Document_and_Entity_Informatio
Document and Entity Information | 6 Months Ended | |
Jun. 29, 2014 | Jul. 29, 2014 | |
Document and Entity Information | ' | ' |
Document Type | '10-Q | ' |
Amendment Flag | 'false | ' |
Document Period End Date | 29-Jun-14 | ' |
Document Fiscal Year Focus | '2014 | ' |
Document Fiscal Period Focus | 'Q2 | ' |
Trading Symbol | 'PZZA | ' |
Entity Registrant Name | 'PAPA JOHNS INTERNATIONAL INC | ' |
Entity Central Index Key | '0000901491 | ' |
Current Fiscal Year End Date | '--12-28 | ' |
Entity Filer Category | 'Large Accelerated Filer | ' |
Entity Common Stock, Shares Outstanding | ' | 40,926,449 |
Condensed_Consolidated_Balance
Condensed Consolidated Balance Sheets (USD $) | Jun. 29, 2014 | Dec. 29, 2013 |
In Thousands, unless otherwise specified | ||
Current assets: | ' | ' |
Cash and cash equivalents | $19,971 | $13,670 |
Accounts receivable, net | 48,377 | 53,203 |
Notes receivable, net | 5,862 | 3,566 |
Inventories | 31,895 | 23,035 |
Deferred income taxes | 7,673 | 8,004 |
Prepaid expenses | 14,156 | 14,336 |
Other current assets | 9,646 | 9,226 |
Total current assets | 137,580 | 125,040 |
Property and equipment, net | 218,448 | 212,097 |
Notes receivable, less current portion, net | 11,534 | 13,239 |
Goodwill | 82,106 | 79,391 |
Other assets | 35,532 | 34,524 |
Total assets | 485,200 | 464,291 |
Current liabilities: | ' | ' |
Accounts payable | 33,719 | 35,653 |
Income and other taxes payable | 5,824 | 4,401 |
Accrued expenses and other current liabilities | 54,468 | 57,807 |
Total current liabilities | 94,011 | 97,861 |
Deferred revenue | 5,579 | 5,827 |
Long-term debt | 210,000 | 157,900 |
Deferred income taxes | 12,928 | 14,660 |
Other long-term liabilities | 45,644 | 42,835 |
Total liabilities | 368,162 | 319,083 |
Redeemable noncontrolling interests | 8,433 | 7,024 |
Stockholders' equity: | ' | ' |
Preferred stock ($0.01 par value per share; no shares issued) | ' | ' |
Common stock ($0.01 par value per share; issued 43,152 at June 29, 2014 and 42,796 at December 29, 2013) | 432 | 428 |
Additional paid-in capital | 139,705 | 137,552 |
Accumulated other comprehensive income | 2,765 | 2,463 |
Retained earnings | 66,944 | 41,297 |
Treasury stock (2,297 shares at June 29, 2014 and 1,129 shares at December 29, 2013, at cost) | -101,830 | -44,066 |
Total stockholders' equity, net of noncontrolling interests | 108,016 | 137,674 |
Noncontrolling interests in subsidiaries | 589 | 510 |
Total stockholders' equity | 108,605 | 138,184 |
Total liabilities, redeemable noncontrolling interests and stockholders' equity | $485,200 | $464,291 |
Condensed_Consolidated_Balance1
Condensed Consolidated Balance Sheets (Parenthetical) (USD $) | Jun. 29, 2014 | Dec. 29, 2013 |
In Thousands, except Per Share data, unless otherwise specified | ||
Condensed Consolidated Balance Sheets | ' | ' |
Preferred stock, par value | $0.01 | $0.01 |
Preferred stock, shares issued | 0 | 0 |
Common stock, par value | $0.01 | $0.01 |
Common stock, shares issued | 43,152 | 42,796 |
Treasury stock, shares | 2,297 | 1,129 |
Condensed_Consolidated_Stateme
Condensed Consolidated Statements of Income (USD $) | 3 Months Ended | 6 Months Ended | ||
In Thousands, except Per Share data, unless otherwise specified | Jun. 29, 2014 | Jun. 30, 2013 | Jun. 29, 2014 | Jun. 30, 2013 |
Total revenues | $380,864 | $349,186 | $782,241 | $704,790 |
General and administrative expenses | 33,562 | 33,126 | 70,528 | 66,284 |
Other general expenses | 1,964 | 1,597 | 3,497 | 2,782 |
Depreciation and amortization | 9,855 | 8,530 | 19,019 | 17,067 |
Total costs and expenses | 353,865 | 322,238 | 723,240 | 648,217 |
Operating income | 26,999 | 26,948 | 59,001 | 56,573 |
Net interest (expense) income | -763 | -340 | -1,355 | 332 |
Income before income taxes | 26,236 | 26,608 | 57,646 | 56,905 |
Income tax expense | 8,397 | 8,563 | 19,266 | 18,541 |
Net income before attribution to noncontrolling interests | 17,839 | 18,045 | 38,380 | 38,364 |
Income attributable to noncontrolling interests | -1,091 | -895 | -2,321 | -1,908 |
Net income attributable to the Company | 16,748 | 17,150 | 36,059 | 36,456 |
Calculation of income for earnings per share: | ' | ' | ' | ' |
Net income attributable to the Company | 16,748 | 17,150 | 36,059 | 36,456 |
Increase in noncontrolling interest redemption value | -31 | ' | -39 | ' |
Net income attributable to participating securities | -81 | ' | -218 | ' |
Net income attributable to common shareholders | 16,636 | 17,150 | 35,802 | 36,456 |
Basic earnings per common share | $0.40 | $0.39 | $0.86 | $0.83 |
Diluted earnings per common share | $0.40 | $0.39 | $0.85 | $0.81 |
Basic weighted average common shares outstanding | 41,225 | 43,484 | 41,501 | 43,996 |
Diluted weighted average common shares outstanding | 41,970 | 44,500 | 42,332 | 45,086 |
Dividends declared per common share (in dollars per share) | $0.13 | ' | $0.25 | ' |
International | ' | ' | ' | ' |
Royalties and franchise and development fees | 6,317 | 5,391 | 12,096 | 10,458 |
Restaurant and commissary sales | 19,256 | 15,746 | 37,106 | 30,605 |
International restaurant and commissary expenses | 15,876 | 12,983 | 30,761 | 25,636 |
North America | Domestic Company-owned restaurants | ' | ' | ' | ' |
Total revenues | 170,000 | 155,153 | 348,193 | 313,051 |
Cost of sales | 42,030 | 37,825 | 87,186 | 74,898 |
Salaries and benefits | 45,805 | 42,053 | 93,388 | 85,325 |
Advertising and related costs | 15,354 | 14,677 | 31,610 | 29,470 |
Occupancy costs | 9,446 | 8,939 | 18,757 | 17,650 |
Other operating expenses | 25,220 | 22,431 | 50,507 | 45,176 |
Total costs and expenses | 137,855 | 125,925 | 281,448 | 252,519 |
North America | North America franchising | ' | ' | ' | ' |
Franchise royalties | 20,983 | 20,230 | 43,597 | 40,963 |
Franchise and development fees | 132 | 219 | 276 | 765 |
North America | Domestic commissaries | ' | ' | ' | ' |
Total revenues | 150,581 | 140,003 | 314,628 | 283,897 |
Cost of sales | 118,470 | 107,676 | 247,394 | 218,599 |
Salaries and benefits | 6,847 | 6,084 | 13,871 | 12,100 |
Other operating expenses | 16,215 | 15,185 | 32,070 | 30,646 |
Total costs and expenses | 141,532 | 128,945 | 293,335 | 261,345 |
North America | Other | ' | ' | ' | ' |
Total revenues | 13,595 | 12,444 | 26,345 | 25,051 |
Other operating expenses | $13,221 | $11,132 | $24,652 | $22,584 |
Consolidated_Statements_of_Com
Consolidated Statements of Comprehensive Income (USD $) | 3 Months Ended | 6 Months Ended | ||
In Thousands, unless otherwise specified | Jun. 29, 2014 | Jun. 30, 2013 | Jun. 29, 2014 | Jun. 30, 2013 |
Consolidated Statements of Comprehensive Income | ' | ' | ' | ' |
Net income before attribution to noncontrolling interests | $17,839 | $18,045 | $38,380 | $38,364 |
Other comprehensive income (loss), before tax: | ' | ' | ' | ' |
Foreign currency translation adjustments | 959 | -586 | 926 | -1,721 |
Interest rate swaps | -404 | 190 | -447 | 73 |
Other comprehensive income (loss), before tax | 555 | -396 | 479 | -1,648 |
Income tax effect: | ' | ' | ' | ' |
Foreign currency translation adjustments | -355 | 217 | -343 | 637 |
Interest rate swaps | 149 | -71 | 165 | -27 |
Income tax effect | -206 | 146 | -178 | 610 |
Other comprehensive income (loss), net of tax | 349 | -250 | 301 | -1,038 |
Comprehensive income before attribution to noncontrolling interests | 18,188 | 17,795 | 38,681 | 37,326 |
Comprehensive income, redeemable noncontrolling interests | -1,086 | -895 | -2,341 | -1,908 |
Comprehensive (loss) income, nonredeemable noncontrolling interests | -5 | ' | 20 | ' |
Comprehensive income attributable to the Company | $17,097 | $16,900 | $36,360 | $35,418 |
Consolidated_Statements_of_Com1
Consolidated Statements of Comprehensive Income (Parenthetical) (USD $) | 3 Months Ended | 6 Months Ended | ||
In Thousands, unless otherwise specified | Jun. 29, 2014 | Jun. 30, 2013 | Jun. 29, 2014 | Jun. 30, 2013 |
Consolidated Statements of Comprehensive Income | ' | ' | ' | ' |
Net interest (expense) income | ($763) | ($340) | ($1,355) | $332 |
Income tax effects | 8,397 | 8,563 | 19,266 | 18,541 |
Qualifying as hedges | Interest rate swap | Amount reclassified from AOCI | ' | ' | ' | ' |
Consolidated Statements of Comprehensive Income | ' | ' | ' | ' |
Net interest (expense) income | 250 | 44 | 499 | 88 |
Income tax effects | $93 | $16 | $185 | $32 |
Consolidated_Statements_of_Cas
Consolidated Statements of Cash Flows (USD $) | 6 Months Ended | |
In Thousands, unless otherwise specified | Jun. 29, 2014 | Jun. 30, 2013 |
Operating activities | ' | ' |
Net income before attribution to noncontrolling interests | $38,380 | $38,364 |
Adjustments to reconcile net income to net cash provided by operating activities: | ' | ' |
