns). There was no gain or loss recognized in connection with the sale of Perfect Pizza. The following summarizes the results of the discontinued operations for the year ended December31, 2006 (in thousands): 2006 Net sales $ 2,421 Operating expenses 1,449 GA expenses 330 Other expenses 25 Income before income taxes 617 Income tax expense 228 Net income from discontinued operations $ 389 Basic earnings per common share $ 0.01 Earnings per common share - assuming dilution $ 0.01
Accounting for Variable Interest Entities	4. Accounting for Variable Interest Entities FASB Interpretation No.46, Consolidation of Variable Interest Entities, an Interpretation of Accounting Research Bulletin No.51 (FIN 46), provides a framework for identifying variable interest entities (VIEs) and determining when a company should include the assets, liabilities, noncontrolling interests and results of activities of a VIE in its consolidated financial statements. In general, a VIE is a corporation, partnership, limited liability company, trust, or any other legal structure used to conduct activities or hold assets that either (1)has an insufficient amount of equity to carry out its principal activities without additional subordinated financial support, (2)has a group of equity owners that are unable to make significant decisions about its activities, or (3)has a group of equity owners that do not have the obligation to absorb losses or the right to receive returns generated by its operations. FIN 46 requires a VIE to be consolidated if a party with an ownership, contractual or other financial interest in the VIE (a variable interest holder) is obligated to absorb a majority of the risk of loss from the VIEs activities, is entitled to receive a majority of the VIEs residual returns (if no party absorbs a majority of the VIEs losses), or both. A variable interest holder that consolidates the VIE is called the primary beneficiary. Upon consolidation, the primary beneficiary generally must initially record all of the VIEs assets, liabilities and noncontrolling interests at fair value and subsequently account for the VIE as if it were consolidated based on majority voting interest. FIN 46 also requires disclosures about VIEs that the variable interest holder is not required to consolidate but in which it has a significant variable interest. We have a purchasing arrangement with BIBP, a special-purpose entity formed at the direction of our Franchise Advisory Council, for the sole purpose of reducing cheese price volatility to domestic system-wide restaurants. BIBP is an independent, franchisee-owned corporation. BIBP purchases cheese at the market price and sells it to our distribution subsidiary, PJ Food Service,Inc. (PJFS), at a price based in part upon historical average market prices. PJFS in turn sells cheese to Papa Johns restaurants (both Company-owned and franchised) at a set quarterly price. Effective in March2009, we will modify the BIBP formula to establish the price of cheese on a more frequent basis at the projected spot market price plus a certain mark-up. The amount of the mark-up depends on the projected spot market prices. Under this new price formula, we anticipate BIBP will substantially repay its cumulative deficit by the end of 2011. PJFS purchased $165.4 million, $138.2 million and $144.1 million of cheese from BIBP during 2008, 2007 and 2006, respectively. As defined by FIN 46, we are deemed the primary beneficiary of BIBP, a VIE. We recognize the operating losses generated by BIBP if BIBPs shareholders equity is in a net deficit position. Further, we recognize the subsequent operating income generated by BIBP up to the amount of any losses previ
Acquisitions	5. Acquisitions During 2007 and 2006 (no significant acquisitions in 2008), we acquired 63 and 65 Papa Johns restaurants, respectively, as summarized below (dollars in thousands). Acquistion Month Location Number of Restaurants Cash Paid Recorded Goodwill 2007 Period 2 Pennsylvania 4 $ 1,000 $ 779 Period 4 Georgia 13 7,400 6,465 Period 7 Missouri and Kansas 31 10,306 7,266 Period 8 Maryland 11 6,062 4,663 Other 4 215 Total 2007* 63 $ 24,983 $ 19,173 2006 Period 2 Pennsylvania 3 $ 568 $ 361 Period 6 Mexico City, Mexico 3 632 Period 8 Arizona 43 17,658 14,190 Period 10 North Carolina 11 8,800 7,995 Period 12 Beijing, China 5 4,285 3,592 Total 2006* 65 $ 31,943 $ 26,138 *Substantially all of the remaining purchase price was allocated to acquired property and equipment. The business combinations in 2007 and 2006 were accounted for by the purchase method of accounting, whereby operating results subsequent to the acquisition date are included in our consolidated financial statements. The goodwill associated with the above-mentioned acquisitions is eligible for deduction over 15 years under U.S. tax regulations.
