Papa John‘s International, Inc.
Mar 1, 2005

Papa John's Reports Fourth Quarter and Full-Year 2004 Results; February Comparable Sales Results Announced

LOUISVILLE, Ky.--(BUSINESS WIRE)--March 1, 2005--Papa John's International, Inc. (Nasdaq:PZZA):

Papa John's International, Inc. (Nasdaq:PZZA) today announced revenues of $247.7 million for the fourth quarter of 2004, representing an increase of 3.6% from revenues of $239.0 million for the same period in 2003. Net income for the fourth quarter of 2004 was $9.4 million, or $0.55 per share, (including a pre-tax loss of $3.0 million, or $0.11 per share after tax, from the consolidation of BIBP Commodities, Inc. (BIBP)) compared to last year's net income of $8.2 million, and diluted earnings per share of $0.46. The fourth quarter 2004 results also included a pre-tax charge of $1.9 million, or $0.07 per share after tax, associated with certain lease and leasehold accounting adjustments applicable to prior periods.

The 2003 pre-tax income was reduced $776,000, or $0.03 per share, related to $1.1 million of costs incurred with the closure of certain domestic company-owned restaurants, net of a $275,000 gain on the sale of seven restaurants in the U.K. to franchisees, while the 2004 pre-tax income was reduced $750,000, or $0.03 per share related to severance and other costs associated with previously announced Q4 staffing reductions.



Revenues were $942.4 million for the full year ended December 26, 2004, representing an increase of 2.7% from 2003 revenues of $917.4 million. Net income for 2004 was $23.2 million, or $1.33 per share, compared to 2003 net income of $33.6 million or diluted earnings per share of $1.86. The 2004 results include a pre-tax loss of $23.5 million ($14.7 million net loss), or $0.84 per share, from the consolidation of BIBP. The 2004 results also include a $1.6 million pre-tax charge, or $0.06 per share after tax, associated with certain lease and leasehold accounting adjustments applicable to prior years.

The 2003 pre-tax income was reduced $5.5 million, or $0.19 per share, primarily as a result of charges related to the closure of 27 domestic company-owned restaurants and impairment of an additional 25 domestic company-owned restaurants. The 2003 results also include a reduction in net income of $413,000, or $0.02 per share, from the cumulative effect adjustment related to the adoption of Statement of Financial Accounting Standards No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity" (FAS No. 150). This item was reversed during 2004 via a $625,000 reduction in interest expense as a result of a change in an underlying joint venture operating agreement eliminating a mandatory purchase requirement and related liability.

Lease Expense Recognition

The company recently completed a comprehensive review of its accounting for lease expense and depreciation of leasehold improvements. Several restaurant companies recently announced financial statement restatements and/or adjustments as a result of inconsistencies between assumed lease terms and depreciable lives and other similar issues related to their accounting for leases and leasehold improvements. Our review resulted in a cumulative fourth quarter adjustment increasing rent and depreciation expense by $1.9 million (or $0.07 per share, after tax) applicable to prior periods, of which $1.6 million (or $0.06 per share, after tax) was applicable to years prior to 2004. This accounting adjustment does not affect the company's historical or future cash flows or the timing or amounts of rental payments. Additionally, this correction is not material to prior periods.

Revenues Comparison

The primary components of the $8.6 million increase in revenues for the fourth quarter 2004, as compared to the same 2003 period, were: (1) $4.4 million from the consolidation of 33 franchised restaurants beginning in the second quarter of 2004 resulting from the implementation of Financial Accounting Standards Board Interpretation No. 46, Consolidation of Variable Interest Entities, An Interpretation of Accounting Research Bulletin No. 51 (FIN 46) and (2) $4.7 million from commissary sales reflecting the sales of promotional items (principally DVDs) and the favorable impact of higher commodity prices, primarily cheese, partially offset by lower sales volumes.



The $25.0 million increase in revenues for full-year 2004, as compared to full-year 2003, was primarily due to the following: (1) $14.4 million from the consolidation of the 33 franchised restaurants mentioned above; (2) $6.8 million from commissary sales for the same reasons noted above for the fourth quarter; and (3) $3.0 million from the first quarter sales of promotional items associated with our March 2004 NCAA national basketball promotion. The domestic company-owned restaurant sales declined $3.4 million in 2004, as compared to 2003, primarily as a result of the previously mentioned closing of restaurants during the last quarter of 2003.

Operating Results

Fourth Quarter Results

Our pre-tax income for the fourth quarter of 2004 was $15.1 million compared to pre-tax income of $13.2 million for the corresponding period in 2003. Excluding the impact of the consolidation of BIBP, fourth quarter 2004 pre-tax income was $18.1 million. The increase of $4.9 million in 2004 pre-tax income (excluding the consolidation of BIBP), as compared to the corresponding 2003 period is principally due to the following:



Full Year Results

Our pre-tax income for full-year 2004 was $37.2 million compared to $54.4 million for 2003. Excluding the impact of consolidation of BIBP, full-year 2004 pre-tax income is $60.6 million. The significant items that comprise this $6.2 million increase in operating income in 2004 as compared to 2003 (excluding the consolidation of BIBP) include the following:

See "Supplemental Information" for additional information concerning the operating results for the three-month and full-year periods ended December 26, 2004.

