PAPA JOHNS INTERNATIONAL INC 10-K

Item 8. Financial Statements and Supplementary Data ​ Report of Independent Registered Public Accounting Firm (PCAOB ID 42 ) ​ Consolidated Financial Statements: ​ ● Consolidated Statements of Operations for the years ended December 26, 2021, December 27, 2020 and December 29, 2019 ● Consolidated Statements of Comprehensive Income (Loss) for the years ended December 26, 2021, December 27, 2020 and December 29, 2019 ● Consolidated Balance Sheets as of December 26, 2021 and December 27, 2020 ● Consolidated Statements of Stockholders’ Deficit for the years ended December 26, 2021, December 27, 2020 and December 29, 2019 ● Consolidated Statements of Cash Flows for the years ended December 26, 2021, December 27, 2020 and December 29, 2019 ● Notes to Consolidated Financial Statements ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 45 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of Papa John’s International, Inc. and Subsidiaries ​ Opinion on the Financial Statements ​ We have audited the accompanying consolidated balance sheets of Papa John’s International, Inc. and Subsidiaries (the Company) as of December 26, 2021 and December 27, 2020, the related consolidated statements of operations, comprehensive income (loss), stockholders' deficit and cash flows for each of the three years in the period ended December 26, 2021, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 26, 2021 and December 27, 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 26, 2021, in conformity with U.S. generally accepted accounting principles. ​ We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 26, 2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework), and our report dated February 24, 2022, expressed an unqualified opinion thereon. ​ Basis for Opinion ​ These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. ​ We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. ​ Critical Audit Matters ​ The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. ​ ​ ​ ​ ​ ​ ​ ​ ​ 46 Table of Contents ​ ​ Measurement and valuation of insurance reserves ​ ​ Description of the Matter As described in Note 2 to the consolidated financial statements, the Company is self-insured for certain obligations up to stated retention levels under its retention programs related to workers’ compensation, automobile, property and general liability programs. As of December 26, 2021, the Company has $88.1 million accrued for self-insurance reserves (“Insurance Reserves”). Judgments and estimates are used by the Company in determining the potential value associated with incurred but not reported claims. ​ ​ Auditing the valuation of the Insurance Reserves is highly judgmental and complex due to the significant uncertainty in estimating the potential value of reported claims, estimating the number and potential value of incurred but not reported claims and the use of actuarial valuation methods. The reserve estimate is sensitive to actuarial assumptions (e.g., future emergence of losses, incurred but not reported claims) used to estimate the ultimate liability for reported claims and claims that have been incurred but have not been reported. ​ How We Addressed the Matter in Our Audit We tested controls related to the measurement and valuation of the Insurance Reserves. For example, we tested controls over management’s review of the assumptions and methods used to establish the estimate, the underlying data, significant actuarial assumptions and the related reconciliations. ​ To test the measurement and valuation of the Insurance Reserves, our audit procedures included, among others, performing transactional tests of details over the completeness and accuracy of claims data and vouching payments made to third parties. Furthermore, we involved our actuarial specialists to assist in the evaluation of the key assumptions and methodologies used by management to determine the Insurance Reserves. ​ ​ ​ Measurement and valuation of allowance for credit losses for franchisee notes receivable ​ ​ Description of the Matter As described in Note 10 to the consolidated financial statements, the Company has an allowance for credit losses for franchisee notes receivable of $1.5 million (“Allowance for Credit Losses for Franchisee Notes Receivable”) against a gross balance of franchisee notes receivable of $49.4 million as of December 26, 2021. The Allowance for Credit Losses for Franchisee Notes Receivable is estimated to reduce the outstanding notes receivable for expected credit losses after consideration of the fair value of the Company’s collateral rights (e.g., underlying franchisee business, property and equipment) and any guarantees as well as a review of each franchisee’s economic performance, historical loss information, current market conditions, and future economic conditions. ​ Auditing the Allowance for Credit Losses for Franchisee Notes Receivable is challenging due to the judgment inherent in estimating the fair value of the Company’s collateral rights, which has a significant effect on measurement and valuation. ​ ​ ​ ​ ​ 47 Table of Contents How We Addressed the Matter in Our Audit We tested controls related to the measurement and valuation of the Allowance for Credit Losses for Franchisee Notes Receivable. For example, we tested controls over management’s review of the progression of outstanding notes receivable and the Allowance for Credit Losses for Franchisee Notes Receivable and the overall review of its adequacy. Where judgment was exercised by management, our audit procedures included testing controls over management’s evaluation of the assumptions, including the fair value of the collateral rights and guarantees where collateral is available or personal guarantee given in connection with issuance of the applicable note. Our control testing also considered management’s review over the completeness and accuracy of the underlying data used in evaluating the measurement and valuation of the Allowance for Credit Losses for Franchisee Notes Receivable. ​ To test the measurement and valuation of the Allowance for Credit Losses for Franchisee Notes Receivable, our audit procedures included, among others, evaluating the status of collection of scheduled payments for outstanding notes receivable, analyzing unit economics for franchisees to identify indicators of their financial health, evaluating the estimates of collateral value, and the underlying data used by management. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ /s/ Ernst & Young LLP ​ We have served as the Company’s auditor since 2019. ​ Louisville, Kentucky February 24, 2022 ​ ​ 48 Table of Contents ​ Papa John’s International, Inc. and Subsidiaries Consolidated Statements of Operations ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended ​ December 26, December 27, December 29, (In thousands, except per share amounts) 2021 ​ 2020 ​ 2019 ​ ​ ​ ​ ​ ​ ​ ​ ​ Revenues: ​ ​ ​ ​ ​ ​ ​ ​ ​ Domestic Company-owned restaurant sales ​ $ 778,323 ​ $ 700,757 ​ $ 652,053 North America franchise royalties and fees ​ 129,310 ​ 96,732 ​ 71,828 North America commissary revenues ​ 761,305 ​ 680,793 ​ 612,652 International revenues ​ 150,771 ​ ​ 123,963 ​ ​ 102,924 Other revenues ​ ​ 248,712 ​ ​ 210,989 ​ ​ 179,791 Total revenues ​ 2,068,421 ​ 1,813,234 ​ 1,619,248 Costs and expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating costs (excluding depreciation and amortization shown separately below): ​ ​ ​ ​ ​ ​ ​ ​ ​ Domestic Company-owned restaurant expenses ​ ​ 621,871 ​ ​ 563,799 ​ ​ 526,237 North America commissary expenses ​ ​ 703,622 ​ ​ 630,937 ​ ​ 569,180 International expenses ​ ​ 87,286 ​ ​ 73,994 ​ ​ 57,702 Other expenses ​ ​ 226,320 ​ ​ 200,304 ​ ​ 175,592 General and administrative expenses ​ 212,265 ​ 204,242 ​ 223,460 Depreciation and amortization ​ 48,816 ​ 49,705 ​ 47,281 Total costs and expenses ​ 1,900,180 ​ 1,722,981 ​ 1,599,452 Refranchising gains ​ — ​ — ​ 4,739 Operating income ​ 168,241 ​ 90,253 ​ 24,535 Investment income ​ ​ 1,912 ​ ​ 2,131 ​ ​ 1,104 Interest expense ​ ( 19,205 ) ​ ​ ( 17,022 ) ​ ​ ( 20,593 ) Income before income taxes ​ 150,948 ​ 75,362 ​ 5,046 Income tax expense (benefit) ​ 25,993 ​ 14,748 ​ ( 611 ) Net income before attribution to noncontrolling interests ​ 124,955 ​ 60,614 ​ 5,657 Net income attributable to noncontrolling interests ​ ( 4,939 ) ​ ( 2,682 ) ​ ( 791 ) Net income attributable to the Company ​ $ 120,016 ​ $ 57,932 ​ $ 4,866 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Calculation of net income (loss) for earnings (loss) per share: ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income attributable to the Company ​ $ 120,016 ​ $ 57,932 ​ $ 4,866 Dividends on redemption of Series B Convertible Preferred Stock ​ ​ ( 109,852 ) ​ ​ — ​ ​ — Dividends paid to participating securities ​ ( 6,091 ) ​ ( 14,059 ) ​ ( 12,499 ) Net income attributable to participating securities ​ — ​ ( 2,136 ) ​ — Net income (loss) attributable to common shareholders ​ $ 4,073 ​ $ 41,737 ​ $ ( 7,633 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic earnings (loss) per common share ​ $ 0.12 ​ $ 1.29 ​ $ ( 0.24 ) Diluted earnings (loss) per common share ​ $ 0.12 ​ $ 1.28 ​ $ ( 0.24 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic weighted average common shares outstanding ​ 35,007 ​ 32,421 ​ 31,632 Diluted weighted average common shares outstanding ​ 35,337 ​ 32,717 ​ 31,632 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Dividends declared per common share ​ $ 1.15 ​ $ 0.90 ​ $ 0.90 ​ See accompanying notes. 49 Table of Contents Papa John’s International, Inc. and Subsidiaries Consolidated Statements of Comprehensive Income (Loss) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 26, December 27, December 29, (In thousands) 2021 ​ 2020 ​ 2019 ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income before attribution to noncontrolling interests ​ $ 124,955 ​ $ 60,614 ​ $ 5,657 Other comprehensive income (loss), before tax: ​ ​ ​ ​ ​ ​ ​ ​ ​ Foreign currency translation adjustments ​ ​ ( 1,397 ) ​ ​ 2,344 ​ ​ 1,638 Interest rate swaps (1) ​ 6,848 ​ ( 7,517 ) ​ ( 10,783 ) Other comprehensive income (loss), before tax ​ 5,451 ​ ( 5,173 ) ​ ( 9,145 ) Income tax effect: ​ ​ ​ ​ ​ ​ ​ ​ ​ Foreign currency translation adjustments ​ 321 ​ ( 539 ) ​ ( 377 ) Interest rate swaps (2) ​ ( 1,575 ) ​ 1,729 ​ 2,480 Income tax effect ​ ( 1,254 ) ​ 1,190 ​ 2,103 Other comprehensive income (loss), net of tax ​ 4,197 ​ ( 3,983 ) ​ ( 7,042 ) Comprehensive income (loss) before attribution to noncontrolling interests ​ 129,152 ​ 56,631 ​ ( 1,385 ) Less: comprehensive (income) loss, redeemable noncontrolling interests ​ ( 2,609 ) ​ ( 824 ) ​ 519 Less: comprehensive (income), nonredeemable noncontrolling interests ​ ( 2,330 ) ​ ( 1,858 ) ​ ( 1,310 ) Comprehensive income (loss) attributable to the Company ​ $ 124,213 ​ $ 53,949 ​ $ ( 2,176 ) (1) Amounts reclassified out of accumulated other comprehensive loss into interest expense included ($ 5,965 ) , ($ 5,068 ) and $ 660 for the years ended December 26, 2021, December 27, 2020 and December 29, 2019, respectively. ​ (2) The income tax effects of amounts reclassified out of accumulated other comprehensive loss were $ 1,342 , $ 1,140 and ($ 152 ) for the years ended December 26, 2021, December 27, 2020 and December 29, 2019, respectively. ​ See accompanying notes. ​ 50 Table of Contents Papa John’s International, Inc. and Subsidiaries Consolidated Balance Sheets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 26, December 27, (In thousands, except per share amounts) ​ 2021 ​ 2020 ​ ​ ​ ​ ​ Assets ​ ​ ​ ​ ​ ​ Current assets: ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ $ 70,610 ​ $ 130,204 Accounts receivable (less allowance for credit losses of $ 2,364 in 2021 and $ 3,622 in 2020) ​ ​ 81,370 ​ ​ 90,135 Notes receivable, current portion ​ 12,352 ​ 11,318 Income tax receivable ​ ​ 9,386 ​ ​ 1,273 Inventories ​ 34,981 ​ 30,265 Prepaid expenses and other current assets ​ 46,310 ​ 43,212 Total current assets ​ 255,009 ​ 306,407 Property and equipment, net ​ 223,856 ​ 200,895 Finance lease right-of-use assets, net ​ ​ 20,907 ​ ​ 16,840 Operating lease right-of-use assets ​ ​ 176,256 ​ ​ 148,110 Notes receivable, less current portion (less allowance for credit losses of $ 1,500 in 2021 and $ 3,211 in 2020) ​ 35,504 ​ 36,538 Goodwill ​ 80,632 ​ 80,791 Deferred income taxes ​ ​ 5,156 ​ ​ 10,800 Other assets ​ 88,384 ​ 72,389 Total assets ​ $ 885,704 ​ $ 872,770 ​ ​ ​ ​ ​ ​ ​ Liabilities, Series B Convertible Preferred Stock, Redeemable noncontrolling interests and Stockholders’ deficit ​ ​ ​ ​ ​ ​ Current liabilities: ​ ​ ​ ​ ​ ​ Accounts payable ​ $ 28,092 ​ $ 37,370 Income and other taxes payable ​ 19,996 ​ 10,263 Accrued expenses and other current liabilities ​ 190,116 ​ 174,563 Current deferred revenue ​ ​ 21,700 ​ ​ 19,590 Current finance lease liabilities ​ ​ 4,977 ​ ​ 3,545 Current operating lease liabilities ​ ​ 22,543 ​ ​ 23,538 Current portion of long-term debt ​ ​ — ​ ​ 20,000 Total current liabilities ​ 287,424 ​ 288,869 Deferred revenue ​ 13,846 ​ 13,664 Long-term finance lease liabilities ​ ​ 16,580 ​ ​ 13,531 Long-term operating lease liabilities ​ ​ 160,672 ​ ​ 124,666 Long-term debt, less current portion, net ​ 480,730 ​ 328,292 Deferred income taxes ​ 258 ​ 948 Other long-term liabilities ​ 93,154 ​ 111,364 Total liabilities ​ 1,052,664 ​ 881,334 ​ ​ ​ ​ ​ ​ ​ Series B Convertible Preferred Stock ; $ 0.01 par value; no shares authorized, issued or outstanding at December 26, 2021 , compared to 260.0 shares authorized, 252.5 shares issued and outstanding at December 27, 2020 ​ ​ — ​ ​ 251,901 Redeemable noncontrolling interests ​ 5,498 ​ 6,474 ​ ​ ​ ​ ​ ​ ​ Stockholders’ deficit: ​ ​ ​ ​ ​ ​ Common stock ($ 0.01 par value per share; issued 49,002 at December 26, 2021 and 45,288 at December 27, 2020) ​ ​ 490 ​ ​ 453 Additional paid-in capital ​ 445,126 ​ 254,103 Accumulated other comprehensive loss ​ ( 9,971 ) ​ ( 14,168 ) Retained earnings ​ 183,157 ​ 219,158 Treasury stock ( 13,205 shares at December 26, 2021 and 12,743 shares at December 27, 2020, at cost) ​ ( 806,472 ) ​ ( 741,724 ) Total stockholders’ deficit ​ ( 187,670 ) ​ ( 282,178 ) Noncontrolling interests in subsidiaries ​ 15,212 ​ 15,239 Total Stockholders’ deficit ​ ( 172,458 ) ​ ( 266,939 ) Total liabilities, Series B Convertible Preferred Stock, Redeemable noncontrolling interests and Stockholders’ deficit ​ $ 885,704 ​ $ 872,770 ​ See accompanying notes. ​ ​ 51 Table of Contents Papa John’s International, Inc. and Subsidiaries Consolidated Statements of Stockholders’ Deficit ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Papa John’s International, Inc. ​ ​ ​ ​ ​ ​ ​ Common ​ ​ Accumulated ​ ​ ​ ​ ​ ​ Stock ​ ​ ​ ​ Additional ​ Other ​ ​ ​ ​ ​ ​ ​ Noncontrolling ​ Total ​ ​ Shares ​ Common ​ Paid-In ​ Comprehensive ​ Retained ​ Treasury ​ Interests in ​ Stockholders’ (In thousands) ​ Outstanding ​ Stock ​ Capital ​ Loss ​ Earnings ​ Stock ​ Subsidiaries ​ Deficit Balance at December 30, 2018 31,372 ​ $ 443 ​ $ 192,984 ​ $ ( 3,143 ) ​ $ 242,182 ​ $ ( 751,704 ) ​ $ 15,225 ​ $ ( 304,013 ) Net income (1) — ​ — ​ — ​ — ​ 4,866 ​ — ​ 1,310 ​ 6,176 Other comprehensive loss, net of tax — ​ — ​ — ​ ( 7,042 ) ​ — ​ — ​ — ​ ( 7,042 ) Cash dividends on common stock ​ — ​ — ​ 209 ​ — ​ ( 28,761 ) ​ — ​ — ​ ( 28,552 ) Cash dividends on preferred stock ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 10,020 ) ​ ​ — ​ ​ — ​ ​ ( 10,020 ) Dividends declared on preferred stock ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 2,273 ) ​ ​ — ​ ​ — ​ ​ ( 2,273 ) Exercise of stock options 447 ​ 4 ​ 16,006 ​ — ​ — ​ — ​ — ​ 16,010 Stock-based compensation expense ​ — ​ — ​ 15,303 ​ — ​ — ​ — ​ — ​ 15,303 Issuance of restricted stock 63 ​ — ​ ( 3,681 ) ​ — ​ — ​ 3,681 ​ — ​ — Tax effect of restricted stock awards — ​ — ​ ( 1,433 ) ​ — ​ — ​ — ​ — ​ ( 1,433 ) Distributions to noncontrolling interests ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 