Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 27, 2015 | Oct. 27, 2015 | |
Document and Entity Information | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Sep. 27, 2015 | |
Document Fiscal Year Focus | 2,015 | |
Document Fiscal Period Focus | Q3 | |
Trading Symbol | PZZA | |
Entity Registrant Name | PAPA JOHNS INTERNATIONAL INC | |
Entity Central Index Key | 901,491 | |
Current Fiscal Year End Date | --12-27 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 39,014,067 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Sep. 27, 2015 | Dec. 28, 2014 |
Current assets: | ||
Cash and cash equivalents | $ 24,441 | $ 20,122 |
Accounts receivable, net | 56,445 | 56,047 |
Notes receivable, net | 7,738 | 6,106 |
Income taxes receivable | 796 | 9,527 |
Inventories | 24,335 | 27,394 |
Deferred income taxes | 9,990 | 8,248 |
Prepaid expenses | 15,914 | 18,736 |
Other current assets | 9,462 | 9,828 |
Assets held for sale | 9,555 | |
Total current assets | 158,676 | 156,008 |
Property and equipment, net | 209,137 | 219,457 |
Notes receivable, less current portion, net | 10,444 | 12,801 |
Goodwill | 79,913 | 82,007 |
Deferred income taxes | 3,021 | 3,914 |
Other assets | 33,426 | 38,616 |
Total assets | 494,617 | 512,803 |
Current liabilities: | ||
Accounts payable | 35,546 | 38,832 |
Income and other taxes payable | 10,012 | 9,637 |
Accrued expenses and other current liabilities | 78,562 | 58,293 |
Total current liabilities | 124,120 | 106,762 |
Deferred revenue | 3,627 | 4,257 |
Long-term debt | 239,000 | 230,451 |
Deferred income taxes | 14,251 | 22,188 |
Other long-term liabilities | 44,034 | 41,875 |
Total liabilities | 425,032 | 405,533 |
Redeemable noncontrolling interests | $ 8,274 | $ 8,555 |
Stockholders' equity: | ||
Preferred stock ($0.01 par value per share; no shares issued) | ||
Common stock ($0.01 par value per share; issued 43,708 at September 27, 2015 and 43,331 at December 28, 2014) | $ 437 | $ 433 |
Additional paid-in capital | 155,170 | 147,912 |
Accumulated other comprehensive income (loss) | (1,305) | 671 |
Retained earnings | 126,045 | 92,876 |
Treasury stock (4,673 shares at September 27, 2015 and 3,549 shares at December 28, 2014, at cost) | (232,032) | (155,659) |
Total stockholders' equity, net of noncontrolling interests | 48,315 | 86,233 |
Noncontrolling interests in subsidiaries | 12,996 | 12,482 |
Total stockholders' equity | 61,311 | 98,715 |
Total liabilities, redeemable noncontrolling interests and stockholders' equity | $ 494,617 | $ 512,803 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheet (Parenthetical) - $ / shares shares in Thousands | Sep. 27, 2015 | Dec. 28, 2014 |
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 | 43,708 | 43,331 |
Treasury stock, shares | 4,673 | 3,549 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Income - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 27, 2015 | Sep. 28, 2014 | Sep. 27, 2015 | Sep. 28, 2014 | |
Total revenues | $ 389,284 | $ 390,399 | $ 1,220,559 | $ 1,172,640 |
General and administrative expenses | 36,053 | 33,671 | 120,029 | 104,199 |
Other general expenses | 1,607 | 3,143 | 4,427 | 6,640 |
Depreciation and amortization | 10,461 | 10,520 | 30,638 | 29,539 |
Total costs and expenses | 361,847 | 365,213 | 1,124,481 | 1,088,453 |
Operating income | 27,437 | 25,186 | 96,078 | 84,187 |
Legal settlement expense | (12,278) | |||
Net interest (expense) income | (1,180) | (968) | (3,576) | (2,323) |
Income before income taxes | 26,257 | 24,218 | 80,224 | 81,864 |
Income tax expense | 7,281 | 7,256 | 24,541 | 26,522 |
Net income before attribution to noncontrolling interests | 18,976 | 16,962 | 55,683 | 55,342 |
Income attributable to noncontrolling interests | (1,005) | (887) | (4,696) | (3,208) |
Net income attributable to the Company | 17,971 | 16,075 | 50,987 | 52,134 |
Calculation of income for earnings per share: | ||||
Net income attributable to the Company | 17,971 | 16,075 | 50,987 | 52,134 |
Decrease (increase) in noncontrolling interest redemption value | 49 | (42) | 192 | (81) |
Net income attributable to participating securities | (73) | (77) | (223) | (295) |
Net income attributable to common shareholders | $ 17,947 | $ 15,956 | $ 50,956 | $ 51,758 |
Basic earnings per common share | $ 0.46 | $ 0.39 | $ 1.29 | $ 1.25 |
Diluted earnings per common share | $ 0.45 | $ 0.39 | $ 1.27 | $ 1.23 |
Basic weighted average common shares outstanding | 39,394 | 40,739 | 39,640 | 41,248 |
Diluted weighted average common shares outstanding | 39,895 | 41,386 | 40,210 | 42,021 |
Dividends declared per common share | $ 0.175 | $ 0.14 | $ 0.455 | $ 0.39 |
International | ||||
Royalties and franchise and development fees | $ 6,755 | $ 6,673 | $ 19,894 | $ 18,769 |
Restaurant and commissary sales | 20,246 | 19,719 | 58,859 | 56,825 |
International restaurant and commissary expenses | 16,481 | 16,605 | 48,209 | 47,366 |
Domestic market | Domestic Company-owned restaurants | ||||
Total revenues | 180,059 | 169,076 | 563,308 | 517,269 |
Cost of sales | 42,150 | 42,460 | 132,943 | 129,646 |
Salaries and benefits | 50,229 | 45,835 | 155,389 | 139,223 |
Advertising and related costs | 16,293 | 15,369 | 49,555 | 46,979 |
Occupancy costs and other restaurant operating expenses | 39,864 | 35,687 | 113,037 | 104,951 |
Total costs and expenses | 148,536 | 139,351 | 450,924 | 420,799 |
Domestic market | North America franchising | ||||
Franchise royalties | 22,079 | 22,131 | 70,519 | 65,728 |
Franchise and development fees | 206 | 217 | 666 | 493 |
Domestic market | Domestic commissaries | ||||
Total revenues | 145,863 | 149,224 | 457,203 | 463,852 |
Cost of sales | 111,205 | 116,908 | 350,108 | 364,302 |
Salaries and benefits and other commissary operating expenses | 24,029 | 22,221 | 72,420 | 68,162 |
