Papa John‘s International, Inc.
Aug 1, 2006

Papa John's Reports Second Quarter 2006 Earnings; July Comparable Sales Results Announced; 2006 Earnings Guidance Updated

LOUISVILLE, Ky., Aug 01, 2006 (BUSINESS WIRE) -- Papa John's International, Inc. (NASDAQ: PZZA):

Highlights

Papa John's International, Inc. (NASDAQ: PZZA) today announced revenues of $241.6 million for the second quarter of 2006, representing an increase of 1.2% from revenues of $238.7 million for the same period in 2005. Net income for the second quarter of 2006 was $15.3 million, or $0.46 per share (including a net gain of $4.0 million, or $0.12 per share, from the consolidation of the results of the franchisee-owned cheese purchasing company, BIBP Commodities, Inc. (BIBP), a variable interest entity), compared to last year's net income of $10.9 million, or $0.32 per share (including a net loss of $117,000, which had no impact on earnings per share, from the consolidation of BIBP). Excluding the impact of BIBP, pre-tax income from continuing operations for the second quarter of 2006 increased $1.2 million, or $0.02 per share, after-tax, from the corresponding 2005 period.

As discussed below, revenues were $483.9 million for the six months ended June 25, 2006, representing a decrease of 0.7% from revenues of $487.3 million for the same period in 2005. Net income for the six months ended June 25, 2006 was $31.3 million, or $0.93 per share (including net income of $7.4 million, or $0.22 per share, from the consolidation of BIBP), compared to last year's net income of $20.8 million, or $0.62 per share (including a net loss of $1.1 million, or $0.03 per share, from the consolidation of BIBP). Excluding the impact of BIBP, pre-tax income from continuing operations increased $4.1 million, or $0.08 per share, after-tax, from the corresponding 2005 period.

"Our second quarter results were very good, with our system now posting positive domestic comp sales for the nineteenth consecutive month," commented Papa John's president and chief executive officer, Nigel Travis. "Our system continues to outperform the competition in a very challenging environment, even as we continue to make both domestic and international investments to sustain our long-term growth."

Revenues Comparison

The primary reasons for the $2.9 million increase or 1.2% in revenues for the second quarter of 2006, as compared to the same period in 2005, were a $5.5 million increase in commissary revenues reflecting increased volumes, and an increase in domestic franchise royalties of $1.1 million as a result of the 4.7% increase in comparable sales and additional equivalent units for the quarter. These increases were partially offset by a decrease in company-owned restaurant revenues of $5.1 million as the 4.6% increase in comparable sales for the quarter was more than offset by a decline in the number of company-owned units resulting from the sale of the 84 company units to a new franchisee at the beginning of the fourth quarter of 2005.

For the six-month period ending June 25, 2006, consolidated revenues declined $3.4 million, or 0.7%, primarily due to a decline of $9.1 million in company-owned restaurant revenues, reflecting the previously mentioned sale of 84 company units. In addition, revenues from restaurants classified as variable interest entities (VIEs) declined $2.3 million reflecting the sale of 19 restaurants at the beginning of the second quarter of 2005 by one of the franchisees to a third party, eliminating the VIE classification under Interpretation No. 46, Consolidation of Variable Interest Entities, an Interpretation of Accounting Research Bulletin No. 51 (FIN 46), and the related consolidation of the operating results of such restaurants at that time. These decreases were partially offset by an increase in commissary revenues of $7.3 million and domestic franchise royalties of $1.9 million. The revenue increases in the commissary operations and franchise royalties occurred for the same reasons mentioned above for the second quarter-only results.

Operating Results and Cash Flow

Operating Results

Our pre-tax income from continuing operations for the second quarter of 2006 was $24.2 million compared to $16.5 million for the corresponding period in 2005. For the six months ended June 25, 2006, pretax income was $49.0 million compared to $31.5 million for the corresponding period in 2005. Excluding the impact of the consolidation of BIBP, second quarter 2006 pre-tax income from continuing operations was $17.9 million, an increase of $1.2 million over 2005 comparable results, and pretax income for the six months ended June 25, 2006 was $37.3 million, an increase of $4.1 million over 2005 comparable results. The increase of $1.2 million and $4.1 million, respectively, in pre-tax income from continuing operations for the three- and six-month periods ended June 25, 2006 (excluding the consolidation of BIBP) is principally due to the following (analyzed on a segment basis -- see the Summary Financial Data table that follows for the reconciliation of segment income to consolidated income below):

