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Delaware
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61-1203323
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(State or other jurisdiction of
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(I.R.S. Employer Identification
|
|
incorporation or organization)
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Number)
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Title of each class:
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Trading Symbol
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Name of each exchange on which registered:
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Common stock, $0.01 par value
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PZZA
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The NASDAQ Stock Market LLC
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Exhibit |
Description |
Number |
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99.1
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Papa John’s International, Inc. press release dated August 6, 2019.
|
Date: August 6, 2019
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/s/ Joseph H. Smith, IV
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|
Joseph H. Smith, IV
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Senior Vice President, Chief Financial
|
|
Officer
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Exhibit
Number |
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Description of Exhibit
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LOUISVILLE, Ky.--(BUSINESS WIRE)--August 6, 2019--Papa John’s International, Inc. (NASDAQ: PZZA) today announced financial results for the three and six months ended June 30, 2019.
Highlights
Steve Ritchie, President and CEO of Papa John’s, said, “Papa John’s made strong progress in the key pillars of its strategy in the second quarter, recording another sequential improvement in comparable sales. In addition to adding a highly experienced chief restaurant operations officer, we announced a significant, multi-quarter investment in the brand and our franchise system from Starboard’s investment earlier this year. The table is now set as we begin rolling out our new marketing campaigns and menu items in the second half of the year.”
Global restaurant and comparable sales information and operating highlights for the three and six months ended June 30, 2019, compared to the three and six months ended July 1, 2018 are as follows:
Global Restaurant and Comparable Sales Information
Three Months Ended |
Six Months Ended |
|||||||||||
June 30, |
July 1, |
June 30, |
July 1, |
|||||||||
Global restaurant sales (decline) / growth (a) |
(3.8 |
%) |
(2.3 |
%) |
(4.7 |
%) |
(1.8 |
%) |
||||
Global restaurant sales (decline) / growth, excluding the impact of foreign currency (a) |
(2.6 |
%) |
2.3 |
% |
(3.2 |
%) |
0.6 |
% |
||||
Comparable sales (decline) / growth (b) | ||||||||||||
Domestic company-owned restaurants |
(6.8 |
%) |
(7.2 |
%) |
(7.9 |
%) |
(6.7 |
%) |
||||
North America franchised restaurants |
(5.3 |
%) |
(5.7 |
%) |
(5.7 |
%) |
(5.3 |
%) |
||||
System-wide North America restaurants |
(5.7 |
%) |
(6.1 |
%) |
(6.3 |
%) |
(5.7 |
%) |
||||
System-wide international restaurants |
0.3 |
% |
(0.8 |
%) |
0.1 |
% |
(0.3 |
%) |
||||
(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 North America, international and global restaurant and comparable sales growth information, as defined in the table above, is useful in analyzing our results since our franchisees pay royalties and marketing fund contributions that are based on a percentage of franchise sales. Franchise sales also generate commissary revenue in the United States and in certain international markets. Franchise restaurant and comparable sales growth information is also useful for comparison to industry trends and evaluating the strength of our brand. Management believes the presentation of franchise restaurant sales growth, excluding the impact of foreign currency, provides investors with useful information regarding underlying sales trends and the impact of new unit growth without being impacted by swings in the external factor of foreign currency. Franchise restaurant sales are not included in company revenues.
