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Item 1. Financial Statements

2024-08-08 compared with 2024-05-09 · 226 added, 135 removed, 533 unchanged (40% of the section changed)

3 unchanged sentences

Condensed Consolidated Balance Sheets

(In thousands, except per share amounts) March 31,

(In thousands, except per share amounts) June 30,

2024 December 31,

6 unchanged sentences

Prepaid expenses and other current assets 58,762 42,285

Assets held for sale 4,205 —

Total current assets 225,740 231,018

25 unchanged sentences

Common stock ($ 0.01 par value per share;

issued 49,278 at March 31, 2024 and 49,235 at December 31, 2023)

issued 49,280 at June 30, 2024 and 49,235 at December 31, 2023)

Additional paid-in capital 446,547 452,290

1 unchanged sentence

Retained earnings 215,800 219,027

Treasury stock ( 16,674 shares at March 31, 2024 and 16,747 shares at December 31, 2023, at cost)

Treasury stock ( 16,658 shares at June 30, 2024 and 16,747 shares at December 31, 2023, at cost)

( 1,117,140 ) ( 1,123,098 )

7 unchanged sentences

Condensed Consolidated Statements of Operations

Three Months Ended

(In thousands, except per share amounts) March 31,

2024 March 26,

Three Months Ended Six Months Ended

(In thousands, except per share amounts) June 30,

2024 June 25,

2023 June 30,

2024 June 25,

Domestic Company-owned restaurant sales $ 173,207 $ 175,780 $ 349,431 $ 355,646

29 unchanged sentences

Condensed Consolidated Statements of Comprehensive Income

Three Months Ended

(In thousands) March 31,

2024 March 26,

Three Months Ended Six Months Ended

(In thousands) June 30,

2024 June 25,

2023 June 30,

2024 June 25,

Net income before attribution to noncontrolling interests $ 12,536 $ 17,859 $ 27,450 $ 40,405

2 unchanged sentences

Interest rate swaps (1)

88 1,514 956 1,850

Other comprehensive income (loss), before tax 253 1,919 575 3,697

10 unchanged sentences

___________________________________

(1) Amounts reclassified out of accumulated other comprehensive loss into net interest income (expense) include $ 200 and $( 207 ) for the three months ended March 31, 2024 and March 26, 2023, respectively.

(2) The income tax effects of amounts reclassified out of accumulated other comprehensive loss were $( 45 ) and $ 47 for the three months ended March 31, 2024 and March 26, 2023, respectively.

(1) Amounts reclassified out of accumulated other comprehensive loss into net interest income (expense) include $ 197 and $ 397 for the three and six months ended June 30, 2024, respectively, and $( 36 ) and $( 243 ) for the three and six months ended June 25, 2023, respectively.

(2) The income tax effects of amounts reclassified out of accumulated other comprehensive loss were $( 45 ) and $( 90 ) for the three and six months ended June 30, 2024, respectively, and $ 8 and $ 55 for the three and six months ended June 25, 2023, respectively.

See accompanying notes.

13 unchanged sentences

For the three months ended

March 31, 2024

June 30, 2024

Balance at March 31, 2024 32,604 $ 493 $ 444,793 $ ( 7,554 ) $ 218,608 $ ( 1,118,196 ) $ 15,433 $ ( 446,423 )

Net income (1)

— — — — 12,243 — 202 12,445

Other comprehensive income (loss), net of tax — — — 196 — — — 196

Dividends on common stock — — 32 — ( 15,051 ) — — ( 15,019 )

Exercise of stock options 2 — 92 — — — — 92

Stock-based compensation expense — — 2,915 — — — — 2,915

Issuance of restricted stock 16 — ( 900 ) — — 900 — —

Tax effect of restricted stock awards ( 3 ) — ( 138 ) — — — — ( 138 )

Distributions to noncontrolling interests — — — — — — ( 117 ) ( 117 )

Other 3 — ( 247 ) — — 156 — ( 91 )

Balance at June 30, 2024 32,622 $ 493 $ 446,547 $ ( 7,358 ) $ 215,800 $ ( 1,117,140 ) $ 15,518 $ ( 446,140 )

For the six months ended

June 30, 2024

Balance at December 31, 2023 32,488 $ 492 $ 452,290 $ ( 7,803 ) $ 219,027 $ ( 1,123,098 ) $ 15,476 $ ( 443,616 )

4 unchanged sentences

Exercise of stock options 20 1 932 — — — — 933

Acquisition of Company common stock — — — — — — — —

Stock-based compensation expense — — 2,545 — — — — 2,545

3 unchanged sentences

Other 5 — ( 344 ) — — 348 — 4

Balance at March 31, 2024 32,604 $ 493 $ 444,793 $ ( 7,554 ) $ 218,608 $ ( 1,118,196 ) $ 15,433 $ ( 446,423 )

(1) Net income to the Company for the three months ended March 31, 2024 excludes $ 99 , respectively, allocable to the redeemable noncontrolling interests for our joint venture arrangements.

