Form: 10-Q

Quarterly report pursuant to Section 13 or 15(d)

November 12, 1996

Documents

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

Published on November 12, 1996



================================================================================

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 SEPTEMBER 29, 1996

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
incorporation or organization) Identification Number)

11492 BLUEGRASS PARKWAY, SUITE 175
LOUISVILLE, KENTUCKY 40299-2334
(Address of principal executive offices)

(502) 266-5200
(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 October 30, 1995, there were outstanding 19,143,196 shares of
the registrant's common stock, par value $.01 per share. This does not
reflect a 3-for-2 stock split, to be effected in the form of a 50% stock
dividend, for holders of record on November 8, 1996, and with an effective
date of November 22, 1996.


INDEX





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

Item 1. Financial Statements

Condensed Consolidated Balance Sheets --
September 29, 1996 and December 31, 1995 2

Condensed Consolidated Statements of
Income -- Three Months and Nine Months
Ended September 29, 1996 and September 24, 1995 3

Condensed Consolidated Statements of
Stockholders' Equity -- Nine Months
Ended September 29, 1996 and September 24, 1995 4

Condensed Consolidated Statements of Cash
Flows -- Nine Months Ended September 29, 1996
and September 24, 1995 5

Notes to Condensed Consolidated Financial
Statements 6

Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8

PART II. OTHER INFORMATION

Item 1. Legal Proceedings 12

Item 6. Exhibits and Reports on Form 8-K 12



-1-

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



September 29, 1996 December 31, 1995
(Unaudited) (Note)
------------------ -----------------

(In thousands)
Assets
Current assets:
Cash and cash equivalents.................. $ 19,169 $ 19,904
Accounts receivable........................ 12,839 10,198
Inventories................................ 5,772 5,188
Deferred pre-opening costs................. 2,449 1,936
Prepaid expenses and other current assets.. 1,681 1,092
-------- --------
Total current assets........................ 41,910 38,318

Investments................................. 67,730 24,394
Net property and equipment.................. 71,606 56,699
Notes receivable from franchisees........... 6,339 837
Other assets................................ 11,111 8,571
-------- --------
Total assets................................ $198,696 $128,819
======== ========

Liabilities and stockholders' equity
Current liabilities:
Accounts payable........................... $ 10,503 $ 9,388
Accrued expenses........................... 7,714 6,432
Current maturities of long-term debt....... 695 830
Deferred income taxes...................... 298 250
-------- --------
Total current liabilities................... 19,210 16,900

Unearned franchise and development fees..... 3,022 2,678
Long-term debt, less current maturities..... 1,505 1,680
Deferred income taxes....................... 1,481 1,034
Other long-term liabilities................. 230 245

Stockholders' equity:
Preferred stock............................ -- --
Common stock............................... 287 268
Additional paid-in capital................. 142,270 88,043
Unrealized loss on investments............. (288) (263)
Deferred compensation...................... (36) (4)
Retained earnings.......................... 31,507 18,842
-------- --------
173,740 106,886
Reaquired treasury stock................... (492) (604)
-------- --------

Total stockholders' equity.................. 173,248 106,282
-------- --------

Total liabilities and stockholders' equity.. $198,696 $128,819
======== ========


Note: The balance sheet at December 31, 1995 has been derived from the audited
financial statements at that date but does not include all information and
footnotes required by generally accepted accounting principles for complete
financial statements.

See accompanying notes.

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


Three Months Ended Nine Months Ended
September 29, September 24, September 29, September 24,
1996 1995 1996 1995
------------- ------------- -------------- -------------

(In thousands, except per share amounts)
Revenues:
Restaurant sales $42,311 $27,164 $118,085 $ 74,965
Franchise royalties 4,506 3,411 12,699 9,603
Franchise and development fees 1,211 797 3,032 2,553
Commissary sales 37,153 26,295 104,011 71,764
Equipment and other sales 7,548 4,744 19,308 12,857
------- ------- -------- --------
Total revenues 92,729 62,411 257,135 171,742
Costs and expenses:
Restaurant expenses:
Cost of sales 12,170 7,671 33,632 21,303
Salaries and benefits 11,300 7,308 31,467 20,220
Advertising and related costs 4,016 2,635 11,145 7,371
Occupancy costs 2,288 1,529 6,058 3,924
Other operating expenses 5,811 3,636 16,012 10,063
------- ------- -------- --------
35,585 22,779 98,314 62,881
Commissary, equipment and other expenses:
Cost of sales 35,474 25,299 98,302 68,475
Salaries and benefits 2,357 1,808 6,607 4,919
Other operating expenses 2,791 1,820 7,820 5,268
------- ------- -------- --------
40,622 28,927 112,729 78,662

