<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 MARCH 26, 2000
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)
2002 PAPA JOHN'S BOULEVARD
LOUISVILLE, KENTUCKY 40299-2334
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(502) 261-7272
(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 May 4, 2000, there were outstanding 25,210,687 shares of the
registrant's common stock, par value $.01 per share.
<PAGE>
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION Page No.
--------
<S> <C>
Item 1. Financial Statements
Condensed Consolidated Balance Sheets --
March 26, 2000 and December 26, 1999 2
Condensed Consolidated Statements of Income --
Three Months Ended March 26, 2000 and March 28, 1999 3
Condensed Consolidated Statements of Stockholders' Equity -
Three Months Ended March 26, 2000 and March 28, 1999 4
Condensed Consolidated Statements of Cash Flows -
Three Months Ended March 26, 2000 and March 28, 1999 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 11
Item 6. Exhibits and Reports on Form 8-K 11
</TABLE>
1
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PAPA JOHN'S INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(In thousands) MARCH 26, 2000 DECEMBER 26, 1999
- -------------------------------------------------------------------------------------------------------------------------
(UNAUDITED) (NOTE)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 11,896 $ 3,698
Accounts receivable 18,342 21,415
Inventories 11,880 10,637
Prepaid expenses and other current assets 5,091 7,378
Deferred income taxes 3,127 2,977
- -------------------------------------------------------------------------------------------------------------------------
Total current assets 50,336 46,105
Investments 5,545 22,086
Net property and equipment 237,257 227,813
Notes receivable from franchisees 14,753 11,743
Intangibles 52,768 47,669
Other assets 18,692 16,635
- -------------------------------------------------------------------------------------------------------------------------
Total assets $ 379,351 $ 372,051
=========================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 23,120 $ 24,947
Accrued expenses 41,700 38,516
Current portion of debt 1,838 5,308
- -------------------------------------------------------------------------------------------------------------------------
Total current liabilities 66,658 68,771
Unearned franchise and development fees 7,108 6,222
Long-term debt, net of current portion 84,437 925
Deferred income taxes 2,371 2,109
Other long-term liabilities 2,131 1,891
Stockholders' equity:
Preferred stock - -
Common stock 306 305
Additional paid-in capital 190,351 189,920
Accumulated other comprehensive loss (480) (390)
Retained earnings 146,033 134,492
Treasury stock (119,564) (32,194)
- -------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 216,646 292,133
- -------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 379,351 $ 372,051
=========================================================================================================================
</TABLE>
Note: The balance sheet at December 26, 1999 has been derived from the
audited consolidated financial statements at that date but does not
include all information and footnotes required by accounting
principles generally accepted in the United States for a complete set
of financial statements.
SEE ACCOMPANYING NOTES.
2
<PAGE>
PAPA JOHN'S INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
(In thousands, except per share amounts) MARCH 26, 2000 MARCH 28, 1999
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
REVENUES:
Restaurant sales $ 111,253 $ 94,452
Franchise royalties 12,145 9,418
Franchise and development fees 1,507 1,470
Commissary sales 89,922 70,004
Equipment and other sales 12,222 12,007
- ------------------------------------------------------------------------------------------------
Total revenues 227,049 187,351
COSTS AND EXPENSES:
Restaurant expenses:
Cost of sales 27,821 23,227
Salaries and benefits 30,870 25,318
Advertising and related costs 10,720 8,137
Occupancy costs 5,481 4,590
Other operating expenses 15,336 12,724
- ------------------------------------------------------------------------------------------------
90,228 73,996
Commissary, equipment and other expenses:
Cost of sales 76,393 62,354
Salaries and benefits 6,725 5,610
Other operating expenses 7,718 6,849
- ------------------------------------------------------------------------------------------------
90,836 74,813
General and administrative expenses 17,408 14,095
Advertising litigation expense 889 -
Pre-opening and other general expenses 218 1,265
Depreciation and amortization expense 8,223 5,531
- ------------------------------------------------------------------------------------------------
Total costs and expenses 207,802 169,700
- ------------------------------------------------------------------------------------------------
Operating income 19,247 17,651
Other income (expense):
Investment income 292 792
Interest expense (804) (151)
- ------------------------------------------------------------------------------------------------
Income before income taxes 18,735 18,292
Income tax expense 7,194 6,909
- ------------------------------------------------------------------------------------------------
Net income $ 11,541 $ 11,383
================================================================================================
Basic earnings per share $ 0.43 $ 0.38
================================================================================================
Diluted earnings per share $ 0.43 $ 0.37
================================================================================================
Basic weighted average shares outstanding 26,851 29,966
================================================================================================
Diluted weighted average shares outstanding 27,104 31,099
================================================================================================
</TABLE>
Note: Certain 1999 amounts have been reclassified to conform to the 2000
presentation.
SEE ACCOMPANYING NOTES.
3
<PAGE>
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 (LOSS) EARNINGS STOCK EQUITY
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 27, 1998 $ 298 $ 166,209 $ 688 $ 87,456 $ (481) $ 254,170
Comprehensive income:
Net income - - - 11,383 - 11,383
Unrealized gain on investments,
net of tax of $187 - - 424 - - 424
--------
Comprehensive income 11,807
Exercise of stock options 3 6,406 - - - 6,409
Tax benefit related to exercise of
non-qualified stock options - 2,129 - - - 2,129
Deferred tax asset - pooling of interests
business combination - 5,245 - - - 5,245
Other - 69 - - - 69
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at March 28, 1999 $ 301 $ 180,058 $ 1,112 $ 98,839 $ (481) $ 279,829
===================================================================================================================================
Balance at December 26, 1999 $ 305 $ 189,920 $ (390) $134,492 $ (32,194) $ 292,133
Comprehensive income:
Net income - - - 11,541 - 11,541
Unrealized loss on investments,
net of tax of $286 - - (492) - - (492)
Other, net 402 402
---------
Comprehensive income 11,451
Exercise of stock options 1 350 - - - 351
Tax benefit related to exercise of
non-qualified stock options - 81 - - - 81
Acquisition of treasury stock
(3,444,500 shares) - - - - (87,370) (87,370)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at March 26, 2000 $ 306 $ 190,351 $ (480) $ 146,033 $ (119,564) $ 216,646
===================================================================================================================================
</TABLE>
SEE ACCOMPANYING NOTES.
4
<PAGE>
PAPA JOHN'S INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
(In thousands) MARCH 26, 2000 MARCH 28, 1999
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net cash provided by operating activities $ 25,562 $ 20,278
INVESTING ACTIVITIES
Purchase of property and equipment (14,149) (25,232)
Purchase of investments - (9,765)
Proceeds from sale or maturity of investments 15,014 10,515
Loans to franchisees (3,693) (183)
Loan repayments from franchisees 587 77
Deferred systems development costs (410) (298)
Acquisitions (6,022) (825)
Other 410 263
- ---------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (8,263) (25,448)
FINANCING ACTIVITIES
Payments on debt (5,443) (2,365)
Proceeds from debt issuance and line of credit facility 83,500 2,510
Proceeds from exercise of stock options 351 6,409
Tax benefit related to exercise of non-qualified
stock options 81 2,129
Acquisition of treasury stock (87,370) -
Other (186) 73
- ---------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities (9,067) 8,756
Effect of exchange rate changes on cash and cash equivalents (34) -
- ---------------------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents 8,198 3,586
Cash and cash equivalents at beginning of period 3,698 33,814
- ---------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 11,896 $ 37,400
=====================================================================================================================
</TABLE>
SEE ACCOMPANYING NOTES.