Operating Highlights
Three Months Ended |
|
Six Months Ended |
||||||||||||
In thousands, except per share amounts |
|
June 30, |
|
July 1, |
Decrease % |
|
|
|
June 30, |
|
July 1, |
Decrease % |
|
|
Total revenue |
$ |
399,623 |
$ |
429,952 |
(7.1 |
%) |
$ |
798,028 |
$ |
880,074 |
(9.3 |
%) |
||
Income before income taxes |
|
9,959 |
|
19,113 |
(47.9 |
%) |
|
9,192 |
|
42,177 |
(78.2 |
%) |
||
Net income |
|
8,354 |
|
11,199 |
(25.4 |
%) |
|
6,623 |
|
28,642 |
(76.9 |
%) |
||
Diluted earnings per share |
|
0.15 |
|
0.35 |
(57.1 |
%) |
|
0.03 |
|
0.87 |
(96.6 |
%) |
||
Adjusted diluted earnings per share (b) |
|
0.28 |
|
0.48 |
(41.7 |
%) |
|
0.59 |
|
0.99 |
(40.4 |
%) |
||
(a) |
Our financial results for 2018 have been restated to reflect the correction of an immaterial error to consolidate the operations of the Papa John’s Marketing Fund (“PJMF”). The consolidation of PJMF is not expected to have a material impact on the company’s annual financial results as PJMF operates at or near break-even results annually. Additional detail on the consolidation of PJMF can be found in our Quarterly Report on Form 10-Q for the three and six months ended June 30, 2019 filed with the Securities and Exchange Commission (“SEC”). |
|||||||||||||
(b) |
Adjusted to exclude Special items, which impact comparability. The reconciliation of GAAP to non-GAAP financial results is included in the table below. |
|||||||||||||
Adjusted financial results excluding Special items, which impact comparability, are summarized in the following reconciliation. The table reconciles our GAAP financial results to our adjusted financial results, which are non-GAAP measures. All highlights are compared to the same period of the prior year, unless otherwise noted.
Three Months Ended |
|
Six Months Ended |
|||||||||||||||
|
June 30, |
|
|
|
July 1, |
|
|
|
June 30, |
|
|
|
July 1, |
|
|||
(In thousands, except per share amounts) |
|
2019 |
|
|
|
2018 (1) |
|
|
|
2019 |
|
|
|
2018 (1) |
|
||
GAAP income before income taxes |
$ |
9,959 |
|
$ |
19,113 |
|
$ |
9,192 |
|
$ |
42,177 |
|
|||||
Special items: | |||||||||||||||||
Special charges (2) |
|
5,362 |
|
|
- |
|
|
21,216 |
|
|
- |
|
|||||
Refranchising (gains) losses, net (3) |
|
(163 |
) |
|
2,122 |
|
|
(163 |
) |
|
1,918 |
|
|||||
Adjusted income before income taxes |
$ |
15,158 |
|
$ |
21,235 |
|
$ |
30,245 |
|
$ |
44,095 |
|
|||||
GAAP net income attributable to common shareholders |
$ |
4,868 |
|
$ |
11,127 |
|
$ |
1,067 |
|
$ |
28,495 |
|
|||||
Special items, net of income taxes: | |||||||||||||||||
Special charges (2) |
|
4,209 |
|
|
- |
|
|
17,757 |
|
|
- |
|
|||||
Refranchising (gains) losses, net (3) |
|
(125 |
) |
|
1,647 |
|
|
(125 |
) |
|
1,488 |
|
|||||
Tax impact of China refranchising (3) |
|
- |
|
|
2,435 |
|
|
- |
|
|
2,435 |
|
|||||
Adjusted net income attributable to common shareholders |
$ |
8,952 |
|
$ |
15,209 |
|
$ |
18,699 |
|
$ |
32,418 |
|
|||||
GAAP diluted earnings per share |
$ |
0.15 |
|
$ |
0.35 |
|
$ |
0.03 |
|
$ |
0.87 |
|
|||||
Special items: | |||||||||||||||||
Special charges (2) |
|
0.13 |
|
|
- |
|
|
0.56 |
|
|
- |
|
|||||
Refranchising (gains) losses, net (3) |
|
- |
|
|
0.05 |
|
|
- |
|
|
0.05 |
|
|||||
Tax impact of China refranchising (3) |
|
- |
|
|
0.08 |
|
|
- |
|
|
0.07 |
|
|||||
Adjusted diluted earnings per share |
$ |
0.28 |
|
$ |
0.48 |
|
$ |
0.59 |
|
$ |
0.99 |
|
|||||
(1) |
The three and six months ended July 1, 2018 have been restated to reflect the correction of an immaterial error to consolidate the operations of PJMF. |
||||||||||||||||
(2) |
The company incurred $5.4 million and $21.2 million of special costs (defined as “Special charges”) for the three and six months ended June 30, 2019, respectively, including the following (in thousands, except per share amounts): |
||||||||||||||
Three Months Ended |
|
Six Months Ended |
|||||||||||||
|
Special |
|
Special |
|
Diluted |
|
|
Special |
|
Special |
|
Diluted |
|||
Royalty relief (a) |
$ |
2,466 |
$ |
1,938 |
$ |
0.06 |
$ |
7,339 |
$ |
5,680 |
$ |
0.18 |
|||
Marketing fund investments (b) |
|
2,500 |
|
1,935 |
|
0.06 |
|
2,500 |
|
1,935 |
|
0.06 |
|||
Legal and advisory fees (c) |
|
396 |
|
336 |
|
0.01 |
|
5,463 |
|
4,228 |
|
0.13 |
|||
Mark to market adjustment on option valuation (d) |