General and administrative expenses 6,355 4,837 18,865 13,797
Depreciation 2,415 1,390 6,495 4,059
Amortization 1,233 631 3,388 1,789
------- ------- -------- --------
Total costs and expenses 86,210 58,564 239,791 161,188
------- ------- -------- --------
Operating income 6,519 3,847 17,344 10,554

Other income:
Investment income 1,098 374 2,445 1,129
Other 183 87 315 201
------- ------- -------- --------
Income before income taxes 7,800 4,308 20,104 11,884
Income tax expense 2,886 1,542 7,439 4,421
------- ------- -------- --------

Net income $ 4,914 $ 2,766 $ 12,665 $ 7,463
======= ======= ======== ========

Net income per share $ 0.17 $ 0.11 $ 0.46 $ 0.30
======= ======= ======== ========
Weighted average shares outstanding 28,671 25,253 27,776 24,651
======= ======= ======== ========

See accompanying notes.


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PAPA JOHN'S INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)



Common Stock
------------------------ Additional Unrealized Reacquired Total
Shares Shares Par Paid-In Gain(Loss) on Deferred Retained Treasury Stockholders'
Authorized Issued Value Capital Investments Compensation Earnings Stock Equity
------------------------------------------------------------------------------------------------

(In thousands)
Balance at December 25, 1994 35,000 24,328 $243 $ 55,628 $(651) $(37) $ 8,039 $(613) $ 62,609
Issuance of common stock -- 1,854 19 30,802 -- -- -- -- 30,821
Exercise of stock options -- 222 2 402 -- -- -- -- 404
Stock compensation and other -- -- -- -- -- 27 -- 16 43
Tax benefit related to exercise of
non-qualified stock options -- -- -- 1,144 -- -- -- -- 1,144
Change in unrealized gain (loss)
on investments -- -- -- -- 423 -- -- -- 423
Net income -- -- -- -- -- -- 7,463 -- 7,463
-------- ------ ---- -------- ----- ---- ------- ----- --------
Balance at September 24, 1995 35,000 26,404 $264 $ 87,976 $(228) $(10) $15,502 $(597) $102,907
======== ====== ==== ======== ===== ==== ======= ===== ========

Balance at December 31, 1995 35,000 26,769 $268 $ 88,043 $(263) $ (4) $18,842 $(604) $106,282

Issuance of common stock -- 1,708 17 50,538 -- -- -- -- 50,555
Exercise of stock options -- 168 1 1,191 -- -- -- -- 1,192
Stock compensation and other -- -- -- 38 -- (32) -- 112 118
Tax benefit related to exercise of
non-qualified stock options -- -- -- 1,006 -- -- -- -- 1,006
Acquisitions -- 52 1 1,454 -- -- -- -- 1,455
Change in unrealized gain (loss)
on investments -- -- -- -- (25) -- -- -- (25)
Net income -- -- -- -- -- -- 12,665 -- 12,665
-------- ------ ---- -------- ----- ---- ------- ----- --------
Balance at September 29, 1996 35,000 28,697 $287 $142,270 $(288) $(36) $31,507 $(492) $173,248
======== ====== ==== ======== ===== ==== ======= ===== ========

See accompanying notes.


