Papa John's Reports Second Quarter 2007 Earnings
2007 Earnings Guidance Updated
Highlights
- Second quarter earnings per diluted share of $0.23 in 2007 vs.
$0.46 in 2006 ($0.40 in 2007 vs. $0.34 in 2006, excluding the
consolidation of the company's franchisee-owned cheese
purchasing entity, BIBP Commodities, Inc. (BIBP))
- 46 net Papa John's restaurant openings worldwide during the quarter
- Domestic system-wide comparable sales decrease of 1.1% for the quarter
- Worldwide system sales increase of 2.1% for the quarter
- Earnings guidance for 2007 increased to a range of $1.56 to $1.60 per diluted share, excluding the impact of consolidating BIBP's results
LOUISVILLE, Ky.--(BUSINESS WIRE)--Aug. 7, 2007--Papa John's International, Inc. (NASDAQ: PZZA) today announced revenues of $256.3 million for the second quarter of 2007, representing an increase of 6.1% from revenues of $241.6 million for the same period in 2006. Net income for the second quarter of 2007 was $7.0 million, or $0.23 per diluted share (including an after-tax loss of $5.3 million, or $0.17 per diluted share, from the consolidation of the results of the franchisee-owned cheese purchasing company, BIBP Commodities, Inc. (BIBP), a variable interest entity), compared to last year's second quarter net income of $15.3 million, or $0.46 per diluted share (including an after-tax gain of $4.0 million, or $0.12 per diluted share, from the consolidation of BIBP).
Revenues were $516.9 million for the six months ended July 1, 2007, representing an increase of 6.8% from revenues of $483.9 million for the same period in 2006. Net income for the six months ended July 1, 2007 was $20.2 million, or $0.66 per diluted share (including a net loss of $5.5 million or $0.18 per diluted share, from the consolidation of BIBP), compared to last year's net income of $31.3 million, or $0.93 per diluted share (including net income of $7.4 million, or $0.22 per diluted share, from the consolidation of BIBP)."While disappointed with our negative comps for the second quarter, I am proud of how our system performed during the quarter in a very challenging competitive and cost environment," commented Papa John's president and chief executive officer, Nigel Travis. "If you look at the second quarter on a historical basis, our domestic system has posted industry-leading 3.6% positive comparable sales on a two-year combined basis and 9.7% on a three-year basis. We have also put strong cost control measures in place to manage through a very challenging cost environment for the remainder of the year, while continuing to make good progress in net new restaurant openings and growing our international business."
Revenues Comparison
Consolidated revenues were $256.3 million for the second quarter, an increase of $14.7 million or 6.1%, over the corresponding 2006 period. The increase in revenues was principally due to a $14.2 million increase in domestic company-owned restaurant revenues, reflecting the acquisition of 54 restaurants during the last five months of 2006 and the acquisition of 19 restaurants during the first six months of 2007, partially offset by the quarter's decrease in comparable sales. Other sales increased $5.2 million due to expanded commercial volumes at our print and promotions operations. Commissary sales declined $4.7 million principally due to lower prices on certain commodities, primarily cheese. The average equivalent block price per pound of cheese as sold from BIBP to PJ Food Service was $1.379 for the second quarter of 2007 as compared to $1.482 for the same quarter of the prior year.
For the six-month period ending July 1, 2007, consolidated revenues increased $32.9 million, or 6.8%, principally due to the reasons mentioned above.
Operating Results and Cash Flow
Operating Results
Our pre-tax income from continuing operations for the second quarter of 2007 was $11.1 million, compared to $24.2 million for the corresponding period in 2006. For the six months ended July 1, 2007, pre-tax income was $31.8 million compared to $49.0 million for the corresponding period of 2006. Excluding the impact of the consolidation of BIBP, second quarter 2007 pre-tax income from continuing operations was $19.4 million, an increase of $1.5 million (8.4%) over 2006 comparable results of $17.9 million, and pre-tax income for the six months ended July 1, 2007 was $40.5 million, an increase of $3.2 million (8.6%) over the 2006 comparable results of $37.3 million. The increases of $1.5 million and $3.2 million in pre-tax income from continuing operations for the three- and six-month periods ended July 1, 2007, respectively (excluding the consolidation of BIBP), are principally due to the following (analyzed on a segment basis -- see the Summary Financial Data table that follows for the reconciliation of segment income to consolidated income below):- Domestic Company-owned Restaurant Segment. Domestic company-owned restaurants' operating income decreased $614,000 and $1.7 million for the three- and six-month periods ended July 1, 2007, respectively, primarily due to the impact of negative comparable sales, an increase in salaries for our general and assistant managers and the impact of minimum wage increases in certain states, partially offset by a $594,000 pre-tax gain associated with the termination of a lease agreement in the second quarter of 2007.