Comparable Sales and Unit Count



As previously announced, domestic system-wide comparable sales for the fourth quarter increased 0.7% (composed of a 0.8% decrease at company-owned restaurants and a 1.2% increase at franchise restaurants). For full-year 2004, system-wide domestic comparable sales increased 0.1% (composed of a 0.5% increase at company-owned restaurants and flat results at franchise restaurants). Total system-wide international sales increased 7.7% for the fourth quarter and 5.0% for the year.

The company today announced that domestic system-wide comparable sales for the four weeks ended February 20, 2005 increased approximately 2.1% (composed of a 1.1% increase at company-owned restaurants and a 2.5% increase at franchised restaurants). Total system-wide international sales for the four weeks ended February 20, 2005 increased 11.5%, on a constant U.S. dollar basis, over the comparable period last year.

During the fourth quarter, a total of 60 Papa John's restaurants were opened (two company-owned and 58 franchised), and 38 restaurants closed (36 franchised Papa John's restaurants and two franchised Perfect Pizza restaurants). At December 26, 2004, there were 2,829 Papa John's restaurants (569 company-owned and 2,260 franchised) operating in 49 states and 20 international markets. The company is also the franchisor of 118 Perfect Pizza restaurants in the United Kingdom.

Share Repurchase Activity

The company repurchased 321,000 shares of common stock at an average price of $33.96 per share during the fourth quarter of 2004, and 2.1 million shares of common stock at an average price of $32.05 during 2004. The company's board of directors has authorized the repurchase of up to an aggregate $450.0 million of common stock through December 25, 2005. Through December 26, 2004, $420.5 million had been repurchased (representing 15.7 million shares at an average price of $26.76 per share) since the program began in 1999. Approximately 16.7 million actual shares were outstanding as of December 26, 2004. Subsequent to December 26, 2004, the company repurchased $12.8 million of stock representing 373,000 shares at an average price of $34.41 per share.

The company's share repurchase activity increased earnings per share by approximately $0.03 for the fourth quarter of 2004 and $0.02 for the 2004 full year.



Earnings Guidance for 2005

The company reaffirms its previously announced 2005 earnings per share guidance range of $2.27 to $2.35, excluding any potential impact from the consolidation of BIBP, which is required by FIN 46.

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; increases in projected claims losses for the company's self-insured coverage or within the captive franchise insurance program; increased advertising, promotions and discounting 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 open new restaurants and operate new and existing restaurants profitably; increases in food, labor, utilities, employee benefits and similar costs; and economic, political and public health conditions in the countries in which the company or its franchisees operate. These factors might be especially harmful to the financial viability of franchisees in under-penetrated or emerging markets, leading to greater unit closings than anticipated. Further information regarding factors that could affect the company's financial and other results is included in the company's Forms 10Q and 10K, filed with the Securities and Exchange Commission.

Conference Call

A conference call is scheduled for Wednesday, March 2, 2005 at 10:00 AM EST to report fourth quarter and full year 2004 earnings results and to review guidance for 2005. The call can be accessed from the company's web page at www.papajohns.com in a listen-only mode, or dial 800-511-7629 for participation in the question and answer session. International participants may dial 706-634-5833.



The conference call will be available for replay beginning Wednesday, March 2, 2005 at approximately Noon through Friday, March 4, 2005 at Midnight EST. The replay can be accessed from the company's web page at www.papajohns.com or by dialing 800-642-1687 (passcode 4027312). International participants may dial 706-645-9291 (password 4027312).

                        Summary Financial Data
                    Papa John's International, Inc.

                               Three Months Ended      Year Ended
                               ------------------- -------------------
(In thousands, except per      Dec. 26,  Dec. 28,  Dec. 26,  Dec. 28,
 share amounts)                  2004      2003      2004      2003
                               --------- --------- --------- ---------


Revenues                       $247,655  $239,038  $942,426  $917,378
                               ========= ========= ========= =========

Income before income taxes and
 cumulative effect of a change
 in accounting principle (1)    $15,111   $13,198   $37,153   $54,361
                               ========= ========= ========= =========

Net income                       $9,445    $8,249   $23,221   $33,563
                               ========= ========= ========= =========

Diluted earnings per share        $0.55     $0.46     $1.33     $1.86
                               ========= ========= ========= =========

Diluted weighted-average
 shares outstanding              17,019    18,118    17,405    18,037
                               ========= ========= ========= =========

EBITDA (A)                      $24,455   $22,359   $72,936   $91,599
                               ========= ========= ========= =========

(1) See information below on a reporting unit basis that separately
    identifies the impact of consolidating VIEs on the three-month and
    full-year results.

