What changed in this filing

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Item 1. Financial Statements

2023-11-02 compared with 2023-08-03 · 160 added, 150 removed, 608 unchanged (34% of the section changed)

3 unchanged sentences

Condensed Consolidated Balance Sheets

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

(In thousands, except per share amounts) September 24,

2023 December 25,

34 unchanged sentences

Common stock ($ 0.01 par value per share;

issued 49,209 at June 25, 2023 and 49,138 at December 25, 2022)

issued 49,227 at September 24, 2023 and 49,138 at December 25, 2022)

Additional paid-in capital 447,699 449,829

1 unchanged sentence

Retained earnings 208,132 195,856

Treasury stock ( 16,815 shares at June 25, 2023 and 14,402 shares at December 25, 2022, at cost)

Treasury stock ( 16,754 shares at September 24, 2023 and 14,402 shares at December 25, 2022, at cost)

( 1,123,599 ) ( 922,434 )

3 unchanged sentences

Total Liabilities, Redeemable noncontrolling interests and Stockholders’ deficit $ 877,565 $ 864,227

(a) Represents vacant land adjacent to the Company’s Louisville office.

(a) Represents vacant land adjacent to the Company’s Louisville office, which was sold on September 29, 2023.

See accompanying notes.

2 unchanged sentences

Condensed Consolidated Statements of Operations

Three Months Ended Six Months Ended

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

2023 June 26,

2022 June 25,

2023 June 26,

Three Months Ended Nine Months Ended

(In thousands, except per share amounts) September 24,

2023 September 25,

2022 September 24,

2023 September 25,

Domestic Company-owned restaurant sales $ 177,195 $ 166,050 $ 532,841 $ 536,226

35 unchanged sentences

Condensed Consolidated Statements of Comprehensive Income

Three Months Ended Six Months Ended

(In thousands) June 25,

2023 June 26,

2022 June 25,

2023 June 26,

Three Months Ended Nine Months Ended

(In thousands) September 24,

2023 September 25,

2022 September 24,

2023 September 25,

Net income before attribution to noncontrolling interests $ 15,951 $ 8,464 $ 56,356 $ 45,621

15 unchanged sentences

___________________________________

(1) Amounts reclassified out of accumulated other comprehensive income into net interest (expense) income include $( 36 ) and $( 243 ) for the three and six months ended June 25, 2023, respectively and $( 735 ) and $( 200 ) for the three and six months ended June 26, 2022, respectively.

(2) The income tax effects of amounts reclassified out of accumulated other comprehensive loss were $ 8 and $ 55 for the three and six months ended June 25, 2023, respectively and $ 165 and $ 45 for the three and six months ended June 26, 2022, respectively.

(1) Amounts reclassified out of accumulated other comprehensive loss into net interest income (expense) include $ 203 and $( 40 ) for the three and nine months ended September 24, 2023, respectively and $( 1,650 ) and $( 1,850 ) for the three and nine months ended September 25, 2022, respectively.

(2) The income tax effects of amounts reclassified out of accumulated other comprehensive loss were $( 46 ) and $ 9 for the three and nine months ended September 24, 2023, respectively and $ 371 and $ 416 for the three and nine months ended September 25, 2022, respectively.

See accompanying notes.

13 unchanged sentences

For the three months ended

June 25, 2023

Balance at March 26, 2023 32,356 $ 492 $ 443,686 $ ( 8,766 ) $ 203,569 $ ( 1,130,136 ) $ 15,830 $ ( 475,325 )

September 24, 2023

Balance at June 25, 2023 32,394 $ 492 $ 445,964 $ ( 7,289 ) $ 207,461 $ ( 1,127,669 ) $ 15,562 $ ( 465,479 )

Net income (1)

8 unchanged sentences

Other 56 — ( 3,673 ) — — 3,755 — 82

Balance at June 25, 2023 32,394 $ 492 $ 445,964 $ ( 7,289 ) $ 207,461 $ ( 1,127,669 ) $ 15,562 $ ( 465,479 )

For the six months ended

June 25, 2023

Balance at September 24, 2023 32,473 $ 492 $ 447,699 $ ( 7,916 ) $ 208,132 $ ( 1,123,599 ) $ 15,294 $ ( 459,898 )

For the nine months ended

September 24, 2023

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

5 unchanged sentences

Acquisition of Company common stock (3)

( 2,523 ) — — — — ( 212,444 ) — ( 212,444 )

Stock-based compensation expense — — 13,224 — — — — 13,224

3 unchanged sentences

Other 66 — ( 4,122 ) — — 4,422 — 300

Balance at June 25, 2023 32,394 $ 492 $ 445,964 $ ( 7,289 ) $ 207,461 $ ( 1,127,669 ) $ 15,562 $ ( 465,479 )

(1) Net income to the Company for the three and six months ended June 25, 2023 excludes $ 59 and $ 105 , respectively, allocable to the redeemable noncontrolling interests for our joint venture arrangements.

