Papa John‘s International, Inc.
Feb 24, 2009

Papa John's Reports Fourth Quarter and Full-Year 2008 Earnings

2009 Earnings Guidance Increased Highlights Fourth quarter earnings per diluted share of $0.46 in 2008 vs. $0.27 in 2007 and full year earnings per diluted share of $1.30 in 2008 vs. $1.09 in 2007 Comparable fourth quarter earnings per diluted share, excluding the consolidation of BIBP, the finalization of certain income tax issues and restaurant closure, impairment and disposition losses, were $0.48 in 2008 vs. $0.54 in 2007, a decrease of 11.1% Comparable full-year earnings per diluted share, excluding the items indicated above, were $1.68 in 2008 vs. $1.70 in 2007, a decrease of 1.2% Domestic system-wide comparable sales decrease of 2.0% for the quarter and an increase of 0.9% for the year 63 net Papa John's worldwide unit openings during the quarter and 172 during the year Earnings guidance for 2009 increased to a range of $1.36 to $1.44 per diluted share, excluding the impact of consolidating BIBP

LOUISVILLE, Ky., Feb 24, 2009 (BUSINESS WIRE) -- Papa John's International, Inc. (NASDAQ: PZZA) today announced revenues of $279.6 million for the fourth quarter of 2008, representing a decrease of 1.5% from revenues of $283.9 million for the same period in 2007. Net income for the fourth quarter of 2008 was $12.8 million, or $0.46 per diluted share (including after-tax income of $600,000, or $0.02 per diluted share, from the consolidation of the results of the franchisee-owned cheese purchasing company, BIBP Commodities, Inc. ("BIBP"), a variable interest entity, and a gain of $1.2 million, or $0.04 per diluted share, from the finalization of certain income tax issues), compared to 2007 fourth quarter net income of $7.7 million, or $0.27 per diluted share (including a net loss of approximately $8.0 million, or $0.28 per diluted share, from the consolidation of BIBP and a gain of $1.0 million, or $0.03 per diluted share, from the finalization of certain income tax issues). The fourth-quarter results include pre-tax restaurant closure, impairment and disposition losses of $3.7 million in 2008 and $1.3 million in 2007 ($2.2 million on an after-tax basis, or $0.08 per diluted share in 2008 and $850,000 on an after-tax basis, or $0.02 per diluted share in 2007).

Consolidated revenues for 2008 were $1.13 billion, representing an increase of 6.4% from revenues of $1.06 billion for the same period in 2007. Net income for 2008 was $36.8 million, or $1.30 per diluted share (including a net loss of $6.9 million, or $0.24 per diluted share, from the consolidation of BIBP and a gain of $1.7 million or $0.06 per diluted share, from the previously mentioned finalization of certain income tax issues), compared to 2007 net income of $32.7 million, or $1.09 per diluted share (including a net loss of $20.5 million, or $0.68 per diluted share, from the consolidation of BIBP and a gain of $3.4 million, or $0.11 per diluted share, from the finalization of certain income tax issues). The full-year results for 2008 and 2007 include losses of $8.8 million and $1.8 million, respectively, associated with restaurant closure, impairment and disposition losses ($5.5 million on an after-tax basis, or $0.20 per diluted share in 2008 and $1.2 million on an after-tax basis, or $0.04 per diluted share in 2007).

Non-GAAP Measures

The financial information we present in this press release excluding the impact of the consolidation of BIBP, the finalization of certain income tax issues and restaurant closure, impairment and disposition losses, are not measures that are defined in accordance with accounting principles generally accepted in the United States ("GAAP"). These non-GAAP measures should not be construed as a substitute for or a better indicator of the company's performance than the company's GAAP measures. Management believes the financial information excluding the impact of the above-mentioned items is important for purposes of comparison to prior periods and development of future projections and earnings growth prospects. Management analyzes the company's business performance and trends excluding the impact of these items because they are not indicative of the principal operating activities of the company. In addition, annual cash bonuses, and certain long-term incentive programs for various levels of management, are based on financial measures that exclude the impact of the consolidation of BIBP and the finalization of income tax issues. The presentation of the non-GAAP measures in this press release is made alongside the most directly comparable GAAP measures.

