Published on August 4, 2009
Exhibit
99.1
For
more information, contact:
David
Flanery
Chief
Financial Officer
502-261-4753
PAPA
JOHN’S ANNOUNCES
SECOND
QUARTER EARNINGS
Company
Reports Positive System-wide Domestic
Comparable
Sales in Challenging Environment
Highlights
|
|
·
|
Second quarter earnings per
diluted share of $0.51 in 2009 vs. $0.27 in
2008
|
|
|
·
|
Comparable second quarter
earnings per diluted share, excluding the consolidation of BIBP, were
$0.36 in 2009 vs. $0.41 in 2008, a decrease of
12.2%
|
|
|
·
|
Domestic system-wide comparable
sales increase of 0.1% for the
quarter
|
|
|
·
|
14 net Papa John’s worldwide
unit openings during the
quarter
|
|
|
·
|
Lower end of earnings guidance
range for 2009 raised to a range of $1.38 to $1.44 per diluted share,
excluding the impact of consolidating
BIBP
|
Louisville, Kentucky (August 4, 2009) –
Papa John’s International, Inc. (NASDAQ: PZZA) today announced revenues of
$276.6 million for the second quarter of 2009, representing a decrease of 2.4%
from revenues of $283.4 million for the comparable period in 2008. Net income
for the second quarter of 2009 was $14.2 million, or $0.51 per diluted share
(including after-tax income of $4.2 million, or $0.15 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 2008 second quarter net income of $7.6 million, or $0.27 per diluted share
(including a net loss of approximately $4.1 million, or $0.14 per diluted share,
from the consolidation of BIBP).
Revenues were $561.6 million for the
six months ended June 28, 2009, representing a decrease of 1.9% from revenues of
$572.4 million for the same period in 2008. Net income for the six months ended
June 28, 2009 was $32.0 million, or $1.15 per diluted share (including after-tax
income of $10.0 million, or $0.36 per diluted share, from the consolidation of
BIBP), compared to net income of $16.3 million, or $0.57 per diluted share, for
the comparable period of 2008 (including a net loss of $9.3 million, or $0.32
per diluted share, from the consolidation of BIBP and a net charge of
approximately $700,000, or $0.02 per diluted share, related to restaurant
impairment and disposition losses).
“We are pleased with our first half
results, especially given the difficult economy and challenging competitive
environment,” said Papa John’s Founder and chief executive officer, John
Schnatter. “The investments we have made in our system this year are continuing
to drive positive results for both our company-owned and franchised restaurants.
Our strong cash flow and conservative balance sheet provide us the flexibility
to continue to invest in our business even in the most challenging of
times.”
Non-GAAP
Measures
Certain components of the financial
information we present in this press release that exclude the impact of the
consolidation of BIBP and restaurant impairment and disposition losses are not
measures that are defined in accordance with accounting principles generally
accepted in the United States (“GAAP”). These non-GAAP measures should not be
construed as a substitute for or a better indicator of the company’s performance
than the company’s GAAP measures. Management believes the financial information
excluding the impact of the above-mentioned items is important for purposes of
comparison to prior periods and development of future projections and earnings
growth prospects. Management analyzes the company’s business performance
and trends excluding the impact of these items because they are not indicative
of the principal operating activities of the company. In addition, annual cash
bonuses, and certain long-term incentive programs for various levels of
management, are based on financial measures that exclude the impact of the
consolidation of BIBP. The presentation of the non-GAAP measures in this press
release is made alongside the most directly comparable GAAP
measures.
2
The
company has provided the following table to reconcile the financial results we
present in this press release excluding the impact of the above-mentioned items
to our GAAP financial measures for the three- and six-month periods ended June
28, 2009 and June 29, 2008.
|
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
|
June
28,
|
June
29,
|
June
28,
|
June
29,
|
|||||||||||||
|
(In
thousands, except per share amounts)
|
2009
|
2008
|
2009
|
2008
|
||||||||||||
|
Pre-tax
income, net of noncontrolling interests, as reported
|
$ | 22,214 | $ | 12,186 | $ | 50,355 | $ | 25,787 | ||||||||
|
(Gain)
loss from BIBP cheese purchasing entity
|
(6,854 | ) | 6,302 | (15,879 | ) | 14,253 | ||||||||||
|
Restaurant
impairment and disposition losses (a)
|
- | - | - | 1,143 | ||||||||||||
|
Pre-tax
income, net of noncontrolling interests,
|
||||||||||||||||
|
excluding
noted items
|
$ | 15,360 | $ | 18,488 | $ | 34,476 | $ | 41,183 | ||||||||
|
Net
income, as reported
|
$ | 14,177 | $ | 7,648 | $ | 32,016 | $ | 16,273 | ||||||||
|
(Gain)
loss from BIBP cheese purchasing entity
|
(4,179 | ) | 4,096 | (10,045 | ) | 9,264 | ||||||||||
|
Restaurant
impairment and disposition losses
|
- | - | - | 687 | ||||||||||||
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Net
income, excluding noted items
|
$ | 9,998 | $ | 11,744 | $ | 21,971 | $ | 26,224 | ||||||||
|
Earnings
per diluted share, as reported
|
$ | 0.51 | $ | 0.27 | $ | 1.15 | $ | 0.57 | ||||||||
|
(Gain)
loss from BIBP cheese purchasing entity
|
(0.15 | ) | 0.14 | (0.36 | ) | 0.32 | ||||||||||
|
Restaurant
impairment and disposition losses
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- | - | - | 0.02 | ||||||||||||
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Earnings
per diluted share, excluding noted items
|
$ | 0.36 | $ | 0.41 | $ | 0.79 | $ | 0.91 | ||||||||
|
Cash
flow from operations, as reported
|
$ | 54,579 | $ | 29,252 | ||||||||||||
|
BIBP
cheese purchasing entity
|
(15,879 | ) | 14,253 | |||||||||||||
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Cash
flow from operations, excluding BIBP
|
$ | 38,700 | $ | 43,505 | ||||||||||||
(a)
Amounts were not significant in 2009, or for the second quarter of
2008.
