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Papa Johns Announces Second Quarter 2023 Financial Results; Increases Cash Dividend by 10%

Papa John’s International, Inc. (NASDAQ: PZZA) (“Papa Johns®”) today announced financial results for the second quarter ended June 25, 2023.

Highlights

  • North America comparable sales were down 1% compared with the second quarter of 2022 as the strength of Domestic Company-owned restaurants was offset by lower North America franchised restaurant comparable sales; International comparable sales were down 1% from a year ago and improved 5% from the first quarter.
  • 47 net unit openings in the second quarter driven by International growth; On track to achieve 270 to 310 net new units in 2023.
  • Global system-wide restaurant sales were $1.22 billion, a 2%(a) increase from the prior year second quarter.
  • Total revenues of $515 million were down 2% from the second quarter a year ago driven by lower revenues in our North American commissary segment due to commodity price declines.
  • Diluted earnings per common share was $0.54, compared with $0.70 for the second quarter of 2022; Adjusted diluted earnings per common share(b) was $0.59, compared with $0.74 for the second quarter a year ago.
  • Announced 10% increase in annual dividend rate to $1.84 per share; declared third quarter dividend of $0.46.

“We are pleased with the solid execution that our teams have demonstrated in what continues to be a challenging operating environment,” said Rob Lynch, President and CEO. “Our company restaurants continued their strong performance with positive comp sales growth and year-over-year margin improvement above and beyond the benefits of moderating food costs. However, this solid performance was not enough to offset the lower-than-anticipated comps our franchisees experienced during the quarter. That being said, our entire system saw sequential sales improvement throughout the quarter with positive North America comp sales in June. This positive momentum has carried over, and accelerated, into the third quarter and we expect it to continue as we optimize our system’s revenue management strategies and expand one of our most popular pizza platforms with the recent introduction of Garlic Epic Stuffed Crust Pizza.”

Commenting on the Company’s International operations, Lynch stated, “Our international business is a long-term growth driver for Papa Johns. We’ve recently established a corporate-owned restaurant portfolio in the UK, our largest international market, allowing us to build a similar success model to the one we’ve created in the US. This model accelerates our ability to scale our company’s capabilities with franchisees in the UK, and worldwide, to grow comps and new unit development. While we know there will be macro-economic challenges ahead, particularly in the short term, we’re confident that we can improve sales and profitability within our UK market, and in our international segment overall.”

Lynch concluded by stating, “The level of operating and fiscal discipline our team has implemented across our business over the past year is remarkable. Our continued investments in sales-driving capabilities and operational excellence, combined with the strength of our balance sheet, gives us confidence that we will produce positive comp sales and attractive new unit development growth in the back half of 2023 and over the long-term.”

____________________________________________________

(a)

 

Excludes the impact of foreign currency.

(b)

Represents a non-GAAP financial measure. See “Non-GAAP Measures” for a reconciliation to the most comparable US GAAP measure.

Financial Highlights

 

 

Three Months Ended

 

Six Months Ended

(In thousands, except per share amounts)

 

June 25,

2023

 

June 26,

2022

 

Increase (Decrease)

 

June 25,

2023

 

June 26,

2022

 

Increase (Decrease)

Total revenues

 

$

514,530

 

$

522,665

 

$

(8,135

)

 

$

1,041,579

 

$

1,065,357

 

$

(23,778

)

Operating income

 

$

34,912

 

$

38,904

 

$

(3,992

)

 

$

72,708

 

$

53,339

 

$

19,369

 

Adjusted operating income (a)

 

$

36,881

 

$

40,411

 

$

(3,530

)

 

$

76,033

 

$

85,642

 

$

(9,609

)

Net income attributable to the Company

 

$

17,768

 

$

25,433

 

$

(7,665

)

 

$

40,144

 

$

35,927

 

$

4,217

 

Diluted earnings per common share

 

$

0.54

 

$

0.70

 

$

(0.16

)

 

$

1.20

 

$

0.99

 

$

0.21

 

Adjusted diluted earnings per common share (a)

 

$

0.59

 

$

0.74

 

$

(0.15

)

 

$

1.28

 

$

1.69

 

$

(0.41

)

 

(a) Represents a Non-GAAP financial measure. See “Non-GAAP Measures” for a reconciliation to the most comparable US GAAP measures.

