Papa John’s Announces Third Quarter 2018 Results
Highlights
- Loss per diluted share of
($0.41) and adjusted earnings per diluted share of$0.20 in the third quarter of 2018, excluding the impact of Special items; adjusted earnings per diluted share down 66.7% from the third quarter 2017 of$0.60 System-wide North America comparable sales decrease of 9.8%- International comparable sales decrease of 3.3%; total international sales increase of 10.0%, driven by unit growth
- Company completed the refranchising of 31 company-owned restaurants in
Minnesota during the third quarter - Cash flow from operations of
$98.8 million ; free cash flow of$68.2 million for the first nine months of 2018 - 2018 EPS outlook narrowed to a range of
$1.30 to $1.60
Operating Highlights
(In thousands, except per share amounts) |
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Three Months Ended | Nine Months Ended | ||||||||||||||||||
Sept 30, |
Sept 24, |
Increase / |
Sept 30, |
Sept 24, |
Increase / |
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Total revenue | $ | 364,007 | $ | 431,709 | (15.7 | %) | $ | 1,199,335 | $ | 1,315,753 | (8.8 | %) | |||||||
(Loss)/ Income before income taxes | (19,953 | ) | 30,949 | (164.5 | %) | 22,114 | 108,278 | (79.6 | %) | ||||||||||
Net (loss)/ income | (13,033 | ) | 21,817 | (159.7 | %) | 15,495 | 73,783 | (79.0 | %) | ||||||||||
Diluted (loss)/ earnings per share | $ | (0.41 | ) | $ | 0.60 | (168.3 | %) | $ | 0.47 | $ | 2.02 | (76.7 | %) | ||||||
Adjusted diluted earnings per share | $ | 0.20 | $ | 0.60 | (66.7 | %) | $ | 1.18 | $ | 2.02 | (41.6 | %) | |||||||
All operating highlights are compared to the same period of the prior year, unless otherwise noted.
Adjusted financial results excluding Special items, which impact comparability, are summarized in the following reconciliation. The table 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 | Nine Months Ended | |||||||||||||
Sept 30, |
Sept 24, |
Sept 30, |
Sept 24, |
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(In thousands, except per share amounts) | 2018 | 2017 | 2018 | 2017 | ||||||||||
GAAP (Loss)/Income before income taxes | $ | (19,953 | ) | $ | 30,949 | $ | 22,114 | $ | 108,278 | |||||
Special items: | ||||||||||||||
Special charges (1) | 24,833 | - | 24,833 | - | ||||||||||
Refranchising losses, net (2) | - | - | 1,918 | - | ||||||||||
Adjusted income before income taxes | $ | 4,880 | $ | 30,949 | $ | 48,865 | $ | 108,278 | ||||||
GAAP (Loss)/Net income | $ | (13,033 | ) | $ | 21,817 | $ | 15,495 | $ | 73,783 | |||||
Special items: | ||||||||||||||
Special charges (3) | 19,270 | - | 19,270 | - | ||||||||||
Refranchising losses, net (3) | - | - | 1,488 | - | ||||||||||
Tax impact of China refranchising | - | - | 2,435 | - | ||||||||||
Adjusted net income | $ | 6,237 | $ | 21,817 | $ | 38,688 | $ | 73,783 | ||||||
GAAP Diluted (Loss)/ Earnings per share | $ | (0.41 | ) | $ | 0.60 | $ | 0.47 | $ | 2.02 | |||||
Special items: | ||||||||||||||
Special charges | 0.61 | - | 0.59 | - | ||||||||||
Refranchising losses, net | - | - | 0.05 | - | ||||||||||
Tax impact of China refranchising | - | - | 0.07 | - | ||||||||||
Adjusted diluted earnings per share | $ | 0.20 | $ | 0.60 | $ | 1.18 | $ | 2.02 | ||||||
(1) 'Special charges' is defined as the costs and expenses in response to recent events including: (i) re-imaging costs at nearly all domestic restaurants and costs to replace or write-off certain branded assets of approximately $3.6 million, (ii) financial assistance to domestic franchisees, such as short-term royalty reductions, in an effort to mitigate closings of approximately $9.9 million, and (iii) costs associated with a third-party audit of the culture at Papa John's commissioned by the Special Committee of the Board of Directors as well as costs associated with implementing new policies and procedures to address any findings as a result of the audit, and additional legal and advisory costs, including costs associated with the activities of the Special Committee totaling approximately $11.3 million. | ||||||||||||||
(2) The refranchising losses of $1.9 million before tax and $1.5 million net of tax for the nine months ended September 30, 2018 are primarily due to the China refranchise of the 34 company-owned restaurants and the quality control center in China that occurred during the second quarter of 2018. We also had $2.4 million of additional tax expense associated with the China refranchise. This additional tax expense is primarily attributable to the required recapture of operating losses previously taken by Papa John’s International. | ||||||||||||||
(3) Tax effect was calculated using the company's marginal rate of 22.4%. | ||||||||||||||
The non-GAAP adjusted results shown above 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 the financial information excluding these 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 analyze trends.
