What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-02-23 compared with 2022-02-24 · 560 added, 419 removed, 759 unchanged (56% of the section changed)

2 unchanged sentences

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 25, 2022 and December 26, 2021

• Consolidated Statements of Operations for the years ended December 25, 2022, December 26, 2021 and December 27, 2020

• Consolidated Statements of Comprehensive Income for the years ended December 25, 2022, December 26, 2021 and December 27, 2020

• Consolidated Statements of Stockholders’ Deficit for the years ended December 25, 2022, December 26, 2021 and December 27, 2020

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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”).

and Subsidiaries (the Company) as of December 25, 2022 and December 26, 2021, the related consolidated statements of operations, comprehensive income, stockholders' deficit and cash flows for each of the three years in the period ended December 25, 2022, 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 25, 2022 and December 26, 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 25, 2022, in conformity with U.S.

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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:

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the 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.

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 matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which they relate.

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.

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 25, 2022, the Company has $ 67.3 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.

Auditing the measurement and 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.

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.

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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.

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

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and Subsidiaries

Consolidated Balance Sheets

(In thousands, except per share amounts) December 25,

2022 December 26,

Current assets:

Cash and cash equivalents $ 47,373 $ 70,610

Accounts receivable (less allowance for credit losses of $ 6,718 in 2022 and $ 2,364 in 2021)

102,533 81,370

Notes receivable, current portion 6,848 12,352

Income tax receivable 8,780 9,386

Inventories 41,382 34,981

Prepaid expenses and other current assets 44,123 46,310

Total current assets 251,039 255,009

Property and equipment, net 249,793 223,856

Finance lease right-of-use assets, net 24,941 20,907

Operating lease right-of-use assets 172,425 176,256

Notes receivable, less current portion (less allowance for credit losses of $ 14,499 in 2022 and $ 1,500 in 2021)

21,248 35,504

Goodwill 70,616 80,632

Deferred income taxes 1,920 5,156

Other assets 72,245 88,384

Total assets $ 864,227 $ 885,704

Liabilities, Redeemable noncontrolling interests and Stockholders’ deficit

Current liabilities:

Accounts payable $ 62,316 $ 28,092

Income and other taxes payable 8,766 19,996

Accrued expenses and other current liabilities 142,535 190,116

Current deferred revenue 21,272 21,700

Current finance lease liabilities 6,850 4,977

Current operating lease liabilities 23,418 22,543

Total current liabilities 265,157 287,424

Deferred revenue 23,204 13,846

Long-term finance lease liabilities 19,022 16,580

Long-term operating lease liabilities 160,905 160,672

Long-term debt, net 597,069 480,730

Deferred income taxes — 258

Other long-term liabilities 68,317 93,154

Total liabilities 1,133,674 1,052,664

Redeemable noncontrolling interests 1,217 5,498

Stockholders’ deficit:

Common stock ($ 0.01 par value per share;

issued 49,138 at December 25, 2022 and 49,002 at December 26, 2021)

Additional paid-in capital 449,829 445,126

Accumulated other comprehensive loss ( 10,135 ) ( 9,971 )

Retained earnings 195,856 183,157

Treasury stock ( 14,402 shares at December 25, 2022 and 13,205 shares at December 26, 2021, at cost)

( 922,434 ) ( 806,472 )

Total stockholders’ deficit ( 286,393 ) ( 187,670 )

Noncontrolling interests in subsidiaries 15,729 15,212

Total Stockholders’ deficit ( 270,664 ) ( 172,458 )

Total Liabilities, Redeemable noncontrolling interests and Stockholders’ deficit $ 864,227 $ 885,704

See accompanying notes.

Papa John’s International, Inc.

and Subsidiaries

Consolidated Statements of Operations

(In thousands, except per share amounts)

(In thousands, except per share amounts) December 25,

2022 December 26,

2021 December 27,

Domestic Company-owned restaurant sales $ 708,389 $ 778,323 $ 700,757

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Total costs and expenses 1,981,008 1,900,180 1,722,981

Refranchising gains

Refranchising and impairment loss ( 12,065 ) — —

Operating income 109,030 168,241 90,253

Investment income

Interest expense

Net interest expense ( 25,261 ) ( 17,293 ) ( 14,891 )

Income before income taxes 83,769 150,948 75,362

Income tax expense (benefit)

Income tax expense 14,420 25,993 14,748

Net income before attribution to noncontrolling interests 69,349 124,955 60,614

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Net income attributable to the Company $ 67,772 $ 120,016 $ 57,932

Calculation of net income (loss) for earnings (loss) per share:

Calculation of net income for earnings per share:

Net income attributable to the Company $ 67,772 $ 120,016 $ 57,932

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Net income attributable to participating securities ( 104 ) — ( 2,136 )

Net income (loss) attributable to common shareholders

Basic earnings (loss) per common share

Diluted earnings (loss) per common share

Net income attributable to common shareholders $ 67,362 $ 4,073 $ 41,737

Basic earnings per common share $ 1.90 $ 0.12 $ 1.29

Diluted earnings per common share $ 1.89 $ 0.12 $ 1.28

Basic weighted average common shares outstanding 35,497 35,007 32,421

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and Subsidiaries

Consolidated Statements of Comprehensive Income (Loss)

(In thousands)

Consolidated Statements of Comprehensive Income

(In thousands) December 25,

2022 December 26,

2021 December 27,

Net income before attribution to noncontrolling interests $ 69,349 $ 124,955 $ 60,614

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Interest rate swaps (1)

4,757 6,848 ( 7,517 )

Other comprehensive income (loss), before tax ( 213 ) 5,451 ( 5,173 )

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Interest rate swaps (2)

( 1,094 ) ( 1,575 ) 1,729

Income tax effect 49 ( 1,254 ) 1,190

Other comprehensive income (loss), net of tax ( 164 ) 4,197 ( 3,983 )

Comprehensive income (loss) before attribution to noncontrolling interests

comprehensive (income) loss, redeemable noncontrolling interests

Comprehensive income before attribution to noncontrolling interests 69,185 129,152 56,631

comprehensive income, redeemable noncontrolling interests ( 574 ) ( 2,609 ) ( 824 )

comprehensive income, nonredeemable noncontrolling interests ( 1,003 ) ( 2,330 ) ( 1,858 )

Comprehensive income (loss) attributable to the Company

Comprehensive income attributable to the Company $ 67,608 $ 124,213 $ 53,949

___________________________________

(1) Amounts reclassified out of accumulated other comprehensive loss into interest expense included ($ 2,384 ), ($ 5,965 ) and ($ 5,068 ) for the years ended December 25, 2022, December 26, 2021 and December 27, 2020, respectively.

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and Subsidiaries

Consolidated Balance Sheets

(In thousands, except per share amounts)

Current assets:

Cash and cash equivalents

Accounts receivable (less allowance for credit losses of $ 2,364 in 2021 and $ 3,622 in 2020)

Notes receivable, current portion

Income tax receivable

Prepaid expenses and other current assets

Total current assets

Property and equipment, net

Finance lease right-of-use assets, net

Operating lease right-of-use assets

Notes receivable, less current portion (less allowance for credit losses of $ 1,500 in 2021 and $ 3,211 in 2020)

Deferred income taxes

Liabilities, Series B Convertible Preferred Stock, Redeemable noncontrolling interests and Stockholders’ deficit

Current liabilities:

Accounts payable

Income and other taxes payable

Accrued expenses and other current liabilities

Current deferred revenue

Current finance lease liabilities

Current operating lease liabilities

Current portion of long-term debt

Total current liabilities

Deferred revenue

Long-term finance lease liabilities

Long-term operating lease liabilities

Long-term debt, less current portion, net

Deferred income taxes

Other long-term liabilities

Total liabilities

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

Redeemable noncontrolling interests

Stockholders’ deficit:

Common stock ($ 0.01 par value per share;

issued 49,002 at December 26, 2021 and 45,288 at December 27, 2020)

Additional paid-in capital

Accumulated other comprehensive loss

Retained earnings

Treasury stock ( 13,205 shares at December 26, 2021 and 12,743 shares at December 27, 2020, at cost)

Total stockholders’ deficit

Noncontrolling interests in subsidiaries

Total Stockholders’ deficit

Total liabilities, Series B Convertible Preferred Stock, Redeemable noncontrolling interests and

Stockholders’ deficit

See accompanying notes.

