What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-11-02 compared with 2023-08-03 · 214 added, 180 removed, 322 unchanged (55% of the section changed)

2 unchanged sentences

(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 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.

As of September 24, 2023, there were 5,825 Papa John’s restaurants in operation, consisting of 644 Company-owned and 5,181 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 second quarter of 2023 are described below.

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

Growth Strategy .

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.

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

This growth is 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 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 .

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

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.

In the third quarter of 2023, we opened 45 net new restaurants for global unit growth of 0.8%.

We expect global development to be between 245 and 260 net new units for fiscal 2023, lower than previous guidance of 270 to 310 due to the dynamic geopolitical environment.

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 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.

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.

Against this backdrop, the Company and franchisees have experienced declines in sales and profitability in the UK market.

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 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.

We are seeing improvement in our restaurant level operating margins, and we experienced a 3.8% increase in comparable sales for Domestic Company-owned restaurants for the first nine months of 2023.

Over the past two years, the UK restaurants have experienced declines in sales.

As we have navigated a dynamic economic environment and worked towards repositioning the market, we established a Company-owned restaurant portfolio in the UK during the second quarter.

We acquired an additional 27 Papa Johns restaurants in the third quarter, bringing the total number of Company-owned restaurants in the UK market to 118.

The Company-owned restaurants have incurred operating losses in the third quarter as we continue to evaluate current operational capabilities and implement improvements in revenue management capabilities, product and technological innovation and operational efficiencies to improve sales and restaurant-level profitability over the longer term.

We continue to focus on rationalizing our portfolio to better position the UK market for success, which could include strategic store closures in the future.

Global Restaurant Sales and Unit Information

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

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,

Three Months Ended Nine Months Ended

Amounts below exclude the impact of foreign currency September 24,

2023 September 25,

2022 September 24,

2023 September 25,

Comparable sales growth (decline):

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_______________________________

(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,

(a) The nine months ended September 25, 2022 exclude the impact of franchisee suspended restaurants.

Restaurant Progression Three Months Ended Nine Months Ended

September 24,

2023 September 25,

2022 September 24,

2023 September 25,

North America Company-owned:

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

Three Months Ended Six Months Ended Increase

(Dollars in thousands) June 25,

2023 June 26,

2022 June 25,

2023 June 26,

Three Months Ended Nine Months Ended Increase

(Dollars in thousands) September 24,

2023 September 25,

2022 September 24,

2023 September 25,

Domestic Company-owned restaurant sales $ 177,195 $ 166,050 $ 532,841 $ 536,226 6.7 % (0.6) %

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Total revenues $ 522,812 $ 510,512 $ 1,564,391 $ 1,575,869 2.4 % (0.7) %

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”).

The discussion below references impacts to the comparable results from the acquisition of 118 formerly franchised restaurants in the UK in the second and third quarters of 2023 (the “UK franchisee acquisitions”) and from the refranchising of 90 restaurants during the second quarter of 2022 (the “2022 refranchising”).

When comparing the operating results of 2023 with 2022, note that the UK franchisee acquisitions resulted in 118 International restaurants changing from franchised to Company-owned restaurants in the second and third quarters of 2023.

Additionally, the 2022 refranchising resulted in 90 restaurants moving from Domestic Company-owned restaurants into North America franchising, effective as of the second quarter of 2022.

These transactions impact the comparability of operating results between the periods.

See “Note 12.

Acquisitions” and “Note 10.

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

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;

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

Total revenues increased $12.3 million or 2.4% to $522.8 million for the three months ended September 24, 2023 and decreased $11.5 million or 0.7% to $1.6 billion for the nine months ended September 24, 2023, as compared to each prior year comparable period.

Changes in total revenues are impacted by the transactions noted above;

see further discussion below.

Domestic Company-owned restaurant sales increased $11.1 million, or 6.7% for the three months ended September 24, 2023 and decreased $3.4 million, or 0.6% for the nine months ended September 24, 2023, as compared to the prior year comparable periods.

Due to the 2022 refranchising, Domestic Company-owned restaurant sales decreased by $27.3 million for the nine months ended September 25, 2022.

Excluding the impact of the 2022 refranchising, Domestic Company-owned restaurant sales would have increased $24.0 million, or 4.7%, for the nine months ended September 24, 2023.

The increases of $11.1 million and $24.0 million were primarily due to comparable sales growth of 5.9% and 3.8% for the three and nine months ended September 24, 2023, respectively.