Total costs and expenses | 135,234 | 139,129 | 422,528 | 432,464 |
Domestic market | All others | ||||
Total revenues | 14,076 | 23,359 | 50,110 | 49,704 |
Other operating expenses | $ 13,475 | $ 22,794 | $ 47,726 | $ 47,446 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 27, 2015 | Sep. 28, 2014 | Sep. 27, 2015 | Sep. 28, 2014 | ||
Consolidated Statements of Comprehensive Income | |||||
Net income before attribution to noncontrolling interests | $ 18,976 | $ 16,962 | $ 55,683 | $ 55,342 | |
Other comprehensive income (loss), before tax: | |||||
Foreign currency translation adjustments | (1,700) | (1,634) | (1,125) | (708) | |
Interest rate swaps | [1] | (1,386) | 694 | (2,011) | 247 |
Other comprehensive income (loss), before tax | (3,086) | (940) | (3,136) | (461) | |
Income tax effect: | |||||
Foreign currency translation adjustments | 629 | 605 | 416 | 262 | |
Interest rate swaps | [2] | 513 | (256) | 744 | (91) |
Income tax effect | 1,142 | 349 | 1,160 | 171 | |
Other comprehensive income (loss), net of tax | (1,944) | (591) | (1,976) | (290) | |
Comprehensive income before attribution to noncontrolling interests | 17,032 | 16,371 | 53,707 | 55,052 | |
Comprehensive loss, redeemable noncontrolling interests | (587) | (724) | (2,915) | (3,066) | |
Comprehensive (loss) income, nonredeemable noncontrolling interests | (418) | (163) | (1,781) | (142) | |
Comprehensive income attributable to the Company | $ 16,027 | $ 15,484 | $ 49,011 | $ 51,844 | |
[1] | Amounts reclassified out of accumulated other comprehensive income (“AOCI”) into net interest (expense) income included $390 and $1,177 for the three and nine months ended September 27, 2015, respectively, and $250 and $749 for the three and nine months ended September 28, 2014, respectively. | ||||
[2] | The income tax effects of amounts reclassified out of AOCI into net interest (expense) income were $145 and $436 for the three and nine months ended September 27, 2015, respectively, and $92 and $277 for the three and nine months ended September 28, 2014, respectively. |
Consolidated Statements of Com6
Consolidated Statements of Comprehensive Income (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 27, 2015 | Sep. 28, 2014 | Sep. 27, 2015 | Sep. 28, 2014 | |
Consolidated Statements of Comprehensive Income | ||||
Net interest (expense) income | $ (1,180) | $ (968) | $ (3,576) | $ (2,323) |
Income tax effects | 7,281 | 7,256 | 24,541 | 26,522 |
Qualifying as hedges | Interest rate swap | Amount reclassified from AOCI | ||||
Consolidated Statements of Comprehensive Income | ||||
Net interest (expense) income | 390 | 250 | 1,177 | 749 |
Income tax effects | $ 145 | $ 92 | $ 436 | $ 277 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 27, 2015 | Sep. 28, 2014 | |
Operating activities | ||
Net income before attribution to noncontrolling interests | $ 55,683 | $ 55,342 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Provision for uncollectible accounts and notes receivable | 813 | 1,714 |
Depreciation and amortization | 30,638 | 29,539 |
Deferred income taxes | 2,259 | 7,687 |
Stock-based compensation expense | 7,124 | 5,958 |
Excess tax benefit on equity awards | (9,884) | (8,493) |
Other | 3,268 | 3,916 |
Changes in operating assets and liabilities, net of acquisitions: | ||
Accounts receivable | (1,994) | (6,861) |
Income taxes receivable | 8,731 | |
Inventories | 2,178 | (9,792) |
Prepaid expenses | 2,033 | 2,461 |
Other current assets | 367 | (313) |
Other assets and liabilities | 819 | 3,887 |
Accounts payable | (3,380) | (1,380) |
Income and other taxes payable | 375 | 6,434 |
Accrued expenses and other current liabilities | 20,508 | (5,163) |
Deferred revenue | 200 | (110) |
Net cash provided by operating activities | 119,738 | 84,826 |
Investing activities | ||
Purchases of property and equipment | (26,508) | (37,700) |
Loans issued | (2,497) | (5,221) |
Repayments of loans issued | 3,961 | 3,371 |
Acquisitions, net of cash acquired | (491) | (4,264) |
Other | 406 | 25 |
Net cash used in investing activities | (25,129) | (43,789) |
Financing activities | ||
Net proceeds on line of credit facility | 8,549 | 66,784 |
Cash dividends paid | (17,950) | (16,119) |
Excess tax benefit on equity awards | 9,884 | 8,493 |
Tax payments for equity award issuances | (10,947) | (7,540) |
Proceeds from exercise of stock options | 4,569 | 4,752 |
Acquisition of Company common stock | (80,166) | (94,152) |
Contributions from noncontrolling interest holders | 683 | 1,086 |
Distributions to noncontrolling interest holders | (4,950) | (1,200) |
Other | 377 | 423 |
Net cash used in financing activities | (89,951) | (37,473) |
Effect of exchange rate changes on cash and cash equivalents | (339) | (86) |
Change in cash and cash equivalents | 4,319 | 3,478 |
Cash and cash equivalents at beginning of year | 20,122 | 13,670 |
Cash and cash equivalents at end of year | $ 24,441 | $ 17,148 |
Basis of Presentation
Basis of Presentation | 9 Months Ended |
Sep. 27, 2015 | |
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 annual 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 nine months ended September 27, 2015 are not necessarily indicative of the results that may be expected for the fiscal year ended December 27, 2015. 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 28, 2014. |
Significant Accounting Policies
Significant Accounting Policies | 9 Months Ended |
Sep. 27, 2015 | |
Significant Accounting Policies | |
