Published on August 3, 2010
Exhibit
99.1
For
more information, contact:
David
Flanery
Chief
Financial Officer
502-261-4753
PAPA
JOHN’S ANNOUNCES
SECOND
QUARTER RESULTS
EPS
Increased 19.4% over Prior Year, Excluding BIBP;
2010
EPS Guidance Updated to a Range of $1.74 to $1.82, Excluding BIBP
Highlights
|
|
·
|
Second quarter earnings per
diluted share, excluding the impact of consolidating the results of the
BIBP cheese purchasing entity, of $0.43 in 2010 vs. $0.36 in
2009
|
|
|
·
|
Second quarter earnings per
diluted share including the results of BIBP of $0.49 in 2010 vs. $0.51 in
2009
|
|
|
·
|
Domestic system-wide comparable
sales increased 0.4% for the second
quarter
|
|
|
·
|
International franchise system
sales increased 12% for the second
quarter
|
|
|
·
|
25 worldwide net unit openings
during the quarter
|
|
|
·
|
Share repurchase authorization
increased by $50 million subsequent to
quarter-end
|
|
|
·
|
Earnings guidance for 2010
updated to a range of $1.74 to $1.82 per diluted share, excluding BIBP;
domestic system-wide comparable sales guidance for 2010 updated to a range
of negative 0.5% to positive
1.0%
|
Louisville, Kentucky (August 3, 2010) –
Papa John’s International, Inc. (NASDAQ: PZZA) today announced revenues of
$280.6 million for the second quarter of 2010, representing an increase of 4.5%
from revenues of $268.5 million for the second quarter of 2009. Net income for
the second quarter of 2010 was $13.2 million, or $0.49 per diluted share
(including after-tax income of $1.7 million, or $0.06 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 2009 second quarter net income of $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 BIBP).
Revenues were $566.4 million for the
six months ended June 27, 2010, representing an increase of 3.1% from revenues
of $549.4 million for the same period in 2009. Net income for the six months
ended June 27, 2010 was $30.1 million, or $1.11 per diluted share (including
after-tax income of $3.9 million, or $0.14 per diluted share, from the
consolidation of BIBP), compared to net income of $32.0 million, or $1.15 per
diluted share, for the comparable period of 2009 (including after-tax income of
$10.0 million, or $0.36 per diluted share, from the consolidation of
BIBP).
“During
the second quarter, we were proud that Papa John’s earned the highest rating
among all limited service restaurants in the prestigious American Customer
Service Index (ACSI),” commented Papa John’s Founder, Chairman and Co-Chief
Executive Officer, John Schnatter. “This marks the 10th time in
11 years that Papa John’s has received the highest ACSI rating among all pizza
chains, confirming that the consumer values our long-term commitment to
quality.”
“We had a
solid second quarter with our system posting positive transaction growth for the
fifth consecutive quarter, as well as positive comp sales this quarter,” said
Papa John’s President and Co-Chief Executive Officer, Jude Thompson. “We are
pleased with our system’s performance in what continues to be a challenging
competitive environment.”
Non-GAAP
Measures
Certain components of the financial
information we present in this press release exclude the impact of the
consolidation of BIBP, which is not a measure that is 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 BIBP 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 BIBP because
they are not indicative of our principal operating activities. 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 provides the following table to reconcile the financial results we
present in this press release excluding the impact of BIBP to our GAAP financial
measures for the three- and six-month periods ended June 27, 2010 and June 28,
2009.
|
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
|
June 27,
|
June 28,
|
June 27,
|
June 28,
|
|||||||||||||
|
(In thousands, except per share amounts)
|
2010
|
2009
|
2010
|
2009
|
||||||||||||
|
Pre-tax
income, net of noncontrolling interests, as reported
|
$ | 20,752 | $ | 22,214 | $ | 46,592 | $ | 50,355 | ||||||||
|
Income
from BIBP cheese purchasing entity
|
(2,678 | ) | (6,854 | ) | (6,163 | ) | (15,879 | ) | ||||||||
|
Pre-tax
income, net of noncontrolling interests,
|
||||||||||||||||
|
excluding
BIBP
|
$ | 18,074 | $ | 15,360 | $ | 40,429 | $ | 34,476 | ||||||||
|
Net
income, as reported
|
$ | 13,192 | $ | 14,177 | $ | 30,067 | $ | 32,016 | ||||||||
|
Income
from BIBP cheese purchasing entity
|
(1,700 | ) | (4,179 | ) | (3,913 | ) | (10,045 | ) | ||||||||
|
Net
income, excluding BIBP
|
$ | 11,492 | $ | 9,998 | $ | 26,154 | $ | 21,971 | ||||||||
|
Earnings
per diluted share, as reported
|
$ | 0.49 | $ | 0.51 | $ | 1.11 | $ | 1.15 | ||||||||
|
Income
from BIBP cheese purchasing entity
|
(0.06 | ) | (0.15 | ) | (0.14 | ) | (0.36 | ) | ||||||||
|
Earnings
per diluted share, excluding BIBP
|
$ | 0.43 | $ | 0.36 | $ | 0.97 | $ | 0.79 | ||||||||
|
Cash
flow from operations, as reported
|
$ | 45,686 | $ | 54,536 | ||||||||||||
|
Net
cash flows from BIBP cheese purchasing entity
|
(6,163 | ) | (15,879 | ) | ||||||||||||
|
Cash
flow from operations, excluding BIBP
|
$ | 39,523 | $ | 38,657 | ||||||||||||
Revenues
Comparison
Consolidated revenues were $280.6
million for the second quarter of 2010, an increase of $12.1 million, or 4.5%,
over the corresponding 2009 period. The increase in revenues was primarily due
to the following:
|
|
·
|
Franchise
royalties revenue increased $2.5 million primarily due to an increase in
the royalty rate (the standard royalty rate for the majority of domestic
franchise restaurants was 4.25% in the second quarter of 2009 and 4.75% in
the second quarter of 2010 as provided for in the franchise
agreement).