Goodwill and Other Intangible Assets	6. Goodwill and Other Intangible Assets Our consolidated balance sheets include $76.9 million and $86.5 million of goodwill at December28, 2008 and December30, 2007, respectively, net of accumulated amortization of $5.5 million and $6.2 million in 2008 and 2007, respectively. The changes in the carrying amount of goodwill by reportable segment for the years ended December28, 2008 and December30, 2007 are as follows: (in thousands) Domestic Restaurants International Variable Interest Entities All Others Total Balance as of December31, 2006 $ 45,709 $ 20,752 $ 460 $ 436 $ 67,357 Acquisitions 19,173 19,173 Other (16 ) (4 ) (5 ) (25 ) Balance as of December30, 2007 64,866 20,748 455 436 86,505 Divestitures (11,392 ) (11,392 ) Impairment charge (2,300 ) (2,300 ) Consolidation of VIEs 4,101 4,101 Balance as of December28, 2008 $ 53,474 $ 18,448 $ 4,556 $ 436 $ 76,914 See Notes 5 and 7 for discussions of acquisitions and dispositions of Company-owned restaurants.
Restaurant Closure, Impairment and Dispositions	7. Restaurant Closure, Impairment and Dispositions The following table summarizes restaurant closure, impairment and disposition losses (gains) included in minority interests and other general expenses in the accompanying consolidated statements of income during 2008, 2007 and 2006: (in thousands) 2008 2007 2006 Net book value of divested restaurants $ 15,915 $ 680 $ Intangible asset - investment in continuing franchise agreement (2) (3,579 ) Adjusted net book value of divested restaurants 12,336 680 Cash proceeds received (1) 2,145 632 Fair value of notes receivable issued to franchisees 6,857 Total consideration at fair value (1) 9,002 632 Loss on restaurants sold 3,334 48 Loss on domestic restaurant closures and restaurants to be sold (3) 2,441 1,569 Adjustment to long-lived asset impairment reserves (4) 743 190 (260 ) PJUK impairment charge (5) 2,300 Total restaurant closure, impairment and disposition losses (gains) $ 8,818 $ 1,807 $ (260 ) (1) We sold 62 and four Company-owned restaurants to franchisees in 2008 and 2007, respectively. As a part of the agreements to sell some of the restaurants, we issued notes receivable totaling $8.4 million, with a fair value of $6.9 million. (2) As a part of the sales of these restaurants, we recorded a $3.6 million intangible asset for the investment in the continuing franchise agreement, representing the discounted value of the royalties we will receive over the next ten years. The $3.6 million intangible asset will be amortized over the ten-year franchise agreement as a reduction in royalty income of $360,000 annually. The intangible assets are recorded in other assets in the accompanying consolidated balance sheet at December28, 2008. (3) During the fourth quarter of 2008, we decided to sell seven restaurants located in one market. We recorded a pre-tax charge of $1.2 million to reflect our estimated fair value associated with these restaurants. We anticipate that the sale will be completed during 2009. We also recorded $1.2 million in charges associated with closed restaurants. During the fourth quarter of 2007, we decided to close ten domestic restaurants (five were closed in 2007 and the remainder were closed in early 2008), which were located in five markets, due to deteriorating economic performance and an insufficient outlook for improvement. We recorded pre-tax expense of approximately $800,000 associated with the closure of these restaurants. In addition, during 2007, we decided to sell four restaurants located in one market. We recorded a pre-tax charge of $765,000 to reflect our estimated fair value associated with these restaurants that were sold during 2008. (4) We identified 14 under-performing restaurants located in one market that were subject to impairment charges due to the restaurants declining performance during 2008, which was a result of increased competition, increased operating expenses and deteriorating economic conditions in that market. During our review of potentially impaired
