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Item 8. Financial Statements and Supplementary Data

2025-02-27 compared with 2024-02-29 · 377 added, 353 removed, 1028 unchanged (42% of the section changed)

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We have audited the accompanying consolidated balance sheets of Papa John’s International, Inc.

and subsidiaries (the Company) as of December 31, 2023 and December 25, 2022, the related consolidated statements of operations, comprehensive income, stockholders' deficit and cash flows for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and December 25, 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with U.S.

and Subsidiaries (the Company) as of December 29, 2024 and December 31, 2023, the related consolidated statements of operations, comprehensive income, stockholders' deficit and cash flows for each of the three fiscal years in the period ended December 29, 2024, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 29, 2024 and December 31, 2023, and the results of its operations and its cash flows for each of the three fiscal years in the period ended December 29, 2024, in conformity with U.S.

generally accepted accounting principles.

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(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Measurement and valuation of insurance reserves

Description of the Matter As described in Note 2 to the consolidated financial statements, the Company is self-insured for certain obligations up to stated retention levels under its retention programs related to workers’ compensation, automobile, property and general liability programs.

As of December 31, 2023, the Company has $56.8 million accrued for self-insurance reserves (“Insurance Reserves”).

Judgments and estimates are used by the Company in determining the potential value associated with incurred but not reported claims.

Auditing the measurement and valuation of the Insurance Reserves is highly judgmental and complex due to the significant uncertainty in estimating the potential value of reported claims, estimating the number and potential value of incurred but not reported claims and the use of actuarial valuation methods.

The reserve estimate is sensitive to actuarial assumptions (e.g., future emergence of losses, incurred but not reported claims) used to estimate the ultimate liability for reported claims and claims that have been incurred but have not been reported.

How We Addressed the Matter in Our Audit We tested controls related to the measurement and valuation of the Insurance Reserves.

For example, we tested controls over management’s review of the assumptions and methods used to establish the estimate, the underlying data, significant actuarial assumptions and the related reconciliations.

To test the measurement and valuation of the Insurance Reserves, our audit procedures included, among others, performing transactional tests of details over the completeness and accuracy of claims data and vouching payments made to third parties.

Furthermore, we involved our actuarial specialists to assist in the evaluation of the key assumptions and methodologies used by management to determine the Insurance Reserves.

Insurance Reserves

Description of the Matter As described in Note 2 to the consolidated financial statements, the Company maintains insurance programs for workers’ compensation, owned and non-owned automobiles, general liability and property insurance coverage.

As of December 29, 2024, the Company’s insurance reserve was $65.7 million.

The insurance reserves are accrued based upon undiscounted estimates of the liability for claims incurred and for events that have occurred but have not been reported using certain third-party actuarial projections and the Company’s claim loss experience.

Auditing the insurance reserve was complex and judgmental due to the actuarial valuation methods and assumptions related to the loss development factors and loss trends.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls that address the valuation of the insurance reserve.

This included management’s review of the actuarial valuation methods and the assumptions related to the loss development factors and loss trends.

To test the valuation of the Company’s insurance reserve, we performed audit procedures that included, among others, assessing the appropriateness of the actuarial valuation methods and testing the significant assumptions discussed above.

We also developed an independent range of reserves for comparison to the Company’s recorded amounts, using standard actuarial methods.

We involved our actuarial specialists to assist with our audit procedures.

/s/ Ernst & Young LLP

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Notes receivable, less current portion (less allowance for credit losses of $ 15,238 in 2024 and $ 16,092 in 2023)

12,346 21,248

Goodwill 75,460 76,206

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2023 December 25,

Domestic Company-owned restaurant sales $ 726,362 $ 708,389 $ 778,323

North America franchise royalties and fees 144,550 137,399 129,310

North America commissary revenues 852,361 869,634 761,305

International revenues 157,187 129,903 150,771

Company-owned restaurant sales $ 724,666 $ 760,825 $ 708,389

Franchise royalties and fees 187,032 194,987 186,821

Commissary revenues 899,664 924,648 950,115

Other revenues 83,682 98,037 101,646

Advertising funds revenue 164,343 157,216 155,132

Total revenues 2,059,387 2,135,713 2,102,103

Costs and expenses:

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

Domestic Company-owned restaurant expenses 587,889 585,307 621,871

North America commissary expenses 787,554 811,446 703,622

International expenses 103,198 76,001 87,286

Other expenses 235,483 238,810 226,320

Cost of sales 1,478,426 1,558,438 1,557,736

General and administrative expenses 190,515 208,083 215,303

Depreciation and amortization 69,407 64,090 52,032

Advertising funds expense 164,335 157,960 155,937

Total costs and expenses 1,902,683 1,988,571 1,981,008

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Income tax expense 29,929 20,874 14,420

Net income before attribution to noncontrolling interests 82,799 69,349 124,955

Net income 84,197 82,799 69,349

Net income attributable to noncontrolling interests ( 711 ) ( 701 ) ( 1,577 )

Net income attributable to the Company $ 83,486 $ 82,098 $ 67,772

Calculation of net income for earnings per share:

Net income attributable to the Company $ 82,098 $ 67,772 $ 120,016

Dividends on redemption of Series B Convertible Preferred Stock — — ( 109,852 )

Dividends paid to participating securities — ( 306 ) ( 6,091 )

Net income attributable to participating securities — ( 104 ) —

Net income attributable to common shareholders $ 83,320 $ 82,098 $ 67,362

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Diluted weighted average common shares outstanding 32,819 33,159 35,717

Dividends declared per common share $ 1.76 $ 1.54 $ 1.15

See accompanying notes.

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2023 December 25,

Net income before attribution to noncontrolling interests $ 82,799 $ 69,349 $ 124,955

Net income $ 84,197 $ 82,799 $ 69,349

Other comprehensive income (loss), before tax:

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(1) Amounts reclassified out of accumulated other comprehensive loss into interest expense included $ 173 , ($ 2,384 ) and ($ 5,965 ) for the years ended December 31, 2023, December 25, 2022 and December 26, 2021, respectively.

(1) Amounts reclassified out of accumulated other comprehensive loss into net interest income (expense) include $ 632 , $ 173 and ($ 2,384 ) for the years ended December 29, 2024, December 31, 2023 and December 25, 2022, respectively.

(2) The income tax effects of amounts reclassified out of accumulated other comprehensive loss were $( 143 ), $( 39 ) and $ 536 for the years ended December 29, 2024, December 31, 2023 and December 25, 2022, respectively.

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Other comprehensive income, net of tax — — — ( 653 ) — — — ( 653 )

Dividends on common stock — — 121 — ( 58,927 ) — — ( 58,806 )

Exercise of stock options 43 1 2,251 — — — — 2,252

Acquisition of Company common stock (3)

Dividends on common stock ($ 1.84 per share)

— — 124 — ( 60,796 ) — — ( 60,672 )

Exercise of stock options 23 1 1,054 — — — — 1,055

Stock-based compensation expense — — 9,590 — — — — 9,590

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(1) Net income to the Company for the year ended December 31, 2023 excludes $ 198 allocable to the redeemable noncontrolling interests for our joint venture arrangements.

(1) Net income for the year ended December 29, 2024 excludes $ 274 allocable to the redeemable noncontrolling interests for our joint venture arrangements.

(2) At December 29, 2024, the accumulated other comprehensive loss of $ 8,456 was comprised of net unrealized foreign currency translation loss of $ 8,332 and a net unrealized loss on the interest rate swap agreements of $ 124 .

(3) Acquisition of Company common stock for the year ended December 31, 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.

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Other comprehensive income, net of tax — — — 2,332 — — — 2,332

Cash dividends on common stock — — 210 — ( 54,977 ) — — ( 54,767 )

Dividends on common stock ($ 1.76 per share)

— — 121 — ( 58,927 ) — — ( 58,806 )

Exercise of stock options 43 1 2,251 — — — — 2,252

Acquisition of Company common stock (3)

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

Stock-based compensation expense — — 17,924 — — — — 17,924

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___________________________________

(1) Net income to the Company for the year ended December 25, 2022 excludes $ 574 allocable to the redeemable noncontrolling interests for our joint venture arrangements.

(1) Net income for the year ended December 31, 2023 excludes $ 198 allocable to the redeemable noncontrolling interests for our joint venture arrangements.

(2) At December 31, 2023, the accumulated other comprehensive loss of $ 7,803 was comprised of net unrealized foreign currency translation loss of $ 7,490 and a net unrealized loss on the interest rate swap agreements of $ 314 .

See accompanying notes.

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Other comprehensive loss, net of tax — — — ( 164 ) — — — ( 164 )

Repurchase and conversion of Series B Convertible Preferred Stock 3,489 35 174,631 — ( 110,498 ) — — 64,168

Cash dividends on common stock — — 158 — ( 40,514 ) — — ( 40,356 )

Cash dividends on preferred stock — — — — ( 4,121 ) — — ( 4,121 )

Cash dividends on common stock ($ 1.54 per share)

— — 210 — ( 54,977 ) — — ( 54,767 )

Exercise of stock options 82 1 4,035 — — — — 4,036

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(1) Net income to the Company for the year ended December 26, 2021 excludes $ 2,609 allocable to the redeemable noncontrolling interests for our joint venture arrangements.

(1) Net income for the year ended December 25, 2022 excludes $ 574 allocable to the redeemable noncontrolling interests for our joint venture arrangements.

(2) At December 25, 2022, the accumulated other comprehensive loss of $ 10,135 was comprised of net unrealized foreign currency translation loss of $ 8,696 and a net unrealized loss on the interest rate swap agreements of $ 1,439 .

