(State or other jurisdiction of | (I.R.S. Employer Identification | ||
incorporation or organization) | Number) |
Title of each class:
|
|
Trading Symbol
|
|
Name of each exchange on which registered:
|
|
|
|
(d)
|
Exhibits
|
99.1
|
Papa John’s International, Inc. press release dated February 26, 2020.
|
104
|
Cover Page Interactive Data File (embedded within the Inline XBRL document)
|
Date
February 26, 2020
|
/s/ Joseph H. Smith, IV | |
Joseph H. Smith, IV | ||
Senior Vice President, Chief Financial Officer | ||
Exhibit
Number |
|
Description of Exhibit
|
|
||
104
|
Cover Page Interactive Data File (embedded within the Inline XBRL document)
|
|
Exhibit 99.1
|
LOUISVILLE, Ky.--(BUSINESS WIRE)--February 26, 2020--Papa John’s International, Inc. (NASDAQ: PZZA) today announced financial results for the three months and full year ended December 29, 2019.
Highlights
Rob Lynch, President & CEO said, “Papa John’s accelerated its turn-around in the fourth quarter with a second consecutive quarter of positive comparable sales, positioning us for a strong start to 2020. The company’s new focused priorities and a more inclusive, winning culture are empowering our team members to innovate our products and marketing, drive sales growth, improve efficiencies and achieve better results for all of our stakeholders. Our 2020 plan accelerates this momentum, as we work to become the world’s best pizza company and deliver strong, long-term profit growth.”
Global Restaurant and Comparable Sales Information
Global restaurant and comparable sales information and operating highlights for the three months and full year ended December 29, 2019, compared to the three months and full year ended December 30, 2018 are as follows:
Three Months Ended | Year Ended | |||||||
Dec. 29, 2019 |
Dec. 30, 2018 |
Dec. 29, 2019 |
Dec. 30, 2018 |
|||||
Global restaurant sales growth / (decline) (a) |
4.4% |
(13.0%) |
(0.8%) |
(5.9%) |
||||
Global restaurant sales growth / (decline), | ||||||||
excluding the impact of foreign currency (a) |
4.7% |
(11.7%) |
0.3% |
(5.4%) |
||||
Comparable sales growth / (decline) (b) | ||||||||
Domestic company-owned restaurants |
4.1% |
(10.2%) |
(2.7%) |
(9.0%) |
||||
North America franchised restaurants |
3.3% |
(7.4%) |
(2.0%) |
(6.7%) |
||||
System-wide North America restaurants |
3.5% |
(8.1%) |
(2.2%) |
(7.3%) |
||||
System-wide international restaurants |
2.4% |
(2.6%) |
1.1% |
(1.6%) |
||||
(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 the company’s revenues.
Revenue and Operating Highlights
Three Months Ended | Year Ended | ||||||||||||||||
In thousands, except per share amounts | Dec. 29, 2019 |
Dec. 30, 2018 (a) |
Increase % |
Dec. 29, 2019 |
Dec. 30, 2018 (a) |
Increase / (Decrease) % |
|||||||||||
Total revenue |
$ |
417,514 |
|
$ |
397,566 |
|
5.0 |
% |
$ |
1,619,248 |
|
$ |
1,662,871 |
(2.6 |
%) |
||
(Loss) income before income taxes |
|
(4,824 |
) |
|
(15,252 |
) |
68.4 |
% |
|
5,046 |
|
|
6,697 |
(24.7 |
%) |
||
Net (loss) income |
|
(2,142 |
) |
|
(12,868 |
) |
83.4 |
% |
|
4,866 |
|
|
2,474 |
96.7 |
% |
||
Diluted (loss) earnings per share |
|
(0.18 |
) |
|
(0.41 |
) |
56.1 |
% |
|
(0.24 |
) |
|
0.08 |
(400.0 |
%) |
||
Adjusted diluted earnings per share (b) |
|
0.37 |
|
|
0.18 |
|
105.6 |
% |
|
1.17 |
|
|
1.37 |
(14.6 |
%) |
||
(a) |
Our 2019 financial results include the consolidation of the operations of the Papa John’s Marketing Fund (“PJMF”). Our 2018 financial results have also been restated to include the PJMF results, as a correction of an immaterial error. The consolidation of PJMF did not have a material impact on the company’s annual financial results as PJMF operates near break-even annually. Additional detail on the consolidation of PJMF can be found in our Annual Report on Form 10-K for the fiscal year ended December 29, 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 are summarized in the following reconciliations. We present these non-GAAP measures because we believe the Special items impact the comparability of our results of operations. The table below 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 | Year Ended | |||||||||||||||||
Dec. 29, | Dec. 30, | Dec. 29, | Dec. 30, | |||||||||||||||
(In thousands, except per share amounts) |
2019 |
2018 (1) |
2019 |
2018 (1) |
||||||||||||||
GAAP (loss) income before income taxes |
$ |
(4,824 |
) |