870 ) ​ ( 870 ) Other 12 ​ — ​ ( 341 ) ​ — ​ ( 297 ) ​ 696 ​ — ​ 58 Balance at December 29, 2019 31,894 ​ $ 447 ​ $ 219,047 ​ $ ( 10,185 ) ​ $ 205,697 ​ $ ( 747,327 ) ​ $ 15,665 ​ $ ( 316,656 ) Cumulative effect of adoption of ASU 2016-13 (2) — ​ — ​ — ​ — ​ ( 1,066 ) ​ — ​ — ​ ( 1,066 ) Adjusted balance at December 30, 2019 31,894 ​ 447 ​ 219,047 ​ ( 10,185 ) ​ 204,631 ​ ( 747,327 ) ​ 15,665 ​ ( 317,722 ) Net income (1) — ​ — ​ — ​ — ​ 57,932 ​ — ​ 1,858 ​ 59,790 Other comprehensive loss, net of tax — ​ — ​ — ​ ( 3,983 ) ​ — ​ — ​ — ​ ( 3,983 ) Cash dividends on common stock — ​ — ​ 141 ​ — ​ ( 29,503 ) ​ — ​ — ​ ( 29,362 ) Cash dividends on preferred stock ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 13,649 ) ​ ​ — ​ ​ — ​ ​ ( 13,649 ) Exercise of stock options 540 ​ 6 ​ 30,616 ​ — ​ — ​ — ​ — ​ 30,622 Acquisition of Company common stock ​ ( 32 ) ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 2,701 ) ​ ​ — ​ ​ ( 2,701 ) Stock-based compensation expense — ​ — ​ 16,310 ​ — ​ — ​ — ​ — ​ 16,310 Issuance of restricted stock 119 ​ — ​ ( 6,922 ) ​ — ​ — ​ 6,922 ​ — ​ — Tax effect of restricted stock awards — ​ — ​ ( 3,974 ) ​ — ​ — ​ — ​ — ​ ( 3,974 ) Distributions to noncontrolling interests ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 2,284 ) ​ ​ ( 2,284 ) Other 24 ​ — ​ ( 1,115 ) ​ — ​ ( 253 ) ​ 1,382 ​ — ​ 14 Balance at December 27, 2020 32,545 ​ $ 453 ​ $ 254,103 ​ $ ( 14,168 ) ​ $ 219,158 ​ $ ( 741,724 ) ​ $ 15,239 ​ $ ( 266,939 ) ​ ​ ​ 52 Table of Contents Papa John’s International, Inc. and Subsidiaries Consolidated Statements of Stockholders’ Deficit (continued) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Papa John’s International, Inc. ​ ​ ​ ​ ​ ​ ​ Common ​ ​ Accumulated ​ ​ ​ ​ ​ ​ ​ Stock ​ ​ ​ ​ Additional ​ Other ​ ​ ​ ​ ​ ​ ​ Noncontrolling ​ Total ​ ​ Shares ​ Common ​ Paid-In ​ Comprehensive ​ Retained ​ Treasury ​ Interests in ​ Stockholders’ (In thousands) ​ Outstanding ​ Stock ​ Capital ​ Loss ​ Earnings ​ Stock ​ Subsidiaries ​ Deficit Balance at December 27, 2020 32,545 ​ $ 453 ​ $ 254,103 ​ $ ( 14,168 ) ​ $ 219,158 ​ $ ( 741,724 ) ​ $ 15,239 ​ $ ( 266,939 ) Net income (1) — ​ — ​ — ​ — ​ 120,016 ​ — ​ 2,330 ​ 122,346 Other comprehensive income, net of tax — ​ — ​ — ​ 4,197 ​ — ​ — ​ — ​ 4,197 Repurchase and conversion of Series B Convertible Preferred Stock ​ 3,489 ​ ​ 35 ​ ​ 174,631 ​ ​ — ​ ​ ( 110,498 ) ​ ​ — ​ ​ — ​ ​ 64,168 Cash dividends on common stock ​ — ​ ​ — ​ ​ 158 ​ ​ — ​ ​ ( 40,514 ) ​ ​ — ​ ​ — ​ ​ ( 40,356 ) Cash dividends on preferred stock — ​ — ​ — ​ — ​ ( 4,121 ) ​ — ​ — ​ ( 4,121 ) Exercise of stock options 212 ​ 2 ​ 11,967 ​ — ​ — ​ — ​ — ​ 11,969 Acquisition of Company common stock ​ ( 594 ) ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 72,499 ) ​ ​ — ​ ​ ( 72,499 ) Stock-based compensation expense — ​ — ​ 16,919 ​ — ​ — ​ — ​ — ​ 16,919 Issuance of restricted stock 132 ​ — ​ ( 6,970 ) ​ — ​ — ​ 6,970 ​ — ​ — Tax effect of restricted stock awards — ​ — ​ ( 5,847 ) ​ — ​ — ​ — ​ — ​ ( 5,847 ) Distributions to noncontrolling interests — ​ — ​ — ​ — ​ — ​ — ​ ( 2,357 ) ​ ( 2,357 ) Other 13 ​ — ​ 165 ​ — ​ ( 884 ) ​ 781 ​ — ​ 62 Balance at December 26, 2021 35,797 ​ $ 490 ​ $ 445,126 ​ $ ( 9,971 ) ​ $ 183,157 ​ $ ( 806,472 ) ​ $ 15,212 ​ $ ( 172,458 ) (1) Net income to the Company at December 26, 2021, December 27, 2020 and December 29, 2019 excludes $ 2,609 , $ 824 and ($ 519 ) , respectively, allocable to the redeemable noncontrolling interests for our joint venture arrangements. (2) As of December 30, 2019, the Company adopted ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”. See “Note 10” of “Notes to Consolidated Financial Statements” for additional information. ​ At December 26, 2021, the accumulated other comprehensive loss of $ 9,971 was comprised of net unrealized foreign currency translation loss of $ 4,869 and a net unrealized loss on the interest rate swap agreements of $ 5,102 . ​ At December 27, 2020, the accumulated other comprehensive loss of $ 14,168 was comprised of net unrealized foreign currency translation loss of $ 3,793 and a net unrealized loss on the interest rate swap agreements of $ 10,375 . ​ At December 29, 2019, the accumulated other comprehensive loss of $ 10,185 was comprised of net unrealized foreign currency translation loss of $ 5,598 and a net unrealized loss on the interest rate swap agreements of $ 4,587 . ​ ​ See accompanying notes. ​ ​ 53 Table of Contents Papa John’s International, Inc. and Subsidiaries Consolidated Statements of Cash Flows ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended ​ ​ December 26, December 27, December 29, (In thousands) ​ 2021 ​ 2020 ​ 2019 ​ ​ ​ ​ ​ ​ ​ ​ Operating activities ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income before attribution to noncontrolling interests ​ $ 124,955 ​ $ 60,614 ​ $ 5,657 Adjustments to reconcile net income to net cash provided by operating activities: ​ ​ ​ ​ ​ ​ ​ ​ ​ (Benefit) provision for allowance for credit losses on accounts and notes receivable ​ ( 852 ) ​ ( 4,734 ) ​ 3,139 Depreciation and amortization ​ 48,816 ​ 49,705 ​ 47,281 Deferred income taxes ​ 3,753 ​ ( 9,268 ) ​ ( 3,764 ) Preferred stock option mark-to-market adjustment ​ ​ — ​ ​ — ​ ​ 5,914 Stock-based compensation expense ​ 16,919 ​ 16,310 ​ 15,303 (Gain) on refranchising ​ ​ — ​ ​ — ​ ​ ( 4,739 ) Other ​ 581 ​ 2,257 ​ 3,203 Changes in operating assets and liabilities, net of acquisitions: ​ ​ ​ ​ ​ ​ ​ ​ ​ Accounts receivable ​ 4,023 ​ ( 22,420 ) ​ ( 6,181 ) Income tax receivable ​ ​ ( 8,113 ) ​ ​ 3,760 ​ ​ 12,122 Inventories ​ ( 4,708 ) ​ ( 2,736 ) ​ ( 326 ) Prepaid expenses and other current assets ​ 2,866 ​ 2,884 ​ 1,367 Other assets and liabilities ​ ( 20,077 ) ​ 20,879 ​ ( 6,354 ) Accounts payable ​ ( 9,278 ) ​ 8,229 ​ 2,035 Income and other taxes payable ​ 9,733 ​ 2,664 ​ 1,009 Accrued expenses and other current liabilities ​ 15,875 ​ 59,353 ​ ( 11,331 ) Deferred revenue ​ 182 ​ ( 1,058 ) ​ ( 2,586 ) Net cash provided by operating activities ​ 184,675 ​ 186,439 ​ 61,749 Investing activities ​ ​ ​ ​ ​ ​ ​ ​ ​ Purchases of property and equipment ​ ( 68,559 ) ​ ( 35,652 ) ​ ( 37,711 ) Notes issued ​ ( 16,132 ) ​ ( 16,589 ) ​ ( 15,864 ) Repayments of notes issued ​ 18,555 ​ 11,154 ​ 5,616 Acquisitions, net of cash acquired ​ ( 699 ) ​ — ​ — Proceeds from divestitures of restaurants ​ — ​ — ​ 13,495 Other ​ 3,323 ​ 16 ​ 1,889 Net cash used in investing activities ​ ( 63,512 ) ​ ( 41,071 ) ​ ( 32,575 ) Financing activities ​ ​ ​ ​ ​ ​ ​ ​ ​ Proceeds from issuance of senior notes ​ ​ 400,000 ​ ​ — ​ ​ — Repayments of term loan ​ ​ ( 340,000 ) ​ ​ ( 20,000 ) ​ ​ ( 15,000 ) Net proceeds (repayments) of revolving credit facilities ​ 80,000 ​ — ​ ( 240,026 ) Debt issuance costs ​ ​ ( 9,179 ) ​ ​ — ​ ​ — Repurchase of Series B Convertible Preferred Stock ​ ​ ( 188,647 ) ​ ​ — ​ ​ — Proceeds from issuance of Series B Convertible Preferred Stock ​ ​ — ​ ​ — ​ ​ 252,530 Issuance costs associated with Series B Convertible Preferred Stock ​ ​ — ​ ​ — ​ ​ ( 7,527 ) Acquisition of Company common stock ​ ( 72,499 ) ​ ( 2,701 ) ​ — Proceeds from exercise of stock options ​ 11,969 ​ 30,622 ​ 16,010 Dividends paid to common stockholders ​ ​ ( 40,356 ) ​ ​ ( 29,362 ) ​ ​ ( 28,552 ) Dividends paid to preferred stockholders ​ ( 6,394 ) ​ ( 13,649 ) ​ ( 10,020 ) Tax payments for equity award issuances ​ ( 5,847 ) ​ ( 3,974 ) ​ ( 1,433 ) Contributions from noncontrolling interests ​ ​ — ​ ​ — ​ ​ 840 Distributions to noncontrolling interests ​ ( 5,942 ) ​ ( 2,420 ) ​ ( 870 ) Other ​ ( 3,631 ) ​ ( 1,977 ) ​ ( 526 ) Net cash used in financing activities ​ ( 180,526 ) ​ ( 43,461 ) ​ ( 34,574 ) Effect of exchange rate changes on cash and cash equivalents ​ ( 231 ) ​ 386 ​ 53 Change in cash and cash equivalents ​ ( 59,594 ) ​ 102,293 ​ ( 5,347 ) Cash and cash equivalents at beginning of period ​ 130,204 ​ 27,911 ​ 33,258 Cash and cash equivalents at end of period ​ $ 70,610 ​ $ 130,204 ​ $ 27,911 ​ See accompanying notes. ​ ​ 54 Table of Contents ​ Papa John’s International, Inc. and Subsidiaries Notes to Consolidated Financial Statements ​ 1. Description of Business ​ Papa John’s International, 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 under the trademark “Papa John’s,” in 50 countries and territories as of December 26, 2021. Our revenues are derived from retail sales of pizza and other food and beverage products to the general public by Company-owned restaurants, franchise royalties and sales of franchise and development rights, printing and promotional items and information systems equipment, and software and related services. We generated revenues from the operation of our Quality Control Centers (“QC Centers”) which supply pizza sauce, dough, food products, paper products, smallwares and cleaning supplies to restaurants. We also derived revenue from contributions received by our national marketing funds. ​ 2. Significant Accounting Policies ​ Principles of Consolidation ​ The accompanying Consolidated Financial Statements include the accounts of Papa John’s International, Inc. and its subsidiaries. All intercompany balances and transactions have been eliminated. ​ Fiscal Year ​ Our fiscal year ends on the last Sunday in December of each year. All fiscal years presented consist of 52 weeks. ​ Use of Estimates ​ The preparation of Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the Consolidated Financial Statements and accompanying notes. Significant items that are subject to such estimates and assumptions include the allowance for credit losses on accounts and notes receivable, intangible assets, contract assets and contract liabilities including the customer loyalty program obligation, right-of-use assets and lease liabilities, gift card breakage, insurance reserves and tax reserves. Although management bases its estimates on historical experience and assumptions that are believed to be reasonable under the circumstances, actual results could significantly differ from these estimates. ​ Revenue Recognition ​ Revenue is measured based on consideration specified in contracts with customers and excludes waivers or incentives and amounts collected on behalf of third parties, primarily sales tax. The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a customer. Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by the Company from a customer, are excluded from revenue. Delivery costs, including freight associated with our domestic commissary and other sales, are accounted for as fulfillment costs and are included in operating costs. ​ The following describes principal activities, separated by major product or service, from which the Company generates its revenues: ​ Domestic Company-owned Restaurant Sales ​ The domestic Company-owned restaurants principally generate revenue from retail sales of high-quality pizza, Papadias, which are flatbread-style sandwiches, and side items including breadsticks, cheesesticks, chicken poppers and wings, dessert items and canned or bottled beverages. Revenues from Company-owned restaurants are recognized when the products are delivered to or carried out by customers. 55 Table of Contents Our North American customer loyalty program, Papa Rewards, is a spend-based program that rewards customers with points for each purchase. Papa Rewards points are accumulated and redeemed for dollar off discounts (“Papa Dough”) to be used on future purchases within a six-month expiration window. The accrued liability in the Consolidated Balance Sheets, and corresponding reduction of Company-owned restaurant sales in the Consolidated Statements of Operations, is for the estimated reward redemptions at domestic Company-owned restaurants based upon estimated redemption patterns. The liability related to Papa Rewards is calculated using the estimated redemption value for which the points and accumulated rewards are expected to be redeemed. Revenue is recognized when the customer redeems the Papa Dough reward and when the points or Papa Dough reward expires. ​ Franchise Royalties and Fees ​ Franchise royalties, which are based on a percentage of franchise restaurant sales, are recognized as sales occur. Any royalty reductions, including waivers or those offered as part of a new store development incentive or as incentive for other behaviors, including acceleration of restaurant remodels or equipment upgrades, are recognized at the same time as the related royalty, as they are not separately distinguishable from the full royalty rate. Our current standard franchise agreement requires the franchisee to pay a royalty fee of 5 % of sales, and the majority of our existing franchised restaurants have a 5 % contractual royalty rate in effect. Incentives offered from time to time, including new store incentives, will reduce the contractual royalty rate paid. Franchise royalties are billed on a monthly basis. ​ The majority of initial franchise license fees and area development exclusivity fees are from international locations. Initial franchise license fees are billed at the store opening date. Area development exclusivity fees are billed upon execution of the development agreements which grant the right to develop franchised restaurants in future periods in specific geographic areas. Area development exclusivity fees are included in Deferred revenue in the Consolidated Balance Sheets and allocated on a pro rata basis to all stores opened under that specific development agreement. The pre-opening services provided to franchisees do not contain separate and distinct performance obligations from the franchise right; thus, the fees collected will be amortized on a straight-line basis beginning at the store opening date through the term of the franchise agreement, which is typically 10 years . Franchise license renewal fees for both domestic and international locations, which generally occur every 10 years , are billed before the renewal date. Fees received for future license renewal periods are included in deferred revenue in the Consolidated Balance Sheets and amortized over the life of the renewal period. ​ The Company offers various incentive programs for franchisees including royalty incentives, new restaurant opening incentives (i.e. development incentives) and other support initiatives. Royalties and franchise fees sales are reduced to reflect any royalty incentives earned or granted under these programs that are in the form of discounts. ​ Commissary Revenues ​ Commissary revenues are comprised of food and supplies sold to franchised restaurants and are recognized as revenue upon shipment of the related products to the franchisees. Payments are generally due within 30 days. ​ As noted above, there are various incentive programs available to franchisees related to new restaurant openings including discounts on initial commissary orders and new store equipment incentives, at substantially no cost to franchisees. Commissary revenues are reduced to reflect incentives in the form of direct discounts on initial commissary orders. The new store equipment incentive is also recorded as a reduction of commissary sales over the term of the incentive agreement, which is generally three to five years . ​ Other Revenues ​ Franchise Marketing Fund revenues represent a required established percentage of monthly restaurant sales collected by Papa John’s Marketing Fund, Inc. (“PJMF”), which is our national marketing fund, and various other international and domestic marketing funds (“Co-op” or “Co-operative” Funds) where we have determined for purposes of accounting that we have control over the significant activities of the funds. PJMF funds its operations with ongoing financial support and contributions from domestic Papa John’s restaurants, of which approximately 80 % are franchised restaurant members. Contributions are based on a percentage of monthly restaurant sales and are billed monthly. When we are determined to be the principal in these arrangements, advertising fund contributions