  • Domestic Company-owned Restaurant Segment. Domestic company-owned restaurants' operating income increased $2.1 million and $6.9 million for the three- and six-months ended June 25, 2006, primarily due to fixed cost leverage and related margin improvement, including the benefit associated with our company-owned restaurants implementing a delivery charge in June 2005, associated with the noted increase in comparable sales for the period.
  • Domestic Commissary Segment. Domestic commissaries' operating income increased approximately $2.1 million and $2.5 million for the three- and six-month periods ended June 25, 2006, respectively, primarily due to the margin on increased sales volumes, including second quarter sales to Six Flags, Inc. as part of our multi-year strategic marketing alliance and partnership agreement that was announced in late March 2006.
  • Domestic Franchising Segment. Domestic franchising operating income increased approximately $531,000 and $738,000 for the three- and six-month periods ended June 25, 2006, respectively, primarily as a result of an increase in royalties due to an increase in comparable sales (see below) and the royalties from the 84 restaurants that were purchased by a franchisee from corporate at the beginning of the fourth quarter of 2005. The increase in royalties during 2006 was partially offset by an increase in administrative costs related to the field organizational restructuring implemented in late 2005 to better drive our domestic franchise operations.
  • International Segment. The international segment, which excludes the Perfect Pizza operations that were sold in March 2006, reported operating losses of $2.4 million and $4.8 million for the three- and six-month periods ended June 25, 2006, respectively, as compared to operating losses of $685,000 and $1.5 million for the corresponding 2005 periods. The decrease in operating results is principally due to increased costs related to the continued development of our support infrastructure throughout the international segment, including the United Kingdom, to support the accelerated development of both company-owned and franchised Papa John's branded restaurants in our international markets. In addition, the company incurred a $470,000 charge in the second quarter related to costs associated with management reorganization with one of our International operating units. As reflected in our earlier guidance, the increase in year-over-year operating losses in the international segment is expected to continue throughout the remainder of 2006.
  • All Others Segment. The operating income for the "All others" reporting segment increased approximately $332,000 and $1.0 million for the three and six months ended June 25, 2006, respectively, as compared to the corresponding 2005 periods, primarily due to improved operating results from our insurance business and our partnership development activities.


  • Unallocated Corporate Segment. The unallocated corporate expenses increased $2.0 million and $3.2 million for the three and six months ended June 25, 2006, respectively, as compared to the corresponding prior year periods. Increased marketing efforts, including our multi-year marketing agreement with Six Flags, Inc., resulted in additional costs of $1.0 million and $1.7 million for the three- and six-month periods ending June 25, 2006 as compared to corresponding 2005 periods. In addition, we incurred additional equity compensation and executive performance unit incentive plan expense, as follows.
  • Stock options were awarded to the majority of management in late March 2005 and April 2006 with a two-year cliff vesting provision. The company also granted approximately 28,000 shares of performance-based restricted stock to employees with a performance period of three years. There were no such stock options or restricted stock awarded in 2004 that vested in 2005 or subsequent years. Stock compensation expense recognized for the three- and six-month periods ending June 25, 2006 was $1.2 million and $1.9 million, respectively, as compared to $700,000 and $900,000 for the corresponding 2005 periods.

    Additionally, performance units were awarded in 2005 and 2006 with each award having a three-year performance period (none awarded prior to 2005). Further, the ultimate cost associated with the performance units is based on the company's ending stock price and total shareholder return relative to a peer group over the three-year performance period ending in December 2007 for the 2005 program and December 2008 for the 2006 program, with the awards paid in cash at the end of the respective performance periods. The estimated ultimate cost associated with the 2005 program increased significantly throughout 2005 as a result of our stock price performance during the year. Therefore, the allocable portion of the estimated cost of the 2005 units recorded in the first and second quarters of 2006 was substantially larger than that recorded in the corresponding 2005 periods. The total expense related to the 2005 and 2006 performance unit programs was approximately $600,000 in the second quarter of 2006 as compared to $180,000 in the second quarter of 2005 and $1.4 million for the six months ending June 25, 2006 as compared to $330,000 for the corresponding 2005 period.

    The decline in net interest expense for the three- and six-month periods ended June 25, 2006, as compared to the corresponding 2005 periods, is principally due to a decrease in our average outstanding debt balance.

    The income tax rate was 37.0% for both the second quarter of 2006 and the second quarter of 2005.