The company has provided the following table to reconcile the financial results we present in this press release excluding the impact of the above-mentioned items to our GAAP financial measures for the fourth quarter and fiscal years ended December 28, 2008 and December 30, 2007.

Fourth QuarterFull Year
(In thousands, except per share amounts) 2008200720082007
Pre-tax income, as reported $ 19,435 $ 10,366 $ 56,776 $ 46,028
(Gain) loss from BIBP cheese purchasing entity (887 ) 12,339 10,540 31,709
Restaurant closure, impairment and disposition losses * 3,747 1,307 8,818 1,807
Pre-tax income, excluding noted items $ 22,295 $ 24,012 $ 76,134 $ 79,544
Net income, as reported $ 12,776 $ 7,744 $ 36,796 $ 32,735
(Gain) loss from BIBP cheese purchasing entity (576 ) 8,021 6,851 20,525
Restaurant closure, impairment and disposition losses * 2,222 850 5,496 1,159
Gain from finalization of certain income tax issues (1,203 ) (993 ) (1,684 ) (3,408 )
Net income, excluding noted items $ 13,219 $ 15,622 $ 47,459 $ 51,011
Earnings per diluted share, as reported $ 0.46 $ 0.27 $ 1.30 $ 1.09
(Gain) loss from BIBP cheese purchasing entity (0.02 ) 0.28 0.24 0.68
Restaurant closure, impairment and disposition losses * 0.08 0.02 0.20 0.04
Gain from finalization of certain income tax issues (0.04 ) (0.03 ) (0.06 ) (0.11 )
Earnings per diluted share, excluding noted items $ 0.48 $ 0.54 $ 1.68 $ 1.70
Cash flow from operations, as reported $ 73,063 $ 61,591
BIBP cheese purchasing entity 10,540 31,709
Cash flow from operations, excluding BIBP $ 83,603 $ 93,300

*The prior year restaurant closure, impairment and disposition losses were not initially added back to the non-GAAP results in 2007 due to their relative insignificance; however, they are included here for comparability purposes.

"Our system performed solidly in 2008, and 2009 is off to a good start," commented Papa John's Founder Chairman and Interim CEO, John Schnatter. "With improvement in the commodities markets, and good momentum in our system during the first two months of the year, we are pleased to be able to increase our earnings guidance range for 2009. During these uncertain economic times, we will continue to run our business in a disciplined manner with a continued focus on product quality and healthy unit economics."

Revenues Comparison

Consolidated revenues were $279.6 million for the fourth quarter of 2008, a decrease of $4.3 million, or 1.5%, over the corresponding 2007 period. The decrease in revenues for the fourth quarter of 2008 was principally due to the following:

Revenues were $1.13 billion for the full year of 2008, an increase of $68.5 million, or 6.4%, over the corresponding 2007 period. The increase in revenues for the full year of 2008 was principally due to the following:

Operating Results and Cash Flow

Operating Results

Our pre-tax income for the fourth quarter of 2008 was $19.4 million, compared to $10.4 million for the corresponding period in 2007. For the year ended December 28, 2008, pre-tax income was $56.8 million compared to $46.0 million for the corresponding period of 2007. Excluding the impact of the consolidation of BIBP and the impact of restaurant closure, impairment and disposition losses, fourth quarter 2008 pre-tax income was $22.3 million, a decrease of $1.7 million or 7.2%, from the 2007 comparable results of $24.0 million, and pre-tax income for the year ended December 28, 2008 was $76.1 million, a decrease of $3.4 million, or 4.3%, from the 2007 comparable results of $79.5 million. An analysis of the changes in pre-tax income for the fourth quarter and full year 2008, respectively (excluding the consolidation of BIBP), are summarized as follows (analyzed on a segment basis -- see the Summary Financial Data table that follows for the reconciliation of segment income to consolidated income below):

QuarterFull Year
Dec. 28,Dec. 30,IncreaseDec. 28,Dec. 30,Increase
20082007(Decrease)20082007(Decrease)
Recurring operations $ 7,556 $ 7,471 $ 85 $ 26,515 $ 26,620 $ (105 )

Closure, impairment and disposition charges (1)

(1,447 ) (1,307 ) (140 ) (6,518 ) (1,807 ) (4,711 )
Gain on lease termination - - - - 594 (594 )
Total segment operating income $ 6,109 $ 6,164 $ (55 ) $ 19,997 $ 25,407 $ (5,410 )

(1) Total 2008 closure, impairment and disposition charges of $3.7 million for the quarter and $8.8 million for the year included $2.3 million of impairment charges reported in the International segment.

