UNITED STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM 8-K
Current Report
Pursuant
to Section 13 or 15(d) of
The
Securities Exchange Act of 1934
Date of Report (Date of earliest event
reported):
May
5, 2015
Commission File Number: 0-21660
PAPA JOHN’S INTERNATIONAL, INC.
(Exact
name of registrant as specified in its charter)
Delaware |
61-1203323 |
(State or other jurisdiction of |
(I.R.S. Employer Identification |
incorporation or organization) |
Number) |
2002 Papa Johns Boulevard
Louisville,
Kentucky 40299-2367
(Address
of principal executive offices)
(502) 261-7272
(Registrant’s
telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
⃞ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
⃞ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
⃞ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
⃞ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Section 2 – Financial Information
Item 2.02 Results of Operations and Financial Condition
On May 5, 2015, Papa John’s International, Inc. issued a press release announcing first quarter 2015 financial results.
Section 9 – Financial Statements and Exhibits
Item 9.01 Financial Statements and Exhibits
(d) Exhibits
Exhibit Number |
||
Description |
||
99.1 | Papa John’s International, Inc. press release dated May 5, 2015. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
PAPA JOHN’S INTERNATIONAL, INC. |
|
(Registrant) |
|
Date: May 5, 2015 |
/s/ Lance F. Tucker |
Lance F. Tucker | |
Senior Vice President, Chief Financial |
EXHIBIT INDEX
Exhibit |
Description of Exhibit | |
99.1 |
Papa John’s International, Inc. press release dated May 5, 2015. |
Exhibit 99.1
Papa John’s Announces First Quarter 2015 Results
First Quarter EPS Growth of 22% with Comparable Sales Increases of 6.5% for North America and 7.7% for International
LOUISVILLE, Ky.--(BUSINESS WIRE)--May 5, 2015--Papa John’s International, Inc. (NASDAQ: PZZA) today announced financial results for the first quarter ended March 29, 2015.
Highlights
“We would like to thank our customers for an incredible quarter, which saw demand for our “Better Ingredients. Better Pizza.” soar, measured by comp sales, earnings growth and new unit openings,” said Papa John’s founder, chairman, president and CEO, John Schnatter. “Our corporate and franchise operators are united in our efforts to expand the Papa John’s brand by leveraging our industry leading digital platforms to deliver our superior Papa John’s pizza to new customers around the world.”
First quarter 2015 revenues were $432.3 million, a 7.7% increase from first quarter 2014 revenues of $401.4 million. First quarter 2015 net income increased 15.1% to $22.2 million, compared to first quarter 2014 net income of $19.3 million. First quarter 2015 diluted earnings per share increased 22.2% to $0.55, compared to first quarter 2014 diluted earnings per share of $0.45.
Global Restaurant and Comparable Sales Information |
||||||||
First Quarter | ||||||||
Mar. 29, |
Mar. 30, |
|||||||
Global restaurant sales growth (a) | 7.4 | % | 12.5 | % | ||||
Global restaurant sales growth, excluding the impact of foreign currency (a) |
9.6 | % | 13.2 | % | ||||
Comparable sales growth (b) | ||||||||
Domestic company-owned restaurants | 8.1 | % | 11.4 | % | ||||
North America franchised restaurants | 6.0 | % | 8.9 | % | ||||
System-wide North America restaurants | 6.5 | % | 9.6 | % | ||||
System-wide international restaurants | 7.7 | % | 6.4 | % | ||||
(a) | Includes both company-owned and franchised restaurant sales. | |
(b) | Represents the change in year-over-year sales for the same base of restaurants for the same fiscal periods. Comparable sales results for restaurants operating outside of the United States are reported on a constant dollar basis, which excludes the impact of foreign currency translation. | |
We believe global restaurant and comparable sales growth information, as defined in the table above, is useful in analyzing our results since our franchisees pay royalties that are based on a percentage of franchise sales. Franchise sales generate commissary revenue in the United States and in certain international markets. Global restaurant and comparable sales growth information is also useful in analyzing industry trends and the strength of our brand. Franchise restaurant sales are not included in company revenues.
Revenue and Operating Highlights
All revenue and operating highlights below are compared to the same period of the prior year, unless otherwise noted.
