☒Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
OR
☐Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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Delaware | 61-1203323 | |||||||
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Common stock, $0.01 par value |
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| The NASDAQ Stock Market LLC |
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March 27, December 26, (In thousands, except per share amounts) 2022 2021 (Unaudited) Assets Current assets: Cash and cash equivalents $ 80,669 $ 70,610 Accounts receivable, net 81,229 81,370 Notes receivable, current portion 9,108 12,352 Income tax receivable 10,537 9,386 Inventories 38,992 34,981 Prepaid expenses and other current assets 46,461 46,310 Assets held for sale 19,273 — Total current assets 286,269 255,009 Property and equipment, net 216,253 223,856 Finance lease right-of-use assets, net 20,159 20,907 Operating lease right-of-use assets 177,767 176,256 Notes receivable, less current portion, net 22,634 35,504 Goodwill 71,593 80,632 Deferred income taxes 6,535 5,156 Other assets 84,416 88,384 Total assets $ 885,626 $ 885,704 Liabilities, Redeemable noncontrolling interests and Stockholders’ deficit Current liabilities: Accounts payable $ 35,434 $ 28,092 Income and other taxes payable 27,973 19,996 Accrued expenses and other current liabilities 156,203 190,116 Current deferred revenue 19,649 21,700 Current finance lease liabilities 5,190 4,977 Current operating lease liabilities 20,938 22,543 Liabilities held for sale 13,247 — Total current liabilities 278,634 287,424 Deferred revenue 12,381 13,846 Long-term finance lease liabilities 15,696 16,580 Long-term operating lease liabilities 164,738 160,672 Long-term debt, less current portion, net 528,088 480,730 Deferred income taxes — 258 Other long-term liabilities 89,210 93,154 Total liabilities 1,088,747 1,052,664 Redeemable noncontrolling interests 5,323 5,498 Stockholders’ deficit: Common stock ($0.01 par value per share; issued 49,074 at March 27, 2022 and 49,002 at December 26, 2021) 491 490 Additional paid-in capital 436,225 445,126 Accumulated other comprehensive loss (9,316) (9,971) Retained earnings 181,124 183,157 Treasury stock (13,399 shares at March 27, 2022 and 13,205 shares at December 26, 2021, at cost) (832,603) (806,472) Total stockholders’ deficit (224,079) (187,670) Noncontrolling interests in subsidiaries 15,635 15,212 Total Stockholders’ deficit (208,444) (172,458) Total liabilities, Redeemable noncontrolling interests and Stockholders’ deficit $ 885,626 $ 885,704 Three Months Ended March 27, March 28, (In thousands, except per share amounts) 2022 2021 Revenues: Domestic Company-owned restaurant sales $ 198,765 $ 197,234 North America franchise royalties and fees 34,268 32,715 North America commissary revenues 209,679 184,878 International revenues 34,617 34,607 Other revenues 65,363 62,312 Total revenues 542,692 511,746 Costs and expenses: Operating costs (excluding depreciation and amortization shown separately below): Domestic Company-owned restaurant expenses 161,661 155,888 North America commissary expenses 197,090 170,684 International expenses 19,914 19,618 Other expenses 60,555 55,807 General and administrative expenses 65,937 50,011 Depreciation and amortization 11,940 12,876 Total costs and expenses 517,097 464,884 Refranchising and impairment loss (11,160) — Operating income 14,435 46,862 Net interest expense (4,264) (3,647) Income before income taxes 10,171 43,215 Income tax (benefit) expense (1,256) 7,932 Net income before attribution to noncontrolling interests 11,427 35,283 Net income attributable to noncontrolling interests (933) (1,400) Net income attributable to the Company $ 10,494 $ 33,883 Calculation of net income for earnings per share: Net income attributable to the Company $ 10,494 $ 33,883 Dividends paid to participating securities (60) (3,527) Net income attributable to participating securities — (3,243) Net income attributable to common shareholders $ 10,434 $ 27,113 Basic earnings per common share $ 0.29 $ 0.83 Diluted earnings per common share $ 0.29 $ 0.82 Basic weighted average common shares outstanding 35,927 32,756 Diluted weighted average common shares outstanding 36,236 33,090 Dividends declared per common share $ 0.350 $ 0.225 (Unaudited) Three Months Ended March 27, March 28, (In thousands) 2022 2021 Net income before attribution to noncontrolling interests $ 11,427 $ 35,283 Other comprehensive income, before tax: Foreign currency translation adjustments (861) 1,059 Interest rate swaps (1) 1,712 1,795 Other comprehensive income, before tax 851 2,854 Income tax effect: Foreign currency translation adjustments 198 (244) Interest rate swaps (2) (394) (413) Income tax effect (196) (657) Other comprehensive income, net of tax 655 2,197 Comprehensive income before attribution to noncontrolling interests 12,082 37,480 Less: comprehensive (income), redeemable noncontrolling interests (510) (787) Less: comprehensive (income), nonredeemable noncontrolling interests (423) (613) Comprehensive income attributable to the Company $ 11,149 $ 36,080(In thousands, except per share amounts) June 26,
2022December 26,
2021(Unaudited) Assets Current assets: Cash and cash equivalents $ 52,124 $ 70,610 Accounts receivable, net 87,495 81,370 Notes receivable, current portion 8,333 12,352 Income tax receivable 4,017 9,386 Inventories 38,076 34,981 Prepaid expenses and other current assets 49,743 46,310 Total current assets 239,788 255,009 Property and equipment, net 225,382 223,856 Finance lease right-of-use assets, net 18,642 20,907 Operating lease right-of-use assets 176,719 176,256 Notes receivable, less current portion, net 19,703 35,504 Goodwill 70,731 80,632 Deferred income taxes 8,657 5,156 Other assets 76,650 88,384 Total assets $ 836,272 $ 885,704 Liabilities, Redeemable noncontrolling interests and Stockholders’ deficit Current liabilities: Accounts payable $ 40,845 $ 28,092 Income and other taxes payable 16,785 19,996 Accrued expenses and other current liabilities 146,213 190,116 Current deferred revenue 19,925 21,700 Current finance lease liabilities 5,224 4,977 Current operating lease liabilities 21,485 22,543 Total current liabilities 250,477 287,424 Deferred revenue 23,633 13,846 Long-term finance lease liabilities 14,252 16,580 Long-term operating lease liabilities 164,336 160,672 Long-term debt, less current portion, net 536,446 480,730 Deferred income taxes 236 258 Other long-term liabilities 79,516 93,154 Total liabilities 1,068,896 1,052,664 Redeemable noncontrolling interests 1,174 5,498 Stockholders’ deficit: Common stock ($0.01 par value per share; issued 49,096 at June 26, 2022 and 49,002 at December 26, 2021) 491 490 Additional paid-in capital 442,255 445,126 Accumulated other comprehensive loss (11,034) (9,971) Retained earnings 193,934 183,157 Treasury stock (13,848 shares at June 26, 2022 and 13,205 shares at December 26, 2021, at cost) (875,205) (806,472) Total stockholders’ deficit (249,559) (187,670) Noncontrolling interests in subsidiaries 15,761 15,212 Total Stockholders’ deficit (233,798) (172,458) Total liabilities, Redeemable noncontrolling interests and Stockholders’ deficit $ 836,272 $ 885,704 (Unaudited)See accompanying notes.Three Months Ended Six Months Ended (In thousands, except per share amounts) June 26,
2022June 27,
2021June 26,
2022June 27,
2021Revenues: Domestic Company-owned restaurant sales $ 171,411 $ 196,124 $ 370,176 $ 393,358 North America franchise royalties and fees 34,917 32,475 69,185 65,190 North America commissary revenues 219,383 186,641 429,062 371,519 International revenues 31,958 37,614 66,575 72,221 Other revenues 64,996 62,154 130,359 124,466 Total revenues 522,665 515,008 1,065,357 1,026,754 Costs and expenses: Operating costs (excluding depreciation and amortization shown separately below): Domestic Company-owned restaurant expenses 142,026 154,293 303,687 310,181 North America commissary expenses 204,470 172,227 401,560 342,911 International expenses 19,236 21,430 39,150 41,048 Other expenses 60,648 56,246 121,203 112,053 General and administrative expenses 44,646 53,698 110,584 103,709 Depreciation and amortization 12,735 12,477 24,674 25,353 Total costs and expenses 483,761 470,371 1,000,858 935,255 Refranchising and impairment loss — — (11,160) — Operating income 38,904 44,637 53,339 91,499 Net interest expense (6,081) (3,649) (10,344) (7,296) Income before income taxes 32,823 40,988 42,995 84,203 Income tax expense 7,093 7,398 5,838 15,330 Net income before attribution to noncontrolling interests 25,730 33,590 37,157 68,873 Net income attributable to noncontrolling interests (297) (1,336) (1,230) (2,736) Net income attributable to the Company $ 25,433 $ 32,254 $ 35,927 $ 66,137 Calculation of net income for earnings per share: Net income attributable to the Company $ 25,433 $ 32,254 $ 35,927 $ 66,137 Dividends on redemption of Series B Convertible Preferred Stock — (109,852) — (109,852) Dividends paid to participating securities (82) (2,300) (141) (5,827) Net income attributable to participating securities (111) — (93) — Net income (loss) attributable to common shareholders $ 25,240 $ (79,898) $ 35,693 $ (49,542) Basic earnings (loss) per common share $ 0.71 $ (2.30) $ 1.00 $ (1.47) Diluted earnings (loss) per common share $ 0.70 $ (2.30) $ 0.99 $ (1.47) Basic weighted average common shares outstanding 35,624 34,729 35,775 33,739 Diluted weighted average common shares outstanding 35,824 34,729 36,032 33,739 Dividends declared per common share $ 0.350 $ 0.225 $ 0.700 $ 0.450 Three Months Ended Six Months Ended (In thousands) June 26,
2022June 27,
2021June 26,
2022June 27,
2021Net income before attribution to noncontrolling interests $ 25,730 $ 33,590 $ 37,157 $ 68,873 Other comprehensive (loss) income, before tax: Foreign currency translation adjustments (4,109) 437 (4,970) 1,496 Interest rate swaps (1) 1,877 1,817 3,589 3,612 Other comprehensive (loss) income, before tax (2,232) 2,254 (1,381) 5,108 Income tax effect: Foreign currency translation adjustments 946 (100) 1,144 (344) Interest rate swaps (2) (432) (418) (826) (831) Income tax effect 514 (518) 318 (1,175) Other comprehensive (loss) income, net of tax (1,718) 1,736 (1,063) 3,933 Comprehensive income before attribution to noncontrolling interests 24,012 35,326 36,094 72,806 Less: comprehensive (income), redeemable noncontrolling interests (18) (713) (528) (1,500) Less: comprehensive (income), nonredeemable noncontrolling interests (279) (623) (702) (1,236) Comprehensive income attributable to the Company $ 23,715 $ 33,990 $ 34,864 $ 70,070
(1) | Amounts reclassified out of accumulated other comprehensive loss into net interest expense include | ||||
(2) | The income tax effects of amounts reclassified out of accumulated other comprehensive loss into net interest expense were $165 and $45 for the three and six months ended June 26, 2022, respectively, and $388 and $771 for the three and six months ended June 27, 2021, respectively. |
See accompanying notes.
Papa John’s International, Inc. | ||||||||||||||||||||||||||||||||||||||||||||||||||
(In thousands) | Common Stock Shares Outstanding | Common Stock | Additional Paid-In Capital | Accumulated Other Comprehensive Loss | Retained Earnings | Treasury Stock | Noncontrolling Interests in Subsidiaries | Total Stockholders’ Deficit | ||||||||||||||||||||||||||||||||||||||||||
For the three months ended June 26, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at March 27, 2022 | 35,675 | $ | 491 | $ | 436,225 | $ | (9,316) | $ | 181,124 | $ | (832,603) | $ | 15,635 | $ | (208,444) | |||||||||||||||||||||||||||||||||||
Net income (1) | — | — | — | — | 25,433 | — | 279 | 25,712 | ||||||||||||||||||||||||||||||||||||||||||
Other comprehensive (loss), net of tax | — | — | — | (1,718) | — | — | — | (1,718) | ||||||||||||||||||||||||||||||||||||||||||
Cash dividends on common stock | — | — | 48 | — | (12,541) | — | — | (12,493) | ||||||||||||||||||||||||||||||||||||||||||
Exercise of stock options | 22 | — | 1,167 | — | — | — | — | 1,167 | ||||||||||||||||||||||||||||||||||||||||||
Acquisition of Company common stock | (452) | — | — | — | — | (42,762) | — | (42,762) | ||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation expense | — | — | 4,925 | — | — | — | — | 4,925 | ||||||||||||||||||||||||||||||||||||||||||
Issuance of restricted stock | 2 | — | (81) | — | — | 81 | — | — | ||||||||||||||||||||||||||||||||||||||||||
Tax payments for equity award issuances | (1) | — | (65) | — | — | — | — | (65) | ||||||||||||||||||||||||||||||||||||||||||
Distributions to noncontrolling interests | — | — | — | — | — | — | (150) | (150) | ||||||||||||||||||||||||||||||||||||||||||
Other | 2 | — | 36 | — | (82) | 79 | (3) | 30 | ||||||||||||||||||||||||||||||||||||||||||
Balance at June 26, 2022 | 35,248 | $ | 491 | $ | 442,255 | $ | (11,034) | $ | 193,934 | $ | (875,205) | $ | 15,761 | $ | (233,798) | |||||||||||||||||||||||||||||||||||
For the six months ended June 26, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at December 26, 2021 | 35,797 | $ | 490 | $ | 445,126 | $ | (9,971) | $ | 183,157 | $ | (806,472) | $ | 15,212 | $ | (172,458) | |||||||||||||||||||||||||||||||||||
Net income (1) | — | — | — | — | 35,927 | — | 702 | 36,629 | ||||||||||||||||||||||||||||||||||||||||||
Other comprehensive (loss), net of tax | — | — | — | (1,063) | — | — | — | (1,063) | ||||||||||||||||||||||||||||||||||||||||||
Cash dividends on common stock | — | — | 95 | — | (25,196) | — | — | (25,101) | ||||||||||||||||||||||||||||||||||||||||||
Exercise of stock options | 39 | — | 1,908 | — | — | — | — | 1,908 | ||||||||||||||||||||||||||||||||||||||||||
Acquisition of Company common stock | (753) | — | — | — | — | (75,471) | — | (75,471) | ||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation expense | — | 1 | 9,100 | — | — | — | — | 9,101 | ||||||||||||||||||||||||||||||||||||||||||
Issuance of restricted stock | 229 | — | (6,450) | — | — | 6,450 | — | — | ||||||||||||||||||||||||||||||||||||||||||
Tax payments for equity award issuances | (70) | — | (7,527) | — | — | — | — | (7,527) | ||||||||||||||||||||||||||||||||||||||||||
Distributions to noncontrolling interests | — | — | — | — | — | — | (150) | (150) | ||||||||||||||||||||||||||||||||||||||||||
Other | 6 | — | 3 | — | 46 | 288 | (3) | 334 | ||||||||||||||||||||||||||||||||||||||||||
Balance at June 26, 2022 | 35,248 | $ | 491 | $ | 442,255 | $ | (11,034) | $ | 193,934 | $ | (875,205) | $ | 15,761 | $ | (233,798) |
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(In thousands) | | Shares | | Common | | Paid-In | | Comprehensive | | Retained | | Treasury | | Interests in | | Stockholders’ | |||||||
For the three months ended March 27, 2022 | | Outstanding | | Stock | | Capital | | Loss | | Earnings | | Stock | | Subsidiaries | | Deficit | |||||||
Balance at December 26, 2021 | | 35,797 | | $ | 490 | | $ | 445,126 | | $ | (9,971) | | $ | 183,157 | | $ | (806,472) | | $ | 15,212 | | $ | (172,458) |
Net income (1) | | — | | | — | | | — | | | — | | | 10,494 | | | — | | | 423 | | | 10,917 |
Other comprehensive income, net of tax | | — | | | — | | | — | | | 655 | | | — | | | — | | | — | | | 655 |
Cash dividends on common stock | | — | | | — | | | 47 | | | — | | | (12,655) | | | — | | | — | | | (12,608) |
Exercise of stock options | | 17 | | | — | | | 741 | | | — | | | — | | | — | | | — | | | 741 |
Acquisition of Company common stock | | (301) | | | — | | | — | | | — | | | — | | | (32,709) | | | — | | | (32,709) |
Stock-based compensation expense | | — | | | 1 | | | 4,175 | | | — | | | — | | | — | | | — | | | 4,176 |
Issuance of restricted stock | | 228 | | | — | | | (6,369) | | | — | | | — | | | 6,369 | | | — | | | — |
Tax payments for equity award issuances | | (69) | | | — | | | (7,461) | | | — | | | — | | | — | | | — | | | (7,461) |
Other | | 3 | | | — | | | (34) | | | — | | | 128 | | | 209 | | | — | | | 303 |
Balance at March 27, 2022 |
| 35,675 | | $ | 491 | | $ | 436,225 | | $ | (9,316) | | $ | 181,124 | | $ | (832,603) | | $ | 15,635 | | $ | (208,444) |
At March 27,June 26, 2022, the accumulated other comprehensive loss of $9,316$11,034 was comprised of net unrealized foreign currency translation loss of $5,533$8,696 and net unrealized loss on the interest rate swap agreements of $3,783.