3
Revenues
Comparison
Consolidated revenues were $276.6
million for the second quarter of 2009, a decrease of $6.8 million, or 2.4%,
over the corresponding 2008 period. The decrease in revenues was principally due
to the following:
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·
|
Domestic
company-owned restaurant sales decreased $8.8 million, reflecting the sale
of 62 company-owned restaurants to franchisees during the fourth quarter
of 2008.
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|
|
·
|
Domestic
commissary sales decreased $4.9 million due to decreases in the prices of
certain commodities, primarily
cheese.
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|
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·
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Other
sales decreased $2.5 million primarily due to a decline in sales at our
print and promotions subsidiary, Preferred Marketing
Solutions.
|
|
|
·
|
Variable
interest entities restaurant sales increased $9.0 million due to the
consolidation of two additional franchise entities in the second quarter
of 2009, as compared to the corresponding 2008
period.
|
For the
six months ended June 28, 2009, revenues decreased $10.8 million, or 1.9%,
principally due to the same reasons as those mentioned above.
Operating Results and Cash
Flow
Operating
Results
Our
pre-tax income, net of noncontrolling interests, for the second quarter of 2009
was $22.2 million, compared to $12.2 million for the corresponding period in
2008. For the six months ended June 28, 2009, pre-tax income, net of
noncontrolling interests, was $50.4 million compared to $25.8 million for the
corresponding period of 2008. Excluding the impact of the noted items in the
previous table, second quarter 2009 pre-tax income, net of noncontrolling
interests, was $15.4 million, a decrease of $3.1 million or 16.9%, from the 2008
comparable results of $18.5 million, and pre-tax income, net of noncontrolling
interests and excluding the impact of the noted items in the previous table, for
the six months ended June 28, 2009 was $34.5 million, a decrease of $6.7
million, or 16.3%, from the 2008 comparable results of $41.2 million. An
analysis of the changes in pre-tax income, net of noncontrolling interests, for
the second quarter and six months ended June 28, 2009, respectively (excluding
the consolidation of BIBP), is summarized as follows (analyzed on a segment
basis — see the Summary Financial Data table that follows for the reconciliation
of segment income to consolidated income below):
4
|
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·
|
Domestic Company-owned
Restaurant Segment. Domestic company-owned restaurants’ operating
income increased $3.0 million and $5.6 million for the three- and
six-month periods ended June 28, 2009, respectively, comprised of the
following:
|
|
Three Months Ended
|
Six Months Ended
|
|||||||||||||||||||||||
|
June
28,
|
June
29,
|
Increase
|
June
28,
|
June
29,
|
Increase
|
|||||||||||||||||||
|
2009
|
2008
|
(Decrease)
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2009
|
2008
|
(Decrease)
|
|||||||||||||||||||
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Recurring
operations
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$ | 10,152 | $ | 7,157 | $ | 2,995 | $ | 20,543 | $ | 16,098 | $ | 4,445 | ||||||||||||
|
Impairment
and disposition losses
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- | - | - | - | (1,143 | ) | 1,143 | |||||||||||||||||
|
Total
segment operating income
|
$ | 10,152 | $ | 7,157 | $ | 2,995 | $ | 20,543 | $ | 14,955 | $ | 5,588 | ||||||||||||
The
increases of $3.0 million and $4.4 million for the three- and six-month periods
ended June 28, 2009, respectively, in domestic company-owned restaurant income
from recurring operations were primarily due to an improvement in operating
margin as a result of pricing and product mix profitability, lower commodity
costs and the sale of 62 restaurants in late 2008, which had a higher labor cost
as a percentage of sales.
Restaurant
operating margin on an external basis was 22.9% for the second quarter of 2009
compared to 18.3% for the comparable 2008 period and 23.2% for the first six
months of 2009, compared to 18.6% for the comparable 2008
period. Excluding the impact of the consolidation of BIBP, restaurant
operating margin was 21.6% for the second quarter of 2009, compared to 19.3% in
the prior comparable quarter and increased to 21.7% in the first six months of
2009 from 19.8% in the comparable 2008 period.
The
restaurant impairment and disposition losses recorded in the first six months of
2008 primarily relate to the loss on the sale of 17 restaurants in one market
(the sale was completed during the fourth quarter of 2008).
|
|
·
|
Domestic Commissary Segment.
Domestic commissaries’ operating income decreased approximately
$100,000 for the three-month period ended June 28, 2009 and increased
approximately $800,000 for the six-month period ended June 28, 2009, as
compared to the corresponding 2008 periods. The decrease in operating
income for the three-month period was due to management transition costs
of approximately $700,000, partially offset by an improvement in operating
margin primarily resulting from lower fuel costs. The operating margin
improvement for the six-month period was primarily due to lower fuel
costs, partially offset by the above mentioned management transition
costs. Our commissary operations have passed along to domestic restaurants
the benefit of lower commodity costs during the first six months of 2009,
which is expected to continue for the remainder of
2009.
|
5
|
|
·
|
Domestic Franchising Segment.
