What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-08-03 compared with 2023-05-04 · 240 added, 159 removed, 262 unchanged (60% of the section changed)

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(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 and, in certain international markets, dine-in and delivery restaurants under the trademark “Papa John’s.” Papa John’s began operations in 1984.

As of March 26, 2023, there were 5,733 Papa John’s restaurants in operation, consisting of 520 Company-owned and 5,213 franchised restaurants operating in 48 countries and territories.

As of June 25, 2023, there were 5,780 Papa John’s restaurants in operation, consisting of 612 Company-owned and 5,168 franchised restaurants operating in 48 countries and territories.

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.

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The Company has focused on executing strategic priorities and building a foundation for long-term success, while navigating a challenging macroeconomic environment.

Our progress and significant transactions during the first quarter of 2023 are described below.

Our progress and significant transactions during the second quarter of 2023 are described below.

Growth Strategy .

The Company delivered its fifteenth consecutive quarter of Global system-wide restaurant sales growth and continues to expand both domestically and internationally.

The Company delivered its sixteenth consecutive quarter of Global system-wide restaurant sales growth and continues to expand both domestically and internationally.

This growth will be fueled by continued product innovation and our development strategy.

Our expanding development pipeline is a key long-term growth driver as we believe there is significant opportunity to offer our differentiated, premium position to more customers globally and domestically.

In the first quarter of 2023, we opened 27 net new restaurants, for global unit growth of 0.5%.

In the second quarter of 2023, we opened 47 net new restaurants, for global unit growth of 0.8%.

We expect this growth to accelerate in 2023 with global development to be between 270 to 310 net new units .

Our view of our long-term unit opportunity, both domestically and internationally, continues to expand as we sign significant deals to develop within key areas.

In April 2023, we announced our future expansion into India through a development agreement to open 650 new restaurants in India by 2033.

In 2022, we announced that we expect 1,400 to 1,800 net new Papa Johns restaurants worldwide from 2022 through the end of 2025.

We plan to continue focusing on our strategic innovative products and restaurant development across our platforms to drive sustainable growth this year and beyond.

Going forward we expect annual net new unit growth to be between 5% and 7%.

This would imply net new unit growth of 1,150 to 1,400 units between 2022 and 2025, compared with our previous expectation of 1,400 to 1,800 net new units during this same time.

This slightly lower rate of growth takes into consideration continued global economic pressures.

Operational Initiatives.

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Running BETTER operations is intended to increase customer and employee satisfaction, as well as drive customer loyalty.

We are seeing improvement in our restaurant level operating margins, and we experienced a 3.4% increase in comparable sales for Domestic Company-owned restaurants in the first quarter of 2023.

We are seeing improvement in our restaurant level operating margins, and we experienced a 2.8% increase in comparable sales for Domestic Company-owned restaurants for the first six months of 2023.

We expect this initiative to continue throughout 2023.

Global Market Conditions.

UK Market Conditions.

Macroeconomic conditions in the UK, the largest region in our International segment, continue to present challenges in light of ongoing inflation and rising interest rates.

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While uncertain how long these conditions will last, the Company is committed to its presence in the UK and is invested in the Company’s long-term success in this region.

As we navigate this challenging economic environment, we are investing in capabilities to improve our operations and are working to reposition the franchise base to further strengthen our UK business.

In addition to the targeted marketing support announced in February, we continue to innovate and implement capabilities and strategies from the US for the UK market.

Also, as our franchise base is repositioned in a way that ensures our franchisees and this market are aligned to drive long-term growth, strategic store closures and refranchising will likely occur.

Share Repurchases.

As part of our long-term growth and capital allocation strategy, we are committed to investing in share repurchases to provide ongoing value and enhanced returns to our shareholders.

During the first quarter of 2023, the Company repurchased 2.5 million shares of common stock for $209.6 million pursuant to its share repurchase program.

Included in these repurchases were approximately 2.2 million shares repurchased from certain funds affiliated with, or managed by, Starboard Value LP (collectively, “Starboard”) on March 1, 2023, at $82.52 per share, for a total 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 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 repurchase was funded with cash on hand and funds drawn under the Company’s PJI Revolving Facility.

Following the repurchases, the Company has $90.2 million available under its existing share repurchase authorization as of March 26, 2023.

As we navigate this challenging economic environment, we recently established a Company-owned restaurant portfolio in the UK, allowing us to build a similar model to the one we have created in the US.

This model enables us to scale our capabilities with franchisees in the UK, and worldwide, including revenue management capabilities, product and technological innovation and operational efficiencies to improve sales and restaurant-level profitability over the longer term.

Global Restaurant Sales and Unit Information

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Franchise restaurant sales are not included in the Company’s revenues.

Three Months Ended

Amounts below exclude the impact of foreign currency March 26,

2023 March 27,

Three Months Ended Six Months Ended

Amounts below exclude the impact of foreign currency June 25,

2023 June 26,

2022 June 25,

2023 June 26,

Comparable sales growth (decline):

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International restaurants (a)

8.6% 3.4% 5.8% 8.3%

Total global system-wide restaurant sales growth (decline) 2.0% 2.6% 2.0% 4.2%

_______________________________

(a) The three months ended March 26, 2023 excludes the impact of franchisee suspended restaurants

Restaurant Progression Three Months Ended

2023 March 27,

(a) The six months ended June 25, 2023 and June 26, 2022 exclude the impact of franchisee suspended restaurants.

Restaurant Progression Three Months Ended Six Months Ended

2023 June 26,

2022 June 25,

2023 June 26,

North America Company-owned:

Beginning of period 520 608 522 600

Opened — 1 — 8

Closed — — (2) —

Acquired 1 — 1 1

Refranchised — (90) — (90)

End of period 521 519 521 519

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Beginning of period 2,864 2,746 2,854 2,739

Opened 13 17 29 32

Closed (8) (16) (14) (23)

Sold (1) — (1) (1)

Refranchised — 90 — 90

End of period 2,868 2,837 2,868 2,837

International Company-owned

Beginning of period — — — —

Acquired 91 — 91 —

End of period 91 91 — 91 —

International franchised:

Beginning of period 2,349 2,170 2,330 2,311

Opened 55 72 98 127

Closed (13) (27) (37) (35)

Sold (91) — (91) —

Suspended (a)

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The following table sets forth the various components of Revenues from the Condensed Consolidated Statements of Operations.

