Papa Johns 2007 Annual Report Download

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A slice above the rest...
PAPA JOHN’S INTERNATIONAL
ANNUAL
REPORT
2
200
2007 PIZZA CHAIN OF THE YEAR
 PIZZA TODAY MAGAZINE

Table of contents

  • Page 1
    A slice above the rest... PAPA JOHN'S INTERNATIONAL 200 2007 PIZZA CHAIN OF THE YEAR ïš» PIZZA TODAY MAGAZINE ANNUAL REPORT

  • Page 2
    ... Vice President and Chief Development Officer Senior Vice President and President - PJ Food Service, Inc. Julie L. Larner International Locations Canada Portugal Ireland Bahamas USA Mexico El Salvador Nicaragua Costa Rica Ecuador Peru Egypt Cayman Islands Puerto Rico Aruba Trinidad & Tobago China...

  • Page 3
    ... served with world-class customer service by outstanding franchisees and team members, is the key ingredient to building a successful brand. Consider some of the awards and recognition Papa John's earned in 2007: ฀ ฀ Papa John's was named 2007 Pizza Chain of the Year by Pizza Today magazine. For...

  • Page 4
    Dear Shareholders, Fr anchisees and Team Members: As I write this letter to you, we find ourselves in an economic climate marked by much uncertainty. Pointing to increasing commodity costs, rising oil and fuel prices, minimum wage increases and a slumping housing market, many have predicted an ...

  • Page 5
    ...incorporation or organization) 61-1203323 (I.R.S. Employer Identification No.) 2002 Papa Johns Boulevard Louisville, Kentucky 40299-2367 (Address of principal executive offices) (502) 261-7272 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of...

  • Page 6
    ... check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes [ ] No [X] The aggregate market value of the common stock held by non-affiliates of the Registrant, computed by reference to the closing sale price on The NASDAQ Stock Market as of the last business day...

  • Page 7
    ... and Corporate Governance Executive Compensation Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Certain Relationships and Related Transactions, and Director Independence Principal Accounting Fees and Services Exhibits, Financial Statement Schedules

  • Page 8
    ... Inc. (referred to as the "Company", "Papa John's" or in the first person notations of "we", "us" and "our") operates and franchises pizza delivery and carryout restaurants and, in certain international markets, dine-in and restaurant-based delivery restaurants under the trademark "Papa John's". The...

  • Page 9
    ...designated delivery areas result in lower restaurant operating costs and improved food quality, and promote superior customer service. Our domestic QC Center system takes advantage of volume purchasing of food and supplies, and provides consistency and efficiencies of scale in fresh dough production...

  • Page 10
    ... resources to provide Papa John's franchisees with assistance in restaurant operations, management training, team member training, marketing, site selection and restaurant design. We also provide significant assistance to licensed international QC Centers in sourcing high-quality suppliers located...

  • Page 11
    ... bright menu board, custom counters and a carryout customer area. The counters are designed to allow customers to watch the team members slap out the dough and put sauce and toppings on pizzas. Most of our international Papa John's restaurants are between 900 and 1,400 square feet; however, in order...

  • Page 12
    ...and related items to our franchisees through our support services subsidiary, Preferred Marketing Solutions, Inc. Quality Control ("QC") Centers; Strategic Supply Chain Management Our domestic QC Centers, comprised of ten regional production and distribution centers in 2007, supply pizza dough, food...

  • Page 13
    ...time for Papa John's national television commercials, in addition to other brand-building activities, such as consumer research and public relations activities. All domestic Company-owned and franchised Papa John's restaurants are required to contribute a certain percentage of sales to the Marketing...

  • Page 14
    ...The PROFIT System is also closely integrated with our online ordering system in all domestic traditional Papa John's restaurants, enabling Papa John's to offer nationwide online ordering to our customers. Reporting. Management at Company-owned restaurants reviews and evaluates daily reports of sales...

  • Page 15
    ...) franchised Papa John's restaurants were opened. Approval. Franchisees are approved on the basis of the applicant's business background, restaurant operating experience and financial resources. We seek franchisees to enter into development agreements for single or multiple restaurants. We require...

  • Page 16
    ... sharing of profits from partnership marketing or alternative sales channels activities, development of a process for defining trade areas for alternative ordering methodologies and marketing contribution requirements for non-traditional units. The financial implications of this renewal activity...