Domestic franchise sales for the second quarter of 2009 increased
4.3% to $388.8 million from $372.6 million for the same period in 2008 and
increased 4.3% to $786.5 million for the six months ended June 28, 2009,
from $754.4 million for the same period in 2008. The increases were
primarily due to increases of 3.8% and 3.7% in equivalent units primarily
resulting from the purchase of 62 restaurants from the Company during the
fourth quarter of 2008. Domestic franchising operating income decreased
approximately $300,000 to $12.8 million for the three months ended June
28, 2009, from $13.1 million in the prior comparable period and decreased
$1.1 million to $26.5 million for the six month period ended June 28,
2009, from $27.6 million in the prior comparable period. The decreases in
operating income were primarily due to lower franchise and development
fees as there were 13 and 21 fewer domestic franchise unit openings in the
second quarter and first six months of 2009, respectively, as compared to
the prior year periods. Additionally, the average fee per unit opening was
lower in 2009 due to various incentive programs in place this
year. Finally, the first half of 2008 included the collection
of approximately $500,000 in franchise renewal fees associated with the
domestic franchise renewal program.
|
As
previously announced, during 2009 the company implemented a 25th Anniversary
development incentive program that provides for no franchise fee, no royalty for
12 months and the opportunity for a $10,000 early opening award payment, if
certain conditions are met related to new domestic unit openings.
|
|
·
|
International Segment.
The international segment reported operating losses of
approximately $800,000 and $1.6 million for the three and six months ended
June 28, 2009, respectively, compared to losses of $1.5 million and $3.3
million, respectively, in the same periods in 2008. The improvement in the
operating results reflects leverage on the international organizational
structure from increased revenues due to growth in the number of units and
unit volumes.
|
|
|
·
|
All Others Segment.
Operating income for the “All others” reporting segment was
approximately $600,000 in the second quarter of 2009, or a decrease of
$1.4 million from the corresponding 2008 period and $1.0 million for the
six months ended June 28, 2009, or a decrease of $3.5 million from the
corresponding 2008 period. The decreases occurred primarily in our online
ordering system business ($500,000 and $1.9 million decline from 2008 in
operating income for the three- and six-month periods, respectively) and
our print and promotions subsidiary, Preferred Marketing Solutions
($500,000 and $1.2 million decline from 2008 in operating income for the
three- and six-month periods, respectively). The decline in the online
ordering system business reflects a reduction in the online fee percentage
in accordance with our previously disclosed agreement with the domestic
franchise system to operate the business at a break-even level beginning
in 2009. The decline in profitability in the print and
promotions business is due to lower sales in 2009, as compared to 2008,
reflecting the deterioration of the U.S. economic
environment.
|
6
|
|
·
|
Unallocated
Corporate Segment. Unallocated corporate expenses
increased approximately $4.5 million and $8.3 million for the three- and
six-month periods ended June 28, 2009, respectively, as compared to the
corresponding periods in the prior year. The components of unallocated
corporate expenses were as follows (in
thousands):
|
|
Three Months Ended
|
Six Months Ended
|
|||||||||||||||||||||||
|
June
28,
|
June
29,
|
Increase
|
June
28,
|
June
29,
|
Increase
|
|||||||||||||||||||
|
2009
|
2008
|
(decrease)
|
2009
|
2008
|
(decrease)
|
|||||||||||||||||||
|
General
and administrative (a)
|
$ | 7,896 | $ | 6,048 | $ | 1,848 | $ | 14,692 | $ | 12,196 | $ | 2,496 | ||||||||||||
|
Net
interest
|
1,080 | 1,186 | (106 | ) | 2,116 | 2,358 | (242 | ) | ||||||||||||||||
|
Depreciation
|
2,118 | 1,940 | 178 | 4,245 | 3,737 | 508 | ||||||||||||||||||
|
Franchise
support initiatives (b)
|
2,168 | 75 | 2,093 | 4,415 | 150 | 4,265 | ||||||||||||||||||
|
Provisions
for uncollectible accounts and notes receivable (c)
|
449 | 106 | 343 | 1,512 | 365 | 1,147 | ||||||||||||||||||
|
Other
income
|
(38 | ) | (211 | ) | 173 | (282 | ) | (443 | ) | 161 | ||||||||||||||
|
Total
unallocated corporate expenses
|
$ | 13,673 | $ | 9,144 | $ | 4,529 | $ | 26,698 | $ | 18,363 | $ | 8,335 | ||||||||||||
|
|
(a)
|
The
increase in general and administrative expenses for the three months ended
June 28, 2009, was primarily due to the settlement of a litigation issue
(approximately $800,000 in the second quarter of 2009), management
transition costs (including recruiting fees) and increased employee
benefit costs. The increase for the six-month period ended June 28, 2009
was principally due to the same
reasons.
|
|
|
(b)
|
Franchise
support initiatives primarily consist of discretionary contributions to
the national marketing fund and other local advertising
cooperatives.
|
|
|
(c)
|
The
increases in the provisions for uncollectible accounts and notes
receivable were due to our evaluation of the collectibility of certain
specific receivables, primarily non-franchise third
parties.
|
Our
effective income tax rate was 34.5% and 35.0%, respectively, for the three- and
six-month periods ended June 28, 2009, as compared to 35.3% for both the
corresponding 2008 periods (32.6% and 34.3%, respectively, excluding BIBP for
the three- and six-month periods in 2009 and 35.2% excluding BIBP for both the
three- and six-month periods in 2008).
Cash
Flow
Cash flow
from operations was $54.6 million for the first six months of 2009 as compared
to $29.3 million for the comparable period in 2008. The consolidation of BIBP
increased cash flow from operations by approximately $15.9 million in the first
six months of 2009 and decreased cash flow from operations by approximately
$14.3 million in the first six months of 2008. Excluding the impact of the
consolidation of BIBP, cash flow from operations was $38.7 million in 2009, as
compared to $43.5 million in the comparable period in 2008. The $4.8 million
decrease, excluding the consolidation of BIBP, was primarily due to a decrease
in net income.
7
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 June
28, 2009.
