[X]
|
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|
[ ]
|
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|
Delaware | 61-1203323 |
(State or other jurisdiction of
|
(I.R.S. Employer |
incorporation or organization)
|
Identification number) |
Large accelerated filer [X]
|
Accelerated filer [ ]
|
Non-accelerated filer [ ]
|
Smaller reporting company [ ]
|
Page No.
|
|||||
2 | |||||
3 | |||||
|
|||||
4 | |||||
5 | |||||
6 | |||||
13 | |||||
25 | |||||
26 | |||||
27 | |||||
27 | |||||
28 |
Condensed Consolidated Balance Sheets
|
||||||||
(In thousands)
|
March 27, 2011
|
December 26, 2010
|
||||||
(Unaudited)
|
(Note)
|
|||||||
Assets
|
||||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$ | 13,744 | $ | 46,225 | ||||
Accounts receivable, net
|
28,325 | 25,357 | ||||||
Inventories
|
17,430 | 17,402 | ||||||
Prepaid expenses
|
10,333 | 10,009 | ||||||
Other current assets
|
3,647 | 3,732 | ||||||
Deferred income taxes
|
7,691 | 9,647 | ||||||
Total current assets
|
81,170 | 112,372 | ||||||
Investments
|
1,809 | 1,604 | ||||||
Net property and equipment
|
182,724 | 186,594 | ||||||
Notes receivable, net
|
16,171 | 17,354 | ||||||
Goodwill
|
75,290 | 74,697 | ||||||
Other assets
|
23,640 | 23,320 | ||||||
Total assets
|
$ | 380,804 | $ | 415,941 | ||||
Liabilities and stockholders’ equity
|
||||||||
Current liabilities:
|
||||||||
Accounts payable
|
$ | 26,751 | $ | 31,569 | ||||
Income and other taxes
|
11,380 | 6,140 | ||||||
Accrued expenses
|
51,638 | 52,978 | ||||||
Total current liabilities
|
89,769 | 90,687 | ||||||
Unearned franchise and development fees
|
6,254 | 6,596 | ||||||
Long-term debt
|
48,008 | 99,017 | ||||||
Other long-term liabilities
|
12,219 | 12,100 | ||||||
Deferred income taxes
|
1,138 | 341 | ||||||
Stockholders’ equity:
|
||||||||
Preferred stock
|
- | - | ||||||
Common stock
|
362 | 361 | ||||||
Additional paid-in capital
|
248,469 | 245,380 | ||||||
Accumulated other comprehensive income
|
2,122 | 849 | ||||||
Retained earnings
|
259,579 | 243,152 | ||||||
Treasury stock
|
(295,015 | ) | (291,048 | ) | ||||
Total stockholders' equity, net of noncontrolling interests
|
215,517 | 198,694 | ||||||
Noncontrolling interests in subsidiaries
|
7,899 | 8,506 | ||||||
Total stockholders’ equity
|
223,416 | 207,200 | ||||||
Total liabilities and stockholders’ equity
|
$ | 380,804 | $ | 415,941 |
Note: The balance sheet at December 26, 2010 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.
|
||||
|
||||
See accompanying notes.
|
Three Months Ended
|
||||||||
(In thousands, except per share amounts)
|
March 27, 2011
|
March 28, 2010
|
||||||
North America revenues:
|
||||||||
Domestic Company-owned restaurant sales
|
$ | 138,671 | $ | 129,644 | ||||
Franchise royalties
|
19,731 | 18,045 | ||||||
Franchise and development fees
|
185 | 205 | ||||||
Domestic commissary sales
|
127,672 | 112,640 | ||||||
Other sales
|
13,447 | 14,513 | ||||||
International revenues:
|
||||||||
Royalties and franchise and development fees
|
3,762 | 3,166 | ||||||
Restaurant and commissary sales
|
8,999 | 7,573 | ||||||
Total revenues
|
312,467 | 285,786 | ||||||
Costs and expenses:
|
||||||||
Domestic Company-owned restaurant expenses:
|
||||||||
Cost of sales
|
32,100 | 27,286 | ||||||
Salaries and benefits
|
37,649 | 35,403 | ||||||
Advertising and related costs
|
12,789 | 11,404 | ||||||
Occupancy costs
|
7,869 | 7,840 | ||||||
Other operating expenses
|
19,915 | 18,190 | ||||||
Total domestic Company-owned restaurant expenses
|
110,322 | 100,123 | ||||||
Domestic commissary and other expenses:
|
||||||||
Cost of sales
|
106,443 | 95,292 | ||||||
Salaries and benefits
|
9,011 | 8,732 | ||||||
Other operating expenses
|
13,585 | 11,700 | ||||||
Total domestic commissary and other expenses
|
129,039 | 115,724 | ||||||
Income from the franchise cheese-purchasing program,
|
||||||||
net of noncontrolling interest
|
- | (2,809 | ) | |||||
International operating expenses
|
7,728 | 6,776 | ||||||
General and administrative expenses
|
29,074 | 27,860 | ||||||
Other general expenses
|
781 | 2,290 | ||||||
Depreciation and amortization
|
8,312 | 7,880 | ||||||
Total costs and expenses
|
285,256 | 257,844 | ||||||
Operating income
|
27,211 | 27,942 | ||||||
Investment income
|
177 | 231 | ||||||
Interest expense
|
(608 | ) | (1,244 | ) | ||||
Income before income taxes
|
26,780 | 26,929 | ||||||
Income tax expense
|
9,231 | 8,965 | ||||||
Net income, including noncontrolling interests
|
17,549 | 17,964 | ||||||
Less: income attributable to noncontrolling interests
|
(1,122 | ) | (1,089 | ) | ||||
Net income, net of noncontrolling interests
|
$ | 16,427 | $ | 16,875 | ||||
Basic earnings per common share
|
$ | 0.64 | $ | 0.62 | ||||
Earnings per common share - assuming dilution
|
$ | 0.64 | $ | 0.62 | ||||
Basic weighted average shares outstanding
|
25,484 | 27,038 | ||||||
Diluted weighted average shares outstanding
|
25,757 | 27,154 | ||||||
See accompanying notes.