(2) At March 31, 2024, the accumulated other comprehensive loss of $ 7,554 was comprised of net unrealized foreign currency translation loss of $ 7,912 and net unrealized gain on the interest rate swap agreements of $ 358 .

Balance at June 30, 2024 32,622 $ 493 $ 446,547 $ ( 7,358 ) $ 215,800 $ ( 1,117,140 ) $ 15,518 $ ( 446,140 )

(1) Net income to the Company for the three and six months ended June 30, 2024 excludes $ 91 and $ 190 , respectively, allocable to the redeemable noncontrolling interests for our joint venture arrangements.

(2) At June 30, 2024, the accumulated other comprehensive loss of $ 7,358 was comprised of net unrealized foreign currency translation loss of $ 7,784 and net unrealized gain on the interest rate swap agreements of $ 426 .

See accompanying notes.

13 unchanged sentences

For the three months ended

March 25, 2023

June 25, 2023

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

Net income (1)

— — — — 17,768 — 32 17,800

Other comprehensive income (loss), net of tax — — — 1,477 — — — 1,477

Dividends on common stock — — 54 — ( 13,876 ) — — ( 13,822 )

Exercise of stock options 2 — 68 — — — — 68

Stock-based compensation expense — — 4,601 — — — — 4,601

Issuance of restricted stock 30 — ( 1,933 ) — — 1,933 — —

Tax effect of restricted stock awards ( 1 ) — ( 109 ) — — — — ( 109 )

Distributions to noncontrolling interests — — — — — — ( 300 ) ( 300 )

Other 7 — ( 403 ) — — 534 — 131

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

10 unchanged sentences

Other 10 — ( 449 ) — — 667 — 218

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

(1) Net income to the Company for the three months ended March 26, 2023 excludes $ 46 allocable to the redeemable noncontrolling interests for our joint venture arrangements.

(2) At March 26, 2023, the accumulated other comprehensive loss of $ 8,766 was comprised of net unrealized foreign currency translation loss of $ 7,586 and net unrealized loss on the interest rate swap agreements of $ 1,180 .

(3) Acquisition of Company common stock for the three months ended March 26, 2023, includes $ 2,804 of transaction costs directly attributable to share repurchases, including a 1% excise tax incurred under the Inflation Reduction Act of 2022.

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.

See accompanying notes.

2 unchanged sentences

Condensed Consolidated Statements of Cash Flows

Three Months Ended

(In thousands) March 31,

2024 March 26,

Six Months Ended

(In thousands) June 30,

2024 June 25,

Operating activities

5 unchanged sentences

Stock-based compensation expense 2,545 8,498

Impairment loss 7,554 —

Refranchising and impairment losses 14,713 —

Loss on disposal of property and equipment 965 —

15 unchanged sentences

Repayments of notes issued 1,794 3,224

Proceeds from dispositions, net of cash transferred 1,495 —

Other 2,178 182

18 unchanged sentences

Notes to Condensed Consolidated Financial Statements (Unaudited)

March 31, 2024

June 30, 2024

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 months ended March 31, 2024 are not necessarily indicative of the results that may be expected for the fiscal year ending December 29, 2024.

Operating results for the three and six months ended June 30, 2024 are not necessarily indicative of the results that may be expected for the fiscal year ending December 29, 2024.

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 Johns has joint venture arrangements in which there are noncontrolling interests held by third parties that includ ed 98 restaurants at March 31, 2024 and March 26, 2023, respectively.

Papa Johns has joint venture arrangements in which there are noncontrolling interests held by third parties that includ ed 98 restaurants at June 30, 2024 and June 25, 2023, respectively.

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

Net income attributable to these joint ventures for the three months ended March 31, 2024 and March 26, 2023 was as follows:

Three Months Ended

(In thousands) March 31,

2024 March 26,

Net income attributable to these joint ventures for the three and six months ended June 30, 2024 and June 25, 2023 was as follows:

Three Months Ended Six Months Ended

(In thousands) June 30,

2024 June 25,

2023 June 30,

2024 June 25,

Papa John’s International, Inc.

$ 739 $ 228 $ 1,331 $ 625

Redeemable noncontrolling interests 91 59 190 105

31 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 that were measured at fair value on a recurring basis as of March 31, 2024 and December 31, 2023 are as follows:

Our financial assets and liabilities that were measured at fair value on a recurring basis as of June 30, 2024 and December 31, 2023 are as follows:

Fair Value Measurements

1 unchanged sentence

Value Level 1 Level 2 Level 3

March 31, 2024

June 30, 2024

Financial assets:

3 unchanged sentences

$ 364 $ — $ 364 $ —

Financial liabilities:

Interest rate swaps (b)

$ 72 $ — $ 72 $ —

December 31, 2023

12 unchanged sentences

Interest rate swaps entered into prior to 2023 were based on London Interbank Offered Rates (“LIBOR”).