    Cash Flow

    Cash flow from continuing operations was $37.2 million in the first six months of 2006 as compared to $36.5 million for the comparable period in 2005. The consolidation of BIBP increased cash flow from operations by approximately $11.7 million in 2006 and reduced cash flow from operations by approximately $1.8 million in 2005. Excluding the impact of the consolidation of BIBP, cash flow from continuing operations decreased $12.8 million in the first six months of 2006 as compared to the corresponding 2005 period, primarily due to unfavorable working capital changes with accounts receivable and income taxes. The 2005 operating cash flows were favorably impacted by the collection of unusually high accounts receivable balances at the end of 2004. In addition, the decrease in cash flow from continuing operations, excluding the impact of the consolidation of BIBP, occurred due to the classification in 2006 of $4.5 million of excess tax benefits related to the exercise of non-qualified stock options from operating activities to financing activities as required by Statement of Financial Accounting Standards (SFAS) No. 123®, Share-Based Payment.

    Form 10-Q Filing

    See the Management Discussion & Analysis section of our second quarter Form 10-Q filed with the Securities and Exchange Commission for additional information concerning the operating results and cash flows for the six-month period ended June 25, 2006.

    Comparable Sales and Unit Count

    As previously announced, domestic system-wide comparable sales for the second quarter increased 4.7% (composed of a 4.6% increase at company-owned restaurants and a 4.7% increase at franchised restaurants). Comparable results for the second quarter of 2006 were unfavorably impacted by approximately 0.4% due to the timing of the Easter holiday weekend, which has lower sales volumes than a typical weekend. The Easter holiday occurred in the March period in 2005 and in the April period in 2006. Total system-wide international sales for Papa John's branded units increased 23.2% for the quarter, on a constant U.S. dollar basis, over the comparable period last year.

    Domestic system-wide comparable sales for the six months ended June 25, 2006 increased 4.4% (composed of a 5.3% increase at company-owned restaurants and a 4.2% increase at franchised restaurants). Total system-wide international sales for Papa John's branded units increased 26.0% on a year-to-date basis, on a constant U.S. dollar basis, over the comparable period last year.

    The company today announced that domestic system-wide comparable sales for the four weeks ended July 23, 2006 increased approximately 4.4% (composed of a 3.1% increase at company-owned restaurants and a 4.7% increase at franchised restaurants). Total system-wide international sales for Papa John's branded units increased 29.2% for the four weeks ended July 23, 2006, on a constant U.S. dollar basis, over the comparable period last year.

    During the second quarter of 2006, 40 domestic (four company-owned and 36 franchised) and 28 international franchised restaurants were opened and 12 domestic and 20 international restaurants were closed (all were franchised Papa John's restaurants). The international closings for the quarter included 17 franchise restaurants in Mexico as discussed further below.

    At June 25, 2006, there were 2,960 Papa John's restaurants (516 company-owned and 2,444 franchised) operating in 49 states and 24 countries. The company-owned unit count includes 114 restaurants operated in majority-owned domestic joint venture arrangements, the operations of which are fully consolidated into the company's results.

    Acquisition Activity

    As previously disclosed, the company announced the acquisition of 43 franchised restaurants in the Phoenix and Flagstaff, Arizona markets effective July 24, 2006. The purchase price was $18.4 million, subject to certain post-closing adjustments. It is not expected that this acquisition will significantly impact operating income for the remainder of 2006 as management transition costs are expected to substantially offset incremental unit level operating income during this time frame. We expect to open an additional four to six restaurants in this market over the next two to three years.

    International Update

    A total of 28 restaurants were opened in all international markets during the quarter, of which 14 were located in our fastest growing markets of Korea and China. As of June 25, 2006, we had a total of 83 franchised restaurants open and contractual agreements for an additional 407 Papa John's restaurants to be opened over the next eight years in these two countries. We also have a 100-unit development agreement for Northern India, of which two units were opened during the second quarter of 2006. Our total international development pipeline as of June 25, 2006 included 825 restaurants expected to open over the next ten years.

    In the fourth quarter of 2005, we terminated the master franchise agreement in Mexico. In the first quarter of 2006, 17 franchised and subfranchised restaurants in Mexico were closed, and an additional 17 restaurants closed in early April. The royalty income earned from the 34 closed restaurants was not material to our consolidated operating results.