Revenue Highlights
Consolidated revenues were $432.3 million for the first quarter of 2015, an increase of $30.9 million, or 7.7%. This increase in revenues was primarily due to the following:
Operating Highlights
The table below summarizes income before income taxes on a reporting segment basis: |
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First Quarter | |||||||||||||||
Mar. 29, | Mar. 30, | Increase | |||||||||||||
(In thousands) | 2015 | 2014 | (Decrease) | ||||||||||||
Domestic company-owned restaurants | $ | 18,480 | $ | 13,285 | $ | 5,195 | |||||||||
Domestic commissaries | 11,800 | 10,431 | 1,369 | ||||||||||||
North America franchising | 22,319 | 19,484 | 2,835 | ||||||||||||
International | 1,344 | 732 | 612 | ||||||||||||
All others | 443 | 590 | (147 | ) | |||||||||||
Unallocated corporate expenses | (17,205 | ) | (12,461 | ) | (4,744 | ) | |||||||||
Elimination of intersegment profits | (745 | ) | (651 | ) | (94 | ) | |||||||||
Total income before income taxes | $ | 36,436 | $ | 31,410 | $ | 5,026 | |||||||||
First quarter 2015 income before income taxes increased approximately $5.0 million, or 16.0%. This increase was primarily due to the following:
These increases were partially offset by higher unallocated corporate expenses of approximately $4.7 million in 2015 primarily due to higher legal, insurance, management incentive compensation, and interest costs. Additionally, the results for the first quarter of 2015 include approximately $700,000 of depreciation expense associated with FOCUS capitalized software development costs.
The first quarter 2015 effective income tax rate was 33.5%, representing a decrease of 1.1% from the prior year rate of 34.6%. Our effective income tax rate may fluctuate from quarter to quarter for various reasons.
The company’s free cash flow, a non-GAAP financial measure, for the first quarters of 2015 and 2014, was as follows (in thousands): |
||||||||||
First Quarter | ||||||||||
Mar. 29, | Mar. 30, | |||||||||
2015 | 2014 | |||||||||
Net cash provided by operating activities (a) | $ | 40,249 | $ | 26,678 | ||||||
Purchases of property and equipment (b) | (7,558 | ) | (11,137 | ) | ||||||
Free cash flow | $ | 32,691 | $ | 15,541 | ||||||
(a) | The increase of approximately $13.6 million was primarily due to higher net income and favorable changes in working capital and other operating activities, including higher depreciation and amortization expense. The prior year included higher inventory levels of equipment to support the rollout of FOCUS to our domestic franchised restaurants. | |
(b) | The decrease of approximately $3.6 million is primarily due to the prior year including FOCUS equipment costs for domestic Company-owned restaurants and FOCUS software development costs. | |
We define free cash flow as net cash provided by operating activities (from the consolidated statements of cash flows) less the amounts spent on the purchase of property and equipment. We view free cash flow as an important measure because it is a factor that management uses in determining the amount of cash available for discretionary investment. Free cash flow is not a term defined by GAAP, and as a result, our measure of free cash flow might not be comparable to similarly titled measures used by other companies. Free cash flow should not be construed as a substitute for or a better indicator of the company’s performance than the company’s GAAP measures.
See the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of our Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission (SEC) for additional information concerning our operating results and cash flow for the three-month period ended March 29, 2015.
FOCUS Update
As of March 29, 2015, the company had implemented its new, proprietary point-of-sale system (“FOCUS”) in substantially all domestic restaurants. The impact of implementing FOCUS was a $1.8 million reduction in income before income taxes in the first quarter of 2015, or a $0.03 reduction in diluted earnings per share, compared to a reduction of approximately $200,000 in the first quarter of 2014. For additional information, see the Quarterly Report on Form 10-Q for the three months ended March 29, 2015.