(2) At June 25, 2023, the accumulated other comprehensive loss of $ 7,289 was comprised of net unrealized foreign currency translation loss of $ 7,274 and net unrealized loss on the interest rate swap agreements of $ 15 .

(3) Acquisition of Company common stock for the six months ended June 25, 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.

Balance at September 24, 2023 32,473 $ 492 $ 447,699 $ ( 7,916 ) $ 208,132 $ ( 1,123,599 ) $ 15,294 $ ( 459,898 )

(1) Net income to the Company for the three and nine months ended September 24, 2023 excludes $ 30 and $ 135 , respectively, allocable to the redeemable noncontrolling interests for our joint venture arrangements.

(2) At September 24, 2023, the accumulated other comprehensive loss of $ 7,916 was comprised of net unrealized foreign currency translation loss of $ 8,702 and net unrealized gain on the interest rate swap agreements of $ 786 .

(3) Acquisition of Company common stock for the nine months ended September 24, 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.

13 unchanged sentences

For the three months ended

June 26, 2022

Balance at March 27, 2022 35,675 $ 491 $ 436,225 $ ( 9,316 ) $ 181,124 $ ( 832,603 ) $ 15,635 $ ( 208,444 )

September 25, 2022

Balance at June 26, 2022 35,248 $ 491 $ 442,255 $ ( 11,034 ) $ 193,934 $ ( 875,205 ) $ 15,761 $ ( 233,798 )

Net income (1)

9 unchanged sentences

Other 2 — ( 67 ) — — 156 — 89

Balance at June 26, 2022 35,248 $ 491 $ 442,255 $ ( 11,034 ) $ 193,934 $ ( 875,205 ) $ 15,761 $ ( 233,798 )

For the six months ended

June 26, 2022

Balance at September 25, 2022 35,065 $ 491 $ 444,643 $ ( 13,868 ) $ 187,286 $ ( 892,818 ) $ 15,647 $ ( 258,619 )

For the nine months ended

September 25, 2022

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

10 unchanged sentences

Other 8 — ( 64 ) — — 444 ( 3 ) 377

Balance at June 26, 2022 35,248 $ 491 $ 442,255 $ ( 11,034 ) $ 193,934 $ ( 875,205 ) $ 15,761 $ ( 233,798 )

(1) Net income to the Company for the three and six months ended June 26, 2022 excludes $ 18 and $ 528 , respectively, allocable to the redeemable noncontrolling interests for our joint venture arrangements.

(2) At June 26, 2022, the accumulated other comprehensive loss of $ 11,034 was comprised of net unrealized foreign currency translation loss of $ 8,696 and net unrealized loss on the interest rate swap agreements of $ 2,338 .

Balance at September 25, 2022 35,065 $ 491 $ 444,643 $ ( 13,868 ) $ 187,286 $ ( 892,818 ) $ 15,647 $ ( 258,619 )

(1) Net income to the Company for the three and nine months ended September 25, 2022 excludes $ 31 and $ 559 , respectively, allocable to the redeemable noncontrolling interests for our joint venture arrangements.

(2) At September 25, 2022, the accumulated other comprehensive loss of $ 13,868 was comprised of net unrealized foreign currency translation loss of $ 12,430 and net unrealized loss on the interest rate swap agreements of $ 1,438 .

See accompanying notes.

2 unchanged sentences

Condensed Consolidated Statements of Cash Flows

Six Months Ended

(In thousands) June 25,

2023 June 26,

Nine Months Ended

(In thousands) September 24,

2023 September 25,

Operating activities

24 unchanged sentences

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

Other 182 238

Net cash used in investing activities ( 57,654 ) ( 30,229 )

16 unchanged sentences

Notes to Condensed Consolidated Financial Statements (Unaudited)

June 25, 2023

September 24, 2023

Basis of Presentation

3 unchanged sentences

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 and six months ended June 25, 2023 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2023.

