<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended June 29, 1997
OR
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number: 0-21660
PAPA JOHN'S INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 61-1203323
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification number)
11492 Bluegrass Parkway, Suite 175
Louisville, Kentucky 40299-2334
(Address of principal executive offices)
(502) 266-5200
(Registrant's telephone number, including area code)
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Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days:
Yes X No
----- -----
At August 7, 1997, there were outstanding 28,957,869 shares of the
registrant's common stock, par value $.01 per share.
<PAGE>
INDEX
PART I. FINANCIAL INFORMATION Page No.
--------
Item 1. Financial Statements
Condensed Consolidated Balance Sheets--
June 29, 1997 and December 29, 1996 2
Condensed Consolidated Statements of Income --
Three Months and Six Months Ended June 29, 1997
and June 30, 1996 3
Condensed Consolidated Statements of
Stockholders' Equity -- Six Months Ended
June 29, 1997 and June 30, 1996 4
Condensed Consolidated Statements of Cash Flows
--Six Months Ended June 29, 1997 and
June 30, 1996 5
Notes to Condensed Consolidated Financial
Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 4. Submission of Matters to a Vote of Security Holders 10
Item 6. Exhibits and Reports on 8-K 11
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<PAGE>
Part I. Financial Information
Item l. Financial Statements (Unaudited)
Papa John's International, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
June 29, 1997 December 29, 1996
(Unaudited) (Note)
------------- -----------------
<S> <C> <C>
(In thousands)
Assets
Current assets:
Cash and cash equivalents $ 9,424 $ 24,063
Accounts receivable 13,613 13,101
Inventories 8,862 6,839
Deferred pre-opening costs 3,669 2,654
Prepaid expenses and other current assets 2,042 1,591
--------- -----------
Total current assets 37,610 48,248
Investments 59,454 65,067
Net property and equipment 98,457 80,717
Notes receivable from franchises 13,511 5,053
Other assets 17,552 12,976
--------- -----------
Total assets $226,584 $212,061
========= ===========
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 11,338 $ 13,105
Accrued expenses 11,180 9,062
Current maturities of long-term debt 185 175
Deferred income taxes 733 672
--------- -----------
Total current liabilities 23,436 23,014
Unearned franchise and development fees 3,488 3,378
Long-term debt, less current maturities 1,320 1,505
Deferred income taxes 3,468 3,285
Other long-term liabilities 232 236
Stockholders' equity:
Preferred stock -- --
Common Stock 290 288
Additional paid-in capital 146,332 143,978
Unrealized gain on investments 637 977
Retained earnings 47,863 35,882
Treasury stock (482) (482)
--------- -----------
Total stockholders' equity 194,640 180,643
--------- -----------
Total liabilities and stockholders' equity $226,584 $212,061
========= ===========
</TABLE>
Note: The balance sheet at December 29, 1996 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
See accompanying notes.
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<PAGE>
Papa John's International, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 29, 1997 June 30, 1996 June 29, 1997 June 30, 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
(In thousands, except per share amounts)
Revenues:
Restaurant sales $ 63,587 $40,521 $116,469 $ 75,774
Franchise royalties 5,973 4,262 11,303 8,193
Franchise and development fees 1,384 1,003 2,625 1,821
Commissary sales 45,599 35,367 86,889 66,858
Equipment and other sales 9,660 6,527 18,569 11,760
-------- ------- -------- --------
Total revenues 126,212 87,680 235,855 164,406
Costs and expenses:
Restaurant expenses:
Cost of sales 16,748 11,662 30,754 21,462
Salaries and benefits 17,425 10,680 31,689 20,167
Advertising and related costs 5,968 3,836 10,701 7,129
Occupancy costs 3,040 1,983 5,707 3,770
Other operating expenses 8,434 5,468 15,905 10,201
-------- ------- -------- --------
51,615 33,629 94,756 62,729
Commissary, equipment and other expenses:
Cost of sales 43,587 33,468 82,148 62,828
Salaries and benefits 3,213 2,151 6,215 4,250
Other operating expenses 4,471 2,616 8,532 5,029
-------- ------- -------- --------
51,271 38,235 96,895 72,107
General and administrative expenses 9,386 6,667 17,830 12,510
Depreciation 3,136 2,178 5,906 4,080
Amortization 1,604 1,160 2,886 2,155
-------- ------- -------- --------
Total costs and expenses 117,012 81,879 218,273 153,581
-------- ------- -------- --------
Operating income 9,200 5,801 17,582 10,825
Other income (expense):
Investment income 1,122 819 2,224 1,347
Other, net (368) 98 (816) 132
-------- ------- -------- --------
Income before income taxes 9,954 6,718 18,990 12,304
Income tax expense 3,683 2,486 7,026 4,553
-------- ------- -------- --------
Net income $ 6,271 $ 4,232 $ 11,964 $ 7,751
======== ======= ======== ========
Net income per share $ 0.22 $ 0.15 $ 0.42 $ 0.28
======== ======= ======== ========
Weighted average shares outstanding 28,888 27,870 28,822 27,328
======== ======= ======== ========
</TABLE>
See accompanying notes.
