<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 28, 1998
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 Identification
incorporation or organization) 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)
- --------------------------------------------------------------------------------
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 4, 1998, there were outstanding 29,512,032 shares of the
registrant's common stock, par value $.01 per share.
<PAGE>
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION Page No.
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<S> <C>
Item 1. Financial Statements
Condensed Consolidated Balance Sheets --
June 28, 1998 and December 28, 1997 2
Condensed Consolidated Statements of Income --
Three Months and Six Months Ended June 28, 1998
and June 29, 1997 3
Condensed Consolidated Statements of
Stockholders' Equity -- Six Months Ended
June 28, 1998 and June 29, 1997 4
Condensed Consolidated Statements of Cash Flows
-- Six Months Ended June 28, 1998 and
June 29, 1997 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 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 10
</TABLE>
1
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Papa John's International, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
June 28, 1998 December 28, 1997
(In thousands) (Unaudited) (Note)
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 24,075 $ 18,692
Accounts receivable 14,353 15,132
Inventories 9,071 9,091
Deferred pre-opening costs 3,241 3,827
Prepaid expenses and other current assets 2,467 2,434
- ------------------------------------------------------------------------------------------
Total current assets 53,207 49,176
Investments 59,940 57,933
Net property and equipment 136,297 112,601
Notes receivable 16,780 15,080
Other assets 21,588 18,453
- ------------------------------------------------------------------------------------------
Total assets $ 287,812 $ 253,243
==========================================================================================
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 14,457 $ 15,148
Accrued expenses 22,503 15,132
Deferred income taxes 252 102
- ------------------------------------------------------------------------------------------
Total current liabilities 37,212 30,382
Unearned franchise and development fees 6,304 4,613
Deferred income taxes 3,566 3,987
Other long-term liabilities 1,336 1,528
Stockholders' equity:
Preferred stock - -
Common stock 295 291
Additional paid-in capital 158,755 149,850
Accumulated other comprehensive income
(unrealized gain on investments, net of tax) 815 321
Retained earnings 80,010 62,752
Treasury stock (481) (481)
- ------------------------------------------------------------------------------------------
Total stockholders' equity 239,394 212,733
- ------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 287,812 $ 253,243
==========================================================================================
</TABLE>
Note: The balance sheet at December 28, 1997 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.
2
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Papa John's International, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
(In thousands, except per share amounts) June 28, 1998 June 29, 1997 June 28, 1998 June 29, 1997
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues:
Restaurant sales $ 79,949 $ 63,587 $ 155,867 $ 116,469
Franchise royalties 8,074 5,973 15,446 11,303
Franchise and development fees 1,265 1,384 2,412 2,625
Commissary sales 61,999 45,599 119,556 86,889
Equipment and other sales 10,986 9,669 21,920 18,569
- --------------------------------------------------------------------------------------------------------------
Total revenues 162,273 126,212 315,201 235,855
Costs and expenses:
Restaurant expenses:
Cost of sales 20,718 16,748 40,838 30,754
Salaries and benefits 21,684 17,425 41,862 31,689
Advertising and related costs 7,163 5,968 13,954 10,701
Occupancy costs 3,817 3,040 7,337 5,707
Other operating expenses 10,443 8,434 20,558 15,905
- --------------------------------------------------------------------------------------------------------------
63,825 51,615 124,549 94,756
Commissary, equipment and other expenses:
Cost of sales 56,669 43,587 110,339 82,148
Salaries and benefits 4,090 3,213 7,972 6,215
Other operating expenses 5,258 4,471 10,490 8,532
- --------------------------------------------------------------------------------------------------------------
66,017 51,271 128,801 96,895
General and administrative expenses 12,298 9,386 23,307 17,830
Depreciation 4,268 3,136 8,250 5,906
Amortization 1,799 1,604 3,669 2,886
- --------------------------------------------------------------------------------------------------------------
Total costs and expenses 148,207 117,012 288,576 218,273
- --------------------------------------------------------------------------------------------------------------
Operating income 14,066 9,200 26,625 17,582
Other income (expense):
Investment income 1,181 1,122 2,241 2,224
Other, net (339) (368) (815) (816)
- --------------------------------------------------------------------------------------------------------------
Income before income taxes 14,908 9,954 28,051 18,990
Income tax expense 5,516 3,683 10,379 7,026
- --------------------------------------------------------------------------------------------------------------
Net income $ 9,392 $ 6,271 $ 17,672 $ 11,964
==============================================================================================================
Basic earnings per share $ 0.32 $ 0.22 $ 0.60 $ 0.42
==============================================================================================================
Diluted earnings per share $ 0.31 $ 0.21 $ 0.58 $ 0.41
==============================================================================================================
Basic weighted average shares outstanding 29,365 28,888 29,264 28,822
==============================================================================================================
Diluted weighted average shares outstanding 30,522 29,519 30,269 29,442
==============================================================================================================
</TABLE>
See accompanying notes.
