Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 28, 2021 | Apr. 30, 2021 | |
Document and Entity Information | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Mar. 28, 2021 | |
Document Fiscal Year Focus | 2021 | |
Document Transition Report | false | |
Entity File Number | 0-21660 | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 61-1203323 | |
Entity Address, Address Line One | 2002 Papa John’s Boulevard | |
Entity Address, City or Town | Louisville | |
Entity Address, State or Province | KY | |
Entity Address, Postal Zip Code | 40299-2367 | |
City Area Code | 502 | |
Local Phone Number | 261-7272 | |
Title of 12(b) Security | Common stock, $0.01 par value | |
Trading Symbol | PZZA | |
Security Exchange Name | NASDAQ | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 33,074,641 | |
Entity Registrant Name | PAPA JOHNS INTERNATIONAL INC | |
Entity Central Index Key | 0000901491 | |
Current Fiscal Year End Date | --12-26 | |
Document Fiscal Period Focus | Q1 | |
Amendment Flag | false |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Mar. 28, 2021 | Dec. 27, 2020 |
Current assets: | ||
Cash and cash equivalents | $ 171,272 | $ 130,204 |
Accounts receivable, net | 76,008 | 90,135 |
Notes receivable, current portion | 10,687 | 11,318 |
Income tax receivable | 707 | 1,273 |
Inventories | 27,552 | 30,265 |
Prepaid expenses and other current assets | 45,355 | 43,212 |
Total current assets | 331,581 | 306,407 |
Property and equipment, net | 195,083 | 200,895 |
Finance lease right-of-use assets, net | 22,710 | 16,840 |
Operating lease right-of-use assets | 166,976 | 148,110 |
Notes receivable, less current portion, net | 35,966 | 36,538 |
Goodwill | 81,019 | 80,791 |
Deferred income taxes | 6,890 | 10,800 |
Other assets | 78,060 | 72,389 |
Total assets | 918,285 | 872,770 |
Current liabilities: | ||
Accounts payable | 32,020 | 37,370 |
Income and other taxes payable | 25,308 | 10,263 |
Accrued expenses and other current liabilities | 165,767 | 174,563 |
Current deferred revenue | 19,807 | 19,590 |
Current finance lease liabilities | 4,499 | 3,545 |
Current operating lease liabilities | 24,322 | 23,538 |
Current portion of long-term debt | 20,000 | 20,000 |
Total current liabilities | 291,723 | 288,869 |
Deferred revenue | 13,391 | 13,664 |
Long-term finance lease liabilities | 18,533 | 13,531 |
Long-term operating lease liabilities | 143,269 | 124,666 |
Long-term debt, less current portion, net | 328,538 | 328,292 |
Deferred income taxes | 267 | 948 |
Other long-term liabilities | 104,601 | 111,364 |
Total liabilities | 900,322 | 881,334 |
Series B Convertible Preferred Stock; $0.01 par value; 260.0 shares authorized, 252.5 shares issued and outstanding at March 28, 2021 and December 27, 2020 | 251,938 | 251,901 |
Redeemable noncontrolling interests | 6,125 | 6,474 |
Stockholders' deficit: | ||
Common stock ($0.01 par value per share; issued 45,341 at March 28, 2021 and 45,288 at December 27, 2020) | 453 | 453 |
Additional paid-in capital | 251,285 | 254,103 |
Accumulated other comprehensive loss | (11,971) | (14,168) |
Retained earnings | 242,119 | 219,158 |
Treasury stock (12,660 shares at March 28, 2021 and 12,743 shares at December 27, 2020, at cost) | (737,268) | (741,724) |
Total stockholders' deficit | (255,382) | (282,178) |
Noncontrolling interests in subsidiaries | 15,282 | 15,239 |
Total Stockholders' deficit | (240,100) | (266,939) |
Total liabilities, Series B Convertible Preferred Stock, Redeemable noncontrolling interests and Stockholders' deficit | $ 918,285 | $ 872,770 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares | Mar. 28, 2021 | Dec. 27, 2020 |
Condensed Consolidated Balance Sheets | ||
Series B Convertible Preferred Stock, par value | $ 0.01 | $ 0.01 |
Series B Convertible Preferred Stock, shares authorized | 260,000 | 260,000 |
Series B Convertible Preferred Stock, shares issued | 252,500 | 252,500 |
Series B Convertible Preferred Stock, shares outstanding | 252,530 | 252,500 |
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, shares issued | 45,341,000 | 45,288,000 |
Treasury stock, shares | 12,660,000 | 12,743,000 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 28, 2021 | Mar. 29, 2020 | |
Revenues: | ||
Total revenues | $ 511,746 | $ 409,859 |
Costs and expenses: | ||
General and administrative expenses | 50,011 | 47,651 |
Depreciation and amortization | 12,876 | 12,295 |
Total costs and expenses | 464,884 | 394,387 |
Operating income | 46,862 | 15,472 |
Net interest expense | (3,647) | (3,967) |
Income before income taxes | 43,215 | 11,505 |
Income tax expense | 7,932 | 2,512 |
Net income before attribution to noncontrolling interests | 35,283 | 8,993 |
Net income attributable to noncontrolling interests | (1,400) | (550) |
Net income attributable to the Company | 33,883 | 8,443 |
Calculation of net income for earnings (loss) per share: | ||
Net income attributable to the Company | 33,883 | 8,443 |
Dividends paid to participating securities and accretion | (3,527) | (3,471) |
Net income attributable to participating securities | (3,243) | |
Net income attributable to common shareholders | $ 27,113 | $ 4,972 |
Basic earnings per common share | $ 0.83 | $ 0.15 |
Diluted earnings per common share | $ 0.82 | $ 0.15 |
Basic weighted average common shares outstanding | 32,756 | 32,093 |
Diluted weighted average common shares outstanding | 33,090 | 32,320 |
Dividends declared per common share | $ 0.225 | $ 0.225 |
Domestic Company-owned restaurants | ||
Revenues: | ||
Total revenues | $ 197,234 | $ 161,440 |
Costs and expenses: | ||
Operating costs (excluding depreciation and amortization shown separately below): | 155,888 | 129,111 |
North America franchising | ||
Revenues: | ||
Total revenues | 32,715 | 19,440 |
North America commissary | ||
Revenues: | ||
Total revenues | 184,878 | 155,422 |
Costs and expenses: | ||
Operating costs (excluding depreciation and amortization shown separately below): | 170,684 | 144,272 |
International | ||
Revenues: | ||
Total revenues | 34,607 | 26,059 |
Costs and expenses: | ||
Operating costs (excluding depreciation and amortization shown separately below): | 19,618 | 15,101 |
Other segment | ||
Revenues: | ||
Total revenues | 62,312 | 47,498 |
Costs and expenses: | ||
Operating costs (excluding depreciation and amortization shown separately below): | $ 55,807 | $ 45,957 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 28, 2021 | Mar. 29, 2020 | |
Condensed Consolidated Statements of Comprehensive Income (Loss) | ||
Net income before attribution to noncontrolling interests | $ 35,283 | $ 8,993 |
Other comprehensive income (loss), before tax: | ||
Foreign currency translation adjustments | 1,059 | (2,825) |
Interest rate swaps | 1,795 | (10,919) |
Other comprehensive income (loss), before tax | 2,854 | (13,744) |
Income tax effect: | ||
Foreign currency translation adjustments | (244) | 650 |
Interest rate swaps | (413) | 2,511 |
Income tax effect | (657) | 3,161 |
Other comprehensive income (loss), net of tax | 2,197 | (10,583) |
Comprehensive income (loss) before attribution to noncontrolling interests | 37,480 | (1,590) |
Less: comprehensive (income), redeemable noncontrolling interests | (787) | (176) |
Less: comprehensive (income), nonredeemable noncontrolling interests | (613) | (374) |
Comprehensive income (loss) attributable to the Company | $ 36,080 | $ (2,140) |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Comprehensive Income (Loss) (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 28, 2021 | Mar. 29, 2020 | |
Consolidated Statements of Comprehensive Income (Unaudited) | ||
Income tax expense (benefit) | $ 7,932 | $ 2,512 |
Net interest expense | (3,647) | (3,967) |
Interest expense | Interest rate swap | ||
Consolidated Statements of Comprehensive Income (Unaudited) | ||
Amount of Gain or (Loss) Reclassified from AOCI/AOCL into Income | (1,709) | (330) |
Net interest expense | 3,647 | 3,967 |
Qualifying as hedges | Interest rate swap | Amount reclassified from AOCL | ||
Consolidated Statements of Comprehensive Income (Unaudited) | ||
Income tax expense (benefit) | 385 | 80 |
Net interest expense | $ (1,709) | $ (330) |
Condensed Consolidated Statem_4
Condensed Consolidated Statements of Stockholders' Deficit - USD ($) shares in Thousands, $ in Thousands | AdjustmentRetained Earnings | Adjustment | Adjusted BalanceCommon Stock | Adjusted BalanceAdditional Paid-In Capital | Adjusted BalanceAccumulated Other Comprehensive Income (Loss) | Adjusted BalanceRetained Earnings | Adjusted BalanceTreasury Stock | Adjusted BalanceNoncontrolling Interests in Subsidiaries | Adjusted Balance | Common Stock | Additional Paid-In Capital | Accumulated Other Comprehensive Income (Loss) | Retained Earnings | Treasury Stock | Noncontrolling Interests in Subsidiaries | Total |
Balance (ASU 2016-13) at Dec. 29, 2019 | $ (1,066) | $ (1,066) | $ 447 | $ 219,047 | $ (10,185) | $ 204,631 | $ (747,327) | $ 15,665 | $ (317,722) | |||||||
Balance at Dec. 29, 2019 | $ 447 | $ 219,047 | $ (10,185) | $ 205,697 | $ (747,327) | $ 15,665 | $ (316,656) | |||||||||
Balance (in shares) (ASU 2016-13) at Dec. 29, 2019 | 31,894 | |||||||||||||||
Balance (in shares) at Dec. 29, 2019 | 31,894 | |||||||||||||||
Net income | 8,443 | 374 | 8,817 | |||||||||||||
Other comprehensive income (loss), net of tax | (10,583) | (10,583) | ||||||||||||||
Cash dividends on common stock | 55 | (7,292) | (7,237) | |||||||||||||
Cash dividends on preferred stock | (3,412) | (3,412) | ||||||||||||||
Exercise of stock options | $ 1 | 1,240 | 1,241 | |||||||||||||
Exercise of stock options (in shares) | 27 | |||||||||||||||
Stock-based compensation expense | 3,950 | 3,950 | ||||||||||||||
Issuance of restricted stock | (2,707) | 2,707 | ||||||||||||||
Issuance of restricted stock (in shares) | 47 | |||||||||||||||
Tax effect of restricted stock awards | (1,383) | (1,383) | ||||||||||||||
Distributions to noncontrolling interests | (30) | (30) | ||||||||||||||
Other | (15) | (83) | 157 | 59 | ||||||||||||
Other (in shares) | 3 | |||||||||||||||
Balance at Mar. 29, 2020 | $ 448 | 220,187 | (20,768) | 202,287 | (744,463) | 16,009 | (326,300) | |||||||||
Balance (in shares) at Mar. 29, 2020 | 31,971 | |||||||||||||||
Balance at Dec. 27, 2020 | $ 453 | 254,103 | (14,168) | 219,158 | (741,724) | 15,239 | (266,939) | |||||||||
Balance (in shares) at Dec. 27, 2020 | 32,545 | |||||||||||||||
Net income | 33,883 | 613 | 34,496 | |||||||||||||
Other comprehensive income (loss), net of tax | 2,197 | 2,197 | ||||||||||||||
Cash dividends on common stock | 31 | (7,435) | (7,404) | |||||||||||||
Cash dividends on preferred stock | (3,412) | (3,412) | ||||||||||||||
Exercise of stock options | 2,298 | 2,298 | ||||||||||||||
Exercise of stock options (in shares) | 41 | |||||||||||||||
Acquisition of Company common stock | (1,267) | (1,267) | ||||||||||||||
Acquisition of Company common stock (in shares) | (15) | |||||||||||||||
Stock-based compensation expense | 4,113 | 4,113 | ||||||||||||||
Issuance of restricted stock | (5,371) | 5,371 | ||||||||||||||
Issuance of restricted stock (in shares) | 104 | |||||||||||||||
Tax effect of restricted stock awards | (3,834) | (3,834) | ||||||||||||||
Distributions to noncontrolling interests | (570) | (570) | ||||||||||||||
Other | (55) | (75) | 352 | 222 | ||||||||||||
Other (in shares) | 6 | |||||||||||||||
Balance at Mar. 28, 2021 | $ 453 | $ 251,285 | $ (11,971) | $ 242,119 | $ (737,268) | $ 15,282 | $ (240,100) | |||||||||
Balance (in shares) at Mar. 28, 2021 | 32,681 |
Condensed Consolidated Statem_5
Condensed Consolidated Statements of Stockholders' Deficit (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 28, 2021 | Mar. 29, 2020 | |
Accumulated other comprehensive income (loss) | $ (11,971) | $ (20,768) |
Unrealized foreign currency translation gains (losses) | (2,977) | (7,774) |
Net unrealized gain (loss) on the interest rate swap agreements | (8,994) | (12,994) |
Joint ventures | ||
Net income (loss) allocated to the redeemable noncontrolling interest from joint venture arrangements | $ 787 | $ 176 |
Condensed Consolidated Statem_6
Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 28, 2021 | Mar. 29, 2020 | |
Operating activities | ||
Net income before attribution to noncontrolling interests | $ 35,283 | $ 8,993 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
(Credit) provision for allowance for credit losses on accounts and notes receivable | (1,098) | 768 |
