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Papa Johns Announces Third Quarter 2022 Financial Results

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

Highlights

  • Total revenues of $511 million in the third quarter 2022 were down $2 million, or less than one percent, from a record third quarter 2021.
  • North America comparable sales were down less than one percent from a year ago and up 30% on a three-year stack. International comparable sales were down 10% and up 19% on a three-year stack.
  • Global system-wide restaurant sales were $1.20 billion(a), a 0.5% increase over the prior year third quarter.
  • 18 net unit openings in the third quarter primarily within International markets; net unit openings in 2022 now expected to be between 240 and 260 units.
  • Earnings per diluted share of $0.23; non-GAAP adjusted diluted earnings per share of $0.54 excluding Special items, compared with $0.83 a year ago.

“Our team at Papa Johns continued to execute on our plan to create the world’s best pizza company, despite facing macroeconomic and seasonal headwinds during the quarter,” said Rob Lynch, Papa Johns President and Chief Executive Officer. “Coming off a record third quarter in 2021, our North American comparable sales were down less than one percent, but more importantly, our track record of industry outperformance continued as evidenced by our 30% three-year stacked growth. This is a true testament to our culture of innovation and the increasing strength of the Papa Johns brand.

“Although the third quarter is typically the slowest period for pizza delivery, this year was especially challenging as the demand for travel was amplified coming out of the pandemic. In addition, commodity and labor costs reached all-time highs, impacting profit. These are all short-term challenges that we navigated well and I am pleased to say we are off to a solid start in the fourth quarter. While we expect some near-term headwinds to continue, particularly in the UK market, we continue to build global excitement behind our brand, reinforcing our confidence in our multi-year development outlook,” continued Lynch. “I am extremely proud of our team members and franchisees for their continued improvements across our operations, marketing, technology and development capabilities in this challenging business environment. We’re well-positioned to drive continued growth in the long-term and to take advantage of the tremendous global whitespace available to Papa Johns.”

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

Financial Highlights

 

 

Three Months Ended

 

Nine Months Ended

(In thousands, except per share amounts)

 

September 25,

2022

 

September 26,

2021

 

Increase

(Decrease)

 

September 25,

2022

 

September 26,

2021

 

Increase

(Decrease)

Revenue

 

$

510,512

 

$

512,782

 

$

(2,270

)

 

$

1,575,869

 

$

1,539,536

 

 

$

36,333

 

Operating income

 

$

19,461

 

$

38,577

 

$

(19,116

)

 

$

72,800

 

$

130,076

 

 

$

(57,276

)

Adjusted operating income(a)

 

$

33,593

 

$

40,730

 

$

(7,137

)

 

$

119,235

 

$

139,440

 

 

$

(20,205

)

Net income

 

$

8,331

 

$

29,256

 

$

(20,925

)

 

$

44,258

 

$

95,393

 

 

$

(51,135

)

Diluted earnings (loss) per share

 

$

0.23

 

$

0.79

 

$

(0.56

)

 

$

1.22

 

$

(0.59

)

 

$

1.81

 

Adjusted diluted earnings per share(a)

 

$

0.54

 

$

0.83

 

$

(0.29

)

 

$

2.23

 

$

2.76

 

 

$

(0.53

)

(a) Adjusted operating income and adjusted diluted earnings per share are non-GAAP measures that exclude “Special items,” which impact comparability. Please see the “Reconciliation of Non-GAAP Financial Measures” below.

Revenues

Consolidated total revenues of $510.5 million decreased $2.3 million, or 0.4%, in the third quarter of 2022 compared with the prior year. Excluding the impact of refranchising 90 restaurants in the first quarter of 2022, consolidated total revenues increased $15.5 million, or 3.1%. The higher total revenue is primarily the result of a 14.2% increase in commissary sales tied to accelerating commodity inflation, partially offset by lower domestic restaurant sales and international revenues.