Operating results for the three and nine months ended September 24, 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.

18 unchanged sentences

Noncontrolling Interests

Papa John’s has joint venture arrangements in which there are noncontrolling interests held by third parties that includ ed 98 restaurants at June 25, 2023 and June 26, 2022, respectively.

Papa John’s has joint venture arrangements in which there are noncontrolling interests held by third parties that includ ed 98 restaurants at September 24, 2023 and September 25, 2022, respectively.

As further described in “Note 10.

1 unchanged sentence

Consolidated net income is required to be reported separately at amounts attributable to both the Company and the noncontrolling interests.

Net income attributable to these joint ventures for the three and six months ended June 25, 2023 and June 26, 2022 was as follows (in thousands):

Three Months Ended Six Months Ended

2023 June 26,

2022 June 25,

2023 June 26,

Net income attributable to these joint ventures for the three and nine months ended September 24, 2023 and September 25, 2022 was as follows (in thousands):

Three Months Ended Nine Months Ended

September 24,

2023 September 25,

2022 September 24,

2023 September 25,

Papa John’s International, Inc.

32 unchanged sentences

accordingly, the fair values presented do not necessarily indicate what the Company or its debtholders could realize in a current market exchange.

Our financial assets and liabilities that were measured at fair value on a recurring basis as of June 25, 2023 and December 25, 2022 are as follows:

Our financial assets that were measured at fair value on a recurring basis as of September 24, 2023 and December 25, 2022 are as follows:

Fair Value Measurements

1 unchanged sentence

Value Level 1 Level 2 Level 3

June 25, 2023

September 24, 2023

Financial assets:

1 unchanged sentence

$ 26,984 $ 26,984 $ — $ —

Financial liabilities:

Interest rate swaps (b)

10 unchanged sentences

The future cash flows are derived based on the terms of our interest rate swaps, as well as considering published discount factors, and projected Secured Overnight Financing Rates (“SOFR”).

Interest rate swaps entered into prior to the three months ended June 25, 2023 were based on London Interbank Offered Rates (“LIBOR”).

Interest rate swaps entered into prior to 2023 were based on 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.

1 unchanged sentence

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 June 25, 2023 and December 25, 2022:

June 25, 2023 December 25, 2022

September 24, 2023 December 25, 2022

(In thousands) Carrying

11 unchanged sentences

Write-offs charged against the allowance ( 1,496 ) ( 147 )

Balance at June 25, 2023 $ 6,533 $ 14,379

Balance at September 24, 2023 $ 6,456 $ 14,466

Lessor Operating Leases

The Company subleases certain retail space to our franchisees in the United Kingdom (“UK”), which are primarily operating leases.

At June 25, 2023, we leased and subleased 368 Papa Johns restaurants to franchisees in the UK.

At September 24, 2023, we leased and subleased 340 Papa Johns restaurants to franchisees in the UK.

The initial lease terms on the franchised sites in the UK are generally 15 years.

2 unchanged sentences

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 $ 2.7 million and $ 5.6 million for the three and six months ended June 25, 2023, respectively, and $ 3.0 million and $ 6.0 million for the three and six months ended June 26, 2022, respectively, within Other revenues in the Condensed Consolidated Statements of Operations.

The Company recognized total sublease income of $ 2.3 million and $ 8.0 million for the three and nine months ended September 24, 2023, respectively, and $ 3.0 million and $ 9.0 million for the three and nine months ended September 25, 2022, respectively, within Other revenues in the Condensed Consolidated Statements of Operations.

Lease Guarantees

1 unchanged sentence

These leases have varying terms, the latest of which expires in 2036.

As of June 25, 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 $ 8.2 million.

As of September 24, 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 $ 7.7 million.

This contingent liability is not included in the Condensed Consolidated Balance Sheets as it is not probable to occur.