  • Page 17
    ...accordingly, the amount of operating income recognized by the Company related to this business unit is expected to be approximately $3.0 million less in 2009 than in 2008. Under our current standard development agreement, the franchisee is required to pay, at the time of signing the agreement, a non...

  • Page 18
    ...newsletters and regional or national conference calls. Franchise Operations. All franchisees are required to operate their Papa John's restaurants in compliance with our policies, standards and specifications, including matters such as menu items, ingredients, materials, supplies, services, fixtures...

  • Page 19
    ... to price, service, location, food quality and variety. There are well-established competitors with substantially greater financial and other resources than Papa John's. Competitors include international, national and regional chains, as well as a large number of local independent pizza operators...

  • Page 20
    With respect to the sale of franchises, we compete with many franchisors of restaurants and other business concepts. In general, there is also active competition for management personnel and attractive commercial real estate sites suitable for our restaurants. Government Regulation We, along with ...

  • Page 21
    ... expansion or continue to operate in existing markets profitably. 2. The restaurant industry is intensely competitive with respect to price, service, location and food quality, and there are many well-established competitors with substantially greater financial and other resources than the Papa John...

  • Page 22
    ... affect the financial results of our QC Centers. 12. Beginning in October 2004, a third-party commercial insurance company began providing fullyinsured coverage to franchisees participating in our franchise insurance program, thus eliminating our risk of loss for franchise insurance coverage written...

  • Page 23
    ... manner, and differing interpretation of the obligations established in franchise agreements with international franchisees. Accordingly, there can be no assurance that our operations will achieve or maintain profitability or meet planned growth rates. Item 1B. Unresolved Staff Comments None. 16

  • Page 24
    ... As of December 30, 2007, there were 3,208 Papa John's restaurants system-wide. Company-owned Papa John's Restaurants Number of Restaurants Arizona...Florida...Georgia...Illinois ...Indiana...Kansas...Kentucky...Maryland...Missouri ...New Jersey...New Mexico...North Carolina ...Ohio...Oklahoma...

  • Page 25
    Domestic Franchised Papa John's Restaurants Number of Restaurants Alabama...Arizona ...Arkansas ...California...Colorado ...Connecticut...Delaware...Florida ...Georgia ...Idaho...Illinois...Indiana ...Iowa ...Kansas ...Kentucky...Louisiana ...Maine...Maryland...Massachusetts...Michigan...Minnesota ...

  • Page 26
    ...rent. Generally, the leases are triple net leases, which require us to pay all or a portion of the cost of insurance, taxes and utilities. Certain leases further provide that the lease payments may be increased annually, with a small number of escalations based on changes in the Consumer Price Index...

  • Page 27
    ... the Louisville QC Center operation and promotions division. The remainder of the building houses our corporate offices. The Papa John's UK management team is located in a leased office near London with a remaining lease term of eight years. The Papa John's China management team leases an office and...

  • Page 28
    ... Manager. Mr. Flanery is a licensed Certified Public Accountant. Lou H. Jones has served as Senior Vice President and General Counsel since May 2007. Prior to joining Papa John's, she spent nine years with Blockbuster Inc., ending her tenure as Senior Vice President, Corporate and International...

  • Page 29
    ... served as one of our Operations Vice Presidents from 2000 to 2005. Prior to joining Papa John's, Mr. Mitchell served as Senior Director of Operations for AFCE/Popeye's from 1996 to 2000, responsible for company and franchise operations as well as Popeye's related acquisitions. From 1993 to 1996, he...

  • Page 30
    ... offering of common stock in 1993, we have not paid cash dividends on our common stock, and have no current plans to do so. Papa John's Board of Directors has authorized the repurchase of up to $725.0 million of common stock under a share repurchase program that began December 9, 1999, and runs...

  • Page 31
    The following table summarizes our repurchase activity by fiscal period during 2007 (in thousands, except per-share amounts): Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs 38,837 38,898 38,985 39,067 39,100 39,328 39,537 39,837 40,318 40,585 40,789 40,789 Maximum ...