|
|
|
·
|
Domestic
commissary sales increased $9.4 million primarily due to an increase in
sales volumes.
|
|
|
·
|
International
revenues increased $1.6 million reflecting an increase in the number of
our company-owned and franchised
restaurants.
|
|
|
·
|
Other
sales decreased $1.0 million primarily due to a decline in sales at our
print and promotions subsidiary, Preferred Marketing
Solutions.
|
3
For the
six months ended June 27, 2010, revenues increased $17.0 million, or 3.1%, over
the corresponding 2009 period, primarily due to the same reasons as those
mentioned above. The increase in revenues in the six-month period was partially
offset by a decline in domestic company-owned restaurant sales resulting from a
decrease of 1.5% in comparable sales. An increase in customer traffic in the
six-month period was more than offset by a decrease in the average ticket price
as the level of discounting was increased consistent with the competitive
environment in which we are currently operating.
Operating Results and Cash
Flow
Operating
Results
Our
pre-tax income, net of noncontrolling interests, for the second quarter of 2010
was $20.8 million, compared to $22.2 million for the corresponding period in
2009. For the six months ended June 27, 2010, pre-tax income, net of
noncontrolling interests, was $46.6 million compared to $50.4 million for the
corresponding period in 2009. Excluding the impact of BIBP, as shown in the
previous table, second-quarter 2010 pre-tax income, net of noncontrolling
interests, was $18.1 million, an increase of $2.7 million or 17.7%, from the
2009 comparable results of $15.4 million. For the six months ended June 27,
2010, pre-tax income excluding BIBP was $40.4 million, an increase of $6.0
million or 17.3% from the 2009 comparable results of $34.5 million. An analysis
of the changes in pre-tax income, net of noncontrolling interests, for the
second quarter and six months ended June 27, 2010, 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):
|
|
·
|
Domestic Company-owned
Restaurant Segment. Domestic company-owned restaurants’ operating
income was $8.7 million for the second quarter of 2010 as compared to
$10.2 million in the comparable 2009 period. For the six months ended June
27, 2010, operating income was $20.1 million compared to $20.5 million in
the comparable 2009 period. The decreases of $1.5 million and $400,000 in
the second quarter and six-month period of 2010, respectively, were
primarily due to a decline in operating margin from a lower average ticket
price, partially offset by increased customer traffic. Commodity costs
were favorable for both the three- and six-month periods, with the most
favorable impact in the first three months of
2010.
|
Restaurant
operating margin on an external basis was 21.2% for the second quarter of 2010,
compared to 22.9% for the comparable 2009 period and 22.0% for the first six
months of 2010, compared to 23.2% for the comparable 2009 period. Excluding the
impact of the consolidation of BIBP, restaurant operating margin was 20.7% for
the second quarter of 2010, compared to 21.6% in the comparable 2009 quarter and
was 21.4% in the first six months of 2010 compared to 21.7% in the comparable
2009 period, with increased levels of discounting as the primary reason for the
quarter and year-to-date declines, as noted above.
4
|
|
·
|
Domestic Commissary Segment.
Domestic commissaries’ operating income increased approximately
$550,000 for the second quarter of 2010 and decreased $1.7 million for the
six-month period ended June 27, 2010. The improvement in operating income
for the second quarter was primarily due to increased sales volumes and
the prior year included management transition costs of approximately
$700,000. The decrease for the first six months of 2010, as compared to
the corresponding 2009 period, was primarily due to a lower gross margin
as we reduced the prices charged to restaurants for certain products and
absorbed both commodity cost increases for certain vegetable products
resulting from harsh Florida winter weather and increased fuel costs,
partially offset by the previously mentioned prior-year impact of $700,000
in management transition costs.
|
|
|
·
|
Domestic Franchising Segment.