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<PAGE>
Papa John's International, Inc. and Subsidiaries
Condensed Consolidated Statements of Stockholders' Equity
(Unaudited)
<TABLE>
<CAPTION>
Additional Unrealized Total
Common Paid-In Gain (Loss) on Retained Treasury Stockholders'
Stock Capital Investments Earnings Stock Equity
-------- ----------- -------------- --------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
(In thousands)
Balance at January 1, 1996 $268 $ 88,043 $(263) $18,838 $(604) $106,282
Issuance of common stock 17 50,540 -- -- -- 50,557
Exercise of stock options 1 648 -- -- -- 649
Tax benefit related to exercise of
non-qualified stock options -- 701 -- -- -- 701
Acquisitions 1 1,454 -- -- -- 1,455
Change in unrealized gain (loss)
on investments -- -- (122) -- -- (122)
Net income -- -- -- 7,751 -- 7,751
Other -- 39 -- (71) 112 80
---- -------- ----- ------- ----- --------
Balance at June 30, 1996 $287 $141,425 $(385) $26,518 $(492) $167,353
==== ======== ===== ======= ===== ========
Balance at December 30, 1996 $288 $143,978 $ 977 $35,882 $(482) $180,643
Exercise of stock options 2 1,062 -- -- -- 1,064
Tax benefit related to exercise of
non-qualified stock options -- 1,292 -- -- -- 1,292
Change in unrealized gain (loss)
on investments -- -- (340) -- -- (340)
Net income -- -- -- 11,964 -- 11,964
Other -- -- -- 17 -- 17
---- -------- ----- ------- ----- --------
Balance at June 29, 1997 $290 $146,332 $ 637 $47,863 $(482) $194,640
==== ======== ===== ======= ===== ========
</TABLE>
See accompanying notes.
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<PAGE>
Papa John's International, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 29, 1997 June 30, 1996
------------- -------------
<S> <C> <C>
(in thousands)
Operating activities
Net cash provided by operating activities $ 15,877 $ 9,329
Investing activities
Purchase of property and equipment (21,568) (11,465)
Purchase of investments (15,307) (40,114)
Proceeds from sale or maturity of investments 18,880 6,681
Loans to franchisees (8,872) (2,648)
Loan repayments from franchisees 414 -
Deferred systems development costs (1,087) -
Acquisitions (5,448) (30)
Other 293 (840)
-------- --------
Net cash used in investing activities (32,695) (48,416)
Financing activities
Proceeds from exercise of stock options 1,064 649
Payments on long-term debt (175) (837)
Proceeds from issuance of common stock - 50,557
Tax benefit related to exercise of non-qualified
stock options 1,292 701
Other (2) (16)
-------- --------
Net cash provided by financing activities 2,179 51,054
-------- --------
Net (decrease) increase in cash and cash equivalents (14,639) 11,967
Cash and cash equivalents at beginning of period 24,063 19,904
-------- --------
Cash and cash equivalents at end of period $ 9,424 $ 31,871
======== ========
See accompanying notes.