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Operating activities

Net income before attribution to noncontrolling interests $ 82,799 $ 69,349 $ 124,955

Net income $ 84,197 $ 82,799 $ 69,349

Adjustments to reconcile net income to net cash provided by operating activities:

Provision (benefit) for allowance for credit losses on accounts and notes receivable 5,393 20,539 ( 852 )

Provision for allowance for credit losses on accounts and notes receivable 2,737 5,393 20,539

Depreciation and amortization 69,407 64,090 52,032

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Stock-based compensation expense 9,590 17,924 18,388

Gain on disposal of property and equipment ( 41,953 ) — —

Other 1,711 146 1,056

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Deferred revenue ( 6,245 ) ( 3,704 ) ( 257 )

Advertising fund assets and liabilities ( 2,635 ) ( 13,175 ) ( 10,353 )

Net cash provided by operating activities 106,632 193,055 117,808

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Acquisitions, net of cash acquired ( 125 ) ( 5,613 ) ( 1,219 )

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

Proceeds from the sale of property and equipment 3,457 — —

Proceeds from dispositions and refranchising, net of cash transferred 49,016 3,457 13,588

Other 2,247 3,336 ( 520 )

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Financing activities

Proceeds from issuance of senior notes — — 400,000

Net proceeds of revolving credit facilities 159,000 115,000 80,000

Debt issuance costs — — ( 9,179 )

Net (repayments) proceeds from revolving credit facilities ( 17,268 ) 159,000 115,000

Proceeds from exercise of stock options 1,055 2,252 4,036

Repurchase of Series B Convertible Preferred Stock — — ( 188,647 )

Acquisition of Company common stock ( 210,348 ) ( 125,000 ) ( 72,499 )

Acquisition of Company common stock (including excise tax payment) ( 2,080 ) ( 210,348 ) ( 125,000 )

Dividends paid to common stockholders ( 60,559 ) ( 58,451 ) ( 54,767 )

Dividends paid to preferred stockholders — — ( 6,394 )

Tax payments for equity award issuances ( 3,619 ) ( 6,416 ) ( 9,546 )

Distributions to noncontrolling interests ( 825 ) ( 1,320 ) ( 1,211 )

Repayments of term loan — — ( 340,000 )

Principal payments on finance leases ( 8,529 ) ( 8,821 ) ( 5,416 )

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(referred to as the “Company,” “Papa John’s,” “Papa Johns” or in the first person notations of “we,” “us” and “our”), operates and franchises pizza delivery and carryout restaurants under the trademark “Papa Johns,” in 51 countries and territories as of December 29, 2024.

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, printing and promotional items and information systems equipment, and software and related services.

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, information systems equipment, and software and related services.

We generate revenues from the operation of our Quality Control Centers (“QC Centers”) which supply pizza sauce, dough, food products, paper products, smallwares and cleaning supplies to restaurants.

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All intercompany balances and transactions have been eliminated.

The Company has implemented several financial statement changes in this Annual Report on Form 10-K, concurrent with the adoption of Accounting Standard Update (“ASU”) 2023-07, “ Improvements to Reportable Segment Disclosure s.” These changes evolve and modernize our financial statements and footnotes to increase transparency and better reflect management’s key performance metrics.

The Consolidated Statements of Operations have been reconfigured to classify revenues and expenses based on the nature of the underlying activities without regard to operating segment.

This reconfiguration and the resulting reclassifications did not change previously reported Total revenues, Total costs and expenses, Operating income or Net income for any period.

The Consolidated Statements of Cash Flows include reclassifications to a new line item that include the net operating cash flows of the consolidated advertising funds.

The reclassifications did not change Net cash provided by operating activities, Net cash used in investing activities or Net cash used in financing activities for any period.

Presentation changes to the Consolidated Statements of Operations and the Consolidated Statements of Cash Flows have been applied retrospectively, and as such, the results from the years ended December 31, 2023 and December 25, 2022 have been reclassified for consistency with the current year presentation.

Additionally, during the year ended December 29, 2024, the Company updated its internal cost allocation methodology to better reflect current levels of time and effort spent managing our different segments.

These updates resulted in a higher allocation of previously unallocated corporate expenses to primarily the North America franchising and International segments.

This update in methodology does not impact total reported expenses, and has been implemented prospectively beginning with the year ended December 29, 2024.

The comparative information has not been restated.

Variable Interest Entity

Papa John’s Domestic restaurants, both Company-owned and franchised, participate in Papa John’s Marketing Fund, Inc.

Papa Johns Domestic restaurants, both Company-owned and franchised, participate in Papa John’s Marketing Fund, Inc.

(“PJMF”), a nonstock corporation designed to operate at break-even as it spends all annual contributions received from the system.

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The preparation of Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the Consolidated Financial Statements and accompanying notes.

Significant items that are subject to such estimates and assumptions include the allowance for credit losses on accounts and notes receivable, intangible assets, contract assets and contract liabilities including the customer loyalty program obligation, property and equipment, right-of-use assets and lease liabilities, gift card breakage, insurance reserves and tax reserves.

Significant items that are subject to such estimates and assumptions include the allowance for credit losses on accounts and notes receivable, property and equipment, net and impairment of long-lived assets, insurance reserves and tax reserves.

Although management bases its estimates on historical experience and assumptions that are believed to be reasonable under the circumstances, actual results could significantly differ from these estimates.

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The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a customer.

Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by the

Company from a customer, are excluded from revenue.

Delivery costs, including freight associated with our Domestic commissary and other sales, are accounted for as fulfillment costs and are included in operating costs.

Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by the Company from a customer, are excluded from revenue.

Delivery costs, including freight associated with our Domestic commissaries and other sales, are accounted for as fulfillment costs and are included in operating costs.

The following describes principal activities, separated by major product or service, from which the Company generates its revenues:

Domestic Company-owned Restaurant Sales

The Domestic Company-owned restaurants principally generates revenues from retail sales of pizza, Papadias, and side items, including breadsticks, Papa Bites, cheesesticks, boneless chicken wings and bone-in chicken wings, dessert items and canned or bottled beverages.

Company-owned Restaurant Sales

Our Company-owned restaurants principally generate revenues from retail sales of pizza and other food and beverage products.

Revenues from Company-owned restaurants are recognized when the products are delivered to or carried out by customers.

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Franchise royalties, which are based on a percentage of franchise restaurant sales, are recognized as sales occur.

Incentives offered from time to time, including new restaurant incentives, will reduce the contractual royalty rate paid.

Any royalty reductions, including waivers or those offered as part of a new restaurant development incentive or as incentive for other behaviors, including acceleration of restaurant remodels or equipment upgrades, are recognized at the same time as the related royalty, as they are not separately distinguishable from the full royalty rate.

Our current standard franchise agreement requires the franchisee to pay a royalty fee of 5 % of sales, and the majority of our existing franchised restaurants have a 5 % contractual royalty rate in effect.

Franchise royalties are billed on a monthly basis.

Incentives offered from time to time, including new restaurant incentives, will reduce the contractual royalty rate paid.

The majority of initial franchise license fees and area development exclusivity fees are from International locations.

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Fees received for future license renewal periods are deferred and amortized over the life of the renewal period.

Area development exclusivity fees are billed upon execution of the development agreements which grant the right to develop franchised restaurants in future periods in specific geographic areas.

Area development exclusivity fees are billed upon execution of the

development agreements which grant the right to develop franchised restaurants in future periods in specific geographic areas.

Area development exclusivity fees are allocated on a pro rata basis to all restaurants opened under that specific development agreement.

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Commissary Revenues

Commissary revenues are comprised of food and supplies sold to franchised restaurants and are recognized as revenue upon shipment of the related products to the franchisees.

Commissary revenues are comprised of food and supplies sold to franchised restaurants at a fixed markup and are recognized as revenue upon shipment of the related products to the franchisees.

Payments are generally due within 30 days.

There are various incentive programs available to franchisees related to new restaurant openings including discounts on initial commissary orders and new restaurant equipment incentives, at substantially no cost to franchisees.

Commissary revenues are reduced to reflect incentives in the form of direct discounts on initial commissary orders.

The new restaurant equipment incentive is also recorded as a reduction of commissary sales over the term of the incentive agreement, which is generally three to five years .

Franchisees have the opportunity to earn incentive-based rebates as they increase volume and open new restaurants, which are recorded as a reduction to Commissary revenues as they are earned based on the estimated rebate amount.

Various other incentive programs are offered to franchisees related to new restaurant openings, including new restaurant equipment incentives and discounts on initial commissary orders.

New restaurant equipment incentives are recorded as a reduction of Commissary revenues over the term of the related incentive agreement, which is generally three to five years .

Other Revenues

Franchise Marketing Fund revenues represent a required established percentage of monthly restaurant sales collected by PJMF, which is our national marketing fund, and various other international and Domestic marketing funds (“Co-op” or

“Co-operative” Funds) where we have determined for purposes of accounting that we have control over the significant activities of the funds.

PJMF funds its operations with ongoing financial support and contributions from Domestic Papa John’s restaurants, of which approximately 85 % are franchised restaurant members.

Contributions are based on a percentage of monthly restaurant sales and are billed monthly.

When we are determined to be the principal in these arrangements, advertising fund contributions and expenditures are reported on a gross basis in the Consolidated Statements of Operations.

Our obligation related to these funds is to develop and conduct advertising activities in a specific country, region, or market, including the placement of electronic and print materials.

There are no expiration dates and we do not deduct non-usage fees from outstanding gift cards.

Other revenues primarily includes revenues derived from our online and mobile ordering business, fees for information services, as well as our previously wholly-owned print and promotions subsidiary.

Fees for information services, including software maintenance fees, help desk fees, centralized call center fees, and online ordering fees are recognized as revenue as such services are provided and are included in Other revenues.

Our gift cards do not have expiration dates and we do not deduct non-usage fees.

While the Company and the franchisees continue to honor all gift cards presented for payment, the likelihood of redemption may be determined to be remote for certain cards due to long periods of inactivity.

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Commissions on gift cards sold by third parties are recorded as a reduction to Deferred revenue and a reduction to Other revenues based upon estimated redemption patterns.

Rental income, primarily derived from properties leased by the Company and subleased to franchisees in the UK, is recognized on a straight-line basis over the respective operating lease terms.