Domestic franchising operating income increased approximately $2.6
million to $15.4 million for the second quarter of 2010, as compared to
$12.8 million in the corresponding 2009 period, and increased $4.9 million
to $31.4 million for the six months ended June 27, 2010, as compared to
$26.5 million in the corresponding 2009 period. The increases were
primarily due to an increase in franchise royalties (the standard rate was
4.25% in 2009 and 4.75% in 2010). The impact of the royalty rate increase
was partially offset by the impact of development incentive programs
offered by the company in 2009 and 2010. Franchise and development fees
were approximately $20,000 higher and $160,000 lower than the prior year
quarter and six-month period, respectively, even though we had 34 and 51
additional domestic unit openings during the three- and six-month periods,
respectively, in 2010. Additionally, we incurred incentive payment costs
of $128,000 in the second quarter of 2010 and $271,000 for the six months
ended June 27, 2010, compared to $30,000 and $60,000 in the comparable
periods of the prior year.
|
|
|
·
|
International Segment.
The international segment reported operating losses of
approximately $1.1 million and $2.2 million for the three and six months
ended June 27, 2010, respectively, compared to losses of $850,000 and $1.6
million, respectively, in the same periods in 2009. The declines in the
operating results in both periods were primarily due to increased
personnel and franchise support costs, and start-up costs associated with
our company-owned commissary in the United Kingdom, which opened in the
second quarter of 2010. The increase in costs was partially offset by
increased revenues due to the growth in the number of international
units.
|
|
|
·
|
All Others Segment.
Operating income for the “All others” reporting segment decreased
approximately $400,000 for the second quarter of 2010 and increased
approximately $100,000 for the six-month period of 2010, as compared to
the corresponding 2009 periods. The decline in the second quarter was
primarily due to an increase in infrastructure and support costs
associated with our online ordering business unit. We expect to recoup
these and future enhancement costs from ongoing online ordering fees
charged to domestic restaurants over time. For the six-month period, the
decline in operating income related to the online ordering business unit
was more than offset by an improvement in operating income at our print
and promotions subsidiary, Preferred Marketing
Solutions.
|
5
|
|
·
|
Unallocated
Corporate Segment. Unallocated corporate expenses
decreased approximately $1.5 million and $3.7 million for the three- and
six-month periods ended June 27, 2010, 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 27,
|
June 28,
|
Increase
|
June 27,
|
June 28,
|
Increase
|
|||||||||||||||||||
|
2010
|
2009
|
(decrease)
|
2010
|
2009
|
(decrease)
|
|||||||||||||||||||
|
General
and administrative (a)
|
$ | 8,118 | $ | 7,896 | $ | 222 | $ | 14,773 | $ | 14,692 | $ | 81 | ||||||||||||
|
Net
interest
|
1,042 | 1,080 | (38 | ) | 1,946 | 2,116 | (170 | ) | ||||||||||||||||
|
Depreciation
|
2,236 | 2,118 | 118 | 4,401 | 4,245 | 156 | ||||||||||||||||||
|
Franchise
support initiatives (b)
|
1,250 | 2,168 | (918 | ) | 2,500 | 4,415 | (1,915 | ) | ||||||||||||||||
|
Provision
(credit) for uncollectible
|
||||||||||||||||||||||||
|
accounts
and notes receivable (c)
|
(98 | ) | 449 | (547 | ) | 217 | 1,512 | (1,295 | ) | |||||||||||||||
|
Other
income (d)
|
(419 | ) | (38 | ) | (381 | ) | (878 | ) | (282 | ) | (596 | ) | ||||||||||||
|
Total
unallocated corporate
|
||||||||||||||||||||||||
|
expenses
|
$ | 12,129 | $ | 13,673 | $ | (1,544 | ) | $ | 22,959 | $ | 26,698 | $ | (3,739 | ) | ||||||||||
|
(a)
|
Unallocated
general and administrative costs were relatively flat as lower salaries and benefits, resulting
from fewer employees, were more than offset by increased short and
long-term incentive compensation and severance costs. The
second quarter and six-month period of 2009 also included $800,000 in
litigation settlement costs.
|
|
(b)
|
A
reduction in franchise support initiatives, which primarily consisted of
discretionary contributions to the national marketing fund and other local
advertising cooperatives, was in line with initial expectations for the
three and six month periods ended June 27,
2010.
|
|
(c)
|
The
2009 provision for uncollectible accounts and notes receivable included
specific incremental reserves for one third-party customer and a loan
issued to one domestic franchisee, whereas the 2010 provision reflects the
collection of a previously reserved
account.
|
|
(d)
|
Other
income was favorable in both the three- and six-month periods of 2010 due
to lower disposition-related costs.
|
Our effective income tax rates were
34.9% and 34.0%, respectively, for the three- and six-month periods ended June
27, 2010, as compared to 34.5% and 35.0%, respectively, for the corresponding
2009 periods (34.7% and 33.6%, respectively, excluding BIBP, for the three- and
six-month periods in 2010 and 32.6% and 34.3%, respectively, excluding BIBP, for
the three- and six-month periods in 2009). The effective rate may fluctuate from
quarter to quarter as specific federal and state issues are settled or otherwise
resolved, and we expect the rate to approximate 35% to 36% over
time.
