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Papa Johns Announces 2022 Fourth Quarter and Full Year Financial Results

Global system-wide restaurant sales up 3%(a) for full year

Third straight year of positive North America comparable sales

System-wide units up 4.5%(b) for full year

Papa John’s International, Inc. (NASDAQ: PZZA) (“Papa Johns®”) today announced financial results for the fourth quarter and year ended December 25, 2022.

Fourth Quarter Highlights

  • North America comparable sales were up 1% from a year ago and up 26% on a three-year stack; International comparable sales were down 3% from a year ago and up 20% on a three-year stack.
  • 117 net unit openings in the fourth quarter largely within international markets.
  • Global system-wide restaurant sales were $1.20 billion, a 3%(a) increase over the prior year.
  • Total revenues of $526 million were down $3 million, or less than 1%, from a record fourth quarter 2021. Revenues increased 3% excluding the impact of refranchising 90 restaurants in the first quarter of 2022.
  • Diluted earnings per common share of $0.66, compared with $0.67 for 2021; adjusted diluted earnings per common share(c) of $0.71 compared with $0.75 a year ago.

Full Year Highlights

  • North America comparable sales were up 1% from a year ago and up 30% on a three-year stack; International comparable sales were down 5% from a year ago and up 20% on a three-year stack.
  • 244 net unit openings(b) for the full year 2022 driven by continued international growth.
  • Global system-wide restaurant sales were $4.84 billion, a 3%(a) increase over the prior year.
  • Record total revenues of $2.10 billion were up $34 million, or 2%, from 2021.
  • Diluted earnings per common share of $1.89 compared with $0.12 for 2021; adjusted diluted earnings per common share(c) of $2.94 compared with $3.51 a year ago.

“We had a strong finish to 2022, posting our third straight year of positive North America comparable sales,” said Rob Lynch, Papa Johns’ President and CEO. “Our performance demonstrates the resiliency of our brand, the agility of our teams and the strength of our business model despite the macro headwinds we faced. This past year, we continued to introduce impactful menu innovations, such as our Epic Pepperoni Stuffed Crust and New York Style pizzas, addressed the need of value-seeking consumers with Papa Pairings, continued to grow our Papa Rewards loyalty program and further expanded our footprint domestically and internationally.”

“Looking ahead to 2023, we will continue to grow on top of the solid foundation we have built over the past three years as we deliver on our strategic priorities and build the world’s best pizza company,” added Lynch. “Investments in product and digital innovation, combined with strong operational excellence, will continue to enhance the customer experience and contribute to healthy North America comparable sales and unit economics. Our differentiated brand positioning, winning product innovation and operational excellence will continue to deliver strong unit development and system-wide sales growth globally.”

____________________________________

(a) Excludes the impact of foreign currency and previously disclosed franchisee suspended restaurants.

(b) Excludes previously disclosed franchisee suspended restaurants.

(c) 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

 

Year Ended

(In thousands, except per share amounts)

 

December 25,

2022

 

December 26,

2021

 

Increase

(Decrease)

 

December 25,

2022

 

December 26,

2021

 

Increase

(Decrease)

Total revenues

 

$

526,234

 

$

528,885

 

$

(2,651

)

 

$

2,102,103

 

$

2,068,421

 

$

33,682

 

Operating income

 

$

36,230

 

$

38,165

 

$

(1,935

)

 

$

109,030

 

$

168,241

 

$

(59,211

)

Adjusted operating income (a)

 

$

38,226

 

$

41,895

 

$

(3,669

)

 

$

157,462

 

$

181,335

 

$

(23,873

)

Net income attributable to the Company

 

$

23,514

 

$

24,623

 

$

(1,109

)

 

$

67,772

 

$

120,016

 

$

(52,244

)

Diluted earnings per common share

 

$

0.66

 

$

0.67

 

$

(0.01

)

 

$

1.89

 

$

0.12

 

$

1.77

 

Adjusted diluted earnings per common share (a)

 

$

0.71

 

$

0.75

 

$

(0.04

)

 

$

2.94

 

$

3.51

 

$

(0.57

)

Quarterly Results

Total revenues of $526.2 million in the fourth quarter of 2022 decreased $2.7 million, or 0.5%, compared with the fourth quarter of the prior year. Excluding the impact of refranchising 90 restaurants in the first quarter of 2022, total revenues increased $14.6 million, or 2.8%. The higher total revenue is primarily the result of a 7.9% increase in North America commissary sales tied to commodity inflation and a 1.1% increase in North America restaurants comparable sales, partially offset by lower international revenues.

