Papa John’s Announces Fourth Quarter 2019 Results and Provides 2020 Outlook
Highlights
- Fourth quarter 2019 loss per diluted share of (
$0.18 ) and adjusted earnings per diluted share, excluding the impact of Special items, of$0.37 versus fourth quarter 2018 loss per diluted share of ($0.41 ) and adjusted earnings per diluted share of$0.18 - Full Year 2019 loss per diluted share of (
$0.24 ) and adjusted earnings per diluted share, excluding the impact of Special items, of$1.17 versus full year 2018 earnings per diluted share of$0.08 and adjusted earnings per diluted share of$1.37 System-wide North America comparable sales increase of 3.5% for the fourth quarter and decrease of 2.2% for the full year- International comparable sales increases of 2.4% for the fourth quarter and 1.1% for the full year
- 52 net unit openings in the fourth quarter and 92 net unit openings for the full year, driven by International
Global restaurant and comparable sales information and operating highlights for the three months and full year ended
Three Months Ended | Year Ended | |||||||
2019 |
2018 |
2019 |
2018 |
|||||
Global restaurant sales growth / (decline) (a) |
4.4% |
(13.0%) |
(0.8%) |
(5.9%) |
||||
Global restaurant sales growth / (decline), | ||||||||
excluding the impact of foreign currency (a) |
4.7% |
(11.7%) |
0.3% |
(5.4%) |
||||
Comparable sales growth / (decline) (b) | ||||||||
Domestic company-owned restaurants |
4.1% |
(10.2%) |
(2.7%) |
(9.0%) |
||||
3.3% |
(7.4%) |
(2.0%) |
(6.7%) |
|||||
3.5% |
(8.1%) |
(2.2%) |
(7.3%) |
|||||
System-wide international restaurants |
2.4% |
(2.6%) |
1.1% |
(1.6%) |
||||
(a) |
Includes both company-owned and franchised restaurant sales. |
|||||||
(b) |
Represents the change in year-over-year sales for the same base of restaurants for the same fiscal periods. Comparable sales results for restaurants operating outside of |
We believe
Revenue and Operating Highlights
Three Months Ended | Year Ended | ||||||||||||||||
In thousands, except per share amounts | 2019 |
2018 (a) |
Increase % |
2019 |
2018 (a) |
Increase / (Decrease) % |
|||||||||||
Total revenue |
$ |
417,514 |
|
$ |
397,566 |
|
5.0 |
% |
$ |
1,619,248 |
|
$ |
1,662,871 |
(2.6 |
%) |
||
(Loss) income before income taxes |
|
(4,824 |
) |
|
(15,252 |
) |
68.4 |
% |
|
5,046 |
|
|
6,697 |
(24.7 |
%) |
||
Net (loss) income |
|
(2,142 |
) |
|
(12,868 |
) |
83.4 |
% |
|
4,866 |
|
|
2,474 |
96.7 |
% |
||
Diluted (loss) earnings per share |
|
(0.18 |
) |
|
(0.41 |
) |
56.1 |
% |
|
(0.24 |
) |
|
0.08 |
(400.0 |
%) |
||
Adjusted diluted earnings per share (b) |
|
0.37 |
|
|
0.18 |
|
105.6 |
% |
|
1.17 |
|
|
1.37 |
(14.6 |
%) |
||
(a) |
Our 2019 financial results include the consolidation of the operations of the Papa John’s |
||||||||||||||||
(b) |
Adjusted to exclude Special items, which impact comparability. The reconciliation of GAAP to non-GAAP financial results is included in the table below. |
||||||||||||||||
Adjusted financial results excluding Special items are summarized in the following reconciliations. We present these non-GAAP measures because we believe the Special items impact the comparability of our results of operations. The table below reconciles our GAAP financial results to our adjusted financial results, which are non-GAAP measures. All highlights are compared to the same period of the prior year, unless otherwise noted.
