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):
February
27, 2018
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))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company [ ]
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
Section 2 – Financial Information
Item 2.02 Results of Operations and Financial Condition
On February 27, 2018, Papa John’s International, Inc. issued a press release announcing fourth quarter 2017 financial results.
Section 9 – Financial Statements and Exhibits
Item 9.01 Financial Statements and Exhibits
(d) Exhibits
Exhibit |
Description |
99.1 |
Papa John’s International, Inc. press release dated February 27, 2018. |
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: February 27, 2018 |
/s/ Lance F. Tucker |
Lance F. Tucker | |
Senior Vice President, Chief Financial |
EXHIBIT INDEX
Exhibit |
Description of Exhibit | |
Papa John’s International, Inc. press release dated February 27, 2018. |
Exhibit 99.1
Papa John’s Announces Fourth Quarter 2017 Results and Provides 2018 Outlook
LOUISVILLE, Ky.--(BUSINESS WIRE)--February 27, 2018--Papa John’s International, Inc. (NASDAQ: PZZA) today announced financial results for the three months and full year ended December 31, 2017.
Highlights
“We know our potential is so much greater than our results, and we are taking significant steps to reinvigorate our record of profitable growth and value creation,” said Steve Ritchie, CEO and President of Papa John’s. “Actions are underway to improve our brand proposition, how we connect with customers, and how we operate at the unit level. These actions build on all the strengths of the Papa John’s brand and include a fresh perspective around marketing driven by new media and creative partnerships, hiring a new PR partner, and bringing online a new engine to drive our Papa Rewards loyalty system. Based on these initiatives, we expect to see marked improvements in sales later in 2018. Our franchise partners in the US are fully aligned with our initiatives and are excited about this next chapter of the Papa John’s brand.”
GAAP and adjusted net income and diluted earnings per share results excluding Special items are summarized below. All highlights are compared to the same period of the prior year, unless otherwise noted on both a 53 week basis as well as a 52 week basis.
(In thousands, except per share amounts) | ||||||||||||||||||||||||||||
Three Months Ended | Year Ended | |||||||||||||||||||||||||||
Dec. 31, |
Dec. 25, |
% |
Dec. 31, |
Dec. 25, |
% |
|||||||||||||||||||||||
GAAP net income- 53 weeks | $ | 28,509 | $ | 32,630 | -12.6 | % | $ | 102,292 | $ | 102,820 | -0.5 | % | ||||||||||||||||
Special items(*) | (5,716 | ) | (7,022 | ) | -18.6 | % | (7,576 | ) | (7,022 | ) | 7.9 | % | ||||||||||||||||
Adjusted net income- 53 weeks | $ | 22,793 | $ | 25,608 | -11.0 | % | $ | 94,716 | $ | 95,798 | -1.1 | % | ||||||||||||||||
53rd week | (3,900 | ) | - | (3,900 | ) | - | ||||||||||||||||||||||
Adjusted net income- 52 weeks | $ | 18,893 | $ | 25,608 | -26.2 | % | $ | 90,816 | $ | 95,798 | -5.2 | % | ||||||||||||||||
|
||||||||||||||||||||||||||||
GAAP diluted EPS- 53 weeks | $ | 0.81 | $ | 0.88 | -8.0 | % | $ | 2.83 | $ | 2.74 | 3.3 | % | ||||||||||||||||
Special items (*) | (0.16 | ) | (0.19 | ) | -15.8 | % | (0.21 | ) | (0.19 | ) | 10.5 | % | ||||||||||||||||
Adjusted diluted EPS- 53 weeks | $ | 0.65 | $ | 0.69 | -5.8 | % | $ | 2.62 | $ | 2.55 | 2.7 | % | ||||||||||||||||
53rd week | (0.11 | ) | - | (0.11 | ) | - | ||||||||||||||||||||||
Adjusted diluted EPS- 52 weeks | $ | 0.54 | $ | 0.69 | -21.7 | % | $ | 2.51 | $ | 2.55 | -1.6 | % | ||||||||||||||||
(*) See Special items detail in “Items Impacting Comparability - Non-GAAP Presentation” table. |
||||||||||||||||||||||||||||
Revenue and Operating Highlights
Consolidated revenues for the fourth quarter were $467.6 million, increasing $27.9 million, or 6.4%, compared to the fourth quarter of 2016. The fourth quarter and full year 2017 results include the benefit of the 53rd week of operations which contributed approximately $31.0 million. Excluding the 53rd week, the revenues for the fourth quarter of 2017 decreased $2.9 million or 0.7%. This decrease is primarily due to the decrease in company-owned restaurant sales due to negative comparable sales of 4.7% and the impact of refranchising 42 Domestic company-owned restaurants in the fourth quarter of 2016. These decreases were somewhat offset by increases in International revenues due to higher comparable sales of 2.6% and an increase in equivalent units as well as an increase in North America commissary sales due to higher commodity prices. Foreign currency exchange rates during the fourth quarter of 2017 favorably impacted International revenues by approximately $1.8 million.