North America franchise royalties and fees increased $1.3 million, or 3.9% and increased $2.9 million or 2.8% for the three and nine months ended September 24, 2023, respectively, as compared to each prior year comparable period.

The impact of the 2022 refranchising for North America franchise royalties and fees was $1.4 million for the nine months ended September 25, 2022.

Excluding the 2022 refranchising, North America franchise royalties increased $1.6 million or 1.5%, for the nine months ended September 24, 2023.

Comparable sales for the three and nine months ended September 24, 2023 grew 2.2% and declined 0.4%, respectively.

Equivalent units declined 1.7% and 0.6% for the three and nine months ended September 24, 2023, respectively, excluding the impact of the 2022 refranchising.

North America franchise restaurant sales increased 3.1% to $749.8 million for the three months ended September 24, 2023 and increased 2.2% to $2.3 billion for the nine months ended September 24, 2023 compared to the prior year comparable periods.

Excluding the impact of the 2022 refranchising, North America franchise restaurant sales increased 0.9% to $2.3 billion for the nine months ended September 24, 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 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.

North America commissary revenues decreased $11.2 million, or 5.2% for the three months ended September 24, 2023 and decreased $20.7 million, or 3.2% for the nine months ended September 24, 2023, compared to the prior year comparable periods.

Excluding the impact of the 2022 refranchising, North America commissary revenues decreased $28.9 million, or 4.4% for the nine months ended September 24, 2023.

The declines in North America commissary revenues were primarily a result of declining commodity prices in 2023 and lower volumes during the first half of 2023, partially offset by higher volumes during the three months ended September 24, 2023.

International revenues increased $12.2 million, or 39.7% for the three months ended September 24, 2023 and increased $11.7 million, or 12.0% for the nine months ended September 24, 2023, compared with the respective prior year periods.

International revenues included $14.0 million and $17.0 million for the three and nine months ended September 24, 2023, respectively, attributable to the acquired UK restaurants, and included $5.0 million and $7.0 million for the three and nine months ended September 25, 2022, respectively, related to franchise royalty and food distribution revenue generated from the UK formerly franchised restaurants.

Excluding the impact of the UK franchisee acquisitions, revenues would have increased $3.2 million, or 12.5%, and increased $1.6 million, or 1.8%, for the three and nine months ended September 24, 2023, respectively.

International revenues benefited from new unit development in 2023 and positive foreign currency fluctuations, partially offset by comparable sales declines of 0.3% and 2.3% for the three and nine months ended September 24, 2023.

International franchise restaurant sales increased $28.8 million to $289.2 million and increased $36.8 million to $880.2 million for the three and nine months ended September 24, 2023, respectively.

Excluding the impact of the UK franchisee acquisitions, the previously disclosed suspended restaurants, and foreign currency fluctuations, International franchise restaurant sales increased 9.5% and 7.0% for the three and nine months ended September 24, 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, 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.

Other revenues, which primarily includes our national marketing funds, online and mobile ordering business and our wholly-owned print and promotions subsidiary, decreased $1.1 million, or 1.8%, and decreased $2.0 million, or 1.0%, for the three and nine months ended September 24, 2023, respectively, compared to the prior year comparable periods.

The impacts of the UK franchisee acquisitions decreased Other revenues by $1.3 million and $1.8 million for the three and nine months ended September 24, 2023, respectively.

Excluding the impact of the UK franchisee acquisitions, Other revenues would have increased $0.2 million and decreased $0.1 million for the three and nine months ended September 24, 2023.

Costs and Expenses

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(Dollars in thousands) Three Months Ended

June 25, 2023 % of Related

Revenues June 26, 2022 % of Related

September 24, 2023 % of Related

Revenues September 25, 2022 % of Related

Revenues Increase (Decrease) in % of Revenues

8 unchanged sentences

Total costs and expenses 490,944 93.9 % 490,146 96.0 % (2.1) %

Refranchising and impairment loss — — % (905) (0.2) % 0.2 %

Operating income $ 31,868 6.1 % $ 19,461 3.8 % 2.3 %

(Dollars in thousands) Six Months Ended

June 25, 2023 % of Related

Revenues June 26, 2022 % of Related

(Dollars in thousands) Nine Months Ended

September 24, 2023 % of Related

Revenues September 25, 2022 % of Related

Revenues Increase (Decrease) in % of Revenues

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Operating income $ 104,576 6.7 % $ 72,800 4.6 % 2.1 %

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.