Domestic Comparable Sales
and Unit Count
Domestic
system-wide comparable sales for the second quarter of 2009 increased 0.1%
(comprised of a 0.4% decrease at company-owned restaurants and a 0.2% increase
at franchised restaurants). Domestic system-wide comparable sales for the six
months ended June 28, 2009 increased 0.2% (comprised of flat sales at
company-owned restaurants and a 0.2% increase at franchised restaurants). We
estimate that the timing of the Easter holiday weekend had a negative impact of
0.3% on the second quarter results (and an estimated beneficial 0.3% impact on
the first quarter 2009 results). The comparable sales percentage represents the
change in year-over-year sales for the same base of restaurants for the same
calendar period.
During
the second quarter of 2009, 11 domestic franchised restaurants were opened and
18 domestic restaurants were closed (one company-owned and 17 franchised).
During the first six months of 2009, we opened 28 domestic restaurants (three
company-owned and 25 franchised) and closed 39 restaurants (five company-owned
and 34 franchised). Our total domestic development pipeline as of June 28, 2009
included approximately 200 restaurants scheduled to open over the next ten
years.
At June
28, 2009, there were 3,418 domestic and international Papa John’s restaurants
(612 company-owned and 2,806 franchised) operating in all 50 states and 29
countries. The company-owned unit count includes 126 restaurants operated in
majority-owned domestic joint venture arrangements, the operating results of
which are fully consolidated into the company’s results.
International
Update
Highlights:
|
|
·
|
During
the second quarter of 2009, 29 international restaurants were opened (one
company-owned and 28 franchised) while eight international franchised
restaurants were closed. On a year-to-date basis, 63 international
restaurants were opened (one company-owned and 62 franchised) while 14
international restaurants were closed (one company-owned and 13
franchised).
|
8
|
|
·
|
International
franchise sales increased approximately 16% to $63.9 million in the second
quarter of 2009, from $55.3 million in the comparable period in
2008 and increased approximately 13% to $122.0 million for the six months
ended June 28, 2009, from $107.7 million in the comparable period in 2008.
Excluding the negative impact of foreign exchange rates, the increases in
the second quarter and first six months of 2009 would have approximated
32% and 30% respectively.
|
As of
June 28, 2009, the company had a total of 637 restaurants operating
internationally (23 company-owned and 614 franchised), of which 207 were located
in Korea and China and 135 were located in the United Kingdom and Ireland. Our
total international development pipeline as of June 28, 2009 included
approximately 1,100 restaurants scheduled to open over the next ten
years.
Acquisition / Disposition
Activity
As
previously disclosed, at the end of April 2009 we completed the sale of ten
company-owned restaurants in Albuquerque, New Mexico, with lower than average
sales volumes and geographically isolated from other company-owned operations.
The sales price of $1.1 million consisted of a cash payment of approximately
$600,000 and notes financed by Papa John’s to the purchasers, who are current
Papa John’s franchisees, for $500,000. The gain recognized upon completion of
the sale was not significant.
During
the second quarter of 2009, we acquired 11 franchised Papa John’s restaurants in
West Palm Beach Florida, which were adjacent to other company-owned restaurants,
for a purchase price of $2.8 million, which included the cancellation of a $2.3
million bridge loan issued in March 2009 and a cash payment of $500,000. We
recorded goodwill of $1.5 million associated with this transaction.
We
currently have no plans for any additional significant acquisitions or
dispositions during the remainder of 2009.
Share Repurchase
Activity
We
repurchased 275,000 shares of our common stock at an average price of $18.05 per
share, or a total of $5.0 million for the three months ended March 29, 2009. We
did not repurchase any shares of our common stock in the three months ended June
28, 2009. A total of 477,000 shares of common stock were issued upon the
exercise of stock options during the first six months of 2009. Under our current
authorization, the company had $57.3 million remaining available for the
repurchase of common stock as of June 28, 2009.
9
The
Company utilizes a written trading plan under Rule 10b5-1 under the
Securities Exchange Act of 1934, as amended, to facilitate the repurchase of
shares of our common stock under this share repurchase program. There can be no
assurance that we will repurchase shares of our common stock either through our
Rule 10b5-1 trading plan or otherwise. We may terminate the
Rule 10b5-1 trading plan at any time.
There
were 28.0 million diluted weighted average shares outstanding for the second
quarter of 2009, as compared to 28.7 million for the same period in 2008, a 2.4%
decrease. Approximately 28.1 million actual shares of the company’s common stock
were outstanding as of June 28, 2009.
The
company’s share repurchase activity had a $0.01 impact on earnings per diluted
share, excluding the impact of the consolidation of BIBP, in both the three and
six months ended June 28, 2009.
2009 Earnings Guidance Range
Narrowed
The
company revised its previously announced 2009 earnings per diluted share
guidance from a range of $1.36 to $1.44 to a range of $1.38 to $1.44 for the
year. The projected earnings guidance excludes any impact from the consolidation
of the results of BIBP. The projected earnings guidance includes $0.30 to $0.35
per diluted share unfavorable impact of 2009 initiatives, including the impact
of the franchise support initiatives, management transition costs and certain
additional initiatives focused on enhancing quality and driving alternative
ordering channels. The comparable base earnings results for 2008 were $1.68 per
diluted share.
We
reiterate our expectations for full-year net worldwide unit growth of 100 to 140
units, with domestic net openings expected to exceed initial assumptions and
international net openings expected to fall short of initial assumptions. We
revise our previous expectations for full-year domestic system-wide comparable
sales from a range of flat to negative 2% to a range of flat to negative
1%.
Our
guidance reflects continued concern over the uncertainty of the economic
environment, including consumer spending, and considers the impact of the
federal and state minimum wage increases that became effective in July. In
addition, we plan to continue to assist our domestic franchisees by maintaining
a reduced commissary operating margin during the last six months of
2009.