Domestic company-owned restaurants' income from recurring operations was relatively flat for the three months ended December 28, 2008, as compared to the same period in 2007, as the impact of the negative 1.3% comparable sales in 2008, was offset by certain labor productivity efficiencies. For the full-year 2008, recurring income was comparable to the 2007 results as the significant increase in commodities costs during 2008 was offset by the fixed cost leverage associated with the 1.7% increase in comparable sales for the year and the benefit from units acquired in the third quarter of 2007.

Restaurant operating margin on an external basis, excluding the impact of the consolidation of BIBP, was 19.7% for the fourth quarter of 2008, which is consistent with the comparable period. For the full year 2008, excluding the impact of BIBP, the restaurant operating margin was 18.9%, which was approximately 1.0% below the 2007 margin primarily due to increased commodities costs.

We recorded restaurant closure, impairment and disposition charges of $1.4 million and $6.5 million in the fourth quarter and full year ended December 28, 2008, respectively, compared to $1.3 million and $1.8 million in the comparable prior periods. The charges were primarily associated with the previously mentioned divestiture of 62 company-owned domestic units during 2008 and our plans to divest 17 restaurants in two markets in 2009.

QuarterFull Year
Dec. 28,Dec. 30,IncreaseDec. 28,Dec. 30,Increase
20082007(decrease)20082007(decrease)
General and administrative (a) $ (974 ) $ 1,929 $ (2,903 ) $ 16,372 $ 17,515 $ (1,143 )
Net interest 1,317 1,609 (292 ) 4,961 5,891 (930 )
Depreciation 2,017 1,711 306 7,770 6,702 1,068
Marketing contributions (b) 3,675 - 3,675 3,900 400 3,500

Provisions for uncollectible accounts and notes receivable ©

3,491 (34 ) 3,525 4,082 203 3,879
Other expense (income) (d) (258 ) 1,089 (1,347 ) (931 ) 743 (1,674 )
Total unallocated corporate expenses $ 9,268 $ 6,304 $ 2,964 $ 36,154 $ 31,454 $ 4,700

(a) The decreases of $2.9 million and $1.1 million in general and administrative costs for the fourth quarter and full year ended December 28, 2008 were primarily due to reductions in equity-based compensation expense due to awards forfeited by our former CEO and other former members of management upon resignation and a reduction in the expected payments under certain cash and equity-based compensation programs. In addition, the 2008 results benefited from reductions in certain overhead costs such as travel and employee benefits.

(b) The company contributed discretionary contributions to the national marketing fund and other local advertising cooperatives in both 2007 and 2008. The majority of the 2008 contributions were in response to our previously announced domestic franchise system support initiatives.

© The increases in the provisions for uncollectible accounts and notes receivable were primarily due to our evaluation of the collectibility of our loan issued in connection with the 2006 sale of the Perfect Pizza operation and a loan issued to one domestic franchisee.

(d) The 2007 results included the write-off of certain obsolete corporate equipment and software.

The company recorded reductions in its customary income tax expense of $1.2 million and $1.7 million for the fourth quarter and full year of 2008, compared to $1.0 million and $3.4 million for the prior comparable periods, due to the finalization of certain income tax issues. The effective income tax rate was 35.2% for the full year ended December 28, 2008, compared to 28.9% in the corresponding 2007 period.

Cash Flow

Cash flow from operations was $73.1 million for the full year 2008 as compared to $61.6 million for the comparable period in 2007. The consolidation of BIBP decreased cash flow from operations by approximately $10.5 million and $31.7 million in 2008 and 2007, respectively. Excluding the impact of the consolidation of BIBP, cash flow from operations was $83.6 million in 2008, as compared to $93.3 million in the corresponding 2007 period. The $9.7 million decrease was primarily due to a decrease in net income and a decline in working capital.