  • Page 32
    ... return of the Company's Common Stock to the NASDAQ Stock Market (U.S.) Index and a group of the Company's peers consisting of U.S. companies listed on NASDAQ with standard industry classification (SIC) codes 5800-5899 (eating and drinking places). Relative performance is compared for the five-year...

  • Page 33
    ... operations, net of tax (7) Cumulative effect of accounting change, net of tax (8) Earnings per common share - assuming dilution Basic weighted average shares outstanding Diluted weighted average shares outstanding Balance Sheet Data Total assets Total debt Total stockholders' equity 52 weeks...

  • Page 34
    ... public by Company-owned restaurants, franchise royalties, sales of franchise and development rights, sales to franchisees of food and paper products, printing and promotional items, risk management services, and information systems and related services used in their operations. New unit openings...

  • Page 35
    ... for 2006 and 2005, were derived from the sale to our domestic and international franchisees of food and paper products, printing and promotional items, risk management services and information systems equipment and software and related services by us. The decline in the percentage of revenues...

  • Page 36
    ... franchised unit openings over the next several years. We will continue to periodically evaluate our progress in achieving these plans. If our initiatives are not successful, future impairment charges could occur. Insurance Reserves Our insurance programs for workers' compensation, general liability...

  • Page 37
    ... of BIBP to continue to have a significant impact on Papa John's operating income in future periods due to the volatility of cheese prices, but BIBP's operating results are not expected to be cumulatively significant over time. Papa John's will recognize the operating losses generated by BIBP if the...

  • Page 38
    ... years beginning after November 15, 2008 or our first quarter of fiscal 2009. This statement provides companies with the option to measure, at specified election dates, many financial instruments and certain other items at fair value that are not currently measured at fair value. Companies electing...

  • Page 39
    ...Loss (income) from the franchise cheese purchasing program, net of minority interest (5) International operating expenses (6) General and administrative expenses Minority interests and other general expenses Depreciation and amortization Total costs and expenses Operating income Net interest expense...

  • Page 40
    ... (8) Number of Company-owned restaurants included in the most recent full year's comparable restaurant base Average sales for Company-owned restaurants included in the most recent comparable restaurant base Papa John's Restaurant Progression: U.S. Company-owned: Beginning of period Opened Closed...

  • Page 41
    ... "Notes to Consolidated Financial Statements." Includes only Company-owned restaurants open throughout the periods being compared. Represents Perfect Pizza restaurants converted to Papa John's restaurants. 2007 Compared to 2006 Variable Interest Entities As required by FIN 46, Papa John's is deemed...

  • Page 42
    ..., consisting of the franchise rights and leases related to the 109 franchised Perfect Pizza restaurants, as well as the related distribution operations. The total proceeds from the sale were approximately $13.0 million, with $8.0 million received in cash at closing, and the balance to be received...

  • Page 43
    ...opened, closed, acquired or sold during the period on a weighted average basis. Domestic commissary sales decreased $14.0 million, or 3.4% from 2006 revenues, due to the impact of the 53rd week of operations in 2006 and the impact of fewer equivalent franchised units due to the Company's acquisition...

  • Page 44
    ... dough products and improved margin from other commodities, partially offset by a $600,000 contribution to the Papa John's Marketing Fund. Domestic Franchising Segment. Domestic franchising operating income was relatively flat year-over-year, as an increase in our field organizational support staff...

  • Page 45
    ... print and promotions operations, reflecting an increase in our sales to commercial customers and improved operating results at our captive insurance subsidiary and online operations. The 53rd week of operations in 2006 did not have a significant impact on this segment. Unallocated Corporate Segment...

  • Page 46
    ... 2007 and 2006 operating results since we adopted SFAS No. 123, Accounting and Disclosure of Stock-Based Compensation, in 2002. Stock options were awarded to management and members of our board of directors in 2005, 2006 and 2007. The option awards follow a two-year cliff-vesting period, except for...

  • Page 47
    ...an average price of $16.55 per share). Share repurchase activity during 2007 increased earnings per diluted share from continuing operations by approximately $0.02 ($0.09 excluding the impact of the consolidation of BIBP). Review of Operating Results Revenues. Domestic Company-owned restaurant sales...

  • Page 48
    ... price per pound of cheese as sold from BIBP to PJ Food Service was $1.45 in 2007 as compared to $1.50 in 2006. Other sales, which include our online and print and promotions businesses, as well as our insurance agency operations, were $61.8 million and $50.5 million for the 2007 and 2006 periods...