Papa John’s International, Inc.

and Subsidiaries

Consolidated Statements of Stockholders’ Deficit

Papa John’s International, Inc.

Noncontrolling

(In thousands) Common

Outstanding Common

Stock Additional

Capital Accumulated

Comprehensive

Earnings Treasury

Stock Noncontrolling

Subsidiaries Total

Stockholders’

(In thousands)

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 )

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Cash dividends on preferred stock — — — — ( 13,649 ) — — ( 13,649 )

Dividends declared on preferred stock

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

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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 )

Cumulative effect of adoption of ASU 2016-13 (2)

Adjusted balance at December 30, 2019

Net income (1)

Other comprehensive loss, net of tax

— — — — 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 )

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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 )

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Papa John’s International, Inc.

Noncontrolling

(In thousands) Common

Outstanding Common

Stock Additional

Capital Accumulated

Comprehensive

Earnings Treasury

Stock Noncontrolling

Subsidiaries Total

Stockholders’

(In thousands)

Balance at December 26, 2021 35,797 $ 490 $ 445,126 $ ( 9,971 ) $ 183,157 $ ( 806,472 ) $ 15,212 $ ( 172,458 )

Net income (1)

— — — — 67,772 — 1,003 68,775

Other comprehensive income, net of tax — — — ( 164 ) — — — ( 164 )

Repurchase and conversion of Series B Convertible Preferred Stock

Cash dividends on common stock — — 210 — ( 54,977 ) — — ( 54,767 )

Cash dividends on preferred stock

Exercise of stock options 82 1 4,035 — — — — 4,036

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Distributions to noncontrolling interests — — — — — — ( 486 ) ( 486 )

Other 9 — 59 — ( 96 ) 595 — 558

Balance at December 25, 2022 34,736 $ 491 $ 449,829 $ ( 10,135 ) $ 195,856 $ ( 922,434 ) $ 15,729 $ ( 270,664 )

(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.

___________________________________

(1) Net income to the Company for the years ended December 25, 2022, December 26, 2021 and December 27, 2020 excludes $ 574 , $ 2,609 and $ 824 , respectively, allocable to the redeemable noncontrolling interests for our joint venture arrangements.

(2) As of December 30, 2019, the Company adopted Accounting Standards Update (“ASU”) 2016-13, “ Financial Instruments – Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments .” See “Note 10.

Allowance for Credit Losses” of “Notes to Consolidated Financial Statements” for additional information.

(3) At December 25, 2022, the accumulated other comprehensive loss of $ 10,135 was comprised of net unrealized foreign currency translation loss of $ 8,696 and a net unrealized loss on the interest rate swap agreements of $ 1,439 .

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Consolidated Statements of Cash Flows

(In thousands)

(In thousands) December 25,

2022 December 26,

2021 December 27,

Operating activities

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Adjustments to reconcile net income to net cash provided by operating activities:

(Benefit) provision for allowance for credit losses on accounts and notes receivable

Provision (benefit) for allowance for credit losses on accounts and notes receivable 20,539 ( 852 ) ( 4,734 )

Depreciation and amortization 52,032 48,816 49,705

Refranchising and impairment loss 12,065 — —

Deferred income taxes 2,798 3,753 ( 9,268 )

Preferred stock option mark-to-market adjustment

Stock-based compensation expense 18,388 16,919 16,310

(Gain) on refranchising

Other 1,056 581 2,257

Changes in operating assets and liabilities, net of acquisitions:

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Income tax receivable 586 ( 8,113 ) 3,760

Inventories ( 7,496 ) ( 4,708 ) ( 2,736 )

Prepaid expenses and other current assets 5,587 2,866 2,884

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Purchases of property and equipment ( 78,391 ) ( 68,559 ) ( 35,652 )

Notes issued ( 9,296 ) ( 16,132 ) ( 16,589 )

Repayments of notes issued 13,045 18,555 11,154

Acquisitions, net of cash acquired ( 1,219 ) ( 699 ) —

Proceeds from divestitures of restaurants

Proceeds from refranchising, net of cash transferred 13,588 — —

Other ( 520 ) 3,323 16

Net cash used in investing activities ( 62,793 ) ( 63,512 ) ( 41,071 )

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Proceeds from issuance of senior notes — 400,000 —

Repayments of term loan

Net proceeds (repayments) of revolving credit facilities

Net proceeds of revolving credit facilities 115,000 80,000 —

Debt issuance costs — ( 9,179 ) —

Proceeds from exercise of stock options 4,036 11,969 30,622

Repurchase of Series B Convertible Preferred Stock — ( 188,647 ) —

Proceeds from issuance of Series B Convertible Preferred Stock

Issuance costs associated with Series B Convertible Preferred Stock

Acquisition of Company common stock ( 125,000 ) ( 72,499 ) ( 2,701 )

Proceeds from exercise of stock options

Dividends paid to common stockholders ( 54,767 ) ( 40,356 ) ( 29,362 )

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Tax payments for equity award issuances ( 9,546 ) ( 5,847 ) ( 3,974 )

Contributions from noncontrolling interests

Distributions to noncontrolling interests ( 1,211 ) ( 5,942 ) ( 2,420 )

Repayments of term loan — ( 340,000 ) ( 20,000 )

Other ( 4,752 ) ( 3,631 ) ( 1,977 )

Net cash used in financing activities ( 76,240 ) ( 180,526 ) ( 43,461 )

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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.

(referred to as the “Company,” “Papa John’s,” “Papa Johns” 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 48 countries and territories as of December 25, 2022.

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.

We generate 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 derive revenue from contributions received into our national marketing funds.

In discussions of our business, “Domestic” is defined as within the contiguous United States, “North America” includes Canada, and “International” includes the rest of the world other than North America.

Significant Accounting Policies

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All intercompany balances and transactions have been eliminated.

Variable Interest Entity

Papa John’s Domestic restaurants, both Company-owned and franchised, participate in Papa John’s Marketing Fund, Inc.

(“PJMF”), a nonstock corporation designed to operate at break-even as it spends all annual contributions received from the system.

PJMF 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.

PJMF is a variable interest entity (“VIE”) that funds its operations with ongoing financial support and contributions from the Domestic restaurants, of which approximately 85 percent are franchised, and does not have sufficient equity to fund its operations without these ongoing financial contributions.

Based on an assessment of the governance structure and operating procedures of PJMF, the Company determined it has the power to control certain significant activities of PJMF, and therefore, is the primary beneficiary.

The Company has consolidated PJMF in its financial results in accordance with Accounting Standards Codification (“ASC”) 810, “ Consolidation .”

Our fiscal year ends on the last Sunday in December of each year.

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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.

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, Papa Bites, 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.

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Franchise royalties, which are based on a percentage of franchise restaurant sales, are recognized as sales occur.

Incentives offered from time to time, including new store incentives, will reduce the contractual royalty rate paid.

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.

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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 .

thus, the fees collected will be deferred and 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.

Fees received for future license renewal periods are deferred and amortized over the life of the renewal period.

