Papa John's International Inc. (NASDAQ:PZZA) Q4 2016 Earnings Conference Call Transcript

Feb 22, 2017 • 10:00 am ET

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Papa John's International Inc. (NASDAQ:PZZA) Q4 2016 Earnings Conference Call Transcript

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Presentation
Operator
operator

Good day, ladies and gentlemen. Welcome to the Papa John's Fourth Quarter 2016 Conference Call and Webcast. (Operator Instructions).

I would now like to introduce your host for conference call, Mr. Lance Tucker, CFO. You may begin, sir.

Executive
Lance Tucker

Thank you, Kevin. Good morning. Joining me on the call today are our Founder, Chairman and CEO, John Schnatter, and our President and COO, Steve Ritchie, as well as other members of our senior management team. After the financial update, John and Steve will have comments about our business and the management team will then be available for Q&A.

(Forward-Looking Cautionary Statements). Unless otherwise noted, all comparisons are versus the comparable periods from a year ago. This call is being taped and the replay will be available for limited time on our website and in downloadable podcast format.

Now for discussion of our fourth quarter operating results. Diluted EPS in the fourth quarter was $0.88 on a GAAP basis. Excluding special items, adjusted EPS was $0.69, up 11% over 2015. We ended the full-year 2016 with diluted EPS of $2.74 on a GAAP basis. Excluding the special items, adjusted EPS was $2.55, an increase of 22% over adjusted 2015 EPS. Fourth quarter revenues were up 5.5%, mostly driven by 3.8% higher comp sales in our North American restaurants. In addition, international revenues were up nearly 9%. We opened 126 net global units in the fourth quarter and 204 for the full-year, with 151 on the international side and 53 in North America.

On a business segment basis, adjusted operating income for domestic company-owned restaurants increased $1.2 million, due mainly to 4.8% comp sales increases, a 3.2% increase in units and lower commodities. These increases were partially offset by increased labor costs and higher non-owned automobile insurance costs. Operating income for the North American franchising segment was up $2 million, due primarily to 3.4% comps and lower sales and development incentives. Operating income for our domestic commissary segment was down $200,000, due to planned lower margins to attain our annual profit commitment. This was a timing difference only, as our full-year results were higher due to higher restaurant sales volumes.

Fourth quarter operating results for our international segment decreased approximately $300,000. We generated 5.6% comps and did unit growth. However, the higher profits that resulted were offset by a negative foreign exchange of $800,000 and the timing of marketing spend in the United Kingdom. Our unallocated corporate expenses, excluding special items, increased versus 2015 by $700,000, primarily due to an increase in salaries and benefits, including higher incentive compensation from higher annual operating profits as well as higher interest expense. Lower medical claims costs partially offset these increases.

Our effective tax rate was 32.2% in the fourth quarter and 31.3% for the year, with each approximating the prior year's tax rate. We repurchased $13 million of stock during the quarter and $122 million for the year at an average price of about $57 and currently have just under $130 million of remaining share repurchase