Global Restaurant Unit Data
At March 29, 2015, there were 4,699 Papa John’s restaurants operating in all 50 states and in 37 international countries and territories, as follows: |
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Domestic |
Franchised |
Total North |
International | System-wide | ||||||||||||||||
First Quarter |
||||||||||||||||||||
Beginning - December 28, 2014 | 686 | 2,654 | 3,340 | 1,323 | 4,663 | |||||||||||||||
Opened | 3 | 18 | 21 | 50 | 71 | |||||||||||||||
Closed | - | (20 | ) | (20 | ) | (15 | ) | (35 | ) | |||||||||||
Acquired (divested) | 2 | (2 | ) | - | - | - | ||||||||||||||
Ending - March 29, 2015 | 691 | 2,650 | 3,341 | 1,358 | 4,699 | |||||||||||||||
Unit growth (decline) | 5 | (4 | ) | 1 | 35 | 36 | ||||||||||||||
% increase (decrease) | 0.7 | % | -0.2 | % | 0.0 | % | 2.6 | % | 0.8 | % | ||||||||||
Our development pipeline as of March 29, 2015 included approximately 1,200 restaurants (200 units in North America and 1,000 units internationally), the majority of which are scheduled to open over the next six years.
Share Repurchase Activity
The following table reflects our repurchases for the first quarter of 2015 and subsequent repurchases through April 28, 2015 (in thousands): |
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Period |
Number |
Cost | |||||
First Quarter 2015 | 402 | $ | 24,765 | ||||
March 30, 2015 through April 28, 2015 | 135 | $ | 8,341 | ||||
There were 40.5 million diluted weighted average shares outstanding for the first quarter, representing a decrease of 5.1% over the prior year first quarter. Diluted earnings per share increased $0.03 for the first quarter of 2015 due to the reduction in shares outstanding, primarily resulting from the share repurchase program. Approximately 39.8 million actual shares of the company’s common stock were outstanding as of March 29, 2015.
2015 Guidance Update
The company provided the following 2015 guidance updates: |
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Updated Guidance | Previous Guidance | |||||
Diluted earnings per share | $2.00 to $2.08 | $1.98 to $2.06 | ||||
North America comparable sales | +3% to +5% | +2% to +4% | ||||
Conference Call
A conference call is scheduled for May 6, 2015 at 10:00 a.m. Eastern Time to review our first quarter 2015 earnings results. The call can be accessed from the company’s web page at www.papajohns.com in a listen-only mode, or dial 877-312-8816 (U.S. and Canada) or 253-237-1189 (international). The conference call will be available for replay, including by downloadable podcast, from the company’s web site at www.papajohns.com. The Conference ID is 45346371.
Investors and others should note that we announce material financial information to our investors using our investor relations website, press releases, SEC filings and public conference calls and webcasts. We intend to use our investor relations website as a means of disclosing information about our business, our financial condition and results of operations and other matters and for complying with our disclosure obligations under Regulation FD. The information we post on our investor relations website, including information contained in investor presentations, may be deemed material. Accordingly, investors should monitor our investor relations website, in addition to following our press releases, SEC filings and public conference calls and webcasts. We encourage investors and others to sign up for email alerts at our investor relations page under Shareholder Tools at the bottom right side of the page. These email alerts are intended to help investors and others to monitor our investor relations website by notifying them when new information is posted on the site.
Forward-Looking Statements
Certain matters discussed in this press release and other company communications constitute forward-looking statements within the meaning of the federal securities laws. Generally, the use of words such as “expect,” “estimate,” “believe,” “anticipate,” “will,” “forecast,” “plan,” “project,” or similar words identify forward-looking statements that we intend to be included within the safe harbor protections provided by the federal securities laws. Such forward-looking statements may relate to projections or guidance concerning business performance, revenue, earnings, contingent liabilities, resolution of litigation, commodity costs, profit margins, unit growth, capital expenditures, and other financial and operational measures. Such statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions, which are difficult to predict and many of which are beyond our control. Therefore, actual outcomes and results may differ materially from those matters expressed or implied in such forward-looking statements. The risks, uncertainties and assumptions that are involved in our forward-looking statements include, but are not limited to:
These and other risk factors are discussed in detail in “Part I. Item 1A. – Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 28, 2014. We undertake no obligation to update publicly any forward-looking statements, whether as a result of future events, new information or otherwise, except as required by law.
* * * *
For more information about the company, please visit www.papajohns.com.