Total costs and expenses were $490.9 million or 93.9% of total revenues for the three months ended September 24, 2023, as compared to $490.1 million or 96.0% of total revenues for the prior year comparable period.

For the nine months ended September 24, 2023, total costs and expenses were $1.5 billion or 93.3% of total revenues, as compared to $1.5 billion, or 94.6% 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.

Domestic Company-owned restaurant expenses were $145.4 million or 82.1% of related revenues for the three months ended September 24, 2023, compared to expenses of $138.3 million or 83.3% of related revenues for the prior year period.

For the nine months ended September 24, 2023 Domestic Company-owned restaurant expenses were $436.9 million or 82.0% of related revenues compared to $442.0 million or 82.4% of related revenues for the prior year comparable period.

The quarter and year to date decreases of 1.2% and 0.4%, respectively, were primarily due to decreases in certain commodity expenses.

North America commissary expenses were $189.6 million or 92.5% of related revenues for the three months ended September 24, 2023 compared to expenses of $203.1 million or 94.0% of related revenues for the prior year comparable period.

For the nine months ended September 24, 2023 North America commissary expenses were $576.4 million, or 92.3% of related revenues compared to $604.7 million or 93.7% of related revenues for the prior year period.

The expenses, as a percentage of related revenues, decreased 1.5% and 1.4% for the three and nine months ended September 24, 2023, respectively, primarily due to declining commodity prices and delivery costs in 2023 and lower volumes during the first half of 2023.

International expenses were $29.8 million or 69.4% of related revenues for the three months ended September 24, 2023 as compared to $18.2 million, or 59.2% of related revenues for the prior year comparable period.

For the nine months ended September 24, 2023, International expenses were $67.5 million, or 62.0% of related revenues, as compared to $57.3 million, or 58.9% of related revenues for the prior year comparable period.

International expenses increased in 2023 as a result of the UK franchisee acquisitions, which added operating costs of 118 Company-owned restaurants, partially offset by declining commodity prices at our International commissary.

Expenses in 2023 also include repositioning costs and transaction costs related to the UK franchisee acquisitions of approximately $1.2 million and $2.5 million for the three and nine months ended September 24, 2023, respectively.

Other expenses were $57.6 million or 91.8% of related revenues for the three months ended September 24, 2023 as compared to $59.2 million or 92.7% of related revenues for the prior year comparable period.

For the nine months ended September 24, 2023, Other expenses were $177.7 million, or 92.4% of related revenues, compared to $180.5 million, or 92.9% of related revenues for the prior year comparable period.

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.

General and administrative (“G&A”) expenses were $52.2 million, or 10.0% of revenues for the three months ended September 24, 2023, compared to $57.9 million, or 11.3% of revenues for the prior year period.

For the nine months ended September 24, 2023, G&A expenses were $154.4 million or 9.9% of revenues, compared to $168.5 million or 10.7% 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

(Dollars in thousands) Three Months Ended Nine Months Ended

September 24, 2023 September 25, 2022 September 24, 2023 September 25, 2022

Administrative expenses (a)

3 unchanged sentences

Legal settlement accruals (c)

577 10,000 577 15,000

Specific accounts receivable and notes receivable provisions (d)

— 3,227 — 17,863

Other costs (e)

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___________________________________

(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.

(a) For the three and nine months ended September 24, 2023, administrative expenses increased $4.6 million and $13.9 million primarily due to higher incentive compensation and benefit costs.

The nine month period also included higher costs from our franchise operating conference in the second quarter of 2023.

(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.

(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.

(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 and a $3.2 million charge recorded in the third quarter of 2022 associated with the termination of a significant franchisee in the United Kingdom related to the reserve of certain accounts and notes receivable.

(e) Represents severance and related costs associated with the transition of certain executives incurred during the nine months ended September 24, 2023 and nine months ended September 25, 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.

Depreciation and amortization expense was $16.4 million or 3.1% of revenues for the three months ended September 24, 2023, compared to $13.3 million or 2.6% of revenues for the prior year comparable period.

For the nine months ended September 24, 2023, Depreciation and amortization expense was $46.8 million, or 3.0% of revenues compared to $38.0 million, or 2.4% 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 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.

There was no Refranchising and impairment loss during the nine months ended September 24, 2023.