For the third quarter of 2022, global system-wide restaurant sales were $1.20 billion, up 0.5% (excluding the impact of foreign currency and previously disclosed franchisee suspended restaurants) from a year ago.

Operating Results

Consolidated operating income of $19.5 million for the third quarter of 2022 decreased $19.1 million compared with the third quarter last year. Excluding Special items discussed in “Reconciliation of Non-GAAP Financial Measures” below, adjusted operating income was $33.6 million, down $7.1 million from the prior year comparable period.

Diluted earnings per share was $0.23 for the third quarter of 2022 compared with $0.79 in the third quarter of 2021. Excluding the impact of Special items, adjusted diluted earnings per share was $0.54 representing a decrease of $0.29 compared with the same period a year ago. The decrease in both adjusted operating income and adjusted diluted earnings per share was attributable to lower comparable sales, acceleration in commodity costs, wage inflation and the economic downturn in the UK. Adjusted diluted earnings per share was also impacted by higher interest and tax expense in the third quarter of 2022.

See the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of our Quarterly Report on Form 10-Q filed with the SEC for additional information concerning our operating results for the three and nine months ended September 25, 2022.

Global Restaurant Sales Information

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

 

Three Months Ended

 

Nine Months Ended

 

September 25,

2022

 

September 26,

2021

 

September 25,

2022

 

September 26,

2021

Comparable sales (decline) growth:

 

 

 

 

 

 

 

Domestic Company-owned restaurants

(2.2

)%

 

7.4

%

 

(1.6

)%

 

11.6

%

North America franchised restaurants

(0.5

)%

 

6.8

%

 

1.2

%

 

12.3

%

North America restaurants

(0.8

)%

 

6.9

%

 

0.6

%

 

12.1

%

International restaurants

(10.1

)%

 

8.3

%

 

(5.8

)%

 

17.1

%

Total comparable sales (decline) growth(a)

(3.4

)%

 

7.3

%

 

(1.1

)%

 

13.4

%

System-wide restaurant sales growth (decline):

 

 

 

 

 

 

 

(excluding the impact of foreign currency)

 

 

 

 

 

 

 

Domestic Company-owned restaurants

0.5

%

 

7.3

%

 

0.8

%

 

11.1

%

North America franchised restaurants

0.9

%

 

8.0

%

 

2.5

%

 

13.1

%

North America restaurants

0.8

%

 

7.9

%

 

2.2

%

 

12.7

%

International restaurants

(0.4

)%

 

21.4

%

 

5.3

%

 

28.2

%

Total global system-wide restaurant sales growth(a)

0.5

%

 

11.2

%

 

2.9

%

 

16.2

%

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

Global Restaurant Unit Data

As of September 25, 2022, there were 5,589 Papa Johns restaurants operating in 47 countries and territories, as follows:

Third Quarter

Domestic

Company

Owned

 

Franchised

North

America

 

Total North

America

 

International(a)

 

System-wide

Beginning - June 26, 2022

519

 

 

2,837

 

 

3,356

 

 

2,215

 

 

5,571

 

Opened

1

 

 

17

 

 

18

 

 

48

 

 

66

 

Closed

 

 

(16

)

 

(16

)

 

(32

)

 

(48

)

Sold

 

 

(1

)

 

(1

)

 

 

 

(1

)

Acquired

1

 

 

 

 

1

 

 

 

 

1

 

Refranchised

 

 

 

 

 

 

 

 

 

Ending - September 25, 2022

521

 

 

2,837

 

 

3,358

 

2,231

 

 

5,589

 

Net Unit Growth

2

 

 

 

 

2

 

 

16

 

 

18

 

Trailing four quarters net store growth/(decline)

(70

)

105

 

 

35

 

 

173

 

 

208

 

(a) Excludes franchisee suspended restaurants.