For the fourth quarter of 2022, global system-wide restaurant sales were $1.20 billion, up 2.8% from a year ago (excluding the impact of foreign currency fluctuations and previously disclosed franchisee suspended restaurants). The increase reflects higher equivalent units from net restaurant openings primarily in international markets as well as the increase in comparable sales in North America.

Operating income of $36.2 million for the fourth quarter of 2022 decreased $1.9 million or 5.1% compared to the fourth quarter last year. Adjusted operating income(a) was $38.2 million, down $3.7 million or 8.8% from the prior year comparable period. The decreases in both operating income and adjusted operating income were attributable to higher commodity costs, wage inflation and increased depreciation and amortization costs linked to investments in digital innovation.

____________________________________

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

Diluted earnings per common share was $0.66 for the fourth quarter of 2022, representing a decrease of $0.01 from the fourth quarter of 2021. Adjusted diluted earnings per common share(a) was $0.71, representing a decrease of $0.04 from the fourth quarter of 2021. Diluted earnings per common share and adjusted diluted earnings per common share for the fourth quarter of 2022 reflected lower tax expenses compared to the fourth quarter of 2021, which partially offset lower operating income (or adjusted operating income) and higher interest expense linked to borrowings during 2022 that were utilized largely to fund share repurchases.

Full Year Results

Total revenues of $2.10 billion for 2022 were 1.6% higher than 2021 total revenues of $2.07 billion. Excluding the impact of refranchising 90 restaurants in the first quarter of 2022, total revenues increased $86.9 million or 4.4% for the year. The growth was primarily due to a 14.2% increase in North America commissary revenues in addition to a 4.5% increase in system-wide units and positive comparable sales for the year. This growth was partially offset by lower international revenues.

Operating income of $109.0 million for 2022 decreased $59.2 million or 35.2% compared with the prior year, as inflation drove commodity prices and wages higher during 2022. 2022 results also include $12.1 million in refranchising and impairment losses and $15.0 million of legal settlement costs. Adjusted operating income(a) for 2022, which excludes the refranchising and impairment losses and legal settlement costs, was $157.5 million, down $23.9 million or 13.2% from the prior year comparable period.

Diluted earnings per common share was $1.89 for 2022 compared with $0.12 in 2021. The increase in diluted earnings per common share in 2022 primarily resulted from the effect of cash consideration paid for the redemption of preferred stock in the 2021 comparable period. Adjusted diluted earnings per common share was $2.94 for 2022 representing a decrease of $0.57 compared with 2021. The decrease in adjusted diluted earnings per common share was attributable to lower adjusted operating income combined with higher interest expense in 2022 linked to higher borrowings utilized for share repurchases.

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 SEC for additional information concerning our operating results for the year ended December 25, 2022.

____________________________________

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

Global Restaurant Sales Information

Global restaurant and comparable sales information for the fourth quarter and year ended December 25, 2022, compared with the fourth quarter and year ended December 26, 2021 are as follows (See “Supplemental Information and Financial Statements” below for related definitions):

 

Three Months Ended

 

Year ended

Amounts below exclude the impact of foreign currency

December 25, 2022

 

December 26, 2021

 

December 25, 2022

 

December 26, 2021

Comparable sales growth (decline):

 

 

 

 

 

 

 

Domestic Company-owned restaurants

0.8%

 

10.2%

 

(1.0)%

 

11.3%

North America franchised restaurants

1.1%

 

11.3%

 

1.2%

 

12.0%

North America restaurants

1.1%

 

11.1%

 

0.7%

 

11.8%

International restaurants

(3.4)%

 

2.4%

 

(5.3)%

 

13.0%

Total comparable sales growth (decline)

0.0%

 

8.6%

 

(0.8)%

 

12.1%

System-wide restaurant sales growth:

 

 

 

 

 

 

 

Domestic Company-owned restaurants

2.9%

 

10.9%

 

1.3%

 

11.1%

North America franchised restaurants

2.5%

 

12.7%

 

2.5%

 

13.0%

North America restaurants

2.6%

 

12.3%

 

2.3%

 

12.6%

International restaurants (a)

3.5%

 

15.2%

 

4.8%

 

24.4%

Total global system-wide restaurant sales growth (a)

2.8%

 

13.1%

 

2.9%

 

15.4%

 

(a) The three and twelve months ended December 25, 2022 excludes the impact of franchisee suspended restaurants.