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 allocated on a pro rata basis to all restaurants opened under that specific development agreement.

These fees are deferred and amortized over the term of the related franchise agreements, which is typically 10 years.

Commissary Revenues

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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.

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.

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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.

Franchise Marketing Fund revenues represent a required established percentage of monthly restaurant sales collected by 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 85 % 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

Consolidated Statements of Operations.

When we are determined to be the principal in these

arrangements, advertising fund contributions and expenditures are reported on a gross basis in the 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.

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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.

Rental income, primarily derived from properties leased by the Company and subleased to franchisees in the UK, is recognized on a straight-line basis over the respective operating lease terms.

Advertising and Related Costs

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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.

During 2020 the Company recorded additional amounts of $ 15.0 million 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.

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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.

Management evaluates its award grants and modifications and will adjust the fair value if any are determined to be spring-loaded.

Cash Equivalents

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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.

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.

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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.

Interest income recorded on franchisee loans was approximately $ 1.3 million in 2022, $ 1.9 million in 2021 and $ 2.1 million in 2020 and is reported in Net interest expense in the accompanying Consolidated Statements of Operations.

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.

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Total costs capitalized were approximately $ 4.1 million in 2022, $ 4.1 million in 2021 and $ 3.3 million in 2020.

The unamortized information systems development costs approximated $ 10.5 million as of December 26, 2021 and December 27, 2020.

The unamortized information systems development costs approximated $ 9.6 and $ 10.5 million as of December 25, 2022 and December 26, 2021, respectively.

Intangible Assets — Goodwill

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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.

We elected to perform a quantitative assessment for our Domestic Company-owned restaurants, PJUK, China, and Preferred Marketing Solutions operations in the fourth quarter of 2022.

Our Domestic Company-owned restaurants, PJUK, China and Preferred Marketing Solutions fair value calculations considered both an income approach and a market approach.

The income approach used projected net cash flows, with various growth assumptions, over a ten-year discrete period and a terminal value, which were discounted using appropriate rates.

The selected discount rate considered the risk and nature of each reporting unit’s cash flow and the rates of return market participants would require to invest their capital in the reporting unit.

In determining the fair value from a market approach, we considered sales multiples and earnings

before interest, taxes, depreciation and amortization multiples that a potential buyer would pay based on third-party transactions in similar markets.

As a result of our quantitative 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.

See “Note 11.

Goodwill” for additional information.

Deferred Income Tax Accounts and Tax Reserves

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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 and liabilities are netted by tax jurisdiction.

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).

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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.

See “Note 17.

Income Taxes” for additional information.

Insurance Reserves

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As of December 25, 2022, our insurance reserve was $ 67.3 million as compared to $ 88.1 million as of December 26, 2021 primarily related to auto liability and workers’ compensation claims.

Of these amounts, approximately $ 29.7 million and $ 34.7 million were recorded in Accrued expenses and other current liabilities and $ 37.6 million and $ 53.6 million were recorded in Other long-term liabilities on the Consolidated Balance Sheets as of December 25, 2022 and December 26, 2021, respectively.

Our reserves include claim costs above our retention that have a corresponding receivable.

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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.

In 2021, ou r interest rate swaps were de-designated as cash flow hedges following the issuance of the Notes (as defined in “Note 12.

Debt”) and remained undesignated as hedges through June 26, 2022.

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.

As of June 27, 2022, the interest rate swaps were re-designated as cash flow hedges to provide a hedge against changes in variable rate cash flows regarding fluctuations in the London Interbank Offered Rates (“LIBOR”) rate utilized on the revolving credit facility.

Therefore, beginning in the third quarter of 2022, our interest rate swaps are accounted for utilizing cash flow hedge accounting treatment.

The interest rate swaps are marked to market at each reporting date and any unrealized gains or losses are included in AOCL and reclassified to interest expense in the same period or periods during which the hedged transactions affect earnings.

Noncontrolling Interests

At December 26, 2021, the Company had four joint ventures consisting of 188 restaurants, which have noncontrolling interests.

Papa John’s has joint venture arrangements in which there are noncontrolling interests held by third parties that included 98 and 188 restaurants at December 25, 2022 and December 26, 2021, respectively.

As further described in “Note 22.

Divestitures,” the Company divested its 51 percent interest in one joint venture that owned 90 restaurants in the second quarter of 2022.

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.

The following summarizes the redemption feature, location and related accounting within the Consolidated Balance Sheets for these 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 venture with option to require the Company to purchase the noncontrolling interest - not currently redeemable or redemption not probable Temporary equity Carrying value

Noncontrolling Interests” 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.

Revenues and expenses are translated into United States (“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 AOCL, net of income taxes.

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.

In March 2020, the Financial Accounting Standards Board (“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.

This guidance was effective beginning on March 12, 2020, and amendments could be applied 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.

however, those expedients generally could not be applied to hedging relationships for periods after December 31, 2022.

The FASB issued ASU 2022-06, “Deferral of the Sunset Date of Topic 848,” which deferred the sunset date from December 31, 2022 to December 31, 2024.

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.

The Company has significant leases that include most domestic Company-owned restaurant and commissary locations.

The Company has significant leases that include most Domestic Company-owned restaurant and commissary locations as well as our corporate office located in Atlanta, Georgia.

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;

Additionally, the Company leases a significant number of restaurants within the United Kingdom (“UK”);

these restaurants are then subleased to the franchisees.

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Average lease term

Domestic Company-owned restaurants

Five years , plus at least one renewal

United Kingdom franchise-owned restaurants

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

Domestic Company-owned restaurants Five years , plus at least one renewal

UK 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.

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The following schedule details the total right-of-use assets and lease liabilities on the Consolidated Balance Sheets as of December 25, 2022 and December 26, 2021 (in thousands):

Classification

Finance lease assets, net

Finance lease right-of-use assets, net

Operating lease assets, net

Operating lease right-of-use assets

Leases Classification December 25,

2022 December 26,

Finance lease assets, net Finance lease right-of-use assets, net $ 24,941 $ 20,907

Operating lease assets, net Operating lease right-of-use assets 172,425 176,256

Total lease assets $ 197,366 $ 197,163

Current finance lease liabilities

Current operating lease liabilities

Noncurrent finance lease liabilities

Long-term finance lease liabilities

Noncurrent operating lease liabilities

Long-term operating lease liabilities

Current finance lease liabilities Current finance lease liabilities $ 6,850 $ 4,977

Current operating lease liabilities Current operating lease liabilities 23,418 22,543

Noncurrent finance lease liabilities Long-term finance lease liabilities 19,022 16,580

Noncurrent operating lease liabilities Long-term operating lease liabilities 160,905 160,672

Total lease liabilities $ 210,195 $ 204,772

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:

(in thousands)

December 26, 2021

Lease costs for the years ended December 25, 2022, December 26, 2021 and December 27, 2020 were as follows (in thousands):

December 25, 2022 Year Ended

December 26, 2021 Year Ended

December 27, 2020

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Total lease costs, net of sublease income $ 51,194 $ 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):

Future minimum lease payments under contractually-obligated leases and associated sublease income as of December 25, 2022 were as follows (in thousands):

Fiscal Year Finance

Costs Operating

Costs Expected

2023 $ 7,849 $ 32,860 $ 10,303

2024 6,801 32,267 10,371

2025 5,171 30,695 9,952

2026 4,125 26,973 9,251

2027 2,971 21,568 8,523

Thereafter 1,440 92,002 42,089

Total future minimum lease payments 28,357 236,365 90,489

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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 subleases certain retail space to our franchisees in the UK which are primarily operating leases.

At December 25, 2022, we leased and subleased approximately 442 Papa John’s restaurants to franchisees in the UK.