Consolidated revenues decreased
- lower comparable sales for
North America restaurants that resulted in lower company-owned restaurant revenues, lower royalties and decreasedNorth America commissary sales, - the refranchising of 62 company-owned restaurants in
North America which reduced total revenues on a quarter and year-to-date basis approximately$15.0 million and$27.2 million , respectively, compared to the prior year comparable periods, - the short-term royalty reductions that are part of our franchise assistance program of approximately
$9.9 million , which are included in the previously mentioned special charges, and - decreases in International revenues due to the refranchising of the company-owned restaurants and quality control center in
China of approximately$4.1 million , partially offset by higher International royalties due to an increase in equivalent units; - these decreases were offset by increases in revenues of approximately
$1.5 million and$5.7 million , respectively, primarily due to the required reporting of franchise marketing fund contributions as revenues (previously netted with expenses) under the newly adopted revenue recognition standard, Revenue from Contracts with Customers (“Topic 606”); see the “Revenue Recognition and Income Statement Presentation” section below for more details.
The consolidated loss before income taxes was
Domestic Company -owned restaurants operating margin decreased$12.0 million , or 3.3% as a percentage of related revenues, primarily due to lower comparable sales of 13.2% and higher non-owned automobile costs. Additionally, the adoption of Topic 606 reduced the restaurant operating margin due to the revised method of accounting for the customer loyalty program.North America franchise royalties and fees decreased$12.8 million , or 49.9%, as compared to the third quarter of 2017, primarily due to the short-term royalty reductions granted to the entireNorth America system as part of the franchise assistance program, which is included in the Special charges. Royalties were further reduced due to the negative 8.6% comparable sales and an increase in other franchise royalty waivers not associated with the Special charges.North America commissary operating margin remained relatively flat but increased 0.5% as a percentage of related revenues primarily due to lower operating costs.- International operating margin decreased
$400,000 primarily due to lower income from theUnited Kingdom quality control center on lower sales margins, partially offset by higher royalties from increased equivalent units. As a percentage of international revenues, the operating margin increased 3.1% primarily due to the divestiture of ourChina operations in the second quarter of 2018. - Other operating margin decreased
$2.1 million primarily due to higher costs related to various technology initiatives and increased advertising spend in theUnited Kingdom . The “Revenue Recognition and Income Statement Presentation” section below provides more information on our “Other revenues” and “Other expenses” income statement line items. - General and administrative (“G&A”) costs increased
$19.7 million , or 55.1%, primarily due to costs associated with the special charges of approximately$14.9 million as previously detailed. The remainder of the increase is due to higher technology initiative costs and increases in professional and legal fees for matters not associated with the special charges. The increase for the quarter also includes the cost for our annual operators’ conference due to the shift in the timing from the second quarter in 2017 to the third quarter in 2018. - Net interest expense increased
$3.4 million for the third quarter due to an increase in average outstanding debt, including the impact of share repurchases, as well as higher interest rates. - For the nine months ended
September 30, 2018 consolidated income before income taxes was$22.1 million , a decrease of$86.2 million compared to the nine months endedSeptember 24, 2017 . Income before income taxes, as a percentage of consolidated revenues, was 1.8% for the nine months endedSeptember 30, 2018 compared to 8.2% for the nine months endedSeptember 24, 2017 . These decreases were primarily due to the same reasons noted above for the three-month period. Additionally, for the nine months endedSeptember 30, 2018 , theNorth America commissary operating margin decreased$1.9 million compared to the corresponding period in 2017 primarily due to lower sales volumes and the company’s commitment to maintain a lower overall profit margin as additional support to franchisees.
