PAPA JOHNS INTERNATIONAL INC 10-Q

Item 1. Financial Statements Papa John’s International, Inc. and Subsidiaries Condensed Consolidated Balance Sheets (In thousands, except per share amounts) March 26, 2023 December 25, 2022 (Unaudited) Assets Current assets: Cash and cash equivalents $ 46,708 $ 47,373 Accounts receivable, net 99,997 102,533 Notes receivable, current portion 7,207 6,848 Income tax receivable 5,957 8,780 Inventories 37,112 41,382 Prepaid expenses and other current assets 49,917 44,123 Total current assets 246,898 251,039 Property and equipment, net 253,144 249,793 Finance lease right-of-use assets, net 27,847 24,941 Operating lease right-of-use assets 170,148 172,425 Notes receivable, less current portion, net 21,242 21,248 Goodwill 70,788 70,616 Deferred income taxes 553 1,920 Other assets 74,241 72,245 Total assets $ 864,861 $ 864,227 Liabilities, Redeemable noncontrolling interests and Stockholders’ deficit Current liabilities: Accounts payable $ 68,622 $ 62,316 Income and other taxes payable 8,180 8,766 Accrued expenses and other current liabilities 134,988 142,535 Current deferred revenue 20,508 21,272 Current finance lease liabilities 7,473 6,850 Current operating lease liabilities 24,959 23,418 Current portion of long-term debt 8,200 — Total current liabilities 272,930 265,157 Deferred revenue 21,733 23,204 Long-term finance lease liabilities 21,392 19,022 Long-term operating lease liabilities 157,211 160,905 Long-term debt, less current portion, net 797,362 597,069 Deferred income taxes 1,112 — Other long-term liabilities 67,183 68,317 Total liabilities 1,338,923 1,133,674 Redeemable noncontrolling interests 1,263 1,217 Stockholders’ deficit: Common stock ($ 0.01 par value per share; issued 49,207 at March 26, 2023 and 49,138 at December 25, 2022) 492 491 Additional paid-in capital 443,686 449,829 Accumulated other comprehensive loss ( 8,766 ) ( 10,135 ) Retained earnings 203,569 195,856 Treasury stock ( 16,851 shares at March 26, 2023 and 14,402 shares at December 25, 2022, at cost) ( 1,130,136 ) ( 922,434 ) Total stockholders’ deficit ( 491,155 ) ( 286,393 ) Noncontrolling interests in subsidiaries 15,830 15,729 Total Stockholders’ deficit ( 475,325 ) ( 270,664 ) Total Liabilities, Redeemable noncontrolling interests and Stockholders’ deficit $ 864,861 $ 864,227 See accompanying notes. 1 Papa John’s International, Inc. and Subsidiaries Condensed Consolidated Statements of Operations (Unaudited) Three Months Ended (In thousands, except per share amounts) March 26, 2023 March 27, 2022 Revenues: Domestic Company-owned restaurant sales $ 179,866 $ 198,765 North America franchise royalties and fees 36,072 34,268 North America commissary revenues 212,566 209,679 International revenues 31,463 34,617 Other revenues 67,082 65,363 Total revenues 527,049 542,692 Costs and expenses: Operating costs (excluding depreciation and amortization shown separately below): Domestic Company-owned restaurant expenses 147,784 161,661 North America commissary expenses 196,415 197,090 International expenses 17,311 19,914 Other expenses 61,078 60,555 General and administrative expenses 51,944 65,937 Depreciation and amortization 14,721 11,940 Total costs and expenses 489,253 517,097 Refranchising and impairment loss — ( 11,160 ) Operating income 37,796 14,435 Net interest expense ( 9,021 ) ( 4,264 ) Income before income taxes 28,775 10,171 Income tax expense (benefit) 6,229 ( 1,256 ) Net income before attribution to noncontrolling interests 22,546 11,427 Net income attributable to noncontrolling interests ( 170 ) ( 933 ) Net income attributable to the Company $ 22,376 $ 10,494 Calculation of net income for earnings per share: Net income attributable to the Company $ 22,376 $ 10,494 Dividends paid to participating securities — ( 60 ) Net income attributable to common shareholders $ 22,376 $ 10,434 Basic earnings per common share $ 0.66 $ 0.29 Diluted earnings per common share $ 0.65 $ 0.29 Basic weighted average common shares outstanding 34,155 35,927 Diluted weighted average common shares outstanding 34,324 36,236 Dividends declared per common share $ 0.42 $ 0.35 See accompanying notes. 2 Papa John’s International, Inc. and Subsidiaries Condensed Consolidated Statements of Comprehensive Income (Unaudited) Three Months Ended (In thousands) March 26, 2023 March 27, 2022 Net income before attribution to noncontrolling interests $ 22,546 $ 11,427 Other comprehensive income (loss), before tax: Foreign currency translation adjustments 1,442 ( 861 ) Interest rate swaps (1) 336 1,712 Other comprehensive income (loss), before tax 1,778 851 Income tax effect: Foreign currency translation adjustments ( 332 ) 198 Interest rate swaps (2) ( 77 ) ( 394 ) Income tax effect ( 409 ) ( 196 ) Other comprehensive income (loss), net of tax 1,369 655 Comprehensive income before attribution to noncontrolling interests 23,915 12,082 Less: comprehensive income, redeemable noncontrolling interests ( 46 ) ( 510 ) Less: comprehensive income, nonredeemable noncontrolling interests ( 124 ) ( 423 ) Comprehensive income attributable to the Company $ 23,745 $ 11,149 ___________________________________ (1) Amounts reclassified out of accumulated other comprehensive income into net interest (expense) income include $( 207 ) and $ 535 for the three months ended March 26, 2023 and March 27, 2022, respectively. (2) The income tax effects of amounts reclassified out of accumulated other comprehensive loss were $ 47 and $( 120 ) for the three months ended March 26, 2023 and March 27, 2022, respectively. See accompanying notes. 