Debt and Credit Arrangements	8. Debt and Credit Arrangements Debt and credit arrangements consist of the following (in thousands): 2008 2007 Revolving line of credit $ 123,500 $ 134,000 Debt associated with VIEs * 7,075 8,700 Other 79 6 Total debt 130,654 142,706 Less: current portion of debt (7,075 ) (8,700 ) Long-term debt $ 123,579 $ 134,006 * During 2008, Papa Johns entered into an agreement to guarantee BIBPs outstanding debt. In January2006, we executed a five-year, unsecured Revolving Credit Facility (Credit Facility) totaling $175.0 million. Under the New Credit Facility, outstanding balances accrue interest at 50.0 to 100.0 basis points over the London Interbank Offered Rate (LIBOR) or other bank-developed rates, at our option. The commitment fee on the unused balance ranges from 12.5 to 20.0 basis points. The increment over LIBOR and the commitment fee are determined quarterly based upon the ratio of total indebtedness to earnings before interest, taxes, depreciation and amortization (EBITDA), as defined. The remaining availability under our line of credit, reduced for certain outstanding letters of credit, approximated $31.1 million and $20.6 million as of December28, 2008 and December30, 2007, respectively. The fair value of our outstanding debt approximates the carrying value since our debt agreements are variable-rate instruments. The Credit Facility contains customary affirmative and negative covenants, including financial covenants requiring the maintenance of specified fixed charges and leverage ratios. At December28, 2008 and December30, 2007, we were in compliance with these covenants. We presently have three interest rate swap agreements that provide for a fixed rate of 4.98%, 5.18% and 3.74% respectively, as compared to LIBOR, on the following amount of floating rate debt: Floating Rate Debt Fixed Rates The first interest rate swap agreement: March15, 2006 to January16, 2007 $ 50 million 4.98 % January16, 2007 to January15, 2009 $ 60 million 4.98 % January15, 2009 to January15, 2011 $ 50 million 4.98 % The second interest rate swap agreement: March1, 2007 to January31, 2009 $ 30 million 5.18 % The third interest rate swap agreement: January31, 2009 to January31, 2011 $ 50 million 3.74 % The purpose of the swaps is to provide a hedge against the effects of rising interest rates on forecasted future borrowings. Amounts payable or receivable under the swaps are accounted for as adjustments to interest expense. The net fair value of the swaps was a liability balance of $6.2 million ($4.0 million net of tax) at December28, 2008 and $2.0 million ($1.3 million net of tax) at December30, 2007. The liabilities are included in other long-term liabilities in the accompanying consolidated balance sheets (offset by corresponding amounts in stockholders equity, representing the net unrealized losses included in accumulated other comprehensive income (loss)). The weighted average interest rate for our revolving line of credit, including the
Net Property and Equipment	9. Net Property and Equipment Net property and equipment consists of the following (in thousands): 2008 2007 Land $ 31,450 $ 31,659 Buildings and improvements 79,586 79,726 Leasehold improvements 82,319 84,737 Equipment and other 190,913 203,532 Construction in progress 3,812 8,420 388,080 408,074 Less accumulated depreciation and amortization (198,088 ) (209,117 ) Net property and equipment $ 189,992 $ 198,957
Notes Receivable	10. Notes Receivable Selected franchisees have borrowed funds from our subsidiary, Capital Delivery, Ltd., principally for use in the acquisition, construction and development of their restaurants. We have also entered into loan agreements with certain franchisees that purchased restaurants from us or from other franchisees. In addition, as part of the sale of Perfect Pizza (see Note 3), we have a loan outstanding from the purchaser of those operations. Loans outstanding were approximately $7.6 million on a consolidated basis as of December28, 2008, net of allowance for doubtful accounts (our $35.7 million loan was eliminated upon consolidating BIBP and $8.0 million of loans were eliminated upon consolidating franchisee VIEs) and $11.8 million as of December30, 2007, net of allowance for doubtful accounts ($20.5 million was eliminated upon consolidating BIBP and $560,000 was eliminated upon consolidating franchisee VIEs). Notes receivable bear interest at fixed or floating rates (with an average stated rate of 6.2% at December28, 2008), and are generally secured by the fixtures, equipment, signage and, where applicable, land of each restaurant and the ownership interests in the franchisee. The carrying amounts of the loans approximate market value. Interest income recorded on franchisee loans was approximately $349,000 in 2008, $811,000 in 2007 and $689,000 in 2006 and is reported in investment income in the accompanying consolidated statements of income. We established reserves of $5.4 million and $1.1 million as of December28, 2008 and December30, 2007, respectively, for potentially uncollectible notes receivable from franchisees and the purchaser of the Perfect Pizza operations. We concluded the reserves were necessary due to certain franchisees economic performance and underlying collateral value.