Significant Accounting Policies | 2. Significant Accounting Policies Noncontrolling Interests Papa John’s has joint ventures in which there are noncontrolling interests, including the following as of September 27, 2015 and September 28, 2014: Number of Restaurants Restaurant Locations Papa John’s Ownership Noncontrolling Interest Ownership September 27, 2015 Star Papa, LP Texas % % Colonel’s Limited, LLC Maryland and Virginia % % PJ Minnesota, LLC Minnesota % % PJ Denver, LLC Colorado % % September 28, 2014 Star Papa, LP Texas % % Colonel’s Limited, LLC Maryland and Virginia % % PJ Minnesota, LLC Minnesota % % PJ Denver, LLC Colorado % % 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 these joint ventures for the three and nine months ended September 27, 2015 and September 28, 2014 was as follows (in thousands): Three Months Ended Nine Months Ended Sept. 27, Sept. 28, Sept. 27, Sept. 28, 2015 2014 2015 2014 Papa John’s International, Inc. $ $ $ $ Noncontrolling interests Total income before income taxes $ $ $ $ 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 September 27, 2015: Joint Venture Redemption Feature Location within the Condensed Consolidated Balance Sheets Recorded Value Star Papa, LP Redeemable Temporary equity Carrying value PJ Denver, LLC Redeemable Temporary equity Redemption value Colonel’s Limited, LLC No redemption feature Permanent equity Carrying value PJ Minnesota, LLC No redemption feature Permanent equity Carrying value The noncontrolling interest holders of two 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 28, 2014 $ Net income Distributions ) Change in redemption value ) Balance at September 27, 2015 $ The noncontrolling interests of our Colonel’s Limited, LLC and PJ Minnesota, LLC joint ventures are recorded at carrying value in “Stockholders’ equity” in the condensed consolidated balance sheets at both September 27, 2015 and December 28, 2014, as the noncontrolling interest holders’ agreements had no redemption features. 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 rate 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 September 27, 2015, we had a net deferred tax liability of approximately $1.2 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 September 27, 2015 and December 28, 2014 are as follows (in thousands): Carrying Fair Value Measurements Value Level 1 Level 2 Level 3 September 27, 2015 Financial assets: Cash surrender value of life insurance policies (a) $ $ $ — $ — Financial liabilities: Interest rate swaps (b) — — December 28, 2014 Financial assets: Cash surrender value of life insurance policies (a) $ $ $ — $ — Financial liabilities: Interest rate swaps (b) — — (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 nine months ended September 27, 2015. 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, consolidation of PJMF is not appropriate. Revenue from Contracts with Customers In May 2014, the Financial Accounting Standards Board (“FASB”) 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 2018 based on the FASB’s decision to defer the effective date by one year. We are evaluating the method of adoption and its impact of the new requirements on our consolidated financial statements. We currently do not believe the impact will be significant. |
Calculation of Earnings Per Sha
Calculation of Earnings Per Share | 9 Months Ended |
Sep. 27, 2015 | |
Calculation of Earnings Per Share | |
Calculation of Earnings Per Share | 3. 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 change in the redemption value for the noncontrolling interest of PJ Denver, LLC increases or decreases 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 Nine Months Ended Sept. 27, Sept. 28, Sept. 27, Sept. 28, 2015 2014 2015 2014 Basic earnings per common share: Net income attributable to the Company $ $ $ $ Decrease (increase) in noncontrolling interest redemption value ) ) Net income attributable to participating securities ) ) ) ) Net income attributable to common shareholders $ $ $ $ Weighted average common shares outstanding Basic earnings per common share $ $ $ $ Diluted earnings per common share: Net income attributable to common shareholders $ $ $ $ Weighted average common shares outstanding Dilutive effect of outstanding equity awards (a) Diluted weighted average common shares outstanding Diluted earnings per common share $ $ $ $ (a) Excludes 219 and 234 awards for the three and nine months ended September 27, 2015 and 270 and 208 awards for the three and nine months ended September 28, 2014, because their inclusion would have had an antidilutive effect. |
Debt
Debt | 9 Months Ended |
Sep. 27, 2015 | |
Debt | |
Debt | 4. Debt Our debt is comprised entirely of borrowings under our unsecured revolving line of credit (“Credit Facility”). The outstanding balance was $239.0 million as of September 27, 2015 and $230.5 million as of December 28, 2014. On October 31, 2014, we amended our Credit Facility to increase the amount available to $400 million from the previous $300 million availability and to extend the maturity date from April 30, 2018 to October 31, 2019. Additionally, we have the option to increase the Credit Facility an additional $100 million. 