|
||||||||
Papa John's International, Inc.
|
||||||||||||||||||||||||||||||||
Common
|
Accumulated
|
|||||||||||||||||||||||||||||||
Stock
|
Additional
|
Other
|
Noncontrolling
|
Total
|
||||||||||||||||||||||||||||
Shares
|
Common
|
Paid-In
|
Comprehensive
|
Retained
|
Treasury
|
Interests in
|
Stockholders'
|
|||||||||||||||||||||||||
(In thousands)
|
Outstanding
|
Stock
|
Capital
|
Income (Loss)
|
Earnings
|
Stock
|
Subsidiaries
|
Equity
|
||||||||||||||||||||||||
Balance at December 27, 2009
|
26,930 | $ | 358 | $ | 231,720 | $ | (1,084 | ) | $ | 191,212 | $ | (245,337 | ) | $ | 8,168 | $ | 185,037 | |||||||||||||||
Comprehensive income:
|
||||||||||||||||||||||||||||||||
Net income
|
- | - | - | - | 16,875 | - | 1,089 | 17,964 | ||||||||||||||||||||||||
Change in valuation of interest rate
|
||||||||||||||||||||||||||||||||
swap agreements, net of tax of $72
|
- | - | - | 502 | - | - | - | 502 | ||||||||||||||||||||||||
Foreign currency translation
|
- | - | - | (1,762 | ) | - | - | - | (1,762 | ) | ||||||||||||||||||||||
Comprehensive income
|
16,704 | |||||||||||||||||||||||||||||||
Exercise of stock options
|
218 | 2 | 3,931 | - | - | - | - | 3,933 | ||||||||||||||||||||||||
Tax effect of non-qualified
|
||||||||||||||||||||||||||||||||
stock options
|
- | - | 167 | - | - | - | - | 167 | ||||||||||||||||||||||||
Acquisition of Company common stock
|
(215 | ) | - | - | - | - | (5,269 | ) | - | (5,269 | ) | |||||||||||||||||||||
Net contributions (distributions) -
|
||||||||||||||||||||||||||||||||
noncontrolling interests
|
- | - | - | - | - | - | (180 | ) | (180 | ) | ||||||||||||||||||||||
Stock-based compensation expense
|
- | - | 1,673 | - | - | - | - | 1,673 | ||||||||||||||||||||||||
Other
|
80 | - | 2,035 | - | - | - | - | 2,035 | ||||||||||||||||||||||||
Balance at March 28, 2010
|
27,013 | $ | 360 | $ | 239,526 | $ | (2,344 | ) | $ | 208,087 | $ | (250,606 | ) | $ | 9,077 | $ | 204,100 | |||||||||||||||
Balance at December 26, 2010
|
25,439 | $ | 361 | $ | 245,380 | $ | 849 | $ | 243,152 | $ | (291,048 | ) | $ | 8,506 | $ | 207,200 | ||||||||||||||||
Comprehensive income:
|
||||||||||||||||||||||||||||||||
Net income
|
- | - | - | - | 16,427 | - | 1,122 | 17,549 | ||||||||||||||||||||||||
Change in valuation of interest rate
|
||||||||||||||||||||||||||||||||
swap agreements, net of tax of $89
|
- | - | - | 159 | - | - | - | 159 | ||||||||||||||||||||||||
Foreign currency translation
|
- | - | - | 1,114 | - | - | - | 1,114 | ||||||||||||||||||||||||
Comprehensive income
|
18,822 | |||||||||||||||||||||||||||||||
Exercise of stock options
|
63 | 1 | 1,313 | - | - | - | - | 1,314 | ||||||||||||||||||||||||
Tax effect of non-qualified
|
||||||||||||||||||||||||||||||||
stock options
|
- | - | 31 | - | - | - | - | 31 | ||||||||||||||||||||||||
Acquisition of Company common stock
|
(143 | ) | - | - | - | - | (4,119 | ) | - | (4,119 | ) | |||||||||||||||||||||
Net contributions (distributions) -
|
||||||||||||||||||||||||||||||||
noncontrolling interests
|
- | - | - | - | - | - | (1,729 | ) | (1,729 | ) | ||||||||||||||||||||||
Stock-based compensation expense
|
- | - | 1,795 | - | - | - | - | 1,795 | ||||||||||||||||||||||||