Depreciation and amortization | 12,876 | 12,295 |
Deferred income taxes | 2,586 | 1,185 |
Stock-based compensation expense | 4,113 | 3,950 |
Other | 325 | 234 |
Changes in operating assets and liabilities, net of acquisitions: | ||
Accounts receivable | 13,349 | (1,839) |
Income tax receivable | 566 | 932 |
Inventories | 2,721 | (2,281) |
Prepaid expenses and other current assets | 711 | 5,586 |
Other assets and liabilities | (7,901) | 2,670 |
Accounts payable | (5,350) | 4,604 |
Income and other taxes payable | 15,045 | 568 |
Accrued expenses and other current liabilities | (9,736) | (1,903) |
Deferred revenue | (273) | (2,028) |
Net cash provided by operating activities | 63,217 | 33,734 |
Investing activities | ||
Purchases of property and equipment | (7,076) | (5,933) |
Notes issued | (3,417) | (7,413) |
Repayments of notes issued | 4,864 | 3,790 |
Acquisitions, net of cash acquired | (699) | |
Other | 29 | 1 |
Net cash used in investing activities | (6,299) | (9,555) |
Financing activities | ||
Repayments of term loan | (5,000) | (5,000) |
Net proceeds of revolving credit facilities | 5,000 | 640 |
Proceeds from exercise of stock options | 2,298 | 1,241 |
Dividends paid to common stockholders | (7,404) | (7,237) |
Dividends paid to preferred stockholders | (3,412) | (3,412) |
Tax payments for equity award issuances | (3,834) | (1,383) |
Acquisition of Company common stock | (1,267) | |
Distributions to noncontrolling interests | (1,705) | (30) |
Other | (756) | (350) |
Net cash used in financing activities | (16,080) | (15,531) |
Effect of exchange rate changes on cash and cash equivalents | 230 | (183) |
Change in cash and cash equivalents | 41,068 | 8,465 |
Cash and cash equivalents at beginning of period | 130,204 | 27,911 |
Cash and cash equivalents at end of period | $ 171,272 | $ 36,376 |
Basis of Presentation
Basis of Presentation | 3 Months Ended |
Mar. 28, 2021 | |
Basis of Presentation | |
Basis of Presentation | 1. Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete annual financial statements. In the opinion of management, all adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation have been included. Operating results for the three months ended March 28, 2021 are not necessarily indicative of the results that may be expected for the fiscal year ending December 26, 2021. For further information, refer to the consolidated financial statements and footnotes thereto included in the Annual Report on Form 10-K for Papa John’s International, Inc. (referred to as the “Company”, “Papa John’s” or in the first-person notations of “we”, “us” and “our”) for the year ended December 27, 2020. |
Significant Accounting Policies
Significant Accounting Policies | 3 Months Ended |
Mar. 28, 2021 | |
Significant Accounting Policies | |
Significant Accounting Policies | 2. Significant Accounting Policies Use of Estimates The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Significant items that are subject to such estimates and assumptions include allowance for doubtful accounts and notes receivable, intangible assets, contract assets and contract liabilities, including the online customer loyalty program obligation and gift card breakage, right-of-use assets and lease liabilities, insurance reserves and tax reserves. Although management bases its estimates on historical experience and assumptions that are believed to be reasonable under the circumstances, actual results could significantly differ from these estimates. Variable Interest Entity Papa John’s domestic restaurants, both Company-owned and franchised, participate in Papa John’s Marketing Fund, Inc. (“PJMF”), a nonstock corporation designed to operate at break-even as it spends all annual contributions received from the system. PJMF collects a percentage of revenues from Company-owned and franchised restaurants in the United States for the purpose of designing and administering advertising and promotional programs. PJMF is a variable interest entity (“VIE”) that funds its operations with ongoing financial support and contributions from the domestic restaurants, of which approximately 80% are franchised, and does not have sufficient equity to fund its operations without these ongoing financial contributions. Based on an assessment of the governance structure and operating procedures of PJMF, the Company determined it has the power to control certain significant activities of PJMF, and therefore, is the primary beneficiary. The Company has consolidated PJMF in its financial results in accordance with Accounting Standards Codification (“ASC”) 810, “Consolidations.” Noncontrolling Interests Papa John’s has four joint venture arrangements in which there are noncontrolling interests held by third parties that include 188 and 192 restaurants at March 28, 2021 and March 29, 2020, respectively. Consolidated net income is required to be reported separately at amounts attributable to both the Company and the noncontrolling interests. Additionally, disclosures are required to clearly identify and distinguish between the interests of the Company and the interests of the noncontrolling owners, including a disclosure on the face of the Condensed Consolidated Statements of Operations of net income attributable to noncontrolling interests. Net income attributable to these joint ventures for the three months ended March 28, 2021 and March 29, 2020 was as follows (in thousands): Three Months Ended March 28, March 29, 2021 2020 Papa John’s International, Inc. $ 2,349 $ 1,131 Noncontrolling interests 1,400 550 Total net income $ 3,749 $ 1,681 The following summarizes the redemption feature, location and related accounting within the Condensed Consolidated Balance Sheets for these joint venture arrangements: Type of Joint Venture Arrangement Location within the Balance Sheets Recorded Value Joint ventures with no redemption feature Permanent equity Carrying value Joint ventures with option to require the Company to purchase the noncontrolling interest - not currently redeemable or redemption not probable Temporary equity Carrying value Deferred Income Tax Accounts and Tax Reserves We are subject to income taxes in the United States and several foreign jurisdictions. Significant judgment is required in determining Papa John’s provision for income taxes and the related assets and liabilities. The provision for income taxes includes income taxes paid, currently payable or receivable and those deferred. We use an estimated annual effective rate based on expected annual income to determine our quarterly provision for income taxes. The effective income tax rate includes the estimated domestic state effective income tax rate and applicable foreign income tax rates. The effective income tax rate is also impacted by various permanent items and credits, net of any related valuation allowances, and can vary based on changes in estimated annual income. Discrete items are recorded in the quarter in which they occur. Deferred tax assets and liabilities are determined based on differences between financial reporting and tax basis of assets and liabilities and are measured using enacted tax rates and laws that are expected to be in effect when the differences reverse. Deferred tax assets are also recognized for the estimated future effects of tax attribute carryforwards (e.g., net operating losses, capital losses, and foreign tax credits). The effect on deferred taxes of changes in tax rates is recognized in the period in which the new tax rate is enacted. Valuation allowances are established when necessary on a jurisdictional basis to reduce deferred tax assets to the amounts we expect to realize. Tax authorities periodically audit the Company. We record reserves and related interest and penalties for identified exposures as income tax expense. We evaluate these issues on a quarterly basis to adjust for events, such as statute of limitations expirations, court or state rulings or audit settlements, which may impact our ultimate payment for such exposures. Fair Value Measurements and Disclosures The Company is required to determine the fair value of financial assets and liabilities based on the price that would be received to sell the asset or paid to transfer the liability to a market participant. Fair value is a market-based measurement, not an entity-specific measurement. The fair value of certain assets and liabilities approximates carrying value because of the short-term nature of the accounts, including cash and cash equivalents, accounts receivable, net of allowances, and accounts payable. The carrying value of notes receivable, net of allowances, also approximates fair value. The fair value of the amount outstanding under our term debt approximates the carrying value due to the variable market-based interest rate (Level 2). Certain assets and liabilities are measured at fair value on a recurring basis and are required to be classified and disclosed in one of the following categories: ● Level 1: Quoted market prices in active markets for identical assets or liabilities. ● Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data. ● Level 3: Unobservable inputs that are not corroborated by market data. Our financial assets and liabilities that were measured at fair value on a recurring basis as of March 28, 2021 and December 27, 2020 are as follows (in thousands): Carrying Fair Value Measurements Value Level 1 Level 2 Level 3 March 28, 2021 Financial assets: Cash surrender value of life insurance policies (a) $ 38,721 $ 38,721 $ — $ — Financial liabilities: Interest rate swaps (b) 11,615 — 11,615 — December 27, 2020 Financial assets: Cash surrender value of life insurance policies (a) $ 37,578 $ 37,578 $ — $ — Financial liabilities: Interest rate swaps (b) 13,452 — 13,452 — (a) Represents life insurance policies held in our non-qualified deferred compensation plan. (b) The fair value of our interest rate swaps is based on the sum of all future net present value cash flows. The future cash flows are derived based on the terms of our interest rate swaps, as well as considering published discount factors, and projected London Interbank Offered Rates (“LIBOR”). Allowance for Credit Losses Estimates of expected credit losses, even if remote, are based upon historical account write-off trends, facts about the current financial condition of the debtor, forecasts of future operating results based upon current trends of select operating metrics, and macroeconomic factors. Credit quality is monitored through the timing of payments compared to the prescribed payment terms and known facts regarding the financial condition of the franchisee or customer. Account and note balances are charged off against the allowance after recovery efforts have ceased. The following table summarizes changes in our allowances for credit losses for accounts receivable and notes receivable: (in thousands) Accounts Receivable Notes Receivable Balance at December 27, 2020 $ 3,622 $ 3,211 Current period credit for expected credit losses (307) (531) Write-offs charged against the allowance (978) (843) Recoveries collected — (260) Balance at March 28, 2021 $ 2,337 $ 1,577 |
Leases
Leases | 3 Months Ended |
Mar. 28, 2021 | |
Leases | |
Leases | 3. Leases Lessor Operating Leases We sublease certain retail space to our franchisees in the United Kingdom which are primarily operating leases. At March 28, 2021, we leased and subleased approximately 390 Papa John’s restaurants to franchisees in the United Kingdom. The initial lease terms on the franchised sites in the United Kingdom are generally 15 years. The Company has the option to negotiate an extension toward the end of the lease term at the landlord’s discretion. Rental income, primarily derived from properties leased and subleased to franchisees in the United Kingdom, is recognized on a straight-line basis over the respective operating lease terms. We recognized total sublease income of $2.8 million and $2.5 million for the three months ended March 28, 2021 and March 29, 2020, respectively. Lease Guarantees As a result of assigning our interest in obligations under property leases as a condition of the refranchising of certain restaurants, we are contingently liable for payment of 80 domestic leases. These leases have varying terms, the latest of which expires in 2036. As of March 28, 2021, the estimated maximum amount of undiscounted payments the Company could be required to make in the event of nonpayment by the primary lessees was $13.6 million. This contingent liability is not included in the Condensed Consolidated Balance Sheet as it is not probable to occur. The fair value of the guarantee is not material. Supplemental Cash Flow & Other Information Supplemental cash flow information related to leases for the periods reported is as follows: Three Months Ended (in thousands) March 28, 2021 March 29, 2020 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from finance leases $ 278 $ 151 Financing cash flows from finance leases 1,059 466 Operating cash flows from operating leases (a) 9,483 9,480 Right-of-use assets obtained in exchange for new finance lease liabilities 7,014 19 Right-of-use assets obtained in exchange for new operating lease liabilities (b) 28,428 7,451 Cash received from sublease income 2,987 2,494 (a) Included within the change in Other assets and liabilities within the Condensed Consolidated Statements of Cash Flows offset by non-cash operating lease right-of-use asset amortization and lease liability accretion. (b) Includes right-of-use assets of approximately |