$ |
(15,252 |
) |
$ |
5,046 |
|
$ |
6,697 |
|
||||||
Special Items: | ||||||||||||||||||
Special charges (2) |
|
25,404 |
|
|
25,899 |
|
|
60,817 |
|
|
50,732 |
|
||||||
Refranchising (gains) losses, net (3) |
|
(2,850 |
) |
|
(1,629 |
) |
|
(4,739 |
) |
|
289 |
|
||||||
Adjusted income before income taxes |
$ |
17,730 |
|
$ |
9,018 |
|
$ |
61,124 |
|
$ |
57,718 |
|
||||||
GAAP net (loss) income attributable to common shareholders |
$ |
(5,612 |
) |
$ |
(12,868 |
) |
$ |
(7,633 |
) |
$ |
2,474 |
|
||||||
Special Items, net of income taxes: | ||||||||||||||||||
Special charges (2) |
|
19,774 |
|
|
19,687 |
|
|
48,519 |
|
|
38,957 |
|
||||||
Refranchising (gains) losses, net (3) |
|
(2,215 |
) |
|
(1,251 |
) |
|
(3,677 |
) |
|
222 |
|
||||||
Tax impact of China refranchising (3) |
|
- |
|
|
- |
|
|
- |
|
|
2,435 |
|
||||||
Adjusted net income attributable to common shareholders |
$ |
11,947 |
|
$ |
5,568 |
|
$ |
37,209 |
|
$ |
44,088 |
|
||||||
GAAP diluted (loss) earnings per share |
$ |
(0.18 |
) |
$ |
(0.41 |
) |
$ |
(0.24 |
) |
$ |
0.08 |
|
||||||
Special items: | ||||||||||||||||||
Special charges (2) |
|
0.62 |
|
|
0.63 |
|
|
1.53 |
|
|
1.21 |
|
||||||
Refranchising (gains) losses, net (3) |
|
(0.07 |
) |
|
(0.04 |
) |
|
(0.12 |
) |
|
0.01 |
|
||||||
Tax impact of China refranchising (3) |
|
- |
|
|
- |
|
|
- |
|
|
0.07 |
|
||||||
Adjusted diluted earnings per share |
$ |
0.37 |
|
$ |
0.18 |
|
$ |
1.17 |
|
$ |
1.37 |
|
||||||
(1) |
The three months and full year ended December 30, 2018 have been restated to reflect the correction of an immaterial error to consolidate the operations of PJMF. | |||||||||||||||||
(2) |
The company incurred special costs (defined as “Special charges”) of $25.4 million and $60.8 million for the three months and full year ended December 29, 2019, respectively, and $25.9 million and $50.7 million for the three months and full year ended December 30, 2018, respectively, as follows (in thousands): |
Three Months Ended | Year Ended | ||||||||||
Dec. 29, | Dec. 30, | Dec. 29, | Dec. 30, | ||||||||
(In thousands) |
2019 |
2018 |
2019 |
2018 |
|||||||
Special charges before income taxes: | |||||||||||
Royalty relief (a) |
$ |
5,404 |
$ |
5,532 |
$ |
19,097 |
$ |
15,416 |
|||
Marketing fund investments (b) |
|
20,000 |
|
10,000 |
|
27,500 |
|
10,000 |
|||
Legal and advisory fees (c) |
|
- |
|
8,123 |
|
5,921 |
|
19,475 |
|||
Reimaging costs and write-off of branded assets (d) |
|
- |
|
2,244 |
|
- |
|
5,841 |
|||
Other costs (e) |
|
- |
|
- |
|
2,385 |
|
- |
|||
Mark to market adjustment on option valuation (f) |
|
- |
|
- |
|
5,914 |
|
- |
|||
Total Special charges before income taxes |
$ |
25,404 |
$ |
25,899 |
$ |
60,817 |
$ |
50,732 |
|||
(a) |
Represents financial assistance provided to the North America franchise system in the form of royalty reductions that are above and beyond the level of franchise support the company would incur in the ordinary course of its business. | ||||||||||
(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 the strategic investment in the company by affiliates of Starboard Value LP (“Starboard”) as well as certain litigation costs. The costs in 2018 also include a third-party audit of the culture at Papa John’s commissioned by a special committee of the Board of Directors. |
||||||||||
(d) |
2018 includes re-imaging costs at nearly all domestic restaurants and costs to replace or write-off certain branded assets. | ||||||||||
(e) |
2019 includes severance costs for our former CEO and costs related to the termination of a license agreement for intellectual property no longer being utilized. | ||||||||||
(f) |
Represents a one-time mark-to-market adjustment of $5.9 million related to the increase in the fair value of the Starboard option to purchase Series B preferred stock that culminated in the purchase of an additional $52.5 million of preferred stock in late March 2019. | ||||||||||
|
|||||||||||
(3) |
The refranchising gains in 2019 are primarily associated with the refranchise of 46 domestic restaurants, including 19 restaurants in Georgia in Q3 2019 and 23 restaurants in Florida in Q4 2019. 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, substantially offset by refranchising gains related to the refranchising of 62 Company-owned restaurants in North America in 2018. 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.