Form 10-K Filing

See the Management's Discussion and Analysis of Financial Condition and Results of Operations section of our annual Form 10-K filed with the Securities and Exchange Commission for additional information concerning our operating results and cash flow for the full year ended December 28, 2008.

Domestic Comparable Sales and Unit Count

Domestic system-wide comparable sales for the fourth quarter of 2008 decreased 2.0% (comprised of a 1.3% decrease at company-owned restaurants and a 2.2% decrease at franchised restaurants). Domestic system-wide comparable sales for the full year 2008 increased 0.9% (comprised of a 1.7% increase at company-owned restaurants and a 0.6% increase at franchised restaurants). The comparable sales percentage represents the change in year-over-year sales for the same base of restaurants for the same calendar period.

During the fourth quarter of 2008, 32 domestic restaurants were opened (five company-owned and 27 franchised) and 17 domestic franchised restaurants were closed. On a year-to-date basis, 112 domestic restaurants were opened (14 company-owned and 98 franchised) and 80 restaurants were closed (nine company-owned and 71 franchised). Our total domestic development pipeline as of December 28, 2008 included approximately 300 restaurants scheduled to open over the next ten years.

At December 28, 2008, there were 3,380 domestic and international Papa John's restaurants (615 company-owned and 2,765 franchised) operating in all 50 states and 29 countries. The company-owned unit count includes 128 restaurants operated in majority-owned domestic joint venture arrangements, the operating results of which are fully consolidated into the company's results.

International Update

Highlights:

As of December 28, 2008, the company had a total of 588 restaurants operating internationally (23 company-owned and 565 franchised), of which 199 were located in Korea and China and 118 were located in the United Kingdom and Ireland. Our total international development pipeline as of December 28, 2008 included approximately 1,200 restaurants scheduled to open over the next ten years.

Refranchising Initiative Update

During the fourth quarter, we sold 62 domestic restaurants to franchisees. The restaurants were primarily located in three markets. Total consideration for the sale of the restaurants was $10.5 million, consisting of cash proceeds of $2.1 million and loans financed by Papa John's for $8.4 million. The annual revenues of the divested restaurants approximated $38 million. In addition, at the end of 2008, we have classified 17 domestic restaurants, located in two markets, as held for sale.

At December 28, 2008, company-owned and majority-owned joint venture units represented 21.2% of total domestic restaurants (reduced from 23.5% at December 30, 2007). The company's previously stated goal is to reduce the percentage of domestic-owned company units to below 20% although the current economic and credit environment may negatively impact near-term refranchising activity.

Share Repurchase Activity

The company repurchased 1.4 million shares of its common stock at an average price of $26.93 per share, or a total of $37.7 million, during 2008 (no significant repurchases in the fourth quarter). A total of 260,000 shares of common stock were issued upon the exercise of stock options for the full year ended December 28, 2008 (no significant exercises in the fourth quarter). Subsequent to year-end, through February 17, 2009, the company repurchased an additional $4.8 million of common stock (264,000 shares at an average price of $17.98 per share) under its Rule 10b5-1 trading plan. At February 17, 2009, $57.5 million remained available for repurchase under our current authorization.

There were 27.6 million diluted weighted average shares outstanding for the fourth quarter of 2008, as compared to 29.0 million for the same period in 2007, a 4.8% decrease. Approximately 27.6 million actual shares of the company's common stock were outstanding as of December 28, 2008.

The company's share repurchase activity increased earnings per diluted share, excluding the impact of the consolidation of BIBP, by $0.01 and $0.02 for the fourth quarter and full-year 2008 periods, respectively.

2009 Earnings Guidance Increased

The company is increasing its 2009 earnings per diluted share guidance from the previous range of $1.32 to $1.40 to an updated range of $1.36 to $1.44. The comparable base earnings results for 2008 were $1.68 per diluted share. The projected earnings guidance excludes any impact from the consolidation of the results of BIBP. The 2009 guidance includes $0.30 to $0.35 per diluted share unfavorable impact of 2009 initiatives, including the impact of the franchise support initiatives, CEO transition costs and certain additional initiatives focused on enhancing quality and driving alternative ordering channels, none of which is expected to reoccur in 2010.