- Domestic Commissary Segment. Domestic commissaries' operating income decreased approximately $595,000 for the second quarter of 2007 principally due to an increase in delivery, utility and labor costs. Operating income increased $2.1 million for the six-month period ended July 1, 2007 due to increased volumes of higher-margin fresh dough products and improved margin from other commodities during the first quarter of 2007, partially offset by an increase in delivery, utility and labor costs.
- Domestic Franchising Segment. Domestic franchising operating income decreased $672,000 and $643,000 for the three- and six-month periods ended July 1, 2007, respectively, principally due to a decline in royalties as a result of our previously mentioned acquisition of franchised restaurants during the last five months of 2006 and the first half of 2007.
- International Segment. The international operating results, which excludes the Perfect Pizza operations in the United Kingdom that were sold in March 2006, reported losses of $2.0 million and $4.4 million for the three- and six-month periods of 2007, respectively, compared to losses of $2.4 million and $4.8 million, respectively, in the same periods of the prior year. The improvements in operating results were due to the prior year results including a $470,000 charge incurred in the second quarter related to costs associated with management reorganization with one of our international operating units. Increased current year revenues due to growth in number of units and unit volumes were substantially offset by increased personnel and infrastructure investment costs.
- All Others Segment. The operating income for the "All others" reporting segment increased approximately $461,000 to $1.7 million for the second quarter of 2007 and was $2.7 million for the first six months of 2007, which was substantially the same as the comparable period in the prior year. The increase in the second quarter operating income was primarily due to an improvement in the operating results of our print and promotions operations reflecting an increase in our sales to commercial customers, and reversing a comparable shortfall in sales and operating income for this business in the first quarter.
- Unallocated Corporate Segment. Unallocated corporate expenses decreased approximately $2.5 million and $3.0 million for the three- and six-month periods ended July 1, 2007, respectively, as compared to the corresponding periods of 2006. The decreases are primarily due to lower general and administrative costs, including management incentives (as more fully discussed below), health insurance and legal costs. In addition, the company collected $650,000, which had previously been reserved, from Papa Card, Inc., a nonstock, nonprofit corporation, which administers the Papa John's gift card program. These decreases were partially offset by increased marketing efforts, including our previously disclosed multi-year deals with Six Flags, Inc. and Live Nation.
The following table summarizes our recorded expense associated with our management incentive programs:
Three Months Six Months
Ended Ended
------------- --------------
Jun-07 Jun-06 Jun-07 Jun-06
----------------------------
Stock option expense $ 889 $1,184 $1,855 $1,882
Restricted stock 185 48 248 48
Performance unit plan (652) 565 (150) 1,353
Management incentive bonus plan 125 1,966 1,750 3,952
----------------------------
Total expense $ 547 $3,763 $3,703 $7,235
============================
The decrease in the executive performance unit incentive plan expense was primarily due to the units forfeited by our Founder Chairman due to a change in status from an employee director of the company to a non-employee director.
The annual management incentive bonus plan is based on the company's annual operating income performance and certain sales measures as compared to pre-established targets. The decrease in the expense for the three- and six-month periods in 2007 as compared to the corresponding prior year periods was principally due to updated sales and operating income projections for the full year and the transition of the Founder Chairman to a non-employee director status.
Net interest expense, which is included in the unallocated corporate segment, increased approximately $1.2 million and $2.4 million for the three- and six-month periods ended July 1, 2007, respectively, as compared to the corresponding 2006 period, principally due to a higher average debt balance resulting from our share repurchase program and franchise restaurant acquisitions during the last twelve months. The increase in net interest costs was offset, in this operating segment, by an increase in allocations to the operating units for the three and six months ended July 1, 2007, as compared to the corresponding periods of 2006, partially due to an increase in the number of company-owned restaurants that are supported.