3
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Papa John's International, Inc. and Subsidiaries
Condensed Consolidated Statements of Stockholders' Equity
(Unaudited)
<TABLE>
<CAPTION>
Accumulated
Additional Other Total
Common Paid-In Comprehensive Retained Treasury Stockholders'
(In thousands) Stock Capital Income Earnings Stock Equity
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 30, 1996 $ 288 $ 143,978 $ 977 $ 35,882 $ (482) $ 180,643
Comprehensive income:
Net income - - - 11,964 - 11,964
Unrealized loss on investments
net of tax of $211 - - (340) - - (340)
------------
Comprehensive income 11,624
Exercise of stock options 2 1,062 - - - 1,064
Tax benefit related to exercise of
non-qualified stock options - 1,292 - - - 1,292
Other - - - 17 - 17
- ----------------------------------------------------------------------------------------------------------------
Balance at June 29, 1997 $ 290 $ 146,332 $ 637 $ 47,863 $ (482) $ 194,640
================================================================================================================
Balance at December 29,1997 $ 291 $ 149,850 $ 321 $ 62,752 $ (481) $ 212,733
Comprehensive income:
Net income - - - 17,672 - 17,672
Unrealized gain on investments
net of tax of $326 - - 494 - - 494
------------
Comprehensive income 18,166
Exercise of stock options 3 7,006 - - - 7,009
Tax benefit related to exercise of
non-qualified stock options - 1,660 - - - 1,660
Other 1 239 - (414) - (174)
- ----------------------------------------------------------------------------------------------------------------
Balance at June 28,1998 $ 295 $ 158,755 $ 815 $ 80,010 $ (481) $ 239,394
================================================================================================================
</TABLE>
See accompanying notes
4
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Papa John's International, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
(In thousands) June 28, 1998 June 29, 1997
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Operating activities
Net cash provided by operating activities $ 30,031 $ 15,877
Investing activities
Purchase of property and equipment (27,806) (21,568)
Purchase of investments (15,849) (15,307)
Proceeds from sale or maturity of investments 14,204 18,880
Loans to franchisees (3,639) (8,872)
Loan repayments from franchisees 1,939 414
Deferred systems development costs (634) (1,087)
Acquisitions (228) (5,448)
Other 128 293
- ------------------------------------------------------------------------------------------
Net cash used in investing activities (31,885) (32,695)
Financing activities
Proceeds from exercise of stock options 7,009 1,064
Payments on long-term debt (1,430) (175)
Tax benefit related to exercise of non-qualified
stock options 1,660 1,292
Other (2) (2)
- ------------------------------------------------------------------------------------------
Net cash provided by financing activities 7,237 2,179
- ------------------------------------------------------------------------------------------
Net (decrease) increase in cash and cash equivalents 5,383 (14,639)
Cash and cash equivalents at beginning of period 18,692 24,063
- ------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 24,075 $ 9,424
==========================================================================================
</TABLE>
See accompanying notes.