6
Cash
Flow
Net cash provided by operating
activities was $45.7 million for the first six months of 2010 as compared to
$54.5 million for the comparable period in 2009. The consolidation of BIBP
increased cash flow from operations by approximately $6.2 million in the first
six months of 2010 and approximately $15.9 million in the first six months of
2009. Excluding the impact of the consolidation of BIBP, cash flow from
operations was $39.5 million in 2010, as compared to $38.7 million in the
comparable period in 2009. The favorable impact of higher net income was
partially offset by unfavorable working capital changes.
Our net debt position, defined as total
debt less cash and cash equivalents, was $61.3 million at June 27, 2010,
compared to $73.6 million at December 27, 2009.
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 27, 2010.
Domestic Comparable Sales
and Unit Count
Domestic system-wide comparable sales
for the second quarter of 2010 increased 0.4% (comprised of a 1.1% decrease at
company-owned restaurants and a 0.9% increase at franchised restaurants).
Domestic system-wide comparable sales for the six months ended June 27, 2010
were even (comprised of a 1.5% decrease at company-owned restaurants and a 0.5%
increase at franchised restaurants). An increase in customer traffic for both
the second quarter and six-month results in 2010 was offset by a decline in the
average ticket price due to increased levels of discounting. 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 2010, 45 domestic franchised restaurants were opened and
16 domestic restaurants were closed (one company-owned and 15 franchised).
During the first six months of 2010, we opened 80 domestic restaurants (four
company-owned and 76 franchised) and closed 47 restaurants (two company-owned
and 45 franchised). Our total domestic development pipeline as of June 27, 2010
included approximately 270 restaurants, two-thirds of which are scheduled to
open over the next two to three years.
7
At June
27, 2010, there were 3,516 domestic and international Papa John’s restaurants
(619 company-owned and 2,897 franchised) operating in all 50 states and in 28
countries. The company-owned restaurants include 127 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:
|
|
·
|
International
franchise system sales increased approximately 12% to $71.8 million in the
second quarter of 2010, from $63.9 million in the comparable period in
2009 and increased approximately 14% to $139.5 million for the six months
ended June 27, 2010, from $122.0 million. The impact of foreign exchange
rates was not material to the three- and six-month
periods.
|
|
|
·
|
During
the second quarter of 2010, 28 international restaurants were opened (four
company-owned and 24 franchised) while 32 international franchised
restaurants were closed, including all of the 25 franchised restaurants in
one country. We expect to begin reopening restaurants in that country
later this year under a new franchise ownership and management structure.
For the six-month period ended June 27, 2010, 57 international restaurants
were opened (four company-owned and 53 franchised) while 43 international
franchised restaurants were closed.
|
|
|
·
|
During
the second quarter, the first two Papa John’s restaurants in Chile were
opened by our franchisee in that
country.
|
|
|
·
|
We
anticipate opening restaurants in three or four additional new countries
during the last six months of 2010.
|
As of
June 27, 2010, there were 702 Papa John’s restaurants operating internationally
(29 company-owned and 673 franchised), of which 221 were located in Korea and
China and 161 were located in the United Kingdom and Ireland. Our total
international development pipeline as of June 27, 2010 included approximately
1,200 restaurants, the substantial majority of which are scheduled to open over
the next seven years.
Share Repurchase
Activity
The
company repurchased 760,000 shares of its common stock at an average price of
$25.21 per share, or a total of $19.2 million, during the three months ended
June 27, 2010 and repurchased 975,000 shares at an average of $25.05 per share,
or a total of $24.4 million, during the six months ended June 27, 2010. A total
of 273,000 shares of common stock were issued upon the exercise of stock options
for the first six months of 2010.
8
In July
2010, the Board of Directors approved a $50 million increase in share repurchase
authorization through 2011. Subsequent to quarter-end through July 28, 2010, the
company repurchased 274,000 shares at a total cost of $6.7 million, or $24.36
per share average cost. Approximately $52.7 million remains available under the
company’s share repurchase program.
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 27.0 million diluted weighted average shares outstanding for the second
quarter of 2010, as compared to 28.0 million for the second quarter of 2009, a
3.6% decrease. Approximately 26.3 million actual shares of the company’s common
stock were outstanding as of June 27, 2010.
The
company’s share repurchase activity had no impact on earnings per diluted share
for both the three- and six-month periods ended June 27, 2010.
2010 Earnings Guidance
Updated; Comparable Sales Guidance Reaffirmed
The
company is updating its previously issued guidance for 2010 earnings per share
of $1.72 to $1.87 per diluted share, excluding the impact of the consolidation
of BIBP, to $1.74 to $1.82 per diluted share. We expect the current pricing and
promotional environment in the pizza category to result in continued restaurant
margin pressures for the remainder of 2010. The company is also updating
its guidance
for domestic system-wide comparable sales for 2010 from a range of negative
1% to positive 1% to a range of negative 0.5% to positive 1.0%, reflecting the
even results for the first half of the year.
In July,
the company implemented an initiative to reduce G&A expenses, which included
a reduction in force primarily in the corporate support area and our printing
and promotions subsidiary. After considering severance and related costs, the
G&A initiative is not expected to have a significant impact on operating
income for the second half of 2010; cost savings from the initiative are
expected to approximate $4.0 to $4.5 million in 2011.