Insurance Reserves	11. Insurance Reserves Our insurance programs for workers compensation, general liability, owned and non-owned automobiles and health insurance coverage provided to our employees are self-insured up to certain individual and aggregate reinsurance levels. Losses are accrued based upon estimates of the aggregate retained liability for claims incurred using certain third-party actuarial projections and our claims loss experience. The estimated insurance claims losses could be significantly affected should the frequency or ultimate cost of claims significantly differ from historical trends used to estimate the insurance reserves recorded by the Company. Our estimated corporate insurance reserves totaled $18.7 million in 2008 and $19.5 million in 2007. From October2000 through September2004, our franchisee insurance program, which provides insurance to our franchisees, was self-insured. Beginning in October2004, a third-party commercial insurance company began providing fully-insured coverage to franchisees participating in the franchise insurance program. Accordingly, the 2004 agreement eliminates our risk of loss for franchise insurance coverage written after September2004. Our operating income will still be subject to potential adjustments for changes in estimated insurance reserves for policies written from the inception of the captive insurance company in October2000 to September2004. Such adjustments, if any, will be determined in part based upon periodic actuarial valuations. Our estimated liabilities for claims loss reserves associated with the franchise insurance program are $2.9 million at December28, 2008 and $5.5 million at December30, 2007, and are included in other long-term liabilities in the accompanying consolidated balance sheets. Investments of $530,000 and $825,000 as of December28, 2008 and December30, 2007, respectively, are held by the captive insurance subsidiary to fund these estimated liabilities and are classified as long-term investments in the accompanying consolidated balance sheets. We are a party to standby letters of credit with off-balance sheet risk associated with our insurance programs and with RSC. The total amount committed under letters of credit for these programs was $24.8 million at December28, 2008.
Accrued Expenses	12. Accrued Expenses Accrued expenses consisted of the following (in thousands): 2008 2007 Self-insurance reserves $ 18,777 $ 20,679 Salaries, benefits and bonuses 13,676 14,701 Rent 5,348 4,904 Marketing 4,215 1,898 Purchases 3,200 4,031 Consulting and professional fees 1,779 1,629 Utilities 1,001 966 Interest 296 342 Other 5,928 7,316 Total $ 54,220 $ 56,466
Other Long-term Liabilities	13. Other Long-term Liabilities Other long-term liabilities consist of the following (in thousands): 2008 2007 Deferred compensation plan $ 8,395 $ 10,595 Minority interest - joint ventures 8,252 8,035 Captive insurance claims loss reserves 2,880 5,495 Interest rate swaps 6,173 2,048 Minority interest - variable interest entities 623 613 Other 536 649 Total $ 26,859 $ 27,435
Income Taxes	14. Income Taxes A summary of the provision (benefit) for income taxes, exclusive of the tax effects related to discontinued operations, follows (in thousands): 2008 2007 2006 Current: Federal $ 20,500 $ 21,107 $ 26,425 Foreign 810 620 619 State and local 2,278 2,345 2,936 Deferred (federal and state) (3,608 ) (10,779 ) 3,191 Total $ 19,980 $ 13,293 $ 33,171 Significant deferred tax assets (liabilities) follow (in thousands): 2008 2007 Unearned development fees $ 2,101 $ 2,214 Accrued liabilities 10,911 11,857 Other assets and liabilities 5,697 4,543 BIBP net operating loss 15,057 11,324 Stock options 4,517 3,569 Other 2,277 802 Foreign net operating losses 5,508 4,504 Valuation allowance on foreign net operating losses (5,508 ) (4,504 ) Total deferred tax assets 40,560 34,309 Deferred expenses (1,946 ) (2,794 ) Accelerated depreciation (3,827 ) (3,932 ) Goodwill (5,997 ) (4,255 ) Other (4,170 ) (3,797 ) Total deferred tax liabilities (15,940 ) (14,778 ) Net deferred tax assets $ 24,620 $ 19,531 The Company had approximately $19.9 million and $15.2 million of foreign tax net operating loss carryovers as of December28, 2008 and December30, 2007, respectively, for which a valuation allowance has been provided. A substantial majority of our foreign tax net operating losses do not have an expiration date. Management believes it is more likely than not that the Companys future earnings will be sufficient to ensure the realization of the recorded net deferred tax assets for federal and state purposes. The reconciliation of income tax computed at the U.S. federal statutory rate to income tax expense, exclusive of income associated with discontinued operations, for the years ended December28, 2008, December30, 2007 and December31, 2006 is as follows (in thousands): 2008 2007 2006 Tax at U.S. federal statutory rate $ 19,872 $ 16,110 $ 33,655 State and local income taxes 1,462 1,167 2,501 Foreign income taxes 810 620 619 Settlement of certain tax issues (1,684 ) (3,408 ) (2,494 ) Tax credits and other (480 ) (1,196 ) (1,110 ) Total $ 19,980 $ 13,293 $ 33,171 Income taxes paid were $23.9 million in 2008, $24.0 million in 2007 and $28.0 million in 2006. The Company files income tax returns in the U.S. federal jurisdiction and various states and foreign jurisdictions. The Company, with few exceptions, is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2004. The Company is currently undergoing examinations by various state and local tax authorities. The Company anticipates that the finalization of these current examinations and other issues could result in a decrease in the liability for unrecognized ta