3 Papa John’s International, Inc. and Subsidiaries Condensed Consolidated Statements of Stockholders’ Deficit (Unaudited) Papa John’s International, Inc. (In thousands) Common Stock Shares Outstanding Common Stock Additional Paid-In Capital Accumulated Other Comprehensive Loss (2) Retained Earnings Treasury Stock (3) Noncontrolling Interests in Subsidiaries Total Stockholders’ Deficit For the three months ended March 26, 2023 Balance at December 25, 2022 34,736 $ 491 $ 449,829 $ ( 10,135 ) $ 195,856 $ ( 922,434 ) $ 15,729 $ ( 270,664 ) Net income (1) — — — — 22,376 — 124 $ 22,500 Other comprehensive income (loss), net of tax — — — 1,369 — — — $ 1,369 Dividends on common stock — — — — ( 14,663 ) — — $ ( 14,663 ) Exercise of stock options 15 — 614 — — — — $ 614 Acquisition of Company common stock ( 2,523 ) — — — — ( 212,444 ) — $ ( 212,444 ) Stock-based compensation expense — 1 3,897 — — — — $ 3,898 Issuance of restricted stock 197 — ( 4,609 ) — — 4,609 — $ — Tax effect of restricted stock awards ( 72 ) — ( 5,999 ) — — — — $ ( 5,999 ) Distributions to noncontrolling interests — — — — — — ( 23 ) $ ( 23 ) Other 3 — ( 46 ) — — 133 — $ 87 Balance at March 26, 2023 32,356 $ 492 $ 443,686 $ ( 8,766 ) $ 203,569 $ ( 1,130,136 ) $ 15,830 $ ( 475,325 ) ___________________________________ (1) Net income to the Company for the three months ended March 26, 2023 excludes $ 46 allocable to the redeemable noncontrolling interests for our joint venture arrangements. (2) At March 26, 2023, the accumulated other comprehensive loss of $ 8,766 was comprised of net unrealized foreign currency translation loss of $ 7,586 and net unrealized loss on the interest rate swap agreements of $ 1,180 . (3) Acquisition of Company common stock for the three months ended March 26, 2023 includes $ 2,804 of transaction costs directly attributable to share repurchases, including a 1% excise tax incurred under the Inflation Reduction Act of 2022. See accompanying notes. 4 Papa John’s International, Inc. and Subsidiaries Condensed Consolidated Statements of Stockholders’ Deficit (continued) (Unaudited) Papa John’s International, Inc. (In thousands) Common Stock Shares Outstanding Common Stock Additional Paid-In Capital Accumulated Other Comprehensive Loss (2) Retained Earnings Treasury Stock Noncontrolling Interests in Subsidiaries Total Stockholders’ Deficit For the three months ended March 27, 2022 Balance at December 26, 2021 35,797 $ 490 $ 445,126 $ ( 9,971 ) $ 183,157 $ ( 806,472 ) $ 15,212 $ ( 172,458 ) Net income (1) — — — — 10,494 — 423 $ 10,917 Other comprehensive income (loss), net of tax — — — 655 — — — $ 655 Dividends on common stock — — 47 — ( 12,527 ) — — $ ( 12,480 ) Exercise of stock options 17 — 741 — — — — $ 741 Acquisition of Company common stock ( 301 ) — — — — ( 32,709 ) — $ ( 32,709 ) Stock-based compensation expense — 1 4,175 — — — — $ 4,176 Issuance of restricted stock 228 — ( 6,369 ) — — 6,369 — $ — Tax effect of restricted stock awards ( 69 ) — ( 7,461 ) — — — — $ ( 7,461 ) Other 3 — ( 34 ) — — 209 — $ 175 Balance at March 27, 2022 35,675 $ 491 $ 436,225 $ ( 9,316 ) $ 181,124 $ ( 832,603 ) $ 15,635 $ ( 208,444 ) ___________________________________ (1) Net income to the Company for the three months ended March 27, 2022 excludes $ 510 allocable to the redeemable noncontrolling interests for our joint venture arrangements. (2) At March 27, 2022, the accumulated other comprehensive loss of $ 9,316 was comprised of net unrealized foreign currency translation loss of $ 5,533 and net unrealized loss on the interest rate swap agreements of $ 3,783 . See accompanying notes. 5 Papa John’s International, Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows (Unaudited) Three Months Ended (In thousands) March 26, 2023 March 27, 2022 Operating activities Net income before attribution to noncontrolling interests $ 22,546 $ 11,427 Adjustments to reconcile net income to net cash provided by operating activities: Provision for allowance for credit losses on accounts and notes receivable 513 15,167 Depreciation and amortization 14,721 11,940 Refranchising and impairment loss — 11,160 Deferred income taxes 2,031 ( 1,817 ) Stock-based compensation expense 3,898 4,176 Other 496 ( 2,135 ) Changes in operating assets and liabilities, net of acquisitions: Accounts receivable 2,182 ( 2,503 ) Income tax receivable 2,822 ( 1,151 ) Inventories 4,330 ( 4,731 ) Prepaid expenses and other current assets ( 4,351 ) 77 Other assets and liabilities 71 ( 654 ) Accounts payable ( 310 ) 7,359 Income and other taxes payable ( 512 ) 8,013 Accrued expenses and other current liabilities ( 5,413 ) ( 29,469 ) Deferred revenue ( 2,236 ) ( 1,465 ) Net cash provided by operating activities 40,788 25,394 Investing activities Purchases of property and equipment ( 18,410 ) ( 10,233 ) Notes issued ( 976 ) ( 272 ) Repayments of notes issued 1,069 3,432 Acquisitions, net of cash acquired — ( 1,250 ) Other 42 8 Net cash used in investing activities ( 18,275 ) ( 8,315 ) Financing activities Net proceeds of revolving credit facilities 208,200 47,000 Proceeds from exercise of stock options 614 741 Acquisition of Company common stock ( 209,640 ) ( 32,709 ) Dividends paid to common stockholders ( 14,603 ) ( 12,608 ) Tax payments for equity award issuances ( 5,999 ) ( 7,461 ) Distributions to noncontrolling interests ( 23 ) ( 685 ) Other ( 1,761 ) ( 1,065 ) Net cash used in financing activities ( 23,212 ) ( 6,787 ) Effect of exchange rate changes on cash and cash equivalents 34 ( 233 ) Change in cash and cash equivalents ( 665 ) 10,059 Cash and cash equivalents at beginning of period 47,373 70,610 Cash and cash equivalents at end of period $ 46,708 $ 80,669 See accompanying notes. 