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PAPA JOHN'S INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)



Nine Months Ended
September 29, 1996 September 24, 1995
------------------ ------------------

(In thousands)
Operating activities
Net cash provided by operating activities $ 18,108 $ 6,763

Investing activities
Purchase of property and equipment (21,104) (26,447)
Purchase of investments (52,094) (9,349)
Proceeds from sale or maturity of investments 9,225 5,808
Loans to franchisees (5,502) (100)
Acquisitions (30) (643)
Other (1,238) (107)
-------- --------

Net cash used in investing activities (70,743) (30,838)

Financing activities
Proceeds from issuance of long-term debt -- 2,000
Payments on long-term debt (837) (937)
Proceeds from issuance of common stock 50,555 30,171
Proceeds from exercise of stock options 1,192 404
Tax benefit related to exercise of
non-qualified stock options 1,006 1,144
Other (16) 236
-------- --------
Net cash provided by financing activities 51,900 33,018
-------- --------
Net (decrease) increase in cash and cash equivalents (735) 8,943
Cash and cash equivalents at beginning of period 19,904 12,773
-------- --------
Cash and cash equivalents at end of period $ 19,169 $ 21,716
======== ========



See accompanying notes.

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PAPA JOHN'S INTERNATIONAL, INC. AND SUBSIDIARIES


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

September 29, 1996

NOTE 1 -- BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles 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 generally accepted accounting principles 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 and nine months ended September
29, 1996, are not necessarily indicative of the results that may be expected for
the year ended December 29, 1996. For further information, refer to the
consolidated financial statements and footnotes thereto included in the Papa
John's International, Inc. Annual Report on Form 10-K for the year ended
December 31, 1995.

Certain prior year data has been reclassified to conform to the 1996
presentation.

NOTE 2 -- BUSINESS COMBINATIONS

In February 1996, the Company purchased the assets and assumed certain
liabilities of one Papa John's restaurant in Floyd Knobs, Indiana, from
Educators, Inc., a franchisee, for $60,000. The purchase price consisted of a
cash payment of $30,000 and the issuance of 1,589 shares of Company stock.

In May 1996, the Company purchased the assets and assumed certain liabilities of
three Papa John's restaurants in Indianapolis, Indiana from Acumen, Inc., a
franchisee. The purchase price was approximately $1,425,000 consisting solely
of 50,211 shares of Company common stock.

The above business combinations were accounted for by the purchase method of
accounting.

Subsequent to quarter-end, the Company acquired Nortex Pizza, L.P. ("Nortex"), a
franchisee of eighteen Papa John's restaurants in the Dallas, Texas market. The
Company issued 46,593 shares of its common stock (valued at $1.5 million on the
date the agreement was reached) in exchange for all of the issued and
outstanding capital stock of Nortex. In addition, the Company retired $3.5
million of Nortex debt at the closing (see Note 3).

The Nortex acquisition will be accounted for as a pooling of interests. The
acquisition is not considered significant for restatement of prior financial
statements and the pro forma impact is not material.

-6-

NOTE 3 -- FRANCHISEE LOAN PROGRAM

The Company has established a program under which selected franchisees may
borrow funds for use in the construction and development of their restaurants.
At September 29, 1996, loans outstanding to franchisees were approximately $6.3
million. Such loans bear interest at fixed or floating rates (ranging from 5.5%
to 9.25% at September 29, 1996), and are generally secured by the fixtures,
equipment, signage and, where applicable, land of each restaurant and the
ownership interests in the franchisee. Approximately $3.5 million of the total
franchisee loans outstanding at September 29, 1996 was retired subsequent to
quarter-end in connection with the Nortex acquisition (see Note 2).

NOTE 4 -- FINANCING ARRANGEMENTS

In April 1996, the Company purchased 6 acres of land in Louisville, Kentucky for
approximately $787,000. Of the total purchase price, approximately $520,000 was
financed through a non-interest bearing promissory note. The note requires
quarterly principal payments through October 1996, at which time the note will
be paid in full. The land is adjacent to 31 previously purchased acres which
will be the site of the Company's corporate headquarters and Kentucky commissary
facility.

The Company's revolving credit agreement was amended effective June 30, 1996,
increasing the amount of maximum available borrowings to $10 million. The
amended agreement expires on June 29, 1997, at which time any unpaid balance is
due and payable.

NOTE 5 -- COMMON STOCK OFFERING

In May 1996, the Company completed a public offering of 1,707,750 shares of its
common stock at a price of $31.50 per share. The net proceeds to the Company of
the offering were approximately $50.6 million.

