LOUISVILLE, Ky. - August 6, 2013 - (BUSINESS WIRE) - Papa John's International, Inc. (NASDAQ: PZZA) today announced financial results for the three and six months ended June 30, 2013.
"Our commitment to delivering a quality product around the globe continues to pay off, with excellent financial performance, a top ranking by the prestigious American Customer Satisfaction Index for the 12th time in 14 years, and the milestone opening of the 1,000th international Papa John's restaurant," said Papa John's Founder, Chairman and Chief Executive Officer John Schnatter. "I am also pleased to announce a quarterly dividend. The combination of share repurchases and quarterly dividends reflects the strength of our brand and our long term commitment to deliver increasing shareholder value."
Second quarter 2013 revenues were $349.2 million, a 9.6% increase from second quarter 2012 revenues of $318.6 million. Second quarter 2013 net income was $17.2 million, compared to second quarter 2012 net income of $14.3 million ($17.0 million and $14.1 million, for the second quarter of 2013 and 2012, respectively, excluding the impact of the previously disclosed 2012 Incentive Contribution). Second quarter 2013 diluted earnings per share were $0.77 compared to second quarter 2012 diluted earnings per share of $0.59 ($0.76 for the second quarter of 2013 and $0.59 for the second quarter of 2012, excluding the impact of the 2012 Incentive Contribution).
Revenues were $704.8 million for the six months ended June 30, 2013, an 8.5% increase from revenues of $649.9 million for the same period in 2012. Net income was $36.5 million for the six months ended June 30, 2013, compared to $31.3 million for the same period in 2012 ($36.1 million and $33.5 million, for the six-month periods in 2013 and 2012, respectively, excluding the impact of the previously disclosed 2012 Incentive Contribution). Diluted earnings per share were $1.62 for the six months ended June 30, 2013, compared to $1.29 for the same period in 2012 ($1.60 and $1.38, for the six-month periods in 2013 and 2012, respectively, excluding the impact of the 2012 Incentive Contribution).
Global Restaurant and Comparable Sales Information
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Management believes 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. Franchise restaurant sales are not included in company revenues.
All revenues and operating highlights below are compared to the same period of the prior year, unless otherwise noted.
Consolidated revenues increased $30.6 million, or 9.6%, for the second quarter of 2013 and increased $54.9 million, or 8.5%, for the six months ended June 30, 2013. The increases in revenues were primarily due to the following:
The table below summarizes income before income taxes on a reporting segment basis, excluding the Incentive Contribution:
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Second quarter 2013 income before income taxes increased approximately $3.1 million, or 13.5%, excluding the Incentive Contribution, primarily due to the following:
These increases were partially offset by a decrease in income before income taxes at our domestic company-owned restaurants primarily due to higher commodity costs, somewhat offset by incremental profits associated with higher comparable sales of 6.0%.
The increase in income before income taxes for the six months ended June 30, 2013 of $1.9 million, or 3.6%, excluding the Incentive Contribution, was primarily due to the same reasons noted above.
The effective income tax rates were 32.2% and 32.6% for the three and six months ended June 30, 2013, representing decreases of 1.9% and 1.2% from the prior year rates. The lower tax rates were due to the settlement or resolution of specific state issues in 2013. Additionally, the rate for the six months ended June 30, 2013 reflected the reinstatement of certain 2012 tax credits under the American Taxpayer Relief Act of 2012.
The company's free cash flow, a non-GAAP financial measure, for the first six months of 2013 and 2012 was as follows (in thousands):
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We define free cash flow as net cash provided by operating activities (from the consolidated statements of cash flows) less 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 performance than the company's GAAP measures.
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 Securities and Exchange Commission for additional information concerning our operating results and cash flow for the three- and six-month periods ended June 30, 2013.
At June 30, 2013, there were 4,252 Papa John's restaurants operating in all 50 states and in 34 countries, as follows:
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Our development pipeline as of June 30, 2013 included approximately 1,350 restaurants (300 units in North America and 1,050 units internationally), the majority of which are scheduled to open over the next six years.
The following table reconciles our GAAP financial results to our results excluding the Incentive Contribution for the three and six months ended June 30, 2013 versus the same periods in 2012:
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The results shown in the table above and elsewhere in this press release, which exclude the Incentive Contribution, are not measures defined by accounting principles generally accepted in the United States ("GAAP"). These non-GAAP measures 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 the impact of the Incentive Contribution is important for purposes of comparison to prior year results. In addition, management uses these non-GAAP measures to allocate resources, and analyze trends and underlying operating performance. Annual cash bonuses, and certain long-term incentive programs for various levels of management, were based on financial measures that excluded the Incentive Contribution.
The Company's Board of Directors approved a $25 million increase in the amount of common stock that may be purchased under the Company's share repurchase program through March 30, 2014. Approximately $80.1 million remains available under the Company's share repurchase program as ofAugust 2, 2013.
The following table reflects our repurchases for the three and six months ended June 30, 2013 and subsequent repurchases through August 2, 2013 (in thousands):
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There were 22.3 million and 22.5 million diluted weighted average shares outstanding for the three and six months ended June 30, 2013, representing decreases of 7.7% and 7.1% over the prior year comparable periods. Diluted earnings per share increased $0.06 and $0.12 for the three and six months ended June 30, 2013 due to the reduction in shares outstanding resulting from the share repurchase program. Approximately 21.6 million actual shares of the company's common stock were outstanding as of June 30, 2013.
The company announced that its Board of Directors approved the initiation of quarterly cash dividends to its shareholders. A quarterly dividend of $0.25per common share will be paid on September 20, 2013 to shareholders of record as of the close of business on September 6, 2013. This is the first cash dividend paid to shareholders in the company's history. While future dividends will be subject to Board declaration, the company is initially targeting a dividend payout of $0.25 per quarter.
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A conference call is scheduled for August 7, 2013 at 10:00 a.m. Eastern Time to review our second quarter 2013 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 atwww.papajohns.com. The Conference ID is 45274568.
Certain matters discussed in this press release constitute forward-looking statements within the meaning of the federal securities laws. Generally, the use of words such as "expect," "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, contingent liabilities, resolution of litigation, commodity costs, profit margins, unit growth, 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" of the Annual Report on Form 10-K for the fiscal year endedDecember 30, 2012. We undertake no obligation to update publicly any forward-looking statements, whether as a result of future events, new information or otherwise.
For more information about the Company, please visit www.papajohns.com.
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Papa John's International, Inc.
Lance Tucker
Chief Financial Officer
502-261-4218
Source: Papa John's International, Inc.
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