Revenue Highlights
Consolidated revenues increased $19.9 million, or 5.0%, for the fourth quarter of 2019 compared to the fourth quarter of 2018. Excluding the impact of refranchising 46 domestic restaurants and a quality control center in Mexico in 2019, consolidated revenues increased approximately $30.9 million, or 8.0%, for the three months ended December 29, 2019, primarily due to the following:
Consolidated revenues decreased $43.6 million, or 2.6%, for the year ended December 29, 2019 compared to the year ended December 30, 2018. Excluding the impact of refranchising activities in 2019 and 2018, consolidated revenues decreased $3.9 million, or 0.2%, for the year ended December 29, 2019, primarily due to the following:
These decreases were substantially offset by the following revenue increases:
Operating Highlights
The tables below summarize income before income taxes on a reporting segment basis. Alongside the GAAP income before income taxes data, we have included “adjusted” income before income taxes for the three-month period and year ended December 29, 2019 to exclude Special items. We believe this non-GAAP measure is important for purposes of comparison to prior year results.
Three Months Ended | |||||||||||||||||||||||||||||
Reported |
|
Adjusted |
|
Reported |
|
Adjusted |
|
Adjusted |
|||||||||||||||||||||
Dec. 29, |
Special |
Dec. 29, |
|
Dec. 30, |
Special |
Dec. 30, |
|
Increase |
|||||||||||||||||||||
(In thousands) |
2019 |
Items |
2019 |
|
2018 |
Items |
2018 |
|
(Decrease) |
||||||||||||||||||||
Domestic Company-owned restaurants |
$ |
12,486 |
|
$ |
(2,850 |
) |
$ |
9,636 |
|
$ |
3,638 |
|
$ |
(1,629 |
) |
$ |
2,009 |
|
$ |
7,627 |
|
||||||||
North America commissaries |
|
8,345 |
|
|
- |
|
|
8,345 |
|
|
4,426 |
|
|
- |
|
|
4,426 |
|
|
3,919 |
|
||||||||
North America franchising |
|
16,669 |
|
|
5,404 |
|
|
22,073 |
|
|
17,599 |
|
|
5,532 |
|
|
23,131 |
|
|
(1,058 |
) |
||||||||
International |
|
4,195 |
|
|
- |
|
|
4,195 |
|
|
4,065 |
|
|
- |
|
|
4,065 |
|
|
130 |
|
||||||||
All others |
|
81 |
|
|
- |
|
|
81 |
|
|
(778 |
) |
|
- |
|
|
(778 |
) |
|
859 |
|
||||||||
Unallocated corporate expenses |
|
(46,670 |
) |
|
20,000 |
|
|
(26,670 |
) |
|
(43,796 |
) |
|
20,367 |
|
|
(23,429 |
) |
|
(3,241 |
) |
||||||||
Elimination of intersegment profits |
|
70 |
|
|
- |
|
|
70 |
|
|
(406 |
) |
|
- |
|
|
(406 |
) |
|
476 |
|
||||||||
Total income (loss) before income taxes |
$ |
(4,824 |
) |
$ |
22,554 |
|
$ |
17,730 |
|
$ |
(15,252 |
) |
$ |
24,270 |
|
$ |
9,018 |
|
$ |
8,712 |
|
||||||||
Year Ended | ||||||||||||||||||||||||||||
Reported |
|
Adjusted |
|
Reported |
|
Adjusted |
|
Adjusted |
||||||||||||||||||||
Dec. 29, |
Special |
Dec. 29, |
|
Dec. 30, |
Special |
Dec. 30, |
|
Increase |
||||||||||||||||||||
(In thousands) |
2019 |
Items |
2019 |
|
2018 |
Items |
2018 |
|
(Decrease) |
|||||||||||||||||||
Domestic Company-owned restaurants |