Operating margin is not a measurement defined by GAAP and should not be considered in isolation, or as an alternative to evaluation of the company’s financial performance. In addition to an evaluation of GAAP consolidated (loss) income before income taxes, we believe the presentation of operating margin is beneficial as it represents an additional measure used by the company to further evaluate operating efficiency and performance of the various business units. Additionally, operating margin discussion may be helpful for comparison within the industry. The operating margin results detailed herein can be calculated by business unit based on the specific revenue and operating expense line items on the face of the Condensed Consolidated Statements of Operations. Consolidated (loss) income before income taxes reported includes G&A expenses, depreciation and amortization, refranchising losses and net interest expense that have been excluded from this operating margin calculation.
The effective income tax (benefit) and expense for the three and nine-month comparable periods are as follows:
Three Months Ended | Nine Months Ended | ||||||||||||||
Sept 30, 2018 | Sept 24, 2017 | Sept 30, 2018 | Sept 24, 2017 | ||||||||||||
Income/(loss) before income taxes | $ | (19,953 | ) | $ | 30,949 | $ | 22,114 | $ | 108,278 | ||||||
Income tax (benefit)/expense | (7,359 | ) | 8,280 | 4,663 | 30,728 | ||||||||||
Effective tax (benefit)/expense rate |
(36.9% |
) |
26.8% | 21.1% | 28.4% | ||||||||||
The decrease for the both the three and nine months ended
Diluted loss per share was
Three Months Ended | Nine Months Ended | ||||||||||||
Sept 30, |
Sept 24, |
Sept 30, |
Sept 24, |
||||||||||
Global restaurant sales (decline) / growth (a) | (6.6 | %) | 4.4 | % | (3.3 | %) | 4.5 | % | |||||
Global restaurant sales (decline) / growth, excluding the impact of foreign currency (a) | (5.9 | %) | 5.0 | % | (3.2 | %) | 5.2 | % | |||||
Comparable sales (decline) / growth (b) | |||||||||||||
Domestic company-owned restaurants | (13.2 | %) | 1.7 | % | (8.7 | %) | 2.3 | % | |||||
North America franchised restaurants | (8.6 | %) | 0.7 | % | (6.4 | %) | 1.2 | % | |||||
System-wide North America restaurants | (9.8 | %) | 1.0 | % | (7.0 | %) | 1.5 | % | |||||
System-wide international restaurants | (3.3 | %) | 5.3 | % | (1.3 | %) | 5.0 | % | |||||
(a) |
Includes both company-owned and franchised restaurant sales. |
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(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 the United States are reported on a constant dollar basis, which excludes the impact of foreign currency translation. |
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We believe
Free Cash Flow
The company’s free cash flow, a non-GAAP financial measure, was as follows for the first nine months of 2018 and 2017 (in thousands):
Nine Months Ended | |||||||||
Sept 30, | Sept 24, | ||||||||
2018 | 2017 | ||||||||
Net cash provided by operating activities (a) | $ | 98,812 | $ | 114,917 | |||||
Purchases of property and equipment (b) | (30,593 | ) | (43,195 | ) | |||||
Free cash flow | $ | 68,219 | $ | 71,722 | |||||
(a) |
The decrease of $16.1 million was primarily due to lower net income, partially offset by favorable changes in working capital items. |
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(b) |
The decrease of $12.6 million was primarily due to higher capital expenditures in 2017 related to the construction of the company’s new domestic commissary in Georgia, which opened in the third quarter of 2017. |
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We define free cash flow as net cash provided by operating activities (from the Consolidated Statements of Cash Flows) less the amounts spent on the purchase of property and equipment. We view free cash flow as an important liquidity measure because it is one factor that management uses in determining the amount of cash available for investment. However, it does not represent residual cash flows available for discretionary expenditures. 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 liquidity than the company’s GAAP measures.