Papa John's Marketing Fund, Inc
Papa John's Marketing Fund, Inc. | 3 Months Ended |
Mar. 28, 2021 | |
Papa John's Marketing Fund, Inc. | |
Papa John's Marketing Fund, Inc. | 4. Papa John’s Marketing Fund, Inc. PJMF collects a percentage of revenues from Company-owned and franchised restaurants in the United States, for the purpose of designing and administering advertising and promotional programs for all participating domestic restaurants. Contributions and expenditures are reported on a gross basis in the Condensed Consolidated Statements of Operations within Other revenues and Other expenses. Assets and liabilities of PJMF, which are restricted in their use, included in the Condensed Consolidated Balance Sheets were as follows (in thousands): March 28, December 27, 2021 2020 Assets Current assets: Cash and cash equivalents $ 23,922 $ 9,394 Accounts receivable, net 13,003 23,711 Income tax receivable 192 192 Prepaid expenses and other current assets 1,261 1,914 Total current assets 38,378 35,211 Deferred income taxes 553 588 Total assets $ 38,931 $ 35,799 Liabilities Current liabilities: Accounts payable $ 260 $ 5,429 Income and other taxes payable 2 2 Accrued expenses and other current liabilities 37,445 32,578 Current deferred revenue 3,272 3,938 Total current liabilities 40,979 41,947 Deferred revenue 2,002 2,419 Total liabilities $ 42,981 $ 44,366 |
Revenue Recognition
Revenue Recognition | 3 Months Ended |
Mar. 28, 2021 | |
Revenue Recognition | |
Revenue Recognition | 5. Revenue Recognition Contract Balances Our contract liabilities primarily relate to franchise fees, unredeemed gift card liabilities, and loyalty program obligations, which we classify as Deferred revenue on the Condensed Consolidated Balance Sheets. During the three months ended March 28, 2021 and March 29, 2020, the Company recognized $9.1 million and $8.0 million in revenue, respectively, related to deferred revenue. The contract liability balances are (in thousands): Contract Liabilities March 28, 2021 December 27, 2020 Change Franchise fees and unredeemed gift card liabilities $ 18,971 $ 19,890 $ (919) Customer loyalty program obligations 14,227 13,364 863 Total contract liabilities $ 33,198 $ 33,254 $ (56) Our contract assets consist primarily of equipment incentives provided to franchisees. Equipment incentives are related to the future value of commissary revenue the Company will receive over the term of the incentive agreement. As of March 28, 2021 and December 27, 2020, the contract assets were approximately $5.0 million and $5.1 million, respectively. For the three months ended March 28, 2021 and March 29, 2020, revenue was reduced approximately $0.8 million and $0.9 million for the amortization of contract assets over the applicable contract terms. Contract assets are included in Prepaid expenses and other current assets and Other assets on the Condensed Consolidated Balance Sheets. Transaction Price Allocated to the Remaining Performance Obligations The following table (in thousands) includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied at the end of the reporting period. Performance Obligations by Period Less than 1 Year 1-2 Years 2-3 Years 3-4 Years 4-5 Years Thereafter Total Franchise fees $ 2,308 $ 2,105 $ 1,832 $ 1,613 $ 1,368 $ 2,882 $ 12,108 Approximately $1.6 million of area development fees related to unopened stores and international unearned royalties are included in Deferred revenue. Timing of revenue recognition is dependent upon the timing of store openings and franchisees’ revenues. Gift card liabilities of approximately $5.3 million, included in Deferred revenue, will be recognized in Company-owned restaurant revenues when gift cards are redeemed. The Company will recognize redemption fee revenue in Other revenues when cards are redeemed at franchised restaurant locations. The Company applies the practical expedient in ASC 606-10-50-14 and does not disclose information about remaining performance obligations that have original expected durations of one year or less. |
Common Stock and Series B Conve
Common Stock and Series B Convertible Preferred Stock | 3 Months Ended |
Mar. 28, 2021 | |
Common Stock and Series B Convertible Preferred Stock | |
Common Stock and Series B Convertible Preferred Stock | 6. Common Stock and Series B Convertible Preferred Stock Shares Authorized and Outstanding The Company has authorized 5.0 million shares of preferred stock, 100.0 million shares of common stock, and 260,000 shares of Series B Convertible Preferred Stock (the “Series B Preferred Stock”). The Company’s outstanding shares of common stock were 32.7 million shares at March 28, 2021 and 32.5 million shares at December 27, 2020. There were 252,530 shares of Series B Preferred Stock outstanding at both March 28, 2021 and December 27, 2020. The Series B Preferred Stock is classified as temporary equity on the Condensed Consolidated Balance Sheets as of March 28, 2021 and December 27, 2020. Dividends The Company recorded dividends of approximately $10.8 million in the first quarter of 2021 consisting of the following: ● $7.4 million paid to common stockholders ($0.225 per share); ● $1.1 million in common stock “pass-through” dividends paid to Series B Preferred Stockholders on an as-converted basis ($0.225 per share); and ● $2.3 million in preferred dividends on the Series B Preferred Stock (3.6% of the investment per annum). On April 27, 2021, our Board of Directors declared a second quarter dividend of $0.225 per common share (of which approximately $7.5 million will be paid to common stockholders and $1.1 million will be paid as “pass through” dividends to holders of Series B Preferred Stock on an “as converted basis”). The common share dividend will be paid on May 21, 2021 to stockholders of record as of the close of business on May 11, 2021 . |
Earnings Per Share
Earnings Per Share | 3 Months Ended |
Mar. 28, 2021 | |
Earnings Per Share | |
Earnings Per Share | 7. Earnings Per Share We compute earnings per share using the two-class method. The two-class method requires an earnings allocation formula that determines earnings per share for common shareholders and participating security holders according to dividends declared and participating rights in undistributed earnings. The Series B Preferred Stock and time-based restricted stock awards are participating securities because holders of such shares have non-forfeitable dividend rights and participate in undistributed earnings with common stock. Under the two-class method, total dividends provided to the holders of participating securities and undistributed earnings allocated to participating securities, are subtracted from net income attributable to the Company in determining net income attributable to common shareholders. Additionally, any accretion to the redemption value for the Series B Preferred Stock is treated as a deemed dividend in the two-class EPS calculation. The calculations of basic and diluted earnings per common share are as follows (in thousands, except per-share data): Three Months Ended March 28, March 29, 2021 2020 Basic earnings per common share Net income attributable to the Company $ 33,883 $ 8,443 Dividends paid to participating securities and accretion (3,527) (3,471) Net income attributable to participating securities (3,243) — Net income attributable to common shareholders $ 27,113 $ 4,972 Basic weighted average common shares outstanding 32,756 32,093 Basic earnings per common share $ 0.83 $ 0.15 Diluted earnings per common share Net income attributable to common shareholders $ 27,113 $ 4,972 Weighted average common shares outstanding 32,756 32,093 Dilutive effect of outstanding equity awards (a) 334 227 Diluted weighted average common shares outstanding (b) 33,090 32,320 Diluted earnings per common share $ 0.82 $ 0.15 (a) Excludes 18 and 382 equity awards for the three months ended March 28, 2021 and March 29, 2020 respectively, as the effect of including such awards would have been anti-dilutive. (b) The Company had 252.5 shares of Series B Preferred Stock outstanding as of March 28, 2021 and March 29, 2020. For the fully diluted calculation, the Series B Preferred stock dividends were added back to net income attributable to common shareholders. The Company then applied the if-converted method to calculate dilution on the Series B Preferred Stock, which resulted in 5.0 million additional common shares. This calculation was anti-dilutive for both periods presented and as such was excluded. |
Debt
Debt | 3 Months Ended |
Mar. 28, 2021 | |
Debt | |
Debt | 8. Debt Long-term debt, net, consists of the following (in thousands): March 28, December 27, 2021 2020 Outstanding debt $ 350,000 $ 350,000 Unamortized debt issuance costs (1,462) (1,708) Current portion of long-term debt (20,000) (20,000) Total long-term debt, net $ 328,538 $ 328,292 The Company has a secured revolving credit facility with available borrowings of $400.0 million (the “Revolving Facility”), of which $15.0 million was outstanding as of March 28, 2021, and a secured term loan facility with an outstanding balance of $335.0 million (the “Term Loan Facility”) and together with the Revolving Facility, the “PJI Facilities”. The PJI Facilities mature on August 30, 2022. The loans under the PJI Facilities accrue interest at a per annum rate equal to, at the Company’s election, either LIBOR plus a margin ranging from 125 to 250 basis points or a base rate (generally determined by a prime rate, federal funds rate or LIBOR plus 1.00%) plus a margin ranging from 25 to 150 basis points. In each case, the actual margin is determined according to a ratio of the Company’s total indebtedness to earnings before interest, taxes, depreciation and amortization (“EBITDA”) for the then most recently ended four-quarter period (the “Leverage Ratio”). The Credit Agreement governing the PJI Facilities (the “PJI Credit Agreement”) places certain customary restrictions upon the Company based on its financial covenants. These include limiting the repurchase of common stock and not increasing the cash dividend above the lesser of $0.225 per share per quarter or $35 million per fiscal year if the Company’s leverage ratio is above 3.75 to 1.0. Quarterly amortization payments are required to be made on the Term Loan Facility in the amount of $5.0 million. Loans outstanding under the PJI Facilities may be prepaid at any time without premium or penalty, subject to customary breakage costs in the case of borrowings for which a LIBOR rate election is in effect. Up to $35.0 million of the Revolving Facility may be advanced in certain agreed foreign currencies, including Euros, Pounds Sterling, Canadian Dollars, Japanese Yen, and Mexican Pesos. The PJI Credit Agreement contains customary affirmative and negative covenants, including financial covenants requiring the maintenance of the Leverage Ratio and a specified fixed charge coverage ratio. The PJI Credit Agreement allows for a permitted Leverage Ratio of 4.25 to 1.0, decreasing over time to 4.00 to 1.0 by 2022; and a fixed charge coverage ratio of 2.50 to 1.0. We were in compliance with these financial covenants at March 28, 2021. Under the PJI Credit Agreement, we have the option to increase the Revolving Facility or the Term Loan Facility in an aggregate amount of up to $300.0 million, subject to the Leverage Ratio of the Company not exceeding 4.00 to 1.00. The