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 Credit Facility, reduced for outstanding letters of credit, was approximately $138.5 million as of September 27, 2015. The Credit Facility contains customary affirmative and negative covenants, including financial covenants requiring the maintenance of specified fixed charges and leverage ratios. At September 27, 2015, we were in compliance with these covenants. We use interest rate swaps to hedge against the effects of potential interest rate increases on borrowings under our Credit Facility. During the quarter ended September 27, 2015, we executed three additional forward starting swaps for $125.0 million that become effective in 2018 upon expiration of the two existing swaps for $125.0 million. As of September 27, 2015, we have the following interest rate swap agreements: Effective Dates Debt Amount Fixed Rates July 30, 2013 through April 30, 2018 $75 million % December 30, 2014 through April 30, 2018 $50 million % April 30, 2018 through April 30, 2023 $55 million % April 30, 2018 through April 30, 2023 $35 million % April 30, 2018 through April 30, 2023 $35 million % 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 newly executed forward starting swaps are also deemed cash flow hedges based upon our intent to replace the existing facility that matures in 2019 with new variable rate debt. As of September 27, 2015, the swaps were highly effective cash flow hedges with no ineffectiveness for the three and nine month periods ended September 27, 2015. The newly executed forward starting swaps are deemed effective given the probability of future forecasted interest payments. 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. The weighted average interest rate for the Credit Facility, including the impact of the previously mentioned swaps, were 2.0% and 1.8% for the three months ended September 27, 2015 and September 28, 2014, respectively, and 2.0% and 1.7% for the nine months ended September 27, 2015 and September 28, 2014, respectively. Interest paid, including payments made or received under the swaps, was $1.3 million and $1.0 million for the three months ended September 27, 2015 and September 28, 2014, respectively, and $3.9 million and $2.6 million for the nine months ended September 27, 2015 and September 28, 2014, respectively. As of September 27, 2015, the portion of the $2.4 million interest rate swap liability that would be reclassified into earnings during the next twelve months as interest expense approximates $715,000. |
Litigation
Litigation | 9 Months Ended |
Sep. 27, 2015 | |
Litigation | |
Litigation | 5. Litigation Litigation The Company is involved in a number of lawsuits, claims, investigations and proceedings, including the matter 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 and class action filed in August 2009 in the United States District Court, Eastern District of Missouri (“the Court”), alleging that delivery drivers were not properly reimbursed for mileage and expenses in accordance with the Fair Labor Standards Act (“FLSA”). Approximately 3,900 drivers out of a potential class size of 28,800 opted into the action. In late December 2013, the Court granted a motion for class certification in five additional states, which added approximately 15,000 plaintiffs to the case. The trial, originally scheduled for August 2015, was stayed in June 2015, pending U.S. Supreme Court review of another relevant case regarding certification. After the stay was granted, the parties reached a settlement in principle, which has been preliminarily approved by the Court in September 2015. The Court has scheduled a final approval hearing in January 2016. The Company continues to deny any liability or wrongdoing in this matter. In accordance with this preliminary settlement agreement, the Company recorded a pre-tax expense of $12.3 million in June 2015 under the provisions of ASC 450, Contingencies. There was no impact for the quarter ended September 27, 2015. This amount is separately reported as Legal settlement expense in the condensed consolidated statements of income. |
Segment Information
Segment Information | 9 Months Ended |
Sep. 27, 2015 | |
Segment Information | |
Segment Information | 6. 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 and wings, dessert items and canned or bottled beverages. 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 Nine Months Ended Sept. 27, 2015 Sept. 28, 2014 Sept. 27, 2015 Sept. 28, 2014 Revenues from external customers: Domestic Company-owned restaurants $ $ $ $ Domestic commissaries North America franchising International All others Total revenues from external customers $ $ $ $ Intersegment revenues: Domestic commissaries $ $ $ $ North America franchising International All others Total intersegment revenues $ $ $ $ Income (loss) before income taxes: Domestic Company-owned restaurants $ $ $ $ Domestic commissaries North America franchising International All others ) ) ) ) Unallocated corporate expenses (1) ) ) ) ) Elimination of intersegment losses (profits) ) ) ) ) Total income before income taxes $ $ $ $ Property and equipment: Domestic Company-owned restaurants $ Domestic commissaries International All others Unallocated corporate assets Accumulated depreciation and amortization ) Net property and equipment $ (1) Includes a $12.3 million legal settlement expense in the nine-month period of 2015. See “Note 5” for additional information. |
Assets Held for Sale
Assets Held for Sale | 9 Months Ended |
Sep. 27, 2015 | |
Assets Held for Sale | |
Assets Held for Sale | 7. Assets Held for Sale The Company has decided to refranchise the China market and is planning a sale of its existing China operations, consisting of the Company-owned restaurants and a commissary. We expect to sell the business within the next 12 months; upon completion of the sale, the Company will not have any Company-owned international restaurants. We have classified the assets as held for sale within the condensed consolidated balance sheet. Upon the transfer of these assets to held for sale, no loss was recognized as their fair value exceeded their carrying value. The following summarizes the associated assets that are classified as held for sale (in thousands): September 27, 2015 Inventories $ Prepaid expenses Net property and equipment Goodwill Other assets Total assets held for sale $ The Company-owned China operations have incurred losses before income taxes of $0.4 million and $1.4 million for the three months ended September 27, 2015 and September 28, 2014, respectively, and losses before income taxes of $0.9 million and $2.3 million for the nine months ended September 27, 2015 and September 28, 2014, respectively. The losses for the three and nine months ended September 28, 2014, include an impairment charge of $0.7 million for eight Company-owned restaurants in China. These results are reported in our International segment. |