In November 2008, we announced a modification to the 2009 BIBP pricing formula whereby the price of cheese would be established on a quarterly basis as the greater of $1.75 per pound or the expected average price per pound based on the futures market projections for the quarter. As a result of subsequent significant decreases in both the spot and futures market prices of cheese, we have determined that further modification of the BIBP pricing formula is warranted. Effective in March 2009, we will modify the BIBP formula to establish the price of cheese to restaurants monthly based on a sliding scale premium over the futures market projections for the period. Based on current futures market projections, the modified formula will result in an approximate 0.5% reduction in food cost at the restaurant level for the year as compared to the previous formula and projections. Under this new price formula, we anticipate BIBP will substantially repay the cumulative deficit by the end of 2011.

Forward-Looking Statements

Certain matters discussed in this press release and other company communications constitute forward-looking statements within the meaning of the federal securities laws. Generally, the use of words such as "expect," "estimate," "believe," "anticipate," "will," "forecast," "plan," project," or similar words identify forward-looking statements that we intend to be included within the safe harbor protections provided by the federal securities laws. Such statements may relate to projections concerning revenue, earnings and other financial and operational measures. Such statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions, which are difficult to predict and many of which are beyond our control. Therefore, actual outcomes and results may differ materially from those matters expressed or implied in such forward-looking statements.

The risks, uncertainties and assumptions that are involved in our forward-looking statements include, but are not limited to: changes in pricing or other marketing or promotional strategies by competitors which may adversely affect sales; new product and concept developments by food industry competitors; the ability of the company and its franchisees to meet planned growth targets and operate new and existing restaurants profitably; general economic conditions and resulting impact on consumer buying habits; increases in or sustained high costs of food ingredients and other commodities, paper, utilities, fuel, employee compensation and benefits, insurance and similar costs; changes in consumer preferences; the ability of the company to pass along such increases in or sustained high costs to franchisees; and the impact of legal claims and current proposed legislation impacting our business. These and other risk factors are discussed in detail in "Part I. Item 1A. - Risk Factors" of the Annual Report on Form 10-K for the fiscal year ended December 28, 2008. We undertake no obligation to update publicly any forward-looking statements, whether as a result of future events, new information or otherwise.

Conference Call

A conference call is scheduled for February 25, 2009 at 10:00 a.m. Eastern Standard Time to review fourth quarter and full year earnings results. The call can be accessed from the company's web page at www.papajohns.com in a listen-only mode, or dial 800-487-2662 (pass code 32148028) for participation in the question and answer session. International participants may dial 706-679-8452 (pass code 32148028).

The conference call will be available for replay, including downloadable podcast, beginning February 25, 2009, at approximately noon Eastern Standard Time, through March 4. The replay can be accessed from the company's web page at www.papajohns.com or by dialing 800-642-1687 (pass code 32148028). International participants may dial 706-645-9291 (pass code 32148028).

Summary Financial Data

Papa John's International, Inc.

(Unaudited)

Three Months EndedYear Ended
Dec. 28,Dec. 30,Dec. 28,Dec. 30,
(In thousands, except per share amounts) 2008200720082007
Revenues $ 279,646 $ 283,940 $

1,132,087

$

1,063,595

Income before income taxes * $ 19,435 $ 10,366 $ 56,776 $ 46,028
Net income $ 12,776 $ 7,744 $ 36,796 $ 32,735
Earnings per share - assuming dilution $ 0.46 $ 0.27 $ 1.30 $ 1.09
Weighted average shares outstanding - assuming dilution 27,639 28,985 28,264 30,017
EBITDA (1) $ 28,985 $ 20,677 $ 96,310 $ 83,913
*The following is a summary of our income (loss) before income taxes (in thousands):
Three Months EndedYear Ended
Dec. 28,Dec. 30,Dec. 28,Dec. 30,
2008200720082007
Domestic company-owned restaurants (A) $ 6,109 $ 6,164 $ 19,997 $ 25,407
Domestic commissaries 8,036 8,255 30,235 35,847
Domestic franchising 13,444 14,729 53,610 51,466
International (B) (2,741 ) (2,360 ) (7,193 ) (8,734 )
All others 3,618 2,303 9,175 6,348
Unallocated corporate expenses (9,268 ) (6,304 ) (36,154 ) (31,454 )
Minority interests and other (650 ) (82 ) (2,354 ) (1,143 )
Income before income taxes, excluding VIEs 18,548 22,705 67,316 77,737
VIEs, primarily BIBP (2) 887 (12,339 ) (10,540 ) (31,709 )
Total income before income taxes $ 19,435 $ 10,366 $ 56,776 $ 46,028
(A) Includes pre-tax losses of $1.4 million and $6.5 million in the fourth quarter and year ended December 28, 2008, respectively, and pre-tax losses of $1.3 million and $1.8 million in the fourth quarter and year ended December 30, 2007, respectively, associated with restaurant closure, impairment and disposition losses.
(B) Includes a goodwill impairment charge of $2.3 million in both the fourth quarter and year ended December 28, 2008, associated with our PJUK operations.