Advertising and Related Costs

Domestic Company-owned advertising and related costs of $ 53.9 million, $ 55.2 million and $ 61.7 million in 2023, 2022, and 2021, respectively, include the costs of Domestic Company-owned local restaurant activities such as mail coupons, door hangers and promotional items and advertising activities administered through PJMF and various local market cooperative advertising funds.

PJMF is responsible for developing and conducting marketing and advertising for the Domestic Papa John’s system.

Rental income, primarily derived from properties leased by the Company and subleased to franchisees in the United Kingdom, is recognized on a straight-line basis over the respective operating lease terms.

Advertising Funds Revenue

Advertising funds revenue primarily represents contributions made to PJMF, our national marketing fund, via a required established percentage of monthly restaurant sales (subject, in certain instances, to lower rates based on certain incentives).

Advertising funds revenue also contains contributions made to a marketing fund designated for Canada, Alaska, and Hawaii, other Domestic local marketing funds (“Co-op” or “Co-operative” funds), and our international marketing funds.

When we are determined to be the principal in these arrangements, advertising fund contributions and expenditures are reported on a gross basis in the Consolidated Statements of Operations.

Our obligation related to these funds is to develop and conduct advertising activities in a specific country, region, or market, including the placement of electronic and print materials.

Advertising Funds Expense

Advertising funds expense includes the costs of developing and administering our advertising and promotional activities, which are administered through PJMF, our marketing fund for Canada, Alaska, and Hawaii, various local market Co-operative advertising funds for the Domestic Papa Johns system, and through our international marketing funds to support our International business.

This includes the cost of advertising via television, print, digital, mobile marketing and social media channels as well as local restaurant activities such as mail coupons, door hangers and promotional items.

The Co-op funds are responsible for developing and conducting advertising activities in a specific market, including the placement of electronic and print materials developed by PJMF.

The marketing fund investments are included in General and administrative expenses within the accompanying Consolidated Statements of Operations and are accrued and expensed when the franchise advertising revenues are recognized, as PJMF is designed to operate at break-even.

Marketing expenses incurred by PJMF are accrued and expensed when the franchise advertising revenues are recognized, as PJMF is designed to operate at break-even.

Lease expense is recognized on a straight-line basis over the expected life of the lease term for operating leases, whereas lease expense follows an accelerated expense recognition for finance leases.

A lease term often includes option periods, available at the inception of the lease.

Lease expense is comprised of operating and finance lease costs, short-term lease costs, and variable lease costs, which primarily include common area maintenance, real estate taxes, and insurance for the Company’s real estate leases.

Lease expense is comprised of operating and finance lease costs, short-term lease

costs, and variable lease costs, which primarily include common area maintenance, real estate taxes, and insurance for the Company’s real estate leases.

Lease costs also include variable rent, which is primarily related to the Company’s supply chain tractor and trailer leases that are based on a rate per mile.

Stock-Based Compensation

Compensation expense for equity grants is estimated on the grant date, net of projected forfeitures, and is recognized over the vesting period (graded vesting over three years ).

Compensation expense for equity grants is estimated at fair value on the grant date, net of projected forfeitures, and is recognized over the vesting period.

We have elected a policy to estimate forfeitures in determining the amount of stock-based employee compensation expense.

Restricted stock is valued based on the market price of the Company’s shares on the date of grant.

Management evaluates its award grants and modifications and will adjust the fair value if any are determined to be spring-loaded.

See “Note 20.

Equity Compensation” for additional information.

Cash Equivalents

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Credit is extended based on an evaluation of the franchisee’s financial condition and collateral is generally not required.

An allowance for credit losses is an estimate, even if remote, based upon historical account write-off trends, facts about the current financial condition of the debtor, forecasts of future operating results based upon current trends of select operating metrics and macroeconomic factors.

An allowance for credit losses is an estimate of lifetime losses, even if remote, based upon historical account write-off trends, facts about the current financial condition of the debtor, forecasts of future operating results based upon current trends of select operating metrics and macroeconomic factors.

Account balances are charged off against the allowance after recovery efforts have ceased.

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Most notes receivable bear interest at fixed or floating rates and are generally secured by the assets of each restaurant and the ownership interests in the franchise.

The Company has provided long-term financing to certain franchisees with royalty payment plans.

We establish an allowance for credit losses for franchisee notes receivables to reduce the outstanding notes receivable to their net realizable values based on a review of each franchisee’s economic performance and market conditions after consideration of the fair value of our underlying collateral rights (e.g., underlying franchisee business, property and equipment) and any guarantees.

We establish an allowance for credit losses for franchisee notes receivables to reduce the outstanding notes receivable to their net realizable values based on estimated lifetime losses derived from a review of each franchisee’s economic performance and market conditions after consideration of the fair value of our underlying collateral rights (e.g., underlying franchisee business, property and equipment) and any guarantees.

Note balances are charged off against the allowance after recovery efforts have ceased.

Interest income recorded on franchisee loans was approximately $ 1.1 million in 2023, $ 1.3 million in 2022 and $ 1.9 million in 2021 and is reported in Net interest expense in the accompanying Consolidated Statements of Operations.

Interest income recorded on franchisee loans was approximately $ 1.1 million in 2024 and 2023 and $ 1.3 million in 2022 and is reported in Net interest expense in the accompanying Consolidated Statements of Operations.

Inventories, which consist of food products, paper goods, supplies and smallwares are stated at the lower of cost, determined under the first-in, first-out (FIFO) method, or net realizable value.

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Amounts capitalized, which are included in property and equipment, are amortized principally over periods not exceeding five years upon completion of the related information systems project.

Total costs capitalized were approximately $ 4.1 million in 2023, 2022 and 2021.

Total costs capitalized were approximately $ 4.4 million in 2024 and $ 4.1 million in 2023 and 2022.

The unamortized information systems development costs approximated $ 10.3 million and $ 9.9 million as of December 29, 2024 and December 31, 2023, respectively.

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We evaluate goodwill annually as of the first day of the fourth quarter or whenever we identify certain triggering events or circumstances that would more-likely-than-not reduce the fair value of a reporting unit below its carrying amount.

Such tests are completed separately with respect to the goodwill of each of our reporting units, which includes our Domestic Company-owned restaurants, United Kingdom (“PJUK”), China, and Preferred Marketing Solutions operations, which were sold on October 22, 2023.

Such tests are completed separately with respect to the goodwill of each of our reporting units, which includes our Domestic Company-owned restaurants, United Kingdom, and China operations.

We may perform a qualitative assessment or move directly to the quantitative assessment for any reporting unit in any period if we believe that it is more efficient or if impairment indicators exist.

We elected to perform a qualitative assessment for our Domestic Company-owned restaurants, PJUK, and China as of the first day of the fourth quarter of 2023;

we excluded the goodwill associated with our Preferred Marketing Solutions reporting unit, as the business was sold shortly after the date of our assessment and the balance was not material to the consolidated financial statements.

As a result of our qualitative analysis, we determined that it was more-likely-than-not

that the fair values of our reporting units were greater than their carrying amounts.

Subsequent to completing our goodwill impairment tests, no indicators of impairment were identified.

We performed our annual goodwill impairment testing as of the first day of the fourth quarter of 2024.

We elected to perform a qualitative assessment for our Domestic Company-owned restaurants and China reporting units.

As a result of our qualitative analysis, we determined that it was more-likely-than-not that the fair values of these reporting units were greater than their carrying amounts.

Due to adverse macroeconomic conditions in the United Kingdom (“UK”) and declines in sales from Papa Johns restaurants in the UK business since our most recent quantitative analysis, we elected to perform a quantitative assessment for the UK reporting unit with the assistance of a third-party valuation specialist.

The assessment entailed estimating the UK’s fair value, which involved using a combination of both income and market approaches, and comparing these estimations to its carrying value.

Our income approach utilized discounted projected net cash flows, which required estimates for future revenue growth rates, operating margins, and a weighted-average cost of capital, which are the most sensitive inputs and require management estimation.

Our market approach, which includes the guideline public company method, utilized pricing multiples derived from an analysis of comparable publicly traded companies.

We believe the comparable companies we evaluate as market participants serve as an appropriate reference because those companies have similar risks, participate in similar markets, provide similar products and services for their customers and compete with us directly.

Based on our quantitative assessment, the fair value of the UK reporting unit substantially exceeded its carrying value, and thus there was no impairment to goodwill.

Subsequent to completing our goodwill impairment tests and through the year ended December 29, 2024, no indicators of impairment were identified.

See “Note 11.

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Valuation allowances are established when necessary on a jurisdictional basis to reduce deferred tax assets to the amounts we expect to realize.

Deferred tax assets and liabilities are recorded within Other assets and Other long-term liabilities on the Consolidated Balance Sheets.

Tax authorities periodically audit the Company.

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Losses are accrued based upon undiscounted estimates of the liability for claims incurred and for events that have occurred but have not been reported using certain third-party actuarial projections and our claims loss experience.

The determination of the recorded insurance reserves is highly judgmental and complex due to the significant uncertainty in the potential value of reported claims and the number and potential value of incurred but not reported claims, the application of significant judgment in making those estimates and the use of various actuarial valuation methods.

The estimated insurance claims losses could be significantly affected should the frequency or ultimate cost of claims differ significantly from historical trends used to estimate the insurance reserves recorded by the Company.

The determination of the recorded insurance reserves is complex due to the actuarial valuation methods utilized in determining the reserve and the assumptions related to the loss development factors and loss trends.

The estimated insurance claims losses could be

significantly affected should the frequency or ultimate cost of claims differ significantly from historical trends used to estimate the insurance reserves recorded by the Company.

The Company records estimated losses above retention within its reserve with a corresponding receivable for expected amounts due from insurance carriers.

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Noncontrolling Interests

Papa John’s has joint venture arrangements in which there are noncontrolling interests held by third parties that included 98 restaurants at December 31, 2023 and December 25, 2022.

