Papa Johnís Results

Papa Johnís Announces Second Quarter 2018 Results and Updates 2018 Outlook

System-wide North America comparable sales decrease of 6.1% - International comparable sales decrease of 0.8%; total international sales increase of 12.2%, driven by unit growth

Papa John’s

Papa John’s International, Inc. (NASDAQ: PZZA) today announced financial results for the three and six months ended July 1, 2018.

Highlights

 

  • Earnings per diluted share of $0.36 and adjusted earnings per diluted share of $0.49 in the second quarter of 2018, excluding the impact of China refranchising; adjusted earnings per diluted share down 24.6% from the second quarter 2017 of $0.65
  • System-wide North America comparable sales decrease of 6.1%
  • International comparable sales decrease of 0.8%; total international sales increase of 12.2%, driven by unit growth
  • 35 net unit openings in second quarter of 2018 driven by international operations
  • Company completed the refranchising of 34 company-owned restaurants in China during Q2
  • Cash flow from operations of $74.2 million; free cash flow of $52.6 million for the first six months of 2018
  • 2018 outlook revised downward including lowered adjusted EPS range of $1.30 to $1.80 as a result of negative sales trends

“Earlier this year, we began implementing key changes in how we operate and market our products to refocus on quality and better connect with customers,” said Steve Ritchie, President and CEO of Papa John’s. “While results have been challenged by recent events, we are committed to these strategic priorities and continue to believe that they will lead to enhanced performance. We have also begun an external audit of Papa John’s culture and will address any improvements that are recommended at its conclusion. Our entire leadership team understands the importance of getting our culture and business improvements right. We have important work ahead of us, and I feel certain that with the collective efforts of our 120,000 corporate and franchise team members that the best days for Papa John’s are ahead.”

 

Operating Highlights

 

   

(In thousands, except per share amounts)

 
Three Months Ended Six Months Ended

July 1,

2018

 

June 25,

2017

 

Increase /

(Decrease)

%

 

July 1,

2018

 

June 25,

2017

 

Increase /

(Decrease)

%

 
Total revenue $ 407,959 $ 434,778 (6.2 %) $ 835,328 $ 884,044 (5.5 %)
Income before income taxes 19,705 35,458 (44.4 %) 42,067 77,329 (45.6 %)
Net income 11,791 23,538 (49.9 %) 28,528 51,966 (45.1 %)
Diluted EPS $ 0.36 $ 0.65 (44.6 %) $ 0.86 $ 1.42 (39.4 %)
Diluted EPS, adjusted $ 0.49 $ 0.65 (24.6 %) $ 0.98 $ 1.42 (31.0 %)
 

 

All operating highlights are compared to the same period of the prior year, unless otherwise noted.

 

Adjusted financial results excluding Special items, which impact comparability, are summarized in the following reconciliation. The table reconciles our GAAP financial results to our adjusted financial results, which are non-GAAP measures. All highlights are compared to the same period of the prior year, unless otherwise noted.

 

  Three Months Ended     Six Months Ended
Jul. 1,   Jun. 25, Jul. 1,   Jun. 25,
(In thousands, except per share amounts) 2018 2017 2018 2017
 
GAAP Income before income taxes $ 19,705

 

$ 35,458 $ 42,067 $ 77,329
Special items:
Refranchising losses, net   2,122

 

  -   1,918   -
Adjusted income before income taxes $ 21,827

 

$ 35,458 $ 43,985 $ 77,329
 
GAAP Net income $ 11,791 $ 23,538 $ 28,528 $ 51,966
Special items:
Refranchising losses, net (1) 1,647 - 1,488 -
Tax impact of China refranchising   2,435   -   2,435   -
Adjusted net income $ 15,873 $ 23,538 $ 32,451 $ 51,966
 
GAAP Diluted earnings per share $ 0.36 $ 0.65 $ 0.86 $ 1.42
Special items:
Refranchising losses, net 0.05 - 0.05 -
Tax impact of China refranchising   0.08   -   0.07   -
Adjusted diluted earnings per share $ 0.49 $ 0.65 $ 0.98 $ 1.42
 
(1) Tax effect was calculated using the company's marginal rate of 22.4%.
 