Three Months Ended

(Dollars in thousands) March 26,

2023 March 27,

2022 Increase

Three Months Ended Six Months Ended Increase

(Dollars in thousands) June 25,

2023 June 26,

2022 June 25,

2023 June 26,

Domestic Company-owned restaurant sales $ 175,780 $ 171,411 $ 355,646 $ 370,176 2.5 % (3.9) %

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Total revenues $ 514,530 $ 522,665 $ 1,041,579 $ 1,065,357 (1.6) % (2.2) %

For the three months ended March 26, 2023, the discussion of changes in revenues below for Domestic Company-owned restaurants and North America franchised restaurants include explanations of the impact to the comparable results of the

refranchising of 90 restaurants during the second quarter of 2022 (the “2022 refranchising”).

For the three and six months ended June 25, 2023, the discussion of changes in revenues below for International, Other revenues, Domestic Company-owned restaurants and North America franchised restaurants include explanations of the impact to the comparable results for the acquisition of 91 stores in the UK in 2023 (the “2023 acquisition”) and for the refranchising of 90 restaurants during the second quarter of 2022 (the “2022 refranchising”).

See “Note 12.

Acquisitions” and “Note 10.

Divestitures” of the “Notes to Condensed Consolidated Financial Statements” for additional information.

Total revenues decreased $15.6 million or 2.9% to $527.0 million for the three months ended March 26, 2023, as compared to the prior year period.

Excluding the impact of the 2022 refranchising, total revenues increased $2.2 million, or 0.4%, for the three months ended March 26, 2023.

Domestic Company-owned restaurant sales decreased $18.9 million, or 9.5% for the three months ended March 26, 2023, compared to the prior year period.

Excluding the impact of the 2022 refranchising, Domestic Company-owned restaurant sales increased $8.4 million, or 4.9%, for the three months ended March 26, 2023, primarily due to comparable sales of 3.4% and an increase in equivalent units of 1.2 % .

North America franchise royalties and fees increased $1.8 million, or 5.3% for the three months ended March 26, 2023, compared to prior year period.

Excluding the impact of the 2022 refranchising, North America franchise royalties and fees increased $0.4 million, or 1.3%, for the three months ended March 26, 2023, primarily due to an increase in equivalent units of 1.4%, partially offset by negative comparable sales of 0.8%.

North America franchise restaurant sales, excluding the impact of the 2022 refranchising, increased 0.6% to $771.4 million for the three months ended March 26, 2023, compared to the prior year period.

Total revenues decreased $8.1 million or 1.6% to $514.5 million for the three months ended June 25, 2023 and decreased $23.8 million or 2.2% to $1.0 billion for the six months ended June 25, 2023, as compared to each prior year comparable period.

Excluding the impacts of the 2023 acquisition and the 2022 refranchising, total revenues decreased $9.8 million or 1.9% and decreased $7.6 million, or 0.7%, for the three and six months ended June 25, 2023, respectively.

Domestic Company-owned restaurant sales increased $4.4 million, or 2.5% for the three months ended June 25, 2023 and decreased $14.5 million, or 3.9% for the six months ended June 25, 2023, as compared to the prior year comparable periods.

Excluding the impact of refranchising in the second quarter of 2022, Domestic Company-owned restaurant sales increased $12.8 million, or 3.7%, for the six months ended June 25, 2023.

The increases for the three and six month periods were primarily due to comparable sales growth of 2.2% and 2.8% for the three and six months ended June 25, 2023, respectively.

North America franchise royalties and fees decreased $0.2 million, or 0.6% for the three months ended June 25, 2023 and increased $1.6 million, or 2.3% for the six months ended June 25, 2023, as compared to each prior year comparable period.

Excluding the impact of the 2022 refranchising, North America franchise royalties increased $0.2 million or 0.3%, for the six months ended June 25, 2023.

Comparable sales for the three and six months ended June 25, 2023 were negative 2.3% and negative 1.6%, respectively.

Equivalent units were negative 1.5% for the second quarter and negative 0.1% for the six months ended June 25, 2023, excluding the impact of the 2023 acquisition.

North America franchise restaurant sales decreased 0.8% to $747.7 million for the three months ended June 25, 2023 compared to the prior year comparable period.

Excluding the impact of 2022 refranchising, North America franchise restaurant sales decreased 0.1% to $1.5 billion for the six months ended June 25, 2023 compared to the prior year comparable period.

North America franchise restaurant sales are not included in Company revenues;

however, our North America franchise royalties are derived from these sales.

North America commissary revenues increased $2.9 million, or 1.4% for the three months ended March 26, 2023, compared to the prior year period.

Excluding the impact of the 2022 refranchising, North America commissary decreased $5.2 million primarily due to lower volumes, partially offset by increased prices in line with rising commodity prices driven by inflation.

International revenues decreased $3.2 million, or 9.1% for the three months ended March 26, 2023, compared to the prior year period, primarily due to lower UK royalties and commissary revenues.

The overall declines in our International revenue performance were largely attributable to lower comparable sales of 5.8% for the three months ended March 26, 2023, related to inflationary pressures in the UK market.

International franchise restaurant sales decreased to $293.5 million for the three months ended March 26, 2023, compared to $321.7 million for the prior year period.

Excluding the impact of previously disclosed suspended restaurants and foreign currency fluctuations, International franchise restaurant sales increased 3.3% for the three months ended March 26, 2023.

North America commissary revenues decreased $12.4 million, or 5.7% for the three months ended June 25, 2023 and decreased $9.5 million, or 2.2% for the six months ended June 25, 2023, compared to the prior year comparable periods.

Excluding the impact of the 2022 refranchising, North America commissary revenues decreased $17.6 million, or 4.0% for the six months ended June 25, 2023.

The declines in North America commissary revenues were primarily a result of lower volumes in the 2023 periods and declining commodity prices during the second quarter of 2023.

International revenues increased $2.7 million, or 8.3% for the three months ended June 25, 2023 and decreased $0.5 million, or 0.8% for the six months ended June 25, 2023, compared to the prior year comparable periods, respectively.