2 unchanged sentences

Supplemental cash flow information related to leases for the periods reported is as follows:

Six Months Ended

(In thousands) June 25, 2023 June 26, 2022

Nine Months Ended

(In thousands) September 24, 2023 September 25, 2022

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

13 unchanged sentences

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):

September 24,

2023 December 25, 2022

2 unchanged sentences

Accounts receivable, net 24,274 14,780

Income tax receivable 56 —

Prepaid expenses and other current assets 8,278 1,815

4 unchanged sentences

Accounts payable $ 517 $ 12,428

Income and other taxes payable 2 8

Accrued expenses and other current liabilities 21,762 17,936

7 unchanged sentences

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 and six months ended June 25, 2023, the Company recognized $ 7.9 million and $ 16.3 million in revenue, respectively, related to deferred revenue compared to $ 8.3 million and $ 17.6 million for the three and six months ended June 26, 2022.

During the three and nine months ended September 24, 2023, the Company recognized $ 8.1 million and $ 24.4 million in revenue, respectively, related to deferred revenue compared to $ 8.0 million and $ 25.6 million for the three and nine months ended September 25, 2022.

The following table includes a breakout of contract liability balances (in thousands):

Contract Liabilities

June 25, 2023 December 25, 2022 Change

September 24, 2023 December 25, 2022 Change

Franchise fees and unredeemed gift card liabilities $ 27,189 $ 30,710 $ ( 3,521 )

3 unchanged sentences

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

As of June 25, 2023 and December 25, 2022, the contract assets were approximately $ 7.0 million and $ 6.2 million, respectively.

For the three and six months ended June 25, 2023, revenue was reduced approximately $ 0.9 million and $ 1.8 million, respectively, for the amortization of contract assets over the applicable contract terms.

For the three and six months ended June 26, 2022, revenue was reduced approximately $ 1.1 million and $ 1.9 million, respectively, for the amortization of contract assets over the applicable contract terms.

As of September 24, 2023 and December 25, 2022, the contract assets were approximately $ 6.7 million and $ 6.2 million, respectively.

For the three and nine months ended September 24, 2023, revenue was reduced approximately $ 0.9 million and $ 2.7 million, respectively, for the amortization of contract assets over the applicable contract terms.

For the three and nine months ended September 25, 2022, revenue was reduced approximately $ 0.8 million and $ 2.7 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.

4 unchanged sentences

Franchise fees $ 3,015 $ 2,774 $ 2,566 $ 2,308 $ 2,033 $ 5,631 $ 18,327

At June 25, 2023, approximately $ 3.5 million of area development fees related to unopened stores and international unearned royalties are included in Deferred revenue.

At September 24, 2023, approximately $ 3.5 million of area development fees related to unopened stores and international unearned royalties are included in Deferred revenue.

Timing of revenue recognition is dependent upon the timing of store openings and franchisees’ revenues.

3 unchanged sentences

Shares Authorized and Outstanding

The Company has authorized 100.0 million shares of common stock as of June 25, 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 June 25, 2023, compared to 34.7 million shares at December 25, 2022.

The Company has authorized 100.0 million shares of common stock as of September 24, 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 32.5 million shares at September 24, 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 and six months ended June 25, 2023 and June 26, 2022:

The following table summarizes our repurchase activity under our share repurchase programs for the three and nine months ended September 24, 2023 and September 25, 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

September 24, 2023 — $ — $ — $ 90,160

September 25, 2022 229 $ 85.15 $ 19,529 $ 329,800

(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

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) Aggregate cost of shares purchased for the six months ended June 25, 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.

Of these costs, $ 2.1 million were classified as non-cash financing activities during the six months ended June 25, 2023.

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 (collectively, “Starboard”), at a price of $ 82.52 per share, for aggregate consideration of $ 179.6 million.

Nine Months Ended

September 24, 2023 2,523 $ 83.10 $ 209,640 $ 90,160

September 25, 2022 982 $ 96.71 $ 95,000 $ 329,800

(a) Aggregate cost of shares purchased for the nine months ended September 24, 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.

Of these costs, $ 2.1 million were classified as non-cash financing activities during the nine months ended September 24, 2023.

The shares repurchased during the nine months ended September 24, 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.

4 unchanged sentences

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

The Company paid dividends of approx imately $ 28.5 million ($ 0.84 per share) f or the six months ended June 25, 2023.

On July 31, 2023, our Board of Directors approved a 9.5 % increase in the Company’s dividend rate per common share from $ 1.68 on an annual basis to $ 1.84 on an annual basis and subsequently 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 declarat ion and payment of any future dividends will be at the discretion of our Board.

The Company paid dividends of approx imately $ 43.6 million ($ 1.30 per share) f or the nine months ended September 24, 2023.

