Papa John’s Announces Third Quarter 2021 Financial Results And Additional $425 Million Share Repurchase Program
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Papa John’s Announces Third Quarter 2021 Financial Results And Additional $425 Million Share Repurchase Program

LOUISVILLE, Ky. - (BUSINESS WIRE) - Nov. 4, 2021 - Papa John’s International, Inc. (NASDAQ: PZZA) today announced financial results for the three and nine months ended September 26, 2021.

Third quarter 2021 highlights compared to prior year

  • Total company revenues increased 8.4% to $512.8 million
  • Comparable sales up 6.9% in North America and 8.3% Internationally; Global system-wide restaurant sales of $1.2 billion, up 11.2% driven by continued benefit from innovation strategies and accelerating unit growth
  • 46 net unit openings driven by strong International openings
  • Earnings per diluted share of $0.79; Adjusted earnings per diluted share grew to $0.83 from $0.35 a year ago
  • For first nine months of 2021, cash flow from operations of $193.6 million, up from $168.5 million a year ago; free cash flow of $145.9 million up from $134.0 million
  • New $425 million share repurchase program authorized

“With hard work, dedication and the support of our customers, Papa John’s team members and franchisees delivered another quarter of industry outperformance in Q3, as system-wide sales grew 11.2% and adjusted EPS more than doubled. Comparable sales in North America and internationally grew 6.9% and 8.3%, respectively, on top of last year’s tremendous results, as our innovation strategy continues to attract new customers and engage our loyal ones, while also driving sustainable ticket growth,” said President & CEO Rob Lynch. “Escalating interest and excitement among new and existing franchisees continues to accelerate unit growth and led to signing our largest international and domestic development deals ever last quarter.”

Mr. Lynch continued, “We also are delivering on our commitment to optimize our capital structure and allocation priorities to support long-term value creation and growth. Last quarter we strategically refinanced our debt and this morning announced a new $425 million share repurchase program. Now, more than two years into our brand’s return to positive results, with the foundations of our business stronger than ever, Papa John’s has passed the inflection point from turn-around to long-term growth story.”

Financial Highlights

    Three Months Ended   Nine Months Ended
In thousands, except per share amounts   Sept. 26,
2021
  Sept. 27,
2020
  Increase   Sept. 26,
2021
  Sept. 27,
2020
  Increase
(Decrease)
                         
Revenue  

$

512,782

 

$

472,941

 

$

39,841

 

$

1,539,536

 

 

$

1,343,423

 

$

196,113

 

Operating income  

 

38,577

 

 

24,549

 

 

14,028

 

 

130,076

 

 

 

70,555

 

 

59,521

 

Net income  

 

29,256

 

 

15,708

 

 

13,548

 

 

95,393

 

 

 

44,765

 

 

50,628

 

Diluted earnings (loss) per share  

 

0.79

 

 

0.35

 

 

0.44

 

 

(0.59

)

 

 

0.99

 

 

(1.58

)

Adjusted diluted earnings per share (a)  

 

0.83

 

 

0.35

 

 

0.48

 

 

2.76

 

 

 

0.99

 

 

1.77

 

(a)

Adjusted diluted earnings per share is a non-GAAP measure that excludes “Special items,” which impact comparability. Special items include strategic corporate reorganization costs associated with the company’s new office in Atlanta, Georgia of $2.2 million and $9.4 million for the three and nine months ended September 26, 2021, respectively. For the nine months ended September 26, 2021, Special items also include $109.9 million of one-time charges associated with the repurchase and conversion of all shares of the company’s Series B Convertible Preferred Stock (“Series B Preferred Stock”) during the second quarter. The reconciliation of GAAP to non-GAAP financial results is included in “Reconciliation of Non-GAAP Financial Measures” below.

Revenues

Consolidated revenues of $512.8 million increased $39.8 million, or 8.4%, in the third quarter of 2021 compared to the prior year primarily as a result of higher comparable sales of 6.9% for North America restaurants, which benefited from continued execution of our innovation strategies and customer retention as reflected in higher company-owned restaurant revenues, franchise royalties and commissary sales. International revenues also increased primarily due to higher royalties from strong comparable sales results of 8.3% for the quarter and higher unit counts.

