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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Papa Johns International Inc | NASDAQ:PZZA | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 58.31 | 56.12 | 59.73 | 0 | 09:05:22 |
Papa John’s International, Inc. (NASDAQ: PZZA) today announced financial results for the three months and full year ended December 25, 2016.
This Smart News Release features multimedia. View the full release here: http://www.businesswire.com/news/home/20170221006371/en/
Highlights
“We are pleased to have delivered another excellent year in 2016,” said Papa John’s founder, chairman and CEO, John Schnatter. “Thanks to the efforts of the entire Papa John’s family, we opened our 5,000th global unit and increased our digital mix to over 55% -- all while delivering on our clear label promises and generating strong comp sales and another year of record earnings.”
Fourth quarter 2016 revenues were $439.6 million, a 5.5% increase from fourth quarter 2015 revenues of $416.8 million. Full year 2016 revenues were $1.71 billion, a 4.7% increase from full year 2015 revenues of $1.64 billion.
GAAP and adjusted net income and diluted earnings per share (“EPS”) excluding Special Items results are summarized below:
Three Months Ended Year EndedDec. 25,
2016
Dec. 27,
2015
Increase
%
Dec. 25,
2016
Dec. 27,
2015
Increase
%
GAAP net income $ 32,630 $ 24,695 32.1 % $ 102,820 $ 75,682 35.9 % Special items (7,022 ) - (7,022 ) 7,986 Adjusted net income $ 25,608 $ 24,695 3.7 % $ 95,798 $ 83,668 14.5 % GAAP diluted EPS $ 0.88 $ 0.62 41.9 % $ 2.74 $ 1.89 45.0 % Special items (0.19 ) - (0.19 ) 0.20 Adjusted diluted EPS $ 0.69 $ 0.62 11.3 % $ 2.55 $ 2.09 22.0 %Special Items include a refranchising gain in 2016 from the sale of the 42 restaurant Phoenix company-owned market to a franchisee, an impairment charge in 2016 related to our company-owned stores in China that are currently for sale, and the finalization of a 2015 legal settlement that was paid in 2016. See “Items Impacting Comparability- Non-GAAP Presentation” table on page 8 for more details.
Global Restaurant and Comparable Sales Information
Three Months Ended Year EndedDec. 25,
2016
Dec. 27,
2015
Dec. 25,
2016
Dec. 27,
2015
Global restaurant sales growth (a) 5.3 %3.4
% 5.2 % 5.3 %
Global restaurant sales growth, excluding the impact of foreign currency (a)
7.0 % 5.7 % 6.8 % 7.8 % Comparable sales growth (b) Domestic company-owned restaurants 4.8 % 3.4 % 4.4 % 5.9 % North America franchised restaurants 3.4 % 1.3 % 3.1 % 3.6 % System-wide North America restaurants 3.8 % 1.9 % 3.5 % 4.2 % System-wide international restaurants 5.6 % 5.3 % 6.0 % 6.9 %(a) Includes both company-owned and franchised restaurant sales.(b) Represents the change in year-over-year sales for the same base of restaurants for the same fiscal periods. Comparable 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.
We believe global restaurant and comparable sales growth information, as defined in the table above, is useful in analyzing our results since our franchisees pay royalties that are based on a percentage of franchise sales. Franchise sales generate commissary revenue in the United States and in certain international markets. Global restaurant and comparable sales growth information is also useful in analyzing industry trends and the strength of our brand. Management believes the presentation of global restaurant sales growth excluding the impact of foreign currency provides investors with useful information regarding underlying sales trends by presenting sales growth excluding the external factor of foreign currency exchange. Franchise restaurant sales are not included in company revenues.
Revenue and Operating Highlights
All revenue and operating highlights below are compared to the same period of the prior year, unless otherwise noted.
Revenue Highlights
Consolidated revenues increased $22.8 million, or 5.5%, for the fourth quarter of 2016 and increased $76.2 million, or 4.7%, for the year ended December 25, 2016. The increases in revenues were primarily due to the following:
Operating Highlights
The tables below summarize income before income taxes on a reporting segment basis for the fourth quarter and full year ended December 25, 2016 and December 27, 2015, and reconcile our GAAP financial results to the adjusted financial results, excluding Special Items. See “Items Impacting Comparability- Non-GAAP Presentation” table for more details.