Provision for uncollectible accounts and notes receivable | 936 | 780 |
Depreciation and amortization | 19,019 | 17,067 |
Deferred income taxes | 6,298 | 8,256 |
Stock-based compensation expense | 3,612 | 3,784 |
Excess tax benefit on equity awards | -7,890 | -3,803 |
Other | 2,270 | 694 |
Changes in operating assets and liabilities, net of acquisitions: | ' | ' |
Accounts receivable | 3,400 | 496 |
Inventories | -7,295 | 456 |
Prepaid expenses | 180 | 2,000 |
Other current assets | -152 | -37 |
Other assets and liabilities | -17 | -1,954 |
Accounts payable | -1,934 | -3,896 |
Income and other taxes payable | 1,423 | -9,022 |
Accrued expenses and other current liabilities | -3,970 | -5,870 |
Deferred revenue | 305 | -83 |
Net cash provided by operating activities | 54,565 | 47,232 |
Investing activities | ' | ' |
Purchases of property and equipment | -26,239 | -25,493 |
Loans issued | -2,642 | -3,103 |
Repayments of loans issued | 1,880 | 2,908 |
Acquisitions, net of cash acquired | -3,179 | ' |
Other | 3 | 319 |
Net cash used in investing activities | -30,177 | -25,369 |
Financing activities | ' | ' |
Net proceeds on line of credit facility | 52,100 | 44,983 |
Cash dividends paid | -10,404 | ' |
Excess tax benefit on equity awards | 7,890 | 3,803 |
Tax payments for equity award issuances | -7,498 | -1,841 |
Proceeds from exercise of stock options | 3,361 | 3,696 |
Acquisition of Company common stock | -63,304 | -58,806 |
Contributions from noncontrolling interest holders | 100 | 450 |
Distributions to noncontrolling interest holders | -600 | -1,750 |
Other | 293 | -468 |
Net cash used in financing activities | -18,062 | -9,933 |
Effect of exchange rate changes on cash and cash equivalents | -25 | -90 |
Change in cash and cash equivalents | 6,301 | 11,840 |
Cash and cash equivalents at beginning of period | 13,670 | 16,396 |
Cash and cash equivalents at end of period | $19,971 | $28,236 |
Basis_of_Presentation
Basis of Presentation | 6 Months Ended |
Jun. 29, 2014 | |
Basis of Presentation | ' |
Basis of Presentation | ' |
1. Basis of Presentation | |
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation have been included. Operating results for the six months ended June 29, 2014 are not necessarily indicative of the results that may be expected for the fiscal year ended December 28, 2014. For further information, refer to the consolidated financial statements and footnotes thereto included in the Annual Report on Form 10-K for Papa John’s International, Inc. (referred to as the “Company,” “Papa John’s” or in the first person notations of “we,” “us” and “our”) for the year ended December 29, 2013. |
Significant_Accounting_Policie
Significant Accounting Policies | 6 Months Ended | |||||||||||||
Jun. 29, 2014 | ||||||||||||||
Significant Accounting Policies | ' | |||||||||||||
Significant Accounting Policies | ' | |||||||||||||
2. Significant Accounting Policies | ||||||||||||||
Reclassifications | ||||||||||||||
Certain prior year amounts in the condensed consolidated statements of income have been reclassified to conform to the current year presentation, which had no effect on current or previously reported net income. | ||||||||||||||
Noncontrolling Interests | ||||||||||||||
Papa John’s has joint ventures in which there are noncontrolling interests, including the following as of June 29, 2014 and June 30, 2013: | ||||||||||||||
Number of | Restaurant Locations | Papa John’s | Noncontrolling | |||||||||||
Restaurants | Ownership | Interest | ||||||||||||
Ownership | ||||||||||||||
June 29, 2014 | ||||||||||||||
Star Papa, LP | 81 | Texas | 51 | % | 49 | % | ||||||||
Colonel’s Limited, LLC | 52 | Maryland and Virginia | 70 | % | 30 | % | ||||||||
PJ Minnesota, LLC | 34 | Minnesota | 80 | % | 20 | % | ||||||||
PJ Denver, LLC | 25 | Colorado | 60 | % | 40 | % | ||||||||
June 30, 2013 | ||||||||||||||
Star Papa, LP | 78 | Texas | 51 | % | 49 | % | ||||||||
Colonel’s Limited, LLC | 52 | Maryland and Virginia | 70 | % | 30 | % | ||||||||
PJ Minnesota, LLC | 31 | Minnesota | 80 | % | 20 | % | ||||||||
PJ Denver, LLC | 24 | Colorado | 60 | % | 40 | % | ||||||||
We are required to report consolidated net income at amounts attributable to the Company and the noncontrolling interests. Additionally, disclosures are required to clearly identify and distinguish between the interests of the Company and the interests of the noncontrolling owners, including a disclosure on the face of the condensed consolidated statements of income attributable to the noncontrolling interest holder. | ||||||||||||||
The income before income taxes attributable to the joint ventures for the three and six months ended June 29, 2014 and June 30, 2013 was as follows (in thousands): | ||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||
June 29, | June 30, | June 29, | June 30, | |||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||
Papa John’s International, Inc. | $ | 1,744 | $ | 1,284 | $ | 3,592 | $ | 2,792 | ||||||
Noncontrolling interests | 1,091 | 895 | 2,321 | 1,908 | ||||||||||
Total income before income taxes | $ | 2,835 | $ | 2,179 | $ | 5,913 | $ | 4,700 | ||||||
The following summarizes the redemption feature, location within the condensed consolidated balance sheets and the value at which the noncontrolling interests are recorded for each joint venture as of June 29, 2014: | ||||||||||||||
Joint Venture | Redemption Feature | Location within the | Recorded Value | |||||||||||
Condensed Consolidated | ||||||||||||||
Balance Sheets | ||||||||||||||
Colonel’s Limited, LLC | Mandatorily redeemable | Other long-term liabilities | Redemption value | |||||||||||
Star Papa, LP | Redeemable | Temporary equity | Carrying value | |||||||||||
PJ Denver, LLC | Redeemable | Temporary equity | Redemption value | |||||||||||
PJ Minnesota, LLC | No redemption feature | Permanent equity | Carrying value | |||||||||||
The Colonel’s Limited, LLC agreement contains a mandatory redemption clause and, accordingly, the Company has recorded this noncontrolling interest as a liability at its redemption value in other long-term liabilities. The redemption value is adjusted at each reporting date and any change is recorded in interest expense. We recorded interest income of $48,000 and interest expense of $36,000 in the second quarter of 2014 and 2013, respectively, and interest income of $21,000 and $773,000 in the first six months of 2014 and 2013 respectively. The redemption value was $11.1 million as of June 29, 2014 and $10.8 million as of December 29, 2013. | ||||||||||||||
The noncontrolling interest holders of two other joint ventures have the option to require the Company to purchase their interests. Since redemption of the noncontrolling interests is outside of the Company’s control, the noncontrolling interests are presented in the caption “Redeemable noncontrolling interests” in the condensed consolidated balance sheets and include the following joint ventures: | ||||||||||||||
· The Star Papa, LP agreement contains a redemption feature that is not currently redeemable, but it is probable to become redeemable in the future. Due to specific valuation provisions contained in the agreement, this noncontrolling interest has been recorded at its carrying value. | ||||||||||||||
· The PJ Denver, LLC agreement contains a redemption feature that is currently redeemable and, therefore, this noncontrolling interest has been recorded at its current redemption value. The change in redemption value is recorded as an adjustment to “Redeemable noncontrolling interests” and “Retained earnings” in the condensed consolidated balance sheets. | ||||||||||||||
The following summarizes changes in these redeemable noncontrolling interests (in thousands): | ||||||||||||||
Balance at December 29, 2013 | $ | 7,024 | ||||||||||||
Net income | 1,370 | |||||||||||||
Change in redemption value | 39 | |||||||||||||
Balance at June 29, 2014 | $ | 8,433 | ||||||||||||
We have a fourth joint venture, PJ Minnesota, LLC, that had a redemption feature until a contract amendment removed the redemption feature in the fourth quarter of 2013. The noncontrolling interest was reclassified from temporary equity to “Stockholders’ equity” in the condensed consolidated balance sheet at December 29, 2013, at carrying value. | ||||||||||||||
Deferred Income Tax Accounts and Tax Reserves | ||||||||||||||
We are subject to income taxes in the United States and several foreign jurisdictions. Significant judgment is required in determining our provision for income taxes and the related assets and liabilities. The provision for income taxes includes income taxes paid, currently payable or receivable and those deferred. We use an estimated annual effective rate based on expected annual income to determine our quarterly provision for income taxes. Discrete items are recorded in the quarter in which they occur. | ||||||||||||||
