Papa John’s Announces Repurchase and Conversion of All Convertible Preferred Stock Owned by Starboard Value LP
Following Transaction,
The Preferred Shares, which were acquired by
Pursuant to the agreement, the Company will repurchase 31% of the outstanding Preferred Shares, representing approximately 1.6 million shares of common stock on an as-converted basis, and
President & CEO
As a result of the repurchase and conversion, the Company’s fully diluted common stock share count will increase by approximately 3.5 million shares and Starboard’s 3.6% preferential dividend on the Preferred Shares, which amounted to
The transaction will be financed using cash on hand with the balance coming from the Company’s existing revolving credit facility. The repurchase of the Preferred Shares from
The transaction was negotiated by an independent committee of the Papa John’s Board of Directors formed for the purpose of evaluating a possible transaction involving the Preferred Shares. Lazard acted as financial advisor and Hogan Lovells and Richards, Layton & Finger acted as legal advisors to the independent committee of the Board in connection with the transaction.
About Papa John’s
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 include or may relate to projections or guidance concerning business performance, earnings, earnings per share, cash flow, the impact and benefits of the Series B Preferred Shares repurchase and conversion, corporate governance, financing, liquidity, compliance with debt covenants, strategic decisions and actions, dividends, regulatory changes and impacts, 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, risks and uncertainties related to the ability to realize the anticipated benefits of the Series B Preferred Shares repurchase and conversion, risks related to the debt financing for the transaction, risks and uncertainties related to the capital markets, and those other risk factors discussed in detail in “Part I. Item 1A. – Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended
Exhibit – As Reported Versus Pro Forma Diluted Earnings Per Common Share
Three Months Ended |
|||
(in thousands, except per share amounts) |
As Reported |
Adjustments |
Pro Forma |
Net income attributable to the company |
|
|
|
Dividends paid to participating securities and
|
(3,527) |
3,415 |
(112) |
Net income attributable to participating
|
(3,243) |
2,953 |
(290) |
Net income attributable to common shareholders |
|
|
|
Diluted weighted average common shares
|
33,090 |
3,458 |
36,548 |
Diluted earnings per common share |
|
|
|
Pro forma diluted earnings per common share were calculated to reflect the impact of the repurchase and conversion of the Preferred Shares, assuming that the transaction had occurred at the end of 2020. The only items considered are those that directly resulted from the repurchase and conversion of the Preferred Shares.
The Company calculates diluted earnings per common share using the two-class method, and the Company will continue to have participating securities outstanding following this transaction. The
-
GAAP net income attributable to common shareholders of
$27.1 million would have increased to$33.3 million due to a net reduction in dividends paid and elimination of undistributed earnings being allocated to Starboard’s participating securities, partially offset by incremental interest expense as a result of the assumed draw down on the revolving credit facility. - Diluted weighted average common shares outstanding (GAAP) of 33.1 million shares would have increased to 36.5 million shares due to the Preferred Shares converted to approximately 3.5 million common shares; as a result of the repurchase, the remaining Preferred Shares, representing approximately 1.6 million common shares on an as-converted basis, did not impact the diluted weighted average common shares outstanding.
1 See the accompanying exhibit for details on the pro forma presentation.
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Papa John’s:
Investors:
Chief Financial Officer
502-261-7272
Ann_Gugino@papajohns.com
SVP, Financial Operations, Accounting and Reporting
502-261-7272
Steve_Coke@papajohns.com
Media:
SVP, Communications & Corporate Affairs
502-261-4189
Madeline_Chadwick@papajohns.com
646-569-5711
JMathews@gagnierfc.com
Source: Papa John’s