|
- |
|
- |
|
- |
|
5,914 |
|
5,914 |
|
0.19 |
|||
Total Special charges |
$ |
5,362 |
$ |
4,209 |
$ |
0.13 |
$ |
21,216 |
$ |
17,757 |
$ |
0.56 |
|||
(a) |
Represents financial assistance provided to the entire North America system in the form of royalty reductions. |
||||||||||||||
(b) |
Represents marketing fund investments as part of our support package to our franchisees. |
||||||||||||||
(c) |
Represents advisory and legal costs primarily associated with the review of a wide range of strategic opportunities that culminated in Starboard’s strategic investment in the company by affiliates of Starboard. |
||||||||||||||
(d) |
Represents a one-time mark-to-market adjustment of $5.9 million related to the increase in the fair value of the Starboard and franchisee options to purchase Series B preferred stock that culminated in the purchase of an additional $52.5 million of preferred stock in late March 2019. |
||||||||||||||
(e) |
The tax effect was calculated using the company’s full year marginal rate of 22.6%, excluding the mark-to-market adjustment on the Series B preferred stock option valuation, which was not tax deductible. |
||||||||||||||
(3) |
The refranchising losses in 2018 are primarily associated with the June 2018 refranchise of our China operations, which included 34 restaurants and a quality control center, and the related tax impact. The additional tax expense is primarily attributable to the required recapture of China operating losses previously taken by the company. |
||||||||||||||
The non-GAAP adjusted results shown above and within this document, which exclude Special items, 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 certain financial information excluding the Special 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 and to analyze trends.
Consolidated revenues decreased $30.3 million, or 7.1%, for the second quarter of 2019 and decreased $82.0 million, or 9.3%, for the six months ended June 30, 2019. Excluding the impact of refranchising 62 company-owned restaurants in North America and the China operations in 2018 and a quality control center in Mexico in 2019, consolidated revenues decreased $16.8 million, or 4.0%, for the second quarter of 2019 and decreased $56.2 million, or 6.6% for the six months ended June 30, 2019, primarily due to the following:
Consolidated income before income taxes of $10.0 million for the second quarter of 2019 decreased $9.2 million, or 47.9%, compared to the second quarter of 2018. Excluding the impact of the previously mentioned Special items, consolidated income before income taxes was $15.2 million, or a decrease of $6.1 million from the second quarter of 2018. Significant changes in income before income taxes are as follows:
For the six months ended June 30, 2019, consolidated income before income taxes was $9.2 million, a decrease of $33.0 million, or 78.2%, compared to the six months ended July 1, 2018. Excluding the impact of the previously mentioned Special charges, consolidated income before income taxes was $30.2 million, or a decrease of $13.8 million, compared to the six months ended July 1, 2018. These decreases were primarily due to the same reasons as the three-month period.
Operating margin (loss) is not a measure defined by GAAP and should not be considered in isolation, or as an alternative to evaluation of the company’s financial performance. In addition to an evaluation of GAAP consolidated income before income taxes, we believe the presentation of operating margin (loss) is beneficial as it represents an additional measure used by the company to further evaluate operating efficiency and performance of the various business units. Additionally, operating margin (loss) discussion may be helpful for comparison within the industry. The operating margin (loss) results detailed herein can be calculated by business unit based on the specific revenue and operating expense line items on the face of the Condensed Consolidated Statements of Operations. Consolidated income before income taxes reported includes G&A expenses, depreciation and amortization, refranchising gains (losses), net and net interest expense that have been excluded from this operating margin (loss) calculation.