On October 24, 2023, our Board of Directors declared a fourth quarter dividend of $ 0.46 per common share (approximately $ 15.1 million in the aggregate), which will be paid on November 24, 2023 to stockholders of record as of the close of business on November 13, 2023.

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

Earnings per Share

7 unchanged sentences

The calculations of basic and diluted earnings per common share are as follows (in thousands, except per share data):

Three Months Ended Six Months Ended

2023 June 26,

2022 June 25,

2023 June 26,

Three Months Ended Nine Months Ended

September 24,

2023 September 25,

2022 September 24,

2023 September 25,

Basic earnings per common share

13 unchanged sentences

___________________________________

(a) Excludes 103,000 and 49,000 shares underlying equity awards for the three and six months ended June 25, 2023, respectively, and 63,000 and 42,000 shares underlying equity awards for the three and six months ended June 26, 2022, respectively, as the effect of including such awards would have been anti-dilutive.

(a) Excludes 48,000 and 147,000 shares underlying equity awards for the three and nine months ended September 24, 2023, respectively, and 58,000 and 47,000 shares underlying equity awards for the three and nine months ended September 25, 2022, respectively, as the effect of including such awards would have been anti-dilutive.

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

September 24,

2023 December 25,

7 unchanged sentences

___________________________________

(a) Revolving facilities as of June 25, 2023 includes $ 15.5 million outstanding under the PJMF Revolving Facility as defined and discussed below.

(a) Revolving facilities as of September 24, 2023 includes $ 14.8 million outstanding under the PJMF Revolving Facility as defined and discussed below.

On September 14, 2021, the Company issued $ 400.0 million of 3.875 % senior notes (the “Notes”) which will mature on September 15, 2029.

5 unchanged sentences

The PJI Revolving Facility will mature on September 14, 2026.

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

The remaining availability under the PJI Revolving Facility was approximately $ 224.0 million as of September 24, 2023.

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 further description of the provisions and covenant requirements under the Credit Agreement.

3 unchanged sentences

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 6.8 % for the three months ended June 25, 2023.

As of June 25, 2023, t he principal amount of debt outstanding under the PJMF Revolving Facility was approximately $ 15.5 million and is classified as Current portion of long-term debt in the Condensed Consolidated Balance Sheets .

The PJMF Revolving F acility 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 SOFR plus 1.60 %.

The applicable interest rate on the PJMF Revolving facility was 6.9 % for the three months ended September 24, 2023.

As of September 24, 2023, t he principal amount of debt outstanding under the PJMF Revolving Facility was approximately $ 14.8 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.

On September 30, 2023, the Company amended the PJMF Revolving Facility to, among other items:

(i) extend the maturity date to September 30, 2024;

(ii) amend the variable interest rate to a one month SOFR plus 1.975 %;

and (iii) expand the capacity from $ 20.0 million to $ 30.0 million.

Derivative Financial Instruments

During the three months ended June 25, 2023, the Company executed a new interest rate swap with an initial notional value of $ 100.0 million to replace the Company’s prior interest swaps, which had a notional value of $ 125.0 million and matured on April 30, 2023.

On June 23, 2023, the Company entered into a new interest rate swap with an initial notional value of $ 100.0 million to replace the Company’s prior interest swaps, which had a notional value of $ 125.0 million and matured on April 30, 2023.

The objective of the interest rate swap is to mitigate the Company’s exposure to the impact of interest rate changes associated with our variable rate debt under the PJI Revolving Facility.

We have designated the interest rate swap as a cash flow hedge and will assess hedge effectiveness at regular intervals through the maturity date of June 30, 2025.

The interest rate swaps are marked to market at each reporting date, and any unrealized gains or losses are included in Accumulated other comprehensive loss in the Condensed Consolidated Balance Sheets and reclassified to Net interest

expense in the Condensed Consolidated Statements of Operations in the same period or periods during which the hedged transaction affect earnings.

As of June 25, 2023, we have the following interest rate swap agreements:

The interest rate swaps are recorded at fair value at each reporting date, and any unrealized gains or losses are included in Accumulated

other comprehensive loss in the Condensed Consolidated Balance Sheets and reclassified to Net interest expense in the Condensed Consolidated Statements of Operations in the same period or periods during which the hedged transaction affect earnings.