There were no transfers among levels within the fair value hierarchy during the three months ended March 31, 2024 or fiscal year 2023.

There were no transfers among levels within the fair value hierarchy during the three and six months ended June 30, 2024 or fiscal year 2023.

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 March 31, 2024 and December 31, 2023:

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

(In thousands) Carrying

11 unchanged sentences

Write-offs charged against the allowance ( 1,181 ) —

Balance at March 31, 2024 $ 7,940 $ 16,012

Balance at June 30, 2024 $ 8,245 $ 17,416

Assets Held for Sale

Assets held for sale are recorded at the lower of their carrying value or fair value less estimated cost to sell.

Certain assets previously classified within property and equipment, net, related to two Domestic Quality Control Centers (“QC Centers”) that were sold on August 2, 2024 for a purchase price of $ 46.7 million were classified within Assets held for sale in the Condensed Consolidated Balance Sheets at June 30, 2024 for $ 3.4 million, which represents their carrying value.

Certain assets related to 20 Company-owned restaurants in the United Kingdom (“UK”) that were sold on July 1, 2024 were classified within Assets held for sale in the Condensed Consolidated Balance Sheets at June 30, 2024 and were remeasured to $ 0.8 million, which represents their fair value less estimated cost to sell.

The remeasurement resulted in charges of $ 0.6 million during the three months ended June 30, 2024, which were recorded within General and administrative expenses in the Condensed Consolidated Statements of Operations.

See also “Note 9.

Restructuring” for more information on the UK Company-owned restaurants and “Note 12.

Subsequent Events” for more information on the QC Centers.

Impairment of Long-lived Assets

The Company evaluates its property and equipment and other long-lived assets for potential indicators of impairment at least annually, or as facts and circumstances arise that indicate the carrying value of the asset group may not be recoverable.

For Domestic Company-owned restaurants, the evaluation is performed at the operating market level while International Company-owned restaurants are evaluated at the store level as these represent the lowest level for which identifiable cash flows and are largely independent of the cash flows of other assets and liabilities.

If the carrying amount of the long-lived asset group exceeds the amount of estimated future undiscounted cash flows, the fair value of the asset group is estimated and an impairment loss is recorded if the carrying value exceeds the estimated fair value.

The assumptions used in the undiscounted cash flow calculation related to future growth are subjective and may be negatively impacted by future changes in operating performance or economic conditions.

The Company determined that indicators of impairment existed as of June 30, 2024 within one Domestic Company-owned restaurant operating market and recorded non-cash impairment charges of $ 3.3 million for property and equipment and $ 0.7 million for intangible assets for the three and six months ended June 30, 2024.

Separately, the Company recorded impairments related to International Company-owned restaurants in connection with its International Transformation Plan during the three and six months ended June 30, 2024, as further described in “Note 9.

Restructuring”.

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

Recent Accounting Pronouncements

3 unchanged sentences

Finally, the ASU requires all segment profit or loss and assets disclosures to be provided on both an annual and interim basis and requires entities to disclose the title and position of the individual identified as the CODM.

The ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024 and shall be applied retrospectively to all periods presented in the financial statements.

The ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024 and

shall be applied retrospectively to all periods presented in the financial statements.

The Company is currently evaluating the standard and determining the extent of additional interim and annual segment disclosures that will be required.

5 unchanged sentences

Lessor Operating Leases

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

At March 31, 2024, we leased and subleased 323 Papa Johns restaurants to franchisees in the UK.

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

At June 30, 2024, we leased and subleased approximately 350 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 $ 2.3 million and $ 2.9 million for the three months ended March 31, 2024 and March 26, 2023, respectively, within Other revenues in the Condensed Consolidated Statements of Operations.

The Company recognized total sublease income of $ 2.1 million and $ 4.4 million for the three and six months ended June 30, 2024, respectively, and $ 2.7 million and $ 5.6 million for the three and six months ended June 25, 2023, 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 March 31, 2024, the estimated maximum amount of undiscounted payments the Company could be required to make in the event of nonpayment by the primary lessees was $ 6.8 million.

As of June 30, 2024, the estimated maximum amount of undiscounted payments the Company could be required to make in the event of nonpayment by the primary lessees was $ 6.6 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:

Three Months Ended

(In thousands) March 31, 2024 March 26, 2023

Six Months Ended

(In thousands) June 30, 2024 June 25, 2023

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

2 unchanged sentences

Operating cash flows from operating leases (a)

19,710 18,738

Right-of-use assets obtained in exchange for new finance lease liabilities 2,988 14,129

5 unchanged sentences

PJMF, which is a consolidated VIE where the Company has been identified as the primary beneficiary, collects a percentage of revenues from Company-owned and franchised restaurants in the United States, for the purpose of designing and administering advertising and promotional programs for all participating Domestic restaurants.