6 Papa John’s International, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements (Unaudited) March 26, 2023 1. Basis of Presentation The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP” or “U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete annual financial statements. In the opinion of management, all adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation have been included. Operating results for the three months ended March 26, 2023 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2023. For further information, refer to the consolidated financial statements and footnotes thereto included in the Annual Report on Form 10-K for Papa John’s International, Inc. (referred to as the “Company,” “Papa John’s,” “Papa Johns” or in the first-person notations of “we,” “us” and “our”) for the year ended December 25, 2022. 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. 2. Significant Accounting Policies Principles of Consolidation The accompanying Condensed Consolidated Financial Statements include the accounts of Papa John’s International, Inc. and its subsidiaries. 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 and Canada 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 North America 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 .” Use of Estimates The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Significant items that are subject to such estimates and assumptions include the allowance for credit losses on accounts and notes receivable, intangible assets, contract assets and contract liabilities including the customer loyalty program obligation, right-of-use assets and lease liabilities, unredeemed gift card liabilities, insurance reserves and tax reserves. Although management bases its estimates on historical experience and assumptions that are believed to be reasonable under the circumstances, actual results could significantly differ from these estimates. Noncontrolling Interests Papa John’s has joint venture arrangements in which there are noncontrolling interests held by third parties that includ ed 98 and 188 restaurants at March 26, 2023 and March 27, 2022, respectively. As further described in “Note 10. Divestitures” we divested our 51 percent interest in one joint venture in Texas 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 Condensed Consolidated Statements of Operations of net income attributable to noncontrolling interests. 7 Net income attributable to these joint ventures for the three months ended March 26, 2023 and March 27, 2022 was as follows (in thousands): Three Months Ended March 26, 2023 March 27, 2022 Papa John’s International, Inc. $ 397 $ 1,621 Noncontrolling interests 170 933 Total net income $ 567 $ 2,554 The following summarizes the redemption feature, location and related accounting within the Condensed Consolidated Balance Sheets for these joint venture arrangements: Type of Joint Venture Arrangement Location within the Condensed 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 Deferred Income Tax Accounts and Tax Reserves We are subject to income taxes in the United States and several foreign jurisdictions. Significant judgment is required in determining the provision for income taxes and the related assets and liabilities. The provision for income taxes includes income taxes paid, currently payable or receivable and those deferred. We use an estimated annual effective rate based on expected annual income to determine our quarterly provision for income taxes. The effective income tax rate includes the estimated domestic state effective income tax rate and applicable foreign income tax rates. The effective income tax rate is also impacted by various permanent items and credits, net of any related valuation allowances, and can vary based on changes in estimated annual income. Discrete items are recorded in the quarter in which they occur. 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). The effect on deferred taxes of changes in tax rates is recognized in the period in which the new tax rate is enacted. Valuation allowances are established when necessary on a jurisdictional basis to reduce deferred tax assets to the amounts we expect to realize. Tax authorities periodically audit the Company. We record reserves and related interest and penalties for identified exposures as income tax expense. We evaluate these issues on a quarterly basis to adjust for events, such as statute of limitations expirations, court rulings or audit settlements, which may impact our ultimate payment for such exposures. Fair Value Measurements and Disclosures The Company determines the fair value of financial assets and liabilities based on the price that would be received to sell the asset or paid to transfer the liability to a market participant. Certain assets and liabilities are measured at fair value on a recurring basis and are required to be classified and disclosed in one of the following three categories: • Level 1: Quoted market prices in active markets for identical assets or liabilities. • Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data. • Level 3: Unobservable inputs that are not corroborated by market data. Fair value is a market-based measurement, not an entity-specific measurement. Considerable judgment is required to interpret market data to estimate fair value; accordingly, the fair values presented do not necessarily indicate what the Company or its debtholders could realize in a current market exchange. 