The following is a summary of our income before
 income taxes and the cumulative effect of a
 change in accounting principle by reporting unit:

Domestic company-owned
 restaurants (B)                 $1,488     $(826)   $5,069   $(6,335)
Domestic commissaries (C)         6,060     5,832    19,797    22,382
Domestic franchising             12,120    12,239    46,076    47,725
International                       286        60       786       (59)
VIEs, primarily BIBP             (2,965)        -   (23,459)        -
All others (D)                    1,271      (581)    2,620    (1,866)
Unallocated corporate
 expenses (E)                    (3,373)   (3,462)  (14,035)   (7,256)
Elimination of intersegment
 profits                            224       (64)      299      (230)
                               --------- --------- --------- ---------
Income before income taxes and
 cumulative effect of a change
 in accounting principle        $15,111   $13,198   $37,153   $54,361
                               ========= ========= ========= =========

The following is a reconciliation of
 EBITDA to net income:

EBITDA (A)                      $24,455   $22,359   $72,936   $91,599
Income tax expense               (5,666)   (4,949)  (13,932)  (20,385)
Interest expense                 (1,538)   (1,699)   (5,313)   (6,851)
Investment income                   201       139       689       672
Depreciation and amortization    (8,007)   (7,601)  (31,159)  (31,059)
Cumulative effect of
 accounting change, net of tax        -         -         -      (413)
                               --------- --------- --------- ---------
Net income                       $9,445    $8,249   $23,221   $33,563
                               ========= ========= ========= =========

(A) EBITDA represents operating performance 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.

(B) The operating results for domestic company-owned restaurants
    improved $2.3 million in the fourth quarter of 2004 and $11.4
    million for full year 2004 as compared to the same periods of the
    prior year. A substantial portion of the year over year
    improvement is because a provision for restaurant closures,
    impairment and dispositions of $1.1 million and $5.7 million is
    included in the results for the three-month and twelve-month
    periods ended December 28, 2003, respectively (the 2004 amounts
    were not significant). The additional improvement in 2004 results
    over 2003 results for the quarter and year on a reporting unit
    basis is primarily attributable to labor reductions due to
    staffing efficiencies and leverage on restaurant pricing
    increases, lower administrative costs and reduced cost of sales
    resulting from commissary margin reductions - see (C) below.

(C) The 2004 results for the domestic commissaries segment are
    favorably impacted by a reduction in the corporate expense
    allocations of $2.5 million for the full-year ended December 26,
    2004, as compared to the same period in 2003 ($230,000 reduction
    for the fourth quarter of 2004 as compared to 2003) - see (E)
    below. The $5.1 million decrease in commissary operating income in
    2004 as compared to 2003 (before considering the favorable impact
    of the reduced corporate expense allocations) is primarily
    attributable to reduced commissary sales volumes and commissary
    margin reductions - see (B) above.

(D) The "all others" business segment includes a $1.7 million and $6.3
    million increase in claims loss reserves related to the franchise
    insurance program for the three and twelve month periods ending
    December 28, 2003, respectively. For the year-ended December 26,
    2004, the increase in claims loss reserves was $1.1 million (none
    in the fourth quarter of 2004).

(E) The increase in full-year 2004 unallocated corporate expenses from
    2003 is primarily due to: (1) $1.9 million attributable to the
    lease adjustment previously discussed; (2) $1.6 million in 2004
    compensation expense attributable to stock options awarded in 2003
    (no comparable 2003 expense); (3) the previously noted reduction
    in the corporate allocations to domestic commissaries
    approximating $2.5 million for the year ended December 26, 2004 -
    see (C) above; and (4) a reduction in the 2003 unallocated
    corporate expenses due to the recognition of $2.0 million of
    income from the settlement of a litigation matter in the second
    quarter of 2003. These increases were partially offset by
    decreases in insurance and benefit costs.

Supplemental Information

Fourth-Quarter Operating Results

Variable Interest Entities



As disclosed in previous releases, as required by FIN 46, the company's 2004 operating results include BIBP's operating results. The consolidation of BIBP had a significant impact on the full-year 2004 operating results and is expected to have a significant ongoing impact on the company's future operating results and income statement presentation as described below.

Consolidation accounting requires the net impact from the consolidation of BIBP to be reflected primarily in two separate components of the company's statement of income. The first component is the portion of BIBP operating income or loss attributable to the amount of cheese purchased by company-owned restaurants during the period. This portion of BIBP operating income (loss) is reflected as a reduction (increase) in the "Domestic company-owned restaurant expenses - cost of sales" line item. This approach effectively reports cost of sales for company-owned restaurants as if the purchasing arrangement with BIBP did not exist and such restaurants were purchasing cheese at the spot market prices (i.e., the impact of BIBP is eliminated in consolidation).

The second component of the net impact from the consolidation of BIBP is reflected in the caption "Loss (income) from the franchise cheese-purchasing program, net of minority interest." This line item represents BIBP's income or loss from purchasing cheese at the spot market price and selling to franchised restaurants at a fixed quarterly price, net of any income or loss attributable to the minority interest BIBP shareholders. The amount of income or loss attributable to the BIBP shareholders depends on its cumulative shareholders' equity balance and the change in such balance during the reporting period.

