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Papa John's To Restate Results, Q4 Profit Misses Estimates

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2/26/2013 11:19 PM ET

Shares of Papa John's International Inc. (PZZA: Quote) tumbled more than 8 percent in extended trading on Tuesday after the pizza chain said it will restate its financial results for fiscal years 2009, 2010 and 2011 as well as the first three quarter of fiscal 2012 due to an accounting error in a joint venture agreement.

In addition, the Louisville, Kentucky-based company reported a 9 percent increase in profit for the fourth quarter on higher revenues and comparable sales. However, both revenue and earnings per share missed analysts' estimates. The company also forecast fiscal 2013 earnings below Street expectations.

Papa John's said it will restate its previously issued consolidated financial statements for the years ended December 27, 2009, December 26, 2010 and December 25, 2011 to correct an error that occurred in the accounting for one of its joint venture agreements.

Papa John's will also restate its results for the first, second and third quarters of 2012. However, the company noted that the corrections had no impact on total revenues, operating income, or operating cash flows, and also had no impact on the company's compliance with debt covenants in any periods presented. Further, the company does not expect the corrected accounting treatment to have a meaningful impact on its operating results in future periods.

Accordingly, Papa John's restated its net income for 2011 to $54.74 million or $2.16 per share, from the previously reported $55.66 million or $2.20 per share. Net income for 2010 has been restated to $52.58 million or $1.99 per share, from $51.94 million, or $1.96 per share.

For 2009, Papa John's restated its net income to $53.73 million or $1.93 per share, from $57.45 million or $2.06 per share. The company recorded a $3.72 million charge, net of income taxes, to 2009 retained earnings in its consolidated statements of stockholders' equity to adjust the previously reported balance to its redemption value as of December 27, 2009.

System-wide comparable sales for the fourth quarter of fiscal 2012 increased 5.2 percent for North America and 7.0 percent for the International segment. Global restaurant sales growth was 19.6 percent, compared to growth of 6.0 percent in the year-ago period.

Domestic company-owned restaurant sales for the quarter grew 24 percent from the year-ago period, while North America franchise royalty revenue increased 18 percent, domestic commissary sales rose 16 percent and International revenues increased 29 percent.

Papa John's fourth-quarter net income was $17.36 million or $0.74 per share, up from restated earnings of $15.89 million or $0.65 per share in the year-ago period. Earnings per share for the latest quarter includes a benefit of $0.11 from a 53rd week of operations.

On average, four analysts polled by Thomson Reuters expected the company to report earnings of $0.76 per share for the quarter.

The company reported adjusted net income for the quarter of $14.56 million or $0.62 per share.

Total revenues for the quarter grew 20 percent to $367.28 million from $306.21 million in the same period last year. However, adjusted revenues for the quarter were $345.78 million. Analysts had a consensus revenue estimate of $348.31 million.

For fiscal 2012, Papa Pizza's net income increased to $61.66 million or $2.58 per share from $54.74 million or $2.16 per share in the previous year. Excluding the benefit from the 53rd week of operations, adjusted net income for the year was $60.98 million or $2.55.

Revenues for the year grew 10 percent to $1.34 billion from $1.22 billion last year.

Analysts expected the company to earn $2.62 per share for the year on revenues of $1.32 billion.

Papa John's said that its development pipeline as of December 30, 2012 included about 1,400 restaurants - 300 restaurants in North America and 1,100 restaurants internationally- the majority of which are scheduled to open over the next six years.

Looking ahead to fiscal 2013, Papa John's forecasts earnings per share in a range of $2.85 to $2.95, representing an increase of 10 to 14 percent over the preceding year.

The company projects total consolidated revenues for the year to increase 6 to 7 percent, or 8 to 9 percent excluding the impact of the 53rd week of operations in 2012.

Street expects the company to earn $3.00 per share for the year on revenues of $1.40 billion.

PZZA closed Tuesday's trading at $56.65, up $0.64 or 1.14 percent on a volume of 294,353 shares. However, in after-hours, the stock declined $4.65 or 8.21 percent to $52.00.

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by RTT Staff Writer

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