In the second quarter of 2023, the Company completed the purchase of 91 formerly franchised restaurants in the United Kingdom. The restaurants are now operating as International Company-owned restaurants effective June 2, 2023. Our second quarter results include royalty revenues for these restaurants for the period until June 2, 2023, and the restaurants are consolidated after this date with results reflected in International revenues and expenses.

Total revenues of $514.5 million decreased $8.1 million, or 1.6%, in the second quarter of 2023 compared with the prior year period. Excluding the impact of purchasing the 91 International stores in 2023, total revenues decreased $9.8 million, or 1.9%, compared with the prior period. The revenue decline was driven by lower North American commissary revenues, driven by lower sales volume and decreased commodity prices in 2023 as compared to 2022. The decrease was partially offset by comparable sales growth from Domestic Company-owned restaurants.

For the second quarter of 2023, global system-wide restaurant sales were $1.22 billion, up 2.0% from a year ago (excluding the impact of foreign currency). The increase reflected higher equivalent units from net restaurant openings primarily in International markets.

Operating income of $34.9 million for the second quarter of 2023 decreased $4.0 million compared with the second quarter last year. Adjusted operating income(a) was $36.9 million, down $3.5 million from the prior year period. The second quarter of 2023 reflects higher operating income from Domestic Company-owned restaurants as the Back to BETTER initiative drove increased comparable sales and labor efficiencies in this category compared to the prior year. Second quarter 2023 International operating income declined as compared to the prior year as a result of lower comparable sales and incremental marketing costs related to our efforts to reposition the UK market. General and administrative expenses increased as the second quarter of 2023 reflected increased variable compensation expense and costs related to the franchise operating conference, which was held in April 2023 for the first time since 2019.

Diluted earnings per common share was $0.54 for the second quarter of 2023 compared with $0.70 in the second quarter of 2022. Adjusted diluted earnings per common share(a) was $0.59 for the second quarter of 2023 compared with $0.74 in the second quarter of 2022. These changes were driven by the same factors impacting operating income and adjusted operating income as discussed above. In addition, diluted earnings per common share and adjusted diluted earnings per common share reflected higher interest expense compared with the second quarter of 2022. Interest expense increased in 2023 largely due to higher borrowings used to fund share repurchases.

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 SEC for additional information concerning our operating results for the three and six months ended June 25, 2023.

Global Restaurant Sales Information

Global restaurant and comparable sales information for the second quarter and six months ended June 25, 2023, compared with the second quarter and six months ended June 26, 2022 are as follows (See “Supplemental Information and Financial Statements” below for related definitions):

 

 

Three Months Ended

 

Six Months Ended

Amounts below exclude the impact of foreign currency

 

June 25,

2023

 

June 26,

2022

 

June 25,

2023

 

June 26,

2022

Comparable sales growth (decline):

 

 

 

 

 

 

 

 

Domestic Company-owned restaurants

 

2.2

%

 

(1.5

)%

 

2.8

%

 

(1.3

)%

North America franchised restaurants

 

(2.3

)%

 

1.4

%

 

(1.6

)%

 

2.1

%

North America restaurants

 

(1.4

)%

 

0.9

%

 

(0.7

)%

 

1.4

%

International restaurants

 

(0.7

)%

 

(8.0

)%

 

(3.3

)%

 

(3.6

)%

Total comparable sales growth (decline)

 

(1.3

)%

 

(1.4

)%

 

(1.3

)%

 

0.1

%

System-wide restaurant sales growth (decline):

 

 

 

 

 

 

 

 

Domestic Company-owned restaurants

 

2.5

%

 

1.2

%

 

3.7

%

 

8.9

%

North America franchised restaurants

 

(0.6

)%

 

2.7

%

 

0.1

%

 

1.4

%

North America restaurants

 

%

 

2.4

%

 

0.8

%

 

2.8

%

International restaurants (a)

 

8.6

%

 

3.4

%

 

5.8

%

 

8.3

%

Total global system-wide restaurant sales growth (decline)

 

2.0

%

 

2.6

%

 

2.0

%

 

4.2

%

 

(a) The six months ended June 25, 2023 and June 26, 2022 exclude the impact of franchisee suspended restaurants.