5
<PAGE>
Papa John's International, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
June 28, 1998
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 three and six months ended June 28,
1998, are not necessarily indicative of the results that may be expected for the
year ended December 27, 1998. 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 28, 1997.
2. Advertising and Related Costs
Advertising and related costs include the costs of Company-owned restaurant
activities such as mail coupons, door hangers and promotional items and, through
December 28, 1997, Company-owned restaurant contributions to the Papa John's
Marketing Fund, Inc. (the "Marketing Fund") and local market cooperative
advertising funds as incurred. Contributions by Company-owned and franchised
restaurants to the Marketing Fund and the cooperative advertising funds are
based on an established percentage of monthly restaurant revenues. The Marketing
Fund is responsible for developing and conducting marketing and advertising for
the Papa John's system. The local market cooperative advertising funds are
responsible for developing and conducting advertising activities in a specific
market, including the placement of electronic and print materials developed by
the Marketing Fund. Such funds are accounted for separately and are not
included in the consolidated financial statements of the Company, except as
described below beginning with the first quarter of 1998.
Effective December 29, 1997, the Company began recognizing Company-owned
restaurant contributions to the Marketing Fund and to those local market
cooperative advertising funds deemed to be controlled by the Company
(collectively, the "Controlled Funds"), as advertising and related costs at the
time the Controlled Funds actually incurred such expenses. Through December 28,
1997, the Controlled Funds generally incurred expenses as contributions were
received; therefore, the impact of this change was not material to the Company's
first and second quarter 1998 financial statements.
3. Accounting Pronouncement
In May 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued Statement of Position 98-5,
"Reporting on the Costs of Start-up Activities" (the "SOP"), which will require
adoption at the beginning of 1999. The Company's initial application of the SOP
will require the write-off of deferred pre-opening costs as of the date of
adoption, and such write-off will be reported, on a net of tax basis, as the
cumulative effect of a change in accounting principle. The Company does not
expect the adoption of the SOP to materially impact future operating income.
Deferred pre-opening costs as of June 28, 1998, were $3.2 million.
4. Subsequent Event
During 1997, the Company acquired a 49% equity ownership interest in Mountain
Pizza Group, L.L.C. ("MPG"), for $150,000 in cash. In July 1998, the Company
acquired the remaining 51% for $565,000 in cash. In connection with the
acquisition, the Company also assumed $2.4 million in MPG debt. MPG, an entity
which operates seven Papa John's restaurants in Denver, Colorado, was owned by
the President of the Company.
6
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Restaurant Progression
<TABLE>
Three Months Ended Six Months Ended
June 28, June 29, June 28, June 29,
1998 1997 1998 1997
- -------------------------------------------------------------------
<S> <C> <C> <C> <C>
Company-owned:
Beginning of period 418 325 401 303
Opened 16 23 32 45
Closed (1) (1) (1) (1)
Acquired from Franchisees 9 20 10 20
Sold to Franchisee (1) - (1) -
- -------------------------------------------------------------------
End of Period 441 367 441 367
- -------------------------------------------------------------------
Franchised:
Beginning of period 1,180 925 1,116 857
Opened 75 74 140 142
Closed (2) (3) (2) (3)
Sold to Company (9) (20) (10) (20)
Acquired from Company 1 - 1 -
- -------------------------------------------------------------------
End of period 1,245 976 1,245 976
- -------------------------------------------------------------------
Total at end of period 1,686 1,343 1,686 1,343
===================================================================
</TABLE>
Results of Operations
Revenues. Total revenues increased 28.6% to $162.3 million for the three months
ended June 28, 1998, from $126.2 million for the comparable period in 1997, and
33.6% to $315.2 million for the six months ended June 28, 1998, from $235.9
million for the comparable period in 1997.