Global Restaurant Unit Data

As of December 25, 2022, there were 5,706 Papa Johns restaurants operating in 48 countries and territories, as follows:

Fourth Quarter

Domestic

Company

Owned

 

Franchised

North

America

 

Total North

America

 

International(a)

 

System-wide

Beginning - September 25, 2022

522

 

2,836

 

 

3,358

 

 

2,231

 

 

5,589

 

Opened

 

28

 

 

28

 

 

117

 

 

145

 

Closed

 

(10

)

 

(10

)

 

(18

)

 

(28

)

Ending - December 25, 2022

522

 

2,854

 

 

3,376

 

 

2,330

 

 

5,706

 

Net unit growth

 

18

 

 

18

 

 

99

 

 

117

 

Full year

Domestic

Company

Owned

 

Franchised

North

America

 

Total North

America

 

International(a)

 

System-wide

Beginning - December 26, 2021

600

 

 

2,739

 

 

3,339

 

 

2,311

 

 

5,650

 

Opened

10

 

 

76

 

 

86

 

 

292

 

 

378

 

Closed

 

 

(49

)

 

(49

)

 

(85

)

 

(134

)

Sold

 

 

(2

)

 

(2

)

 

 

 

(2

)

Acquired

2

 

 

 

 

2

 

 

 

 

2

 

Refranchised

(90

)

 

90

 

 

 

 

 

 

 

Suspended (a)

 

 

 

 

 

 

(188

)

 

(188

)

Ending - December 25, 2022

522

 

2,854

 

 

3,376

 

2,330

 

 

5,706

 

Net unit growth/(decline) (a)

(78

)

 

115

 

 

37

 

 

207

 

 

244

 

(a) As previously disclosed, the Company has suspended corporate support for all franchised restaurants located in Russia. These suspended restaurants are excluded from net unit growth calculations.

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 and dividends paid to preferred shareholders, was $39.4 million for the year ended December 25, 2022, compared with $109.7 million in the prior year period. The year over year change primarily reflects lower cash flow from operating activities as a result of overall business performance and lower accrued expenses, as well as increases in purchases of property and equipment.

 

 

Year Ended

(in thousands)

 

December 25, 2022

 

December 26, 2021

Net cash provided by operating activities

 

$

117,808

 

 

$

184,675

 

Purchases of property and equipment

 

 

(78,391

)

 

 

(68,559

)

Dividends paid to preferred shareholders (a)

 

 

 

 

 

(6,394

)

Free cash flow

 

$

39,417

 

 

$

109,722

 

 

(a) Excludes cash consideration paid for the repurchase and conversion of the Company’s former Series B Convertible Preferred Stock (“Series B Preferred Stock”) in 2021.

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 and Share Repurchases

The Company paid cash dividends of $14.8 million ($0.42 per common share) in the fourth quarter of 2022. On January 26, 2023, our Board of Directors declared a first quarter 2023 dividend of $0.42 per common share. The dividend was paid on February 17, 2023 to stockholders of record as of the close of business on February 6, 2023.

During the fourth quarter of 2022, the Company repurchased 361,000 shares of common stock for $30.0 million pursuant to its share repurchase program. For the year ended December 25, 2022, the Company repurchased 1,343,000 shares of common stock for $125.0 million. As of December 25, 2022, the Company had $299.8 million remaining available for repurchase under its outstanding share repurchase authorization.

Conference Call

Papa Johns will host a call with analysts today, February 23, 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, the continuing impact of the coronavirus pandemic, commodity and labor costs, currency fluctuations, profit margins, net unit growth, unit level performance, capital expenditures, restaurant and franchise development, labor shortages and price increases, inflation, royalty relief, franchisee support, the effectiveness of our menu innovations and other business initiatives, investments in product and digital innovation, marketing efforts, liquidity, compliance with debt covenants, impairments, strategic decisions and actions, 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.