Operating Results

Consolidated operating income of $38.6 million for the third quarter of 2021 increased $14.0 million compared to the third quarter of 2020. The increase reflects strong consolidated revenue on higher comparable sales and year-over-year unit growth domestically and internationally. Additionally, temporary franchise support of $13.5 million ($10.0 million of discretionary marketing fund investments and $3.5 million of royalty relief) was provided in the prior year comparable period as part of our franchise assistance program, which was non-recurring and concluded in the third quarter of 2020. These benefits more than offset higher costs associated with labor shortages and commodity inflation experienced within our domestic company-owned restaurants and supply chain.

The effective income tax rate was 11.7% for the third quarter of 2021 representing a decrease of 9.9% from the prior year period. The decrease in the effective rate was primarily due to the finalization of our 2020 federal income tax return, which resulted in a $2.7 million benefit to tax expense, including immaterial prior year true-up adjustments. Diluted earnings per share was $0.79 for the third quarter of 2021 representing an increase of $0.44 over the third quarter of 2020. Excluding the impact of Special items, adjusted diluted earnings per share was $0.83 representing an increase of $0.48 over the third quarter of 2020.

Global Restaurant Sales Information

Global restaurant and comparable sales information for the three and nine months ended September 26, 2021, compared to the three and nine months ended September 27, 2020 are as follows (See “Supplemental Information and Financial Statements” below for related definitions):

    Three Months Ended   Nine Months Ended
    Sept. 26,
2021
  Sept. 27,
2020
  Sept. 26,
2021
  Sept. 27,
2020
Comparable sales growth:                
Domestic company-owned restaurants  

7.4%

 

18.2%

 

11.6%

 

15.6%

North America franchised restaurants  

6.8%

 

25.6%

 

12.3%

 

20.0%

North America restaurants  

6.9%

 

23.8%

 

12.1%

 

19.0%

International restaurants  

8.3%

 

20.7%

 

17.1%

 

9.4%

Total comparable sales growth  

7.3%

 

23.0%

 

13.4%

 

16.5%

                 
System-wide restaurant sales growth:                
(excluding the impact of foreign currency)                
Domestic company-owned restaurants  

7.3%

 

8.3%

 

11.1%

 

7.3%

North America franchised restaurants  

8.0%

 

26.2%

 

13.1%

 

20.4%

North America restaurants  

7.9%

 

21.8%

 

12.7%

 

17.3%

International restaurants  

21.4%

 

22.9%

 

28.2%

 

12.2%

Total global system-wide restaurant sales growth  

11.2%

 

22.1%

 

16.2%

 

16.0%

Global Restaurant Unit Data

As of September 26, 2021, there were 5,569 Papa John’s restaurants operating in 50 countries and territories, as follows:

    Domestic
Company-
owned
Franchised
North
America
Total North
America
International System-wide
Third Quarter            
Beginning - June 27, 2021  

589

 

2,720

 

3,309

 

2,214

 

5,523

 

Opened  

2

 

21

 

23

 

71

 

94

 

Closed  

-

 

(9

)

(9

)

(39

)

(48

)

Ending - September 26, 2021  

591

 

2,732

 

3,323

 

2,246

 

5,569

 

Net unit growth  

2

 

12

 

14

 

32

 

46

 

Trailing four quarters net store growth/(decline)  

(6

)

43

 

37

 

172

 

209

 

 

Free Cash Flow

The company’s free cash flow (a non-GAAP financial measure defined as net cash provided by operating activities, less purchases of property and equipment and dividends paid to preferred shareholders) was as follows (in thousands):

   

Nine Months Ended

   

Sept. 26,

 

Sept. 27,

   

2021

 

2020

         
Net cash provided by operating activities  

$

193,624

 

 

$

168,547

 

Purchases of property and equipment  

 

(41,328

)

 

 

(24,269

)

Dividends paid to preferred shareholders (1)  

 

(6,394

)

 

 

(10,237

)

Free cash flow  

$

145,902

 

 

$

134,041

 

(1)

Excludes cash consideration of $188.6 million paid for the repurchase and conversion of the Series B Preferred Stock in the second quarter of 2021.

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.