Related Party Transactions	15. Related Party Transactions Certain of our officers and directors own equity interests in entities that generate and/or have rights to develop franchised restaurants. Following is a summary of full-year transactions and year-end balances with franchisees owned by related parties, the Marketing Fund and Papa Card,Inc. (in thousands): 2008 2007 2006 Revenues from affiliates: Commissary sales $ 18,280 $ 17,656 $ 47,124 Other sales 4,240 4,103 3,696 Franchise royalties 2,500 2,426 6,305 Franchise and development fees 50 65 15 Total $ 25,070 $ 24,250 $ 57,140 Other income from affiliates $ $ 61 $ 66 Accounts receivable-affiliates $ 854 $ 864 $ 783 The above table excludes transactions and balances related to former non-management directors for the time period subsequent to their retirement or resignation from our Board. We paid $355,000 in 2008, $251,000 in 2007 and $80,000 in 2006 for charter aircraft services provided by an entity owned by our Founder Chairman and Interim Chief Executive Officer. We believe the rates charged to the Company were at the market rates that could have been obtained from independent third parties for similar aircraft. We sold approximately $55,000 of print and promotional materials to a company partially owned by our Founder Chairman and Interim Chief Executive Officer during 2008 (none in 2007 and 2006). We charged fair market value for these print and promotional materials. During 2008, a franchise entity that is owned by one executive officer and two former executive officers of Papa Johns sold two restaurants for $415,000 to an unrelated third-party franchise entity. In addition, a franchise entity that is owned by a member of our Board of Directors sold three restaurants in two separate transactions for a total of $470,000 to unrelated third-party franchise entities. A former member of our Board of Directors had a minority interest (less than 20%) in a franchisee during 2005. This franchise entity entered into an agreement to sell an additional 14 restaurants to a new unaffiliated third-party franchise for $2.4 million in a separate market. Papa Johns agreed to receive reduced royalties from the purchaser for 12 months from the date of purchase, which amounted to $70,000 in 2006. See Note 4 for information related to our purchasing arrangement with BIBP.
Lease Commitments and Contingencies	16. Lease Commitments and Contingencies We lease office, retail and commissary space under operating leases, which have an average term of five years and provide for at least one renewal. Certain leases further provide that the lease payments may be increased annually based on the fixed rate terms or adjustable terms such as the Consumer Price Index. PJUK, our subsidiary located in the United Kingdom, leases certain retail space, which is primarily subleased to our franchisees. We also lease the trailers used by our distribution subsidiary, PJFS, for an average period of eight years. Total rent expense was $24.5 million in 2008, $22.4 million in 2007 and $18.5 million in 2006, net of sublease payments received. Future gross lease costs, future expected sublease payments and net lease costs as of December28, 2008, are as follows (in thousands): Future Expected Gross Lease Sublease Net Lease Year Costs Payments Costs 2009 $ 25,427 $ 2,331 $ 23,096 2010 22,844 2,496 20,348 2011 19,517 2,337 17,180 2012 15,049 2,108 12,941 2013 10,658 1,881 8,777 Thereafter 24,677 7,422 17,255 Total $ 118,172 $ 18,575 $ 99,597 We subleased 77 sites in 2008, 87 sites in 2007 and 101 sites in 2006 to our Papa Johns and former Perfect Pizza franchisees located in the United Kingdom and received payments of $3.0 million, $3.4 million and $4.0 million, respectively, which are netted with international operating expenses. In addition, as a condition of the sale of the Perfect Pizza operations in March2006, we remain contingently liable for payment under approximately 70 lease arrangements, primarily associated with Perfect Pizza restaurant sites. The leases have varying terms, the latest of which expires in 2017. As of December28, 2008, the potential amount of undiscounted payments we could be required to make in the event of non-payment by the new owner of Perfect Pizza and associated franchisees was $6.6 million. We believe our cross-default provisions with the Perfect Pizza franchisor significantly reduce the risk that we will be required to make payments under these leases. Accordingly, we have not recorded any liability with respect to such leases at December28, 2008 and December30, 2007. We are subject to claims and legal actions in the ordinary course of business. We believe that all such claims and actions currently pending against us are either adequately covered by insurance or would not have a material adverse effect on us if decided in a manner unfavorable to us.