9
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, margins, unit growth and
other financial and operational measures. Such statements are not guarantees of
future performance and involve certain risks, uncertainties and assumptions,
which are difficult to predict and many of which are beyond our control.
Therefore, actual outcomes and results may differ materially from those matters
expressed or implied in such forward-looking statements.
The
risks, uncertainties and assumptions that are involved in our forward-looking
statements include, but are not limited to: changes in pricing or other
marketing or promotional strategies by competitors which may adversely affect
sales, including an increase in or continuation of the aggressive pricing and
promotional environment; 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 (including the impact of the recently
passed federal health care legislation); the ability of the company to pass
along increases in or sustained high costs to franchisees or consumers; the
company’s contingent liability for the payment of certain lease arrangements,
approximating $4.8 million, involving our former Perfect Pizza operations in the
United Kingdom that were sold in March 2006; the impact of legal claims and
current proposed legislation impacting our business; the impact that product
recalls, food quality or safety issues, and general public health concerns could
have on our restaurants; 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 27, 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 4, 2010 at 10:00 a.m. Eastern Daylight Time to review the 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 877-312-8816 (pass code 83093318) for participation
in the question and answer session. International participants may dial
253-237-1189 (pass code 83093318).
The
conference call will be available for replay, including by downloadable podcast,
beginning August 4, 2010, at approximately noon Eastern Time, through August 8,
2010, at midnight Eastern Time. The replay can be accessed from the company’s
web site at www.papajohns.com or
by dialing 800-642-1687 (pass code 83093318). International participants may
dial 706-645-9291 (pass code 83093318).
10
Summary
Financial Data
Papa
John's International, Inc.
(Unaudited)
|
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
|
June 27,
|
June 28,
|
June 27,
|
June 28,
|
|||||||||||||
|
(In thousands, except per share amounts)
|
2010
|
2009
|
2010
|
2009
|
||||||||||||
|
Revenues
|
$ | 280,647 | $ | 268,509 | $ | 566,433 | $ | 549,433 | ||||||||
|
Income
before income taxes, net of
|
||||||||||||||||
|
noncontrolling
interests*
|
$ | 20,752 | $ | 22,214 | $ | 46,592 | $ | 50,355 | ||||||||
|
Net
income
|
$ | 13,192 | $ | 14,177 | $ | 30,067 | $ | 32,016 | ||||||||
|
Earnings
per share - assuming dilution
|
$ | 0.49 | $ | 0.51 | $ | 1.11 | $ | 1.15 | ||||||||
|
Weighted
average shares outstanding -
|
||||||||||||||||
|
assuming
dilution
|
26,971 | 27,989 | 27,036 | 27,860 | ||||||||||||
|
EBITDA
(1)
|
$ | 30,063 | $ | 31,305 | $ | 66,796 | $ | 68,533 | ||||||||
*The
following is a summary of our income (loss) before income taxes, net of
noncontrolling interests:
|
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
|
June 27,
|
June 28,
|
June 27,
|
June 28,
|
|||||||||||||
|
(in thousands)
|
2010
|
2009
|
2010
|
2009
|
||||||||||||
|
Domestic
company-owned restaurants
|
$ | 8,656 | $ | 10,152 | $ | 20,101 | $ | 20,543 | ||||||||
|
Domestic
commissaries
|
8,036 | 7,484 | 15,184 | 16,868 | ||||||||||||
|
Domestic
franchising
|
15,448 | 12,824 | 31,370 | 26,506 | ||||||||||||
|
International
|
(1,071 | ) | (847 | ) | (2,174 | ) | (1,624 | ) | ||||||||
|
All
others
|
178 | 613 | 1,127 | 1,014 | ||||||||||||
|
Unallocated
corporate expenses
|
(12,129 | ) | (13,673 | ) | (22,959 | ) | (26,698 | ) | ||||||||
|
Elimination
of intersegment profit
|
(133 | ) | (101 | ) | (220 | ) | (116 | ) | ||||||||
|
Income
before income taxes, excluding BIBP