Refranchising and impairment loss was $12.1 million for the nine months ended September 25, 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 June 25, 2023 Three Months Ended June 26, 2022

Three Months Ended September 24, 2023 Three Months Ended September 25, 2022

(In thousands) Reported Adjustments (a)

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Unallocated corporate expenses (20,792) 577 (20,215) (27,684) 10,000 (17,684) 6,892 (2,531)

Elimination of intersegment (profits) 358 — 358 (750) — (750) 1,108 1,108

Elimination of intersegment (profits) losses (1,061) — (1,061) 416 — 416 (1,477) (1,477)

Total $ 31,868 $ 1,770 $ 33,638 $ 19,461 $ 14,132 $ 33,593 $ 12,407 $ 45

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

Nine Months Ended September 24, 2023 Nine Months Ended September 25, 2022

(In thousands) Reported Adjustments (a)

7 unchanged sentences

Unallocated corporate expenses (63,859) 2,594 (61,265) (84,138) 30,376 (53,762) 20,279 (7,503)

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

Elimination of intersegment (profits) losses (710) — (710) (423) — (423) (287) (287)

Total $ 104,576 $ 5,095 $ 109,671 $ 72,800 $ 46,435 $ 119,235 $ 31,776 $ (9,564)

2 unchanged sentences

GAAP measure.

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 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.

Operating income was $31.9 million and $104.6 million for the three and nine months ended September 24, 2023, respectively, compared to $19.5 million and $72.8 million for the prior year comparable periods, increases of $12.4 million and $31.8 million, respectively.

Adjusted operating income was $33.6 million and $109.7 million for the three and nine months ended September 24, 2023, respectively, compared to $33.6 million and $119.2 million for the prior year comparable periods, which was flat and a decrease of $9.6 million, respectively.

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

• Domestic Company-owned restaurants increased $2.5 million and decreased $0.6 million for the three and nine months ended September 24, 2023, respectively.

The three month period increase of $2.5 million was primarily due to higher revenues from comparable sales growth of 5.9% and improved results from lower food costs, partially offset by higher depreciation and utility expenses.

The impact of the 2022 refranchising decreased the

segment’s operating income by $2.3 million for the nine months ended September 25, 2022.

Excluding the impact of the 2022 refranchising, the nine month period would have increased $1.7 million primarily due to comparable sales growth of 3.8%, partially offset by higher compensation and benefit costs.

• North America franchising increased $0.8 million for the three months ended September 24, 2023 primarily due to comparable sales growth of 2.2%, partially offset by a 1.7% decrease in equivalent units.

For the nine months ended September 24, 2023, North America franchising increased $1.5 million primarily due to the impact of the 2022 refranchising.

• North America commissaries increased $2.3 million and $3.1 million for the three and nine months ended September 24, 2023, respectively.

The three month period increase of $2.3 million was primarily due to lower commodity and labor costs.

The impact of the 2022 refranchising decreased the segment’s operating income by $0.3 million for the nine months ended September 25, 2022.

Excluding the impact of the 2022 refranchising for the nine month period, North America commissaries would have increased $2.8 million primarily due to lower commodity costs and delivery costs throughout 2023 and lower volumes during the first half of 2023.

• International decreased $1.8 million and $4.8 million for the three and nine months ended September 24, 2023, respectively.

The decreases in adjusted operating income were primarily driven by operating losses attributable to the recently acquired UK Company-owned restaurants as well as comparable sales declines of 0.3% and 2.3% for the respective periods.

These decreases were partially offset by favorable commissary results from lower commodity costs.

• All Others, which primarily includes our online and mobile ordering business and our marketing funds, increased $0.3 million and decreased $1.1 million for the three and nine months ended September 24, 2023, respectively, compared to the prior year comparable periods.

The $1.1 million decrease for the nine months ended September 24, 2023 was primarily due to lower results from higher depreciation expense related to our investments in technology support initiatives.

• Unallocated corporate expenses increased $2.5 million and $7.5 million for the three and nine months ended September 24, 2023, respectively.

The increases are primarily due to higher incentive compensation and benefit costs and higher depreciation expense related to our investments in technology support initiatives.

The nine month period also included increases from higher insurance expense and costs for our franchise operating conference in the second quarter of 2023.

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 Six Months Ended Increase (Decrease)

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

2023 June 26,

2022 June 25,

2023 June 26,

Three Months Ended Nine Months Ended Increase (Decrease)

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

2023 September 25,

2022 September 24,

2023 September 25,

Operating income $ 31,868 $ 19,461 $ 104,576 $ 72,800 $ 12,407 $ 31,776

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Net Interest Expense

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.