Consolidated revenues for the full year 2017 were $1.78 billion, increasing $69.7 million, or 4.1%, compared to 2016. Excluding the 53rd week, 2017 revenues increased $38.8 million, or 2.3%, compared to 2016. This increase was primarily due to higher North America commissary sales from commodity price increases and higher volumes. International revenues also increased due to higher comparable sales of 4.4% and an increase in equivalent units. The increased revenues from International were somewhat offset by the impact of unfavorable foreign currency exchange rates approximating $4.1 million. North America franchise revenues also increased primarily due to the impact of refranchising 42 Domestic company-owned restaurants in the fourth quarter of 2016; this increase was more than offset by a related decrease in Domestic company-owned restaurant sales.
Consolidated income before income taxes of $32.1 million for the fourth quarter of 2017 decreased $18.5 million, or 36.6%, compared to the fourth quarter of 2016. Excluding the impact of Special items, adjusted income before income taxes was $33.7 million for the fourth quarter of 2017, a decrease of $5.7 million, or 14.5%, compared to the fourth quarter of 2016 as detailed below. Adjusted income before income taxes as a percentage of consolidated revenues was 7.2% for the fourth quarter of 2017, a decrease of 1.8% compared to the fourth quarter of fiscal 2016. See “Items Impacting Comparability - Non-GAAP Presentation” table for more details.
Consolidated income before income taxes was $140.3 million, a decrease of $18.5 million, or 11.6%, for the year ended December 31, 2017. Excluding the impact of Special items, adjusted income before income taxes was $142.0 million, a decrease of $5.7 million, or 3.8% for the year ended December 31, 2017, which was driven by the fourth quarter results, as previously discussed. Adjusted income before income taxes as a percentage of consolidated revenues was 8.0%, a decrease of 0.6% for the full year.
The effective income tax rates were 9.6% and 24.1% for the fourth quarter and full year 2017, respectively, representing decreases of 22.6% and 7.2% from the prior year comparable periods. The decreases in the effective income tax rates for the fourth quarter and full year are primarily attributable to the impact of the “Tax Cuts and Jobs Act,” (the “Tax Act”) which was signed into law on December 22, 2017. The Tax Act contains substantial changes to the Internal Revenue Code including a reduction of the U.S. corporate tax rate from 35% to 21% effective January 1, 2018. As a result of the enactment of this tax legislation in 2017, deferred tax assets and liabilities were remeasured. This remeasurement yielded a one-time benefit of approximately $7 million in the fourth quarter of 2017. See “Items Impacting Comparability-Non-GAAP Presentation” table for more details. Given the substantial changes associated with the Tax Act, the estimated remeasurement of deferred taxes for fourth quarter and the full year 2017 are provisional and subject to further interpretation and clarification of the Tax Act.
Diluted earnings per share (“EPS”) decreased 8.0% for the fourth quarter of 2017 and increased 3.3% for the full year. Excluding Special items, adjusted diluted EPS was $0.65 for the fourth quarter, a decrease of 5.8%. The decrease is primarily attributable to the lower operating income results previously discussed, which more than offset the favorable impact of the 53rd week. The 2017 full year adjusted diluted EPS was $2.62, an increase of 2.7% over 2016 EPS of $2.55. This full year increase includes the $0.11 favorable impact of the 53rd week, a favorable tax rate and lower share count. These favorable items were somewhat offset by other decreases in income, as previously discussed.
