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Business Services Industry

Papa John's Reports First Quarter Earnings

Business Wire, May 6, 2008

2008 Earnings Guidance Reaffirmed

LOUISVILLE, Ky. -- Papa John's International, Inc. (NASDAQ: PZZA)

Highlights

* First quarter earnings per diluted share of $0.30 in 2008 vs. $0.43 in 2007

* Comparable first quarter results, excluding the consolidation of BIBP, were $0.48 in 2008 vs. $0.44 in 2007, an increase of 9.1%

* Domestic system-wide comparable sales increase of 1.7% for the quarter

* 30 net Papa John's worldwide unit openings during the quarter

* Earnings guidance for 2008 reaffirmed at a range of $1.68 to $1.76 per diluted share, excluding the impact of consolidating BIBP

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Papa John's International, Inc. (NASDAQ: PZZA) today announced revenues of $289.0 million for the first quarter of 2008, representing an increase of 10.9% from revenues of $260.6 million for the same period in 2007. Net income for the first quarter of 2008 was $8.6 million, or $0.30 per diluted share (including an after-tax loss of $5.2 million, or $0.18 per diluted share, from the consolidation of the results of the franchisee-owned cheese purchasing company, BIBP Commodities, Inc. ("BIBP"), a variable interest entity), compared to 2007 first quarter net income of $13.2 million, or $0.43 per diluted share (including an after-tax loss of approximately $300,000, or $0.01 per diluted share, from the consolidation of BIBP).

"We had an outstanding first quarter in arguably the toughest operating environment in our company's history," said Papa John's president and chief executive officer, Nigel Travis. "To run positive comp sales and grow EPS on a comparable basis 9.1% over the same quarter last year is a real testament to the strength of our brand and outstanding execution by our restaurant operators. We are also pleased with our international operating results which improved over the prior year's results as we remain on target with our international growth plans."

Revenues Comparison

Consolidated revenues were $289.0 million for the first quarter of 2008, an increase of $28.4 million or 10.9%, over the corresponding 2007 period. The increase in revenues for the first quarter of 2008 was principally due to the following:

* Domestic company-owned restaurant revenues increased $16.8 million or 13.8%, reflecting an increase in comparable sales results of 2.6% and an 11.2% increase in equivalent units due to the acquisition of 55 domestic restaurants during the last nine months of 2007.

* Franchise royalties increased $1.0 million, primarily due to the increase in royalty rate from 4.0% to 4.25% for the majority of domestic franchise restaurants effective at the beginning of 2008.

* Domestic commissaries revenues increased $5.8 million due to increases in the price of certain commodities, primarily cheese. The commissary charges a fixed dollar mark-up on its cost of cheese, and cheese cost is based upon the 40 lb. cheddar block price, which increased from $1.34 per pound in the first quarter of 2007 to $1.61 per pound in the first quarter of 2008, or a 20.1% increase.

* Other sales increased $2.4 million, primarily from expanded commercial volumes at our print and promotions subsidiary, Preferred Marketing Solutions, Inc.

* International revenues increased $1.9 million reflecting the increase in both the number and average unit volumes of our company-owned and franchised restaurants over the past year.

Operating Results and Cash Flow

Operating Results

Our pre-tax income for the first quarter of 2008 was $13.6 million, compared to $20.7 million for the corresponding period in 2007. Excluding the impact of the consolidation of BIBP, pre-tax income for 2008 was $21.6 million, or a $400,000 increase over the 2007 comparable results. An analysis of the changes in pre-tax income for the first quarter (excluding the consolidation of BIBP), is summarized as follows (analyzed on a segment basis -- see the Summary Financial Data table that follows for the reconciliation of segment income to consolidated income below):

* Domestic Company-owned Restaurant Segment. Domestic company-owned restaurants' operating income was $7.8 million for the three-month period ended March 30, 2008, as compared to $8.2 million for the same period in 2007. The 2008 operating results include a $1.2 million charge for the loss on the anticipated sale of 27 restaurants in two markets and the costs associated with the closing of five restaurants during the quarter, compared to a charge of approximately $100,000 in the prior year. Excluding the incremental $1.1 million charge, domestic company-owned restaurants' operating income improved approximately $700,000 in 2008 as compared to 2007. The improvement in operating results occurred primarily due to the operating income earned from the 55 restaurants acquired during the last nine months of 2007. Restaurant operating margin as a percent of sales slightly decreased primarily due to increased commodity costs.

* Domestic Commissary Segment. Domestic commissaries' operating income decreased approximately $1.6 million for the three months ended March 30, 2008, as compared to the corresponding period in 2007, primarily due to a 1.9% reduction in gross margin resulting from increases in the cost of certain commodities that were not passed along via price increases to domestic restaurants, and an increase in other operating expenses of $500,000, as compared to the corresponding 2007 period, reflecting an increase in distribution costs due to higher fuel prices.

Business Services Industry

Papa John's Reports First Quarter Earnings

Business Wire, May 6, 2008

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