In addition, Papa John's has extended loans to certain franchisees. Under the FIN 46 rules, Papa John's is deemed to be the primary beneficiary of four of these franchisees, even though we have no ownership interest in them. Beginning in the second quarter of 2004, FIN 46 required Papa John's to recognize the operating income (losses) generated by these four franchise entities (representing 33 Papa John's restaurants). For the fourth quarter of 2004, the consolidation of these four franchise entities had no significant net impact (less than $25,000) on Papa John's operating results, generating revenues of $4.4 million, operating expenses of $3.9 million and other expenses (including G&A, depreciation and interest) totaling $500,000.

Review of Operating Results

During the fourth quarter of 2004, domestic corporate restaurant sales were $106.1 million, compared to $107.6 million for the same period in 2003. The 1.3% decrease is primarily due to a 0.8% decrease in comparable sales for the quarter and a 1.2% decrease in equivalent units as the company closed 22 under performing restaurants in the fourth quarter of 2003. Domestic franchise sales for the quarter increased 1.8% to $335.4 million from $329.4 million for the same period in 2003, primarily resulting from a 1.2% increase in comparable sales for the 2004 quarter.



The fourth-quarter comparable sales base for domestic corporate restaurants consisted of 551 units, or 97.7% of total equivalent units, and the domestic franchise base consisted of 1,864 units or 94.2% of total equivalent units. Average weekly sales for restaurants included in the corporate comparable base were $14,560, while other corporate units averaged $11,025 for an overall average of $14,479. Average weekly sales for the restaurants included in the franchise comparable base were $13,221, while other franchise units averaged $9,998 for an overall average of $13,033.

Domestic franchise royalties were $13.2 million in the fourth quarter of 2004, a 1.8% increase from $12.9 million for the comparable period in 2003, primarily due to the previously mentioned increase in franchised sales. Domestic franchise and development fees were $705,000 in the quarter, including approximately $105,000 recognized upon development cancellation or franchise renewal and transfer, compared to $534,000 (including $164,000 of cancellation, renewal and transfer fees) for the same period in 2003. There were 30 domestic franchise restaurant openings in the fourth quarter of 2004 compared to 18 in 2003.

The restaurant operating margin at domestic company-owned units was 16.5% in the fourth quarter of 2004 compared to 17.1% for the same period in 2003, consisting of the following differences:

Domestic commissary sales increased 4.9% to $101.8 million for the fourth quarter of 2004 as the impact of sales of promotional items (principally DVDs) and higher cheese prices was partially offset by lower volumes resulting from decreased restaurant transactions. Other sales decreased 3.2% to $12.4 million for the fourth quarter of 2004 from $12.8 million for the comparable period in 2003, primarily as a result of a decrease in revenues associated with the waiver of certain information services fees to our franchisees in 2004.

Domestic commissary and other margin was 8.8% in the fourth quarter of 2004 compared to 9.8% for the same period in 2003. Cost of sales was 72.9% of revenues in 2004 compared to 70.1% in 2003 primarily due to higher cheese costs incurred by our commissaries (cheese has a fixed-dollar, as opposed to fixed-percentage, mark-up) and increased sales of lower margin products, such as promotional items (principally DVDs). Salaries and benefits were lower as a percentage of sales, 6.2% in 2004 as compared to 6.5% for the same period in 2003, due to staffing efficiencies and the impact of higher cheese prices on sales. Other operating expenses decreased to 12.1% of sales in 2004 from 13.6% in 2003, primarily as a result of a $1.7 million increase in claims loss reserves in the fourth quarter of 2003 related to the franchise insurance program (none in the fourth quarter of 2004).

Effective October 2004, a third-party commercial insurance company began providing fully insured coverage to franchisees participating in the franchise insurance program. Accordingly, this new agreement eliminates our risk of loss for franchise insurance coverage written after September 2004. Our operating income will still be subject to potential adjustments for changes in estimated insurance reserves for policies written from October 2000 to September 2004. Such adjustments, if any, will be determined in part based upon semi-annual actuarial valuations.



The loss from the franchise cheese-purchasing program, net of minority interest, was $2.0 million during the fourth quarter of 2004.

International revenues, which include the Papa John's United Kingdom operations, were $9.0 million compared to $8.2 million for the same period in 2003, primarily due to revenues from increased unit openings and the impact of a more favorable dollar/pound exchange rate. International operating margin increased to 17.5% in 2004 from 14.4% in 2003 primarily as a result of expense leverage on the increased unit openings and an improved commissary operating margin.

General and administrative expenses were $18.2 million or 7.3% of revenues in the fourth quarter of 2004 compared to $17.7 million or 7.4% of revenues in the same period in 2003. This $500,000 increase was primarily attributable to $1.5 million of rent expense recognized upon a review of the company's accounting for leases (the remaining $400,000 of the adjustment associated with our review of leases was recorded in depreciation expense), $750,000 related to severance and other costs associated with the previously announced Q4 staffing reductions and $420,000 of G&A costs associated with the consolidation of variable interest entities, substantially offset by lower insurance and benefit costs, and savings related to various administrative efficiencies implemented throughout the year.

During the fourth quarter of 2003, we recorded an $838,000 provision for uncollectible notes receivable and a $776,000 net provision primarily related to the closure of 22 under performing restaurants in the quarter. Our provisions for these items were insignificant for the fourth quarter of 2004 based on our evaluation of the franchise loan and company-owned restaurant portfolios. The 2004 restaurant closure, impairment and disposition losses (gains) caption includes a gain of $265,000 from the favorable settlement of certain previously reserved costs related to closed restaurants.