Deferred tax assets and liabilities are determined based on differences between financial reporting and tax basis of assets and liabilities and are measured using enacted tax rates and laws that are expected to be in effect when the differences reverse. Deferred tax assets are also recognized for the estimated future effects of tax loss carryforwards. The effect on deferred taxes of changes in tax rates is recognized in the period in which the new tax is enacted. As a result, our effective tax rate may fluctuate. Valuation allowances are established when necessary on a jurisdictional basis to reduce deferred tax assets to the amounts we expect to realize. As of June 29, 2014, we had a net deferred tax liability of approximately $5.3 million. | ||||||||||||||
Tax authorities periodically audit the Company. We record reserves and related interest and penalties for identified exposures as income tax expense. We evaluate these issues on a quarterly basis to adjust for events, such as statute of limitations expirations, court rulings or audit settlements, which may impact our ultimate payment for such exposures. | ||||||||||||||
Fair Value Measurements and Disclosures | ||||||||||||||
The Company is required to determine the fair value of financial assets and liabilities based on the price that would be received to sell the asset or paid to transfer the liability to a market participant. Fair value is a market-based measurement, not an entity specific measurement. The fair value of certain assets and liabilities approximates carrying value because of the short-term nature of the accounts, including cash, accounts receivable and accounts payable. The fair value of our notes receivable net of allowances also approximates carrying value. The fair value of the amount outstanding under our revolving credit facility approximates its carrying value due to its variable market-based interest rate. These assets and liabilities are categorized as Level 1 as defined below. | ||||||||||||||
Certain assets and liabilities are measured at fair value on a recurring basis and are required to be classified and disclosed in one of the following categories: | ||||||||||||||
· Level 1: Quoted market prices in active markets for identical assets or liabilities. | ||||||||||||||
· Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data. | ||||||||||||||
· Level 3: Unobservable inputs that are not corroborated by market data. | ||||||||||||||
Our financial assets and liabilities that were measured at fair value on a recurring basis as of June 29, 2014 and December 29, 2013 are as follows (in thousands): | ||||||||||||||
Carrying | Fair Value Measurements | |||||||||||||
Value | Level 1 | Level 2 | Level 3 | |||||||||||
June 29, 2014 | ||||||||||||||
Financial assets: | ||||||||||||||
Cash surrender value of life insurance policies (a) | $ | 17,613 | $ | 17,613 | $ | — | $ | — | ||||||
Interest rate swap (b) | 41 | — | 41 | — | ||||||||||
Financial liabilities: | ||||||||||||||
Interest rate swap (b) | 584 | — | 584 | — | ||||||||||
December 29, 2013 | ||||||||||||||
Financial assets: | ||||||||||||||
Cash surrender value of life insurance policies (a) | $ | 16,798 | $ | 16,798 | $ | — | $ | — | ||||||
Financial liabilities: | ||||||||||||||
Interest rate swap (b) | 76 | — | 76 | — | ||||||||||
(a) Represents life insurance policies held in our non-qualified deferred compensation plan. | ||||||||||||||
(b) The fair values of our interest rate swaps are based on the sum of all future net present value cash flows. The future cash flows are derived based on the terms of our interest rate swaps, as well as considering published discount factors, and projected London Interbank Offered Rates (“LIBOR”). | ||||||||||||||
There were no transfers among levels within the fair value hierarchy during the six months ended June 29, 2014. | ||||||||||||||
Variable Interest Entities | ||||||||||||||
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 for the purpose of designing and administering advertising and promotional programs for all participating domestic restaurants. PJMF is a variable interest entity as it does not have sufficient equity to fund its operations without ongoing financial support and contributions from its members. Based on the ownership and governance structure and operating procedures of PJMF, we have determined that we do not have the power to direct the most significant activities of PJMF and therefore are not the primary beneficiary. Accordingly, we determined that consolidation is not appropriate. | ||||||||||||||
Recent Accounting Pronouncement | ||||||||||||||
In May 2014, the Financial Accounting Standards Board issued “Revenue from Contracts with Customers” (Accounting Standards update 2014-09), a comprehensive new revenue recognition standard that will supersede nearly all existing revenue recognition guidance under GAAP. This update requires companies to recognize revenue at amounts that reflect the consideration to which the company expects to be entitled in exchange for those goods or services at the time of transfer. In doing so, companies will need to use more judgment and make more estimates than under today’s guidance. Such estimates may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. Companies can either apply a full retrospective adoption or a modified retrospective adoption. | ||||||||||||||
We are required to adopt the new requirements in the first quarter of 2017. We are currently evaluating the impact of the new requirements on our consolidated financial statements. We currently do not believe the impact will be significant. |
Stockholders_Equity
Stockholders' Equity | 6 Months Ended |
Jun. 29, 2014 | |
Stockholders' Equity | ' |
Stockholders' Equity | ' |
3. Stockholders’ Equity | |
In the fourth quarter of 2013, we completed a two-for-one stock split of our outstanding shares in the form of a stock dividend. The stock dividend was distributed on December 27, 2013 with approximately 21.0 million shares of stock distributed. In conjunction with the stock split, we also retired shares held in treasury. The per-share and share amounts for 2013 in the accompanying condensed consolidated financial statements and notes to the financial statements have been adjusted to reflect the stock split. |
Calculation_of_Earnings_Per_Sh
Calculation of Earnings Per Share | 6 Months Ended | |||||||||||||
Jun. 29, 2014 | ||||||||||||||
Calculation of Earnings Per Share | ' | |||||||||||||
Calculation of Earnings Per Share | ' | |||||||||||||
4. Calculation of Earnings Per Share | ||||||||||||||
We compute earnings per share using the two-class method. The two-class method requires an earnings allocation formula that determines earnings per share for common shareholders and participating security holders according to dividends declared and participating rights in undistributed earnings. We consider time-based restricted stock awards to be participating securities because holders of such shares have non-forfeitable dividend rights. Under the two-class method, undistributed earnings allocated to participating securities are subtracted from net income attributable to the Company in determining net income attributable to common shareholders. | ||||||||||||||
Additionally, in accordance with Accounting Standards Codification (“ASC”) 480, Distinguishing Liabilities from Equity, the increase in the redemption value for the noncontrolling interest of PJ Denver, LLC reduces income attributable to common shareholders. | ||||||||||||||
The calculations of basic and diluted earnings per common share are as follows (in thousands, except per-share data): | ||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||
June 29, | June 30, | June 29, | June 30, | |||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||
Basic earnings per common share: | ||||||||||||||
Net income attributable to the Company | $ | 16,748 | $ | 17,150 | $ | 36,059 | $ | 36,456 | ||||||
Increase in noncontrolling interest redemption value | (31 | ) | — | (39 | ) | — | ||||||||
Net income attributable to participating securities | (81 | ) | — | (218 | ) | — | ||||||||
Net income attributable to common shareholders | $ | 16,636 | $ | 17,150 | $ | 35,802 | $ | 36,456 | ||||||
Weighted average common shares outstanding | 41,225 | 43,484 | 41,501 | 43,996 | ||||||||||
Basic earnings per common share | $ | 0.4 | $ | 0.39 | $ | 0.86 | $ | 0.83 | ||||||
Diluted earnings per common share: | ||||||||||||||
Net income attributable to common shareholders | $ | 16,636 | $ | 17,150 | $ | 35,802 | $ | 36,456 | ||||||