Global Restaurant and Comparable Sales Information
Three Months Ended | Year Ended | |||||||||||||||
Dec. 31, |
Dec. 25, |
Dec. 31, |
Dec. 25, |
|||||||||||||
Global restaurant sales growth (a) | 9.9 | % | 5.3 | % | 5.8 | % | 5.2 | % | ||||||||
Global restaurant sales growth, excluding the impact of foreign currency (a) |
9.6 | % | 7.0 | % | 6.3 | % | 6.8 | % | ||||||||
Comparable sales growth (b) | ||||||||||||||||
Domestic company-owned restaurants | (4.7 | %) | 4.8 | % | 0.4 | % | 4.4 | % | ||||||||
North America franchised restaurants | (3.5 | %) | 3.4 | % | (0.1 | %) | 3.1 | % | ||||||||
System-wide North America restaurants | (3.9 | %) | 3.8 | % | 0.1 | % | 3.5 | % | ||||||||
System-wide international restaurants | 2.6 | % | 5.6 | % | 4.4 | % | 6.0 | % | ||||||||
(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. Management believes the presentation of global restaurant sales growth excluding the impact of foreign currency provides investors with useful information regarding underlying sales trends by presenting sales growth excluding the external factor of foreign currency exchange. Franchise restaurant sales are not included in company revenues.
Free Cash Flow
The company’s free cash flow, a non-GAAP financial measure, for the full year of 2017 and 2016 was as follows (in thousands):
Full Year Ended | ||||||||||
Dec. 31 | Dec. 25 | |||||||||
2017 | 2016 | |||||||||
Net cash provided by operating activities (a) | $ | 134,975 | $ | 150,257 | ||||||
Purchases of property and equipment | (52,594 | ) | (55,554 | ) | ||||||
Free cash flow | $ | 82,381 | $ | 94,703 | ||||||
(a) The decrease of $15.3 million was primarily due to changes in working capital amounts. |
||||||||||
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 liquidity or performance than the company’s GAAP measures.
See the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of our Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC) for additional information concerning our operating results and cash flow for the full year ended December 31, 2017.
Global Restaurant Unit Data
At December 31, 2017, there were 5,199 Papa John’s restaurants operating in all 50 states and in 44 international countries and territories, as follows:
Domestic |
Franchised |
Total North |
International | System-wide | ||||||||||||||||
Fourth Quarter |
||||||||||||||||||||
Beginning - September 24, 2017 | 705 | 2,736 | 3,441 | 1,660 | 5,101 | |||||||||||||||
Opened | 5 | 37 | 42 | 118 | 160 | |||||||||||||||
Closed | (1 | ) | (41 | ) | (42 | ) | (20 | ) | (62 | ) | ||||||||||
Acquired | - | 1 | 1 | - | 1 | |||||||||||||||
Sold | (1 | ) | - | (1 | ) | - | (1 | ) | ||||||||||||
Ending - December 31, 2017 | 708 | 2,733 | 3,441 | 1,758 | 5,199 | |||||||||||||||
Year-to-date |
||||||||||||||||||||
Beginning - December 25, 2016 | 702 | 2,739 | 3,441 | 1,656 | 5,097 | |||||||||||||||
Opened | 9 | 110 | 119 | 257 | 376 | |||||||||||||||
Closed | (3 | ) | (116 | ) | (119 | ) | (155 | ) | (274 | ) | ||||||||||
Acquired | 1 | 1 | 2 | - | 2 | |||||||||||||||
Sold | (1 | ) | (1 | ) | (2 | ) | - | (2 | ) | |||||||||||
Ending - December 31, 2017 | 708 | 2,733 | 3,441 | 1,758 | 5,199 | |||||||||||||||
Unit growth (decline) | 6 | (6 | ) | - | 102 | 102 | ||||||||||||||
% increase (decrease) | 0.9 | % | (0.2 | %) | - | 6.2 | % | 2.0 | % | |||||||||||
The 2017 International franchise closures include 66 India closures for the year ended December 31, 2017. There was no significant impact on our 2017 operating results from the closure of the market.
Our development pipeline as of December 31, 2017 includes 1,190 restaurants (200 units in North America and 990 units internationally), the majority of which are scheduled to open over the next six years.
