Papa John's shares rise on $500 million stock buy-back plan
Investors bid up shares of Louisville-based Papa John’s International on Wednesday after the Louisville-based company said it would increase debt to fund $500 million in stock buy-backs over the next year to 18 months.
LOUISVILLE, Ky. (WDRB) -- Investors bid up shares of Louisville-based Papa John’s International on Wednesday after the Louisville-based company announced it would increase debt to fund $500 million in stock buy-backs over the next year to 18 months.
Shares of Papa John’s shot up about 10 percent, to about $78, on Wednesday.
The buy-back announcement came as the pizza company reported earnings that were up about 6.6 percent in the April-June period compared to a year earlier.
The earnings were in line with Wall Street’s expectations, but the company’s total revenue of $435 million fell slightly short. Executives attributed the lower revenue to a decision to sell about 40 stores in the Phoenix market to a franchisee.
Papa John’s chief financial officer Lance Tucker told analysts on a conference call that the company decided to take advantage of low interest rates to return money to shareholders through the $500 million buy-back.
“The favorable lending environment is not going to last forever… We decided now is the right time to put some additional leverage on,” he said.
Papa John’s founder and CEO John Schnatter, the company’s single-largest shareholder, said he doesn’t plan to sell his stock to the company as part of the buy-back.
Schnatter, who owns about 26 percent of the company’s shares, said he already sold about $450 million of Papa John’s stock in the last 15 years, “so I don’t need the money.”
He said the only stock he has sold “in the last couple of years” has been to donate to charity and to buy an airplane that he didn’t want to put on the company’s books.
“I can’t find a better place to put my money than Papa Johns,” Schnatter said. “I have no intention of selling stock at this time; I want more stock. I want to own 40 percent of Papa Johns.”
Schnatter said earlier in the call that the company generates pre-tax profits of about $200 million a year, and “I would like as much of that as I can get my hands on. I believe in what we are doing.”
Even with Wednesday’s boost, Papa John’s shares are still down about 12 percent so far this year.
Sales growth has slowed at both the company’s North American and international restaurant divisions compared to the first half of 2016.
Executives said they have plans to speed up growth in the second half of 2017, including increased marketing spending and what President Steve Ritchie called “a better year” anticipated for the NFL, one of the company’s biggest advertising venues.