8 Our financial assets and liabilities that were measured at fair value on a recurring basis as of March 26, 2023 and December 25, 2022 are as follows: Fair Value Measurements (In thousands) Carrying Value Level 1 Level 2 Level 3 March 26, 2023 Financial assets: Cash surrender value of life insurance policies (a) $ 30,337 $ 30,337 $ — $ — Interest rate swaps (b) $ 274 $ — $ 274 $ — December 25, 2022 Financial assets: Cash surrender value of life insurance policies (a) $ 30,120 $ 30,120 $ — $ — Interest rate swaps (b) $ 986 $ — $ 986 $ — ___________________________________ (a) Represents life insurance policies held in our non-qualified deferred compensation plan. (b) The fair value of our interest rate swaps is based on the sum of all future net present value cash flows. The future cash flows are derived based on the terms of our interest rate swaps, as well as considering published discount factors, and projected London Interbank Offered Rates (“LIBOR”). The fair value of certain assets and liabilities approximates carrying value because of the short-term nature of the accounts, including cash and cash equivalents, accounts receivable, net of allowances, and accounts payable. The carrying value of notes receivable, net of allowances, also approximates fair value. The Company’s revolving credit facilities 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 March 26, 2023 and December 25, 2022: March 26, 2023 December 25, 2022 (In thousands) Carrying Value Fair Value Carrying Value Fair Value 3.875 % Senior Notes $ 400,000 $ 342,000 $ 400,000 $ 339,500 Allowance for Credit Losses Estimates of expected credit losses, even if remote, are based upon historical account write-off trends, facts about the current financial condition of the debtor, forecasts of future operating results based upon current trends of select operating metrics, and macroeconomic factors. Credit quality is monitored through the timing of payments compared to the prescribed payment terms and known facts regarding the financial condition of the franchisee or customer. Account and note balances are charged off against the allowance after recovery efforts have ceased. 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 25, 2022 $ 6,718 $ 14,499 Current period provision for expected credit losses 609 24 Write-offs charged against the allowance ( 228 ) — Recoveries collected ( 84 ) ( 36 ) Balance at March 26, 2023 $ 7,015 $ 14,487 9 3. Leases Lessor Operating Leases The Company subleases certain retail space to our franchisees in the United Kingdom (“UK”), which are primarily operating leases. At March 26, 2023, we leased and subleased 446 Papa Johns 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. 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 $ 2.9 million and $ 3.0 million for the three months ended March 26, 2023 and March 27, 2022, respectively, within Other revenues in the Condensed Consolidated Statements of Operations. Lease Guarantees As a result of assigning our interest in obligations under property leases as a condition of the refranchising of certain restaurants, we are contingently liable for payment of 52 domestic leases. These leases have varying terms, the latest of which expires in 2036. As of March 26, 2023, the estimated maximum amount of undiscounted payments the Company could be required to make in the event of nonpayment by the primary lessees was $ 8.7 million. This contingent liability is not included in the Condensed Consolidated Balance Sheets as it is not probable to occur. The fair value of the guarantee is not material. Supplemental Cash Flow & Other Information Supplemental cash flow information related to leases for the periods reported is as follows: Three Months Ended (In thousands) March 26, 2023 March 27, 2022 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from finance leases $ 309 $ 262 Financing cash flows from finance leases $ 1,743 $ 1,241 Operating cash flows from operating leases (a) $ 9,178 $ 9,612 Right-of-use assets obtained in exchange for new finance lease liabilities $ 4,764 $ 569 Right-of-use assets obtained in exchange for new operating lease liabilities $ 4,721 $ 20,801 Cash received from sublease income $ 2,532 $ 3,092 ___________________________________ (a) Included within the change in Other assets and liabilities within the Condensed Consolidated Statements of Cash Flows offset by non-cash operating lease right-of-use asset amortization and lease liability accretion. 4. Papa John’s Marketing Fund, Inc. PJMF, which is a consolidated VIE where the Company has been identified as the primary beneficiary, collects a percentage of revenues from Company-owned and franchised restaurants in the United States, for the purpose of designing and administering advertising and promotional programs for all participating Domestic restaurants. Contributions and expenditures are reported on a gross basis in the Condensed Consolidated Statements of Operations within Other revenues and Other expenses. PJMF also has a wholly-owned subsidiary, Papa Card, Inc., which administers the Company’s gift card programs. 