Other
|
- | - | (50 | ) | - | - | 152 | - | 102 | |||||||||||||||||||||||
Balance at March 27, 2011
|
25,359 | $ | 362 | $ | 248,469 | $ | 2,122 | $ | 259,579 | $ | (295,015 | ) | $ | 7,899 | $ | 223,416 |
Three Months Ended
|
||||||||
(In thousands)
|
March 27, 2011
|
March 28, 2010
|
||||||
Operating activities
|
||||||||
Net income, net of noncontrolling interests
|
$
|
16,427
|
$
|
16,875
|
||||
Adjustments to reconcile net income to net cash provided by operating activities:
|
||||||||
Provision for uncollectible accounts and notes receivable
|
39
|
497
|
||||||
Depreciation and amortization
|
8,312
|
7,880
|
||||||
Deferred income taxes
|
2,664
|
1,901
|
||||||
Stock-based compensation expense
|
1,795
|
1,673
|
||||||
Excess tax benefit related to exercise of non-qualified stock options
|
(107
|
)
|
(207
|
)
|
||||
Other
|
43
|
330
|
||||||
Changes in operating assets and liabilities, net of acquisitions:
|
||||||||
Accounts receivable
|
(3,011
|
)
|
(3,247
|
)
|
||||
Inventories
|
(28
|
)
|
514
|
|||||
Prepaid expenses
|
(324
|
)
|
(986
|
)
|
||||
Other current assets
|
85
|
(270
|
)
|
|||||
Other assets and liabilities
|
77
|
(645
|
)
|
|||||
Accounts payable
|
(4,818
|
)
|
(1,205
|
)
|
||||
Income and other taxes
|
5,240
|
7,370
|
||||||
Accrued expenses
|
(487
|
)
|
(4,540
|
)
|
||||
Unearned franchise and development fees
|
(342
|
)
|
73
|
|||||
Net cash provided by operating activities
|
25,565
|
26,013
|
||||||
Investing activities
|
||||||||
Purchase of property and equipment
|
(4,823
|
)
|
(9,125
|
)
|
||||
Purchase of investments
|
(205
|
)
|
-
|
|||||
Proceeds from sale or maturity of investments
|
-
|
241
|
||||||
Loans issued
|
(165
|
)
|
(310
|
)
|
||||
Loan repayments
|
1,468
|
579
|
||||||
Other
|
-
|
10
|
||||||
Net cash used in investing activities
|
(3,725
|
)
|
(8,605
|
)
|
||||
Financing activities
|
||||||||
Net repayments on line of credit facility
|
(51,000
|
)
|
-
|
|||||
Excess tax benefit related to exercise of non-qualified stock options
|
107
|
207
|
||||||
Proceeds from exercise of stock options
|
1,314
|
3,933
|
||||||
Acquisition of Company common stock
|
(4,119
|
)
|
(5,269
|
)
|
||||
Noncontrolling interests, net of contributions and distributions
|
(607
|
)
|
909
|
|||||
Other
|
(10
|
)
|
(10
|
)
|
||||
Net cash used in financing activities
|
(54,315
|
)
|
(230
|
)
|
||||
Effect of exchange rate changes on cash and cash equivalents
|
(6
|
)
|
(84
|
)
|
||||
Change in cash and cash equivalents
|
(32,481
|
)
|
17,094
|
|||||
Cash and cash equivalents at beginning of period
|
46,225
|
25,457
|
||||||
Cash and cash equivalents at end of period
|
$
|
13,744
|
$
|
42,551
|
||||
See accompanying notes.
|
Restaurants as
of March 27,
2011
|
Restaurants as
of March 28,
2010
|
Restaurant Locations
|
Papa John's
Ownership*
|
Noncontrolling
Interest
Ownership*
|
|||||||||||||
Star Papa, LP
|
75 | 75 |
Texas
|
51 | % | 49 | % | ||||||||||
Colonel's Limited, LLC
|
52 | 52 |
Maryland and Virginia
|
70 | % | 30 | % | ||||||||||
*The ownership percentages were the same for both the 2011 and 2010 periods presented in the accompanying consolidated financial statements.