Global Restaurant Unit Data

As of June 25, 2023, there were 5,780 Papa Johns restaurants operating in 48 countries and territories, as follows:

Second Quarter

Domestic Company Owned

 

Franchised North America

 

Total North America

 

International Company Owned

 

International

Franchised

 

Total International

 

System-wide

Beginning - March 26, 2023

520

 

2,864

 

 

3,384

 

 

 

2,349

 

 

2,349

 

 

5,733

 

Opened

 

13

 

 

13

 

 

 

55

 

 

55

 

 

68

 

Closed

 

(8

)

 

(8

)

 

 

(13

)

 

(13

)

 

(21

)

Acquired

1

 

 

 

1

 

 

91

 

 

 

91

 

 

92

 

Sold

 

(1

)

 

(1

)

 

 

(91

)

 

(91

)

 

(92

)

Ending - June 25, 2023

521

 

2,868

 

 

3,389

 

 

91

 

2,300

 

 

2,391

 

 

5,780

 

Net Unit Growth

1

 

4

 

 

5

 

 

91

 

(49

)

 

42

 

 

47

 

Trailing four quarters net store growth/(decline)

1

 

32

 

 

33

 

 

91

 

85

 

 

176

 

 

209

 

Free Cash Flow

Free cash flow, a non-GAAP financial measure which the Company defines as net cash provided by operating activities, less purchases of property and equipment, was $59.0 million for the six months ended June 25, 2023, compared with $14.8 million in the prior year period. The year over year change primarily reflects higher cash flow from operating activities as a result of favorable working capital changes partially offset by increases in purchases of property and equipment.

 

 

Six Months Ended

(in thousands)

 

June 25,

2023

 

June 26,

2022

Net cash provided by operating activities

 

$

93,735

 

 

$

45,585

 

Purchases of property and equipment

 

 

(34,759

)

 

 

(30,744

)

Free cash flow

 

$

58,976

 

 

$

14,841

 

We view free cash flow as an important financial 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.

Cash Dividend

The Company paid cash dividends of $13.9 million ($0.42 per common share) in the second quarter of 2023. On July 31, 2023, our Board of Directors declared a third quarter dividend of $0.46 per common share, representing a 10% increase from the previous dividend. The dividend will be paid on August 25, 2023 to stockholders of record as of the close of business on August 14, 2023.

Conference Call

Papa Johns will host a call with analysts today, August 3, 2023, at 8:00 a.m. Eastern Time. To access the conference call or webcast, please register online at: ir.papajohns.com/events-presentations. A replay of the webcast will be available two hours after the call and archived on the same web page.

About Papa Johns

Papa John’s International, Inc. (NASDAQ: PZZA) opened its doors in 1984 with one goal in mind: BETTER INGREDIENTS. BETTER PIZZA.® Papa Johns believes that using high-quality ingredients leads to superior quality pizzas. Its original dough is made of only six ingredients and is fresh, never frozen. Papa Johns tops its pizzas with real cheese made from mozzarella, pizza sauce made with vine-ripened tomatoes that go from vine to can in the same day and meat free of fillers. It was the first national pizza delivery chain to announce the removal of artificial flavors and synthetic colors from its entire food menu. Papa Johns is co-headquartered in Atlanta, Ga. and Louisville, Ky. and is the world’s third-largest pizza delivery company with more than 5,700 restaurants in approximately 50 countries and territories. For more information about the Company or to order pizza online, visit www.papajohns.com or download the Papa Johns mobile app for iOS or Android.