Three Months Ended | Year Ended | |||||||||||||||||
(In thousands, except per share amounts) |
2019 |
2018 (1) |
2019 |
2018 (1) |
||||||||||||||
GAAP (loss) income before income taxes |
$ |
(4,824 |
) |
$ |
(15,252 |
) |
$ |
5,046 |
|
$ |
6,697 |
|
||||||
Special Items: | ||||||||||||||||||
Special charges (2) |
|
25,404 |
|
|
25,899 |
|
|
60,817 |
|
|
50,732 |
|
||||||
Refranchising (gains) losses, net (3) |
|
(2,850 |
) |
|
(1,629 |
) |
|
(4,739 |
) |
|
289 |
|
||||||
Adjusted income before income taxes |
$ |
17,730 |
|
$ |
9,018 |
|
$ |
61,124 |
|
$ |
57,718 |
|
||||||
GAAP net (loss) income attributable to common shareholders |
$ |
(5,612 |
) |
$ |
(12,868 |
) |
$ |
(7,633 |
) |
$ |
2,474 |
|
||||||
Special Items, net of income taxes: | ||||||||||||||||||
Special charges (2) |
|
19,774 |
|
|
19,687 |
|
|
48,519 |
|
|
38,957 |
|
||||||
Refranchising (gains) losses, net (3) |
|
(2,215 |
) |
|
(1,251 |
) |
|
(3,677 |
) |
|
222 |
|
||||||
Tax impact of |
|
- |
|
|
- |
|
|
- |
|
|
2,435 |
|
||||||
Adjusted net income attributable to common shareholders |
$ |
11,947 |
|
$ |
5,568 |
|
$ |
37,209 |
|
$ |
44,088 |
|
||||||
GAAP diluted (loss) earnings per share |
$ |
(0.18 |
) |
$ |
(0.41 |
) |
$ |
(0.24 |
) |
$ |
0.08 |
|
||||||
Special items: | ||||||||||||||||||
Special charges (2) |
|
0.62 |
|
|
0.63 |
|
|
1.53 |
|
|
1.21 |
|
||||||
Refranchising (gains) losses, net (3) |
|
(0.07 |
) |
|
(0.04 |
) |
|
(0.12 |
) |
|
0.01 |
|
||||||
Tax impact of |
|
- |
|
|
- |
|
|
- |
|
|
0.07 |
|
||||||
Adjusted diluted earnings per share |
$ |
0.37 |
|
$ |
0.18 |
|
$ |
1.17 |
|
$ |
1.37 |
|
||||||
(1) |
The three months and full year ended |
|||||||||||||||||
(2) |
The company incurred special costs (defined as “Special charges”) of |
Three Months Ended | Year Ended | ||||||||||
(In thousands) |
2019 |
2018 |
2019 |
2018 |
|||||||
Special charges before income taxes: | |||||||||||
Royalty relief (a) |
$ |
5,404 |
$ |
5,532 |
$ |
19,097 |
$ |
15,416 |
|||
Marketing fund investments (b) |
|
20,000 |
|
10,000 |
|
27,500 |
|
10,000 |
|||
Legal and advisory fees (c) |
|
- |
|
8,123 |
|
5,921 |
|
19,475 |
|||
Reimaging costs and write-off of branded assets (d) |
|
- |
|
2,244 |
|
- |
|
5,841 |
|||
Other costs (e) |
|
- |
|
- |
|
2,385 |
|
- |
|||
Mark to market adjustment on option valuation (f) |
|
- |
|
- |
|
5,914 |
|
- |
|||
Total Special charges before income taxes |
$ |
25,404 |
$ |
25,899 |
$ |
60,817 |
$ |
50,732 |
|||
(a) |
Represents financial assistance provided to the |
||||||||||
(b) |
Represents marketing fund investments as part of our support package to our franchisees. |
||||||||||
(c) |
Represents advisory and legal costs primarily associated with the review of a wide range of strategic opportunities that culminated in the strategic investment in the company by affiliates of |
||||||||||
(d) |
2018 includes re-imaging costs at nearly all domestic restaurants and costs to replace or write-off certain branded assets. | ||||||||||
(e) |
2019 includes severance costs for our former CEO and costs related to the termination of a license agreement for intellectual property no longer being utilized. | ||||||||||
(f) |
Represents a one-time mark-to-market adjustment of |
||||||||||
|
|||||||||||
(3) |
The refranchising gains in 2019 are primarily associated with the refranchise of 46 domestic restaurants, including 19 restaurants in |
The non-GAAP adjusted results shown above and within this document, which exclude Special items, should not be construed as a substitute for or a better indicator of the company’s performance than the company’s GAAP results. Management believes presenting certain financial information excluding the Special items is important for purposes of comparison to prior year results. In addition, management uses these metrics to evaluate the company’s underlying operating performance and to analyze trends.
Revenue Highlights
Consolidated revenues increased
- Excluding the impact of refranchising,
Domestic Company -owned restaurant sales increased due to positive comparable sales of 4.1% and the favorable impact of the expiration of customer rewards associated with our Papa Rewards loyalty program. North America commissary revenues increased primarily due to higher pricing associated with higher commodities costs, primarily cheese.- Excluding the favorable impact of refranchising,
North America royalties and fees increased due to positive comparable sales. - International revenues increased primarily due to higher royalties and higher
United Kingdom commissary revenues from increased equivalent units and positive comparable sales of 2.4%. - Other revenues increased due to higher marketing fund revenue primarily due to an increase in the PJMF contribution rate and higher online revenues.
Consolidated revenues decreased
- Negative comparable sales for
North America restaurants for the year endedDecember 29, 2019 resulted in lower company-owned restaurant revenues and royalties. - Royalty relief of approximately
$19.1 million for the year endedDecember 29, 2019 was$3.7 million higher than the prior year comparable period, as detailed in the previously discussed Special charges.
These decreases were substantially offset by the following revenue increases:
- Excluding the impact of the 2018 China refranchising and the 2019 Mexico quality control center refranchising, International revenues increased primarily due to higher royalties and higher
United Kingdom commissary revenues from increased equivalent units, partially offset by unfavorable foreign exchange rates of approximately$4.2 million . North America commissary revenues increased due to higher pricing associated with higher commodities costs, partially offset by lower volumes.- Other revenues increased due to higher marketing fund revenue primarily due to an increase in the PJMF contribution rate and higher online revenues.