Company and certain direct and indirect domestic subsidiaries are required to grant a security interest in substantially all of the capital stock and equity interests of their respective domestic and first tier material foreign subsidiaries to secure the obligations owed under the PJI Facilities. Including outstanding letters of credit, the Company’s remaining availability under the PJI Facilities at March 28, 2021 was approximately $339.2 million. We attempt to minimize interest rate risk exposure by fixing our rate through the utilization of interest rate swaps, which are derivative financial instruments. Our swaps are entered into with financial institutions that participate in the PJI Credit Agreement. By using a derivative instrument to hedge exposures to changes in interest rates, we expose ourselves to credit risk due to the possible failure of the counterparty to perform under the terms of the derivative contract. We use interest rate swaps to hedge against the effects of potential interest rate increases on borrowings under our PJI Facilities. As of March 28, 2021, we have the following interest rate swap agreements with a total notional value of $350.0 million: Effective Dates Floating Rate Debt Fixed Rates April 30, 2018 through April 30, 2023 $ 55 million 2.33 % April 30, 2018 through April 30, 2023 $ 35 million 2.36 % April 30, 2018 through April 30, 2023 $ 35 million 2.34 % January 30, 2018 through August 30, 2022 $ 100 million 1.99 % January 30, 2018 through August 30, 2022 $ 75 million 1.99 % January 30, 2018 through August 30, 2022 $ 50 million 2.00 % The gain or loss on the swaps is recognized in Accumulated other comprehensive loss (“AOCL”) and reclassified into earnings as adjustments to interest expense in the same period or periods during which the swaps affect earnings. Gains or losses on the swaps representing hedge components excluded from the assessment of effectiveness are recognized in current earnings. The following table provides information on the location and amounts of our swaps in the accompanying condensed consolidated financial statements (in thousands): Interest Rate Swap Derivatives Fair Value Fair Value March 28, December 27, Balance Sheet Location 2021 2020 Other current and long-term liabilities $ 11,615 $ 13,452 The effect of derivative instruments on the accompanying condensed consolidated financial statements is as follows (in thousands): Location of Gain Amount of Gain Derivatives - Amount of Gain or or (Loss) or (Loss) Total Net Interest Expense Cash Flow (Loss) Recognized Reclassified from Reclassified from on Condensed Hedging in AOCL AOCL into AOCL into Consolidated Statements Relationships on Derivative Income Income of Operations Interest rate swaps for the three months ended: March 28, 2021 $ 1,382 Interest expense $ (1,709) $ (3,647) March 29, 2020 $ (8,408) Interest expense $ (330) $ (3,967) The weighted average interest rates on our PJI Facilities, including the impact of the interest rate swap agreements, were 3.6% and 3.8% for the three months ended March 28, 2021 and March 29, 2020, respectively. Interest paid, including payments made or received under the swaps, was $3.4 million and $4.1 million for the three months ended March 28, 2021 and March 29, 2020, respectively. As of March 28, 2021, the portion of the aggregate $11.6 million interest rate swap liability that would be reclassified into net interest expense during the next twelve months approximates $7.1 million. PJMF has a $20.0 million revolving line of credit (the “PJMF Revolving Facility”) pursuant to a Revolving Loan Agreement, dated September 30, 2015 with U.S. Bank National Association, as lender. The PJMF Revolving Facility is secured by substantially all assets of PJMF. The PJMF Revolving Facility matures on September 30, 2021. The borrowings under the PJMF Revolving Facility accrue interest at a variable rate of the one-month LIBOR plus 1.75%. The applicable interest rate on the PJMF Revolving Facility was 3.4% for the three months ended March 29, 2020. There was no debt outstanding under the PJMF Revolving Facility as of March 28, 2021 and December 27, 2020. The PJMF operating results and the related debt outstanding do not impact the financial covenants under the PJI Credit Agreement. |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 28, 2021 | |
Commitments and Contingencies | |
Commitments and Contingencies | 9. Commitments and Contingencies Litigation The Company is involved in a number of lawsuits, claims, investigations and proceedings, including those specifically identified below, consisting of intellectual property, employment, consumer, commercial and other matters arising in the ordinary course of business. In accordance with ASC 450, “ Contingencies Durling et al v. Papa John’s International, Inc. , |
Strategic Corporate Reorganizat
Strategic Corporate Reorganization for Long-term Growth | 3 Months Ended |
Mar. 28, 2021 | |
Strategic Corporate Reorganization for Long-term Growth | |
Strategic Corporate Reorganization for Long-term Growth | 10. Strategic Corporate Reorganization for Long-term Growth On September 17, 2020, we announced plans to open an office in Atlanta, Georgia located in Three Ballpark Center at The Battery Atlanta. The 60,000 square foot modern space will be designed to drive continued menu innovation and optimized integration across marketing, communications, customer experience, operations, human resources, diversity, equity and inclusion, communications, financial planning and analysis, investor relations and development functions. Our information technology, finance, supply chain, and legal teams will continue to operate in our Louisville, Kentucky office, which remains critical to our success. We also maintain an office outside of London, UK, where our international operations are managed. The opening of the office in Atlanta and related organizational changes are projected to be completed by the summer of 2021. All affected employees were either offered an opportunity to continue with the organization or were offered a severance package. As a result, we expect to incur certain one-time corporate reorganization costs of approximately $15.0 to $20.0 million related to employee severance and transition, recruitment and relocation, and third party and other costs through 2021. Of these costs, we have cumulatively incurred approximately $9.9 million through March 28, 2021 which include $6.8 million of employee severance and other employee transition costs, $2.5 million of recruiting and professional fees, $0.8 million of relocation costs, and $0.7 million of other costs, offset by ($0.9) million of stock-based compensation forfeitures on unvested awards. We record severance as a one-time termination benefit and recognize the expense ratably over the employees’ required future service period. All other costs, including employee transition costs, recruitment and relocation costs, and third-party costs, are recognized in the period incurred. All strategic corporate reorganization costs have been recorded in General and administrative expenses on the Condensed Consolidated Statement of Operations. As of March 28, 2021 and December 27, 2020, the estimate of incurred but unpaid strategic corporate reorganization costs are included in Accrued expenses and other current liabilities on the Condensed Consolidated Balance Sheets. The following table summarizes the activity for the three months ended March 28, 2021: Balance at Balance at Dec. 27 Mar. 28, 2020 Charges Payments 2021 Employee severance and other employee transition costs $ 4,615 $ 2,037 $ (3,847) $ 2,805 Recruiting and professional fees 145 860 (884) 121 Relocation costs 101 546 (133) 514 Other costs — 440 (440) — Total strategic corporate reorganization liability $ 4,861 $ 3,883 $ (5,304) $ 3,440 We expect to recognize additional costs associated with the corporate reorganization in the remainder of 2021 of approximately $5.0 to $10.0 million, including expenditures related to (i) employee severance and other employee transition costs of approximately $2.0 million to $3.0 million, (ii) relocation and recruiting costs of $2.0 million to $5.0 million, and (iii) third-party and other costs of $1.0 million to $2.0 million. |
Segment Information
Segment Information | 3 Months Ended |
Mar. 28, 2021 | |
Segment Information | |
Segment Information | 11. Segment Information We have four reportable segments: domestic Company-owned restaurants, North America franchising, North America commissaries, and international operations. The domestic Company-owned restaurant segment consists of the operations of all domestic (“domestic” is defined as contiguous United States) Company-owned restaurants and derives its revenues principally from retail sales of pizza, Papadias, which are flatbread-style sandwiches, and side items, including breadsticks, cheesesticks, chicken poppers and wings, dessert items and canned or bottled beverages. The North America commissary segment consists of the operations of our regional dough production and product distribution centers and derives its revenues principally from the sale and distribution of food and paper products to domestic Company-owned and franchised restaurants in the United States and Canada. The North America franchising segment consists of our franchise sales and support activities and derives its revenues from sales of franchise and development rights and collection of royalties from our franchisees located in the United States and Canada. The international segment principally consists of distribution sales to franchised Papa John’s restaurants located in the United Kingdom and our franchise sales and support activities, which derive revenues from sales of franchise and development rights and the collection of royalties from our international franchisees. International franchisees are defined as all franchise operations outside of the United States and Canada. All other business units that do not meet the quantitative thresholds for determining reportable segments, which are not operating segments, we refer to as “all other,” which consists of operations that derive revenues from the sale, principally to Company-owned and franchised restaurants, of printing and promotional items, franchise contributions to marketing funds and information systems and related services used in restaurant operations, including our point-of-sale system, online and other technology-based ordering platforms. Generally, we evaluate performance and allocate resources based on operating income and intercompany eliminations. Certain administrative and capital costs are allocated to segments based upon predetermined rates or actual estimated resource usage. We account for intercompany sales and transfers as if the sales or transfers were to third parties and eliminate the activity in consolidation. Our reportable segments are business units that provide different products or services. Separate management of each segment is required because each business unit is subject to different operational issues and strategies. No single external customer accounted for 10% or more of our consolidated revenues. Our segment information is as follows: Three Months Ended March 28, March 29, (In thousands) 2021 2020 Revenues: Domestic Company-owned restaurants $ 197,234 $ 161,440 North America franchising 32,715 19,440 North America commissaries 184,878 155,422 International 42,604 32,152 All others 54,315 41,405 Total revenues $ 511,746 $ 409,859 Intersegment revenues: North America franchising $ 1,060 $ 674 North America commissaries 52,070 44,506 All others 19,148 20,955 Total intersegment revenues $ 72,278 $ 66,135 Operating income: Domestic Company-owned restaurants $ 15,324 $ 8,667 North America franchising 30,443 17,326 North America commissaries 9,713 7,660 International 8,364 4,379 All others 6,118 (198) Unallocated corporate expenses (23,162) (22,176) Elimination of intersegment losses (profits) 62 (186) Total operating income $ 46,862 $ 15,472 Property and equipment, net: Domestic Company-owned restaurants $ 230,302 North America commissaries 145,432 International 14,169 All others 92,961 Unallocated corporate assets 214,845 Accumulated depreciation and amortization (502,626) Total property and equipment, net $ 195,083 Disaggregation of Revenue In the following tables, revenues are disaggregated by major product/service line. The tables also include a reconciliation of