5
<PAGE>
PAPA JOHN'S INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
March 26, 2000
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with accounting principles generally accepted in
the United States 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 accounting
principles generally accepted in the United States 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 months ended March 26, 2000,
are not necessarily indicative of the results that may be expected for the
year ended December 31, 2000. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Annual Report on Form 10-K for Papa John's International, Inc. (referred to
as the "Company", "Papa John's" or in the first person notations of "we",
"us" and "our") for the year ended December 26, 1999.
2. SEGMENT INFORMATION
<TABLE>
<CAPTION>
THREE MONTHS ENDED
(In thousands) MARCH 26, 2000 MARCH 28, 1999
- --------------------------------------------------------------------------------------------------
(NOTE)
<S> <C> <C>
REVENUES FROM EXTERNAL CUSTOMERS:
Restaurants $ 111,253 $ 94,452
Commissaries 89,922 70,004
Franchising 13,652 10,888
All others 12,222 12,007
- --------------------------------------------------------------------------------------------------
TOTAL REVENUES FROM EXTERNAL CUSTOMERS $ 227,049 $ 187,351
==================================================================================================
INTERSEGMENT REVENUES:
Commissaries $ 30,265 $ 26,856
Franchising 40 34
All others 4,000 3,273
- --------------------------------------------------------------------------------------------------
TOTAL INTERSEGMENT REVENUES $ 34,305 $ 30,163
==================================================================================================
INCOME BEFORE INCOME TAXES:
Restaurants $ 3,830 $ 5,364
Commissaries 7,086 4,379
Franchising 11,693 9,357
All others 982 987
Unallocated corporate expenses (4,817) (1,817)
Elimination of intersegment profits (losses) (39) 22
- --------------------------------------------------------------------------------------------------
TOTAL INCOME BEFORE INCOME TAXES $ 18,735 $ 18,292
==================================================================================================
FIXED ASSETS:
Restaurants $ 150,985
Commissaries 59,705
All others 5,273
Unallocated corporate assets 96,976
Accumulated depreciation and amortization (75,682)
- --------------------------------------------------------------------------------
NET FIXED ASSETS $ 237,257
================================================================================
</TABLE>
Note: Certain 1999 amounts have been reclassified to conform to the 2000
presentation.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
RESTAURANT PROGRESSION:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 26, MARCH 28,
2000 1999
- --------------------------------------------------------------------------
<S> <C> <C>
PAPA JOHN'S RESTAURANTS:
U.S. COMPANY-OWNED:
Beginning of period 573 514
Opened 5 4
Closed - (1)
Sold to franchisees (5) (5)
Acquired from franchisees 20 2
- ------------------------------------------------------------------------
End of period 593 514
- ------------------------------------------------------------------------
U.S. FRANCHISED:
Beginning of period 1,681 1,365
Opened 62 69
Closed (6) (2)
Sold to Company (20) (2)
Acquired from Company 5 5
- ------------------------------------------------------------------------
End of period 1,722 1,435
- ------------------------------------------------------------------------
INTERNATIONAL FRANCHISED:
Beginning of period 26 6
Opened 7 3
- ------------------------------------------------------------------------
End of period 33 9
- ------------------------------------------------------------------------
Total at end of period 2,348 1,958
========================================================================
PERFECT PIZZA RESTAURANTS:
COMPANY-OWNED:
Beginning of period 12 -
Closed (1) -
- ------------------------------------------------------------------------
End of period 11 -
- ------------------------------------------------------------------------
FRANCHISED:
Beginning of period 194 -
- ------------------------------------------------------------------------
End of period 194 -
- ------------------------------------------------------------------------
Total at end of period 205 -
========================================================================
</TABLE>
RESULTS OF OPERATIONS
REVENUES. Total revenues increased 21.2% to $227.0 million for the three months
ended March 26, 2000, from $187.4 million for the comparable period in 1999.
Restaurant sales increased 17.8% to $111.3 million for the three months ended
March 26, 2000, from $94.5 million for the comparable period in 1999. This
increase was primarily due to an increase of 14.9% in the number of equivalent
Company-owned Papa John's restaurants open during the three months ended March
26, 2000, compared to the same period in the prior year. "Equivalent
restaurants" represent the number of restaurants open at the beginning of a
given
7
<PAGE>
period, adjusted for restaurants opened, closed, acquired or sold during the
period on a weighted average basis. Also, sales increased 4.0% for the three
months ended March 26, 2000, over the comparable period in 1999 for
Company-owned Papa John's restaurants open throughout both periods. Sales for
the three months ended March 26, 2000, for the Company-owned Perfect Pizza
restaurants acquired in November 1999, contributed 1.2% to the overall
increase.
Franchise royalties increased 29.0% to $12.1 million for the three months ended
March 26, 2000, from $9.4 million for the comparable period in 1999. This
increase was primarily due to an increase of 22.3% in the number of equivalent
franchised Papa John's restaurants open during the three months ended March 26,
2000, compared to the same period in 1999. Also, sales increased 2.8% for the
three months ended March 26, 2000, over the comparable period in 1999 for
franchised Papa John's restaurants open throughout both periods. Royalties for
the three months ended March 26, 2000, from Perfect Pizza franchised restaurants
contributed 8.6% to the overall increase.
Franchise and development fees remained consistent at $1.5 million for both the
three months ended March 26, 2000, and the comparable period in 1999. An
increase in the average franchise and development fee per store, primarily for
"Hometown restaurants", was offset by slightly fewer restaurant openings than in
the first quarter of 1999. The average dollar amount of fees per "Hometown
restaurant" increased for the three months ended March 26, 2000 over the
comparable period in 1999 due to the terms of development agreements entered
into subsequent to March 1998 generally providing for fees equivalent to those
under standard development agreements. "Hometown restaurants" are located in
smaller markets, generally markets with less than 9,000 households.
Commissary sales increased 28.5% to $89.9 million for the three months ended
March 26, 2000, from $70.0 million for the comparable period in 1999. This
increase was primarily the result of the increases in equivalent franchised
restaurants previously noted. Perfect Pizza commissary operations contributed
7.4% to the overall increase.
Equipment and other sales increased 1.8% to $12.2 million for the three months
ended March 26, 2000, from $12.0 million for the comparable period in 1999. This
increase was due to ongoing equipment, smallwares, uniforms and print materials
sales related to the previously noted increase in equivalent franchised
restaurants, offset by slightly fewer equipment package sales due to fewer
franchised restaurant openings than in the prior comparable period.
COSTS AND EXPENSES. Restaurant cost of sales, which consists of food, beverage
and paper costs, increased as a percentage of restaurant sales to 25.0% for the
three months ended March 26, 2000, from 24.6% for the comparable period in 1999.