Operating Highlights
The tables below summarize income before income taxes on a reporting segment basis. Alongside the GAAP income before income taxes data, we have included “adjusted” income before income taxes for the three-month period and year ended
Three Months Ended | |||||||||||||||||||||||||||||
Reported |
|
Adjusted |
|
Reported |
|
Adjusted |
|
Adjusted |
|||||||||||||||||||||
|
Special |
|
|
|
Special |
|
|
Increase |
|||||||||||||||||||||
(In thousands) |
2019 |
Items |
2019 |
|
2018 |
Items |
2018 |
|
(Decrease) |
||||||||||||||||||||
$ |
12,486 |
|
$ |
(2,850 |
) |
$ |
9,636 |
|
$ |
3,638 |
|
$ |
(1,629 |
) |
$ |
2,009 |
|
$ |
7,627 |
|
|||||||||
|
8,345 |
|
|
- |
|
|
8,345 |
|
|
4,426 |
|
|
- |
|
|
4,426 |
|
|
3,919 |
|
|||||||||
|
16,669 |
|
|
5,404 |
|
|
22,073 |
|
|
17,599 |
|
|
5,532 |
|
|
23,131 |
|
|
(1,058 |
) |
|||||||||
International |
|
4,195 |
|
|
- |
|
|
4,195 |
|
|
4,065 |
|
|
- |
|
|
4,065 |
|
|
130 |
|
||||||||
All others |
|
81 |
|
|
- |
|
|
81 |
|
|
(778 |
) |
|
- |
|
|
(778 |
) |
|
859 |
|
||||||||
Unallocated corporate expenses |
|
(46,670 |
) |
|
20,000 |
|
|
(26,670 |
) |
|
(43,796 |
) |
|
20,367 |
|
|
(23,429 |
) |
|
(3,241 |
) |
||||||||
Elimination of intersegment profits |
|
70 |
|
|
- |
|
|
70 |
|
|
(406 |
) |
|
- |
|
|
(406 |
) |
|
476 |
|
||||||||
Total income (loss) before income taxes |
$ |
(4,824 |
) |
$ |
22,554 |
|
$ |
17,730 |
|
$ |
(15,252 |
) |
$ |
24,270 |
|
$ |
9,018 |
|
$ |
8,712 |
|
||||||||
Year Ended | ||||||||||||||||||||||||||||
Reported |
|
Adjusted |
|
Reported |
|
Adjusted |
|
Adjusted |
||||||||||||||||||||
|
Special |
|
|
|
Special |
|
|
Increase |
||||||||||||||||||||
(In thousands) |
2019 |
Items |
2019 |
|
2018 |
Items |
2018 |
|
(Decrease) |
|||||||||||||||||||
$ |
33,957 |
|
$ |
(4,739 |
) |
$ |
29,218 |
|
$ |
18,988 |
|
$ |
(1,624 |
) |
$ |
17,364 |
|
$ |
11,854 |
|
||||||||
|
30,439 |
|
|
- |
|
|
30,439 |
|
|
27,961 |
|
|
- |
|
|
27,961 |
|
|
2,478 |
|
||||||||
|
64,362 |
|
|
19,097 |
|
|
83,459 |
|
|
70,732 |
|
|
15,416 |
|
|
86,148 |
|
|
(2,689 |
) |
||||||||
International |
|
19,110 |
|
|
- |
|
|
19,110 |
|
|
14,399 |
|
|
1,913 |
|
|
16,312 |
|
|
2,798 |
|
|||||||
All others |
|
(2,500 |
) |
|
- |
|
|
(2,500 |
) |
|
(6,082 |
) |
|
- |
|
|
(6,082 |
) |
|
3,582 |
|
|||||||
Unallocated corporate expenses |
|
(139,355 |
) |
|
41,720 |
|
|
(97,635 |
) |
|
(118,296 |
) |
|
35,316 |
|
|
(82,980 |
) |
|
(14,655 |
) |
|||||||
Elimination of intersegment profits |
|
(967 |
) |
|
- |
|
|
(967 |
) |
|
(1,005 |
) |
|
- |
|
|
(1,005 |
) |
|
38 |
|
|||||||
Total income before income taxes |
$ |
5,046 |
|
$ |
56,078 |
|
$ |
61,124 |
|
$ |
6,697 |
|
$ |
51,021 |
|
$ |
57,718 |
|
$ |
3,406 |
|
|||||||
Consolidated loss before income taxes of
Domestic Company -owned restaurants income before income taxes increased$7.6 million primarily due to positive comparable sales of 4.1%, lower workers’ compensation, automobile and general insurance costs of$2.0 million , and the favorable impact of the expiration of rewards associated with our Papa Rewards loyalty program.North America commissaries income before income taxes increased$3.9 million primarily due to higher pricing and lower franchise new equipment incentives costs that were previously reported in the North America Franchising segment.- North America Franchising income before income taxes was
$1.0 million lower primarily due to 2018 including a favorable cost reduction related to franchise new equipment incentives. The costs of these incentives are now reported in theNorth America commissaries segment, as noted above. These segment adjustments had no impact on consolidated income before income taxes. Excluding the reclassification, the royalties from North America Franchising increased approximately$2 million as compared to the prior year. - International income before income taxes approximated the prior year as higher royalties and higher
United Kingdom commissary income were offset by higher legal costs. - All others income before income taxes, which primarily includes our online and mobile ordering business, our wholly-owned print and promotions subsidiary and our North America Marketing funds, increased
$900,000 primarily due to higher online revenues, partially offset by the timing of marketing spend. - Unallocated corporate expenses increased
$3.3 million primarily due to higher management incentive and executive severance costs as well as increased legal costs and bad debt expense. These increases were partially offset by a decrease in interest expense of$3.4 million due to lower outstanding debt. Total debt outstanding was$370.0 million as ofDecember 29, 2019 . Outstanding debt decreased$255.0 million fromDecember 30, 2018 , primarily due to the use of proceeds from the issuance of Series B preferred stock to Starboard to repay debt.