The effective income tax rate was 36.9% and 36.6% for the three and six months ended July 1, 2007, respectively, and 37.0% for the same periods in 2006.
Cash Flow
Cash flow from continuing operations was $26.2 million in the first six months of 2007 as compared to $37.2 million for the comparable period in 2006. The consolidation of BIBP decreased cash flow from operations by approximately $8.7 million in 2007 and increased cash flow from operations by approximately $11.7 million in 2006. Excluding the impact of the consolidation of BIBP, cash flow from continuing operations increased $9.4 million in the first six months of 2007 as compared to the corresponding 2006 period, primarily due to an increase in net income as described above.
Form 10-Q Filing
See the Management's Discussion and Analysis of Financial Condition and Results of Operations section of our quarterly report on Form 10-Q filed with the Securities and Exchange Commission for additional information concerning our operating results and cash flow for the three- and six-month periods ended July 1, 2007.
Comparable Sales, System-wide Sales and Unit Count
Domestic system-wide comparable sales for the second quarter decreased 1.1% (composed of a 1.5% decrease at company-owned restaurants and a 0.9% decrease at franchised restaurants). Domestic system-wide comparable sales for the six months ended July 1, 2007 decreased 0.4% (composed of a 0.4% decrease at both company-owned and franchised restaurants). Comparable sales percentage represents the change in year-over-year sales for the same base of restaurants for the same calendar quarter.
Worldwide system sales increased 2.1% to $527.1 million for the second quarter of 2007 and increased 3.1% to $1.07 billion for the six months ended July 1, 2007 as compared to the same periods of the prior year. The following table summarizes system-wide sales for the three- and six-month periods ended July 1, 2007, and the comparable 2006 periods on an actual U.S. dollar basis (dollars in thousands):
Three Months Ended
----------------------------
Percentage
July 1, June 25, Increase
2007 2006 (Decrease)
----------------------------
Domestic:
Company-owned $119,633 $105,424 13.5%
Franchised 364,127 378,142 (3.7%)
----------------------------
Total Domestic 483,760 483,566 0.0%
International 43,360 32,795 32.2%
----------------------------
Total System-wide Sales $527,120 $516,361 2.1%
============================
Six Months Ended
--------------------------------
Percentage
July 1, June 25, Increase
2007 2006 (Decrease)
--------------------------------
Domestic:
Company-owned $241,677 $212,164 13.9%
Franchised 740,475 757,209 (2.2%)
--------------------------------
Total Domestic 982,152 969,373 1.3%
International 83,507 63,754 31.0%
--------------------------------
Total System-wide Sales $1,065,659 $1,033,127 3.1%
================================
During the second quarter of 2007, 47 domestic restaurants (nine company-owned and 38 franchised) were opened, including 13 franchised units in Live Nation amphitheaters under our recently announced agreement. Additionally, 18 international franchised restaurants were opened, while 17 domestic and two international franchised restaurants were closed, resulting in 46 net openings worldwide for the quarter. There were 75 net openings worldwide for the first six months of 2007. Our total domestic development pipeline as of July 1, 2007 included approximately 330 restaurants scheduled to open over the next nine years.
At July 1, 2007, there were 3,090 Papa John's restaurants (614 company-owned and 2,476 franchised) operating in all 50 states and 27 countries. The company-owned unit count includes 119 restaurants operated in majority-owned domestic joint venture arrangements, the operating results of which are fully consolidated into the company's results.
Acquisition / Disposition Activity
During the second quarter, the company completed the acquisition of 13 franchised Papa John's restaurants in Georgia. The purchase price, which was paid in cash, was $7.4 million, of which approximately $6.5 million was recorded as goodwill.
Effective July 2, 2007, the company acquired 31 franchised Papa John's restaurants located in Missouri and Kansas. The purchase price of $10.2 million, of which approximately $7.4 million was recorded as goodwill, was paid in cash and is subject to post-closing adjustments. Effective July 30, 2007, the company acquired 11 franchised Papa John's restaurants located in the Washington D.C. area through our 70% owned joint venture, Colonel's Limited, LLC. The purchase price was $6.1 million, which was paid in cash and is subject to post-closing adjustments, of which approximately $4.7 million was recorded as goodwill.