$2,338.
Papa John’s International, Inc. | ||||||||||||||||||||||||||||||||||||||||||||||||||
(In thousands) | Common Stock Shares Outstanding | Common Stock | Additional Paid-In Capital | Accumulated Other Comprehensive Loss | Retained Earnings | Treasury Stock | Noncontrolling Interests in Subsidiaries | Total Stockholders’ Deficit | ||||||||||||||||||||||||||||||||||||||||||
For the three months ended June 27, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at March 28, 2021 | 32,681 | $ | 453 | $ | 251,285 | $ | (11,971) | $ | 242,119 | $ | (737,268) | $ | 15,282 | $ | (240,100) | |||||||||||||||||||||||||||||||||||
Net income (1) | — | — | — | — | 32,254 | — | 623 | 32,877 | ||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income, net of tax | — | — | — | 1,736 | — | — | — | 1,736 | ||||||||||||||||||||||||||||||||||||||||||
Repurchase and conversion of Series B Convertible Preferred Stock | 3,489 | 35 | 174,631 | — | (110,783) | — | — | 63,883 | ||||||||||||||||||||||||||||||||||||||||||
Cash dividends on common stock | — | — | 31 | — | (7,471) | — | — | (7,440) | ||||||||||||||||||||||||||||||||||||||||||
Cash dividends on preferred stock | — | — | — | — | (709) | — | — | (709) | ||||||||||||||||||||||||||||||||||||||||||
Exercise of stock options | 107 | 1 | 5,801 | — | — | — | — | 5,802 | ||||||||||||||||||||||||||||||||||||||||||
Acquisition of Company common stock | (68) | — | — | — | — | (6,921) | — | (6,921) | ||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation expense | — | — | 4,089 | — | — | — | — | 4,089 | ||||||||||||||||||||||||||||||||||||||||||
Issuance of restricted stock | 5 | — | (294) | — | — | 294 | — | — | ||||||||||||||||||||||||||||||||||||||||||
Tax payments for equity award issuances | — | — | (52) | — | — | — | — | (52) | ||||||||||||||||||||||||||||||||||||||||||
Distributions to noncontrolling interests | — | — | — | — | — | — | (615) | (615) | ||||||||||||||||||||||||||||||||||||||||||
Other | 1 | — | 117 | — | (641) | 76 | — | (448) | ||||||||||||||||||||||||||||||||||||||||||
Balance at June 27, 2021 | 36,215 | $ | 489 | $ | 435,608 | $ | (10,235) | $ | 154,769 | $ | (743,819) | $ | 15,290 | $ | (147,898) | |||||||||||||||||||||||||||||||||||
For the six months ended June 27, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at December 27, 2020 | 32,545 | $ | 453 | $ | 254,103 | $ | (14,168) | $ | 219,158 | $ | (741,724) | $ | 15,239 | $ | (266,939) | |||||||||||||||||||||||||||||||||||
Net income (1) | — | — | — | — | 66,137 | — | 1,236 | 67,373 | ||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income, net of tax | — | — | — | 3,933 | — | — | — | 3,933 | ||||||||||||||||||||||||||||||||||||||||||
Repurchase and conversion of Series B Convertible Preferred Stock | 3,489 | 35 | 174,631 | — | (110,783) | — | — | 63,883 | ||||||||||||||||||||||||||||||||||||||||||
Cash dividends on common stock | — | — | 62 | — | (14,906) | — | — | (14,844) | ||||||||||||||||||||||||||||||||||||||||||
Cash dividends on preferred stock | — | — | — | — | (4,121) | — | — | (4,121) | ||||||||||||||||||||||||||||||||||||||||||
Exercise of stock options | 148 | 1 | 8,099 | — | — | — | — | 8,100 | ||||||||||||||||||||||||||||||||||||||||||
Acquisition of Company common stock | (83) | — | — | — | — | (8,188) | — | (8,188) | ||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation expense | — | — | 8,202 | — | — | — | — | 8,202 | ||||||||||||||||||||||||||||||||||||||||||
Issuance of restricted stock | 109 | — | (5,665) | — | — | 5,665 | — | — | ||||||||||||||||||||||||||||||||||||||||||
Tax payments for equity award issuances | — | — | (3,887) | — | — | — | — | (3,887) | ||||||||||||||||||||||||||||||||||||||||||
Distributions to noncontrolling interests | — | — | — | — | — | — | (1,185) | (1,185) | ||||||||||||||||||||||||||||||||||||||||||
Other | 7 | — | 63 | — | (716) | 428 | — | (225) | ||||||||||||||||||||||||||||||||||||||||||
Balance at June 27, 2021 | 36,215 | $ | 489 | $ | 435,608 | $ | (10,235) | $ | 154,769 | $ | (743,819) | $ | 15,290 | $ | (147,898) |
Papa John’s International, Inc.(1) Net income to the Company for the three and Subsidiaries
Condensed Consolidated Statements of Stockholders’ Deficit (continued)
(Unaudited)
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| | Papa John’s International, Inc. | | | | | | | |||||||||||||||
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(In thousands) | | Shares | | Common | | Paid-In | | Comprehensive | | Retained | | Treasury | | Interests in | | Stockholders’ | |||||||
For the three months ended March 28, 2021 | | Outstanding | | Stock | | Capital | | Loss | | Earnings | | Stock | | Subsidiaries | | Deficit | |||||||
Balance at December 27, 2020 |
| 32,545 | | $ | 453 | | $ | 254,103 | | $ | (14,168) | | $ | 219,158 | | $ | (741,724) | | $ | 15,239 | | $ | (266,939) |
Net income (1) |
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| 33,883 | |
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| 613 | |
| 34,496 |
Other comprehensive income, net of tax |
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| 2,197 | |
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| 2,197 |
Cash dividends on common stock |
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| 31 | |
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| (7,435) | |
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| — | |
| (7,404) |
Cash dividends on preferred stock | | — | | | — | | | — | | | — | | | (3,412) | | | — | | | — | | | (3,412) |
Exercise of stock options |
| 41 | |
| — | |
| 2,298 | |
| — | |
| — | |
| — | |
| — | |
| 2,298 |
Acquisition of Company common stock |
| (15) | |
| — | |
| — | |
| — | |
| — | |
| (1,267) | |
| — | |
| (1,267) |
Stock-based compensation expense |
| — | |
| — | |
| 4,113 | |
| — | |
| — | |
| — | |
| — | |
| 4,113 |
Issuance of restricted stock |
| 104 | |
| — | |
| (5,371) | |
| — | |
| — | |
| 5,371 | |
| — | |
| — |
Tax effect of restricted stock awards |
| — | |
| — | |
| (3,834) | |
| — | |
| — | |
| — | |
| — | | | (3,834) |
Distributions to noncontrolling interests | | — | | | — | | | — | | | — | | | — | | | — | | | (570) | | | (570) |
Other |
| 6 | |
| — | |
| (55) | |
| — | |
| (75) | |
| 352 | |
| — | |
| 222 |
Balance at March 28, 2021 |
| 32,681 | | $ | 453 | | $ | 251,285 | | $ | (11,971) | | $ | 242,119 | | $ | (737,268) | | $ | 15,282 | | $ | (240,100) |
At March 28,June 27, 2021, the accumulated other comprehensive loss of $11,971$10,235 was comprised of net unrealized foreign currency translation loss of $2,977$2,641 and net unrealized loss on the interest rate swap agreements of $8,994.
$7,594.
| | | | | | |
| | | ||||
| | Three Months Ended | ||||
| | March 27, | | March 28, | ||
(In thousands) |
| 2022 |
| 2021 | ||
| | | | | | |
Operating activities | | | | | | |
Net income before attribution to noncontrolling interests | | $ | 11,427 | | $ | 35,283 |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | |
Provision (benefit) for allowance for credit losses on accounts and notes receivable | |
| 15,167 | |
| (1,098) |
Depreciation and amortization | |
| 11,940 | |
| 12,876 |
Refranchising and impairment loss | | | 11,160 | | | — |
Deferred income taxes | |
| (1,817) | |
| 2,586 |
Stock-based compensation expense | |
| 4,176 | |
| 4,113 |
Other | |
| (2,135) | |
| 325 |
Changes in operating assets and liabilities, net of acquisitions: | | | | | | |
Accounts receivable | |
| (2,503) | |
| 13,349 |
Income tax receivable | | | (1,151) | | | 566 |
Inventories | |
| (4,731) | |
| 2,721 |
Prepaid expenses and other current assets | |
| 77 | |
| 711 |
Other assets and liabilities | |
| (654) | |
| (7,901) |
Accounts payable | |
| 7,359 | |
| (5,350) |
Income and other taxes payable | |
| 8,013 | |
| 15,045 |
Accrued expenses and other current liabilities | |
| (29,469) | |
| (9,736) |
Deferred revenue | |
| (1,465) | |
| (273) |
Net cash provided by operating activities | |
| 25,394 | |
| 63,217 |
Investing activities | | | | | | |
Purchases of property and equipment | |
| (10,233) | |
| (7,076) |
Notes issued | |
| (272) | |
| (3,417) |
Repayments of notes issued | |
| 3,432 | |
| 4,864 |
Acquisitions, net of cash acquired | |
| (1,250) | |
| (699) |
Other | |
| 8 | |
| 29 |
Net cash used in investing activities | |
| (8,315) | |
| (6,299) |
Financing activities | | | | | | |
Net proceeds of revolving credit facilities | |
| 47,000 | |
| 5,000 |
Proceeds from exercise of stock options | |
| 741 | |
| 2,298 |
Acquisition of Company common stock | |
| (32,709) | |
| (1,267) |
Dividends paid to common stockholders | | | (12,608) | | | (7,404) |
Dividends paid to preferred stockholders | |
| — | |
| (3,412) |
Tax payments for equity award issuances | |
| (7,461) | |
| (3,834) |
Distributions to noncontrolling interests | |
| (685) | |
| (1,705) |
Repayments of term loan | | | — | | | (5,000) |
Other | |
| (1,065) | |
| (756) |
Net cash used in financing activities | |
| (6,787) | |
| (16,080) |
Effect of exchange rate changes on cash and cash equivalents | |
| (233) | |
| 230 |
Change in cash and cash equivalents | |
| 10,059 | |
| 41,068 |
Cash and cash equivalents at beginning of period | |
| 70,610 | |
| 130,204 |
Cash and cash equivalents at end of period | | $ | 80,669 | | $ | 171,272 |
Six Months Ended | ||||||||||||||||||||||||||
(In thousands) | June 26, 2022 | June 27, 2021 | ||||||||||||||||||||||||
Operating activities | ||||||||||||||||||||||||||
Net income before attribution to noncontrolling interests | $ | 37,157 | $ | 68,873 | ||||||||||||||||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||||||||||||||
Provision (benefit) for allowance for credit losses on accounts and notes receivable | 15,558 | (1,200) | ||||||||||||||||||||||||
Depreciation and amortization | 24,674 | 25,353 | ||||||||||||||||||||||||
Refranchising and impairment loss | 11,160 | — | ||||||||||||||||||||||||
Deferred income taxes | (2,993) | (1,397) | ||||||||||||||||||||||||
Stock-based compensation expense | 9,100 | 8,202 | ||||||||||||||||||||||||
Other | (2,071) | 467 | ||||||||||||||||||||||||
Changes in operating assets and liabilities, net of acquisitions: | ||||||||||||||||||||||||||
Accounts receivable | (9,177) | 13,299 | ||||||||||||||||||||||||
Income tax receivable | 5,369 | 189 | ||||||||||||||||||||||||
Inventories | (3,815) | 430 | ||||||||||||||||||||||||
Prepaid expenses and other current assets | (3,901) | 1,092 | ||||||||||||||||||||||||
Other assets and liabilities | (5,379) | (11,380) | ||||||||||||||||||||||||
Accounts payable | 12,742 | (5,874) | ||||||||||||||||||||||||
Income and other taxes payable | (3,175) | 18,500 | ||||||||||||||||||||||||
Accrued expenses and other current liabilities | (37,456) | 12,123 | ||||||||||||||||||||||||
Deferred revenue | (2,208) | (647) | ||||||||||||||||||||||||
Net cash provided by operating activities | 45,585 | 128,030 | ||||||||||||||||||||||||
Investing activities | ||||||||||||||||||||||||||
Purchases of property and equipment | (30,744) | (21,543) | ||||||||||||||||||||||||
Notes issued | (1,098) | (5,263) | ||||||||||||||||||||||||
Repayments of notes issued | 6,743 | 7,922 | ||||||||||||||||||||||||
Acquisitions, net of cash acquired | (1,250) | (699) | ||||||||||||||||||||||||
Proceeds from refranchising, net of cash transferred | 13,588 | — | ||||||||||||||||||||||||
Other | 238 | 116 | ||||||||||||||||||||||||
Net cash used in investing activities | (12,523) | (19,467) | ||||||||||||||||||||||||
Financing activities | ||||||||||||||||||||||||||
Net proceeds of revolving credit facilities | 55,000 | 85,000 | ||||||||||||||||||||||||
Proceeds from exercise of stock options | 1,908 | 8,100 | ||||||||||||||||||||||||
Repurchase of Series B Convertible Preferred Stock | — | (188,647) | ||||||||||||||||||||||||
Acquisition of Company common stock | (75,471) | (8,188) | ||||||||||||||||||||||||
Dividends paid to common stockholders | (25,101) | (14,844) | ||||||||||||||||||||||||
Dividends paid to preferred stockholders | — | (6,394) | ||||||||||||||||||||||||
Tax payments for equity award issuances | (7,526) | (3,887) | ||||||||||||||||||||||||
Distributions to noncontrolling interests | (835) | (2,320) | ||||||||||||||||||||||||
Repayments of term loan | — | (10,000) | ||||||||||||||||||||||||
Other | 1,348 | (1,691) | ||||||||||||||||||||||||
Net cash used in financing activities | (50,677) | (142,871) | ||||||||||||||||||||||||
Effect of exchange rate changes on cash and cash equivalents | (871) | 317 | ||||||||||||||||||||||||
Change in cash and cash equivalents | (18,486) | (33,991) | ||||||||||||||||||||||||
Cash and cash equivalents at beginning of period | 70,610 | 130,204 | ||||||||||||||||||||||||
Cash and cash equivalents at end of period | $ | 52,124 | $ | 96,213 |
See accompanying notes.