For the year ended
Domestic Company -owned restaurants income before income taxes increased approximately$11.9 million for the year endedDecember 29, 2019 primarily due to improved operating costs including lower advertising spend, lower workers’ compensation, automobile and general insurance costs of$4.2 million , and the favorable impact of the expiration of rewards associated with the Papa Rewards loyalty program. These increases were partially offset from the impact of lower comparable sales of 2.7%.North America commissaries income before income taxes increased$2.5 million as 2018 included additional franchise support in the form of lower commissary pricing.- North America Franchising income before income taxes decreased
$2.7 million primarily due to a decrease in comparable sales of 2.0%. - International income before income taxes increased
$2.8 million primarily due to increased royalties and lower marketing spend in theUnited Kingdom . These increases were partially offset by unfavorable foreign exchange rates of approximately$1.3 million and higher legal costs. - All others income before income taxes increased
$3.6 million primarily due to higher online revenues and the timing of marketing spend. - Unallocated corporate expenses increased
$14.7 million primarily due to higher management incentive costs, including equity compensation, as well as increased legal and professional fees not associated with the Special charges. These increases were partially offset by a$5.6 million decrease in interest expense due to lower outstanding debt.
The effective income tax (benefit) and expense for the three months and full year comparable periods are as follows (dollars in thousands):
Three Months Ended |
|
Year Ended |
||||||||||||||||
|
|
|
|
|
||||||||||||||
Income / (loss) before income taxes |
$ |
(4,824 |
) |
$ |
(15,252 |
) |
$ |
5,046 |
|
$ |
6,697 |
|||||||
Income tax (benefit) / expense |
|
(3,147 |
) |
|
(2,027 |
) |
|
(611 |
) |
|
2,624 |
|||||||
Effective tax (benefit) / expense rate |
|
(65.2% |
) |
|
(13.3% |
) |
|
(12.1% |
) |
|
39.2% |
|||||||
The tax benefit for the three months and year ended
The diluted (loss) earnings per share and adjusted diluted earnings per share, excluding Special items, for the three months and full year comparable periods are as follows:
Three Months Ended | Year Ended | |||||||||||||||||
Diluted (loss) earnings per share |
$ |
(0.18 |
) |
$ |
(0.41 |
) |
$ |
(0.24 |
) |
$ |
0.08 |
|||||||
Adjusted diluted earnings per share |
|
0.37 |
|
|
0.18 |
|
|
1.17 |
|
|
1.37 |
|||||||
Free Cash Flow
The company’s free cash flow, a non-GAAP financial measure, for the year end of 2019 and 2018 were as follows (in thousands):
Year End | |||||||||
2019 |
2018 (b) | ||||||||
Net cash provided by operating activities (a) |
$ |
61,749 |
|
$ |
92,454 |
|
|||
Purchases of property and equipment |
|
(37,711 |
) |
|
(42,028 |
) |
|||
Dividends paid to preferred shareholders |
|
(10,020 |
) |
|
- |
|
|||
Free cash flow |
$ |
14,018 |
|
$ |
50,426 |
|
|||
(a) |
The decrease of |
||||||||
(b) |
The year ended |
We define free cash flow as net cash provided by operating activities (from the Consolidated Statements of Cash Flows) less the purchases of property and equipment and dividends paid to preferred shareholders. We view free cash flow as an important measure because it is one factor that management uses in determining the amount of cash available for discretionary investment. Free cash flow is not a term defined by GAAP, and as a result, our measure of free cash flow might not be comparable to similarly titled measures used by other companies. Free cash flow should not be construed as a substitute for or a better indicator of the company’s performance than the company’s GAAP measures.