10 Assets and liabilities of PJMF, which are utilized solely for the Company’s advertising and promotional programs, were as follows in the Condensed Consolidated Balance Sheets (in thousands): March 26, 2023 December 25, 2022 Assets Current assets: Cash and cash equivalents $ 16,076 $ 17,174 Accounts receivable, net 14,254 14,780 Prepaid expenses and other current assets 7,638 1,815 Total current assets 37,968 33,769 Deferred income taxes 655 655 Total assets $ 38,623 $ 34,424 Liabilities Current liabilities: Accounts payable $ 13,589 $ 12,428 Income and other taxes payable 13 8 Accrued expenses and other current liabilities 13,911 17,928 Current portion of long-term debt 8,200 — Current deferred revenue 4,381 4,395 Total current liabilities 40,094 34,759 Deferred revenue 1,800 2,503 Total liabilities $ 41,894 $ 37,262 5. Revenue Recognition Contract Balances Our contract liabilities primarily relate to franchise fees, unredeemed gift card liabilities, and loyalty program obligations, which we classify as Deferred revenue on the Condensed Consolidated Balance Sheets. During the three months ended March 26, 2023 and March 27, 2022, the Company recognized $ 8.4 million and $ 9.3 million in revenue, respectively, related to deferred revenue. The following table includes a breakout of contract liability balances (in thousands): Contract Liabilities March 26, 2023 December 25, 2022 Change Franchise fees and unredeemed gift card liabilities $ 29,166 $ 30,710 $ ( 1,544 ) Customer loyalty program obligations 13,075 13,766 ( 691 ) Total contract liabilities $ 42,241 $ 44,476 $ ( 2,235 ) Our contract assets consist primarily of equipment incentives provided to franchisees. Equipment incentives are related to the future value of commissary revenue the Company will receive over the term of the incentive agreement. As of March 26, 2023 and December 25, 2022, the contract assets were approximately $ 7.0 million and $ 6.2 million, respectively. For the three months ended March 26, 2023 and March 27, 2022, revenue was reduced approximately $ 0.9 million and $ 0.8 million, respectively, for the amortization of contract assets over the applicable contract terms. Contract assets are included in Prepaid expenses and other current assets and Other assets on the Condensed Consolidated Balance Sheets. 11 Transaction Price Allocated to the Remaining Performance Obligations The following table (in thousands) includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied at the end of the reporting period. Performance Obligations by Period Less than 1 Year 1-2 Years 2-3 Years 3-4 Years 4-5 Years Thereafter Total Franchise fees $ 3,052 $ 2,884 $ 2,702 $ 2,439 $ 2,165 $ 6,485 $ 19,727 At March 26, 2023, approximately $ 3.3 million of area development fees related to unopened stores and international unearned royalties are included in Deferred revenue. Timing of revenue recognition is dependent upon the timing of store openings and franchisees’ revenues. Gift card liabilities of approximately $ 6.2 million, included in Deferred revenue, will be recognized in Company-owned restaurant revenues when gift cards are redeemed. The Company will recognize redemption fee revenue in Other revenues when cards are redeemed at franchised restaurant locations. The Company applies the practical expedient in ASC 606, “ Revenue Recognition” and does not disclose information about remaining performance obligations that have original expected durations of one year or less. 6. Common Stock Shares Authorized and Outstanding The Company has authorized 100.0 million shares of common stock as of March 26, 2023 and December 25, 2022. The Company’s outstanding shares of common stock outstanding, net of repurchased shares of common stock held as treasury stock, were 32.4 million shares at March 26, 2023, compared to 34.7 million shares at December 25, 2022. Share Repurchase Program On October 28, 2021, our Board of Directors (the “Board”) approved a share repurchase program with an indefinite duration for up to $ 425.0 million of the Company’s common stock. The following table summarizes our repurchase activity under our share repurchase programs for the three months ended March 26, 2023 and March 27, 2022: (In thousands, except average price per share) Total Number of Shares Purchased Average Price Paid per Share Aggregate Cost of Shares Purchased (a) Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs Three Months Ended March 26, 2023 2,523 $ 83.10 $ 209,640 $ 90,160 March 27, 2022 301 $ 108.76 $ 32,709 $ 392,091 (a) Aggregate cost of shares purchased for the three months ended March 26, 2023 excludes $ 2.8 million of transaction costs directly attributable to share repurchases, including a 1% excise tax incurred under the Inflation Reduction Act of 2022. These costs were classified as non-cash financing activities during the three months ended March 26, 2023. The shares repurchased during the three months ended March 26, 2023 included 2,176,928 shares repurchased on March 1, 2023 from certain funds affiliated with, or managed by, Starboard Value LP (collectively, “Starboard”), at a price of $ 82.52 per share, for aggregate consideration of $ 179.6 million. The transaction was negotiated by an independent committee of the Board of Directors formed for the purpose of evaluating a possible transaction involving Starboard, and was approved by the full Board of Directors upon such independent committee’s recommendation. Starboard’s Chief Executive Officer is Jeffrey Smith, who previously served as the Company’s Chairman of the Board until his resignation on March 1, 2023. The timing and volume of share repurchases under the Company’s share repurchase programs may be executed at the discretion of management on an opportunistic basis, subject to market and business conditions, regulatory requirements and other factors, or pursuant to trading plans or other arrangements. Repurchases under the programs may be made through open market, block, and privately negotiated transactions, including Rule 10b5-1 plans, at times and in such amounts as management deems appropriate. Repurchases under the Company’s share repurchase programs may be commenced or suspended from time to time at the Company’s discretion without prior notice. Funding for the share repurchase programs will be provided through our credit facility, operating cash flow, stock option exercises and cash and cash equivalents. 