Papa John's International, Inc. and Subsidiaries | ||||||||||
Condensed Consolidated Statements of Income | ||||||||||
Three Months Ended | ||||||||||
March 29, 2015 | March 30, 2014 | |||||||||
(In thousands, except per share amounts) | (Unaudited) | (Unaudited) | ||||||||
Revenues: | ||||||||||
North America: | ||||||||||
Domestic company-owned restaurant sales | $ | 197,287 | $ | 178,193 | ||||||
Franchise royalties | 25,359 | 22,614 | ||||||||
Franchise and development fees | 265 | 144 | ||||||||
Domestic commissary sales | 162,333 | 164,047 | ||||||||
Other sales | 21,614 | 12,750 | ||||||||
International: | ||||||||||
Royalties and franchise and development fees | 6,498 | 5,779 | ||||||||
Restaurant and commissary sales | 18,928 | 17,850 | ||||||||
Total revenues | 432,284 | 401,377 | ||||||||
Costs and expenses: | ||||||||||
Domestic company-owned restaurant expenses: | ||||||||||
Cost of sales | 47,504 | 45,156 | ||||||||
Salaries and benefits | 53,658 | 47,583 | ||||||||
Advertising and related costs | 16,770 | 16,256 | ||||||||
Occupancy costs and other restaurant operating expenses | 37,100 | 34,598 | ||||||||
Total domestic company-owned restaurant expenses | 155,032 | 143,593 | ||||||||
Domestic commissary expenses: | ||||||||||
Cost of sales | 125,126 | 128,924 | ||||||||
Salaries and benefits and other commissary operating expenses | 24,610 | 22,879 | ||||||||
Total domestic commissary expenses | 149,736 | 151,803 | ||||||||
Other operating expenses | 20,603 | 11,431 | ||||||||
International restaurant and commissary expenses | 15,478 | 14,885 | ||||||||
General and administrative expenses | 41,933 | 36,966 | ||||||||
Other general expenses | 1,816 | 1,533 | ||||||||
Depreciation and amortization | 10,041 | 9,164 | ||||||||
Total costs and expenses | 394,639 | 369,375 | ||||||||
Operating income | 37,645 | 32,002 | ||||||||
Net interest (expense) income | (1,209 | ) | (592 | ) | ||||||
Income before income taxes | 36,436 | 31,410 | ||||||||
Income tax expense | 12,197 | 10,869 | ||||||||
Net income before attribution to noncontrolling interests | 24,239 | 20,541 | ||||||||
Income attributable to noncontrolling interests | (2,003 | ) | (1,230 | ) | ||||||
Net income attributable to the company | $ | 22,236 | $ | 19,311 | ||||||
Calculation of income for earnings per share: | ||||||||||
Net income attributable to the company | $ | 22,236 | $ | 19,311 | ||||||
Decrease (increase) in noncontrolling interest redemption value | 70 | (8 | ) | |||||||
Net income attributable to participating securities | (100 | ) | (137 | ) | ||||||
Net income attributable to common shareholders | $ | 22,206 | $ | 19,166 | ||||||
Basic earnings per common share | $ | 0.56 | $ | 0.46 | ||||||
Diluted earnings per common share | $ | 0.55 | $ | 0.45 | ||||||
Basic weighted average common shares outstanding | 39,827 | 41,778 | ||||||||
Diluted weighted average common shares outstanding | 40,510 | 42,696 | ||||||||
Dividends declared per common share | $ | 0.14 | $ | 0.125 | ||||||
Papa John's International, Inc. and Subsidiaries | ||||||||
Condensed Consolidated Balance Sheets | ||||||||
March 29, | December 28, | |||||||
2015 | 2014 | |||||||
(In thousands) | (Unaudited) | (Note) | ||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 23,524 | $ | 20,122 | ||||
Accounts receivable, net | 56,187 | 56,047 | ||||||
Notes receivable, net | 6,103 | 6,106 | ||||||
Income taxes receivable | 3,628 | 9,527 | ||||||
Inventories | 26,354 | 27,394 | ||||||
Deferred income taxes | 7,576 | 8,248 | ||||||
Prepaid expenses and other current assets | 26,114 | 28,564 | ||||||
Total current assets | 149,486 | 156,008 | ||||||
Property and equipment, net | 216,080 | 219,457 | ||||||
Notes receivable, less current portion, net | 12,482 | 12,801 | ||||||
Goodwill | 81,421 | 82,007 | ||||||
Deferred income taxes | 3,914 | 3,914 | ||||||
Other assets | 38,594 | 38,616 | ||||||
Total assets | $ | 501,977 | $ | 512,803 | ||||