See the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of our Annual Report on Form 10-K filed with the
Global Restaurant Unit Data
At
Domestic Company- owned |
Franchised North America |
Total North America |
International | System-wide | ||||||||||||
Fourth Quarter | ||||||||||||||||
Beginning - |
621 |
|
2,675 |
|
3,296 |
|
2,047 |
|
5,343 |
|
||||||
Opened |
1 |
|
18 |
|
19 |
|
90 |
|
109 |
|
||||||
Closed |
(2 |
) |
(25 |
) |
(27 |
) |
(30 |
) |
(57 |
) |
||||||
Acquired |
1 |
|
23 |
|
24 |
|
- |
|
24 |
|
||||||
Sold |
(23 |
) |
(1 |
) |
(24 |
) |
- |
|
(24 |
) |
||||||
Ending - |
598 |
|
2,690 |
|
3,288 |
|
2,107 |
|
5,395 |
|
||||||
Year-to-date | ||||||||||||||||
Beginning - |
645 |
|
2,692 |
|
3,337 |
|
1,966 |
|
5,303 |
|
||||||
Opened |
3 |
|
76 |
|
79 |
|
233 |
|
312 |
|
||||||
Closed |
(5 |
) |
(123 |
) |
(128 |
) |
(92 |
) |
(220 |
) |
||||||
Acquired |
1 |
|
46 |
|
47 |
|
- |
|
47 |
|
||||||
Sold |
(46 |
) |
(1 |
) |
(47 |
) |
- |
|
(47 |
) |
||||||
Ending - |
598 |
|
2,690 |
|
3,288 |
|
2,107 |
|
5,395 |
|
||||||
Net unit (decline) growth - 2019 |
(47 |
) |
(2 |
) |
(49 |
) |
141 |
|
92 |
|
||||||
% increase (decrease) |
(7.3 |
%) |
(0.1 |
%) |
(1.5 |
%) |
7.2 |
% |
1.7 |
% |
||||||
The company has added 92 net worldwide units in 2019. Our development pipeline as of
Cash Dividend
The company declared common and preferred stock dividends of
Fourth Quarter 2019 |
First Quarter 2020 |
|||||
Common stock dividends ( |
$ |
7,200 |
$ |
7,300 |
||
Common stock dividends to preferred shareholders ( |
|
1,140 |
|
1,140 |
||
Preferred dividends (3.6% of the investment per annum) |
|
2,270 |
|
2,270 |
||
Total dividends |
$ |
10,610 |
$ |
10,710 |
||
(a) |
Common stock dividends payable to holders of Series B Preferred Stock are on an as-converted to common stock basis | |||||
The declaration and payment of any future dividends on our common stock will be at the discretion of our Board of Directors, subject to the company’s financial results, cash requirements, and other factors deemed relevant by our Board of Directors. The Series B preferred stockholders receive quarterly preferred dividends and common stock dividends on an as-converted to common stock basis.
2020 Key Operating Assumptions and Financial Outlook
In 2020, the company is targeting the following performance:
- GAAP EPS of
$0.60 to$0.90 for the full-year, including anticipated Special charges of$25 million to$30 million (a) - Adjusted EPS of
$1.35 to$1.55 , excluding Special charges that are anticipated for 2020 (a) North America comparable sales of 2.5% to 5.0%- International comparable sales of 1.5% to 4.0%
- Net global new unit growth of 100 to 140 net units
- Income tax rate of 20% to 23%
- Block cheese prices are projected to be in the low to mid
$1.80 - Capital expenditures of
$40 million -$50 million
(a) |
Special charges include the costs associated with the previously announced program to provide assistance to the |
Conference Call and Website Information
A conference call is scheduled for
Investors and others should note that we announce material financial information to our investors using our investor relations website, press releases,
Forward-Looking Statements
Certain matters discussed in this press release and other company communications that are not statements of historical fact constitute forward-looking statements within the meaning of the federal securities laws. Generally, the use of words such as “expect,” “intend,” “estimate,” “believe,” “anticipate,” “will,” “forecast,” “plan,” “project,” or similar words identify forward-looking statements that we intend to be included within the safe harbor protections provided by the federal securities laws. Such forward-looking statements may relate to projections or guidance concerning business performance, revenue, earnings, cash flow, earnings per share, contingent liabilities, resolution of litigation, commodity costs, currency fluctuations, profit margins, unit growth, unit level performance, capital expenditures, restaurant and franchise development, royalty relief, the effectiveness of our strategic turnaround efforts and other business initiatives, marketing efforts, compliance with debt covenants, stockholder and other stakeholder engagement, strategic decisions and actions, share repurchases, dividends, effective tax rates, regulatory changes and impacts, adoption of new accounting standards, and other financial and operational measures. Such statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions, which are difficult to predict and many of which are beyond our control. Therefore, actual outcomes and results may differ materially from those matters expressed or implied in such forward-looking statements. The risks, uncertainties and assumptions that are involved in our forward-looking statements include, but are not limited to:
- increased costs for branding initiatives and launching new advertising and marketing campaigns and promotions to improve consumer sentiment and sales trends, and the risk that such initiatives will not be effective;
- the ability of the company to ensure the long-term success of the brand through significant investments committed to our
U.S. franchise system, including marketing fund investments and royalty relief; - the ability of the company to improve customer sentiment and sales trends through advertising, marketing and promotional activities;
- risks related to social media, including publicity adversely and rapidly impacting our brand and reputation;
- aggressive changes in pricing or other marketing or promotional strategies by competitors, which may adversely affect sales and profitability; and new product and concept developments by food industry competitors;
- changes in consumer preferences or consumer buying habits, including the growing popularity of delivery aggregators, as well as changes in general economic conditions or other factors that may affect consumer confidence and discretionary spending;
- the adverse impact on the company or our results caused by global health concerns, such as coronavirus, product recalls, food quality or safety issues, incidences of foodborne illness, food contamination and other general public health concerns about our Company-owned or franchised restaurants or others in the restaurant industry;
- the effectiveness of our technology investments and changes in unit-level operations;
- the ability of the company and its franchisees to meet planned growth targets and operate new and existing restaurants profitably, including difficulties finding qualified franchisees, store level employees or suitable sites;
- increases in food costs or sustained higher other operating costs. This could include increased employee compensation, benefits, insurance, tax rates, new regulatory requirements or increasing compliance costs;
- increases in insurance claims and related costs for programs funded by the company up to certain retention limits, including medical, owned and non-owned vehicles, workers’ compensation, general liability and property;
- disruption of our supply chain or commissary operations which could be caused by our sole source of supply of cheese or limited source of suppliers for other key ingredients or more generally due to weather, natural disasters including drought, disease, or geopolitical or other disruptions beyond our control;
- increased risks associated with our international operations, including economic and political conditions and risks associated with the withdrawal of the
United Kingdom from theEuropean Union , instability or uncertainty in our international markets, especially emerging markets, fluctuations in currency exchange rates, difficulty in meeting planned sales targets and new store growth; - the impact of current or future claims and litigation and our ability to comply with current, proposed or future legislation that could impact our business including compliance with the
European Union General Data Protection Regulation; - the company's ability to continue to pay dividends to shareholders based upon profitability, cash flows and capital adequacy if restaurant sales and operating results decline;
- failure to effectively manage recent transitions within our executive leadership team or to otherwise successfully execute succession planning;
- disruption of critical business or information technology systems, or those of our suppliers, and risks associated with systems failures and data privacy and security breaches, including theft of confidential company, employee and customer information, including payment cards; and
- changes in Federal or state income, general and other tax laws, rules and regulations and changes in generally accepted accounting principles.
These and other risk factors are discussed in detail in “Part I. Item 1A. – Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended
For more information about the company, please visit www.papajohns.com.
Condensed Consolidated Balance Sheets | ||||||||
2019 |
2018 |
|||||||
(In thousands) | (Note) | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents |
$ |
27,911 |
|
$ |
33,258 |
|
||
Accounts receivable, net |
|
80,921 |
|
|
78,118 |
|
||
Notes receivable, current portion |