Contributions and expenditures are reported on a gross basis in the Condensed Consolidated Statements of Operations within Other revenues and Other expenses.

Contributions and

expenditures are reported on a gross basis in the Condensed Consolidated Statements of Operations within Other revenues and Other expenses.

PJMF also has a wholly-owned subsidiary, Papa Card, Inc., which administers the Company’s gift card programs.

19 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 months ended March 31, 2024 and March 26, 2023, the Company recognized $ 8.1 million and $ 8.4 million in revenue, respectively, related to deferred revenue.

During the three and six months ended June 30, 2024, the Company recognized $ 8.2 million and $ 16.3 million in revenue, respectively, related to deferred revenue compared to $ 7.9 million and $ 16.3 million, respectively, for the three and six months ended June 25, 2023.

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

Contract Liabilities

March 31, 2024 December 31, 2023 Change

June 30, 2024 December 31, 2023 Change

Franchise fee liabilities $ 20,065 $ 20,564 $ ( 499 )

4 unchanged sentences

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

Contract assets were approximately $ 7.9 million at both March 31, 2024 and December 31, 2023.

For the three months ended March 31, 2024 and March 26, 2023, revenue was reduced approximately $ 1.2 million and $ 0.9 million respectively, for the amortization of contract assets over the applicable contract terms.

Contract assets were approximately $ 12.2 million and $ 7.9 million, respectively, at June 30, 2024 and December 31, 2023.

For the three and six months ended June 30, 2024 and June 25, 2023, revenue was reduced approximately $ 1.4 million and $ 2.6 million and $ 0.9 million and $ 1.8 million, respectively, for the amortization of contract assets over the applicable contract terms.

Contract assets are included in Prepaid expenses and other current assets and Other assets on the Condensed Consolidated Balance Sheets.

4 unchanged sentences

Franchise fees $ 2,990 $ 2,609 $ 2,426 $ 2,190 $ 1,957 $ 4,628 $ 16,800

At March 31, 2024, approximately $ 3.3 million of area development fees related to unopened stores and international unearned royalties are included in Deferred revenue.

At June 30, 2024, approximately $ 3.3 million of area development fees related to unopened stores and International unearned royalties are included in Deferred revenue.

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

3 unchanged sentences

Shares Authorized and Outstanding

The Company has authorized 100.0 million shares of common stock as of March 31, 2024 and December 31, 2023.

The Company’s outstanding shares of common stock, net of repurchased shares of common stock held as treasury stock, were 32.6 million shares at March 31, 2024, compared to 32.5 million shares at December 31, 2023.

The Company has authorized 100.0 million shares of common stock as of June 30, 2024 and December 31, 2023.

The Company’s outstanding shares of common stock, net of repurchased shares of common stock held as treasury stock, were 32.6 million shares at June 30, 2024, compared to 32.5 million shares at December 31, 2023.

Share Repurchase Program

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

The following table summarizes our repurchase activity under our share repurchase programs for the three months ended March 31, 2024 and March 26, 2023:

(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

The following table summarizes our repurchase activity under our share repurchase programs for the three and six months ended June 30, 2024 and June 25, 2023:

(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

March 31, 2024 — $ — $ — $ 90,160

March 26, 2023 2,523 $ 83.10 $ 209,640 $ 90,160

(a) Aggregate cost of shares purchased for the three months ended March 26, 2023 excluded $ 2.8 million of transaction costs directly attributable to share repurchases, including a 1% excise tax incurred under the Inflation Reduction Act of 2022.

These costs were classified as non-cash financing activities during the three months ended March 26, 2023.

The shares repurchased during the three months ended March 26, 2023 included 2,176,928 shares repurchased on March 1, 2023 from certain funds affiliated with, or managed by, Starboard Value LP (collectively, “Starboard”), at a price of $ 82.52 per share, for aggregate consideration of $ 179.6 million.

The transaction was negotiated by an independent committee of the Board of Directors formed for the purpose of evaluating a possible transaction involving Starboard, and was approved by the full Board of Directors upon such independent committee’s recommendation.

Starboard’s Chief Executive Officer is Jeffrey Smith, who previously served as the Company’s Chairman of the Board until his resignation on March 1, 2023.

June 30, 2024 — $ — $ — $ 90,160

June 25, 2023 — $ — $ — $ 90,160

(In thousands, except average price per share) Total Number of Shares Purchased (a)

Average Price Paid per Share Aggregate Cost of Shares Purchased (b)

Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs

Six Months Ended

June 30, 2024 — $ — $ — $ 90,160

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

(a) 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.

Refer to Note 18 of the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2023 for further details.

(b) Aggregate cost of shares purchased for the six months ended June 25, 2023 excluded $ 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 timing and volume of share repurchases under the Company’s share repurchase programs may be executed at the discretion of management on an opportunistic basis, subject to market and business conditions, regulatory requirements and other factors, or pursuant to trading plans or other arrangements.