Free Cash Flow

Free cash flow, a non-GAAP financial measure which the Company defines as net cash provided by operating activities, less purchases of property and equipment and dividends paid to preferred shareholders, was $28.1 million for the nine months ended September 25, 2022, compared with $145.9 million in the prior year period. The year over year change primarily reflects lower cash flow from operating activities as a result of overall business performance and lower accrued expenses, as well as increases in purchases of property and equipment.

 

 

Nine Months Ended

 

 

September 25,

2022

 

September 26,

2021

Net cash provided by operating activities

 

$

76,553

 

 

$

193,624

 

Purchases of property and equipment

 

 

(48,424

)

 

 

(41,328

)

Dividends paid to preferred shareholders (a)

 

 

 

 

 

(6,394

)

Free cash flow

 

$

28,129

 

 

$

145,902

 

(a) Excludes cash consideration paid for the repurchase and conversion of the Series B Preferred Stock. See “Repurchase and Conversion of Series B Preferred Stock” below for additional information.

We view free cash flow as an important financial measure because it is one factor that management uses in determining the amount of cash available for discretionary investment. Free cash flow is not a term defined by GAAP, and as a result, our measure of free cash flow might not be comparable to similarly titled measures used by other companies. Free cash flow should not be construed as a substitute for or a better indicator of the Company’s performance than the Company’s GAAP measures.

Cash Dividend and Share Repurchases

The Company paid cash dividends of $14.9 million ($0.42 per common share) in the third quarter of 2022. On October 27, 2022, our Board of Directors declared a fourth quarter dividend of $0.42 per common share. The dividend will be paid on November 25, 2022 to stockholders of record as of the close of business on November 14, 2022.

During the third quarter of 2022, the Company repurchased 229,000 shares of common stock for $19.5 million pursuant to its share repurchase program. As of September 25, 2022, the Company had $329.8 million remaining available for repurchase under the outstanding authorization.

Conference Call

Papa Johns will host a call with analysts today, November 3, 2022, at 8:00 a.m. Eastern Time. To access the conference call or webcast, please register online at: ir.papajohns.com/events-presentations. A replay of the webcast will be available two hours after the call and archived on the same web page.

About Papa Johns

Papa John’s International, Inc. (NASDAQ: PZZA) opened its doors in 1984 with one goal in mind: BETTER INGREDIENTS. BETTER PIZZA.® Papa Johns believes that using high-quality ingredients leads to superior quality pizzas. Its original dough is made of only six ingredients and is fresh, never frozen. Papa Johns tops its pizzas with real cheese made from mozzarella, pizza sauce made with vine-ripened tomatoes that go from vine to can in the same day and meat free of fillers. It was the first national pizza delivery chain to announce the removal of artificial flavors and synthetic colors from its entire food menu. Papa Johns is co-headquartered in Atlanta, Ga. and Louisville, Ky. and is the world’s third-largest pizza delivery company with more than 5,500 restaurants in 47 countries and territories. For more information about the Company or to order pizza online, visit www.PapaJohns.com or download the Papa Johns mobile app for iOS or Android.

Forward-Looking Statements

Certain matters discussed in this press release and other Company communications that are not statements of historical fact constitute forward-looking statements within the meaning of the federal securities laws. Generally, the use of words such as “expect,” “intend,” “estimate,” “believe,” “anticipate,” “will,” “forecast,” “outlook”, “plan,” “project,” or similar words identify forward-looking statements that we intend to be included within the safe harbor protections provided by the federal securities laws. Such forward-looking statements include or may relate to projections or guidance concerning business performance, revenue, earnings, cash flow, earnings per share, share repurchases, the current economic environment, the financial impact of the temporary business disruptions and changes in demand we are experiencing related to the current outbreak of the coronavirus pandemic, commodity and labor costs, currency fluctuations, profit margins, unit growth, unit level performance, capital expenditures, restaurant and franchise development, the duration of changes in consumer behavior caused by the pandemic, labor shortages and price increases, inflation, royalty relief, franchisee support, the effectiveness of our menu innovations and other business initiatives, marketing efforts, liquidity, compliance with debt covenants, impairments, strategic decisions and actions, dividends, effective tax rates, regulatory changes and impacts, adoption of new accounting standards, and other financial and operational measures. Such statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions, which are difficult to predict and many of which are beyond our control. Therefore, actual outcomes and results may differ materially from those matters expressed or implied in such forward-looking statements.