  • Page 49
    .... The decrease in cost of sales was primarily due to an increase in the sales of higher margin fresh dough products. Salaries and benefits as a percentage of sales were 7.5% in 2007, compared to 7.0% in 2006. The increase was primarily due to additional staff to support additional volumes for our...

  • Page 50
    ... $635,000, respectively, related to BIBP's debt with a third-party bank. The increase in our 2007 net interest expense reflects a higher average outstanding debt balance resulting from share repurchase activity under our share repurchase program and franchise restaurant acquisitions during the last...

  • Page 51
    ..., the Company's fiscal year consisted of 53 weeks, with the additional week added to the fourth quarter (14 weeks) results. The additional week of operations in 2006 resulted in revenues of approximately $20.0 million and pre-tax income of approximately $3.5 million, or $0.07 per diluted share for...

  • Page 52
    ... year, including approximately $1.6 million related to the 53rd week of operations. The increase was primarily due to fixed-cost leverage and related margin improvement associated with a 3.6% increase in comparable sales and lower commodity costs (primarily cheese). The acquisition of 57 Papa John...

  • Page 53
    ... related to the launch of Papa's Perfect Pan Pizza. Equity Compensation and Executive Performance Unit Incentive Plan Stock options were awarded to the majority of management in March 2005 and April 2006, each with a two-year cliff vesting period. The Company also granted approximately 28,000 shares...

  • Page 54
    ... About Market Risk for additional information regarding BIBP and movement in the cheese price during the years. Net interest expense for 2006 decreased $1.3 million from 2005 principally due to a decrease in our average outstanding debt balance during 2006 and an increase in investment income...

  • Page 55
    ..., primarily due to increased volumes. Other sales, which includes our online and print and promotions businesses, as well as our insurance agency operations, were $50.5 million for both the 2006 and 2005 periods. International revenues, which exclude the Perfect Pizza operations that were sold in...

  • Page 56
    ... (Decrease) Equity compe nsation and executive performance unit incentive plan Employee benefits costs Marketing for non-traditional restaurant initiatives Development of international support infrastructure Domestic operations field organization restructuring Other Total increase $ $ 3,112 2,044...

  • Page 57
    ... VIEs' third-party creditors do not have any recourse to Papa John's. The revolving line of credit allows us to borrow up to $175.0 million with an expiration date of January 2011. Outstanding balances accrue interest at 50.0 to 100.0 basis points over the London Interbank Offered Rate ("LIBOR") or...

  • Page 58
    ... year accounts receivable balances. In addition, a decrease in cash flow from continuing operations occurred due to the classification in 2006 of $6.5 million of excess tax benefits related to the exercise of non-qualified stock options from operating activities to financing activities as required...

  • Page 59
    ... and China, as well as technical support assets for numerous areas of the business, including the online ordering function. We expect to fund the planned capital expenditures, restaurant acquisitions and any additional share repurchases of our common stock for the next twelve months from operating...

  • Page 60
    ... The off-balance sheet arrangements that are reasonably likely to have a current or future effect on the Company's financial condition are leases of Company-owned restaurant sites, QC Centers, office space and transportation equipment. As a condition of the sale of the Perfect Pizza operations in...

  • Page 61
    ... to meet planned growth targets and operate new and existing restaurants profitably; general economic conditions; increases in or sustained high cost levels of food ingredients and other commodities, paper, utilities, fuel, employee compensation and benefits, insurance and similar costs; the ability...

  • Page 62
    ...previously discussed in "Results of Operations and Critical Accounting Policies and Estimates," we have a purchasing arrangement with a third-party entity, BIBP, formed at the direction of our Franchise Advisory Council for the sole purpose of reducing cheese price volatility to domestic system-wide...

  • Page 63
    .... Consolidation accounting requires the portion of BIBP operating income (loss) related to domestic Company-owned restaurants to be reflected as a reduction (increase) in the "Domestic Company-owned restaurant expenses - cost of sales" line item, thus reflecting the actual market price of cheese had...

  • Page 64
    ... fluctuations and have differed significantly from previous projections using the futures market prices. Over the long term, we expect to purchase cheese at a price approximating the actual average market price and therefore we do not generally make use of financial instruments to hedge commodity...