Subsequent Event - Acquisition
Subsequent Event - Acquisition | 9 Months Ended |
Sep. 27, 2015 | |
Subsequent Event - Acquisition | |
Subsequent Event - Acquisition | 8. Subsequent Event - Acquisition In October 2015, the Company signed a letter of intent to purchase 19 domestic franchised Papa John’s restaurants in the Southeast for approximately $11.0 million. The transaction is expected to be completed in the first quarter of 2016. |
Significant Accounting Polici16
Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 27, 2015 | |
Significant Accounting Policies | |
Noncontrolling Interests | Noncontrolling Interests Papa John’s has joint ventures in which there are noncontrolling interests, including the following as of September 27, 2015 and September 28, 2014: Number of Restaurants Restaurant Locations Papa John’s Ownership Noncontrolling Interest Ownership September 27, 2015 Star Papa, LP Texas % % Colonel’s Limited, LLC Maryland and Virginia % % PJ Minnesota, LLC Minnesota % % PJ Denver, LLC Colorado % % September 28, 2014 Star Papa, LP Texas % % Colonel’s Limited, LLC Maryland and Virginia % % PJ Minnesota, LLC Minnesota % % PJ Denver, LLC Colorado % % 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 these joint ventures for the three and nine months ended September 27, 2015 and September 28, 2014 was as follows (in thousands): Three Months Ended Nine Months Ended Sept. 27, Sept. 28, Sept. 27, Sept. 28, 2015 2014 2015 2014 Papa John’s International, Inc. $ $ $ $ Noncontrolling interests Total income before income taxes $ $ $ $ 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 September 27, 2015: Joint Venture Redemption Feature Location within the Condensed Consolidated Balance Sheets Recorded Value Star Papa, LP Redeemable Temporary equity Carrying value PJ Denver, LLC Redeemable Temporary equity Redemption value Colonel’s Limited, LLC No redemption feature Permanent equity Carrying value PJ Minnesota, LLC No redemption feature Permanent equity Carrying value The noncontrolling interest holders of two 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 28, 2014 $ Net income Distributions ) Change in redemption value ) Balance at September 27, 2015 $ The noncontrolling interests of our Colonel’s Limited, LLC and PJ Minnesota, LLC joint ventures are recorded at carrying value in “Stockholders’ equity” in the condensed consolidated balance sheets at both September 27, 2015 and December 28, 2014, as the noncontrolling interest holders’ agreements had no redemption features. |
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 rate 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 September 27, 2015, we had a net deferred tax liability of approximately $1.2 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 September 27, 2015 and December 28, 2014 are as follows (in thousands): Carrying Fair Value Measurements Value Level 1 Level 2 Level 3 September 27, 2015 Financial assets: Cash surrender value of life insurance policies (a) $ $ $ — $ — Financial liabilities: Interest rate swaps (b) — — December 28, 2014 Financial assets: Cash surrender value of life insurance policies (a) $ $ $ — $ — Financial liabilities: Interest rate swaps (b) — — (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 nine months ended September 27, 2015. |
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, consolidation of PJMF is not appropriate. |
Revenue from Contracts with Customers | Revenue from Contracts with Customers In May 2014, the Financial Accounting Standards Board (“FASB”) 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 2018 based on the FASB’s decision to defer the effective date by one year. We are evaluating the method of adoption and its impact of the new requirements on our consolidated financial statements. We currently do not believe the impact will be significant. |
Significant Accounting Polici17
Significant Accounting Policies (Tables) | 9 Months Ended |
Sep. 27, 2015 | |
Significant Accounting Policies | |
Schedule of Joint Venture Arrangements | Number of Restaurants Restaurant Locations Papa John’s Ownership Noncontrolling Interest Ownership September 27, 2015 Star Papa, LP Texas % % Colonel’s Limited, LLC Maryland and Virginia % % PJ Minnesota, LLC Minnesota % % PJ Denver, LLC Colorado % % September 28, 2014 Star Papa, LP Texas % % Colonel’s Limited, LLC Maryland and Virginia % % PJ Minnesota, LLC Minnesota % % PJ Denver, LLC Colorado % % |
Schedule of Income Before Income Taxes Attributable to Joint Ventures | The income before income taxes attributable to these joint ventures for the three and nine months ended September 27, 2015 and September 28, 2014 was as follows (in thousands): Three Months Ended Nine Months Ended Sept. 27, Sept. 28, Sept. 27, Sept. 28, 2015 2014 2015 2014 Papa John’s International, Inc. $ $ $ $ Noncontrolling interests Total income before income taxes $ $ $ $ |
Schedule of Joint Ventures in Which There are Noncontrolling Interests | 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 September 27, 2015: Joint Venture Redemption Feature Location within the Condensed Consolidated Balance Sheets Recorded Value Star Papa, LP Redeemable Temporary equity Carrying value PJ Denver, LLC Redeemable Temporary equity Redemption value Colonel’s Limited, LLC No redemption feature Permanent equity Carrying value PJ Minnesota, LLC No redemption feature Permanent equity Carrying value |