As further described in “Note 22.

Divestitures,” the Company divested its 51 percent interest in one joint venture that owned 90 restaurants in the second quarter of 2022.

Papa Johns has joint venture arrangements in which there are noncontrolling interests held by third parties that included 98 restaurants at December 29, 2024 and December 31, 2023.

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

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Recent Accounting Pronouncements

Segment Disclosures

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2023-07, “ Improvements to Reportable Segment Disclosure s.” The ASU expands the scope and frequency of segment disclosures and introduces the concept of a “significant expense principle,” which requires entities to disclose significant expense categories and amounts that are regularly provided to the chief operating decision maker (“CODM”) and included within the reported measure of a segment’s profit or loss.

Recently Adopted Accounting Standards

within the reported measure of a segment’s profit or loss.

The ASU also changes current disclosure requirements by allowing entities to report multiple measures of a segment’s profit or loss, provided the reported measures are used by the CODM to assess performance and allocate resources and that the measure closest to GAAP is also provided.

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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.

Income Tax Disclosures

The Company has expanded its annual segment disclosures in compliance with ASU 2023-07;

see “Note 23.

Segment Information”.

The additional interim segment disclosures will be required beginning in the first quarter of 2025.

Accounting Standards Not Yet Adopted

In December 2023, the FASB issued ASU 2023-09, “ Income Taxes (Topic 740):

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

The Company has significant leases that include most Domestic Company-owned restaurant and commissary locations as well as our corporate office located in Atlanta, Georgia.

In November 2024, the FASB issued ASU No.

2024-03, “ Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses.” The ASU includes required disclosures in the notes to the consolidated financial statements of specific information about certain costs and expenses.

The amendments are effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027.

Early adoption is permitted and the standard may be applied either prospectively or retrospectively.

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

The Company has significant leases that include most Domestic Company-owned restaurant and commissary locations as well as our restaurant support center located in Atlanta, Georgia.

Other Domestic leases include tractor and trailer leases used by our distribution subsidiary as well as commissary equipment.

Additionally, the Company leases a significant number of

restaurants within the United Kingdom (“UK”);

these restaurants are then operated as Company-owned restaurants or subleased to franchisees.

Additionally, the Company leases a significant number of restaurants within the UK, many of which contain early termination rights exercisable by the Company;

these restaurants are then subleased to franchisees or operated as Company-owned restaurants.

The Company’s leases have terms as follows:

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A finance lease right-of-use asset is amortized on a straight-line basis, with interest costs reported separately, over the lesser of the useful life of the leased asset or lease term.

Operating lease expense is recognized on a straight-line basis over the lease term and is included in Operating costs or General and administrative expenses.

Operating lease expense is recognized on a straight-line basis over the lease term and is included in Cost of sales or General and administrative expenses.

Variable lease payments are expensed as incurred.

The Company uses its incremental borrowing rates as the discount rate for its leases, which is equal to the rate of interest the Company would have to pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms.

The lease terms for all the Company’s leases include the contractually obligated period of the leases, plus any additional periods covered by Company options to extend the leases that the Company is reasonably certain to exercise.

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

At December 31, 2023, we leased and subleased approximately 322 Papa John’s restaurants to franchisees in the UK.

At December 29, 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.

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These leases have varying terms, the latest of which expires in 2034.

As of December 31, 2023, the estimated maximum amount of undiscounted payments the Company could be required to make in the event of nonpayment by the primary lessees was $ 7.3 million.

As of December 29, 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 approximately $ 10.4 million.

This contingent liability is not included in the Consolidated Balance Sheets or future minimum lease obligation.

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PJMF, which is a consolidated variable interest entity 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 Consolidated Statements of Operations within Other revenues and Other expenses.

Contributions and expenditures are reported on a gross basis in the Consolidated Statements of Operations within Advertising funds revenue and Advertising funds expense.

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

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Deferred income taxes 1,019 674

Other assets 122 —

Total assets $ 33,716 $ 26,417

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Accounts payable $ — $ 1,509

Income and other taxes payable 298 —

Accrued expenses and other current liabilities 30,324 22,245

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December 29, 2024 December 31, 2023 Change

Franchise fee liabilities $ 20,564 $ 23,836 $ ( 3,272 )

Unearned franchise fees and royalties $ 21,860 $ 20,564 $ 1,296

Unredeemed gift card liabilities 7,694 6,955 739

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Shares Authorized and Outstanding

The Company has authorized 100.0 million shares of common stock as of December 31, 2023 and December 25, 2022, respectively.

The Company’s outstanding shares of common stock, net of repurchased common stock held as treasury stock, were 32.5 million shares at December 31, 2023 and 34.7 million shares at December 25, 2022.

The Company has 100.0 million shares of common stock authorized as of December 29, 2024 and December 31, 2023, respectively.

The Company’s outstanding shares of common stock, net of repurchased common stock held as treasury stock, were 32.6 million shares at December 29, 2024 and 32.5 million shares at December 31, 2023, respectively.

Share Repurchase Program

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.

This share repurchase program operated alongside our previous $ 75.0 million share repurchase authorization, which began on November 4, 2020 and expired on December 26, 2021.

The following table summarizes our repurchase activity for the years ended December 29, 2024, December 31, 2023 and December 25, 2022, respectively:

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December 25, 2022 1,343 $ 93.07 $ 125,000 $ 299,800

(a) Aggregate cost of shares purchased for year ended December 31, 2023 excludes $ 2.8 million of transaction costs directly attributable to share repurchases, including a 1% excise tax incurred under the Inflation Reduction Act of 2022.

Of these costs, $ 2.1 million were classified as non-cash financing activities for the year ended December 31, 2023.

(a) Aggregate cost of shares purchased for year ended December 31, 2023 excludes $ 2.8 million of transaction costs directly attributable to share repurchases, including $ 2.1 million related to a 1% excise tax incurred under the Inflation Reduction Act of 2022.

These excise taxes were paid during the year ended December 29, 2024 and are classified as a financing cash outflow within the Consolidated Statements of Cash Flows.

We did no t repurchase any shares subsequent to December 29, 2024.

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The shares repurchased during the year ended December 31, 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.

Related Party Transactions” for additional details.

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.

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

The timing and volume of share repurchases under the Company’s share repurchase programs may be executed at the discretion of management on an opportunistic basis, subject to market and business conditions, access to borrowings, regulatory requirements and other factors, or pursuant to trading plans or other arrangements.

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

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

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

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

Dividends on Common Stock

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

Preferred Stock

The Company has authorized 5.0 million shares of preferred stock (of which none were issued or outstanding at December 31, 2023 or December 25, 2022, respectively).

On May 11, 2021, the Company entered into a Share Repurchase Agreement with certain funds affiliated with, or managed by, Starboard Value LP (collectively, “Starboard”), pursuant to which (i) the Company repurchased from Starboard 78,387 shares of the Series B Convertible Preferred Stock, par value $ 0.01 per share, of the Company (“Series B Preferred Stock”) and (ii) Starboard converted the remaining 171,613 shares of Series B Preferred Stock that it owned into 3,458,360 shares of the Company’s common stock pursuant to the terms of the Certificate of Designation of the Series B Preferred Stock.

On June 3, 2021, the Company entered into agreements with certain franchisee investors to repurchase 1,000 shares of the outstanding Series B Preferred Stock and convert the remaining 1,530 shares of Series B Preferred Stock into 30,769 shares of common stock.

The Company paid Starboard and the franchisee investors aggregate one-time cash payments of $ 188.6 million for the repurchase and conversion of all of the outstanding shares of Series B Preferred Stock.

The excess of the cash payment over the carrying value of the respective Series B Preferred Stock redeemed resulted in $ 109.9 million of dividends on redemption of Series B Preferred Stock in the Consolidated Statements of Operations, which reduced net income attributable to common stockholders and also reduced diluted earnings per share by $ 3.10 for the year ended December 26, 2021.

As a result of the repurchase and conversion, there were no shares of Series B Preferred Stock issued or outstanding at December 31, 2023 or December 25, 2022.

Dividends on Series B Preferred Stock

The Company paid common stock “pass-through” dividends on an as-converted basis to Series B Preferred Stockholders of $ 1.1 million and preferred dividends on the Series B Preferred Stock of $ 3.0 million in 2021.

The Company also paid $ 1.5 million of common stock deemed dividend distributions in connection with the repurchase and conversion of the Series B Preferred Stock in 2021.

Earnings per Share

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The two-class method requires an earnings allocation formula that determines earnings per share for common shareholders and participating security holders according to dividends declared and participating rights in undistributed earnings.

Time-based restricted stock awards are participating securities because holders of such shares have non-forfeitable dividend rights and participate in undistributed earnings with common stock.

Under the two-class method, total dividends provided to the holders of participating securities and undistributed earnings allocated to participating securities, are subtracted from net income attributable to the Company in determining net income attributable to common shareholders.

Time-based restricted stock awards are participating securities because holders of such unvested shares have rights to receive non-forfeitable dividends.

Under the two-class method, total dividends provided to the holders of participating securities are subtracted from net income attributable to the Company in determining net income attributable to common shareholders.

The Company may, at its sole discretion, require any dividends paid on the unvested restricted stock awards to be paid in shares rather than in cash, which could then be forfeited if the employee forfeits the underlying awards.

Basic earnings per common share are computed by dividing net income attributable to common shareholders by the weighted-average common shares outstanding.

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2024 2023 2022

Basic earnings per common share

Calculation of net income attributable to common shareholders

Net income attributable to the Company $ 83,486 $ 82,098 $ 67,772

Dividends on redemption of Series B Convertible Preferred Stock — — ( 109,852 )

Dividends paid to participating securities ( 166 ) — ( 306 )

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Net income attributable to common shareholders $ 83,320 $ 82,098 $ 67,362

Basic earnings per common share

Basic weighted average common shares outstanding 32,717 32,931 35,497

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Diluted earnings per common share

Net income attributable to common shareholders $ 82,098 $ 67,362 $ 4,073

Weighted average common shares outstanding 32,717 32,931 35,497

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______________________________

(a) Excludes 194,846 shares underlying equity awards for the year ended December 31, 2023, as the effect of including such awards would have been anti-dilutive, and no ne in 2022 or 2021.