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 and cash flow for the nine months ended September 26, 2021.

Senior Notes Offering and Refinancing of Revolving Credit Facility

On September 14, 2021, the company issued $400.0 million of 3.875% senior notes which will mature on September 15, 2029. Concurrently with the closing of the offering, the company amended and restated its credit agreement, which provides for a senior secured revolving credit facility in an aggregate available principal amount of $600.0 million. The revolving facility will mature on September 14, 2026. The company used borrowings under the amended credit agreement, together with the net proceeds from the offering of the senior notes, to repay outstanding revolver and term loan borrowings under the company’s previously existing credit agreement.

Cash Dividend

The company paid cash dividends of $12.8 million ($0.35 per common share) in the third quarter of 2021. On October 28, 2021, our Board of Directors declared a fourth quarter dividend of $0.35 per common share. The common share dividend will be paid on November 19, 2021 to stockholders of record as of the close of business on November 9, 2021. The declaration and payment of any future dividends will be at the discretion of our Board of Directors.

New $425 million Share Repurchase Program

Subsequent to the end of the third quarter, on October 28, 2021, our Board of Directors approved a new share repurchase program for up to $425.0 million of the company’s common stock, which will be funded by our operating cash flows and increased liquidity following the senior notes offering and refinancing of our revolving credit facility, to further enhance shareholder returns as we also continue to invest in our long-term growth. This additional program represents approximately 9.4% of the company’s currently outstanding common stock based on the closing stock price as of October 29, 2021. The new share repurchase program has an indefinite duration and will initially operate alongside the Company’s existing $75.0 million share repurchase authorization, which expires on December 26, 2021.

The timing and volume of share repurchases under the new share repurchase program may be executed at the discretion of management on an opportunistic basis, subject to market and business conditions, regulatory requirements and other factors, or pursuant to trading plans or other arrangements. Repurchases under the new program may be made through open market, block, and privately negotiated transactions, including Rule 10b5-1 plans, at times and in such amounts as management deems appropriate. Repurchases under the company’s share repurchase program may be commenced or suspended from time to time at the company’s discretion without prior notice.

Conference Call

A conference call is scheduled for November 4, 2021 at 8:00 a.m. Eastern Time to review the company’s third quarter 2021 earnings results. The conference call will be available for replay, including by downloadable podcast, from the company’s web. The Conference ID is 6323967.

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,” “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 financial impact of the temporary business opportunities, disruptions and temporary changes in demand we are experiencing related to the current outbreak of the novel coronavirus disease (COVID-19), commodity 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, reorganization costs and the related organizational, employment and real estate changes from opening our new office in Atlanta, royalty relief, the effectiveness of our menu innovations and other business initiatives, marketing efforts, liquidity, compliance with debt covenants, 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.

Our forward-looking statements are based on our assumptions which are based on currently available information, including assumptions about our ability to manage difficulties and opportunities associated with or related to the COVID-19 pandemic, including risks related to: the impact of governmental restrictions on freedom of movement and business operations including quarantines, social distancing requirements and mandatory business closures; changes in consumer demand or behavior; labor shortages at company and/or franchised stores; impact of delayed new store openings, both domestically and internationally; our ability to navigate changing governmental programs and regulations relating to the pandemic; the increased risk of phishing, ransomware and other cyber-attacks; and our ability to successfully implement or fully realize the anticipated benefits of our corporate reorganization and new office in Atlanta, Georgia and corporate reorganization in the timeframes we desire or within the expected range of expenses, or at all. In addition, turnover in our support teams due to our relocations to Georgia could distract our employees, decrease employee morale, harm our reputation, and negatively impact the overall performance of our corporate support teams. Actual outcomes and results may differ materially from those matters expressed or implied in such forward-looking statements. 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 27, 2020. 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.