12 Dividends The Company paid dividends of approx imately $ 14.6 million ($ 0.42 per share) f or the three months ended March 26, 2023. On April 25, 2023, our Board of Directors declared a first quarter dividend of $ 0.42 per common share (approximately $ 13.8 million in the aggregate), which will be paid on May 26, 2023 to stockholders of record as of the close of business on May 15, 2023. The declarat ion and payment of any future dividends will be at the discretion of our Board. 7. 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. 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 attributable to common shareholders. 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 and diluted earnings per common share are as follows (in thousands, except per share data): Three Months Ended March 26, 2023 March 27, 2022 Basic earnings per common share Net income attributable to the Company $ 22,376 $ 10,494 Dividends paid to participating securities — ( 60 ) Net income attributable to common shareholders $ 22,376 $ 10,434 Basic weighted average common shares outstanding 34,155 35,927 Basic earnings per common share $ 0.66 $ 0.29 Diluted earnings per common share Net income attributable to common shareholders $ 22,376 $ 10,434 Weighted average common shares outstanding 34,155 35,927 Dilutive effect of outstanding equity awards (a) 169 309 Diluted weighted average common shares outstanding 34,324 36,236 Diluted earnings per common share $ 0.65 $ 0.29 ___________________________________ (a) Excludes 22,000 and 21,000 equity awards for the three months ended March 26, 2023 and March 27, 2022, respectively, as the effect of including such awards would have been anti-dilutive. 13 8. Debt Long-term debt, net, consists of the following (in thousands): March 26, 2023 December 25, 2022 Senior notes $ 400,000 $ 400,000 Revolving facilities (a) 413,133 205,000 Outstanding debt $ 813,133 $ 605,000 Unamortized debt issuance costs ( 7,571 ) ( 7,931 ) Current portion of long-term debt ( 8,200 ) — Total long-term debt, net $ 797,362 $ 597,069 ___________________________________ (a) Revolving facilities as of March 26, 2023 includes $ 8.2 million outstanding under the PJMF Revolving Facility as defined and discussed below. Senior Notes On September 14, 2021, the Company issued $ 400.0 million of 3.875 % senior notes (the “Notes”) which will mature on September 15, 2029. Interest on the Notes is payable semi-annually in cash in arrears on March 15 and September 15 of each year at a fixed interest rate of 3.875 % per annum. The Company may redeem the Notes, in whole or in part, at any time on or after September 15, 2024 at established redemption prices ranging from 97 to 194 basis points depending on when the Notes are redeemed. At any time prior to September 15, 2024, the Company may also redeem up to 40 % of the Notes with net cash proceeds of certain equity offerings at a redemption price equal to 103.875 % of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest, excluding the redemption date. In addition, at any time prior to September 15, 2024, the Company may redeem the Notes, in whole or in part, at a redemption price equal to 100 % of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest and an applicable “make-whole” premium. The Notes also contain customary redemption provisions related to asset sales and certain change of control transactions. The Indenture governing the Notes contains customary events of default, including, among other things, payment default, failure to comply with covenants or agreements contained in the Indenture or the Notes and certain provisions related to bankruptcy events. The Indenture also contains customary negative covenants. Credit Agreement The Company’s amended and restated credit agreement, dated September 14, 2021 (the “Credit Agreement”) provides for a senior secured revolving credit facility in an aggregate available principal amount of $ 600.0 million (the “PJI Revolving Facility”), of which up to $ 40.0 million is available as swingline loans and up to $ 80.0 million is available as letters of credit. The PJI Revolving Facility will mature on September 14, 2026. The remaining availability under the PJI Revolving Facility was approximately $ 195.0 million as of March 26, 2023. Up to $ 50.0 million of the PJI Revolving Facility may be advanced in certain agreed foreign currencies, including Euros, Pounds Sterling, Canadian Dollars, Japanese Yen, and Mexican Pesos. Additionally, the Credit Agreement includes an accordion feature allowing for a future increase of the PJI Revolving Facility and/or incremental term loans in an aggregate amount of up to $ 500.0 million, subject to certain conditions, including obtaining commitments from one or more new or existing lenders to provide such increased amounts and ongoing compliance with financial covenants. Loans under the PJI Revolving Facility accrue interest at a per annum rate equal to, at the Company’s election, either a LIBOR rate plus a margin ranging from 1.25 % to 2.00 % or a base rate (generally determined according to the greater of a prime rate, federal funds rate plus 0.50 %, or a LIBOR rate plus 1.00 %) plus a margin ranging