Restaurant sales increased 25.7% to $79.9 million for the three months ended
June 28, 1998, from $63.6 million for the comparable period in 1997, and 33.8%
to $155.9 million for the six months ended June 28, 1998, from $116.5 million
for the comparable period in 1997. These increases were primarily due to
increases of 21.6% and 26.1% in the number of equivalent Company-owned
restaurants open during the three and six months ended June 28, 1998,
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, acquired, closed or sold during
the period on a weighted average basis. Also, sales increased 5.9% for the three
months ended June 28, 1998, over the comparable period in 1997, and 9.5% for the
six months ended June 28, 1998, over the comparable period in 1997, for Company-
owned restaurants open throughout both periods.
Franchise royalties increased 35.2% to $8.1 million for the three months ended
June 28, 1998, from $6.0 million for the comparable period in 1997, and 36.7% to
$15.4 million for the six months ended June 28, 1998, from $11.3 million for the
comparable period in 1997. These increases were primarily due to increases of
28.9% and 29.1% in the number of equivalent franchised restaurants open during
the three and six months ended June 28, 1998, respectively, compared to the same
periods in the prior year. Also, sales increased 7.8% for the three months
ended June 28, 1998, over the comparable period in 1997,and 9.1% for the six
months ended June 28, 1998, over the comparable period in 1997, for franchised
restaurants open throughout both periods.
Franchise and development fees decreased 8.6% to $1.3 million for the three
months ended June 28, 1998, from $1.4 million for the comparable period in 1997,
and 8.1% to $2.4 million for the six months ended June 28, 1998, from $2.6
million for the comparable period in 1997. These decreases were primarily due
to the 140 franchised restaurants opened during the six months ended June 28,
1998, versus the 142 opened during the comparable
7
<PAGE>
period in 1997, and the nature and mix of development agreements under which the
restaurants were opened. The average dollar amount of fees per franchised
restaurant opening 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 36.0% to $62.0 million for the three months ended
June 28, 1998, from $45.6 million for the comparable period in 1997, and 37.6%
to $119.6 million for the six months ended June 28, 1998, from $86.9 million for
the comparable period in 1997. These increases were primarily the result of the
increases in equivalent franchised restaurants and comparable sales for
franchised restaurants previously noted.
Equipment and other sales increased 13.6% to $11.0 million for the three months
ended June 28, 1998, from $9.7 million for the comparable period in 1997, and
18.0% to $21.9 million for the six months ended June 28, 1998 from $18.6 million
for the comparable period in 1997. These increases were primarily the result of
the previously noted increase in equivalent franchised restaurants and sales of
the Papa John's PROFIT System, a proprietary point of sale system, and related
PROFIT support services to franchisees.
Costs and Expenses. Restaurant cost of sales, which consists of food, beverage
and paper costs, decreased as a percentage of restaurant sales to 25.9% for the
three months ended June 28, 1998, from 26.3% for the comparable period in 1997,
and decreased to 26.2% for the six months ended June 28, 1998, from 26.4% for
the comparable period in 1997. These decreases were primarily due to restaurant
efficiencies, partially offset by increases in the average cheese block market
prices. Cheese, representing approximately 40% of food cost, and other
commodities are subject to seasonal fluctuations, weather, demand and other
factors. Most of the factors affecting cost are beyond the control of the
Company. An increase in the cost of cheese, or other operating costs, could
adversely affect profitability of the Company.
Restaurant salaries and benefits as a percentage of restaurant sales decreased
to 27.1% for the three months ended June 28, 1998, from 27.4% for the comparable
period in 1997, and decreased to 26.9% for the six months ended June 28, 1998,
from 27.2% for the comparable period in 1997, as a result of certain
efficiencies gained on a higher sales base, partially offset by an increase in
the federal minimum wage in September 1997. Occupancy costs remained relatively
consistent at 4.8% and 4.7%, respectively, for the three and six months ended
June 28, 1998, as compared to 4.8% and 4.9% for the comparable periods in 1997.