|
18,985 | 16,452 | 42,429 | 36,493 | ||||||||||||
|
BIBP,
a variable interest entity (2)
|
2,678 | 6,854 | 6,163 | 15,879 | ||||||||||||
|
Less:
noncontrolling interests
|
(911 | ) | (1,092 | ) | (2,000 | ) | (2,017 | ) | ||||||||
|
Total
income before income taxes, net of
|
||||||||||||||||
|
noncontrolling
interests
|
$ | 20,752 | $ | 22,214 | $ | 46,592 | $ | 50,355 | ||||||||
11
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 27,
|
June 28,
|
June 27,
|
June 28,
|
|||||||||||||
|
2010
|
2009
|
2010
|
2009
|
|||||||||||||
|
EBITDA
(1)
|
$ | 30,063 | $ | 31,305 | $ | 66,796 | $ | 68,533 | ||||||||
|
Income
tax expense
|
(7,560 | ) | (8,037 | ) | (16,525 | ) | (18,339 | ) | ||||||||
|
Net
interest expense
|
(1,136 | ) | (1,296 | ) | (2,149 | ) | (2,580 | ) | ||||||||
|
Depreciation
and amortization
|
(8,175 | ) | (7,795 | ) | (16,055 | ) | (15,598 | ) | ||||||||
|
Net
income
|
$ | 13,192 | $ | 14,177 | $ | 32,067 | $ | 32,016 | ||||||||
The
company's free cash flow for the first six months of 2010 and 2009 was as
follows (in thousands):
|
Six Months Ended
|
||||||||
|
June 27,
|
June 28,
|
|||||||
|
2010
|
2009
|
|||||||
|
Net
cash provided by operating activities
|
$ | 45,686 | $ | 54,536 | ||||
|
Income
from BIBP cheese purchasing entity
|
(6,163 | ) | (15,879 | ) | ||||
|
Purchases
of property and equipment
|
(16,871 | ) | (15,193 | ) | ||||
|
Free
cash flow (3)
|
$ | 22,652 | $ | 23,464 | ||||
|
(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 pre-tax income of approximately $2.7 million in the second
quarter of 2010, which was composed of income associated with cheese sold
to domestic company-owned and franchised restaurants of approximately
$600,000 and $2.2 million, respectively, partially offset by interest
expense on outstanding debt with Papa John’s. For the second
quarter of 2009, BIBP reported pre-tax income of $6.9 million, which was
primarily 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.
|
12
|
BIBP
generated pre-tax income of approximately $6.2 million for the six months
ended June 27, 2010, which was composed of income associated with cheese
sold to domestic company-owned and franchised restaurants of approximately
$1.5 and $5.0 million, respectively, partially offset by interest expense
on outstanding debt with Papa John’s. For the six months ended June 28,
2009, BIBP reported pre-tax income of approximately $15.9 million, 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.
|
|
(3)
|
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 purchases 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 the company’s performance than the
company’s GAAP measures.
|
* * * *
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 27, 2010
|
June 28, 2009
|
June 27, 2010
|
June 28, 2009
|
|||||||||||||
|
(In thousands, except per share amounts)
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
||||||||||||
|
Revenues:
|
||||||||||||||||
|
Domestic:
|
||||||||||||||||
|
Company-owned
restaurant sales
|
$ | 124,594 | $ | 124,966 | $ | 254,238 | $ | 256,671 | ||||||||
|
Franchise
royalties
|
17,140 | 14,664 | 34,876 | 30,025 | ||||||||||||
|
Franchise
and development fees
|
101 | 78 | 147 | 306 | ||||||||||||
|
Commissary
sales
|
113,936 | 104,539 | 226,576 | 214,078 | ||||||||||||
|
Other
sales
|
13,023 | 13,981 | 27,536 | 28,750 | ||||||||||||
|
International:
|
||||||||||||||||
|
Royalties
and franchise and development fees
|
3,458 | 3,388 | 7,092 | 6,623 | ||||||||||||
|
Restaurant
and commissary sales
|
8,395 | 6,893 | 15,968 | 12,980 | ||||||||||||
|
Total
revenues
|
280,647 | 268,509 | 566,433 | 549,433 | ||||||||||||
|
Costs
and expenses:
|
||||||||||||||||
|
Domestic
Company-owned restaurant expenses:
|
||||||||||||||||
|
Cost
of sales
|
27,020 | 23,893 | 54,306 | 49,794 | ||||||||||||
|
Salaries
and benefits
|
34,192 | 36,157 | 69,595 | 74,360 | ||||||||||||
|
Advertising
and related costs
|
11,149 | 11,376 | 22,553 | 22,649 | ||||||||||||
|
Occupancy