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

   

Sept. 26,

 

Sept. 27,

 

Sept. 26,

 

Sept. 27,

(In thousands, except per share amounts)  

2021

 

2020

 

2021

 

2020

                 
GAAP operating income  

$

38,577

 

 

$

24,549

 

$

130,076

 

 

$

70,555

Strategic corporate reorganization costs (1)  

 

2,153

 

 

 

-

 

 

9,364

 

 

 

-

Adjusted operating income  

$

40,730

 

 

$

24,549

 

$

139,440

 

 

$

70,555

                 
GAAP net income/(loss) attributable to common shareholders  

$

28,961

 

 

$

11,457

 

$

(20,423

)

 

$

32,410

Strategic corporate reorganization costs (1)  

 

2,153

 

 

 

-

 

 

9,364

 

 

 

-

Repurchase and conversion of Series B Preferred Stock (2)  

 

-

 

 

 

-

 

 

109,852

 

 

 

-

Tax effect of strategic corporate reorganization costs (3)  

 

(483

)

 

 

-

 

 

(2,098

)

 

 

-

Adjusted net income attributable to common shareholders  

$

30,631

 

 

$

11,457

 

$

96,695

 

 

$

32,410

                 
GAAP diluted earnings/(loss) per common share  

$

0.79

 

 

$

0.35

 

$

(0.59

)

 

$

0.99

Strategic corporate reorganization costs (1)  

 

0.05

 

 

 

-

 

 

0.27

 

 

 

-

Repurchase and conversion of Series B Preferred Stock (2)  

 

-

 

 

 

-

 

 

3.14

 

 

 

-

Tax effect of strategic corporate reorganization costs (3)  

 

(0.01

)

 

 

-

 

 

(0.06

)

 

 

-

Adjusted diluted earnings per common share  

$

0.83

 

 

$

0.35

 

$

2.76

 

 

$

0.99

(Note) The above table does not include the impact of allocation of undistributed earnings to participating securities for Special items.

(1)

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

(2)

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.

(3)

The tax effect for strategic corporate reorganization costs was calculated by applying the 2021 marginal tax rate of 22.4%. There was no tax effect on the repurchase and conversion of the Series B Preferred Stock as the one-time charge was non-deductible for tax purposes.

 
Papa John's International, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
         
         
   

September 26,

 

December 27,

   

2021

 

2020

(In thousands)   (Unaudited)   (Note)
         
Assets        
Current assets:        
Cash and cash equivalents  

$

105,813

 

 

$

130,204

 

Accounts receivable, net  

 

79,534

 

 

 

90,135

 

Notes receivable, current portion  

 

13,075

 

 

 

11,318

 

Income tax receivable  

 

599

 

 

 

1,273

 

Inventories  

 

33,490

 

 

 

30,265

 

Prepaid expenses and other current assets  

 

39,249

 

 

 

43,212

 

Total current assets  

 

271,760

 

 

 

306,407

 

         
Property and equipment, net  

 

209,072

 

 

 

200,895

 

Finance lease right-of-use assets, net  

 

21,917

 

 

 

16,840

 

Operating lease right-of-use assets  

 

174,119

 

 

 

148,110

 

Notes receivable, less current portion, net  

 

37,263

 

 

 

36,538

 

Goodwill  

 

80,906

 

 

 

80,791

 

Deferred income taxes  

 

13,926

 

 

 

10,800

 

Other assets  

 

80,991

 

 

 

72,389

 

Total assets  

$

889,954

 

 

$

872,770

 

         
         
Liabilities, Series B Convertible Preferred Stock, Redeemable noncontrolling interests and Stockholders' deficit        
Current liabilities:        
Accounts payable  

$

42,384

 

 

$

37,370

 

Income and other taxes payable  

 

26,221

 

 

 

10,263

 

Accrued expenses and other current liabilities  

 

201,528

 

 

 

174,563

 

Current deferred revenue  

 

20,617

 

 

 

19,590

 

Current finance lease liabilities  

 

4,914

 

 

 

3,545

 

Current operating lease liabilities  

 

22,455

 

 

 

23,538

 

Current portion of long-term debt  

 

-

 

 

 

20,000

 

Total current liabilities  

 

318,119

 

 

 

288,869

 

         
Deferred revenue  

 

12,471

 

 

 

13,664

 

Long-term finance lease liabilities  

 

17,555

 

 

 

13,531

 

Long-term operating lease liabilities  

 

157,359

 

 

 

124,666

 

Long-term debt, less current portion, net  

 

414,915

 

 

 

328,292

 

Deferred income taxes  

 

178

 

 

 

948

 