</TABLE>
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<PAGE>
Papa John's International, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
June 29, 1997
Note 1 -- Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments, consisting
of normal recurring accruals, considered necessary for a fair presentation have
been included. Operating results for the six months ended June 29, 1997, are
not necessarily indicative of the results that may be expected for the year
ended December 28, 1997. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Papa John's
International, Inc. Annual Report on Form 10-K for the year ended December 29,
1996.
Note 2 -- Business Combinations
During the second quarter of 1997, the Company acquired four Papa John's
restaurants in Arlington, Texas for approximately $488,000 in cash and 16 Papa
John's restaurants in North Carolina for $5 million (consisting of $4,960,000 in
cash and a credit of $40,000 towards future development fees), in transactions
accounted for by the purchase method of accounting. A majority ownership
interest in the franchisee of the North Carolina restaurants was held by certain
directors and officers, including the Chief Executive Officer, of the Company.
Note 3 -- Accounting Pronouncements
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings Per Share," which is required
to be adopted for 1997 year-end financial reporting. In addition to the
Company's current presentation of net income per share, this Statement will
require the Company to present diluted net income per share, which will include
the dilutive effect of stock options. The Company does not believe the
additional disclosure of diluted net income per share will materially impact the
financial statements.
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<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Restaurant Progression
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 29, June 30, June 29, June 30,
1997 1996 1997 1996
------- ------- ------ --------
<S> <C> <C> <C> <C>
Company owned:
Beginning of period 325 23 303 217
Opened 23 15 45 28
Closed (1) -- (1) (1)
Acquired 20 3 20 4
------ ------ ------ ------
End of Period 367 248 367 248
====== ====== ====== ======
Franchised:
Beginning of period 925 702 857 661
Opened 74 54 142 97
Closed (3) (1) (3) (2)
Sold to Company (20) (3) (20) (4)
------ ------ ------ ------
End of Period 976 752 976 752
====== ====== ====== ======
Total at end of period 1343 1000 1343 1000
====== ====== ====== ======
</TABLE>
Results of Operations
Revenues. Total revenues increased 43.9% to $126.2 million for the three months
ended June 29, 1997, from $87.7 million for the comparable period in 1996, and
43.5% to $235.9 million for the six months ended June 29, 1997, from $164.4
million for the comparable period in 1996.
Restaurant sales increased 56.9% to $63.6 million for the three months ended
June 29, 1997, from $40.5 million for the comparable period in 1996, and 53.7%
to $116.5 million for the six months ended June 29, 1997, from $75.8 million for
the comparable period in 1996. These increases were primarily due to increases
of 45.9% and 43.4% in the number of equivalent Company-owned restaurants open
during the three and six months ended June 29, 1997, respectively, compared to
the same periods in the prior year. "Equivalent restaurants" represent the
number of restaurants open at the beginning of a given period, adjusted for
restaurants opened or acquired during the period on a weighted average basis.
Also, sales increased 11.0% for the three months ended June 29, 1997, over the
comparable period in 1996, for Company-owned restaurants open throughout both
periods.
Franchise royalties increased 40.1% to $6.0 million for the three months ended
June 29, 1997, from $4.3 million for the comparable period in 1996, and 38.0% to
$11.3 million for the six months ended June 29, 1997, from $8.2 million for the
comparable period in 1996. These increases were primarily due to increases of
30.0% and 30.6% in the number of equivalent franchised restaurants open during
the three and six months ended June 29,
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<PAGE>
1997, respectively, compared to the same periods in the prior year. Also, sales
increased 10.0% for the three months ended June 29, 1997, over the comparable
period in 1996, for franchised restaurants open throughout both periods.
Franchise and development fees increased 38.0% to $1.4 million for the three
months ended June 29, 1997, from $1.0 million for the comparable period in 1996,
and 44.1% to $2.6 million for the six months ended June 29, 1997, from $1.8
million for the comparable period in 1996. These increases were primarily due to
the 142 franchised restaurants opened during the six months ended June 29, 1997,
versus the 97 opened during the comparable period in 1996, an increase of 46.4%.
The average dollar amount of fees per franchised restaurant may vary from period
to period, as restaurants opened pursuant to older development agreements and
"Hometown restaurants" generally have lower required fees than restaurants
opened pursuant to more recent development agreements. "Hometown restaurants"
are located in smaller markets, generally markets with less than 9,000
households.