costs
|
7,930 | 7,722 | 15,770 | 15,638 | ||||||||||||
|
Other
operating expenses
|
17,844 | 17,181 | 36,034 | 34,809 | ||||||||||||
|
Total
domestic Company-owned restaurant expenses
|
98,135 | 96,329 | 198,258 | 197,250 | ||||||||||||
|
Domestic
commissary and other expenses:
|
||||||||||||||||
|
Cost
of sales
|
95,195 | 86,924 | 190,487 | 179,108 | ||||||||||||
|
Salaries
and benefits
|
8,568 | 8,638 | 17,300 | 17,469 | ||||||||||||
|
Other
operating expenses
|
11,841 | 10,945 | 23,541 | 21,617 | ||||||||||||
|
Total
domestic commissary and other expenses
|
115,604 | 106,507 | 231,328 | 218,194 | ||||||||||||
|
Income
from the franchise cheese-purchasing
|
||||||||||||||||
|
program,
net of noncontrolling interest
|
(2,173 | ) | (5,462 | ) | (4,982 | ) | (12,565 | ) | ||||||||
|
International
operating expenses
|
7,430 | 5,907 | 14,206 | 11,264 | ||||||||||||
|
General
and administrative expenses
|
28,990 | 29,788 | 56,850 | 57,325 | ||||||||||||
|
Other
general expenses
|
1,687 | 3,043 | 3,977 | 7,415 | ||||||||||||
|
Depreciation
and amortization
|
8,175 | 7,795 | 16,055 | 15,598 | ||||||||||||
|
Total
costs and expenses
|
257,848 | 243,907 | 515,692 | 494,481 | ||||||||||||
|
Operating
income
|
22,799 | 24,602 | 50,741 | 54,952 | ||||||||||||
|
Net
interest expense
|
(1,136 | ) | (1,296 | ) | (2,149 | ) | (2,580 | ) | ||||||||
|
Income
before income taxes
|
21,663 | 23,306 | 48,592 | 52,372 | ||||||||||||
|
Income
tax expense
|
7,560 | 8,037 | 16,525 | 18,339 | ||||||||||||
|
Net
income, including noncontrolling interests
|
14,103 | 15,269 | 32,067 | 34,033 | ||||||||||||
|
Less:
income attributable to noncontrolling interests
|
(911 | ) | (1,092 | ) | (2,000 | ) | (2,017 | ) | ||||||||
|
Net
income, net of noncontrolling interests
|
$ | 13,192 | $ | 14,177 | $ | 30,067 | $ | 32,016 | ||||||||
|
Basic
earnings per common share
|
$ | 0.49 | $ | 0.51 | $ | 1.12 | $ | 1.16 | ||||||||
|
Earnings
per common share - assuming dilution
|
$ | 0.49 | $ | 0.51 | $ | 1.11 | $ | 1.15 | ||||||||
|
Basic
weighted average shares outstanding
|
26,760 | 27,789 | 26,901 | 27,715 | ||||||||||||
|
Diluted
weighted average shares outstanding
|
26,971 | 27,989 | 27,036 | 27,860 | ||||||||||||
14
Papa
John's International, Inc. and Subsidiaries
Condensed
Consolidated Balance Sheets
|
June 27,
|
December 27,
|
|||||||
|
2010
|
2009
|
|||||||
|
(Unaudited)
|
(Note)
|
|||||||
|
(In
thousands)
|
||||||||
|
Assets
|
||||||||
|
Current
assets:
|
||||||||
|
Cash
and cash equivalents
|
$ | 37,710 | $ | 25,457 | ||||
|
Accounts
receivable, net
|
22,914 | 22,119 | ||||||
|
Inventories
|
15,289 | 15,576 | ||||||
|
Prepaid
expenses
|
10,266 | 8,695 | ||||||
|
Other
current assets
|
3,642 | 3,748 | ||||||
|
Deferred
income taxes
|
8,895 | 8,408 | ||||||
|
Total
current assets
|
98,716 | 84,003 | ||||||
|
Investments
|
1,690 | 1,382 | ||||||
|
Net
property and equipment
|
189,027 | 187,971 | ||||||
|
Notes
receivable , net
|
15,092 | 16,359 | ||||||
|
Deferred
income taxes
|
5,920 | 6,804 | ||||||
|
Goodwill
|
74,229 | 75,066 | ||||||
|
Other
assets
|
21,588 | 22,141 | ||||||
|
Total
assets
|
$ | 406,262 | $ | 393,726 | ||||
|
Liabilities
and stockholders' equity
|
||||||||
|
Current
liabilities:
|
||||||||
|
Accounts
payable
|
$ | 26,139 | $ | 26,990 | ||||
|
Income
and other taxes payable
|
10,383 | 5,854 | ||||||
|
Accrued
expenses
|
49,382 | 54,241 | ||||||
|
Current
portion of debt
|
99,035 | - | ||||||
|
Total
current liabilities
|
184,939 | 87,085 | ||||||
|
Unearned
franchise and development fees
|
6,096 | 5,668 | ||||||
|
Long-term
debt, net of current portion
|
- | 99,050 | ||||||
|
Other
long-term liabilities
|
12,729 | 16,886 | ||||||
|
Total
liabilities
|
203,764 | 208,689 | ||||||
|
Total
stockholders' equity
|
202,498 | 185,037 | ||||||
|
Total
liabilities and stockholders' equity
|
$ | 406,262 | $ | 393,726 | ||||
|
Note:
|
The
balance sheet at December 27, 2009 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.