    We are committed to the development of Mexico as an important international market as demonstrated by our acquisition during the second quarter of three franchised restaurants and a commissary in Mexico City. We plan to open an additional 20 to 25 company-owned restaurants in Mexico City during the next three years. We are also in active negotiations with potential franchisees in Mexico City and other regions of the country.

    As noted in our first quarter Form 10-Q filing, the company sold its Perfect Pizza operations, consisting of the franchised units and related distribution operations on March 8, 2006. In accordance with U.S. generally accepted accounting principles, we have classified the Perfect Pizza operating results, including directly associated G&A expenses, as "discontinued operations" for both 2006 and 2005. The following summarizes the discontinued operations for 2006 and 2005 (in 000's):

                       Three Months Ended         Six Months Ended
                       June 25,  June 26,        June 25,  June 26,
                         2006      2005            2006      2005
                       ------------------        ------------------
    Net sales           $    -    $3,459          $2,421    $7,196
    
    Pre-tax income           -       720             617     1,621
    
    Net income               -       453             389     1,021
    
    

    Share Repurchase Activity

    The company repurchased approximately 928,000 shares of its common stock at an average price of $31.91 per share, or a total of $29.6 million, during the second quarter of 2006, and 1.6 million shares of its common stock at an average of $31.45 per share, or a total of $51.7 million, during the first six months of 2006. A total of 273,000 and 710,000 shares of common stock were issued upon the exercise of stock options for the three- and six-month periods ended June 25, 2006. Subsequent to the second quarter 2006, through July 23, 2006, the company repurchased an additional 216,000 shares of common stock at an average price of $31.82 per share.

    As a result, there were 33.3 million diluted weighted average shares outstanding for the second quarter of 2006 as compared to 33.7 million for the same period in 2005. Approximately 32.1 million actual shares of the company's common stock were outstanding as of June 25, 2006. The company's board of directors has authorized the repurchase of up to an aggregate $575.0 million of common stock through December 31, 2006, and through July 23, 2006, approximately 36.6 million shares have been repurchased at a total cost of $554.5 million (average price of $15.17).

    The company's share repurchase activity increased earnings per share from continuing operations by $0.02 and $0.04 for the three- and six-month periods ending June 25, 2006, respectively.

    2006 Earnings Guidance Updated

    In connection with the first quarter earnings release, the company revised the original guidance for the 53-week year, excluding the impact of the consolidation of BIBP, to a range of $1.40 to $1.46. Based upon actual second quarter operating results and July sales results, the company is updating its 2006 EPS guidance to a range of $1.42 to $1.46. Our determination of our updated earnings guidance for 2006 included the following factors:

    The above full-year 2006 guidance anticipates that third quarter earnings per share will increase slightly on a year-over-year basis. As previously disclosed, the impact of the additional week of operations in the fourth quarter of 2006 is expected to increase earnings per share by $0.07, as reflected in the above earnings guidance range.

    The updated full-year guidance assumes domestic comparable sales will increase 3% to 5% for the year. Total sales growth for international Papa John's branded units is expected to be in the range of 25% to 30%. Worldwide net unit growth is expected to be 135 to 170 units, which is consistent with previous guidance. The international sales growth and unit closings take into consideration the 34 unit closings in Mexico that occurred in the first and second quarter of 2006, as previously noted.

    The overall operating margin is expected to be in the range of 8.3% to 8.7%. There are no other significant changes in the key operating assumptions we provided in our press release dated December 8, 2005.

    Forward-Looking Statements

    Except for historical information, this announcement contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements reflect management's expectations based upon currently available information and data; however, actual results are subject to future events and uncertainties, which could cause actual results to materially differ from those projected in these statements. Certain factors that can cause actual results to materially differ include: the uncertainties associated with litigation; 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; increases in or sustained high levels of food, paper, utilities, fuel, employee compensation and benefits, insurance and similar costs; the ability to obtain ingredients from alternative suppliers, if needed; health- or disease-related disruptions or consumer concerns about commodities supplies; economic, political and health conditions in the countries in which the company or its franchisees operate; the selection and availability of suitable restaurant locations; negotiation of suitable lease or financing terms; constraints on permitting and construction of restaurants; higher-than-anticipated construction costs; the hiring, training and retention of management and other personnel; changes in consumer taste, demographic trends, traffic patterns and the type, number and location of competing restaurants; franchisee relations; federal and state laws governing such matters as wages, working conditions, citizenship requirements and overtime; and labor shortages in various markets resulting in higher required wage rates. The above factors might be especially harmful to the financial viability of franchisees in under-penetrated or emerging markets, leading to greater unit closings than anticipated. Increases in projected claims losses for the company's self-insured coverage or within the captive franchise insurance program could have a significant impact on our operating results. Our international operations are subject to additional factors, including currency regulations and fluctuations; differing business and social cultures and consumer preferences; diverse government regulations and structures; ability to source high-quality ingredients and other commodities in a cost-effective manner; and differing interpretation of the obligations established in franchise agreements with international franchisees. Further information regarding factors that could affect the company's financial and other results is included in the company's Forms 10-Q and 10-K, filed with the Securities and Exchange Commission.