Commissary sales increased 28.9% to $45.6 million for the three months ended
June 29, 1997, from $35.4 million for the comparable period in 1996, and 30.0%
to $86.9 million for the six months ended June 29, 1997, from $66.9 million for
the comparable period in 1996. These increases were primarily the result of the
increases in equivalent franchised restaurants and comparable sales for
franchised restaurants noted above, partially offset by a 14% decrease in the
average cheese block market price, which resulted in lower sales prices to
franchisees.
Equipment and other sales increased 48.1% to $9.7 million for the three months
ended June 29, 1997, from $6.5 million for the comparable period in 1996, and
57.9% to $18.6 million for the six months ended June 29, 1997, from $11.8
million for the comparable period in 1996. These increases were primarily due to
the increase in equivalent franchised restaurants open during the three and six
months ended June 29, 1997, as compared to the same periods in 1996, and the
increase in franchised restaurants opened during the three and six months ended
June 29, 1997, as compared to the same periods in 1996. A portion of the
equipment and other sales increase was attributable to the increase in sales of
the Papa John's PROFIT System, a proprietary point of sale system, and related
PROFIT support services to the franchisees, as well as increasing insurance
commissions from franchisees. The company initiated an insurance agency function
for franchisees during the fourth quarter of 1996.
Costs and Expenses. Restaurant cost of sales, which consists of food, beverage
and paper costs, decreased as a percentage of restaurant sales to 26.3% for the
three months ended June 29, 1997, from 28.8% for the comparable period in 1996,
and decreased as a percentage of restaurant sales to 26.4% for the six months
ended June 29, 1997, from 28.3% for the comparable period in 1996. This decrease
was primarily due to a 7% and 21% decrease in the average cheese block market
prices for the first and second quarters of 1997, respectively. This decrease in
cost was slightly offset by increased price discounting associated with the 12th
Anniversary Promotion in April 1997.
Restaurant salaries and benefits (27.4% vs. 26.4% and 27.2% vs. 26.6%,
respectively) increased as a percentage of sales for the three and six months
ended June 29, 1997, as compared to the same periods in the prior year. Salaries
and benefits were relatively consistent for the three months ended March 30,
1997, compared to the same period in 1996. The increase in the second quarter of
1997 primarily related to increased staffing levels to ensure quality customer
service was delivered during the 12/th/ Anniversary Promotion.
Advertising and related costs (9.4% vs. 9.5% and 9.2% vs. 9.4%, respectively)
and occupancy costs (4.8% vs. 4.9% and 4.9% vs. 5.0, respectively) were
relatively consistent as a percentage of sales for the three and six months
ended June 29,1997, as compared to the same periods in the prior year.
Other restaurant operating expenses decreased as a percentage of restaurant
sales to 13.2% for the three months ended June 29, 1997, from 13.5% for the
comparable period in 1996, but increased as a percentage of restaurant sales to
13.7% for the six months ended June 29, 1997, compared to 13.5% for the
comparable period in 1996. Other operating expenses include all other
restaurant-level operating costs, the material components of which are
automobile mileage reimbursement for delivery drivers, telephone costs, training
costs and workers compensation insurance. Other operating expenses also include
an allocation of commissary operating expenses equal to 3% of
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<PAGE>
Company-owned restaurant sales in order to assess a portion of the costs of
dough production and food and equipment purchasing and storage to Company-owned
restaurants.
The impact on other restaurant operating expenses of higher training costs
incurred in the first quarter of 1997 to prepare for the 12th Anniversary
Promotion was partially offset by the impact of higher sales volume in the
second quarter, also attributable to the 12/th/ Anniversary Promotion.
Commissary, equipment and other expenses include cost of sales and operating
expenses associated with sales of food, paper, equipment, printing and
promotional items to franchisees and other customers. These costs increased as a
percentage of combined commissary sales and equipment and other sales to 92.8%
for the three months ended June 29, 1997, as compared to 91.3% for the same
period in 1996, and to 91.9% for the six months ended June 29, 1997, from 91.7%
for the comparable period in 1996. Cost of sales as a percentage of combined
commissary sales and equipment and other sales decreased to 78.9% and 77.9%,
respectively for the three and six months ended June 29,1997 from 79.9% for the
comparable periods in 1996, due to the timing of certain favorable commodity
price changes. The decrease was more than offset by an increase in other
operating expenses to 8.1% for the three months and six months ended June
29,1997, compared to 6.2% and 6.4%, respectively, for the three and six months
ended June 30, 1996, due primarily to increased delivery costs resulting from
larger commissary service areas and costs related to the opening of two
commissary facilities in 1997.