Summary of Changes in Redeemable Noncontrolling Interests | The following summarizes changes in these redeemable noncontrolling interests (in thousands): Balance at December 28, 2014 $ Net income Distributions ) Change in redemption value ) Balance at September 27, 2015 $ |
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 September 27, 2015 and December 28, 2014 are as follows (in thousands): Carrying Fair Value Measurements Value Level 1 Level 2 Level 3 September 27, 2015 Financial assets: Cash surrender value of life insurance policies (a) $ $ $ — $ — Financial liabilities: Interest rate swaps (b) — — December 28, 2014 Financial assets: Cash surrender value of life insurance policies (a) $ $ $ — $ — Financial liabilities: Interest rate swaps (b) — — (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 S18
Calculation of Earnings Per Share (Tables) | 9 Months Ended |
Sep. 27, 2015 | |
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 Nine Months Ended Sept. 27, Sept. 28, Sept. 27, Sept. 28, 2015 2014 2015 2014 Basic earnings per common share: Net income attributable to the Company $ $ $ $ Decrease (increase) in noncontrolling interest redemption value ) ) Net income attributable to participating securities ) ) ) ) Net income attributable to common shareholders $ $ $ $ Weighted average common shares outstanding Basic earnings per common share $ $ $ $ Diluted earnings per common share: Net income attributable to common shareholders $ $ $ $ Weighted average common shares outstanding Dilutive effect of outstanding equity awards (a) Diluted weighted average common shares outstanding Diluted earnings per common share $ $ $ $ (a) Excludes 219 and 234 awards for the three and nine months ended September 27, 2015 and 270 and 208 awards for the three and nine months ended September 28, 2014, because their inclusion would have had an antidilutive effect. |
Debt (Tables)
Debt (Tables) | 9 Months Ended |
Sep. 27, 2015 | |
Debt | |
Schedule of interest rate swap agreements | Effective Dates Debt Amount Fixed Rates July 30, 2013 through April 30, 2018 $75 million % December 30, 2014 through April 30, 2018 $50 million % April 30, 2018 through April 30, 2023 $55 million % April 30, 2018 through April 30, 2023 $35 million % April 30, 2018 through April 30, 2023 $35 million % |
Segment Information (Tables)
Segment Information (Tables) | 9 Months Ended |
Sep. 27, 2015 | |
Segment Information | |
Schedule of Segment Reporting Information, by Segment | Our segment information is as follows (in thousands): Three Months Ended Nine Months Ended Sept. 27, 2015 Sept. 28, 2014 Sept. 27, 2015 Sept. 28, 2014 Revenues from external customers: Domestic Company-owned restaurants $ $ $ $ Domestic commissaries North America franchising International All others Total revenues from external customers $ $ $ $ Intersegment revenues: Domestic commissaries $ $ $ $ North America franchising International All others Total intersegment revenues $ $ $ $ Income (loss) before income taxes: Domestic Company-owned restaurants $ $ $ $ Domestic commissaries North America franchising International All others ) ) ) ) Unallocated corporate expenses (1) ) ) ) ) Elimination of intersegment losses (profits) ) ) ) ) Total income before income taxes $ $ $ $ Property and equipment: Domestic Company-owned restaurants $ Domestic commissaries International All others Unallocated corporate assets Accumulated depreciation and amortization ) Net property and equipment $ (1) Includes a $12.3 million legal settlement expense in the nine-month period of 2015. See “Note 5” for additional information. |
Assets Held for Sale (Tables)
Assets Held for Sale (Tables) | 9 Months Ended |
Sep. 27, 2015 | |
Assets Held for Sale | |
Schedule of assets classified as held for sale | The following summarizes the associated assets that are classified as held for sale (in thousands): September 27, 2015 Inventories $ Prepaid expenses Net property and equipment Goodwill Other assets Total assets held for sale $ |
Significant Accounting Polici22
Significant Accounting Policies (Details 1) - restaurant | Sep. 27, 2015 | Sep. 28, 2014 |
Star Papa, LP | ||
Noncontrolling Interests | ||
Number of Restaurants | 85 | 82 |
Papa John's Ownership | 51.00% | 51.00% |
Noncontrolling Interest Ownership | 49.00% | 49.00% |
Colonel's Limited, LLC | ||
Noncontrolling Interests | ||
Number of Restaurants | 61 | 56 |
Papa John's Ownership | 70.00% | 70.00% |
Noncontrolling Interest Ownership | 30.00% | 30.00% |
PJ Minnesota, LLC | ||
Noncontrolling Interests | ||
Number of Restaurants | 35 | 34 |
Papa John's Ownership | 70.00% | 70.00% |
Noncontrolling Interest Ownership | 30.00% | 30.00% |
PJ Denver, LLC | ||
Noncontrolling Interests | ||
Number of Restaurants | 27 | 25 |
Papa John's Ownership | 60.00% | 60.00% |
Noncontrolling Interest Ownership | 40.00% | 40.00% |
Significant Accounting Polici23
Significant Accounting Policies (Details 2) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 27, 2015 | Sep. 28, 2014 | Sep. 27, 2015 | Sep. 28, 2014 | |
Income before income taxes attributable to joint ventures | ||||
Noncontrolling interests | $ 1,005 | $ 887 | $ 4,696 | $ 3,208 |
Total income before income taxes | 26,257 | 24,218 | 80,224 | 81,864 |
Joint ventures | ||||
Income before income taxes attributable to joint ventures | ||||
Papa John's International, Inc. | 1,570 | 1,387 | 7,240 | 4,979 |
Noncontrolling interests | 1,005 | 887 | 4,696 | 3,208 |
Total income before income taxes | $ 2,575 | $ 2,274 | $ 11,936 | $ 8,187 |
Significant Accounting Polici24
Significant Accounting Policies (Details 3) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 27, 2015USD ($)item | Sep. 28, 2014USD ($) | Sep. 27, 2015USD ($)item | Sep. 28, 2014USD ($) | |