  • Page 65
    ... reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even...

  • Page 66
    ...accounting for stock-based compensation to conform to Statement of Financial Accounting Standards No. 123(R), "Share-Based Payment". We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Papa John's International...

  • Page 67
    ...the standards of the Public Company Accounting Oversight Board (United States), the accompanying consolidated balance sheets of Papa John's International, Inc. and subsidiaries as of December 30, 2007 and December 31, 2006, and the related consolidated statements of income, stockholders' equity, and...

  • Page 68
    ... sales Other sales International revenues: Royalties and franchise and development fees Restaurant and commissary sales Total revenues Costs and expenses: Domestic Company-owned restaurant expenses: Cost of sales Salaries and benefits Advertising and related costs Occupancy costs Other operating...

  • Page 69
    ... Current liabilities: Accounts payable Income and other taxes Accrued expenses Current portion of debt Total current liabilities Unearned franchise and development fees Long-term debt, net of current portion Other long-term liabilities Stockholders' equity: Preferred stock ($.01 par value per share...

  • Page 70
    Papa John's International, Inc. and Subsidiaries Consolidated Statements of Stockholders' Equity Comm on Stock Shares Outstanding 33,460 Additional Paid-In Capital $ 242,331 Accum ulated Other Comprehensive Retained Income (Loss) Earnings $ (555) $ 317,142 46,056 Total Treasury Stockholders' Stock ...

  • Page 71
    ...and amortization Deferred income taxes Stock-based compensation expense Excess tax benefit related to exercise of non-qualified stock options Other Changes in operating assets and liabilities, net of acquisitions: Accounts receivable Inventories Prepaid expenses Other current assets Other assets and...

  • Page 72
    ... Company-owned restaurants, franchise royalties, sales of franchise and development rights, and sales to franchisees of food and paper products, printing and promotional items, risk management services, and information systems and related services used in their operations. 2. Significant Accounting...

  • Page 73
    ... market prices. Accounts Receivable Substantially all accounts receivable are due from franchisees for purchases of food, paper products, restaurant equipment, printing and promotional items, risk management services, information systems and related services, and for royalties from December sales...

  • Page 74
    ... have restructured management and developed plans for PJUK to improve its future operating results. The plans include efforts to increase Papa John's brand awareness in the United Kingdom, improve sales and profitability for individual restaurants, and increase net PJUK franchised unit openings over...

  • Page 75
    ... Operations The Company sold its Perfect Pizza operations, consisting of the franchised units and related distribution operations in March 2006, which were classified as discontinued (see Note 4). A business component that either has been disposed of or is classified as held for sale is accounted...

  • Page 76
    ...of certain income tax issues in 2007 and 2006, respectively. Advertising and Related Costs Advertising and related costs include the costs of domestic Company-owned restaurant activities such as mail coupons, door hangers and promotional items and contributions to the Papa John's Marketing Fund, Inc...

  • Page 77
    ... of SFAS No. 123(R), we elected to continue using the Black-Scholes optionpricing model. If we had adopted SFAS No. 123(R) in prior years, the impact on our 2005 operating income of that standard would have been minimal. SFAS No. 123(R) requires the benefit of tax deductions in excess of recognized...

  • Page 78
    ... market price for the year were not included in the computation of the dilutive effect of common stock options because the effect would have been antidilutive. The weighted average number of shares subject to antidilutive options was 895,000 in 2007, 12,000 in 2006 and 48,000 in 2005. New Accounting...

  • Page 79
    ... years beginning after November 15, 2008 or our first quarter of fiscal 2009. This statement provides companies with the option to measure, at specified election dates, many financial instruments and certain other items at fair value that are not currently measured at fair value. Companies electing...

  • Page 80
    ... to the financial statements have been adjusted to reflect the stock split. In conjunction with the stock split, we retired all shares held in treasury as of December 23, 2005. 4. Discontinued Operations The Company sold its Perfect Pizza operations, consisting of the franchised units and related...

  • Page 81
    ... cheese at the market price and sells it to our distribution subsidiary, PJ Food Service, Inc. ("PJFS"), at a fixed quarterly price based in part upon historical average market prices. PJFS in turn sells cheese to Papa John's restaurants (both Company-owned and franchised) at a set quarterly price...