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
Amended Credit Agreement
As previously disclosed, the Company amended its Credit Agreement on
Global Restaurant Unit Data
At
Domestic |
Franchised |
Total North |
International | System-wide | |||||||||||
Third Quarter |
|||||||||||||||
Beginning - July 1, 2018 | 678 | 2,729 | 3,407 | 1,840 | 5,247 | ||||||||||
Opened | 1 | 16 | 17 | 79 | 96 | ||||||||||
Closed | (1 | ) | (67 | ) | (68 | ) | (28 | ) | (96 | ) | |||||
Acquired | - | 31 | 31 | - | 31 | ||||||||||
Sold | (31 | ) | - | (31 | ) | - | (31 | ) | |||||||
Ending - September 30, 2018 | 647 | 2,709 | 3,356 | 1,891 | 5,247 | ||||||||||
|
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Year-to-date |
|||||||||||||||
Beginning - December 31, 2017 | 708 | 2,733 | 3,441 | 1,758 | 5,199 | ||||||||||
Opened | 6 | 60 | 66 | 193 | 259 | ||||||||||
Closed | (5 | ) | (146 | ) | (151 | ) | (60 | ) | (211 | ) | |||||
Acquired | - | 62 | 62 | 34 | 96 | ||||||||||
Sold | (62 | ) | - | (62 | ) | (34 | ) | (96 | ) | ||||||
Ending - September 30, 2018 | 647 | 2,709 | 3,356 | 1,891 | 5,247 | ||||||||||
Unit growth (decline) | (61 | ) | (24 | ) | (85 | ) | 133 | 48 | |||||||
% increase (decrease) | (8.6 | %) | (0.9 | %) | (2.5 | %) | 7.6 | % | 0.9 | % | |||||
The company has added 146 net worldwide units over the trailing four quarters ended
Non-traditional restaurant closings in our
Share Repurchase Activity
The following table reflects our share repurchases for the three and nine months ended
Period |
Number |
Cost | ||||||
Three months ended September 30, 2018 | 207 | $ | 9,609 | |||||
Nine months ended September 30, 2018 | 2,698 | 158,000 | ||||||
There were 31.6 million and 32.5 million diluted weighted average shares outstanding for the three and nine months ended
As previously disclosed, on
The company has not purchased shares since
Cash Dividend
We paid a cash dividend of approximately
Revenue Recognition and Income Statement Presentation
On
(in thousands, except for per share amounts) | |||||||||
Three Months Ended | Nine Months Ended | ||||||||
Sept 30, 2018 | Sept 30, 2018 | ||||||||
Total revenue impact (a) | $ | 1,486 | $ | 5,736 | |||||
Pre-tax income impact (b) | (1,239 | ) | (3,099 | ) | |||||
Diluted (loss) / earnings per share impact | (0.03 | ) | (0.07 | ) | |||||
(a) |
The increase in total revenues of $1.5 million and $5.7 million for the three and nine months ended September 30, 2018, respectively, is primarily due to the requirement to present revenues and expenses related to marketing funds we control on a “gross” basis. This increase was partially offset by lower company-owned restaurant revenues attributable to the revised method of accounting for the loyalty program. The marketing fund gross up is reported in the new financial statement line items, Other revenues and Other expenses, as discussed further below. |
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(b) |
The $1.2 million and $3.1 million decreases in pre-tax income for the three and nine months ended September 30, 2018, respectively, are primarily due to the revised method of accounting for the loyalty program, marketing fund co-ops we control and franchise fees. |
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Additional detail on the adoption and the 2018 impact of the new revenue recognition standard can be found in our Form 10-Q for the quarterly period ended
While not required as part of the adoption of Topic 606, our income statement includes newly created Other revenues and Other expenses line items. Other revenues and Other expenses include the Topic 606 “gross up” of revenues and expenses derived from certain domestic and international marketing fund co-ops we control, as previously discussed. Additionally, Other revenues and Other expenses include various reclassifications from
Update of Previously Issued Financial Guidance
The negative publicity surrounding the company’s brand that began in
- financial assistance to domestic franchisees, such as short-term royalty reductions,
- contributions to the national marketing fund in the fourth quarter to increase marketing and promotional activities,
- costs associated with the continuation of the third-party audit of the culture at Papa John’s commissioned by the Special Committee as well as costs associated with implementing new policies and procedures to address any findings of the audit, and
- additional legal and advisory costs, including costs associated with the implementation of plans and activities of the Special Committee.