International Update
A total of 18 restaurants were opened in international markets during the second quarter of 2007, of which eight were located in our fastest-growing markets, Korea and China. In addition, our new franchisee in Mexico City opened its first restaurant during the quarter and recently entered into an agreement to open a Papa John's restaurant in the Mexico City airport in late 2007.
As of July 1, 2007, the company had a total of 121 corporate and franchised restaurants open in Korea and China and contractual agreements for an additional 369 Papa John's franchised restaurants to be opened in those countries over the next seven years. Our total international development pipeline as of July 1, 2007 included approximately 800 restaurants scheduled to open over the next nine years.
Share Repurchase Activity
The company repurchased approximately 343,000 shares of its common stock at an average price of $29.90 per share, or a total of $10.3 million, during the second quarter of 2007, and 1.2 million shares of its common stock at an average price of $29.29 per share, or a total of $35.8 million, during the first six months of 2007. A total of 465,000 and 647,000 shares of common stock were issued upon the exercise of stock options for the three- and six-month periods ended July 1, 2007. Subsequent to the second quarter 2007, through August 1, 2007, the company repurchased an additional $7.2 million of common stock (249,000 shares at an average price of $28.85 per share).
As a result, there were 30.6 million diluted weighted average shares outstanding for the second quarter of 2007 as compared to 33.3 million for the same period in 2006. Approximately 30.1 million actual shares of the company's common stock were outstanding as of July 1, 2007. The company's board of directors has authorized the repurchase of up to an aggregate $675 million of common stock through December 30, 2007. Since the inception of the repurchase program in 1999, through July 1, 2007, the company has repurchased approximately 39.3 million shares at a total cost of $638.0 million (average price of $16.22 per share).
The company's share repurchase activity increased earnings per diluted share from continuing operations by $0.02 for the six-month period ended July 1, 2007 (no impact on the second quarter of 2007).
2007 Earnings Guidance Updated
The company today increased its previously disclosed earnings per share guidance for 2007 from the range of $1.52 to $1.58, excluding any potential impact from the required consolidation of BIBP, to a range of $1.56 to $1.60. The increase in the projected earnings per share guidance for 2007 is due to our second quarter results which exceeded our previous expectations.
The following table compares certain key operating assumptions included in the updated earnings guidance to the assumptions used in the original guidance provided on December 7, 2006 (excludes the consolidation of BIBP):
Actual Results Original Updated
through 2007 2007
July 1, 2007 Guidance Guidance
------------- -------------------- --------------------
Domestic
system-wide
comparable
sales -0.40% 1.5% to 2.5% -1.0% to 1.0%
Worldwide net
unit growth 75 units 225 to 250 units 210 to 230 units
General and
administrative
expenses $50.6 million $118 to $119 million $102 to $104 million
International
operating
losses $4.4 million $8.5 to $9.0 million $8.5 to $9.0 million
Consolidated
operating
income 8.3% 7.7% to 8.0% 8.0% to 8.2%
Net interest
expense (a) $2.5 million $2.0 to $3.0 million $4.8 to $5.2 million
Capital
expenditures $16.4 million $50 million $40 to $45 million
Average number
of diluted
shares (a) 30.6 million 31.6 to 31.9 million 30.2 to 30.5 million
(a) Updated 2007 guidance is the result of increased share repurchase
activity as compared to original projections.
Our determination of our updated earnings guidance for 2007 also includes consideration of the following factors:
- The negative impact on our domestic company-owned restaurant operations from recently enacted federal and state legislation for minimum wage, which is estimated to reduce pre-tax earnings approximately $2.7 million for the last six months of 2007 (representing a 1.0% decrease in margin for the domestic company-owned restaurant business segment and a 0.5% decrease in consolidated margin).
- The impact from the continued upward pressure on commodity prices, including the BIBP formula price for cheese, is estimated to reduce company-owned restaurant operating income approximately $1.3 million for the last six months of 2007 (representing a 0.5% decrease in margin for the domestic company-owned restaurant business segment and a 0.25% decrease in consolidated margin).