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,” “outlook”, “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, revenue, earnings, cash flow, earnings per share, share repurchases, the current economic environment, commodity and labor costs, currency fluctuations, profit margins, net unit growth, unit level performance, capital expenditures, restaurant and franchise development, labor shortages, labor cost increases, inflation, royalty relief, franchisee support, the effectiveness of our menu innovations and other business initiatives, investments in product and digital innovation, marketing efforts and investments, liquidity, compliance with debt covenants, impairments, strategic decisions and actions, dividends, effective tax rates, regulatory changes and impacts, investments in the UK market, 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.

Our forward-looking statements are based on our assumptions which are based on currently available information. Actual outcomes and results may differ materially from those matters expressed or implied in our forward-looking statements as a result of various factors, including but not limited to risks related to: deteriorating economic conditions in the U.S. and international markets, including the United Kingdom; labor shortages at Company and/or franchised stores and our quality control centers; increases in labor costs, commodity costs or sustained higher other operating costs, including as a result of supply chain disruption, inflation or climate change; the potential for delayed new store openings, both domestically and internationally, or lower net unit development due to changing circumstances outside of our control; the increased risk of phishing, ransomware and other cyber-attacks; risks and disruptions to the global economy and our business related to the conflict in Ukraine and other international conflicts; risks related to a possible economic recession or downturn that could reduce consumer spending or demand; and continuing risks related to outbreak of COVID-19 and other health crises. These and other risks, uncertainties and assumptions that are involved in our forward-looking statements are discussed in detail in “Part I. Item 1A. – Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 25, 2022 as updated by those included in our Quarterly Report on Form 10-Q for the quarter ended June 25, 2023. We undertake no obligation to update publicly any forward-looking statements, whether as a result of future events, new information or otherwise, except as required by law.

For more information about the company, please visit www.papajohns.com.

Supplemental Information and Financial Statements

Definitions

“Comparable sales” represents sales for the same base of restaurants for the same fiscal periods. “Comparable sales growth (decline)” represents the change in year-over-year comparable sales. “Global system-wide restaurant sales” represents total restaurant sales for all Company-owned and franchised restaurants open during the comparable periods, and “Global system-wide restaurant sales growth (decline)” represents the change in global system-wide restaurant sales year-over-year. Comparable sales, Comparable sales growth (decline), Global system-wide restaurant sales and Global system-wide sales growth (decline) exclude franchisees for which we suspended corporate support.

“Equivalent units” represents the number of restaurants open at the beginning of a given period, adjusted for restaurants opened, closed, acquired or sold during the period on a weighted average basis.

We believe Domestic Company-owned, North America franchised, and International Comparable sales growth (decline) and Global system-wide restaurant sales information is useful in analyzing our results since our franchisees pay royalties and marketing fund contributions that are based on a percentage of franchise sales. Comparable sales and Global system-wide restaurant 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. Franchise sales also generate commissary revenue in the United States and in certain international markets. Comparable sales growth (decline) and Global system-wide restaurant sales information is also useful for comparison to industry trends and evaluating the strength of our brand. Management believes the presentation of Global system-wide restaurant sales growth, excluding the impact of foreign currency, provides investors with useful information regarding underlying sales trends and the impact of new unit growth without being impacted by swings in the external factor of foreign currency. Franchise restaurant sales are not included in the Company’s revenues.

Non-GAAP Measures

In addition to the results provided in accordance with U.S. GAAP, we provide certain non-GAAP measures, which present results on an adjusted basis. These are supplemental measures of performance that are not required by or presented in accordance with U.S. GAAP and include the following: adjusted operating income, adjusted net income attributable to common shareholders and adjusted diluted earnings per common share. We believe that our non-GAAP financial measures enable investors to assess the operating performance of our business relative to our performance based on U.S. GAAP results and relative to other companies. We believe that the disclosure of these non-GAAP measures is useful to investors as they reflect metrics that our management team and Board utilize to evaluate our operating performance, allocate resources and administer employee incentive plans. The most directly comparable U.S. GAAP measures to adjusted operating income, adjusted net income attributable to common shareholders and adjusted diluted earnings per common share are operating income, net income attributable to common shareholders and diluted earnings per common share, respectively. 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 U.S. GAAP results. The table below reconciles our GAAP financial results to our non-GAAP financial measures.