Excluding the impact of the 2023 acquisition, revenues increased $0.7 million, or 2.0%, and decreased $2.5 million, or 3.8%, for the three and six months ended June 25, 2023, respectively.

Our International revenues were pressured by lower comparable sales of 0.7% and 3.3% for the three and six months ended June 25, 2023 related to inflationary pressures in the UK market.

These decreases were offset by positive foreign currency fluctuations.

International franchise restaurant sales increased $19.2 million to $300.5 million and increased $8.0 million to $594.0 million for the three and six months ended June 25, 2023, respectively.

Excluding the impact of the 2023 acquisition and the previously disclosed suspended restaurants and foreign currency fluctuations, International franchise restaurant sales increased 8.6% and 5.8% for the three and six months ended June 25, 2023, respectively.

International franchise restaurant sales are not included in Company revenues;

however, our international royalty revenue is derived from these sales.

Other revenues, which primarily includes our national marketing funds, online and mobile ordering business and our wholly-owned print and promotions subsidiary, increased $1.7 million, or 2.6%, for the three months ended March 26, 2023, compared to the prior year period primarily due to higher revenues from our technology services from point of sale hardware sales and higher equivalent units.

Other revenues, which primarily includes our national marketing funds, online and mobile ordering business and our wholly-owned print and promotions subsidiary, decreased $2.5 million, or 3.9%, and decreased $0.8 million, or 0.6%, for the three and six months ended June 25, 2023, respectively, compared to the prior year comparable periods.

The decreases were primarily due to decreases in franchise sales resulting in lower marketing fund revenues and technology fees.

Costs and Expenses

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(Dollars in thousands) Three Months Ended

March 26, 2023 % of Related

Revenues March 27, 2022 % of Related

June 25, 2023 % of Related

Revenues June 26, 2022 % of Related

Revenues Increase (Decrease) in % of Revenues

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Total costs and expenses 479,618 93.2 % 483,761 92.6 % 0.6 %

Operating income $ 34,912 6.8 % $ 38,904 7.4 % (0.6) %

(Dollars in thousands) Six Months Ended

June 25, 2023 % of Related

Revenues June 26, 2022 % of Related

Revenues Increase (Decrease) in % of Revenues

Costs and expenses:

Operating costs (excluding depreciation and amortization shown separately below):

Domestic Company-owned restaurant expenses $ 291,489 82.0 % $ 303,687 82.0 % — %

North America commissary expenses 386,883 92.2 % 401,560 93.6 % (1.4) %

International expenses 37,746 57.1 % 39,150 58.8 % (1.7) %

Other expenses 120,074 92.7 % 121,203 93.0 % (0.3) %

General and administrative expenses 102,268 9.8 % 110,584 10.4 % (0.6) %

Depreciation and amortization 30,411 2.9 % 24,674 2.3 % 0.6 %

Total costs and expenses 968,871 93.0 % 1,000,858 93.9 % (0.9) %

Refranchising and impairment loss — — % (11,160) (1.0) % 1.0 %

Operating income $ 72,708 7.0 % $ 53,339 5.0 % 2.0 %

Total costs and expenses were $489.3 million or 92.8% of total revenues for the three months ended March 26, 2023 , as compared to $517.1 million, or 95.3% of total revenues for the prior year period.

The decrease in total costs and expenses, as a percentage of revenues, was primarily due to the following:

Domestic Company-owned restaurant expenses were $147.8 million or 82.2% of related revenues for the three months ended March 26, 2023, compared to expenses of $161.7 million or 81.3% of related revenues for the prior year period.

The expenses, as a percentage of revenues, increased 0.9% primarily due to increases in certain commodity, labor, and utility expenses.

North America commissary expenses were $196.4 million, or 92.4% of related revenues for the three months ended March 26, 2023, compared to $197.1 million or 94.0% of related revenues for the prior year period.

The expenses, as a percentage of related revenues, decreased 1.6% primarily due to pricing adjustments stemming from higher commodity pricing driven by inflation, principally paper, dough and desserts.

International expenses were $17.3 million, or 55.0% of related revenues for the three months ended March 26, 2023, compared to $19.9 million, or 57.5% of related revenues for the prior year period.

The expenses as a percentage of related revenues, decreased 2.5%, primarily due to pricing adjustments stemming from higher commodity pricing driven by inflation, principally paper, dough and desserts.

Other expenses were $61.1 million, or 91.0% of related revenues for the three months ended March 26, 2023, compared to $60.6 million, or 92.6% of related revenues for the prior year period.

The expenses as a percentage of related revenues, decreased 1.6% primarily due to timing of expenditures on technology platform initiatives to further enhance our digital capabilities and the customer experience.

General and Administrative Expenses General and administrative (“G&A”) expenses were $51.9 million, or 9.9% of revenues for the three months ended March 26, 2023, compared to $65.9 million, or 12.1% of revenues for the prior year periods.

G&A expenses consisted of the following (in thousands):

Three Months Ended

March 26, 2023 March 27, 2022

Total costs and expenses were $479.6 million or 93.2% of total revenues for the three months ended June 25, 2023, as compared to $483.8 million or 92.6% of total revenues for the prior year comparable period.

For the six months ended June 25, 2023, total costs and expenses were $968.9 million or 93.0% of total revenues, as compared to $1.0 billion, or 93.9% of total revenues for the prior year comparable period.

The changes in total costs and expenses, as percentages of revenues, were primarily due to the following:

Domestic Company-owned restaurant expenses were $143.7 million or 81.8% of related revenues for the three months ended June 25, 2023, compared to expenses of $142.0 million or 82.9% of related revenues for the prior year period resulting from decreases in certain commodity expenses.

For the six months ended June 25, 2023 Domestic Company-owned restaurant expenses were $291.5 million or 82.0% of related revenues compared to $303.7 million or 82.0% of related revenues for the prior year comparable period.

North America commissary expenses were $190.5 million or 92.0% of related revenues for the three months ended June 25, 2023 compared to expenses of $204.5 million or 93.2% of related revenues for the prior year comparable period.