Other general expenses were $742,000 in the fourth quarter of 2004 compared to $3.7 million for the comparable period in 2003. The 2004 amount includes $52,000 of pre-opening costs, with the majority of the remaining costs associated with disposition or valuation losses for other assets. The 2003 amount includes $1.0 million for a contribution to the Papa John's Marketing Fund to assist the system with costs incurred for national advertising, a $500,000 sales incentive program provided to our franchisees during the fourth quarter of 2003, a $1.4 million provision for uncollectible accounts receivable and $300,000 of disposition-related losses for other assets.

Depreciation and amortization was $8.0 million (3.2% of revenues) for the fourth quarter of 2004, which is essentially the same percentage of sales for the corresponding period in 2003.



Net interest expense was $1.3 million in the fourth quarter of 2004 as compared to $1.6 million in 2003, reflecting a lower average effective interest rate for our debt. The company's effective income tax rate was 37.5% in both 2004 and 2003.

Full-Year 2004 Operating Results

Full-year domestic corporate restaurant sales were $412.7 million, compared to $416.0 million in 2003. The 0.8% decrease is primarily due to a 2.3% decrease in equivalent units for 2004, as the company closed 27 under performing restaurants during 2003, partially offset by a 0.5% increase in comparable sales. Domestic franchise sales increased 0.9% to $1.30 billion compared to $1.29 billion as average unit volumes increased slightly due to new units opening at higher sales levels relative to closed units.

The 2004 comparable sales base for domestic corporate restaurants consisted of 549 units, or 97.5% of total equivalent units, and the domestic franchise base consisted of 1,892 units or 95.4% of total equivalent units. Average weekly sales for restaurants included in the corporate comparable base were $14,172, while other corporate units averaged $10,880 for an overall average of $14,089. Average weekly sales for the restaurants included in the franchise comparable base were $12,733, while other franchise units averaged $10,378 for an overall average of $12,623.

Domestic franchise royalties increased 0.9% to $50.3 million from $49.9 million in 2003, consistent with the above-noted increase in franchise sales. Domestic franchise and development fees were $2.5 million in 2004 compared to $1.5 million in 2003, as there were 97 domestic franchise unit openings in 2004 compared to 56 in 2003.

The restaurant operating margin at domestic company-owned units was 15.5% for 2004 compared to 16.9% in 2003. The decrease in the operating margin is primarily due to an increase in cost of sales of 1.9%, 1.5% of which is a result of the consolidation of BIBP, while the remaining 0.4% increase is due to higher cheese costs charged by BIBP, partially offset by lower costs for other commodities as a result of various product cost savings initiatives and the impact of restaurant pricing increases. Salaries and benefits were 0.9% lower as a percentage of sales in 2004 due to staffing efficiencies and leverage on restaurant pricing increases. The remaining restaurant operating expenses as a percentage of sales in 2004 were substantially consistent with 2003.



Domestic commissary sales increased 1.8% to $376.6 million for 2004 from $369.8 million in 2003, as the sales of promotional items and the impact of higher cheese prices was substantially offset by lower volumes due to a decline in restaurant transactions. Other sales increased to $53.1 million for 2004 from $48.5 million for the comparable period in 2003, primarily as a result of an increase in revenues associated with insurance-related services provided to franchisees and the first-quarter promotional item sales associated with our March 2004 NCAA basketball national promotion.

Domestic commissary and other margin was 8.0% for 2004 compared to 9.1% for 2003. Cost of sales was 72.1% of revenues in 2004 compared to 69.8% in 2003 primarily due to higher cheese costs incurred by our commissaries (cheese has a fixed-dollar, as opposed to fixed-percentage, mark-up) and increased sales of lower margin products, such as promotional items (principally DVDs and the items sold in the first quarter related to the March 2004 NCAA national promotion). Salaries and benefits were lower as a percentage of sales, 6.6% in 2004 as compared to 6.9% in 2003, due to staffing efficiencies and the impact of higher cheese prices on sales. Other operating expenses decreased to 13.3% of sales in 2004 from 14.1% in 2003, primarily as a result of reduced claims loss reserves related to the franchise insurance program in 2004 as compared to 2003.

The loss from the franchise cheese-purchasing program, net of minority interest, was $16.6 million during 2004.

International revenues, which include the Papa John's United Kingdom operations, increased 3.8% to $32.8 million for 2004 from $31.6 million in 2003, as revenues from increased unit openings and the impact of a more favorable dollar/pound exchange rate were partially offset by a decrease in corporate restaurant revenues due to the operation of only one company-owned restaurant during 2004 as compared to an average of five restaurants during 2003. International operating margin for 2004 increased to 17.0% from 14.2% in 2003 primarily due to the disposition of company-owned restaurants, which had a lower operating margin than our commissary operation, expense leverage on the increased unit openings and an improvement in commissary operating margin.