Other long-term liabilities  

 

98,872

 

 

 

111,364

 

Total liabilities  

 

1,019,469

 

 

 

881,334

 

         
Series B Convertible Preferred Stock  

 

 

 

 

251,901

 

Redeemable noncontrolling interests  

 

7,531

 

 

 

6,474

 

         
Total Stockholders' deficit  

 

(137,046

)

 

 

(266,939

)

Total liabilities, Series B Convertible Preferred Stock, Redeemable noncontrolling interests and Stockholders' deficit  

$

889,954

 

 

$

872,770

 

         
Note: The Condensed Consolidated Balance Sheet at December 27, 2020 has been derived from the audited consolidated financial statements, but does 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
Condensed Consolidated Statements of Operations
 
                 
    Three Months Ended   Nine Months Ended
    September 26,
2021
  September 27,
2020
  September 26,
2021
  September 27,
2020
(In thousands, except per share amounts)   (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)
Revenues:                
Domestic company-owned restaurant sales  

$

191,584

 

 

$

178,371

 

 

$

584,942

 

 

$

526,317

 

North America franchise royalties and fees  

 

31,933

 

 

 

25,281

 

 

 

97,123

 

 

 

68,895

 

North America commissary revenues  

 

189,224

 

 

 

181,338

 

 

 

560,743

 

 

 

504,379

 

International revenues  

 

38,408

 

 

 

33,440

 

 

 

110,629

 

 

 

87,592

 

Other revenues  

 

61,633

 

 

 

54,511

 

 

 

186,099

 

 

 

156,240

 

Total revenues  

 

512,782

 

 

 

472,941

 

 

 

1,539,536

 

 

 

1,343,423

 

                 
Costs and expenses:                
Operating costs (excluding depreciation and amortization shown separately below):                
Domestic company-owned restaurant expenses  

 

155,477

 

 

 

144,803

 

 

 

465,658

 

 

 

419,082

 

North America commissary expenses  

 

175,399

 

 

 

167,937

 

 

 

518,310

 

 

 

466,676

 

International expenses  

 

21,743

 

 

 

19,370

 

 

 

62,791

 

 

 

52,775

 

Other expenses  

 

56,039

 

 

 

50,917

 

 

 

168,092

 

 

 

148,219

 

General and administrative expenses  

 

54,070

 

 

 

52,601

 

 

 

157,779

 

 

 

148,680

 

Depreciation and amortization  

 

11,477

 

 

 

12,764

 

 

 

36,830

 

 

 

37,436

 

Total costs and expenses  

 

474,205

 

 

 

448,392

 

 

 

1,409,460

 

 

 

1,272,868

 

Operating income  

 

38,577

 

 

 

24,549

 

 

 

130,076

 

 

 

70,555

 

Net interest expense  

 

(3,979

)

 

 

(3,636

)

 

 

(11,275

)

 

 

(11,230

)

Income before income taxes  

 

34,598

 

 

 

20,913

 

 

 

118,801

 

 

 

59,325

 

Income tax expense  

 

4,057

 

 

 

4,516

 

 

 

19,387

 

 

 

11,984

 

Net income before attribution to noncontrolling interests  

 

30,541

 

 

 

16,397

 

 

 

99,414

 

 

 

47,341

 

Net income attributable to noncontrolling interests  

 

(1,285

)

 

 

(689

)

 

 

(4,021

)

 

 

(2,576

)

Net income attributable to the company  

$

29,256

 

 

$

15,708

 

 

$

95,393

 

 

$

44,765

 

                 
Calculation of net income (loss) for earnings per share:                
Net income attributable to the company  

$

29,256

 

 

$

15,708

 

 

$

95,393

 

 

$

44,765

 

Dividends on redemption of Series B Convertible Preferred Stock  

 

 

 

 

 

 

 

(109,852

)

 

 

 

Dividends paid to participating securities  

 

(137

)

 

 

(3,548

)

 

 

(5,964

)

 

 

(10,546

)

Net income attributable to participating securities  

 

(158

)

 

 

(703

)

 

 

 

 

 

(1,809

)

Net income (loss) attributable to common shareholders  

$

28,961

 

 

$

11,457

 

 