    Conference Call

    A conference call is scheduled for Wednesday, August 2, 2006, at 10:00 AM EDT to review second quarter 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 for participation in the question and answer session. International participants may dial 706-679-8452.

    The conference call will be available for replay beginning Wednesday, August 2, 2006 at approximately noon through Friday, August 4, 2006, at midnight EDT. The replay can be accessed from the company's web page at www.papajohns.com or by dialing 800-642-1687 (passcode 5719280). International participants may dial 706-645-9291 (passcode 5719280).

                            Summary Financial Data
                        Papa John's International, Inc.
    
                                  Three Months Ended   Six Months Ended
                                  ------------------- -------------------
    (In thousands, except per     June 25,  June 26,  June 25,  June 26,
     share amounts)                 2006      2005      2006      2005
                                  --------- --------- --------- ---------
    
    Revenues                      $241,593  $238,675  $483,942  $487,312
                                  ========= ========= ========= =========
    
    Income from continuing
     operations before
     income taxes(1)               $24,232   $16,535   $49,015   $31,451
                                  ========= ========= ========= =========
    
    Net income                     $15,266   $10,870   $31,268   $20,835
                                  ========= ========= ========= =========
    
    Diluted earnings per share       $0.46     $0.32     $0.93     $0.62
                                  ========= ========= ========= =========
    
    Diluted weighted-average
     shares outstanding             33,309    33,746    33,632    33,716
                                  ========= ========= ========= =========
    
    EBITDA(A)                      $31,102   $24,743   $62,871   $48,128
                                  ========= ========= ========= =========
    
    (1) See information below on a reporting unit basis that separately
        identifies the impact of consolidating VIEs on income before
        income taxes.
    
    The following is a summary of
     our income (loss) from continuing
     operations before income taxes:
    
    Domestic company-owned
     restaurants                    $8,149    $6,021   $17,450   $10,578
    Domestic commissaries            8,511     6,400    15,865    13,352
    Domestic franchising            12,737    12,206    25,751    25,013
    International                   (2,418)     (685)   (4,759)   (1,542)
    VIEs, primarily BIBP             6,303      (185)   11,692    (1,780)
    All others                       1,218       886     2,717     1,673
    Unallocated corporate expenses  (9,935)   (7,904)  (18,819)  (15,582)
    Elimination of intersegment
     profits                          (333)     (204)     (882)     (261)
                                  --------- --------- --------- ---------
    Income from continuing
     operations before
     income taxes                  $24,232   $16,535   $49,015   $31,451
                                  ========= ========= ========= =========
    
    The following is a
     reconciliation of
     EBITDA to net income:
    
    EBITDA(A)                      $31,102   $24,743   $62,871   $48,128
    Income tax expense              (8,966)   (6,118)  (18,136)  (11,637)
    Interest expense                  (631)   (1,313)   (1,432)   (2,815)
    Investment income                  364       369       740       746
    Depreciation and amortization   (6,603)   (7,264)  (13,164)  (14,608)
    Income from discontinued
     operations, net of tax              -       453       389     1,021
                                  --------- --------- --------- ---------
    Net income                     $15,266   $10,870   $31,268   $20,835
                                  ========= ========= ========= =========
    
    (A) EBITDA represents operating performance from continuing
        operations before depreciation, amortization, net interest and
        income taxes. While EBITDA should not be construed as a substitute
        for operating 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, 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.
    
    

    As of July 23, 2006, Papa John's had 2,956 restaurants (517 company-owned and 2,439 franchised) operating in 49 states and 24 countries. For more information about the company, please visit www.papajohns.com.