Significant Accounting Policies | ||||
Number of joint ventures under which noncontrolling interest holders have the option to require the Company to purchase their interests | item | 2 | 2 | ||
Net deferred tax liability, net | $ 1,200 | $ 1,200 | ||
Redeemable Noncontrolling Interests | ||||
Balance at the beginning of the period | 8,555 | |||
Change in redemption value | 49 | $ (42) | 192 | $ (81) |
Balance at the end of the period | 8,274 | 8,274 | ||
Redeemable noncontrolling interests | ||||
Redeemable Noncontrolling Interests | ||||
Balance at the beginning of the period | 8,555 | |||
Net income | 2,915 | |||
Distributions | (3,004) | |||
Change in redemption value | (192) | |||
Balance at the end of the period | $ 8,274 | $ 8,274 |
Significant Accounting Polici25
Significant Accounting Policies (Details 4) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 27, 2015 | Dec. 28, 2014 | |
Measurement of financial assets and liabilities at fair value on a recurring basis | ||
Transfers among levels within the fair value hierarchy | $ 0 | |
Measured on Recurring Basis | Level 1 | ||
Measurement of financial assets and liabilities at fair value on a recurring basis | ||
Cash surrender value of life insurance policies | 17,412 | $ 18,238 |
Measured on Recurring Basis | Level 2 | ||
Measurement of financial assets and liabilities at fair value on a recurring basis | ||
Interest rate swap liabilities | 2,417 | 376 |
Measured on Recurring Basis | Carrying Value | ||
Measurement of financial assets and liabilities at fair value on a recurring basis | ||
Cash surrender value of life insurance policies | 17,412 | 18,238 |
Interest rate swap liabilities | $ 2,417 | $ 376 |
Calculation of Earnings Per S26
Calculation of Earnings Per Share (Details 1) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 27, 2015 | Sep. 28, 2014 | Sep. 27, 2015 | Sep. 28, 2014 | |
Basic earnings per common share: | ||||
Net income attributable to the Company | $ 17,971 | $ 16,075 | $ 50,987 | $ 52,134 |
Decrease (increase) in noncontrolling interest redemption value | 49 | (42) | 192 | (81) |
Net income attributable to participating securities | (73) | (77) | (223) | (295) |
Net income attributable to common shareholders | $ 17,947 | $ 15,956 | $ 50,956 | $ 51,758 |
Weighted average common shares outstanding | 39,394 | 40,739 | 39,640 | 41,248 |
Basic earnings per common share | $ 0.46 | $ 0.39 | $ 1.29 | $ 1.25 |
Diluted earnings per common share: | ||||
Net income attributable to common shareholders | $ 17,947 | $ 15,956 | $ 50,956 | $ 51,758 |
Weighted average common shares outstanding | 39,394 | 40,739 | 39,640 | 41,248 |
Dilutive effect of outstanding equity awards | 501 | 647 | 570 | 773 |
Diluted weighted average common shares outstanding | 39,895 | 41,386 | 40,210 | 42,021 |
Diluted earnings per common share | $ 0.45 | $ 0.39 | $ 1.27 | $ 1.23 |
Weighted average antidilutive awards excluded from computation of earnings per share | 219 | 270 | 234 | 208 |
Debt (Details 1)
Debt (Details 1) $ in Millions | Oct. 31, 2014USD ($) | Sep. 27, 2015USD ($)derivative | Jun. 28, 2015USD ($)derivative | Dec. 28, 2014USD ($) | Apr. 30, 2013USD ($) |
Interest rate swap, July 2013 | |||||
Interest rate swaps | |||||
Interest rate swap agreement, fixed interest rate | 1.42% | ||||
Interest rate swap agreement, notional amount | $ 75 | ||||
Interest rate swap, December 2014 | |||||
Interest rate swaps | |||||
Interest rate swap agreement, fixed interest rate | 1.36% | ||||
Interest rate swap agreement, notional amount | $ 50 | ||||
Interest rate swap, April 2018, 2.33% fixed | |||||
Interest rate swaps | |||||
Interest rate swap agreement, fixed interest rate | 2.33% | ||||
Interest rate swap agreement, notional amount | $ 55 | ||||
Interest rate swap, April 2018, 2.36% fixed | |||||
Interest rate swaps | |||||
Interest rate swap agreement, fixed interest rate | 2.36% | ||||
Interest rate swap agreement, notional amount | $ 35 | ||||
Interest rate swap, April 2018, 2.34% fixed | |||||
Interest rate swaps | |||||
Interest rate swap agreement, fixed interest rate | 2.34% | ||||
Interest rate swap agreement, notional amount | $ 35 | ||||
Interest rate swap | |||||
Interest rate swaps | |||||
Number of derivatives held | derivative | 2 | ||||
Number of additional derivatives executed | derivative | 3 | ||||
Interest rate swap agreement, notional amount | $ 125 | $ 125 | |||
Revolving credit facility | |||||
Debt | |||||
Line of credit outstanding balance | 239 | $ 230.5 | |||
Line of credit facility, maximum borrowing capacity | $ 400 | $ 300 | |||
Additional amount that company has option to increase borrowing capacity | $ 100 | ||||
Line of credit facility, remaining availability | $ 138.5 | ||||
Revolving credit facility | Minimum | |||||
Debt | |||||
Percentage of commitment fee on unused credit facility | 0.15% | ||||
Revolving credit facility | Maximum | |||||
Debt | |||||
Percentage of commitment fee on unused credit facility | 0.25% | ||||
Revolving credit facility | LIBOR | Minimum | |||||
Debt | |||||
Interest margin rate on debt | 0.75% | ||||
Revolving credit facility | LIBOR | Maximum | |||||
Debt | |||||
Interest margin rate on debt | 1.75% |
Debt (Details 2)
Debt (Details 2) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 27, 2015 | Sep. 28, 2014 | Sep. 27, 2015 | Sep. 28, 2014 | |
Debt | ||||
Weighted average interest rate for credit facility borrowings, including the impact of interest rate swaps | 2.00% | 1.80% | 2.00% | 1.70% |
Interest paid | $ 1,300,000 | $ 1,000,000 | $ 3,900,000 | $ 2,600,000 |
Interest rate swap | ||||
Debt | ||||
Gain (loss) on cash flow hedge ineffectiveness | 0 | 0 | ||