|
15
Papa
John's International, Inc. and Subsidiaries
Consolidated
Statements of Cash Flows
|
Six Months Ended
|
||||||||
|
(In thousands)
|
June 27, 2010
|
June 28, 2009
|
||||||
|
(Unaudited)
|
(Unaudited)
|
|||||||
|
Operating
activities
|
||||||||
|
Net
income, net of noncontrolling interests
|
$ | 30,067 | $ | 32,016 | ||||
|
Adjustments
to reconcile net income to net cash provided by
|
||||||||
|
operating
activities:
|
||||||||
|
Provision
for uncollectible accounts and notes receivable
|
713 | 2,181 | ||||||
|
Depreciation
and amortization
|
16,055 | 15,598 | ||||||
|
Deferred
income taxes
|
(250 | ) | 2,731 | |||||
|
Stock-based
compensation expense
|
3,549 | 2,607 | ||||||
|
Excess
tax benefit related to exercise of non-qualified stock
options
|
(242 | ) | (443 | ) | ||||
|
Other
|
368 | 811 | ||||||
|
Changes
in operating assets and liabilities, net of acquisitions:
|
||||||||
|
Accounts
receivable
|
(1,764 | ) | 737 | |||||
|
Inventories
|
298 | 868 | ||||||
|
Prepaid
expenses
|
(1,559 | ) | 101 | |||||
|
Other
current assets
|
106 | 1,880 | ||||||
|
Other
assets and liabilities
|
(329 | ) | (345 | ) | ||||
|
Accounts
payable
|
(851 | ) | (4,363 | ) | ||||
|
Income
and other taxes payable
|
4,529 | 3,840 | ||||||
|
Accrued
expenses
|
(5,432 | ) | (3,326 | ) | ||||
|
Unearned
franchise and development fees
|
428 | (357 | ) | |||||
|
Net
cash provided by operating activities
|
45,686 | 54,536 | ||||||
|
Investing
activities
|
||||||||
|
Purchases
of property and equipment
|
(16,871 | ) | (15,193 | ) | ||||
|
Purchases
of investments
|
(548 | ) | (1,187 | ) | ||||
|
Proceeds
from sale or maturity of investments
|
240 | - | ||||||
|
Loans
issued
|
(460 | ) | (9,739 | ) | ||||
|
Loan
repayments
|
1,943 | 1,439 | ||||||
|
Acquisitions
|
- | (464 | ) | |||||
|
Proceeds
from divestitures of restaurants
|
36 | 830 | ||||||
|
Other
|
11 | 18 | ||||||
|
Net
cash used in investing activities
|
(15,649 | ) | (24,296 | ) | ||||
|
Financing
activities
|
||||||||
|
Net
repayments from line of credit facility
|
- | (20,500 | ) | |||||
|
Net
repayments from short-term debt - variable interest
entities
|
- | (2,600 | ) | |||||
|
Excess
tax benefit related to exercise of non-qualified stock
options
|
242 | 443 | ||||||
|
Proceeds
from exercise of stock options
|
5,125 | 8,057 | ||||||
|
Acquisition
of Company common stock
|
(24,417 | ) | (4,958 | ) | ||||
|
Noncontrolling
interests, net of contributions and distributions
|
1,130 | 1,162 | ||||||
|
Other
|
114 | (13 | ) | |||||
|
Net
cash used in financing activities
|
(17,806 | ) | (18,409 | ) | ||||
|
Effect
of exchange rate changes on cash and cash equivalents
|
22 | (11 | ) | |||||
|
Change
in cash and cash equivalents
|
12,253 | 11,820 | ||||||
|
Cash
and cash equivalents at beginning of period
|
25,457 | 10,917 | ||||||
|
Cash
and cash equivalents at end of period
|
$ | 37,710 | $ | 22,737 | ||||
16
Restaurant
Progression
Papa
John's International, Inc.
|
Second Quarter Ended June 27, 2010
|
||||||||||||||||||||
|
Corporate
|
Franchised
|
|||||||||||||||||||
|
Domestic
|
Int'l
|
Domestic
|
Int'l
|
Total
|
||||||||||||||||
|
Papa
John's restaurants
|
||||||||||||||||||||
|
Beginning
of period
|
591 | 27 | 2,194 | 679 | 3,491 | |||||||||||||||
|
Opened
|
- | 4 | 45 | 24 | 73 | |||||||||||||||
|
Closed
|
(1 | ) | - | (15 | ) | (32 | ) | (48 | ) | |||||||||||
|
Acquired
|
- | - | - | 2 | 2 | |||||||||||||||
|
Sold
|
- | (2 | ) | - | - | (2 | ) | |||||||||||||
|
End
of Period
|
590 | 29 | 2,224 | 673 | 3,516 | |||||||||||||||
|
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 | |||||||||||||||
17
Restaurant
Progression
Papa
John's International, Inc.
|
Six Months Ended June 27, 2010
|
||||||||||||||||||||
|
Corporate
|
Franchised
|
|||||||||||||||||||
|
Domestic
|
Int'l
|
Domestic
|
Int'l
|
Total
|
||||||||||||||||
|
Papa
John's restaurants
|
||||||||||||||||||||
|
Beginning
of period
|
588 | 26 | 2,193 | 662 | 3,469 | |||||||||||||||
|
Opened
|
4 | 4 | 76 | 53 | 137 | |||||||||||||||
|
Closed
|
(2 | ) | - | (45 | ) | (43 | ) | (90 | ) | |||||||||||
|
Acquired
|
- | 1 | - | 2 | 3 | |||||||||||||||
|
Sold
|
- | (2 | ) | - | (1 | ) | (3 | ) | ||||||||||||
|
End
of Period
|
590 | 29 | 2,224 | 673 | 3,516 | |||||||||||||||
|
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 | |||||||||||||||
18