|
March 27,
|
March 28,
|
|||||||
(In thousands)
|
2011
|
2010
|
||||||
Papa John's International, Inc.
|
$ | 1,798 | $ | 1,647 | ||||
Noncontrolling interests
|
1,122 | 1,089 | ||||||
Total pre-tax income
|
$ | 2,920 | $ | 2,736 |
March 27,
|
December 26,
|
|||||||
2011
|
2010
|
|||||||
Revolving line of credit
|
$ | 48,000 | $ | 99,000 | ||||
Other
|
8 | 17 | ||||||
Total long-term debt
|
$ | 48,008 | $ | 99,017 |
Floating
Rate Debt
|
Fixed
Rates
|
||||||
The first interest rate swap agreement:
|
|||||||
January 16, 2007 to January 15, 2009
|
$60 million
|
4.98%
|
|||||
January 15, 2009 to January 15, 2011
|
$50 million
|
4.98%
|
|||||
The second interest rate swap agreement:
|
|||||||
January 31, 2009 to January 31, 2011
|
$50 million
|
3.74%
|
Three Months Ended
|
||||||||
March 27,
|
March 28,
|
|||||||
2011
|
2010
|
|||||||
Basic earnings per common share:
|
||||||||
Net income, net of noncontrolling interests
|
$ | 16,427 | $ | 16,875 | ||||
Weighted average shares outstanding
|
25,484 | 27,038 | ||||||
Basic earnings per common share
|
$ | 0.64 | $ | 0.62 | ||||
Earnings per common share - assuming dilution:
|
||||||||
Net income, net of noncontrolling interests
|
$ | 16,427 | $ | 16,875 | ||||
Weighted average shares outstanding
|
25,484 | 27,038 | ||||||
Dilutive effect of outstanding compensation awards
|
273 | 116 | ||||||
Diluted weighted average shares outstanding
|
25,757 | 27,154 | ||||||
Earnings per common share - assuming dilution
|
$ | 0.64 | $ | 0.62 |
Three Months Ended
|
||||||||
March 27, 2011
|
March 28, 2010
|
|||||||
Revenues from external customers:
|
||||||||
Domestic Company-owned restaurants
|
$ | 138,671 | $ | 129,644 | ||||
Domestic commissaries
|
127,672 | 112,640 | ||||||
North America Franchising *
|
19,916 | 18,250 | ||||||
International *
|
12,761 | 10,739 | ||||||
All others
|
13,447 | 14,513 | ||||||
Total revenues from external customers
|
$ | 312,467 | $ | 285,786 | ||||
Intersegment revenues:
|
||||||||
Domestic commissaries
|
$ | 38,100 | $ | 33,643 | ||||
North America Franchising
|
548 | 504 | ||||||
International
|
47 | 333 | ||||||
Variable interest entities
|
25,117 | 39,143 | ||||||
All others
|
2,555 | 3,150 | ||||||
Total intersegment revenues
|
$ | 66,367 | $ | 76,773 | ||||
Income (loss) before income taxes:
|
||||||||
Domestic Company-owned restaurants
|
$ | 10,883 | $ | 11,445 | ||||
Domestic commissaries
|
9,554 | 7,148 | ||||||
North America Franchising *
|
18,009 | 16,351 | ||||||
International *
|
(816 | ) | (1,532 | ) | ||||
Variable interest entities
|
- | 3,485 | ||||||
All others
|
(378 | ) | 949 | |||||
Unallocated corporate expenses
|
(9,769 | ) | (10,830 | ) | ||||
Elimination of intersegment profits
|
(703 | ) | (87 | ) | ||||
Total income before income taxes
|
$ | 26,780 | $ | 26,929 | ||||
Income attributable to noncontrolling interests
|
(1,122 | ) | (1,089 | ) | ||||
Total income before income taxes, net of noncontrolling interests
|
$ | 25,658 | $ | 25,840 | ||||
Property and equipment:
|
||||||||
Domestic Company-owned restaurants
|
$ | 166,683 | ||||||
Domestic commissaries
|
82,845 | |||||||
International
|
17,721 | |||||||
All others
|
34,575 | |||||||
Unallocated corporate assets
|
128,493 | |||||||
Accumulated depreciation and amortization
|
(247,593 | ) | ||||||
Net property and equipment
|
$ | 182,724 |
* |
The results for the three months ended March 28, 2010 for franchised restaurants operating in Hawaii, Alaska and Canada have been reclassified from International to North America Franchising to conform to the current year presentation. The impact of the reclassification was to increase North America Franchising revenues and income before income taxes by approximately $470 and $430, respectively, with corresponding decreases in the International operating segment results.