Weighted average common shares outstanding | 41,225 | 43,484 | 41,501 | 43,996 | ||||||||||
Dilutive effect of outstanding equity awards (a) | 745 | 1,016 | 831 | 1,090 | ||||||||||
Diluted weighted average common shares outstanding | 41,970 | 44,500 | 42,332 | 45,086 | ||||||||||
Diluted earnings per common share | $ | 0.4 | $ | 0.39 | $ | 0.85 | $ | 0.81 | ||||||
(a) Excludes 284 and 176 awards for the three and six months ended June 29, 2014 and 218 and 151 awards for the three and six months ended June 30, 2013, as the effect of including such awards would have been antidilutive. |
Debt
Debt | 6 Months Ended |
Jun. 29, 2014 | |
Debt | ' |
Debt | ' |
5. Debt | |
Our debt is comprised entirely of a revolving line of credit. The outstanding balance was $210.0 million as of June 29, 2014 and $157.9 million as of December 29, 2013. | |
In September 2010, we entered into a five-year, $175 million unsecured revolving credit facility, which was amended in November 2011 to extend the maturity date to November 30, 2016. On April 30, 2013, we amended and restated our revolving credit facility to increase the amount available for borrowing thereunder to $300 million and extend the maturity date to April 30, 2018. The interest rate charged on outstanding balances is LIBOR plus 75 to 175 basis points. The commitment fee on the unused balance ranges from 15 to 25 basis points. The remaining availability under the revolving credit facility, reduced for outstanding letters of credit, was approximately $67.5 million as of June 29, 2014. | |
The revolving credit facility contains customary affirmative and negative covenants, including financial covenants requiring the maintenance of specified fixed charges and leverage ratios. At June 29, 2014, we were in compliance with these covenants. | |
In August 2011, we entered into an interest rate swap agreement that resulted in a fixed rate of 0.53%, instead of the variable rate of LIBOR, with a notional amount of $50 million and a maturity date of August 2013. On December 31, 2012, we amended our interest rate swap agreement to extend the maturity date to December 30, 2015. The amendment resulted in a change to the fixed rate (to 0.56% from 0.53%) but did not impact the notional amount of the interest rate swap agreement. On July 30, 2013, we terminated the $50 million swap and entered into a new $75 million swap. The new swap has an interest rate of 1.42% and a maturity date of April 30, 2018, which coincides with the maturity date of our revolving credit facility. The termination of the previous swap did not have a material impact on our 2013 results. In May 2014, we entered into a $50 million forward interest rate swap with an interest rate of 1.36%, an effective date of December 30, 2014 and a maturity date of April 30, 2018. | |
Our swaps are derivative instruments that are designated as cash flow hedges because the swaps provide a hedge against the effects of rising interest rates on borrowings. The effective portion of the gain or loss on the swaps is reported as a component of accumulated other comprehensive income and reclassified into earnings in the same period or periods during which the swaps affect earnings. Gains or losses on the swaps representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current earnings. Amounts payable or receivable under the swaps are accounted for as adjustments to interest expense. As of June 29, 2014, the swaps are highly effective cash flow hedges with no ineffectiveness for the three- and six-month periods ended June 29, 2014. | |
The weighted average interest rates for our revolving credit facility, including the impact of the previously mentioned swap agreement, were 1.7% and 1.6% for the three and six months ended June 29, 2014, respectively. Interest paid, including payments made or received under the swap, was $853,000 and $424,000 for the three months ended June 29, 2014 and June 30, 2013, respectively, and $1.6 million and $802,000 for the six months ended June 29, 2014 and June 30, 2013, respectively. As of June 29, 2014, the portion of the $543,000 net interest rate swap liability that would be reclassified into earnings during the next twelve months as interest expense approximates $142,000. |
Litigation
Litigation | 6 Months Ended |
Jun. 29, 2014 | |
Litigation | ' |
Litigation | ' |
6. Litigation | |
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 financial statements. We review these provisions at least quarterly and adjust these provisions to reflect the impact of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular case. | |
Perrin v. Papa John’s International, Inc. and Papa John’s USA, Inc. is a conditionally certified collective action filed in August 2009 in the United States District Court, Eastern District of Missouri, alleging that delivery drivers were not reimbursed for mileage and expenses in accordance with the Fair Labor Standards Act. Approximately 3,900 drivers out of a potential class size of 28,800 have opted into the action. Additionally, in late December 2013, the District Court granted a motion for class certification in five additional states, which will add approximately 15,000 plaintiffs to the case. | |
We intend to vigorously defend against all claims in this lawsuit. However, given the inherent uncertainties of litigation, the outcome of this case cannot be predicted and the amount of any potential loss cannot be reasonably estimated. A negative outcome in this case could have a material adverse effect on the Company. |
Segment_Information
Segment Information | 6 Months Ended | |||||||||||||
Jun. 29, 2014 | ||||||||||||||
Segment Information | ' | |||||||||||||
Segment Information | ' | |||||||||||||
7. Segment Information | ||||||||||||||
We have five reportable segments: domestic Company-owned restaurants, domestic commissaries, North America franchising, international operations, and “all other” units. | ||||||||||||||
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 and side items, such as breadsticks, cheesesticks, chicken poppers, chicken wings, cookie and dessert pizza and soft drinks to the general public. The domestic commissary segment consists of the operations of our regional dough production and product distribution centers and derives its revenues principally from the sale and distribution of food and paper products to domestic Company-owned and franchised restaurants. The North America franchising segment consists of our franchise sales and support activities and derives its revenues from sales of franchise and development rights and collection of royalties from our franchisees located in the United States and Canada. The international operations segment principally consists of Company-owned restaurants in China and distribution sales to franchised Papa John’s restaurants located in the United Kingdom, Mexico and China and our franchise sales and support activities, which derive revenues from sales of franchise and development rights and the collection of royalties from our international franchisees. International franchisees are defined as all franchise operations outside of the United States and Canada. All other business units that do not meet the quantitative thresholds for determining reportable segments, which are not operating segments, we refer to as our “all other” segment, which consists of operations that derive revenues from the sale, principally to Company-owned and franchised restaurants, of printing and promotional items, risk management services, and information systems and related services used in restaurant operations, including our point-of-sale system, online and other technology-based ordering platforms. | ||||||||||||||
Generally, we evaluate performance and allocate resources based on profit or loss from operations before income taxes and intercompany eliminations. Certain administrative and capital costs are allocated to segments based upon predetermined rates or actual estimated resource usage. We account for intercompany sales and transfers as if the sales or transfers were to third parties and eliminate the activity in consolidation. | ||||||||||||||
Our reportable segments are business units that provide different products or services. Separate management of each segment is required because each business unit is subject to different operational issues and strategies. No single external customer accounted for 10% or more of our consolidated revenues. | ||||||||||||||
Our segment information is as follows (in thousands): | ||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||
June 29, 2014 | June 30, 2013 | June 29, 2014 | June 30, 2013 | |||||||||||