March 27,
|
|
|
|
Papa John’s domestic restaurants, both Company-owned and franchised, participate in Papa John’s Marketing Fund, Inc. (“PJMF”), a nonstock corporation designed to operate at break-even as it spends all annual contributions received from the system. PJMF collects a percentage of revenues from Company-owned and franchised restaurants in the United States for the purpose of designing and administering advertising and promotional programs. PJMF is a variable interest entity (“VIE”) that funds its operations with ongoing financial support and contributions from the domestic restaurants, of which approximately 80%80 percent are franchised (85%(85 percent following the divestiture of the Company’s interest in 1 joint venture subsequent toin the end of the firstsecond quarter that included 90 restaurants as discussed in Note 10) and does not have sufficient equity to fund its operations without these ongoing financial contributions. Based on an assessment of the governance structure and operating procedures of PJMF, the Company determined it has the power to control certain significant activities of PJMF, and therefore, is the primary beneficiary. The Company has consolidated PJMF in its financial results in accordance with Accounting Standards Codification (“ASC”) 810, “Consolidations.”
of 2022.
9
the Company and the interests of the noncontrolling owners, including a disclosure on the face of the Condensed Consolidated Statements of Operations of net income attributable to noncontrolling interests.
| | | | | | |
| | | ||||
| | Three Months Ended | ||||
| | March 27, | | March 28, | ||
|
| 2022 |
| 2021 | ||
| | | | | | |
Papa John’s International, Inc. | | $ | 1,621 | | $ | 2,349 |
Noncontrolling interests | |
| 933 | |
| 1,400 |
Total net income | | $ | 2,554 | | $ | 3,749 |
Three Months Ended | Six Months Ended | ||||||||||||||||||||||
June 26, 2022 | June 27, 2021 | June 26, 2022 | June 27, 2021 | ||||||||||||||||||||
Papa John’s International, Inc. | $ | 706 | $ | 2,296 | $ | 2,327 | $ | 4,645 | |||||||||||||||
Noncontrolling interests | 297 | 1,336 | 1,230 | 2,736 | |||||||||||||||||||
Total net income | $ | 1,003 | $ | 3,632 | $ | 3,557 | $ | 7,381 |
|
|
|
|
| ||||||||||
|
|
| ||||||||||||
Type of Joint Venture Arrangement | Location within the Balance Sheets | Recorded Value | ||||||||||||
|
|
|
|
| ||||||||||
Joint ventures with no redemption feature | Permanent equity | Carrying value | ||||||||||||
Joint ventures with option to require the Company to purchase the noncontrolling interest - not currently redeemable or redemption not probable | Temporary equity | Carrying value |
10
Level 1: Quoted market prices in active markets for identical assets or liabilities.
Fair Value Measurements | ||||||||||||||||||||||||||
(in thousands) | Carrying Value | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||||
June 26, 2022 | ||||||||||||||||||||||||||
Financial assets: | ||||||||||||||||||||||||||
Cash surrender value of life insurance policies (a) | $ | 29,514 | $ | 29,514 | $ | — | $ | — | ||||||||||||||||||
Interest rate swaps (b) | $ | 672 | $ | — | $ | 672 | $ | — | ||||||||||||||||||
December 26, 2021 | ||||||||||||||||||||||||||
Financial assets: | ||||||||||||||||||||||||||
Cash surrender value of life insurance policies (a) | $ | 41,904 | $ | 41,904 | $ | — | $ | — | ||||||||||||||||||
Financial liabilities: | ||||||||||||||||||||||||||
Interest rate swaps (b) | $ | 5,536 | $ | — | $ | 5,536 | $ | — |
| | | | | | | | | | | | | |
| | Carrying | | Fair Value Measurements |
| ||||||||
(in thousands) |
| Value |
| Level 1 |
| Level 2 |
| Level 3 |
| ||||
March 27, 2022 | | | | | | | | | | | | | |
Financial assets: | | | | | | | | | | | | | |
Cash surrender value of life insurance policies (a) | | $ | 34,205 | | $ | 34,205 | | $ | — | | $ | — | |
| | | | | | | | | | | | | |
Financial liabilities: | | | | | | | | | | | | | |
Interest rate swaps (b) | | $ | 1,528 | | $ | — | | $ | 1,528 | | $ | — | |
| | | | | | | | | | | | | |
December 26, 2021 | | | | | | | | | | | | | |
Financial assets: | | | | | | | | | | | | | |
Cash surrender value of life insurance policies (a) | | $ | 41,904 | | $ | 41,904 | | $ | — | | $ | — | |
| | | | | | | | | | | | | |
Financial liabilities: | | | | | | | | | | | | | |
Interest rate swaps (b) | | $ | 5,536 | | $ | — | | $ | 5,536 | | $ | — | |
The fair value of certain assets and liabilities approximates carrying value because of the short-term nature of the accounts, including cash and cash equivalents, accounts receivable, net of allowances, and accounts payable. The carrying value of notes receivable, net of allowances, also approximates fair value. The Company’s revolving credit facilities under its credit agreement approximate carrying value due to its variable market-based interest rate. The Company’s 3.875%senior notes are classified as a Level 2 fair value measurement since the Company estimates the fair value by using recent trading transactions, and has the following estimated fair values and carrying values (excluding the impact of unamortized debt issuance costs) as of March 27,June 26, 2022 and December 26, 2021, respectively:
| | | | | | | | | | | | |
| | March 27, 2022 | | December 26, 2021 | ||||||||
| | Carrying | | Fair | | Carrying | | Fair | ||||
(in thousands) | | Value | | Value | | Value | | Value | ||||
3.875% Senior Notes | | $ | 400,000 | | $ | 362,000 | | $ | 400,000 | | $ | 396,000 |
11
June 26, 2022 | December 26, 2021 | |||||||||||||||||||||||||
(in thousands) | Carrying Value | Fair Value | Carrying Value | Fair Value | ||||||||||||||||||||||
3.875% Senior Notes | $ | 400,000 | $ | 332,000 | $ | 400,000 | $ | 396,000 |
| | | | | | |
| | | | |||
(in thousands) | | Accounts Receivable | | Notes Receivable | ||
Balance at December 26, 2021 | | $ | 2,364 | | $ | 1,500 |
Current period provision for expected credit losses (1) | | | 2,613 | | | 12,560 |
Write-offs charged against the allowance | | | (126) | | | — |
Recoveries collected | | | — | | | (6) |
Balance at March 27, 2022 | | $ | 4,851 | | $ | 14,054 |
(in thousands) | Accounts Receivable | Notes Receivable | ||||||||||||
Balance at December 26, 2021 | $ | 2,364 | $ | 1,500 | ||||||||||
Current period provision for expected credit losses (1) | 3,019 | 12,534 | ||||||||||||
Write-offs charged against the allowance | (275) | — | ||||||||||||
Recoveries collected | — | (14) | ||||||||||||
Balance at June 26, 2022 | $ | 5,108 | $ | 14,020 |
(1) | The Company recorded $14.6 million of one-time, non-cash reserves in the first quarter of 2022 for certain accounts receivable and notes receivable primarily associated with a master franchisee with operations principally in Russia. |
Operations.March 27,June 26, 2022, we leased and subleased approximately 430436 Papa John’s restaurant properties to franchisees in the United Kingdom. The initial lease terms on the franchised sites in the United Kingdom are generally 15 years. The Company has the option to negotiate an extension toward the end of the lease term at the landlord’s discretion. Rental income, primarily derived from properties leased and subleased to franchisees in the United Kingdom, is recognized on a straight-line basis over the respective operating lease terms. We recognized total sublease income of $3.0 million and $2.8$6.0 million for the three and six months ended June 26, 2022, respectively, and $3.3 million and $6.1 million for the three and six months ended June 27, 2021, respectively, within Other revenues in the Condensed Consolidated Statements of Operations for the three months ended March 27, 2022 and March 28, 2021, respectively.6562 domestic leases. These leases have varying terms, the latest of which expires in 2036. As of March 27,June 26, 2022, the estimated maximum amount of undiscounted payments the Company could be required to make in the event of nonpayment by the primary lessees was $10.8$10.2 million. This contingent liability is not included in the Condensed Consolidated Balance Sheet as it is not probable to occur. The fair value of the guarantee is not material.Subsequent to quarter-end, we refranchised 90 Company-owned restaurants held in a consolidated joint venture in Texas through the sale of our 51% ownership in the joint venture, as discussed in Note 10. As part of this transaction, we are contingently liable for payment of 12 of the 90 domestic leases, and the estimated maximum amount of undiscounted payments the Company could be required to make in the event of nonpayment by the primary lessees for these stores is approximately $1.6 million. 12
Six Months Ended | ||||||||||||||||||||||||||
(in thousands) | June 26, 2022 | June 27, 2021 | ||||||||||||||||||||||||
Cash paid for amounts included in the measurement of lease liabilities: | ||||||||||||||||||||||||||
Operating cash flows from finance leases | $ | 510 | $ | 574 | ||||||||||||||||||||||
Financing cash flows from finance leases | 2,508 | 2,188 | ||||||||||||||||||||||||
Operating cash flows from operating leases (a) | 18,363 | 19,139 | ||||||||||||||||||||||||
Right-of-use assets obtained in exchange for new finance lease liabilities | 569 | 8,393 | ||||||||||||||||||||||||
Right-of-use assets obtained in exchange for new operating lease liabilities (b) | 31,369 | 35,115 | ||||||||||||||||||||||||
Cash received from sublease income | 5,623 | 5,890 | ||||||||||||||||||||||||
(a)Included within the change in Other assets and liabilities within the Condensed Consolidated Statements of Cash Flows offset by non-cash operating lease right-of-use asset amortization and lease liability accretion. | ||||||||||||||||||||||||||
(b)Includes right-of-use assets of approximately $14.3 million for the six months ended June 27, 2021 associated with the lease commencement of our Atlanta, Georgia corporate office. |
| | | | | | |
| | Three Months Ended | ||||
(in thousands) | | March 27, 2022 | | March 28, 2021 | ||
Cash paid for amounts included in the measurement of lease liabilities: | | | | | | |
Operating cash flows from finance leases | | $ | 262 | | $ | 278 |
Financing cash flows from finance leases | | | 1,241 | | | 1,059 |
Operating cash flows from operating leases (a) | | | 9,612 | | | 9,483 |
Right-of-use assets obtained in exchange for new finance lease liabilities | | | 569 | | | 7,014 |
Right-of-use assets obtained in exchange for new operating lease liabilities (b) | | | 20,801 | | | 28,428 |
Cash received from sublease income | | | 3,092 | | | 2,987 |
| | | | | | |
(a) Included within the change in Other assets and liabilities within the Condensed Consolidated Statements of Cash Flows offset by non-cash operating lease right-of-use asset amortization and lease liability accretion. | ||||||
(b) Includes right-of-use assets of approximately $14.5 million for the three months ended March 28, 2021 associated with the lease commencement of our Atlanta, Georgia corporate office. |
| | | | | | |
| | | | | | |
| | March 27, | | December 26, | ||
| | 2022 | | 2021 | ||
| | | | | | |
Assets | | | | | | |
Current assets: | | | | | | |
Cash and cash equivalents | | $ | 24,136 | | $ | 24,481 |
Accounts receivable, net | | | 13,078 | | | 14,150 |
Income tax receivable | | | 44 | | | 300 |
Prepaid expenses and other current assets | | | 2,148 | | | 1,718 |
Total current assets | | | 39,406 | | | 40,649 |
Deferred income taxes | | | 604 | | | 614 |
Total assets | | $ | 40,010 | | $ | 41,263 |
| | | | | | |
| | | | | | |
Liabilities | | | | | | |
Current liabilities: | | | | | | |
Accounts payable | | $ | 2,868 | | $ | 140 |
Income and other taxes payable | | | 2 | | | 2 |
Accrued expenses and other current liabilities | | | 35,131 | | | 40,154 |
Current deferred revenue | | | 4,320 | | | 4,317 |
Total current liabilities | | | 42,321 | | | 44,613 |
Deferred revenue | | | 1,399 | | | 2,478 |
Total liabilities | | $ | 43,720 | | $ | 47,091 |
13
June 26, 2022 | December 26, 2021 | |||||||||||||
Assets | ||||||||||||||
Current assets: | ||||||||||||||
Cash and cash equivalents | $ | 16,886 | $ | 24,481 | ||||||||||
Accounts receivable, net | 13,523 | 14,150 | ||||||||||||
Income tax receivable | 44 | 300 | ||||||||||||
Prepaid expenses and other current assets | 2,012 | 1,718 | ||||||||||||
Total current assets | 32,465 | 40,649 | ||||||||||||
Deferred income taxes | 592 | 614 | ||||||||||||
Total assets | $ | 33,057 | $ | 41,263 | ||||||||||
Liabilities | ||||||||||||||
Current liabilities: | ||||||||||||||
Accounts payable | $ | 278 | $ | 140 | ||||||||||
Income and other taxes payable | 2 | 2 | ||||||||||||
Accrued expenses and other current liabilities | 32,805 | 40,154 | ||||||||||||
Current deferred revenue | 3,479 | 4,317 | ||||||||||||
Total current liabilities | 36,564 | 44,613 | ||||||||||||
Deferred revenue | 1,978 | 2,478 | ||||||||||||
Total liabilities | $ | 38,542 | $ | 47,091 |
revenue, compared to $9.0 million and $18.2 million for the three and six months ended June 27, 2021.
| | | | | | | | | |
| | Contract Liabilities | |||||||
| | | March 27, 2022 | | | December 26, 2021 | | | Change |
Franchise fees and unredeemed gift card liabilities | | $ | 18,731 | | $ | 20,410 | | $ | (1,679) |
Customer loyalty program obligations | | | 13,299 | | | 15,136 | | | (1,837) |
Total contract liabilities | | $ | 32,030 | | $ | 35,546 | | $ | (3,516) |
Contract Liabilities | ||||||||||||||||||||
June 26, 2022 | December. 26, 2021 | Change | ||||||||||||||||||
Franchise fees and unredeemed gift card liabilities | $ | 30,306 | $ | 20,410 | $ | 9,896 | ||||||||||||||
Customer loyalty program obligations | 13,252 | 15,136 | (1,884) | |||||||||||||||||
Total contract liabilities | $ | 43,558 | $ | 35,546 | $ | 8,012 |
| | | | | | | | | | | | | | | | | | | | | |
| | | Performance Obligations by Period | ||||||||||||||||||
| | Less than 1 Year | | 1-2 Years | | 2-3 Years | | 3-4 Years | | 4-5 Years | | Thereafter | | Total | |||||||
Franchise fees | | $ | 2,011 | | $ | 1,783 | | $ | 1,601 | | $ | 1,390 | | $ | 1,127 | | $ | 2,134 | | $ | 10,046 |
Performance Obligations by Period | ||||||||||||||||||||||||||||||||||||||||||||
Less than 1 Year | 1-2 Years | 2-3 Years | 3-4 Years | 4-5 Years | Thereafter | Total | ||||||||||||||||||||||||||||||||||||||
Franchise fees | $ | 3,198 | $ | 2,989 | $ | 2,811 | $ | 2,604 | $ | 2,324 | $ | 7,888 | $ | 21,814 |
The Company applies the practical expedient in ASC 606-10-50-14606, "Revenue Recognition" and does not disclose information about remaining performance obligations that have original expected durations of one year or less.