|
Three Months Ended
|
||||||||
March 27,
2011
|
March 28,
2010
|
|||||||
BIBP sales
|
$ | 25,117 | $ | 39,143 | ||||
Cost of sales
|
25,100 | 35,495 | ||||||
General and administrative expenses
|
17 | 29 | ||||||
Total costs and expenses
|
25,117 | 35,524 | ||||||
Operating income
|
- | 3,619 | ||||||
Interest expense
|
- | (134 | ) | |||||
Income before income taxes
|
$ | - | $ | 3,485 |
Three Months Ended
|
||||||||
March 27, 2011
|
March 28, 2010
|
|||||||
Papa John's Restaurant Progression:
|
||||||||
North America Company-owned:
|
||||||||
Beginning of period
|
591 | 588 | ||||||
Opened
|
1 | 4 | ||||||
Closed
|
- | (1 | ) | |||||
End of period
|
592 | 591 | ||||||
International Company-owned:
|
||||||||
Beginning of period
|
21 | 26 | ||||||
Acquired from franchisees
|
- | 1 | ||||||
End of period
|
21 | 27 | ||||||
North America franchised (a):
|
||||||||
Beginning of period
|
2,346 | 2,246 | ||||||
Opened
|
32 | 36 | ||||||
Closed
|
(7 | ) | (30 | ) | ||||
End of period
|
2,371 | 2,252 | ||||||
International franchised (a):
|
||||||||
Beginning of period
|
688 | 609 | ||||||
Opened
|
23 | 24 | ||||||
Sold to Company
|
- | (1 | ) | |||||
Closed
|
(8 | ) | (11 | ) | ||||
End of period
|
703 | 621 | ||||||
Total restaurants - end of period
|
3,687 | 3,491 |
|
(a)
|
The restaurant unit data for the three months ended March 28, 2010 has been adjusted to reflect the reclassification of restaurants operating in Hawaii, Alaska and Canada from International franchised to North America franchised. There were 58 restaurants reclassified from International to North America franchised as of March 28, 2010.
|
|
·
|
National Marketing Fund Contribution Rate – Domestic Company-owned and franchised restaurants will contribute 4.0% of sales to the marketing fund in 2011 and have agreed to a minimum contribution rate in 2012 and 2013. The Company expects this agreement to primarily represent a shift, or a slight increase, in total marketing spend, and believes an increase in marketing spend on a national basis will improve the consistency of the overall marketing message and favorably impact brand awareness.
|
|
·
|
BIBP Accumulated Deficit – BIBP had an accumulated deficit (representing prior purchases of cheese by PJFS from BIBP at below market prices) of $14.2 million at December 26, 2010. PJFS agreed to pay to BIBP the amount equal to the accumulated deficit at December 26, 2010. Accordingly, BIBP recorded a decrease of $14.2 million in cost of sales and PJFS recorded a corresponding increase in cost of sales in the 2010 financial statements. This transaction did not have any impact on the Company's 2010 consolidated income statement results since both PJFS and BIBP were fully consolidated with the Company’s financial results.
|
|
·
|
Cheese Purchasing Agreement – As previously discussed, in order to facilitate franchisees' planning of food costs and promotions going forward, PJFS agreed to charge a fixed monthly price for cheese to franchisees who signed a cheese purchasing agreement with PJFS.
|
|
·
|
Online Ordering System Fees – The Company agreed to reduce the online ordering fee paid by domestic franchisees by 0.5% for 2011, and agreed to limit the fee for 2012 and 2013.
|
|
·
|
Royalty Rebate Program – The standard royalty rate in 2011 is 5.0% of sales. Franchisees can earn up to a 0.25% quarterly royalty rebate for 2011 to 2013 by meeting certain sales growth targets; they can earn an additional 0.20% royalty rebate in 2011 by making specified re-imaging restaurant lobby investments. The Company agreed to consider a similar capital investment-based royalty rebate opportunity for franchisees in 2012 and 2013 as well.
|
|
·
|
Company-owned restaurant sales increased $9.0 million, or 7.0%, from the corresponding 2010 quarter, reflecting an increase of 6.7% in comparable sales during the first quarter of 2011. An increase in customer traffic was partially offset by a decrease in the average ticket spend as a result of increased levels of discounting, as compared to the first quarter of 2010. “Comparable sales” represents sales generated by restaurants open throughout both periods reported.
|
|
·
|
North America franchise royalty revenue increased $1.7 million, or 9.3%, primarily due to a 5.9% increase in comparable sales and an increase in net franchise units over the prior year. The impact of the standard royalty rate increase to 5.0% (0.25% increase over 2010) was substantially offset by the franchisees’ ability to earn up to a 0.25% royalty rebate by meeting certain sales growth targets and an additional 0.20% royalty rebate by making specified re-imaging restaurant lobby investments as part of the previously announced National Marketing Fund Agreement.
|
|
·
|
Domestic commissary sales increased $15.0 million, or 13.3%, due to an increase in sales volumes and increases in the prices of certain commodities.