The initial lease terms on the franchised sites in the UK 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.

The initial lease terms of the franchisee subleases are generally five to ten years .

Rental income, primarily derived from properties leased and subleased to franchisees in the UK, is recognized on a straight-line basis over the respective operating lease terms.

The Company recognized total sublease income of $ 11.7 million, $ 12.0 million and $ 10.4 million for the years ended December 25, 2022, December 26, 2021 and December 27, 2020, respectively, within Other revenues in the Consolidated Statements of Operations.

Lease Guarantees

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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:

(in thousands)

December 26, 2021

December 27, 2020

December 29, 2019

The following table presents supplemental cash flow information related to leases for the years ended December 25, 2022, December 26, 2021 and December 27, 2020:

(Dollars in thousands) Year Ended

December 25, 2022 December 26, 2021 December 27, 2020

Cash paid for amounts included in the measurement of lease liabilities:

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Operating cash flows from operating leases (a)

$ 35,573 $ 38,530 $ 37,113

Right-of-use assets obtained in exchange for new finance lease liabilities $ 9,875 $ 9,486 $ 9,152

Right-of-use assets obtained in exchange for new operating lease liabilities (b)

$ 53,869 $ 64,420 $ 30,266

Cash received from sublease income $ 10,847 $ 11,597 $ 10,545

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Operating leases 5.63 % 6.20 % 6.65 %

______________________________

(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.

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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):

2022 December 26,

Current assets:

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Deferred income taxes 655 614

Total assets $ 34,424 $ 41,263

Current liabilities:

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Contract Liabilities

December 26, 2021

December 27, 2020

December 25, 2022 December 26, 2021 Change

Franchise fees and unredeemed gift card liabilities $ 30,710 $ 20,410 $ 10,300

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Equipment incentives are related to the future value of commissary revenue the Company will receive over the term of the incentive agreement.

December 26, 2021 and December 27, 2020, the contract assets were approximately $ 5.8 million and $ 5.1 million, respectively.

As of December 25, 2022 and December 26, 2021, the contract assets were approximately $ 4.5 million and $ 5.8 million, respectively.

For the years ended December 25, 2022 and December 26, 2021, revenue was reduced approximately $ 3.4 million and $ 3.0 million, respectively, for the amortization of contract assets over the applicable contract terms.

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Performance Obligations by Period

Less than 1 Year

Less than 1 Year 1-2 Years 2-3 Years 3-4 Years 4-5 Years Thereafter Total

Franchise fees $ 3,098 $ 2,927 $ 2,755 $ 2,524 $ 2,210 $ 7,120 $ 20,634

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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

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

Tax deduction on issuance costs

Balance at December 27, 2020

Balance at December 26, 2021

The Company has authorized 100.0 million shares of common stock as of December 25, 2022 and December 26, 2021, respectively.

The Company’s outstanding shares of common stock, net of repurchased common stock held as treasury stock, were 34.7 million shares at December 25, 2022 and 35.8 million shares at December 26, 2021.

Share Repurchase Program

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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

The following table summarizes our repurchase activity for the years ended December 25, 2022, December 26, 2021 and December 27, 2020, respectively:

(In thousands, except average price per share)

Purchased Average

Share Aggregate

Purchased Maximum Dollar

Value of Shares

that May Yet Be

(in thousands, except average price per share)

Purchased Under the

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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 319,307 shares at an aggregate cost of $ 27.6 million.

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Funding for the share repurchase programs will be provided through our credit facility, operating cash flow, stock option exercises and cash and cash equivalents.

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;

● $ 1.1 million in common stock “pass-through” dividends paid to Series B Preferred Stockholders on an as-converted basis ( $ 0.45 per share).

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 .

Dividends on Common Stock

The Company paid dividends of approximately $ 54.8 million ($ 1.54 per share), $ 40.4 million and $ 29.4 million to common stockholders for the years 2022, 2021 and 2020, respectively.

On January 26, 2023, our Board of Directors declared a first quarter 2023 dividend of $ 0.42 per common share, representing a $ 14.6 million aggregate dividend that was paid on February 17, 2023 to stockholders of record as of the close of business on February 6, 2023.

The declaration and payment of any future dividends will be at the discretion of our Board of Directors.

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.

Preferred Stock

The Company has authorized 5.0 million shares of preferred stock (of which none were issued or outstanding at December 25, 2022 or December 26, 2021, respectively).

As a result of the repurchase and conversion, there were no shares of Series B Preferred Stock authorized or outstanding at December 25, 2022 or December 26, 2021.

The following table summarizes changes to our Series B Preferred Stock in 2021 (in thousands):

Balance at December 27, 2020 $ 251,901

Accretion 629

Redemption ( 252,530 )

Balance at December 26, 2021 $ —

Dividends on Series B Preferred Stock

The Company paid common stock “pass-through” dividends on an as-converted basis to Series B Preferred Stockholders of $ 1.1 million and $ 4.6 million and preferred dividends on the Series B Preferred Stock of $ 3.0 million and $ 9.1 million, in 2021 and 2020, respectively.

The Company also paid $ 1.5 million of common stock deemed dividend distributions in connection with the repurchase and conversion of the Series B Preferred Stock in 2021.

Earnings per Share

We compute earnings per share using the two-class method.

The two-class method requires an earnings allocation formula that determines earnings 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.

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 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.

Basic earnings per common share are computed by dividing net income attributable to common shareholders by the weighted-average common shares outstanding.

Diluted earnings per common share are computed by dividing the net income 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):

Basic earnings (loss) per common share

The calculations of basic earnings per common share and diluted earnings per common share for the years ended December 25, 2022, December 26, 2021 and December 27, 2020 are as follows (in thousands, except per share data):

2022 2021 2020

Basic earnings per common share

Net income attributable to the Company $ 67,772 $ 120,016 $ 57,932

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Net income attributable to participating securities ( 104 ) — ( 2,136 )

Net income (loss) attributable to common shareholders

Net income attributable to common shareholders $ 67,362 $ 4,073 $ 41,737

Basic weighted average common shares outstanding 35,497 35,007 32,421

Basic earnings (loss) per common share

Diluted earnings (loss) per common share

Net income (loss) attributable to common shareholders

Basic earnings per common share $ 1.90 $ 0.12 $ 1.29

Diluted earnings per common share

Net income attributable to common shareholders $ 67,362 $ 4,073 $ 41,737

Weighted average common shares outstanding 35,497 35,007 32,421

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Diluted weighted average common shares outstanding (b)

Diluted earnings (loss) per common share

35,717 35,337 32,717

Diluted earnings per common share $ 1.89 $ 0.12 $ 1.28

______________________________

(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 weighted average number of shares subject to antidilutive options was 100,000 in 2020 ( none in 2022 or 2021).

(b) The Company had 252,500 shares of Series B Preferred Stock outstanding as of December 27, 2020 ( none as of December 25, 2022 or December 26, 2021).

For the fully diluted calculation, the Series B Preferred Stock dividends were added back to net income 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.

This calculation was anti-dilutive in 2020 and as such was excluded.

See “Note 20.

Equity Compensation” for additional information regarding our equity awards, including restricted stock.

Fair Value Measurements and Disclosures

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Our financial assets and liabilities that were measured at fair value on a recurring basis as of December 25, 2022 and December 26, 2021 are as follows:

Fair Value Measurements

(in thousands)

Value Fair Value Measurements

(in thousands) Level 1 Level 2 Level 3

December 25, 2022

1 unchanged sentence

Cash surrender value of life insurance policies (a)

Financial liabilities:

$ 30,120 $ 30,120 $ — $ —

Interest rate swaps (b)

$ 986 $ — $ 986 $ —

December 26, 2021

1 unchanged sentence

Cash surrender value of life insurance policies (a)

$ 41,904 $ 41,904 $ — $ —

Financial liabilities:

Interest rate swaps (b)

$ 5,536 $ — $ 5,536 $ —

______________________________

(a) Represents life insurance policies held in our non-qualified deferred compensation plan.