- A number of other factors that are expected to negatively impact the pizza category, including macroeconomic issues potentially impacting consumer confidence such as increased fuel and energy costs, and increased mortgage interest rates and the related downward trend in housing prices.
Forward-Looking Statements
Except for historical information, this announcement contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements reflect management's expectations based upon currently available information and data; however, actual results are subject to future events and uncertainties, which could cause actual results to materially differ from those projected in these statements. Certain factors that can cause actual results to materially differ include: the uncertainties associated with litigation; changes in pricing or other marketing or promotional strategies by competitors, which may adversely affect sales; new product and concept developments by food industry competitors; the ability of the company and its franchisees to meet planned growth targets and operate new and existing restaurants profitably; general economic conditions; increases in or sustained high cost levels of food, paper, utilities, fuel, employee compensation and benefits, insurance and similar costs; the ability to obtain ingredients from alternative suppliers, if needed; health- or disease-related disruptions or consumer concerns about commodities supplies; the selection and availability of suitable restaurant locations; negotiation of suitable lease or financing terms; constraints on permitting and construction of restaurants; local governmental agencies' restrictions on the sale of certain food products; higher-than-anticipated construction costs; the hiring, training and retention of management and other personnel; changes in consumer taste, demographic trends, traffic patterns and the type, number and location of competing restaurants; franchisee relations; the possibility of impairment charges if our United Kingdom operations or recently acquired restaurants perform below our expectations; federal and state laws governing such matters as wages, benefits, working conditions, citizenship requirements and overtime, including legislation to further increase the federal and state minimum wage; and labor shortages in various markets resulting in higher required wage rates. The above factors might be especially harmful to the financial viability of franchisees or company-owned operations in under-penetrated or emerging markets, leading to greater unit closings than anticipated. Increases in projected claims losses for the company's self-insured coverage or within the captive franchise insurance program could have a significant impact on our operating results. Additionally, domestic franchisees are only required to purchase seasoned sauce and dough from our quality control centers (QC Centers) and changes in purchasing practices by domestic franchisees could adversely affect the financial results of our QC Centers. Our international operations are subject to additional factors, including political and health conditions in the countries in which the company or its franchisees operate; currency regulations and fluctuations; differing business and social cultures and consumer preferences; diverse government regulations and structures; ability to obtain high-quality ingredients and other commodities in a cost-effective manner; and differing interpretation of the obligations established in franchise agreements with international franchisees. Further information regarding factors that could affect the company's financial and other results is included in the company's Forms 10-Q and 10-K, filed with the Securities and Exchange Commission.
Conference Call
A conference call is scheduled for August 8, 2007 at 10:00 EDT to review second quarter earnings results. The call can be accessed from the company's web page at www.papajohns.com in a listen-only mode, or dial 800-487-2662 (pass code 4893014) for participation in the question and answer session. International participants may dial 706-679-8452 (pass code 4893014).
The conference call will be available for replay beginning August 8, 2007, at approximately noon through August 15, 2007, at midnight EDT. The replay can be accessed from the company's web page at www.papajohns.com or by dialing 800-642-1687 (pass code 4893014). International participants may dial 706-645-9291 (pass code 4893014).
Summary Financial Data
Papa John's International, Inc.
(Unaudited)
Three Months Ended Six Months Ended
------------------- -------------------
(In thousands, except per
share amounts) July 1, June 25, July 1, June 25,
2007 2006 2007 2006
--------- --------- --------- ---------
Revenues $256,256 $241,593 $516,880 $483,942
========= ========= ========= =========
Income from continuing
operations before income
taxes (1) $ 11,110 $ 24,232 $ 31,823 $ 49,015
========= ========= ========= =========
Net income $ 7,009 $ 15,266 $ 20,164 $ 31,268
========= ========= ========= =========
Earnings per share - assuming
dilution $ 0.23 $ 0.46 $ 0.66 $ 0.93
========= ========= ========= =========
Weighted average shares
outstanding - assuming
dilution 30,600 33,309 30,623 33,632
========= ========= ========= =========
EBITDA (A) $ 20,037 $ 31,102 $ 49,818 $ 62,871
========= ========= ========= =========
(1) See information below on a reporting unit basis that separately
identifies the impact of consolidating VIEs on income from continuing
operations before income taxes.