|
|
·
|
International revenues increased $2.0 million, or 18.8%, primarily due to an increase in the number of restaurants in addition to a 5.6% increase in comparable sales, calculated on a constant dollar basis. This increase was partially offset by the prior year including revenues from Company-owned restaurants located in the United Kingdom, which were sold in the third quarter of 2010.
|
|
·
|
These increases were partially offset by a $1.1 million, or 7.3%, decrease in other sales primarily resulting from a decline in sales at our print and promotions subsidiary, Preferred Marketing Solutions, and an online fee reduction in connection with the new National Marketing Fund Agreement.
|
Three Months Ended
|
||||||||||||
March 27,
|
March 28,
|
Increase
|
||||||||||
2011
|
2010
|
(Decrease)
|
||||||||||
Domestic Company-owned restaurants
|
$ | 10,883 | $ | 11,445 | $ | (562 | ) | |||||
Domestic commissaries
|
9,554 | 7,148 | 2,406 | |||||||||
North America Franchising*
|
18,009 | 16,351 | 1,658 | |||||||||
International *
|
(816 | ) | (1,532 | ) | 716 | |||||||
All others
|
(378 | ) | 949 | (1,327 | ) | |||||||
Unallocated corporate expenses
|
(9,769 | ) | (10,830 | ) | 1,061 | |||||||
Elimination of intersegment profits
|
(703 | ) | (87 | ) | (616 | ) | ||||||
Income before income taxes, excluding variable interest entities
|
26,780 | 23,444 | 3,336 | |||||||||
BIBP, a variable interest entity
|
- | 3,485 | (3,485 | ) | ||||||||
Total income before income taxes
|
26,780 | 26,929 | (149 | ) | ||||||||
Income attributable to noncontrolling interests
|
(1,122 | ) | (1,089 | ) | (33 | ) | ||||||
Total income before income taxes, net of noncontrolling interests
|
$ | 25,658 | $ | 25,840 | $ | (182 | ) |
|
·
|
Domestic Company-owned Restaurant Segment. Domestic company-owned restaurants’ operating income was $10.9 million in the first quarter of 2011 as compared to $11.5 million in the comparable 2010 period. The decrease of approximately $600,000 in the first quarter of 2011 was primarily due to increased commodity and advertising costs. The increased costs were partially offset by the profits from higher comparable sales, which were driven primarily by higher transaction levels slightly offset by a lower average ticket price.
|
|
·
|
Domestic Commissary Segment. Domestic commissaries’ operating income increased approximately $2.4 million for first quarter primarily due to increased sales volumes, partially offset by an increase in distribution costs due to higher volumes and fuel prices.
|
|
·
|
North America Franchising Segment. North America Franchising operating income increased approximately $1.7 million to $18.0 million for the first quarter of 2011, as compared to the comparable 2010 period. The increase was due to the previously mentioned royalty revenue increases, partially offset by the royalty rebates described above.
|
|
·
|
International Segment. The operating loss during the first quarter of 2011 for the international segment was approximately $800,000 as compared to a loss of $1.5 million in the first quarter of 2010. The improvement of approximately $700,000 in the operating results was primarily due to increased royalties due to growth in the number of units and the 5.6% increase in comparable sales. Additionally, the prior year results included start-up costs associated with our Company-owned commissary in the United Kingdom that opened during 2010.
|
|
·
|
All Others Segment. The “All others” reporting segment reported a loss of approximately $400,000 in 2011 as compared to income of approximately $900,000 in 2010. The decrease of $1.3 million was primarily due to a decline in the operating results of Preferred Marketing Solutions and our online operations (“eCommerce”). The Preferred Marketing Solutions decrease was due to the previously noted reduction in sales. Our eCommerce operations had both lower revenues, due to a reduction in the online ordering fee charged to domestic franchised restaurants (the fee was reduced by 0.5% in 2011 as part of the National Marketing Fund Agreement), and an increase in infrastructure and support costs attributable to the new online ordering system introduced in the fourth quarter of 2010.
|
|
·
|
Unallocated Corporate Segment. Unallocated corporate expenses decreased approximately $1.1 million for the first quarter of 2011 as compared to the corresponding quarter in 2010. The components of unallocated corporate expenses were as follows (in thousands):
|
Three Months Ended
|
||||||||||||
March 27,
|
March 28,
|
Increase
|
||||||||||
2011
|
2010
|
(decrease)
|
||||||||||
General and administrative (a)
|
$ | 7,385 | $ | 6,655 | $ | 730 | ||||||
Net interest (b)
|
431 | 904 | (473 | ) | ||||||||
Depreciation
|
2,178 | 2,165 | 13 | |||||||||
Franchise support initiatives (c)
|
- | 1,250 | (1,250 | ) | ||||||||
Provision for uncollectible accounts
|
||||||||||||
and notes receivable
|
32 | 315 | (283 | ) | ||||||||
Other income
|
(257 | ) | (459 | ) | 202 | |||||||
Total unallocated corporate expenses
|
$ | 9,769 | $ | 10,830 | $ | (1,061 | ) |
|
(a)
|
Unallocated general and administrative costs increased primarily due to increased travel costs.
