Form: 10-Q

Quarterly report pursuant to Section 13 or 15(d)

May 10, 2000

Documents

10-Q: Quarterly report pursuant to Section 13 or 15(d)

Published on May 10, 2000



SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549


FORM 10-Q


(MARK ONE)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED MARCH 26, 2000

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934


COMMISSION FILE NUMBER: 0-21660


PAPA JOHN'S INTERNATIONAL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)


DELAWARE 61-1203323
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION
INCORPORATION OR ORGANIZATION) NUMBER)



2002 PAPA JOHN'S BOULEVARD
LOUISVILLE, KENTUCKY 40299-2334
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

(502) 261-7272
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)



Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days:

Yes X No
--- ---

At May 4, 2000, there were outstanding 25,210,687 shares of the
registrant's common stock, par value $.01 per share.



INDEX




PART I. FINANCIAL INFORMATION Page No.
--------

Item 1. Financial Statements

Condensed Consolidated Balance Sheets --
March 26, 2000 and December 26, 1999 2

Condensed Consolidated Statements of Income --
Three Months Ended March 26, 2000 and March 28, 1999 3

Condensed Consolidated Statements of Stockholders' Equity -
Three Months Ended March 26, 2000 and March 28, 1999 4

Condensed Consolidated Statements of Cash Flows -
Three Months Ended March 26, 2000 and March 28, 1999 5

Notes to Condensed Consolidated Financial Statements 6

Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations 7

PART II. OTHER INFORMATION

Item 1. Legal Proceedings 11

Item 6. Exhibits and Reports on Form 8-K 11


1

PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

PAPA JOHN'S INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS


(In thousands) MARCH 26, 2000 DECEMBER 26, 1999
- -------------------------------------------------------------------------------------------------------------------------
(UNAUDITED) (NOTE)

ASSETS
Current assets:
Cash and cash equivalents $ 11,896 $ 3,698
Accounts receivable 18,342 21,415
Inventories 11,880 10,637
Prepaid expenses and other current assets 5,091 7,378
Deferred income taxes 3,127 2,977
- -------------------------------------------------------------------------------------------------------------------------
Total current assets 50,336 46,105

Investments 5,545 22,086
Net property and equipment 237,257 227,813
Notes receivable from franchisees 14,753 11,743
Intangibles 52,768 47,669
Other assets 18,692 16,635
- -------------------------------------------------------------------------------------------------------------------------
Total assets $ 379,351 $ 372,051
=========================================================================================================================

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 23,120 $ 24,947
Accrued expenses 41,700 38,516
Current portion of debt 1,838 5,308
- -------------------------------------------------------------------------------------------------------------------------
Total current liabilities 66,658 68,771

Unearned franchise and development fees 7,108 6,222
Long-term debt, net of current portion 84,437 925
Deferred income taxes 2,371 2,109
Other long-term liabilities 2,131 1,891

Stockholders' equity:
Preferred stock - -
Common stock 306 305
Additional paid-in capital 190,351 189,920
Accumulated other comprehensive loss (480) (390)
Retained earnings 146,033 134,492
Treasury stock (119,564) (32,194)
- -------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 216,646 292,133
- -------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 379,351 $ 372,051
=========================================================================================================================

Note: The balance sheet at December 26, 1999 has been derived from the
audited consolidated financial statements at that date but does not
include all information and footnotes required by accounting
principles generally accepted in the United States for a complete set
of financial statements.

SEE ACCOMPANYING NOTES.
2

PAPA JOHN'S INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)


THREE MONTHS ENDED
(In thousands, except per share amounts) MARCH 26, 2000 MARCH 28, 1999
- ------------------------------------------------------------------------------------------------

REVENUES:
Restaurant sales $ 111,253 $ 94,452
Franchise royalties 12,145 9,418
Franchise and development fees 1,507 1,470
Commissary sales 89,922 70,004
Equipment and other sales 12,222 12,007
- ------------------------------------------------------------------------------------------------
Total revenues 227,049 187,351