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 targets 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; 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. 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 the change in year-over-year sales for the same base of restaurants for the same fiscal periods. Comparable sales excludes sales of restaurants that were not open during both the current and prior fiscal periods and franchisees for which we suspended corporate support. “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 total system restaurant sales year-over-year. 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 North America, International and global restaurant and comparable sales growth 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. Franchise restaurant and comparable sales growth information is also useful for comparison to industry trends and evaluating the strength of our brand. Management believes the presentation of franchise 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 of Directors 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

 

Year Ended

(In thousands, except per share amounts)

 

December 25, 2022

 

December 26, 2021

 

December 25, 2022

 

December 26, 2021

 

 

 

 

 

 

 

 

 

Operating income

 

$

36,230

 

 

$

38,165

 

 

$

109,030

 

 

$

168,241

 

Refranchising and impairment losses (a)

 

 

 

 

 

 

 

 

26,702

 

 

 

 

Legal settlements (b)

 

 

 

 

 

 

 

 

15,000

 

 

 

 

Costs associated with the termination of significant franchisees (c)

 

 

1,996

 

 

 

 

 

 

5,223

 

 

 

 

Strategic corporate reorganization costs (d)

 

 

 

 

 

3,730

 

 

 

 

 

 

13,094

 

Other costs (e)

 

 

 

 

 

 

 

 

1,507

 

 

 

 

Adjusted operating income

 

$

38,226

 

 

$

41,895

 

 

$

157,462

 

 

$

181,335

 

 

 

 

 

 

 

 

 

 

Net income attributable to common shareholders

 

$

23,373

 

 

$

24,389

 

 

$

67,362

 

 

$

4,073

 

Refranchising and impairment losses (a)

 

 

 

 

 

 

 

 

26,702

 

 

 

 

Legal settlements (b)

 

 

 

 

 

 

 

 

15,000

 

 

 

 

Costs associated with the termination of significant franchisees (c)

 

 

1,996

 

 

 

 

 

 

5,223

 

 

 

 

Strategic corporate reorganization costs (d)

 

 

 

 

 

3,730

 

 

 

 

 

 

13,094

 

Other costs (e)

 

 

 

 

 

 

 

 

1,507

 

 

 

 

Repurchase and conversion of Series B Preferred Stock (f)

 

 

 

 

 

 

 

 

 

 

 

109,852

 

Tax effect of adjustments (g)

 

 

(449

)

 

 

(839

)

 

 

(10,897

)

 

 

(2,946

)

Adjusted net income attributable to common shareholders (h)

 

$

24,920

 

 

$

27,280

 

 

$

104,897

 

 

$

124,073

 

 

 

 

 

 

 

 

 

 

Diluted earnings per common share

 

$

0.66

 

 

$

0.67

 

 

$

1.89

 

 

$

0.12

 

Refranchising and impairment losses (a)

 

 

 

 

 

 

 

 

0.75

 

 

 

 

Legal settlements (b)

 

 

 

 

 

 

 

 

0.42

 

 

 

 

Costs associated with the termination of significant franchisees (c)

 

 

0.07

 

 

 

 

 

 

0.15

 

 

 

 

Strategic corporate reorganization costs (d)

 

 

 

 

 

0.10

 

 

 

 

 

 

0.37

 

Other costs (e)

 

 

 

 

 

 

 

 

0.04

 

 

 

 

Repurchase and conversion of Series B Preferred Stock (f)

 

 

 

 

 

 

 

 

 

 

 

3.10

 

Tax effect of adjustments (g)

 

 

(0.02

)

 

 

(0.02

)

 

 

(0.31

)

 

 

(0.08

)

Adjusted diluted earnings per common share (h)

 

$

0.71

 

 

$

0.75

 

 

$

2.94

 

 

$

3.51

 

 

See footnotes on following page

Footnotes to Non-GAAP Financial Measures

 

(a) Refranchising and impairments losses consisted of the following pre-tax adjustments:

 

 

 

Year Ended

(In thousands)

 

December 25,

2022

Refranchising impairment loss (1)

 

$

8,412

Ukraine-related charge (2)

 

 

17,385

UK lease impairment (3)

 

 

905

Total adjustment

 

$

26,702

(1)

Represents a one-time, non-cash charge of $8.4 million ($0.24 loss per diluted share for the year ended December 25, 2022) recorded in the first quarter of 2022 associated with the refranchising of the Company’s controlling interest in a 90-restaurant joint venture, recorded as Refranchising and impairment loss;

 

(2)

Represents a one-time non-cash charge of $17.4 million ($0.49 loss per diluted share for the year ended December 25, 2022) recorded in the first quarter of 2022 related to the reserve of certain loans and impairment of reacquired franchised 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;

 

(3)

An impairment charge of $0.9 million on the right-of-use assets on leases recorded in the third quarter of 2022 associated with the termination of a significant franchisee in the UK, which was recorded in Refranchising and impairment loss.