Three Months Ended Adjusted Adjusted Dec. 25, Special Dec. 25, Dec. 27, Increase (In thousands) 2016 Items 2016 2015 (Decrease) Domestic company-owned restaurants $ 28,048 $ (11,572 ) $ 16,476 $ 15,267 $ 1,209 North America commissaries 11,786 - 11,786 12,027 (241 ) North America franchising 23,788 - 23,788 21,770 2,018 International 2,412 1,350 3,762 4,084 (322 ) All others 599 - 599 1,075 (476 ) Unallocated corporate expenses (15,020 ) (898 ) (15,918 ) (15,260 ) (658 ) Elimination of intersegment profits (1,040 ) - (1,040 ) (40 ) (1,000 ) Total income before income taxes $ 50,573 $ (11,120 ) $ 39,453 $ 38,923 $ 530 Year Ended Adjusted Adjusted Adjusted Dec. 25, Special Dec. 25, Dec. 27, Special Dec. 27, Increase (In thousands) 2016 Items 2016 2015 Items 2015 (Decrease) Domestic company-owned restaurants $ 75,136 $ (11,572 ) $ 63,564 $ 56,452 $ - $ 56,452 $ 7,112 North America commissaries 46,325 - 46,325 44,721 - 44,721 1,604 North America franchising 91,669 - 91,669 83,315 - 83,315 8,354 International 11,408 1,350 12,758 10,891 - 10,891 1,867 All others 1,467 - 1,467 845 - 845 622 Unallocated corporate expenses (64,791 ) (898 ) (65,689 ) (75,896 ) 12,278 (63,618 ) (2,071 ) Elimination of intersegment profits (2,405 ) - (2,405 ) (1,181 ) - (1,181 ) (1,224 ) Total income before income taxes $ 158,809 $ (11,120 ) $ 147,689 $ 119,147 $ 12,278 $ 131,425 $ 16,264Fourth quarter 2016 income before income taxes increased approximately $11.6 million, or 29.9%. When excluding the impact of the Special Items in the fourth quarter of 2016, adjusted income before income taxes increased approximately $500,000, or 1.4%. This adjusted increase was primarily due to the following:
Full year 2016 income before income taxes increased approximately $39.7 million, or 33.3%. When excluding the impact of Special Items in both years, full year 2016 adjusted income before income taxes increased approximately $16.3 million, or 12.4%. This adjusted increase was primarily due to the following:
The effective income tax rates were 32.2% and 31.3% for the fourth quarter and full year ended December 25, 2016, respectively. These rates approximated the effective rates for the fourth quarter and full year ended December 27, 2015, respectively.
The company’s free cash flow, a non-GAAP financial measure, for the full year of 2016 and 2015 was as follows (in thousands):
Full Year Ended Dec. 25 Dec. 27 2016 2015 Net cash provided by operating activities (a) $ 144,057 $ 160,312 Purchases of property and equipment (b) (55,554 ) (38,972 ) Free cash flow $ 88,503 $ 121,340(a) The decrease of approximately $16.3 million was primarily due to the payment of approximately $11.6 million for the previously mentioned legal settlement and other unfavorable changes in working capital items, partially offset by higher net income.(b) The increase of $16.6 million was primarily due to construction costs for our new domestic commissary in Georgia, which will open in 2017, and initiatives within our online and mobile ordering business.
We define free cash flow as net cash provided by operating activities (from the consolidated statements of cash flows) less the amounts spent on the purchase of property and equipment. We view free cash flow as an important measure because it is a 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 liquidity or performance than the company’s GAAP measures.
See the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of our Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC) for additional information concerning our operating results and cash flow for the full year ended December 25, 2016.