and expenditures are reported on a gross basis in the 56 Table of Contents Consolidated Statements of Operations. Our obligation related to these funds is to develop and conduct advertising activities in a specific country, region, or market, including the placement of electronic and print materials. ​ There are no expiration dates and we do not deduct non-usage fees from outstanding gift cards. While the Company and the franchisees continue to honor all gift cards presented for payment, the likelihood of redemption may be determined to be remote for certain cards due to long periods of inactivity. In these circumstances, the Company recognizes breakage revenue for amounts not subject to unclaimed property laws. Based upon our analysis of historical gift card redemption patterns, we can reasonably estimate the amount of gift cards for which redemption is remote. Breakage revenue is recognized over time in proportion to estimated redemption patterns as Other revenues. Commissions on gift cards sold by third parties are recorded as a reduction to Deferred revenue and a reduction to Other revenues based upon estimated redemption patterns. ​ Fees for information services, including software maintenance fees, help desk fees, centralized call center fees, and online ordering fees are recognized as revenue as such services are provided and are included in Other revenues. ​ Revenues for printing, promotional items, and direct mail marketing services are recognized upon shipment of the related products to franchisees and other customers. Direct mail advertising discounts are also periodically offered by our Preferred Marketing Solutions subsidiary. Other revenues are reduced to reflect these advertising discounts. ​ Rental income, primarily derived from properties leased by the Company and subleased to franchisees in the United Kingdom, is recognized on a straight-line basis over the respective operating lease terms. ​ Advertising and Related Costs ​ Domestic Company-owned advertising and related costs of $ 61.7 million, $ 56.7 million and $ 54.3 million in 2021, 2020, and 2019, respectively, include the costs of domestic Company-owned local restaurant activities such as mail coupons, door hangers and promotional items and advertising activities administered through PJMF and various local market cooperative advertising funds. PJMF is responsible for developing and conducting marketing and advertising for the domestic Papa John’s system. The Co-op Funds are responsible for developing and conducting advertising activities in a specific market, including the placement of electronic and print materials developed by PJMF. During 2020 and 2019, the Company recorded additional amounts of $ 15.0 million and $ 27.5 million, respectively, to PJMF, representing incremental discretionary marketing fund investments in excess of contractual Company-owned restaurant-level contributions as part of our temporary financial support package to our franchisees. The marketing fund investments are included in General and administrative expenses within the accompanying Consolidated Statements of Operations. ​ Leases ​ Lease expense is recognized on a straight-line basis over the expected life of the lease term for operating leases, whereas lease expense follows an accelerated expense recognition for finance leases. A lease term often includes option periods, available at the inception of the lease. Lease expense is comprised of operating and finance lease costs, short-term lease costs, and variable lease costs, which primarily include common area maintenance, real estate taxes, and insurance for the Company’s real estate leases. Lease costs also include variable rent, which is primarily related to the Company’s supply chain tractor and trailer leases that are based on a rate per mile. ​ Stock-Based Compensation ​ Compensation expense for equity grants is estimated on the grant date, net of projected forfeitures, and is recognized over the vesting period (graded vesting over three years ). Restricted stock is valued based on the market price of the Company’s shares on the date of grant. Stock options are valued using a Black-Scholes option pricing model. Our specific assumptions for estimating the fair value of options are included in Note 20. ​ 57 Table of Contents Cash Equivalents ​ Cash equivalents consist of highly liquid investments with maturity of three months or less at date of purchase. These investments are carried at cost, which approximates fair value. ​ Accounts Receivable ​ Substantially all accounts receivable is due from franchisees for purchases of food, paper products, point of sale equipment, printing and promotional items, information systems and related services, marketing and royalties. Credit is extended based on an evaluation of the franchisee’s financial condition and collateral is generally not required. An allowance for credit losses is an estimate, even if remote, based upon historical account write-off trends, facts about the current financial condition of the debtor, forecasts of future operating results based upon current trends of select operating metrics and macroeconomic factors. Account balances are charged off against the allowance after recovery efforts have ceased. ​ Notes Receivable ​ The Company has provided financing to select domestic and international franchisees principally for use in the construction and development of their restaurants and for the purchase of restaurants from the Company or other franchisees. Most notes receivable bear interest at fixed or floating rates and are generally secured by the assets of each restaurant and the ownership interests in the franchise. The Company has provided long-term financing to certain franchisees with royalty payment plans. We establish an allowance for credit losses for franchisee notes receivables to reduce the outstanding notes receivable to their net realizable values based on a review of each franchisee’s economic performance and market conditions after consideration of the fair value of our underlying collateral rights (e.g., underlying franchisee business, property and equipment) and any guarantees. Note balances are charged off against the allowance after recovery efforts have ceased. ​ Interest income recorded on franchisee loans was approximately $ 1.9 million in 2021, $ 2.1 million in 2020 and $ 0.8 million in 2019 and is reported in Investment income in the accompanying Consolidated Statements of Operations. ​ Inventories ​ Inventories, which consist of food products, paper goods and supplies, smallwares, and printing and promotional items, are stated at the lower of cost, determined under the first-in, first-out (FIFO) method, or net realizable value. ​ Property and Equipment ​ Property and equipment are stated at cost. Depreciation is recorded using the straight-line method over the estimated useful lives of the assets (generally five to ten years for restaurant, commissary and other equipment, twenty to forty years for buildings and improvements, and five years for technology and communication assets). Leasehold improvements are amortized over the shorter of their estimated useful lives or the terms of the respective leases, including the first renewal period (generally five to ten years ). ​ Depreciation expense was $ 43.0 million in 2021, $ 46.6 million in 2020 and $ 45.9 million in 2019. ​ Deferred Costs ​ We capitalize certain information systems development and related costs that meet established criteria. Amounts capitalized, which are included in property and equipment, are amortized principally over periods not exceeding five years upon completion of the related information systems project. Total costs capitalized were approximately $ 4.1 million in 2021, $ 3.3 million in 2020 and $ 3.5 million in 2019. The unamortized information systems development costs approximated $ 10.5 million as of December 26, 2021 and December 27, 2020. ​ 58 Table of Contents Intangible Assets — Goodwill ​ We evaluate goodwill annually in the fourth quarter or whenever we identify certain triggering events or circumstances that would more-likely-than-not reduce the fair value of a reporting unit below its carrying amount. Such tests are completed separately with respect to the goodwill of each of our reporting units, which includes our domestic Company-owned restaurants, United Kingdom (“PJUK”), China, and Preferred Marketing Solutions operations. We may perform a qualitative assessment or move directly to the quantitative assessment for any reporting unit in any period if we believe that it is more efficient or if impairment indicators exist. ​ We elected to perform a qualitative assessment for all reporting units in the fourth quarter of 2021. As a result of our qualitative analyses, we determined that it was more-likely-than-not that the fair values of our reporting units were greater than their carrying amounts. Subsequent to completing our goodwill impairment tests, no indicators of impairment were identified. See Note 11 for additional information. ​ Deferred Income Tax Accounts and Tax Reserves ​ We are subject to income taxes in the United States and several foreign jurisdictions. Significant judgment is required in determining the provision for income taxes and the related assets and liabilities. The provision for income taxes includes income taxes paid, currently payable or receivable and those deferred. ​ Deferred tax assets and liabilities are determined based on differences between financial reporting and tax basis of assets and liabilities and are measured using enacted tax rates and laws that are expected to be in effect when the differences reverse. Deferred tax assets are also recognized for the estimated future effects of tax attribute carryforwards (e.g., net operating losses, capital losses, and foreign tax credits). The effect on deferred taxes of changes in tax rates is recognized in the period in which the new tax rate is enacted. Valuation allowances are established when necessary on a jurisdictional basis to reduce deferred tax assets to the amounts we expect to realize. ​ Tax authorities periodically audit the Company. We record reserves and related interest and penalties for identified exposures as income tax expense. We evaluate these issues and adjust for events, such as statute of limitations expirations, court rulings or audit settlements, which may impact our ultimate payment for such exposures. See Note 17 for additional information. ​ Insurance Reserves ​ Our insurance programs for workers’ compensation, owned and non-owned automobiles, general liability and property insurance coverage provided to our employees are funded by the Company up to certain retention limits which range up to $ 1.0 million. ​ Losses are accrued based upon undiscounted estimates of the liability for claims incurred and for events that have occurred but have not been reported using certain third-party actuarial projections and our claims loss experience. The determination of the recorded insurance reserves is highly judgmental and complex due to the significant uncertainty in the potential value of reported claims and the number and potential value of incurred but not reported claims, the application of significant judgment in making those estimates and the use of various actuarial valuation methods. The estimated insurance claims losses could be significantly affected should the frequency or ultimate cost of claims differ significantly from historical trends used to estimate the insurance reserves recorded by the Company. The Company records estimated losses above retention within its reserve with a corresponding receivable for expected amounts due from insurance carriers. ​ As of December 26, 2021, our insurance reserve was $ 88.1 million as compared to $ 82.0 million as of December 27, 2020 primarily related to auto liability and workers’ compensation claims. Our reserves include claim costs above our retention that have a corresponding receivable. Our insurance receivable for claims above retention totaled $ 48.1 million and $ 32.2 million as of December 26, 2021 and December 27, 2020, respectively. Of these amounts, approximately $ 18.7 million and $ 12.7 million were recorded in Prepaid expenses and other current assets, and $ 29.4 million and $ 19.5 million were recorded in Other assets on the Consolidated Balance Sheets as of December 26, 2021 and December 27, 2020, respectively. 59 Table of Contents Derivative Financial Instruments ​ We recognize all derivatives on the balance sheet at fair value. At inception and on an ongoing basis, we assess whether each derivative that qualifies for hedge accounting continues to be highly effective in offsetting changes in the cash flows of the hedged item. If the derivative meets the hedge criteria as defined by certain accounting standards, depending on the nature of the hedge, changes in the fair value of the derivative are either offset against the change in fair value of assets, liabilities or firm commitments through earnings or recognized in accumulated other comprehensive income/(loss) until the hedged item is recognized in earnings. During 2021, our interest rate swaps were de-designated as cash flow hedges following the issuance of our 3.875 % fixed senior notes. For these de-designated hedges, the portion of gains or losses on the derivative instruments previously recognized in accumulated other comprehensive loss will be reclassified into earnings as adjustments to interest expense on a straight-line basis over the remaining life of the originally hedged transactions. ​ We recognized income (loss) of $ 6.8 million ($ 5.3 million after tax) in 2021, ($ 7.5 ) million (($ 5.8 ) million after tax) in 2020, and ($ 10.8 ) million (($ 8.3 ) million after tax) in 2019 in other comprehensive income (loss) for the net change in the fair value of our interest rate swaps. See Note 12 for additional information on our debt and credit arrangements. ​ Noncontrolling Interests ​ At December 26, 2021, the Company had four joint ventures consisting of 188 restaurants, which have noncontrolling interests. Consolidated net income is required to be reported separately at amounts attributable to both the Company and the noncontrolling interests. Additionally, disclosures are required to clearly identify and distinguish between the interests of the Company and the interests of the noncontrolling owners, including a disclosure on the face of the Consolidated Statements of Operations of income attributable to the noncontrolling interest holder. ​ The following summarizes the redemption feature, location and related accounting within the Consolidated Balance Sheets for these four joint venture arrangements: ​ ​ ​ ​ ​ ​ ​ ​ Type of Joint Venture Arrangement Location within the Consolidated Balance Sheets Recorded Value ​ ​ ​ ​ ​ Joint ventures with no redemption feature Permanent equity Carrying value Joint ventures with option to require the Company to purchase the noncontrolling interest - not currently redeemable or redemption not probable Temporary equity Carrying value ​ See Note 9 for additional information regarding noncontrolling interests. ​ Foreign Currency Translation ​ The local currency is the functional currency for each of our foreign subsidiaries. Revenues and expenses are translated into U.S. dollars using monthly average exchange rates, while assets and liabilities are translated using year-end exchange rates and historical rates. The resulting translation adjustments are included as a component of accumulated other comprehensive loss, net of income taxes. ​ 60 Table of Contents Recent Accounting Pronouncements ​ Reference Rate Reform – Hedging ​ In March 2020, the FASB issued ASU 2020-04, “ Facilitation of the Effects of Reference Rate Reform on Financial Reporting. ” The ASU provides optional expedients and exceptions for applying guidance on contract modifications and hedge accounting related to the expected market transition from LIBOR