|
|
(b)
|
The decrease in net interest expense reflects the decrease in our average outstanding debt balance and lower interest rates as our two interest rate swap agreements expired in January 2011.
|
|
(c)
|
In 2010, franchise support initiatives primarily consist of discretionary contributions to the national marketing fund and other local advertising cooperatives. We have not made any discretionary contributions during 2011 and have instead offered various incentives that can be earned in connection with the National Marketing Fund Agreement. The financial impact of such incentives is reflected in the North America Franchising segment.
|
Three Months Ended
|
||||||||||||||||
March 27, 2011
|
March 28, 2010
|
|||||||||||||||
Company
|
Franchised
|
Company
|
Franchised
|
|||||||||||||
Total domestic units (end of period)
|
592 | 2,371 | 591 | 2,252 | ||||||||||||
Equivalent units
|
586 | 2,293 | 585 | 2,191 | ||||||||||||
Comparable sales base units
|
578 | 2,104 | 575 | 2,071 | ||||||||||||
Comparable sales base percentage
|
98.6 | % | 91.8 | % | 98.3 | % | 94.5 | % | ||||||||
Average weekly sales - comparable units
|
$ | 18,295 | $ | 15,426 | $ | 17,162 | $ | 14,543 | ||||||||
Average weekly sales - total non-comparable units
|
$ | 11,476 | $ | 11,817 | $ | 10,791 | $ | 11,288 | ||||||||
Average weekly sales - all units
|
$ | 18,201 | $ | 15,128 | $ | 17,056 | $ | 14,365 | ||||||||
Note: Franchised data for the three months ended March 28, 2010 has been reclassified to include 58 units in Hawaii, Alaska and Canada. These units were previously reported in our international business segment.
|
|
·
|
Cost of sales was 1.5% higher for the first quarter of 2011, as compared to the first quarter of 2010, due to the impact of higher commodities costs, principally cheese, wheat and certain meats.
|
|
·
|
Salaries and benefits were 0.2% lower as a percentage of sales in the first quarter of 2011, compared to the first quarter of 2010.
|
|
·
|
Advertising and related costs as a percentage of sales were 0.4% higher in the first quarter of 2011 as compared to the first quarter of 2010. The increase in advertising was due to an increase in local store marketing activities.
|
|
·
|
Occupancy costs and other operating costs, on a combined basis, as a percentage of sales, were 20.1% for both the first quarter of 2011 and 2010.
|
March 27,
|
March 28,
|
Increase
|
||||||||||
2011
|
2010
|
(Decrease)
|
||||||||||
Disposition and valuation-related costs
|
$ | 185 | $ | 308 | $ | (123 | ) | |||||
Provision for uncollectible accounts and notes receivable
|
82 | 370 | (288 | ) | ||||||||
Pre-opening costs
|
27 | 111 | (84 | ) | ||||||||
Franchise support initiatives (a)
|
- | 1,250 | (1,250 | ) | ||||||||
Franchise incentives (b)
|
272 | 140 | 132 | |||||||||
Other
|
215 | 111 | 104 | |||||||||
Total other general expenses
|
$ | 781 | $ | 2,290 | $ | (1,509 | ) |
(a)
|
Primarily consists of discretionary contributions to the national marketing fund and other local advertising cooperatives. We have not made any discretionary contributions during 2011 and have instead offered various incentives that can be earned in connection with the National Marketing Fund Agreement.
|
(b)
|
Includes incentives provided to franchisees for opening new domestic restaurants.
|
March 27,
|
December 26,
|
|||||||
2011
|
2010
|
|||||||
Revolving line of credit
|
$ | 48,000 | $ | 99,000 | ||||
Other
|
8 | 17 | ||||||
Total long-term debt
|
$ | 48,008 | $ | 99,017 |
Actual Ratio for the
|
|||
Quarter Ended
|
|||
Permitted Ratio
|
March 27, 2011
|
||
Leverage Ratio
|
Not to exceed 2.5 to 1.0
|
0.5 to 1.0
|
|
Interest Coverage Ratio
|
Not less than 3.5 to 1.0
|
4.7 to 1.0
|
Three Months Ended
|
||||||||
March 27,
|
March 28,
|
|||||||
2011
|
2010
|
|||||||
Net cash provided by operating activities
|
$ | 25,565 | $ | 26,013 | ||||
Pre-tax income from BIBP cheese purchasing entity
|
- | (3,485 | ) | |||||
Purchase of property and equipment
|
(4,823 | ) | (9,125 | ) | ||||
Free cash flow (a)
|
$ | 20,742 | $ | 13,403 |
|
(a)
|
Free cash flow is defined as net cash provided by operating activities (from the consolidated statements of cash flows) excluding the impact of BIBP, less the purchase of property and equipment. 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 our performance than the Company’s GAAP measures.