               Papa John's International, Inc. and Subsidiaries
                       Consolidated Statements of Income
    
    
                             Three Months Ended       Six Months Ended
                           ----------------------- -----------------------
                            June 25,    June 26,    June 25,    June 26,
                               2006        2005        2006        2005
                           ----------------------- -----------------------
    (In thousands, except  (Unaudited) (Unaudited) (Unaudited) (Unaudited)
     per share amounts)
    Revenues:
     Domestic:
      Company-owned
       restaurant sales      $105,424    $110,558    $212,164    $221,272
      Variable interest
       entities restaurant
       sales                    2,691       2,293       5,137       7,460
      Franchise royalties      13,964      12,908      28,202      26,273
      Franchise and
       development fees           593         807       1,181       1,510
      Commissary sales        100,968      95,496     203,660     196,408
      Other sales              12,202      12,059      23,072      25,451
     International:
      Royalties and
       franchise and
       development fees         1,839       1,469       3,296       3,027
      Restaurant and
       commissary sales         3,912       3,085       7,230       5,911
                           ----------------------- -----------------------
    Total revenues            241,593     238,675     483,942     487,312
    
    Costs and expenses:
     Domestic Company-owned
     restaurant expenses:
      Cost of sales            19,650      23,585      40,528      48,825
      Salaries and benefits    31,252      34,205      62,753      68,344
      Advertising and
       related costs            9,821       9,946      19,013      19,557
      Occupancy costs           6,364       6,561      12,526      13,161
      Other operating
       expenses                13,774      14,025      27,577      28,091
                           ----------------------- -----------------------
     Total domestic
      Company-owned
      restaurant expenses      80,861      88,322     162,397     177,978
    
     Variable interest
      entities restaurant
      expenses                  2,224       1,931       4,331       6,543
    
     Domestic commissary
       and other expenses:
      Cost of sales            81,866      78,477     165,409     160,905
      Salaries and benefits     7,851       7,089      15,316      14,543
      Other operating
       expenses                11,282      12,234      22,422      26,404
                           ----------------------- -----------------------
     Total domestic
      commissary and other
      expenses                100,999      97,800     203,147     201,852
    
    Loss (income) from the
     franchise cheese-purchasing
      program, net of
      minority interest        (5,189)       (167)     (9,765)        842
    International operating
     expenses                   3,883       2,833       7,306       5,542
    General and
     administrative
     expenses                  26,386      21,908      50,630      43,205
    Minority interests and
     other general expenses     1,327       1,305       3,025       3,222
    Depreciation and
     amortization               6,603       7,264      13,164      14,608
                           ----------------------- -----------------------
    Total costs and
     expenses                 217,094     221,196     434,235     453,792
                           ----------------------- -----------------------
    
    Operating income           24,499      17,479      49,707      33,520
    Net interest expense         (267)       (944)       (692)     (2,069)
                           ----------------------- -----------------------
    Income from continuing
     operations before
     income taxes              24,232      16,535      49,015      31,451
    Income tax expense          8,966       6,118      18,136      11,637
                           ----------------------- -----------------------
    
    Income from continuing
     operations                15,266      10,417      30,879      19,814
    Income from discontinued
     operations, net of tax         -         453         389       1,021
                           ----------------------- -----------------------
    Net income                $15,266     $10,870     $31,268     $20,835
                           ======================= =======================
    
    Basic earnings per
     common share:
       Income from
        continuing
        operations              $0.47       $0.31       $0.94       $0.60
       Income from
        discontinued
        operations                  -        0.01        0.01        0.03
                           ----------------------- -----------------------
    Basic earnings per
     common share               $0.47       $0.32       $0.95       $0.63
                           ======================= =======================
    
    Earnings per common
     share - assuming
     dilution:
       Income from
        continuing
        operations              $0.46       $0.31       $0.92       $0.59
       Income from
        discontinued
        operations                  -        0.01        0.01        0.03
                           ----------------------- -----------------------
    Earnings per common
     share - assuming
     dilution                   $0.46       $0.32       $0.93       $0.62
                           ======================= =======================
    
    Basic weighted average
     shares outstanding        32,589      33,336      32,855      33,258
                           ======================= =======================
    Weighted average shares
     outstanding - assuming
     dilution                  33,309      33,746      33,632      33,716
                           ======================= =======================
    
    
    
    
               Papa John's International, Inc. and Subsidiaries
                     Condensed Consolidated Balance Sheets
    
                                                      June 25,   Dec. 25,
                                                        2006       2005
                                                     (Unaudited)  (Note)
                                                     ----------- ---------
    (In thousands)
    