  • Page 82
    ...no further funding commitments. The consolidation of the franchise entities has had no significant impact on Papa John's operating results and is not expected to have a significant impact in future periods. The following table summarizes the balance sheets for our consolidated VIEs as of December 30...

  • Page 83
    ... price was allocated to acquired property and equipment. In the fourth quarter of 2005, Star Papa, our 51% owned joint venture operating Papa John's restaurants in Texas, completed the acquisition of six independently owned franchised Papa John's restaurants located in the Austin, Texas area...

  • Page 84
    ... by reportable segment for the years ended December 30, 2007 and December 31, 2006 are as follows: Variable Interest Entities $ 460 460 (5) 455 (in thousands) Balance as of December 25, 2005 Acquisitions Sale of Perfect Pizza Final adjustments to 2005 acquisitions Balance as of December 31, 2006...

  • Page 85
    ... in cash at closing. The sale of the restaurants resulted in a $1.1 million gain in the fourth quarter of 2005. On December 25, 2005, we sold five Company-owned restaurants located in Florida to one of our operations vice presidents, who resigned from the Company concurrently with the sale of the...

  • Page 86
    ... the ratio of total indebtedness to earnings before interest, taxes, depreciation and amortization (EBITDA), as defined. Outstanding balances under the Old Credit Facility accrued interest at 62.5 to 100.0 basis points over LIBOR or other bank developed rates at our option. The commitment fee on the...

  • Page 87
    ... floating rates (with an average stated rate of 7.5% at December 30, 2007), and are generally secured by the fixtures, equipment, signage and, where applicable, land of each restaurant and the ownership interests in the franchisee. The carrying amounts of the loans approximate market value. Interest...

  • Page 88
    ..., 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...

  • Page 89
    ... Captive insurance claims loss reserves Interest rate swaps Minority interest - variable interest entities Other Total $ $ 15. Income Taxes A summary of the provision (benefit) for income taxes, exclusive of the tax effects related to discontinued operations, follows (in thousands): 2007 Current...

  • Page 90
    ... tax benefits is as follows (in thousands): 2007 8,009 (614) 7,395 357 107 (1,826) (60) (124) $ 5,849 $ Balance at December 31, 2006 Cumulative effect of adoption of FIN 48 Adjusted beginning balance Additions based on tax positions related to current year Additions for tax positions of prior years...

  • Page 91
    ... the Board, under which $20,000 was paid in 2005. The employment agreement with this director was terminated during 2005. Following is a summary of full-year transactions and year-end balances with franchisees owned by related parties and outstanding amounts due from the Marketing Fund and Papa Card...

  • Page 92
    ... to an operations vice president, who resigned from the Company concurrently with the sale. A franchise entity that is owned by one executive officer and two former executive officers of Papa John's purchased a total of three restaurants for $1.2 million in 2005 from unrelated third-party franchise...

  • Page 93
    ..., the Board of Directors of the Company adopted a Stockholder Protection Rights Agreement (the "Rights Plan"). Under the terms of the Rights Plan, one preferred stock purchase right was distributed as a dividend on each outstanding share of Papa John's common stock held of record as of the close of...

  • Page 94
    ... Team Member Stock Ownership Plan (the "1999 Plan") and the Papa John's International, Inc. 2003 Stock Option Plan for Non-Employee Directors (the "Directors Plan") and other such agreements as may arise. On January 31, 2005, the Company awarded an option to purchase 400,000 shares, at the closing...

  • Page 95
    ... three-year cliff vesting period with vesting based upon the Company's achievement of compounded annual growth rate (CAGR) of consolidated corporate operating income from continuing operations, as defined. The fair value of the restricted stock is based on the market price of the Company's shares on...

  • Page 96
    .... Employee Benefit Plans We have established the Papa John's International, Inc. 401(k) Plan (the "401(k) Plan"), as a defined contribution benefit plan, in accordance with Section 401(k) of the Internal Revenue Code. The 401(k) Plan is open to all employees who meet certain eligibility requirements...

  • Page 97
    ... sale, principally to Company-owned and franchised restaurants, of printing and promotional items, risk management services, and information systems and related services used in restaurant operations. Generally, we evaluate performance and allocate resources based on profit or loss from operations...