 

On June 15, 2018, we refranchised our China operations including our 34 company-owned restaurants and the quality control center. The refranchising losses, net of tax, of $1.6 million for the second quarter of 2018 and $1.5 million for the six months ended July 1, 2018 are primarily driven by this China refranchise. We also had $2.4 million of additional tax expense associated with the China refranchise. This additional tax expense is primarily attributable to the required recapture of operating losses previously taken by Papa John’s International.

 

The non-GAAP adjusted results shown above should not be construed as a substitute for or a better indicator of the company’s performance than the company’s GAAP results. Management believes presenting the financial information excluding these Special items is important for purposes of comparison to prior year results. In addition, management uses these metrics to evaluate the company’s underlying operating performance, to analyze trends, and to determine compensation.

 

Consolidated revenues decreased $26.8 million, or 6.2%, for the second quarter of 2018 and decreased $48.7 million, or 5.5%, for the six months ended July 1, 2018. These decreases were primarily due to lower comparable sales for North America restaurants that resulted in lower company-owned restaurant revenues, lower royalties and decreased North America commissary sales. These decreases were somewhat offset by higher International revenues due to an increase in equivalent units and the favorable impact of foreign exchange rates and the impact of higher commodity prices on North America commissary revenues. Additionally, 2018 included an increase in revenues of approximately $1.8 million and $4.3 million for the quarter and six months ended July 1, 2018, respectively, primarily due to the required reporting of franchise marketing fund contributions as revenues (previously netted with expenses) under the newly adopted revenue recognition standard, Revenue from Contracts with Customers (“Topic 606”); see the “Revenue Recognition and Income Statement Presentation” section below for more details.

 

Consolidated income before income taxes of $19.7 million for the second quarter of 2018 decreased $15.8 million, or 44.4%, compared to the second quarter of 2017. Income before income taxes, as a percentage of consolidated revenues, was 4.8% for the second quarter of 2018, as compared to 8.2% for the second quarter of 2017. The $15.8 million decrease was primarily driven by lower North America revenues as explained above, higher restaurant operating costs, higher interest expense and a loss on the sale of our China operations. Significant changes in the components of income before income taxes are as follows:

 

  • Domestic Company-owned restaurants operating margin decreased $6.7 million, or 1.4% as a percentage of related revenues, primarily due to lower comparable sales of 7.2% and increased operating costs including higher commodities and minimum wages as well as increased non-owned automobile costs. Additionally, the adoption of Topic 606 reduced the restaurant operating margin due to the revised method of accounting for the customer loyalty program.
  • North America franchise royalties and fees decreased $2.7 million, or 10.1% as compared to the second quarter of 2017, primarily due to lower comparable sales of 5.7% and an increase in franchise royalty waivers.
  • North America commissary operating margin decreased $400,000, and remained flat as a percentage of related revenues, primarily due to lower sales volumes.
  • International operating margin increased $800,000, or 0.6% as a percentage of related revenues, primarily due to higher royalties from increased equivalent units and higher income from the United Kingdom Quality Control Center.
  • Other operating margin decreased $1.2 million, or 6.3%, primarily due to higher costs related to various technology initiatives and increased advertising spend in the United Kingdom. The “Revenue Recognition and Income Statement Presentation” section below provides more information on our “Other revenues” and “Other expenses” income statement line items.
  • General and administrative (“G&A”) costs decreased $1.5 million, or 3.8%, primarily due to lower management incentive and benefit costs as well as a shift in the timing of the annual operators’ conference to the third quarter of 2018. These cost decreases were partially offset by an increase in various technology initiative costs and higher bad debt expenses.
  • Refranchising losses of $2.1 million were incurred in the second quarter of 2018 primarily related to the refranchising of China, as previously discussed.
  • Net interest expense increased $3.9 million for the second quarter due to an increase in average outstanding debt, which is primarily due to share repurchases, as well as higher interest rates.