14
| | | | | | | | | | | |
| | | | | | | | | | | Maximum Dollar |
| | Total | | | Average | | | Aggregate | | | Value of Shares |
| | Number | | | Price | | | Cost of | | | that May Yet Be |
(in thousands, except average price per share) | | of Shares | | | Paid per | | | Shares | | | Purchased Under the |
Three Months Ended | | Purchased | |
| Share | | | Purchased | | | Plans or Programs |
March 27, 2022 | | 301 | | $ | 108.76 | | $ | 32,709 | | $ | 392,091 |
March 28, 2021 | | 15 | | $ | 84.63 | | $ | 1,267 | | $ | 71,031 |
(in thousands, except average price per share) | Total Number of Shares Purchased | Average Price Paid per Share | Aggregate Cost of Shares Purchased | Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs | ||||||||||||||||||||||
Three Months Ended | ||||||||||||||||||||||||||
June 26, 2022 | 452 | $ | 94.56 | $ | 42,762 | $ | 349,329 | |||||||||||||||||||
June 27, 2021 | 68 | $ | 101.21 | $ | 6,921 | $ | 64,110 | |||||||||||||||||||
(in thousands, except average price per share) | Total Number of Shares Purchased | Average Price Paid per Share | Aggregate Cost of Shares Purchased | Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs | ||||||||||||||||||||||
Six Months Ended | ||||||||||||||||||||||||||
June 26, 2022 | 753 | $ | 100.23 | $ | 75,471 | $ | 349,329 | |||||||||||||||||||
June 27, 2021 | 83 | $ | 98.23 | $ | 8,188 | $ | 64,110 |
15
| | | | | | |
| | Three Months Ended | ||||
| | March 27, | | March 28, | ||
| | 2022 |
| 2021 | ||
Basic earnings per common share (in thousands, except per share data) | | | | | | |
Net income attributable to the Company | | $ | 10,494 | | $ | 33,883 |
Dividends paid to participating securities | | | (60) | | | (3,527) |
Net income attributable to participating securities | |
| — | |
| (3,243) |
Net income attributable to common shareholders | | $ | 10,434 | | $ | 27,113 |
| | | | | | |
Basic weighted average common shares outstanding | |
| 35,927 | |
| 32,756 |
Basic earnings per common share | | $ | 0.29 | | $ | 0.83 |
| | | | | | |
Diluted earnings per common share (in thousands, except per share data) | | | | | | |
Net income attributable to common shareholders | | $ | 10,434 | | $ | 27,113 |
| | | | | | |
Weighted average common shares outstanding | |
| 35,927 | |
| 32,756 |
Dilutive effect of outstanding equity awards (a) | |
| 309 | |
| 334 |
Diluted weighted average common shares outstanding (b) | |
| 36,236 | |
| 33,090 |
Diluted earnings per common share | | $ | 0.29 | | $ | 0.82 |
Three Months Ended | Six Months Ended | ||||||||||||||||||||||
June 26, 2022 | June 27, 2021 | June 26, 2022 | June 27, 2021 | ||||||||||||||||||||
Basic earnings (loss) per common share (in thousands, except per share data) | |||||||||||||||||||||||
Net income attributable to the Company | $ | 25,433 | $ | 32,254 | $ | 35,927 | $ | 66,137 | |||||||||||||||
Dividends on redemption of Series B Convertible Preferred Stock | — | (109,852) | — | (109,852) | |||||||||||||||||||
Dividends paid to participating securities | (82) | (2,300) | (141) | (5,827) | |||||||||||||||||||
Net income attributable to participating securities | (111) | — | (93) | — | |||||||||||||||||||
Net income (loss) attributable to common shareholders | $ | 25,240 | $ | (79,898) | $ | 35,693 | $ | (49,542) | |||||||||||||||
Basic weighted average common shares outstanding | 35,624 | 34,729 | 35,775 | 33,739 | |||||||||||||||||||
Basic earnings (loss) per common share | $ | 0.71 | $ | (2.30) | $ | 1.00 | $ | (1.47) | |||||||||||||||
Diluted earnings (loss) per common share (in thousands, except per share data) | |||||||||||||||||||||||
Net income (loss) attributable to common shareholders | $ | 25,240 | $ | (79,898) | $ | 35,693 | $ | (49,542) | |||||||||||||||
Weighted average common shares outstanding | 35,624 | 34,729 | 35,775 | 33,739 | |||||||||||||||||||
Dilutive effect of outstanding equity awards (a) | 200 | — | 257 | — | |||||||||||||||||||
Diluted weighted average common shares outstanding | 35,824 | 34,729 | 36,032 | 33,739 | |||||||||||||||||||
Diluted earnings (loss) per common share | $ | 0.70 | $ | (2.30) | $ | 0.99 | $ | (1.47) |
(a) | Excludes |
16
|
|
Long-term debt, net, consists of the following (in thousands):
| | | | | | | |
| | | | March 27, | | | December 26, |
| | | | 2022 | | | 2021 |
Senior notes | | | $ | 400,000 | | $ | 400,000 |
Revolving facilities | | | | 137,000 | | | 90,000 |
Outstanding debt | | | $ | 537,000 | | $ | 490,000 |
Unamortized debt issuance costs | | | | (8,912) | | | (9,270) |
Total long-term debt, net | | | $ | 528,088 | | $ | 480,730 |
June 26, 2022 | December 26, 2021 | ||||||||||
Senior notes | $ | 400,000 | $ | 400,000 | |||||||
Revolving facilities | 145,000 | 90,000 | |||||||||
Outstanding debt | $ | 545,000 | $ | 490,000 | |||||||
Unamortized debt issuance costs | (8,554) | (9,270) | |||||||||
Total long-term debt, net | $ | 536,446 | $ | 480,730 |
The remaining availability under the PJI Revolving Facility was approximately $455.0 million as of June 26, 2022.
17
The Amended Credit Agreement contains customary affirmative and negative covenants that, among other things, require customary reporting obligations, and restrict, subject to certain exceptions, the incurrenceoccurrence of additional indebtedness and liens, the consummation of certain mergers, consolidations, sales of assets and similar transactions, the making of investments, equity distributions and other restricted payments, and transactions with affiliates. In addition, theThe Company will beis also subject to the following financial covenants: (1) a maximum Leverage Ratio of 5.25 to 1.00, subject to the Company’s election to increase the maximum Leverage Ratio by 0.50 to 1.00 in connection with material acquisitions if the Company satisfies certain requirements, and (2) a minimum interest coverage ratio defined as EBITDA plus consolidated rental expense to consolidated interest expense plus consolidated rental expense of 2.00 to 1.00. We were in compliance with these financial covenants at March 27,June 26, 2022.
| | | | | | | |
Effective Dates |
| Floating Rate Debt |
| Fixed Rates |
| ||
April 30, 2018 through April 30, 2023 | | $ | 55 | million | | 2.33 | % |
April 30, 2018 through April 30, 2023 | | $ | 35 | million | | 2.36 | % |
April 30, 2018 through April 30, 2023 | | $ | 35 | million | | 2.34 | % |
January 30, 2018 through August 30, 2022 | | $ | 100 | million | | 1.99 | % |
January 30, 2018 through August 30, 2022 | | $ | 75 | million | | 1.99 | % |
January 30, 2018 through August 30, 2022 | | $ | 50 | million | | 2.00 | % |
Effective Dates | Floating Rate Debt | Fixed Rates | ||||||||||||
April 30, 2018 through April 30, 2023 | $ | 55 million | 2.33% | |||||||||||
April 30, 2018 through April 30, 2023 | $ | 35 million | 2.36% | |||||||||||
April 30, 2018 through April 30, 2023 | $ | 35 million | 2.34% | |||||||||||
January 30, 2018 through August 30, 2022 | $ | 100 million | 1.99% | |||||||||||
January 30, 2018 through August 30, 2022 | $ | 75 million | 1.99% | |||||||||||
January 30, 2018 through August 30, 2022 | $ | 50 million | 2.00% |
18
The following table provides information on the location and amounts of our swaps in the accompanying condensed consolidated financial statements (in thousands):
Interest Rate Swap Derivatives | ||||||||||||||
Balance Sheet Location | Fair Value June 26, 2022 | Fair Value December 26, 2021 | ||||||||||||
Other current and long-term assets | $ | 672 | $ | — | ||||||||||
Other current and long-term liabilities | $ | — | $ | 5,536 |
| | | | | | |
| | Interest Rate Swap Derivatives | ||||
| | Fair Value | | Fair Value | ||
| | March 27, | | December 26, | ||
Balance Sheet Location | | 2022 | | 2021 | ||
Other current and long-term liabilities | | $ | 1,528 | | $ | 5,536 |
The effect of derivative instruments on the accompanying condensed consolidated financial statements is as follows (in thousands):
| | | | | | | | | | | | |
| | | | | | | | | | | ||
| | | | Location of (Loss) | | Amount of (Loss) | | | ||||
Derivatives - | | Amount of Gain or | | or Gain | | or Gain | | Total Net Interest Expense | ||||
Cash Flow | | (Loss) Recognized | | Reclassified from | | Reclassified from | | on Condensed | ||||
Hedging | | in AOCL | | AOCL into | | AOCL into | | Consolidated Statements | ||||
Relationships | | on Derivative | | Income | | Income | | of Operations | ||||
Interest rate swaps for the three months ended: | ||||||||||||
March 27, 2022 | | $ | 1,318 | |
| Interest expense | | $ | 535 | | $ | (4,264) |
March 28, 2021 | | $ | 1,382 | |
| Interest expense | | $ | (1,709) | | $ | (3,647) |
Derivatives - Cash Flow Hedging Relationships | Amount of Gain or (Loss) Recognized in AOCL on Derivative | Location of (Loss) or Gain Reclassified from AOCL into Income | Amount of (Loss) or Gain Reclassified from AOCL into Income | Total Net Interest Expense on Condensed Consolidated Statements of Operations | ||||||||||||||||||||||
Interest rate swaps for the three months ended: | ||||||||||||||||||||||||||
June 26, 2022 | $ | 1,445 | Interest expense | $ | (735) | $ | (6,081) | |||||||||||||||||||
June 27, 2021 | $ | 1,399 | Interest expense | $ | (1,730) | $ | (3,649) | |||||||||||||||||||
Interest rate swaps for the six months ended: | ||||||||||||||||||||||||||
June 26, 2022 | $ | 2,763 | Interest Expense | $ | (200) | $ | (10,344) | |||||||||||||||||||
June 27, 2021 | $ | 2,781 | Interest Expense | $ | (3,439) | $ | (7,296) |
Litigation
The Company is involved in a number of lawsuits, claims, investigations and proceedings, including those specifically identified below, consisting of intellectual property, employment, consumer, commercial and other matters arising in the ordinary course of business. In accordance with ASC 450, “Contingencies” the Company has made accruals with respect to these matters where appropriate, which are reflected in the Company’s condensed consolidated financial statements. We review these provisions at least quarterly and adjust them to reflect the impact of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular case.
In re Papa John’s Employee & Franchise Employee Antitrust Litigation is a putative class action filed in December 2018 in the United States District Court for the Western District of Kentucky. The suit alleges that the “no-poaching” provision previously contained in the Company’s franchise agreement constituted an unlawful agreement or conspiracy in restraint of trade and commerce in violation of Section 1 of the Sherman Antitrust Act. On April 14, 2022, the parties reached a settlement (the “Legal Settlement”) in principle to resolve the case. Pursuant to the terms of the proposed settlement, in exchange for the Company’s payment of a total aggregate settlement amount of $5.0 million and other non-monetary consideration, all claims in the action will be dismissed, the litigation will be terminated, and the Company will receive a release. The settlement amount was recorded in General and Administrative expenses in the Condensed Consolidated Statements of Operations in the first quarter of 2022. The proposed settlement is subject to approval by the District Court and contains certain customary contingencies. The Company continues to deny any liability or wrongdoing in this matter.
Durling et al v. Papa John’s International, Inc.Inc., is a conditionally certified collective action filed in May 2016 in the United States District Court for the Southern District of New York, alleging that corporate restaurant delivery drivers were not properly reimbursed for vehicle mileage and expenses in accordance with the Fair Labor Standards Act. In July 2018, the District Court granted a motion to certify a conditional corporate collective class and the opt-in notice process has been completed. As of the close of the opt-in period on October 29, 2018, 9,571 drivers opted into the collective class. The Company continues to deny any liability or wrongdoing in this matter and intends to vigorously defend this action. The Company has 0tnot recorded any liability related to this lawsuit as of March 27,June 26, 2022 as it does not believe a loss is probable or reasonably estimable.
19
| | | |
|
| | |
| | | March 27, 2022 |
Current assets | | $ | 1,632 |
Property and equipment, net | | | 7,030 |
Operating lease right-of-use assets |
| | 8,924 |
Goodwill | | | 9,908 |
Other assets | | | 191 |
Loss on impairment | | | (8,412) |
Total assets held for sale | | $ | 19,273 |
| | | |
Accounts payable, taxes payable, accrued expenses and other | | $ | 1,632 |
Current deferred revenue | | | 1,930 |
Current operating lease liabilities | | | 2,338 |
Long-term operating lease liabilities | | | 7,097 |
Other long-term liabilities | | | 250 |
Total liabilities held for sale | | $ | 13,247 |
Upon reclassification of assets and liabilities held for sale,divestiture, we recorded a one-time, non-cash charge of $8.4 million as a Refranchising Loss in the Condensed Consolidated Statement of Operations, which reflects net sale proceeds of $14.0 million, the noncontrolling interest of $4.2 million, and the recognition of an unearned royalty stream of $12.2 million to be recognized as revenue over the 10-year term of the franchise agreement executed concurrent with the disposition in accordance with ASC 810, “Consolidation.