|
7,790 |
|
|
5,498 |
|
||
Income tax receivable |
|
4,024 |
|
|
16,146 |
|
||
Inventories |
|
27,529 |
|
|
27,203 |
|
||
Prepaid expenses and other current assets |
|
33,371 |
|
|
36,054 |
|
||
Total current assets |
|
181,546 |
|
|
196,277 |
|
||
Property and equipment, net |
|
211,741 |
|
|
226,894 |
|
||
Finance lease right-of-use assets, net |
|
9,383 |
|
|
- |
|
||
Operating lease right-of-use assets |
|
148,229 |
|
|
- |
|
||
Notes receivable, less current portion, net |
|
33,010 |
|
|
23,259 |
|
||
|
80,340 |
|
|
84,516 |
|
|||
Deferred income taxes, net |
|
1,839 |
|
|
1,137 |
|
||
Other assets |
|
64,633 |
|
|
63,814 |
|
||
Total assets |
$ |
730,721 |
|
$ |
595,897 |
|
||
Liabilities, Series B Convertible Preferred Stock, Redeemable noncontrolling interests and Stockholders' deficit | ||||||||
Current liabilities: | ||||||||
Accounts payable |
$ |
29,141 |
|
$ |
27,106 |
|
||
Income and other taxes payable |
|
7,599 |
|
|
6,590 |
|
||
Accrued expenses and other current liabilities |
|
120,566 |
|
|
129,167 |
|
||
Current deferred revenue |
|
5,624 |
|
|
6,022 |
|
||
Current finance lease liabilities |
|
1,789 |
|
|
- |
|
||
Current operating lease liabilities |
|
23,226 |
|
|
- |
|
||
Current portion of long-term debt |
|
20,000 |
|
|
20,009 |
|
||
Total current liabilities |
|
207,945 |
|
|
188,894 |
|
||
Deferred revenue |
|
14,722 |
|
|
17,250 |
|
||
Long-term finance lease liabilities |
|
7,629 |
|
|
- |
|
||
Long-term operating lease liabilities |
|
125,297 |
|
|
- |
|
||
Long-term debt, less current portion, net |
|
347,290 |
|
|
601,126 |
|
||
Deferred income taxes, net |
|
2,649 |
|
|
7,852 |
|
||
Other long-term liabilities |
|
84,927 |
|
|
79,324 |
|
||
Total liabilities |
|
790,459 |
|
|
894,446 |
|
||
Series B Convertible Preferred Stock |
|
251,133 |
|
|
- |
|
||
Redeemable noncontrolling interests |
|
5,785 |
|
|
5,464 |
|
||
Total Stockholders' deficit |
|
(316,656 |
) |
|
(304,013 |
) |
||
Total liabilities, Series B Convertible Preferred Stock, Redeemable noncontrolling interests and Stockholders' deficit |
$ |
730,721 |
|
$ |
595,897 |
|
||
Note: The Condensed Consolidated Balance Sheets have been derived from the audited consolidated financial statements, restated to reflect the correction of an immaterial error to consolidate the Papa John's |
Condensed Consolidated Statements of Operations | ||||||||||||||||
Three Months Ended | Year Ended | |||||||||||||||
(In thousands, except per share amounts) | (Note) | (Note) | ||||||||||||||
Revenues: | ||||||||||||||||
Domestic company-owned restaurant sales |
$ |
161,459 |
|
$ |
162,474 |
|
$ |
652,053 |
|
$ |
692,380 |
|
||||
|
18,613 |
|
|
17,769 |
|
|
71,828 |
|
|
79,293 |
|
|||||
|
161,917 |
|
|
148,458 |
|
|
612,652 |
|
|
609,866 |
|
|||||
International revenues |
|
27,081 |
|
|
25,513 |
|
|
102,924 |
|
|
110,349 |
|
||||
Other revenues |
|
48,444 |
|
|
43,352 |
|
|
179,791 |
|
|
170,983 |
|
||||
Total revenues |
|
417,514 |
|
|
397,566 |
|
|
1,619,248 |
|
|
1,662,871 |
|
||||
Costs and expenses: | ||||||||||||||||
Operating costs (excluding depreciation and amortization | ||||||||||||||||
shown separately below): | ||||||||||||||||
Domestic company-owned restaurant expenses |
|
127,197 |
|
|
135,959 |
|
|
526,237 |
|
|
577,658 |
|
||||
|
149,255 |
|
|
142,194 |
|
|
569,180 |
|
|
575,103 |
|
|||||
International expenses |
|
15,188 |
|
|
15,313 |
|
|
57,702 |
|
|
67,775 |
|
||||
Other expenses |
|
46,573 |
|
|
42,652 |
|
|
175,592 |
|
|
170,556 |
|
||||
General and administrative expenses |
|
70,104 |
|
|
58,855 |
|
|
223,460 |
|
|
193,534 |
|
||||
Depreciation and amortization |
|
12,179 |
|
|
11,548 |
|
|
47,281 |
|
|
46,403 |
|
||||
Total costs and expenses |
|
420,496 |
|
|
406,521 |
|
|
1,599,452 |
|
|
1,631,029 |
|
||||
Refranchising gains (losses), net |
|
2,850 |
|
|
1,629 |
|
|
4,739 |
|
|
(289 |
) |
||||
Operating income (loss) |
|
(132 |
) |
|
(7,326 |
) |
|
24,535 |
|
|
31,553 |
|
||||
Investment income |
|
(145 |
) |
|
76 |
|
|
1,104 |
|
|
817 |
|
||||
Interest expense |
|
(4,547 |
) |
|
(8,002 |
) |
|
(20,593 |
) |
|
(25,673 |
) |
||||
Income (loss) before income taxes |
|
(4,824 |
) |
|
(15,252 |
) |
|
5,046 |
|
|
6,697 |
|
||||
Income tax (benefit) expense |
|
(3,146 |
) |
|
(2,027 |
) |
|
(611 |
) |
|
2,624 |
|
||||
Net income (loss) before attribution to noncontrolling interests |
|
(1,678 |
) |
|
(13,225 |
) |
|
5,657 |
|
|
4,073 |
|
||||
Net (income) loss attributable to noncontrolling interests |
|
(464 |
) |
|
357 |
|
|
(791 |
) |
|
(1,599 |
) |
||||
Net income (loss) attributable to the company |
$ |
(2,142 |
) |
$ |
(12,868 |