For the six months ended July 1, 2018 consolidated income before income taxes was $42.1 million, a decrease of $35.3 million, or 45.6%, compared to the six months ended June 25, 2017. Income before income taxes, as a percentage of consolidated revenues, was 5.0% for the six months ended July 1, 2018 compared to 8.7% for the six months ended June 25, 2017. These decreases were primarily due to the same reasons noted above for the three-month period. In addition, for the six months ended July 1, 2018, G&A expenses increased $1.8 million, or 2.3%, primarily due to an increase in various technology initiative costs and higher bad debt expenses and legal fees.

 

Operating margin is not a measurement defined by GAAP and should not be considered in isolation, or as an alternative to evaluation of the company’s financial performance. In addition to an evaluation of GAAP consolidated income before income taxes, we believe the presentation of operating margin is beneficial as it represents an additional measure used by the company to further evaluate operating efficiency and performance of the various business units. Additionally, operating margin discussion may be helpful for comparison within the industry. The operating margin results detailed herein can be calculated by business unit based on the specific revenue and operating expense line items on the face of the Condensed Consolidated Income Statement. Consolidated income before income taxes reported includes G&A expenses, depreciation and amortization, refranchising losses and net interest expense that have been excluded from this operating margin calculation.

 

The effective income tax rates were 35.7% and 28.6% for the three and six months ended July 1, 2018, respectively, representing an increase of 6.2% and a decrease of 0.5%, respectively, from the prior year comparable periods. The increase for the three months ended July 1, 2018 was due the impact of the China refranchising, as previously discussed. Excluding the China refranchising impact of 12.4% and 5.8%, the effective income tax rates were 23.4% and 22.8% for the three and six months ended July 1, 2018, respectively.

 

Diluted earnings per share decreased 44.6% to $0.36 for the second quarter of 2018 and decreased 39.4% to $0.86 for the six months ended July 1, 2018. Adjusted diluted earnings per share decreased 24.6% to $0.49 for the second quarter of 2018 and 31.0% to $0.98 for the six months ended.

 

Global Restaurant and Comparable Sales Information

 

  Three Months Ended   Six Months Ended

July 1,

2018

 

June 25,

2017

July 1,

2018

 

June 25,

2017

 
Global restaurant sales (decline) / growth (a) (2.3%) 4.1% (1.8%) 4.5%
 

Global restaurant sales growth, excluding the impact of foreign currency (a)

2.3% 5.1% 0.6% 5.3%
 
Comparable sales (decline) / growth (b)
Domestic company-owned restaurants (7.2%) 2.3% (6.7%) 2.7%
North America franchised restaurants (5.7%) 1.1% (5.3%) 1.4%
System-wide North America restaurants (6.1%) 1.4% (5.7%) 1.7%
 
System-wide international restaurants (0.8%) 3.9% (0.3%) 4.9%
 

 

(a) Includes both company-owned and franchised restaurant sales.
 
(b) Represents the change in year-over-year sales for the same base of restaurants for the same fiscal periods. Comparable sales results for restaurants operating outside of the United States are reported on a constant dollar basis, which excludes the impact of foreign currency translation.
 

 

We believe North America, international and global restaurant and comparable sales growth information, as defined in the table above, is useful in analyzing our results since our franchisees pay royalties that are based on a percentage of franchise sales. Franchise sales also generate commissary revenue in the United States and in certain international markets. Franchise restaurant and comparable sales growth information is also useful for comparison to industry trends and evaluating the strength of our brand. Management believes the presentation of franchise restaurant sales growth, excluding the impact of foreign currency, provides investors with useful information regarding underlying sales trends and the impact of new unit growth without being impacted by swings in the external factor of foreign currency. Franchise restaurant sales are not included in company revenues.