See “Note 21.

Employee Benefit Plans” for additional information.

(b) The fair value of our interest rate swaps is based on the sum of all future net present value cash flows.

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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

(in thousands)

December 25, 2022 December 26, 2021

(in thousands) Carrying

Value Carrying

3.875 % Senior Notes

$ 400,000 $ 339,500 $ 400,000 $ 396,000

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):

As of December 25, 2022, the Company had three joint venture arrangements comprising 98 restaurants as compared to four joint venture arrangements comprising 188 restaurants at December 26, 2021.

As further described in “Note 22.

Divestitures,” the Company divested its 51 percent interest in one joint venture that owned 90 restaurants in the second quarter of 2022.

Net income attributable to these joint ventures for the years ended December 25, 2022, December 26, 2021 and December 27, 2020 was as follows (in thousands):

2022 2021 2020

Papa John’s International, Inc.

$ 3,136 $ 8,457 $ 5,654

Noncontrolling interests 1,577 4,939 2,682

Total net income $ 4,713 $ 13,396 $ 8,336

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 2022 and 2021 (in thousands):

Balance at December 27, 2020 $ 6,474

Net income 2,609

Distributions ( 3,585 )

Balance at December 26, 2021 $ 5,498

Net income 574

Distributions ( 4,855 )

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Account and note balances are charged off against the allowance after recovery efforts have ceased.

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

Cumulative effect of adoption of ASU 2016-13

The following table summarizes changes in our allowances for credit losses for accounts receivable and notes receivable:

(In thousands) Accounts Receivable Notes Receivable

Balance at December 27, 2020 $ 3,622 $ 3,211

Current period (benefit) provision for expected credit losses

Current period provision (benefit) for expected credit losses 16 ( 583 )

Write-offs charged against the allowance ( 1,274 ) ( 843 )

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Balance at December 26, 2021 $ 2,364 $ 1,500

Current period (benefit) provision for expected credit losses

Current period provision for expected credit losses (a)

Write-offs charged against the allowance ( 2,120 ) ( 1,042 )

1 unchanged sentence

Balance at December 25, 2022 $ 6,718 $ 14,499

______________________________

(a) The Company recorded $ 14.6 million of one-time, non-cash reserves in the first quarter of 2022 for certain accounts receivable and notes receivable primarily associated with a master franchisee with operations principally in Russia.

The Company recorded $ 3.7 million of one-time, non-cash reserves in the second half of 2022 for certain accounts receivable and notes receivable primarily associated with the termination of significant franchisees in the UK.

The following summarizes changes in the Company’s goodwill, by reportable segment (in thousands):

Domestic Company- owned Restaurants

International (a)

Balance as of December 29, 2019

Domestic Company-

owned Restaurants International (a)

All Others Total

Balance at December 27, 2020 $ 64,254 $ 16,101 $ 436 $ 80,791

Foreign currency adjustments — ( 159 ) — ( 159 )

Balance as of December 27, 2020

Balance at December 26, 2021 $ 64,254 $ 15,942 $ 436 $ 80,632

Acquisitions (b)

1,161 — — 1,161

Divestitures (c)

( 9,908 ) — — ( 9,908 )

Foreign currency adjustments — ( 1,269 ) — ( 1,269 )

Balance as of December 26, 2021

Balance at December 25, 2022 $ 55,507 $ 14,673 $ 436 $ 70,616

______________________________

(a) The International goodwill balances for all years presented are net of accumulated impairment of $ 2.3 million associated with our PJUK reporting unit.

(b) Goodwill from acquisitions was $ 1.2 million in 2022, due to acquisitions of two stores.

(c) In conjunction with the refranchising of our 51.0 % ownership interest in a 90 -restaurant consolidated joint venture in Texas, goodwill was allocated to the disposal group based on relative fair value within the Domestic Company-owned restaurants reporting group.

See “Note 22.

Divestitures” for further information.

Long-term debt, net consists of the following (in thousands):

2022 December 26,

Senior notes $ 400,000 $ 400,000

Revolving facilities 205,000 90,000

Term loan facility

Outstanding debt 605,000 490,000

Unamortized debt issuance costs ( 7,931 ) ( 9,270 )

Current portion of long-term debt

Total long-term debt, net $ 597,069 $ 480,730

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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.

Interest on the Notes is payable semi-annually in cash in arrears on March 15 and September 15 of each year, beginning 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.

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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.

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.

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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.

The remaining availability under the PJI Revolving Facility was $ 395.0 million as of December 25, 2022.

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.

1 unchanged sentence

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.

In each case, the actual margin is determined according to a ratio of the Company’s total indebtedness to an earnings calculation, Consolidated EBITDA (as defined in our credit agreement), 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 underutilized 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.

1 unchanged sentence

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.

The Company is 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 Consolidated EBITDA (as defined in our credit agreement) 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 25, 2022.

1 unchanged sentence

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

1 unchanged sentence

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.

The PJMF Revolving Facility is

secured by substantially all assets of PJMF.

The PJMF Revolving Facility matures on September 30, 2023, but is subject to annual amendments.

The borrowings under the PJMF Revolving Facility accrue interest at a variable rate of the one-month LIBOR plu s 1.60 %.

There was no debt outstanding under the PJMF Revolving Facility as of December 25, 2022 or December 26, 2021.

2 unchanged sentences

As of December 25, 2022, we have the following interest rate swap agreements with a total notional value of $ 125.0 million :

Effective Dates

Floating Rate Debt

April 30, 2018 through April 30, 2023

January 30, 2018 through August 30, 2022

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.

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 %

In 2021, ou r interest rate swaps were de-designated as cash flow hedges following the issuance of the Notes and remained undesignated as hedges through June 26, 2022.

For these de-designated hedges, the portion of gains or losses on the derivative instruments previously recognized in 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.

As of June 27, 2022, the interest rate swaps were re-designated as cash flow hedges to provide a hedge against changes in variable rate cash flows regarding fluctuations in the LIBOR rate utilized on the revolving credit facility.

Therefore, beginning in the third quarter of 2022, our interest rate swaps are accounted for utilizing cash flow hedge accounting treatment.

We recognized income of $ 4.8 million ($ 3.7 million after tax) in 2022 and $ 6.8 million ($ 5.3 million after tax) in 2021, and a loss of $ 7.5 million ($ 5.8 million after tax) in 2020 in other comprehensive income (loss) for the net change in the fair value of our interest rate swaps.

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

Balance Sheet Location

Balance Sheet Location Fair Value

2022 Fair Value

Other current and long-term assets $ 986 $ —

Other current and long-term liabilities $ — $ 5,536

1 unchanged sentence

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

Total Interest Expense

Relationships Amount of Gain or

(Loss) Recognized

on Derivative Location of (Loss)

Reclassified from

Income Amount of (Loss)

Reclassified from

Income Total Interest Expense

on Consolidated

Statements of

Relationships

on Derivative

Interest rate swaps:

5 unchanged sentences

Property and equipment, net consists of the following (in thousands):

2022 December 26,

Land $ 31,679 $ 31,032

Buildings and improvements 91,462 91,508

7 unchanged sentences

Accrued expenses and other current liabilities consist of the following (in thousands):

Salaries, benefits and bonuses

2022 December 26,

Marketing $ 36,858 $ 59,248

Insurance reserves, current 29,676 34,661

Salaries, benefits and bonuses 21,934 48,728

Legal settlement accrual (a)

Purchases 13,789 13,319

Other 25,278 34,160

Total $ 142,535 $ 190,116

______________________________

(a) See “Note 19.