Advertising and related costs decreased to 9.0% for the three months ended June
28, 1998, from 9.4% for the comparable period in 1997, and decreased to 9.0% for
the six months ended June 28, 1998, from 9.2% for the comparable period in 1997.
This decrease is not considered unusual as advertising for the Company often
varies based on the timing of market-level promotions.
Other restaurant operating expenses decreased as a percentage of restaurant
sales to 13.1% for the three months ended June 28, 1998, from 13.3% for the
comparable period in 1997, and decreased as a percentage of restaurant sales to
13.2% for the six months ended June 28, 1998, from 13.7% for the comparable
period in 1997. Other operating expenses include an allocation of commissary
operating expenses equal to 3% of 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 decrease in other
operating expenses as a percentage of restaurant sales was primarily due to
training efficiencies and lower worker's compensation costs.
Commissary, equipment and other expenses include cost of sales and operating
expenses associated with sales of food, paper, equipment, information systems,
and printing and promotional items to franchisees and other customers. These
costs decreased as a percentage of combined commissary sales and equipment and
other sales to 90.5% for the three months ended June 28, 1998, as compared to
92.8% for the same period in 1997, and to 91.0% for the six months ended June
28, 1998, from 91.9% for the comparable period in 1997.
Cost of sales as a percentage of combined commissary sales and equipment and
other sales decreased to 77.6% from 78.9% for the comparable period in 1997, due
to the mix of commissary sales to equipment and other sales which have a higher
margin. Cost of sales remained relatively consistent at 78.0% for the six months
ended June 28, 1998, as compared to 77.9% for the comparable period in 1997.
Salaries and benefits as a percentage of combined commissary sales and equipment
and other sales decreased to 5.6% for the three months ended June 28, 1998, from
5.8% for the comparable period in 1997 and to 5.6% for the six months ended June
28, 1998, from 5.9% for the comparable period in 1997. Other operating expenses
8
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decreased to 7.2% for the three months ended and 7.4% for the six months ended
June 28, 1998, from 8.1% for the comparable periods in 1997. These decreases
were due primarily to higher costs related to the opening of two commissary
facilities in the comparable periods in 1997, as compared to one commissary
facility opened in the current comparable periods.
General and administrative expenses as a percentage of total revenues increased
to 7.6% for the three months ended June 28, 1998, from 7.4% for the comparable
period in 1997, and decreased to 7.4% for the six months ended June 28, 1998,
from 7.6% for the comparable period in 1997. The increase for the three months
ended was due principally to the decrease in deferral of system development
costs, partially offset by the receipt of incentives under the Kentucky Jobs
Development Act (the "KJDA incentives") related to certain corporate employment
increases. The reduction in costs for the six months ended, June 28, 1998 was
due to leveraging expenses on a higher sales base and the KJDA incentives.
Depreciation and amortization were relatively consistent as a percentage of
total revenues at 3.7% and 3.8%, respectively, for the three and six months
ended June 28, 1998, as compared to 3.8% and 3.7% for the comparable periods in
1997.
Investment Income. Investment income increased to $1.2 million for the three
months ended June 28, 1998, from $1.1 million for the comparable period in 1997,
and remained consistent at $2.2 million for the six months ended June 28, 1998,
and the comparable period in 1997 due to relatively consistent invested balances
and yields.
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 28, 1998
and June 29, 1997, representing statutory rates applied to pre-tax income as
adjusted by the impact of tax-exempt investment income and other items.
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, the enhancement of corporate systems and facilities, and the funding
of franchisee loans. Capital expenditures of $27.8 million and loans to
franchisees of $1.7 million (net of repayments) for the six months ended June
28, 1998, were funded by cash flow from operations.
Cash flow from operations increased to $30.0 million for the six months ended
June 28, 1998, from $15.9 million for the comparable period in 1997, due
primarily to the higher level of net income for the first six months of 1998 and
changes in working capital.