COSTS AND EXPENSES:
Restaurant expenses:
Cost of sales 27,821 23,227
Salaries and benefits 30,870 25,318
Advertising and related costs 10,720 8,137
Occupancy costs 5,481 4,590
Other operating expenses 15,336 12,724
- ------------------------------------------------------------------------------------------------
90,228 73,996
Commissary, equipment and other expenses:
Cost of sales 76,393 62,354
Salaries and benefits 6,725 5,610
Other operating expenses 7,718 6,849
- ------------------------------------------------------------------------------------------------
90,836 74,813
General and administrative expenses 17,408 14,095
Advertising litigation expense 889 -
Pre-opening and other general expenses 218 1,265
Depreciation and amortization expense 8,223 5,531
- ------------------------------------------------------------------------------------------------
Total costs and expenses 207,802 169,700
- ------------------------------------------------------------------------------------------------

Operating income 19,247 17,651
Other income (expense):
Investment income 292 792
Interest expense (804) (151)
- ------------------------------------------------------------------------------------------------

Income before income taxes 18,735 18,292
Income tax expense 7,194 6,909
- ------------------------------------------------------------------------------------------------
Net income $ 11,541 $ 11,383
================================================================================================
Basic earnings per share $ 0.43 $ 0.38
================================================================================================
Diluted earnings per share $ 0.43 $ 0.37
================================================================================================

Basic weighted average shares outstanding 26,851 29,966
================================================================================================
Diluted weighted average shares outstanding 27,104 31,099
================================================================================================

Note: Certain 1999 amounts have been reclassified to conform to the 2000
presentation.

SEE ACCOMPANYING NOTES.
3

PAPA JOHN'S INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(UNAUDITED)


ACCUMULATED
ADDITIONAL OTHER TOTAL
COMMON PAID-IN COMPREHENSIVE RETAINED TREASURY STOCKHOLDERS'
(In thousands) STOCK CAPITAL INCOME (LOSS) EARNINGS STOCK EQUITY
- ------------------------------------------------------------------------------------------------------------------------------------

Balance at December 27, 1998 $ 298 $ 166,209 $ 688 $ 87,456 $ (481) $ 254,170
Comprehensive income:
Net income - - - 11,383 - 11,383
Unrealized gain on investments,
net of tax of $187 - - 424 - - 424
--------
Comprehensive income 11,807
Exercise of stock options 3 6,406 - - - 6,409
Tax benefit related to exercise of
non-qualified stock options - 2,129 - - - 2,129
Deferred tax asset - pooling of interests
business combination - 5,245 - - - 5,245
Other - 69 - - - 69
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at March 28, 1999 $ 301 $ 180,058 $ 1,112 $ 98,839 $ (481) $ 279,829
===================================================================================================================================
Balance at December 26, 1999 $ 305 $ 189,920 $ (390) $134,492 $ (32,194) $ 292,133
Comprehensive income:
Net income - - - 11,541 - 11,541
Unrealized loss on investments,
net of tax of $286 - - (492) - - (492)
Other, net 402 402
---------
Comprehensive income 11,451
Exercise of stock options 1 350 - - - 351
Tax benefit related to exercise of
non-qualified stock options - 81 - - - 81
Acquisition of treasury stock
(3,444,500 shares) - - - - (87,370) (87,370)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at March 26, 2000 $ 306 $ 190,351 $ (480) $ 146,033 $ (119,564) $ 216,646
===================================================================================================================================

SEE ACCOMPANYING NOTES.
4

PAPA JOHN'S INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)



THREE MONTHS ENDED
(In thousands) MARCH 26, 2000 MARCH 28, 1999
- ---------------------------------------------------------------------------------------------------------------------

OPERATING ACTIVITIES
Net cash provided by operating activities $ 25,562 $ 20,278

INVESTING ACTIVITIES
Purchase of property and equipment (14,149) (25,232)
Purchase of investments - (9,765)
Proceeds from sale or maturity of investments 15,014 10,515
Loans to franchisees (3,693) (183)
Loan repayments from franchisees 587 77
Deferred systems development costs (410) (298)
Acquisitions (6,022) (825)
Other 410 263
- ---------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (8,263) (25,448)