$ |
33,957 |
|
$ |
(4,739 |
) |
$ |
29,218 |
|
$ |
18,988 |
|
$ |
(1,624 |
) |
$ |
17,364 |
|
$ |
11,854 |
|
|||||||
North America commissaries |
|
30,439 |
|
|
- |
|
|
30,439 |
|
|
27,961 |
|
|
- |
|
|
27,961 |
|
|
2,478 |
|
|||||||
North America franchising |
|
64,362 |
|
|
19,097 |
|
|
83,459 |
|
|
70,732 |
|
|
15,416 |
|
|
86,148 |
|
|
(2,689 |
) |
|||||||
International |
|
19,110 |
|
|
- |
|
|
19,110 |
|
|
14,399 |
|
|
1,913 |
|
|
16,312 |
|
|
2,798 |
|
|||||||
All others |
|
(2,500 |
) |
|
- |
|
|
(2,500 |
) |
|
(6,082 |
) |
|
- |
|
|
(6,082 |
) |
|
3,582 |
|
|||||||
Unallocated corporate expenses |
|
(139,355 |
) |
|
41,720 |
|
|
(97,635 |
) |
|
(118,296 |
) |
|
35,316 |
|
|
(82,980 |
) |
|
(14,655 |
) |
|||||||
Elimination of intersegment profits |
|
(967 |
) |
|
- |
|
|
(967 |
) |
|
(1,005 |
) |
|
- |
|
|
(1,005 |
) |
|
38 |
|
|||||||
Total income before income taxes |
$ |
5,046 |
|
$ |
56,078 |
|
$ |
61,124 |
|
$ |
6,697 |
|
$ |
51,021 |
|
$ |
57,718 |
|
$ |
3,406 |
|
|||||||
Consolidated loss before income taxes of $4.8 million for the fourth quarter of 2019 improved $10.4 million compared to the fourth quarter of 2018. Excluding the impact of the previously mentioned Special items, consolidated income before income taxes was $17.7 million, or an increase of $8.7 million from the fourth quarter of 2018. Significant changes in income before income taxes excluding Special items are as follows:
For the year ended December 29, 2019, consolidated income before income taxes was $5.0 million, a decrease of $1.7 million compared to the year ended December 30, 2018. Excluding the impact of the previously mentioned Special items, consolidated income before income taxes was $61.1 million, an increase of $3.4 million, compared to the year ended December 30, 2018. Significant changes in income before income taxes excluding Special items are as follows:
The effective income tax (benefit) and expense for the three months and full year comparable periods are as follows (dollars in thousands):
Three Months Ended |
|
Year Ended |
||||||||||||||||
Dec. 29, 2019 |
Dec. 30, 2018 |
|
Dec. 29, 2019 |
Dec. 30, 2018 |
||||||||||||||
Income / (loss) before income taxes |
$ |
(4,824 |
) |
$ |
(15,252 |
) |
$ |
5,046 |
|
$ |
6,697 |
|||||||
Income tax (benefit) / expense |
|
(3,147 |
) |
|
(2,027 |
) |
|
(611 |
) |
|
2,624 |
|||||||
Effective tax (benefit) / expense rate |
|
(65.2% |
) |
|
(13.3% |
) |
|
(12.1% |
) |
|
39.2% |
|||||||
The tax benefit for the three months and year ended December 29, 2019 is primarily related to higher excess tax benefits from equity-based compensation and other favorable tax credits. Additionally, for the full year 2018, income tax expense was $2.6 million, or an effective income tax rate of 39.2%. This included a significant tax impact from the China divestiture, as previously detailed in the Special items.