NOTE 6 -- STOCK SPLIT

The Board of Directors approved a 3-for-2 stock split on October 29, 1996, to be
effected in the form of a 50% stock dividend, to stockholders of record on
November 8, 1996 with an effective date of November 22, 1996. All share data
included in these condensed consolidated financial statements have been restated
to reflect this stock split.

NOTE 7 -- PJ AMERICA, INC. STOCK WARRANT

PJ America, Inc. ("PJ America"), a franchisee of the Company, completed an
initial public offering ("IPO") of its common stock effective October 25, 1996.
In connection with the IPO, PJ America issued a warrant to purchase 225,000
shares of its common stock to the Company. The warrant is exercisable in whole
or in part at any time within 5 years from the closing date of the IPO, and the
purchase price of each share of common stock pursuant to the warrant is $11.25
per share (90% of the IPO price of $12.50 per share). The warrant was issued by
PJ America to the Company in consideration for the guarantee by the Company of
rights to enter into development agreements for certain specified territories
and the waiver by the Company of certain market transfer fees. The

-7-

Company's agreement with PJ America anticipates that PJ America will pay
standard development and franchise fees in connection with opening restaurants
in the specified territories.

The Company will not recognize income in connection with receipt of the warrant.
The warrant will be classified as an available-for-sale security, and
accordingly, will be stated at fair value in the balance sheet, with unrealized
gains reported as a separate component of stockholders' equity. The intrinsic
value of the warrant (market value of PJ America common stock less the exercise
price of the warrant) will be considered a reasonable approximation of the fair
value of the warrant.

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



RESTAURANT PROGRESSION


Three Months Ended Nine Months Ended
Sept. 29, Sept. 24, Sept. 29, Sept. 24,
1996 1995 1996 1995
-------- -------- -------- --------
Company-owned:
- -------------

Beginning of period 248 169 217 133
Opened 20 15 48 45
Closed (1) -- (2) --
Acquired -- -- 4 6
--- --- --- ---

End of period 267 184 267 184
=== === === ===
Franchised:
- ----------

Beginning of period 752 581 661 499
Opened 62 44 159 133
Closed (1) -- (3) (1)
Sold to Company -- -- (4) (6)
--- --- --- ---

End of period 813 625 813 625
=== === === ===

Total at end of period 1,080 809 1,080 809
===== === ===== ===

RESULTS OF OPERATIONS

Revenues. Total revenues increased 48.6% to $92.7 million for the three months
ended September 29, 1996, from $62.4 million for the comparable period in 1995,
and 49.7% to $257.1 million for the nine months ended September 29, 1996, from
$171.7 million for the comparable period in 1995.



-8-


Restaurant sales increased 55.8% to $42.3 million for the three months ended
September 29, 1996, from $27.2 million for the comparable period in 1995, and
57.5% to $118.1 million for the nine months ended September 29, 1996, from $75.0
million for the comparable period in 1995. These increases were primarily due
to increases of 44.8% and 47.8% in the number of equivalent Company-owned
restaurants open during the three and nine months ended September 29, 1996,
respectively, compared to the same periods in the prior year. "Equivalent
restaurants" represent the number of restaurants open at the beginning of a
given period, adjusted for restaurants opened or acquired during the period on a
weighted average basis. Also, sales increased 11.5% for the three months ended
September 29, 1996, over the comparable period in 1995, for Company-owned
restaurants open throughout both periods.

Franchise royalties increased 32.1% to $4.5 million for the three months ended
September 29, 1996, from $3.4 million for the comparable period in 1995, and
32.2% to $12.7 million for the nine months ended September 29, 1996, from $9.6
million for the comparable period in 1995. These increases were primarily due
to increases of 31.3% and 30.8% in the number of equivalent franchised
restaurants open during the three and nine months ended September 29, 1996,
respectively, compared to the same periods in the prior year. Also, sales
increased 4.7% for the three months ended September 29, 1996, over the
comparable period in 1995, for franchised restaurants open throughout both
periods.

Franchise and development fees increased 51.9% to $1.2 million for the three
months ended September 29, 1996, from $797,000 for the comparable period in
1995, and 18.8% to $3.0 million for the nine months ended September 29, 1996,
from $2.6 million for the comparable period in 1995. These increases were
primarily due to the 62 and 159 franchised restaurants opened during the three
and nine months ended September 29, 1996, respectively, versus the 44 and 133
opened during the comparable periods in 1995, an increase of 40.9% and 19.5%,
respectively.