(a) Excludes 342,440 and 194,846 shares underlying equity awards for the year ended December 29, 2024 and December 31, 2023, respectively, as the effect of including such awards would have been anti-dilutive ( none in 2022).

See “Note 20.

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$ 30,775 $ 30,775 $ — $ —

Interest rate swaps (b)

$ 107 $ — $ 107 $ —

Financial liabilities:

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$ 107 $ — $ 107 $ —

Financial liabilities:

Interest rate swaps (b)

$ 483 $ — $ 483 $ —

______________________________

(a) Represents life insurance policies held in our non-qualified deferred compensation plan.

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

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

There were no transfers among levels within the fair value hierarchy during fiscal 2024 or 2023.

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______________________________

(a) The Company recorded $ 14.6 million of one-time, non-cash reserves in the first quarter of 2022 for certain accounts receivable and notes receivable primarily associated with a master franchisee with operations principally in Russia.

The Company recorded $ 3.7 million of one-time, non-cash reserves in the second half of 2022 for certain accounts receivable and notes receivable primarily associated with the termination of significant franchisees in the UK.

(b) During the fourth quarter of 2023, the Company recorded $ 1.7 million of reserves for certain accounts receivable and notes receivable associated with the termination of a specific franchisee in the UK and $ 0.9 million of reserves for certain accounts receivable related to the conflict in the Middle East.

(a) During the year ended December 31, 2023, the Company recorded $ 1.7 million of reserves for certain accounts receivable and notes receivable associated with the termination of a specific franchisee in the United Kingdom and $ 0.9 million of reserves for certain accounts receivable related to the conflict in the Middle East.

(b) During the year ended December 29, 2024, the Company recorded $ 1.7 million of reserves for certain notes receivable associated with the termination of specific franchisees in the United Kingdom as part of our International Transformation Plan.

See “Note 16.

Restructuring” for further information.

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

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owned Restaurants International

All Others Total

All Other Total

Balance at December 25, 2022 $ 55,507 $ 14,673 $ 436 $ 70,616

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

Acquisitions (a)

1,102 4,274 — 5,376

Divestitures (b)

— ( 453 ) — ( 453 )

Acquisition accounting adjustments (c)

— ( 95 ) — ( 95 )

Foreign currency adjustments — ( 198 ) — ( 198 )

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______________________________

(a) Goodwill from acquisitions for the year 2023 includes $ 4.3 million from the UK franchisee acquisitions as well as $ 1.1 million related to the Domestic restaurant acquisitions.

(a) Goodwill recognized during the year ended December 31, 2023 includes $ 4.3 million from the UK franchisee acquisitions as well as $ 1.1 million related to the Domestic restaurant acquisitions.

See “Note 24.

Acquisitions” for further information.

Goodwill from acquisitions for the year 2022 include $ 1.2 million in 2022, due to acquisitions of two restaurants.

(b) During the year ended December 31, 2023, the Company disposed of $ 0.4 million of goodwill in connection with the sale of our Preferred Marketing Solutions business.

In conjunction with the refranchising of our 51.0 % ownership interest in a 90 -restaurant consolidated joint venture in Texas during the year ended December 25, 2022, goodwill was allocated to the disposal group based on relative fair value within the Domestic Company-owned restaurants reporting group.

(b) During the year ended December 29, 2024, the Company disposed of $ 0.5 million of goodwill in connection with the refranchising of 60 formerly Company-owned restaurants in the United Kingdom.

During the year ended December 31, 2023, the Company disposed of $ 0.4 million of goodwill in connection with the sale of our Preferred Marketing Solutions business.

See “Note 16.

Restructuring” and “Note 22.

Divestitures” for further information.

(c) Acquisition accounting adjustments were recorded during the year ended December 29, 2024 to increase property and equipment to fair value as a result of the finalization of our valuation of acquired property and equipment from the UK franchisee acquisitions.

See “Note 24.

Acquisitions” for further information.

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

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

The Credit Agreement was amended on May 30, 2023 to update the borrowing benchmark from LIBOR to SOFR with a fixed credit spread adjustment of 0.10 %.

In connection with the Credit Agreement, the Company recorded $ 2.1 million of debt issuance costs during the year ended December 26, 2021, which are being amortized into Net interest expense over the term of the Credit Agreement.

In connection with the Credit Agreement, the Company recorded $ 2.1 million of debt issuance costs, which are being amortized into Net interest expense over the term of the Credit Agreement.

The Credit Agreement was amended in 2023 to update the borrowing benchmark from LIBOR to SOFR with a fixed credit spread adjustment of 0.10 %.

The remaining availability under the PJI Revolving Facility was $ 253.3 million as of December 29, 2024.

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PJMF Revolving Facility

PJMF has a revolving line of credit (the “PJMF Revolving Facility”) pursuant to a Revolving Loan Agreement, dated September 30, 2015 with U.S.

Bank National Association, as lender.

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 one-month SOFR plus 1.975 %;

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

PJMF has a $ 30.0 million revolving line of credit (the “PJMF Revolving Facility”) pursuant to a Revolving Loan Agreement, dated September 30, 2015, and most recently amended on September 30, 2024.

The PJMF Revolving Facility is secured by substantially all assets of PJMF.

The PJMF Revolving Facility matures on September 30, 2024, but is subject to annual amendments.

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

The PJMF Revolving Facility matures on September 30, 2025, but is subject to annual renewals.

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

There was no debt outstanding under the PJMF Revolving Facility as of December 29, 2024 or December 31, 2023.

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Derivative Financial Instruments

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

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

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

The interest rate swaps are recorded at fair value at each reporting date, and any unrealized gains or losses are included in Accumulated other comprehensive loss in the Consolidated Balance Sheets and reclassified to Net interest expense in the Consolidated Statements of Operations in the same period or periods during which the hedged transaction affect earnings.

The Company has historically entered into interest rate swaps with the objective of mitigating the Company’s exposure to the impact of interest rate changes associated with our variable rate debt under the PJI Revolving Facility.

As of December 29, 2024, we have the following interest rate swap agreements with a total notional value of $ 100.0 million:

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June 23, 2023 through June 30, 2025 $ 50 million 4.55 %

In 2021, ou r prior interest rate swaps, which matured on April 30, 2023, were de-designated as cash flow hedges following the issuance of the Notes and remained undesignated as hedges through June 26, 2022.

For these de-designated hedges, the portion of gains or losses on the derivative instruments previously recognized in AOCL were reclassified into earnings as adjustments to Net interest expense on a straight-line basis over the remaining life of the originally hedged transactions.

As of June 27, 2022, the interest rate swaps were re-designated as cash flow hedges to provide a hedge against changes in variable rate cash flows regarding fluctuations in the LIBOR rate previously utilized under the PJI Revolving Facility.

Therefore, beginning in the third quarter of 2022 and through the maturity date of April 30, 2023, our prior interest rate swaps were accounted for utilizing cash flow hedge accounting treatment.

We have designated the interest rate swaps as cash flow hedges and assess hedge effectiveness on a quarterly basis.

We recognized income of $ 0.2 million ($ 0.2 million after tax), $ 1.5 million ($ 1.1 million after tax) and $ 4.8 million ($ 3.7 million after tax) in 2024, 2023 and 2022, respectively, in other comprehensive income for the net change in the fair value of our interest rate swaps.

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Prepaid expenses and other current assets $ — $ 107

Accrued expense and other current liabilities $ 161 $ —

Other long-term liabilities $ — $ 483

As of December 31, 2023, the portion of the aggregate $ 0.4 million interest rate swap liability that would be reclassified into interest expense during the next twelve months is a benefit of approximately $ 0.1 million.

As of December 29, 2024, the remaining $ 0.2 million interest rate swap liability is current and thus will be reclassified into interest expense during the next twelve months .

The effect of derivative instruments on the accompanying Consolidated Financial Statements is as follows (in thousands):

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In December 2023, the Company announced international transformation initiatives (“International Transformation Plan”) designed to evolve our business structure to deliver an enhanced value proposition to our International customers and franchisees, ensure targeted investments and efficient resource management, and better position our largest markets, including the UK, for long-term profitable growth and brand strength.

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.

The Company incurred restructuring related costs of $ 2.2 million for the year ended December 31, 2023 related to the International Transformation Plan.

Restructuring related costs associated with the approved initiatives primarily relate to employee severance benefits accounted for under ASC 712, “Compensation - Nonretirement Postemployment Benefits”, professional services, recruiting and relocation costs, and stock-based compensation forfeitures on unvested awards.

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

Total estimated pre-tax costs associated with approved initiatives in 2023 are approximately $ 3.0 million to $ 6.0 million , all of which will be recorded within our International segment, and we expect to incur the remainder of these costs through 2024.

These estimates will be updated as additional initiatives associated with the International Transformation Plan are developed and approved.

Refer to Note 25.

Subsequent Events for further details on initiatives approved by our Board of Directors subsequent to December 31, 2023.

The following table summarizes restructuring related costs recorded for the year ended December 31, 2023 (in thousands):

Employee severance $ 1,522

Professional services 527

Recruiting 150

Total international transformation costs 2,199

Stock-based compensation forfeitures on unvested awards ( 21 )

Total international transformation costs, net of stock-based award forfeitures $ 2,178

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 first quarter of 2024, the Company commenced the next phase of the International Transformation Plan, which involved 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.

This resulted in the closure of 43 underperforming UK Company-owned restaurants and 30 franchised locations during 2024.

Due to indicators of potential impairment associated with the UK Company-owned and franchised restaurant closures, the Company performed impairment analyses throughout the year and determined that the carrying amount of the assets related to the closing UK restaurants were not recoverable.