For the six months ended June 25, 2023 North America commissary expenses were $386.9 million, or 92.2% of related revenues compared to $401.6 million or 93.6% of related revenues for the prior year period.

The expenses, as a percentage of related revenues, decreased 1.2% and 1.4% for the three and six months ended June 25, 2023, respectively, primarily due to lower volumes and lower pricing in the second quarter of 2023 driven by commodity price declines.

International expenses were $20.4 million or 59.0% of related revenues for the three months ended June 25, 2023 as compared to $19.2 million, or 60.2% of related revenues for the prior year comparable period.

For the six months ended June 25, 2023, International expenses were $37.7 million, or 57.1% of related revenues, as compared to $39.2 million, or 58.8% of related revenues for the prior year comparable period.

The expenses, as a percentage of related revenues, decreased 1.3% and 1.7%, respectively, primarily due to lower volumes in our international commissary.

Other expenses were $59.0 million or 94.5% of related revenues for the three months ended June 25, 2023 as compared to $60.6 million or 93.3% of related revenues for the prior year comparable period.

For the six months ended June 25, 2023, Other expenses were $120.1 million, or 92.7% of related revenues, compared to $121.2 million, or 93.0% of related revenues for the prior year comparable period.

Other expenses, as a percentage of related revenues, decreased 1.2% and 0.3%, respectively, primarily due to timing of expenditures on technology platform initiatives to further enhance our digital capabilities and the customer experience.

General and Administrative Expenses

General and administrative (“G&A”) expenses were $50.3 million, or 9.8% of revenues for the three months ended June 25, 2023, compared to $44.6 million, or 8.5% of revenues for the prior year period.

For the six months ended June 25, 2023, G&A expenses were $102.3 million or 9.8% of revenues, compared to $110.6 million or 10.4% of revenues for the prior year comparable period.

G&A expenses consisted of the following:

(Dollars in thousands) Three Months Ended Six Months Ended

June 25, 2023 June 26, 2022 June 25, 2023 June 26, 2022

Administrative expenses (a)

$ 48,401 $ 42,889 $ 98,237 $ 88,979

Legal settlement accruals (b)

Additional specific accounts receivable and notes receivable provisions (c)

Executive severance costs (d)

Other general expenses

UK repositioning and acquisition-related costs (b)

1,308 — 1,308

Legal settlement accruals (c)

Specific accounts receivable and notes receivable provisions (d)

Other costs (e)

661 1,507 2,017 1,507

Other general expenses, net (46) 250 706 462

General and administrative expenses $ 50,324 $ 44,646 $ 102,268 $ 110,584

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(a) For the three months ended March 26, 2023, Administrative expenses increased $5.1 million, primarily due to higher labor and incentive compensation costs.

(b) Represents expenses related to certain legal settlements.

Litigation, Commitments and Contingencies” to our “Notes to Condensed Consolidated Financial Statements” for additional information.

(c) Represents a one-time, non-cash provision of $14.6 million on accounts receivable and notes receivable in connection with the conflict in Ukraine and related government actions in the first quarter of 2022.

(d) Represents severance and related costs associated with the transition of certain executives.

Depreciation and Amortization Depreciation and amortization expense was $14.7 million, or 2.8% of revenues for the three months ended March 26, 2023, compared to $11.9 million, or 2.2% of revenues, for the prior year period.

The increase was primarily due to higher depreciation expense related to our investments in technology support initiatives.

(a) For the three and six months ended June 25, 2023, administrative expenses increased $5.5 million and $9.3 million primarily due to higher costs from our franchise operating conference in the second quarter of 2023 and higher incentive compensation costs, partially offset by lower travel.

The six month period also included higher labor costs.

(b) Represents costs associated with repositioning the UK portfolio as well as transaction costs related to acquisition of stores from franchisees.

Litigation, Commitments and Contingencies” for further information.

(d) Represents a one-time, non-cash provision of $14.6 million on accounts receivable and notes receivable in connection with the conflict in Ukraine and related government actions in the first quarter of 2022.

(e) Represents severance and related costs associated with the transition of certain executives incurred during the three and six months ended June 25, 2023 and June 26, 2022.

Depreciation and Amortization.

Depreciation and amortization expense was $15.7 million or 3.0% of revenues for the three months ended June 25, 2023, compared to $12.7 million or 2.4% of revenues for the prior year comparable period.

For the six months ended June 25, 2023, Depreciation and amortization expense was $30.4 million, or 2.9% of revenues compared to $24.7 million, or 2.3% of revenues, for the prior year comparable period.

The increases were primarily due to higher depreciation expense related to our investments in technology support initiatives.

Refranchising and Impairment Loss

There was no Refranchising and impairment loss during the three months ended March 26, 2023.

Refranchising and impairment loss was $11.2 million for the three months ended March 27, 2022, consisting of an $8.4 million loss on the 2022 refranchising and an impairment loss 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.

There was no Refranchising and impairment loss during the six months ended June 25, 2023.

Refranchising and impairment loss was $11.2 million for the six months ended June 26, 2022, consisting of an $8.4 million loss on the 2022 refranchising and an impairment loss 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.

See “Note 10.

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We believe this non-GAAP measure is important for comparability purposes.

Three Months Ended March 26, 2023 Three Months Ended March 27, 2022

(In thousands) Reported (a) Adjustments

Adjusted Reported (a) Adjustments

Three Months Ended June 25, 2023 Three Months Ended June 26, 2022

(In thousands) Reported Adjustments (a)

Adjusted Reported Adjustments (a)

Adjusted Reported Increase (Decrease) Adjusted

7 unchanged sentences

Total $ 34,912 $ 1,969 $ 36,881 $ 38,904 $ 1,507 $ 40,411 $ (3,992) $ (3,530)

Six Months Ended June 25, 2023 Six Months Ended June 26, 2022

(In thousands) Reported Adjustments (a)

Adjusted Reported Adjustments (a)

Adjusted Reported Increase (Decrease) Adjusted

Domestic Company-owned restaurants $ 13,291 $ — $ 13,291 $ 7,912 $ 8,412 $ 16,324 $ 5,379 $ (3,033)

North America franchising 65,511 — 65,511 64,761 — 64,761 750 750

North America commissaries 21,127 — 21,127 20,292 — 20,292 835 835

International 10,995 1,308 12,303 11,761 3,515 15,276 (766) (2,973)

All others 4,500 — 4,500 5,906 — 5,906 (1,406) (1,406)

Unallocated corporate expenses (43,067) 2,017 (41,050) (56,454) 20,376 (36,078) 13,387 (4,972)

Elimination of intersegment (profits) 351 — 351 (839) — (839) 1,190 1,190

Total $ 72,708 $ 3,325 $ 76,033 $ 53,339 $ 32,303 $ 85,642 $ 19,369 $ (9,609)

___________________________________

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GAAP measure.