The effective income tax rate was 12.9% for the quarter ended June 30, 2019 in comparison to 36.8% for the quarter ended July 1, 2018. The 2018 higher tax rate includes the impact of refranchising our China operations. The effective income tax rate for the six months ended June 30, 2019 was 23.0%. The effective income tax rate is higher for the six months ended June 30, 2019 due in part to the $5.9 million mark-to-market fair value adjustment of the options to purchase Series B preferred stock, which was not tax deductible.
Diluted earnings per share was $0.15 for the second quarter of 2019, compared to $0.35 for the prior year period. Excluding Special items, adjusted diluted earnings per share was $0.28 for the second quarter of 2019, as compared to $0.48 for the second quarter of 2018. For the six months ended June 30, 2019, diluted earnings per share was $0.03, compared to diluted earnings per share of $0.87 for the prior year period. Excluding Special items, adjusted diluted earnings per share was $0.59 for the six months ended June 30, 2019, as compared to $0.99 for the prior year period.
Free Cash Flow
The company’s free cash flow, a non-GAAP financial measure, for the first six months of 2019 and 2018 were as follows (in thousands):
Six Months Ended | |||||||||
June 30, |
July 1, |
||||||||
2019 |
2018 (b) |
||||||||
Net cash provided by operating activities (a) |
$ |
32,175 |
|
$ |
73,427 |
|
|||
Purchases of property and equipment |
|
(17,836 |
) |
|
(21,562 |
) |
|||
Dividends paid to preferred shareholders |
|
(5,470 |
) |
|
- |
|
|||
Free cash flow |
$ |
8,869 |
|
$ |
51,865 |
|
|||
(a) |
The decrease of $41.3 million was primarily due to lower net income and unfavorable changes in working capital items, including the impact of PJMF. |
||||||||
(b) |
The six-month period ended July 1, 2018 has been restated to reflect the correction of an immaterial error to consolidate the operations of PJMF. |
||||||||
We define free cash flow as net cash provided by operating activities (from the Consolidated Statements of Cash Flows) less the purchases of property and equipment and dividends paid to preferred shareholders. We view free cash flow as an important measure because it is one 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 SEC for additional information concerning our operating results for the three and six months ended June 30, 2019 and cash flow for the six months ended June 30, 2019.
Global Restaurant Unit Data
At June 30, 2019, there were 5,345 Papa John’s restaurants operating in all 50 states and in 47 international countries and territories, as follows:
Domestic |
Franchised |
Total |
International |
System-wide |
||||||
Second Quarter | ||||||||||
Beginning - March 31, 2019 |
645 |
|
2,691 |
|
3,336 |
|
2,000 |
|
5,336 |
|
Opened |
1 |
|
17 |
|
18 |
|
34 |
|
52 |
|
Closed |
(2 |
) |
(33 |
) |
(35 |
) |
(8 |
) |
(43 |
) |
Acquired |
- |
|
1 |
|
1 |
|
- |
|
1 |
|
Sold |
(1 |
) |
- |
|
(1 |
) |
- |
|
(1 |
) |
Ending - June 30, 2019 |
643 |
|
2,676 |
|
3,319 |
|
2,026 |
|
5,345 |
|
Year-to-date | ||||||||||
Beginning - December 30, 2018 |
645 |
|
2,692 |
|
3,337 |
|
1,966 |
|
5,303 |
|
Opened |
2 |
|
43 |
|
45 |
|
83 |
|
128 |
|
Closed |
(2 |
) |
(61 |
) |
(63 |
) |
(23 |
) |
(86 |
) |
Acquired |
- |
|
2 |
|
2 |
|
- |
|
2 |
|
Sold |
(2 |
) |
- |
|
(2 |
) |
- |
|
(2 |
) |
Ending - June 30, 2019 |
643 |
|
2,676 |
|
3,319 |
|
2,026 |
|
5,345 |
|
Unit growth (decline) |
(2 |
) |
(16 |
) |
(18 |
) |
60 |
|
42 |
|
% increase (decrease) |
(0.3% |
) |
(0.6% |
) |
(0.5% |
) |
3.1% |
0.8% |
||
The company has added 98 net worldwide units over the trailing four quarters ended June 30, 2019. Our development pipeline as of June 30, 2019 included approximately 1,080 restaurants (90 units in North America and 990 units internationally), the majority of which are scheduled to open over the next six years.