from 0.25 % to 1.00 %. In each case, the actual margin is determined according to a ratio of the Company’s total indebtedness to 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. The Credit Agreement also contains 14 provisions specifying alternative interest rate calculations to be used at such time as LIBOR ceases to be available as a benchmark for establishing the interest rate on floating interest rate borrowings. The Credit Agreement contains customary affirmative and negative covenants that, among other things, require customary reporting obligations, and restrict, subject to certain exceptions, the occurrence 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. The Company is also 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 the 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 March 26, 2023. Obligations under the Credit Agreement are guaranteed by certain direct and indirect material domestic subsidiaries of the Company (the “Guarantors”) and are secured by a security interest in substantially all of the capital stock and equity interests of the Company’s and the Guarantors’ Domestic and first tier material foreign subsidiaries. The 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 Guarantors. PJMF Revolving Facility PJMF has a $ 20.0 million revolving line of credit (the “PJMF Revolving Facility”) pursuant to a Revolving Loan Agreement, dated September 30, 2015 with U.S. Bank National Association, as lender. The PJMF Revolving Facility is secured by substantially all assets of PJMF. The PJMF Revolving Facility matures on September 30, 2023, but is subject to annual amendments. The borrowings under the PJMF Revolving Facility accrue interest at a variable rate of a one month LIBOR plus 1.60 %. The applicable interest rate on the PJMF Revolving facility was 5.9 % for the three months ended March 26, 2023. As of March 26, 2023, t he principal amount of debt outstanding under the PJMF Revolving Facility was approximately $ 8.2 million and is classified as Current portion of long-term debt in the Condensed Consolidated Balance Sheets . The PJMF operating results and the related debt outstanding do not impact the financial covenants under the Credit Agreement. Derivative Financial Instruments As of March 26, 2023, we have the following interest rate swap agreements with a total notional value of $ 125.0 million: Effective Dates Floating Rate Debt Fixed Rates April 30, 2018 through April 30, 2023 $ 55 million 2.33 % April 30, 2018 through April 30, 2023 $ 35 million 2.36 % April 30, 2018 through April 30, 2023 $ 35 million 2.34 % In the third quarter of 2021, our 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 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 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 accumulated other comprehensive income and reclassified to interest expense in the same period or periods during which the hedged transactions affect earnings. 15 The following table provides information on the location and amounts of our swaps in the accompanying condensed consolidated financial statements (in thousands): Interest Rate Swap Derivatives Balance Sheet Location Fair Value March 26, 2023 Fair Value December 25, 2022 Other current assets $ 274 $ 986 The effect of derivative instruments on the accompanying condensed consolidated financial statements is as follows (in thousands): Derivatives - Cash Flow Hedging Relationships Amount of Gain or (Loss) Recognized in AOCL on Derivative Location of (Loss) or Gain Reclassified from AOCL into Income Amount of (Loss) or Gain Reclassified from AOCL into Income Total Net Interest Expense on Condensed Consolidated Statements of Operations Interest rate swaps: March 26, 2023 $ 259 Interest Expense $ ( 207 ) $ ( 9,021 ) March 27, 2022 $ 1,318 Interest Expense $ 535 $ ( 4,264 ) Interest paid, including payments made or received under the swaps, was $ 10.9 million and $ 10.1 million for the three months ended March 26, 2023 and March 27, 2022, respectively. 9. Litigation, Commitments and Contingencies Litigation The Company is involved in a number of lawsuits, claims, investigations and proceedings, including those specifically identified below, consisting of intellectual property, employment, consumer, commercial and other matters arising in the ordinary course of business. In accordance with ASC 450, “ Contingencies, ” the Company has made accruals with respect to these matters, where appropriate, which are reflected in the Company’s condensed consolidated financial statements. 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. 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. 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. v. 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. 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. On January 18, 2023, 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. As of March 26, 2023, $ 5.0 million remains in Accrued expenses and other accrued liabilities in the Condensed Consolidated Balance Sheets. 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 16 trade and commerce in violation of Section 1 of the Sherman Antitrust Act. 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 Condensed Consolidated Statements of Operations for the three months ended March 27, 2022 and remained accrued in Accrued expenses and other accrued liabilities in the Condensed Consolidated Balance Sheets as of March 26, 2023. 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. 