Global Restaurant Unit Data
At December 25, 2016, there were 5,097 Papa John’s restaurants operating in all 50 states and in 45 international countries and territories, as follows:
Domestic
Company-
owned
Franchised
North
America
Total North
America
International
System-wideFourth Quarter
Beginning - September 25, 2016 736 2,675 3,411 1,560 4,971 Opened 3 38 41 109 150 Closed - (11 ) (11 ) (13 ) (24 ) Acquired 5 42 47 - 47 Sold (42 ) (5 ) (47 ) - (47 ) Ending - December 25, 2016 702 2,739 3,441 1,656 5,097Year-to-date
Beginning - December 27, 2015 707 2,681 3,388 1,505 4,893 Opened 13 104 117 226 343 Closed (1 ) (63 ) (64 ) (75 ) (139 ) Acquired 25 42 67 - 67 Sold (42 ) (25 ) (67 ) - (67 ) Ending - December 25, 2016 702 2,739 3,441 1,656 5,097 Unit growth (decline) (5 ) 58 53 151 204 % increase (decrease) (0.7 %) 2.2 % 1.6 % 10.0 % 4.2 %Our development pipeline as of December 25, 2016 included approximately 1,300 restaurants (220 units in North America and 1,080 units internationally), the majority of which are scheduled to open over the next six years.
Items Impacting Comparability – Non-GAAP Presentation
The following table reconciles our GAAP financial results to our adjusted financial results, which are non-GAAP measures, for the fourth quarter and full year ended December 25, 2016 and December 27, 2015:
Three Months Ended Full Year Ended Dec. 25, Dec. 27, Dec. 25, Dec. 27, (In thousands, except per share amounts) 2016 2015 2016 2015 GAAP income before income taxes $ 50,573 $ 38,923 $ 158,809 $ 119,147 Refranchising gain (11,572 ) - (11,572 ) - Impairment loss on assets held for sale 1,350 - 1,350 - Legal settlement (898 ) - (898 ) 12,278 Income before income taxes, as adjusted $ 39,453 $ 38,923 $ 147,689 $ 131,425 GAAP net income $ 32,630 $ 24,695 $ 102,820 $ 75,682 Refranchising gain (7,308 ) - (7,308 ) - Impairment loss on assets held for sale 853 - 853 - Legal settlement (567 ) - (567 ) 7,986 Net income, as adjusted $ 25,608 $ 24,695 $ 95,798 $ 83,668 GAAP diluted earnings per share $ 0.88 $ 0.62 $ 2.74 $ 1.89 Refranchising gain (0.19 ) - (0.19 ) - Impairment loss on assets held for sale 0.02 - 0.02 - Legal settlement (0.02 ) - (0.02 ) 0.20 Diluted earnings per share, as adjusted $ 0.69 $ 0.62 $ 2.55 $ 2.09Refranchising gain includes a gain in 2016 from the sale of the 42 restaurant Phoenix company–owned market to a franchisee. Impairment loss includes a charge in 2016 related to our company-owned stores in China that are for sale. The legal settlement represents a charge in 2015 for a collective and class action litigation, Perrin v. Papa John’s International, Inc. and Papa John’s USA, Inc. The settlement amount was finalized and paid in 2016 and the expense was adjusted in 2016 accordingly.
The non-GAAP adjusted results shown above, which exclude Special Items referenced in the preceding paragraph, 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 the financial information excluding Special Items is important for purposes of comparison to prior year results. In addition, management uses this metric to evaluate the company’s underlying operating performance, to analyze trends, and to determine compensation.
Share Repurchase Activity
The following table reflects our repurchases for the fourth quarter and full year 2016 and subsequent repurchases through February 14, 2017 (in thousands):
PeriodNumber
of Shares
Cost Fourth Quarter 2016 158 $ 12,974 Full Year 2016 2,145 $ 122,381 December 26, 2016 through February 14, 2017 87 $ 7,389There were 37.3 million and 37.6 million diluted weighted average shares outstanding for the fourth quarter and full year ended December 25, 2016, representing decreases of 5.2% and 6.0%, respectively, over the prior year comparable periods. Approximately 37.0 million actual shares of the company’s common stock were outstanding as of December 25, 2016.
