Pizza delivery and carryout restaurant operator Papa John's International Inc. (PZZA) said Tuesday that second quarter profit nearly doubled from last year, helped by comparable sales growth, lower expenses, and a gain from the consolidation of its cheese purchasing company, BIBP Commodities. In addition, the company also tightened its earnings outlook for the full year 2009, reflecting the continued concern over the uncertainty of the economic environment, including consumer spending.
Net income for the second quarter was $14.2 million or $0.51 per share, compared to $7.6 million or $0.27 per share in the prior year quarter. Result for the latest quarter included after-tax income of $4.2 million or $0.15 per share, from the consolidation of the results of the franchisee-owned cheese purchasing company, BIBP Commodities Inc., a variable interest entity.
Excluding items, net income fell to $10.0 million or $0.36 per share from $11.7 million or $0.41 per share in the year-ago quarter. On average, 5 analysts polled by Thomson Reuters expected the company to report earnings of $0.34 per share for the second quarter. Analysts' estimates typically exclude special items.
The Louisville, Kentucky-based company's second quarter revenues declined 2.4% to $276.6 million from $283.4 million in the same quarter of last year. Four analysts had a consensus revenue estimate of $272.70 million for the second quarter.
Domestic system-wide comparable sales for the second quarter increased 0.1%, which comprised of a 0.4% decrease at company-owned restaurants and a 0.2% increase at franchised restaurants.
International franchise sales grew by 16% to $63.9 million in the second quarter of 2009. Excluding the negative impact of foreign exchange rates, sales growth would have been about 32%.
Total costs and expenses for the second quarter eased to $252.0 million from $268.9 million in the year-ago quarter.
During the second quarter of 2009, the company opened 11 domestic franchised restaurants and 29 international restaurants, while it closed 18 domestic restaurants and 8 international franchised restaurants.
Also, during the quarter, the company acquired 11 franchised Papa John's restaurants in West Palm Beach Florida, which were adjacent to other company-owned restaurants, for a purchase price of $2.8 million, which included the cancellation of a $2.3 million bridge loan issued in March 2009 and a cash payment of $500,000. The company said it recorded goodwill of $1.5 million related to this transaction.
The company also said that it currently has no plans for any additional significant acquisitions or dispositions during the remainder of 2009.
The company did not repurchase any shares of its common stock during the latest quarter. Under its current authorization, the company had $57.3 million remaining available for the repurchase of common stock as of June 28, 2009.
For the first-half of 2009, net income was $32.0 million or $1.15 per share, compared to $16.3 million or $0.57 per share for the comparable period of 2008.
Net income, excluding items, dropped to $22.0 million or $0.79 per share from $26.2 million or $0.91 per share in the prior year period.
Revenues decreased 1.9% to $561.6 million from $572.4 million in the previous year period.
For 2009, the company now expects earnings of $1.38 to $1.44 per share, compared to its previous estimate of $1.36 to $1.44 per share. The company now expects full-year domestic system-wide comparable sales to a range of flat to negative 1% from its prior expectation of a range of flat to negative 2%. Street expects earnings of $1.47 per share on revenue of $1.11 billion for the year.
The company noted that the earnings outlook excludes any impact from the consolidation of the results of BIBP.
PZZA closed Tuesday's regular trading session at $25.46, down 7 cents. In the after-hours, the shares further lost 51 cents or 2.00%.
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