The diluted (loss) earnings per share and adjusted diluted earnings per share, excluding Special items, for the three months and full year comparable periods are as follows:
Three Months Ended | Year Ended | |||||||||||||||||
Dec. 29, 2019 | Dec. 30, 2018 | Dec. 29, 2019 | Dec. 30, 2018 | |||||||||||||||
Diluted (loss) earnings per share |
$ |
(0.18 |
) |
$ |
(0.41 |
) |
$ |
(0.24 |
) |
$ |
0.08 |
|||||||
Adjusted diluted earnings per share |
|
0.37 |
|
|
0.18 |
|
|
1.17 |
|
|
1.37 |
|||||||
Free Cash Flow
The company’s free cash flow, a non-GAAP financial measure, for the year end of 2019 and 2018 were as follows (in thousands):
Year End | |||||||||
Dec. 29, | Dec. 30, | ||||||||
2019 |
2018 (b) | ||||||||
Net cash provided by operating activities (a) |
$ |
61,749 |
|
$ |
92,454 |
|
|||
Purchases of property and equipment |
|
(37,711 |
) |
|
(42,028 |
) |
|||
Dividends paid to preferred shareholders |
|
(10,020 |
) |
|
- |
|
|||
Free cash flow |
$ |
14,018 |
|
$ |
50,426 |
|
|||
(a) |
The decrease of $30.7 million was primarily due to unfavorable working capital changes compared to the previous year including timing of payments of liabilities. | ||||||||
(b) |
The year ended December 30, 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 Annual Report on Form 10-K filed with the SEC for additional information concerning our operating results and cash flow for the year ended December 29, 2019.
Global Restaurant Unit Data
At December 29, 2019, there were 5,395 Papa John’s restaurants operating in 49 countries and territories, as follows:
Domestic Company- owned |
Franchised North America |
Total North America |
International | System-wide | ||||||||||||
Fourth Quarter | ||||||||||||||||
Beginning - September 29, 2019 |
621 |
|
2,675 |
|
3,296 |
|
2,047 |
|
5,343 |
|
||||||
Opened |
1 |
|
18 |
|
19 |
|
90 |
|
109 |
|
||||||
Closed |
(2 |
) |
(25 |
) |
(27 |
) |
(30 |
) |
(57 |
) |
||||||
Acquired |
1 |
|
23 |
|
24 |
|
- |
|
24 |
|
||||||
Sold |
(23 |
) |
(1 |
) |
(24 |
) |
- |
|
(24 |
) |
||||||
Ending - December 29, 2019 |
598 |
|
2,690 |
|
3,288 |
|
2,107 |
|
5,395 |
|
||||||
Year-to-date | ||||||||||||||||
Beginning - December 30, 2018 |
645 |
|
2,692 |
|
3,337 |
|
1,966 |
|
5,303 |
|
||||||
Opened |
3 |
|
76 |
|
79 |
|
233 |
|
312 |
|
||||||
Closed |
(5 |
) |
(123 |
) |
(128 |
) |
(92 |
) |
(220 |
) |
||||||
Acquired |
1 |
|
46 |
|
47 |
|
- |
|
47 |
|
||||||
Sold |
(46 |
) |
(1 |
) |
(47 |
) |
- |
|
(47 |
) |
||||||
Ending - December 29, 2019 |
598 |
|
2,690 |
|
3,288 |
|
2,107 |
|
5,395 |
|
||||||
Net unit (decline) growth - 2019 |
(47 |
) |
(2 |
) |
(49 |
) |
141 |
|
92 |
|
||||||
% increase (decrease) |
(7.3 |
%) |
(0.1 |
%) |
(1.5 |
%) |
7.2 |
% |
1.7 |
% |
||||||
The company has added 92 net worldwide units in 2019. Our development pipeline as of December 29, 2019 included approximately 1,085 restaurants (85 units in North America and 1,000 units internationally), the majority of which are scheduled to open over the next six years.
Cash Dividend
The company declared common and preferred stock dividends of $10.6 million in the fourth quarter of 2019. The company declared first quarter 2020 cash dividends of approximately $10.7 million on January 29, 2020 which were paid to common shareholders on February 21, 2020. The first quarter preferred dividend will be paid on April 1, 2020. The dividends are as follows (in thousands):
Fourth Quarter 2019 |
First Quarter 2020 |
|||||
Common stock dividends ($0.225 per share) |
$ |
7,200 |
$ |
7,300 |
||
Common stock dividends to preferred shareholders ($0.225 per share) (a) |
|
1,140 |
|
1,140 |
||
Preferred dividends (3.6% of the investment per annum) |
|
2,270 |
|
2,270 |
||
Total dividends |
$ |
10,610 |
$ |
10,710 |
||
(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.