Items Impacting Comparability – Non-GAAP Presentation
The following table reconciles our GAAP financial results to our adjusted financial results, which are non-GAAP measures, for the fourth quarter and full year ended December 31, 2017 and December 25, 2016:
Three Months Ended | Full Year Ended | |||||||||||||||||||
Dec. 31, | Dec. 25, | Dec. 31, | Dec. 25, | |||||||||||||||||
(In thousands, except per share amounts) | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||
GAAP income before income taxes | $ | 32,064 | $ | 50,573 | $ | 140,342 | $ | 158,809 | ||||||||||||
Special items: | ||||||||||||||||||||
Refranchising and impairment (gains)/losses | 1,674 | (10,222 | ) | 1,674 | (10,222 | ) | ||||||||||||||
Legal settlement | - | (898 | ) | - | (898 | ) | ||||||||||||||
Adjusted income before income taxes | $ | 33,738 | $ | 39,453 | $ | 142,016 | $ | 147,689 | ||||||||||||
53rd week | $ | (5,900 | ) | $ | - | $ | (5,900 | ) | $ | - | ||||||||||
Adjusted income before income taxes - 52 weeks | $ | 27,838 | $ | 39,453 | $ | 136,116 | $ | 147,689 | ||||||||||||
GAAP net income | $ | 28,509 | $ | 32,630 | $ | 102,292 | $ | 102,820 | ||||||||||||
Special items, net of income taxes: | ||||||||||||||||||||
Refranchising and impairment (gains)/losses | 1,323 | (6,455 | ) | 1,323 | (6,455 | ) | ||||||||||||||
Legal settlement | - | (567 | ) | - | (567 | ) | ||||||||||||||
U.S. tax legislation effect on deferred taxes | (7,020 | ) | - | (7,020 | ) | - | ||||||||||||||
Equity compensation tax benefit | (19 | ) | - | (1,879 | ) | - | ||||||||||||||
Adjusted net income | $ | 22,793 | $ | 25,608 | $ | 94,716 | $ | 95,798 | ||||||||||||
53rd week | $ | (3,900 | ) | $ | - | $ | (3,900 | ) | $ | - | ||||||||||
Adjusted net income - 52 weeks | $ | 18,893 | $ | 25,608 | $ | 90,816 | $ | 95,798 | ||||||||||||
GAAP diluted earnings per share | $ | 0.81 | $ | 0.88 | $ | 2.83 | $ | 2.74 | ||||||||||||
Special items: | ||||||||||||||||||||
Refranchising and impairment (gains)/losses | 0.04 | (0.17 | ) | 0.04 | (0.17 | ) | ||||||||||||||
Legal settlement | - | (0.02 | ) | - | (0.02 | ) | ||||||||||||||
U.S. tax legislation effect on deferred taxes | (0.20 | ) | - | (0.20 | ) | - | ||||||||||||||
Equity compensation tax benefit | - | - | (0.05 | ) | - | |||||||||||||||
Adjusted diluted earnings per share | $ | 0.65 | $ | 0.69 | $ | 2.62 | $ | 2.55 | ||||||||||||
53rd week | $ | (0.11 | ) | $ | - | $ | (0.11 | ) | $ | - | ||||||||||
Adjusted diluted earnings per share - 52 weeks | $ | 0.54 | $ | 0.69 | $ | 2.51 | $ | 2.55 | ||||||||||||
Refranchising and impairment (gains)/losses includes impairment charges in 2016 and 2017 related to our company-owned stores in China that are held for sale. 2016 also includes a refranchising gain from the sale of the company–owned Phoenix market with 42 restaurants to a franchisee.
The legal settlement represents the favorable 2016 finalization related to the collective and class action litigation, Perrin v. Papa John’s International, Inc. and Papa John’s USA, Inc.
U.S. tax legislation effect on deferred taxes is related to the remeasurement of the net deferred tax liability due to the Tax Cuts and Jobs Act.
2017 also includes the favorable impact of adopting the new guidance for accounting for share-based compensation. This guidance requires excess tax benefits recognized on stock based awards to be recorded as a reduction of income tax expense rather than stockholders’ equity.
The non-GAAP adjusted results shown should not be construed as a substitute for or a better indicator of the company’s performance than the company’s GAAP results. Management believes presenting the financial information excluding these items is important for purposes of comparison to prior year results. In addition, management uses these metrics to evaluate the company’s underlying operating performance, to analyze trends, and to determine compensation.