General and administrative expenses were $72.5 million or 7.7% of revenues for 2004 as compared to $67.2 million or 7.3% of revenues in the same period in 2003. This $5.3 million increase was primarily attributable to: the previously mentioned $1.5 million rent expense adjustment associated with leases, a $1.8 million increase in bonuses to corporate and restaurant management who met pre-established goals for their operating units, a $1.6 million increase in compensation expense related to stock options awarded in late 2003 that vest over a 12-month period throughout 2004, a $1.1 million increase in administrative costs associated with our expanded domestic franchise sales efforts, $750,000 of severance and other costs associated with the previously announced Q4 staffing reductions and $1.3 million of administrative expenses associated with variable interest entities. These increases were partially offset by lower insurance and benefit costs, and savings related to various administrative efficiencies implemented throughout the year.

A provision for uncollectible notes receivable of $638,000 was recorded for 2004 as compared to $1.9 million for 2003. A net gain of $203,000 (primarily composed of the $280,000 gain on sale of 49% of the Texas market, which occurred in the third quarter of 2004) was recorded for 2004 as compared to a $5.5 million loss (primarily related to the closure of 27 under-performing restaurants) recorded in 2003. These provisions were based on our evaluation of our franchise loan and company-owned restaurant portfolios.



Other general expenses reflected net expense of $2.4 million for 2004, as compared to $3.3 million in 2003. The 2004 amount includes $112,000 of pre-opening costs, $1.8 million of disposition and valuation related losses for other assets and a $1.2 million provision for uncollectible accounts receivable, partially offset by a $550,000 gain on the sale of unused property. The 2003 amount includes $192,000 of pre-opening costs, $346,000 of restaurant relocation costs, $1.8 million provision for uncollectible franchisee accounts receivable, $1.1 million related to disposition or valuation losses for other assets, the $1.0 million contribution to the Papa John's Marketing Fund and a $500,000 sales incentive program offered to our franchisees. The 2003 expenses were partially offset by $2.0 million of income derived from the settlement of a litigation matter during the second quarter of 2003.

Depreciation and amortization was $31.2 million (3.3% of revenues) for 2004 as compared to $31.1 million (3.4% of revenues) for 2003.

Net interest expense decreased to $4.6 million for 2004 from $6.2 million in 2003, partially due to the $625,000 benefit recorded pursuant to FAS No. 150 associated with a change in a joint venture operating agreement during 2004, which eliminated a mandatory purchase requirement and related liability. Lower average debt outstanding during 2004 as compared to 2003 and a lower average effective interest rate for the 2004 outstanding debt also reduced net interest expense. The company's effective income tax rate was 37.5% in both 2004 and 2003.

Cheese Costs

The cost of cheese has historically represented approximately 35% to 40% of our restaurant cost of sales. In January 2000, Papa John's Franchise Advisory Council initiated a program through the formation of BIBP that allows the cost of cheese to Papa John's restaurants to be established on a quarterly basis. The consolidation of BIBP, as a result of the adoption of FIN 46, results in the company-owned restaurant cost of sales reflecting the actual spot market price of cheese paid by BIBP.

The following table presents the actual average block market price for cheese and the BIBP block price by quarter for 2003 and 2004:



                              2003                      2004
                     -----------------------   -----------------------
                         BIBP      Actual          BIBP      Actual
                     Block Price Block Price   Block Price Block Price
                     -----------------------   -----------------------

Quarter 1                 $1.159     $1.115         $1.220     $1.426
Quarter 2                  1.122      1.134          1.326      2.012
Quarter 3                  1.242      1.536          1.556      1.528
Quarter 4                  1.217      1.474          1.535      1.617
                     -----------------------   -----------------------
Full Year                 $1.185     $1.315         $1.409     $1.646
                     =======================   =======================

Based on the projected CME milk futures market prices, and the actual first and second quarter 2005 and projected third and fourth quarter 2005 cheese costs to restaurants as determined by the BIBP pricing formula, the consolidation of BIBP is projected to increase (decrease) the company's operating income as follows (in thousands):

                   Quarter 1 - 2005                $(1,700)
                   Quarter 2 - 2005                 (1,800)
                   Quarter 3 - 2005                  2,700
                   Quarter 4 - 2005                  4,400
                                               ------------
                                                    $3,600
                                               ============

The projections above are based upon current futures market prices. Historically, actual results have differed significantly from previous projections using the futures market prices.

As of February 20, 2005, Papa John's had 2,832 restaurants (570 company-owned and 2,262 franchised) operating in 49 states and 20 international markets. Papa John's also franchises an additional 117 Perfect Pizza restaurants in the United Kingdom. For more information about the company, please visit www.papajohns.com.