Repurchases under the programs may be made through open market, block, and privately negotiated transactions, including Rule 10b5-1 plans, at times and in such amounts as management deems appropriate.

Repurchases under the programs may be made through open market, block, and privately negotiated transactions, including Rule 10b5-1 plans, at times and in such amounts as

management deems appropriate.

Repurchases under the Company’s share repurchase programs may be commenced or suspended from time to time at the Company’s discretion without prior notice.

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

The Company paid aggregate cash dividends of approx imately $ 15.1 million ($ 0.46 per share) f or the three months ended March 31, 2024.

On May 2, 2024, our Board of Directors declared a second quarter dividend of $ 0.46 per common share (approximately $ 15.2 million in the aggregate), which will be paid on May 31, 2024 to stockholders of record as of the close of business on May 20, 2024.

The Company paid ag gregate cash dividends of approximately $ 30.2 million ($ 0.92 per share) for the six months ended June 30, 2024.

On July 31, 2024, our Board of Directors declared a third quarter dividend of $ 0.46 per common share (approximately $ 15.2 million in the aggregate), which will be paid on August 30, 2024 to stockholders of record as of the close of business on August 19, 2024.

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

4 unchanged sentences

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

Three Months Ended

2024 March 26,

Three Months Ended Six Months Ended

2024 June 25,

2023 June 30,

2024 June 25,

Net income available to common stockholders $ 12,243 $ 17,768 $ 26,879 $ 40,144

1 unchanged sentence

Dilutive effect of outstanding equity awards (a)

123 87 183 128

Diluted weighted average number of shares 32,853 32,650 32,871 33,487

2 unchanged sentences

___________________________________

(a) Excludes 103,000 and 22,000 shares underlying equity awards for the three months ended March 31, 2024 and March 26, 2023, respectively, as the effect of including such awards would have been anti-dilutive.

(a) Excludes 377,000 and 207,000 shares underlying equity awards for the three and six months ended June 30, 2024, respectively, and 103,000 and 49,000 shares underlying awards for the three and six months ended June 25, 2023, respectively, as the effect of including such awards would have been anti-dilutive.

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

8 unchanged sentences

___________________________________

(a) Revolving facilities as of March 31, 2024 includes $ 1.8 million outstanding under the PJMF Revolving Facility as defined and discussed below.

(a) Revolving facilities as of June 30, 2024 includes $ 2.4 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.

Interest on the Notes is payable semi-annually in cash in arrears on March 15 and September 15 of each year at a fixed interest rate of 3.875 % per annum.

Refer to Note 12 of the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2023 for further description of the provisions and covenant requirements under the Senior Notes.

Refer to Note 12 of the consolidated financial statements in our

Annual Report on Form 10-K for the year ended December 31, 2023 for further description of the provisions and covenant requirements under the Senior Notes.

Credit Agreement

1 unchanged sentence

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

The remaining availability under the PJI Revolving Facility was approximately $ 232.5 million as of March 31, 2024.

The remaining availability under the PJI Revolving Facility was approximately $ 235.3 million as of June 30, 2024.

5 unchanged sentences

The borrowings under the PJMF Revolving Facility accrue interest at a variable rate of a one month SOFR plus 1.975 %.

The applicable interest rate on the PJMF Revolving facility was 7.3 % for the three months ended March 31, 2024.

As of March 31, 2024, t he principal amount of debt outstanding under the PJMF Revolving Facility was approximately $ 1.8 million and is classified as Current portion of long-term debt in the Condensed Consolidated Balance Sheets .

The applicable interest rate on the PJMF Revolving facility was 7.3 % for the three months ended June 30, 2024.

As of June 30, 2024, t he principal amount of debt outstanding under the PJMF Revolving Facility was approximately $ 2.4 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 Company’s Credit Agreement.

2 unchanged sentences

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.

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

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 March 31, 2024, we have the following interest rate swap agreements:

As of June 30, 2024, we have the following interest rate swap agreements:

Effective Dates Floating Rate Debt Fixed Rates

19 unchanged sentences

Interest rate swaps for the three months ended:

March 31, 2024 $ 672 Interest expense $ 200 $ ( 11,063 )

March 26, 2023 $ 259 Interest expense $ ( 207 ) $ ( 9,021 )

Net interest paid, including payments made or received under the swaps, was $ 14.5 million and $ 10.9 million for the three months ended March 31, 2024 and March 26, 2023, respectively.

June 30, 2024 $ 68 Interest expense $ 197 $ ( 10,896 )

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

Interest rate swaps for the six months ended:

June 30, 2024 $ 740 Interest expense $ 397 $ ( 21,959 )

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

Net interest paid, including payments made or received under the swaps, was $ 5.8 million and $ 20.4 million for the three and six months ended June 30, 2024, respectively, and $ 5.7 million and $ 16.6 million for the three and six months ended June 25, 2023, respectively.