Share Repurchase Activity
The following table reflects our repurchases for the fourth quarter and full year 2017 and subsequent repurchases through February 20, 2018 (in thousands):
Period |
Number |
Cost | |||||||||
Fourth Quarter 2017 | 1,387 | $ | 87,881 | ||||||||
Full Year 2017 | 2,960 | $ | 209,586 | ||||||||
January 1, 2018 through February 20, 2018 | 546 | $ | 32,713 | ||||||||
There were 35.1 million and 36.5 million diluted weighted average shares outstanding for the fourth quarter and full year ended December 31, 2017, representing decreases of 6.1% and 2.9%, respectively, over the prior year comparable periods. Approximately 34.1 million actual shares of the company’s common stock were outstanding as of December 31, 2017.
The Company expects to repurchase shares in an amount equal to the remaining authorization by the end of 2019. The timing and volume of share repurchases may be executed at the discretion of management on an opportunistic basis, or pursuant to trading plans or other arrangements. Any share repurchase under this program may be made in the open market, in privately negotiated transactions, or otherwise. The Company continues to evaluate the use of an accelerated share repurchase program to execute a portion of the share repurchase authorization. There can be no assurance as to the amount, timing or prices of repurchases, whether through an accelerated share repurchase program or otherwise. The specific timing and amount of repurchases will vary based on prevailing market conditions and other factors. Repurchases under the Company’s share repurchase program may be commenced or suspended from time to time at the Company’s discretion without prior notice.
Cash Dividend
We paid a cash dividend of approximately $7.8 million ($0.225 per common share) during the fourth quarter of 2017. Subsequent to the fourth quarter, on February 2, 2018, our Board of Directors declared a fourth quarter dividend of $0.225 per common share (approximately $7.6 million based on the current number of shares outstanding). The dividend was paid on February 23, 2018 to shareholders of record as of the close of business on February 12, 2018. The declaration and payment of any future dividends will be at the discretion of our Board of Directors, subject to the company’s financial results, cash requirements, and other factors deemed relevant by our Board of Directors.
2018 Key Operating Assumptions and Financial Outlook
In 2018, the Company is targeting the following performance:
Conference Call and Website Information
A conference call is scheduled for February 27, 2018 at 5:00 p.m. Eastern Time to review our fourth quarter and full year 2017 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 24776789.
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,” “intend,” “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, cash flow, contingent liabilities, resolution of litigation, commodity costs, profit margins, unit growth, unit level performance, capital expenditures, share repurchases, dividends, effective tax rates, the impact of the Tax Cuts and Job Act and the adoption of new accounting standards, 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 31, 2017. 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 | Year Ended | |||||||||||||||||||
December 31, 2017 | December 25, 2016 | December 31, 2017 | December 25, 2016 | |||||||||||||||||
(In thousands, except per share amounts) | (Unaudited) | (Unaudited) | ||||||||||||||||||
Revenues: | ||||||||||||||||||||
Domestic company-owned restaurant sales | $ | 210,799 | $ | 206,963 | $ | 816,718 | $ | 815,931 | ||||||||||||
North America franchise royalties and fees | 26,967 | 26,426 | 106,729 | 102,980 | ||||||||||||||||
North America commissary and other sales | 194,095 | 177,983 | 733,627 | 681,606 | ||||||||||||||||
International | 35,745 | 28,247 | 126,285 | 113,103 | ||||||||||||||||
Total revenues | 467,606 | 439,619 | 1,783,359 | 1,713,620 | ||||||||||||||||
Costs and expenses: | ||||||||||||||||||||
Operating costs (excluding depreciation and amortization shown separately below): |
||||||||||||||||||||
Domestic company-owned restaurant expenses | 174,921 | 165,007 | 664,640 | 651,536 | ||||||||||||||||
North America commissary and other expenses | 180,474 | 164,859 | 685,206 | 631,475 | ||||||||||||||||