In addition to restaurant development and potential acquisitions, significant
capital projects for the next 12 months are expected to include the development
of full-service commissaries in Dallas, Texas and Pittsburgh, Pennsylvania by
mid-1999. In early-1999, the Company also expects to open a 240,000 square foot
facility in Louisville, Kentucky, approximately 40% of which will accommodate
relocation and expansion of the Louisville commissary operations and Novel
Approach promotional division, and the remainder of which will accommodate
relocation and consolidation of corporate offices.
The Company has been approved to receive up to $21.0 million in incentives under
the Kentucky Jobs Development Act in connection with the relocation of the
corporate offices. Based upon the expected timing of completion of the
facility, the Company expects to earn approximately $14.0 million of such
incentives through 2007.
Additionally, during the remainder of 1998 the Company expects to fund up to
$2.3 million in additional loans under existing franchisee loan program
commitments. Approximately $16.8 million was outstanding under this program as
of June 28, 1998. The Company does not expect to significantly expand the
program beyond existing commitments.
Capital resources available at June 28, 1998, include $24.1 million of cash and
cash equivalents, $59.9 million of investments and $8.2 million under a line of
credit expiring in June 1999. The Company expects to fund planned capital
expenditures for the next twelve months from these resources and operating cash
flows.
9
<PAGE>
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 21, 1998 at the
Hyatt Regency Hotel, 320 West Jefferson Street, Louisville, Kentucky at 11:00
a.m.
At the meeting, the Company's stockholders elected two directors to serve until
the 2001 annual meeting of stockholders. The vote counts were as follows:
Affirmative Withheld
----------- --------
Charles W. Schnatter 27,567,883 40,263
Richard F. Sherman 27,568,364 39,782
The Company's other directors continue to serve in accordance with their
previous elections: through 1999- John H. Schnatter and Blaine E. Hurst; and
through 2000 - O. Wayne Gaunce, Jack A. Laughery, and Michael W. Pierce.
The Company's stockholders also took the following actions at the meeting:
(1) Amended the Papa John's International, Inc. 1993 Stock Ownership Incentive
Plan by a vote of 21,839,813 affirmative to 5,720,716 negative and 47,617
abstention votes;
(2) Ratified the selection of Ernst & Young LLP as the Company's independent
auditors for the fiscal year ending December 27, 1998 by a vote of
27,593,248 affirmative to 6,847 negative and 8,051 abstention votes;
Item 5. Other Information.
Any stockholder proposal intended to be presented at next year's Annual Meeting
of Stockholders must be received by the Company by December 10, 1998 to be
considered for inclusion in the Company's proxy materials for such meeting. Any
stockholder proposal submitted with respect to the Company's 1999 Annual
Meeting of Stockholders, which proposal is submitted outside the requirements of
Rule 14a-8 under the Securities Exchange Act of 1934, will be considered
untimely for purposes of Rule 14a-4 and Rule 14a-5 if notice thereof is received
by the Company after February 24, 1999. A stockholder who wishes to introduce a
proposal at an annual meeting of stockholders, regardless of whether the
stockholder wants the proposal included in the Company's proxy statement, must
comply with certain requirements set forth in the Company's Certificate of
Incorporation. A copy of the Certificate of Incorporation may be obtained from
the General Counsel of the Company by written request to the Company's executive
offices at P.O. Box 99900, Louisville, Kentucky 40269-9990.
Item 6. Exhibits and Reports on Form 8-K.
a. Exhibits
Exhibit
Number Description
------ -----------
10 Amendment to Papa John's International, Inc.
1993 Stock Ownership Incentive Plan approved by
stockholders on May 21, 1998.
11 Calculation of Earnings Per Share
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 28, 1997 (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 28, 1998.
10
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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 12, 1998 /s/ E. Drucilla Milby
----------------------------------
E. Drucilla Milby, Chief Financial
Officer and Treasurer
11
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EXHIBIT 10
AMENDMENT TO
PAPA JOHN'S INTERNATIONAL, INC.