Operating income was $37.8 million for the three months ended March 26, 2023 compared to $14.4 million for the prior year period, an increase of $23.4 million.

Adjusted operating income was $39.2 million for the three months ended March 26, 2023 compared to $45.2 million for the prior year period, a decrease of $6.1 million.

The decrease in adjusted operating income in 2023 compared to 2022 was primarily due to the following:

• Domestic Company-owned restaurants decreased $3.8 million for the three months ended March 26, 2023.

Excluding the impact of the 2022 refranchising, Domestic Company-owned restaurants decreased $1.5 million, primarily due to increases in certain commodity, labor, and utility expenses, partially offset by higher revenues from comparable sales growth of 3.4% driven by strategic pricing actions.

• North America franchising increased $1.3 million for the three months ended March 26, 2023.

Operating income was $34.9 million and $72.7 million for the three and six months ended June 25, 2023, respectively, compared to $38.9 million and $53.3 million for the prior year comparable periods, a decrease of $4.0 million and increase of $19.4 million, respectively.

Adjusted operating income was $36.9 million and $76.0 million for the three and six months ended June 25, 2023, respectively, compared to $40.4 million and $85.6 million for the prior year comparable periods,

decreases of $3.5 million and $9.6 million, respectively.

The decreases in adjusted operating income in 2023 compared to 2022 were primarily due to the following:

• Domestic Company-owned restaurants increased $0.7 million and decreased $3.0 million for the three and six months ended June 25, 2023, respectively.

The three month period increase of $0.7 million was primarily due to higher revenues from comparable sales growth of 2.2% and margin improvement from labor efficiencies.

Excluding the impact of the 2022 refranchising, the six month period decreased $0.8 million as higher compensation, insurance and utility costs in 2023 were partially offset by comparable sales growth of 2.8%.

• North America franchising decreased $0.5 million and increased $0.8 million for the three and six months ended June 25, 2023, respectively.

Excluding the impact of the 2022 refranchising, North America franchising decreased $0.6 million.

The decrease was primarily due to a 0.8% decrease in comparable sales, partially offset by an increase in equivalent units of 1.2%.

• North America commissaries increased $1.4 million for the three months ended March 26, 2023.

Excluding the impact of the 2022 refranchising, North America commissaries increased $1.1 million primarily due to price increases in line with inflation and lower delivery costs, partially offset by lower volumes.

• International decreased $0.7 million for the three months ended March 26, 2023, primarily due to lower UK restaurant and commissary revenues and royalties attributed to lower comparable sales, which declined 5.8% , for the three months ended March 26, 2023.

• All Others, which primarily includes our online and mobile ordering business and our marketing funds, decreased $0.6 million for the three months ended March 26, 2023 compared to the prior year period, primarily due to higher depreciation expense related to our investments in technology support initiatives.

• Unallocated corporate expenses increased $3.8 million for the three months ended March 26, 2023.

The increase is primarily due to higher labor and incentive compensation costs and higher deprecation expense related to our investments in technology support initiatives.

The decreases were primarily due to 2.3% and 1.6% decreases in comparable sales, respectively and equivalent units decreases of 1.5% and 0.1%, respectively.

• North America commissaries decreased $0.6 million and increased $0.8 million for the three and six months ended June 25, 2023, respectively.

The three month period decrease of $0.6 million was primarily due to lower volumes.

Excluding the impact of the 2022 refranchising for the six month period, North America commissaries increased $0.5 million primarily due to declining commodity prices during the second quarter of 2023, lower delivery costs, partially offset by lower volumes.

• International decreased $2.2 million and $3.0 million for the three and six months ended June 25, 2023, respectively.

Excluding the impact of the 2023 acquisition, International decreased $2.1 million and $2.8 million, primarily due to lower UK restaurant and commissary revenues and royalties attributed to lower comparable sales, which declined 0.7% and 3.3%, for the three and six months ended June 25, 2023, respectively.

• All Others, which primarily includes our online and mobile ordering business and our marketing funds, decreased $0.8 million and $1.4 million for the three and six months ended June 25, 2023, respectively, compared to the prior year comparable periods, primarily due to higher depreciation expense related to our investments in technology support initiatives.

• Unallocated corporate expenses increased $1.2 million and $5.0 million for the three and six months ended June 25, 2023, respectively.

The increases are primarily due to higher costs for our franchise operating conference in the second quarter of 2023, higher labor and incentive compensation costs, insurance costs and higher depreciation expense related to our investments in technology support initiatives.

Items Below Operating Income

The following table sets forth the various items below Operating income from the Condensed Consolidated Statements of Operations:

Three Months Ended

(In thousands, except per share amounts) March 26,

2023 March 27,

2022 Increase (Decrease)

Three Months Ended Six Months Ended Increase (Decrease)

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

2023 June 26,

2022 June 25,

2023 June 26,

Operating income $ 34,912 $ 38,904 $ 72,708 $ 53,339 $ (3,992) $ 19,369

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Income before income taxes 23,637 32,823 52,412 42,995 (9,186) 9,417

Income tax expense (benefit) 6,229 (1,256) 7,485

Income tax expense 5,778 7,093 12,007 5,838 (1,315) 6,169

Net income before attribution to noncontrolling interests 17,859 25,730 40,405 37,157 (7,871) 3,248

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Net Interest Expense

Net interest expense increased $4.8 million, or 111.6% for the three months ended March 26, 2023 due to an increase in the LIBOR rate as well as higher average outstanding debt on the PJI Revolving Facility that was primarily utilized to finance share repurchases.