Cash Dividend
The company paid cash dividends of $10.5 million in the second quarter of 2019 and declared third quarter cash dividends of approximately $10.5 million on July 18, 2019 to be paid to common and preferred shareholders. The dividends are as follows (in thousands):
Second |
Third |
|||||
Common stock dividends ($0.225 per share) |
$ |
7,070 |
$ |
7,100 |
||
Common stock dividends to preferred shareholders ($0.225 per share) (a) |
|
1,140 |
|
1,140 |
||
Preferred dividends (3.6% of the investment per annum) |
|
2,290 |
|
2,270 |
||
Total dividends |
$ |
10,500 |
$ |
10,510 |
||
(a) | Common stock dividends payable to holders of Series B Preferred Stock are on an as-converted to common stock basis | |||||
The declaration and payment of any future dividends on our common stock 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. The Series B preferred stockholders receive quarterly preferred dividends and common stock dividends on an as-converted to common stock basis.
2019 Outlook
On June 19, 2019, we announced an investment of $80 million in marketing and royalty relief for our U.S. franchise system beginning in the third quarter of 2019 through the fourth quarter of 2020. The marketing investment includes advertising initiatives with our new ambassador, Shaquille O’Neal. Additionally, we will continue financial assistance to our traditional domestic franchisees through 2020 in the form of lower royalties and related incentives. We expect to incur approximately 50% of the $80 million investment in 2019.
We are updating our GAAP diluted earnings per share (EPS) outlook to reflect these investments and to narrow our North America comparable sales and net global new unit growth outlook as detailed below.
Updated Outlook | Previous Outlook | ||
GAAP diluted earnings (loss) per share |
($0.40) to ($0.10) |
|
$0.00 to $0.50 |
Adjusted diluted earnings per share* |
$1.00 to $1.20 |
|
$1.00 to $1.20 |
Special Charges |
$50 to $60 million |
|
$30 to $50 million |
North America comparable sales |
(1.0%) to (4.0%) |
|
(1.0%) to (5.0%) |
International comparable sales |
0.0% to 3.0% |
|
0.0% to 3.0% |
Net global new unit growth |
100 to 150 |
|
75 to 150 |
Block cheese price |
low $1.70's |
|
low to mid $1.60's |
Capital expenditures |
$45 to $50 million |
|
$45 to $50 million |
*Adjusted diluted earnings per share outlook excludes the impact of the Special items mentioned above, which have an estimated impact of approximately $1.20 to $1.40 for 2019. We believe excluding the Special items is meaningful to our financial statement users as it presents our core results excluding unusual items. |
|||
Conference Call and Website Information
A conference call is scheduled for August 6, 2019 at 5:00 p.m. Eastern Time to review the company’s second quarter 2019 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 7481107.