This increase is primarily due to a decrease in average sales prices, partially
offset by a decrease in cheese costs. Cheese represents approximately 40% of
food cost and is subject to significant price fluctuations caused by weather,
demand and other factors. Most of the factors affecting the cost of cheese are
beyond our control. However, a cheese pricing arrangement was initiated with an
independent franchisee-owned corporation effective December 27, 1999, which is
expected to reduce cheese price volatility over time.
Restaurant salaries and benefits as a percentage of restaurant sales increased
to 27.7% for the three months ended March 26, 2000, from 26.8% for the
comparable period in 1999. The increase for the three months ended March 26,
2000 was the result of a reduction in average sales prices, partially offset by
an increase in labor efficiency. Occupancy costs were consistent as a percentage
of restaurant sales at 4.9% for the three months ended March 26, 2000 and March
28, 1999.
Advertising and related costs increased as a percentage of restaurant sales to
9.6% for the three months ended March 26, 2000, from 8.6% for the comparable
period in 1999 as a result of increased marketing activities in response to the
competitive environment and sales trends.
Other restaurant operating expenses increased as a percentage of restaurant
sales to 13.8% for the three months ended March 26, 2000, from 13.5% for the
comparable period in 1999. This increase was primarily due to an increase in
certain recruitment incentives in anticipation of 15th Anniversary staffing
needs and in response to increased fuel costs for drivers. Other operating
expenses includes 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, food, equipment purchases and storage to Company-owned
restaurants.
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 88.9% for the three months ended March 26, 2000, as compared to
91.2% for the same period in 1999. Cost of sales as a percentage of combined
commissary sales and equipment and other sales decreased to 74.8% for the three
months ended March 26,
8
<PAGE>
2000, from 76.0% for the comparable period in 1999. This decrease was due
primarily to the timing of certain favorable commodity price changes,
primarily cheese. Additionally, higher relative gross margins for the Perfect
Pizza commissary operations contributed 0.5% to the overall cost of sales
decrease. Salaries and benefits remained relatively consistent at 6.6% and
6.8% for the three months ended March 26, 2000 and March 28, 1999,
respectively. Other operating expenses decreased to 7.6% for the three months
ended March 26, 2000, from 8.4% for the comparable period in 1999. This
decrease was due to general operating efficiencies and leverage on a higher
sales base.
General and administrative expenses remained relatively consistent as a
percentage of total revenues at 7.7% and 7.5% for the three months ended March
26, 2000 and March 28, 1999, respectively.
Advertising litigation expense represents costs associated with the lawsuit
filed against us by Pizza Hut, Inc. claiming that our "Better Ingredients.
Better Pizza." slogan is false and deceptive advertising. The $889,000 in
advertising litigation expense for the three months ended March 26, 2000
consists primarily of legal costs and costs related to the potential
discontinuation of the use of the "Better Ingredients. Better Pizza" slogan.
See "Part II. Other Information - Item 1. Legal Proceedings" for additional
information.
Pre-opening and other general expenses decreased to $218,000 for the three
months ended March 26, 2000, from $1.3 million for the comparable period in
1999. This decrease was primarily due to the recognition of a $630,000 gain on
the divestiture of five restaurants for the three months ended March 26, 2000,
compared to a $592,000 loss on the divestiture of five restaurants and one
closure in the prior comparable period.
Depreciation and amortization as a percentage of total revenues increased to
3.6% for the three months ended March 26, 2000, from 3.0% for the comparable
period in 1999. This increase was primarily due to depreciation expense
associated with the relocation of the Corporate Headquarters to an owned
facility and the continued growth of our commissary system in mid to late 1999.
INVESTMENT INCOME. Investment income decreased to $292,000 for the three months
ended March 26, 2000, from $792,000 for the comparable period in 1999. This
decrease was primarily due to a decrease in our average investment portfolio
balance, partially offset by an increase in the average balance of franchise
loans. A significant portion of our investment portfolio was liquidated to fund
the repurchase of our common stock.
INTEREST EXPENSE. Interest expense increased to $804,000 for the three months
ended March 26, 2000, from $151,000 for the comparable period in 1999 due to
amounts borrowed to fund the repurchase of our common stock.
INCOME TAX EXPENSE. Income tax expense reflects a combined federal, state and
local effective tax rate of 38.4% for the three months ended March 26, 2000,
compared to 37.8% for the comparable period in 1999. The effective tax rate in
2000 increased as a result of less tax-exempt investment income due to the
liquidation of investments to fund the repurchase of common stock.
LIQUIDITY AND CAPITAL RESOURCES
Cash flow from operations increased to $25.6 million for the three months ended
March 26, 2000, from $20.3 million for the comparable period in 1999, due
primarily to decreases in components of working capital.
We require 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. Additionally, we began a share repurchase program in December
1999. Share repurchases of $87.4 million, capital expenditures of $14.1 million,
acquisitions of $6.0 million, payments on debt of $5.4 million and loans to
franchisees of $3.7 million for the three months ended March 26, 2000, were
funded by advances on an unsecured revolving line of credit agreement, cash flow
from operations and the liquidation of available cash and cash equivalents.
In addition to restaurant development and potential acquisitions, significant
capital projects for the next 12 months are expected to include the expansion
and relocation of the Phoenix, Arizona distribution center to a full-service
commissary and the development of a dough production facility in Cambridge,
Ontario, Canada by mid-2000.
Subsequent to March 26, 2000, we acquired an additional $16.0 million of common
stock under our share repurchase program. These repurchases were funded by
additional advances on our line of credit. The Board of Directors has
9
<PAGE>
authorized up to $150.0 million for the share repurchase program through
December 31, 2000, and $14.9 million currently remains available for
repurchase under this authorization.
Capital resources available at March 26, 2000, include $11.9 million of cash and
cash equivalents, $5.5 million of investments, and $66.5 million remaining
borrowing capacity under a $150.0 million, three-year, unsecured revolving line
of credit agreement expiring in March 2003. We expect to fund planned capital
expenditures and additional discretionary repurchases of our common stock, if
any, for the next twelve months from these resources and operating cash flows.
IMPACT OF YEAR 2000
In prior years, we discussed the nature and progress of our plans to become Year
2000-ready. In late 1999, we completed testing of our systems and made
modifications as deemed necessary. As a result of our planning and
implementation efforts, we experienced no significant disruptions in business
critical information technology and non-information technology systems and
believe these systems successfully responded to the Year 2000 date change. The
costs incurred in connection with necessary modifications of our systems were
not material to our financial position. We are not aware of any material
problems resulting from Year 2000 issues regarding our internal systems, the
products and services of third parties, or the businesses operated by our
franchisees. We will continue to monitor our business critical computer
applications and those of our suppliers and franchisees throughout the year 2000
to ensure that any Year 2000 matters that may arise are addressed promptly.
FORWARD LOOKING STATEMENTS
Certain information contained in this quarterly report, particularly information
regarding future financial performance and plans and objectives of management,
is forward looking. Certain factors could cause actual results to differ
materially from those expressed in forward looking statements. These factors
include, but are not limited to, our ability and the ability of our franchisees
to obtain suitable locations and financing for new restaurant development; the
hiring, training, and retention of management and other personnel; competition
in the industry with respect to price, service, location and food quality; an
increase in food cost due to seasonal fluctuations, weather or demand; changes
in consumer tastes or demographic trends; changes in federal or state laws, such
as increases in minimum wage; and risks inherent to international development,
including operational or market risks associated with the planned conversion of
Perfect Pizza restaurants to Papa John's in the United Kingdom. See "Part I.