For the year ended December 29, 2024, we recognized impairment charges of $ 11.7 million for the amount by which the carrying value exceeded the estimated fair value of the asset groups.

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

Management judgement 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.

During the second and third quarters of 2024, the Company also completed the refranchising of 60 formerly Company-owned restaurants to primarily existing franchisees, which resulted in a loss on sale of $ 1.7 million .

We have completed substantially all of the strategic restaurant closures in the UK market and the Company’s efforts have turned towards growth opportunities and mitigating closure-related costs as we complete the optimization of the portfolio.

The following table summarizes restructuring related costs recorded for the years ended December 29, 2024 and December 31, 2023, respectively (in thousands):

Long-lived asset impairment charges $ 11,664 $ —

Loss on franchisee notes receivable 1,744 —

Loss on refranchising Company-owned restaurants 1,745 —

Professional services and other related costs 8,599 677

Employee termination costs, net (a)

Lease terminations and other lease related costs (b)

Total international transformation costs, net $ 27,273 $ 2,178

(a) Includes noncash reversal of $ 0.1 million related to the forfeiture of unvested stock-based compensation awards during the year ended December 29, 2024.

(b) Includes $ 1.1 million in connection with early lease terminations and $ 2.1 million related to our existing leases for closed stores.

The Company has incurred total restructuring related costs of $ 29.5 million since commencement of the International Transformation Plan, all of which were included in General and administrative expenses in the Consolidated Statements of Operations.

Total estimated pre-tax costs associated with the International Transformation Plan are approximately $ 30.0 million to $ 35.0 million (inclusive of the cumulative $ 29.5 million incurred through the fourth quarter of 2024), all of which will be recorded within our International segment, and we expect to incur the remainder of these costs in 2025 .

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 Consolidated Balance Sheets (in thousands):

Employee severance Professional services Recruiting Total

Employee severance Professional services and other related costs Lease terminations and other lease related costs Total

Balance as of December 31, 2023 $ 1,227 $ 556 $ — $ 1,783

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Balance as of December 29, 2024 $ 133 $ 2,335 $ 2,073 $ 4,541

Strategic Corporate Reorganization (2021)

On September 17, 2020, we announced plans to open an office in Atlanta, Georgia located in Three Ballpark Center at The Battery Atlanta, which opened in October 2021.

The space is designed to drive continued menu innovation and optimize integration across marketing, communications, customer experience, operations, human resources, diversity, equity and inclusion, financial planning and analysis, investor relations and development functions.

Our information technology, finance, supply chain, and legal teams continue to operate in our Louisville, Kentucky office, which remains critical to our success.

We also maintain an office outside of London, UK, where our International operations are managed.

Employees whose positions were relocated to the new Atlanta office were either offered an opportunity to continue with the organization or were offered a severance package.

As a result, we incurred one-time corporate reorganization costs of approximately $ 13.1 million during the year ended December 26, 2021 as detailed in the table below (in thousands).

Employee severance and other employee transition costs $ 5,429

Recruiting and professional fees 3,815

Relocation costs 3,100

Other costs 750

Total strategic corporate reorganization costs $ 13,094

There were no additional corporate reorganization costs incurred during the year ended December 31, 2023 or December 25, 2022, and all costs incurred during 2021 were paid by December 25, 2022.

We record severance as a one-time termination benefit and recognize the expense ratably over the employees’ required future service period.

All other costs, including employee transition costs, recruitment and relocation costs, and third-party costs, are recognized in the period incurred.

All strategic corporate reorganization costs were recorded in General and administrative expenses on the Consolidated Statements of Operations.

The following table presents the domestic and foreign components of income before income taxes for 2024, 2023 and 2022 (in thousands):

31 unchanged sentences

US deferred offset on foreign deferreds ( 1,883 ) ( 1.7 ) % 270 0.3 % 1,183 1.4 %

Foreign tax deduction ( 1,657 ) ( 1.5 ) % — — % — — %

Foreign valuation allowance 6,597 5.8 % 1,386 1.3 % 67 0.1 %

Other ( 1,156 ) ( 1.0 ) % 201 0.2 % 514 0.6 %

33 unchanged sentences

We believe that a portion of these state income tax credit carryforwards would not be realizable before expiration.

The Company had approximately $ 4.6 million and $ 2.2 million of foreign net operating loss and capital loss carryovers as of December 31, 2023 and December 25, 2022, respectively.

The Company had approximately $ 2.7 million and $ 1.2 million of valuation allowances primarily related to the foreign net operating losses, foreign capital losses and foreign deferred tax assets at both December 31, 2023 and December 25, 2022.

The Company had approximately $ 9.2 million and $ 4.6 million of foreign net operating loss, capital loss carryovers and foreign deferred tax assets as of December 29, 2024 and December 31, 2023, respectively.

The Company had approximately $ 9.2 million and $ 2.7 million of valuation allowances primarily related to the foreign net operating losses,

foreign capital losses and foreign deferred tax assets at both December 29, 2024 and December 31, 2023.

A substantial majority of our foreign net operating losses do not have an expiration date.

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Pursuant to the Original Endorsement Agreement, the Company received the right and license to use Mr.

O’Neal’s name, nickname, initials, autograph, voice, video or film portrayals, photograph, likeness and certain other intellectual property rights (individually and collectively, the “Personality Rights”), in each case, solely as approved by ABG-Shaq, in connection with the advertising, promotion and sale of Papa John’s-branded products.

O’Neal also agreed to provide brand ambassador services related to appearances, social media and public relations matters, and to collaborate with us to develop one or more co-branded products using the Personality Rights.

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Pursuant to the Second Amendment, the Company was granted the ability to use the Personality Rights for a limited time to promote, advertise, and sell our co-branded extra-large pizza developed under the First Amendment.

ABG-Shaq did not receive any additional royalty fees from the Company beyond the cash payment already contemplated under the Original Endorsement Agreement under the Amendment.

In addition, the Company

donated one U.S.

ABG-Shaq did not receive any additional royalty fees from the Company beyond the cash payment

already contemplated under the Original Endorsement Agreement under the Amendment.

In addition, the Company donated one U.S.

dollar for each unit of the pizza sold in the United States and one Canadian dollar for each unit sold in Canada to The Papa John’s Foundation for Building Community.

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● 33 % ( 18,632 ) of the RSUs vested on April 12, 2023;

● 33 % ( 18,632 ) of the RSUs will vest on March 15, 2024;

● 33 % ( 18,632 ) of the RSUs vested on March 15, 2024;

● 33 % ( 18,634 ) of the RSUs will vest on March 15, 2025.

1 unchanged sentence

The New Endorsement Agreement also includes customary exclusivity, termination and indemnification clauses.

The one-year extension referenced above was entered into and will be effective for the term April 1, 2025, to March 31, 2026.

As consideration for the rights and services granted under this Extension Agreement, the Company and PJMF agreed to pay ABG-Shaq cash payments totaling $ 3.5 million plus a $ 100,000 donation to The Shaquille O’Neal Foundation.

Effective August 1, 2023, the Company and PJMF entered into Amendment No.

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As consideration for rights and services granted within Amendment No.

1, the Company agreed to a pay a minimum donation of $ 375,000 for the benefit of The Shaquille O’Neal Foundation, of which $ 125,000 was paid during 2023 with the remaining $ 250,000 to be paid during 2024.

Starboard Share Repurchase

On March 1, 2023, the Company repurchased approximately 2.2 million shares from certain funds affiliated with, or managed by, Starboard Value LP (collectively, “Starboard”), at $ 82.52 per share, for a total aggregate consideration of $ 179.6 million.

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

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

1, the Company agreed to a pay a minimum donation of $ 375,000 for the benefit of The Shaquille O’Neal Foundation, of which $ 125,000 was paid during 2023 and the remaining $ 250,000 paid during 2024.

On February 22, 2024, Mr.

O’Neal informed the Board of Directors of his decision not to stand for re-election as a director at the Company’s 2024 annual meeting of stockholders.

His term expired at the annual meeting on May 2, 2024, at which point Mr.

O’Neal was no longer considered a member of management and thus is no longer considered to be a related party under ASC 850.

Litigation, Commitments and Contingencies

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The suit alleges that the “no-poaching” provision previously contained in the Company’s franchise agreement constituted an unlawful agreement or conspiracy in restraint of trade and commerce in violation of Section 1 of the Sherman Antitrust Act.

On April 14, 2022, the parties reached a

settlement in principle to resolve the case.

Pursuant to the terms of the proposed settlement, in exchange for the Company’s payment of a total aggregate settlement amount of $ 5.0 million and other non-monetary consideration, all claims in the action will be dismissed, the litigation will be terminated, and the Company will receive a release.

On April 14, 2022, the parties reached a settlement in principle to resolve the case.

Pursuant to the terms of the proposed settlement, in exchange for the Company’s

payment of a total aggregate settlement amount of $ 5.0 million and other non-monetary consideration, all claims in the action will be dismissed, the litigation will be terminated, and the Company will receive a release.

The settlement amount was recorded in General and administrative expenses in the Consolidated Statements of Operations in the first quarter of 2022 and remained accrued in Accrued expenses and other current liabilities in the Consolidated Balance Sheets as of December 29, 2024.

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

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

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

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We recorded stock-based employee compensation expense of $ 9.6 million in 2024, $ 17.9 million in 2023 and $ 18.4 million in 2022.

At December 31, 2023, there was $ 18.9 million of unrecognized compensation cost related to unvested awards, of which the Company expects to recognize $ 12.4 million in 2024, $ 5.6 million in 2025 and $ 0.9 million in 2026.

At December 29, 2024, there was $ 17.4 million of unrecognized compensation cost related to unvested awards, of which the Company expects to recognize $ 10.9 million in 2025, $ 4.7 million in 2026, $ 1.4 million in 2027 and $ 0.4 million in 2028.

Stock Options

16 unchanged sentences

shares are intended to focus participants on our long-range objectives, while at the same time serving as a retention mechanism.