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, earnings per share, contingent liabilities, resolution of litigation, commodity costs, currency fluctuations, profit margins, unit growth, unit level performance, capital expenditures, restaurant and franchise development, royalty relief, the strategic investment by Starboard and use of the proceeds, the ability of the company to mitigate negative consumer sentiment through advertising, marketing and promotional activity, the effectiveness of our strategic turnaround efforts and other business initiatives, corporate governance, future costs related to the company’s response to negative consumer sentiment and business challenges, management reorganizations, compliance with debt covenants, stockholder and other stakeholder engagement, strategic decisions and actions, share repurchases, dividends, effective tax rates, regulatory changes and impacts, the impact of the Tax Cuts and Jobs 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/A for the fiscal year ended December 30, 2018, as updated by “Part II. Item 1A. – Risk Factors” in our Quarterly Report on Form 10-Q for the period ended March 31, 2019. 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 Operations | |||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||
June 30, 2019 | July 1, 2018 | June 30, 2019 | July 1, 2018 | ||||||||||||||
(In thousands, except per share amounts) | (Unaudited) | (Note) | (Unaudited) | (Note) | |||||||||||||
Revenues: | |||||||||||||||||
Domestic Company-owned restaurant sales |
$ |
163,656 |
|
$ |
181,379 |
|
$ |
325,459 |
|
$ |
371,621 |
|
|||||
North America franchise royalties and fees |
|
19,761 |
|
|
23,912 |
|
|
37,291 |
|
|
48,718 |
|
|||||
North America commissary revenues |
|
147,128 |
|
|
153,455 |
|
|
296,032 |
|
|
315,168 |
|
|||||
International revenues |
|
25,497 |
|
|
29,069 |
|
|
51,164 |
|
|
59,183 |
|
|||||
Other revenues |
|
43,581 |
|
|
42,137 |
|
|
88,082 |
|
|
85,384 |
|
|||||
Total revenues |
|
399,623 |
|
|
429,952 |
|
|
798,028 |
|
|
880,074 |
|
|||||
Costs and expenses: | |||||||||||||||||
Operating costs (excluding depreciation and amortization shown separately below): | |||||||||||||||||
Domestic company-owned restaurant expenses |
|
131,950 |
|
|
147,868 |
|
|
265,003 |
|
|
305,442 |
|
|||||
North America commissary expenses |
|
136,744 |
|
|
143,300 |
|
|
275,301 |
|
|
294,981 |
|
|||||
International expenses |
|
14,652 |
|
|
18,248 |
|
|
28,957 |
|
|
37,278 |
|
|||||
Other expenses |
|
41,970 |
|
|
42,801 |
|
|
86,067 |
|
|
85,168 |
|
|||||
General and administrative expenses |
|
48,718 |
|
|
38,972 |
|
|
99,853 |
|
|
78,968 |
|
|||||
Depreciation and amortization |
|
11,521 |
|
|
11,731 |
|
|
23,270 |
|
|
23,270 |
|
|||||
Total costs and expenses |
|
385,555 |
|
|
402,920 |
|
|
778,451 |
|
|
825,107 |
|
|||||
Refranchising gains (losses), net |
|
163 |
|
|
(2,122 |
) |
|
163 |
|
|
(1,918 |
) |
|||||
Operating income |
|
14,231 |
|
|
24,910 |
|
|
19,740 |
|
|
53,049 |
|
|||||
Net interest expense |
|
(4,272 |
) |
|
(5,797 |
) |
|
(10,548 |
) |
|
(10,872 |
) |
|||||
Income before income taxes |
|
9,959 |
|
|
19,113 |
|
|
9,192 |
|
|
42,177 |
|
|||||
Income tax expense |
|
1,283 |
|
|
7,040 |
|
|
2,114 |
|
|
12,018 |
|
|||||
Net income before attribution to noncontrolling interests |
|
8,676 |
|
|
12,073 |
|
|
7,078 |
|
|
30,159 |
|
|||||
Income attributable to noncontrolling interests |
|
(322 |
) |
|
(874 |
) |
|
(455 |
) |
|
(1,517 |
) |
|||||
Net income attributable to the company |
$ |
8,354 |
|
$ |
11,199 |
|
$ |
6,623 |