Liabilities and stockholders' equity | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 35,009 | $ | 38,832 | ||||
Income and other taxes payable | 9,804 | 9,637 | ||||||
Accrued expenses and other current liabilities | 55,521 | 58,293 | ||||||
Total current liabilities | 100,334 | 106,762 | ||||||
Deferred revenue | 3,906 | 4,257 | ||||||
Long-term debt | 231,000 | 230,451 | ||||||
Deferred income taxes | 20,508 | 22,188 | ||||||
Other long-term liabilities | 44,130 | 41,875 | ||||||
Total liabilities | 399,878 | 405,533 | ||||||
Redeemable noncontrolling interests | 8,798 | 8,555 | ||||||
Total stockholders' equity |
93,301 | 98,715 | ||||||
Total liabilities, redeemable noncontrolling interests and stockholders' equity | $ | 501,977 | $ | 512,803 | ||||
Note: The Condensed Consolidated Balance Sheet has been derived from the audited consolidated financial statements, but does not include all information and footnotes required by accounting principles generally accepted in the United States for a complete set of financial statements. |
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|
Papa John's International, Inc. and Subsidiaries | ||||||||||
Consolidated Statements of Cash Flows | ||||||||||
Three Months Ended | ||||||||||
(In thousands) | March 29, 2015 | March 30, 2014 | ||||||||
(Unaudited) | (Unaudited) | |||||||||
Operating activities | ||||||||||
Net income before attribution to noncontrolling interests | $ | 24,239 | $ | 20,541 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||||
Provision for uncollectible accounts and notes receivable | 659 | 145 | ||||||||
Depreciation and amortization | 10,041 | 9,164 | ||||||||
Deferred income taxes | 5,055 | 6,170 | ||||||||
Stock-based compensation expense | 2,264 | 2,190 | ||||||||
Excess tax benefit on equity awards | (5,091 | ) | (4,900 | ) | ||||||
Other | 1,180 | 1,110 | ||||||||
Changes in operating assets and liabilities, net of acquisitions: | ||||||||||
Accounts receivable | (1,312 | ) | (854 | ) | ||||||
Income taxes receivable | 5,899 | - | ||||||||
Inventories | 1,043 | (3,210 | ) | |||||||
Prepaid expenses and other current assets | 2,452 | 1,715 | ||||||||
Other assets and liabilities | (154 | ) | (795 | ) | ||||||
Accounts payable | (3,828 | ) | (1,311 | ) | ||||||
Income and other taxes payable | 167 | 3,268 | ||||||||
Accrued expenses and other current liabilities | (2,291 | ) | (6,958 | ) | ||||||
Deferred revenue | (74 | ) | 403 | |||||||
Net cash provided by operating activities | 40,249 | 26,678 | ||||||||
Investing activities | ||||||||||
Purchases of property and equipment | (7,558 | ) | (11,137 | ) | ||||||
Loans issued | (506 | ) | (1,758 | ) | ||||||
Repayments of loans issued | 1,083 | 1,164 | ||||||||
Acquisitions, net of cash acquired | (341 | ) | - | |||||||
Other | 20 | 7 | ||||||||
Net cash used in investing activities | (7,302 | ) | (11,724 | ) | ||||||
Financing activities | ||||||||||
Net proceeds on line of credit facility | 549 | 19,267 | ||||||||
Cash dividends paid | (5,545 | ) | (5,240 | ) | ||||||
Excess tax benefit on equity awards | 5,091 | 4,900 | ||||||||
Tax payments for equity award issuances | (5,557 | ) | (3,233 | ) | ||||||
Proceeds from exercise of stock options | 2,210 | 2,989 | ||||||||
Acquisition of Company common stock | (24,765 | ) | (32,800 | ) | ||||||
Distributions to noncontrolling interest holders | (1,705 | ) | (300 | ) | ||||||
Other | 253 | 223 | ||||||||
Net cash used in financing activities | (29,469 | ) | (14,194 | ) | ||||||
Effect of exchange rate changes on cash and cash equivalents | (76 | ) | (42 | ) | ||||||
Change in cash and cash equivalents | 3,402 | 718 | ||||||||
Cash and cash equivalents at beginning of period | 20,122 | 13,670 | ||||||||
Cash and cash equivalents at end of period | $ | 23,524 | $ | 14,388 | ||||||
CONTACT:
Papa John’s International, Inc.
Lance Tucker,
502-261-4218
Chief Financial Officer