Papa John’s(PZZA)2022-08-03 16:00Restaurant Operations - As of June 26, 2022, Papa John's operates 5,571 restaurants, including 519 company-owned and 5,052 franchised locations across 49 countries[97]. - The company expects to open between 280 and 320 net new restaurants in 2022, with a long-term goal of 1,400 to 1,800 new locations by the end of 2025[99]. - Papa John's reported a total system-wide restaurant sales growth of 2.6% for Q2 2022, compared to 12.2% in Q2 2021[108]. Financial Performance - Total revenues for Q2 2022 were $522.7 million, a 1.5% increase from $515.0 million in Q2 2021[111]. - Operating income for Q2 2022 was $38.9 million, representing 7.4% of total revenues, down from 8.7% in Q2 2021[111]. - Total revenues increased by $38.6 million, or 3.8%, to $1.1 billion for the six months ended June 26, 2022, compared to the prior year[113]. - Domestic Company-owned restaurant sales decreased by $23.2 million, or 5.9%, for the six months ended June 26, 2022, compared to the prior year[114]. - North America franchise royalties and fees increased by $4.0 million, or 6.1%, for the six months ended June 26, 2022, compared to the prior year[115]. - North America commissary revenues increased by $57.5 million, or 15.5%, for the six months ended June 26, 2022, primarily due to higher pricing[118]. - International revenues decreased by $5.6 million, or 7.8%, for the six months ended June 26, 2022, primarily due to lower UK commissary revenues[119]. - Operating income decreased by $38.2 million to $53.3 million for the six months ended June 26, 2022, compared to the prior year[128]. - Adjusted net income attributable to common shareholders for the six months ended June 26, 2022, was $60.7 million, down 7.3% from $65.9 million in the same period of 2021[145]. Costs and Expenses - Total costs and expenses were approximately $1.0 billion, or 93.9% of total revenues for the six months ended June 26, 2022, compared to $935.3 million, or 91.1% for the prior year[122]. - General and administrative expenses were $110.6 million, or 10.4% of revenues for the six months ended June 26, 2022, compared to $103.7 million, or 10.1% for the prior year[127]. - Inflationary pressures have led the company to implement strategic price increases to offset rising costs, while maintaining a focus on premium product offerings[103]. Special Items and Charges - The company recorded a one-time, non-cash charge of $17.4 million related to the suspension of franchisee support in Russia due to geopolitical issues[101]. - Special items included a one-time, non-cash provision of $14.6 million related to the conflict in Ukraine for the six months ended June 26, 2022[127]. - The company recorded a one-time, non-cash charge of $14.6 million related to accounts receivable due to the conflict in Ukraine[133]. Cash Flow and Financing - Cash flow provided by operating activities was $45.6 million for the six months ended June 26, 2022, a decrease of 64.3% from $128.0 million in the corresponding period of 2021[149]. - Free cash flow for the six months ended June 26, 2022, was $14.8 million, significantly lower than $100.1 million for the same period in 2021[163]. - Total cash used in financing activities was $50.7 million for the six months ended June 26, 2022, compared to $142.9 million in the same period of 2021, reflecting a decrease of 64.7%[152]. - Outstanding debt as of June 26, 2022, was $545.0 million, consisting of $400.0 million in senior notes and $145.0 million under the revolving credit facility[153]. Market and Economic Conditions - Inflationary pressures have led to increased food and labor costs, which may continue to impact profitability[142]. - The company is exposed to labor cost increases, food costs, and sustained higher operating costs due to supply chain disruptions and inflation[167]. - The company anticipates potential delays in new store openings both domestically and internationally due to various risks[167]. - The company has not historically hedged its exposure to foreign currency fluctuations, which can adversely impact revenues and cash flows[171]. Shareholder Returns - The company declared a second quarter dividend of $0.42 per common share, totaling approximately $14.9 million, to be paid on August 26, 2022[161]. - The company repurchased 452,000 shares at an average price of $94.56 per share for a total cost of $42.8 million during the three months ended June 26, 2022[158]. Pricing and Commodity Costs - The average block price for cheese is projected to be $2.091 for the full year 2022, compared to an actual average block price of $1.705 for 2021[174]. - The actual average block price for cheese in Quarter 2 of 2022 was $2.296, significantly higher than the $1.680 in Quarter 2 of 2021[174]. - The company has pricing agreements with some vendors, including forward pricing agreements for a portion of cheese purchases, but remains exposed to ongoing commodity volatility[172].