and other interbank offered rates to alternative reference rates if certain criteria are met. This guidance was effective beginning on March 12, 2020, and the Company may elect to apply the amendments prospectively through December 31, 2022. The hedge accounting expedients may be applied, on an individual hedging relationship basis, to eligible hedge accounting relationships that existed as of the beginning of the effective date of this guidance, and to new eligible hedging relationships entered into after the effective date of this guidance; however, those expedients generally cannot be applied to hedging relationships for periods after December 31, 2022. The Company adopted certain optional hedge accounting expedients provided by ASU 2020-04 during fiscal 2020. The adoption of this guidance did not have a material impact on the Company’s consolidated financial position, results of operations, or cash flows. ​ ​ 61 Table of Contents 3. Leases ​ The Company has significant leases that include most domestic Company-owned restaurant and commissary locations. Other domestic leases include tractor and trailer leases used by our distribution subsidiary as well as commissary equipment. Additionally, the Company leases a significant number of restaurants within the United Kingdom; these restaurants are then subleased to the franchisees. The Company’s leases have terms as follows: ​ ​ ​ ​ Average lease term Domestic Company-owned restaurants Five years , plus at least one renewal United Kingdom franchise-owned restaurants 15 years Domestic commissary locations 10 years , plus at least one renewal Domestic and international tractors and trailers Five to seven years Domestic and international commissary and office equipment Three to five years ​ The Company determines if an arrangement is or contains a lease at contract inception and recognizes a right-of-use asset and a lease liability at the lease commencement date. Leases with an initial term of 12 months or less but greater than one month are not recorded on the balance sheet for select asset classes. The lease liability is measured at the present value of future lease payments as of the lease commencement date. The right-of-use asset recognized is based on the lease liability adjusted for prepaid and deferred rent and unamortized lease incentives. An operating lease right-of-use asset is amortized on a straight-line basis over the lease term and is recognized as a single lease cost against the operating lease liability. A finance lease right-of-use asset is amortized on a straight-line basis, with interest costs reported separately, over the lesser of the useful life of the leased asset or lease term. Operating lease expense is recognized on a straight-line basis over the lease term and is included in Operating costs or General and administrative expenses. Variable lease payments are expensed as incurred. ​ The Company uses its incremental borrowing rates as the discount rate for its leases, which is equal to the rate of interest the Company would have to pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms. The lease terms for all the Company’s leases include the contractually obligated period of the leases, plus any additional periods covered by Company options to extend the leases that the Company is reasonably certain to exercise. ​ Certain leases provide that the lease payments may be increased annually based on the fixed rate terms or adjustable terms such as the Consumer Price Index. Future base rent escalations that are not contractually quantifiable as of the lease commencement date are not included in our lease liability. ​ The following schedule details the total right-of-use assets and lease liabilities on the Consolidated Balance Sheets as of December 26, 2021 and December 27, 2020 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 26, ​ ​ December 27, Leases ​ Classification ​ ​ 2021 ​ ​ 2020 Assets ​ ​ ​ ​ ​ ​ ​ ​ Finance lease assets, net ​ Finance lease right-of-use assets, net ​ $ 20,907 ​ $ 16,840 Operating lease assets, net ​ Operating lease right-of-use assets ​ ​ 176,256 ​ ​ 148,110 Total lease assets ​ ​ ​ $ 197,163 ​ $ 164,950 Liabilities ​ ​ ​ ​ ​ ​ ​ ​ Current finance lease liabilities ​ Current finance lease liabilities ​ $ 4,977 ​ $ 3,545 Current operating lease liabilities ​ Current operating lease liabilities ​ ​ 22,543 ​ ​ 23,538 Noncurrent finance lease liabilities ​ Long-term finance lease liabilities ​ ​ 16,580 ​ ​ 13,531 Noncurrent operating lease liabilities ​ Long-term operating lease liabilities ​ ​ 160,672 ​ ​ 124,666 Total lease liabilities ​ ​ ​ $ 204,772 ​ $ 165,280 ​ 62 Table of Contents Lease expense for lease payments is recognized on a straight-line basis over the lease term. Lease expense is comprised of operating and finance lease costs, short-term lease costs, and variable lease costs, which primarily include common area maintenance, real estate taxes, and insurance for the Company’s real estate leases. Lease costs also include variable rent, which is primarily related to the Company’s supply chain tractor and trailer leases that are based on a rate per mile. Lease expense for the years ended December 26, 2021 and December 27, 2020 are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ Year Ended (in thousands) ​ ​ December 26, 2021 ​ ​ December 27, 2020 Finance lease: ​ ​ ​ ​ ​ ​ Amortization of right-of-use assets ​ $ 4,980 ​ $ 2,342 Interest on lease liabilities ​ ​ 1,140 ​ ​ 606 Operating lease: ​ ​ ​ ​ ​ ​ Operating lease cost ​ ​ 43,072 ​ ​ 40,026 Short-term lease cost ​ ​ 2,032 ​ ​ 3,960 Variable lease cost ​ ​ 8,572 ​ ​ 6,503 Total lease costs ​ $ 59,796 ​ $ 53,437 Sublease income ​ ​ ( 12,039 ) ​ ​ ( 10,407 ) Total lease costs, net of sublease income ​ $ 47,757 ​ $ 43,030 ​ Future minimum lease payments under contractually-obligated leases and associated sublease income as of December 26, 2021 are as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year ​ Finance Lease Costs ​ Operating Lease Costs ​ Expected Sublease Income 2022 ​ $ 5,969 ​ $ 33,323 ​ $ 10,704 2023 ​ ​ 5,919 ​ ​ 32,174 ​ ​ 10,515 2024 ​ ​ 4,872 ​ ​ 31,069 ​ ​ 10,302 2025 ​ ​ 3,242 ​ ​ 26,794 ​ ​ 9,835 2026 ​ ​ 2,265 ​ ​ 22,727 ​ ​ 9,107 Thereafter ​ ​ 1,748 ​ ​ 96,187 ​ ​ 44,700 Total future minimum lease payments ​ $ 24,015 ​ $ 242,274 ​ $ 95,163 Less imputed interest ​ ​ ( 2,458 ) ​ ​ ( 59,059 ) ​ ​ — Total present value of lease liabilities ​ $ 21,557 ​ $ 183,215 ​ $ 95,163 ​ Lessor Operating Leases We sublease certain retail space to our franchisees in the United Kingdom which are primarily operating leases. At December 26, 2021, we leased and subleased approximately 425 Papa John’s restaurants to franchisees in the United Kingdom. The initial lease terms on the franchised sites in the United Kingdom are generally 15 years . The Company has the option to negotiate an extension toward the end of the lease term at the landlord’s discretion. Rental income, primarily derived from properties leased and subleased to franchisees in the United Kingdom, is recognized on a straight-line basis over the respective operating lease terms. 63 Table of Contents Lease Guarantees As a result of assigning our interest in obligations under property leases as a condition of the refranchising of certain restaurants, we are contingently liable for payment of approximately 70 domestic leases. These leases have varying terms, the latest of which expires in 2036. As of December 26, 2021, the estimated maximum amount of undiscounted payments the Company could be required to make in the event of nonpayment by the primary lessees was $ 11.5 million. This contingent liability is not included in the Consolidated Balance Sheet or future minimum lease obligation. The fair value of the guarantee is not material. There were no leases recorded between related parties. Supplemental Cash Flow & Other Information Supplemental cash flow information related to leases for the years ended December 26, 2021 and December 27, 2020 are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended (in thousands) ​ December 26, 2021 ​ December 27, 2020 ​ December 29, 2019 Cash paid for amounts included in the measurement of lease liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating cash flows from finance leases ​ $ 1,140 ​ $ 606 ​ $ 269 Financing cash flows from finance leases ​ ​ 4,566 ​ ​ 2,139 ​ ​ 781 Operating cash flows from operating leases (a) ​ ​ 38,530 ​ ​ 37,113 ​ ​ 40,152 Right-of-use assets obtained in exchange for new finance lease liabilities ​ ​ 9,486 ​ ​ 9,152 ​ ​ 10,199 Right-of-use assets obtained in exchange for new operating lease liabilities (b) ​ ​ 64,420 ​ ​ 30,266 ​ ​ 20,903 Cash received from sublease income ​ ​ 11,597 ​ ​ 10,545 ​ ​ 10,139 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted-average remaining lease term (in years): ​ ​ ​ ​ ​ ​ ​ ​ ​ Finance leases ​ ​ 4.51 ​ ​ 4.71 ​ ​ 4.75 Operating leases ​ ​ 8.30 ​ ​ 7.00 ​ ​ 7.00 Weighted-average discount rate: ​ ​ ​ ​ ​ ​ ​ ​ ​ Finance leases ​ ​ 5.08 % ​ ​ 5.34 % ​ ​ 6.38 % Operating leases ​ ​ 6.20 % ​ ​ 6.65 % ​ ​ 6.94 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (a) Included within the change in Other assets and liabilities within the Consolidated Statements of Cash Flows offset by non-cash operating lease right-of-use asset amortization and lease liability accretion. (b) Includes right-of-use assets of approximately $ 21.8 million for the year ended December 26, 2021 associated with the lease commencement of our Atlanta, Georgia corporate office. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 64 Table of Contents 4. Papa John’s Marketing Fund, Inc. ​ PJMF, which is a consolidated variable interest entity where the Company has been identified as the primary beneficiary, collects a percentage of revenues from Company-owned and franchised restaurants in the United States, for the purpose of designing and administering advertising and promotional programs for all participating domestic restaurants. Contributions and expenditures are reported on a gross basis in the Consolidated Statements of Operations within Other revenues and Other expenses. PJMF also has a wholly-owned subsidiary, Papa Card, Inc., which administers the Company’s gift card programs. ​ Assets and liabilities of PJMF, which are utilized solely for the Company’s advertising and promotional programs, were as follows in the Consolidated Balance Sheets (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 26, ​ December 27, ​ ​ 2021 ​ 2020 ​ ​ ​ ​ ​ ​ ​ Assets ​ ​ ​ ​ ​ ​ Current assets: ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ $ 24,481 ​ $ 9,394 Accounts receivable, net ​ ​ 14,150 ​ ​ 23,711 Income tax receivable ​ ​ 300 ​ ​ 192 Prepaid expenses and other current assets ​ ​ 1,718 ​ ​ 1,914 Total current assets ​ ​ 40,649 ​ ​ 35,211 Deferred income taxes ​ ​ 614 ​ ​ 588 Total assets ​ $ 41,263 ​ $ 35,799 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Liabilities ​ ​ ​ ​ ​ ​ Current liabilities: ​ ​ ​ ​ ​ ​ Accounts payable ​ $ 140 ​ $ 5,429 Income and other taxes payable ​ ​ 2 ​ ​ 2 Accrued expenses and other current liabilities ​ ​ 40,154 ​ ​ 32,578 Current deferred revenue ​ ​ 4,317 ​ ​ 3,938 Total current liabilities ​ ​ 44,613 ​ ​ 41,947 Deferred revenue ​ ​ 2,478 ​ ​ 2,419 Total liabilities ​ $ 47,091 ​ $ 44,366 ​ ​ 5. Revenue Recognition ​ Contract Balances ​ Our contract liabilities primarily relate to franchise fees, unredeemed gift card liabilities, and loyalty program obligations, which we classify as Deferred revenue on the Consolidated Balance Sheets. During the years ended December 26, 2021 and December 27, 2020, the Company recognized $ 36.3 million and $ 33.2 million in revenue, respectively, related to deferred revenue. ​ The following table includes a breakout of contract liability balances (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Contract Liabilities ​ ​ ​ December 26, 2021 ​ ​ December 27, 2020 ​ ​ Change Franchise fees and unredeemed gift card liabilities ​ $ 20,410 ​ $ 19,890 ​ $ 520 Customer loyalty program obligations ​ ​ 15,136 ​ ​ 13,364 ​ ​ 1,772 Total contract liabilities ​ $ 35,546 ​ $ 33,254 ​ $ 2,292 ​ ​ ​ ​ Our contract assets consist primarily of equipment incentives provided to franchisees. Equipment incentives are related to the future value of commissary revenue the Company will receive over the term of the incentive agreement. As of 65 Table of Contents December 26, 2021 and December 27, 2020, the contract assets were approximately $ 5.8 million and $ 5.1 million, respectively. For the years ended December 26, 2021 and December 27, 2020, revenue was reduced approximately $ 3.0 million and $ 3.2 million, respectively, for the amortization of contract assets over the applicable contract terms. Contract assets are included in Prepaid expenses and other current assets and Other assets on the Consolidated Balance Sheets. ​ Transaction Price Allocated to the Remaining Performance Obligations ​ The following table (in thousands) includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied at the end of the reporting period. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Performance Obligations by Period ​ ​ Less than 1 Year ​ 1-2 Years ​ 2-3 Years ​ 3-4 Years ​ 4-5 Years ​ Thereafter ​ Total Franchise fees ​ $ 2,236 ​ $ 1,979 ​ $ 1,758 ​ $ 1,530 ​ $ 1,255 ​ $ 2,343 ​ $ 11,101 ​ Approximately $ 2.5 million of area development fees related to unopened stores and international unearned royalties are included in Deferred revenue. Timing of revenue recognition is dependent upon the timing of store openings and franchisees’ revenues. Gift card liabilities of approximately $ 6.8 million, included in Deferred revenue, will be recognized in Company-owned restaurant revenues when gift cards are redeemed. The Company will recognize redemption fee revenue in Other revenues when cards are redeemed at franchised restaurant locations. ​ The Company applies the practical expedient in ASC 606-10-50-14 and does not disclose information about remaining performance obligations that have original expected durations of one year or less. ​ ​ 6. Stockholders’ Deficit ​ Shares Authorized and Outstanding ​ The Company has authorized 5.0 million shares of preferred stock (of which no ne were issued or outstanding at December 26, 2021 or December 27, 2020, respectively) and 100.0 million shares of common stock as of December 26, 2021 and December 27, 2020, respectively. The Company’s outstanding shares of common stock, net of repurchased common stock, were 35.8 million shares at December 26, 2021 and 32.5 million shares at December 27, 2020. ​ On May 11, 2021, the Company entered into a Share Repurchase Agreement with certain funds affiliated with, or managed by, Starboard Value LP (collectively, “Starboard”), pursuant to which (i) the Company repurchased from Starboard 78,387 shares of the Series B Convertible Preferred Stock, par value $ 0.01 per share, of the Company (“Series B Preferred Stock”) and (ii) Starboard converted the remaining 171,613 shares of Series B Preferred Stock that it owned into 3,458,360 shares of the Company’s common stock pursuant to the terms of the Certificate of Designation of the Series B Preferred Stock. On June 3, 2021, the Company entered into agreements with certain franchisee investors to repurchase 1,000 shares of the outstanding Series B Preferred Stock and convert the remaining 1,530 shares of Series B Preferred Stock into 30,769 shares of common stock. The Company paid Starboard and the franchisee investors aggregate one-time cash payments of $ 188.6 million for the repurchase and conversion of all of the outstanding shares of Series B Preferred Stock. The excess of the cash payment over the carrying value of the respective Series B Preferred Stock redeemed resulted in $ 109.9 million of dividends on redemption of Series B Preferred Stock in the Consolidated Statement of Operations, which reduced net income attributable to common stockholders and also reduced diluted earnings