Summary Financial Data (continued)

Papa John's International, Inc.

(Unaudited)

The following is a reconciliation of EBITDA to net income (in thousands):
Three Months EndedYear Ended
Dec. 28,Dec. 30,Dec. 28,Dec. 30,
2008200720082007
EBITDA (1) $ 28,985 $ 20,677 $ 96,310 $ 83,913
Income tax expense (6,659 ) (2,622 ) (19,980 ) (13,293 )
Net interest (1,704 ) (1,840 ) (6,688 ) (6,019 )
Depreciation and amortization (7,846 ) (8,471 ) (32,846 ) (31,866 )
Net income $ 12,776 $ 7,744 $ 36,796 $ 32,735
(1) Management considers EBITDA to be a meaningful indicator of operating performance from operations before depreciation, amortization, net interest and income taxes. EBITDA provides us with an understanding of one aspect of earnings before the impact of investing and financing transactions and income taxes. While EBITDA should not be construed as a substitute for net income or a better indicator of liquidity than cash flows from operating activities, which are determined in accordance with accounting principles generally accepted in the United States ("GAAP"), it is included herein to provide additional information with respect to the ability of the company to meet its future debt service, capital expenditure and working capital requirements. EBITDA is not necessarily a measure of the company's ability to fund its cash needs and it excludes components that are significant in understanding and assessing our results of operations and cash flows. In addition, EBITDA is not a term defined by GAAP and as a result our measure of EBITDA might not be comparable to similarly titled measures used by other companies. The above EBITDA calculation includes the operating results of BIBP Commodities, Inc., a variable interest entity.
(2) BIBP generated operating income of approximately $900,000 in the fourth quarter of 2008, which was composed of income associated with cheese sold to domestic company-owned restaurants and franchise restaurants of approximately $300,000 and $1.0 million, respectively, partially offset by interest expense on outstanding debt with a third-party bank and Papa John's. For the fourth quarter of 2007, BIBP reported an operating loss of $12.3 million, which was primarily composed of losses associated with cheese sold to domestic company-owned restaurants and franchise restaurants of $3.0 million and $8.8 million, respectively. The remainder of the loss was primarily composed of interest expense on outstanding debt with a third-party bank and Papa John's.
BIBP incurred an operating loss of $10.5 million for the full year 2008, which was primarily composed of losses associated with cheese sold to domestic company-owned restaurants and franchise restaurants of $2.1 million and $6.3 million, respectively. The remainder of the 2008 loss was primarily composed of interest expense on outstanding debt with a third-party bank and Papa John's. For the full year 2007, BIBP reported operating losses of $31.7 million, which was primarily composed of losses associated with cheese sold to domestic company-owned restaurants and franchise restaurants of $8.0 million and $22.9 million, respectively. The remainder of the 2007 loss was primarily composed of interest expense on outstanding debt with a third-party bank and Papa John's.

For more information about the company, please visit www.papajohns.com.