Litigation, Commitments and Contingencies” for additional information.

Other Long-term Liabilities

Other long-term liabilities consist of the following (in thousands):

2022 December 26,

Insurance reserves $ 37,624 $ 53,551

Deferred compensation plan

Employer payroll taxes (1)

(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.

Deferred compensation plan (a)

28,285 36,170

Other 2,408 3,433

Total $ 68,317 $ 93,154

______________________________

(a) See “Note 21.

Employee Benefit Plans” for additional information on our non-qualified deferred compensation plan.

Strategic Corporate Reorganization for Long-term Growth

2 unchanged sentences

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.

We also maintain an office outside of London, UK, 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:

(in thousands)

As a result, we incurred one-time corporate reorganization costs of approximately $ 13.1 million and $ 6.0 million through December 26, 2021 and December 27, 2020, respectively, as detailed in the table below (in thousands).

There were no additional corporate reorganization costs incurred during the year ended December 25, 2022.

2021 December 27,

Employee severance and other employee transition costs $ 5,429 $ 4,775

1 unchanged sentence

Relocation costs 3,100 267

Other costs 750 285

Total strategic corporate reorganization costs 13,094 6,925

1 unchanged sentence

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:

(in thousands)

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.

As of December 26, 2021, the estimate of unpaid strategic corporate reorganization costs was included in Accrued expenses and other current liabilities on the Consolidated Balance Sheets.

The following tables summarize the activity for the years ended December 25, 2022 and December 26, 2021, respectively (in thousands):

Balance at December 26, 2021 Charges Payments Balance at December 25, 2022

Employee severance and other employee transition costs $ 2,122 $ — $ ( 2,122 ) $ —

2 unchanged sentences

Total strategic corporate reorganization liability $ 2,954 $ — $ ( 2,954 ) $ —

(in thousands)

Balance at December 27, 2020 Charges Payments Balance at December 26, 2021

Employee severance and other employee transition costs $ 4,615 $ 5,429 $ ( 7,922 ) $ 2,122

1 unchanged sentence

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

The following table presents the domestic and foreign components of income (loss) before income taxes for 2021, 2020 and 2019 (in thousands):

Domestic income (loss)

The following table presents the domestic and foreign components of income before income taxes for 2022, 2021 and 2020 (in thousands):

2022 2021 2020

Domestic income $ 65,434 $ 115,221 $ 48,616

Foreign income 18,335 35,727 26,746

Total income $ 83,769 $ 150,948 $ 75,362

Included within the foreign income before income taxes above is $ 23.6 million, $ 22.4 million, and $ 14.7 million of foreign sourced income subject to foreign withholding taxes in 2022, 2021, and 2020, respectively.

A summary of the expense (benefit) for income tax follows (in thousands):

2022 2021 2020

Federal $ 3,496 $ 10,591 $ 16,400

Foreign 5,335 8,812 6,047

State and local 2,791 2,837 1,569

Federal 4,243 2,430 ( 7,375 )

Foreign ( 1,152 ) 769 357

State and local ( 293 ) 554 ( 2,250 )

Total income tax expense (benefit)

Total income tax expense $ 14,420 $ 25,993 $ 14,748

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):

federal statutory rate to income tax expense for the years ended December 25, 2022, December 26, 2021 and December 27, 2020 is as follows in both dollars and as a percentage of income before income taxes (dollars in thousands):

2022 2021 2020

Expense (Benefit) Income

Tax Rate Income Tax

Expense (Benefit) Income

Tax Rate Income Tax

Expense (Benefit) Income

federal statutory rate $ 17,591 21.0 % $ 31,699 21.0 % $ 15,826 21.0 %

1 unchanged sentence

Foreign income taxes 4,672 5.6 % 9,144 6.1 % 6,463 8.6 %

Income of consolidated partnerships

attributable to noncontrolling interests

Non-qualified deferred compensation plan

Income of consolidated partnerships attributable to noncontrolling interests ( 355 ) ( 0.4 ) % ( 1,110 ) ( 0.7 ) % ( 603 ) ( 0.8 ) %

Non-qualified deferred compensation plan expense (income) 1,278 1.5 % ( 911 ) ( 0.6 ) % ( 898 ) ( 1.2 ) %

Excess tax (benefits) on equity awards ( 3,902 ) ( 4.7 ) % ( 3,697 ) ( 2.5 ) % ( 2,029 ) ( 2.7 ) %

Preferred stock option mark-to-market adjustment

Tax credits ( 8,981 ) ( 10.7 ) % ( 8,830 ) ( 5.9 ) % ( 6,002 ) ( 8.0 ) %

Non-deductible executive compensation 2,450 2.9 % 2,636 1.7 % 1,314 1.7 %

Foreign-derived intangible income ( 1,452 ) ( 1.7 ) % ( 1,519 ) ( 1.0 ) % ( 924 ) ( 1.2 ) %

US deferred offset on foreign deferreds 1,183 1.4 % 238 0.2 % — — %

Other 514 0.6 % ( 3,974 ) ( 2.6 ) % 452 0.6 %

Total $ 14,420 17.2 % $ 25,993 17.2 % $ 14,748 19.5 %

Significant deferred tax assets (liabilities) follow (in thousands):

2022 December 26,

Accrued liabilities $ 17,424 $ 14,802

3 unchanged sentences

Lease liabilities 45,646 41,999

Other 2,904 2,712

Net operating losses 11,738 8,127

5 unchanged sentences

Accelerated depreciation ( 31,098 ) ( 23,858 )

Goodwill ( 7,690 ) ( 10,052 )

Right-of-use assets ( 41,892 ) ( 39,814 )

Other ( 365 ) ( 254 )

Total deferred tax liabilities ( 86,801 ) ( 81,065 )

Net deferred tax assets $ 1,920 $ 4,898

The following table summarizes changes in the Company’s valuation allowance on deferred tax:

Balance as of December 29, 2019

The following table summarizes changes in the Company’s valuation allowances on deferred tax (in thousands):

Balance at December 27, 2020

Charged to costs and expenses 5,658

Balance as of December 27, 2020

Balance at December 26, 2021

Charged to costs and expenses 3,454

Balance as of December 26, 2021

Balance at December 25, 2022

The Company had approximately $ 10.2 million and $ 8.8 million of state deferred tax assets primarily related to state net operating loss carryforwards as of December 25, 2022 and December 26, 2021, respectively.

1 unchanged sentence

The Company provided a full valuation allowance of $ 10.2 million and $ 8.8 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 25, 2022 and December 26, 2021, respectively.

The Company had approximately $ 2.0 million and $ 1.4 million of state deferred tax assets related to state income tax credit carryforwards as of December 25, 2022 and December 26, 2021, respectively.

Our ability to fully utilize these deferred tax assets related to state income tax credit carryforwards is dependent on our ability to generate earnings in future years in the respective state jurisdictions.

In 2022, the Company provided a partial valuation allowance of $ 0.5 million against these state deferred tax assets as we believe that a portion of these state income tax credit carryforwards would not be realizable before expiration.

The Company had approximately $ 8.7 million and $ 4.5 million of foreign net operating loss and capital loss carryovers as of December 25, 2022 and December 26, 2021, 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.

The Company had approximately $ 1.2 million of valuation allowances primarily related to the foreign capital losses at both December 25, 2022 and December 26, 2021.

A substantial majority of our foreign net operating losses do not have an expiration date.

2 unchanged sentences

The Company provided a full valuation allowance of $ 20.2 million and $ 18.6 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 25, 2022 and December 26, 2021, respectively.