 

 

Three Months Ended

 

Six Months Ended

(In thousands, except per share amounts)

 

June 25,

2023

 

June 26,

2022

 

June 25,

2023

 

June 26,

2022

 

 

 

 

 

 

 

 

 

Operating income

 

$

34,912

 

 

$

38,904

 

 

$

72,708

 

 

$

53,339

 

UK repositioning and acquisition-related costs (a)

 

 

1,308

 

 

 

 

 

 

1,308

 

 

 

 

Refranchising and impairment losses (b)

 

 

 

 

 

 

 

 

 

 

 

25,796

 

Legal settlement (c)

 

 

 

 

 

 

 

 

 

 

 

5,000

 

Other costs (d)

 

 

661

 

 

 

1,507

 

 

 

2,017

 

 

 

1,507

 

Adjusted operating income

 

$

36,881

 

 

$

40,411

 

 

$

76,033

 

 

$

85,642

 

 

 

 

 

 

 

 

 

 

Net income attributable to common shareholders

 

$

17,768

 

 

$

25,240

 

 

$

40,144

 

 

$

35,693

 

UK repositioning and acquisition-related costs (a)

 

 

1,308

 

 

 

 

 

 

1,308

 

 

 

 

Refranchising and impairment losses (b)

 

 

 

 

 

 

 

 

 

 

 

25,796

 

Legal settlement (c)

 

 

 

 

 

 

 

 

 

 

 

5,000

 

Other costs (d)

 

 

661

 

 

 

1,507

 

 

 

2,017

 

 

 

1,507

 

Tax effect of adjustments (e)

 

 

(449

)

 

 

(339

)

 

 

(758

)

 

 

(7,269

)

Adjusted net income attributable to common shareholders (f)

 

$

19,288

 

 

$

26,408

 

 

$

42,711

 

 

$

60,727

 

 

 

 

 

 

 

 

 

 

Diluted earnings per common share

 

$

0.54

 

 

$

0.70

 

 

$

1.20

 

 

$

0.99

 

UK repositioning and acquisition-related costs (a)

 

 

0.04

 

 

 

 

 

 

0.04

 

 

 

 

Refranchising and impairment losses (b)

 

 

 

 

 

 

 

 

 

 

 

0.72

 

Legal settlement (c)

 

 

 

 

 

 

 

 

 

 

 

0.14

 

Other costs (d)

 

 

0.02

 

 

 

0.05

 

 

 

0.06

 

 

 

0.04

 

Tax effect of adjustments (e)

 

 

(0.01

)

 

 

(0.01

)

 

 

(0.02

)

 

 

(0.20

)

Adjusted diluted earnings per common share (f)

 

$

0.59

 

 

$

0.74

 

 

$

1.28

 

 

$

1.69

 

Footnotes to Non-GAAP Financial Measures

(a)

Represents costs associated with repositioning the UK portfolio as well as transaction costs related to the acquisition of stores from franchisees.

(b)

Refranchising and impairment losses consisted of the following pre-tax adjustments:

 

 

Six Months Ended

 

(In thousands)

June 26,

2022

 

Refranchising impairment loss (1)

$

8,412

 

Ukraine-related charge (2)

 

17,384

 

Total adjustment

$

25,796

 

(1)

 

Represents a one-time, non-cash charge of $8.4 million ($0.23 loss per diluted share) recorded in the first quarter of 2022 associated with the refranchising of the Company’s controlling interest in the 90-restaurant joint venture, recorded as Refranchising and impairment loss.