International expenses | 21,714 | 17,573 | 78,971 | 71,509 | ||||||||||||||||
General and administrative expenses | 40,843 | 40,393 | 158,183 | 163,812 | ||||||||||||||||
Depreciation and amortization | 11,376 | 10,598 | 43,668 | 40,987 | ||||||||||||||||
Total costs and expenses | 429,328 | 398,430 | 1,630,668 | 1,559,319 | ||||||||||||||||
Refranchising and impairment gains/(losses), net | (1,674 | ) | 10,222 | (1,674 | ) | 10,222 | ||||||||||||||
Operating income | 36,604 | 51,411 | 151,017 | 164,523 | ||||||||||||||||
Legal settlement expense | - | 898 | - | 898 | ||||||||||||||||
Net interest expense | (4,540 | ) | (1,736 | ) | (10,675 | ) | (6,612 | ) | ||||||||||||
Income before income taxes | 32,064 | 50,573 | 140,342 | 158,809 | ||||||||||||||||
Income tax expense | 3,089 | 16,294 | 33,817 | 49,717 | ||||||||||||||||
Net income before attribution to noncontrolling interests | 28,975 | 34,279 | 106,525 | 109,092 | ||||||||||||||||
Income attributable to noncontrolling interests | (466 | ) | (1,649 | ) | (4,233 | ) | (6,272 | ) | ||||||||||||
Net income attributable to the company | $ | 28,509 | $ | 32,630 | $ | 102,292 | $ | 102,820 | ||||||||||||
Calculation of income for earnings per share: | ||||||||||||||||||||
Net income attributable to the company | $ | 28,509 | $ | 32,630 | $ | 102,292 | $ | 102,820 | ||||||||||||
Change in noncontrolling interest redemption value | - | 225 | 1,419 | 567 | ||||||||||||||||
Net income attributable to participating securities | (118 | ) | (132 | ) | (423 | ) | (420 | ) | ||||||||||||
Net income attributable to common shareholders | $ | 28,391 | $ | 32,723 | $ | 103,288 | $ | 102,967 | ||||||||||||
Basic earnings per common share | $ | 0.82 | $ | 0.89 | $ | 2.86 | $ | 2.76 | ||||||||||||
Diluted earnings per common share | $ | 0.81 | $ | 0.88 | $ | 2.83 | $ | 2.74 | ||||||||||||
Basic weighted average common shares outstanding | 34,745 | 36,892 | 36,083 | 37,253 | ||||||||||||||||
Diluted weighted average common shares outstanding | 35,052 | 37,311 | 36,522 | 37,608 | ||||||||||||||||
Dividends declared per common share | $ | 0.225 | $ | 0.200 | $ | 0.850 | $ | 0.750 | ||||||||||||
Papa John’s International, Inc. and Subsidiaries |
|||||||||
Condensed Consolidated Balance Sheets | |||||||||
December 31, | December 25, | ||||||||
2017 | 2016 | ||||||||
(In thousands) | |||||||||
Assets | |||||||||
Current assets: | |||||||||
Cash and cash equivalents | $ | 22,345 | $ | 15,563 | |||||
Accounts receivable, net | 64,644 | 59,691 | |||||||
Notes receivable, net | 4,333 | 3,417 | |||||||
Income tax receivable | 3,903 | 2,372 | |||||||
Inventories | 30,620 | 25,132 | |||||||
Prepaid expenses and other current assets | 38,016 | 33,143 | |||||||
Assets held for sale | 6,133 | 6,257 | |||||||
Total current assets | 169,994 | 145,575 | |||||||
Property and equipment, net | 234,331 | 230,473 | |||||||
Notes receivable, less current portion, net | 15,568 | 10,141 | |||||||
Goodwill | 86,892 | 85,529 | |||||||
Deferred income taxes | 585 | 769 | |||||||
Other assets | 48,183 | 40,078 | |||||||
Total assets | $ | 555,553 | $ | 512,565 | |||||
Liabilities and stockholders’ equity (deficit) |
|||||||||
Current liabilities: | |||||||||
Accounts payable | $ | 32,006 | $ | 42,701 | |||||
Income and other taxes payable | 10,561 | 8,540 | |||||||
Accrued expenses and other current liabilities | 70,293 | 76,789 | |||||||
Current portion of long-term debt | 20,000 | - | |||||||
Total current liabilities | 132,860 | 128,030 | |||||||
Deferred revenue | 2,652 | 3,313 | |||||||
Long-term debt, net | 446,565 | 299,820 | |||||||
Deferred income taxes | 12,546 | 10,047 | |||||||
Other long-term liabilities | 60,146 | 53,093 | |||||||
Total liabilities | 654,769 | 494,303 | |||||||
Redeemable noncontrolling interests | 6,738 | 8,461 | |||||||
Total stockholders’ equity (deficit) |
(105,954 | ) | 9,801 | ||||||
Total liabilities, redeemable noncontrolling interests and stockholders’ equity (deficit) |
$ | 555,553 | $ | 512,565 | |||||
|
Note: The Condensed Consolidated Balance Sheets have been derived from the audited consolidated financial statements, but do not include all information and footnotes required by accounting principles generally accepted in the United States for a complete set of financial statements.