Restructuring

2 unchanged sentences

During the fourth quarter of the year ended December 31, 2023, the Company commenced approved initiatives under the International Transformation Plan related to establishing new regional hubs across APAC (Asia Pacific), EMEA (Europe, Middle East and Africa), and Latin America that will be led by experienced general managers and their teams.

During the quarter ended March 31, 2024, the Company commenced the next phase of the International Transformation Plan as approved by the Board of Directors, and began the process to close 43 underperforming Company-owned restaurants in the UK.

The purpose of this plan is to optimize the Company's restaurant portfolio in the UK and improve overall profitability by closing unprofitable locations and allowing the Company to focus on improving profitability across its remaining portfolio of Company-owned and franchised restaurants in the UK.

The Company is on track to complete these store closures in the second quarter of 2024.

We are continuing to evaluate our restaurant portfolio in the UK, which may result in additional strategic restaurant closures or divestitures.

During the first quarter of 2024, the Company commenced the next phase of the International Transformation Plan as approved by the Board, which involves strategic restaurant closures and divestitures in the UK.

The purpose of this plan is to optimize the Company’s restaurant portfolio in the UK and improve overall profitability by closing unprofitable locations and enhancing profitability across the remaining portfolio of Company-owned restaurants.

The execution of this phase of the International Transformation Plan resulted in the closure of 43 underperforming UK Company-owned restaurants during the three months ended June 30, 2024.

During the second quarter of 2024, the Company completed the refranchising of 40 formerly Company-owned restaurants to existing franchisees in June 2024, which resulted in a loss on sale of $ 1.2 million during the three months ended June 30, 2024.

Additionally, the Company refranchised an additional 20 formerly Company-owned restaurants effective July 1, 2024.

The assets of these 20 stores were classified as assets held for sale on the Condensed Consolidated Balance Sheets as of June 30, 2024, and the remeasurement of these assets resulted in charges of $ 0.6 million during the three months ended June 30, 2024.

The loss on sale and remeasurement charges were recorded within General and administrative expenses in the Condensed Consolidated Statements of Operations.

Further, as a result of ongoing evaluation of our UK market, the Company closed an additional 19 franchised locations during the first six months of 2024.

We are finalizing the evaluation of our restaurant portfolio in the UK, which may result in limited strategic restaurant closures with the Company’s efforts turning towards growth opportunities within this market as we complete optimization of the portfolio.

The Company evaluates its property and equipment and other long-lived assets (primarily right-of-use operating lease assets) for potential indicators of impairment at least annually, or as facts and circumstances indicate that the carrying value of the asset group may not be recoverable.

The asset group is at the store level for our UK Company-owned restaurants and primarily includes lease right-of-use assets and fixed assets.

Due to indicators of potential impairment associated with the 43 store closures, the Company performed a recoverability test and determined that the carrying amount of the asset groups were not recoverable.

For the three months ended March 31, 2024, we recognized impairment charges for the amount by which the carrying value exceeded the estimated fair value of the asset groups.

The asset group is at the store level for our UK-based restaurants and primarily includes lease right-of-use assets for franchised stores and lease right-of-use assets and leasehold improvements for Company-owned stores.

Due to indicators of potential impairment associated with the UK Company-owned and franchised store closures mentioned above, the Company performed an impairment analysis and determined that the carrying amount

of the assets related to the closing UK stores were not recoverable.

For the three and six months ended June 30, 2024, we recognized impairment charges for the amount by which the carrying value exceeded the estimated fair value of the asset groups.

Fair values were determined based on an income approach, specifically a discounted cash flow ("DCF") model, primarily using estimated sublease income considering market rental rates.

Management judgment is involved in determining the estimated fair value and includes uncertainties that under different assumptions and circumstances could drive material changes in the fair value determination.

In connection with these actions, the Company incurred restructuring related costs of $ 9.5 million for the three months ended March 31, 2024 primarily related to lease right-of-use asset and fixed asset impairment charges, employee severance benefits accounted for under ASC 712, “Compensation – Nonretirement Postemployment Benefits,” and professional advisory services.

In connection with the International Transformation Plan, the Company incurred restructuring related costs of $ 6.1 million and $ 15.7 million for the three and six months ended June 30, 2024, respectively, primarily related to lease right-of-use asset and leasehold improvement impairment charges, losses associated with the refranchising of corporate stores, losses on notes receivable with a UK franchisee in relation to franchised store closures, lease termination impacts related to closed stores, employee termination costs , and professional advisory services and other related costs.

The Company has incurred total restructuring related costs of $ 17.9 million since commencement of the International Transformation Plan.

These costs were included in General and administrative expenses in the Condensed Consolidated Statements of Operations.

Total estimated pre-tax costs associated with the International Transformation Plan are approximately $ 25 million to $ 35 million (inclusive of the $ 11.7 million spent through the first quarter of 2024), all of which will be recorded within our International segment, and we expect to incur the remainder of these costs through 2024 and 2025.