Total debt outstanding was $813.1 million and $605.0 million as of March 26, 2023 and December 25, 2022, respectively.

Net interest expense increased $5.2 million and $10.0 million, or 85.4% and 96.2% for the three and six months ended June 25, 2023, respectively, due primarily to higher average outstanding debt as well as an increase in the LIBOR rate.

The higher outstanding debt on our senior secured revolving credit facility (“the PJI Revolving Facility”) was primarily utilized to finance share repurchases in the first quarter of 2023.

Total debt outstanding was $791.5 million and $605.0 million as of June 25, 2023 and December 25, 2022, respectively.

Income Tax Expense (Benefit)

Our effective income tax rate was 21.6% for three months ended March 26, 2023, compared to a benefit of 12.3% for the prior year period.

The prior year benefit of 12.3% was caused by higher excess tax benefits generated by stock option exercises and vesting of restricted shares along with a lower pre-tax income.

Three Months Ended

(Dollars in thousands) March 26, 2023 March 27, 2022

Our effective income tax rates were 24.4% and 22.9% for three and six months ended June 25, 2023, compared to income tax rates of 21.6% and 13.6% for the prior year comparable periods.

The lower effective tax rate for the six months ended June 26, 2022 was caused by higher excess tax benefits generated by stock option exercises and vesting of restricted shares in 2022 along with a lower pre-tax income.

Quarter Ended Six Months Ended

(Dollars in thousands) June 25, 2023 June 26, 2022 June 25, 2023 June 26, 2022

Income before income taxes $ 23,637 $ 32,823 $ 52,412 $ 42,995

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Effective tax rate 24.4 % 21.6 % 22.9 % 13.6 %

Net Income Attributable to Noncontrolling Interests Net income attributable to noncontrolling interests was $0.2 million for the three months ended March 26, 2023, compared with $0.9 million for the prior year period.

Net Income Attributable to Noncontrolling Interests

Net income attributable to noncontrolling interests was $0.1 million and $0.3 million for the three and six months ended June 25, 2023, compared with $0.3 million and $1.2 million for the prior year comparable period.

The decrease was due to the refranchising of our 51% ownership interest in a 90-restaurant consolidated joint venture in Texas on March 28, 2022.

Diluted Earnings Per Common Share

Diluted earnings per common share was $0.65 for the three months ended March 26, 2023 compared to $0.29 for the prior year period, representing an increase of $0.36.

Adjusted diluted earnings per common share, a non-GAAP measure, was $0.68 for the three months ended March 26, 2023, compared to adjusted diluted earnings per common share of $0.95 for the prior year period, representing a decrease of $0.27.

Diluted earnings per common share was $0.54 and $1.20 for the three and six months ended June 25, 2023, respectively, compared to $0.70 and $0.99 for the prior year comparable period, representing a decrease of $0.16 and an increase of $0.21 for the three and six months ended June 25, 2023, respectively.

Adjusted diluted earnings per common share, a non-GAAP measure, was $0.59 and $1.28 for the three and six months ended June 25, 2023, compared to adjusted diluted earnings per common share of $0.74 and $1.69 for the prior year comparable periods, representing decreases of $0.15 and $0.41, respectively.

See “Non-GAAP Measures” for additional information.

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GAAP measures to adjusted operating income, adjusted net income attributable to common shareholders and adjusted diluted earnings per common share are operating income, net income attributable to common shareholders and diluted earnings per common share, respectively.

These non-GAAP measures should not be construed as a substitute for or a better indicator of the Company’s performance than the Company’s U.S.

These non-GAAP measures should not be construed as a substitute for or a better indicator of the Company’s

performance than the Company’s U.S.

GAAP results.

The table below reconciles our GAAP financial results to our non-GAAP financial measures.

Three Months Ended

(In thousands, except per share amounts) March 26,

2023 March 27,

Three Months Ended Six Months Ended

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

2023 June 26,

2022 June 25,

2023 June 26,

Operating income $ 34,912 $ 38,904 $ 72,708 $ 53,339

Refranchising and impairment losses (a)

Legal settlement (b)

Other costs (c)

UK repositioning and acquisition-related costs (a)

1,308 — 1,308 —

Refranchising and impairment losses (b)

Legal settlement (c)

Other costs (d)

661 1,507 2,017 1,507

Adjusted operating income $ 36,881 $ 40,411 $ 76,033 $ 85,642

Net income attributable to common shareholders $ 17,768 $ 25,240 $ 40,144 $ 35,693

Refranchising and impairment losses (a)

Legal settlement (b)

Other costs (c)

Tax effect of adjustments (d)

UK repositioning and acquisition-related costs (a)

1,308 — 1,308 —

Adjusted net income attributable to common shareholders (e)

Refranchising and impairment losses (b)

Legal settlement (c)

Other costs (d)

661 1,507 2,017 1,507

Tax effect of adjustments (e)

(449) (339) (758) (7,269)

Adjusted net income attributable to common shareholders (f)

$ 19,288 $ 26,408 $ 42,711 $ 60,727

Diluted earnings per common share $ 0.54 $ 0.70 $ 1.20 $ 0.99

Refranchising and impairment losses (a)

Legal settlement (b)

Other costs (c)

Tax effect of adjustments (d)

UK repositioning and acquisition-related costs (a)

0.04 — 0.04 —

Adjusted diluted earnings per common share (e)

Refranchising and impairment losses (b)

Legal settlement (c)

Other costs (d)

0.02 0.05 0.06 0.04

Tax effect of adjustments (e)

(0.01) (0.01) (0.02) (0.20)

(a) Refranchising and impairment losses consisted of the following pre-tax adjustments:

Three Months Ended

(In thousands) March 27,

Adjusted diluted earnings per common share (f)

$ 0.59 $ 0.74 $ 1.28 $ 1.69

___________________________________

(a) Represents costs associated with repositioning the UK portfolio as well as transaction costs related to the acquisition of stores from franchisees.

(b) Refranchising and impairment losses consisted of the following pre-tax adjustments:

Six Months Ended

(In thousands) June 26,

Refranchising impairment loss (1)

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(1) Represents a one-time, non-cash charge of $8.4 million ($0.23 loss per diluted share) recorded in the first quarter of 2022 associated with the refranchising of the Company’s controlling interest in the 90-restaurant joint venture, recorded as Refranchising and impairment loss.