20
|
|
We have 4 reportable segments: domestic Company-owned restaurants, North America franchising, North America commissaries, and international operations. The domestic Company-owned restaurant segment consists of the operations of all domestic (“domestic” is defined as contiguous United States) Company-owned restaurants and derives its revenues principally from retail sales of pizza, Papadias, which are flatbread-style sandwiches, and side items, including breadsticks, cheesesticks, chicken poppers and wings, dessert items and canned or bottled beverages. The North America commissary
Our segment information is as follows:
| | | | | | | |
| | | Three Months Ended | ||||
| | | March 27, | | March 28, | ||
(In thousands) | |
| 2022 |
| 2021 | ||
Revenues: | | | | | | | |
Domestic Company-owned restaurants | | | $ | 198,765 | | $ | 197,234 |
North America franchising | | |
| 34,268 | |
| 32,715 |
North America commissaries | | |
| 209,679 | |
| 184,878 |
International | | |
| 42,707 | |
| 42,604 |
All others | | |
| 57,273 | |
| 54,315 |
Total revenues | | | $ | 542,692 | | $ | 511,746 |
| | | | | | | |
Intersegment revenues: | | | | | | | |
North America franchising | | | $ | 1,053 | | $ | 1,060 |
North America commissaries | | | | 58,507 | | | 52,070 |
All others | | |
| 19,379 | |
| 19,148 |
Total intersegment revenues | | | $ | 78,939 | | $ | 72,278 |
| | | | | | | |
Operating income: | | | | | | | |
Domestic Company-owned restaurants (1) | | | $ | 1,989 | | $ | 15,324 |
North America franchising | | |
| 32,137 | |
| 30,443 |
North America commissaries | | |
| 9,334 | |
| 9,713 |
International (2) | | |
| 4,455 | |
| 8,364 |
All others | | |
| 3,719 | |
| 6,118 |
Unallocated corporate expenses (3) | | |
| (37,111) | |
| (23,162) |
Elimination of intersegment (profits) losses | | |
| (88) | |
| 62 |
Total operating income | | | $ | 14,435 | | $ | 46,862 |
| | | | | | | |
Property and equipment, net: | | | | | | | |
Domestic Company-owned restaurants | | | $ | 220,357 | | | |
North America commissaries | | | | 149,503 | | | |
International | | | | 14,857 | | | |
All others | | | | 112,037 | | | |
Unallocated corporate assets | | | | 234,115 | | | |
Accumulated depreciation and amortization | | | | (514,616) | | | |
Total property and equipment, net | | | $ | 216,253 | | | |
Three Months Ended | Six Months Ended | ||||||||||||||||||||||
(In thousands) | June 26, 2022 | June 27, 2021 | June 26, 2022 | June 27, 2021 | |||||||||||||||||||
Revenues: | |||||||||||||||||||||||
Domestic Company-owned restaurants | $ | 171,411 | $ | 196,124 | $ | 370,176 | $ | 393,358 | |||||||||||||||
North America franchising | 34,917 | 32,475 | 69,185 | 65,190 | |||||||||||||||||||
North America commissaries | 219,383 | 186,641 | 429,062 | 371,519 | |||||||||||||||||||
International | 39,282 | 46,277 | 81,989 | 88,881 | |||||||||||||||||||
All others | 57,672 | 53,491 | 114,945 | 107,806 | |||||||||||||||||||
Total revenues | $ | 522,665 | $ | 515,008 | $ | 1,065,357 | $ | 1,026,754 | |||||||||||||||
Intersegment revenues: | |||||||||||||||||||||||
North America franchising | $ | 1,048 | $ | 1,041 | $ | 2,101 | $ | 2,101 | |||||||||||||||
North America commissaries | 52,754 | 53,428 | 111,261 | 105,498 | |||||||||||||||||||
All others | 15,889 | 18,943 | 35,268 | 38,091 | |||||||||||||||||||
Total intersegment revenues | $ | 69,691 | $ | 73,412 | $ | 148,630 | $ | 145,690 | |||||||||||||||
Operating income: | |||||||||||||||||||||||
Domestic Company-owned restaurants (1) | $ | 5,924 | $ | 15,361 | $ | 7,912 | $ | 30,685 | |||||||||||||||
North America franchising | 32,624 | 30,518 | 64,761 | 60,961 | |||||||||||||||||||
North America commissaries | 10,957 | 9,778 | 20,292 | 19,491 | |||||||||||||||||||
International (2) | 7,306 | 8,683 | 11,761 | 17,047 | |||||||||||||||||||
All others | 2,187 | 4,894 | 5,906 | 11,012 | |||||||||||||||||||
Unallocated corporate expenses (3) | (19,344) | (24,617) | (56,454) | (47,779) | |||||||||||||||||||
Elimination of intersegment (profits) losses | (750) | 20 | (839) | 82 | |||||||||||||||||||
Total operating income | $ | 38,904 | $ | 44,637 | $ | 53,339 | $ | 91,499 | |||||||||||||||
Property and equipment, net: | |||||||||||||||||||||||
Domestic Company-owned restaurants | $ | 225,755 | |||||||||||||||||||||
North America commissaries | 151,648 | ||||||||||||||||||||||
International | 15,157 | ||||||||||||||||||||||
All others | 118,496 | ||||||||||||||||||||||
Unallocated corporate assets | 240,431 | ||||||||||||||||||||||
Accumulated depreciation and amortization | (526,105) | ||||||||||||||||||||||
Total property and equipment, net | $ | 225,382 |
(1) | Includes a one-time, non-cash charge of $8.4 million associated with the refranchising of the Company’s ownership interest in a 90-restaurant joint venture, recorded as Refranchising and impairment |
(2) | Includes $3.5 million of one-time, non-cash reserves for certain accounts receivable and impairments of reacquired franchise rights |
Unallocated corporate expenses include $13.9 million of one-time, non-cash reserves of certain notes receivable, |
Reportable Segments | |||||||||||||||||||||||||||||||||||
Three Months Ended June 26, 2022 | |||||||||||||||||||||||||||||||||||
Major Products/Services Lines | Domestic Company-owned restaurants | North America franchising | North America commissaries | International | All others | Total | |||||||||||||||||||||||||||||
Company-owned restaurant sales | $ | 171,411 | $ | — | $ | — | $ | — | $ | — | $ | 171,411 | |||||||||||||||||||||||
Franchise royalties and fees | — | 35,965 | — | 12,043 | — | 48,008 | |||||||||||||||||||||||||||||
Commissary sales | — | — | 272,137 | 19,915 | — | 292,052 | |||||||||||||||||||||||||||||
Other revenues | — | — | — | 7,324 | 73,561 | 80,885 | |||||||||||||||||||||||||||||
Eliminations | — | (1,048) | (52,754) | — | (15,889) | (69,691) | |||||||||||||||||||||||||||||
Total segment revenues | $ | 171,411 | $ | 34,917 | $ | 219,383 | $ | 39,282 | $ | 57,672 | $ | 522,665 | |||||||||||||||||||||||
International other revenues (1) | — | — | — | (7,324) | 7,324 | — | |||||||||||||||||||||||||||||
Total revenues | $ | 171,411 | $ | 34,917 | $ | 219,383 | $ | 31,958 | $ | 64,996 | $ | 522,665 | |||||||||||||||||||||||
Reportable Segments | |||||||||||||||||||||||||||||||||||
Three Months Ended June 27, 2021 | |||||||||||||||||||||||||||||||||||
Major Products/Services Lines | Domestic Company-owned restaurants | North America franchising | North America commissaries | International | All others | Total | |||||||||||||||||||||||||||||
Company-owned restaurant sales | $ | 196,124 | $ | — | $ | — | $ | — | $ | — | $ | 196,124 | |||||||||||||||||||||||
Franchise royalties and fees | — | 33,516 | — | 13,156 | — | 46,672 | |||||||||||||||||||||||||||||
Commissary sales | — | — | 240,069 | 24,458 | — | 264,527 | |||||||||||||||||||||||||||||
Other revenues | — | — | — | 8,663 | 72,434 | 81,097 | |||||||||||||||||||||||||||||
Eliminations | — | (1,041) | (53,428) | — | (18,943) | (73,412) | |||||||||||||||||||||||||||||
Total segment revenues | $ | 196,124 | $ | 32,475 | $ | 186,641 | $ | 46,277 | $ | 53,491 | $ | 515,008 | |||||||||||||||||||||||
International other revenues (1) | — | — | — | (8,663) | 8,663 | — | |||||||||||||||||||||||||||||
Total revenues | $ | 196,124 | $ | 32,475 | $ | 186,641 | $ | 37,614 | $ | 62,154 | $ | 515,008 | |||||||||||||||||||||||
Reportable Segments | |||||||||||||||||||||||||||||||||||
Six Months Ended June 26, 2022 | |||||||||||||||||||||||||||||||||||
Major Products/Services Lines | Domestic Company-owned restaurants | North America franchising | North America commissaries | International | All others | Total | |||||||||||||||||||||||||||||
Company-owned restaurant sales | $ | 370,176 | $ | — | $ | — | $ | — | $ | — | $ | 370,176 | |||||||||||||||||||||||
Franchise royalties and fees | — | 71,286 | — | 25,478 | — | 96,764 | |||||||||||||||||||||||||||||
Commissary sales | — | — | 540,323 | 41,097 | — | 581,420 | |||||||||||||||||||||||||||||
Other revenues | — | — | — | 15,414 | 150,213 | 165,627 | |||||||||||||||||||||||||||||
Eliminations | — | (2,101) | (111,261) | — | (35,268) | (148,630) | |||||||||||||||||||||||||||||
Total segment revenues | $ | 370,176 | $ | 69,185 | $ | 429,062 | $ | 81,989 | $ | 114,945 | $ | 1,065,357 | |||||||||||||||||||||||
International other revenues (1) | — | — | — | (15,414) | 15,414 | — | |||||||||||||||||||||||||||||
Total revenues | $ | 370,176 | $ | 69,185 | $ | 429,062 | $ | 66,575 | $ | 130,359 | $ | 1,065,357 | |||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | |
| | Reportable Segments | ||||||||||||||||
| | Three Months Ended March 27, 2022 | ||||||||||||||||
Major Products/Services Lines | | | Domestic Company-owned restaurants | | | North America franchising | | | North America commissaries | | | International | | | All others | | | Total |
Company-owned restaurant sales | | $ | 198,765 | | $ | - | | $ | - | | $ | - | | $ | - | | $ | 198,765 |
Franchise royalties and fees | | | - | | | 35,321 | | | - | | | 13,435 | | | - | | | 48,756 |
Commissary sales | | | - | | | - | | | 268,186 | | | 21,182 | | | - | | | 289,368 |
Other revenues | | | - | | | - | | | - | | | 8,090 | | | 76,652 | | | 84,742 |
Eliminations | | | - | | | (1,053) | | | (58,507) | | | - | | | (19,379) | | | (78,939) |
Total segment revenues | | $ | 198,765 | | $ | 34,268 | | $ | 209,679 | | $ | 42,707 | | $ | 57,273 | | $ | 542,692 |
International other revenues (1) | | | - | | | - | | | - | | | (8,090) | | | 8,090 | | | - |
Total revenues | | $ | 198,765 | | $ | 34,268 | | $ | 209,679 | | $ | 34,617 | | $ | 65,363 | | $ | 542,692 |
| | | | | | | | | | | | | | | | | | |
| | Reportable Segments | ||||||||||||||||
| | Three Months Ended March 28, 2021 | ||||||||||||||||
Major Products/Services Lines | | | Domestic Company-owned restaurants | | | North America franchising | | | North America commissaries | | | International | | | All others | | | Total |
Company-owned restaurant sales | | $ | 197,234 | | $ | - | | $ | - | | $ | - | | $ | - | | $ | 197,234 |
Franchise royalties and fees | | | - | | | 33,775 | | | - | | | 12,208 | | | - | | | 45,983 |
Commissary sales | | | - | | | - | | | 236,948 | | | 22,399 | | | - | | | 259,347 |
Other revenues | | | - | | | - | | | - | | | 7,997 | | | 73,463 | | | 81,460 |
Eliminations | | | - | | | (1,060) | | | (52,070) | | | - | | | (19,148) | | | (72,278) |
Total segment revenues | | $ | 197,234 | | $ | 32,715 | | $ | 184,878 | | $ | 42,604 | | $ | 54,315 | | $ | 511,746 |
International other revenues (1) | | | - | | | - | | | - | | | (7,997) | | | 7,997 | | | - |
Total revenues | | $ | 197,234 | | $ | 32,715 | | $ | 184,878 | | $ | 34,607 | | $ | 62,312 | | $ | 511,746 |
| | | | | | | | | | | | | | | | | | |
Reportable Segments | |||||||||||||||||||||||||||||||||||
Six Months Ended June 27, 2021 | |||||||||||||||||||||||||||||||||||
Major Products/Services Lines | Domestic Company-owned restaurants | North America franchising | North America commissaries | International | All others | Total | |||||||||||||||||||||||||||||
Company-owned restaurant sales | $ | 393,358 | $ | — | $ | — | $ | — | $ | — | $ | 393,358 | |||||||||||||||||||||||
Franchise royalties and fees | — | 67,291 | — | 25,364 | — | 92,655 | |||||||||||||||||||||||||||||
Commissary sales | — | — | 477,017 | 46,857 | — | 523,874 | |||||||||||||||||||||||||||||
Other revenues | — | — | — | 16,660 | 145,897 | 162,557 | |||||||||||||||||||||||||||||
Eliminations | — | (2,101) | (105,498) | — | (38,091) | (145,690) | |||||||||||||||||||||||||||||
Total segment revenues | $ | 393,358 | $ | 65,190 | $ | 371,519 | $ | 88,881 | $ | 107,806 | $ | 1,026,754 | |||||||||||||||||||||||
International other revenues (1) | — | — | — | (16,660) | 16,660 | — | |||||||||||||||||||||||||||||
Total revenues | $ | 393,358 | $ | 65,190 | $ | 371,519 | $ | 72,221 | $ | 124,466 | $ | 1,026,754 |
(1) | Other revenues as reported in the Condensed Consolidated Statements of Operations include |
23
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24
the one-week early access period. Growth Strategy. The Company’s goalcontinuestobetotake market shareinthepizzacategorywhileleveragingourdifferentiatedstrategy and premiumpositiontoprotect marginsinthefaceof accelerating commodityandlabor 2022.March 27,June 26, 2022, there were 5,5245,571 Papa John’s restaurants in operation, consisting of 608519 Company-owned and 4,9165,052 franchised restaurants operating in 49 countries and territories. Our revenues are derived from retail sales of pizza and other food and beverage products to the general public by Company-owned restaurants, franchise royalties, and sales of franchise and development rights. Additionally, we derive revenues from sales to franchisees of various items including food and paper products from our domestic Quality Control Centers (“QC Centers”), operation of our international QC Center in the United Kingdom, contributions received by Papa John’s Marketing Fund (“PJMF”) which is our national marketing fund, printing and promotional items and information systems equipment, and software and related services.itsEpic Pepperoni Stuffed Crust Pizza and Spicy Pepperoni Rolls in the second quarter of 2022. Epic Pepperoni Stuffed Crust Pizza features original, fresh, never-frozen, dough hand-stuffed with our signature pepperoni and melted cheese, then baked into a seasoned crust, which is finished with Papa John's signature pizza sauce, more cheese, and topped off with more pepperoni. Spicy Pepperoni Rolls feature signature pizza sauce and pepperoni rolled up with jalapenos and creamy melty cheese on our fresh dough. These offers are in addition to our first quarter launch of NY Style pizza in the first quarter of 2022. NY Stylewhich features eight oversized slices on a thin, foldable crust. NY Style pizza hasThese 2022 launches have proven to be popular with customers and highly incremental to revenues. The combination of Epic Stuffed Crust and NY Style pizza has contributed to our positive results for the first quarter of 2022 as we compare the period to the prior year’s record first quarter sales, our highest in the history of the Company. Our digital innovation through Papa Rewards, our loyalty program, allows us to directly engage our customers with targeted personalized offers that drivewith the goal of driving higher frequency, higher ticket and higher customer satisfaction. Continued investment in one-to-one marketing capabilities is a big part ofimportant to our business plan for 2022 and beyond. In addition, third-party delivery aggregators have been another focus of our digital innovation and strategy as they have helped us reach incremental, profitable customers, while providing supplemental delivery drivers, especiallythe second quarter, we promoted exclusive members-only access to Epic Pepperoni Stuffed Crust before its launch, successfully adding nearly 150,000 new members during peak times.headwinds. inflation. We acceleratedcurrently expect our 2022 global