per share by $ 3.10 for the year ended December 26, 2021. ​ On August 3, 2021, the Company filed a Certificate of Elimination (the “Certificate of Elimination”) with the Secretary of State of the State of Delaware to eliminate the Series B Preferred Stock. Effective upon filing, the Certificate of Elimination eliminated from the Company’s Amended and Restated Certificate of Incorporation all matters set forth in the Certificate of Designation with respect to the Series B Preferred Stock. The shares that were designated to such series were returned to the status of authorized but unissued shares of preferred stock, par value $ 0.01 per share, of the Company, without designation as to series. As a result of the repurchase and conversion, there were no shares of Series B Preferred Stock authorized or outstanding at December 26, 2021 compared to 260,000 and 252,530 shares of Series B Preferred 66 Table of Contents Stock authorized and outstanding, respectively, at December 27, 2020. The Series B Preferred Stock was classified as temporary equity on the Consolidated Balance Sheet as of December 27, 2020. ​ The following table summarizes changes to our Series B Preferred Stock (in thousands): ​ ​ ​ ​ ​ Balance at December 29, 2019 ​ $ 251,133 Tax deduction on issuance costs ​ ​ 702 Accretion ​ ​ 66 Balance at December 27, 2020 ​ $ 251,901 Accretion ​ ​ 629 Redemption ​ ​ ( 252,530 ) Balance at December 26, 2021 ​ $ — ​ Share Repurchase Program ​ On October 28, 2021, our Board of Directors approved a share repurchase program with an indefinite duration for up to $ 425.0 million of the Company’s common stock. This share repurchase program operated alongside our previous $ 75.0 million share repurchase authorization, which began on November 4, 2020 and expired on December 26, 2021. ​ The following table summarizes our repurchase activity for the years ended December 26, 2021 and December 27, 2020, respectively (none in 2019): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Maximum Dollar ​ ​ Total ​ ​ Average ​ ​ Aggregate ​ ​ Value of Shares ​ ​ Number ​ ​ Price ​ ​ Cost of ​ ​ that May Yet Be (in thousands, except average price per share) ​ of Shares ​ ​ Paid per ​ ​ Shares ​ ​ Purchased Under the Year Ended ​ Purchased ​ Share ​ ​ Purchased ​ ​ Plans or Programs December 26, 2021 ​ 594 ​ $ 121.96 ​ $ 72,499 ​ $ 424,800 December 27, 2020 ​ 32 ​ $ 83.90 ​ $ 2,701 ​ $ 72,299 ​ Subsequent to year-end, we acquired an additional 109,000 shares at an aggregate cost of $ 13.3 million. Approximately $ 411.5 million remained available under the Company’s share repurchase program as of February 17, 2022. ​ The timing and volume of share repurchases under the Company’s share repurchase programs may be executed at the discretion of management on an opportunistic basis, subject to market and business conditions, regulatory requirements and other factors, or pursuant to trading plans or other arrangements. Repurchases under the programs may be made through open market, block, and privately negotiated transactions, including Rule 10b5-1 plans, at times and in such amounts as management deems appropriate. Repurchases under the Company’s share repurchase programs may be commenced or suspended from time to time at the Company’s discretion without prior notice. Funding for the share repurchase programs will be provided through our credit facility, operating cash flow, stock option exercises and cash and cash equivalents. ​ Dividends ​ The Company recorded dividends of approximately $ 46.0 million for the year ended December 26, 2021 consisting of the following: ​ ● $ 40.4 million paid to common stockholders ( $ 1.15 per share); ● $ 3.0 million in preferred dividends on the Series B Preferred Stock ( 3.6 % of the investment per annum); ● $ 1.5 million of common stock deemed dividend distributions in conjunction with the repurchase and conversion of the Series B Preferred Stock; and ● $ 1.1 million in common stock “pass-through” dividends paid to Series B Preferred Stockholders on an as-converted basis ( $ 0.45 per share). ​ 67 Table of Contents The Company paid aggregate common stock dividends of $ 29.4 million and $ 28.6 million in 2020 and 2019, respectively. Additionally, the Company paid common stock “pass-through” dividends on an as-converted basis to Series B Preferred Stockholders of $ 4.6 million and $ 4.3 million, and preferred dividends on the Series B Preferred Stock of $ 9.1 million and $ 5.7 million, in 2020 and 2019, respectively. ​ On January 27, 2022 , our Board of Directors declared a first quarter dividend of $ 0.35 per share of common stock, representing an approximate $ 12.7 million aggregate dividend that was paid on February 18, 2022 to common stockholders of record as of the close of business on February 7, 2022 . The declaration and payment of any future dividends will be at the discretion of our Board of Directors. ​ ​ 68 Table of Contents 7. Earnings (Loss) per Share ​ We compute earnings (loss) per share using the two-class method. The two-class method requires an earnings allocation formula that determines earnings (loss) per share for common shareholders and participating security holders according to dividends declared and participating rights in undistributed earnings. The shares of Series B Preferred Stock, which were repurchased by the Company or converted into shares of common stock during the second quarter of 2021, and time-based restricted stock awards are participating securities because holders of such shares have non-forfeitable dividend rights and participate in undistributed earnings with common stock. Under the two-class method, total dividends provided to the holders of participating securities and undistributed earnings allocated to participating securities, are subtracted from net income attributable to the Company in determining net income (loss) attributable to common shareholders. Additionally, any accretion to the redemption value for the Series B Preferred Stock or cash payments in excess of their respective carrying values upon redemption was treated as a deemed dividend in the two-class earnings per share calculation. ​ Basic earnings (loss) per common share are computed by dividing net income (loss) attributable to common shareholders by the weighted-average common shares outstanding. Diluted earnings (loss) per common share are computed by dividing the net income (loss) attributable to common shareholders by the diluted weighted average common shares outstanding. Diluted weighted average common shares outstanding consist of basic weighted average common shares outstanding plus weighted average awards outstanding under our equity compensation plans, which are dilutive securities. ​ The calculations of basic earnings (loss) per common share and diluted earnings (loss) per common share for the years ended December 26, 2021, December 27, 2020 and December 29, 2019 are as follows (in thousands, except per share data): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2021 ​ 2020 2019 Basic earnings (loss) per common share ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income attributable to the Company ​ $ 120,016 ​ $ 57,932 ​ $ 4,866 Dividends on redemption of Series B Convertible Preferred Stock ​ ​ ( 109,852 ) ​ ​ — ​ ​ — Dividends paid to participating securities ​ ​ ( 6,091 ) ​ ​ ( 14,059 ) ​ ​ ( 12,499 ) Net income attributable to participating securities ​ — ​ ( 2,136 ) ​ — Net income (loss) attributable to common shareholders ​ $ 4,073 ​ $ 41,737 ​ $ ( 7,633 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic weighted average common shares outstanding ​ 35,007 ​ 32,421 ​ 31,632 Basic earnings (loss) per common share ​ $ 0.12 ​ $ 1.29 ​ $ ( 0.24 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Diluted earnings (loss) per common share ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income (loss) attributable to common shareholders ​ $ 4,073 ​ $ 41,737 ​ $ ( 7,633 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average common shares outstanding ​ 35,007 ​ 32,421 ​ 31,632 Dilutive effect of outstanding equity awards (a) ​ 330 ​ 296 ​ — Diluted weighted average common shares outstanding (b) ​ 35,337 ​ 32,717 ​ 31,632 Diluted earnings (loss) per common share ​ $ 0.12 ​ $ 1.28 ​ $ ( 0.24 ) ​ (a) Shares subject to options to purchase common stock with an exercise price greater than the average market price for the year were not included in the computation of diluted earnings per common share because the effect would have been antidilutive. The weighted average number of shares subject to antidilutive options was 100 in 2020 ( no ne in 2021 or 2019, respectively). (b) The Company had 252.5 shares of Series B Preferred Stock outstanding as of December 27, 2020 and December 29, 2019, respectively ( no ne as of December 26, 2021). For the fully diluted calculation, the Series B Preferred stock dividends were added back to net income (loss) attributable to common shareholders. The Company then applied the if-converted method to calculate dilution on the Series B Preferred Stock, which resulted in 5.0 million additional common shares. This calculation was anti-dilutive for both periods presented and as such was excluded. ​ See Note 20 for additional information regarding our equity awards, including restricted stock. ​ 69 Table of Contents 8. Fair Value Measurements and Disclosures ​ The Company determines the fair value of financial assets and liabilities based on the price that would be received to sell the asset or paid to transfer the liability to a market participant. Certain assets and liabilities are measured at fair value on a recurring basis and are required to be classified and disclosed in one of the following three categories: ​ ● Level 1: Quoted market prices in active markets for identical assets or liabilities. ● Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data. ● Level 3: Unobservable inputs that are not corroborated by market data. ​ Fair value is a market-based measurement, not an entity specific measurement. Considerable judgment is required to interpret market data to estimate fair value; accordingly, the fair values presented do not necessarily indicate what the Company or its debtholders could realize in a current market exchange. ​ Our financial assets and liabilities that were measured at fair value on a recurring basis as of December 26, 2021 and December 27, 2020 are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Carrying ​ Fair Value Measurements (in thousands) Value Level 1 Level 2 Level 3 December 26, 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Financial assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash surrender value of life insurance policies (a) ​ $ 41,904 ​ $ 41,904 ​ $ — ​ $ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Financial liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest rate swaps (b) ​ $ 5,536 ​ $ — ​ $ 5,536 ​ $ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 27, 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Financial assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash surrender value of life insurance policies (a) ​ $ 37,578 ​ $ 37,578 ​ $ — ​ $ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Financial liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest rate swaps (b) ​ $ 13,452 ​ $ — ​ $ 13,452 ​ $ — ​ (a) Represents life insurance policies held in our non-qualified deferred compensation plan. (b) The fair value of our interest rate swaps is based on the sum of all future net present value cash flows. The future cash flows are derived based on the terms of our interest rate swaps, as well as considering published discount factors, and projected London Interbank Offered Rates (“LIBOR”). ​ There were no transfers among levels within the fair value hierarchy during fiscal 2021 or 2020. ​ The fair value of certain assets and liabilities approximates carrying value because of the short-term nature of the accounts, including cash and cash equivalents, accounts receivable, net of allowances, and accounts payable. The carrying value of notes receivable, net of allowances, also approximates fair value. The Company’s revolving credit facilities and term debt under the Company’s credit agreement approximate carrying value due to their variable market-based interest rate. The Company’s 3.875 % senior notes are classified as a Level 2 fair value measurement since the Company estimates the fair value by using recent trading transactions, and have the following estimated fair values and carrying values (excluding the impact of unamortized debt issuance costs) as of December 26, 2021 (none in 2020): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 26, 2021 ​ ​ Carrying ​ Fair (in thousands) ​ Value ​ Value 3.875 % Senior Notes ​ $ 400,000 ​ $ 396,000 ​ ​ 70 Table of Contents 9. Noncontrolling Interests ​ Papa John’s has four joint venture arrangements in which there are noncontrolling interests held by third parties. These joint venture arrangements include 188 restaurants at December 26, 2021 and December 27, 2020 respectively. Net income attributable to these joint ventures for the years ended December 26, 2021, December 27, 2020 and December 29, 2019 were as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2021 2020 2019 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Papa John’s International, Inc. ​ $ 8,457 ​ $ 5,654 ​ $ 2,560 Noncontrolling interests ​ 4,939 ​ 2,682 ​ 791 Total net income ​ $ 13,396 ​ $ 8,336 ​ $ 3,351 ​ As of December 26, 2021, the noncontrolling interest holder of two joint ventures have the option to require the Company to purchase their interest, though not currently redeemable. Since redemption of the noncontrolling interests is outside of the Company’s control, the noncontrolling interests are presented in the caption “Redeemable noncontrolling interests” in the Consolidated Balance Sheets. ​ The following summarizes changes in our redeemable noncontrolling interests in 2021 and 2020 (in thousands): ​ ​ ​ ​ ​ Balance at December 29, 2019 $ 5,785 Net income ​ 824 Distributions ​ ​ ( 135 ) Balance at December 27, 2020 $ 6,474 Net income ​ ​ 2,609 Distributions ​ ( 3,585 ) Balance at December 26, 2021 ​ $ 5,498 ​ ​ 10. Allowance for Credit Losses ​ The Company adopted ASU 2016-13, “ Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ,” (“ASU 2016-13”) as of December 30, 2019 (the first day of fiscal 2020) under the modified retrospective transition method. Topic 326 requires measurement and recognition of expected versus incurred losses for financial assets held. Financial instruments subject to Topic 326 include trade accounts receivable, notes receivable and interest receivable (classified as Other assets in the Consolidated Balance Sheets) from franchisees. The impact of the adoption was not material to our consolidated financial statements. ​ Estimates of expected credit losses, even if remote, are based upon historical account write-off trends, facts about the current financial condition of the debtor, forecasts of future operating results based upon current trends of select operating metrics, and macroeconomic factors. Credit quality is monitored through the timing of payments compared to the prescribed payment terms and known facts regarding the financial condition of the franchisee or customer. Account and note balances are charged off against the allowance after recovery efforts have ceased. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 71 Table of Contents The following table summarizes changes in our allowances for credit losses for accounts receivable, notes receivable and interest receivable: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) ​ Accounts Receivable ​ Notes Receivable ​ Interest Receivable Balance at December 29, 2019 ​ $ 7,341 ​ $ 3,572 ​ $ 910 Cumulative effect of adoption of ASU 2016-13 ​ ​ 912 ​ ​ 463 ​ ​ — Balance at December 30, 2019 ​ $ 8,253 ​ $ 4,035 ​ $ 910 Current period (benefit) provision for expected credit losses ​ ​ ( 3,843 ) ​ ​ ( 191 ) ​ ​ 144 Write-offs charged against the allowance ​ ​ ( 788 ) ​ ​ ( 843 ) ​ ​ — Recoveries collected ​ ​ — ​ ​ ( 844 ) ​ ​ — Transfers ​ ​ — ​ ​ 1,054 ​ ​ ( 1,054 ) Balance at December 27, 2020 ​ $ 3,622 ​ $ 3,211 ​ $ — Current period (benefit) provision for expected credit losses ​ ​ 16 ​ ​ ( 583 ) ​ ​ — Write-offs charged against the allowance ​ ​ ( 1,274 ) ​ ​ ( 843 ) ​ ​ — Recoveries collected ​ ​ — ​ ​ ( 285 ) ​ ​ — Balance at December 26, 2021 ​ $ 2,364 ​ $ 1,500 ​ $ — ​ ​ 11. Goodwill ​ The following summarizes changes in the Company’s goodwill, by reportable segment (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Domestic Company- owned Restaurants ​ International (a) ​ All Others ​ Total ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance as of December 29, 2019 ​ $ 64,254 ​ $ 15,650 ​ $ 436 ​ $ 80,340 Foreign currency adjustments ​ — ​ 451 ​ — ​ 451 Balance as of December 27, 2020 ​ $ 64,254 ​ $ 16,101 ​ $ 436 ​ $ 80,791 Foreign currency adjustments ​ — ​ ( 159 ) ​ ​ — ​ ( 159 ) Balance as of December 26, 2021 ​ $ 64,254 ​ $ 15,942 ​ $ 436 ​ $ 80,632 ​ (a) The international goodwill balances for all years presented are net of accumulated impairment of $ 2.3 million associated with our PJUK reporting unit. ​ 72 Table of Contents 12. Debt ​ Long-term debt, net consists of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 26, ​ ​ December 27, ​ ​ ​ ​ 2021 ​ ​ 2020 Senior notes ​ ​ $ 400,000 ​ $ — Revolving facilities ​ ​ ​ 90,000 ​ ​ 10,000 Term loan facility ​ ​ ​ — ​ ​ 340,000 Outstanding debt ​ ​ $ 490,000 ​ $ 350,000 Unamortized debt issuance costs ​ ​ ​ ( 9,270 ) ​ ​ ( 1,708 ) Current portion of long-term debt ​ ​ ​ — ​ ​ ( 20,000 ) Total long-term debt, net ​ ​ $ 480,730 ​ $ 328,292 ​ Senior Notes ​ On September 14, 2021, the Company issued $ 400.0 million of 3.875 % senior notes (the “Notes”) which will mature on September 15, 2029. The Notes are guaranteed by each of the Company’s existing and future domestic restricted subsidiaries that are guarantors or borrowers under the Amended Credit Agreement (as defined below) or other certain indebtedness. The Notes were offered and sold either to persons reasonably believed to be “qualified institutional buyers” pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), or to persons outside the United States under Regulation S of the Securities Act. Interest on the Notes will be payable semi-annually in cash in arrears on March 15 and September 15 of each year, commencing on March 15, 2022, at a fixed interest rate of 3.875 % per annum. In connection with the Notes, the Company recorded $ 7.1 million of debt issuance costs, which are being amortized into net interest expense over the term of the Notes. ​ The net proceeds from the Notes, together with borrowings under the Amended Credit Agreement (as defined below), were used to repay outstanding revolver and term loan borrowings under the Company’s Previous Credit Agreement (as defined below). ​ The Company may redeem the Notes, in whole or in part, at any time on or after September 15, 2024 at established redemption prices ranging from 97 to 194 basis points depending on when the Notes are redeemed. At any time prior to September 15, 2024, the Company may also redeem up to 40 % of the Notes with net cash proceeds of certain equity offerings at a redemption price equal to 103.875 % of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest, excluding the redemption date. In addition, at any time prior to September 15, 2024, the Company may redeem the Notes, in whole or in part, at a redemption price equal to 100 % of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest and an applicable “make-whole” premium. The Notes also contain customary redemption provisions related to asset sales and certain change of control transactions. ​ The Indenture governing the Notes contains customary events of default, including, among other things, payment default, failure to comply with covenants or agreements contained in the Indenture or the Notes and certain provisions related to bankruptcy events. The Indenture also contains customary negative covenants. ​ Amended Credit Agreement ​ Concurrently with the issuance of the Notes, the Company entered into an amended and restated credit agreement (the “Amended Credit Agreement”) replacing the previous credit agreement (“Previous Credit Agreement”). The Amended Credit Agreement provides for a senior secured revolving credit facility in an aggregate available principal amount of $ 600.0 million (the “PJI Revolving Facility”), of which up to $ 40.0 million is available as swingline loans and up to $ 80.0 million is available as letters of credit. The PJI Revolving Facility will mature on September 14, 2026. In connection with the Amended Credit Agreement, the Company recorded $ 2.1 million of debt issuance costs, which are being amortized into net interest expense over the term of the Amended Credit Agreement. The remaining availability under the PJI Revolving Facility was approximately $ 510.0 million as of December 26, 2021. ​ 73 Table of Contents Up to $ 50.0 million of the PJI Revolving Facility may be advanced in certain agreed foreign currencies, including Euros, Pounds Sterling, Canadian Dollars, Japanese Yen, and Mexican Pesos. Additionally, the Amended Credit Agreement includes an accordion feature allowing for a future increase of the PJI Revolving Facility and/or incremental term loans in an aggregate amount of up to $ 500.0 million, subject to certain conditions, including obtaining commitments from one or more new or existing lenders to provide such increased amounts and ongoing compliance with financial covenants. ​ Loans under the PJI Revolving Facility accrue interest at a per annum rate equal to, at the Company’s election, either a LIBOR rate plus a margin ranging from 1.25 % to 2.00 % or a base rate (generally determined according to the greater of a prime rate, federal funds rate plus 0.50 %, or a LIBOR rate plus 1.00 %) plus a margin ranging from 0.25 % to 1.00 %. In each case, the actual margin is determined according to a ratio of the Company’s total indebtedness to earnings before interest, taxes, depreciation, and amortization (“EBITDA”) for the then most recently ended four quarter period (the “Leverage Ratio”). An unused commitment fee ranging from 18 to 30 basis points per annum, determined according to the Leverage Ratio, applies to the unutilized commitments under the PJI Revolving Facility. Loans outstanding under the PJI Revolving Facility may be prepaid at any time without premium or penalty, subject to customary breakage costs in the case of borrowings for which a LIBOR rate election is in effect. The Amended Credit Agreement also contain provisions specifying alternative interest rate calculations to be used at such time as LIBOR ceases to be available as a benchmark for establishing the interest rate on floating interest rate borrowings. ​ The Amended Credit Agreement contains customary affirmative and negative covenants that, among other things, require customary reporting obligations, and restrict, subject to certain exceptions, the incurrence of additional indebtedness and liens, the consummation of certain mergers, consolidations, sales of assets and similar transactions, the making of investments, equity distributions and other restricted payments, and transactions with affiliates. In addition, the Company will be subject to the following financial covenants: (1) a maximum Leverage Ratio of 5.25 to 1.00, subject to the Company’s election to increase the maximum Leverage Ratio by 0.50 to 1.00 in connection with material acquisitions if the Company satisfies certain requirements, and (2) a minimum interest coverage ratio defined as EBITDA plus consolidated rental expense to consolidated interest expense plus consolidated rental expense of 2.00 to 1.00. We were in compliance with these financial covenants at December 26, 2021. ​ Obligations under the Amended Credit Agreement are guaranteed by certain direct and indirect material domestic subsidiaries of the Company (the “Guarantors”) and are secured by a security interest in substantially all of the capital stock and equity interests of the Company’s and the Guarantors’ domestic and first tier material foreign subsidiaries. The Amended Credit Agreement contains customary events of default including, among other things, payment defaults, breach of covenants, cross acceleration to material indebtedness, bankruptcy-related defaults, judgment defaults, and the occurrence of certain change of control events. The occurrence of an event of default may result in the termination of the PJI Revolving Facility, acceleration of repayment obligations and the exercise of remedies by the Lenders with respect to the subsidiary guarantors. ​ PJMF Revolving Facility ​ PJMF has a $ 20.0 million revolving line of credit (the “PJMF Revolving Facility”) pursuant to a Revolving Loan Agreement, dated September 30, 2015 with U.S. Bank National Association, as lender. The PJMF Revolving Facility is secured by substantially all assets of PJMF. The PJMF Revolving Facility matures on September 30, 2022. The borrowings under the PJMF Revolving Facility accrue interest at a variable rate of the one-month LIBOR plus 1.75 %. The applicable interest rates on the PJMF Revolving Facility were 2.7 % and 4.1 % in fiscal 2020 and 2019, respectively. There was no debt outstanding under the PJMF Revolving Facility as of December 26, 2021 or December 27, 2020. The PJMF operating results and the related debt outstanding do not impact the financial covenants under the Amended Credit Agreement. ​ ​ ​ ​ ​ ​ ​ ​ 74 Table of Contents Derivative Financial Instruments ​ As of December 26, 2021, we have the following interest rate swap agreements with a total notional value of $ 350.0 million: ​ ​ ​ ​ ​ ​ ​ ​ ​ Effective Dates Floating Rate Debt Fixed Rates April 30, 2018 through April 30, 2023 ​ $ 55 million ​ 2.33 % April 30, 2018 through April 30, 2023 ​ $ 35 million ​ 2.36 % April 30, 2018 through April 30, 2023 ​ $ 35 million ​ 2.34 % January 30, 2018 through August 30, 2022 ​ $ 100 million ​ 1.99 % January 30, 2018 through August 30, 2022 ​ $ 75 million ​ 1.99 % January 30, 2018 through August 30, 2022 ​ $ 50 million ​ 2.00 % ​ Our interest rate swaps were de-designated as cash flow hedges during 2021 following the issuance of the Notes. For these de-designated hedges, the portion of gains or losses on the derivative instruments previously recognized in accumulated other comprehensive loss (“AOCL”) will be reclassified into earnings as adjustments to interest expense on a straight-line basis over the remaining life of the originally hedged transactions. ​ The following table provides information on the location and amounts of our swaps in the accompanying Consolidated Financial Statements (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest Rate Swap Derivatives ​ ​ Fair Value ​ Fair Value ​ ​ December 26, ​ December 27, Balance Sheet Location ​ 2021 ​ 2020 Other current and long-term liabilities ​ $ 5,536 ​ $ 13,452 ​ As of December 26, 2021, the portion of the aggregate $ 5.5 million interest rate swap liability that would be reclassified into interest expense during the next twelve months approximates $ 4.8 million. ​ The effect of derivative instruments on the accompanying Consolidated Financial Statements is as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Location of (Loss) ​ Amount of (Loss) ​ ​ Derivatives - ​ Amount of Gain or ​ or Gain ​ or Gain ​ Total Interest Expense Cash Flow ​ (Loss) Recognized ​ Reclassified from ​ Reclassified from ​ on Consolidated Hedging ​ in AOCL ​ AOCL into ​ AOCL into ​ Statements of Relationships ​ on Derivative ​ Income ​ Income ​ Operations Interest rate swaps: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2021 ​ $ 5,273 ​ ​ Interest expense ​ $ ( 5,965 ) ​ $ ( 19,205 ) 2020 ​ $ ( 5,788 ) ​ ​ Interest expense ​ $ ( 5,068 ) ​ $ ( 17,022 ) 2019 ​ $ ( 8,303 ) ​ ​ Interest expense ​ $ 660 ​ $ ( 20,593 ) ​ Interest paid, including payments made or received under the swaps, was $ 13.4 million, $ 15.8 million and $ 18.1 million in fiscal 2021, 2020 and 2019, respectively. ​ 75 Table of Contents 13. Property and Equipment, Net ​ Property and equipment, net consists of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ December 26, December 27, ​ ​ 2021 2020 Land ​ $ 31,032 ​ $ 33,381 Buildings and improvements ​ 91,508 ​ 91,335 Leasehold improvements ​ 138,016 ​ 123,167 Equipment and other ​ 465,813 ​ 436,678 Construction in progress ​ 23,725 ​ 7,954 Total property and equipment ​ 750,094 ​ 692,515 Accumulated depreciation and amortization ​ ( 526,238 ) ​ ( 491,620 ) Property and equipment, net ​ $ 223,856 ​ $ 200,895 ​ ​ 14. Accrued Expenses and Other Current Liabilities ​ Accrued expenses and other current liabilities consist of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ December 26, December 27, ​ ​ 2021 ​ 2020 Marketing ​ $ 59,248 ​ $ 47,885 Salaries, benefits and bonuses ​ 48,728 ​ 46,352 Insurance reserves, current ​ ​ 34,661 ​ ​ 32,947 Purchases ​ 13,319 ​ 16,550 Other ​ 34,160 ​ 30,829 Total ​ $ 190,116 ​ $ 174,563 ​ ​ ​ 15. Other Long-term Liabilities ​ Other long-term liabilities consist of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 26, December 27, ​ ​ 2021 ​ 2020 Insurance reserves ​ $ 53,551 ​ $ 49,002 Deferred compensation plan ​ 36,170 ​ 35,793 Employer payroll taxes (1) ​ ​ — ​ ​ 18,473 Other ​ 3,433 ​ 8,096 Total ​ $ 93,154 ​ $ 111,364 ​ (1) Represents deferred employer payroll taxes under the Coronavirus Aid, Relief, and Economic Security Act. Approximately half of the deferral was paid in 2021, with the remaining $ 9.2 million recorded within Income and other taxes payable within the Consolidated Balance Sheet as of December 26, 2021. ​ ​ 76 Table of Contents 16. Strategic Corporate Reorganization for Long-term Growth ​ On September 17, 2020, we announced plans to open an office in Atlanta, Georgia located in Three Ballpark Center at The Battery Atlanta, which opened in October 2021. The space is designed to drive continued menu innovation and optimize integration across marketing, communications, customer experience, operations, human resources, diversity, equity and inclusion, financial planning and analysis, investor relations and development functions. Our information technology, finance, supply chain, and legal teams continue to operate in our Louisville, Kentucky office, which remains critical to our success. We also maintain an office outside of London, United Kingdom, where our international operations are managed. Employees whose positions were relocated to the new Atlanta office were either offered an opportunity to continue with the organization or were offered a severance package. As a result, we incurred one-time corporate reorganization costs of approximately $ 19.1 million through December 26, 2021 which include $ 10.2 million of employee severance and other employee transition costs, $ 5.4 million of recruiting and professional fees, $ 3.4 million of relocation costs, and $ 1.0 million of other costs, offset by ($ 0.9 ) million of stock-based compensation forfeitures on unvested awards. ​ We record severance as a one-time termination benefit and recognize the expense ratably over the employees’ required future service period. All other costs, including employee transition costs, recruitment and relocation costs, and third-party costs, are recognized in the period incurred. All strategic corporate reorganization costs have been recorded in General and administrative expenses on the Consolidated Statement of Operations. ​ Strategic corporate reorganization costs recorded for the years ended December 26, 2021 and December 27, 2020, respectively, are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ Year Ended ​ ​ Dec. 26, ​ Dec. 27, (in thousands) ​ 2021 ​ 2020 Employee severance and other employee transition costs ​ $ 5,429 ​ $ 4,775 