(2) Represents a one-time non-cash charge of $17.4 million ($0.48 loss per diluted share) recorded in the first quarter of 2022 related to the reserve of certain loans and impairment of reacquired franchised rights related to the conflict in Ukraine and subsequent international government actions and sanctions, which were recorded as Refranchising and impairment loss of $2.8 million and General and administrative expenses of $14.6 million.

(b) Represents an accrual of a certain legal settlement, recorded in General and administrative expenses.

(2) Represents a one-time non-cash charge of $17.4 million ($0.48 loss per diluted share) on accounts receivable, notes receivable, and impairment of reacquired franchised rights in connection with the conflict in Ukraine and related government actions in the first quarter of 2022, which were recorded as Refranchising and impairment loss of $2.8 million and General and administrative expenses of $14.6 million.

Litigation, Commitments and Contingencies” for further information.

(d) The tax effect on non-GAAP adjustments was calculated by applying the marginal tax rates of 22.8% and 22.5% for the three-month periods ended March 26, 2023 and March 27, 2022, respectively.

(e) Amounts shown exclude the impact of allocation of undistributed earnings to participating securities.

(d) Represents severance and related costs associated with the transition of certain executives incurred during the three and six months ended June 25, 2023 and June 26, 2022, which were recorded in General and administrative expenses.

(e) The tax effect on non-GAAP adjustments was calculated by applying the marginal tax rates of 22.8% and 22.5% for the three and six-month periods ended June 25, 2023 and June 26, 2022, respectively.

(f) Amounts shown exclude the impact of allocation of undistributed earnings to participating securities.

In addition, we present free cash flow in this report, which is a non-GAAP measure.

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The Company believes that its balances of cash and cash equivalents and borrowing capacity, along with cash generated by operations, will be sufficient to satisfy its cash requirements, cash dividends, interest payments and share repurchases over the next twelve months and beyond.

The table below summarizes our cash flows from continuing operations for the three months ended March 26, 2023 and March 27, 2022 (in thousands):

Three Months Ended

2023 March 27,

The table below summarizes our cash flows for the six months ended June 25, 2023 and June 26, 2022 (in thousands):

Six Months Ended

2023 June 26,

Total cash provided by (used in):

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Operating Activities

Total cash provided by operating activities was $40.8 million for the three months ended March 26, 2023 compared to $25.4 million for the corresponding period of 2022.

The increase of $15.4 million primarily reflects favorable working capital changes, principally related to increases in accrued expenses and other current liabilities as well as lower inventory and accounts receivable balances primarily due to lower volumes.

Total cash provided by operating activities was $93.7 million for the six months ended June 25, 2023 compared to $45.6 million for the corresponding period of 2022.

The increase of $48.2 million primarily reflects favorable working capital changes, principally related to higher incentive compensation payments during the six months ended June 26, 2022 and other current liabilities, as well as lower inventory and accounts receivable balances primarily due to lower volumes.

Investing Activities

Total cash used in investing activities was $18.3 million for the three months ended March 26, 2023 compared to $8.3 million for the same period in 2022, or an increase of $10.0 million.

The increase in cash used in investing activities was primarily due to an increase in capital expenditures.

Total cash used in investing activities was $35.7 million for the six months ended June 25, 2023 compared to $12.5 million for the same period in 2022, or an increase of $23.2 million.

The increase in cash used in investing activities was primarily due to an increase in capital expenditures as well as cash proceeds of $14.0 million, net of transaction costs, received from the 2022 refranchising during the six months ended June 26, 2022.

Our capital expenditures consisted primarily of capital investments for existing stores, new store locations and capital expenditures for strategic initiatives.

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Financing Activities

Total cash used in financing activities was $23.2 million for the three months ended March 26, 2023 compared to $6.8 million for the same period of 2022, an increase of $16.4 million.

In 2023, cash used for financing activities includes outflows of $209.6 million in share repurchases, and $14.6 million of common stock dividends paid, partially offset by net borrowings of $208.2 million from the PJI Revolving Facility.

Total cash used in financing activities was $61.6 million for the six months ended June 25, 2023 compared to $50.7 million for the same period of 2022, an increase of $10.9 million.

In 2023, cash used for financing activities includes outflows of $210.3 million in share repurchases and $28.5 million of common stock dividends paid, partially offset by net borrowings of $171.0 million from the PJI Revolving Facility and $15.5 million from the PJMF revolving line of credit (the “PJMF Revolving Facility”).

In 2022, cash used for financing activities includes outflows of $75.5 million in share repurchases and $25.1 million of common dividends paid, partially offset by net borrowings of $55.0 million from the PJI Revolving Facility.

Our outstanding debt as of March 26, 2023 was $813.1 million, which was comprised of $400.0 million of our 3.875% senior notes (the “Notes”) and $413.1 million outstanding under the PJI Revolving Facility and PJMF Revolving Facility.

Remaining availability under the PJI Revolving Facility was approximately $195.0 million as of March 26, 2023.

Our outstanding debt as of June 25, 2023 was $791.5 million, which was comprised of $400.0 million of our 3.875% senior notes (the “Notes”) and $391.5 million outstanding under the PJI Revolving Facility and the PJMF Revolving Facility.

Remaining availability under the PJI Revolving Facility was approximately $224.0 million as of June 25, 2023.

Our Credit Agreement, dated September 14, 2021, contains 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.

The Company is also subject to certain financial covenants, as shown in the following table, that could restrict or impose constraints on the liquidity of our business:

Permitted Ratio Actual Ratio as of March 26, 2023

Permitted Ratio Actual Ratio as of June 25, 2023

Leverage ratio Not to exceed 5.25 to 1.0 3.4 to 1.0

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Our interest coverage ratio is defined as the sum of Consolidated EBITDA and consolidated rental expense for the most recent four fiscal quarters divided by the sum of consolidated interest expense and consolidated rental expense for the most recent four fiscal quarters.

We were in compliance with all financial covenants as of March 26, 2023.

We were in compliance with all financial covenants as of June 25, 2023.