10. Divestitures Refranchising Loss On March 28, 2022, we refranchised our 51 % 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 in Refranchising and impairment loss in the Condensed Consolidated Statements 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 .” 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 in Refranchising and impairment loss in the Condensed Consolidated Statements of Operations 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. 11. Segment Information We have four reportable segments: Domestic Company-owned restaurants, North America franchising, North America commissaries, and International operations. The Domestic Company-owned restaurant segment consists of the operations of all Domestic 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 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 John’s 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. 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. Certain administrative and capital costs are allocated to segments based upon predetermined rates or estimated resource usage. We account for intercompany sales and transfers as if the sales or transfers were to third parties and eliminate the activity in consolidation. Our reportable segments are business units that provide different products or services. Separate management of each segment is required because each business unit is subject to different operational issues and strategies. No single external customer accounted for 10% or more of our consolidated revenues. 17 The following tables present our segment information. Three Months Ended (In thousands) March 26, 2023 March 27, 2022 Revenues: Domestic Company-owned restaurants $ 179,866 $ 198,765 North America franchising 36,072 34,268 North America commissaries 212,566 209,679 International 38,704 42,707 All others 59,841 57,273 Total revenues $ 527,049 $ 542,692 Intersegment revenues: North America franchising $ 1,052 $ 1,053 North America commissaries 51,817 58,507 All others 16,835 19,379 Total intersegment revenues $ 69,704 $ 78,939 Operating income: Domestic Company-owned restaurants (a) $ 6,650 $ 1,989 North America franchising 33,400 32,137 North America commissaries 10,730 9,334 International (b) 7,232 4,455 All others 3,157 3,719 Unallocated corporate expenses (c) ( 23,366 ) ( 37,111 ) Elimination of intersegment (profits) losses ( 7 ) ( 88 ) Total operating income $ 37,796 $ 14,435 (In thousands) As of March 26, 2023 Property and equipment, net: Domestic Company-owned restaurants $ 242,755 North America commissaries 152,411 International 17,118 All others 135,467 Unallocated corporate assets 257,368 Accumulated depreciation and amortization ( 551,975 ) Total property and equipment, net $ 253,144 ___________________________________ (a) The three months ended March 27, 2022 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. See “Note 10. Divestitures” for additional information. (b) The three months ended March 27, 2022 includes $ 3.5 million of one-time, non-cash reserves for certain accounts receivable and impairments of reacquired franchise rights. See “Notes 2. Significant Accounting Policies” and “10. Divestitures” for additional information. (c) The three months ended March 26, 2023 includes $ 1.4 million of severance and related costs associated with the transition of certain executives. For the three months ended March 27, 2022 , Unallocated corporate expenses includes $ 13.9 million of one-time, non-cash reserves of certain notes receivable and $ 5.0 million for certain legal settlements. See “Notes 2. Significant Accounting Policies” and “9. Litigation, Commitments and Contingencies” for additional information. 18 Disaggregation of Revenue In the following tables, revenues are disaggregated by major product/service line. The tables also include a reconciliation of the disaggregated revenues by the reportable segment (in thousands): Reportable Segments Three Months Ended March 26, 2023 Major Products/Services Lines Domestic Company-owned restaurants North America franchising North America commissaries International All others Total Company-owned restaurant sales $ 179,866 $ — $ — $ — $ — $ 179,866 Franchise royalties and fees — 37,124 — 12,491 — 49,615 Commissary sales — — 264,383 18,972 — 283,355 Other revenues — — — 7,241 76,676 83,917 Eliminations — ( 1,052 ) ( 51,817 ) — ( 16,835 ) ( 69,704 ) Total segment revenues 179,866 36,072 212,566 38,704 59,841 527,049 International other revenues (a) — — — ( 7,241 ) 7,241 — Total revenues $ 179,866 $ 36,072 $ 212,566 $ 31,463 $ 67,082 $ 527,049 Reportable Segments Three Months Ended March 27, 2022 Major Products/Services Lines Domestic Company-owned restaurants North America franchising North America commissaries International All others Total Company-owned restaurant sales $ 198,765 $ — $ — $ — $ — $ 198,765 Franchise royalties and fees — 35,321 — 13,435 — 48,756 Commissary sales — — 268,186 21,182 — 289,368 Other revenues — — — 8,090 76,652 84,742 Eliminations — ( 1,053 ) ( 58,507 ) — ( 19,379 ) ( 78,939 ) Total segment revenues 198,765 34,268 209,679 42,707 57,273 542,692 International other revenues (a) — — — ( 8,090 ) 8,090 — Total revenues $ 198,765 $ 34,268 $ 209,679 $ 34,617 $ 65,363 $ 542,692 ___________________________________ (a) Other revenues as reported in the Condensed Consolidated Statements of Operations include $ 7.2 million and $ 8.1 million of revenues for the three months ended March 26, 2023 and March 27, 2022, 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 operating income 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 Condensed Consolidated Statements of Operations. 19