General and administrative expenses were relatively consistent as a percentage
of total revenues at 7.4% and 7.6%, respectively, for the three and six months
ended June 29, 1997, as compared to 7.6% for the comparable periods in 1996.
Depreciation and amortization was relatively consistent as a percentage of total
revenues at 3.8% and 3.7%, respectively, for the three and six months ended June
29, 1997, as compared to 3.8% for the comparable periods in 1996.
Investment Income. Investment income increased to $1.1 million for the three
months ended June 29, 1997, from $819,000 for the comparable period in 1996, and
to $2.2 million for the six months ended June 29, 1997, from $1.3 million for
the comparable period in 1996. These increases were primarily the result of
higher average investment balances during the first three and six months of 1997
compared to the same periods in 1996 due to the investment of proceeds from the
Company's public offering of common stock in May 1996.
Other income (expense). Other expenses were $368,000 for the three months ended
June 29,1997, compared to other income of $98,000 for the same period in 1996,
and $816,000 for the six months ended June 29,1997, compared to other income of
$132,000 for the same period in 1996. The increase in other expenses for the
three and six months ended June 29,1997 was primarily attributable to the
equipment and leasehold write-offs related to an increasing number of restaurant
relocations.
Income Tax Expense. Income tax expense reflects a combined federal, state and
local effective tax rate of 37% for the three and six months ended June 29, 1997
and June 30,1996.
Liquidity and Capital Resources
The Company requires capital primarily for the development and acquisition of
restaurants, the addition of new commissary and support services facilities and
equipment and the enhancement of corporate systems and facilities. Capital
expenditures of $21.6 million, acquisitions of $5.5 million and loans to
franchisees of $8.9 million for the six months ended June 29, 1997, were
primarily funded by cash flow from operations, available cash and liquidation of
investments.
Cash flow from operations increased to $15.9 million for the six months ended
June 29, 1997, from $9.3 million for the comparable period in 1996, due
primarily to the higher level of net income for the first six months of 1997.
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<PAGE>
In addition to restaurant development and possible acquisitions, significant
capital projects for the next twelve months are expected to include a new
commissary in Des Moines, Iowa (opened in July 1997) and a new commissary in the
Pacific Northwest area. The Company also expects to begin construction during
1997 of a 250,000 square foot facility in Louisville, Kentucky, scheduled for
completion in mid-1998, approximately one-half of which will accommodate
relocation and expansion of the Louisville commissary facility and Novel
Approach promotional division and the remainder of which will accommodate
relocation and consolidation of corporate offices. In addition, the Company
expects to fund an additional $8 to $12 million in loans under the franchisee
loan program. The amounts actually funded may vary as the Company continues to
gain experience with the loan program.
Capital resources available at June 29, 1997, include $9.4 million of cash and
cash equivalents, $59.5 million of investments and a $10 million line of credit,
which is in the process of being renewed through June 1998. The Company expects
to fund planned capital expenditures and disbursements under the franchise loan
program for the next twelve months from these resources and operating cash
flows.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
The Company is subject to claims and legal actions in the ordinary course of its
business. The Company believes that all such claims and actions currently
pending against it are either adequately covered by insurance or would not have
a material adverse effect on the Company if decided in a manner unfavorable to
the Company.
Item 4. Submission of Matters to a Vote of Security Holders.
The Company's annual meeting of stockholders was held on May 22, 1997 at the
Hyatt Regency Hotel, 320 West Jefferson Street, Louisville, Kentucky at 11:00
a.m.