Our forward-looking statements are based on our assumptions which are based on currently available information. Actual outcomes and results may differ materially from those matters expressed or implied in our forward-looking statements as a result of various factors, including but not limited to risks related to: our ability to manage difficulties and opportunities associated with or related to the coronavirus pandemic, including governmental restrictions, changes in consumer demand or behavior, vaccine mandates and changing governmental programs and regulations relating to the pandemic; labor shortages at company and/or franchised stores and our quality control centers; increases in labor costs, food costs or sustained higher other operating costs, including as a result of supply chain disruption, inflation or climate change; the potential for delayed new store openings, both domestically and internationally; the increased risk of phishing, ransomware and other cyber-attacks; our ability to successfully navigate the deteriorating macroeconomic conditions in the United Kingdom; and risks to the global economy and our business related to the conflict in Ukraine. These and other risks, uncertainties and assumptions that are involved in our forward-looking statements are discussed in detail in “Part I. Item 1A. – Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 26, 2021 as updated by those included in our Quarterly Reports on Form 10-Q for the quarters ended March 27, 2022 and September 25, 2022. We undertake no obligation to update publicly any forward-looking statements, whether as a result of future events, new information or otherwise, except as required by law.

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

Supplemental Information and Financial Statements

Definition

“Comparable sales” represents the change in year-over-year sales for the same base of restaurants for the same fiscal periods. “Global system-wide restaurant sales” represents total restaurant sales for all company-owned and franchised stores open during the comparable periods, and “Global system-wide restaurant sales growth” represents the change in such sales year-over-year. We believe North America, international and global restaurant and comparable sales growth and Global system-wide restaurant sales information is useful in analyzing our results since our franchisees pay royalties and marketing fund contributions that are based on a percentage of franchise sales. Comparable sales and Global system-wide restaurant sales results for restaurants operating outside of the United States are reported on a constant dollar basis, which excludes the impact of foreign currency translation. Franchise sales also generate commissary revenue in the United States and in certain international markets. Franchise restaurant and comparable sales growth information is also useful for comparison to industry trends and evaluating the strength of our brand. Management believes the presentation of franchise restaurant sales growth, excluding the impact of foreign currency, provides investors with useful information regarding underlying sales trends and the impact of new unit growth without being impacted by swings in the external factor of foreign currency. Franchise restaurant sales are not included in the Company’s revenues.

Reconciliation of Non-GAAP Financial Measures

The table below reconciles our GAAP financial results to our adjusted financial results, which are non-GAAP measures. The non-GAAP adjusted results shown below and within this press release, which exclude the items in the table below (collectively defined as “Special items”), should not be construed as a substitute for or a better indicator of the Company’s performance than the Company’s GAAP results. Management believes presenting certain financial information excluding the Special items is important for purposes of comparison to current year results. In addition, management uses these metrics to evaluate the Company’s underlying operating performance and to analyze trends.

 

 

Three Months Ended

 

Nine Months Ended

(In thousands, except per share amounts)

 

September 25,

2022

 

September 26,

2021

 

September 25,

2022

 

September 26,

2021

 

 

 

 

 

 

 

 

 

GAAP operating income

 

$

19,461

 

 

$

38,577

 

 

$

72,800

 

 

$

130,076

 

Refranchising and impairment losses(a)

 

 

905

 

 

 

 

 

 

26,701

 

 

 

 

Legal settlements(b)

 

 

10,000

 

 

 

 

 

 

15,000

 

 

 

 

Provision for uncollectible accounts and notes receivable(c)

 

 

3,227

 

 

 

 

 

 