We are narrowing our previously issued financial outlook for certain metrics and reaffirming our other outlook metrics, as follows:
Updated Outlook | Previous Outlook | |||
North America Comparable Sales | (6.5%) to (8.5%) | (7.0%) to (10.0%) | ||
International Comparable Sales | (2%) to 1% | (2%) to 1% | ||
Adjusted Diluted EPS (1) | $1.30 - $1.60 | $1.30 - $1.80 | ||
Net global unit growth | 0.0% - 3.0% | 0.0% - 3.0% | ||
Debt / Adjusted EBITDA ratio | Above 4.0x | Above 4.0x | ||
Income tax rate (2) | 20% - 24% | 20% - 24% | ||
Capital Expenditures | $45 - $50 million | $45 - $50 million | ||
Block Cheese Prices per lb. | High $1.50s | Low $1.60s | ||
(1) This adjusted diluted EPS guidance excludes the impact of the restaurant divestitures and the Special charges mentioned above, which have an estimated EPS impact of $1.32 to $1.56 for 2018. We believe excluding these items from adjusted EPS is meaningful to our financial statement users as it presents our core results excluding unusual, non-recurring items. | ||||
(2) The tax rate excludes any tax impact from the divestiture of our China company-owned operations and the Special charges mentioned above. | ||||
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 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, contingent liabilities, resolution of litigation, commodity costs, profit margins, unit growth, unit level performance, capital expenditures, ability of the company to mitigate negative consumer sentiment through advertising, marketing and promotional activity, corporate governance, future costs related to the company’s response to the negative consumer sentiment, management reorganizations, compliance with debt covenants, shareholder and other stakeholder engagement, strategic decisions and actions, the ongoing cultural audit and investigation, share repurchases, dividends, effective tax rates, the impact of the Tax Cuts and Job Act and the 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:
- negative publicity and consumer sentiment as a result of statements and actions by the company’s founder and former spokesperson, which may continue to cause sales to decline and/or change consumers’ acceptance of and enthusiasm for our brand;
- the results of the previously announced external audit and investigation the Special Committee is overseeing regarding the company’s existing processes, policies and systems related to diversity and inclusion, supplier and vendor engagement and the company’s culture;
- costs the company expects to continue to incur as a result of the recent negative publicity and negative consumer sentiment, including costs related to the audit and investigation, costs associated with the operations of the Special Committee, any costs associated with related litigation, legal fees, and increased costs for branding initiatives and launching a new advertising and marketing campaign and promotions to mitigate negative consumer sentiment and negative sales trends;
- costs the company expects to continue to incur relating to franchisee financial assistance to mitigate store closings;
- the ability of the company to mitigate the negative consumer sentiment through advertising, marketing and promotional activities;
- the company’s ability to regain lost customers;
- 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 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 initiatives to improve our brand proposition and operating results, including marketing, advertising and public relations initiatives, technology investments and changes in unit-level operations;
- the risk that any new advertising or marketing campaign may not be effective in increasing sales;
- 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, 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; - maintaining compliance with amended debt covenants under our credit agreement if restaurant sales and operating results continue to decline;
- 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 continue to decline;
- failure to effectively 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;
- changes in Federal or state income, general and other tax laws, rules and regulations, including changes from the Tax Cuts and Jobs Act and any related Treasury regulations, rules or interpretations if and when issued; and