   

 

(2)

 

Represents a one-time non-cash charge of $17.4 million ($0.48 loss per diluted share) recorded in the first quarter of 2022 related to the reserve of certain loans and impairment of reacquired franchise rights related to the conflict in Ukraine and subsequent international government actions and sanctions, which were recorded as Refranchising and impairment loss of $2.8 million and General and administrative expenses of $14.6 million.

 

(c)

Represents an accrual of a certain legal settlement, recorded in General and administrative expenses.
 

(d)

Represents severance and related costs associated with the transition of certain executives incurred during the three and six-month periods ended  June 25, 2023  and June 26, 2022, which were recorded in General and administrative expenses.
 

(e)

The tax effect on non-GAAP adjustments was calculated by applying the marginal tax rates of 22.8% and 22.5% for the three and six-month periods ended June 25, 2023 and June 26, 2022, respectively.
 
(f) Amounts shown exclude the impact of allocation of undistributed earnings to participating securities.

Papa John’s International, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

 

(In thousands, except per share amounts)

 

June 25,

2023

 

December 25,

2022

 

 

(Unaudited)

 

 

Assets

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

43,772

 

 

$

47,373

 

Accounts receivable, net

 

 

94,255

 

 

 

102,533

 

Notes receivable, current portion

 

 

4,850

 

 

 

6,848

 

Income tax receivable

 

 

2,097

 

 

 

8,780

 

Inventories

 

 

37,515

 

 

 

41,382

 

Prepaid expenses and other current assets

 

 

56,086

 

 

 

44,123

 

Assets held for sale (a)

 

 

3,427

 

 

 

 

Total current assets

 

 

242,002

 

 

 

251,039

 

Property and equipment, net

 

 

264,393

 

 

 

249,793

 

Finance lease right-of-use assets, net

 

 

34,418

 

 

 

24,941

 

Operating lease right-of-use assets

 

 

171,550

 

 

 

172,425

 

Notes receivable, less current portion, net

 

 

15,809

 

 

 

21,248

 

Goodwill

 

 

76,623

 

 

 

70,616

 

Other assets

 

 

68,848

 

 

 

74,165

 

Total assets

 

$

873,643

 

 

$

864,227

 

 

 

 

 

 

Liabilities, Redeemable noncontrolling interests and Stockholders’ deficit

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable

 

$

55,351

 

 

$

62,316

 

Income and other taxes payable

 

 

8,148

 

 

 

8,766

 

Accrued expenses and other current liabilities

 

 

163,273

 

 

 

142,535

 

Current deferred revenue

 

 

19,587

 

 

 

21,272

 

Current finance lease liabilities

 

 

9,190

 

 

 

6,850

 

Current operating lease liabilities

 

 

25,715

 

 

 

23,418

 

Current portion of long-term debt

 

 

15,529

 

 

 

 

Total current liabilities

 

 

296,793

 

 

 

265,157

 

Deferred revenue

 

 

21,726

 

 

 

23,204

 

Long-term finance lease liabilities

 

 

26,486

 

 

 

19,022

 

Long-term operating lease liabilities

 

 

159,170

 

 

 

160,905

 

Long-term debt, less current portion, net

 

 

768,820

 

 

 

597,069

 

Other long-term liabilities

 

 

65,106

 

 

 

68,317

 

Total liabilities

 

 

1,338,101

 

 

 

1,133,674

 

 

 

 

 

 

Redeemable noncontrolling interests

 

 

1,021

 

 

 

1,217

 

 

 

 

 

 

Stockholders’ deficit:

 

 

 

 

Common stock ($0.01 par value per share; issued 49,209 at June 25, 2023 and 49,138 at December 26, 2022)

 

 

492

 

 

 

491

 

Additional paid-in capital

 

 

445,964

 

 

 

449,829

 

Accumulated other comprehensive loss

 

 

(7,289

)

 

 

(10,135

)

Retained earnings

 

 

207,461

 

 

 

195,856

 

Treasury stock (16,815 shares at June 25, 2023 and 14,402 shares at December 26, 2022, at cost)

 

 

(1,127,669

)

 

 

(922,434

)

Total stockholders’ deficit

 

 

(481,041

)

 

 

(286,393

)

Noncontrolling interests in subsidiaries

 

 

15,562

 

 

 

15,729

 

Total Stockholders’ deficit

 

 

(465,479

)

 

 

(270,664

)

Total Liabilities, Redeemable noncontrolling interests and Stockholders’ deficit

 

$

873,643

 

 

$

864,227

 

 

(a) Represents vacant land adjacent to the Company’s Louisville office.