2020 Key Operating Assumptions and Financial Outlook
In 2020, the company is targeting the following performance:
(a) |
Special charges include the costs associated with the previously announced program to provide assistance to the North America franchise system, including franchise royalty relief and National Marketing Fund investments, both of which are expected to end in the third quarter of 2020. |
Conference Call and Website Information
A conference call is scheduled for February 26, 2020 at 8:00 a.m. Eastern Time to review the company’s fourth quarter and full year 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 5623458.
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 that are not statements of historical fact 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 effectiveness of our strategic turnaround efforts and other business initiatives, marketing efforts, compliance with debt covenants, stockholder and other stakeholder engagement, strategic decisions and actions, share repurchases, dividends, effective tax rates, regulatory changes and impacts, 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 29, 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 Balance Sheets | ||||||||
December 29, | December 30, | |||||||
2019 |
2018 |
|||||||
(In thousands) | (Note) | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents |
$ |
27,911 |
|
$ |
33,258 |
|
||
Accounts receivable, net |
|
80,921 |
|
|
78,118 |
|
||
Notes receivable, current portion |
|
7,790 |
|
|
5,498 |
|
||
Income tax receivable |
|
4,024 |
|
|
16,146 |
|
||
Inventories |
|
27,529 |
|
|
27,203 |
|
||
Prepaid expenses and other current assets |
|
33,371 |
|
|
36,054 |
|
||
Total current assets |
|
181,546 |
|
|
196,277 |
|
||
Property and equipment, net |
|
211,741 |
|
|
226,894 |
|
||
Finance lease right-of-use assets, net |
|
9,383 |
|
|
- |
|
||
Operating lease right-of-use assets |
|
148,229 |
|
|
- |
|
||
Notes receivable, less current portion, net |
|
33,010 |
|
|
23,259 |
|
||
Goodwill |
|
80,340 |
|
|
84,516 |
|
||
Deferred income taxes, net |
|
1,839 |
|
|
1,137 |
|
||
Other assets |
|
64,633 |
|
|
63,814 |
|
||
Total assets |
$ |
730,721 |
|
$ |
595,897 |
|
||
Liabilities, Series B Convertible Preferred Stock, Redeemable noncontrolling interests and Stockholders' deficit | ||||||||
Current liabilities: | ||||||||
Accounts payable |
$ |
29,141 |
|
$ |
27,106 |
|
||
Income and other taxes payable |
|
7,599 |
|
|
6,590 |
|
||
Accrued expenses and other current liabilities |
|
120,566 |
|
|
129,167 |
|
||
Current deferred revenue |
|
5,624 |
|
|
6,022 |
|
||
Current finance lease liabilities |
|
1,789 |
|
|
- |
|
||
Current operating lease liabilities |
|
23,226 |
|
|
- |
|
||
Current portion of long-term debt |
|
20,000 |
|
|
20,009 |
|
||
Total current liabilities |
|
207,945 |
|
|
188,894 |
|
||
Deferred revenue |
|
14,722 |
|
|
17,250 |
|
||
Long-term finance lease liabilities |
|
7,629 |
|
|
- |
|
||
Long-term operating lease liabilities |
|
125,297 |
|
|
- |
|
||
Long-term debt, less current portion, net |
|
347,290 |
|
|
601,126 |
|
||
Deferred income taxes, net |
|
2,649 |
|
|
7,852 |
|
||
Other long-term liabilities |
|
84,927 |
|
|
79,324 |
|
||
Total liabilities |
|
790,459 |
|
|
894,446 |
|
||
Series B Convertible Preferred Stock |
|
251,133 |
|
|
- |
|
||
Redeemable noncontrolling interests |
|
5,785 |
|
|
5,464 |
|
||
Total Stockholders' deficit |
|
(316,656 |
) |
|
(304,013 |
) |
||
Total liabilities, Series B Convertible Preferred Stock, Redeemable noncontrolling interests and Stockholders' deficit |