Item 1. - Business Section - Forward Looking Statements" of the Form 10-K for
the fiscal year ended December 26, 1999 for additional factors.
10
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On August 12, 1998, Pizza Hut, Inc. filed suit against us in the United States
District Court for the Northern District of Texas, claiming that our "Better
Ingredients. Better Pizza." slogan constitutes false and deceptive advertising
in violation of the Lanham Trademark Act. The trial began on October 25, 1999.
On November 18, 1999, the jury returned a verdict that our "Better Ingredients.
Better Pizza." slogan is false and deceptive. On January 3, 2000, the court
announced its judgment, awarding Pizza Hut $468,000 in damages and ordering us
to cease all use of the "Better Ingredients. Better Pizza." slogan. Under the
judge's order, we were to cease using the slogan in print and broadcast
advertising by January 24, 2000, phase out printed promotional materials and
other items containing the slogan (except signage) by March 3, 2000 and remove
the slogan from restaurant signage by April 3, 2000. We have estimated that the
pre-tax costs of complying with the court's order and certain related costs
could approximate $12.0 to $15.0 million, of which $6.1 million and $889,000
were recorded as pre-tax charges against 1999 and first quarter 2000 earnings,
respectively. We filed an appeal of the verdict and the court's order and a
motion for stay of the court's order pending outcome of the appeal. On January
21, 2000, the United States Court of Appeals for the Fifth Circuit granted a
stay of the District Court judgment pending our appeal. Oral arguments related
to the appeal were held on April 5, 2000. The outcome of the appeal is unknown
at this time. If our appeal is successful, the timing and possibly the amount of
costs to be incurred could be favorably impacted.
We are also subject to claims and legal actions in the ordinary course of our
business. We believe that all such claims and actions currently pending against
us are either adequately covered by insurance or would not have a material
adverse effect on us if decided in a manner unfavorable to us.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a. Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
10.1 Secured Loan Agreement entered into as of December
27, 1999, by and between BIBP Commodities, Inc. and
Capital Delivery, Ltd.
10.2 Promissory Note dated December 27, 1999, by BIBP
Commodities, Inc.
11 Calculation of Earnings per Share
27 Financial Data Schedule for the three months ended
March 26, 2000, 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 our Annual
Report on Form 10-K for the fiscal year ended
December 26, 1999 (Commission File No. 0-21660) is
incorporated herein by reference.
</TABLE>
b. Current Reports on Form 8-K.
1. We filed a Current Report on Form 8-K dated December 27, 1999
attaching a press release dated December 27, 1999 announcing
our fourth quarter 1999 and period twelve comparable sales
growth percentages for company-owned restaurants. We also
announced that Wade Oney would transition out of his role as
Papa John's Chief Operating Officer during the first quarter
of 2000.
2. We filed a Current Report on Form 8-K dated January 3, 2000
attaching a press release dated January 3, 2000 announcing
that a federal court judge in Dallas ruled that we could no
longer use our "Better Ingredients. Better Pizza." trademarked
slogan. The press release also announced our plans to appeal
the ruling and that management would be evaluating the impact
of the ruling on fourth quarter and full-year 1999 earnings.
11
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3. We filed a Current Report on Form 8-K dated January 6, 2000
attaching a press release dated January 6, 2000 announcing the
approval by our Board of Directors of an increase to $100
million in the amount of our common stock which may be
repurchased from time to time through December 31, 2000. We
also announced that we had nearly completed the initial $50
million in common stock repurchases previously authorized by
our Board of Directors.
4. We filed a Current Report on Form 8-K dated January 14, 2000
attaching a press release dated January 14, 2000 announcing
our fourth quarter and full-year 1999 systemwide comparable
sales increases. We announced our expected costs to comply
with the Pizza Hut litigation ruling. The press release also
announced that we filed a motion to stay the court's
injunction against the use of our slogan pending an appeal of
the ruling.
5. We filed a Current Report on Form 8-K dated January 31, 2000
attaching a press release dated January 31, 2000 announcing
our Board of Directors approved an increase to $150 million in
the amount of our common stock which may be repurchased from
time to time through December 31, 2000. We announced that we
had completed the $100 million in common stock repurchases
previously authorized by our Board of Directors. The press
release also announced that our Board of Directors authorized
an increase in our existing credit availability to $200
million to fund the increased share repurchase and for general
corporate purposes.
6. We filed a Current Report on Form 8-K dated February 14, 2000
attaching a press release dated February 14, 2000 announcing
the approval of a Stockholder Protection Rights Agreement by
our Board of Directors. In connection with the adoption of the
Rights Plan, the Board declared a dividend of one Right for
each share of the Company's common stock outstanding at the
close of business on March 1, 2000.
12
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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: May 10, 2000 /s/ E. Drucilla Milby
----------------- ------------------------------------
E. Drucilla Milby, Senior Vice President,
Chief Financial Officer and Treasurer
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EXHIBIT 10.1
LOAN AGREEMENT
(REVOLVING LINE OF CREDIT)
THIS SECURED LOAN AGREEMENT ("Agreement") is entered into as of
December 27, 1999, by and between BIBP COMMODITIES, INC., a Delaware corporation
(the "Borrower"), and CAPITAL DELIVERY, LTD., a Kentucky corporation (the
"Lender").
RECITAL:
Borrower desires to establish a line of credit with Lender to finance
its working capital needs in operating its business of purchasing cheese in
accordance with product specifications for Papa John's Pizza restaurants and
selling cheese to PJ Food Service, Inc., the wholly owned distribution
subsidiary of Papa John's International, Inc. ("PJI"), and Lender is willing to
make such loan on the terms and conditions set forth herein.
AGREEMENT:
NOW, THEREFORE, Borrower and Lender have agreed as follows:
1. LOAN.
(a) LOAN; PROMISSORY NOTE. Lender agrees to make "Advances" to
Borrower from time to time during the period commencing on the date hereof and
ending on the day immediately prior to the Maturity Date, as defined below, in
an aggregate principal amount not to exceed the Maximum Amount, as defined below
(the "Loan"). The Loan shall be evidenced by a Promissory Note (the "Note") of
even date herewith.
(b) EXTENSION OF TERM. Effective December 31, 2000, and
continuing effective each December 31 thereafter, the Maturity Date shall be
extended for a period of one (1) year, provided that on the effective of each
such extension there exists then no Event of
<PAGE>
Default, as defined below, and provided further that Lender has not given
notice to Borrower of nonextension prior to such effective date.
(c) MAXIMUM PRINCIPAL BALANCE. The aggregate outstanding
principal balance of the Loan shall not exceed $17,600,000 ("Maximum Amount").