Share Repurchase Program	17. Share Repurchase Program The Papa Johns Board of Directors has authorized the repurchase of up to $100.0 million of common stock during 2008, of which $62.3 million remained available at December28, 2008 for repurchase through the end of 2009. Funding for the share repurchase program has been provided through a credit facility, operating cash flow, stock option exercises and cash and cash equivalents. Subsequent to year-end (through February17, 2009), an additional 264,000 shares with an aggregate cost of $4.8 million were repurchased. As of February17, 2009, approximately $57.5 million remained available for repurchase of common stock under this authorization.
Stockholder Protection Rights Agreement	18. Stockholder Protection Rights Agreement On February14, 2000, the Board of Directors of the Company adopted a Stockholder Protection Rights Agreement (the Rights Plan). Under the terms of the Rights Plan, one preferred stock purchase right was distributed as a dividend on each outstanding share of Papa Johns common stock held of record as of the close of business on March1, 2000. The rights generally would not become exercisable until a person or group acquired beneficial ownership of 15% or more of the Companys common stock in a transaction that was not approved in advance by the Board of Directors. In December2002, the Board of Directors of the Company adopted an amendment to the Rights Plan to permit a stockholder who becomes the owner of 15% or more of the Companys outstanding common stock due to the Companys repurchase of outstanding shares to acquire up to an additional 1% of the outstanding shares without triggering the Rights Plans dilution provisions. The Companys Founder Chairman and Interim Chief Executive Officer, John Schnatter, who owns approximately 21% of the outstanding common stock, will be excluded from operation of the Rights Plan unless (together with his affiliates and family members) he acquires more than 40% of the Companys common stock. If the rights are triggered, then each right owned by a stockholder other than the unapproved acquirer entitles its holder to purchase shares of Company common stock at 50% of its market price. In addition, after the rights are triggered, if the Company is acquired by an unapproved acquirer in a merger or other business combination transaction, each right that has not previously been exercised will entitle its holder to purchase, at the rights current exercise price, common shares of such other entity having a value of twice the rights exercise price. The Company may redeem the rights for a nominal amount at any time prior to an event that causes the rights to become exercisable.
Equity Compensation	19. Equity Compensation We award stock options and restricted stock from time to time under the Papa Johns International,Inc. 2008 Omnibus Incentive Plan (the Omnibus Plan) and other such agreements as may arise. Shares of common stock authorized for issuance under the Omnibus Plan are approximately 3.7 million, which includes 1.7 million shares transferred in from the Papa Johns International,Inc. 1999 Team Member Stock Ownership Plan (the 1999 Plan) and 183,000 shares transferred in from the Papa Johns International,Inc. 2003 Stock Option Plan for Non-Employee Directors. Approximately 3.0 million shares were available for future issuance under the Omnibus Plan as of December28, 2008. Option awards are generally granted with an exercise price equal to the market price of the Companys stock at the date of grant. Options granted prior to 2003 generally expire ten years from the date of grant and vest over one to five-year periods, except for certain options awarded under a previous, multi-year operations compensation program that vested immediately upon grant. Options granted after 2005 generally expire five years from the date of grant and vest over a 24- or 36-month period. We recorded stock-based employee compensation expense of $2.6 million in 2008, $4.9 million in 2007 and $4.7 million in 2006. The total income tax benefit recognized in the income statement for share-based compensation arrangements was $930,000 in 2008, $1.8 million in 2007 and $1.7 million in 2006. At December28, 2008, there was $3.5 million of unrecognized compensation cost related to nonvested option awards and restricted stock, of which the Company expects to recognize $2.3 million in 2009, $1.0 million in 2010 and $200,000 in 2011. Stock Options Options exercised included 260,000 shares in 2008, 765,000 shares in 2007 and 