  • Page 98
    ...loss) from continuing operations before income taxes Domestic Company-owned restaurants (2) Domestic commissaries (3) Domestic franchising (4) International (5) Variable interest entities (6) All others Unallocated corporate expenses (7) Elimination of intersegment losses (profits) Total income from...

  • Page 99
    ... by a $600,000 contribution to the Papa John's Marketing Fund. Approximately $4.3 million of the increase in 2006, as compared to 2005, is due to the 53rd week included in 2006, income from sales to the Six Flags, Inc. theme-park operator and the closing of the Jackson, Mississippi facility in 2005...

  • Page 100
    ... operations. (5) The international segment, which excludes the Perfect Pizza operations that were sold in March 2006, reported operating losses of $8.7 million in 2007 as compared to a loss of $8.9 million in 2006. Increased current year revenues due to growth in number of units and unit volumes...

  • Page 101
    ... 13-week periods. The fourth quarter of 2006 includes a 14-week period. The additional week in the fourth quarter of 2006 increased pre-tax income approximately $3.5 million, or $0.07 per diluted share. Quarterly earnings per share on a full-year basis may not agree to the Consolidated Statements of...

  • Page 102
    ... code of ethics can be found on our web site, which is located at www.papajohns.com. Item 11. Executive Compensation The information required by this item is omitted because we are filing a definitive proxy statement pursuant to Regulation 14A not later than 120 days after the end of the fiscal year...

  • Page 103
    ... and Management and Related Stockholder Matters The following table provides information as of December 30, 2007 regarding the number of shares of the Company's common stock that may be issued under the Company's equity compensation plans. (c) Number of securities remaining available for future...

  • Page 104
    ... Statement Schedules (a)(1) Financial Statements: The following consolidated financial statements, notes related thereto and report of independent auditors are included in Item 8 of this Report Reports of Independent Registered Public Accounting Firm Consolidated Statements of Income for the years...

  • Page 105
    ... is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and, therefore, have been omitted. (a)(3) Exhibits: The exhibits listed in the accompanying index to Exhibits are filed as part of this...

  • Page 106
    ...thereunto duly authorized. Date: February 26, 2008 By: PAPA JOHN'S INTERNATIONAL, INC. /s/ Nigel Travis Nigel Travis President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the...

  • Page 107
    ..., of the Secured Loan Agreement, by and between BIBP Commodities, Inc. and Capital Delivery, Ltd. Conformed Copy through Fourth Amendment, As of December 19, 2007, of the Promissory Note by BIBP Commodities, Inc. Papa John's International, Inc. 1993 Stock Ownership Incentive Plan. Exhibit 10.2 to...

  • Page 108
    ... of Performance Unit Award Agreement - 1999 Team Member Stock Ownership Plan. Exhibit 10.4 to our report on Form 10-K for the fiscal year ended December 31, 2006 is incorporated herein by reference. 10.16* Papa John's International, Inc. Deferred Compensation Plan, as effective September 30, 1998...

  • Page 109
    ..., Inc. Board of Directors' Deferred Compensation Plan, as effective November 6, 2003. Exhibit 10.2 to our report on Form 10-K for the fiscal year ended December 26, 2004 is incorporated herein by reference. 10.19* Papa John's International, Inc. Summary of Short-Term Incentive Compensation Program...

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    ... Papa John's International, Inc. and PJCOMN Acquisition Corporation. Exhibit 10.1 to our quarterly report on Form 10-Q for the quarter ended September 26, 2005 is incorporated herein by reference. Agreement for the Sale and Purchase of the Perfect Pizza Franchise Business Operated by Perfect Pizza...

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    The Exhibits to this Annual Report on Form 10-K are not contained herein. The Company will furnish a copy of any of the Exhibits to a stockholder upon written request to Investor Relations, Papa John's International, Inc., P.O. Box 99900, Louisville, KY 40269-0900. 104

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    ... CORPOR ATE HEADQUARTERS 2002 Papa John's Boulevard Louisville, Kentucky 40299 502-261-7272 FOR MORE INFORMATION To learn more about Papa John's, visit our website at www.papajohns.com 2007 DIRECTORS John H. Schnatter Nigel Tr avis Founder, Chairman Papa John's International, Inc. President...

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