 

Free Cash Flow

 

The company’s free cash flow, a non-GAAP financial measure, was as follows for the first six months of 2018 and 2017 (in thousands):

 

  Six Months Ended
July 1,   June 25,
2018 2017
 
Net cash provided by operating activities (a) $ 74,201 $ 77,863
Purchases of property and equipment (b)   (21,562 )   (30,457 )
Free cash flow $ 52,639   $ 47,406  
 

 

(a) The decrease of $3.7 million was primarily due to lower net income somewhat offset by favorable changes in working capital items.
(b) The decrease of $8.9 million was primarily due to higher capital expenditures in 2017 related to the construction of the company’s new domestic commissary in Georgia, which opened in the third quarter of 2017.
 

 

We define free cash flow as net cash provided by operating activities (from the Consolidated Statements of Cash Flows) less the amounts spent on the purchase of property and equipment. We view free cash flow as an important liquidity measure because it is one factor that management uses in determining the amount of cash available for investment. However, it does not represent residual cash flows available for discretionary expenditures. Free cash flow is not a term defined by GAAP, and as a result, our measure of free cash flow might not be comparable to similarly titled measures used by other companies. Free cash flow should not be construed as a substitute for or a better indicator of the company’s liquidity than the company’s GAAP measures.

 

See the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of our Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission (SEC) for additional information concerning our operating results for the three and six months ended July 1, 2018 and cash flow for the six months ended July 1, 2018.

 

Global Restaurant Unit Data

 

At July 1, 2018, there were 5,247 Papa John’s restaurants operating in all 50 states and in 46 international countries and territories, as follows:

 

 

Domestic

Company-

owned

 

Franchised

North

America

 

Total North

America

  International   System-wide

Second Quarter

       
Beginning - April 1, 2018 679 2,745 3,424 1,788 5,212
Opened 1 26 27 61 88
Closed (2 ) (42 ) (44 ) (9 ) (53 )
Acquired - - - 34 34
Sold -     -     -     (34 )   (34 )
Ending - July 1, 2018 678     2,729     3,407     1,840     5,247  
 

Year-to-date

Beginning - December 31, 2017 708 2,733 3,441 1,758 5,199
Opened 5 44 49 114 163
Closed (4 ) (79 ) (83 ) (32 ) (115 )
Acquired - 31 31 34 65
Sold (31 )   -     (31 )   (34 )   (65 )
Ending - July 1, 2018 678     2,729     3,407     1,840     5,247  
 
Unit growth (decline) (30 )   (4 )   (34 )   82     48  
 
% increase (decrease) (4.2 %)   (0.1 %)   (1.0 %)   4.7 %   0.9 %
 

 

The company has added 159 net worldwide units over the trailing four quarters ended July 1, 2018. Our development pipeline as of July 1, 2018 included approximately 1,210 restaurants (140 units in North America and 1,070 units internationally), the majority of which are scheduled to open over the next six years.

 

Share Repurchase Activity

 

The following table reflects our share repurchases for the three and six months ended July 1, 2018 and subsequent repurchases through July 31, 2018 (in thousands):

 

Period      

Number

of Shares

      Cost
           
Three months ended July 1, 2018 490 $ 28,440
Six months ended July 1, 2018 2,491 148,390
July 2, 2018 through July 31, 2018 134 6,518
 

 

There were 32.2 million and 32.9 million diluted weighted average shares outstanding for the three and six months ended July 1, 2018, respectively, representing decreases of 13.6% and 11.9% over the prior year comparable periods. Approximately 31.5 million actual shares of the company’s common stock were outstanding as of July 1, 2018.