The following table summarizes restructuring related costs recorded for the three months ended March 31, 2024 (in thousands):

Three Months Ended March 31, 2024

Total estimated pre-tax costs associated with the International Transformation Plan are approximately $ 25 million to $ 35 million (inclusive of the $ 17.9 million incurred through the second quarter of 2024), all of which will be recorded within our International segment, and we expect to incur the remainder of these costs through 2024 and 2025.

The following table summarizes restructuring related costs recorded for the three and six months ended June 30, 2024 (in thousands):

Three Months Ended Six Months Ended

2024 June 30,

Long-lived asset impairment charges $ 1,422 $ 8,976

Employee severance 643

Loss on franchisee notes receivable 1,564 1,564

Loss on refranchising Company-owned stores 1,737 1,737

Professional services and other related costs 1,355 2,701

Total international transformation costs 9,543

Stock-based compensation forfeitures on unvested awards ( 20 )

Total international transformation costs, net of stock-based award forfeitures $ 9,523

Employee termination costs, net (a)

Operating lease terminations 306 306

Total international transformation costs, net $ 6,129 $ 15,652

(a) During the three months ended June 30, 2024, the Company had a partial reversal of severance originally estimated in connection with the closure of Company-owned restaurants.

Includes noncash reversal of $ 0.1 million related to the forfeiture of unvested stock-based compensation awards.

The following table presents changes in the balance of accrued expenses relating to approved initiatives, which are recorded in accrued expenses and other current liabilities in the Condensed Consolidated Balance Sheets (in thousands):

Employee severance Professional services and other related costs Recruiting Total

Employee severance Professional services and other related costs Other Total

Balance as of December 31, 2023 $ 1,227 $ 527 $ 29 $ 1,783

1 unchanged sentence

Payments ( 1,286 ) ( 2,605 ) ( 29 ) ( 3,920 )

Balance as of March 31, 2024 $ 1,222 $ 1,330 $ — $ 2,552

Balance as of June 30, 2024 $ 385 $ 623 $ — $ 1,008

Litigation, Commitments and Contingencies

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In accordance with ASC 450, “ Contingencies, ” the Company has made accruals with respect to these matters, where appropriate, which are reflected in the Company’s condensed consolidated financial statements.

We review these provisions at least quarterly and adjust these provisions to reflect the impact of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular case.

review these provisions at least quarterly and adjust these provisions to reflect the impact of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular case.

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 current liabilities in the Condensed Consolidated Balance Sheets as of March 31, 2024.

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

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The International segment consists of the operations of all Company-owned restaurants located in the UK, as well as distribution sales to franchised Papa Johns restaurants located in the UK and our franchise sales and support activities, which derive revenues from sales of franchise and development rights and the collection of royalties from our International franchisees.

All other business units that do not meet the quantitative thresholds for determining reportable segments, which are not operating segments, we refer to as “all other,” which consists of operations that derive revenues from the sale, principally to Company-owned and franchised restaurants, of printing and promotional items, franchise contributions to marketing funds and information systems and related services used in restaurant operations, including our point-of-sale system, online and other technology-based ordering platforms.

All other business units that do not meet the quantitative thresholds for determining reportable segments, which are not operating segments, we refer to as “all other,” which consists of operations that derive revenues from the sale, principally to Company-owned and franchised restaurants, of information systems and related services used in restaurant operations, including our point-of-sale system, online and other technology-based ordering platforms, as well as franchise contributions to marketing funds.

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

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The following tables present our segment information.

Three Months Ended

(In thousands) March 31,

2024 March 26,

Three Months Ended Six Months Ended

(In thousands) June 30,

2024 June 25,

2023 June 30,

2024 June 25,

Domestic Company-owned restaurants $ 173,207 $ 175,780 $ 349,431 $ 355,646

7 unchanged sentences

North America commissaries 50,303 51,586 99,570 103,403

International — 869 — 869

All others 13,778 16,348 26,950 33,183

1 unchanged sentence

Operating income:

Domestic Company-owned restaurants $ 10,359 $ 6,650

Domestic Company-owned restaurants (a)

$ 4,777 $ 6,641 $ 15,136 $ 13,291

North America franchising 32,409 32,111 66,120 65,511

North America commissaries 11,403 10,397 23,738 21,127

International (a)

International (b)

( 2,665 ) 3,763 ( 8,654 ) 10,995

All others 2,170 1,343 5,368 4,500

Unallocated corporate expenses (b)

Unallocated corporate expenses (c)

( 19,598 ) ( 19,701 ) ( 39,240 ) ( 43,067 )

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___________________________________

(a) The three months ended March 31, 2024 includes $ 9.5 million of costs related to the International Transformation Plan.

(a) The three and six months ended June 30, 2024 includes a $ 4.0 million non-cash impairment charge related to fixed and intangible assets related to certain Domestic restaurants.