Papa John's International, Inc. and Subsidiaries
Consolidated Statements of Income
Three Months EndedYear Ended
December 28, 2008December 30, 2007December 28, 2008December 30, 2007
(In thousands, except per share amounts) (Unaudited)(Unaudited)
Revenues:
Domestic:
Company-owned restaurant sales $ 129,923 $ 136,043 $ 533,255 $ 504,330
Variable interest entities restaurant sales 2,035 1,980 8,328 7,131
Franchise royalties 15,122 13,927 59,704 55,283
Franchise and development fees 239 2,853 1,600 4,758
Commissary sales 107,896 104,923 429,068 399,099
Other sales 14,493 14,979 61,415 61,820
International:
Royalties and franchise and development fees 3,414 3,129 12,868 10,314
Restaurant and commissary sales 6,524 6,106 25,849 20,860
Total revenues 279,646 283,940 1,132,087 1,063,595
Costs and expenses:
Domestic Company-owned restaurant expenses:
Cost of sales 28,420 32,906 120,545 112,773
Salaries and benefits 37,597 40,802 158,276 152,043
Advertising and related costs 11,814 12,061 48,547 47,121
Occupancy costs 8,446 8,405 34,973 31,866
Other operating expenses 17,767 18,326 72,349 68,460
Total domestic Company-owned restaurant expenses 104,044 112,500 434,690 412,263
Variable interest entities restaurant expenses 1,815 1,721 7,360 6,018
Domestic commissary and other expenses:
Cost of sales 91,169 88,438 363,042 332,163
Salaries and benefits 8,270 8,126 35,090 34,622
Other operating expenses 9,660 10,706 45,732 43,766
Total domestic commissary and other expenses 109,099 107,270 443,864 410,551

(Income) loss from the franchise cheese-purchasing program, net of minority interest

(1,039 ) 8,821 6,296 22,853
International operating expenses 5,464 5,697 22,822 18,718
General and administrative expenses 19,102 23,437 99,723 101,340
Minority interests and other general expenses 12,176 3,817 21,022 7,939
Depreciation and amortization 7,846 8,471 32,846 31,866
Total costs and expenses 258,507 271,734 1,068,623 1,011,548
Operating income 21,139 12,206 63,464 52,047
Net interest (1,704 ) (1,840 ) (6,688 ) (6,019 )
Income before income taxes 19,435 10,366 56,776 46,028
Income tax expense 6,659 2,622 19,980 13,293
Net income $ 12,776 $ 7,744 $ 36,796 $ 32,735
Basic earnings per common share $ 0.46 $ 0.27 $ 1.31 $ 1.10
Earnings per common share - assuming dilution $ 0.46 $ 0.27 $ 1.30 $ 1.09
Basic weighted average shares outstanding 27,639 28,837 28,124 29,666
Diluted weighted average shares outstanding 27,639 28,985 28,264 30,017
Note: The statements of income for the years ended December 28, 2008 and December 30, 2007 have been derived from the audited consolidated financial statements at those dates, but do not include all information and footnotes required by accounting principles generally accepted in the United States for a complete set of financial statements.
Papa John's International, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
December 28,December 30,
20082007
(Note)(Note)
(In thousands)
Assets
Current assets:
Cash and cash equivalents $ 10,987 $ 8,877
Accounts receivable 23,775 22,539
Inventories 16,872 18,806
Prepaid expenses 9,797 10,711
Other current assets 5,275 5,581
Assets held for sale 1,540 -
Deferred income taxes 7,102 7,147
Total current assets 75,348 73,661
Investments 530 825
Net property and equipment 189,992 198,957
Notes receivable 7,594 11,804
Deferred income taxes 17,518 12,384
Goodwill 76,914 86,505
Other assets 18,572 17,681
Total assets $ 386,468 $ 401,817
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 29,148 $ 31,157
Income and other taxes 9,685 10,866
Accrued expenses 54,220 56,466
Current portion of debt 7,075 8,700
Total current liabilities 100,128 107,189
Unearned franchise and development fees 5,916 6,284
Long-term debt, net of current portion 123,579 134,006
Other long-term liabilities 26,859 27,435
Total liabilities 256,482 274,914
Total stockholders' equity 129,986 126,903
Total liabilities and stockholders' equity $ 386,468 $ 401,817
Note: The balance sheets at December 28, 2008 and December 30, 2007 have been derived from the audited consolidated financial statements at those dates, but do not include all information and footnotes required by accounting principles generally accepted in the United States for a complete set of financial statements.
Papa John's International, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Year Ended
(In thousands) December 28, 2008December 30, 2007
Operating activities
Net income $ 36,796 $ 32,735