As of September 24, 2023, we have the following interest rate swap agreements:

Effective Dates Floating Rate Debt Fixed Rates

4 unchanged sentences

Balance Sheet Location Fair Value

September 24,

2023 Fair Value

Other current assets $ 726 $ 986

Other long-term liabilities $ 15 $ —

Other assets $ 59 $ —

The effect of derivative instruments on the accompanying condensed consolidated financial statements is as follows (in thousands):

10 unchanged sentences

Interest rate swaps for the three months ended:

June 25, 2023 $ 1,165 Interest expense $ ( 36 ) $ ( 11,275 )

June 26, 2022 $ 1,445 Interest expense $ ( 735 ) $ ( 6,081 )

Interest rate swaps for the six months ended:

June 25, 2023 $ 1,424 Interest Expense $ ( 243 ) $ ( 20,296 )

June 26, 2022 $ 2,763 Interest Expense $ ( 200 ) $ ( 10,344 )

Interest paid, including payments made or received under the swaps, was $ 5.7 million and $ 2.4 million for the three months ended June 25, 2023 and June 26, 2022, respectively, and $ 16.6 million and $ 12.6 million for the six months ended June 25, 2023 and June 26, 2022, respectively.

September 24, 2023 $ 801 Interest expense $ 203 $ ( 11,378 )

September 25, 2022 $ 901 Interest expense $ ( 1,650 ) $ ( 7,623 )

Interest rate swaps for the nine months ended:

September 24, 2023 $ 2,225 Interest Expense $ ( 40 ) $ ( 31,674 )

September 25, 2022 $ 3,664 Interest Expense $ ( 1,850 ) $ ( 17,967 )

Net interest paid, including payments made or received under the swaps, was $ 11.2 million and $ 9.6 million for the three months ended September 24, 2023 and September 25, 2022, respectively, and $ 28.0 million and $ 22.2 million for the nine months ended September 24, 2023 and September 25, 2022, respectively.

Litigation, Commitments and Contingencies

4 unchanged sentences

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.

, 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.

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

The 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 submitted a claim form.

The Company is still awaiting a final accounting from the settlement administrator.

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

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.

The remainder of the settlement amount will be paid to the settlement administrator on or prior to August 10, 2023 in accordance with the settlement terms.

As of June 25, 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.

On August 10, 2023, the Company remitted the remaining $ 5.6 million settlement amount to the administrator in accordance with the final settlement terms.

The settlement of these claims and lawsuits is materially complete, and the Company anticipates that the claims process will be concluded by the end of 2023.

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.

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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 in the first quarter of 2022 and remained accrued in Accrued expenses and other accrued liabilities in the Condensed Consolidated Balance Sheets as of June 25, 2023.

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

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

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

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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 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

The International segment consists of the operations of all Company-owned restaurants located in the UK, as well as 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.

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The following tables present our segment information.

Three Months Ended Six Months Ended

(In thousands) June 25,

2023 June 26,

2022 June 25,

2023 June 26,

Three Months Ended Nine Months Ended

(In thousands) September 24,

2023 September 25,

2022 September 24,

2023 September 25,

Domestic Company-owned restaurants $ 177,195 $ 166,050 $ 532,841 $ 536,226

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North America commissaries 51,237 51,330 154,640 162,591

International 869 — 869 —

All others 16,180 15,562 49,363 50,830

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___________________________________

(a) The six months ended June 26, 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.

(a) The nine months ended September 25, 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 and six months ended June 25, 2023 includes $ 1.3 million of costs associated with repositioning the UK portfolio as well as transaction costs related to the acquisition of stores from franchisees.

The six months ended June 26, 2022 includes $ 3.5 million of one-time, non-cash reserves for certain accounts receivable and impairments of reacquired franchise rights.

(b) The three and nine months ended September 24, 2023 includes $ 1.2 million and $ 2.5 million of costs associated with repositioning the UK portfolio as well as transaction costs related to the acquisition of stores from franchisees.

The three and nine months ended September 25, 2022 includes a charge of $ 4.1 million related to the reserve of certain accounts and notes receivable and operating lease right-of-use assets impairment associated with the termination of a significant franchise in the United Kingdom.

The three and nine months ended September 25, 2022 also 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 and six months ended June 25, 2023 includes $ 0.7 million and $ 2.0 million, respectively, of severance and related costs associated with the transition of certain executives.