 

As previously disclosed, on March 1, 2018 we announced a $100 million accelerated share repurchase agreement (“ASR Agreement”) with Bank of America, N.A. (“BofAML”). Pursuant to the terms of the ASR Agreement, we paid BofAML $100 million in cash. On March 6, 2018, we received an initial delivery of approximately 1.3 million shares of common stock for $78.0 million or 78% of the total ASR Agreement. The remaining $22.0 million of the ASR Agreement was completed May 14, 2018, delivering approximately 400,000 additional shares. Under the completed ASR Agreement, approximately 1.7 million shares were repurchased for $100.0 million.

 

The company does not expect to repurchase any more shares in 2018 after the current trading plan expires in early August.

 

Cash Dividend

 

We paid a cash dividend of approximately $7.2 million ($0.225 per common share) during the second quarter of 2018. Subsequent to the second quarter, on August 1, 2018, our Board of Directors declared a third quarter dividend of $0.225 per common share (approximately $7.2 million based on current shareholders of record). The dividend will be paid on August 24, 2018 to shareholders of record as of the close of business on August 13, 2018. The declaration and payment of any future dividends will be at the discretion of our Board of Directors, subject to the company’s financial results, cash requirements, and other factors deemed relevant by our Board of Directors.

 

Revenue Recognition and Income Statement Presentation

 

On January 1, 2018, we adopted the new revenue recognition standard using the modified retrospective method. Under the modified retrospective method, prior period results were not restated to reflect the impact of Topic 606, resulting in reduced comparability between 2018 and 2017 operating results. The impact of adoption includes the following:

 

 
(in thousands, except for per share amounts)
 
  Three Months Ended   Six Months Ended
July 1, 2018   July 1, 2018
 
Total revenue impact (a) $ 1,814 $ 4,250
Pre-tax income impact (b) (1,375 ) (1,860 )
Diluted EPS (0.03 ) (0.04 )

 

(a) The increase in total revenues of $1.8 million and $4.3 million for the three and six months ended July 1, 2018, respectively, is primarily due to the requirement to present revenues and expenses related to marketing funds we control on a “gross” basis. This increase was partially offset by lower company-owned restaurant revenues attributable to the revised method of accounting for the loyalty program. The marketing fund gross up is reported in the new financial statement line items, Other revenues and Other expenses, as discussed further below.
(b) The $1.4 million and $1.9 million decreases in pre-tax income for the three and six months ended July 1, 2018 are primarily due to the revised method of accounting for the loyalty program, marketing fund co-ops we control and franchise fees.
 

 

 

Update of Previously Issued Financial Guidance

 

The recent negative publicity surrounding the company’s brand negatively impacted July sales in North America. Our North America comparable sales for the July period decreased approximately 10.5%. At this time, the company cannot predict how long and the extent to which the negative customer sentiment will continue to impact future sales. In addition, the company expects to incur significant costs as a result of the recent negative publicity including, but not limited to, the following:

 

  • re-imaging costs at nearly all domestic and international restaurants,
  • costs to accelerate our replacement of certain branded assets and related marketing efforts,
  • financial assistance to domestic franchisees, such as short-term royalty reductions, in an effort to mitigate closings,
  • additional costs for branding initiatives, including but not limited to, launching a new advertising and marketing campaign and promotional activities to mitigate negative consumer sentiment and negative sales trends,
  • costs associated with a third-party audit of the culture at Papa John’s commissioned by the Special Committee as well as costs associated with implementing new policies and procedures to address any findings as a result of the audit, and
  • additional legal and advisory costs, including costs associated with the activities of the Special Committee.

 

Based on the negative consumer sentiment and the expected impact on future sales, the company is lowering its financial and associated outlook items. The below outlook incorporates a range of the potential negative sales impact from these recent events but excludes the related costs the company will incur, as detailed above. The company is still gathering information regarding these costs but has developed a preliminary range of $30 million to $50 million for the remainder of 2018. The below outlook also excludes the $0.13 impact of the China refranchising.