development outlook to be between280and320netnewrestaurantsgloballyin2022.Atthemidpoint restaurants. Our view oftherange,thisrepresentsapproximately5%growthon ourtotalsystem-wide long-term unitcount. Ourviewofourlong-termunitopportunity,bothdomesticallyandinternationally,continues to expand as we sign historic deals to develop within key areas and we now expect to open between 1,400 toand 1,800 net new Papa John’s restaurants worldwide by the end of 2025, relative to the start of 2021.Restaurant Staffing and Related Market ImpactOn March 28,. Throughout the first six months of 2022, our restaurants continued to navigate a challenging staffing environment. This has impacted customer service and, in limited cases, our ability to deliver or take orders. Our integrations with the Company sold its 51% controlling interestaggregator marketplaces and our nationwide integrations with Delivery-as-a-Service providers have been key tools allowing us to continue to serve our customers during peak times. Though these Delivery-as-a-Service transactions are slightly lower margin versus using our own drivers, they are incremental, profitable orders that otherwise may have gone unfulfilled. Papa Call, our centralized order taking and customer service center is another example of our long-term investment to make our team members productive and help them focus on making and delivering great pizza. We will continue to invest capital in technology innovations that can make our teams more productive. Further, we remain focused on continuing to hire great employees and reducing turnover by providing competitive compensation, a joint venture betweengreat working environment, benefits and compelling career paths. Our goal is to be the employer of choice in our industry, and we've taken many actions to create a strong culture and support our people. In the second quarter of 2022, we released our 2021 Corporate Responsibility Report, outlining our progress against our priorities to create a positive impact on people, pizza and the planet that sets us up for long-term success. Papa JohnsJohn's is the first major publicly traded pizza chain to announce that our executive compensation plan now includes Environmental Social and Blue and Silver Ventures, Ltd. Sun Holdings, a leading multi-brand franchisee operator and oneGovernance metrics.Papa John’s largest domestic franchise partners, has assumed control of the 90 Papa John’s restaurantsFranchisee Support in Texas that operated under the joint venture. The Company recorded Russia $8.4 million impairment loss in. During the first quarter of 2022, related to the divestiture. The strategic refranchising deal between Papa Johns and Sun Holdings builds upon the historic development agreement signed by the two parties in September 2021, under which Sun Holdings will open 100 new restaurants across high-growth markets, including in Texas, by 2029, in addition to the restaurants it has acquired. Now with significant operational scale with the brand, we believe Sun Holdings is positioned to accelerate its development plans and Papa John’s domestic growth.The agreement continues a rapid acceleration of unit growth and development activity by Papa Johns in the U.S. and across the globe. In January, Papa Johns announced its biggest franchisee development agreement in the Company’s history – a partnership with FountainVest Partners to open more than 1,350 new stores across South China by 2040.Suspension of Franchisee Support in Russia. The Company has no Company-owned restaurants in Russia or Ukraine. Out of the Company’s total 5,524 Company-owned and franchised restaurants worldwide, 188 franchised restaurants are located in Russia, all of which are operated and supplied through a master franchisee. In 2021, franchise royalties derived from these stores represented less than 1% of total company revenue, and therefore were not a material part of the Company’s business or results of operations.25
Papa John’s has suspended its corporate operations and support for franchised restaurants in Russia, and fully reserved all receivables from the aforementioned master franchisee. The Company recognized $17.4 million ($0.48 loss per diluted share) on a pre-tax basis in one-time, non-cash charges in the first quarter related to reserves for certain loans and impairments of reacquired franchised rights due 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. All assets related to the franchised operations in Russia have been fully reserved or impaired so there will bethus, no additional Russia relatedRussia-related charges for reserves, write-offs, or impairments of amountsare recorded on the Condensed Consolidated Balance Sheet.
Coronavirus Pandemic and Related Market Impact.
value proposition is focused on delivering premium value, not hitting specific low price points.
26
Global Restaurant Sales Information
| | | | | | |
|
| Three Months Ended | ||||
|
| March 27, 2022 | | March 28, 2021 | ||
Comparable sales growth (decline): | | | | | | |
Domestic Company-owned restaurants | | | (1.2%) | | | 23.3% |
North America franchised restaurants | | | 2.8% | | | 27.1% |
North America restaurants | | | 1.9% | | | 26.2% |
International restaurants | | | 0.8% | | | 23.2% |
Total comparable sales growth | | | 1.6% | | | 25.4% |
System-wide restaurant sales growth: | | | | | | |
(excluding the impact of foreign currency) | | | | | | |
Domestic Company-owned restaurants | | | 0.8% | | | 22.2% |
North America franchised restaurants | | | 4.0% | | | 27.0% |
North America restaurants | | | 3.3% | | | 25.9% |
International restaurants | | | 11.6% | | | 28.9% |
Total global system-wide restaurant sales growth | | | 5.3% | | | 26.6% |
| | | | | | |
Restaurant Progression |
| Three Months Ended | ||||
|
| March 27, 2022 |
| March 28, 2021 | ||
North America Company-owned: | | | | | | |
Beginning of period | |
| 600 | |
| 588 |
Opened | |
| 7 | |
| — |
Acquired | |
| 1 | |
| 1 |
End of period | |
| 608 | |
| 589 |
North America franchised: | | | | | | |
Beginning of period | |
| 2,739 | |
| 2,701 |
Opened | |
| 15 | |
| 12 |
Closed | |
| (7) | |
| (3) |
Sold | | | (1) | | | (1) |
End of period | |
| 2,746 | |
| 2,709 |
International franchised: | | | | | | |
Beginning of period | |
| 2,311 | |
| 2,111 |
Opened | |
| 55 | |
| 68 |
Closed | |
| (8) | |
| (9) |
Suspended (a) | | | (188) | | | — |
End of period | |
| 2,170 | |
| 2,170 |
Total restaurants – end of period | |
| 5,524 | |
| 5,468 |
| | | | | | |
Trailing four quarters net store growth (b) | |
| 244 | | | 90 |
Three Months Ended | Six Months Ended | ||||||||||||||||||||||
June 26, 2022 | June 27, 2021 | June 26, 2022 | June 27, 2021 | ||||||||||||||||||||
Comparable sales growth (decline): | |||||||||||||||||||||||
Domestic Company-owned restaurants | (1.5)% | 5.6% | (1.3)% | 13.8% | |||||||||||||||||||
North America franchised restaurants | 1.4% | 5.2% | 2.1% | 15.1% | |||||||||||||||||||
North America restaurants | 0.9% | 5.2% | 1.4% | 14.8% | |||||||||||||||||||
International restaurants | (8.0)% | 21.2% | (3.6)% | 22.2% | |||||||||||||||||||
Total comparable sales growth | (1.4)% | 9.0% | 0.1% | 16.6% | |||||||||||||||||||
System-wide restaurant sales growth (decline): | |||||||||||||||||||||||
(excluding the impact of foreign currency) | |||||||||||||||||||||||
Domestic Company-owned restaurants | 1.2% | 5.2% | 8.9% | 13.1% | |||||||||||||||||||
North America franchised restaurants | 2.7% | 6.4% | 1.4% | 15.8% | |||||||||||||||||||
North America restaurants | 2.4% | 6.2% | 2.8% | 15.2% | |||||||||||||||||||
International restaurants | 3.4% | 35.7% | 8.3% | 32.2% | |||||||||||||||||||
Total global system-wide restaurant sales growth | 2.6% | 12.2% | 4.2% | 19.0% |
Restaurant Progression | Three Months Ended | Six Months Ended | |||||||||||||||||||||
June 26, 2022 | June 27, 2021 | June 26, 2022 | June 27, 2021 | ||||||||||||||||||||
North America Company-owned: | |||||||||||||||||||||||
Beginning of period | 608 | 589 | 600 | 588 | |||||||||||||||||||
Opened | 1 | — | 8 | — | |||||||||||||||||||
Acquired | — | — | 1 | 1 | |||||||||||||||||||
Refranchised | (90) | — | (90) | — | |||||||||||||||||||
End of period | 519 | 589 | 519 | 589 | |||||||||||||||||||
North America franchised: | |||||||||||||||||||||||
Beginning of period | 2,746 | 2,709 | 2,739 | 2,701 | |||||||||||||||||||
Opened | 17 | 24 | 32 | 36 | |||||||||||||||||||
Closed | (16) | (13) | (23) | (16) | |||||||||||||||||||
Refranchised | 90 | — | 90 | — | |||||||||||||||||||
Sold | — | — | (1) | (1) | |||||||||||||||||||
End of period | 2,837 | 2,720 | 2,837 | 2,720 | |||||||||||||||||||
International franchised: | |||||||||||||||||||||||
Beginning of period | 2,170 | 2,170 | 2,311 | 2,111 | |||||||||||||||||||
Opened | 72 | 71 | 127 | 139 | |||||||||||||||||||
Closed | (27) | (27) | (35) | (36) | |||||||||||||||||||
Suspended (a) | — | — | (188) | — | |||||||||||||||||||
End of period | 2,215 | 2,214 | 2,215 | 2,214 | |||||||||||||||||||
Total restaurants – end of period | 5,571 | 5,523 | 5,571 | 5,523 | |||||||||||||||||||
Trailing four quarters net store growth (b) | 236 | 176 |
| | | | | | | | | | | | | |
| | Three Months Ended | | | | ||||||||
| | March 27, 2022 | | March 28, 2021 | | | | ||||||
| | | | % of Related | | | | % of Related | | | Increase | ||
($ in thousands) | | | | Revenues | | | | Revenues | | | (Decrease) | ||
Revenues: | | | | | ��� | | | | | | | | |
Domestic Company-owned restaurant sales | | $ | 198,765 | | | | $ | 197,234 | | | | | |
North America franchise royalties and fees | | | 34,268 | | | | | 32,715 | | | | | |
North America commissary revenues | | | 209,679 | | | | | 184,878 | | | | | |
International revenues | | | 34,617 | | | | | 34,607 | | | | | |
Other revenues | | | 65,363 | | | | | 62,312 | | | | | |
Total revenues | | | 542,692 | | | | | 511,746 | | | | | |
Costs and expenses: | | | | | | | | | | | | | |
Operating costs (excluding depreciation and amortization shown separately below): | | | | | | | | | | | | | |
Domestic Company-owned restaurant expenses | | | 161,661 | | 81.3% | | | 155,888 | | 79.0% | | | 2.3% |
North America commissary expenses | | | 197,090 | | 94.0% | | | 170,684 | | 92.3% | | | 1.7% |
International expenses | | | 19,914 | | 57.5% | | | 19,618 | | 56.7% | | | 0.8% |
Other expenses | | | 60,555 | | 92.6% | | | 55,807 | | 89.6% | | | 3.0% |
General and administrative expenses | | | 65,937 | | 12.1% | | | 50,011 | | 9.8% | | | 2.3% |
Depreciation and amortization | | | 11,940 | | 2.2% | | | 12,876 | | 2.5% | | | (0.3)% |
Total costs and expenses | | | 517,097 | | 95.3% | | | 464,884 | | 90.8% | | | 4.5% |
Refranchising and impairment loss | | | (11,160) | | (2.1)% | | | - | | 0.0% | | | (2.1)% |
Operating income | | | 14,435 | | 2.7% | | | 46,862 | | 9.2% | | | (6.5)% |
Net interest expense | | | (4,264) | | (0.8)% | | | (3,647) | | (0.7)% | | | (0.1)% |
Income before income taxes | | $ | 10,171 | | 1.9% | | $ | 43,215 | | 8.4% | | | (6.5)% |
Three Months Ended | ||||||||||||||||||||||||||||||||
June 26, 2022 | June 27, 2021 | |||||||||||||||||||||||||||||||
($ in thousands) | % of Related Revenues | % of Related Revenues | Increase (Decrease) | |||||||||||||||||||||||||||||
Revenues: | ||||||||||||||||||||||||||||||||
Domestic Company-owned restaurant sales | $ | 171,411 | $ | 196,124 | (12.6) | % | ||||||||||||||||||||||||||
North America franchise royalties and fees | 34,917 | 32,475 | 7.5 | % | ||||||||||||||||||||||||||||
North America commissary revenues | 219,383 | 186,641 | 17.5 | % | ||||||||||||||||||||||||||||
International revenues | 31,958 | 37,614 | (15.0) | % | ||||||||||||||||||||||||||||
Other revenues | 64,996 | 62,154 | 4.6 | % | ||||||||||||||||||||||||||||
Total revenues | 522,665 | 515,008 | 1.5 | % | ||||||||||||||||||||||||||||
Costs and expenses: | ||||||||||||||||||||||||||||||||
Operating costs (excluding depreciation and amortization shown separately below): | ||||||||||||||||||||||||||||||||
Domestic Company-owned restaurant expenses | 142,026 | 82.9% | 154,293 | 78.7% | 4.2% | |||||||||||||||||||||||||||
North America commissary expenses | 204,470 | 93.2% | 172,227 | 92.3% | 0.9% | |||||||||||||||||||||||||||
International expenses | 19,236 | 60.2% | 21,430 | 57.0% | 3.2% | |||||||||||||||||||||||||||
Other expenses | 60,648 | 93.3% | 56,246 | 90.5% | 2.8% | |||||||||||||||||||||||||||
General and administrative expenses | 44,646 | 8.5% | 53,698 | 10.4% | (1.9)% | |||||||||||||||||||||||||||
Depreciation and amortization | 12,735 | 2.4% | 12,477 | 2.4% | —% | |||||||||||||||||||||||||||
Total costs and expenses | 483,761 | 92.6% | 470,371 | 91.3% | 1.2% | |||||||||||||||||||||||||||
Operating income | 38,904 | 7.4% | 44,637 | 8.7% | (1.2)% | |||||||||||||||||||||||||||
Net interest expense | (6,081) | (1.2) | % | (3,649) | (0.7) | % | (0.5) | % | ||||||||||||||||||||||||
Income before income taxes | $ | 32,823 | 6.3% | $ | 40,988 | 8.0% | (1.7)% |
Six Months Ended | ||||||||||||||||||||||||||||||||
June 26, 2022 | June 27, 2021 | |||||||||||||||||||||||||||||||
($ in thousands) | % of Related Revenues | % of Related Revenues | Increase (Decrease) | |||||||||||||||||||||||||||||
Revenues: | ||||||||||||||||||||||||||||||||
Domestic Company-owned restaurant sales | $ | 370,176 | $ | 393,358 | (5.9) | % | ||||||||||||||||||||||||||
North America franchise royalties and fees | 69,185 | 65,190 | 6.1 | % | ||||||||||||||||||||||||||||
North America commissary revenues | 429,062 | 371,519 | 15.5 | % | ||||||||||||||||||||||||||||
International revenues | 66,575 | 72,221 | (7.8) | % | ||||||||||||||||||||||||||||
Other revenues | 130,359 | 124,466 | 4.7 | % | ||||||||||||||||||||||||||||
Total revenues | 1,065,357 | 1,026,754 | 3.8 | % | ||||||||||||||||||||||||||||
Costs and expenses: | ||||||||||||||||||||||||||||||||
Operating costs (excluding depreciation and amortization shown separately below): | ||||||||||||||||||||||||||||||||
Domestic Company-owned restaurant expenses | 303,687 | 82.0% | 310,181 | 78.9% | 3.2% | |||||||||||||||||||||||||||
North America commissary expenses | 401,560 | 93.6% | 342,911 | 92.3% | 1.3% | |||||||||||||||||||||||||||
International expenses | 39,150 | 58.8% | 41,048 | 56.8% | 2.0% | |||||||||||||||||||||||||||
Other expenses | 121,203 | 93.0% | 112,053 | 90.0% | 2.9% | |||||||||||||||||||||||||||
General and administrative expenses | 110,584 | 10.4% | 103,709 | 10.1% | 0.3% | |||||||||||||||||||||||||||
Depreciation and amortization | 24,674 | 2.3% | 25,353 | 2.5% | (0.2)% | |||||||||||||||||||||||||||
Total costs and expenses | 1,000,858 | 93.9% | 935,255 | 91.1% | 2.9% | |||||||||||||||||||||||||||
Refranchising and impairment loss | (11,160) | (1.0) | % | — | — | % | (1.0) | % | ||||||||||||||||||||||||
Operating income | 53,339 | 5.0% | 91,499 | 8.9% | (3.9)% | |||||||||||||||||||||||||||
Net interest expense | (10,344) | (1.0) | % | (7,296) | (0.7) | % | (0.3) | % | ||||||||||||||||||||||||
Income before income taxes | $ | 42,995 | 4.0% | $ | 84,203 | 8.2% | (4.2)% |
three and six months ended June 26, 2022, respectively.