We consider time-based restricted stock awards to be participating securities because holders of such shares have non-forfeitable dividend rights.

We consider time-based restricted stock awards to be participating securities because holders of such nonvested awards receive non-forfeitable dividends.

We declared dividends totaling $ 0.6 million ($ 1.84 per share) in 2024, $ 0.5 million ($ 1.76 per share) in 2023 and $ 0.5 million ($ 1.54 per share) in 2022 to holders of time-based restricted stock.

2 unchanged sentences

Total dividends declared for these awards were insignificant to the results of our operations.

The fair value of time-based restricted stock units is based on the market price of the Company’s shares on the grant date.

Additionally, we granted stock-settled performance-based restricted stock units to executive management ( 250,000 units in 2024, 80,000 units in 2023, and 64,000 units in 2022).

The performance-based restricted stock units require the achievement of certain performance and market factors, which consist of the Company’s Total Shareholder Return (“TSR”) relative to a predetermined peer group.

The grant-date fair value of the performance-based restricted stock units was determined through the use of a Monte Carlo simulation model.

Historically, the performance-based restricted stock units required the achievement of certain performance and market factors, which consist of the Company’s Total Shareholder Return (“TSR”) relative to a predetermined peer group.

Starting in 2024, awards granted include a cumulative system-wide sales metric as measured over the fiscal years 2024, 2025, and 2026 in addition to the TSR metric.

Therefore, these awards are comprised of two distinct components each representing 50 % of the total award that each have a separate grant date fair value.

The grant-date fair value of the TSR metric was determined using the Monte Carlo simulation model and compensation expense is recognized over the vesting period regardless of the metric being achieved.

The grant-date fair value of the cumulative system-wide sales metric was set at the grant date stock price and compensation expense is recognized over the vesting period based on the Company’s expectation of achieving the performance metric.

Additional one-time performance-based restricted stock units with a four year cliff vesting period were also granted in 2024, which require the satisfaction of applicable stock price hurdles.

The grant-date fair value of these one-time awards were determined through the use of a Monte Carlo simulation model.

The following is a summary of the significant assumptions used in estimating the fair value of the performance-based restricted stock units granted in 2024, 2023 and 2022:

2 unchanged sentences

Expected volatility 34.0 - 34.8 %

38.6 % 45.0 %

The risk-free interest rate for the periods within the contractual life of the performance-based restricted stock unit is based on the U.S.

1 unchanged sentence

Expected volatility was estimated using the Company’s historical share price volatility for a period similar to the expected life of the performance-based restricted stock unit.

The performance-based restricted stock units granted vest over three years (cliff vest) and are expensed over the performance period.

The performance-based restricted stock units granted generally vest over three years (cliff vest) and are expensed over the vesting period.

The weighted average grant-date fair value of performance-based restricted stock units granted during 2024, 2023 and 2022 was $ 37.87 , $ 88.43 and $ 113.90 , respectively.

The fair value of time-based restricted stock and performance-based restricted stock units is based on the market price of the Company’s shares on the grant date.

Information pertaining to these awards during 2023 is as follows (shares in thousands):

Information pertaining to time-based restricted stock and performance-based restricted stock units during 2024 is as follows (shares in thousands):

Shares Weighted

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401(k) Plan (the “401(k) Plan”), is a defined contribution benefit plan in accordance with Section 401(k) of the Internal Revenue Code.

The 401(k) Plan is open to employees who meet certain eligibility requirements and allows participating employees to defer receipt of a portion of their compensation and contribute such amount to one or more investment funds.

The 401(k) Plan is open to employees who meet certain eligibility

requirements and allows participating employees to defer receipt of a portion of their compensation and contribute such amount to one or more investment funds.

In addition, we maintain a non-qualified deferred compensation plan available to certain employees and directors.

Under this plan, the participants may defer a certain amount of their compensation, which is credited to the participants’ accounts.

The participant-directed investments associated with this plan are included in Other assets ($ 29.4 million and $ 30.1 million

at December 31, 2023 and December 25, 2022, respectively) and the associated liabilities ($ 28.3 million at December 31, 2023 and December 25, 2022) are included in Other long-term liabilities in the accompanying Consolidated Balance Sheets.

The participant-directed investments associated with this plan are included in Other assets ($ 30.8 million and $ 29.4 million at December 29, 2024 and December 31, 2023, respectively) and the associated liabilities ($ 28.2 million and $ 28.3 million at December 29, 2024 and December 31, 2023) are included in Other long-term liabilities in the accompanying Consolidated Balance Sheets.

We contributed a matching payment of 4 % of a participating employee’s earnings deferred into the 401(k) Plan in 2024, 2023 and 2022.

In 2021, we contributed a discretionary matching payment of 4 %, up to a maximum of 6 % of a participating employee’s earnings deferred into both the 401(k) Plan and the non-qualified deferred compensation plan.

Such costs were $ 4.8 million in 2024, $ 4.3 million in 2023 and $ 4.4 million in 2022.

Divestiture of Preferred Marketing Solutions

On October 22, 2023, we sold the operations of Preferred Marketing Solutions, our previously wholly-owned print and promotions company, for upfront consideration of $ 0.6 million as well as a percentage of future revenues to be paid on a quarterly basis over the next ten years .

In connection with the divestiture, we deconsolidated total net assets of approximately $ 1.2 million, which primarily included property and equipment of $ 0.6 million and goodwill of $ 0.4 million associated with Preferred Marketing Solutions.

There was no gain or loss recognized on the sale, and the impact to the Consolidated Financial Statements was not material for the year ended December 31, 2023.

Refranchising Loss

Sale-Leaseback of Texas and Florida Quality Control Centers

On August 2, 2024, the Company finalized the sale and subsequent leaseback of two Domestic Quality Control Center properties (“QC Centers”) in Texas and Florida for an aggregate purchase price of $ 46.7 million.

Under the terms of the leases, each of which commenced on August 2, 2024, the Company will lease the QC Centers for 17 years with two five-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.

During the year ended December 29, 2024, we recorded a pre-tax gain on sale of approximately $ 41.3 million, net of transaction costs, which was recorded within General and administrative expenses in the Consolidated Statements of Operations, and sales proceeds of $ 46.7 million were recorded as investing cash inflows within the Consolidated Statements of Cash Flows.

Refranchising Transactions

On September 30, 2024, the Company refranchised 15 Domestic Company-owned restaurants to an existing franchisee for a purchase price of approximately $ 2.6 million.

In connection with the divestiture, we recorded non-cash impairment and remeasurement charges of $ 5.5 million for the year ended December 29, 2024 to remeasure the net assets within the disposal group to fair value, less estimated costs to sell.

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

The Company recorded a note receivable of $ 2.6 million as consideration received, which was a noncash investing activity during the year ended December 29, 2024.

The Company also completed the refranchising of 60 formerly Company-owned restaurants in the UK to primarily existing franchisees, which is described in more detail in “Note 16.

Restructuring.”

On March 28, 2022, we refranchised our 51.0 % ownership interest in a 90 -restaurant consolidated joint venture in Texas for $ 14.0 million, net of transaction costs.

1 unchanged sentence

The $ 8.4 million of the one-time, non-cash refranchising loss was recorded in the first quarter of 2022 and realized upon consummation of the sale in the second quarter of 2022.

Divestiture of Preferred Marketing Solutions

In connection with the divestiture, we deconsolidated total net assets of approximately $ 1.2 million, which primarily included property and equipment of $ 0.6 million and goodwill of $ 0.4 million

associated with Preferred Marketing Solutions.

There was no gain or loss recognized on the sale, and the impact to the Consolidated Financial Statements was not material for the year ended December 31, 2023.

Impairment of Reacquired Master Franchise Rights

4 unchanged sentences

Domestic Company-owned restaurants, North America franchising, North America commissaries, and International operations.

The Domestic Company-owned restaurant segment consists of the operations of all Domestic Company-owned restaurants and principally generates revenues from retail sales of pizza, Papadias, and side items, including breadsticks, Papa Bites, cheesesticks, boneless chicken wings and bone-in chicken wings, dessert items and canned or bottled beverages.

The North America franchising segment consists of our franchise sales and support activities and derives its revenues from sales of franchise and development rights and collection of royalties from our franchisees located in the United States and Canada.

2 unchanged sentences

International franchisees are defined as all franchise operations outside of the United States and Canada.

All other business units that do not meet the quantitative thresholds for determining reportable segments, which are not operating segments, we refer to as “all other,” which consists of operations that derive revenues from the sale, principally

to Company-owned and franchised restaurants, of printing and promotional items, franchise contributions to marketing funds and information systems and related services used in restaurant operations, including our point-of-sale system, online and other technology-based ordering platforms.

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

Certain administrative and capital costs are allocated to segments based upon predetermined rates or estimated resource usage.

We account for intercompany sales and transfers as if the sales or transfers were to third parties and eliminate the activity in consolidation.

Our reportable segments are business units that provide different products or services.

Separate management of each segment is required because each business unit is subject to different operational issues and strategies.

No single external customer accounted for 10% or more of our total revenues.

The following tables present our segment information.

(In thousands) 2023 2022 2021

Domestic Company-owned restaurants $ 726,362 $ 708,389 $ 778,323

North America franchising 144,550 137,399 129,310

North America commissaries 852,361 869,634 761,305

International 182,487 158,682 184,099

All others 229,953 227,999 215,384

Total revenues $ 2,135,713 $ 2,102,103 $ 2,068,421

All other business units that do not meet the quantitative or qualitative thresholds for determining reportable segments, which are not operating segments, we refer to as “All Other”.

These consist of operations that derive revenues from 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.

Prior to the sale of Preferred Marketing Solutions in the fourth quarter of 2023, All Other included revenues from the sale of printing and promotional items (principally to Company-owned and franchised restaurants).

Our chief operating decision maker (“CODM”) is the Chief Executive Officer.