At the meeting, the Company's stockholders elected three directors to serve
until the 2000 annual meeting of stockholders. The vote counts were as follows:
<TABLE>
<CAPTION>
Affirmative Withheld
<S> <C> <C>
O. Wayne Gaunce 24,172,404 73,936
Jack A. Laughery 24,174,870 71,470
Michael W. Pierce 24,174,270 72,070
</TABLE>
The Company's stockholders also elected Blaine E. Hurst to serve as a director
until the 1999 annual meeting of stockholders by a vote of 24,174,420
affirmative and 71,920 withheld. The Company's other directors continue to serve
in accordance with their previous elections: through 1998 - Charles W. Schnatter
and Richard F. Sherman; and through 1999 - John H. Schnatter.
The Company's stockholders also took the following actions at the meeting:
(1) Amended the Company's Certificate of Incorporation to increase the number of
shares of common stock authorized by a vote of 24,059,055 affirmative to 176,306
negative and 10,979 abstention votes;
(2) Amended the Papa John's International, Inc. 1993 Stock Ownership Incentive
Plan by a vote of 21,312,671 affirmative to 2,922,094 negative and 11,575
abstention votes;
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<PAGE>
(3) Ratified the selection of Ernst & Young LLP as the Company's independent
auditors for the fiscal year ending December 28, 1997 by a vote of 24,231,070
affirmative to 10,177 negative and 5,093 abstention votes;
Item 6. Exhibits and Reports on Form 8-K.
a. Exhibits
Exhibit
Number Description
------ -----------
3 Certificate of Amendment of Amended and Restated
Certificate of Incorporation of Papa John's
International, Inc. approved by Stockholders on
May 22, 1997.
10 Amendment to Papa John's International, Inc. 1993
Stock Ownership Incentive Plan approved by
Stockholders on May 22, 1997.
27 Financial Data Schedule which is submitted
electronically to the Securities and Exchange
Commission for information only and not deemed to be
filed with the Commission.
99.1 Cautionary Statements. Exhibit 99.1 to the Company's
Annual Report on Form 10-K for the fiscal year ended
December 29, 1996 (Commission File No. 0-21660) is
incorporated herein by reference.
b. Current Reports on Form 8-K.
There were no reports filed on Form 8-K during the quarterly period ended June
29, 1997.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PAPA JOHN'S INTERNATIONAL, INC.
(Registrant)
Date: August 13, 1997 /s/ E. Drucilla Milby
--------------------- ---------------------
E. Drucilla Milby, Chief Financial
Officer and Treasurer
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<PAGE>
Exhibit 3
CERTIFICATE OF AMENDMENT OF
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
PAPA JOHN'S INTERNATIONAL, INC.
Papa John's International, Inc., a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of Papa John's
International, Inc. (the "Corporation"), resolutions were duly adopted setting
forth a proposed amendment of the Amended and Restated Certificate of
Incorporation of the Corporation, declaring said amendment to be advisable and
submitting said amendment to the stockholders of the Corporation for
consideration thereof. The resolution setting forth the proposed amendment is
as follows:
RESOLVED, that Article Fourth of the Certificate of Incorporation of this
Corporation be amended to read in its entirety as follows:
"FOURTH: The total number of shares of all classes of capital stock which
the Corporation shall have the authority to issue is Fifty Five Million
(55,000,000) shares divided into two classes, of which Five Million (5,000,000)
shares, par value $.01 per share, shall be designated Preferred Stock and Fifty
Million (50,000,000) shares, par value $.01 per share, shall be designated
Common Stock.
A. Preferred Stock
The Board of Directors is authorized, subject to limitations prescribed by
law, to provide for the issuance of shares of Preferred Stock in one or more
series, to establish the number of shares to be included in each such series and
to fix the designations, powers, preferences and rights of the shares of each
such series, and any qualifications, limitations or restrictions thereof.
B. Common Stock
1. Dividends. Subject to the preferential rights, if any, of the
Preferred Stock, the holders of shares of Common Stock shall be entitled to
receive, when and if declared by the Board of Directors, out of the assets of
the Corporation which are by law available therefor, dividends payable either in
cash, in property or in shares of Common Stock or other securities of the
Corporation.
2. Voting Rights. At every annual or special meeting of stockholders of
the Corporation, every holder of Common Stock shall be entitled to one vote, in
person or by proxy, for each share of Common Stock standing in his or her name
on the books of the Corporation.