$

(20,423

)

 

$

32,410

 

                 
Basic earnings (loss) per common share  

$

0.80

 

 

$

0.35

 

 

$

(0.59

)

 

$

1.00

 

Diluted earnings (loss) per common share  

$

0.79

 

 

$

0.35

 

 

$

(0.59

)

 

$

0.99

 

                 
Basic weighted average common shares outstanding  

 

36,387

 

 

 

32,616

 

 

 

34,619

 

 

 

32,347

 

Diluted weighted average common shares outstanding  

 

36,719

 

 

 

32,971

 

 

 

34,619

 

 

 

32,643

 

                 
Dividends declared per common share  

$

0.350

 

 

$

0.225

 

 

$

0.800

 

 

$

0.675

 

 
Papa John's International, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
 
         
    Nine Months Ended
(In thousands)   September 26,
2021
  September 27,
2020
    (Unaudited)   (Unaudited)
Operating activities        
Net income before attribution to noncontrolling interests  

$

99,414

 

 

$

47,341

 

Adjustments to reconcile net income to net cash provided by operating activities:        
Benefit for allowance for credit losses on accounts and notes receivable  

 

(920

)

 

 

(334

)

Depreciation and amortization  

 

36,830

 

 

 

37,436

 

Deferred income taxes  

 

(5,113

)

 

 

(4,696

)

Stock-based compensation expense  

 

12,519

 

 

 

13,071

 

Other  

 

1,052

 

 

 

1,233

 

Changes in operating assets and liabilities, net of acquisitions:        
Accounts receivable  

 

5,955

 

 

 

(4,378

)

Income tax receivable  

 

674

 

 

 

3,131

 

Inventories  

 

(3,217

)

 

 

(1,173

)

Prepaid expenses and other current assets  

 

11,277

 

 

 

14,393

 

Other assets and liabilities  

 

(8,627

)

 

 

18,080

 

Accounts payable  

 

5,014

 

 

 

3,147

 

Income and other taxes payable  

 

15,958

 

 

 

2,435

 

Accrued expenses and other current liabilities  

 

24,001

 

 

 

40,112

 

Deferred revenue  

 

(1,193

)

 

 

(1,251

)

Net cash provided by operating activities  

 

193,624

 

 

 

168,547

 

         
Investing activities        
Purchases of property and equipment  

 

(41,328

)

 

 

(24,269

)

Notes issued  

 

(14,637

)

 

 

(13,240

)

Repayments of notes issued  

 

15,352

 

 

 

8,906

 

Acquisitions, net of cash acquired  

 

(699

)

 

 

 

Other  

 

121

 

 

 

15

 

Net cash used in investing activities  

 

(41,191

)

 

 

(28,588

)

         
Financing activities        
Proceeds from issuance of senior notes  

 

400,000

 

 

 

 

Repayment of term loan  

 

(340,000

)

 

 

(15,000

)

Net proceeds (repayments) of revolving credit facilities  

 

15,000

 

 

 

(5,000

)

Debt issuance costs  

 

(9,179

)

 

 

 

Proceeds from exercise of stock options  

 

11,211

 

 

 

29,204

 

Dividends paid to common stockholders  

 

(27,640

)

 

 

(21,856

)

Dividends paid to preferred stockholders  

 

(6,394

)

 

 

(10,237

)

Tax payments for equity award issuances  

 

(5,310

)

 

 

(1,665

)

Repurchase of Series B Convertible Preferred Stock  

 

(188,647

)

 

 

 

Acquisition of Company common stock  

 

(20,555

)

 

 

 

Distributions to noncontrolling interests  

 

(2,914

)

 

 

(1,778

)

Other  

 

(2,630

)

 

 

(1,105

)

Net cash used in financing activities  

 

(177,058

)

 

 

(27,437

)

         
Effect of exchange rate changes on cash and cash equivalents  

 

234

 

 

 

(383

)

Change in cash and cash equivalents  

 

(24,391

)

 

 

112,139

 

Cash and cash equivalents at beginning of period  

 

130,204

 

 

 

27,911

 

         
Cash and cash equivalents at end of period  

$

105,813

 

 

$

140,050

 

SOURCE Papa John’s International, Inc.

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