$ |
730,721 |
|
$ |
595,897 |
|
||
Note: The Condensed Consolidated Balance Sheets have 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 Operations | ||||||||||||||||
Three Months Ended | Year Ended | |||||||||||||||
Dec 29, 2019 | Dec 30, 2018 | Dec 29, 2019 | Dec 30, 2018 | |||||||||||||
(In thousands, except per share amounts) | (Note) | (Note) | ||||||||||||||
Revenues: | ||||||||||||||||
Domestic company-owned restaurant sales |
$ |
161,459 |
|
$ |
162,474 |
|
$ |
652,053 |
|
$ |
692,380 |
|
||||
North America franchise royalties and fees |
|
18,613 |
|
|
17,769 |
|
|
71,828 |
|
|
79,293 |
|
||||
North America commissary revenues |
|
161,917 |
|
|
148,458 |
|
|
612,652 |
|
|
609,866 |
|
||||
International revenues |
|
27,081 |
|
|
25,513 |
|
|
102,924 |
|
|
110,349 |
|
||||
Other revenues |
|
48,444 |
|
|
43,352 |
|
|
179,791 |
|
|
170,983 |
|
||||
Total revenues |
|
417,514 |
|
|
397,566 |
|
|
1,619,248 |
|
|
1,662,871 |
|
||||
Costs and expenses: | ||||||||||||||||
Operating costs (excluding depreciation and amortization | ||||||||||||||||
shown separately below): | ||||||||||||||||
Domestic company-owned restaurant expenses |
|
127,197 |
|
|
135,959 |
|
|
526,237 |
|
|
577,658 |
|
||||
North America commissary expenses |
|
149,255 |
|
|
142,194 |
|
|
569,180 |
|
|
575,103 |
|
||||
International expenses |
|
15,188 |
|
|
15,313 |
|
|
57,702 |
|
|
67,775 |
|
||||
Other expenses |
|
46,573 |
|
|
42,652 |
|
|
175,592 |
|
|
170,556 |
|
||||
General and administrative expenses |
|
70,104 |
|
|
58,855 |
|
|
223,460 |
|
|
193,534 |
|
||||
Depreciation and amortization |
|
12,179 |
|
|
11,548 |
|
|
47,281 |
|
|
46,403 |
|
||||
Total costs and expenses |
|
420,496 |
|
|
406,521 |
|
|
1,599,452 |
|
|
1,631,029 |
|
||||
Refranchising gains (losses), net |
|
2,850 |
|
|
1,629 |
|
|
4,739 |
|
|
(289 |
) |
||||
Operating income (loss) |
|
(132 |
) |
|
(7,326 |
) |
|
24,535 |
|
|
31,553 |
|
||||
Investment income |
|
(145 |
) |
|
76 |
|
|
1,104 |
|
|
817 |
|
||||
Interest expense |
|
(4,547 |
) |
|
(8,002 |
) |
|
(20,593 |
) |
|
(25,673 |
) |
||||
Income (loss) before income taxes |
|
(4,824 |
) |
|
(15,252 |
) |
|
5,046 |
|
|
6,697 |
|
||||
Income tax (benefit) expense |
|
(3,146 |
) |
|
(2,027 |
) |
|
(611 |
) |
|
2,624 |
|
||||
Net income (loss) before attribution to noncontrolling interests |
|
(1,678 |
) |
|
(13,225 |
) |
|
5,657 |
|
|
4,073 |
|
||||
Net (income) loss attributable to noncontrolling interests |
|
(464 |
) |
|
357 |
|
|
(791 |
) |
|
(1,599 |
) |
||||
Net income (loss) attributable to the company |
$ |
(2,142 |
) |
$ |
(12,868 |
) |
$ |
4,866 |
|
$ |
2,474 |
|
||||
Calculation of net (loss) income for earnings per share: | ||||||||||||||||
Net income (loss) attributable to the company |
$ |
(2,142 |
) |
$ |
(12,868 |
) |
$ |
4,866 |
|
$ |
2,474 |
|
||||
Preferred stock dividends and accretion |
|
(3,470 |
) |
|
- |
|
|
(12,499 |
) |
|
- |
|
||||
Net (loss) income attributable to common shareholders |
$ |
(5,612 |
) |
$ |
(12,868 |
) |
$ |
(7,633 |
) |
$ |
2,474 |
|
||||
Basic (loss) earnings per common share |
$ |
(0.18 |
) |
$ |
(0.41 |
) |
$ |
(0.24 |
) |
$ |
0.08 |
|
||||
Diluted (loss) earnings per common share |
$ |
(0.18 |
) |
$ |
(0.41 |
) |
$ |
(0.24 |
) |
$ |
0.08 |
|
||||
Basic weighted average common shares outstanding |
|
31,783 |
|
|
31,534 |
|
|
31,632 |
|
|
32,083 |
|
||||
Diluted weighted average common shares outstanding |
|
31,783 |
|
|
31,534 |
|
|
31,632 |
|
|
32,299 |
|
||||
Dividends declared per common share |
$ |
0.225 |
|
$ |