- changes in generally accepted accounting principles including new standards for revenue recognition and leasing.
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.
Papa John's International, Inc. and Subsidiaries | ||||||||||||||||||
Condensed Consolidated Statements of Operations | ||||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||||
September 30, 2018 | September 24, 2017 | September 30, 2018 | September 24, 2017 | |||||||||||||||
(In thousands, except per share amounts) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||||
Revenues: | ||||||||||||||||||
Domestic Company-owned restaurant sales | $ | 158,285 | $ | 196,267 | $ | 529,906 | $ | 605,919 | ||||||||||
North America franchise royalties and fees | 12,806 | 25,567 | 61,524 | 79,762 | ||||||||||||||
North America commissary | 146,240 | 164,028 | 461,408 | 495,427 | ||||||||||||||
International | 25,653 | 28,771 | 84,836 | 81,638 | ||||||||||||||
Other revenues | 21,023 | 17,076 | 61,661 | 53,007 | ||||||||||||||
Total revenues | 364,007 | 431,709 | 1,199,335 | 1,315,753 | ||||||||||||||
Costs and expenses: | ||||||||||||||||||
Operating costs (excluding depreciation and amortization shown separately below): |
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Domestic company-owned restaurant expenses | 135,836 | 161,867 | 440,936 | 489,719 | ||||||||||||||
North America commissary | 137,928 | 155,572 | 432,909 | 465,001 | ||||||||||||||
International expenses | 15,184 | 17,910 | 52,462 | 50,973 | ||||||||||||||
Other expenses | 22,002 | 15,906 | 63,658 | 50,935 | ||||||||||||||
General and administrative expenses | 55,462 | 35,758 | 133,903 | 112,420 | ||||||||||||||
Depreciation and amortization | 11,585 | 11,181 | 34,855 | 32,292 | ||||||||||||||
Total costs and expenses | 377,997 | 398,194 | 1,158,723 | 1,201,340 | ||||||||||||||
Refranchising loss, net | - | - | (1,918 | ) | - | |||||||||||||
Operating (loss) income | (13,990 | ) | 33,515 | 38,694 | 114,413 | |||||||||||||
Net interest expense | (5,963 | ) | (2,566 | ) | (16,580 | ) | (6,135 | ) | ||||||||||
(Loss) Income before income taxes | (19,953 | ) | 30,949 | 22,114 | 108,278 | |||||||||||||
Income tax (benefit) expense | (7,359 | ) | 8,280 | 4,663 | 30,728 | |||||||||||||
Net (loss) income before attribution to noncontrolling interests | (12,594 | ) | 22,669 | 17,451 | 77,550 | |||||||||||||
Income attributable to noncontrolling interests | (439 | ) | (852 | ) | (1,956 | ) | (3,767 | ) | ||||||||||
Net (loss) income attributable to the company | $ | (13,033 | ) | $ | 21,817 | $ | 15,495 | $ | 73,783 | |||||||||
Calculation of (loss) income for (loss) earnings per share: | ||||||||||||||||||
Net (loss) income attributable to the Company | $ | (13,033 | ) | $ | 21,817 | $ | 15,495 | $ | 73,783 | |||||||||
Change in noncontrolling interest redemption value | - | 237 | - | 1,419 | ||||||||||||||
Net income attributable to participating securities | - | (89 | ) | (147 | ) | (305 | ) | |||||||||||
Net (loss) income attributable to common shareholders | $ | (13,033 | ) | $ | 21,965 | $ | 15,348 | $ | 74,897 | |||||||||
Basic (loss) earnings per common share | $ | (0.41 | ) | $ | 0.61 | $ | 0.48 | $ | 2.05 | |||||||||
Diluted (loss) earnings per common share | $ | (0.41 | ) | $ | 0.60 | $ | 0.47 | $ | 2.02 | |||||||||
Basic weighted average common shares outstanding | 31,573 | 36,146 | 32,265 | 36,563 | ||||||||||||||
Diluted weighted average common shares outstanding | 31,573 | 36,581 | 32,489 | 37,047 | ||||||||||||||
Dividends declared per common share | $ | 0.225 | $ | 0.225 | $ | 0.675 | $ | 0.625 | ||||||||||
Papa John's International, Inc. and Subsidiaries | ||||||||
Condensed Consolidated Balance Sheets | ||||||||
September 30, | December 31, | |||||||
2018 | 2017 | |||||||
(In thousands) | (Unaudited) | (Note) | ||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 24,880 | $ | 22,345 | ||||
Accounts receivable, net | 53,157 | 64,644 | ||||||
Notes receivable, net | 6,466 | 4,333 | ||||||
Income tax receivable | 11,051 | 3,903 | ||||||
Inventories | 29,311 | 30,620 | ||||||
Prepaid expenses and other current assets | 27,506 | 38,016 | ||||||
Assets held for sale | - | 6,133 | ||||||
Total current assets | 152,371 | 169,994 | ||||||
Property and equipment, net | 224,510 | 234,331 | ||||||
Notes receivable, less current portion, net | 16,097 | 15,568 | ||||||
Goodwill | 84,830 | 86,892 | ||||||