FINANCING ACTIVITIES
Payments on debt (5,443) (2,365)
Proceeds from debt issuance and line of credit facility 83,500 2,510
Proceeds from exercise of stock options 351 6,409
Tax benefit related to exercise of non-qualified
stock options 81 2,129
Acquisition of treasury stock (87,370) -
Other (186) 73
- ---------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities (9,067) 8,756

Effect of exchange rate changes on cash and cash equivalents (34) -
- ---------------------------------------------------------------------------------------------------------------------

Net increase in cash and cash equivalents 8,198 3,586
Cash and cash equivalents at beginning of period 3,698 33,814
- ---------------------------------------------------------------------------------------------------------------------

Cash and cash equivalents at end of period $ 11,896 $ 37,400
=====================================================================================================================

SEE ACCOMPANYING NOTES.

5





PAPA JOHN'S INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

March 26, 2000

1. BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with accounting principles generally accepted in
the United States for interim financial information and with the instructions
to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by accounting
principles generally accepted in the United States for complete financial
statements. In the opinion of management, all adjustments, consisting of
normal recurring accruals, considered necessary for a fair presentation have
been included. Operating results for the three months ended March 26, 2000,
are not necessarily indicative of the results that may be expected for the
year ended December 31, 2000. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Annual Report on Form 10-K for Papa John's International, Inc. (referred to
as the "Company", "Papa John's" or in the first person notations of "we",
"us" and "our") for the year ended December 26, 1999.

2. SEGMENT INFORMATION


THREE MONTHS ENDED
(In thousands) MARCH 26, 2000 MARCH 28, 1999
- --------------------------------------------------------------------------------------------------
(NOTE)

REVENUES FROM EXTERNAL CUSTOMERS:
Restaurants $ 111,253 $ 94,452
Commissaries 89,922 70,004
Franchising 13,652 10,888
All others 12,222 12,007
- --------------------------------------------------------------------------------------------------
TOTAL REVENUES FROM EXTERNAL CUSTOMERS $ 227,049 $ 187,351
==================================================================================================

INTERSEGMENT REVENUES:
Commissaries $ 30,265 $ 26,856
Franchising 40 34
All others 4,000 3,273
- --------------------------------------------------------------------------------------------------
TOTAL INTERSEGMENT REVENUES $ 34,305 $ 30,163
==================================================================================================

INCOME BEFORE INCOME TAXES:
Restaurants $ 3,830 $ 5,364
Commissaries 7,086 4,379
Franchising 11,693 9,357
All others 982 987
Unallocated corporate expenses (4,817) (1,817)
Elimination of intersegment profits (losses) (39) 22
- --------------------------------------------------------------------------------------------------
TOTAL INCOME BEFORE INCOME TAXES $ 18,735 $ 18,292
==================================================================================================

FIXED ASSETS:
Restaurants $ 150,985
Commissaries 59,705
All others 5,273
Unallocated corporate assets 96,976
Accumulated depreciation and amortization (75,682)
- --------------------------------------------------------------------------------
NET FIXED ASSETS $ 237,257
================================================================================

Note: Certain 1999 amounts have been reclassified to conform to the 2000
presentation.


6

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

RESTAURANT PROGRESSION:



THREE MONTHS ENDED
MARCH 26, MARCH 28,
2000 1999
- --------------------------------------------------------------------------

PAPA JOHN'S RESTAURANTS:

U.S. COMPANY-OWNED:
Beginning of period 573 514
Opened 5 4
Closed - (1)
Sold to franchisees (5) (5)
Acquired from franchisees 20 2
- ------------------------------------------------------------------------
End of period 593 514
- ------------------------------------------------------------------------

U.S. FRANCHISED:
Beginning of period 1,681 1,365
Opened 62 69
Closed (6) (2)
Sold to Company (20) (2)
Acquired from Company 5 5
- ------------------------------------------------------------------------
End of period 1,722 1,435
- ------------------------------------------------------------------------

INTERNATIONAL FRANCHISED:
Beginning of period 26 6
Opened 7 3
- ------------------------------------------------------------------------
End of period 33 9
- ------------------------------------------------------------------------

Total at end of period 2,348 1,958
========================================================================

PERFECT PIZZA RESTAURANTS:

COMPANY-OWNED:
Beginning of period 12 -
Closed (1) -
- ------------------------------------------------------------------------
End of period 11 -
- ------------------------------------------------------------------------

FRANCHISED:
Beginning of period 194 -
- ------------------------------------------------------------------------
End of period 194 -
- ------------------------------------------------------------------------

Total at end of period 205 -
========================================================================

RESULTS OF OPERATIONS

REVENUES. Total revenues increased 21.2% to $227.0 million for the three months
ended March 26, 2000, from $187.4 million for the comparable period in 1999.