Recruiting and professional fees ​ ​ 3,815 ​ ​ 1,598 Relocation costs ​ ​ 3,100 ​ ​ 267 Other costs ​ ​ 750 ​ ​ 285 Total strategic corporate reorganization costs ​ $ 13,094 ​ $ 6,925 Stock-based compensation forfeitures on unvested awards ​ ​ — ​ ​ ( 940 ) Total strategic corporate reorganization costs, net of stock forfeitures ​ $ 13,094 ​ $ 5,985 ​ As of December 26, 2021 and December 27, 2020, the estimate of unpaid strategic corporate reorganization costs are included in Accrued expenses and other current liabilities on the Consolidated Balance Sheets. The following tables summarizes the activity for the years ended December 26, 2021 and December 27, 2020, respectively: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance at ​ ​ ​ ​ ​ ​ ​ Balance at ​ ​ Dec. 27 ​ ​ ​ ​ ​ ​ ​ Dec. 26, (in thousands) ​ 2020 ​ Charges ​ Payments ​ 2021 Employee severance and other employee transition costs ​ $ 4,615 ​ $ 5,429 ​ $ ( 7,922 ) ​ $ 2,122 Recruiting and professional fees ​ ​ 145 ​ ​ 3,815 ​ ​ ( 3,868 ) ​ ​ 92 Relocation costs ​ ​ 101 ​ ​ 3,100 ​ ​ ( 2,461 ) ​ ​ 740 Other costs ​ ​ — ​ ​ 750 ​ ​ ( 750 ) ​ ​ — Total strategic corporate reorganization liability ​ $ 4,861 ​ $ 13,094 ​ $ ( 15,001 ) ​ $ 2,954 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance at ​ ​ ​ ​ ​ ​ ​ Balance at ​ ​ Dec. 29 ​ ​ ​ ​ ​ ​ ​ Dec. 27 (in thousands) ​ 2019 ​ Charges ​ Payments ​ 2020 Employee severance and other employee transition costs ​ $ — ​ $ 4,775 ​ $ ( 160 ) ​ $ 4,615 Recruiting and professional fees ​ ​ — ​ ​ 1,598 ​ ​ ( 1,453 ) ​ ​ 145 Relocation costs ​ ​ — ​ ​ 267 ​ ​ ( 166 ) ​ ​ 101 Other costs ​ ​ — ​ ​ 285 ​ ​ ( 285 ) ​ ​ — Total strategic corporate reorganization liability ​ $ — ​ $ 6,925 ​ $ ( 2,064 ) ​ $ 4,861 ​ ​ 77 Table of Contents 17. Income Taxes ​ The following table presents the domestic and foreign components of income (loss) before income taxes for 2021, 2020 and 2019 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2021 2020 2019 Domestic income (loss) ​ $ 115,221 ​ $ 48,616 ​ $ ( 16,065 ) Foreign income ​ ​ 35,727 ​ ​ 26,746 ​ ​ 21,111 Total income ​ $ 150,948 ​ $ 75,362 ​ $ 5,046 ​ ​ Included within the foreign income before income taxes above is $ 22.4 million, $ 14.7 million, and $ 15.6 million of foreign sourced income subject to foreign withholding taxes in 2021, 2020, and 2019, respectively. ​ A summary of the expense (benefit) for income tax follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2021 2020 2019 Current: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Federal ​ $ 10,591 ​ $ 16,400 ​ $ ( 2,734 ) ​ Foreign ​ 8,812 ​ 6,047 ​ 5,077 ​ State and local ​ 2,837 ​ 1,569 ​ 810 ​ Deferred: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Federal ​ ​ 2,430 ​ ​ ( 7,375 ) ​ ​ ( 1,989 ) ​ Foreign ​ ​ 769 ​ ​ 357 ​ ​ ( 662 ) ​ State and local ​ ​ 554 ​ ​ ( 2,250 ) ​ ​ ( 1,113 ) ​ Total income tax expense (benefit) ​ $ 25,993 ​ $ 14,748 ​ $ ( 611 ) ​ ​ The reconciliation of income tax computed at the U.S. federal statutory rate to income tax expense (benefit) for the years ended December 26, 2021, December 27, 2020 and December 29, 2019 is as follows in both dollars and as a percentage of income before income taxes ($ in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2021 ​ 2020 ​ 2019 ​ Income Tax ​ Income ​ Income Tax ​ Income ​ Income Tax ​ Income ​ ​ Expense ​ Tax Rate ​ Expense ​ Tax Rate ​ (Benefit) ​ Tax Rate ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Tax at U.S. federal statutory rate ​ $ 31,699 ​ 21.0 % ​ $ 15,826 ​ 21.0 % ​ $ 1,060 21.0 % State and local income taxes ​ 2,317 ​ 1.5 % ​ 1,149 ​ 1.5 % ​ 79 1.6 % Foreign income taxes ​ 9,144 ​ 6.1 % ​ 6,463 ​ 8.6 % ​ 5,058 100.2 % Income of consolidated partnerships ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ attributable to noncontrolling interests ​ ( 1,110 ) ​ ( 0.7 ) % ​ ( 603 ) ​ ( 0.8 ) % ​ ( 177 ) ( 3.5 ) % Non-qualified deferred compensation plan ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (income) ​ ( 911 ) ​ ( 0.6 ) % ​ ( 898 ) ​ ( 1.2 ) % ​ ( 1,260 ) ( 25.0 ) % Excess tax (benefits) on equity awards ​ ​ ( 3,697 ) ​ ( 2.5 ) % ​ ​ ( 2,029 ) ​ ( 2.7 ) % ​ ​ ( 212 ) ​ ( 4.2 ) % Preferred stock option mark-to-market adjustment ​ ​ — ​ — % ​ ​ — ​ — % ​ ​ 1,338 ​ 26.5 % Tax credits ​ ( 8,830 ) ​ ( 5.9 ) % ​ ( 6,002 ) ​ ( 8.0 ) % ​ ( 6,128 ) ( 121.4 ) % Other ​ ​ ( 2,619 ) ​ ( 1.7 ) % ​ ​ 842 ​ 1.1 % ​ ​ ( 369 ) ​ ( 7.3 ) % Total ​ $ 25,993 17.2 % ​ $ 14,748 19.6 % ​ $ ( 611 ) ( 12.1 ) % ​ 78 Table of Contents Significant deferred tax assets (liabilities) follow (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ December 26, December 27, ​ ​ 2021 2020 Accrued liabilities ​ $ 14,802 ​ $ 17,740 Accrued bonuses ​ 6,404 ​ 6,155 Other liabilities and asset reserves ​ 14,583 ​ 18,763 Equity awards ​ 7,323 ​ 6,760 Lease liabilities ​ ​ 41,999 ​ ​ 32,374 Other ​ 2,712 ​ 2,563 Net operating losses ​ 8,127 ​ 8,139 Foreign tax credit carryforwards ​ ​ 18,611 ​ ​ 14,405 Total deferred tax assets ​ ​ 114,561 ​ ​ 106,899 Valuation allowances ​ ( 28,598 ) ​ ( 22,972 ) Total deferred tax assets, net of valuation allowances ​ $ 85,963 ​ $ 83,927 ​ ​ ​ ​ ​ ​ ​ Deferred expenses ​ $ ( 7,087 ) ​ $ ( 9,623 ) Accelerated depreciation ​ ( 23,858 ) ​ ( 21,337 ) Goodwill ​ ( 10,052 ) ​ ( 9,801 ) Right-of-use assets ​ ​ ( 39,814 ) ​ ​ ( 32,065 ) Other ​ ( 254 ) ​ ( 1,249 ) Total deferred tax liabilities ​ ( 81,065 ) ​ ( 74,075 ) Net deferred tax assets ​ $ 4,898 ​ $ 9,852 ​ ​ ​ ​ ​ ​ ​ The following table summarizes changes in the Company’s valuation allowance on deferred tax: ​ ​ ​ ​ ​ Balance as of December 29, 2019 ​ $ 17,303 Charged to costs and expenses ​ ​ 5,647 Other ​ ​ 22 Balance as of December 27, 2020 ​ $ 22,972 Charged to costs and expenses ​ ​ 5,658 Other ​ ​ ( 32 ) Balance as of December 26, 2021 ​ $ 28,598 ​ The Company had approximately $ 8.8 million and $ 8.0 million of state deferred tax assets primarily related to state net operating loss carryforwards as of December 26, 2021 and December 27, 2020, respectively. Our ability to utilize these state deferred tax assets is dependent on our ability to generate earnings in future years in the respective state jurisdictions. The Company provided a full valuation allowance of $ 8.8 million and $ 8.0 million for these state deferred tax assets as we believe realization based on the more-likely-than-not criteria has not been met as of December 26, 2021 and December 27, 2020, respectively. ​ The Company had approximately $ 4.5 million and $ 6.3 million of foreign net operating loss and capital loss carryovers as of December 26, 2021 and December 27, 2020, respectively. The Company had approximately $ 1.2 million and $ 0.6 million of valuation allowances primarily related to the foreign capital losses as of December 26, 2021 and December 27, 2020, respectively. A substantial majority of our foreign net operating losses do not have an expiration date. ​ In addition, the Company had approximately $ 18.6 million and $ 14.4 million in foreign tax credit carryforwards as of December 26, 2021 and December 27, 2020, respectively, that expire ten years from inception in years 2025 through 2031. Our ability to utilize these foreign tax credit carryforwards is dependent on our ability to generate foreign earnings in future years sufficient to claim foreign tax credits in excess of foreign taxes paid in those years. The Company provided a full valuation allowance of $ 18.6 million and $ 14.4 million for these foreign tax credit carryforwards as we believe realization based on the more-likely-than-not criteria has not been met as of December 26, 2021 and December 27, 2020, respectively. ​ 79 Table of Contents Cash for income taxes paid (received) were $ 32.6 million in 2021, $ 19.3 million in 2020 and ($ 6.2 ) million in 2019. ​ The Company files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. The Company, with few exceptions, is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2017. The Company is currently undergoing examinations by various tax authorities. The Company anticipates that the finalization of these current examinations and other issues could result in a decrease in the liability for unrecognized tax benefits (and a decrease of income tax expense) of approximately $ 49,000 during the next 12 months. ​ The Company had $ 0.9 million of unrecognized tax benefits at December 26, 2021 which, if recognized, would affect the effective tax rate. A reconciliation of the beginning and ending liability for unrecognized tax benefits excluding interest and penalties is as follows, which is recorded as an other long-term liability (in thousands): ​ ​ ​ ​ ​ Balance at December 29, 2019 $ 1,579 Additions for tax positions of prior years ​ 60 Reductions for tax positions of prior years ​ ​ ( 426 ) Reductions for lapse of statute of limitations ​ ( 183 ) Balance at December 27, 2020 ​ $ 1,030 Additions for tax positions of prior years ​ ​ 81 Reductions for tax positions of prior years ​ ​ ( 215 ) Balance at December 26, 2021 ​ $ 896 ​ The Company recognizes accrued interest and penalties related to unrecognized tax benefits as part of income tax expense. The Company has accrued approximately $ 132,000 and $ 136,000 for the payment of interest and penalties as of December 26, 2021 and December 27, 2020, respectively. ​ 18. Related Party Transactions ​ On March 21, 2019, Shaquille O’Neal was appointed to our Board of Directors. On June 11, 2019, PJMF entered into an Endorsement Agreement (the “Endorsement Agreement”), effective March 15, 2019, with ABG-Shaq, LLC (“ABG-Shaq”), an entity affiliated with Mr. O’Neal, for the personal services of Mr. O’Neal. Pursuant to the Endorsement Agreement, the Company received the right and license to use Mr. O’Neal’s name, nickname, initials, autograph, voice, video or film portrayals, photograph, likeness and certain other intellectual property rights (individually and collectively, the “Personality Rights”), in each case, solely as approved by ABG-Shaq, in connection with the advertising, promotion and sale of Papa John’s-branded products. Mr. O’Neal also agreed to provide brand ambassador services related to appearances, social media and public relations matters, and to collaborate with us to develop one or more co-branded products using the Personality Rights. Mr. O’Neal and the Company developed a co-branded extra-large pizza product using the Personality Rights under an amendment to the Endorsement Agreement signed July 27, 2020 (the “First Amendment”). ​ As consideration for the rights and services granted under the Endorsement Agreement, the Company agreed to pay to ABG-Shaq aggregate cash payments of $ 4.125 million over the three years of the Endorsement Agreement. The Company will also pay expenses related to the marketing and personal services provided by Mr. O’Neal. In addition, the Company agreed to grant 87,136 restricted stock units to Mr. O’Neal (as agent of ABG) under our 2018 Omnibus Incentive Plan. The initial term of the Endorsement Agreement ends on March 15, 2022, with an option for a one-year extension upon the parties’ mutual agreement. The Endorsement Agreement also includes customary exclusivity, termination and indemnification clauses. ​ On July 29, 2021, the Company and PJFM entered into Amendment No. 2 (the “ Second Amendment”) to the Endorsement Agreement with ABG-Shaq. Pursuant to the Second Amendment, the Company was granted the ability to use the Personality Rights for a limited time to promote, advertise, and sell our co-branded extra-large pizza developed under the First Amendment. ABG-Shaq did not receive any additional royalty fees from the Company beyond the cash payment already contemplated under his Endorsement Agreement under the Amendment. In addition, the Company donated one 80 Table of Contents U.S. dollar for each unit of the pizza sold in the United States and one Canadian dollar for each unit sold in Canada to The Papa John’s Foundation for Building Community. ​ 19. Litigation, Commitments and Contingencies ​ Litigation ​ The Company is involved in a number of lawsuits, claims, investigations and proceedings, including those specifically identified below, consisting of intellectual property, employment, consumer, commercial and other matters arising in the ordinary course of business. In accordance with ASC 450, “ Contingencies ” the Company has made accruals with respect to these matters where appropriate, which are reflected in the Company’s consolidated financial statements. We review these provisions at least quarterly and adjust them to reflect the impact of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular case. ​ Durling et al v. Papa John’s International, Inc. , is a conditionally certified collective action filed in May 2016 in the United States District Court for the Southern District of New York, alleging that corporate restaurant delivery drivers were not properly reimbursed for vehicle mileage and expenses in accordance with the Fair Labor Standards Act. In July 2018, the District Court granted a motion to certify a conditional corporate collective class and the opt-in notice process has been completed. As of the close of the opt-in period on October 29, 2018, 9,571 drivers opted into the collective class. The Company continues to deny any liability or wrongdoing in this matter and is vigorously defending this action. The Company has no t recorded any liability related to this lawsuit as of December 26, 2021 as it does not believe a loss is probable or reasonably estimable. ​ In re Papa John’s Employee & Franchise Employee Antitrust Litigation is a putative class action filed in December 2018 in the United States District Court for the Western District of Kentucky. The suit alleges that the “no-poaching” provision previously contained in the Company’s franchise agreement constituted an unlawful agreement or conspiracy in restraint of trade and commerce in violation of Section 1 of the Sherman Antitrust Act. The case is currently in discovery and to date no class has been certified or conditionally certified. The Company continues to deny any liability or wrongdoing in this matter and is vigorously defending this action. The Company has not recorded any liability related to this lawsuit as of December 26, 2021 as it does not believe a loss is probable or reasonably estimable. ​ 20. Equity Compensation ​ We award stock options, time-based restricted stock and performance-based restricted stock units from time to time under the Papa John’s International, Inc. 2018 Omnibus Incentive Plan. There are approximately 4.3 million shares of common stock authorized for issuance and remaining available under the 2018 Omnibus Incentive Plan as of December 26, 2021, which includes 5.9 million shares transferred from the Papa John’s International 2011 Omnibus Incentive Plan. ​ We recorded stock-based employee compensation expense of $ 16.9 million in 2021, $ 16.3 million in 2020 and $ 15.3 million in 2019. At December 26, 2021, there was $ 16.7 million of unrecognized compensation cost related to nonvested awards, of which the Company expects to recognize $ 11.0 million in 2022, $ 5.0 million in 2023 and $ 0.7 million in 2024. ​ Stock Options ​ Options exercised, which were issued from authorized shares, included 212,000 shares in 2021, 541,000 shares in 2020 and 448,000 shares in 2019. The total intrinsic value of the options exercised during 2021, 2020 and 2019 was $ 10.1 million, $ 13.8 million and $ 10.6 million, respectively. ​ 81 Table of Contents Information pertaining to option activity during 2021 is as follows (number of options and aggregate intrinsic value in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ ​ ​ ​ ​ Average ​ ​ ​ ​ ​ ​ ​ Weighted ​ Remaining ​ ​ ​ ​ ​ Number ​ Average ​ Contractual ​ Aggregate ​ ​ of ​ Exercise ​ Term ​ Intrinsic ​ ​ Options ​ Price ​ (In Years) ​ Value Outstanding at December 27, 2020 564 ​ $ 54.82 ​ ​ ​ ​ ​ ​ Exercised ( 212 ) ​ 56.41 ​ ​ ​ ​ ​ ​ Cancelled ( 33 ) ​ 46.18 ​ ​ ​ ​ ​ ​ Outstanding at December 26, 2021 319 ​ $ 54.65 5.68 ​ $ 24,870 ​ Exercisable at December 26, 2021 258 ​ $ 57.14 5.33 ​ $ 19,502 ​ ​ The following is a summary of the significant assumptions used in estimating the fair value of options granted in 2019 (none granted in 2021 or 2020, respectively): ​ ​ ​ ​ ​ ​ 2019 ​ ​ ​ ​ Assumptions (weighted average): ​ ​ ​ Risk-free interest rate 2.5 % Expected dividend yield 2.1 % Expected volatility 31.2 % Expected term (in years) 5.7 ​ ​ The risk-free interest rate for the periods within the contractual life of an option is based on the U.S. Treasury yield curve in effect at the time of grant. The expected dividend yield was estimated as the annual dividend divided by the market price of the Company’s shares on the date of grant. Expected volatility was estimated using the Company’s historical share price volatility for a period similar to the expected life of the option. ​ Option awards are granted with an exercise price equal to the market price of the Company’s stock at the date of grant. Options granted generally vest in equal installments over three years and expire ten years after grant. The expected term for these options represents the period of time that options granted are expected to be outstanding and was calculated using historical experience. ​ The weighted average grant-date fair values of options granted during 2019 was $ 11.69 . The Company granted options to purchase 353,000 shares in 2019. There were no options granted in 2021 or 2020, respectively. ​ Restricted Stock ​ We granted shares of restricted stock that are time-based and generally vest in equal installments over three years ( 130,000 in 2021, 207,000 in 2020 and 212,000 in 2019). Upon vesting, the shares are issued from treasury stock. These restricted shares are intended to focus participants on our long-range objectives, while at the same time serving as a retention mechanism. We consider time-based restricted stock awards to be participating securities because holders of such shares have non-forfeitable dividend rights. We declared dividends totaling $ 410,000 ( $ 1.15 per share) in 2021, $ 366,000 ( $ 0.90 per share) in 2020 and $ 310,000 ( $ 0.90 per share) in 2019 to holders of time-based restricted stock. ​ We granted 11,000 , 15,000 and 113,000 restricted stock units that are time-based and vest over a period of one to three years in 2021, 2020 and 2019, respectively. Upon vesting, the units are issued from treasury stock. Total dividends declared for these awards were insignificant to the results of our operations. ​ Additionally, we granted stock settled performance-based restricted stock units to executive management ( 61,000 units in 2021, 92,000 units in 2020, and 89,000 units in 2019). ​ 82 Table of Contents The 2021 and 2020 performance-based restricted stock units require the achievement of certain performance and market factors, which consist of the Company’s Total Shareholder Return (“TSR”) relative to a predetermined peer group. The grant-date fair value of the performance-based restricted stock units was determined through the use of a Monte Carlo simulation model. ​ The following is a summary of the significant assumptions used in estimating the fair value of the performance-based restricted stock units granted in 2021, 2020 and 2019: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2021 ​ 2020 ​ 2019 ​ ​ ​ ​ ​ ​ ​ ​ ​ Assumptions: ​ ​ ​ ​ ​ ​ ​ Risk-free interest rate 0.2 % 0.9 % 2.5 % Expected volatility 48.3 % 36.3 % 33.9 % ​ The risk-free interest rate for the periods within the contractual life of the performance-based restricted stock unit is based on the U.S. Treasury yield curve in effect at the time of grant. Expected volatility was estimated using the Company’s historical share price volatility for a period similar to the expected life of the performance-based restricted stock unit. ​ The performance-based restricted stock units granted vest over three years (cliff vest) and are expensed over the performance period. The weighted average grant-date fair value of performance-based restricted stock units granted during 2021, 2020 and 2019 was $ 103.14 , $ 59.52 and $ 44.95 , respectively. ​ The fair value of time-based restricted stock and performance-based restricted stock units is based on the market price of the Company’s shares on the grant date. Information pertaining to these awards during 2021 is as follows (shares in thousands): ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ Average ​ ​ ​ ​ Grant-Date ​ ​ Shares ​ Fair Value Total as of December 27, 2020 667 ​ $ 54.33 Granted 203 ​ ​ 98.05 Forfeited ( 57 ) ​ ​ 60.90 Vested ( 231 ) ​ ​ 56.41 Total as of December 26, 2021 582 ​ $ 68.06 ​ ​ 21. 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 employees who meet certain eligibility requirements and allows participating employees to defer receipt of a portion of their compensation and contribute such amount to one or more investment funds. At our discretion, we may make matching contribution payments, which are subject to vesting based on an employee’s length of service with us. ​ In addition, we maintain a non-qualified deferred compensation plan available to certain employees and directors. Under this plan, the participants may defer a certain amount of their compensation, which is credited to the participants’ accounts. The participant-directed investments associated with this plan are included in Other assets ($ 41.9 million and $ 37.6 million at December 26, 2021 and December 27, 2020, respectively) and the associated liabilities ($ 36.2 million and $ 35.8 million at December 26, 2021 and December 27, 2020, respectively) are included in Other long-term liabilities in the accompanying Consolidated Balance Sheets. ​ At our discretion, we contributed a matching payment of 4.0 % in 2021, 2.1 % in 2020 and 2.1 % in 2019, up to a maximum of 6 % of a participating employee’s earnings deferred into both the 401(k) Plan and the non-qualified deferred compensation plan. Such costs were $ 3.5 million in 2021, $ 1.8 million in 2020 and $ 1.5 million in 2019. ​ 83 Table of Contents 22. Segment Information ​ We have four reportable segments: domestic Company-owned restaurants, North America franchising, North America commissaries, and international operations. The domestic Company-owned restaurant segment consists of the operations of all domestic (“domestic” is defined as contiguous United States) Company-owned restaurants and derives its revenues principally from retail sales of pizza, Papadias, which are flatbread-style sandwiches, and side items, including breadsticks, cheesesticks, chicken poppers and wings, dessert items and canned or bottled beverages. The North America commissary segment consists of the operations of our regional dough production and product distribution centers and derives its revenues principally from the sale and distribution of food and paper products to domestic Company-owned and franchised restaurants in the United States and Canada. The North America franchising segment consists of our franchise sales and support activities and derives its revenues from sales of franchise and development rights and collection of royalties from our franchisees located in the United States and Canada. The international segment principally consists of distribution sales to franchised Papa John’s restaurants located in the United Kingdom and our franchise sales and support activities, which derive revenues from sales of franchise and development rights and the collection of royalties from our international franchisees. International franchisees are defined as all franchise operations outside of the United States and Canada. All other business units that do not meet the quantitative thresholds for determining reportable segments, which are not operating segments, we refer to as “all other,” which consists of operations that derive revenues from the sale, principally to Company-owned and franchised restaurants, of printing and promotional items, franchise contributions to marketing funds and information systems and related services used in restaurant operations, including our point-of-sale system, online and other technology-based ordering platforms. ​ Generally, we evaluate performance and allocate resources based on operating income and intercompany eliminations. Certain administrative and capital costs are allocated to segments based upon predetermined rates or estimated resource usage. We account for intercompany sales and transfers as if the sales or transfers were to third parties and eliminate the activity in consolidation. ​ Our reportable segments are business units that provide different products or services. Separate management of each segment is required because each business unit is subject to different operational issues and strategies. No single external customer accounted for 10% or more of our consolidated revenues. ​ 84 Table of Contents Our segment information is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (In thousands) ​ 2021 ​ 2020 ​ 2019 Revenues: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Domestic Company-owned restaurants ​ ​ $ 778,323 ​ $ 700,757 ​ $ 652,053 North America franchising ​ ​ 129,310 ​ 96,732 ​ 71,828 North America commissaries ​ ​ 761,305 ​ 680,793 ​ 612,652 International ​ ​ 184,099 ​ 150,939 ​ 126,077 All others ​ ​ 215,384 ​ 184,013 ​ 156,638 Total revenues ​ ​ $ 2,068,421 ​ $ 1,813,234 ​ $ 1,619,248 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Intersegment revenues: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ North America franchising ​ ​ $ 4,179 ​ $ 3,229 ​ $ 2,782 North America commissaries ​ ​ ​ 215,393 ​ ​ 192,332 ​ ​ 187,073 International ​ ​ - ​ - ​ 191 All others ​ ​ 75,366 ​ 83,635 ​ 88,286 Total intersegment revenues ​ ​ $ 294,938 ​ $ 279,196 ​ $ 278,332 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Depreciation and amortization: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Domestic Company-owned restaurants ​ ​ $ 11,728 ​ $ 11,905 ​ $ 12,883 North America commissaries ​ ​ 11,974 ​ 9,660 ​ 8,131 International ​ ​ 2,326 ​ 1,975 ​ 1,722 All others ​ ​ 9,928 ​ 10,254 ​ 10,738 Unallocated corporate expenses ​ ​ 12,860 ​ 15,911 ​ 13,807 Total depreciation and amortization ​ ​ $ 48,816 ​ $ 49,705 ​ $ 47,281 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating income: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Domestic Company-owned restaurants (1) ​ ​ $ 49,628 ​ $ 37,049 ​ $ 33,957 North America franchising ​ ​ 120,949 ​ 89,801 ​ 64,362 North America commissaries ​ ​ 39,873 ​ 33,185 ​ 30,690 International ​ ​ 34,896 ​ 24,034 ​ 18,738 All others ​ ​ 17,704 ​ 7,043 ​ ( 1,966 ) Unallocated corporate expenses ​ ​ ( 94,114 ) ​ ( 100,069 ) ​ ( 120,280 ) Elimination of intersegment (profits) ​ ​ ( 695 ) ​ ( 790 ) ​ ( 966 ) Total operating income ​ ​ $ 168,241 ​ $ 90,253 ​ $ 24,535 (1) Includes $ 4.7 million of refranchising gains in 2019. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (In thousands) 2021 2020 2019 Property and equipment, net: ​ ​ ​ ​ ​ ​ ​ ​ ​ Domestic Company-owned restaurants ​ $ 241,050 ​ $ 228,077 ​ $ 221,420 North America commissaries ​ 149,218 ​ 145,282 ​ 142,946 International ​ 14,642 ​ 13,604 ​ 16,031 All others ​ 109,052 ​ 91,724 ​ 84,167 Unallocated corporate assets ​ 236,132 ​ 213,828 ​ 211,842 Accumulated depreciation and amortization ​ ( 526,238 ) ​ ( 491,620 ) ​ ( 464,665 ) Property and equipment, net ​ $ 223,856 ​ $ 200,895 ​ $ 211,741 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Expenditures for property and equipment: ​ ​ ​ ​ ​ ​ ​ ​ ​ Domestic Company-owned restaurants ​ $ 16,108 ​ $ 12,848 ​ $ 8,811 North America commissaries ​ 4,007 ​ 4,447 ​ 3,773 International ​ 1,979 ​ 1,065 ​ 1,143 All others ​ 18,645 ​ 11,700 ​ 11,541 Unallocated corporate ​ 27,820 ​ 5,592 ​ 12,443 Total expenditures for property and equipment (1) ​ $ 68,559 ​ $ 35,652 ​ $ 37,711 (1) Increase of $ 32.9 million in expenditures for property and equipment in 2021 primarily driven by investment in growth, including technology and development initiatives. 85 Table of Contents Disaggregation of Revenue ​ In the following tables, revenues are disaggregated by major product line. The tables also include a reconciliation of the disaggregated revenues by the reportable segment (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Reportable Segments ​ ​ Year Ended December 26,2021 Major Products/Services Lines ​ ​ Domestic Company-owned restaurants ​ ​ North America franchising ​ ​ North America commissaries ​ ​ International ​ ​ All others ​ ​ Total Company-owned restaurant sales ​ $ 778,323 ​ $ - ​ $ - ​ $ - ​ $ - ​ $ 778,323 Franchise royalties and fees ​ ​ - ​ ​ 133,489 ​ ​ - ​ ​ 53,148 ​ ​ - ​ ​ 186,637 Commissary sales ​ ​ - ​ ​ - ​ ​ 976,698 ​ ​ 97,623 ​ ​ - ​ ​ 1,074,321 Other revenues ​ ​ - ​ ​ - ​ ​ - ​ ​ 33,328 ​ ​ 290,750 ​ ​ 324,078 Eliminations ​ ​ - ​ ​ ( 4,179 ) ​ ​ ( 215,393 ) ​ ​ - ​ ​ ( 75,366 ) ​ ​ ( 294,938 ) Total segment revenues ​ $ 778,323 ​ $ 129,310 ​ $ 761,305 ​ $ 184,099 ​ $ 215,384 ​ $ 2,068,421 International other revenues (1) ​ ​ - ​ ​ - ​ ​ - ​ ​ ( 33,328 ) ​ ​ 33,328 ​ ​ - Total revenues ​ $ 778,323 ​ $ 129,310 ​ $ 761,305 ​ $ 150,771 ​ $ 248,712 ​ $ 2,068,421 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Reportable Segments ​ ​ Year Ended December 27, 2020 Major Products/Services Lines ​ ​ Domestic Company-owned restaurants ​ ​ North America franchising ​ ​ North America commissaries ​ ​ International ​ ​ All others ​ ​ Total Company-owned restaurant sales ​ $ 700,757 ​ $ - ​ $ - ​ $ - ​ $ - ​ $ 700,757 Franchise royalties and fees ​ ​ - ​ ​ 99,961 ​ ​ - ​ ​ 39,920 ​ ​ - ​ ​ 139,881 Commissary sales ​ ​ - ​ ​ - ​ ​ 873,125 ​ ​ 84,043 ​ ​ - ​ ​ 957,168 Other revenues ​ ​ - ​ ​ - ​ ​ - ​ ​ 26,976 ​ ​ 267,648 ​ ​ 294,624 Eliminations ​ ​ - ​ ​ ( 3,229 ) ​ ​ ( 192,332 ) ​ ​ - ​ ​ ( 83,635 ) ​ ​ ( 279,196 ) Total segment revenues ​ $ 700,757 ​ $ 96,732 ​ $ 680,793 ​ $ 150,939 ​ $ 184,013 ​ $ 1,813,234 International other revenues (1) ​ ​ - ​ ​ - ​ ​ - ​ ​ ( 26,976 ) ​ ​ 26,976 ​ ​ - Total revenues ​ $ 700,757 ​ $ 96,732 ​ $ 680,793 ​ $ 123,963 ​ $ 210,989 ​ $ 1,813,234 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Reportable Segments ​ ​ ​ Year Ended December 29, 2019 Major Products/Services Lines ​ ​ Domestic Company-owned restaurants ​ ​ North America franchising ​ ​ North America commissaries ​ ​ International ​ ​ All others ​ ​ Total Company-owned restaurant sales ​ $ 652,053 ​ $ - ​ $ - ​ $ - ​ $ - ​ $ 652,053 Franchise royalties and fees ​ ​ - ​ ​ 74,610 ​ ​ - ​ ​ 38,745 ​ ​ - ​ ​ 113,355 Commissary sales ​ ​ - ​ ​ - ​ ​ 799,725 ​ ​ 64,179 ​ ​ - ​ ​ 863,904 Other revenues ​ ​ - ​ ​ - ​ ​ - ​ ​ 23,344 ​ ​ 244,924 ​ ​ 268,268 Eliminations ​ ​ - ​ ​ ( 2,782 ) ​ ​ ( 187,073 ) ​ ​ ( 191 ) ​ ​ ( 88,286 ) ​ ​ ( 278,332 ) Total segment revenues ​ $ 652,053 ​ $ 71,828 ​ $ 612,652 ​ $ 126,077 ​ $ 156,638 ​ $ 1,619,248 International other revenues (1) ​ ​ - ​ ​ - ​ ​ - ​ ​ ( 23,344 ) ​ ​ 23,344 ​ ​ - International eliminations (1) ​ ​ - ​ ​ - ​ ​ - ​ ​ 191 ​ ​ ( 191 ) ​ ​ - Total revenues ​ $ 652,053 ​ $ 71,828 ​ $ 612,652 ​ $ 102,924 ​ $ 179,791 ​ $ 1,619,248 ​ (1) Other revenues as reported in the Consolidated Statements of Operations include $ 33.3 million, $ 27.0 million and $ 23.2 million of revenue for the years ended December 26, 2021, December 27, 2020, and December 29, 2019 respectively, that are part of the international reporting segment. These amounts include marketing fund contributions and sublease rental income from international franchisees in the United Kingdom that provide no significant contribution to income before income taxes but must be reported on a gross basis under accounting requirements. The related expenses for these Other revenues are reported in Other expenses in the Consolidated Statements of Operations. ​ ​ ​ ​ ​ 86 Table of Contents Item 9 . Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ​ None. ​