(b) Represents an accrual of certain legal settlements, recorded in General and administrative expenses.

 

(c) Represents costs associated with the termination of significant franchisees in the UK, including costs related to the reserve of certain accounts and notes receivable.

 

(d) Represents strategic corporate reorganization costs associated with our new corporate office in Atlanta, Georgia.

 

(e) Represents advisory fees and severance costs associated with the transition of certain executives.

 

(f) Represents the one-time charge related to the repurchase and conversion of all shares of Series B Preferred Stock and includes related professional fees incurred as part of the transaction.

 

(g) The tax effect on non-GAAP adjustments was calculated by applying the marginal tax rate of 22.5% for the three months and years ended December 25, 2022 and December 26, 2021.

 

(h) 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)

 

December 25, 2022

 

December 26, 2021

 

 

 

 

 

Assets

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

47,373

 

 

$

70,610

 

Accounts receivable (less allowance for credit losses of $6,718 in 2022 and $2,364 in 2021)

 

 

102,533

 

 

 

81,370

 

Notes receivable, current portion

 

 

6,848

 

 

 

12,352

 

Income tax receivable

 

 

8,780

 

 

 

9,386

 

Inventories

 

 

41,382

 

 

 

34,981

 

Prepaid expenses and other current assets

 

 

44,123

 

 

 

46,310

 

Total current assets

 

 

251,039

 

 

 

255,009

 

Property and equipment, net

 

 

249,793

 

 

 

223,856

 

Finance lease right-of-use assets, net

 

 

24,941

 

 

 

20,907

 

Operating lease right-of-use assets

 

 

172,425

 

 

 

176,256

 

Notes receivable, less current portion (less allowance for credit losses of $14,499 in 2022 and $1,500 in 2021)

 

 

21,248

 

 

 

35,504

 

Goodwill

 

 

70,616

 

 

 

80,632

 

Deferred income taxes

 

 

1,920

 

 

 

5,156

 

Other assets

 

 

72,245

 

 

 

88,384

 

Total assets

 

$

864,227

 

 

$

885,704

 

 

 

 

 

 

Liabilities, Redeemable noncontrolling interests and Stockholders’ deficit

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable

 

$

62,316

 

 

$

28,092

 

Income and other taxes payable

 

 

8,766

 

 

 

19,996

 

Accrued expenses and other current liabilities

 

 

142,535

 

 

 

190,116

 

Current deferred revenue

 

 

21,272

 

 

 

21,700

 

Current finance lease liabilities

 

 

6,850

 

 

 

4,977

 

Current operating lease liabilities

 

 

23,418

 

 

 

22,543

 

Total current liabilities

 

 

265,157

 

 

 

287,424

 

Deferred revenue

 

 

23,204

 

 

 

13,846

 

Long-term finance lease liabilities

 

 

19,022

 

 

 

16,580

 

Long-term operating lease liabilities

 

 

160,905

 

 

 

160,672

 

Long-term debt, net

 

 

597,069

 

 

 

480,730

 

Deferred income taxes

 

 

 

 

 

258

 

Other long-term liabilities

 

 

68,317

 

 

 

93,154

 

Total liabilities

 

 

1,133,674

 

 

 

1,052,664

 

 

 

 

 

 

Redeemable noncontrolling interests

 

 

1,217

 

 

 

5,498

 

 

 

 

 

 

Stockholders’ deficit:

 

 

 

 

Common stock ($0.01 par value per share; issued 49,138 at December 25, 2022 and 49,002 at December 26, 2021)

 

 

491

 

 

 

490

 

Additional paid-in capital

 

 

449,829

 

 

 

445,126

 

Accumulated other comprehensive loss

 

 

(10,135

)

 

 

(9,971

)

Retained earnings

 

 

195,856

 

 

 

183,157

 