Forward-Looking
Statements
Certain
matters discussed in this press release and other company communications
constitute forward-looking statements within the meaning of the federal
securities laws. Generally, the use of words such as “expect,” “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 statements
may relate to projections concerning revenue, earnings 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.
10
The
risks, uncertainties and assumptions that are involved in our forward-looking
statements include, but are not limited to: 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 and
resulting impact on consumer buying habits; changes in consumer preferences;
increases in or sustained high costs of food ingredients and other commodities,
paper, utilities, fuel, employee compensation and benefits, insurance and
similar costs; the ability of the company to pass along such increases in or
sustained high costs to franchisees or consumers; the company is contingently
liable for the payment of certain lease arrangements, approximating $6.2
million, involving our former Perfect Pizza operations that were sold in March
2006; the impact of legal claims and current proposed legislation impacting our
business; and increased risks associated with our international operations.
These and other risk factors are discussed in detail in “Part I. Item 1A. - Risk
Factors” of the Annual Report on Form 10-K for the fiscal year ended December
28, 2008 and “Part II, Item 1A. - Risk Factors” of the Quarterly Report on Form
10-Q for the fiscal quarter ended March 29, 2009. We undertake no obligation to
update publicly any forward-looking statements, whether as a result of future
events, new information or otherwise.
Conference
Call
A
conference call is scheduled for August 5, 2009 at 10:00 a.m. Eastern Daylight
Savings Time 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 95826733) for participation
in the question and answer session. International participants may dial
706-679-8452 (pass code 95826733).
The
conference call will be available for replay, including downloadable podcast,
beginning August 5, 2009, at approximately noon Eastern Daylight Savings Time,
through August 12, 2009, at midnight Eastern Daylight Savings Time. The replay
can be accessed from the company’s web page at www.papajohns.com or
by dialing 800-642-1687 (pass code 95826733). International participants may
dial 706-645-9291 (pass code 95826733).
11
Summary
Financial Data
Papa
John's International, Inc.
(Unaudited)
|
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
|
June
28,
|
June
29,
|
June
28,
|
June
29,
|
|||||||||||||
|
(In
thousands, except per share amounts)
|
2009
|
2008
|
2009
|
2008
|
||||||||||||
|
Revenues
|
$ | 276,637 | $ | 283,408 | $ | 561,609 | $ | 572,413 | ||||||||
|
Income
before income taxes, net of noncontrolling interests*
|
$ | 22,214 | $ | 12,186 | $ | 50,355 | $ | 25,787 | ||||||||
|
Net
income
|
$ | 14,177 | $ | 7,648 | $ | 32,016 | $ | 16,273 | ||||||||
|
Earnings
per share - assuming dilution
|
$ | 0.51 | $ | 0.27 | $ | 1.15 | $ | 0.57 | ||||||||
|
Weighted
average shares outstanding - assuming dilution
|
27,989 | 28,705 | 27,860 | 28,754 | ||||||||||||
|
EBITDA
(1)
|
$ | 31,691 | $ | 22,211 | $ | 69,071 | $ | 45,444 | ||||||||
*The
following is a summary of our income (loss) before income taxes, net of
noncontrolling interests (in thousands):
|
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
|
June
28,
|
June
29,
|
June
28,
|
June
29,
|
|||||||||||||
|
2009
|
2008
|
2009
|
2008
|
|||||||||||||
|
Domestic
company-owned restaurants
|
$ | 10,152 | $ | 7,157 | $ | 20,543 | $ | 14,955 | ||||||||
|
Domestic
commissaries
|
7,484 | 7,624 | 16,868 | 16,057 | ||||||||||||
|
Domestic
franchising
|
12,824 | 13,095 | 26,506 | 27,567 | ||||||||||||
|
International
|
(847 | ) | (1,520 | ) | (1,624 | ) | (3,259 | ) | ||||||||
|
All
others
|
613 | 1,993 | 1,014 | 4,518 | ||||||||||||
|
Unallocated
corporate expenses
|
(13,673 | ) | (9,144 | ) | (26,698 | ) | (18,363 | ) | ||||||||
|
Elimination
of intersegment profit
|
(101 | ) | (58 | ) | (116 | ) | (232 | ) | ||||||||
|
Income
before income taxes, excluding VIEs
|
16,452 | 19,147 | 36,493 | 41,243 | ||||||||||||
|
VIEs,
primarily BIBP (2)
|
6,854 | (6,302 | ) | 15,879 | (14,253 | ) | ||||||||||
|
Less:
noncontrolling interests
|
(1,092 | ) | (659 | ) | (2,017 | ) | (1,203 | ) | ||||||||
|
Total
income before income taxes, net of of noncontrolling
interests
|
$ | 22,214 | $ | 12,186 | $ | 50,355 | $ | 25,787 | ||||||||
12
Summary
Financial Data (continued)
Papa
John's International, Inc.
(Unaudited)
The
following is a reconciliation of EBITDA to net income (in
thousands):
|
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
|
June
28,
|
June
29,
|
June
28,
|
June
29,
|
|||||||||||||
|
2009
|
2008
|
2009
|
2008
|
|||||||||||||
|
EBITDA
(1)
|
$ | 31,691 | $ | 22,211 | $ | 69,071 | $ | 45,444 | ||||||||
|
Income
tax expense
|
(8,037 | ) | (4,538 | ) | (18,339 | ) | (9,514 | ) | ||||||||
|
Net
interest
|
(1,296 | ) | (1,621 | ) | (2,580 | ) | (3,247 | ) | ||||||||
|
Depreciation
and amortization
|
(8,181 | ) | (8,404 | ) | (16,136 | ) | (16,410 | ) | ||||||||
|
Net
income
|
$ | 14,177 | $ | 7,648 | $ | 32,016 | $ | 16,273 | ||||||||
|
(1)
|
Management
considers EBITDA to be a meaningful indicator of operating performance
from 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.