Revenues from external customers: | ||||||||||||||
Domestic Company-owned restaurants | $ | 170,000 | $ | 155,153 | $ | 348,193 | $ | 313,051 | ||||||
Domestic commissaries | 150,581 | 140,003 | 314,628 | 283,897 | ||||||||||
North America franchising | 21,115 | 20,449 | 43,873 | 41,728 | ||||||||||
International | 25,573 | 21,137 | 49,202 | 41,063 | ||||||||||
All others | 13,595 | 12,444 | 26,345 | 25,051 | ||||||||||
Total revenues from external customers | $ | 380,864 | $ | 349,186 | $ | 782,241 | $ | 704,790 | ||||||
Intersegment revenues: | ||||||||||||||
Domestic commissaries | $ | 51,592 | $ | 46,115 | $ | 106,313 | $ | 92,912 | ||||||
North America franchising | 583 | 552 | 1,187 | 1,105 | ||||||||||
International | 90 | 73 | 158 | 140 | ||||||||||
All others | 8,087 | 3,318 | 11,817 | 6,486 | ||||||||||
Total intersegment revenues | $ | 60,352 | $ | 50,058 | $ | 119,475 | $ | 100,643 | ||||||
Income (loss) before income taxes: | ||||||||||||||
Domestic Company-owned restaurants | $ | 10,651 | $ | 8,175 | $ | 23,936 | $ | 19,131 | ||||||
Domestic commissaries | 6,846 | 9,642 | 17,277 | 19,805 | ||||||||||
North America franchising | 17,882 | 17,396 | 37,366 | 35,618 | ||||||||||
International | 1,903 | 866 | 2,635 | 1,207 | ||||||||||
All others | (442 | ) | 1,153 | 148 | 1,812 | |||||||||
Unallocated corporate expenses | (10,702 | ) | (10,413 | ) | (23,163 | ) | (19,931 | ) | ||||||
Elimination of intersegment losses (profits) | 98 | (211 | ) | (553 | ) | (737 | ) | |||||||
Total income before income taxes | $ | 26,236 | $ | 26,608 | $ | 57,646 | $ | 56,905 | ||||||
Property and equipment: | ||||||||||||||
Domestic Company-owned restaurants | $ | 203,632 | ||||||||||||
Domestic commissaries | 105,711 | |||||||||||||
International | 27,711 | |||||||||||||
All others | 43,113 | |||||||||||||
Unallocated corporate assets | 161,786 | |||||||||||||
Accumulated depreciation and amortization | (323,505 | ) | ||||||||||||
Net property and equipment | $ | 218,448 | ||||||||||||
Significant_Accounting_Policie1
Significant Accounting Policies (Policies) | 6 Months Ended | |||||||||||||
Jun. 29, 2014 | ||||||||||||||
Significant Accounting Policies | ' | |||||||||||||
Reclassifications | ' | |||||||||||||
Reclassifications | ||||||||||||||
Certain prior year amounts in the condensed consolidated statements of income have been reclassified to conform to the current year presentation, which had no effect on current or previously reported net income. | ||||||||||||||
Noncontrolling Interests | ' | |||||||||||||
Noncontrolling Interests | ||||||||||||||
Papa John’s has joint ventures in which there are noncontrolling interests, including the following as of June 29, 2014 and June 30, 2013: | ||||||||||||||
Number of | Restaurant Locations | Papa John’s | Noncontrolling | |||||||||||
Restaurants | Ownership | Interest | ||||||||||||
Ownership | ||||||||||||||
June 29, 2014 | ||||||||||||||
Star Papa, LP | 81 | Texas | 51 | % | 49 | % | ||||||||
Colonel’s Limited, LLC | 52 | Maryland and Virginia | 70 | % | 30 | % | ||||||||
PJ Minnesota, LLC | 34 | Minnesota | 80 | % | 20 | % | ||||||||
PJ Denver, LLC | 25 | Colorado | 60 | % | 40 | % | ||||||||
June 30, 2013 | ||||||||||||||
Star Papa, LP | 78 | Texas | 51 | % | 49 | % | ||||||||
Colonel’s Limited, LLC | 52 | Maryland and Virginia | 70 | % | 30 | % | ||||||||
PJ Minnesota, LLC | 31 | Minnesota | 80 | % | 20 | % | ||||||||
PJ Denver, LLC | 24 | Colorado | 60 | % | 40 | % | ||||||||
We are required to report consolidated net income at amounts attributable to the Company and the noncontrolling interests. Additionally, disclosures are required to clearly identify and distinguish between the interests of the Company and the interests of the noncontrolling owners, including a disclosure on the face of the condensed consolidated statements of income attributable to the noncontrolling interest holder. | ||||||||||||||
The income before income taxes attributable to the joint ventures for the three and six months ended June 29, 2014 and June 30, 2013 was as follows (in thousands): | ||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||
June 29, | June 30, | June 29, | June 30, | |||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||
Papa John’s International, Inc. | $ | 1,744 | $ | 1,284 | $ | 3,592 | $ | 2,792 | ||||||
Noncontrolling interests | 1,091 | 895 | 2,321 | 1,908 | ||||||||||
Total income before income taxes | $ | 2,835 | $ | 2,179 | $ | 5,913 | $ | 4,700 | ||||||
The following summarizes the redemption feature, location within the condensed consolidated balance sheets and the value at which the noncontrolling interests are recorded for each joint venture as of June 29, 2014: | ||||||||||||||
Joint Venture | Redemption Feature | Location within the | Recorded Value | |||||||||||
Condensed Consolidated | ||||||||||||||
Balance Sheets | ||||||||||||||
Colonel’s Limited, LLC | Mandatorily redeemable | Other long-term liabilities | Redemption value | |||||||||||
Star Papa, LP | Redeemable | Temporary equity | Carrying value | |||||||||||
PJ Denver, LLC | Redeemable | Temporary equity | Redemption value | |||||||||||
PJ Minnesota, LLC | No redemption feature | Permanent equity | Carrying value | |||||||||||
The Colonel’s Limited, LLC agreement contains a mandatory redemption clause and, accordingly, the Company has recorded this noncontrolling interest as a liability at its redemption value in other long-term liabilities. The redemption value is adjusted at each reporting date and any change is recorded in interest expense. We recorded interest income of $48,000 and interest expense of $36,000 in the second quarter of 2014 and 2013, respectively, and interest income of $21,000 and $773,000 in the first six months of 2014 and 2013 respectively. The redemption value was $11.1 million as of June 29, 2014 and $10.8 million as of December 29, 2013. | ||||||||||||||
The noncontrolling interest holders of two other joint ventures have the option to require the Company to purchase their interests. Since redemption of the noncontrolling interests is outside of the Company’s control, the noncontrolling interests are presented in the caption “Redeemable noncontrolling interests” in the condensed consolidated balance sheets and include the following joint ventures: | ||||||||||||||
· The Star Papa, LP agreement contains a redemption feature that is not currently redeemable, but it is probable to become redeemable in the future. Due to specific valuation provisions contained in the agreement, this noncontrolling interest has been recorded at its carrying value. | ||||||||||||||
· The PJ Denver, LLC agreement contains a redemption feature that is currently redeemable and, therefore, this noncontrolling interest has been recorded at its current redemption value. The change in redemption value is recorded as an adjustment to “Redeemable noncontrolling interests” and “Retained earnings” in the condensed consolidated balance sheets. | ||||||||||||||
The following summarizes changes in these redeemable noncontrolling interests (in thousands): | ||||||||||||||
Balance at December 29, 2013 | $ | 7,024 | ||||||||||||
Net income | 1,370 | |||||||||||||
Change in redemption value | 39 | |||||||||||||
Balance at June 29, 2014 | $ | 8,433 | ||||||||||||
We have a fourth joint venture, PJ Minnesota, LLC, that had a redemption feature until a contract amendment removed the redemption feature in the fourth quarter of 2013. The noncontrolling interest was reclassified from temporary equity to “Stockholders’ equity” in the condensed consolidated balance sheet at December 29, 2013, at carrying value. | ||||||||||||||
Deferred Income Tax Accounts and Tax Reserves | ' | |||||||||||||
Deferred Income Tax Accounts and Tax Reserves | ||||||||||||||
We are subject to income taxes in the United States and several foreign jurisdictions. Significant judgment is required in determining our provision for income taxes and the related assets and liabilities. The provision for income taxes includes income taxes paid, currently payable or receivable and those deferred. We use an estimated annual effective rate based on expected annual income to determine our quarterly provision for income taxes. Discrete items are recorded in the quarter in which they occur. | ||||||||||||||
Deferred tax assets and liabilities are determined based on differences between financial reporting and tax basis of assets and liabilities and are measured using enacted tax rates and laws that are expected to be in effect when the differences reverse. Deferred tax assets are also recognized for the estimated future effects of tax loss carryforwards. The effect on deferred taxes of changes in tax rates is recognized in the period in which the new tax is enacted. As a result, our effective tax rate may fluctuate. Valuation allowances are established when necessary on a jurisdictional basis to reduce deferred tax assets to the amounts we expect to realize. As of June 29, 2014, we had a net deferred tax liability of approximately $5.3 million. | ||||||||||||||