|
$ |
28,642 |
|
|||||
Calculation of income for earnings per share: | |||||||||||||||||
Net income attributable to the Company |
$ |
8,354 |
|
$ |
11,199 |
|
$ |
6,623 |
|
$ |
28,642 |
|
|||||
Preferred stock dividends and accretion |
|
(3,486 |
) |
|
- |
|
|
(5,556 |
) |
|
- |
|
|||||
Net income attributable to participating securities |
|
- |
|
|
(72 |
) |
|
- |
|
|
(147 |
) |
|||||
Net income attributable to common shareholders |
$ |
4,868 |
|
$ |
11,127 |
|
$ |
1,067 |
|
$ |
28,495 |
|
|||||
Basic earnings per common share |
$ |
0.15 |
|
$ |
0.35 |
|
$ |
0.03 |
|
$ |
0.87 |
|
|||||
Diluted earnings per common share |
$ |
0.15 |
|
$ |
0.35 |
|
$ |
0.03 |
|
$ |
0.87 |
|
|||||
Basic weighted average common shares outstanding |
|
31,587 |
|
|
31,941 |
|
|
31,570 |
|
|
32,610 |
|
|||||
Diluted weighted average common shares outstanding |
|
31,773 |
|
|
32,175 |
|
|
31,746 |
|
|
32,860 |
|
|||||
Dividends declared per common share |
$ |
0.225 |
|
$ |
0.225 |
|
$ |
0.450 |
|
$ |
0.450 |
|
|||||
Note: The Condensed Consolidated Statement of Operations is unaudited and has been restated to reflect the correction of an immaterial error to consolidate the Papa John's Marketing Fund, Inc. |
Papa John's International, Inc. and Subsidiaries | |||||||
Condensed Consolidated Balance Sheets | |||||||
June 30, |
December 30, |
||||||
2019 |
2018 |
||||||
(In thousands) | (Unaudited) | (Note) | |||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents |
$ |
30,656 |
|
$ |
33,258 |
|
|
Accounts receivable, net |
|
77,019 |
|
|
78,118 |
|
|
Notes receivable |
|
5,182 |
|
|
5,498 |
|
|
Income tax receivable |
|
4,447 |
|
|
16,146 |
|
|
Inventories |
|
26,615 |
|
|
27,203 |
|
|
Prepaid expenses and other current assets |
|
38,961 |
|
|
36,054 |
|
|
Assets held for sale |
|
11,005 |
|
|
- |
|
|
Total current assets |
|
193,885 |
|
|
196,277 |
|
|
Property and equipment, net |
|
212,257 |
|
|
226,894 |
|
|
Right-of-use assets |
|
148,868 |
|
|
- |
|
|
Notes receivable, less current portion, net |
|
27,336 |
|
|
23,259 |
|
|
Goodwill |
|
82,763 |
|
|
84,516 |
|
|
Deferred income taxes, net |
|
1,051 |
|
|
1,137 |
|
|
Other assets |
|
60,404 |
|
|
63,814 |
|
|
Total assets |
$ |
726,564 |
|
$ |
595,897 |
|
|
Liabilities, Series B Convertible Preferred Stock, Redeemable noncontrolling interests and stockholders' deficit | |||||||
Current liabilities: | |||||||
Accounts payable |
$ |
32,516 |
|
$ |
27,106 |
|
|
Income and other taxes payable |
|
7,155 |
|
|
6,590 |
|
|
Accrued expenses and other current liabilities |
|
113,812 |
|
|
129,167 |
|
|
Current deferred revenue |
|
2,493 |
|
|
2,598 |
|
|
Current lease liabilities |
|
24,103 |
|
|
- |
|
|
Current portion of long-term debt |
|
31,241 |
|
|
20,009 |
|
|
Total current liabilities |
|
211,320 |
|
|
185,470 |
|
|
Deferred revenue |
|
17,564 |
|
|
20,674 |
|
|
Long-term lease liabilities |
|
124,458 |
|
|
- |
|
|
Long-term debt, less current portion, net |
|
349,749 |
|
|
601,126 |
|
|
Deferred income taxes, net |
|
2,227 |
|
|
7,852 |
|
|
Other long-term liabilities |
|
81,805 |
|
|
79,324 |
|
|
Total liabilities |
|
787,123 |
|
|
894,446 |
|
|
Series B Convertible Preferred Stock |
|
251,290 |
|
|
- |
|
|
Redeemable noncontrolling interests |
|
6,217 |
|
|
5,464 |
|
|
Total stockholders' deficit |
|
(318,066 |
) |
|
(304,013 |
) |
|
Total liabilities, Series B Convertible Preferred Stock, Redeemable noncontrolling interests and stockholders' deficit |
$ |
726,564 |
|
$ |
595,897 |
|
|