The following is a summary of our income (loss) from continuing
operations before income taxes:
Domestic company-owned
restaurants $ 7,535 $ 8,149 $ 15,750 $ 17,450
Domestic commissaries 7,917 8,512 17,931 15,865
Domestic franchising 12,065 12,737 25,108 25,751
International (2,032) (2,418) (4,352) (4,759)
VIEs, primarily BIBP (8,257) 6,303 (8,663) 11,692
All others 1,679 1,218 2,724 2,717
Unallocated corporate expenses (7,486) (9,936) (15,781) (18,818)
Elimination of intersegment
profits (311) (333) (894) (883)
--------- --------- --------- ---------
Income from continuing
operations before income
taxes $ 11,110 $ 24,232 $ 31,823 $ 49,015
========= ========= ========= =========
The following is a reconciliation of EBITDA to net income:
EBITDA (A) $ 20,037 $ 31,102 $ 49,818 $ 62,871
Income tax expense (4,101) (8,966) (11,659) (18,136)
Net interest (1,338) (267) (2,511) (692)
Depreciation and amortization (7,589) (6,603) (15,484) (13,164)
Income from discontinued
operations, net of tax - - - 389
--------- --------- --------- ---------
Net income $ 7,009 $ 15,266 $ 20,164 $ 31,268
========= ========= ========= =========
(A) Management considers EBITDA to be a meaningful indicator of
operating performance from continuing operations before depreciation,
amortization, net interest and income taxes. EBITDA provides us with
an understanding of one aspect of earnings before the impact of
investing and financing transactions and income taxes. While EBITDA
should not be construed as a substitute for net income or a better
indicator of liquidity than cash flows from operating activities,
which are determined in accordance with accounting principles
generally accepted in the United States (GAAP), it is included herein
to provide additional information with respect to the ability of the
company to meet its future debt service, capital expenditure and
working capital requirements. EBITDA is not necessarily a measure of
the company's ability to fund its cash needs and it excludes
components that are significant in understanding and assessing our
results of operations and cash flows. In addition, EBITDA is not a
term defined by GAAP and as a result our measure of EBITDA might not
be comparable to similarly titled measures used by other companies.
The above EBITDA calculation includes the operating results of BIBP
Commodities, Inc., a variable interest entity.
Papa John's International, Inc. and Subsidiaries
Consolidated Statements of Income
Three Months Ended Six Months Ended
----------------------- -----------------------
July 1, June 25, July 1, June 25,
2007 2006 2007 2006
----------------------- -----------------------
(In thousands, except (Unaudited) (Unaudited) (Unaudited) (Unaudited)
per share amounts)
Revenues:
Domestic:
Company-owned
restaurant sales $119,633 $105,424 $241,677 $212,164
Variable interest
entities
restaurant sales 1,602 2,691 3,289 5,137
Franchise
royalties 13,746 13,964 28,198 28,202
Franchise and
development fees 541 593 1,303 1,181
Commissary sales 96,224 100,968 196,423 203,660
Other sales 17,355 12,202 31,846 23,072
International:
Royalties and
franchise and
development fees 2,223 1,839 4,671 3,296
Restaurant and
commissary sales 4,932 3,912 9,473 7,230
----------------------- -----------------------
Total revenues 256,256 241,593 516,880 483,942
Costs and expenses:
Domestic Company-
owned restaurant
expenses:
Cost of sales 25,829 19,650 50,917 40,528
Salaries and
benefits 35,928 31,252 72,872 62,753
Advertising and
related costs 11,159 9,821 22,062 19,013
Occupancy costs 7,520 6,364 14,809 12,526
Other operating
expenses 16,411 13,774 32,804 27,577
----------------------- -----------------------
Total domestic
Company-owned
restaurant expenses 96,847 80,861 193,464 162,397
Variable interest
entities restaurant
expenses 1,352 2,224 2,731 4,331
Domestic commissary
and other expenses:
Cost of sales 80,944 81,866 162,719 165,409
Salaries and
benefits 9,006 7,851 17,804 15,316
Other operating
expenses 11,147 11,282 22,145 22,422
----------------------- -----------------------
Total domestic
commissary and
other expenses 101,097 100,999 202,668 203,147
Loss (income) from the
franchise cheese-
purchasing program,
net of minority