    Assets
    Current assets:
      Cash and cash equivalents                         $10,494   $22,098
      Accounts receivable                                21,371    21,300
      Inventories                                        24,444    26,030
      Prepaid expenses and other current assets          12,501    13,456
      Deferred income taxes                               7,117     7,085
      Assets of discontinued operations held for sale         -     2,039
                                                     ----------- ---------
    Total current assets                                 75,927    92,008
    
    Investments                                           3,765     6,282
    Net property and equipment                          179,983   178,447
    Notes receivable                                     11,443     7,667
    Deferred income taxes                                   927     1,899
    Goodwill                                             41,306    41,878
    Other assets                                         16,815    13,772
    Assets of discontinued operations held for sale           -     8,609
                                                     ----------- ---------
    Total assets                                       $330,166  $350,562
                                                     =========== =========
    
    
    Liabilities and stockholders' equity
    Current liabilities:
      Accounts payable                                  $25,228   $28,937
      Income and other taxes                             16,432    16,862
      Accrued expenses                                   50,889    49,634
      Current portion of debt                             9,900     6,100
                                                     ----------- ---------
    Total current liabilities                           102,449   101,533
    
    Unearned franchise and development fees               6,509     7,256
    Long-term debt, net of current portion               35,514    49,016
    Other long-term liabilities                          27,752    31,478
                                                     ----------- ---------
    Total liabilities                                   172,224   189,283
    
    Total stockholders' equity                          157,942   161,279
                                                     ----------- ---------
    Total liabilities and stockholders' equity         $330,166  $350,562
                                                     =========== =========
    
    
    Note: The balance sheet at December 25, 2005 has been derived from the
     audited consolidated financial statements at that date, but does not
     include all information and footnotes required by generally accepted
     accounting principles for a complete set of financial statements.
    
    
    
    
    
    
               Papa John's International, Inc. and Subsidiaries
                     Consolidated Statements of Cash Flows
                                  (Unaudited)
    
                                                        Six Months Ended
                                                       -------------------
    (In thousands)                                     June 25,  June 26,
                                                          2006      2005
                                                       -------------------
    
    Operating activities
    Income from continuing operations                   $30,879   $19,814
    Adjustments to reconcile income from
     continuing operations to net cash
     provided by operating activities:
         Provision for uncollectible accounts
          and notes receivable                            1,887     1,327
         Depreciation and amortization                   13,164    14,608
         Deferred income taxes                              212      (753)
         Stock-based compensation expense                 1,882       912
         Excess tax benefit related to exercise
          of non-qualified stock options                 (4,500)        -
         Other                                            3,556     2,602
         Changes in operating assets and liabilities:
            Accounts receivable                          (2,274)    4,549
            Inventories                                   1,586     1,221
            Prepaid expenses and other current assets       938     4,272
            Other assets and liabilities                 (4,885)   (1,170)
            Accounts payable                             (3,709)   (7,944)
            Income and other taxes                         (430)   (3,088)
            Accrued expenses                               (354)      325
            Unearned franchise and development fees        (747)     (148)
                                                       --------- ---------
    Net cash provided by operating activities from
     continuing operations                               37,205    36,527
    Operating cash flows from discontinued operations       414     1,301
                                                       --------- ---------
    Net cash provided by operating activities            37,619    37,828
    
    Investing activities
    Purchase of property and equipment                  (14,068)   (6,658)
    Proceeds from sale of property and equipment             26        44
    Purchase of investments                              (2,014)   (5,397)
    Proceeds from sale or maturity of investments         4,472     5,800
    Loans to franchisees and affiliates                  (4,616)   (2,770)
    Loan repayments from franchisees and affiliates       6,410     3,630
    Acquisitions                                         (1,200)        -
    Proceeds from divestiture of discontinued
     operations                                           8,020         -
                                                       --------- ---------
    Net cash used in investing activities                (2,970)   (5,351)
    
    Financing activities
    Net repayments on line of credit facility           (13,500)  (29,300)
    Net proceeds from short-term debt - variable
     interest entities                                    3,800       225
    Proceeds from issuance of common stock                    -     1,000
    Excess tax benefit related to exercise of
     non-qualified stock options                          4,500         -
    Proceeds from exercise of stock options              10,450    16,857
    Acquisition of common stock                         (51,728)  (13,932)
    Other                                                   172      (123)
                                                       --------- ---------
    Net cash used in financing activities               (46,306)  (25,273)
    
    Effect of exchange rate changes on cash and
     cash equivalents                                        53      (109)
                                                       --------- ---------
    Change in cash and cash equivalents                 (11,604)    7,095
    Cash and cash equivalents at beginning of period     22,098    14,698
                                                       --------- ---------
    
    Cash and cash equivalents at end of period          $10,494   $21,793
                                                       ========= =========
    
    
    
    
    Restaurant Progression
    Papa John's International, Inc.
    