Restaurant sales increased 17.8% to $111.3 million for the three months ended
March 26, 2000, from $94.5 million for the comparable period in 1999. This
increase was primarily due to an increase of 14.9% in the number of equivalent
Company-owned Papa John's restaurants open during the three months ended March
26, 2000, compared to the same period in the prior year. "Equivalent
restaurants" represent the number of restaurants open at the beginning of a
given

7



period, adjusted for restaurants opened, closed, acquired or sold during the
period on a weighted average basis. Also, sales increased 4.0% for the three
months ended March 26, 2000, over the comparable period in 1999 for
Company-owned Papa John's restaurants open throughout both periods. Sales for
the three months ended March 26, 2000, for the Company-owned Perfect Pizza
restaurants acquired in November 1999, contributed 1.2% to the overall
increase.

Franchise royalties increased 29.0% to $12.1 million for the three months ended
March 26, 2000, from $9.4 million for the comparable period in 1999. This
increase was primarily due to an increase of 22.3% in the number of equivalent
franchised Papa John's restaurants open during the three months ended March 26,
2000, compared to the same period in 1999. Also, sales increased 2.8% for the
three months ended March 26, 2000, over the comparable period in 1999 for
franchised Papa John's restaurants open throughout both periods. Royalties for
the three months ended March 26, 2000, from Perfect Pizza franchised restaurants
contributed 8.6% to the overall increase.

Franchise and development fees remained consistent at $1.5 million for both the
three months ended March 26, 2000, and the comparable period in 1999. An
increase in the average franchise and development fee per store, primarily for
"Hometown restaurants", was offset by slightly fewer restaurant openings than in
the first quarter of 1999. The average dollar amount of fees per "Hometown
restaurant" increased for the three months ended March 26, 2000 over the
comparable period in 1999 due to the terms of development agreements entered
into subsequent to March 1998 generally providing for fees equivalent to those
under standard development agreements. "Hometown restaurants" are located in
smaller markets, generally markets with less than 9,000 households.

Commissary sales increased 28.5% to $89.9 million for the three months ended
March 26, 2000, from $70.0 million for the comparable period in 1999. This
increase was primarily the result of the increases in equivalent franchised
restaurants previously noted. Perfect Pizza commissary operations contributed
7.4% to the overall increase.

Equipment and other sales increased 1.8% to $12.2 million for the three months
ended March 26, 2000, from $12.0 million for the comparable period in 1999. This
increase was due to ongoing equipment, smallwares, uniforms and print materials
sales related to the previously noted increase in equivalent franchised
restaurants, offset by slightly fewer equipment package sales due to fewer
franchised restaurant openings than in the prior comparable period.

COSTS AND EXPENSES. Restaurant cost of sales, which consists of food, beverage
and paper costs, increased as a percentage of restaurant sales to 25.0% for the
three months ended March 26, 2000, from 24.6% for the comparable period in 1999.
This increase is primarily due to a decrease in average sales prices, partially
offset by a decrease in cheese costs. Cheese represents approximately 40% of
food cost and is subject to significant price fluctuations caused by weather,
demand and other factors. Most of the factors affecting the cost of cheese are
beyond our control. However, a cheese pricing arrangement was initiated with an
independent franchisee-owned corporation effective December 27, 1999, which is
expected to reduce cheese price volatility over time.

Restaurant salaries and benefits as a percentage of restaurant sales increased
to 27.7% for the three months ended March 26, 2000, from 26.8% for the
comparable period in 1999. The increase for the three months ended March 26,
2000 was the result of a reduction in average sales prices, partially offset by
an increase in labor efficiency. Occupancy costs were consistent as a percentage
of restaurant sales at 4.9% for the three months ended March 26, 2000 and March
28, 1999.