1993 STOCK OWNERSHIP INCENTIVE PLAN
A. Papa John's International, Inc., a Delaware corporation ("Company"),
has adopted, and the stockholders of the Company have approved, the Papa John's
International, Inc. 1993 Stock Ownership Incentive Plan ("Plan").
B. The Company desires to increase the number of shares of Common Stock
reserved for issuance under the Plan.
NOW THEREFORE, the Plan is hereby amended as follows:
1. AMENDMENT OF PLAN. Section 4.1 of the Plan is hereby deleted and the
following substituted in its place:
"4.1 Number of Shares. Subject to adjustment as provided in Section
4.3 the number of shares of Common Stock reserved for issuance under
the Plan is 6,000,000. Any Common Stock issued under the Plan may
consist, in whole or in part, of authorized and unissued shares or
treasury shares. If and to the extent an Award shall expire or
terminate for any reason without having been exercised in full
(including a cancellation and regrant of an Option), or shall be
forfeited, without, in either case, the Participant having realized
any of the economic benefits of a shareholder (such as the receipt of
dividends or other distributions paid on shares of Restricted Stock),
the shares (including Restricted Stock) associated with such Awards
shall again become available for Awards under the Plan."
2. CONTINUATION OF BALANCE OF PLAN. Except as amended hereby, the Plan is
unchanged and remains in full force and effect.
3. GOVERNING LAW. This Amendment shall be governed by, and construed in
accordance with, the laws of the State of Delaware without regard to its
conflict of laws rules.
IN WITNESS WHEREOF, this Amendment has been adopted by the Company as of
the 21st day of May, 1998.
PAPA JOHN'S INTERNATIONAL, INC.
By: /s/ Charles W. Schnatter
----------------------------
Title: Secretary
<PAGE>
Exhibit 11 - Calculation of Earnings per Share
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
(in thousands except per share data) June 28, 1998 June 29, 1997 June 28, 1998 June 29, 1997
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Basic Earnings per share:
Net income $ 9,392 $ 6,271 $17,672 $11,964
Weighted average shares outstanding 29,365 28,888 29,264 28,822
-------------------------------------------------------------
Basic earnings per share $ 0.32 $ 0.22 $ 0.60 $ 0.42
=============================================================
Diluted Earnings per Share:
Net income $ 9,392 $ 6,271 $17,672 $11,964
Weighted average shares outstanding 29,365 28,888 29,264 28,822
Dilutive effect of outstanding common stock options 1,157 631 1,005 620
-------------------------------------------------------------
Diluted weighted average shares outstanding 30,522 29,519 30,269 29,442
-------------------------------------------------------------
Diluted earnings per share $ 0.31 $ 0.21 $ 0.58 $ 0.41
============================================================
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-27-1998
<PERIOD-START> DEC-29-1997
<PERIOD-END> JUN-28-1998
<CASH> 24,075
<SECURITIES> 59,940
<RECEIVABLES> 14,353
<ALLOWANCES> 0
<INVENTORY> 9,071
<CURRENT-ASSETS> 53,207
<PP&E> 176,720
<DEPRECIATION> 40,423
<TOTAL-ASSETS> 287,812
<CURRENT-LIABILITIES> 37,212
<BONDS> 1,130
0
0
<COMMON> 295
<OTHER-SE> 239,099
<TOTAL-LIABILITY-AND-EQUITY> 287,812
<SALES> 297,343
<TOTAL-REVENUES> 315,201
<CGS> 151,177
<TOTAL-COSTS> 253,350
<OTHER-EXPENSES> 33,800
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 28,051
<INCOME-TAX> 10,379
<INCOME-CONTINUING> 17,672
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17,672
<EPS-PRIMARY> 0.60
<EPS-DILUTED> 0.58
</TABLE>