Note: The Condensed Consolidated Balance Sheet has been derived from the audited consolidated financial statements, restated to reflect the correction of an immaterial error to consolidate the Papa John's Marketing Fund, Inc., 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. |
Papa John's International, Inc. and Subsidiaries | |||||||
Condensed Consolidated Statements of Cash Flows | |||||||
Six Months Ended | |||||||
(In thousands) | June 30, 2019 | July 1, 2018 | |||||
(Unaudited) | (Note) | ||||||
Operating activities | |||||||
Net income before attribution to noncontrolling interests |
$ |
7,078 |
|
$ |
30,159 |
|
|
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Provision for uncollectible accounts and notes receivable |
|
676 |
|
|
3,591 |
|
|
Depreciation and amortization |
|
23,270 |
|
|
23,270 |
|
|
Deferred income taxes |
|
(3,096 |
) |
|
(2,511 |
) |
|
Preferred stock option mark-to-market adjustment |
|
5,914 |
|
|
- |
|
|
Stock-based compensation expense |
|
7,531 |
|
|
4,929 |
|
|
(Gain) Loss on refranchising |
|
(163 |
) |
|
1,918 |
|
|
Other |
|
1,999 |
|
|
3,032 |
|
|
Changes in operating assets and liabilities: | |||||||
Accounts receivable |
|
(1,092 |
) |
|
3,114 |
|
|
Income tax receivable |
|
11,699 |
|
|
3,628 |
|
|
Inventories |
|
326 |
|
|
3,188 |
|
|
Prepaid expenses |
|
8,899 |
|
|
1,285 |
|
|
Other current assets |
|
(14,282 |
) |
|
3,276 |
|
|
Other assets and liabilities |
|
(2,094 |
) |
|
(2,206 |
) |
|
Accounts payable |
|
5,410 |
|
|
6,993 |
|
|
Income and other taxes payable |
|
565 |
|
|
(1,656 |
) |
|
Accrued expenses and other current liabilities |
|
(17,297 |
) |
|
(6,885 |
) |
|
Deferred revenue |
|
(3,168 |
) |
|
(1,698 |
) |
|
Net cash provided by operating activities |
|
32,175 |
|
|
73,427 |
|
|
Investing activities | |||||||
Purchases of property and equipment |
|
(17,836 |
) |
|
(21,562 |
) |
|
Loans issued |
|
(4,757 |
) |
|
(1,904 |
) |
|
Repayments of loans issued |
|
2,234 |
|
|
2,720 |
|
|
Proceeds from divestitures of restaurants |
|
225 |
|
|
3,690 |
|
|
Other |
|
568 |
|
|
146 |
|
|
Net cash used in investing activities |
|
(19,566 |
) |
|
(16,910 |
) |
|
Financing activities | |||||||
Proceeds from issuance of preferred stock |
|
252,530 |
|
|
- |
|
|
Repayments of term loan |
|
(10,000 |
) |
|
(10,000 |
) |
|
Net (repayments) proceeds of revolving credit facilities |
|
(230,776 |
) |
|
119,567 |
|
|
Dividends paid to common stockholders |
|
(14,269 |
) |
|
(14,762 |
) |
|
Dividends paid to preferred stockholders |
|
(5,470 |
) |
|
- |
|
|
Issuance costs associated with preferred stock |
|
(7,250 |
) |
|
- |
|
|
Tax payments for equity award issuances |
|
(895 |
) |
|
(1,353 |
) |
|
Proceeds from exercise of stock options |
|
93 |
|
|
2,179 |
|
|
Acquisition of Company common stock |
|
- |
|
|
(148,440 |
) |
|
Contributions from noncontrolling interest holders |
|
840 |
|
|
- |
|
|
Distributions to noncontrolling interest holders |
|
(183 |
) |
|
(1,110 |
) |
|
Other |
|
168 |
|
|
231 |
|
|
Net cash used in financing activities |
|
(15,212 |
) |
|
(53,688 |
) |
|
Effect of exchange rate changes on cash and cash equivalents |
|
1 |
|
|
(62 |
) |
|
Change in cash and cash equivalents |
|
(2,602 |
) |
|
2,767 |
|
|
Cash and cash equivalents at beginning of period |
|
33,258 |
|
|
27,891 |
|
|
Cash and cash equivalents at end of period |
$ |
30,656 |
|
$ |
30,658 |
|
|
Note: The Condensed Consolidated Statement of Cash Flows is unaudited and has been restated to reflect the correction of an immaterial error to consolidate the Papa John's Marketing Fund, Inc. |
Joe Smith
Senior Vice President, Chief Financial Officer
502-261-7272