Net interest expense increased $3.8 million and $13.7 million, or 49.3% and 76.3% for the three and nine months ended September 24, 2023, respectively, due primarily to higher average outstanding debt as well as an increase in borrowing rates in 2023.

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.

Total debt outstanding was $790.8 million and $605.0 million as of September 24, 2023 and December 25, 2022, respectively.

Income Tax Expense (Benefit)

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

Our effective income tax rates were 22.2% and 22.7% for three and nine months ended September 24, 2023, compared to income tax rates of 28.5% and 16.8% for the prior year comparable periods.

The lower effective tax rate for the nine months ended September 25, 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.

Three Months Ended Nine Months Ended

(Dollars in thousands) September 24, 2023 September 25, 2022 September 24, 2023 September 25, 2022

Income before income taxes $ 20,490 $ 11,838 $ 72,902 $ 54,833

Income tax expense (benefit) $ 5,778 $ 7,093 $ 12,007 $ 5,838

Income tax expense $ 4,539 $ 3,374 $ 16,546 $ 9,212

Effective tax rate 22.2 % 28.5 % 22.7 % 16.8 %

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.

Net income attributable to noncontrolling interests was $0.1 million and $0.4 million for the three and nine months ended September 24, 2023, compared with $0.1 million and $1.4 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 $0.54 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.

Diluted earnings per common share was $0.48 and $1.68 for the three and nine months ended September 24, 2023, respectively, compared to $0.23 and $1.22 for the prior year comparable period, representing increases of $0.25 and $0.46, respectively.

Adjusted diluted earnings per common share, a non-GAAP measure, was $0.53 and $1.80 for the three and nine months ended September 24, 2023, compared to adjusted diluted earnings per common share of $0.54 and $2.23 for the prior year comparable periods, representing decreases of $0.01 and $0.43, 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 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,

Operating income $ 31,868 $ 19,461 $ 104,576 $ 72,800

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Refranchising and impairment losses (b)

Legal settlement (c)

Other costs (d)

— 905 — 26,701

Legal settlements (c)

577 10,000 577 15,000

Provision for uncollectible accounts and notes receivable (d)

— 3,227 — 3,227

Other costs (e)

— — 2,017 1,507

Adjusted operating income $ 33,638 $ 33,593 $ 109,671 $ 119,235

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Refranchising and impairment losses (b)

Legal settlement (c)

Other costs (d)

— 905 — 26,701

Tax effect of adjustments (e)

Legal settlements (c)

577 10,000 577 15,000

Adjusted net income attributable to common shareholders (f)

Provision for uncollectible accounts and notes receivable (d)

— 3,227 — 3,227

Other costs (e)

— — 2,017 1,507

Tax effect of adjustments (f)

(404) (3,180) (1,162) (10,449)

Adjusted net income attributable to common shareholders (g)

$ 17,227 $ 19,197 $ 59,938 $ 79,982

Diluted earnings per common share $ 0.48 $ 0.23 $ 1.68 $ 1.22

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Refranchising and impairment losses (b)

Legal settlement (c)

Other costs (d)

— 0.03 — 0.75

Tax effect of adjustments (e)

Legal settlements (c)

0.02 0.28 0.02 0.42

Adjusted diluted earnings per common share (f)

Provision for uncollectible accounts and notes receivable (d)

— 0.09 — 0.09

Other costs (e)

— — 0.06 0.04

Tax effect of adjustments (f)

(0.01) (0.09) (0.03) (0.29)

Adjusted diluted earnings per common share (g)

$ 0.53 $ 0.54 $ 1.80 $ 2.23

___________________________________

(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,

(In thousands) Three Months Ended September 25, 2022 Nine Months Ended September 25, 2022

Refranchising impairment loss (1)

Ukraine-related charge (2)

PJUK lease impairment (3)

Total adjustment $ 905 $ 26,701

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(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.

(3) An impairment charge of $0.9 million on the right-of-use assets on leases recorded in the third quarter of 2022 associated with the termination of a significant franchisee in the United Kingdom, which was recorded in Refranchising and impairment loss.

Litigation, Commitments and Contingencies” for further information.

(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.

(d) Represents a $3.2 million charge recorded in the third quarter of 2022 associated with the termination of a significant franchisee in the United Kingdom related to the reserve of certain accounts and notes receivable.

(e) Represents severance and related costs associated with the transition of certain executives incurred during the three and nine months ended September 24, 2023 and September 25, 2022, which were recorded in General and administrative expenses.