The three months ended June 26, 2022 includes $ 1.5 million of advisory fees and severance costs associated with the transition of certain executives.

The six months ended June 26, 2022 includes $ 13.9 million of one-time, non-cash reserves of certain notes receivable, $ 5.0 million for certain legal settlements, and $ 1.5 million of advisory fees and severance costs associated with the transition of certain executives.

Significant Accounting Policies”, “10.

Divestitures” and “12.

Acquisitions” for additional information.

(c) The nine months ended September 24, 2023 includes $ 2.0 million of severance and related costs associated with the transition of certain executives.

The three and nine months ended September 24, 2023 includes $ 0.6 million for certain legal settlements.

Unallocated corporate expenses includes $ 10.0 million for certain legal settlements for the three months ended September 25, 2022.

The nine months ended September 25, 2022 includes $ 13.9 million of one-time, non-cash reserves of certain notes receivable, $ 15.0 million for certain legal settlements, and $ 1.5 million of advisory fees and severance costs associated with the transition of certain

See “Notes 2.

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Reportable Segments

Three Months Ended June 25, 2023

Three Months Ended September 24, 2023

Major Products/Services Lines Domestic Company-owned restaurants North America franchising North America commissaries International All others Total

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Reportable Segments

Three Months Ended June 26, 2022

Three Months Ended September 25, 2022

Major Products/Services Lines Domestic Company-owned restaurants North America franchising North America commissaries International All others Total

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Reportable Segments

Six Months Ended June 25, 2023

Nine Months Ended September 24, 2023

Major Products/Services Lines Domestic Company-owned restaurants North America franchising North America commissaries International All others Total

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Reportable Segments

Six Months Ended June 26, 2022

Nine Months Ended September 25, 2022

Major Products/Services Lines Domestic Company-owned restaurants North America franchising North America commissaries International All others Total

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___________________________________

(a) Other revenues as reported in the Condensed Consolidated Statements of Operations include $ 6.7 million and $ 14.0 million of revenues for the three and six months ended June 25, 2023, respectively, and $ 7.3 million and $ 15.4 million for the three and six months ended June 26, 2022, respectively, that are part of the International reporting segment.

(a) Other revenues as reported in the Condensed Consolidated Statements of Operations include $ 5.6 million and $ 19.5 million of revenues for the three and nine months ended September 24, 2023, respectively, and $ 7.0 million and $ 22.4 million for the three and nine months ended September 25, 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.

UK Franchisee Acquisition

On June 2, 2023 (the “Acquisition Date”), the Company acquired 91 Papa Johns restaurants previously operated by the M25 division of Drake Food Service International in the United Kingdom (referred to as “DFSI”), the Company's largest franchisee, for total consideration of approximately $ 13.7 million.

The acquisition establishes a portfolio of Company-owned restaurants in the UK market and enables the Company to implement operating model enhancements in the restaurants including revenue management capabilities, product and technological innovation and operational efficiencies to improve sales and restaurant-level profitability.

The acquisition represents a part of the Company’s investments to reposition our UK portfolio and drive initiatives for future growth and profitability in the Company’s largest market outside of North America.

During the three months ended June 25, 2023, the Company incurred $ 1.3 million of acquisition-related costs, which were recorded within General and administrative expenses and within the International segment in the Condensed Consolidated Statements of Operations.

The results of DFSI’s operations after the Acquisition Date are included in the Company’s Condensed Consolidated Statements of Operations.

The revenues and income before income taxes were recorded within the International segment and were not material to the Company’s Condensed Consolidated Statements of Operations during the three months ended June 25, 2023.

Preliminary Acquisition Accounting

The DFSI acquisition has been accounted for as a business combination.

As such, the Company concluded that the consideration was measured at fair value and has recorded the preliminary estimated fair value of the assets acquired and liabilities assumed as of the Acquisition Date.

Total consideration was approximately $ 13.7 million, substantially all of which was pre-existing accounts receivable and notes receivable and was classified as a noncash investing transaction within the Condensed Consolidated Statements of Cash Flows during the six months ended June 25, 2023.

UK Franchisee Acquisitions

As part of our investment to reposition our UK business, we have acquired a portfolio of Company-owned restaurants in the UK market that were previously franchised.