 

  Updated Outlook   Previous Outlook
 
North America Comparable Sales (7.0%) to (10.0%) (3%) to flat
International Comparable Sales (2%) to 1% 3.0% - 5.0%
Adjusted Diluted EPS (1) $1.30 - $1.80 $2.40 - $2.60
Net global unit growth 0.0% - 3.0% 3.0% - 5.0%
Debt / Adjusted EBITDA ratio (2) Above 4.0x 3.0x - 3.5x
Income tax rate (3) 20% - 24% 20% - 24%
Capital Expenditures $45 - $50 million $45 - $55 million
Block Cheese Prices per lb. Low $1.60s Low $1.60s
 
(1) This adjusted diluted EPS guidance excludes the impact of the China refranchising and the estimated future costs of the above noted items related to the recent negative publicity. We believe excluding these items from adjusted EPS is meaningful to our financial statement users as it presents our core results excluding unusual, non-recurring items.
 
(2) We were in compliance with all financial covenants as of July 1, 2018. Based on this revised lower outlook, we plan to work with the banks within our credit facility to evaluate options with the covenants to mitigate the possibility of violating a financial covenant in the future.
 
(3) The tax rate excludes any tax impact from the divestiture of our China company-owned operations.
 

 

 

 

       
Papa John's International, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
   
 
Three Months Ended Six Months Ended
July 1, 2018 June 25, 2017 July 1, 2018   June 25, 2017
(In thousands, except per share amounts) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Revenues:
Domestic Company-owned restaurant sales $ 181,379 $ 202,756 $ 371,621 $ 409,652
North America franchise royalties and fees 23,912 26,588 48,718 54,195
North America commissary 153,455 160,059 315,168 331,399
International 29,069 27,245 59,183 52,867
Other revenues   20,144     18,130     40,638     35,931  
Total revenues 407,959 434,778 835,328 884,044
 
Costs and expenses:

Operating costs (excluding depreciation and amortization shown separately below):

Domestic company-owned restaurant expenses 147,781 162,433 305,100 327,852
North America commissary 143,300 149,472 294,981 309,429
International expenses 18,248 17,272 37,278 33,063
Other expenses 20,698 17,482 41,656 35,029
General and administrative expenses 38,712 40,248 78,441 76,662
Depreciation and amortization   11,731     10,654     23,270     21,111  
Total costs and expenses 380,470 397,561 780,726 803,146
Refranchising loss, net   (2,122 )   -     (1,918 )   -  
Operating income 25,367 37,217 52,684 80,898
Net interest expense   (5,662 )   (1,759 )   (10,617 )   (3,569 )
Income before income taxes 19,705 35,458 42,067 77,329
Income tax expense   7,040     10,476     12,022     22,448  
Net income before attribution to noncontrolling interests 12,665 24,982 30,045 54,881
Income attributable to noncontrolling interests   (874 )   (1,444 )   (1,517 )   (2,915 )
Net income attributable to the company $ 11,791   $ 23,538   $ 28,528   $ 51,966  
 
Calculation of income for earnings per share:
Net income attributable to the Company $ 11,791 $ 23,538 $ 28,528 $ 51,966
Change in noncontrolling interest redemption value - 662 - 1,182
Net income attributable to participating securities   (72 )   (99 )   (147 )   (216 )
Net income attributable to common shareholders $ 11,719   $ 24,101   $ 28,381   $ 52,932  
 
Basic earnings per common share $ 0.37   $ 0.66   $ 0.87   $ 1.44  
Diluted earnings per common share $ 0.36   $ 0.65   $ 0.86   $ 1.42  
 
Basic weighted average common shares outstanding   31,941     36,732     32,610     36,771  
Diluted weighted average common shares outstanding   32,175     37,217     32,860     37,283  
 
Dividends declared per common share $ 0.225 $ 0.20 $ 0.450 $ 0.40
 

 

   

Papa John's International, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets
 
 
July 1, December 31,
2018   2017
(In thousands) (Unaudited) (Note)
 