Papa John’s International, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(Unaudited)

 

 

 

Three Months Ended

 

Six Months Ended

(In thousands, except per share amounts)

 

June 25,

2023

 

June 26,

2022

 

June 25,

2023

 

June 26,

2022

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

Domestic Company-owned restaurant sales

 

$

175,780

 

 

$

171,411

 

 

$

355,646

 

 

$

370,176

 

North America franchise royalties and fees

 

 

34,711

 

 

 

34,917

 

 

 

70,783

 

 

 

69,185

 

North America commissary revenues

 

 

206,980

 

 

 

219,383

 

 

 

419,546

 

 

 

429,062

 

International revenues

 

 

34,608

 

 

 

31,958

 

 

 

66,071

 

 

 

66,575

 

Other revenues

 

 

62,451

 

 

 

64,996

 

 

 

129,533

 

 

 

130,359

 

Total revenues

 

 

514,530

 

 

 

522,665

 

 

 

1,041,579

 

 

 

1,065,357

 

Costs and expenses:

 

 

 

 

 

 

 

 

Operating costs (excluding depreciation and amortization shown separately below):

 

 

 

 

 

 

 

 

Domestic Company-owned restaurant expenses

 

 

143,705

 

 

 

142,026

 

 

 

291,489

 

 

 

303,687

 

North America commissary expenses

 

 

190,468

 

 

 

204,470

 

 

 

386,883

 

 

 

401,560

 

International expenses

 

 

20,435

 

 

 

19,236

 

 

 

37,746

 

 

 

39,150

 

Other expenses

 

 

58,996

 

 

 

60,648

 

 

 

120,074

 

 

 

121,203

 

General and administrative expenses

 

 

50,324

 

 

 

44,646

 

 

 

102,268

 

 

 

110,584

 

Depreciation and amortization

 

 

15,690

 

 

 

12,735

 

 

 

30,411

 

 

 

24,674

 

Total costs and expenses

 

 

479,618

 

 

 

483,761

 

 

 

968,871

 

 

 

1,000,858

 

Refranchising and impairment loss

 

 

 

 

 

 

 

 

 

 

 

(11,160

)

Operating income

 

 

34,912

 

 

 

38,904

 

 

 

72,708

 

 

 

53,339

 

Net interest expense

 

 

(11,275

)

 

 

(6,081

)

 

 

(20,296

)

 

 

(10,344

)

Income before income taxes

 

 

23,637

 

 

 

32,823

 

 

 

52,412

 

 

 

42,995

 

Income tax expense

 

 

5,778

 

 

 

7,093

 

 

 

12,007

 

 

 

5,838

 

Net income before attribution to noncontrolling interests

 

 

17,859

 

 

 

25,730

 

 

 

40,405

 

 

 

37,157

 

Net income attributable to noncontrolling interests

 

 

(91

)

 

 

(297

)

 

 

(261

)

 

 

(1,230

)

Net income attributable to the Company

 

$

17,768

 

 

$

25,433

 

 

$

40,144

 

 

$

35,927

 

 

 

 

 

 

 

 

 

 

Calculation of net income for earnings per share:

 

 

 

 

 

 

 

 

Net income attributable to the Company

 

$

17,768

 

 

$

25,433

 

 

$

40,144

 

 

$

35,927

 

Dividends paid to participating securities

 

 

 

 

 

(82

)

 

 

 

 

 

(141

)

Net income attributable to participating securities

 

 

 

 

 

(111

)

 

 

 

 

 

(93

)

Net income attributable to common shareholders

 

$

17,768

 