(d) LOAN ACCOUNT. Lender shall maintain a loan account on its
books in which shall be recorded all advances made by Lender to Borrower
pursuant to this Agreement, and all payments made by Borrower with respect to
the Loan; provided, however, that failure to maintain such account or record any
advances therein shall not relieve Borrower of its obligations to repay the
outstanding principal amount of the Loan, all accrued interest thereon, and any
amounts payable with respect thereto in accordance with the terms of this
Agreement and the Note.
(e) INTEREST RATE AND PAYMENT.
(i) Interest shall accrue daily on the aggregate
outstanding principal balance of the Loan, for the period commencing on the
date an initial Advance under the Loan is made until the Loan is paid in
full, at a variable rate per annum equal to the "Prime Rate" less one (1)
percentage point, in respect of such principal amount until such unpaid
amount has been paid in full, adjusted monthly on the first day of each
calendar month. "Prime Rate," as used in this Note, shall mean the interest
rate published in THE WALL STREET JOURNAL in the "Money Rates" column as the
prevailing "Prime Rate," it being understood and agreed that the Prime Rate
is not necessarily the lowest or best rate of interest available on
commercial loans of the nature evidenced by this Note.
(ii) Interest on the outstanding principal balance of
the Loan shall be calculated daily for each day on which there is an
outstanding balance on the Loan. Interest shall be due and payable as
provided in the Note.
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(iii) Interest shall be computed on the basis of a
360-day year and the actual number of days elapsed.
(iv) Any principal or interest payment due under the
Note not paid at stated maturity, by acceleration, conversion or otherwise,
shall, to the extent permitted by applicable law, thereafter bear interest
(compounded monthly and payable upon demand) at a rate which is 2% per annum
in excess of the rate of interest otherwise payable under this Agreement in
respect of such principal amount until such unpaid amount has been paid in
full (whether before or after judgment). The charging or collection of any
such additional interest shall not be deemed a waiver of any of the Lender's
rights arising thereby or hereunder, including the right to declare an "Event
of Default" hereunder.
(f) REPAYMENT OF THE LOAN. If not earlier paid, or if not
accelerated for payment, the outstanding principal amount of the Loan and all
accrued and unpaid interest shall, at the close of business on December 31, 2002
(the "Maturity Date"), be paid in full.
(g) ONE OBLIGATION. All Advances made hereunder, and all
interest accrued thereon, shall constitute one obligation of Borrower secured by
all security interests, liens, claims, and encumbrances from time to time
hereafter granted to Lender by Borrower.
(h) CREDIT RESOURCES. Borrower acknowledges that Lender has
informed it that Lender may not from time to time in the future have cash, cash
equivalents, and credit resources sufficient to permit Lender to make all
requested advances under this Agreement and other agreements with developers and
franchisees of PJI while maintaining sufficient working capital for Lender's
expansion and operating needs, and Borrower agrees that in the event Lender
shall fail to fund the Loan as and to the extent required hereby and such
failure shall constitute a breach of this Agreement (a "Funding Default"), such
Funding Default shall not (v) constitute fraud (by any person or entity,
including Lender and its Successors and Assignees) or (vi) give rise to any
liability of any person or entity, including Lender and its Successors and
Assignees, in
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any other tort, and Borrower further agrees that it shall be limited to its
remedies in contract solely against Lender.
(i) PAYMENT METHOD. All payments to be made by Borrower
hereunder shall be made in lawful money of the United States (vii) by check
delivered to Lender, (viii) in immediately available funds, or (ix) via
electronic funds transfer, without set off, counterclaims, deduction or
withholding of any type.
2. CONDITIONS ON ADVANCES. Advances under the Note shall be subject to
the following:
(a) Lender shall have received, at least five (5) business
days prior to the day an Advance is to be made hereunder, (i) a written request
from an authorized officer of Borrower for an Advance in a specific amount, (ii)
a Certificate of Borrower in the form attached hereto as Exhibit A, which shall
be signed by the president or chief financial officer of Borrower and which
shall certify that Borrower meets all conditions for receipt of the Advance and
is in compliance with this Agreement, and (iii) copies of all other documents
reasonably requested by Lender.
(b) No material adverse change, as determined by Lender in its
sole discretion, in the financial condition, results of operations, assets, or
business of Borrower, shall have occurred at any time or times subsequent to the
date hereof.
(c) No Event of Default or any event that, through the passage
of time or the service of notice or both, would mature into an Event of Default
shall have occurred and be continuing under this Agreement or the Note.
(d) The representations and warranties contained in Section 6
hereof shall be true and correct as of the date such Advance is made.
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(e) Advances may be used solely to finance Borrower's working
capital needs in operating its business of purchasing cheese in accordance with
product specifications for Papa John's Pizza restaurants and selling cheese to
PJ Food Service, Inc. ("PJFS").
(f) Advances will be permitted only to the extent of
Borrower's deficit cash position, if any, resulting from its business and the
application of the Pricing Formula in effect as of the date of this Agreement,
or as amended from time to time with the consent of Lender, and employed to
establish the price of cheese under the Cheese Purchase Agreement between
Borrower and PJFS.
(g) No Advances will be made if any agreement between Lender
(or any affiliate of Lender) and Borrower (or any affiliate of Borrower) is in
default or has been terminated.
(h) Advances will be made in increments of $100,000.
(i) Advances shall be made by wire transfer from Lender to the
account of Borrower or by regular check of Lender payable to Borrower and
forwarded to Borrower by overnight courier to its address as set forth herein
for delivery on the next regular business day.
3. REPRESENTATIONS, AGREEMENTS AND WARRANTIES. To induce the Lender to
enter into this Agreement, Borrower represents, warrants and agrees as follows:
(a) Borrower has full power and authority to enter into and
perform this Agreement; this Agreement has been duly entered into and delivered
and constitutes a legal, valid and binding obligation of the Borrower
enforceable in accordance with its terms.
(b) Borrower has no debt other than ordinary trade accounts
payable, except for the debt evidenced by the Note.
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<PAGE>
(c) Borrower is a corporation duly organized and validly
existing in good standing under the laws of the state of Delaware and is
qualified to do business and is in good standing in every jurisdiction where the
nature of its business and the ownership of its properties requires it to be so
qualified and where failure so to qualify might materially affect its business
or property, and has all requisite power and authority, corporate and otherwise,
to conduct its business, to own its property, and to execute, deliver and
perform all of its Obligations under this Agreement and the Note.
(d) Borrower's registered office, chief executive office and
principal place of business, are at the addresses set forth in Section 10.
(e) The execution, delivery and performance of this Agreement
and the Note are within Borrower's powers, have been duly authorized by all
necessary or proper action on the part of Borrower including the consent of its
members where required, are not in contravention of any provision of law or of
any agreement or indenture by which Borrower is bound or of the organizational
or charter documents of Borrower and do not require the consent or approval of
any governmental body, agency, authority or other person that has not been
obtained and a copy thereof furnished to Lender.
(f) Borrower is, and after giving effect to the transactions
contemplated hereby, will be solvent, and will remain solvent throughout the
Term.
(g) No action or proceeding is now pending or, threatened
against Borrower at law, in equity or otherwise before any court, board,
commission, agency or instrumentality of the federal or state government or of
any state or municipal government or any agency or subdivision thereof, or
before any arbitrator or panel of arbitrators.
(h) Borrower is not engaged in any joint venture or
partnership with any Person.