           Papa John's International, Inc. and Subsidiaries
                Condensed Consolidated Balance Sheets

                                             December 26, December 28,
                                                2004         2003
                                             (Unaudited)     (Note)
                                             ------------ ------------
(In thousands)

Assets
Current assets:
  Cash and cash equivalents                   $   14,698   $    7,071
  Accounts receivable                             28,384       19,717
  Inventories                                     23,230       17,030
  Prepaid expenses and other current assets       15,208       11,590
  Deferred income taxes                            7,624        7,050
                                               ----------   ----------
Total current assets                              89,144       62,458

Investments                                        8,552        7,522
Net property and equipment                       197,103      203,818
Notes receivable from franchisees and
 affiliates                                        6,828       11,580
Goodwill                                          51,071       48,577
Other assets                                      15,672       13,259
Deferred income taxes                              6,117            -
                                               ----------   ----------
Total assets                                  $  374,487   $  347,214
                                               ==========   ==========


Liabilities and stockholders' equity
Current liabilities:
  Accounts payable                            $   35,934   $   28,309
  Income and other taxes                          17,270       12,070
  Accrued expenses                                44,771       40,288
  Current portion of debt                         15,709          250
                                               ----------   ----------
Total current liabilities                        113,684       80,917

Unearned franchise and development fees            8,208        5,911
Long-term debt, net of current portion            78,521       61,000
Deferred income taxes                                  -        7,881
Other long-term liabilities                       34,851       32,233
                                               ----------   ----------
Total liabilities                                235,264      187,942

Total stockholders' equity                       139,223      159,272
                                               ----------   ----------
Total liabilities and stockholders' equity    $  374,487   $  347,214
                                               ==========   ==========


Note: The balance sheet at December 28, 2003 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 Income

                           Three Months Ended         Year Ended
                         ----------------------- ---------------------
                          Dec. 26,    Dec. 28,    Dec. 26,   Dec. 28,
                             2004        2003        2004       2003
                         ----------------------- ---------------------
(In thousands, except    (Unaudited) (Unaudited) (Unaudited)
 per share amounts)
Revenues:
 Domestic:
  Company-owned restaurant
   sales                   $106,146    $107,558    $412,676  $416,049
  Variable interest
   entities restaurant
   sales                      4,438           -      14,387         -
  Franchise royalties        13,168      12,932      50,292    49,851
  Franchise and
   development fees             705         534       2,475     1,475
  Commissary sales          101,753      97,013     376,642   369,825
  Other sales                12,434      12,846      53,117    48,541
 International:
  Royalties and franchise
   and development fees       2,350       1,765       7,516     6,297
  Restaurant and
   commissary sales           6,661       6,390      25,321    25,340
                         ----------------------- ---------------------
Total revenues              247,655     239,038     942,426   917,378

Costs and expenses:
 Domestic Company-owned
  restaurant expenses:
   Cost of sales             25,455      24,495      99,743    92,488
   Salaries and benefits     32,828      34,694     130,642   135,295
   Advertising and
    related costs            10,505      10,068      38,258    38,329
   Occupancy costs            6,399       6,181      25,950    25,406
   Other operating
    expenses                 13,489      13,754      54,015    54,405
                         ----------------------- ---------------------
 Total domestic Company-
  owned restaurant
  expenses                   88,676      89,192     348,608   345,923

 Variable interest
  entities restaurant
  expenses                    3,883           -      12,667         -

 Domestic commissary and
  other expenses:
   Cost of sales             83,192      76,968     309,746   292,226
   Salaries and benefits      7,094       7,184      28,458    28,925
   Other operating expenses  13,869      14,887      57,100    59,127
                         ----------------------- ---------------------
 Total domestic commissary
  and other expenses        104,155      99,039     395,304   380,278

Loss from the franchise
 cheese-purchasing
 program, net of
 minority interest            2,044           -      16,599         -

International operating
 expenses                     5,497       5,472      21,024    21,736

General and
 administrative expenses     18,169      17,703      72,458    67,191
Provision for
 uncollectible notes
 receivable                     299         838         638     1,868
Restaurant closure,
 impairment and
 disposition losses
 (gains)                       (265)        776        (203)    5,469
Other general expenses          742       3,659       2,395     3,314
Depreciation and
 amortization                 8,007       7,601      31,159    31,059
                         ----------------------- ---------------------
Total costs and expenses    231,207     224,280     900,649   856,838
                         ----------------------- ---------------------

Operating income             16,448      14,758      41,777    60,540
Investment income               201         139         689       672
Interest expense             (1,538)     (1,699)     (5,313)   (6,851)
                         ----------------------- ---------------------
Income before income
 taxes and cumulative
 effect of a change in
 accounting principle        15,111      13,198      37,153    54,361
Income tax expense            5,666       4,949      13,932    20,385
                         ----------------------- ---------------------

Income before cumulative
 effect of a change in
 accounting principle         9,445       8,249      23,221    33,976
Cumulative effect of
 accounting change, net
 of tax                           -           -           -      (413)
                         ----------------------- ---------------------
Net income                   $9,445      $8,249     $23,221   $33,563
                         ======================= =====================

Basic earnings per
 common share:
  Income before cumulative
   effect of a change in
   accounting principle       $0.56       $0.46       $1.35     $1.89
  Cumulative effect of
   accounting change, net
   of tax                         -           -           -     (0.02)
                         ----------------------- ---------------------
Basic earnings per
 common share                 $0.56       $0.46       $1.35     $1.87
                         ======================= =====================

Earnings per common
 share - assuming
 dilution:
  Income before cumulative
   effect of a change in
   accounting principle       $0.55       $0.46       $1.33     $1.88
  Cumulative effect of
   accounting change, net
   of tax                         -           -           -     (0.02)
                         ----------------------- ---------------------
Earnings per common
 share - assuming
 dilution                     $0.55       $0.46       $1.33     $1.86
                         ======================= =====================

Basic weighted-average
 shares outstanding          16,801      17,998      17,207    17,938
                         ======================= =====================
Diluted weighted-average
 shares outstanding          17,019      18,118      17,405    18,037
                         ======================= =====================


Restaurant Progression
Papa John's International, Inc.