2017 Key Operating Assumptions and Financial Outlook
In 2017, the Company is targeting the following performance:
Conference Call and Website Information
A conference call is scheduled for February 22, 2017 at 10:00 a.m. Eastern Time to review our fourth quarter and full year 2016 earnings results. The call can be accessed from the company’s web page at www.papajohns.com in a listen-only mode, or dial 877-312-8816 (U.S. and Canada) or 253-237-1189 (international). The conference call will be available for replay, including by downloadable podcast, from the company’s web site at www.papajohns.com. The Conference ID is 46802412.
Investors and others should note that we announce material financial information to our investors using our investor relations website, press releases, SEC filings and public conference calls and webcasts. We intend to use our investor relations website as a means of disclosing information about our business, our financial condition and results of operations and other matters and for complying with our disclosure obligations under Regulation FD. The information we post on our investor relations website, including information contained in investor presentations, may be deemed material. Accordingly, investors should monitor our investor relations website, in addition to following our press releases, SEC filings and public conference calls and webcasts. We encourage investors and others to sign up for email alerts at our investor relations page under Shareholder Tools at the bottom right side of the page. These email alerts are intended to help investors and others to monitor our investor relations website by notifying them when new information is posted on the site.
Forward-Looking Statements
Certain matters discussed in this press release and other company communications 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,” “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 may relate to projections or guidance concerning business performance, revenue, earnings, cash flow, contingent liabilities, resolution of litigation, commodity costs, profit margins, unit growth, unit level performance, capital expenditures, 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. The risks, uncertainties and assumptions that are involved in our forward-looking statements include, but are not limited to:
These and other risk factors are discussed in detail in “Part I. Item 1A. – Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 25, 2016. 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.
Papa John's International, Inc. and Subsidiaries Condensed Consolidated Statements of Income Three Months Ended Year Ended December 25, 2016 December 27, 2015 December 25, 2016 December 27, 2015 (In thousands, except per share amounts) (Unaudited) (Unaudited) Revenues: Domestic company-owned restaurant sales $ 206,963 $ 192,999 $ 815,931 $ 756,307 North America franchise royalties and fees 26,426 24,871 102,980 96,056 North America commissary and other sales 177,983 173,008 681,606 680,321 International 28,247 25,938 113,103 104,691 Total revenues 439,619 416,816 1,713,620 1,637,375 Costs and expenses:
Operating costs (excluding depreciation and amortization shown separately below):
Domestic company-owned restaurant expenses 165,007 153,282 651,536 604,206 North America commissary and other expenses 164,859 159,169 631,475 629,423 International expenses 17,573 15,297 71,509 63,506 General and administrative expenses 40,393 39,170 163,812 163,626 Depreciation and amortization 10,598 9,669 40,987 40,307 Total costs and expenses 398,430 376,587 1,559,319 1,501,068Refranchising and impairment gains/(losses), net
10,222 - 10,222 - Operating income 51,411 40,229 164,523 136,307 Legal settlement expense 898 - 898 (12,278 ) Net interest expense (1,736 ) (1,306 ) (6,612 ) (4,882 ) Income before income taxes 50,573 38,923 158,809 119,147 Income tax expense 16,294 12,642 49,717 37,183 Net income before attribution to noncontrolling interests 34,279 26,281 109,092 81,964 Income attributable to noncontrolling interests (1,649 ) (1,586 ) (6,272 ) (6,282 ) Net income attributable to the company $ 32,630 $ 24,695 $ 102,820 $ 75,682 Calculation of income for earnings per share: Net income attributable to the company $ 32,630 $ 24,695 $ 102,820 $ 75,682 Change in noncontrolling interest redemption value 225 (127 ) 567 65 Net income attributable to participating