same periods, respectively.
North America franchise royalties and fees increased $1.6 million, or 4.7% for the first quarter of 2022. The increases were primarily due to positive comparable sales increases of 2.8% and higher equivalent units of 1.9% for the first quarter of 2022 on top of 27.1% comparable sales growth in the prior year period.
28
International revenues were relatively flatdecreased $5.7 million, or 15.0% and $5.6 million, or 7.8% for the first quarter ofthree and six months ended June 26, 2022, asrespectively, compared to prior year comparable periods, primarily due to higher royalties from increased equivalent units and higher comparable sales of 0.8%, offset by lower United Kingdom (“PJUK”("PJUK") commissary revenues from lower PJUKand royalties. Additionally, international comparable sales revenues decreased 8.0% and $1.2 million due3.6% for the three and six months ended June 26, 2022. The overall declines in our international revenue performance were largely attributable to unfavorable foreign exchange rates.
a contracting PJUK market where consumer sentiment is reaching historical lows.
International franchise restaurant sales increased 11.6% to $337.4$281.3 million and $585.9 million for the first quarter ofthree and six months ended June 26, 2022, excludingrespectively. Excluding the impact of foreign currency, primarily due to increases in comparableinternational franchise restaurant sales increased 3.4% and equivalent units.8.3% for the three and six months ended June 26, 2022, respectively. International franchise restaurant sales are not included in Company revenues; however, our international royalty revenue is derived from these sales.
systemwide comparable sales and equivalent units.
as staffing levels recover at a higher cost. Our strategic pricing actions implemented in the first six months of 2022 helped reduce the impact of the underlying cost pressures.
wheat, and higher delivery cost.
Other expenses were $60.6 million for the first quarter of 2022, or 92.6% of related revenues, compared to expenses of $55.8 million, or 89.6% of related revenues for the first quarter of 2021. The 3.0% increase in expenses as a percentage of related revenues, wasincreased 3.2% and 2.0%, respectively, primarily due to higher commodity costs in the PJUK commissary.
platform initiatives to further enhance our digital capabilities and the customer experience.
| | | | | |
| Three Months Ended | ||||
| | Mar. 27, | | | March 28, |
| | 2022 | | | 2021 |
Administrative expenses (a) | $ | 46,090 | | $ | 46,082 |
Special items (b) (c) | | 19,636 | | | 3,883 |
Other general expenses | | 211 | | | 46 |
General and administrative expenses | $ | 65,937 | | $ | 50,011 |
(a)For both the three and six months ended June 26, 2022, Administrative expenses decreased $8.2 million compared to the prior year comparable periods primarily due to lower incentive compensation costs, partially offset by higher labor, travel, and occupancy cost associated with the re-opening of corporate headquarters in the first quarter of 2022. (b)For the three months ended June 26, 2022, Special items include a $1.5 million charge related to advisory fees and severance costs associated with the transition of certain executives. For the six months ended June 26, 2022, Special items include a one-time, non-cash provisions of $14.6 million on accounts receivable and notes receivable in connection with the conflict in Ukraine and related government actions, a charge of $5.0 million associated with a legal settlement. See “Note 2” of “Notes to Condensed Consolidated Financial Statements” for further information regarding one-time, non-cash provision recorded |
29
Depreciation and amortization expense was $11.9 million, or 2.2% of revenues in the first quarter of 2022 comparedand see “Note 9” of “Notes to $12.9 million, or 2.5% of revenuesCondensed Consolidated Financial Statements” for further discussion regarding the first quarter of 2021.
legal settlement.
Operating Income by Segment
Operating income decreased approximately $32.4 million forFor the three and six months ended MarchJune 27, 2022 compared to the prior year comparable period. Operating income is summarized in the following table on a reporting segment basis. Alongside the GAAP operating income data, we have included “adjusted” operating income to exclude Special items.2021, Special items impacting operating income for 2022of $3.3 million and $7.2 million, respectively, include an $8.4 million refranchising loss associated with the sale of our ownership interest in a joint venture including 90 restaurants, $2.8 million for the impairment of certain reacquired franchise rights and $14.6 million of reserves on certain accounts receivable and notes receivable resulting from the conflict in Ukraine and subsequent government actions, and $5.0 million for the Legal Settlement. Special items impacting operating income for 2021 included strategic corporate reorganization costs associated with our new office in Atlanta Georgia.which concluded at the end of 2021.
| | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | |||||||||||||||||||
|
| Reported |
| Special |
| Adjusted |
| Reported |
| Special |
| Adjusted |
| Adjusted | |||||||
| | Mar. 27, | | items | | Mar. 27, |
| Mar. 28, | | items | | Mar. 28, | | Increase | |||||||
(In thousands) |
| 2022 |
| in 2022 |
| 2022 |
| 2021 |
| in 2021 |
| 2021 |
| (Decrease) | |||||||
| | | | | | | | | | | | | | | | | | | | | |
Domestic Company-owned restaurants | | $ | 1,989 | | $ | 8,412 | | $ | 10,401 | | $ | 15,324 | | $ | — | | $ | 15,324 | | $ | (4,923) |
North America franchising | | | 32,137 | | | — | | | 32,137 | | | 30,443 | | | — | | | 30,443 | | | 1,694 |
North America commissaries | | | 9,334 | |
| — | |
| 9,334 | | | 9,713 | |
| — | |
| 9,713 | |
| (379) |
International | | | 4,455 | | | 3,515 | | | 7,970 | | | 8,364 | | | — | | | 8,364 | | | (394) |
All others | | | 3,719 | | | — | | | 3,719 | | | 6,118 | | | — | | | 6,118 | | | (2,399) |
Unallocated corporate expenses | | | (37,111) | | | 18,869 | | | (18,242) | | | (23,162) | | | 3,883 | | | (19,279) | | | 1,037 |
Elimination of intersegment losses (profits) | | | (88) | | | — | | | (88) | | | 62 | | | — | | | 62 | | | (150) |
Total | | $ | 14,435 | | $ | 30,796 | | $ | 45,231 | | $ | 46,862 | | $ | 3,883 | | $ | 50,745 | | $ | (5,514) |
Three Months Ended | ||||||||||||||||||||||||||||||||||||||||||||
(In thousands) | Reported June 26, 2022 | Special items in 2022 (a) | Adjusted June 26, 2022 | Reported June 27, 2021 | Special items in 2021 (b) | Adjusted June 27, 2021 | Adjusted Increase (Decrease) | |||||||||||||||||||||||||||||||||||||
Domestic Company-owned restaurants | $ | 5,924 | $ | — | $ | 5,924 | $ | 15,361 | $ | — | $ | 15,361 | $ | (9,437) | ||||||||||||||||||||||||||||||
North America franchising | 32,624 | — | 32,624 | 30,518 | — | 30,518 | 2,106 | |||||||||||||||||||||||||||||||||||||
North America commissaries | 10,957 | — | 10,957 | 9,778 | — | 9,778 | 1,179 | |||||||||||||||||||||||||||||||||||||
International | 7,306 | — | 7,306 | 8,683 | — | 8,683 | (1,377) | |||||||||||||||||||||||||||||||||||||
All others | 2,187 | — | 2,187 | 4,894 | — | 4,894 | (2,707) | |||||||||||||||||||||||||||||||||||||
Unallocated corporate expenses | (19,344) | 1,507 | (17,837) | (24,617) | 3,328 | (21,289) | 3,452 | |||||||||||||||||||||||||||||||||||||
Elimination of intersegment losses (profits) | (750) | — | (750) | 20 | — | 20 | (770) | |||||||||||||||||||||||||||||||||||||
Total | $ | 38,904 | $ | 1,507 | $ | 40,411 | $ | 44,637 | $ | 3,328 | $ | 47,965 | $ | (7,554) |
Six Months Ended | ||||||||||||||||||||||||||||||||||||||||||||
(In thousands) | Reported June 26, 2022 | Special items in 2022 (a) | Adjusted June 26, 2022 | Reported June 27, 2021 | Special items in 2021 (b) | Adjusted June 27, 2021 | Adjusted Increase (Decrease) | |||||||||||||||||||||||||||||||||||||
Domestic Company-owned restaurants | $ | 7,912 | $ | 8,412 | $ | 16,324 | $ | 30,685 | $ | — | $ | 30,685 | $ | (14,361) | ||||||||||||||||||||||||||||||
North America franchising | 64,761 | — | 64,761 | 60,961 | — | 60,961 | 3,800 | |||||||||||||||||||||||||||||||||||||
North America commissaries | 20,292 | — | 20,292 | 19,491 | — | 19,491 | 801 | |||||||||||||||||||||||||||||||||||||
International | 11,761 | 3,515 | 15,276 | 17,047 | — | 17,047 | (1,771) | |||||||||||||||||||||||||||||||||||||
All others | 5,906 | — | 5,906 | 11,012 | — | 11,012 | (5,106) | |||||||||||||||||||||||||||||||||||||
Unallocated corporate expenses | (56,454) | 20,376 | (36,078) | (47,779) | 7,211 | (40,568) | 4,490 | |||||||||||||||||||||||||||||||||||||
Elimination of intersegment losses (profits) | (839) | — | (839) | 82 | — | 82 | (921) | |||||||||||||||||||||||||||||||||||||
Total | $ | 53,339 | $ | 32,303 | $ | 85,642 | $ | 91,499 | $ | 7,211 | $ | 98,710 | $ | (13,068) |
30
Refranchising and impairmentImpairment loss
In the first quarter of 2022, the Company recorded a one-time, non-cash refranchising and impairment loss of $11.2 million.
prior year comparable periods.
The
| | | | | |
| | Quarter Ended | |||
| March 27, 2022 | | March 28, 2021 | ||
| | | | | |
Income before income taxes | $ | 10,171 | | $ | 43,215 |
Income tax (benefit) expense | $ | (1,256) | | $ | 7,932 |
Effective tax rate | | -12.3% | | | 18.4% |
income.
Quarter Ended | Six Months Ended | ||||||||||||||||||||||
June 26, 2022 | June 27, 2021 | June 26, 2022 | June 27, 2021 | ||||||||||||||||||||
Income before income taxes | $32,823 | $40,988 | $42,995 | $84,203 | |||||||||||||||||||
Income tax expense | $7,093 | $7,398 | $5,838 | $15,330 | |||||||||||||||||||
Effective tax rate | 21.6% | 18.0% | 13.6% | 18.2% |
31
profitability. Severe sustained increases in inflation could affect the global and U.S. economies and could have an adverse impact on our business, financial condition and results of operations. To the extent permitted by competition, increased costs are recovered through a combination of selective menu price increases, product mix, and/or implementing operational improvements.