<PAGE>
3. Liquidation, Dissolution or Winding Up. In the event of any voluntary
or involuntary liquidation, dissolution or winding up of the affairs of the
Corporation, after payment or provision for payment of the debts and other
liabilities of the Corporation and of the preferential amounts, if any, to which
the holders of Preferred Stock may be entitled, the holders of all outstanding
shares of Common Stock shall be entitled to share ratably in the remaining net
assets of the Corporation.
* * * * * *
SECOND: That thereafter, pursuant to resolution of its Board of Directors,
a meeting of the stockholders of the Corporation was held, at which meeting a
majority of the outstanding stock entitled to vote thereon, and a majority of
the outstanding stock of each class entitled to vote thereon as a class, voted
in favor of the amendment.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
signed by Blaine E. Hurst, its President, and Charles W. Schnatter, its
Secretary, this 22nd day of May, 1997.
BY: /s/ Blaine E. Hurst
------------------------------------
Blaine E. Hurst, President
ATTEST: /s/ Charles W. Schnatter
--------------------------------
Charles W. Schnatter, Secretary
<PAGE>
Exhibit 10 Amendment to Papa John's International, Inc. 1993 Stock Ownership
Plan
1. Section 3.2 of the Plan is amended by adding at the end thereof the
following:
"Notwithstanding the foregoing, the Committee may not delegate its
responsibilities hereunder if such delegation would jeopardize compliance
with the "outside directors" requirement (or any other applicable
requirement) under section 162(m) of the Code."
2. The first sentence of Section 4.1 of the Plan is amended to read in its
entirety as follows:
"Subject to adjustment as provided in Section 4.3, the number of shares of
Common Stock reserved for issuance under the Plan is 4,737,500."
3. Section 6.2 of the Plan is amended by adding the following after the second
sentence of such section:
"The maximum number of shares in respect of which Options may be granted to
a Participant during any calendar year shall be 250,000 shares."
4. Section 8.1 of the Plan is amended by adding at the end thereof the
following:
"The maximum number of Performance Units which may be allocated to a
Participant during any calendar year shall be 150,000 Units."
5. Section 8.4 of the Plan is amended by adding at the end thereof the
following:
"The Committee shall establish Performance Goals applicable to a particular
fiscal year within ninety (90) days of the commencement of such fiscal year,
provided that the outcome of the Performance Goals is substantially
uncertain at the time of their adoption."
6. Section 8.8 of the Plan is amended by adding the following after the first
sentence of such section:
"The Committee shall certify that the Performance Goal(s) for awards of
Performance Units under the Plan have been satisfied prior to the
determination and payment of any such incentive in accordance with the
Plan."
7. Section 9.2 of the Plan is amended by adding at the end thereof the
following:
"Each Option and certain Performance Units granted under the Plan are
intended to be performance-based compensation within the meaning of Section
162(m) of the Code. The Committee shall not be entitled to exercise any
discretion otherwise authorized hereunder with respect to such Options or
Units if the ability to exercise such discretion or the exercise of such
discretion itself would cause the compensation attributable to such Options
or Units to fail to qualify as performance-based compensation."
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> Dec-28-1997
<PERIOD-START> Dec-30-1996
<PERIOD-END> Jun-29-1997
<CASH> 9,424
<SECURITIES> 59,454
<RECEIVABLES> 13,613
<ALLOWANCES> 0
<INVENTORY> 8,862
<CURRENT-ASSETS> 37,610
<PP&E> 124,477
<DEPRECIATION> 26,020
<TOTAL-ASSETS> 226,584
<CURRENT-LIABILITIES> 23,436
<BONDS> 1,320
0
0
<COMMON> 290
<OTHER-SE> 194,350
<TOTAL-LIABILITY-AND-EQUITY> 226,584
<SALES> 221,927
<TOTAL-REVENUES> 235,855
<CGS> 112,902
<TOTAL-COSTS> 191,651
<OTHER-EXPENSES> 26,622
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 18,990
<INCOME-TAX> 7,026
<INCOME-CONTINUING> 11,964
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,964
<EPS-PRIMARY> 0.42
<EPS-DILUTED> 0.42
</TABLE>