(f) 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 nine-month periods ended September 24, 2023 and September 25, 2022, respectively.

(g) 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 for the six months ended June 25, 2023 and June 26, 2022 (in thousands):

Six Months Ended

2023 June 26,

The table below summarizes our cash flows for the nine months ended September 24, 2023 and September 25, 2022 (in thousands):

Nine Months Ended

September 24,

2023 September 25,

Total cash provided by (used in):

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Financing activities (79,139) (79,216)

Change in cash and cash equivalents, excluding the effect of exchange rate changes on cash and cash equivalents $ (3,612) $ (17,615)

Effect of exchange rate changes on cash and cash equivalents (24) (1,100)

Change in cash and cash equivalents $ (9,881) $ (33,992)

Operating Activities

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.

Total cash provided by operating activities was $126.9 million for the nine months ended September 24, 2023 compared to $76.6 million for the corresponding period of 2022.

The increase of $50.4 million primarily reflects favorable working capital changes, principally related to higher incentive compensation payments during the nine months ended September 25, 2022 and other current liabilities, as well as lower inventory balances stemming from lower commodity costs and higher cash collections on accounts receivable balances during 2023 due to timing of cash receipts at the beginning of the year.

Investing Activities

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.

Total cash used in investing activities was $57.7 million for the nine months ended September 24, 2023 compared to $30.2 million for the same period in 2022, or an increase of $27.4 million.

The increase in cash used in investing activities was primarily due to cash proceeds of $14.0 million, net of transaction costs, received from the 2022 refranchising during the nine months ended September 25, 2022.

Additionally, the Company paid $5.6 million to purchase 37 International and Domestic restaurants and issued $7.3 million of construction and development notes during the nine months ended September 24, 2023.

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 $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 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.

Total cash used in financing activities was $79.1 million for the nine months ended September 24, 2023 compared to $79.2 million for the same period of 2022.

In 2023, cash used for financing activities includes outflows of $210.3 million in share repurchases and $43.6 million of common stock dividends paid, partially offset by net borrowings of $171.0

million from the PJI Revolving Facility and $14.8 million from the PJMF revolving line of credit (the “PJMF Revolving Facility”).

In 2022, cash used for financing activities includes outflows of $95.0 million in share repurchases and $39.9 million of dividends paid, partially offset by net borrowings of $67.0 million from the PJI Revolving Facility.

Our outstanding debt as of September 24, 2023 was $790.8 million, which was comprised of $400.0 million of our 3.875% senior notes (the “Notes”) and $390.8 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 September 24, 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 June 25, 2023

Permitted Ratio Actual Ratio as of September 24, 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 June 25, 2023.

We were in compliance with all financial covenants as of September 24, 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 $15.5 million as of June 25, 2023.

Debt outstanding under the PJMF Revolving Facility was approximately $14.8 million as of September 24, 2023.

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.

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.

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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 and six months ended June 25, 2023 and June 26, 2022:

The following table summarizes our repurchase activity under these 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) 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.

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) 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 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 $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 Company paid aggregate dividends to common stockholders of $43.6 million ($1.30 per share) and $39.9 million ($1.12 per share) for the nine months ended September 24, 2023 and September 25, 2022, respectively.

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.

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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 six month periods of 2023 and 2022 (in thousands):

Six Months Ended

2023 June 26,

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

Nine Months Ended

September 24,

2023 September 25,

Net cash provided by operating activities $ 126,936 $ 76,553

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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, investments in the UK market, 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, supply chain operating margin, net unit growth, unit level performance, capital expenditures, restaurant and franchise development, restaurant acquisitions, labor shortages, labor cost increases, inflation, royalty relief, franchisee support and incentives, 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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• 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;

• risks related to our indebtedness, including increased interest rates, and the current state of the credit markets;

• risks related to our indebtedness and borrowing costs, including prolonged higher interest rates, and the current state of the credit markets;

• the Company’s ability to continue to pay dividends to stockholders based upon profitability, cash flows and capital adequacy if restaurant sales and operating results decline;

• our ability to effectively operate and improve the performance of International Company-owned restaurants;

• disruption of critical business or information technology systems, or those of our suppliers, and risks associated with systems failures and data privacy and security breaches, including theft of confidential Company, employee and customer information, including payment cards;

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– 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.

- Risk Factors” in our Quarterly Report on Form 10-Q for the three and six months ended June 25, 2023 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