interest 6,277 (5,189) 6,178 (9,765)
International
operating expenses 4,426 3,883 8,464 7,306
General and
administrative
expenses 25,221 26,386 50,621 50,630
Minority interests and
other general
expenses 999 1,327 2,936 3,025
Depreciation and
amortization 7,589 6,603 15,484 13,164
----------------------- -----------------------
Total costs and
expenses 243,808 217,094 482,546 434,235
----------------------- -----------------------
Operating income from
continuing operations 12,448 24,499 34,334 49,707
Net interest (1,338) (267) (2,511) (692)
----------------------- -----------------------
Income from continuing
operations before
income taxes 11,110 24,232 31,823 49,015
Income tax expense 4,101 8,966 11,659 18,136
----------------------- -----------------------
Income from continuing
operations 7,009 15,266 20,164 30,879
Income from
discontinued
operations, net of
tax - - - 389
----------------------- -----------------------
Net income $ 7,009 $ 15,266 $ 20,164 $ 31,268
======================= =======================
Basic earnings per
common share:
Income from
continuing
operations $ 0.23 $ 0.47 $ 0.67 $ 0.94
Income from
discontinued
operations, net of
tax - - - 0.01
----------------------- -----------------------
Basic earnings per
common share $ 0.23 $ 0.47 $ 0.67 $ 0.95
======================= =======================
Earnings per common
share - assuming
dilution:
Income from
continuing
operations $ 0.23 $ 0.46 $ 0.66 $ 0.92
Income from
discontinued
operations, net of
tax - - - 0.01
----------------------- -----------------------
Earnings per common
share - assuming
dilution $ 0.23 $ 0.46 $ 0.66 $ 0.93
======================= =======================
Basic weighted average
shares outstanding 30,054 32,589 30,059 32,855
======================= =======================
Diluted weighted
average shares
outstanding 30,600 33,309 30,623 33,632
======================= =======================
Papa John's International, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
July 1, December 31,
2007 2006
(Unaudited) (Note)
----------- ------------
(In thousands)
Assets
Current assets:
Cash and cash equivalents $ 19,933 $ 12,979
Accounts receivable 21,495 23,326
Inventories 24,936 26,729
Prepaid expenses 9,407 7,779
Other current assets 6,557 7,368
Deferred income taxes 7,507 6,362
----------- ------------
Total current assets 89,835 84,543
Investments 583 1,254
Net property and equipment 199,723 197,722
Notes receivable 14,287 12,104
Deferred income taxes 5,997 1,643
Goodwill 74,580 67,357
Other assets 17,577 15,016
----------- ------------
Total assets $402,582 $379,639
=========== ============
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 26,804 $ 29,202
Income and other taxes 13,294 15,136
Accrued expenses 53,246 57,233
Current portion of debt 10,775 525
----------- ------------
Total current liabilities 104,119 102,096
Unearned franchise and development fees 7,211 7,562
Long-term debt, net of current portion 116,009 96,511
Other long-term liabilities 28,238 27,302
----------- ------------
Total liabilities 255,577 233,471
Total stockholders' equity 147,005 146,168
----------- ------------
Total liabilities and stockholders' equity $402,582 $379,639
=========== ============
Note: The balance sheet at December 31, 2006 has been derived from the
audited consolidated financial statements at that date, 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
Consolidated Statements of Cash Flows
Six Months Ended
-----------------------
(In thousands) July 1, June 25,
2007 2006
-----------------------
(Unaudited) (Unaudited)
Operating activities
Net income $ 20,164 $ 31,268
Results from discontinued operations (net of
income taxes) - (389)
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for uncollectible accounts and
notes receivable 1,034 1,887
Depreciation and amortization 15,484 13,164
Deferred income taxes (5,709) 212
Stock-based compensation expense 1,855 1,882
Excess tax benefit related to exercise of
non-qualified stock options (3,025) (4,500)
Other 3,260 3,556
Changes in operating assets and
liabilities, net of acquisitions:
Accounts receivable 1,048 (2,274)
Inventories 1,785 1,586
Prepaid expenses (1,723) 1,156
Other current assets 908 (218)