securities (132 ) (102 ) (420 ) (325 ) Net income attributable to common shareholders $ 32,723 $ 24,466 $ 102,967 $ 75,422 Basic earnings per common share $ 0.89 $ 0.63 $ 2.76 $ 1.91 Diluted earnings per common share $ 0.88 $ 0.62 $ 2.74 $ 1.89 Basic weighted average common shares outstanding 36,892 38,909 37,253 39,458 Diluted weighted average common shares outstanding 37,311 39,367 37,608 40,000 Dividends declared per common share $ 0.200 $ 0.175 $ 0.750 $ 0.630Papa John's International, Inc. and Subsidiaries Condensed Consolidated Balance Sheets December 25, December 27, 2016 2015 (In thousands) Assets Current assets: Cash and cash equivalents $ 15,563 $ 21,006 Accounts receivable, net 59,691 63,320 Notes receivable, net 3,417 7,816 Income taxes receivable 2,372 272 Inventories 25,132 21,564 Prepaid expenses and other current assets 33,143 29,313 Assets held for sale 6,257 9,299 Total current assets 145,575 152,590 Property and equipment, net 230,473 214,044 Notes receivable, less current portion, net 10,141 11,105 Goodwill 85,529 79,657 Deferred income taxes 769 2,415 Other assets 40,078 34,247 Total assets $ 512,565 $ 494,058 Liabilities and stockholders' equity Current liabilities: Accounts payable $ 42,701 $ 43,492 Income and other taxes payable 8,540 8,527 Accrued expenses and other current liabilities 76,789 80,918 Total current liabilities 128,030 132,937 Deferred revenue 3,313 3,190 Long-term debt, net 299,820 255,146 Deferred income taxes 10,047 4,610 Other long-term liabilities 53,093 47,606 Total liabilities 494,303 443,489 Redeemable noncontrolling interests 8,461 8,363 Total stockholders' equity 9,801 42,206 Total liabilities, redeemable noncontrolling interests and stockholders' equity $ 512,565 $ 494,058
Note: The Condensed Consolidated Balance Sheets have been derived from the audited consolidated financial statements, but do not include all information and footnotes required by accounting principles generally accepted in the United States for a complete set of financial statements.
Papa John's International, Inc. and Subsidiaries Consolidated Statements of Cash Flows Year Ended (In thousands) December 25, 2016 December 27, 2015 Operating activities Net income before attribution to noncontrolling interests $ 109,092 $ 81,964
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for uncollectible accounts and notes receivable 409 1,232 Depreciation and amortization 40,987 40,307 Deferred income taxes 11,624 (6,246 ) Stock-based compensation expense 10,123 9,423 Refranchising gain (11,572 ) - Impairment loss 1,350 - Other 3,337 4,633 Changes in operating assets and liabilities, net of acquisitions: Accounts receivable 1,557 (9,179 ) Income taxes receivable (2,100 ) 9,255 Inventories (3,639 ) 4,967 Prepaid expenses and other current assets (3,210 ) (1,596 ) Other assets and liabilities (6,269 ) 620 Accounts payable (916 ) 4,804 Income and other taxes payable 9 (1,113 ) Accrued expenses and other current liabilities (7,960 ) 21,201 Deferred revenue 1,235 40 Net cash provided by operating activities 144,057 160,312 Investing activities Purchases of property and equipment (55,554 ) (38,972 ) Loans issued (3,210 ) (4,741 ) Repayments of loans issued 8,569 5,183 Acquisitions, net of cash acquired (13,352 ) (922 ) Proceeds from divestiture of restaurants 16,844 - Other 429 500 Net cash used in investing activities (46,274 ) (38,952 ) Financing activities Net proceeds on line of credit facility 44,575 25,549 Cash dividends paid (27,896 ) (24,844 ) Excess tax benefit on equity awards 6,200 10,151 Tax payments for equity award issuances (6,024 ) (10,965 ) Proceeds from exercise of stock options 7,060 5,197 Acquisition of Company common stock (122,381 ) (119,793 ) Contributions from noncontrolling interest holders 690 684 Distributions to noncontrolling interest holders (5,610 ) (6,550 ) Other 556 444 Net cash used in financing activities (102,830 ) (120,127 ) Effect of exchange rate changes on cash and cash equivalents (396 ) (349 ) Change in cash and cash equivalents (5,443 ) 884 Cash and cash equivalents at beginning of period 21,006 20,122 Cash and cash equivalents at end of period $ 15,563 $ 21,006
View source version on businesswire.com: http://www.businesswire.com/news/home/20170221006371/en/
Papa John’s International, Inc.Lance Tucker, 502-261-7272Chief Financial Officer
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