1.0 million shares in 2006. The total intrinsic value of the options exercised during 2008, 2007 and 2006 was $2.8 million, $10.4 million and $18.5 million, respectively. Cash received upon the exercise of stock options was $4.6 million, $12.2 million and $15.2 million during 2008, 2007 and 2006, respectively, and the related tax benefits realized were approximately $1.0 million, $3.9 million and $6.8 million during the corresponding periods. Information pertaining to option activity during 2008 is as follows (number of options and aggregate intrinsic value in thousands): Weighted Weighted Average Number Average Remaining Aggregate of Exercise Contractual Intrinsic Options Price Term Value Outstanding at December30, 2007 2,339 $ 24.31 Granted 618 26.31 Exercised (260 ) 17.78 Cancelled (68 ) 27.52 Outstanding at December28, 2008 2,629 $ 25.34 2.63 $ 1,539 Vested or expected to vest at December28, 2008 2,598 $ 25.33 2.66 $ 1,399 Exercisable at December28, 2008 1,622 $ 23.00 1.80 $ 1,539 The following is a summary of the significant assumptions used in estimating the fair value of options granted in 2008, 2007 and 2006: 2008 2007 2006
Employee Benefit Plans	20. Employee Benefit Plans We have established the Papa Johns International,Inc. 401(k)Plan (the 401(k)Plan), as a defined contribution benefit plan, in accordance with Section401(k)of the Internal Revenue Code. The 401(k)Plan is open to all employees who meet certain eligibility requirements and allows participating employees to defer receipt of a portion of their compensation and contribute such amount to one or more investment funds. At our discretion, we contributed a matching payment of 2.1% in 2008 and 2007 and 1.5% in 2006 of a participating employees earnings, which is subject to vesting based on an employees length of service with us. Costs of the 401(k)Plan recognized in 2008, 2007 and 2006 were $1.1 million, $920,000 and $372,000, respectively. In addition, we maintain a nonqualified deferred compensation plan available to certain key employees and directors. Under this plan, the participants may defer a certain amount of their compensation, which is credited to the participants accounts. The participant-directed investments associated with this plan are included in other long-term assets ($8.9 million and $11.1 million at December28, 2008 and December30, 2007, respectively) and the associated liabilities ($8.4 million and $10.6 million at December28, 2008 and December30, 2007, respectively) are included in other long-term liabilities in the accompanying consolidated balance sheets. Administrative costs of the 401(k)Plan and the nonqualified deferred compensation plan are paid by the Company and are not significant. PJUK, the Companys United Kingdom subsidiary operation, provided a pension plan that was frozen in 1999. There are approximately 20 participants in the PJUK pension plan. The Company recorded expense of $312,000, $436,000 and $296,000 associated with the pension plan for the fiscal years ended 2008, 2007 and 2006, respectively. We recorded a liability of $141,000, and a corresponding entry to accumulated other comprehensive income (loss) of $88,000, net of tax, related to the estimated unfunded pension obligation at December28, 2008. There was not an unfunded pension obligation as of December30, 2007. The annual contributions and expense to the PJUK pension plan are expected to approximate $250,000.
Segment Information	21. Segment Information We have defined five reportable segments: domestic restaurants, domestic commissaries, domestic franchising, international operations and variable interest entities (VIEs). The domestic 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 domestic 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 domestic franchisees. The international operations segment principally consists of our Company-owned restaurants and distribution sales to franchised Papa Johns 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. VIEs consist of entities in which we are the primary beneficiary, as defined in Note 4, and include BIBP and certain franchisees to which we have extended loans. All other business units that do not meet the quantitative thresholds for determining reportable segments consist 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. 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 related profit 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). Our segment information is as follows: (in thousands) 2008 2007 2006 Revenues from external customers: Domestic Company-owned restaurants $ 533,255 $ 504,330 $ 447,938 Domestic commissaries 429,068 399,099 413,075 Domestic franchising 61,304 60,041 58,971 International 38,717 31,174