the disaggregated revenues by the reportable segment (in thousands): Reportable Segments Three Months Ended March 28, 2021 Major Products/Services Lines Domestic Company-owned restaurants North America franchising North America commissaries International All others Total Company-owned restaurant sales $ 197,234 $ - $ - $ - $ - $ 197,234 Franchise royalties and fees - 33,775 - 12,208 - 45,983 Commissary sales - - 236,948 22,399 - 259,347 Other revenues - - - 7,997 73,463 81,460 Eliminations - (1,060) (52,070) - (19,148) (72,278) Total segment revenues $ 197,234 $ 32,715 $ 184,878 $ 42,604 $ 54,315 $ 511,746 International other revenues (1) - - - (7,997) 7,997 - Total revenues $ 197,234 $ 32,715 $ 184,878 $ 34,607 $ 62,312 $ 511,746 Reportable Segments Three Months Ended March 29, 2020 Major Products/Services Lines Domestic Company-owned restaurants North America franchising North America commissaries International All others Total Company-owned restaurant sales $ 161,440 $ - $ - $ - $ - $ 161,440 Franchise royalties and fees - 20,114 - 9,516 - 29,630 Commissary sales - - 199,928 16,543 - 216,471 Other revenues - - - 6,093 62,360 68,453 Eliminations - (674) (44,506) - (20,955) (66,135) Total segment revenues $ 161,440 $ 19,440 $ 155,422 $ 32,152 $ 41,405 $ 409,859 International other revenues (1) - - - (6,093) 6,093 - Total revenues $ 161,440 $ 19,440 $ 155,422 $ 26,059 $ 47,498 $ 409,859 (1) Other revenues as reported in the Condensed Consolidated Statements of Operations include $8.0 million and $6.1 million of revenue for the three months ended March 28, 2021 and March 29, 2020, respectively, that are part of the international reporting segment. These amounts include marketing fund contributions and sublease rental income from international franchisees in the United Kingdom that provide no significant contribution to operating income but must be reported on a gross basis under accounting requirements. The related expenses for these Other revenues are reported in Other expenses in the Condensed Consolidated Statements of Operations. |
Significant Accounting Polici_2
Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 28, 2021 | |
Significant Accounting Policies | |
Use of Estimates | Use of Estimates The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Significant items that are subject to such estimates and assumptions include allowance for doubtful accounts and notes receivable, intangible assets, contract assets and contract liabilities, including the online customer loyalty program obligation and gift card breakage, right-of-use assets and lease liabilities, insurance reserves and tax reserves. Although management bases its estimates on historical experience and assumptions that are believed to be reasonable under the circumstances, actual results could significantly differ from these estimates. |
Variable Interest Entity | Variable Interest Entity Papa John’s domestic restaurants, both Company-owned and franchised, participate in Papa John’s Marketing Fund, Inc. (“PJMF”), a nonstock corporation designed to operate at break-even as it spends all annual contributions received from the system. PJMF collects a percentage of revenues from Company-owned and franchised restaurants in the United States for the purpose of designing and administering advertising and promotional programs. PJMF is a variable interest entity (“VIE”) that funds its operations with ongoing financial support and contributions from the domestic restaurants, of which approximately 80% are franchised, and does not have sufficient equity to fund its operations without these ongoing financial contributions. Based on an assessment of the governance structure and operating procedures of PJMF, the Company determined it has the power to control certain significant activities of PJMF, and therefore, is the primary beneficiary. The Company has consolidated PJMF in its financial results in accordance with Accounting Standards Codification (“ASC”) 810, “Consolidations.” |
Noncontrolling Interests | Noncontrolling Interests Papa John’s has four joint venture arrangements in which there are noncontrolling interests held by third parties that include 188 and 192 restaurants at March 28, 2021 and March 29, 2020, respectively. Consolidated net income is required to be reported separately at amounts attributable to both the Company and the noncontrolling interests. Additionally, disclosures are required to clearly identify and distinguish between the interests of the Company and the interests of the noncontrolling owners, including a disclosure on the face of the Condensed Consolidated Statements of Operations of net income attributable to noncontrolling interests. Net income attributable to these joint ventures for the three months ended March 28, 2021 and March 29, 2020 was as follows (in thousands): Three Months Ended March 28, March 29, 2021 2020 Papa John’s International, Inc. $ 2,349 $ 1,131 Noncontrolling interests 1,400 550 Total net income $ 3,749 $ 1,681 The following summarizes the redemption feature, location and related accounting within the Condensed Consolidated Balance Sheets for these joint venture arrangements: Type of Joint Venture Arrangement Location within the Balance Sheets Recorded Value Joint ventures with no redemption feature Permanent equity Carrying value Joint ventures with option to require the Company to purchase the noncontrolling interest - not currently redeemable or redemption not probable Temporary equity Carrying value |
Deferred Income Tax Accounts and Tax Reserves | Deferred Income Tax Accounts and Tax Reserves We are subject to income taxes in the United States and several foreign jurisdictions. Significant judgment is required in determining Papa John’s provision for income taxes and the related assets and liabilities. The provision for income taxes includes income taxes paid, currently payable or receivable and those deferred. We use an estimated annual effective rate based on expected annual income to determine our quarterly provision for income taxes. The effective income tax rate includes the estimated domestic state effective income tax rate and applicable foreign income tax rates. The effective income tax rate is also impacted by various permanent items and credits, net of any related valuation allowances, and can vary based on changes in estimated annual income. Discrete items are recorded in the quarter in which they occur. Deferred tax assets and liabilities are determined based on differences between financial reporting and tax basis of assets and liabilities and are measured using enacted tax rates and laws that are expected to be in effect when the differences reverse. Deferred tax assets are also recognized for the estimated future effects of tax attribute carryforwards (e.g., net operating losses, capital losses, and foreign tax credits). The effect on deferred taxes of changes in tax rates is recognized in the period in which the new tax rate is enacted. Valuation allowances are established when necessary on a jurisdictional basis to reduce deferred tax assets to the amounts we expect to realize. Tax authorities periodically audit the Company. We record reserves and related interest and penalties for identified exposures as income tax expense. We evaluate these issues on a quarterly basis to adjust for events, such as statute of limitations expirations, court or state rulings or audit settlements, which may impact our ultimate payment for such exposures. |
Fair Value Measurements and Disclosures | Fair Value Measurements and Disclosures The Company is required to determine the fair value of financial assets and liabilities based on the price that would be received to sell the asset or paid to transfer the liability to a market participant. Fair value is a market-based measurement, not an entity-specific measurement. The fair value of certain assets and liabilities approximates carrying value because of the short-term nature of the accounts, including cash and cash equivalents, accounts receivable, net of allowances, and accounts payable. The carrying value of notes receivable, net of allowances, also approximates fair value. The fair value of the amount outstanding under our term debt approximates the carrying value due to the variable market-based interest rate (Level 2). Certain assets and liabilities are measured at fair value on a recurring basis and are required to be classified and disclosed in one of the following categories: ● Level 1: Quoted market prices in active markets for identical assets or liabilities. ● Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data. ● Level 3: Unobservable inputs that are not corroborated by market data. Our financial assets and liabilities that were measured at fair value on a recurring basis as of March 28, 2021 and December 27, 2020 are as follows (in thousands): Carrying Fair Value Measurements Value Level 1 Level 2 Level 3 March 28, 2021 Financial assets: Cash surrender value of life insurance policies (a) $ 38,721 $ 38,721 $ — $ — Financial liabilities: Interest rate swaps (b) 11,615 — 11,615 — December 27, 2020 Financial assets: Cash surrender value of life insurance policies (a) $ 37,578 $ 37,578 $ — $ — Financial liabilities: Interest rate swaps (b) 13,452 — 13,452 — (a) Represents life insurance policies held in our non-qualified deferred compensation plan. (b) The fair value of our interest rate swaps is based on the sum of all future net present value cash flows. The future cash flows are derived based on the terms of our interest rate swaps, as well as considering published discount factors, and projected London Interbank Offered Rates (“LIBOR”). |
Allowance for Credit Losses | Allowance for Credit Losses Estimates of expected credit losses, even if remote, are based upon historical account write-off trends, facts about the current financial condition of the debtor, forecasts of future operating results based upon current trends of select operating metrics, and macroeconomic factors. Credit quality is monitored through the timing of payments compared to the prescribed payment terms and known facts regarding the financial condition of the franchisee or customer. Account and note balances are charged off against the allowance after recovery efforts have ceased. The following table summarizes changes in our allowances for credit losses for accounts receivable and notes receivable: (in thousands) Accounts Receivable Notes Receivable Balance at December 27, 2020 $ 3,622 $ 3,211 Current period credit for expected credit losses (307) (531) Write-offs charged against the allowance (978) (843) Recoveries collected — (260) Balance at March 28, 2021 $ 2,337 $ 1,577 |
Significant Accounting Polici_3
Significant Accounting Policies (Tables) | 3 Months Ended |
Mar. 28, 2021 | |
Significant Accounting Policies | |
Schedule of net income attributable to Joint Ventures | Net income attributable to these joint ventures for the three months ended March 28, 2021 and March 29, 2020 was as follows (in thousands): Three Months Ended March 28, March 29, 2021 2020 Papa John’s International, Inc. $ 2,349 $ 1,131 Noncontrolling interests 1,400 550 Total net income $ 3,749 $ 1,681 |
Schedule of Joint Ventures in Which There are Noncontrolling Interests | The following summarizes the redemption feature, location and related accounting within the Condensed Consolidated Balance Sheets for these joint venture arrangements: Type of Joint Venture Arrangement Location within the Balance Sheets Recorded Value Joint ventures with no redemption feature Permanent equity Carrying value Joint ventures with option to require the Company to purchase the noncontrolling interest - not currently redeemable or redemption not probable Temporary equity Carrying value |
Schedule of Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis | Our financial assets and liabilities that were measured at fair value on a recurring basis as of March 28, 2021 and December 27, 2020 are as follows (in thousands): Carrying Fair Value Measurements Value Level 1 Level 2 Level 3 March 28, 2021 Financial assets: Cash surrender value of life insurance policies (a) $ 38,721 $ 38,721 $ — $ — Financial liabilities: Interest rate swaps (b) 11,615 — 11,615 — December 27, 2020 Financial assets: Cash surrender value of life insurance policies (a) $ 37,578 $ 37,578 $ — $ — Financial liabilities: Interest rate swaps (b) 13,452 — 13,452 — (a) Represents life insurance policies held in our non-qualified deferred compensation plan. (b) The fair value of our interest rate swaps is based on the sum of all future net present value cash flows. The future cash flows are derived based on the terms of our interest rate swaps, as well as considering published discount factors, and projected London Interbank Offered Rates (“LIBOR”). |