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

Restaurant closure, impairment and disposition losses 8,818 1,807
Provision for uncollectible accounts and notes receivable 5,769 1,718
Depreciation and amortization 32,846 31,866
Deferred income taxes (3,608 ) (10,779 )
Stock-based compensation expense 2,564 4,883
Excess tax benefit related to exercise of non-qualified stock options (771 ) (3,325 )
Other 1,255 5,564
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable (5,162 ) (183 )
Inventories 1,833 7,915
Prepaid expenses 914 (3,402 )
Other current assets 446 2,468
Other assets and liabilities (2,913 ) (7,092 )
Accounts payable (2,009 ) 1,893
Income and other taxes (1,181 ) (3,656 )
Accrued expenses (2,166 ) 457
Unearned franchise and development fees (368 ) (1,278 )
Net cash provided by operating activities 73,063 61,591
Investing activities
Purchase of property and equipment (29,271 ) (31,148 )
Purchase of investments (632 ) (303 )
Proceeds from sale or maturity of investments 927 731
Loans issued (1,468 ) (6,541 )
Loan repayments 2,017 6,257
Acquisitions (183 ) (24,983 )
Proceeds from divestitures of restaurants 2,145 632
Other 233 32
Net cash used in investing activities (26,232 ) (55,323 )
Financing activities
Net proceeds (repayments) from line of credit facility (10,500 ) 37,500
Net proceeds (repayments) from short-term debt - variable interest entities (1,625 ) 8,175
Excess tax benefit related to exercise of non-qualified stock options 771 3,325
Proceeds from exercise of stock options 4,623 12,219
Acquisition of Company common stock (37,697 ) (72,871 )
Other 299 1,035
Net cash used in financing activities (44,129 ) (10,617 )
Effect of exchange rate changes on cash and cash equivalents (592 ) 247
Change in cash and cash equivalents 2,110 (4,102 )
Cash and cash equivalents at beginning of year 8,877 12,979
Cash and cash equivalents at end of year $ 10,987 $ 8,877
Note: The cash flows at December 28, 2008 and December 30, 2007 have been derived from the audited consolidated financial statements at those dates, but do not include all information and footnotes required by accounting principles generally accepted in the United States for a complete set of financial statements.
Restaurant Progression
Papa John's International, Inc.
Fourth Quarter Ended December 28, 2008
CorporateFranchised
DomesticInt'lDomesticInt'lTotal
Papa John's restaurants
Beginning of period 649 21 2,128 519 3,317
Opened 5 1 27 52 85
Closed - - (17 ) (5 ) (22 )
Acquired - 1 62 - 63
Sold (62 ) - - (1 ) (63 )
End of Period 592 23 2,200 565 3,380
Fourth Quarter Ended December 30, 2007
CorporateFranchised
DomesticInt'lDomesticInt'lTotal
Papa John's restaurants
Beginning of period 649 11 2,078 401 3,139
Opened 5 3 44 35 87
Closed (6 ) - (10 ) (2 ) (18 )
Acquired - - - - -
Sold - - - - -
End of Period 648 14 2,112 434 3,208
Restaurant Progression
Papa John's International, Inc.
Year Ended December 28, 2008
CorporateFranchised
DomesticInt'lDomesticInt'lTotal
Papa John's restaurants
Beginning of period 648 14 2,112 434 3,208
Opened 14 10 98 145 267
Closed (9 ) (2 ) (71 ) (13 ) (95 )
Acquired 1 1 62 - 64
Sold (62 ) - (1 ) (1 ) (64 )
End of Period 592 23 2,200 565 3,380
Year Ended December 30, 2007
CorporateFranchised
DomesticInt'lDomesticInt'lTotal
Papa John's restaurants
Beginning of period 577 11 2,080 347 3,015
Opened 20 4 140 99 263
Closed (9 ) - (48 ) (13 ) (70 )
Acquired 61 2 1 3 67
Sold (1 ) (3 ) (61 ) (2 ) (67 )
End of Period 648 14 2,112 434 3,208

SOURCE: Papa John's International, Inc.

Papa John's International, Inc.
David Flanery, 502-261-4753
Chief Financial Officer