Assets
Current assets:
Cash and cash equivalents $ 25,719 $ 22,345
Accounts receivable, net 62,973 64,644
Notes receivable, net 5,180 4,333
Income tax receivable - 3,903
Inventories 27,109 30,620
Prepaid expenses and other current assets 33,952 38,016
Assets held for sale   2,786     6,133  
Total current assets 157,719 169,994
 
Property and equipment, net 227,722 234,331
Notes receivable, less current portion, net 15,648 15,568
Goodwill 85,064 86,892
Deferred income taxes, net 709 585
Other assets   71,309     48,183  
Total assets $ 558,171   $ 555,553  
 
 
Liabilities and stockholders' equity (deficit)
Current liabilities:
Accounts payable $ 33,307 $ 32,006
Income and other taxes payable 8,904 10,561
Accrued expenses and other current liabilities 81,197 70,293
Deferred revenue current 2,426 -
Current portion of long-term debt   20,000     20,000  
Total current liabilities 145,834 132,860
 
Deferred revenue 15,329 2,652
Long-term debt, less current portion, net 556,387 446,565
Deferred income taxes, net 5,140 12,546
Other long-term liabilities   78,515     60,146  
Total liabilities 801,205 654,769
 
Redeemable noncontrolling interests 7,356 6,738
 
Total stockholders' (deficit)   (250,390 )   (105,954 )
Total liabilities, redeemable noncontrolling interests and stockholders' (deficit) $ 558,171   $ 555,553  
 
 

Note: The Condensed Consolidated Balance Sheets have been derived from the audited consolidated financial statements, but do not include all information and footnotes required by accounting principles generally accepted in the United States for a complete set of financial statements.

 

 

   
Papa John's International, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
 
 
Six Months Ended
(In thousands) July 1, 2018   June 25, 2017
(Unaudited) (Unaudited)
Operating activities
Net income before attribution to noncontrolling interests $ 30,045 $ 54,881

Adjustments to reconcile net income to net cash provided by operating activities:

Provision for uncollectible accounts and notes receivable 3,591 (1,091 )
Depreciation and amortization 23,270 21,111
Deferred income taxes (2,511 ) 158
Stock-based compensation expense 4,929 5,571
Loss on refranchising 1,918 -
Other 3,032 1,978
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable (148 ) (355 )
Income tax receivable 3,678 (45 )
Inventories 3,188 550
Prepaid expenses and other current assets 6,683 2,594
Other assets and liabilities (2,202 ) (1,559 )
Accounts payable 2,511 (3,950 )
Income and other taxes payable (1,656 ) 1,275
Accrued expenses and other current liabilities (2,506 ) (3,002 )
Deferred revenue   379     (253 )
Net cash provided by operating activities 74,201 77,863
 
Investing activities
Purchases of property and equipment (21,562 ) (30,457 )
Loans issued (1,904 ) (1,476 )
Repayments of loans issued 2,720 2,125
Acquisitions, net of cash acquired - (21 )
Proceeds from divestitures of restaurants 3,690 -
Other   146     25  
Net cash used in investing activities (16,910 ) (29,804 )
 
Financing activities
Repayments of term loan (10,000 ) -
Net proceeds of revolving credit facility 119,400 5,156
Cash dividends paid (14,762 ) (14,703 )
Tax payments for equity award issuances (1,353 ) (2,282 )
Proceeds from exercise of stock options 2,179 5,218
Acquisition of Company common stock (148,440 ) (33,968 )
Distributions to noncontrolling interest holders (1,110 ) (1,389 )
Other   231     494  
Net cash used in financing activities (53,855 ) (41,474 )
 
Effect of exchange rate changes on cash and cash equivalents   (62 )   99  
Change in cash and cash equivalents 3,374 6,684
Cash and cash equivalents at beginning of period   22,345     15,563  
 
Cash and cash equivalents at end of period $ 25,719   $ 22,247  
 



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