Commissary sales increased 41.3% to $37.2 million for the three months ended
September 29, 1996, from $26.3 million for the comparable period in 1995, and
44.9% to $104.0 million for the nine months ended September 29, 1996, from $71.8
million for the comparable period in 1995. These increases were primarily the
result of the increases in equivalent franchised restaurants and comparable
sales for franchised restaurants noted above. Additionally, sales for the
Orlando commissary increased for the three and nine months ended September 29,
1996, versus the comparable periods in 1995 due to its conversion from a dough
production facility to a full-service commissary and distribution center
beginning in August 1995.

Equipment and other sales increased 59.1% to $7.5 million for the three months
ended September 29, 1996, from $4.7 million for the comparable period in 1995,
and 50.2% to $19.3 million for the nine months ended September 29, 1996, from
$12.9 million for the comparable period in 1995. These increases were primarily
due to the increase in equivalent franchised restaurants open during the three
and nine months ended September 29, 1996, as compared to the same periods in
1995, and the increase in franchised restaurants opened during the three and
nine months ended September 29, 1996, as compared to the same periods in 1995.

-9-

Costs and Expenses. Restaurant cost of sales, which consists of food, beverage
and paper costs, increased as a percentage of restaurant sales to 28.8% for the
three months ended September 29, 1996, from 28.2% for the comparable period in
1995, and to 28.5% for the nine months ended September 29, 1996, from 28.4% for
the comparable period in 1995. Increasing cheese prices throughout the second
and third quarters of 1996 were the primary reason for the higher cost of sales
for the three and nine month periods.

Restaurant salaries and benefits (26.7% vs. 26.9% and 26.6% vs. 27.0%),
advertising and related costs (9.5% vs. 9.7% and 9.4% vs. 9.8%) and occupancy
costs (5.4% vs. 5.6% and 5.1% vs. 5.2%) all decreased as a percentage of
restaurant sales for the three and nine months ended September 29, 1996, as
compared to the same periods in 1995. These decreases were primarily the result
of efficiencies related to strong restaurant sales during the three and nine
months ended September 29, 1996, and a generally maturing restaurant base.

Other restaurant operating expenses increased as a percentage of restaurant
sales to 13.7% for the three months ended September 29, 1996, from 13.4% for the
comparable period in 1995, and to 13.6% for the nine months ended September 29,
1996, from 13.4% for the comparable period in 1995. Other operating expenses
include all other restaurant-level operating costs, the material components of
which are automobile mileage reimbursement for delivery drivers, telephone
costs, training costs, repairs and maintenance and workers compensation
insurance. Other operating expenses also include 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 and food and equipment
purchasing and storage to Company-owned restaurants.

The increases in other restaurant operating expenses for the three months and
nine months ended September 29, 1996 were due to a collection of individually
insignificant increases in certain of the above-noted expense components.

Commissary, equipment and other expenses include cost of sales and operating
expenses associated with sales of food, paper, equipment, 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 90.9%
for the three months ended September 29, 1996, as compared to 93.2% for the same
period in 1995, and to 91.4% for the nine months ended September 29, 1996, from
93.0% for the comparable period in 1995. These decreases were primarily due to
volume-related efficiencies in commissary operations.

General and administrative expenses decreased as a percentage of total revenues
to 6.9% for the three months ended September 29, 1996, as compared to 7.8% for
the comparable period in 1995, and to 7.3% for the nine months ended September
29, 1996, from 8.0% for the comparable period in 1995. These decreases were
primarily due to improved organizational efficiencies over an increasing revenue
base. Also, savings in certain insurance costs have been realized as a result
of coverage changes implemented during the fourth quarter of 1995.