Advertising and related costs increased as a percentage of restaurant sales to
9.6% for the three months ended March 26, 2000, from 8.6% for the comparable
period in 1999 as a result of increased marketing activities in response to the
competitive environment and sales trends.

Other restaurant operating expenses increased as a percentage of restaurant
sales to 13.8% for the three months ended March 26, 2000, from 13.5% for the
comparable period in 1999. This increase was primarily due to an increase in
certain recruitment incentives in anticipation of 15th Anniversary staffing
needs and in response to increased fuel costs for drivers. Other operating
expenses includes an allocation of commissary operating expenses equal to 3% of
Company-owned restaurant sales in order to assess a portion of the costs of
dough production, food, equipment purchases and storage to Company-owned
restaurants.

Commissary, equipment and other expenses include cost of sales and operating
expenses associated with sales of food, paper, equipment, information systems,
and printing and promotional items to franchisees and other customers. These
costs decreased as a percentage of combined commissary sales and equipment and
other sales to 88.9% for the three months ended March 26, 2000, as compared to
91.2% for the same period in 1999. Cost of sales as a percentage of combined
commissary sales and equipment and other sales decreased to 74.8% for the three
months ended March 26,

8




2000, from 76.0% for the comparable period in 1999. This decrease was due
primarily to the timing of certain favorable commodity price changes,
primarily cheese. Additionally, higher relative gross margins for the Perfect
Pizza commissary operations contributed 0.5% to the overall cost of sales
decrease. Salaries and benefits remained relatively consistent at 6.6% and
6.8% for the three months ended March 26, 2000 and March 28, 1999,
respectively. Other operating expenses decreased to 7.6% for the three months
ended March 26, 2000, from 8.4% for the comparable period in 1999. This
decrease was due to general operating efficiencies and leverage on a higher
sales base.

General and administrative expenses remained relatively consistent as a
percentage of total revenues at 7.7% and 7.5% for the three months ended March
26, 2000 and March 28, 1999, respectively.

Advertising litigation expense represents costs associated with the lawsuit
filed against us by Pizza Hut, Inc. claiming that our "Better Ingredients.
Better Pizza." slogan is false and deceptive advertising. The $889,000 in
advertising litigation expense for the three months ended March 26, 2000
consists primarily of legal costs and costs related to the potential
discontinuation of the use of the "Better Ingredients. Better Pizza" slogan.
See "Part II. Other Information - Item 1. Legal Proceedings" for additional
information.

Pre-opening and other general expenses decreased to $218,000 for the three
months ended March 26, 2000, from $1.3 million for the comparable period in
1999. This decrease was primarily due to the recognition of a $630,000 gain on
the divestiture of five restaurants for the three months ended March 26, 2000,
compared to a $592,000 loss on the divestiture of five restaurants and one
closure in the prior comparable period.

Depreciation and amortization as a percentage of total revenues increased to
3.6% for the three months ended March 26, 2000, from 3.0% for the comparable
period in 1999. This increase was primarily due to depreciation expense
associated with the relocation of the Corporate Headquarters to an owned
facility and the continued growth of our commissary system in mid to late 1999.

INVESTMENT INCOME. Investment income decreased to $292,000 for the three months
ended March 26, 2000, from $792,000 for the comparable period in 1999. This
decrease was primarily due to a decrease in our average investment portfolio
balance, partially offset by an increase in the average balance of franchise
loans. A significant portion of our investment portfolio was liquidated to fund
the repurchase of our common stock.

INTEREST EXPENSE. Interest expense increased to $804,000 for the three months
ended March 26, 2000, from $151,000 for the comparable period in 1999 due to
amounts borrowed to fund the repurchase of our common stock.

INCOME TAX EXPENSE. Income tax expense reflects a combined federal, state and
local effective tax rate of 38.4% for the three months ended March 26, 2000,
compared to 37.8% for the comparable period in 1999. The effective tax rate in
2000 increased as a result of less tax-exempt investment income due to the
liquidation of investments to fund the repurchase of common stock.

LIQUIDITY AND CAPITAL RESOURCES

Cash flow from operations increased to $25.6 million for the three months ended
March 26, 2000, from $20.3 million for the comparable period in 1999, due
primarily to decreases in components of working capital.