(b) The three and six months ended June 30, 2024 includes $ 6.1 million and $ 15.7 million, respectively, of costs related to the International Transformation Plan.

Restructuring” for additional information.

(b) The three months ended March 26, 2023 includes $ 1.4 million of severance and related costs associated with the transition of certain executives.

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.

(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.

Disaggregation of Revenue

2 unchanged sentences

Reportable Segments

Three Months Ended March 31, 2024

Three Months Ended June 30, 2024

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 March 26, 2023

Three Months Ended June 25, 2023

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

8 unchanged sentences

Total revenues $ 175,780 $ 34,711 $ 206,980 $ 34,608 $ 62,451 $ 514,530

Reportable Segments

Six Months Ended June 30, 2024

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

Company-owned restaurant sales $ 349,431 $ — $ — $ 26,460 $ — $ 375,891

Franchise royalties and fees — 72,196 — 23,599 — 95,795

Commissary sales — — 501,054 30,350 — 531,404

Other revenues — — — 12,811 134,519 147,330

Eliminations — ( 2,090 ) ( 99,570 ) — ( 26,950 ) ( 128,610 )

Total segment revenues 349,431 70,106 401,484 93,220 107,569 1,021,810

International other revenues (a)

— — — ( 12,811 ) 12,811 —

(a) Other revenues as reported in the Condensed Consolidated Statements of Operations include $ 6.0 million and $ 7.2 million of revenues for the three months ended March 31, 2024 and March 26, 2023, respectively, that are part of the International reporting segment.

Total revenues $ 349,431 $ 70,106 $ 401,484 $ 80,409 $ 120,380 $ 1,021,810

Reportable Segments

Six Months Ended June 25, 2023

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

Company-owned restaurant sales $ 355,646 $ — $ — $ 3,018 $ — $ 358,664

Franchise royalties and fees — 72,860 — 24,687 — 97,547

Commissary sales — — 522,949 39,235 — 562,184

Other revenues — — — 13,987 148,729 162,716

Eliminations — ( 2,077 ) ( 103,403 ) ( 869 ) ( 33,183 ) ( 139,532 )

Total segment revenues 355,646 70,783 419,546 80,058 115,546 1,041,579

International other revenues (a)

— — — ( 13,987 ) 13,987 —

Total revenues $ 355,646 $ 70,783 $ 419,546 $ 66,071 $ 129,533 $ 1,041,579

___________________________________

(a) Other revenues as reported in the Condensed Consolidated Statements of Operations include $ 6.8 million and $ 12.8 million of revenues for the three and six months ended June 30, 2024, respectively, and $ 6.7 million and $ 14.0 million of revenues for the three and six months ended June 25, 2023, respectively, that are part of the International reporting segment.

These amounts include marketing fund contributions and sublease rental income from international franchisees in the United Kingdom that provide no significant contribution to income before income taxes but must be reported on a gross basis under accounting requirements.

The related expenses for these Other revenues are reported in Other expenses in the Condensed Consolidated Statements of Operations.

UK Franchisee Acquisitions

As part of our investment to reposition our UK business, during 2023 we acquired a portfolio of Company-owned restaurants in the UK market that were previously franchised.

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 third quarter of 2023 for total consideration of approximately $ 1.5 million.

Collectively, we refer to these acquisitions as the “UK franchisee acquisitions.” The Company incurred substantially all acquisition and transition costs related to the UK franchisee acquisitions during the year ended December 31, 2023.

r esults 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.

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

Total consideration was approximately $ 15.2 million, of which $ 13.7 million was pre-existing accounts receivable and notes receivable.

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

Domestic Company-owned restaurants International Total

Balance at December 31, 2023 $ 56,609 $ 19,597 $ 76,206

Acquisition accounting adjustments (a)

Foreign currency adjustments — ( 326 ) ( 326 )

Balance at March 31, 2024 $ 56,609 $ 19,366 $ 75,975

___________________________________

(a) We recorded acquisition accounting adjustments during the three months ended March 31, 2024 to increase property and equipment to fair value as a result of the finalization of our valuation of acquired property and equipment.

Subsequent Events

Sale-Leaseback of Texas and Florida QC Centers

On August 2, 2024, the Company finalized the sale and subsequent leaseback of two Domestic QC Centers for a purchase price of $ 46.7 million.

Under the terms of the leases, which commenced on August 2, 2024, we will lease the QC Centers for 17 years with two 5 year renewal options.

The Company will pay annual rents under the operating leases of the Texas and Florida QC Centers of $ 2.0 million and $ 1.0 million, respectively, for the first year with annual rents increasing by 2.75 % thereafter.

We have reclassified all long-lived assets associated with the transaction as held for sale as of the balance sheet date, in accordance with ASC 360.

We expect to record a pre-tax gain on sale of approximately $ 40.0 million to $ 42.0 million during the third quarter of 2024, as the sale was not executed as of June 30, 2024.

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