In addition, the Indenture governing the Notes contains customary covenants that, among other things and subject to certain exceptions, limit our ability and the ability of certain of our subsidiaries to:

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Bank National Association, as lender.

Debt outstanding under the PJMF Revolving Facility was approximately $8.2 million as of March 26, 2023.

Debt outstanding under the PJMF Revolving Facility was approximately $15.5 million as of June 25, 2023.

The PJMF operating results and the related debt outstanding do not impact the financial covenants under the Credit Agreement.

Debt” of our “Notes to Condensed Consolidated Financial Statements” for additional information.

Refer to Note 12 of the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 25, 2022 for additional information.

Share Repurchases

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On October 28, 2021, our Board of Directors approved a share repurchase program with an indefinite duration for up to $425.0 million of the Company’s common stock.

The following table summarizes our repurchase activity under these programs for the three months ended March 26, 2023 and March 27, 2022:

The following table summarizes our repurchase activity under these programs for the three and six months ended June 25, 2023 and June 26, 2022:

(In thousands, except average price per share) Total Number of Shares Purchased Average Price Paid per Share Aggregate Cost of Shares Purchased Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs

Three Months Ended

June 25, 2023 — $ — $ — $ 90,160

June 26, 2022 452 $ 94.56 $ 42,762 $ 349,329

(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) The shares repurchased during the three months ended March 26, 2023 included 2,176,928 shares repurchased on March 1, 2023 from Starboard at a price of $82.52 per share for aggregate consideration of $179.6 million.

Six Months Ended

June 25, 2023 2,523 $ 83.10 $ 209,640 $ 90,160

June 26, 2022 753 $ 100.23 $ 75,471 $ 349,329

(a) The shares repurchased during the six months ended June 25, 2023 included 2,176,928 shares repurchased on March 1, 2023 from certain funds affiliated with, or managed by, Starboard Value LP at a price of $82.52 per share for aggregate consideration of $179.6 million.

The Company utilizes a written trading plan under Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, from time to time to facilitate the repurchase of shares of our common stock under this share repurchase program.

There can be no assurance that we will repurchase shares of our common stock either through a Rule 10b5-1 trading plan or otherwise.

The Company paid aggregate dividends to common stockholders of $14.6 million ($0.42 per share) and $12.6 million ($0.35 per share) for the three months ended March 26, 2023 and March 27, 2022, respectively.

O n April 25, 2023, our Board of Directors declared a second 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 Company paid aggregate dividends to common stockholders of $28.5 million ($0.84 per share) and $25.1 million ($0.70 per share) for the six months ended June 25, 2023 and June 26, 2022, respectively.

O n July 31, 2023, our Board of Directors declared a third quarter dividend of $0.46 per common share (approximately $15.1 million in the aggregate), which will be paid on August 25, 2023 to stockholders of record as of the close of business on August 14, 2023.

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

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Free cash flow should not be construed as a substitute for or a better indicator of the Company’s performance than the Company’s GAAP measures.

The Company’s free cash flow was as follows for the three month periods of 2023 and 2022 (in thousands):

Three Months Ended

2023 March 27,

The Company’s free cash flow was as follows for the six month periods of 2023 and 2022 (in thousands):

Six Months Ended

2023 June 26,

Net cash provided by operating activities $ 93,735 $ 45,585

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Generally, the use of words such as “expect,” “intend,” “estimate,” “believe,” “anticipate,” “will,” “forecast,” “outlook”, “plan,” “project,” or similar words identify forward-looking statements that we intend to be included within the safe harbor protections provided by the federal securities laws.

Such forward-looking statements include or may relate to projections or guidance concerning business performance, revenue, earnings, cash flow, earnings per share, share repurchases, the current economic environment, commodity and labor costs, currency fluctuations, profit margins, net unit growth, unit level performance, capital expenditures, restaurant and franchise development, labor shortages, labor cost increases, inflation, royalty relief, franchisee support, the effectiveness of our menu innovations and other business initiatives, investments in product and digital innovation, marketing efforts and investments, liquidity, compliance with debt covenants, impairments, strategic decisions and actions, dividends, effective tax rates, regulatory changes and impacts, adoption of new accounting standards, and other financial and operational measures.

Such forward-looking statements include or may relate to projections or guidance concerning business performance, revenue, earnings, cash flow, earnings per share, share repurchases, the current economic environment, commodity and labor costs, currency fluctuations, profit margins, net unit growth, unit level performance, capital expenditures, restaurant and franchise development, labor shortages, labor cost increases, inflation, royalty relief, franchisee support, the effectiveness of our menu innovations and other business initiatives, investments in product and digital innovation, marketing efforts and investments, liquidity, compliance with debt covenants, impairments, strategic decisions and actions, dividends, effective tax rates, regulatory changes and impacts, investments in the UK market, adoption of new accounting standards, and other financial and operational measures.

Such statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions, which are difficult to predict and many of which are beyond our control.

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• disruption of our supply chain or commissary operations which could be caused by our sole source of supply of mozzarella cheese, desserts, garlic cups or limited source of suppliers for other key ingredients or more generally due to weather, natural disasters including drought, disease, or geopolitical or other disruptions beyond our control, including the coronavirus pandemic;

markets, especially emerging markets, fluctuations in currency exchange rates, difficulty in meeting planned sales targets and new store growth;

• increased risks associated with our International operations, including economic and political conditions and risks associated with the withdrawal of the UK from the European Union, instability or uncertainty in our international markets, especially emerging markets, fluctuations in currency exchange rates, difficulty in meeting planned sales targets and new store growth;

• the impact of current or future claims and litigation and our ability to comply with current, proposed or future legislation that could impact our business including compliance with the European Union General Data Protection Regulation;

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These and other risk factors are discussed in detail in “Part I.

– Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 25, 2022, and they may be updated from time to time in our future reports filed with the Securities and Exchange Commission.

– Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 25, 2022, as updated by “Part II.

- Risk Factors” in this Quarterly Report on Form 10-Q and they may be updated from time to time in our future reports filed with the Securities and Exchange Commission.

We undertake no obligation to update publicly any forward-looking statements, whether as a result of future events, new information or otherwise, except as required by law.

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-Q

Item 2. Management’s Discussion and Analysis