We require capital primarily for the development and acquisition of restaurants,
the addition of new commissary and support services facilities and equipment,
the enhancement of corporate systems and facilities, and the funding of
franchisee loans. Additionally, we began a share repurchase program in December
1999. Share repurchases of $87.4 million, capital expenditures of $14.1 million,
acquisitions of $6.0 million, payments on debt of $5.4 million and loans to
franchisees of $3.7 million for the three months ended March 26, 2000, were
funded by advances on an unsecured revolving line of credit agreement, cash flow
from operations and the liquidation of available cash and cash equivalents.

In addition to restaurant development and potential acquisitions, significant
capital projects for the next 12 months are expected to include the expansion
and relocation of the Phoenix, Arizona distribution center to a full-service
commissary and the development of a dough production facility in Cambridge,
Ontario, Canada by mid-2000.

Subsequent to March 26, 2000, we acquired an additional $16.0 million of common
stock under our share repurchase program. These repurchases were funded by
additional advances on our line of credit. The Board of Directors has

9




authorized up to $150.0 million for the share repurchase program through
December 31, 2000, and $14.9 million currently remains available for
repurchase under this authorization.

Capital resources available at March 26, 2000, include $11.9 million of cash and
cash equivalents, $5.5 million of investments, and $66.5 million remaining
borrowing capacity under a $150.0 million, three-year, unsecured revolving line
of credit agreement expiring in March 2003. We expect to fund planned capital
expenditures and additional discretionary repurchases of our common stock, if
any, for the next twelve months from these resources and operating cash flows.

IMPACT OF YEAR 2000

In prior years, we discussed the nature and progress of our plans to become Year
2000-ready. In late 1999, we completed testing of our systems and made
modifications as deemed necessary. As a result of our planning and
implementation efforts, we experienced no significant disruptions in business
critical information technology and non-information technology systems and
believe these systems successfully responded to the Year 2000 date change. The
costs incurred in connection with necessary modifications of our systems were
not material to our financial position. We are not aware of any material
problems resulting from Year 2000 issues regarding our internal systems, the
products and services of third parties, or the businesses operated by our
franchisees. We will continue to monitor our business critical computer
applications and those of our suppliers and franchisees throughout the year 2000
to ensure that any Year 2000 matters that may arise are addressed promptly.

FORWARD LOOKING STATEMENTS

Certain information contained in this quarterly report, particularly information
regarding future financial performance and plans and objectives of management,
is forward looking. Certain factors could cause actual results to differ
materially from those expressed in forward looking statements. These factors
include, but are not limited to, our ability and the ability of our franchisees
to obtain suitable locations and financing for new restaurant development; the
hiring, training, and retention of management and other personnel; competition
in the industry with respect to price, service, location and food quality; an
increase in food cost due to seasonal fluctuations, weather or demand; changes
in consumer tastes or demographic trends; changes in federal or state laws, such
as increases in minimum wage; and risks inherent to international development,
including operational or market risks associated with the planned conversion of
Perfect Pizza restaurants to Papa John's in the United Kingdom. See "Part I.
Item 1. - Business Section - Forward Looking Statements" of the Form 10-K for
the fiscal year ended December 26, 1999 for additional factors.

10




PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

On August 12, 1998, Pizza Hut, Inc. filed suit against us in the United States
District Court for the Northern District of Texas, claiming that our "Better
Ingredients. Better Pizza." slogan constitutes false and deceptive advertising
in violation of the Lanham Trademark Act. The trial began on October 25, 1999.
On November 18, 1999, the jury returned a verdict that our "Better Ingredients.
Better Pizza." slogan is false and deceptive. On January 3, 2000, the court
announced its judgment, awarding Pizza Hut $468,000 in damages and ordering us
to cease all use of the "Better Ingredients. Better Pizza." slogan. Under the
judge's order, we were to cease using the slogan in print and broadcast
advertising by January 24, 2000, phase out printed promotional materials and
other items containing the slogan (except signage) by March 3, 2000 and remove
the slogan from restaurant signage by April 3, 2000. We have estimated that the
pre-tax costs of complying with the court's order and certain related costs
could approximate $12.0 to $15.0 million, of which $6.1 million and $889,000
were recorded as pre-tax charges against 1999 and first quarter 2000 earnings,
respectively. We filed an appeal of the verdict and the court's order and a
motion for stay of the court's order pending outcome of the appeal. On January
21, 2000, the United States Court of Appeals for the Fifth Circuit granted a
stay of the District Court judgment pending our appeal. Oral arguments related
to the appeal were held on April 5, 2000. The outcome of the appeal is unknown
at this time. If our appeal is successful, the timing and possibly the amount of
costs to be incurred could be favorably impacted.