                                 Second Quarter Ended June 25, 2006
                            ----------------------------------------------
                                   Corporate        Franchised
                              Domestic   Int'l  Domestic   Int'l    Total
                            ----------------------------------------------
    Papa John's restaurants
    Beginning of period            506      3      2,101     314    2,924
    Opened                           4      -         36      28       68
    Closed                           -      -        (12)    (20)     (32)
    Acquired                         -      3          -       -        3
    Sold                             -      -          -      (3)      (3)
                            ----------------------------------------------
    End of Period                  510      6      2,125     319    2,960
                            ==============================================
    
    
    
    
                                  Second Quarter Ended June 26, 2005
                            ----------------------------------------------
                                   Corporate        Franchised
                              Domestic   Int'l  Domestic   Int'l    Total
                            ----------------------------------------------
    Papa John's restaurants
    Beginning of period            569      1      2,001     274    2,845
    Opened                           1      -         29      23       53
    Converted                        -      -          -       1        1
    Closed                           -      -        (18)     (6)     (24)
    Acquired                         2      -          2       -        4
    Sold                            (2)     -         (2)      -       (4)
                            ----------------------------------------------
    End of Period                  570      1      2,012     292    2,875
                            ==============================================
    
    
                            ----------------------------------------------
                                   Corporate        Franchised
                              Domestic   Int'l  Domestic   Int'l    Total
                            ----------------------------------------------
    Perfect Pizza
     restaurants
    Beginning of period              -      -          -     114      114
    Opened                           -      -          -       2        2
    Converted                        -      -          -      (1)      (1)
    Closed                           -      -          -      (1)      (1)
                            ----------------------------------------------
    End of Period                    -      -          -     114      114
                            ==============================================
    
    
    Note: The PJUK Perfect Pizza operations were sold in March 2006.
    
    
    
    
    Restaurant Progression
    Papa John's International, Inc.
    
                                    Six Months Ended June 25, 2006
                              --------------------------------------------
                                     Corporate         Franchised
                                Domestic   Int'l   Domestic   Int'l  Total
                              --------------------------------------------
    Papa John's restaurants
    Beginning of period              502      2       2,097    325  2,926
    Opened                             6      1          56     40    103
    Closed                            (1)     -         (25)   (43)   (69)
    Acquired                           3      3           -      -      6
    Sold                               -      -          (3)    (3)    (6)
                              --------------------------------------------
    End of Period                    510      6       2,125    319  2,960
                              ============================================
    
    
                              --------------------------------------------
                                     Corporate         Franchised
                                Domestic   Int'l   Domestic   Int'l  Total
                              --------------------------------------------
    Perfect Pizza restaurants
    Beginning of period                -      -           -    112    112
    Closed                             -      -           -     (3)    (3)
    Sold                               -      -           -   (109)  (109)
                              --------------------------------------------
    End of Period                      -      -           -      -      -
                              ============================================
    
    
                                      Six Months Ended June 26, 2005
                              --------------------------------------------
                                     Corporate         Franchised
                                Domestic   Int'l   Domestic   Int'l  Total
                              --------------------------------------------
    Papa John's restaurants
    Beginning of period              568      1       1,997    263  2,829
    Opened                             2      -          52     39     93
    Converted                          -      -           -      1      1
    Closed                             -      -         (37)   (11)   (48)
    Acquired                           2      -           2      -      4
    Sold                              (2)     -          (2)     -     (4)
                              --------------------------------------------
    End of Period                    570      1       2,012    292  2,875
                              ============================================
    
    
                              --------------------------------------------
                                     Corporate         Franchised
                                Domestic   Int'l   Domestic   Int'l  Total
                              --------------------------------------------
    Perfect Pizza restaurants
    Beginning of period                -      -           -    118    118
    Opened                             -      -           -      3      3
    Converted                          -      -           -     (1)    (1)
    Closed                             -      -           -     (6)    (6)
                              --------------------------------------------
    End of Period                      -      -           -    114    114
                              ============================================
    
    
    

    SOURCE: Papa John's International, Inc.

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