0.225 |
|
$ |
0.900 |
|
$ |
0.900 |
|
||||
Note: The Condensed Consolidated Statements of Operations are unaudited and have 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 Statements of Cash Flows | |||||||
Year Ended | |||||||
(In thousands) | Dec 29, 2019 | Dec 30, 2018 | |||||
(Note) | |||||||
Operating activities | |||||||
Net income before attribution to noncontrolling interests |
$ |
5,657 |
|
$ |
4,073 |
|
|
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Provision for uncollectible accounts and notes receivable |
|
3,139 |
|
|
6,849 |
|
|
Depreciation and amortization |
|
47,281 |
|
|
46,403 |
|
|
Deferred income taxes |
|
(3,764 |
) |
|
1,620 |
|
|
Preferred stock option mark-to-market adjustment |
|
5,914 |
|
— |
|||
Stock-based compensation expense |
|
15,303 |
|
|
9,936 |
|
|
(Gain) loss on refranchising |
|
(4,739 |
) |
|
289 |
|
|
Other |
|
3,203 |
|
|
5,677 |
|
|
Changes in operating assets and liabilities: | |||||||
Accounts receivable |
|
(5,329 |
) |
|
2,157 |
|
|
Income tax receivable |
|
12,122 |
|
|
(12,157 |
) |
|
Inventories |
|
(326 |
) |
|
3,093 |
|
|
Prepaid expenses |
|
792 |
|
|
(1,039 |
) |
|
Other current assets |
|
(277 |
) |
|
4,834 |
|
|
Other assets and liabilities |
|
(6,354 |
) |
|
1,464 |
|
|
Accounts payable |
|
2,035 |
|
|
(400 |
) |
|
Income and other taxes payable |
|
1,009 |
|
|
(3,971 |
) |
|
Accrued expenses and other current liabilities |
|
(11,331 |
) |
|
21,753 |
|
|
Deferred revenue |
|
(2,586 |
) |
|
1,873 |
|
|
Net cash provided by operating activities |
|
61,749 |
|
|
92,454 |
|
|
Investing activities | |||||||
Purchases of property and equipment |
|
(37,711 |
) |
|
(42,028 |
) |
|
Loans issued |
|
(15,864 |
) |
|
(10,463 |
) |
|
Repayments of loans issued |
|
5,616 |
|
|
5,805 |
|
|
Proceeds from divestitures of restaurants |
|
13,495 |
|
|
7,707 |
|
|
Other |
|
1,889 |
|
|
180 |
|
|
Net cash used in investing activities |
|
(32,575 |
) |
|
(38,799 |
) |
|
Financing activities | |||||||
Proceeds from issuance of preferred stock |
|
252,530 |
|
|
- |
|
|
Issuance costs associated with preferred stock |
|
(7,527 |
) |
|
- |
|
|
Repayments of term loan |
|
(15,000 |
) |
|
(20,000 |
) |
|
Net (repayments) proceeds of revolving credit facilities |
|
(240,026 |
) |
|
163,585 |
|
|
Debt issuance costs |
|
- |
|
|
(1,913 |
) |
|
Dividends paid to common stockholders |
|
(28,552 |
) |
|
(28,985 |
) |
|
Dividends paid to preferred stockholders |
|
(10,020 |
) |
|
- |
|
|
Tax payments for equity award issuances |
|
(1,433 |
) |
|
(1,521 |
) |
|
Proceeds from exercise of stock options |
|
16,010 |
|
|
2,699 |
|
|
Acquisition of Company common stock |
|
- |
|
|
(158,049 |
) |
|
Contributions from noncontrolling interest holders |
|
840 |
|
|
- |
|
|
Distributions to noncontrolling interest holders |
|
(870 |
) |
|
(4,269 |
) |
|
Other |
|
(526 |
) |
|
356 |
|
|
Net cash used in financing activities |
|
(34,574 |
) |
|
(48,097 |
) |
|
Effect of exchange rate changes on cash and cash equivalents |
|
53 |
|
|
(191 |
) |
|
Change in cash and cash equivalents |
|
(5,347 |
) |
|
5,367 |
|
|
Cash and cash equivalents at beginning of period |
|
33,258 |
|
|
27,891 |
|
|
Cash and cash equivalents at end of period |
$ |
27,911 |
|
$ |
33,258 |
|
|
Note: The Condensed Consolidated Statements of Cash Flows are unaudited and have been restated to reflect the correction of an immaterial error to consolidate the Papa John's Marketing Fund, Inc. |
Steve Coke
Vice President, Investor Relations
502-261-7272
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