) |
$ |
4,866 |
|
$ |
2,474 |
|
||||
Calculation of net (loss) income for earnings per share: | ||||||||||||||||
Net income (loss) attributable to the company |
$ |
(2,142 |
) |
$ |
(12,868 |
) |
$ |
4,866 |
|
$ |
2,474 |
|
||||
Preferred stock dividends and accretion |
|
(3,470 |
) |
|
- |
|
|
(12,499 |
) |
|
- |
|
||||
Net (loss) income attributable to common shareholders |
$ |
(5,612 |
) |
$ |
(12,868 |
) |
$ |
(7,633 |
) |
$ |
2,474 |
|
||||
Basic (loss) earnings per common share |
$ |
(0.18 |
) |
$ |
(0.41 |
) |
$ |
(0.24 |
) |
$ |
0.08 |
|
||||
Diluted (loss) earnings per common share |
$ |
(0.18 |
) |
$ |
(0.41 |
) |
$ |
(0.24 |
) |
$ |
0.08 |
|
||||
Basic weighted average common shares outstanding |
|
31,783 |
|
|
31,534 |
|
|
31,632 |
|
|
32,083 |
|
||||
Diluted weighted average common shares outstanding |
|
31,783 |
|
|
31,534 |
|
|
31,632 |
|
|
32,299 |
|
||||
Dividends declared per common share |
$ |
0.225 |
|
$ |
0.225 |
|
$ |
0.900 |
|
$ |
0.900 |
|
||||
Note: The Condensed Consolidated Statements of Operations are unaudited and have been restated to reflect the correction of an immaterial error to consolidate the Papa John's |
Condensed Consolidated Statements of Cash Flows | |||||||
Year Ended | |||||||
(In thousands) | |||||||
(Note) | |||||||
Operating activities | |||||||
Net income before attribution to noncontrolling interests |
$ |
5,657 |
|
$ |
4,073 |
|
|
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Provision for uncollectible accounts and notes receivable |
|
3,139 |
|
|
6,849 |
|
|
Depreciation and amortization |
|
47,281 |
|
|
46,403 |
|
|
Deferred income taxes |
|
(3,764 |
) |
|
1,620 |
|
|
Preferred stock option mark-to-market adjustment |
|
5,914 |
|
— |
|||
Stock-based compensation expense |
|
15,303 |
|
|
9,936 |
|
|
(Gain) loss on refranchising |
|
(4,739 |
) |
|
289 |
|
|
Other |
|
3,203 |
|
|
5,677 |
|
|
Changes in operating assets and liabilities: | |||||||
Accounts receivable |
|
(5,329 |
) |
|
2,157 |
|
|
Income tax receivable |
|
12,122 |
|
|
(12,157 |
) |
|
Inventories |
|
(326 |
) |
|
3,093 |
|
|
Prepaid expenses |
|
792 |
|
|
(1,039 |
) |
|
Other current assets |
|
(277 |
) |
|
4,834 |
|
|
Other assets and liabilities |
|
(6,354 |
) |
|
1,464 |
|
|
Accounts payable |
|
2,035 |
|
|
(400 |
) |
|
Income and other taxes payable |
|
1,009 |
|
|
(3,971 |
) |
|
Accrued expenses and other current liabilities |
|
(11,331 |
) |
|
21,753 |
|
|
Deferred revenue |
|
(2,586 |
) |
|
1,873 |
|
|
Net cash provided by operating activities |
|
61,749 |
|
|
92,454 |
|
|
Investing activities | |||||||
Purchases of property and equipment |
|
(37,711 |
) |
|
(42,028 |
) |
|
Loans issued |
|
(15,864 |
) |
|
(10,463 |
) |
|
Repayments of loans issued |
|
5,616 |
|
|
5,805 |
|
|
Proceeds from divestitures of restaurants |
|
13,495 |
|
|
7,707 |
|
|
Other |
|
1,889 |
|
|
180 |
|
|
Net cash used in investing activities |
|
(32,575 |
) |
|
(38,799 |
) |
|
Financing activities | |||||||
Proceeds from issuance of preferred stock |
|
252,530 |
|
|
- |
|
|
Issuance costs associated with preferred stock |
|
(7,527 |
) |
|
- |
|
|
Repayments of term loan |
|
(15,000 |
) |
|
(20,000 |
) |
|
Net (repayments) proceeds of revolving credit facilities |
|
(240,026 |
) |
|
163,585 |
|
|
Debt issuance costs |
|
- |
|
|
(1,913 |
) |
|
Dividends paid to common stockholders |
|
(28,552 |
) |
|
(28,985 |
) |
|
Dividends paid to preferred stockholders |
|
(10,020 |
) |
|
- |
|
|
Tax payments for equity award issuances |
|
(1,433 |
) |
|
(1,521 |
) |
|
Proceeds from exercise of stock options |
|
16,010 |
|
|
2,699 |
|
|
Acquisition of Company common stock |
|
- |
|
|
(158,049 |
) |
|
Contributions from noncontrolling interest holders |
|
840 |
|
|
- |
|
|
Distributions to noncontrolling interest holders |
|
(870 |
) |
|
(4,269 |
) |
|
Other |
|
(526 |
) |
|
356 |
|
|
Net cash used in financing activities |
|
(34,574 |
) |
|
(48,097 |
) |
|
Effect of exchange rate changes on cash and cash equivalents |
|
53 |
|
|
(191 |
) |
|
Change in cash and cash equivalents |
|
(5,347 |
) |
|
5,367 |
|
|
Cash and cash equivalents at beginning of period |
|
33,258 |
|
|
27,891 |
|
|
Cash and cash equivalents at end of period |
$ |
27,911 |
|
$ |
33,258 |
|
|
Note: The Condensed Consolidated Statements of Cash Flows are unaudited and have been restated to reflect the correction of an immaterial error to consolidate the Papa John's |
View source version on businesswire.com: https://www.businesswire.com/news/home/20200226005139/en/
Vice President, Investor Relations
502-261-7272
Source: Papa John’s
Steve Coke
Vice President, Investor Relations
502-261-7272