|
Floating
Rate Debt
|
Fixed
Rates
|
||
The first interest rate swap agreement:
|
|||
January 16, 2007 to January 15, 2009
|
$60 million
|
4.98%
|
|
January 15, 2009 to January 15, 2011
|
$50 million
|
4.98%
|
|
The second interest rate swap agreement:
|
|||
January 31, 2009 to January 31, 2011
|
$50 million
|
3.74%
|
2011
|
2010
|
|||||||||||
Projected
|
BIBP
|
Actual
|
||||||||||
Block Price
|
Block Price
|
Block Price
|
||||||||||
Quarter 1
|
$ | 1.695 | $ | 1.595 | $ | 1.431 | ||||||
Quarter 2
|
1.697 | * | 1.529 | 1.407 | ||||||||
Quarter 3
|
1.816 | * | 1.572 | 1.597 | ||||||||
Quarter 4
|
1.755 | * | 1.645 | 1.578 | ||||||||
Full Year
|
$ | 1.741 | * | $ | 1.585 | $ | 1.503 | |||||
*amounts are estimates based on futures prices
|
Actual
|
||||
2010
|
||||
Quarter 1
|
$ | 3,485 | ||
Quarter 2
|
2,678 | |||
Quarter 3
|
(658 | ) | ||
Quarter 4 (a)
|
15,449 | |||
Full Year
|
$ | 20,954 |
(a)
|
Includes a reduction in BIBP's cost of sales of $14.2 million at 2010 fiscal year-end associated with PJFS's agreement to pay to BIBP for past cheese purchases an amount equal to its accumulated deficit.
|
Total Number
|
Maximum Dollar
|
||||||||||||||||
Total
|
Average
|
of Shares
|
Value of Shares
|
||||||||||||||
Number
|
Price
|
Purchased as Part of
|
that May Yet Be
|
||||||||||||||
of Shares
|
Paid per
|
Publicly Announced
|
Purchased Under the
|
||||||||||||||
Fiscal Period
|
Purchased
|
Share
|
Plans or Programs
|
Plans or Programs
|
|||||||||||||
12/27/2010 - 01/23/2011
|
66 | $ | 27.93 | 45,455 | $ | 35,030 | |||||||||||
01/24/2011 - 02/20/2011
|
- | - | * | 45,455 | $ | 35,030 | |||||||||||
02/21/2011 - 03/27/2011
|
77 | $ | 29.57 | 45,532 | $ | 32,742 | |||||||||||
*There were no share repurchases during this period.
|
Exhibit
Number
|
Description |
10.1
|
Agreement and Release between Papa John’s International, Inc. and J. David Flanery dated March 25, 2011. Exhibit 10.1 to our report on Form 8-K/A filed on March 28, 2011 is incorporated herein by reference.
|
31.1
|
Certification of Chief Executive Officer Pursuant to Exchange Act Rule 13a-15(e), As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
31.2
|
Certification of Chief Financial Officer Pursuant to Exchange Act Rule 13a-15(e), As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
32.1
|
Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
32.2
|
Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
101
|
Financial statements from the quarterly report on Form 10-Q of Papa John’s International, Inc. for the quarter ended March 27, 2011, filed on May 3, 2011, formatted in XBRL: (i) the Consolidated Statements of Income, (ii) the Condensed Consolidated Balance Sheets, (iii) the Consolidated Statements of Stockholders’ Equity, (iv) the Consolidated Statements of Cash Flows and (v) the Notes to Condensed Consolidated Financial Statements tagged as blocks of text.
|
PAPA JOHN’S INTERNATIONAL, INC.
|
|||
(Registrant)
|
|||
Date: May 3, 2011
|
|
/s/ Lance F. Tucker | |
Lance F. Tucker
|
|||
Senior Vice President and
|
|||
Chief Financial Officer
|
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Papa John’s International, Inc.;
|
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date: May 3, 2011
|
|
/s/ John H. Schnatter | |
John H. Schnatter
|
|||
Founder, Chairman and
|
|||
Chief Executive Officer
|
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Papa John’s International, Inc.;
|
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date: May 3, 2011
|
|
/s/ Lance F. Tucker | |
Lance F. Tucker
|
|||
Senior Vice President and Chief Financial Officer | |||
|
|
1.
|
The Report on Form 10-Q of the Company for the quarterly period ended March 27, 2011 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and
|
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Date: May 3, 2011
|
|
/s/ John H. Schnatter | |
John H. Schnatter
|
|||
Founder, Chairman and
|
|||
Chief Executive Officer |
|
1.
|
The Report on Form 10-Q of the Company for the quarterly period ended March 27, 2011 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and
|
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Date: May 3, 2011
|
|
/s/ Lance F. Tucker | |
Lance F. Tucker
|
|||
Senior Vice President and Chief Financial Officer
|
|||