 

$

25,240

 

 

$

40,144

 

 

$

35,693

 

 

 

 

 

 

 

 

 

 

Basic earnings per common share

 

$

0.55

 

 

$

0.71

 

 

$

1.20

 

 

$

1.00

 

Diluted earnings per common share

 

$

0.54

 

 

$

0.70

 

 

$

1.20

 

 

$

0.99

 

 

 

 

 

 

 

 

 

 

Basic weighted average common shares outstanding

 

 

32,563

 

 

 

35,624

 

 

 

33,359

 

 

 

35,775

 

Diluted weighted average common shares outstanding

 

 

32,650

 

 

 

35,824

 

 

 

33,487

 

 

 

36,032

 

 

 

 

 

 

 

 

 

 

Dividends declared per common share

 

$

0.42

 

 

$

0.35

 

 

$

0.84

 

 

$

0.70

 

Papa John’s International, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

 

 

Six Months Ended

(In thousands)

 

June 25,

2023

 

June 26,

2022

 

 

 

 

 

Operating activities

 

 

 

 

Net income before attribution to noncontrolling interests

 

$

40,405

 

 

$

37,157

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

Provision for allowance for credit losses on accounts and notes receivable

 

 

595

 

 

 

15,558

 

Depreciation and amortization

 

 

30,411

 

 

 

24,674

 

Refranchising and impairment loss

 

 

 

 

 

11,160

 

Deferred income taxes

 

 

3,664

 

 

 

(2,993

)

Stock-based compensation expense

 

 

8,498

 

 

 

9,100

 

Other

 

 

(452

)

 

 

(2,071

)

Changes in operating assets and liabilities, net of acquisitions:

 

 

 

 

Accounts receivable

 

 

4,299

 

 

 

(9,177

)

Income tax receivable

 

 

6,683

 

 

 

5,369

 

Inventories

 

 

4,109

 

 

 

(3,815

)

Prepaid expenses and other current assets

 

 

46

 

 

 

(3,901

)

Other assets and liabilities

 

 

140

 

 

 

(5,379

)

Accounts payable

 

 

(8,174

)

 

 

12,742

 

Income and other taxes payable

 

 

(514

)

 

 

(3,175

)

Accrued expenses and other current liabilities

 

 

7,203

 

 

 

(37,456

)

Deferred revenue

 

 

(3,178

)

 

 

(2,208

)

Net cash provided by operating activities

 

 

93,735

 

 

 

45,585

 

Investing activities

 

 

 

 

Purchases of property and equipment

 

 

(34,759

)

 

 

(30,744

)

Notes issued

 

 

(4,374

)

 

 

(1,098

)

Repayments of notes issued

 

 

3,224

 

 

 

6,743

 

Acquisitions, net of cash acquired

 

 

 

 

 

(1,250

)

Other

 

 

182

 

 

 

238

 

Net cash used in investing activities

 

 

(35,727

)

 

 

(12,523

)

Financing activities

 

 

 

 

Net proceeds of revolving credit facilities

 

 

186,529

 

 

 

55,000

 

Proceeds from exercise of stock options

 

 

682

 

 

 

1,908

 

Acquisition of Company common stock

 

 

(210,348

)

 

 

(75,471

)

Dividends paid to common stockholders

 

 

(28,485

)

 

 

(25,101

)

Tax payments for equity award issuances

 

 

(6,108

)

 

 

(7,526

)

Distributions to noncontrolling interests

 

 

(323

)

 

 

(835

)

Other

 

 

(3,567

)

 

 

1,348

 

Net cash used in financing activities

 

 

(61,620

)

 

 

(50,677

)

Effect of exchange rate changes on cash and cash equivalents

 

 

11

 

 

 

(871

)

Change in cash and cash equivalents

 

 

(3,601

)

 

 

(18,486

)

Cash and cash equivalents at beginning of period

 

 

47,373

 

 

 

70,610

 

Cash and cash equivalents at end of period

 

$

43,772

 

 

$

52,124

 

 

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