Other assets and liabilities (892) (4,885)
Accounts payable (2,437) (3,709)
Income and other taxes (1,228) (430)
Accrued expenses (3,929) (354)
Unearned franchise and development
fees (351) (747)
----------- -----------
Net cash provided by operating activities from
continuing operations 26,244 37,205
Operating cash flows from discontinued
operations - 414
----------- -----------
Net cash provided by operating activities 26,244 37,619
Investing activities
Purchase of property and equipment (16,433) (14,068)
Proceeds from sale of property and equipment 27 26
Purchase of investments - (2,014)
Proceeds from sale or maturity of investments 671 4,472
Loans issued (4,263) (4,616)
Loan repayments 2,029 6,410
Acquisitions (8,615) (1,200)
Proceeds from divestiture of restaurants 632 -
----------- -----------
Net cash from continuing operations used in
investing activities (25,952) (10,990)
Proceeds from divestiture of discontinued
operations - 8,020
----------- -----------
Net cash used in investing activities (25,952) (2,970)
Financing activities
Net proceeds (repayments) from line of credit
facility 19,500 (13,500)
Net proceeds from short-term debt - variable
interest entities 10,250 3,800
Excess tax benefit related to exercise of non-
qualified stock options 3,025 4,500
Proceeds from exercise of stock options 10,323 10,450
Acquisition of Company common stock (35,827) (51,728)
Other (675) 172
----------- -----------
Net cash provided by (used in) financing
activities 6,596 (46,306)
Effect of exchange rate changes on cash and
cash equivalents 66 53
----------- -----------
Change in cash and cash equivalents 6,954 (11,604)
Cash and cash equivalents at beginning of
period 12,979 22,098
----------- -----------
Cash and cash equivalents at end of period $ 19,933 $ 10,494
=========== ===========
Restaurant Progression
Papa John's International, Inc.
Second Quarter Ended July 1, 2007
---------------------------------------
Corporate Franchised
Domestic Int'l Domestic Int'l Total
---------------------------------------
Papa John's restaurants
Beginning of period 586 8 2,086 364 3,044
Opened 9 - 38 18 65
Closed (2) - (15) (2) (19)
Acquired 13 - - - 13
Sold - - (13) - (13)
---------------------------------------
End of Period 606 8 2,096 380 3,090
=======================================
Second Quarter Ended June 25, 2006
---------------------------------------
Corporate Franchised
Domestic Int'l Domestic Int'l Total
---------------------------------------
Papa John's restaurants
Beginning of period 506 3 2,101 314 2,924
Opened 4 - 36 28 68
Closed - - (12) (20) (32)
Acquired - 3 - - 3
Sold - - - (3) (3)
---------------------------------------
End of Period 510 6 2,125 319 2,960
=======================================
Restaurant Progression
Papa John's International, Inc.
Six Months Ended July 1, 2007
---------------------------------------
Corporate Franchised
Domestic Int'l Domestic Int'l Total
---------------------------------------
Papa John's restaurants
Beginning of period 577 11 2,080 347 3,015
Opened 13 - 60 36 109
Closed (2) - (26) (6) (34)
Acquired 19 - 1 3 23
Sold (1) (3) (19) - (23)
---------------------------------------
End of Period 606 8 2,096 380 3,090
=======================================
Six Months Ended June 25, 2006
---------------------------------------
Corporate Franchised
Domestic Int'l Domestic Int'l Total
---------------------------------------
Papa John's restaurants
Beginning of period 502 2 2,097 325 2,926
Opened 6 1 56 40 103
Closed (1) - (25) (43) (69)
Acquired 3 3 - - 6
Sold - - (3) (3) (6)
---------------------------------------
End of Period 510 6 2,125 319 2,960
=======================================
---------------------------------------
Corporate Franchised
Domestic Int'l Domestic Int'l Total
---------------------------------------
Perfect Pizza restaurants
Beginning of period - - - 112 112
Closed - - - (3) (3)
Sold - - - (109) (109)
---------------------------------------
End of Period - - - - -
=======================================
Note: The PJUK Perfect Pizza operations were sold in March 2006.
CONTACT: Papa John's International, Inc.
David Flanery, Chief Financial Officer
502-261-4753
SOURCE: Papa John's International, Inc.