|
|
(2)
|
BIBP
generated operating income of approximately $6.9 million in the second
quarter of 2009, which was composed of income associated with cheese sold
to domestic company-owned and franchised restaurants of approximately $1.6
million and $5.5 million, respectively, partially offset by interest
expense on outstanding debt with a third-party bank and Papa John’s. For
the second quarter of 2008, BIBP reported an operating loss of $6.3
million, which was primarily composed of losses associated with cheese
sold to domestic company-owned and franchised restaurants of $1.4 million
and $4.4 million, respectively. The remainder of the loss was primarily
composed of interest expense on outstanding debt with a third-party bank
and Papa John’s.
|
BIBP
generated operating income of approximately $15.9 million for the six months
ended June 28, 2009, which was composed of income associated with cheese sold to
domestic company-owned and franchised restaurants of approximately $3.9 million
and $12.6 million, respectively, partially offset by interest expense on
outstanding debt with a third-party bank and Papa John’s. For the six months
ended June 29, 2008, BIBP reported an operating loss of $14.3 million, which was
composed of losses associated with cheese sold to domestic company-owned and
franchised restaurants of approximately $3.3 million and $9.9 million,
respectively. The remainder of the loss was due to interest expense on
outstanding debt with a third-party bank and Papa John’s.
* * * *
For more
information about the company, please visit www.papajohns.com.
13
|
Papa
John's International, Inc. and Subsidiaries
|
||||||||||||||||
|
Consolidated
Statements of Income
|
||||||||||||||||
|
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
|
June
28, 2009
|
June
29, 2008
|
June
28, 2009
|
June
29, 2008
|
|||||||||||||
|
(In
thousands, except per share amounts)
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
||||||||||||
|
Revenues:
|
||||||||||||||||
|
Domestic:
|
||||||||||||||||
|
Company-owned
restaurant sales
|
$ | 124,966 | $ | 133,815 | $ | 256,671 | $ | 272,670 | ||||||||
|
Variable
interest entities restaurant sales
|
11,223 | 2,239 | 16,894 | 4,279 | ||||||||||||
|
Franchise
royalties
|
14,664 | 14,759 | 30,025 | 30,204 | ||||||||||||
|
Franchise
and development fees
|
78 | 247 | 306 | 1,167 | ||||||||||||
|
Commissary
sales
|
101,444 | 106,321 | 209,360 | 212,368 | ||||||||||||
|
Other
sales
|
13,981 | 16,434 | 28,750 | 33,279 | ||||||||||||
|
International:
|
||||||||||||||||
|
Royalties
and franchise and development fees
|
3,388 | 3,108 | 6,623 | 6,128 | ||||||||||||
|
Restaurant
and commissary sales
|
6,893 | 6,485 | 12,980 | 12,318 | ||||||||||||
|
Total
revenues
|
276,637 | 283,408 | 561,609 | 572,413 | ||||||||||||
|
Costs
and expenses:
|
||||||||||||||||
|
Domestic
Company-owned restaurant expenses:
|
||||||||||||||||
|
Cost
of sales
|
23,893 | 30,803 | 49,794 | 62,375 | ||||||||||||
|
Salaries
and benefits
|
36,157 | 40,050 | 74,360 | 81,610 | ||||||||||||
|
Advertising
and related costs
|
11,376 | 11,913 | 22,649 | 24,610 | ||||||||||||
|
Occupancy
costs
|
7,722 | 8,540 | 15,638 | 17,011 | ||||||||||||
|
Other
operating expenses
|
17,181 | 18,072 | 34,809 | 36,379 | ||||||||||||
|
Total
domestic Company-owned restaurant expenses
|
96,329 | 109,378 | 197,250 | 221,985 | ||||||||||||
|
Variable
interest entities restaurant expenses
|
9,326 | 1,987 | 14,135 | 3,780 | ||||||||||||
|
Domestic
commissary and other expenses:
|
||||||||||||||||
|
Cost
of sales
|
84,586 | 89,976 | 175,536 | 179,982 | ||||||||||||
|
Salaries
and benefits
|
8,638 | 9,127 | 17,469 | 18,092 | ||||||||||||
|
Other
operating expenses
|
10,945 | 12,112 | 21,617 | 23,644 | ||||||||||||
|
Total
domestic commissary and other expenses
|
104,169 | 111,215 | 214,622 | 221,718 | ||||||||||||
|
(Income)
loss from the franchise cheese-purchasing
|
||||||||||||||||
|
program,
net of minority interest
|
(5,462 | ) | 4,364 | (12,565 | ) | 9,922 | ||||||||||
|
International
operating expenses
|
5,907 | 5,818 | 11,264 | 11,158 | ||||||||||||
|
General
and administrative expenses
|
30,002 | 27,237 | 57,765 | 54,451 | ||||||||||||
|
Other
general expenses
|
3,583 | 539 | 8,050 | 2,752 | ||||||||||||
|
Depreciation
and amortization
|