Treasury stock (14,402 shares at December 25, 2022 and 13,205 shares at December 26, 2021, at cost)

 

 

(922,434

)

 

 

(806,472

)

Total stockholders’ deficit

 

 

(286,393

)

 

 

(187,670

)

Noncontrolling interests in subsidiaries

 

 

15,729

 

 

 

15,212

 

Total Stockholders’ deficit

 

 

(270,664

)

 

 

(172,458

)

Total Liabilities, Redeemable noncontrolling interests and Stockholders’ deficit

 

$

864,227

 

 

$

885,704

 

Papa John’s International, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

 

 

 

Three Months Ended

 

Year ended

(In thousands, except per share amounts)

 

December 25, 2022

 

December 26, 2021

 

December 25, 2022

 

December 26, 2021

 

 

(Unaudited)

 

(Unaudited)

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

Domestic Company-owned restaurant sales

 

$

172,163

 

 

$

193,381

 

 

$

708,389

 

 

$

778,323

 

North America franchise royalties and fees

 

 

34,502

 

 

 

32,187

 

 

 

137,399

 

 

 

129,310

 

North America commissary revenues

 

 

224,457

 

 

 

200,562

 

 

 

869,634

 

 

 

761,305

 

International revenues

 

 

32,593

 

 

 

40,142

 

 

 

129,903

 

 

 

150,771

 

Other revenues

 

 

62,519

 

 

 

62,613

 

 

 

256,778

 

 

 

248,712

 

Total revenues

 

 

526,234

 

 

 

528,885

 

 

 

2,102,103

 

 

 

2,068,421

 

Costs and expenses:

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

Domestic Company-owned restaurant expenses

 

 

143,321

 

 

 

156,213

 

 

 

585,307

 

 

 

621,871

 

North America commissary expenses

 

 

206,757

 

 

 

185,312

 

 

 

811,446

 

 

 

703,622

 

International expenses

 

 

18,655

 

 

 

24,495

 

 

 

76,001

 

 

 

87,286

 

Other expenses

 

 

58,358

 

 

 

58,228

 

 

 

238,810

 

 

 

226,320

 

General and administrative expenses

 

 

48,893

 

 

 

54,486

 

 

 

217,412

 

 

 

212,265

 

Depreciation and amortization

 

 

14,020

 

 

 

11,986

 

 

 

52,032

 

 

 

48,816

 

Total costs and expenses

 

 

490,004

 

 

 

490,720

 

 

 

1,981,008

 

 

 

1,900,180

 

Refranchising and impairment loss

 

 

 

 

 

 

 

 

(12,065

)

 

 

 

Operating income

 

 

36,230

 

 

 

38,165

 

 

 

109,030

 

 

 

168,241

 

Net interest expense

 

 

(7,294

)

 

 

(6,018

)

 

 

(25,261

)

 

 

(17,293

)

Income before income taxes

 

 

28,936

 

 

 

32,147

 

 

 

83,769

 

 

 

150,948

 

Income tax expense

 

 

5,208

 

 

 

6,606

 

 

 

14,420

 

 

 

25,993

 

Net income before attribution to noncontrolling interests

 

 

23,728

 

 

 

25,541

 

 

 

69,349

 

 

 

124,955

 

Net income attributable to noncontrolling interests

 

 

(214

)

 

 

(918

)

 

 

(1,577

)

 

 

(4,939

)

Net income attributable to the Company

 

$

23,514

 

 

$

24,623

 

 

$

67,772

 

 

$

120,016

 

 

 

 

 

 

 

 

 

 

Calculation of net income for earnings per share:

 

 

 

 

 

 

 

 

Net income attributable to the Company

 

$

23,514

 

 

$

24,623

 

 

$

67,772

 

 

$

120,016

 

Dividends on redemption of Series B Convertible Preferred Stock

 

 

 

 

 

 

 

 

 

 

 

(109,852

)

Dividends paid to participating securities

 

 

(78

)

 

 

(127

)

 

 

(306

)

 

 

(6,091

)

Net income attributable to participating securities

 

 

(63

)

 

 

(107

)

 

 

(104

)

 

 

 

Net income attributable to common shareholders

 

$

23,373

 

 

$

24,389

 

 

$

67,362

 

 

$

4,073

 

 

 

 

 

 

 

 

 

 

Basic earnings per common share

 

$

0.66

 

 

$

0.67

 