Schedule rollforward of the allowance for credit losses for accounts receivable, notes receivable and other assets | (in thousands) Accounts Receivable Notes Receivable Balance at December 27, 2020 $ 3,622 $ 3,211 Current period credit for expected credit losses (307) (531) Write-offs charged against the allowance (978) (843) Recoveries collected — (260) Balance at March 28, 2021 $ 2,337 $ 1,577 |
Leases (Tables)
Leases (Tables) | 3 Months Ended |
Mar. 28, 2021 | |
Leases | |
Schedule of supplemental cash flow information | Supplemental cash flow information related to leases for the periods reported is as follows: Three Months Ended (in thousands) March 28, 2021 March 29, 2020 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from finance leases $ 278 $ 151 Financing cash flows from finance leases 1,059 466 Operating cash flows from operating leases (a) 9,483 9,480 Right-of-use assets obtained in exchange for new finance lease liabilities 7,014 19 Right-of-use assets obtained in exchange for new operating lease liabilities (b) 28,428 7,451 Cash received from sublease income 2,987 2,494 (a) Included within the change in Other assets and liabilities within the Condensed Consolidated Statements of Cash Flows offset by non-cash operating lease right-of-use asset amortization and lease liability accretion. (b) Includes right-of-use assets of approximately |
Papa John's Marketing Fund, I_2
Papa John's Marketing Fund, Inc. (Tables) | 3 Months Ended |
Mar. 28, 2021 | |
Papa John's Marketing Fund, Inc. | |
Schedule of Assets and Liabilities of PJMF | Assets and liabilities of PJMF, which are restricted in their use, included in the Condensed Consolidated Balance Sheets were as follows (in thousands): March 28, December 27, 2021 2020 Assets Current assets: Cash and cash equivalents $ 23,922 $ 9,394 Accounts receivable, net 13,003 23,711 Income tax receivable 192 192 Prepaid expenses and other current assets 1,261 1,914 Total current assets 38,378 35,211 Deferred income taxes 553 588 Total assets $ 38,931 $ 35,799 Liabilities Current liabilities: Accounts payable $ 260 $ 5,429 Income and other taxes payable 2 2 Accrued expenses and other current liabilities 37,445 32,578 Current deferred revenue 3,272 3,938 Total current liabilities 40,979 41,947 Deferred revenue 2,002 2,419 Total liabilities $ 42,981 $ 44,366 |
Revenue Recognition (Tables)
Revenue Recognition (Tables) | 3 Months Ended |
Mar. 28, 2021 | |
Revenue Recognition | |
Schedule of information about contract liabilities | The contract liability balances are (in thousands): Contract Liabilities March 28, 2021 December 27, 2020 Change Franchise fees and unredeemed gift card liabilities $ 18,971 $ 19,890 $ (919) Customer loyalty program obligations 14,227 13,364 863 Total contract liabilities $ 33,198 $ 33,254 $ (56) |
Schedule of estimated revenue expected to be recognized in the future | The following table (in thousands) includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied at the end of the reporting period. Performance Obligations by Period Less than 1 Year 1-2 Years 2-3 Years 3-4 Years 4-5 Years Thereafter Total Franchise fees $ 2,308 $ 2,105 $ 1,832 $ 1,613 $ 1,368 $ 2,882 $ 12,108 |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 3 Months Ended |
Mar. 28, 2021 | |
Earnings Per Share | |
Schedule of Earnings (Loss) Per Share, Basic and Diluted | The calculations of basic and diluted earnings per common share are as follows (in thousands, except per-share data): Three Months Ended March 28, March 29, 2021 2020 Basic earnings per common share Net income attributable to the Company $ 33,883 $ 8,443 Dividends paid to participating securities and accretion (3,527) (3,471) Net income attributable to participating securities (3,243) — Net income attributable to common shareholders $ 27,113 $ 4,972 Basic weighted average common shares outstanding 32,756 32,093 Basic earnings per common share $ 0.83 $ 0.15 Diluted earnings per common share Net income attributable to common shareholders $ 27,113 $ 4,972 Weighted average common shares outstanding 32,756 32,093 Dilutive effect of outstanding equity awards (a) 334 227 Diluted weighted average common shares outstanding (b) 33,090 32,320 Diluted earnings per common share $ 0.82 $ 0.15 (a) Excludes 18 and 382 equity awards for the three months ended March 28, 2021 and March 29, 2020 respectively, as the effect of including such awards would have been anti-dilutive. (b) The Company had 252.5 shares of Series B Preferred Stock outstanding as of March 28, 2021 and March 29, 2020. For the fully diluted calculation, the Series B Preferred stock dividends were added back to net income attributable to common shareholders. The Company then applied the if-converted method to calculate dilution on the Series B Preferred Stock, which resulted in 5.0 million additional common shares. This calculation was anti-dilutive for both periods presented and as such was excluded. |
Debt (Tables)
Debt (Tables) | 3 Months Ended |
Mar. 28, 2021 | |
Debt | |
Schedule of long-term debt, net | Long-term debt, net, consists of the following (in thousands): March 28, December 27, 2021 2020 Outstanding debt $ 350,000 $ 350,000 Unamortized debt issuance costs (1,462) (1,708) Current portion of long-term debt (20,000) (20,000) Total long-term debt, net $ 328,538 $ 328,292 |
Schedule of Interest Rate Swap Agreements | Effective Dates Floating Rate Debt Fixed Rates April 30, 2018 through April 30, 2023 $ 55 million 2.33 % April 30, 2018 through April 30, 2023 $ 35 million 2.36 % April 30, 2018 through April 30, 2023 $ 35 million 2.34 % January 30, 2018 through August 30, 2022 $ 100 million 1.99 % January 30, 2018 through August 30, 2022 $ 75 million 1.99 % January 30, 2018 through August 30, 2022 $ 50 million 2.00 % |
Schedule of Location and Amounts of Swaps in the Accompanying Consolidated Financial Statements | The following table provides information on the location and amounts of our swaps in the accompanying condensed consolidated financial statements (in thousands): Interest Rate Swap Derivatives Fair Value Fair Value March 28, December 27, Balance Sheet Location 2021 2020 Other current and long-term liabilities $ 11,615 $ 13,452 |
Schedule of Effect of Derivative Instruments on the Accompanying Consolidated Financial Statements | The effect of derivative instruments on the accompanying condensed consolidated financial statements is as follows (in thousands): Location of Gain Amount of Gain Derivatives - Amount of Gain or or (Loss) or (Loss) Total Net Interest Expense Cash Flow (Loss) Recognized Reclassified from Reclassified from on Condensed Hedging in AOCL AOCL into AOCL into Consolidated Statements Relationships on Derivative Income Income of Operations Interest rate swaps for the three months ended: March 28, 2021 $ 1,382 Interest expense $ (1,709) $ (3,647) March 29, 2020 $ (8,408) Interest expense $ (330) $ (3,967) |
Strategic Corporate Reorganiz_2
Strategic Corporate Reorganization for Long-term Growth (Tables) | 3 Months Ended |
Mar. 28, 2021 | |
Strategic Corporate Reorganization for Long-term Growth | |
Summary of activity of restructuring liability | Balance at Balance at Dec. 27 Mar. 28, 2020 Charges Payments 2021 Employee severance and other employee transition costs $ 4,615 $ 2,037 $ (3,847) $ 2,805 Recruiting and professional fees 145 860 (884) 121 Relocation costs 101 546 (133) 514 Other costs — 440 (440) — Total strategic corporate reorganization liability $ 4,861 $ 3,883 $ (5,304) $ 3,440 |
Segment Information (Tables)
Segment Information (Tables) | 3 Months Ended |
Mar. 28, 2021 | |
Segment Information | |
Schedule of Segment Reporting Information, by Segment | Three Months Ended March 28, March 29, (In thousands) 2021 2020 Revenues: Domestic Company-owned restaurants $ 197,234 $ 161,440 North America franchising 32,715 19,440 North America commissaries 184,878 155,422 International 42,604 32,152 All others 54,315 41,405 Total revenues $ 511,746 $ 409,859 Intersegment revenues: North America franchising $ 1,060 $ 674 North America commissaries 52,070 44,506 All others 19,148 20,955 Total intersegment revenues $ 72,278 $ 66,135 Operating income: Domestic Company-owned restaurants $ 15,324 $ 8,667 North America franchising 30,443 17,326 North America commissaries 9,713 7,660 International 8,364 4,379 All others 6,118 (198) Unallocated corporate expenses (23,162) (22,176) Elimination of intersegment losses (profits) 62 (186) Total operating income $ 46,862 $ 15,472 Property and equipment, net: Domestic Company-owned restaurants $ 230,302 North America commissaries 145,432 International 14,169 All others 92,961 Unallocated corporate assets 214,845 Accumulated depreciation and amortization (502,626) Total property and equipment, net $ 195,083 |
Schedule of revenue disaggregated by major product line | In the following tables, revenues are disaggregated by major product/service line. The tables also include a reconciliation of the disaggregated revenues by the reportable segment (in thousands): Reportable Segments Three Months Ended March 28, 2021 Major Products/Services Lines Domestic Company-owned restaurants North America franchising North America commissaries International All others Total Company-owned restaurant sales $ 197,234 $ - $ - $ - $ - $ 197,234 Franchise royalties and fees - 33,775 - 12,208 - 45,983 Commissary sales - - 236,948 22,399 - 259,347 Other revenues - - - 7,997 73,463 81,460 Eliminations - (1,060) (52,070) - (19,148) (72,278) Total segment revenues $ 197,234 $ 32,715 $ 184,878 $ 42,604 $ 54,315 $ 511,746 International other revenues (1) - - - (7,997) 7,997 - Total revenues $ 197,234 $ 32,715 $ 184,878 $ 34,607 $ 62,312 $ 511,746 Reportable Segments Three Months Ended March 29, 2020 Major Products/Services Lines Domestic Company-owned restaurants North America franchising North America commissaries International All others Total Company-owned restaurant sales $ 161,440 $ - $ - $ - $ - $ 161,440 Franchise royalties and fees - 20,114 - 9,516 - 29,630 Commissary sales - - 199,928 16,543 - 216,471 Other revenues - - - 6,093 62,360 68,453 Eliminations - (674) (44,506) - (20,955) (66,135) Total segment revenues $ 161,440 $ 19,440 $ 155,422 $ 32,152 $ 41,405 $ 409,859 International other revenues (1) - - - (6,093) 6,093 - Total revenues $ 161,440 $ 19,440 $ 155,422 $ 26,059 $ 47,498 $ 409,859 (1) Other revenues as reported in the Condensed Consolidated Statements of Operations include $8.0 million and $6.1 million of revenue for the three months ended March 28, 2021 and March 29, 2020, respectively, that are part of the international reporting segment. These amounts include marketing fund contributions and sublease rental income from international franchisees in the United Kingdom that provide no significant contribution to operating income but must be reported on a gross basis under accounting requirements. The related expenses for these Other revenues are reported in Other expenses in the Condensed Consolidated Statements of Operations. |
Significant Accounting Polici_4
Significant Accounting Policies - Noncontrolling Interest and Joint Ventures (Details) $ in Thousands | 3 Months Ended | |
Mar. 28, 2021USD ($)entityrestaurant | Mar. 29, 2020USD ($)entityrestaurant | |
Noncontrolling Interests | ||
Percentage of domestic restaurants franchised | 80.00% | |
Number of Joint Ventures Having Noncontrolling Interests | entity | 4 | 4 |
Income Amounts Attributable to Noncontrolling Interest, Disclosures | ||
Net income attributable to the Company | $ 33,883 | $ 8,443 |
Joint ventures | ||
Noncontrolling Interests | ||
Number of Restaurants | restaurant | 188 | 192 |
Income Amounts Attributable to Noncontrolling Interest, Disclosures | ||
Papa John's International, Inc. | $ 2,349 | $ 1,131 |
Noncontrolling interests | 1,400 | 550 |
Net income attributable to the Company | $ 3,749 | $ 1,681 |
Significant Accounting Polici_5
Significant Accounting Policies - Fair Value Measurements (Details) - USD ($) $ in Thousands | Mar. 28, 2021 | Dec. 27, 2020 |
Carrying Value | ||
Measurement of financial assets and liabilities at fair value on a recurring basis | ||