3,227

 

 

 

 

Strategic corporate reorganization costs(d)

 

 

 

 

 

2,153

 

 

 

 

 

 

9,364

 

Other costs(e)

 

 

 

 

 

 

 

 

1,507

 

 

 

 

Adjusted operating income

 

$

33,593

 

 

$

40,730

 

 

$

119,235

 

 

$

139,440

 

 

 

 

 

 

 

 

 

 

GAAP net income (loss) attributable to common shareholders

 

$

8,245

 

 

$

28,961

 

 

$

43,996

 

 

$

(20,423

)

Refranchising and impairment losses(a)

 

 

905

 

 

 

 

 

 

26,701

 

 

 

 

Legal settlements(b)

 

 

10,000

 

 

 

 

 

 

15,000

 

 

 

 

Provision for uncollectible accounts and notes receivable(c)

 

 

3,227

 

 

 

 

 

 

3,227

 

 

 

 

Strategic corporate reorganization costs(d)

 

 

 

 

 

2,153

 

 

 

 

 

 

9,364

 

Other costs(e)

 

 

 

 

 

 

 

 

1,507

 

 

 

 

Repurchase and conversion of Series B Preferred Stock(f)

 

 

 

 

 

 

 

 

 

 

 

109,852

 

Tax effect of Non-GAAP adjustments on special items(g)

 

 

(3,180

)

 

 

(483

)

 

 

(10,449

)

 

 

(2,098

)

Adjusted net income attributable to common shareholders

 

$

19,197

 

 

$

30,631

 

 

$

79,982

 

 

$

96,695

 

 

 

 

 

 

 

 

 

 

GAAP diluted earnings (loss) per common share

 

$

0.23

 

 

$

0.79

 

 

$

1.22

 

 

$

(0.59

)

Refranchising and impairment losses(a)

 

 

0.03

 

 

 

 

 

 

0.75

 

 

 

 

Legal settlements(b)

 

 

0.28

 

 

 

 

 

 

0.42

 

 

 

 

Provision for uncollectible accounts and notes receivable(c)

 

 

0.09

 

 

 

 

 

 

0.09

 

 

 

 

Strategic corporate reorganization costs(d)

 

 

 

 

 

0.05

 

 

 

 

 

 

0.27

 

Other costs(e)

 

 

 

 

 

 

 

 

0.04

 

 

 

 

Repurchase and conversion of Series B Preferred Stock(f)

 

 

 

 

 

 

 

 

 

 

 

3.14

 

Tax effect of Non-GAAP adjustments on special items(g)

 

 

(0.09

)

 

 

(0.01

)

 

 

(0.29

)

 

 

(0.06

)

Adjusted diluted earnings per common share

 

$

0.54

 

 

$

0.83

 

 

$

2.23

 

 

$

2.76

 

See footnotes on following page

Footnotes to Reconciliation of Non-GAAP Financial Measures

Amounts shown exclude the impact of allocation of undistributed earnings to participating securities for Special items.

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

 

 

Three Months Ended

 

Nine Months Ended

(In thousands)

 

September 25,

2022

 

September 26,

2021

 

September 25,

2022

 

September 26,

2021

Refranchising impairment loss(1)

 

$

 

$

 

$

8,412

 

$

Ukraine-related charge(2)

 

 

 

 

 

 

17,385

 

 

UK lease impairment(3)

 

 

905

 

 

 

 

905

 

 

Total adjustment

 

$

905

 

$

 

$

26,702

 

$

 

(1)

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

 

 

(2)

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

 

 

(3)

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

 

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

 

 

 

(c) Represents a $3.2 million charge recorded in the third quarter of 2022 associated with the termination of a significant franchisee in the United Kingdom related to the reserve of certain accounts and notes receivable.

 

 

 

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

 

 

 

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

 

 

 

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

 

 

 

(g) The tax effect for Special items was calculated by applying the marginal tax rate of 22.5% and 22.4% for the three and nine months ended September 25, 2022 and September 26, 2021, respectively.