Deferred income taxes, net | 700 | 585 | ||||||
Other assets | 72,654 | 48,183 | ||||||
Total assets | $ | 551,162 | $ | 555,553 | ||||
Liabilities and stockholders' equity (deficit) | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 32,355 | $ | 32,006 | ||||
Income and other taxes payable | 8,964 | 10,561 | ||||||
Accrued expenses and other current liabilities | 100,081 | 70,293 | ||||||
Deferred revenue current | 2,389 | - | ||||||
Current portion of long-term debt | 20,000 | 20,000 | ||||||
Total current liabilities | 163,789 | 132,860 | ||||||
Deferred revenue | 14,946 | 2,652 | ||||||
Long-term debt, less current portion, net | 555,755 | 446,565 | ||||||
Deferred income taxes, net | 7,812 | 12,546 | ||||||
Other long-term liabilities | 77,604 | 60,146 | ||||||
Total liabilities | 819,906 | 654,769 | ||||||
Redeemable noncontrolling interests | 5,979 | 6,738 | ||||||
Total stockholders' (deficit) | (274,723 | ) | (105,954 | ) | ||||
Total liabilities, redeemable noncontrolling interests and stockholders' (deficit) | $ | 551,162 | $ | 555,553 | ||||
Note: The Condensed Consolidated Balance Sheets have been derived from the audited consolidated financial statements, but do not include all information and footnotes required by accounting principles generally accepted in the United States for a complete set of financial statements. |
||||||||
Papa John's International, Inc. and Subsidiaries | ||||||||
Condensed Consolidated Statements of Cash Flows | ||||||||
Nine Months Ended | ||||||||
(In thousands) | September 30, 2018 | September 24, 2017 | ||||||
(Unaudited) | (Unaudited) | |||||||
Operating activities | ||||||||
Net income before attribution to noncontrolling interests | $ | 17,451 | $ | 77,550 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
Provision for uncollectible accounts and notes receivable | 4,047 | (353 | ) | |||||
Depreciation and amortization | 34,855 | 32,292 | ||||||
Deferred income taxes | (227 | ) | 1,283 | |||||
Stock-based compensation expense | 7,073 | 8,094 | ||||||
Loss on refranchising | 1,918 | - | ||||||
Other | 6,952 | 3,004 | ||||||
Changes in operating assets and liabilities, net of acquisitions: | ||||||||
Accounts receivable | 7,410 | (5,131 | ) | |||||
Income tax receivable | (7,373 | ) | 1,795 | |||||
Inventories | 986 | (3,234 | ) | |||||
Prepaid expenses and other current assets | 12,679 | 7,965 | ||||||
Other assets and liabilities | (4,899 | ) | (4,092 | ) | ||||
Accounts payable | 769 | (2,480 | ) | |||||
Income and other taxes payable | (1,597 | ) | 1,779 | |||||
Accrued expenses and other current liabilities | 18,772 | (3,229 | ) | |||||
Deferred revenue | (4 | ) | (326 | ) | ||||
Net cash provided by operating activities | 98,812 | 114,917 | ||||||
Investing activities | ||||||||
Purchases of property and equipment | (30,593 | ) | (43,195 | ) | ||||
Loans issued | (3,511 | ) | (2,376 | ) | ||||
Repayments of loans issued | 3,872 | 3,151 | ||||||
Acquisitions, net of cash acquired | - | (21 | ) | |||||
Proceeds from divestitures of restaurants | 7,707 | - | ||||||
Other | 160 | 25 | ||||||
Net cash used in investing activities | (22,365 | ) | (42,416 | ) | ||||
Financing activities | ||||||||
Proceeds from issuance of term loan | - | 400,000 | ||||||
Repayments of term loan | (15,000 | ) | - | |||||
Net proceeds (repayments) of revolving credit facility | 123,600 | (300,575 | ) | |||||
Debt issuance costs | - | (3,181 | ) | |||||
Cash dividends paid | (21,861 | ) | (22,886 | ) | ||||
Tax payments for equity award issuances | (1,474 | ) | (2,411 | ) | ||||
Proceeds from exercise of stock options | 2,592 | 5,974 | ||||||
Acquisition of Company common stock | (158,049 | ) | (121,705 | ) | ||||
Distributions to noncontrolling interest holders | (3,928 | ) | (4,606 | ) | ||||
Other | 276 | 580 | ||||||
Net cash used in financing activities | (73,844 | ) | (48,810 | ) | ||||
Effect of exchange rate changes on cash and cash equivalents | (68 | ) | 289 | |||||
Change in cash and cash equivalents | 2,535 | 23,980 | ||||||
Cash and cash equivalents at beginning of period | 22,345 | 15,563 | ||||||
Cash and cash equivalents at end of period | $ | 24,880 | $ | 39,543 |
View source version on businesswire.com: https://www.businesswire.com/news/home/20181106005912/en/
Source: Papa John’s
Papa John’s International, Inc.
Joe Smith, 502-261-7272
Senior Vice President, Chief Financial Officer