 

$

1.90

 

 

$

0.12

 

Diluted earnings per common share

 

$

0.66

 

 

$

0.67

 

 

$

1.89

 

 

$

0.12

 

 

 

 

 

 

 

 

 

 

Basic weighted average common shares outstanding

 

 

35,167

 

 

 

36,171

 

 

 

35,497

 

 

 

35,007

 

Diluted weighted average common shares outstanding

 

 

35,336

 

 

 

36,513

 

 

 

35,717

 

 

 

35,337

 

 

 

 

 

 

 

 

 

 

Dividends declared per common share

 

$

0.42

 

 

$

0.35

 

 

$

1.54

 

 

$

1.15

 

Papa John’s International, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

 

 

 

Year ended

(In thousands)

 

December 25, 2022

 

December 26, 2021

Operating activities

 

 

 

 

Net income before attribution to noncontrolling interests

 

$

69,349

 

 

$

124,955

 

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

 

 

 

 

Provision (benefit) for allowance for credit losses on accounts and notes receivable

 

 

20,539

 

 

 

(852

)

Depreciation and amortization

 

 

52,032

 

 

 

48,816

 

Refranchising and impairment loss

 

 

12,065

 

 

 

 

Deferred income taxes

 

 

2,798

 

 

 

3,753

 

Stock-based compensation expense

 

 

18,388

 

 

 

16,919

 

Other

 

 

1,056

 

 

 

581

 

Changes in operating assets and liabilities, net of acquisitions:

 

 

 

 

Accounts receivable

 

 

(29,167

)

 

 

4,023

 

Income tax receivable

 

 

586

 

 

 

(8,113

)

Inventories

 

 

(7,496

)

 

 

(4,708

)

Prepaid expenses and other current assets

 

 

5,587

 

 

 

2,866

 

Other assets and liabilities

 

 

(13,458

)

 

 

(20,077

)

Accounts payable

 

 

(8,350

)

 

 

(9,278

)

Income and other taxes payable

 

 

(10,710

)

 

 

9,733

 

Accrued expenses and other current liabilities

 

 

4,846

 

 

 

15,875

 

Deferred revenue

 

 

(257

)

 

 

182

 

Net cash provided by operating activities

 

 

117,808

 

 

 

184,675

 

Investing activities

 

 

 

 

Purchases of property and equipment

 

 

(78,391

)

 

 

(68,559

)

Notes issued

 

 

(9,296

)

 

 

(16,132

)

Repayments of notes issued

 

 

13,045

 

 

 

18,555

 

Acquisitions, net of cash acquired

 

 

(1,219

)

 

 

(699

)

Proceeds from refranchising, net of cash transferred

 

 

13,588

 

 

 

 

Other

 

 

(520

)

 

 

3,323

 

Net cash used in investing activities

 

 

(62,793

)

 

 

(63,512

)

Financing activities

 

 

 

 

Proceeds from issuance of senior notes

 

 

 

 

 

400,000

 

Net proceeds of revolving credit facilities

 

 

115,000

 

 

 

80,000

 

Debt issuance costs

 

 

 

 

 

(9,179

)

Proceeds from exercise of stock options

 

 

4,036

 

 

 

11,969

 

Repurchase of Series B Convertible Preferred Stock

 

 

 

 

 

(188,647

)

Acquisition of Company common stock

 

 

(125,000

)

 

 

(72,499

)

Dividends paid to common stockholders

 

 

(54,767

)

 

 

(40,356

)

Dividends paid to preferred stockholders

 

 

 

 

 

(6,394

)

Tax payments for equity award issuances

 

 

(9,546

)

 

 

(5,847

)

Distributions to noncontrolling interests

 

 

(1,211

)

 

 

(5,942

)

Repayments of term loan

 

 

 

 

 

(340,000

)

Other

 

 

(4,752

)

 

 

(3,631

)

Net cash used in financing activities

 

 

(76,240

)

 

 

(180,526

)

Effect of exchange rate changes on cash and cash equivalents

 

 

(2,012

)

 

 

(231

)

Change in cash and cash equivalents

 

 

(23,237

)

 

 

(59,594

)

Cash and cash equivalents at beginning of period

 

 

70,610

 

 

 

130,204

 

Cash and cash equivalents at end of period

 

$

47,373

 

 

$

70,610

 

 

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