Cash surrender value of life insurance policies | $ 38,721 | $ 37,578 |
Interest rate swap liabilities | 11,615 | 13,452 |
Measured on Recurring Basis | Level 1 | ||
Measurement of financial assets and liabilities at fair value on a recurring basis | ||
Cash surrender value of life insurance policies | 38,721 | 37,578 |
Measured on Recurring Basis | Level 2 | ||
Measurement of financial assets and liabilities at fair value on a recurring basis | ||
Interest rate swap liabilities | $ 11,615 | $ 13,452 |
Significant Accounting Polici_6
Significant Accounting Policies - Schedule rollforward of the allowance for credit losses for accounts receivable, notes receivable and other assets (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 28, 2021 | Mar. 29, 2020 | |
Allowance for Credit Loss | ||
Current period (credit) provision for expected credit losses | $ (1,098) | $ 768 |
Accounts Receivable | ||
Allowance for Credit Losses | ||
Balance at beginning of period | 3,622 | |
Current period credit for expected credit losses | (307) | |
Write-offs charged against the allowance | (978) | |
Balance at end of period | 2,337 | |
Notes Receivable | ||
Allowance for Credit Losses | ||
Balance at beginning of period | 3,211 | |
Current period credit for expected credit losses | (531) | |
Write-offs charged against the allowance | (843) | |
Recoveries collected | (260) | |
Balance at end of period | $ 1,577 |
Leases - Future Minimum Lease P
Leases - Future Minimum Lease Payments, Lessor Operating Leases, and Lease Guarantees (Details) $ in Millions | 3 Months Ended | |
Mar. 28, 2021USD ($)restaurantlease | Mar. 29, 2020USD ($) | |
Leases | ||
sublease income | $ 2.8 | $ 2.5 |
Number of domestic leases for which the Company is contingently liable | lease | 80 | |
Estimated maximum amount of undiscounted payments in the event of nonpayment by primary lessees | $ 13.6 | |
United Kingdom franchise-owned restaurants | ||
Leases | ||
Number of units leased and subleased | restaurant | 390 | |
Initial lease terms on franchised sites | 15 years |
Leases - Supplemental Cash Flow
Leases - Supplemental Cash Flow Information (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 28, 2021 | Mar. 29, 2020 | |
Leases | ||
Operating cash flows from finance leases | $ 278 | $ 151 |
Financing cash flows from finance leases | 1,059 | 466 |
Operating cash flows from operating leases | 9,483 | 9,480 |
Right-of-use assets obtained in exchange for new finance lease liabilities | 7,014 | 19 |
Right-of-use assets obtained in exchange for new operating lease liabilities | 28,428 | 7,451 |
Cash received from sublease income | 2,987 | $ 2,494 |
Corporate Headquarters Atlanta, Georgia | ||
Leases | ||
Right-of-use assets obtained in exchange for new operating lease liabilities | $ 14,500 |
Papa John's Marketing Fund, I_3
Papa John's Marketing Fund, Inc. (Details) - USD ($) $ in Thousands | Mar. 28, 2021 | Dec. 27, 2020 |
Current assets: | ||
Cash and cash equivalents | $ 171,272 | $ 130,204 |
Accounts receivable, net | 76,008 | 90,135 |
Income tax receivable | 707 | 1,273 |
Prepaid expenses and other current assets | 45,355 | 43,212 |
Total current assets | 331,581 | 306,407 |
Deferred income taxes | 6,890 | 10,800 |
Total assets | 918,285 | 872,770 |
Current liabilities: | ||
Accounts payable | 32,020 | 37,370 |
Income and other taxes payable | 25,308 | 10,263 |
Accrued expenses and other current liabilities | 165,767 | 174,563 |
Current deferred revenue | 19,807 | 19,590 |
Total current liabilities | 291,723 | 288,869 |
Deferred revenue | 13,391 | 13,664 |
Total liabilities | 900,322 | 881,334 |
Papa John's Marketing Fund Inc. | ||
Current assets: | ||
Cash and cash equivalents | 23,922 | 9,394 |
Accounts receivable, net | 13,003 | 23,711 |
Income tax receivable | 192 | 192 |
Prepaid expenses and other current assets | 1,261 | 1,914 |
Total current assets | 38,378 | 35,211 |
Deferred income taxes | 553 | 588 |
Total assets | 38,931 | 35,799 |
Current liabilities: | ||
Accounts payable | 260 | 5,429 |
Income and other taxes payable | 2 | 2 |
Accrued expenses and other current liabilities | 37,445 | 32,578 |
Current deferred revenue | 3,272 | 3,938 |
Total current liabilities | 40,979 | 41,947 |
Deferred revenue | 2,002 | 2,419 |
Total liabilities | $ 42,981 | $ 44,366 |
Revenue Recognition - Contract
Revenue Recognition - Contract Balances (Details) - USD ($) $ in Thousands | 3 Months Ended | |||
Mar. 28, 2021 | Mar. 29, 2020 | Dec. 27, 2020 | Dec. 29, 2019 | |
Revenue disaggregation | ||||
Cumulative effect of adoption of Topic 606 | $ (240,100) | $ (326,300) | $ (266,939) | $ (316,656) |
Revenue recognized related to deferred revenue and customer loyalty program | 9,100 | 8,000 | ||
Contract liabilities | 33,198 | 33,254 | ||
Change | (56) | |||
Contract assets | 5,000 | 5,100 | ||
Amortization expense related to contract assets | 800 | $ 900 | ||
Franchise fees and unredeemed gift card liabilities | ||||
Revenue disaggregation | ||||
Contract liabilities | 18,971 | 19,890 | ||
Change | (919) | |||
Customer loyalty program obligations | ||||
Revenue disaggregation | ||||
Contract liabilities | 14,227 | $ 13,364 | ||
Change | $ 863 |
Revenue Recognition - Transacti
Revenue Recognition - Transaction Price Allocated to Remaining Performance Obligations (Details) - USD ($) $ in Thousands | Mar. 28, 2021 | Dec. 27, 2020 |
Performance Obligations by Period | ||
Total deferred revenue | $ 33,198 | $ 33,254 |
Franchise royalties and fees | ||
Performance Obligations by Period | ||
Less than 1 Year | 2,308 | |
1-2 Years | 2,105 | |
2-3 Years | 1,832 | |
3-4 Years | 1,613 | |
4-5 Years | 1,368 | |
Thereafter | 2,882 | |
Total deferred revenue | 12,108 | |
Area development fees | ||
Performance Obligations by Period | ||
Total deferred revenue | 1,600 | |
Gift Card | ||
Performance Obligations by Period | ||
Total deferred revenue | $ 5,300 |
Common Stock and Series B Con_2
Common Stock and Series B Convertible Preferred Stock - Shares Authorized and Outstanding (Details) - shares | Mar. 28, 2021 | Dec. 27, 2020 | Mar. 29, 2020 |
Authorized shares of preferred stock | 5,000,000 | ||
Authorized shares of common stock | 100,000,000 | ||
Outstanding shares of common stock , net of repurchased stock | 32,700,000 | 32,500,000 | |
Series B Convertible Preferred Stock, shares outstanding | 252,530 | 252,500 | |
Series B Preferred Stock | |||
Authorized shares of preferred stock | 260,000 | ||
Series B Convertible Preferred Stock, shares outstanding | 252,500,000 | 252,500,000 |
Common Stock and Series B Con_3
Common Stock and Series B Convertible Preferred Stock - Cash Dividend (Details) - USD ($) $ / shares in Units, $ in Thousands | Apr. 27, 2021 | Mar. 28, 2021 | Mar. 29, 2020 |
Cash Dividend | |||
Total dividends paid | $ 10,800 | ||
Dividends paid to common shareholders | 7,400 | ||
Dividends paid to common shareholders | $ 7,404 | $ 7,237 | |
Dividend paid per common share (in dollars per share) | $ 0.225 | ||
Common stock dividends paid to preferred shareholders | $ 1,100 | ||
Preferred stock dividend rate | 3.60% | ||
Subsequent event | Forecast | |||
Cash Dividend | |||
Dividends paid to common shareholders | $ 7,500 | ||
Common stock dividends paid to preferred shareholders | $ 1,100 | ||
Quarterly dividend declared, per share (in dollars per share) | $ 0.225 | ||
Series B Preferred Stock | |||
Cash Dividend | |||
Preferred dividends | $ 2,300 | ||
Series B Preferred Stock | Subsequent event | Forecast | |||
Cash Dividend | |||
Preferred dividends | $ 2,300 | ||
Quarterly dividend, date of declaration | Jul. 1, 2021 |
Earnings Per Share (Details)
Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | ||
Mar. 28, 2021 | Mar. 29, 2020 | Dec. 27, 2020 | |
Basic earnings (loss) per common share: | |||
Net income attributable to the Company | $ 33,883 | $ 8,443 | |
Dividends paid to participating securities and accretion | (3,527) | (3,471) | |
Net income attributable to participating securities | (3,243) | ||
Net income attributable to common shareholders | $ 27,113 | $ 4,972 | |
Weighted average common shares outstanding | 32,756,000 | 32,093,000 | |
Basic earnings per common share | $ 0.83 | $ 0.15 | |
Diluted earnings per common share: | |||
Net income attributable to common shareholders | $ 27,113 | $ 4,972 | |
Weighted average common shares outstanding | 32,756,000 | 32,093,000 | |
Dilutive effect of outstanding equity awards | 334,000 | 227,000 | |
Diluted weighted average common shares outstanding | 33,090,000 | 32,320,000 | |
Diluted earnings per common share | $ 0.82 | $ 0.15 | |
Weighted average antidilutive awards excluded from computation of earnings per share | 18,000 | 382,000 | |
Series B Convertible Preferred Stock, shares outstanding | 252,530 | 252,500 | |
Series B Preferred Stock | |||
Diluted earnings per common share: | |||
Weighted average antidilutive awards excluded from computation of earnings per share | 5,000,000 | 5,000,000 | |
Series B Convertible Preferred Stock, shares outstanding | 252,500,000 | 252,500,000 |
Debt - Schedule of Long Term De
Debt - Schedule of Long Term Debt (Details) - USD ($) $ in Thousands | Mar. 28, 2021 | Dec. 27, 2020 |
Debt | ||
Outstanding debt | $ 350,000 | $ 350,000 |
Unamortized debt issuance costs | (1,462) | (1,708) |
Current portion of long-term debt | (20,000) | (20,000) |
Total long-term debt, net | $ 328,538 | $ 328,292 |
Debt - Credit Agreements (Detai
Debt - Credit Agreements (Details) | 3 Months Ended | ||
Mar. 28, 2021USD ($)item$ / shares | Mar. 29, 2020USD ($) | Dec. 27, 2020USD ($) | |
Debt | |||
Outstanding debt | $ 350,000,000 | $ 350,000,000 | |
Quarterly dividend paid per common share (in dollars per share) | $ / shares | $ 0.225 | ||
Dividends paid to common shareholders | $ 7,404,000 | $ 7,237,000 | |
Debt issuance costs | $ 1,462,000 | 1,708,000 | |
PJI Facilities | |||
Debt | |||
Number of quarters in interest margin period | item | 4 | ||
Line of credit facility, remaining availability | $ 339,200,000 | ||
PJI Facilities | Minimum | Modification of financial covenants beginning in the third quarter of 2018 | |||
Debt | |||
Fixed charge coverage ratio | 2.50 | ||
PJI Facilities | Maximum | Ability to make dividends and distributions based on Leverage Ratio | |||
Debt | |||
Quarterly dividend paid per common share (in dollars per share) | $ / shares | $ 0.225 | ||
Dividends paid to common shareholders | $ 35,000,000 | ||
Leverage Ratio | 3.75 | ||
PJI Facilities | Maximum | Modification of financial covenants beginning in the third quarter of 2018 | |||
Debt | |||
Leverage Ratio | 4.25 | ||
PJI Facilities | Maximum | Modification of financial covenants by 2022 | |||
Debt | |||
Leverage Ratio | 4 | ||
PJI Facilities | Maximum | Option to increase the Revolving Facility or the Term Loan Facility | |||
Debt | |||
Leverage Ratio | 4 | ||
Additional amount that company has option to increase borrowing capacity | $ 300,000,000 | ||
PJI Facilities | LIBOR | Minimum | |||
Debt | |||
Interest margin rate on debt | 1.25% | ||
PJI Facilities | LIBOR | Maximum | |||
Debt | |||
Interest margin rate on debt | 2.50% | ||
PJI Facilities | Base rate | Minimum | |||
Debt | |||
Interest margin rate on debt | 0.25% | ||
PJI Facilities | Base rate | Maximum | |||
Debt | |||
Interest margin rate on debt | 1.50% | ||
PJMF Revolving Facility | |||
Debt | |||
Line of credit facility, maximum borrowing capacity | $ 20,000,000 | ||
Outstanding debt | $ 0 | $ 0 | |
Applicable interest rate | 3.40% | ||
PJMF Revolving Facility | One-month LIBOR | |||
Debt | |||
Interest margin rate on debt | 1.75% | ||
Revolving Facility | PJI Facilities | |||
Debt | |||
Line of credit facility, maximum borrowing capacity | $ 400,000,000 | ||
Outstanding debt | 15,000,000 | ||
Line of credit facility, maximum borrowing capacity of foreign currencies | 35,000,000 | ||
Term Loan Facility | PJI Facilities | |||
Debt | |||
Outstanding debt | 335,000,000 | ||
Quarterly amortization payment | $ 5,000,000 |
Debt - Derivatives (Details)
Debt - Derivatives (Details) $ in Millions | Mar. 28, 2021USD ($) |
Interest rate swap, April 2018, 2.33% fixed | |
Interest rate swaps | |
Interest rate swap agreement, notional amount | $ 55 |
Interest rate swap agreement, fixed interest rate | 2.33% |
Interest rate swap, April 2018, 2.36% fixed | |
Interest rate swaps | |
Interest rate swap agreement, notional amount | $ 35 |
Interest rate swap agreement, fixed interest rate | 2.36% |