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(i) Borrower has filed all United States tax returns and all
state, local and foreign tax returns that are required to be filed, and has
paid, or made provision for the payment of, all taxes that have become due
pursuant to said returns or pursuant to any statement received by Borrower,
except such taxes, if any, as are being contested in good faith and as to which
adequate reserves have been provided. Such tax returns properly reflect
Borrower's income and taxes for the periods covered thereby, subject only to
reasonable adjustments required by the Internal Revenue Service upon audit, and
having no material adverse affect on Borrower's financial condition, business or
results of operations.
(j) (i) The financial statements of Borrower, copies of which
have been delivered to Lender, are true, correct and accurate and contain no
material misstatements or omissions and fairly presents the financial position
of Borrower as of the date thereof.
(ii) Since the date of the financial statements referred
to in subsection (i) above, Borrower has not incurred any obligations or
guaranteed the obligations of any other person.
(k) Borrower is not in violation of any applicable statute,
regulation or ordinance of any governmental entity, or of any agency thereof, in
any respect materially and adversely affecting Borrower's business, property,
assets, operations or condition, financial or otherwise.
4. AFFIRMATIVE COVENANTS. For so long as Borrower shall have any
Obligations to Lender under this Agreement, Borrower covenants as follows:
(a) Borrower shall preserve and maintain its separate
existence and all rights, privileges, and franchises in connection therewith,
and maintain its qualification and good standing in all states in which such
qualification is necessary in order for Borrower to conduct its business in such
states.
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<PAGE>
(b) Borrower shall file all federal, state and local tax
returns and other reports that it is required by law to file, maintain adequate
reserves for the payment of all taxes, assessments, governmental charges, and
levies imposed upon it, its income, or profits, or taxes, assessments,
governmental charges and levies prior to the date on which penalties attach
thereto, except where the same may be contested in good faith by appropriate
proceedings.
(c) Borrower shall comply with all laws, statutes, regulations
and ordinances of any governmental entity, or any agency thereof, applicable to
it, a violation of which, in any respect, may materially and adversely affect
Borrower's business, property, assets, operations or condition, financial or
otherwise, including, without limitation, any such laws, statutes, regulations
or ordinances regarding the collection, payment, and deposit of employees'
income, unemployment, and Social Security taxes and with respect to pension
liabilities.
(d) Borrower shall notify Lender in writing:
(i) promptly upon learning thereof, of any material
litigation affecting Borrower, whether or not the claim is considered to be
covered by insurance, and of the institution of any suit or administrative
proceeding which may materially and adversely affect a Borrower's operations,
financial condition or business;
(ii) at least thirty (30) days prior thereto, opening
of any new office or place of business by Borrower or the closing by Borrower
of any existing office or place of business; PROVIDED, HOWEVER, this
provision shall not be construed as a waiver or consent by Lender to allow
Borrower to open or close any new office or place of business; and
(iii) within three (3) calendar days after the
occurrence thereof, of Borrower's default under any lease, deed or other
similar agreement to which Borrower is a party or by which Borrower is bound.
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<PAGE>
(e) From time to time as requested by Lender, Borrower shall
submit a written plan setting forth its current and proposed: management, growth
plans, cash position and debt, and such other information as Lender may
reasonably request.
5. NEGATIVE COVENANTS. For so long as Borrower shall have any
obligations to Lender under this Agreement, Borrower covenants that:
(a) Borrower shall not create, incur, assume, or suffer to
exist any indebtedness for borrowed money, except (i) obligations due to Lender
under this Agreement and the Note, and (ii) unsecured trade payables incurred in
the ordinary course of business.
(b) Borrower shall not assume, guarantee, endorse or otherwise
become directly or contingently liable in connection with any other liability of
any other person except by endorsement of negotiable instruments for deposit or
collection and similar transactions in the ordinary course of business.
(c) Borrower shall not, without the prior written consent of
Lender, merge into or consolidate with any other person or enter into any
agreement with a view to do same.
(d) Borrower shall not enter into any new business or make any
material change in its business objectives.
(e) Borrower shall not, without the prior written consent of
Lender, sell or dispose of any of its "assets" (as that term is defined in
accordance with generally accepted accounting principles) other than a sale in
the ordinary course of business.
(f) Borrower shall not make any loans, advances or extensions
of credit to, or investments in, any persons, including, without limitation, any
of Borrower's affiliates, partners, officers or employees other than expenses
advanced in the ordinary course of business.
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(g) Borrower shall not acquire all or any material portion of
the stock, securities, or assets of any other person or entity.
(h) Borrower shall not cancel any claim or debt, except for
consideration and in the ordinary course of its business.
(i) Without the prior written consent of Lender, Borrower
shall not suffer to exist any lien, encumbrance, mortgage, or security interest
on any of its property, except: (i) those in favor of Lender, and (ii) liens for
(A) property taxes not delinquent, (B) taxes not yet subject to penalties, and
(C) pledges or deposits made under Workmen's Compensation, Unemployment
Insurance, Social Security and similar legislation, or to secure statutory
obligations.
(j) Borrower shall not use any fictitious name.
(k) Borrower shall not enter into or be a party to any
transaction with any of Borrower's affiliates.
(l) Borrower shall not make, or obligate itself to make, any
distribution to its shareholders, or redeem, retire, purchase or otherwise
acquire, directly or indirectly, any of its ownership interests now or hereafter
outstanding, or set aside any funds for any of the foregoing purposes.
(m) Borrower shall not liquidate, dissolve, discontinue
business or materially change its capital structure or its general business
purpose or take any action with a view towards the same.
(n) Borrower shall not, without the prior written consent of
Lender, effect any revisions to the Pricing Formula in effect on the date of
this Agreement and employed to establish cheese prices under the Cheese Purchase
Agreement between Borrower and PJFS.
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(o) Borrower shall not, without the prior written consent of
Lender, increase the dividend paid to Borrower shareholders.
6. DEFAULT. At the option of the Lender the happening of any of the
following events shall constitute a default under this Agreement (an "Event of
Default"):
(a) The occurrence of any "Event of Default" under the Note.
(b) Breach or non-compliance by Borrower of any covenant,
representation or warranty under this Agreement.
(c) Encumbrance of any of Borrower's assets, or the making of
a levy, seizure or attachment thereof or thereon.
7. REMEDIES. Upon any Event of Default, the Lender may at its option
declare any and all of the Obligations to be immediately due and payable, in
addition to exercising all other rights or remedies available to the Lender at
law or in equity.
8. MANDATORY LAWS GOVERNING EXERCISE OF REMEDIES. All of the remedies
under this Agreement are subject to the mandatory, non-waivable provisions of
the laws of the jurisdiction in which Collateral is located or which governs the
exercise of the remedies.
9. CUMULATIVE REMEDIES. The rights and remedies of the Lender shall be
deemed to be cumulative, and any exercise of any right or remedy shall not be
deemed to be an election of that right or remedy to the exclusion of any other
right or remedy.
10. NOTICE. All notices or communications under this Agreement shall be
in writing and shall be given (i) via hand delivery, (ii) by certified mail,
return receipt requested, or (iii) by
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a nationally recognized overnight carrier, to the party at the address listed
below, or at such other address as a party may designate as provided herein.