Cash for income taxes paid (received) were $ 32.6 million in 2021, $ 19.3 million in 2020 and ($ 6.2 ) million in 2019.

Cash for income taxes paid were $ 11.7 million in 2022, $ 32.6 million in 2021 and $ 19.3 million in 2020.

The Company files income tax returns in the U.S.

1 unchanged sentence

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.

federal, state and local, or non-US income tax examinations by tax authorities for years before 2018.

The Company is currently undergoing examinations by various tax authorities.

1 unchanged sentence

The Company had $ 1.2 million of unrecognized tax benefits at December 25, 2022 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):

A reconciliation of the beginning and ending liability for unrecognized tax benefits excluding interest and penalties is as follows, which is recorded in Other long-term liabilities in the Consolidated Balance Sheets (in thousands):

Balance at December 27, 2020

1 unchanged sentence

Reductions for tax positions of prior years ( 215 )

Reductions for lapse of statute of limitations

Balance at December 26, 2021

6 unchanged sentences

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.

On June 11, 2019, PJMF entered into an Endorsement Agreement (the “Original 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.

Pursuant to the Endorsement Agreement, the Company received the right and license to use Mr.

Pursuant to the Original 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.

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.

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 and the Company developed a co-branded extra-large pizza product using the Personality Rights under an amendment to the Original Endorsement Agreement signed July 27, 2020 (the “First Amendment”).

As consideration for the rights and services granted under the Original Endorsement Agreement, the Company agreed to pay to ABG-Shaq aggregate cash payments of $ 4.1 million over the three years of the Original Endorsement Agreement.

The Company also paid expenses related to the marketing and personal services provided by Mr.

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.

On July 29, 2021, the Company and PJMF entered into Amendment No.

2 (the “ Second Amendment”) to the Original 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

ABG-Shaq did not receive any additional royalty fees from the Company beyond the cash payment already contemplated under the Original Endorsement Agreement under the Amendment.

In addition, the Company donated one 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.

On March 15, 2022, the Original Endorsement Agreement expired by its terms.

On April 10, 2022, the Company and PJMF entered into a new Endorsement Agreement (the “New Endorsement Agreement”), effective March 15, 2022, with ABG-Shaq, LLC (“ABG-Shaq”), to replace the Original Endorsement Agreement.

The terms of the New Endorsement Agreement are substantially similar to the Original Endorsement Agreement.

As consideration for the rights and services granted under the New Endorsement Agreement, the Company and PJMF agreed to pay to ABG-Shaq aggregate cash payments of $ 5.6 million over the three years of the New Endorsement Agreement.

The Company and PJMF will also pay ABG-Shaq a royalty fee for the co-branded pizza product if the total amount of royalties in a given contract year (calculated as $ 0.20 per co-branded pizza sold) exceeds the contractual cash payment for that year, in which case the amount of the royalty payment will be the excess of the royalties over the cash payment amount.

The Company did not pay ABG-Shaq any royalties in 2022 for the co-branded pizza promotion.

The Company and PJMF will also pay expenses related to the marketing and personal services provided by Mr.

In addition, the Company agreed to grant 55,898 restricted stock units (the “RSUs”) to Mr.

O’Neal (as agent of ABG) under the Company’s 2018 Omnibus Incentive Plan.

The RSUs will vest into an equivalent number of shares of the Company’s common stock according to the following vesting schedule:

● 33 % ( 18,632 ) of the RSUs will vest on April 12, 2023;

● 33 % ( 18,632 ) of the RSUs will vest on March 15, 2024;

● 33 % ( 18,634 ) of the RSUs will vest on March 15, 2025.

The initial term of the New Endorsement Agreement ends on March 15, 2025, with an option for a one-year extension upon the parties’ mutual agreement.

The New Endorsement Agreement also includes customary exclusivity, termination and indemnification clauses.

Litigation, Commitments and Contingencies

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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.

We review these provisions at least quarterly and adjust these provisions 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.

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.

On September 30, 2022, the parties reached a settlement in principle to resolve the case.

Pursuant to the terms of the proposed settlement, in exchange for the Company’s payment of a total aggregate settlement amount of no more than $ 20.0 million subject to a claims-made process, all claims in the action will be dismissed, the litigation will be terminated, and the Company will receive a release.

The proposed settlement also includes resolution of a companion case, Hubbard, et al.

Papa John’s International, Inc.

, pending in the United States District Court for the Western District of Kentucky.

The proposed settlement is subject to a claims-made process whereby unclaimed funds revert to the Company, and the Company is only responsible for payments to class and collective action members who timely submit a claim form.

Although the return rate for timely claims is unknown and not within the Company’s control, the Company estimates its actual exposure resulting from the settlement to be approximately $ 10.0 million and this amount was recorded in General and administrative expenses in the Consolidated Statements of Operations.

On December 19, 2022, the District Court granted preliminary approval of the proposed settlement;

however, the settlement remains subject to final approval by the District Court and contains certain customary contingencies.

Subsequent to year end, the Company remitted $ 5.0 million to the settlement administrator as partial funding of the settlement in accordance with the terms of the applicable settlement agreement.

The Company continues to deny any liability or wrongdoing in this matter.

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.

On April 14, 2022, the parties reached a settlement in principle to resolve the case.

Pursuant to the terms of the proposed settlement, in exchange for the Company’s payment of a total aggregate settlement amount of $ 5.0 million and other non-monetary consideration, all claims in the action will be dismissed, the litigation will be terminated, and the Company will receive a release.

The settlement amount was recorded in General and administrative expenses in the Consolidated Statements of Operations.

The proposed settlement is subject to approval by the District Court and contains certain customary contingencies.

The Company continues to deny any liability or wrongdoing in this matter.

Equity Compensation

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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.

There were approximately 3.6 million shares of common stock authorized for issuance and remaining available under the 2018 Omnibus Incentive Plan as of December 25, 2022, 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 $ 18.4 million in 2022, $ 16.9 million in 2021 and $ 16.3 million in 2020.

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The total intrinsic value of the options exercised during 2022, 2021 and 2020 was $ 3.4 million, $ 10.1 million and $ 13.8 million, respectively.

There were no options granted in 2022, 2021 or 2020.

Information pertaining to option activity during 2022 is as follows (number of options and aggregate intrinsic value in thousands):

Options Weighted

Price Weighted

(In Years) Aggregate

Outstanding at December 26, 2021 319 $ 54.65

Exercised ( 82 ) 49.48

Cancelled ( 2 ) 45.29

Outstanding at December 25, 2022 235 $ 56.53 4.47 $ 6,452

Exercisable at December 25, 2022 235 $ 56.53 4.47 $ 6,452

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):

Assumptions (weighted average):

Risk-free interest rate

Expected dividend yield

Expected volatility

Expected term (in years)

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

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Additionally, we granted stock settled performance-based restricted stock units to executive management ( 64,000 units in 2022, 61,000 units in 2021, and 92,000 units in 2020).

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 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 2022, 2021 and 2020:

2022 2021 2020

Risk-free interest rate 1.5 % 0.2 % 0.9 %

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Information pertaining to these awards during 2022 is as follows (shares in thousands):

Shares Weighted

Total as of December 26, 2021 582 $ 68.06

Granted 298 103.18

Forfeited ( 82 ) 89.87

Vested ( 280 ) 57.40

Total as of December 25, 2022 518 $ 91.23

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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 late 2021, the Company adopted a Safe Harbor 401k Plan effective for the 2022 benefit year.

In addition, we maintain a non-qualified deferred compensation plan available to certain employees and directors.