Interest rate swap, April 2018, 2.34% fixed | |
Interest rate swaps | |
Interest rate swap agreement, notional amount | $ 35 |
Interest rate swap agreement, fixed interest rate | 2.34% |
Interest rate swap, January 2018, 1.99% fixed, $100 million notional amount | |
Interest rate swaps | |
Interest rate swap agreement, notional amount | $ 100 |
Interest rate swap agreement, fixed interest rate | 1.99% |
Interest rate swap, January 2018, 1.99% fixed, $75 million notional amount | |
Interest rate swaps | |
Interest rate swap agreement, notional amount | $ 75 |
Interest rate swap agreement, fixed interest rate | 1.99% |
Interest rate swap, January 2018, 2.00% fixed, $50 Million notional amount | |
Interest rate swaps | |
Interest rate swap agreement, notional amount | $ 50 |
Interest rate swap agreement, fixed interest rate | 2.00% |
Interest rate swap | |
Interest rate swaps | |
Interest rate swap agreement, notional amount | $ 350 |
Debt - Interest Rate Swaps (Det
Debt - Interest Rate Swaps (Details) - USD ($) $ in Thousands | Mar. 28, 2021 | Dec. 27, 2020 |
Interest rate swap | Other current and long-term Liabilities | ||
Debt and Credit Arrangements | ||
Derivatives designated as hedging instruments, fair value | $ 11,615 | $ 13,452 |
Debt - Effect of Derivatives on
Debt - Effect of Derivatives on Financial Statements (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 28, 2021 | Mar. 29, 2020 | |
Debt and Credit Arrangements | ||
Total net interest expense on Consolidated Statements of Operations | $ (3,647) | $ (3,967) |
Weighted average interest rates on debt, including the impact of interest rate swap agreements | 3.60% | 3.80% |
Interest paid, including payments made or received under the swaps | $ 3,400 | $ 4,100 |
Interest rate swap | ||
Debt and Credit Arrangements | ||
Portion of derivative liability that would be reclassified into earnings | 11,600 | |
Interest expense | Interest rate swap | ||
Debt and Credit Arrangements | ||
Amount of Gain or (Loss) Recognized in AOCI/AOCL on Derivative | 1,382 | (8,408) |
Amount of Gain or (Loss) Reclassified from AOCI/AOCL into Income | (1,709) | (330) |
Total net interest expense on Consolidated Statements of Operations | 3,647 | $ 3,967 |
Portion of derivative liability that would be reclassified into earnings | $ 7,100 | |
Estimate of period of time over which portion of derivative liability would be reclassified into earnings | 12 months |
Commitments and Contingencies (
Commitments and Contingencies (Details) - Durling et al v. Papa John's International, Inc. | Mar. 28, 2021USD ($) | Oct. 29, 2018employee |
Loss Contingencies [Line Items] | ||
Approximate number of employees who opted into the class action | employee | 9,571 | |
Expected future costs | $ | $ 0 |
Strategic Corporate Reorganiz_3
Strategic Corporate Reorganization for Long-term Growth (Details) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Mar. 28, 2021USD ($) | Mar. 28, 2021USD ($) | Dec. 26, 2021USD ($) | Sep. 17, 2020ft² | |
New Corporate Headquarters | ||||
Square footage of new leased facilities | ft² | 60,000 | |||
Restructuring costs | $ 9,900 | |||
Restructuring Reserve [Roll Forward] | ||||
Restructuring reserve, beginning balance | $ 4,861 | |||
Charges | 3,883 | |||
Payments | (5,304) | |||
Restructuring reserve, ending balance | 3,440 | 3,440 | ||
Employee severance and other employee transition costs | ||||
New Corporate Headquarters | ||||
Restructuring costs | 6,800 | |||
Restructuring Reserve [Roll Forward] | ||||
Restructuring reserve, beginning balance | 4,615 | |||
Charges | 2,037 | |||
Payments | (3,847) | |||
Restructuring reserve, ending balance | 2,805 | 2,805 | ||
Relocation costs | ||||
New Corporate Headquarters | ||||
Restructuring costs | 800 | |||
Restructuring Reserve [Roll Forward] | ||||
Restructuring reserve, beginning balance | 101 | |||
Charges | 546 | |||
Payments | (133) | |||
Restructuring reserve, ending balance | 514 | 514 | ||
Recruiting and professional fees | ||||
New Corporate Headquarters | ||||
Restructuring costs | 2,500 | |||
Restructuring Reserve [Roll Forward] | ||||
Restructuring reserve, beginning balance | 145 | |||
Charges | 860 | |||
Payments | (884) | |||
Restructuring reserve, ending balance | 121 | 121 | ||
Other costs | ||||
New Corporate Headquarters | ||||
Restructuring costs | 700 | |||
Restructuring Reserve [Roll Forward] | ||||
Charges | 440 | |||
Payments | $ (440) | |||
Stock-based compensation benefit | ||||
New Corporate Headquarters | ||||
Restructuring costs | $ (900) | |||
Forecast | Minimum | ||||
New Corporate Headquarters | ||||
Reorganizational expected costs | $ 5,000 | |||
Forecast | Maximum | ||||
New Corporate Headquarters | ||||
Reorganizational expected costs | 10,000 | |||
Forecast | Employee severance and other employee transition costs | Minimum | ||||
New Corporate Headquarters | ||||
Reorganizational expected costs | 2,000 | |||
Forecast | Employee severance and other employee transition costs | Maximum | ||||
New Corporate Headquarters | ||||
Reorganizational expected costs | 3,000 | |||
Forecast | Relocation and recruiting costs | Minimum | ||||
New Corporate Headquarters | ||||
Reorganizational expected costs | 2,000 | |||
Forecast | Relocation and recruiting costs | Maximum | ||||
New Corporate Headquarters | ||||
Reorganizational expected costs | 5,000 | |||
Forecast | Other costs | Minimum | ||||
New Corporate Headquarters | ||||
Reorganizational expected costs | 1,000 | |||
Forecast | Other costs | Maximum | ||||
New Corporate Headquarters | ||||
Reorganizational expected costs | 2,000 | |||
Forecast | One-time corporate reorganization costs | Minimum | ||||
New Corporate Headquarters | ||||
Reorganizational expected costs | 15,000 | |||
Forecast | One-time corporate reorganization costs | Maximum | ||||
New Corporate Headquarters | ||||
Reorganizational expected costs | $ 20,000 |
Segment Information - Concentra
Segment Information - Concentration (Details) | 3 Months Ended |
Mar. 28, 2021entitysegment | |
Major customers disclosures | |
Number of reportable segments | segment | 4 |
Consolidated revenues | |
Major customers disclosures | |
Concentration risk, number | entity | 0 |
Segment Information - Schedule
Segment Information - Schedule of Segment Reporting Information, by Segment (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 28, 2021 | Mar. 29, 2020 | Dec. 27, 2020 | |
Segment Information | |||
Total revenues | $ 511,746 | $ 409,859 | |
Operating income | 46,862 | 15,472 | |
Income before income taxes | 43,215 | 11,505 | |
Accumulated depreciation and amortization | (502,626) | ||
Property and equipment, net | 195,083 | $ 200,895 | |
Domestic Company-owned restaurants | |||
Segment Information | |||
Total revenues | 197,234 | 161,440 | |
North America commissary | |||
Segment Information | |||
Total revenues | 184,878 | 155,422 | |
North America commissaries | |||
Segment Information | |||
Total revenues | 184,878 | 155,422 | |
North America franchising | |||
Segment Information | |||
Total revenues | 32,715 | 19,440 | |
International | |||
Segment Information | |||
Total revenues | 34,607 | 26,059 | |
Other segment | |||
Segment Information | |||
Total revenues | 62,312 | 47,498 | |
Operating segments | |||
Segment Information | |||
Total revenues | 511,746 | 409,859 | |
Operating segments | Domestic Company-owned restaurants | |||
Segment Information | |||
Total revenues | 197,234 | 161,440 | |
Operating income | 15,324 | 8,667 | |
Property and equipment, gross | 230,302 | ||
Operating segments | North America commissary | |||
Segment Information | |||
Total revenues | 184,878 | 155,422 | |
Operating income | 9,713 | 7,660 | |
Property and equipment, gross | 145,432 | ||
Operating segments | North America commissaries | |||
Segment Information | |||
Total revenues | 184,878 | 155,422 | |
Operating segments | North America franchising | |||
Segment Information | |||
Total revenues | 32,715 | 19,440 | |
Operating income | 30,443 | 17,326 | |
Operating segments | International | |||
Segment Information | |||
Total revenues | 42,604 | 32,152 | |
Operating income | 8,364 | 4,379 | |
Property and equipment, gross | 14,169 | ||
Operating segments | Other segment | |||
Segment Information | |||
Total revenues | 54,315 | 41,405 | |
Operating income | 6,118 | (198) | |
Property and equipment, gross | 92,961 | ||
Elimination | |||
Segment Information | |||
Total revenues | (72,278) | (66,135) | |
Operating income | 62 | (186) | |
Elimination | North America commissary | |||
Segment Information | |||
Total revenues | (52,070) | (44,506) | |
Elimination | North America commissaries | |||
Segment Information | |||
Total revenues | (52,070) | (44,506) | |
Elimination | North America franchising | |||
Segment Information | |||
Total revenues | (1,060) | (674) | |
Elimination | Other segment | |||
Segment Information | |||
Total revenues | (19,148) | (20,955) | |
Unallocated corporate | |||
Segment Information | |||
Operating income | (23,162) | $ (22,176) | |
Property and equipment, gross | $ 214,845 |
Segment Information - Disaggreg
Segment Information - Disaggregation of Revenue (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 28, 2021 | Mar. 29, 2020 | |
Revenue disaggregation | ||
Total revenues | $ 511,746 | $ 409,859 |
Domestic Company-owned restaurants | ||
Revenue disaggregation | ||
Total revenues | 197,234 | 161,440 |
North America franchising | ||
Revenue disaggregation | ||
Total revenues | 32,715 | 19,440 |
North America commissaries | ||
Revenue disaggregation | ||
Total revenues | 184,878 | 155,422 |
International. | ||
Revenue disaggregation | ||
Total revenues | 34,607 | 26,059 |
International. | International other revenue | ||
Revenue disaggregation | ||
Total revenues | (7,997) | (6,093) |
All others | ||
Revenue disaggregation | ||
Total revenues | 62,312 | 47,498 |
All others | International other revenue | ||
Revenue disaggregation | ||
Total revenues | 7,997 | 6,093 |
Operating segments | ||
Revenue disaggregation | ||
Total revenues | 511,746 | 409,859 |
Operating segments | Company-owned Restaurants | ||
Revenue disaggregation | ||
Total revenues | 197,234 | 161,440 |
Operating segments | Franchise royalties and fees | ||
Revenue disaggregation | ||
Total revenues | 45,983 | 29,630 |
Operating segments | Commissary Sales | ||
Revenue disaggregation | ||
Total revenues | 259,347 | 216,471 |
Operating segments | Other Sales | ||
Revenue disaggregation | ||
Total revenues | 81,460 | 68,453 |
Operating segments | Domestic Company-owned restaurants | ||
Revenue disaggregation | ||
Total revenues | 197,234 | 161,440 |
Operating segments | Domestic Company-owned restaurants | Company-owned Restaurants | ||
Revenue disaggregation | ||
Total revenues | 197,234 | 161,440 |
Operating segments | North America franchising | ||
Revenue disaggregation | ||
Total revenues | 32,715 | 19,440 |
Operating segments | North America franchising | Franchise royalties and fees | ||
Revenue disaggregation | ||
Total revenues | 33,775 | 20,114 |
Operating segments | North America commissaries | ||
Revenue disaggregation | ||
Total revenues | 184,878 | 155,422 |
Operating segments | North America commissaries | Commissary Sales | ||
Revenue disaggregation | ||
Total revenues | 236,948 | 199,928 |
Operating segments | International. | ||
Revenue disaggregation | ||
Total revenues | 42,604 | 32,152 |
Other revenue from marketing fund contributions and sublease rental income | 8,000 | 6,100 |
Operating segments | International. | Franchise royalties and fees | ||
Revenue disaggregation | ||
Total revenues | 12,208 | 9,516 |
Operating segments | International. | Commissary Sales | ||
Revenue disaggregation | ||
Total revenues | 22,399 | 16,543 |
Operating segments | International. | Other Sales | ||
Revenue disaggregation | ||
Total revenues | 7,997 | 6,093 |
Operating segments | All others | ||
Revenue disaggregation | ||
Total revenues | 54,315 | 41,405 |
Operating segments | All others | Other Sales | ||
Revenue disaggregation | ||
Total revenues | 73,463 | 62,360 |
Elimination | ||
Revenue disaggregation | ||
Total revenues | (72,278) | (66,135) |
Elimination | North America franchising | ||
Revenue disaggregation | ||
Total revenues | (1,060) | (674) |
Elimination | North America commissaries | ||
Revenue disaggregation | ||
Total revenues | (52,070) | (44,506) |
Elimination | All others | ||
Revenue disaggregation | ||
Total revenues | $ (19,148) | $ (20,955) |