Tax authorities periodically audit the Company. We record reserves and related interest and penalties for identified exposures as income tax expense. We evaluate these issues on a quarterly basis to adjust for events, such as statute of limitations expirations, court rulings or audit settlements, which may impact our ultimate payment for such exposures. | ||||||||||||||
Fair Value Measurements and Disclosures | ' | |||||||||||||
Fair Value Measurements and Disclosures | ||||||||||||||
The Company is required to determine the fair value of financial assets and liabilities based on the price that would be received to sell the asset or paid to transfer the liability to a market participant. Fair value is a market-based measurement, not an entity specific measurement. The fair value of certain assets and liabilities approximates carrying value because of the short-term nature of the accounts, including cash, accounts receivable and accounts payable. The fair value of our notes receivable net of allowances also approximates carrying value. The fair value of the amount outstanding under our revolving credit facility approximates its carrying value due to its variable market-based interest rate. These assets and liabilities are categorized as Level 1 as defined below. | ||||||||||||||
Certain assets and liabilities are measured at fair value on a recurring basis and are required to be classified and disclosed in one of the following categories: | ||||||||||||||
· Level 1: Quoted market prices in active markets for identical assets or liabilities. | ||||||||||||||
· Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data. | ||||||||||||||
· Level 3: Unobservable inputs that are not corroborated by market data. | ||||||||||||||
Our financial assets and liabilities that were measured at fair value on a recurring basis as of June 29, 2014 and December 29, 2013 are as follows (in thousands): | ||||||||||||||
Carrying | Fair Value Measurements | |||||||||||||
Value | Level 1 | Level 2 | Level 3 | |||||||||||
June 29, 2014 | ||||||||||||||
Financial assets: | ||||||||||||||
Cash surrender value of life insurance policies (a) | $ | 17,613 | $ | 17,613 | $ | — | $ | — | ||||||
Interest rate swap (b) | 41 | — | 41 | — | ||||||||||
Financial liabilities: | ||||||||||||||
Interest rate swap (b) | 584 | — | 584 | — | ||||||||||
December 29, 2013 | ||||||||||||||
Financial assets: | ||||||||||||||
Cash surrender value of life insurance policies (a) | $ | 16,798 | $ | 16,798 | $ | — | $ | — | ||||||
Financial liabilities: | ||||||||||||||
Interest rate swap (b) | 76 | — | 76 | — | ||||||||||
(a) Represents life insurance policies held in our non-qualified deferred compensation plan. | ||||||||||||||
(b) The fair values of our interest rate swaps are based on the sum of all future net present value cash flows. The future cash flows are derived based on the terms of our interest rate swaps, as well as considering published discount factors, and projected London Interbank Offered Rates (“LIBOR”). | ||||||||||||||
There were no transfers among levels within the fair value hierarchy during the six months ended June 29, 2014. | ||||||||||||||
Variable Interest Entities | ' | |||||||||||||
Variable Interest Entities | ||||||||||||||
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 for the purpose of designing and administering advertising and promotional programs for all participating domestic restaurants. PJMF is a variable interest entity as it does not have sufficient equity to fund its operations without ongoing financial support and contributions from its members. Based on the ownership and governance structure and operating procedures of PJMF, we have determined that we do not have the power to direct the most significant activities of PJMF and therefore are not the primary beneficiary. Accordingly, we determined that consolidation is not appropriate. | ||||||||||||||
Recent Accounting Pronouncement | ' | |||||||||||||
Recent Accounting Pronouncement | ||||||||||||||
In May 2014, the Financial Accounting Standards Board issued “Revenue from Contracts with Customers” (Accounting Standards update 2014-09), a comprehensive new revenue recognition standard that will supersede nearly all existing revenue recognition guidance under GAAP. This update requires companies to recognize revenue at amounts that reflect the consideration to which the company expects to be entitled in exchange for those goods or services at the time of transfer. In doing so, companies will need to use more judgment and make more estimates than under today’s guidance. Such estimates may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. Companies can either apply a full retrospective adoption or a modified retrospective adoption. | ||||||||||||||
We are required to adopt the new requirements in the first quarter of 2017. We are currently evaluating the impact of the new requirements on our consolidated financial statements. We currently do not believe the impact will be significant. |
Significant_Accounting_Policie2
Significant Accounting Policies (Tables) | 6 Months Ended | |||||||||||||
Jun. 29, 2014 | ||||||||||||||
Significant Accounting Policies | ' | |||||||||||||
Schedule of Joint Venture Arrangements | ' | |||||||||||||
Number of | Restaurant Locations | Papa John’s | Noncontrolling | |||||||||||
Restaurants | Ownership | Interest | ||||||||||||
Ownership | ||||||||||||||
June 29, 2014 | ||||||||||||||
Star Papa, LP | 81 | Texas | 51 | % | 49 | % | ||||||||
Colonel’s Limited, LLC | 52 | Maryland and Virginia | 70 | % | 30 | % | ||||||||
PJ Minnesota, LLC | 34 | Minnesota | 80 | % | 20 | % | ||||||||
PJ Denver, LLC | 25 | Colorado | 60 | % | 40 | % | ||||||||
June 30, 2013 | ||||||||||||||
Star Papa, LP | 78 | Texas | 51 | % | 49 | % | ||||||||
Colonel’s Limited, LLC | 52 | Maryland and Virginia | 70 | % | 30 | % | ||||||||
PJ Minnesota, LLC | 31 | Minnesota | 80 | % | 20 | % | ||||||||
PJ Denver, LLC | 24 | Colorado | 60 | % | 40 | % | ||||||||
Schedule of Income Before Income Taxes Attributable to Joint Ventures | ' | |||||||||||||
The income before income taxes attributable to the joint ventures for the three and six months ended June 29, 2014 and June 30, 2013 was as follows (in thousands): | ||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||
June 29, | June 30, | June 29, | June 30, | |||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||
Papa John’s International, Inc. | $ | 1,744 | $ | 1,284 | $ | 3,592 | $ | 2,792 | ||||||
Noncontrolling interests | 1,091 | 895 | 2,321 | 1,908 | ||||||||||
Total income before income taxes | $ | 2,835 | $ | 2,179 | $ | 5,913 | $ | 4,700 | ||||||
Schedule of joint ventures in which there are noncontrolling interests | ' | |||||||||||||
Joint Venture | Redemption Feature | Location within the | Recorded Value | |||||||||||
Condensed Consolidated | ||||||||||||||
Balance Sheets | ||||||||||||||
Colonel’s Limited, LLC | Mandatorily redeemable | Other long-term liabilities | Redemption value | |||||||||||
Star Papa, LP | Redeemable | Temporary equity | Carrying value | |||||||||||
PJ Denver, LLC | Redeemable | Temporary equity | Redemption value | |||||||||||
PJ Minnesota, LLC | No redemption feature | Permanent equity | Carrying value | |||||||||||
Schedule of Recorded Values of Redeemable Noncontrolling Interests | ' | |||||||||||||
The following summarizes changes in these redeemable noncontrolling interests (in thousands): | ||||||||||||||
Balance at December 29, 2013 | $ | 7,024 | ||||||||||||
Net income | 1,370 | |||||||||||||
Change in redemption value | 39 | |||||||||||||
Balance at June 29, 2014 | $ | 8,433 | ||||||||||||
Schedule of Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis | ' | |||||||||||||
Our financial assets and liabilities that were measured at fair value on a recurring basis as of June 29, 2014 and December 29, 2013 are as follows (in thousands): | ||||||||||||||
Carrying | Fair Value Measurements | |||||||||||||
Value | Level 1 | Level 2 | Level 3 | |||||||||||
June 29, 2014 | ||||||||||||||
Financial assets: | ||||||||||||||
Cash surrender value of life insurance policies (a) | $ | 17,613 | $ | 17,613 | $ | — | $ | — | ||||||
Interest rate swap (b) | 41 | — | 41 | — | ||||||||||
Financial liabilities: | ||||||||||||||
Interest rate swap (b) | 584 | — | 584 | — | ||||||||||
December 29, 2013 | ||||||||||||||