Our control and ownership of this portfolio enables us to implement operating model enhancements in the restaurants including revenue management capabilities, product and technological innovation and operational efficiencies to improve sales and restaurant-level profitability, and to drive initiatives for future growth and profitability in the Company’s largest market outside of North America.

As part of this investment, the Company acquired 91 Papa Johns restaurants previously operated by the M25 division of Drake Food Service International in the United Kingdom on June 2, 2023 for total consideration of approximately $ 13.7 million.

The Company acquired an additional 27 Papa Johns restaurants in the United Kingdom during the three months ended September 24, 2023 for total consideration of approximately $ 1.5 million.

Collectively, we refer to these acquisitions as the “UK franchisee acquisitions.”

During the three and nine months ended September 24, 2023, the Company incurred $ 0.8 million and $ 2.1 million, respectively, of acquisition and transition costs related to the UK franchisee acquisitions.

These expenses were recorded within General and administrative expenses and within the International segment in the Condensed Consolidated Statements of Operations.

The results of operations of the acquired restaurants after their respective acquisition dates are included within the International segment in the Company’s Condensed Consolidated Statements of Operations.

The impact of the acquisitions was not material to the Company’s Condensed Consolidated Financial Statements.

The UK franchisee acquisitions have been accounted for as business combinations.

Total consideration was approximately $ 15.2 million, of which $ 13.7 million was pre-existing accounts receivable and notes receivable and was classified as a noncash investing transaction within the Condensed Consolidated Statements of Cash Flows during the nine months ended September 24, 2023.

Assets acquired include approximately $ 10.6 million of property and equipment, net, $ 0.3 million of inventories and other assets and $ 4.3 million of goodwill.

The total goodwill recognized in conjunction with the DFSI acquisition, all of which is expected to be deductible for tax purposes, has been assigned to the International operating segment.

The total goodwill recognized in conjunction with the UK franchisee acquisitions, all of which is expected to be deductible for tax purposes, has been assigned to the International operating segment.

The purchase price exceeded the fair value of the net assets acquired, which resulted in the recognition of goodwill, primarily due to synergies created from expected future benefits stemming from implementation of the Company’s operational capabilities and further control of the Company’s brand name in our most prominent international market.

Goodwill also includes certain other benefits that do not qualify for recognition as intangible assets, such as an assembled workforce.

The amounts recorded as a result of our preliminary acquisition accounting are subject to change and further refinement.

The Company is still finalizing certain working capital adjustments with the sellers, assessing the condition and finalizing the fair value of acquired property and equipment, and gathering information regarding leases and other assets.

The Company expects these items to be finalized prior to the one-year anniversary date of the acquisition.

Domestic Acquisitions

During the nine months ended September 24, 2023, we acquired ten Domestic restaurants for a total purchase price of $ 4.1 million, which was classified as cash used in investing activities within the Condensed Consolidated Statements of Cash Flows.

The impact of the acquisitions was not material to the Company’s Condensed Consolidated Financial Statements.

Acquired assets recorded within the Condensed Consolidated Balance Sheets as of September 24, 2023 primarily included store property and equipment of $ 1.4 million, reacquired franchise rights of $ 1.5 million, and goodwill of $ 1.1 million.

The amounts recorded as a result of our preliminary acquisition accounting for the UK franchisee and Domestic acquisitions are subject to change and further refinement.

The Company is still assessing the condition and finalizing the fair value of acquired property and equipment and intangible assets as well as gathering information regarding leases and other assets.

There were no measurement period adjustments recorded during the three months ended September 24, 2023, and the Company expects these items to be finalized prior to the one-year anniversary date of the respective acquisitions.

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

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Foreign currency adjustments — 19 — 19

Balance at June 25, 2023 $ 56,609 $ 19,578 $ 436 $ 76,623

(s) Goodwill from acquisitions during the six months ended June 25, 2023 include $ 4.3 million from the DFSI acquisition described above as well as $ 1.1 million related to a Domestic store acquisition.

The Domestic acquisition was classified as a noncash investing transaction within the Condensed Consolidated Statements of Cash Flows during the six months ended June 25, 2023.

Balance at September 24, 2023 $ 56,609 $ 18,966 $ 436 $ 76,011

(s) Goodwill from acquisitions during the nine months ended September 24, 2023 include $ 4.3 million from the UK franchisee acquisitions described above as well as $ 1.1 million related to the Domestic store acquisitions described above.

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 1. Financial Statements