8,181 | 8,404 | 16,136 | 16,410 | ||||||||||||
|
Total
costs and expenses
|
252,035 | 268,942 | 506,657 | 542,176 | ||||||||||||
|
Operating
income
|
24,602 | 14,466 | 54,952 | 30,237 | ||||||||||||
|
Net
interest
|
(1,296 | ) | (1,621 | ) | (2,580 | ) | (3,247 | ) | ||||||||
|
Income
before income taxes
|
23,306 | 12,845 | 52,372 | 26,990 | ||||||||||||
|
Income
tax expense
|
8,037 | 4,538 | 18,339 | 9,514 | ||||||||||||
|
Net
income, including noncontrolling interests
|
15,269 | 8,307 | 34,033 | 17,476 | ||||||||||||
|
Less:
income attributable to noncontrolling interests
|
(1,092 | ) | (659 | ) | (2,017 | ) | (1,203 | ) | ||||||||
|
Net
income, net of noncontrolling interests
|
$ | 14,177 | $ | 7,648 | $ | 32,016 | $ | 16,273 | ||||||||
|
Basic
earnings per common share
|
$ | 0.51 | $ | 0.27 | $ | 1.16 | $ | 0.57 | ||||||||
|
Earnings
per common share - assuming dilution
|
$ | 0.51 | $ | 0.27 | $ | 1.15 | $ | 0.57 | ||||||||
|
Basic
weighted average shares outstanding
|
27,789 | 28,372 | 27,715 | 28,536 | ||||||||||||
|
Diluted
weighted average shares outstanding
|
27,989 | 28,705 | 27,860 | 28,754 | ||||||||||||
14
|
Papa
John's International, Inc. and Subsidiaries
|
||||||||
|
Condensed
Consolidated Balance Sheets
|
||||||||
|
June
28,
|
December
28,
|
|||||||
|
2009
|
2008
|
|||||||
|
(Unaudited)
|
(Note)
|
|||||||
|
(In
thousands)
|
||||||||
|
Assets
|
||||||||
|
Current
assets:
|
||||||||
|
Cash
and cash equivalents
|
$ | 24,328 | $ | 10,987 | ||||
|
Accounts
receivable
|
22,091 | 23,775 | ||||||
|
Inventories
|
16,167 | 16,872 | ||||||
|
Prepaid
expenses
|
9,635 | 9,797 | ||||||
|
Other
current assets
|
3,986 | 5,275 | ||||||
|
Assets
held for sale
|
1,019 | 1,540 | ||||||
|
Deferred
income taxes
|
8,716 | 7,102 | ||||||
|
Total
current assets
|
85,942 | 75,348 | ||||||
|
Investments
|
1,717 | 530 | ||||||
|
Net
property and equipment
|
192,910 | 189,992 | ||||||
|
Notes
receivable
|
13,464 | 7,594 | ||||||
|
Deferred
income taxes
|
12,852 | 17,518 | ||||||
|
Goodwill
|
76,705 | 76,914 | ||||||
|
Other
assets
|
20,194 | 18,572 | ||||||
|
Total
assets
|
$ | 403,784 | $ | 386,468 | ||||
|
Liabilities
and stockholders' equity
|
||||||||
|
Current
liabilities:
|
||||||||
|
Accounts
payable
|
$ | 25,957 | $ | 29,148 | ||||
|
Income
and other taxes
|
13,525 | 9,685 | ||||||
|
Accrued
expenses
|
51,096 | 54,220 | ||||||
|
Current
portion of debt
|
4,475 | 7,075 | ||||||
|
Total
current liabilities
|
95,053 | 100,128 | ||||||
|
Unearned
franchise and development fees
|
5,559 | 5,916 | ||||||
|
Long-term
debt, net of current portion
|
103,067 | 123,579 | ||||||
|
Other
long-term liabilities
|
19,923 | 18,607 | ||||||
|
Total
liabilities
|
223,602 | 248,230 | ||||||
|
Total
stockholders' equity
|
180,182 | 138,238 | ||||||
|
Total
liabilities and stockholders' equity
|
$ | 403,784 | $ | 386,468 | ||||
|
Note:
|
The
balance sheet at December 28, 2008 has been derived from the audited
consolidatedfinancial
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.
|
15
|
Papa
John's International, Inc. and Subsidiaries
|
||||||||
|
Consolidated
Statements of Cash Flows
|
||||||||
|
Six
Months Ended
|
||||||||
|
(In
thousands)
|
June
28, 2009
|
June
29, 2008
|
||||||
|
(Unaudited)
|
(Unaudited)
|
|||||||
|
Operating
activities
|
||||||||
|
Net
income, net of noncontrolling interests
|
$ | 32,016 | $ | 16,273 | ||||
|
Adjustments
to reconcile net income to net cash provided by
|
||||||||
|
operating
activities:
|
||||||||
|
Restaurant
impairment and disposition losses
|
- | 1,143 | ||||||
|
Provision
for uncollectible accounts and notes receivable
|
2,181 | 1,264 | ||||||
|
Depreciation
and amortization
|
16,136 | 16,410 | ||||||
|
Deferred
income taxes
|
2,731 | (7,178 | ) | |||||
|
Stock-based
compensation expense
|
2,607 | 2,567 | ||||||
|
Excess
tax benefit related to exercise of non-qualified stock
options
|
(443 | ) | (117 | ) | ||||
|
Other
|
692 | 161 | ||||||
|
Changes
in operating assets and liabilities, net of acquisitions:
|
||||||||
|
Accounts
receivable
|
718 | (2,251 | ) | |||||
|
Inventories
|
876 | 1,825 | ||||||
|
Prepaid
expenses
|
184 | 1,026 | ||||||
|
Other
current assets
|
1,880 | (256 | ) | |||||
|
Other
assets and liabilities
|
(559 | ) | (1,233 | ) | ||||
|
Accounts
payable
|
(4,597 | ) | 293 | |||||
|
Income
and other taxes