1 unchanged sentence

The participant-directed investments associated with this plan are included in Other assets ($ 30.1 million and $ 41.9 million at December 25, 2022 and December 26, 2021, respectively) and the associated liabilities ($ 28.3 million and $ 36.2 million at December 25, 2022 and December 26, 2021, 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.

We contributed a matching payment of 4.0 % in 2022, up to a maximum of 6.0 % of a participating employee’s earnings deferred into the 401(k) Plan.

At our discretion, the Company contributed 4.0 % in 2021 and 2.1 % in 2020, up to a maximum of 6.0 % of a participating employee’s earnings deferred into both the 401(k) Plan and the non-qualified deferred compensation plan.

Such costs were $ 4.4 million in 2022, $ 3.5 million in 2021 and $ 1.8 million in 2020.

Refranchising Loss

On March 28, 2022, we refranchised our 51.0 % ownership interest in a 90 -restaurant consolidated joint venture in Texas for $ 14.0 million, net of transaction costs.

In connection with the divestiture, we recorded a one-time, non-cash charge of $ 8.4 million as a Refranchising Loss in the Consolidated Statement of Operations, which reflects net sale proceeds of $ 14.0 million, the noncontrolling interest of $ 4.2 million, and the recognition of an unearned royalty stream of $ 12.2 million to be recognized as revenue over the 10 -year term of the franchise agreement executed concurrent with the disposition in accordance with ASC 810, “ Consolidation .” Goodwill of $ 9.9 million was allocated to the disposal group based on relative fair value within the Domestic Company-owned restaurants reporting group.

The $ 8.4 million of the one-time, non-cash refranchising loss was recorded in the first quarter of 2022 and realized upon consummation of the sale in the second quarter.

Impairment of Reacquired Master Franchise Rights

In the first quarter of 2022, the Company recorded an impairment of $ 2.8 million for reacquired franchise rights due to the financial and operational impact of the conflict in Ukraine and government actions taken in response to that conflict, including, but not limited to, international sanctions.

The reacquired franchise rights were previously acquired from a former master franchisee and capitalized by the Company.

Segment Information

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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 Domestic Company-owned restaurant segment consists of the operations of all Domestic 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 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.

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 International segment principally consists of distribution sales to franchised Papa Johns restaurants located in the UK 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.

Generally, we evaluate performance and allocate resources based on operating income.

Certain administrative and capital costs are allocated to segments based upon predetermined rates or estimated resource usage.

2 unchanged sentences

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.

Our segment information is as follows:

No single external customer accounted for 10% or more of our total revenues.

The following tables present our segment information.

(In thousands) 2022 2021 2020

3 unchanged sentences

International 158,682 184,099 150,939

All others 227,999 215,384 184,013

Total revenues $ 2,102,103 $ 2,068,421 $ 1,813,234

2 unchanged sentences

North America commissaries 217,570 215,393 192,332

International

All others 70,283 75,366 83,635

Total intersegment revenues $ 291,975 $ 294,938 $ 279,196

3 unchanged sentences

International 1,774 2,326 1,975

All others 12,681 9,928 10,254

Unallocated corporate expenses 12,783 12,860 15,911

1 unchanged sentence

Operating income:

Domestic Company-owned restaurants (1)

Domestic Company-owned restaurants (a)

$ 15,966 $ 49,628 $ 37,049

North America franchising 127,882 120,949 89,801

North America commissaries 42,531 39,873 33,185

International

Unallocated corporate expenses

International (b)

17,891 34,896 24,034

All others 10,084 17,704 7,043

Unallocated corporate expenses (c)

( 104,419 ) ( 94,114 ) ( 100,069 )

Elimination of intersegment (profits) ( 905 ) ( 695 ) ( 790 )

Total operating income $ 109,030 $ 168,241 $ 90,253

(1) Includes $ 4.7 million of refranchising gains in 2019.

______________________________

(a) Includes a one-time, non-cash charge of $ 8.4 million associated with the refranchising of the Company’s ownership interest in a 90 -restaurant joint venture, recorded as Refranchising and impairment loss for the year ended December 25, 2022.

See “Note 22.

Divestitures” for additional information.

(b) Includes charges of $ 3.5 million related to one-time, non-cash reserves for certain accounts receivable and impairments of reacquired franchise rights due to the financial and operational impact of the conflict in Ukraine and $ 6.1 million of costs associated with the termination of significant franchisees in the UK, including the reserve of certain accounts and notes receivable and operating lease right-of-use assets impairment.

See “Note 22.

Divestitures” and “Note 10.

Allowance for Credit Losses” for additional information.

(c) For the year ended December 25, 2022, Unallocated corporate expenses includes $ 15.0 million for certain legal settlements, $ 13.9 million of one-time, non-cash reserves of certain notes receivable, and $ 1.5 million of advisory fees and severance costs associated with the transition of certain executives.

For the year ended December 26, 2021, Unallocated corporate expense includes $ 13.1 million of reorganization costs.

See “Note 16.

Strategic Corporate Reorganization for Long-term Growth” for additional information.

(In thousands) 2022 2021 2020

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International 16,080 14,642 13,604

All others 131,210 109,052 91,724

Unallocated corporate assets 254,425 236,132 213,828

5 unchanged sentences

International 5,175 1,979 1,065

All others 18,296 18,645 11,700

Unallocated corporate 26,134 27,820 5,592

Total expenditures for property and equipment (1)

(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.

Total expenditures for property and equipment (a)

$ 78,391 $ 68,559 $ 35,652

______________________________

(a) Increases of $ 9.8 million and $ 32.9 million in expenditures for property and equipment in 2022 and 2021, respectively, were primarily driven by investment in growth, including technology and development initiatives.

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):

The tables also include a reconciliation of the disaggregated revenues by the reportable segment:

Reportable Segments

Year Ended December 26,2021

Major Products/Services Lines

Domestic Company-owned restaurants

North America franchising

North America commissaries

International

(In thousands) Year Ended December 25, 2022

Major Products/Services Lines Domestic Company-owned

restaurants North America franchising North America

commissaries International All others Total

Company-owned restaurant sales $ 708,389 $ — $ — $ — $ — $ 708,389

2 unchanged sentences

Other revenues — — — 28,779 298,282 327,061

Eliminations — ( 4,122 ) ( 217,570 ) — ( 70,283 ) ( 291,975 )

Total segment revenues 708,389 137,399 869,634 158,682 227,999 2,102,103

International other revenues (1)

International other revenues (a)

— — — ( 28,779 ) 28,779 —

Total revenues $ 708,389 $ 137,399 $ 869,634 $ 129,903 $ 256,778 $ 2,102,103

Reportable Segments

Year Ended December 27, 2020

Major Products/Services Lines

Domestic Company-owned restaurants

North America franchising

North America commissaries

International

(In thousands) 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

2 unchanged sentences

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)

International other revenues (a)

— — — ( 33,328 ) 33,328 —

Total revenues $ 778,323 $ 129,310 $ 761,305 $ 150,771 $ 248,712 $ 2,068,421

Reportable Segments

Year Ended December 29, 2019

Major Products/Services Lines

Domestic Company-owned restaurants

North America franchising

North America commissaries

International

(In thousands) 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

2 unchanged sentences

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)

International eliminations (1)

International other revenues (a)

— — — ( 26,976 ) 26,976 —

Total revenues $ 700,757 $ 96,732 $ 680,793 $ 123,963 $ 210,989 $ 1,813,234

(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.

______________________________

(a) Other revenues as reported in the Consolidated Statements of Operations include $ 28.8 million, $ 33.3 million and $ 27.0 million of revenue for the years ended December 25, 2022, December 26, 2021, and December 27, 2020 respectively, that are part of the International reporting segment.

These amounts include marketing fund contributions and sublease rental income from International franchisees in the UK 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.

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data