Papa John’s International, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

 

(In thousands, except per share amounts)

 

September 25,

2022

 

December 26,

2021

 

 

(Unaudited)

 

 

Assets

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

36,618

 

 

$

70,610

 

Accounts receivable, net

 

 

95,855

 

 

 

81,370

 

Notes receivable, current portion

 

 

7,556

 

 

 

12,352

 

Income tax receivable

 

 

10,533

 

 

 

9,386

 

Inventories

 

 

42,448

 

 

 

34,981

 

Prepaid expenses and other current assets

 

 

46,514

 

 

 

46,310

 

Total current assets

 

 

239,524

 

 

 

255,009

 

Property and equipment, net

 

 

230,894

 

 

 

223,856

 

Finance lease right-of-use assets, net

 

 

22,692

 

 

 

20,907

 

Operating lease right-of-use assets

 

 

167,470

 

 

 

176,256

 

Notes receivable, less current portion, net

 

 

17,397

 

 

 

35,504

 

Goodwill

 

 

69,476

 

 

 

80,632

 

Deferred income taxes

 

 

4,969

 

 

 

5,156

 

Other assets

 

 

77,326

 

 

 

88,384

 

Total assets

 

$

829,748

 

 

$

885,704

 

 

 

 

 

 

Liabilities, Redeemable noncontrolling interests and Stockholders’ deficit

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable

 

$

44,263

 

 

$

28,092

 

Income and other taxes payable

 

 

18,171

 

 

 

19,996

 

Accrued expenses and other current liabilities

 

 

152,893

 

 

 

190,116

 

Current deferred revenue

 

 

19,925

 

 

 

21,700

 

Current finance lease liabilities

 

 

6,072

 

 

 

4,977

 

Current operating lease liabilities

 

 

22,403

 

 

 

22,543

 

Total current liabilities

 

 

263,727

 

 

 

287,424

 

Deferred revenue

 

 

22,987

 

 

 

13,846

 

Long-term finance lease liabilities

 

 

17,468

 

 

 

16,580

 

Long-term operating lease liabilities

 

 

155,952

 

 

 

160,672

 

Long-term debt, less current portion, net

 

 

548,753

 

 

 

480,730

 

Deferred income taxes

 

 

362

 

 

 

258

 

Other long-term liabilities

 

 

77,912

 

 

 

93,154

 

Total liabilities

 

 

1,087,161

 

 

 

1,052,664

 

 

 

 

 

 

Redeemable noncontrolling interests

 

 

1,206

 

 

 

5,498

 

 

 

 

 

 

Stockholders’ deficit:

 

 

 

 

Common stock ($0.01 par value per share; issued 49,112 at September 25, 2022 and 49,002 at December 26, 2021)

 

 

491

 

 

 

490

 

Additional paid-in capital

 

 

444,643

 

 

 

445,126

 

Accumulated other comprehensive loss

 

 

(13,868

)

 

 

(9,971

)

Retained earnings

 

 

187,286

 

 

 

183,157

 

Treasury stock (14,047 shares at September 25, 2022 and 13,205 shares at December 26, 2021, at cost)

 

 

(892,818

)

 

 

(806,472

)

Total stockholders’ deficit

 

 

(274,266

)

 

 

(187,670

)

Noncontrolling interests in subsidiaries

 

 

15,647

 

 

 

15,212

 

Total Stockholders’ deficit

 

 

(258,619

)

 

 

(172,458

)

Total liabilities, Redeemable noncontrolling interests and Stockholders’ deficit

 

$

829,748

 

 

$

885,704

 

Papa John’s International, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(Unaudited)

 

 

 

Three Months Ended

 

Nine Months Ended

(In thousands, except per share amounts)

 

September 25,

2022

 

September 26,

2021

 

September 25,

2022

 

September 26,

2021

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

Domestic Company-owned restaurant sales

 