Lender (if by mail): P.O. Box 99900
Louisville, Kentucky 40269
(if by hand delivery
or overnight): 2002 Papa John's Boulevard
Louisville, Kentucky 40299
Borrower: 2002 Papa John's Boulevard
Louisville, Kentucky 40299
11. MISCELLANEOUS.
(a) Failure by the Lender to exercise any right under this
Agreement or the Note shall not be deemed a waiver of that right, and any
single or partial exercise of any right shall not preclude the further
exercise of that right. Every right of the Lender shall continue in full
force and effect until such right is specifically waived in a writing signed
by the Lender.
(b) If any part, term or provision of this Agreement is
held by any court to be prohibited by any law applicable to this Agreement,
the rights and obligations of the parties shall be construed and enforced
with that part, term or provision enforced to the greatest extent allow by
law, or if it is totally unenforceable, as if this Agreement did not contain
that particular part, term or provision.
(c) The headings in this Agreement have been included for
ease of reference only, and shall not be considered in the construction or
interpretation of this Agreement.
(d) Lender shall have the right to assign this Agreement
and/or the Note to a third party, including any affiliate of Lender. This
Agreement shall inure to the benefit of the Lender, its successors and
assigns. Borrower shall not make any transfer or assignment of any of its
rights or obligations under this Agreement or the Note without Lender's prior
written consent.
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(e) To the extent allowed under the Uniform Commercial Code,
this Agreement shall in all respects be governed by and construed in accordance
with the laws of the Commonwealth of Kentucky.
(f) Borrower hereby irrevocably agrees that any legal action,
suit or proceeding against it with respect to its obligations and liabilities
hereunder or any other matter under or arising out of or in connection with this
Agreement, the Note or the Ownership Pledge Agreement or for recognition or for
enforcement of any judgment rendered in any such action, suit or proceeding may
be brought in the United States District Court for the Western District of
Kentucky or in the Courts of the Commonwealth of Kentucky, as the Lender may
elect, and, by execution and delivery of this Agreement, Borrower hereby
irrevocably accepts and submits to the non-exclusive jurisdiction of each of the
aforesaid courts IN PERSONAM generally and unconditionally with respect to any
such action, suit or proceeding for it and/or in respect of its property.
Borrower further agrees that final judgment against it in any action, suit or
proceeding referred to herein shall be conclusive and may be enforced in any
other jurisdiction within the United States of America by suit on the judgment,
a certified or exemplified copy of which shall be conclusive evidence of the
fact and of the amount of the obligations and liabilities. Borrower hereby
irrevocably consents and agrees to the service of any and all legal process,
summons, notices and documents out of any of the aforesaid courts in any such
action, suit or proceeding by mailing copies thereof via registered or certified
mail, postage prepaid to the Borrower at the address set forth herein. Nothing
herein shall in any way be deemed to limit the ability of the Lender to serve
any writs, processes or summons, in any other manner permitted by applicable law
or to obtain jurisdiction over the Borrower in any such other jurisdictions, and
in such manner, as may be permitted by applicable law. In addition, Borrower
hereby irrevocably and unconditionally waives any objection which it may now or
hereafter have to the laying of venue of any of the aforesaid actions, suits or
proceedings arising out of or in connection with this Agreement or the Note
brought in any of the aforesaid courts, and hereby further irrevocably and
unconditionally waives and agrees not to plead or claim that any such action,
suit or proceeding brought in any such court has been brought in an inconvenient
forum.
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(g) The parties waive to the fullest extent permitted by law
any right to or claim for any punitive or exemplary damages against the other
and agree that, in the event of a dispute, the party making the claim will be
limited to equitable relief and to recovery of any actual damages it sustains.
(h) Lender and Borrower irrevocably waive trial by jury in any
action, proceeding or counterclaim, whether at law or in equity, brought by
either of them.
(i) "Affiliate" shall mean any person or entity that directly,
or through one or more intermediaries, controls or is controlled by, or is under
common control with, a specified person or entity.
(j) This Agreement, together with the Exhibits hereto,
constitute the entire agreement of the parties with respect to the Loan, and
supersede all prior understandings and agreements concerning the Loan. No
change, modification, addition or termination of this Agreement or the Note
shall be enforceable unless in writing and signed by the party against whom
enforcement is sought.
IN WITNESS WHEREOF, Borrower and the Lender have executed and delivered
this Secured Loan Agreement as of the date first set forth above, but actually
on the dates set forth below their respective names.
BORROWER: BIBP COMMODITIES, INC.
By: /s/ Patrick W. Gaunce
----------------------
Patrick W. Gaunce
President and Director
Date: MAY 3, 2000
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LENDER: CAPITAL DELIVERY, LTD.
By: /s/ Charles W. Schnatter
---------------------------
Charles W. Schnatter
President
Date: MAY 9, 2000
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CERTIFICATE OF BORROWER EXHIBIT A
BIBP COMMODITIES, INC., the "Borrower" under a Loan Agreement and
Promissory Note dated December 27, 1999 (the "Loan Agreement" and the "Note,"
respectively), evidencing a loan to Borrower from CAPITAL DELIVERY, LTD.
("Lender"), hereby (a) certifies, represents and warrants to Lender that
Borrower meets all the terms and conditions for the receipt of an Advance (as
defined in the Loan Agreement) under the terms of the Loan Agreement, and (b)
makes a request for an Advance of $__________ under the Loan Agreement and the
Note.
Borrower requests that the proceeds of the Advance be delivered to the
account or address below via (check one):
/ / wire transfer / / check
Pay to: ______________________________
______________________________
_____________________________
IN WITNESS WHEREOF, the undersigned, being the duly authorized
representative of Borrower, has executed this Certificate on the date set forth
below.
BIBP COMMODITIES, INC.
By: ___________________________________
Title: ___________________________________
Date: ___________________________________
<PAGE>
EXHIBIT 10.2
PROMISSORY NOTE
(REVOLVING LINE OF CREDIT)
$17,600,000.00 Louisville, Kentucky
December 27, 1999
FOR VALUE RECEIVED, BIBP COMMODITIES, INC., a Delaware corporation with
its principal offices at 2002 Papa John's Boulevard, Louisville, Kentucky 40299
(the "Maker"), hereby promises and agrees to pay to the order of CAPITAL
DELIVERY, LTD., a Kentucky corporation with its principal office and place of
business in Louisville, Kentucky (the "Lender"), the principal sum of SEVENTEEN
MILLION SIX HUNDRED THOUSAND AND 00/100 DOLLARS ($17,600,000.00), or, if less,
the aggregate unpaid balance as may be outstanding from time to time, in legal
tender of the United States of America, together with interest thereon, all in
accordance with the provisions of the Loan Agreement (as defined below) and this
Note.