Interest rate swap liabilities | $ 2,400,000 | 2,400,000 | ||
Interest rate swap | Interest expense | ||||
Debt | ||||
Portion of derivative liability that would be reclassified into earnings | $ 715,000 | |||
Estimate of period of time over which portion of derivative liability would be reclassified into earnings | 12 months |
Litigation (Details 1)
Litigation (Details 1) $ in Thousands | 1 Months Ended | 3 Months Ended | 9 Months Ended |
Jun. 28, 2015USD ($)stateplaintiffemployee | Sep. 27, 2015USD ($) | Sep. 27, 2015USD ($) | |
Loss Contingency Information About Litigation Matters | |||
Legal settlement expense | $ | $ 12,278 | ||
Pending Litigation | Perrin v. Papa John's International, Inc. and Papa John's USA, Inc. | |||
Loss Contingency Information About Litigation Matters | |||
Employees who opted into the class action (in number of employees) | 3,900 | ||
Potential class size (in number of employees) | 28,800 | ||
States which are granted motion for class certification (in number of states) | state | 5 | ||
Plaintiffs added to case (in number of plaintiffs) | plaintiff | 15,000 | ||
Legal settlement expense | $ | $ 12,300 | $ 0 |
Segment Information (Details 1)
Segment Information (Details 1) | 9 Months Ended |
Sep. 27, 2015segmentcustomer | |
Segment Information | |
Reportable segments, number | 5 |
Consolidated revenues | |
Segment Information | |
Concentration risk, number | customer | 0 |
Segment Information (Details 2)
Segment Information (Details 2) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||||
Sep. 27, 2015 | Sep. 28, 2014 | Sep. 27, 2015 | Sep. 28, 2014 | Dec. 28, 2014 | ||
Segment Information | ||||||
Revenue from external customers | $ 389,284 | $ 390,399 | $ 1,220,559 | $ 1,172,640 | ||
Income before income taxes | 26,257 | 24,218 | 80,224 | 81,864 | ||
Accumulated depreciation and amortization | (363,236) | (363,236) | ||||
Net property and equipment | 209,137 | 209,137 | $ 219,457 | |||
Litigation Settlement, Expense | 12,278 | |||||
Operating segments | Domestic Company-owned restaurants | ||||||
Segment Information | ||||||
Revenue from external customers | 180,059 | 169,076 | 563,308 | 517,269 | ||
Income before income taxes | 8,088 | 8,133 | 41,185 | 32,069 | ||
Property and equipment, gross | 215,945 | 215,945 | ||||
Operating segments | Domestic commissaries | ||||||
Segment Information | ||||||
Revenue from external customers | 145,863 | 149,224 | 457,203 | 463,852 | ||
Income before income taxes | 10,192 | 8,897 | 32,694 | 26,174 | ||
Property and equipment, gross | 109,532 | 109,532 | ||||
Operating segments | North America franchising | ||||||
Segment Information | ||||||
Revenue from external customers | 22,285 | 22,348 | 71,185 | 66,221 | ||
Income before income taxes | 19,172 | 19,023 | 61,545 | 56,389 | ||
Operating segments | International | ||||||
Segment Information | ||||||
Revenue from external customers | 27,001 | 26,392 | 78,753 | 75,594 | ||
Income before income taxes | 3,184 | 1,436 | 6,807 | 4,071 | ||
Property and equipment, gross | 21,266 | 21,266 | ||||
Operating segments | All others | ||||||
Segment Information | ||||||
Revenue from external customers | 14,076 | 23,359 | 50,110 | 49,704 | ||
Income before income taxes | (556) | (298) | (230) | (150) | ||
Property and equipment, gross | 49,541 | 49,541 | ||||
Elimination | ||||||
Segment Information | ||||||
Revenue from external customers | 57,947 | 60,903 | 179,411 | 180,378 | ||
Income before income taxes | (341) | (731) | (1,141) | (1,284) | ||
Elimination | Domestic commissaries | ||||||
Segment Information | ||||||
Revenue from external customers | 53,398 | 53,830 | 165,744 | 160,143 | ||
Elimination | North America franchising | ||||||
Segment Information | ||||||
Revenue from external customers | 643 | 574 | 1,985 | 1,761 | ||
Elimination | International | ||||||
Segment Information | ||||||
Revenue from external customers | 73 | 78 | 223 | 236 | ||
Elimination | All others | ||||||
Segment Information | ||||||
Revenue from external customers | 3,833 | 6,421 | 11,459 | 18,238 | ||
Unallocated corporate | ||||||
Segment Information | ||||||
Income before income taxes | [1] | (13,482) | $ (12,242) | (60,636) | $ (35,405) | |
Property and equipment, gross | $ 176,089 | $ 176,089 | ||||
[1] | Includes a $12.3 million legal settlement expense in the nine-month period of 2015. See “Note 5” for additional information. |
Assets Held for Sale (Details)
Assets Held for Sale (Details) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 27, 2015USD ($) | Sep. 28, 2014USD ($)restaurant | Sep. 27, 2015USD ($) | Sep. 28, 2014USD ($)restaurant | |
Assets classified as held for sale | ||||
Total assets held for sale | $ 9,555 | $ 9,555 | ||
China Operations | International | ||||
Assets Held for Sale disclosures | ||||
Gain (loss) on assets transferred to held for sale | 0 | |||
Assets classified as held for sale | ||||
Inventories | 808 | 808 | ||
Prepaid expenses | 790 | 790 | ||
Net property and equipment | 5,406 | 5,406 | ||
Goodwill | 1,719 | 1,719 | ||
Other assets | 832 | 832 | ||
Total assets held for sale | 9,555 | 9,555 | ||
Income statement disclosures related to operations held for sale | ||||
Income (loss) before income taxes | $ (400) | $ (1,400) | $ (900) | $ (2,300) |
Impairment charge | $ (700) | $ (700) | ||
Number of restaurants for which impairment charges recorded | restaurant | 8 | 8 |
Subsequent Event - Acquisition
Subsequent Event - Acquisition (Details) - Subsequent event - Southeast Franchised Restaurants Acquisition - Forecast $ in Millions | 1 Months Ended |
Oct. 25, 2015USD ($)restaurant | |
Subsequent events disclosures | |
Number of restaurants acquired | restaurant | 19 |
Purchase price | $ 11 |