$

166,050

 

 

$

191,584

 

 

$

536,226

 

 

$

584,942

 

North America franchise royalties and fees

 

 

33,712

 

 

 

31,933

 

 

 

102,897

 

 

 

97,123

 

North America commissary revenues

 

 

216,115

 

 

 

189,224

 

 

 

645,177

 

 

 

560,743

 

International revenues

 

 

30,735

 

 

 

38,408

 

 

 

97,310

 

 

 

110,629

 

Other revenues

 

 

63,900

 

 

 

61,633

 

 

 

194,259

 

 

 

186,099

 

Total revenues

 

 

510,512

 

 

 

512,782

 

 

 

1,575,869

 

 

 

1,539,536

 

Costs and expenses:

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

Domestic Company-owned restaurant expenses

 

 

138,299

 

 

 

155,477

 

 

 

441,986

 

 

 

465,658

 

North America commissary expenses

 

 

203,129

 

 

 

175,399

 

 

 

604,689

 

 

 

518,310

 

International expenses

 

 

18,196

 

 

 

21,743

 

 

 

57,346

 

 

 

62,791

 

Other expenses

 

 

59,249

 

 

 

56,039

 

 

 

180,452

 

 

 

168,092

 

General and administrative expenses

 

 

57,935

 

 

 

54,070

 

 

 

168,519

 

 

 

157,779

 

Depreciation and amortization

 

 

13,338

 

 

 

11,477

 

 

 

38,012

 

 

 

36,830

 

Total costs and expenses

 

 

490,146

 

 

 

474,205

 

 

 

1,491,004

 

 

 

1,409,460

 

Refranchising and impairment loss

 

 

(905

)

 

 

 

 

 

(12,065

)

 

 

 

Operating income

 

 

19,461

 

 

 

38,577

 

 

 

72,800

 

 

 

130,076

 

Net interest expense

 

 

(7,623

)

 

 

(3,979

)

 

 

(17,967

)

 

 

(11,275

)

Income before income taxes

 

 

11,838

 

 

 

34,598

 

 

 

54,833

 

 

 

118,801

 

Income tax expense

 

 

3,374

 

 

 

4,057

 

 

 

9,212

 

 

 

19,387

 

Net income before attribution to noncontrolling interests

 

 

8,464

 

 

 

30,541

 

 

 

45,621

 

 

 

99,414

 

Net income attributable to noncontrolling interests

 

 

(133

)

 

 

(1,285

)

 

 

(1,363

)

 

 

(4,021

)

Net income attributable to the Company

 

$

8,331

 

 

$

29,256

 

 

$

44,258

 

 

$

95,393

 

 

 

 

 

 

 

 

 

 

Calculation of net income (loss) for earnings per share:

 

 

 

 

 

 

 

 

Net income attributable to the Company

 

$

8,331

 

 

$

29,256

 

 

$

44,258

 

 

$

95,393

 

Dividends on redemption of Series B Convertible Preferred Stock

 

 

 

 

 

 

 

 

 

 

 

(109,852

)

Dividends paid to participating securities

 

 

(86

)

 

 

(137

)

 

 

(228

)

 

 

(5,964

)

Net income attributable to participating securities

 

 

 

 

 

(158

)

 

 

(34

)

 

 

 

Net income (loss) attributable to common shareholders

 

$

8,245

 

 

$

28,961

 

 

$

43,996

 

 

$

(20,423

)

 

 

 

 

 

 

 

 

 

Basic earnings (loss) per common share

 

$

0.23

 

 

$

0.80

 

 

$

1.23

 

 

$

(0.59

)

Diluted earnings (loss) per common share

 

$

0.23

 

 

$

0.79

 

 

$

1.22

 

 

$

(0.59

)

 

 

 

 

 

 

 

 

 

Basic weighted average common shares outstanding

 

 

35,259

 

 

 

36,387

 

 

 

35,602

 

 

 

34,619

 