                                 Three Months Ended December 26, 2004
                                 -------------------------------------
                                   Corporate      Franchised
                                 Domestic Int'l  Domestic Int'l Total
                                 -------------------------------------
Papa John's restaurants
Beginning of period                   566    1      2,001  236  2,804
Opened                                  2    -         30   28     60
Converted                               -    -          -    1      1
Closed                                  -    -        (34)  (2)   (36)
Acquired                                -    -          -    -      -
Sold                                    -    -          -    -      -
                                 -------------------------------------
End of Period                         568    1      1,997  263  2,829
                                 =====================================

                                 -------------------------------------
                                   Corporate      Franchised
                                 Domestic Int'l  Domestic Int'l Total
                                 -------------------------------------
Perfect Pizza restaurants
Beginning of period                     -    -          -  121    121
Opened                                  -    -          -    -      -
Converted                               -    -          -   (1)    (1)
Closed                                  -    -          -   (2)    (2)
Acquired                                -    -          -    -      -
Sold                                    -    -          -    -      -
                                 -------------------------------------
End of Period                           -    -          -  118    118
                                 =====================================


                                 Three Months Ended December 28, 2003
                                 -------------------------------------
                                   Corporate      Franchised
                                 Domestic Int'l  Domestic Int'l Total
                                 -------------------------------------
Papa John's restaurants
Beginning of period                   586    5      2,008  204  2,803
Opened                                  4    -         18   15     37
Converted                               -    -          -    -      -
Closed                                (22)   -        (20)  (8)   (50)
Acquired                                -    -          -    3      3
Sold                                    -   (3)         -    -     (3)
                                 -------------------------------------
End of Period                         568    2      2,006  214  2,790
                                 =====================================

                                 -------------------------------------
                                   Corporate      Franchised
                                 Domestic Int'l  Domestic Int'l Total
                                 -------------------------------------
Perfect Pizza restaurants
Beginning of period                     -    -          -  139    139
Opened                                  -    -          -    -      -
Converted                               -    -          -    -      -
Closed                                  -    -          -   (4)    (4)
Acquired                                -    -          -    -      -
Sold                                    -    -          -    -      -
                                 -------------------------------------
End of Period                           -    -          -  135    135
                                 =====================================


Restaurant Progression
Papa John's International, Inc.

                                     Year Ended December 26, 2004
                                 -------------------------------------
                                   Corporate      Franchised
                                 Domestic Int'l  Domestic Int'l Total
                                 -------------------------------------
Papa John's restaurants
Beginning of period                   568    2      2,006  214  2,790
Opened                                  6    -         97   70    173
Converted                               -    -          -    1      1
Closed                                 (5)   -       (107) (23)  (135)
Acquired                                -    -          1    1      2
Sold                                   (1)  (1)         -    -     (2)
                                 -------------------------------------
End of Period                         568    1      1,997  263  2,829
                                 =====================================

                                 -------------------------------------
                                   Corporate      Franchised
                                 Domestic Int'l  Domestic Int'l Total
                                 -------------------------------------
Perfect Pizza restaurants
Beginning of period                     -    -          -  135    135
Opened                                  -    -          -    2      2
Converted                               -    -          -   (1)    (1)
Closed                                  -    -          -  (18)   (18)
Acquired                                -    -          -    -      -
Sold                                    -    -          -    -      -
                                 -------------------------------------
End of Period                           -    -          -  118    118
                                 =====================================


                                     Year Ended December 28, 2003
                                 -------------------------------------
                                   Corporate      Franchised
                                 Domestic Int'l  Domestic Int'l Total
                                 -------------------------------------
Papa John's restaurants
Beginning of period                   585    9      2,000  198  2,792
Opened                                 10    -         56   37    103
Converted                               -    -          -    -      -
Closed                                (27)  (1)       (50) (27)  (105)
Acquired                                -    1          -    7      8
Sold                                    -   (7)         -   (1)    (8)
                                 -------------------------------------
End of Period                         568    2      2,006  214  2,790
                                 =====================================

                                 -------------------------------------
                                   Corporate      Franchised
                                 Domestic Int'l  Domestic Int'l Total
                                 -------------------------------------
Perfect Pizza restaurants
Beginning of period                     -    -          -  144    144
Opened                                  -    -          -    2      2
Converted                               -    -          -    -      -
Closed                                  -    -          -  (11)   (11)
Acquired                                -    -          -    -      -
Sold                                    -    -          -    -      -
                                 -------------------------------------
End of Period                           -    -          -  135    135
                                 =====================================



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

SOURCE: Papa John's International, Inc.