Papa John’s International, Inc. and Subsidiaries |
||||||||||
Consolidated Statements of Cash Flows | ||||||||||
Year Ended | ||||||||||
(In thousands) | December 31, 2017 | December 25, 2016 | ||||||||
Operating activities | ||||||||||
Net income before attribution to noncontrolling interests | $ | 106,525 | $ | 109,092 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||||
Provision for uncollectible accounts and notes receivable | 29 | 409 | ||||||||
Depreciation and amortization | 43,668 | 40,987 | ||||||||
Deferred income taxes | 498 | 11,624 | ||||||||
Stock-based compensation expense | 10,413 | 10,123 | ||||||||
Gain on refranchising | - | (11,572 | ) | |||||||
Impairment loss | 1,674 | 1,350 | ||||||||
Other | 3,375 | 3,337 | ||||||||
Changes in operating assets and liabilities, net of acquisitions: | ||||||||||
Accounts receivable | (7,358 | ) | 1,557 | |||||||
Income tax receivable | (1,531 | ) | 4,100 | |||||||
Inventories | (5,485 | ) | (3,639 | ) | ||||||
Prepaid expenses and other current assets | (5,572 | ) | (3,210 | ) | ||||||
Other assets and liabilities | (742 | ) | (6,269 | ) | ||||||
Accounts payable | (8,743 | ) | (916 | ) | ||||||
Income and other taxes payable | 1,897 | 9 | ||||||||
Accrued expenses and other current liabilities | (3,012 | ) | (7,960 | ) | ||||||
Deferred revenue | (661 | ) | 1,235 | |||||||
Net cash provided by operating activities | 134,975 | 150,257 | ||||||||
Investing activities | ||||||||||
Purchases of property and equipment | (52,593 | ) | (55,554 | ) | ||||||
Loans issued | (8,103 | ) | (3,210 | ) | ||||||
Repayments of loans issued | 4,185 | 8,569 | ||||||||
Acquisitions, net of cash acquired | (21 | ) | (13,352 | ) | ||||||
Proceeds from divestitures of restaurants | - | 16,844 | ||||||||
Other | 34 | 429 | ||||||||
Net cash used in investing activities | (56,498 | ) | (46,274 | ) | ||||||
Financing activities | ||||||||||
Proceeds from issuance of term loan | 400,000 | - | ||||||||
Repayments of term loan | (5,000 | ) | - | |||||||
Net (repayments) proceeds of revolving credit facility | (225,575 | ) | 44,575 | |||||||
Debt issuance costs | (3,181 | ) | - | |||||||
Cash dividends paid | (30,720 | ) | (27,896 | ) | ||||||
Tax payments for equity award issuances | (2,428 | ) | (6,024 | ) | ||||||
Proceeds from exercise of stock options | 6,260 | 7,060 | ||||||||
Acquisition of Company common stock | (209,586 | ) | (122,381 | ) | ||||||
Contributions from noncontrolling interest holders | 2,956 | 690 | ||||||||
Distributions to noncontrolling interest holders | (5,449 | ) | (5,610 | ) | ||||||
Other | 663 | 556 | ||||||||
Net cash used in financing activities | (72,060 | ) | (109,030 | ) | ||||||
Effect of exchange rate changes on cash and cash equivalents | 365 | (396 | ) | |||||||
Change in cash and cash equivalents | 6,782 | (5,443 | ) | |||||||
Cash and cash equivalents at beginning of period | 15,563 | 21,006 | ||||||||
Cash and cash equivalents at end of period | $ | 22,345 | $ | 15,563 |
CONTACT:
Papa John’s International, Inc.
Lance Tucker,
502-261-7272
Chief Financial Officer
or
Steve Coke, 502-261-7272
Vice
President of Investor Relations and Strategy