|
3,840 | 1,704 | ||||||
|
Accrued
expenses
|
(3,326 | ) | (1,885 | ) | ||||
|
Unearned
franchise and development fees
|
(357 | ) | (494 | ) | ||||
|
Net
cash provided by operating activities
|
54,579 | 29,252 | ||||||
|
Investing
activities
|
||||||||
|
Purchase
of property and equipment
|
(15,193 | ) | (16,010 | ) | ||||
|
Purchase
of investments
|
(1,187 | ) | (437 | ) | ||||
|
Proceeds
from sale or maturity of investments
|
- | 407 | ||||||
|
Loans
issued
|
(9,739 | ) | (681 | ) | ||||
|
Loan
repayments
|
1,439 | 1,078 | ||||||
|
Acquisitions
|
(464 | ) | (100 | ) | ||||
|
Proceeds
from divestitures of restaurants
|
830 | - | ||||||
|
Other
|
18 | 156 | ||||||
|
Net
cash used in investing activities
|
(24,296 | ) | (15,587 | ) | ||||
|
Financing
activities
|
||||||||
|
Net
(repayments) proceeds from line of credit facility
|
(20,500 | ) | 1,102 | |||||
|
Net
(repayments) proceeds from short-term debt - variable interest
entities
|
(2,600 | ) | 3,525 | |||||
|
Excess
tax benefit related to exercise of non-qualified stock
options
|
443 | 117 | ||||||
|
Proceeds
from exercise of stock options
|
8,057 | 965 | ||||||
|
Acquisition
of Company common stock
|
(4,958 | ) | (20,287 | ) | ||||
|
Noncontrolling
interests, net of distributions
|
1,162 | 363 | ||||||
|
Other
|
378 | (24 | ) | |||||
|
Net
cash used in financing activities
|
(18,018 | ) | (14,239 | ) | ||||
|
Effect
of exchange rate changes on cash and cash equivalents
|
(11 | ) | 53 | |||||
|
Change
in cash and cash equivalents
|
12,254 | (521 | ) | |||||
|
Cash
recorded from consolidation of VIEs
|
1,087 | - | ||||||
|
Cash
and cash equivalents at beginning of period
|
10,987 | 8,877 | ||||||
|
Cash
and cash equivalents at end of period
|
$ | 24,328 | $ | 8,356 | ||||
16
|
Restaurant
Progression
|
||||||||||||||||||||
|
Papa
John's International, Inc.
|
||||||||||||||||||||
|
Second
Quarter Ended June 28, 2009
|
||||||||||||||||||||
|
Corporate
|
Franchised
|
|||||||||||||||||||
|
Domestic
|
Int'l
|
Domestic
|
Int'l
|
Total
|
||||||||||||||||
|
Papa
John's restaurants
|
||||||||||||||||||||
|
Beginning
of period
|
590 | 22 | 2,198 | 594 | 3,404 | |||||||||||||||
|
Opened
|
- | 1 | 11 | 28 | 40 | |||||||||||||||
|
Closed
|
(1 | ) | - | (17 | ) | (8 | ) | (26 | ) | |||||||||||
|
Acquired
|
11 | - | 11 | - | 22 | |||||||||||||||
|
Sold
|
(11 | ) | - | (11 | ) | - | (22 | ) | ||||||||||||
|
End
of Period
|
589 | 23 | 2,192 | 614 | 3,418 | |||||||||||||||
|
Second
Quarter Ended June 29, 2008
|
||||||||||||||||||||
|
Corporate
|
Franchised
|
|||||||||||||||||||
|
Domestic
|
Int'l
|
Domestic
|
Int'l
|
Total
|
||||||||||||||||
|
Papa
John's restaurants
|
||||||||||||||||||||
|
Beginning
of period
|
648 | 17 | 2,122 | 451 | 3,238 | |||||||||||||||
|
Opened
|
5 | 2 | 24 | 36 | 67 | |||||||||||||||
|
Closed
|
(1 | ) | (1 | ) | (29 | ) | (4 | ) | (35 | ) | ||||||||||
|
Acquired
|
- | - | - | - | - | |||||||||||||||
|
Sold
|
- | - | - | - | - | |||||||||||||||
|
End
of Period
|
652 | 18 | 2,117 | 483 | 3,270 | |||||||||||||||
17
|
Restaurant
Progression
|
||||||||||||||||||||
|
Papa
John's International, Inc.
|
||||||||||||||||||||
|
Six
Months Ended June 28, 2009
|
||||||||||||||||||||
|
Corporate
|
Franchised
|
|||||||||||||||||||
|
Domestic
|
Int'l
|
Domestic
|
Int'l
|
Total
|
||||||||||||||||
|
Papa
John's restaurants
|
||||||||||||||||||||
|
Beginning
of period
|
592 | 23 | 2,200 | 565 | 3,380 | |||||||||||||||
|
Opened
|
3 | 1 | 25 | 62 | 91 | |||||||||||||||
|
Closed
|
(5 | ) | (1 | ) | (34 | ) | (13 | ) | (53 | ) | ||||||||||
|
Acquired
|
11 | - | 12 | - | 23 | |||||||||||||||
|
Sold
|
(12 | ) | - | (11 | ) | - | (23 | ) | ||||||||||||
|
End
of Period
|
589 | 23 | 2,192 | 614 | 3,418 | |||||||||||||||
|
Six
Months Ended June 29, 2008
|
||||||||||||||||||||
|
Corporate
|
Franchised
|
|||||||||||||||||||
|
Domestic
|
Int'l
|
Domestic
|
Int'l
|
Total
|
||||||||||||||||
|
Papa
John's restaurants
|
||||||||||||||||||||
|
Beginning
of period
|
648 | 14 | 2,112 | 434 | 3,208 | |||||||||||||||
|
Opened
|
9 | 5 | 46 | 55 | 115 | |||||||||||||||
|
Closed
|
(6 | ) | (1 | ) | (40 | ) | (6 | ) | (53 | ) | ||||||||||
|
Acquired
|
1 | - | - | - | 1 | |||||||||||||||
|
Sold
|
- | - | (1 | ) | - | (1 | ) | |||||||||||||
|
End
of Period
|
652 | 18 | 2,117 | 483 | 3,270 | |||||||||||||||
18