The outstanding principal balance of this Note, as the same shall exist
from time to time, shall bear interest daily at a rate per annum equal to the
"Prime Rate," as hereinafter defined, less one (1) percentage point. The
interest rate this Note bears shall be adjusted monthly on the first day of each
calendar month. "Prime Rate," as used in this Note, shall mean the interest rate
published in THE WALL STREET JOURNAL in the "Money Rates" column as the
prevailing "Prime Rate," it being understood and agreed that the Prime Rate is
not necessarily the lowest or best rate of interest available on commercial
loans of the nature evidenced by this Note. In each month in which there is an
outstanding balance on this Note, interest shall be calculated throughout such
month at the rate in effect on the first day of such month and shall be paid in
arrears in legal tender of the United States of America on or before the tenth
(10th) day of the following month. Interest shall continue to accrue as provided
herein so long as any portion of the principal of, or interest on, this Note
shall remain unpaid. The entire outstanding principal balance of this Note and
all accrued and unpaid interest shall be paid on or before Decdmber 31, 2000
(the "Maturity Date"). All interest on this Note shall be computed on the basis
of the actual number of days elapsed over an assumed year consisting of Three
Hundred Sixty (360) calendar days.
<PAGE>
Any principal or interest payment due under this Note not paid at
stated maturity, by acceleration, conversion or otherwise, shall, to the extent
permitted by applicable law, thereafter bear interest (compounded monthly and
payable upon demand) at a rate which is 2% per annum in excess of the rate of
interest otherwise payable under this Note in respect of such principal amount
until such unpaid amount has been paid in full (whether before or after
judgment). The charging or collection of any such additional interest shall not
be deemed a waiver of any of the Lender's rights arising thereby or hereunder,
including the right to declare a "Default" or an "Event of Default" hereunder.
This Note is a revolving note and is governed by that certain Loan
Agreement of even date herewith between Lender and the Maker (the "Loan
Agreement"). The Lender may make disbursements of principal to the Maker, from
time to time, commencing on the date of this Note and ending on the day
preceding the Maturity Date, in the form of "Advances" in the manner and subject
to the terms and conditions respecting such "Advances" as are set forth in the
Loan Agreement; provided, however, the aggregate outstanding principal balance
of this Note shall never exceed $17,600,000.00 (the "Maximum Committed Amount").
The amount of principal disbursed for each such "Advance" together with the date
of payments of principal on this Note shall be recorded by the Lender. The
amount of principal outstanding shown on the records of the Lender shall be
PRIMA FACIE correct.
Failure of Maker to pay principal or interest, or both, on the date and
in the amounts required by this Note shall constitute an "Event of Default," and
Lender may exercise any or all its rights and remedies, as provided in the Loan
Agreement. The occurrence of any Event of Default under the Loan Agreement or
the Ownership Pledge Agreement shall also constitute an Event of Default under
this Note whereupon the holder of this Note may, at its sole option, exercise
any or all its remedies as set forth in the Loan Agreement.
Failure of the holder of this Note to exercise any of its rights,
powers and/or remedies shall not constitute a waiver of the right to exercise
the same at that or any other time. All rights and remedies of the holder hereof
for default hereunder or under any of the instruments referred
-2-
<PAGE>
to herein shall be cumulative to the greatest extent permitted by law. Time
shall be of the essence in the payment of all installments of interest and
principal on this Note and the performance of the Maker's other obligations
hereunder.
If an Event of Default shall occur under this Note or the Loan
Agreement, and this Note is placed in the hands of an attorney for collection,
or is collected through any court, including any bankruptcy court, the Maker
promises to pay to the holder hereof its attorneys' fees and costs incurred in
collecting or attempting to collect or securing or attempting to secure this
Note or enforcing its rights in any collateral securing this Note, provided the
same is legally allowed by the laws of the Commonwealth of Kentucky or any other
state or country where the subject collateral or any part thereof is situated.
The Maker may prepay the outstanding principal of this Note without
penalty in whole or in minimum increments of $10,000.
The Maker hereby agrees that all prepayments under this Note (whether
voluntary, involuntary or mandatory, and from whatever source derived) shall be
applied, in such order as the Lender shall determine in its sole discretion, to
unpaid fees, costs or expenses of the Maker under this Note, to accrued and
unpaid interest on this Note and to the outstanding principal balance of this
Note, in inverse order of maturity.
This Note has been delivered in, shall be performed in, governed by and
construed in accordance with the laws of, the Commonwealth of Kentucky.
Any legal action, suit or proceeding involving this Note shall be
subject to the provisions of Sections 11(e), (f), (g) and (h) of the Loan
Agreement.
The Maker hereby waives presentment, demand, notice of dishonor,
protest, notice of protest and nonpayment, and further waives all exemptions to
which it may now or hereafter be entitled under the laws of this or any other
state or of the United States or any foreign country,
-3-
<PAGE>
and further agrees that the holder hereof shall have the right without
notice, to deal in any way, at any time with any party, and to grant to any
party any extension of time for payment of this Note or any other indulgence
or forbearance whatsoever, and may release any security for the payment of
this Note and/or modify the terms of any of the instruments referred to
herein or otherwise securing or pertaining to this Note, and may release any
guarantor of this Note from liability for payment hereof, in every instance
without the consent of the Maker and without in any way affecting the
liability of any Maker, surety, guarantor, endorser, accommodation party, or
other party to this Note, and without waiving any rights the holder of this
Note may have hereunder or by virtue of the law of this or any other state or
of the United States or any foreign country.
IN WITNESS WHEREOF, the Maker has caused its authorized representative
to execute and deliver this Note as of the date first written above.
BIBP COMMODITIES, INC.
By: /s/ Patrick W. Gaunce
----------------------
Patrick W. Gaunce
President and Director
(the "Maker")
<PAGE>
EXHIBIT 11 - CALCULATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
THREE MONTHS ENDED
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) MARCH 26, 2000 MARCH 28, 1999
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
BASIC EARNINGS PER SHARE:
Net Income $ 11,541 $ 11,383
Weighted average shares outstanding 26,851 29,966
----------------------------------------------------
Basic earnings per share $ 0.43 $ 0.38
====================================================
DILUTED EARNINGS PER SHARE:
Net Income $ 11,541 $ 11,383
Weighted average shares outstanding 26,851 29,966
Dilutive effect of outstanding common stock options 253 1,133
----------------------------------------------------
Diluted weighted average shares outstanding 27,104 31,099
----------------------------------------------------
Diluted earnings per share $ 0.43 $ 0.37
====================================================
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> DEC-27-1999
<PERIOD-END> MAR-26-2000
<CASH> 11,896
<SECURITIES> 5,545
<RECEIVABLES> 18,859
<ALLOWANCES> 517
<INVENTORY> 11,880
<CURRENT-ASSETS> 50,336
<PP&E> 312,939
<DEPRECIATION> 75,682
<TOTAL-ASSETS> 379,351
<CURRENT-LIABILITIES> 66,658
<BONDS> 84,437
0
0
<COMMON> 306
<OTHER-SE> 216,340
<TOTAL-LIABILITY-AND-EQUITY> 379,351
<SALES> 213,397
<TOTAL-REVENUES> 227,049
<CGS> 104,214
<TOTAL-COSTS> 181,064
<OTHER-EXPENSES> 26,738
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 804
<INCOME-PRETAX> 18,735
<INCOME-TAX> 7,194
<INCOME-CONTINUING> 11,541
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,541
<EPS-BASIC> 0.43
<EPS-DILUTED> 0.43
</TABLE>