The table below reconciles our GAAP financial results to our adjusted financial results, which are non-GAAP measures. We present these non-GAAP measures because we believe the Special items impact the comparability of our results of operations. See “Note 2”, “Note 9”, and “Note 10” of “Notes to Condensed Consolidated Financial Statements,” for additional information about the Special items.
| | | | | | |
| | Three Months Ended | ||||
| | March 27, | | March 28, | ||
(In thousands, except per share amounts) |
| 2022 |
| 2021 | ||
| | | | | | |
GAAP operating income | | $ | 14,435 | | $ | 46,862 |
Refranchising and impairment loss (1) | | | 25,796 | | | — |
Legal settlement (2) | | | 5,000 | | | — |
Strategic corporate reorganization costs (3) | | | — | | | 3,883 |
Adjusted operating income | | $ | 45,231 | | $ | 50,745 |
| | | | | | |
GAAP net income attributable to common shareholders | | $ | 10,434 | | $ | 27,113 |
Refranchising and impairment loss (1) | | | 25,796 | | | — |
Legal settlement (2) | | | 5,000 | | | — |
Strategic corporate reorganization costs (3) | | | — | | | 3,883 |
Tax effect of Non-GAAP adjustment on special items (4) | | | (6,929) | | | (874) |
Adjusted net income attributable to common shareholders | | $ | 34,301 | | $ | 30,122 |
| | | | | | |
GAAP diluted earnings per common share | | $ | 0.29 | | $ | 0.82 |
Refranchising and impairment loss (1) | | | 0.71 | | | — |
Legal settlement (2) | | | 0.14 | | | — |
Strategic corporate reorganization costs (3) | | | — | | | 0.12 |
Tax effect of Non-GAAP adjustment on special items (4) | | | (0.19) | | | (0.03) |
Adjusted diluted earnings per common share | | $ | 0.95 | | $ | 0.91 |
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||
(In thousands, except per share amounts) | June 26, 2022 | June 27, 2021 | June 26, 2022 | June 27, 2021 | ||||||||||||||||||||||
GAAP operating income | $ | 38,904 | $ | 44,637 | $ | 53,339 | $ | 91,499 | ||||||||||||||||||
Refranchising and impairment loss (1) | — | — | 25,796 | — | ||||||||||||||||||||||
Legal settlement (2) | — | — | 5,000 | — | ||||||||||||||||||||||
Strategic corporate reorganization costs (3) | — | 3,328 | — | 7,211 | ||||||||||||||||||||||
Other costs (4) | 1,507 | — | 1,507 | — | ||||||||||||||||||||||
Adjusted operating income | $ | 40,411 | $ | 47,965 | $ | 85,642 | $ | 98,710 | ||||||||||||||||||
GAAP net income attributable to common shareholders | $ | 25,240 | $ | (79,898) | $ | 35,693 | $ | (49,542) | ||||||||||||||||||
Refranchising and impairment loss (1) | — | — | 25,796 | — | ||||||||||||||||||||||
Legal settlement (2) | — | — | 5,000 | — | ||||||||||||||||||||||
Strategic corporate reorganization costs (3) | — | 3,328 | — | 7,211 | ||||||||||||||||||||||
Other costs (4) | 1,507 | — | 1,507 | — | ||||||||||||||||||||||
Repurchase and conversion of Series B Preferred Stock | — | 109,852 | — | 109,852 | ||||||||||||||||||||||
Tax effect of Non-GAAP adjustment on special items (4) | (339) | (745) | (7,269) | (1,615) | ||||||||||||||||||||||
Adjusted net income attributable to common shareholders | $ | 26,408 | $ | 32,537 | $ | 60,727 | $ | 65,906 | ||||||||||||||||||
GAAP diluted earnings per common share | $ | 0.70 | $ | (2.30) | $ | 0.99 | $ | (1.47) | ||||||||||||||||||
Refranchising and impairment loss (1) | — | — | 0.72 | — | ||||||||||||||||||||||
Legal settlement (2) | — | — | 0.14 | — | ||||||||||||||||||||||
Strategic corporate reorganization costs (3) | — | 0.10 | — | 0.22 | ||||||||||||||||||||||
Other costs (4) | 0.05 | — | 0.04 | — | ||||||||||||||||||||||
Repurchase and conversion of Series B Preferred Stock | — | 3.15 | — | 3.23 | ||||||||||||||||||||||
Tax effect of Non-GAAP adjustment on special items (5) | (0.01) | (0.02) | (0.20) | (0.04) | ||||||||||||||||||||||
Adjusted diluted earnings per common share | $ | 0.74 | $ | 0.93 | $ | 1.69 | $ | 1.94 |
Includes on a pre-tax basis (a) a one-time, non-cash charge of $8.4 million ($0.23 loss per diluted share) associated with the refranchising of the Company’s controlling interest in the 90-restaurant joint venture, recorded as Refranchising and impairment loss; and (b) $17.4 million ($0.48 million loss per diluted share) in one-time, non-cash expense related to the reserve of certain loans and impairment of reacquired franchised rights 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.
32
Liquidity and Capital Resources
| | | | | | |
| | Three Months Ended | ||||
| | March 27, | | March 28, | ||
| | 2022 | | 2021 | ||
Total cash provided by (used in): | | | | | | |
Operating activities | | $ | 25,394 | | $ | 63,217 |
Investing activities | | | (8,315) | | | (6,299) |
Financing activities | | | (6,787) | | | (16,080) |
Change in cash and cash equivalents, excluding the impact of foreign currency | | $ | 10,292 | | $ | 40,838 |
Six Months Ended | |||||||||||
June 26, 2022 | June 27, 2021 | ||||||||||
Total cash provided by (used in): | |||||||||||
Operating activities | $ | 45,585 | $ | 128,030 | |||||||
Investing activities | (12,523) | (19,467) | |||||||||
Financing activities | (50,677) | (142,871) | |||||||||
Change in cash and cash equivalents, excluding the impact of foreign currency | $ | (17,615) | $ | (34,308) |
certain marketing payments.
stock and a decrease in proceeds from our revolving credit facility.
33
financial covenants, as shown in the following table, that could restrict or impose constraints on the liquidity of our business:
|
|
|
|
| ||||||||
|
|
|
|
| ||||||||
|
|
|
| Actual Ratio as of June 26, 2022 | ||||||||
|
|
| ||||||||||
Leverage ratio | Not to exceed 5.25 to 1.0 |
| ||||||||||
|
|
|
|
| ||||||||
Interest coverage ratio | Not less than 2.00 to 1.0 |
|
Papa John’s Marketing Fund, Inc. (“PJMF”), our national marketing fund, has a $20.0 million revolving line of credit (the “PJMF Revolving Facility”) pursuant to a Revolving Loan Agreement, dated September 30, 2015 with U.S. Bank National Association, as lender. There was 0no debt outstanding under the PJMF Revolving Facility as of March 27,June 26, 2022 or December 26, 2021. The PJMF operating results and the related debt outstanding do not impact the financial covenants under the Amended Credit Agreement.
(in thousands, except average price per share) | Total Number of Shares Purchased | Average Price Paid per Share | Aggregate Cost of Shares Purchased | Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs | ||||||||||||||||||||||
Three Months Ended | ||||||||||||||||||||||||||
June 26, 2022 | 452 | $ | 94.56 | $ | 42,762 | $ | 349,329 | |||||||||||||||||||
June 27, 2021 | 68 | $ | 101.21 | $ | 6,921 | $ | 64,110 | |||||||||||||||||||
(in thousands, except average price per share) | Total Number of Shares Purchased | Average Price Paid per Share | Aggregate Cost of Shares Purchased | Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs | ||||||||||||||||||||||
Six Months Ended | ||||||||||||||||||||||||||
June 26, 2022 | 753 | $ | 100.23 | $ | 75,471 | $ | 349,329 | |||||||||||||||||||
June 27, 2021 | 83 | $ | 98.23 | $ | 8,188 | $ | 64,110 |
| | | | | | | | | | | |
| | | | | | | | | | | Maximum Dollar |
| | Total | | | Average | | | Aggregate | | | Value of Shares |
| | Number | | | Price | | | Cost of | | | that May Yet Be |
(in thousands, except average price per share) | | of Shares | | | Paid per | | | Shares | | | Purchased Under the |
Three Months Ended | | Purchased | |
| Share | | | Purchased | | | Plans or Programs |
March 27, 2022 | | 301 | | $ | 108.76 | | $ | 32,709 | | $ | 392,091 |
March 28, 2021 | | 15 | | $ | 84.63 | | $ | 1,267 | | $ | 71,031 |
Subsequent to March 27,June 26, 2022, we acquired an additional 223,000229,000 shares at an aggregate cost of $23.0$19.5 million. Approximately $369.1$329.8 million remainedremained available under the Company’s share repurchase program as of AprilJuly 29, 2022.
34
Dividends
The Company recorded dividends of approximately $12.6$25.1 million ($0.350.70 per share) infor the first quarter ofsix months ended June 26, 2022. On April 26,August 2, 2022, our Board of Directors declared a second quarter dividend of $0.35$0.42 per common share approximately $12.6(approximately $14.9 million in the aggregate,aggregate), which will be paid on May 27,August 26, 2022 to stockholders of record as of the close of business on May 16,August 15, 2022. The declaration and payment of any future dividends will be at the discretion of our Board of Directors.
| | | | | | |
| | Three Months Ended | ||||
|
| March 27, |
| March 28, | ||
| | 2022 | | 2021 | ||
| | | | | | |
Net cash provided by operating activities | | $ | 25,394 | | $ | 63,217 |
Purchases of property and equipment | | | (10,233) | | | (7,076) |
Dividends paid to preferred stockholders | |
| — | |
| (3,412) |
Free cash flow | | $ | 15,161 | | $ | 52,729 |
Six Months Ended | |||||||||||
June 26, 2022 | June 27, 2021 | ||||||||||
Net cash provided by operating activities | $ | 45,585 | $ | 128,030 | |||||||
Purchases of property and equipment | (30,744) | (21,543) | |||||||||
Dividends paid to preferred stockholders | — | (6,394) | |||||||||
Free cash flow | $ | 14,841 | $ | 100,093 |
35
36
For a discussion of these and other risks that may cause actual results to differ from expectations, refer to “Part I. Item 1A. – Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 26, 2021 and “Part II. Item IA. – Risk Factors” in thisour Quarterly Report on Form 10-Q for the quarter end March 27, 2022, as well as subsequent filings. 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.
37
operations for the three and six months ended June 26, 2022, respectively, as compared to 7.3% and 7.0% for the prior year comparable periods. three and six months ended June 27, 2021, respectively. The following table presents the actual average block price for cheese by quarter through the 2022 2021 Projected Actual Block Price Block Price Quarter 1 $ 1.966 $ 1.676 Quarter 2 2.352 1.680 Quarter 3 2.374 1.676 Quarter 4 2.318 1.786 Full Year $ 2.253 * $ 1.705 Like other businesses, we have experienced some increased costs for transportation, energy, and commodities due in part to the negative impact of the military conflict in Ukraine on the global economy. Further escalation of geopolitical tensions, including increased trade barriers or restrictions on global trade, could result in, among other things, cyberattacks, supply disruptions, lower consumer demand, and changes to foreign exchange rates and financial markets, any of which may adversely affect our business and supply chain. In addition, the effects of the ongoing conflict could heighten many of our Total Number Maximum Dollar Total Average of Shares Purchased Value of Shares Number Price as Part of Publicly that May Yet Be of Shares Paid per Announced Plans Purchased Under the Fiscal Period Purchased Share or Programs Plans or Programs 12/27/2021 - 1/23/2022 52 $ 126.26 52 $ 418,204 1/24/2022 - 2/20/2022 59 $ 118.87 59 $ 411,196 2/21/2022 - 3/27/2022 190 $ 100.80 190 $ 392,091 Total 301 $ 108.76 301 $ 392,091 Exhibit Description 10.1 10.2 31.1 31.2 32.1 32.2 101 Financial statements from the quarterly report on Form 10-Q of Papa John’s International, Inc. for the quarter ended Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). Date: /s/ Ann B. Gugino Ann B. Gugino Chief Financial Officer3.Quantitative3.Quantitative and Qualitative Disclosures About Market RiskMarch 27,June 26, 2022 have not changed from those reported in “Part II. Item 7A. Quantitative and Qualitative Disclosure About Market Risk” in our Annual Report on Form 10-K for the fiscal year ended December 26, 2021. See “Note 8” of “Notes to Condensed Consolidated Financial Statements” for additional information on our debt obligations and derivative instruments.For each of the periods presented, between 6%Approximately, 6.1% and 7%6.2% of our revenues were derived from these operations.$1.2$3.2 million and $4.4 million on International revenues for first quarter ofthe three and six months ended June 26, 2022, compared torespectively, and a favorable impact of approximately $1.9$3.8 million inand $5.8 million for the first quarter of 2021.three and six months ended June 27, 2021, respectively. Foreign currency exchange rate fluctuations had an unfavorable impact of approximately $0.6$0.4 million and $1.0 million on operating income infor the first quarter ofthree and six months ended June 26, 2022, compared torespectively, and a favorable impact of $0.5$0.9 million inand $1.4 million on operating income for the first quarter of 2021.38firstsecond quarter of 2022 and the projected average block price by quarter for 2022 (based on the AprilJuly 29, 2022 Chicago Mercantile Exchange cheese futures market prices):2022 2021 Projected
Block PriceActual
Block PriceQuarter 1 $ 1.966 $ 1.676 Quarter 2 2.296 1.680 Quarter 3 2.018 1.676 Quarter 4 2.085 1.786 Full Year $ 2.091 * $ 1.705 below,in "Part II. Item IA - Risk Factors" in our Quarterly Report on Form 10-Q for the quarter ended March 27, 2022, there have been no material changes to the risk factors disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 26, 2021.Our business, financial condition and results of operations could be adversely affected by disruptions in the global economy caused by the ongoing conflict between Russia and Ukraine.The global economy has been negatively impacted by the military conflict in Ukraine. Furthermore, governments in the U.S., United Kingdom, and European Union have each imposed export controls on certain products and financial and39economic sanctions on certain industry sectors and parties in Russia. The Company has no company-owned restaurants in Russia or Ukraine and has suspended corporate support for its master franchisee in Russia, which operates and supplies all 188 franchised Papa John’s restaurants there. The Company is unable to predict how long the current environment will last or if it will resume corporate support to impacted franchised restaurants. As all assets related to the Russia master franchisee and franchised restaurants have been fully reserved or impaired, we do not expect further financial statement charges for the Russia operation.first quarterthree months ended March 27,June 26, 2022 (in thousands, except per share amounts):Fiscal Period Total
Number
of Shares
PurchasedAverage
Price
Paid per
ShareTotal Number
of Shares Purchased
as Part of Publicly
Announced Plans
or ProgramsMaximum Dollar
Value of Shares
that May Yet Be
Purchased Under the
Plans or Programs3/28/2022 - 4/24/2022 168 $ 103.94 168 $ 374,655 4/25/2022 - 5/22/2022 102 $ 96.24 102 $ 364,800 5/23/2022 - 6/26/2022 182 $ 84.98 182 $ 349,329 Total 452 $ 94.56 452 $ 349,329 March 27,June 26, 2022, we acquired an additional 223,000229,000 shares at an aggregate cost of $23.0 million.$19.5 million and an average price of $85.15 per share. Approximately $369.1$329.8 million remained available under the Company’s share repurchase program as of AprilJuly 29, 2022.March 27,June 26, 2022, the Company acquired approximately 69,000750 shares of its common stock from employees to satisfy minimum tax withholding obligations that arose upon (i) vesting of restricted stock granted pursuant to approved plans and (ii) distribution of shares of common stock issued pursuant to deferred compensation obligations.40Exhibit
NumberMarch 27,June 26, 2022, filed on May 5,August 4, 2022, formatted in iXBRL: (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statements of Comprehensive Income, (iv) the Condensed Consolidated Statements of Stockholders’ Deficit, (v) the Condensed Consolidated Statements of Cash Flows and (vi) the Notes to Condensed Consolidated Financial Statements.104 41PAPA JOHN’S INTERNATIONAL, INC. (Registrant)(Registrant)May 5,August. 4, 202242