Quarterly Data - unaudited, in thousands, except per share data	22. Quarterly Data - unaudited, in thousands, except per share data Our quarterly financial data is as follows: Quarter 2008 1st 2nd 3rd 4th Total revenues $ 289,005 $ 283,408 $ 280,028 $ 279,646 Operating income from continuing operations (1) 15,227 13,807 13,291 21,139 Income from continuing operations, net of tax (1) 8,625 7,648 7,747 12,776 Basic earnings per common share from continuing operations (1) $ 0.30 $ 0.27 $ 0.28 $ 0.46 Earnings per common share from continuing operations - assuming dilution (1) $ 0.30 $ 0.27 $ 0.28 $ 0.46 Quarter 2007 1st 2nd 3rd 4th Total revenues $ 260,624 $ 256,256 $ 262,775 $ 283,940 Operating income from continuing operations (2) 21,886 12,448 5,507 12,206 Income from continuing operations, net of tax (2) 13,155 7,009 4,827 7,744 Basic earnings per common share from continuing operations (2) $ 0.44 $ 0.23 $ 0.16 $ 0.27 Earnings per common share from continuing operations - assuming dilution (2) $ 0.43 $ 0.23 $ 0.16 $ 0.27 (1) During 2008, we recorded pre-tax losses of $8.0 million ($5.2 million after tax or $0.18 per diluted share) in the first quarter, pre-tax losses of $6.3 million ($4.1 million after tax or $0.14 per diluted share) in the second quarter, pre-tax income of $2.8 million ($1.8 million after tax or $0.07 per diluted share) in the third quarter and pre-tax income of $900,000 ($600,000 after tax or $0.02 per diluted share) in the fourth quarter upon consolidation of BIBP. BIBPs total pre-tax loss for 2008 was $10.5 million, or $0.24 per diluted share. (2) During 2007, we recorded pre-tax losses of $406,000 ($256,000 after tax or $0.01 per diluted share) in the first quarter, pre-tax losses of $8.3 million ($5.3 million after tax or $0.17 per diluted share) in the second quarter, pre-tax losses of $10.7 million ($7.0 million after tax or $0.23 per diluted share) in the third quarter and pre-tax losses of $12.3 million ($8.0 million after tax or $0.28 per diluted share) in the fourth quarter upon consolidation of BIBP. BIBPs total pre-tax loss for 2007 was $31.7 million, or $0.68 per diluted share. All quarterly information above is presented in 13-week periods. Quarterly earnings per share on a full-year basis may not agree to the Consolidated Statements of Income due to rounding.

0060- Financial Statement Sched

0060- Financial Statement Schedules
	12 Months Ended Dec. 28, 2008 USD / shares
Financial Statement Schedules
Schedule II - Valuation and Qualifying Accounts	(a)(2) Financial Statement Schedules: Schedule II Valuation and Qualifying Accounts Charged to Balance at (recoveredfrom) Balance at Beginning of Costs and Additions / End of Classification Year Expenses (Deductions) Year (in thousands) Fiscal year ended December28, 2008: Deducted from asset accounts: Reserve for uncollectible accounts receivable $ 4,431 $ 1,959 $ (3,387 )(2) $ 3,003 Reserve for uncollectible accounts receivable - affiliates Reserve for franchisee notes receivable 1,061 3,810 574 (2) 5,445 $ 5,492 $ 5,769 $ (2,813 ) $ 8,448 Reserves included in liability accounts: Reserve for restaurant closures and dispositions $ 254 $ 730 $ (530 )(1) $ 454 Fiscal year ended December30, 2007: Deducted from asset accounts: Reserve for uncollectible accounts receivable $ 4,471 $ 1,515 $ (1,555 )(2) $ 4,431 Reserve for uncollectible accounts receivable - affiliates 1,456 (650 ) (806 ) Reserve for franchisee notes receivable 1,705 853 (1,497 )(2) 1,061 $ 7,632 $ 1,718 $ (3,858 ) $ 5,492 Reserves included in liability accounts: Reserve for restaurant closures and dispositions $ 200 $ 170 $ (116 )(1) $ 254 Fiscal year ended December31, 2006: Deducted from asset accounts: Reserve for uncollectible accounts receivable $ 6,379 $ 3,282 $ (5,190 )(2) $ 4,471 Reserve for uncollectible accounts receivable - affiliates 1,022 454 (20 ) 1,456 Reserve for franchisee notes receivable 1,499 (291 ) 497 (2) 1,705 $ 8,900 $ 3,445 $ (4,713 ) $ 7,632 Reserves included in liability accounts: Reserve for restaurant closures and dispositions $ 1,269 $ (260 ) $ (809 )(1) $ 200 (1) Represents cash payments and other adjustments. (2) Uncollectible accounts written off, net of recoveries and reclassifications between accounts receivable and notes receivable reserves. All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and, therefore, have been omitted.