Financial assets: | ||||||||||||||
Cash surrender value of life insurance policies (a) | $ | 16,798 | $ | 16,798 | $ | — | $ | — | ||||||
Financial liabilities: | ||||||||||||||
Interest rate swap (b) | 76 | — | 76 | — | ||||||||||
(a) Represents life insurance policies held in our non-qualified deferred compensation plan. | ||||||||||||||
(b) The fair values of our interest rate swaps are based on the sum of all future net present value cash flows. The future cash flows are derived based on the terms of our interest rate swaps, as well as considering published discount factors, and projected London Interbank Offered Rates (“LIBOR”). |
Calculation_of_Earnings_Per_Sh1
Calculation of Earnings Per Share (Tables) | 6 Months Ended | |||||||||||||
Jun. 29, 2014 | ||||||||||||||
Calculation of Earnings Per Share | ' | |||||||||||||
Schedule of Earnings Per Share, Basic and Diluted | ' | |||||||||||||
The calculations of basic and diluted earnings per common share are as follows (in thousands, except per-share data): | ||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||
June 29, | June 30, | June 29, | June 30, | |||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||
Basic earnings per common share: | ||||||||||||||
Net income attributable to the Company | $ | 16,748 | $ | 17,150 | $ | 36,059 | $ | 36,456 | ||||||
Increase in noncontrolling interest redemption value | (31 | ) | — | (39 | ) | — | ||||||||
Net income attributable to participating securities | (81 | ) | — | (218 | ) | — | ||||||||
Net income attributable to common shareholders | $ | 16,636 | $ | 17,150 | $ | 35,802 | $ | 36,456 | ||||||
Weighted average common shares outstanding | 41,225 | 43,484 | 41,501 | 43,996 | ||||||||||
Basic earnings per common share | $ | 0.4 | $ | 0.39 | $ | 0.86 | $ | 0.83 | ||||||
Diluted earnings per common share: | ||||||||||||||
Net income attributable to common shareholders | $ | 16,636 | $ | 17,150 | $ | 35,802 | $ | 36,456 | ||||||
Weighted average common shares outstanding | 41,225 | 43,484 | 41,501 | 43,996 | ||||||||||
Dilutive effect of outstanding equity awards (a) | 745 | 1,016 | 831 | 1,090 | ||||||||||
Diluted weighted average common shares outstanding | 41,970 | 44,500 | 42,332 | 45,086 | ||||||||||
Diluted earnings per common share | $ | 0.4 | $ | 0.39 | $ | 0.85 | $ | 0.81 | ||||||
(a) Excludes 284 and 176 awards for the three and six months ended June 29, 2014 and 218 and 151 awards for the three and six months ended June 30, 2013, as the effect of including such awards would have been antidilutive. |
Segment_Information_Tables
Segment Information (Tables) | 6 Months Ended | |||||||||||||
Jun. 29, 2014 | ||||||||||||||
Segment Information | ' | |||||||||||||
Schedule of Segment Reporting Information, by Segment | ' | |||||||||||||
Our segment information is as follows (in thousands): | ||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||
June 29, 2014 | June 30, 2013 | June 29, 2014 | June 30, 2013 | |||||||||||
Revenues from external customers: | ||||||||||||||
Domestic Company-owned restaurants | $ | 170,000 | $ | 155,153 | $ | 348,193 | $ | 313,051 | ||||||
Domestic commissaries | 150,581 | 140,003 | 314,628 | 283,897 | ||||||||||
North America franchising | 21,115 | 20,449 | 43,873 | 41,728 | ||||||||||
International | 25,573 | 21,137 | 49,202 | 41,063 | ||||||||||
All others | 13,595 | 12,444 | 26,345 | 25,051 | ||||||||||
Total revenues from external customers | $ | 380,864 | $ | 349,186 | $ | 782,241 | $ | 704,790 | ||||||
Intersegment revenues: | ||||||||||||||
Domestic commissaries | $ | 51,592 | $ | 46,115 | $ | 106,313 | $ | 92,912 | ||||||
North America franchising | 583 | 552 | 1,187 | 1,105 | ||||||||||
International | 90 | 73 | 158 | 140 | ||||||||||
All others | 8,087 | 3,318 | 11,817 | 6,486 | ||||||||||
Total intersegment revenues | $ | 60,352 | $ | 50,058 | $ | 119,475 | $ | 100,643 | ||||||
Income (loss) before income taxes: | ||||||||||||||
Domestic Company-owned restaurants | $ | 10,651 | $ | 8,175 | $ | 23,936 | $ | 19,131 | ||||||
Domestic commissaries | 6,846 | 9,642 | 17,277 | 19,805 | ||||||||||
North America franchising | 17,882 | 17,396 | 37,366 | 35,618 | ||||||||||
International | 1,903 | 866 | 2,635 | 1,207 | ||||||||||
All others | (442 | ) | 1,153 | 148 | 1,812 | |||||||||
Unallocated corporate expenses | (10,702 | ) | (10,413 | ) | (23,163 | ) | (19,931 | ) | ||||||
Elimination of intersegment losses (profits) | 98 | (211 | ) | (553 | ) | (737 | ) | |||||||
Total income before income taxes | $ | 26,236 | $ | 26,608 | $ | 57,646 | $ | 56,905 | ||||||
Property and equipment: | ||||||||||||||
Domestic Company-owned restaurants | $ | 203,632 | ||||||||||||
Domestic commissaries | 105,711 | |||||||||||||
International | 27,711 | |||||||||||||
All others | 43,113 | |||||||||||||
Unallocated corporate assets | 161,786 | |||||||||||||
Accumulated depreciation and amortization | (323,505 | ) | ||||||||||||
Net property and equipment | $ | 218,448 | ||||||||||||
Significant_Accounting_Policie3
Significant Accounting Policies (Details) | Jun. 29, 2014 | Jun. 30, 2013 |
Restaurant | Restaurant | |
Star Papa, LP | ' | ' |
Noncontrolling Interests | ' | ' |
Number of Restaurants | 81 | 78 |
Papa John's Ownership | 51.00% | 51.00% |
Noncontrolling Interest Ownership | 49.00% | 49.00% |
Colonel's Limited, LLC | ' | ' |
Noncontrolling Interests | ' | ' |
Number of Restaurants | 52 | 52 |
Papa John's Ownership | 70.00% | 70.00% |
Noncontrolling Interest Ownership | 30.00% | 30.00% |
PJ Minnesota, LLC | ' | ' |
Noncontrolling Interests | ' | ' |
Number of Restaurants | 34 | 31 |
Papa John's Ownership | 80.00% | 80.00% |
Noncontrolling Interest Ownership | 20.00% | 20.00% |
PJ Denver, LLC | ' | ' |
Noncontrolling Interests | ' | ' |
Number of Restaurants | 25 | 24 |
Papa John's Ownership | 60.00% | 60.00% |
Noncontrolling Interest Ownership | 40.00% | 40.00% |
Significant_Accounting_Policie4
Significant Accounting Policies (Details 2) (USD $) | 3 Months Ended | 6 Months Ended | ||
In Thousands, unless otherwise specified | Jun. 29, 2014 | Jun. 30, 2013 | Jun. 29, 2014 | Jun. 30, 2013 |
Income before income taxes attributable to joint ventures | ' | ' | ' | ' |
Noncontrolling interests | $1,091 | $895 | $2,321 | $1,908 |
Total income before income taxes | 26,236 | 26,608 | 57,646 | 56,905 |
Joint ventures | ' | ' | ' | ' |
Income before income taxes attributable to joint ventures | ' | ' | ' | ' |
Papa John's International, Inc. | 1,744 | 1,284 | 3,592 | 2,792 |
Noncontrolling interests | 1,091 | 895 | 2,321 | 1,908 |
Total income before income taxes | $2,835 | $2,179 | $5,913 | $4,700 |
Significant_Accounting_Policie5
Significant Accounting Policies (Details 3) (Colonel's Limited, LLC, USD $) | 3 Months Ended | 6 Months Ended | |||
Jun. 29, 2014 | Jun. 30, 2013 | Jun. 29, 2014 | Jun. 30, 2013 | Dec. 29, 2013 | |
Colonel's Limited, LLC | ' | ' | ' | ' | ' |
Noncontrolling Interests | ' | ' | ' | ' | ' |
Adjustment to interest expense {(Interest income) interest expense} due to change in redemption value | ($48,000) | $36,000 | ($21,000) | ($773,000) | ' |
Redemption value | $11,100,000 | ' | $11,100,000 | ' | $10,800,000 |
Significant_Accounting_Policie6
Significant Accounting Policies (Details 4) (USD $) | Jun. 29, 2014 | Dec. 29, 2013 | Jun. 29, 2014 |
item | Redeemable noncontrolling interests | ||
Significant Accounting Policies | ' | ' | ' |
Number of joint ventures under which noncontrolling interest holders have the option to require the Company to purchase their interests | 2 | ' | ' |
Net deferred tax liability | $5,300,000 | ' | ' |
Redeemable Noncontrolling Interests | ' | ' | ' |
Balance at the beginning of the period | 8,433,000 | 7,024,000 | 7,024,000 |
Net income | ' | ' | 1,370,000 |
Change in redemption value | ' | ' | 39,000 |
Balance at the end of the period | $8,433,000 | $7,024,000 | $8,433,000 |
Significant_Accounting_Policie7
Significant Accounting Policies (Details 5) (USD $) | 6 Months Ended | ||||||
Jun. 29, 2014 | Jun. 29, 2014 | Dec. 29, 2013 | Jun. 29, 2014 | Dec. 29, 2013 | Jun. 29, 2014 | Dec. 29, 2013 | |
Measured on Recurring Basis | Measured on Recurring Basis | Measured on Recurring Basis | Measured on Recurring Basis | Measured on Recurring Basis | Measured on Recurring Basis | ||
Level 1 | Level 1 | Level 2 | Level 2 | Carrying Value | Carrying Value | ||
Measurement of financial assets and liabilities at fair value on a recurring basis | ' | ' | ' | ' | ' | ' | ' |
Cash surrender value of life insurance policies | ' | $17,613,000 | $16,798,000 | ' | ' | $17,613,000 | $16,798,000 |
Interest rate swap assets | ' | ' | ' | 41,000 | ' | 41,000 | ' |
Interest rate swap liabilities | ' | ' | ' | 584,000 | 76,000 | 584,000 | 76,000 |