We are also subject to claims and legal actions in the ordinary course of our
business. We believe that all such claims and actions currently pending against
us are either adequately covered by insurance or would not have a material
adverse effect on us if decided in a manner unfavorable to us.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.


a. Exhibits


Exhibit
Number Description
------ -----------

10.1 Secured Loan Agreement entered into as of December
27, 1999, by and between BIBP Commodities, Inc. and
Capital Delivery, Ltd.

10.2 Promissory Note dated December 27, 1999, by BIBP
Commodities, Inc.

11 Calculation of Earnings per Share

27 Financial Data Schedule for the three months ended
March 26, 2000, which is submitted electronically to
the Securities and Exchange Commission for
information only and not deemed to be filed with the
Commission.

99.1 Cautionary Statements. Exhibit 99.1 to our Annual
Report on Form 10-K for the fiscal year ended
December 26, 1999 (Commission File No. 0-21660) is
incorporated herein by reference.

b. Current Reports on Form 8-K.

1. We filed a Current Report on Form 8-K dated December 27, 1999
attaching a press release dated December 27, 1999 announcing
our fourth quarter 1999 and period twelve comparable sales
growth percentages for company-owned restaurants. We also
announced that Wade Oney would transition out of his role as
Papa John's Chief Operating Officer during the first quarter
of 2000.

2. We filed a Current Report on Form 8-K dated January 3, 2000
attaching a press release dated January 3, 2000 announcing
that a federal court judge in Dallas ruled that we could no
longer use our "Better Ingredients. Better Pizza." trademarked
slogan. The press release also announced our plans to appeal
the ruling and that management would be evaluating the impact
of the ruling on fourth quarter and full-year 1999 earnings.

11


3. We filed a Current Report on Form 8-K dated January 6, 2000
attaching a press release dated January 6, 2000 announcing the
approval by our Board of Directors of an increase to $100
million in the amount of our common stock which may be
repurchased from time to time through December 31, 2000. We
also announced that we had nearly completed the initial $50
million in common stock repurchases previously authorized by
our Board of Directors.

4. We filed a Current Report on Form 8-K dated January 14, 2000
attaching a press release dated January 14, 2000 announcing
our fourth quarter and full-year 1999 systemwide comparable
sales increases. We announced our expected costs to comply
with the Pizza Hut litigation ruling. The press release also
announced that we filed a motion to stay the court's
injunction against the use of our slogan pending an appeal of
the ruling.

5. We filed a Current Report on Form 8-K dated January 31, 2000
attaching a press release dated January 31, 2000 announcing
our Board of Directors approved an increase to $150 million in
the amount of our common stock which may be repurchased from
time to time through December 31, 2000. We announced that we
had completed the $100 million in common stock repurchases
previously authorized by our Board of Directors. The press
release also announced that our Board of Directors authorized
an increase in our existing credit availability to $200
million to fund the increased share repurchase and for general
corporate purposes.

6. We filed a Current Report on Form 8-K dated February 14, 2000
attaching a press release dated February 14, 2000 announcing
the approval of a Stockholder Protection Rights Agreement by
our Board of Directors. In connection with the adoption of the
Rights Plan, the Board declared a dividend of one Right for
each share of the Company's common stock outstanding at the
close of business on March 1, 2000.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


PAPA JOHN'S INTERNATIONAL, INC.
(Registrant)



Date: May 10, 2000 /s/ E. Drucilla Milby
----------------- ------------------------------------
E. Drucilla Milby, Senior Vice President,
Chief Financial Officer and Treasurer

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