Depreciation and amortization increased as a percentage of total revenues to
3.9% for the three months ended September 29, 1996, from 3.2% for the comparable
period in 1995, and to 3.8% for

-10-

the nine months ended September 29, 1996, from 3.4% for the comparable period in
1995. Increases in depreciation and amortization for the three and nine month
periods due to additional capital expenditures by the Company, the amortization
of intangibles related to acquisitions, the amortization of deferred pre-opening
costs for newly-opened restaurants and commissaries and the amortization of
deferred information systems costs were partially offset by decreases due to a
change in estimate of the useful lives of certain restaurant equipment and
signage implemented as of the beginning of July 1995. The estimated useful life
for ovens and certain other restaurant equipment was extended from five to seven
years, and the estimated useful life for restaurant signage was extended from
five to ten years to more accurately reflect the economic lives of the assets.

Investment Income. Investment income increased to $1.1 million for the three
months ended September 29, 1996, from $374,000 for the comparable period in
1995, and to $2.4 million for the nine months ended September 29, 1996, from
$1.1 million for the comparable period in 1995. These increases were primarily
the result of higher average investment balances during 1996 compared to 1995
due to the investment of proceeds from the Company's public offerings of Common
Stock in August 1995 and May 1996.

Income Tax Expense. Income tax expense reflects a combined federal, state and
local effective tax rate of 37.0% for the three and nine months ended September
29, 1996, versus 37.2% year-to-date in 1995. The decrease in the effective tax
rate for 1996 is primarily due to the investment of proceeds from the August
1995 and May 1996 stock offerings in securities which produce tax-exempt
investment income, partially offset by the fact that a greater portion of 1996
taxable income will be subject to the 35% federal tax rate as opposed to the 34%
rate in 1995.


LIQUIDITY AND CAPITAL RESOURCES

The Company requires capital primarily for the development and acquisition of
restaurants, the addition of new commissary and support services facilities and
equipment and the enhancement of corporate systems and facilities. Capital
expenditures of $21.1 million for the nine months ended September 29, 1996, were
primarily funded by cash flow from operations.

Cash flow from operations increased to $18.1 million for the nine months ended
September 29, 1996, from $6.8 million for the comparable period in 1995, due
primarily to the higher level of net income for the first nine months of 1996.
Also, the Company received net proceeds of $50.6 million from a May 1996 public
offering of approximately 1.7 million shares of its common stock.

In addition to restaurant development and possible acquisitions, significant
capital projects for the next twelve months are expected to include the
construction of new commissaries in Rotterdam, New York and Des Moines, Iowa,
and a distribution center in Phoenix, Arizona. The Company also expects to
construct a 250,000 square foot facility in Louisville, Kentucky, scheduled for
completion in late 1997, approximately one-half of which will accommodate
relocation and expansion of the Louisville commissary facility and Novel
Approach promotional division and the remainder of which will accommodate
relocation and consolidation of corporate offices.

Additionally, during each of 1996 and 1997 the Company expects to provide
approximately six to

-11-

eight million dollars in loans to selected franchisees under a loan program
adopted during the second quarter. Approximately $6.3 million in loans were
outstanding under this program as of September 29, 1996, and the amounts
actually provided during the remainder of 1996 and 1997 may vary as the Company
gains experience with the loan program.

Capital resources available at September 29, 1996, include $19.2 million of cash
and cash equivalents, $67.7 million of investments and a $10 million line of
credit expiring in June 1997. The Company expects to fund planned capital
expenditures and disbursements under the franchise loan program for the next
twelve months from these resources and operating cash flows.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

For a description of the significant legal proceedings involving the Company,
reference is made to Item 3 of the Company's Annual Report on Form 10-K for the
period ended December 31, 1995.

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


a. Exhibits

Exhibit
Number Description
------- -----------
10.1 Amended and restated Loan Agreement dated
June 30, 1996, between the Company and PNC Bank,
Kentucky, Inc.

10.2 Papa John's International, Inc. 1993 Stock
Ownership Incentive Plan, as amended.

10.3 Papa John's International, Inc. 1993 Stock Option
Non-Employee Directors, as amended.

27 Financial Data Schedule 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 the
Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995 (Commission File No.
0-21660) is incorporated herein by reference.

b. Current Reports on Form 8-K.

There were no reports filed on Form 8-K during the quarterly period ended
September 29, 1996.

-12-

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: November 12, 1996 /s/ E. Drucilla Milby
------------------------- -----------------------------------------
E. Drucilla Milby, Chief Financial
Officer and Treasurer