Transfers among levels within the fair value hierarchy | $0 | ' | ' | ' | ' | ' | ' |
Stockholders_Equity_Details
Stockholders' Equity (Details) | 0 Months Ended | 3 Months Ended |
In Millions, unless otherwise specified | Dec. 27, 2013 | Dec. 29, 2013 |
Stockholders' Equity | ' | ' |
Stock split ratio | ' | 2 |
Stock dividend distributed (in shares) | 21 | ' |
Calculation_of_Earnings_Per_Sh2
Calculation of Earnings Per Share (Details) (USD $) | 3 Months Ended | 6 Months Ended | ||
In Thousands, except Per Share data, unless otherwise specified | Jun. 29, 2014 | Jun. 30, 2013 | Jun. 29, 2014 | Jun. 30, 2013 |
Basic earnings per common share: | ' | ' | ' | ' |
Net income attributable to the Company | $16,748 | $17,150 | $36,059 | $36,456 |
Increase in noncontrolling interest redemption value | -31 | ' | -39 | ' |
Net income attributable to participating securities | -81 | ' | -218 | ' |
Net income attributable to common shareholders | 16,636 | 17,150 | 35,802 | 36,456 |
Weighted average common shares outstanding | 41,225 | 43,484 | 41,501 | 43,996 |
Basic earnings per common share | $0.40 | $0.39 | $0.86 | $0.83 |
Diluted earnings per common share: | ' | ' | ' | ' |
Net income attributable to common shareholders | $16,636 | $17,150 | $35,802 | $36,456 |
Weighted average common shares outstanding | 41,225 | 43,484 | 41,501 | 43,996 |
Dilutive effect of outstanding equity awards | 745 | 1,016 | 831 | 1,090 |
Diluted weighted average common shares outstanding | 41,970 | 44,500 | 42,332 | 45,086 |
Diluted earnings per common share | $0.40 | $0.39 | $0.85 | $0.81 |
Antidilutive awards excluded from computation of earnings per share | 284 | 218 | 176 | 151 |
Debt_Details
Debt (Details) (USD $) | 3 Months Ended | 6 Months Ended | 6 Months Ended | 1 Months Ended | 1 Months Ended | ||||||||||||||
Jun. 29, 2014 | Jun. 30, 2013 | Jun. 29, 2014 | Jun. 30, 2013 | Jul. 30, 2013 | Jan. 01, 2013 | Aug. 30, 2011 | Jul. 30, 2013 | 31-May-14 | Jun. 29, 2014 | Jun. 29, 2014 | Sep. 30, 2010 | Jun. 29, 2014 | Dec. 29, 2013 | Apr. 30, 2013 | Apr. 30, 2013 | Apr. 30, 2013 | Apr. 30, 2013 | Apr. 30, 2013 | |
Interest rate swap, August 2011 | Interest rate swap, August 2011 | Interest rate swap, August 2011 | Interest rate swap, July 2013 | Interest rate swap, May 2014 | Interest rate swap | Interest rate swap | Revolving line of credit | Revolving line of credit | Revolving line of credit | Revolving line of credit | Revolving line of credit | Revolving line of credit | Revolving line of credit | Revolving line of credit | |||||
Interest expense | Minimum | Maximum | LIBOR | LIBOR | |||||||||||||||
Minimum | Maximum | ||||||||||||||||||
Debt | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Revolving line of credit | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $210,000,000 | $157,900,000 | ' | ' | ' | ' | ' |
Line of credit facility, maximum borrowing capacity | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 175,000,000 | ' | ' | 300,000,000 | ' | ' | ' | ' |
Line of credit facility, term | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | '5 years | ' | ' | ' | ' | ' | ' | ' |
Interest margin rate on debt | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 0.75% | 1.75% |
Percentage of commitment fee on unused credit facility | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 0.15% | 0.25% | ' | ' |
Line of credit facility, remaining availability | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 67,500,000 | ' | ' | ' | ' | ' | ' |
Interest rate swap agreement, fixed interest rate | ' | ' | ' | ' | ' | 0.56% | 0.53% | 1.42% | 1.36% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Interest rate swap agreement, notional amount | ' | ' | ' | ' | ' | 50,000,000 | 50,000,000 | 75,000,000 | 50,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Termination of interest rate swap | ' | ' | ' | ' | 50,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Weighted average interest rate for credit facility borrowings, including the impact of interest rate swaps | 1.70% | ' | 1.60% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Interest paid | 853,000 | 424,000 | 1,600,000 | 802,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Interest rate swap liabilities | ' | ' | ' | ' | ' | ' | ' | ' | ' | 543,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Portion of derivative liability that would be reclassified into earnings | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $142,000 | ' | ' | ' | ' | ' | ' | ' | ' |
Estimate of period of time over which portion of derivative liability would be reclassified into earnings | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | '12 months | ' | ' | ' | ' | ' | ' | ' | ' |
Litigation_Details
Litigation (Details) (Pending Litigation, Perrin v. Papa John's International, Inc. and Papa John's USA, Inc.) | Jun. 29, 2014 |
item | |
Employee | |
Pending Litigation | Perrin v. Papa John's International, Inc. and Papa John's USA, Inc. | ' |
Litigation, Commitments and Contingencies | ' |
Number of employees who opted into the class action | 3,900 |
Potential class size | 28,800 |
Number of states, which are granted motion for class certification | 5 |
Number of plaintiffs added to case | 15,000 |
Segment_Information_Details
Segment Information (Details) | 6 Months Ended |
Jun. 29, 2014 | |
Entity | |
Segment Information | ' |
Reportable segments, number | 5 |
Consolidated revenues | ' |
Segment Information | ' |
Concentration risk, number | 0 |
Segment_Information_Details_2
Segment Information (Details 2) (USD $) | 3 Months Ended | 6 Months Ended | |||
In Thousands, unless otherwise specified | Jun. 29, 2014 | Jun. 30, 2013 | Jun. 29, 2014 | Jun. 30, 2013 | Dec. 29, 2013 |
Segment Information | ' | ' | ' | ' | ' |
Revenue from external customers | $380,864 | $349,186 | $782,241 | $704,790 | ' |
Income (loss) before income taxes | 26,236 | 26,608 | 57,646 | 56,905 | ' |
Accumulated depreciation and amortization | -323,505 | ' | -323,505 | ' | ' |
Net property and equipment | 218,448 | ' | 218,448 | ' | 212,097 |
Operating segments | Domestic company owned restaurants segment | ' | ' | ' | ' | ' |
Segment Information | ' | ' | ' | ' | ' |
Revenue from external customers | 170,000 | 155,153 | 348,193 | 313,051 | ' |
Income (loss) before income taxes | 10,651 | 8,175 | 23,936 | 19,131 | ' |
Property and equipment, gross | 203,632 | ' | 203,632 | ' | ' |
Operating segments | Domestic commissaries | ' | ' | ' | ' | ' |
Segment Information | ' | ' | ' | ' | ' |
Revenue from external customers | 150,581 | 140,003 | 314,628 | 283,897 | ' |
Income (loss) before income taxes | 6,846 | 9,642 | 17,277 | 19,805 | ' |
Property and equipment, gross | 105,711 | ' | 105,711 | ' | ' |
Operating segments | North America franchising | ' | ' | ' | ' | ' |
Segment Information | ' | ' | ' | ' | ' |
Revenue from external customers | 21,115 | 20,449 | 43,873 | 41,728 | ' |
Income (loss) before income taxes | 17,882 | 17,396 | 37,366 | 35,618 | ' |
Operating segments | International | ' | ' | ' | ' | ' |
Segment Information | ' | ' | ' | ' | ' |
Revenue from external customers | 25,573 | 21,137 | 49,202 | 41,063 | ' |
Income (loss) before income taxes | 1,903 | 866 | 2,635 | 1,207 | ' |
Property and equipment, gross | 27,711 | ' | 27,711 | ' | ' |
Operating segments | All others | ' | ' | ' | ' | ' |
Segment Information | ' | ' | ' | ' | ' |
Revenue from external customers | 13,595 | 12,444 | 26,345 | 25,051 | ' |
Income (loss) before income taxes | -442 | 1,153 | 148 | 1,812 | ' |
Property and equipment, gross | 43,113 | ' | 43,113 | ' | ' |
Elimination | ' | ' | ' | ' | ' |
Segment Information | ' | ' | ' | ' | ' |
Revenue from external customers | 60,352 | 50,058 | 119,475 | 100,643 | ' |
Income (loss) before income taxes | 98 | -211 | -553 | -737 | ' |
Elimination | Domestic commissaries | ' | ' | ' | ' | ' |
Segment Information | ' | ' | ' | ' | ' |
Revenue from external customers | 51,592 | 46,115 | 106,313 | 92,912 | ' |
Elimination | North America franchising | ' | ' | ' | ' | ' |
Segment Information | ' | ' | ' | ' | ' |
Revenue from external customers | 583 | 552 | 1,187 | 1,105 | ' |
Elimination | International | ' | ' | ' | ' | ' |
Segment Information | ' | ' | ' | ' | ' |
Revenue from external customers | 90 | 73 | 158 | 140 | ' |
Elimination | All others | ' | ' | ' | ' | ' |
Segment Information | ' | ' | ' | ' | ' |
Revenue from external customers | 8,087 | 3,318 | 11,817 | 6,486 | ' |
Unallocated corporate | ' | ' | ' | ' | ' |
Segment Information | ' | ' | ' | ' | ' |
Income (loss) before income taxes | -10,702 | -10,413 | -23,163 | -19,931 | ' |
Property and equipment, gross | $161,786 | ' | $161,786 | ' | ' |