Diluted weighted average common shares outstanding

 

 

35,448

 

 

 

36,719

 

 

 

35,840

 

 

 

34,619

 

 

 

 

 

 

 

 

 

 

Dividends declared per common share

 

$

0.42

 

 

$

0.35

 

 

$

1.12

 

 

$

0.80

 

Papa John’s International, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

 

 

Nine Months Ended

(In thousands)

 

September 25,

2022

 

September 26,

2021

 

 

 

 

 

Operating activities

 

 

 

 

Net income before attribution to noncontrolling interests

 

$

45,621

 

 

$

99,414

 

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

 

 

 

 

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

 

 

18,576

 

 

 

(920

)

Depreciation and amortization

 

 

38,012

 

 

 

36,830

 

Refranchising and impairment loss

 

 

12,065

 

 

 

 

Deferred income taxes

 

 

519

 

 

 

(5,113

)

Stock-based compensation expense

 

 

14,246

 

 

 

12,519

 

Other

 

 

(466

)

 

 

1,052

 

Changes in operating assets and liabilities, net of acquisitions:

 

 

 

 

Accounts receivable

 

 

(19,584

)

 

 

5,955

 

Income tax receivable

 

 

(1,146

)

 

 

674

 

Inventories

 

 

(8,185

)

 

 

(3,217

)

Prepaid expenses and other current assets

 

 

2,065

 

 

 

11,277

 

Other assets and liabilities

 

 

(4,919

)

 

 

(8,627

)

Accounts payable

 

 

16,188

 

 

 

5,014

 

Income and other taxes payable

 

 

(1,789

)

 

 

15,958

 

Accrued expenses and other current liabilities

 

 

(32,404

)

 

 

24,001

 

Deferred revenue

 

 

(2,246

)

 

 

(1,193

)

Net cash provided by operating activities

 

 

76,553

 

 

 

193,624

 

Investing activities

 

 

 

 

Purchases of property and equipment

 

 

(48,424

)

 

 

(41,328

)

Notes issued

 

 

(2,248

)

 

 

(14,637

)

Repayments of notes issued

 

 

8,125

 

 

 

15,352

 

Acquisitions, net of cash acquired

 

 

(1,346

)

 

 

(699

)

Proceeds from refranchising, net of cash transferred

 

 

13,588

 

 

 

 

Other

 

 

76

 

 

 

121

 

Net cash used in investing activities

 

 

(30,229

)

 

 

(41,191

)

Financing activities

 

 

 

 

Proceeds from issuance of senior notes

 

 

 

 

 

400,000

 

Net proceeds of revolving credit facilities

 

 

66,999

 

 

 

15,000

 

Debt issuance costs

 

 

 

 

 

(9,179

)

Proceeds from exercise of stock options

 

 

2,730

 

 

 

11,211

 

Repurchase of Series B Convertible Preferred Stock

 

 

 

 

 

(188,647

)

Acquisition of Company common stock

 

 

(95,000

)

 

 

(20,555

)

Dividends paid to common stockholders

 

 

(39,949

)

 

 

(27,640

)

Dividends paid to preferred stockholders

 

 

 

 

 

(6,394

)

Tax payments for equity award issuances

 

 

(9,426

)

 

 

(5,310

)

Distributions to noncontrolling interests

 

 

(1,090

)

 

 

(2,914

)

Repayments of term loan

 

 

 

 

 

(340,000

)

Other

 

 

(3,480

)

 

 

(2,630

)

Net cash used in financing activities

 

 

(79,216

)

 

 

(177,058

)

Effect of exchange rate changes on cash and cash equivalents

 

 

(1,100

)

 

 

234

 

Change in cash and cash equivalents

 

 

(33,992

)

 

 

(24,391

)

Cash and cash equivalents at beginning of period

 

 

70,610

 

 

 

130,204

 

Cash and cash equivalents at end of period

 

$

36,618

 

 

$

105,813

 

 

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