The CODM evaluates performance and allocates resources to our segments based on Adjusted operating income.

This measure excludes certain general and administrative expenses and other items that do not reflect normal, recurring expenses necessary to operate our business.

During the annual budget and forecasting process, the CODM uses Adjusted operating income to allocate resources (including employees, property, and financial or capital resources) to the segments.

The CODM regularly reviews trends in Adjusted operating income on at least a quarterly basis to evaluate the profitability of the segments and to make resource allocation decisions.

When our CODM reviews balance sheet information, it is at a consolidated level.

Certain administrative and capital costs are allocated to our segments based upon predetermined rates or estimated resource usage.

In the fourth quarter of 2024, we updated our internal cost allocation methodology to reflect recent changes in the business, including changes to the CODM and ongoing transformation projects.

The methodology updates better align corporate cost allocations with how the CODM allocates resources to the segments and evaluates segment profitability, and result in reductions to the Adjusted operating income of our segments.

These changes are offset in Unallocated corporate expenses and have no impact on consolidated operating income.

We have chosen to prospectively adopt this update in allocation methodology and the comparative information has not been restated.

Segment Results

The tables below present our operating results by segment (in thousands).

The significant expense categories and amounts presented in the tables below align with the segment-level information that is regularly provided to the CODM.

A reconciliation to Company results is included in the following section.

Year Ended December 29, 2024

Domestic Company-owned restaurants North America franchising North America commissaries International Total

Revenues from external customers $ 692,736 $ 139,091 $ 831,774 $ 174,054 $ 1,837,655

Intersegment revenues — 4,150 205,234 — 209,384

North America franchising $ 4,267 $ 4,122 $ 4,179

North America commissaries 210,614 217,570 215,393

All others 66,487 70,283 75,366

Total intersegment revenues $ 281,368 $ 291,975 $ 294,938

Depreciation and amortization:

Domestic Company-owned restaurants $ 14,184 $ 11,495 $ 11,728

North America commissaries 16,046 13,299 11,974

International 3,167 1,774 2,326

All others 15,572 12,681 9,928

Unallocated corporate expenses 15,121 12,783 12,860

Total depreciation and amortization $ 64,090 $ 52,032 $ 48,816

Operating income:

Domestic Company-owned restaurants (a)

Revenues $ 692,736 $ 143,241 $ 1,037,008 $ 174,054 $ 2,047,039

Less costs and expenses (a) :

COS - Product Costs $ 207,704 $ — $ 756,170 $ 51,889 $ 1,015,763

COS - Salaries & Benefits 226,325 — 116,645 13,759 356,729

General & Administrative (b)

39,822 35,064 37,690 38,379 150,955

North America franchising 133,800 127,882 120,949

North America commissaries 43,316 42,531 39,873

International (b) (c)

Other Segment Expenses (c)

194,216 — 77,945 56,259 328,420

All others 10,116 10,084 17,704

Unallocated corporate expenses (d)

Adjusted operating income $ 24,669 $ 108,177 $ 48,558 $ 13,768 $ 195,172

Year Ended December 31, 2023

Domestic Company-owned restaurants North America franchising North America commissaries International Total

Revenues from external customers $ 726,362 $ 144,550 $ 852,361 $ 182,487 $ 1,905,760

Intersegment revenues — 4,267 210,614 — 214,881

Revenues $ 726,362 $ 148,817 $ 1,062,975 $ 182,487 $ 2,120,641

Less costs and expenses (a) :

COS - Product Costs $ 215,545 $ — $ 787,966 $ 54,514 $ 1,058,025

COS - Salaries & Benefits 238,434 — 118,678 17,853 374,965

General & Administrative 40,714 15,017 36,960 31,271 123,962

Other Segment Expenses (c)

198,199 — 76,055 59,794 334,048

Elimination of intersegment losses (profits) 27 ( 905 ) ( 695 )

Total operating income $ 147,142 $ 109,030 $ 168,241

Adjusted operating income $ 33,470 $ 133,800 $ 43,316 $ 19,055 $ 229,641

Year Ended December 25, 2022

Domestic Company-owned restaurants North America franchising North America commissaries International Total

Revenues from external customers $ 708,389 $ 137,399 $ 869,634 $ 158,682 $ 1,874,104

Intersegment revenues — 4,122 217,570 — 221,692

Revenues $ 708,389 $ 141,521 $ 1,087,204 $ 158,682 $ 2,095,796

Less costs and expenses (a) :

COS - Product Costs $ 218,732 $ — $ 820,636 $ 57,781 $ 1,097,149

COS - Salaries & Benefits 237,095 — 113,357 4,117 354,569

General & Administrative 29,510 13,639 33,291 21,889 98,329

Other Segment Expenses (c)

198,674 — 77,389 47,360 323,423

(a) Includes a one-time, non-cash charge of $ 8.4 million associated with the refranchising of the Company’s ownership interest in a 90 -restaurant joint venture, recorded as Refranchising and impairment loss for the year ended December 25, 2022.

See “Note 22.

Divestitures” for additional information.

(b) For the year ended December 31, 2023, International includes the following:

• $ 4.2 million of costs associated with repositioning the UK portfolio as well as transaction costs related to the acquisition of restaurants from franchisees.

• $ 2.2 million of costs related to the Company’s International restructuring plan, comprised of $ 1.5 million in severance compensation costs and $ 0.7 million in consulting and professional fees.

• $ 0.9 million one-time non-cash charge related to the reserve of certain accounts receivable related to the conflict in the Middle East.

(c) For the year ended December 25, 2022, International includes charges of $ 3.5 million related to one-time, non-cash reserves for certain accounts receivable and impairments of reacquired franchise rights due to the financial and operational impact of the conflict in Ukraine and $ 6.1 million of costs associated with the termination of significant franchisees in the UK, including the reserve of certain accounts and notes receivable and operating lease right-of-use assets impairment.

See “Note 22.

Divestitures” and “Note 10.

Allowance for Credit Losses” for additional information.

(d) For the year ended December 31, 2023, Unallocated corporate expenses includes $ 2.0 million of severance and related costs associated with the transition of certain executives and $ 0.6 million for certain legal settlements.

For the year ended December 25, 2022, Unallocated corporate expenses includes $ 15.0 million for certain legal settlements, $ 13.9 million of one-time, non-cash reserves of certain notes receivable, and $ 1.5 million of advisory fees and severance costs associated with the transition of certain executives.

Adjusted operating income $ 24,378 $ 127,882 $ 42,531 $ 27,535 $ 222,326

______________________________

(a) Costs and expenses excludes certain general and administrative expenses and other items that do not reflect normal, recurring expenses necessary to operate our business (see reconciliation table that follows).

(b) As noted in the commentary above, the Company prospectively adjusted for updates in internal cost allocation methodologies in 2024, which increased the amount of internal general and administrative expenses allocated to the segments from Unallocated corporate expenses.

The allocation updates resulted in the following increases to segment G&A in 2024:

$ 0.4 million to Domestic Company-Owned restaurants, $ 22.9 million to North America franchising, $ 3.3 million to International and $ 0.1 million to North America commissaries.

There was no impact on overall company profitability, as the change was offset within Unallocated corporate expenses (see reconciliation table below).

(c) Other Segment Expenses represents all operating expenses that are not included in the significant segment expense categories.

The components of Other Segment Expenses are:

other cost of sales that are not included in “COS - Product Costs” or “COS - Salaries & Benefits” (including, but not limited to, delivery expenses, Company-owned restaurant advertising costs, insurance, rent, utilities, and aggregator fees), advertising costs, depreciation and amortization costs, and other operating expenses.

Reconciliation of Segment Results to Company Results

The following table reconciles Total Revenues from our segments to Total Revenues and Total Adjusted operating income from our segments to Income before income taxes (in thousands):

2024 2023 2022

Total Revenues from our segments $ 2,047,039 $ 2,120,641 $ 2,095,796

All Other revenue (a)

279,385 296,440 298,282

Elimination of intersegment revenue ( 267,037 ) ( 281,368 ) ( 291,975 )

Total Revenues $ 2,059,387 $ 2,135,713 $ 2,102,103

2024 2023 2022

Total Adjusted operating income from our segments $ 195,172 $ 229,641 $ 222,326

All Other profit (a)

4,065 10,116 10,084

Unallocated corporate expenses (b)

( 51,054 ) ( 82,759 ) ( 74,043 )

Elimination of intersegment (profit) loss — 27 ( 905 )

Other income/(expense) adjustments (c)

8,521 ( 9,883 ) ( 48,432 )

Operating income 156,704 147,142 109,030

Net interest expense ( 42,578 ) ( 43,469 ) ( 25,261 )

Income before income taxes $ 114,126 $ 103,673 $ 83,769

______________________________

(a) As noted in the commentary above, All Other revenue and profit is derived from business units that do not meet the quantitative or qualitative thresholds for determining reportable segments, including:

franchise contributions to marketing funds, information systems and related services used in restaurant operations, and sale of printing and promotional items (principally to Company-owned and franchised restaurants).

(b) Unallocated corporate expenses represent administrative fees incurred by the restaurant support centers, including:

information systems and related services, corporate salaries and bonuses, stock compensation expense, and other corporate costs.

(c) Other income/(expense) adjustments represent certain general and administrative expenses and other items that do not reflect normal, recurring expenses necessary to operate our business.

As such, management excludes these items from the evaluation of Adjusted operating income.

For the periods above, the adjustments include:

(In thousands) December 29, 2024 December 31, 2023 December 25, 2022

Gain on sale of QC Center properties (See Note 22) $ 41,289 $ — $ —

International restructuring costs (See Note 16) ( 27,273 ) ( 2,178 ) —

Refranchising and impairment losses ( 5,495 ) — ( 26,702 )

UK repositioning and acquisition-related costs — ( 4,243 ) ( 5,223 )

Legal settlements — ( 577 ) ( 15,000 )

Other costs — ( 2,885 ) ( 1,507 )

Total adjustments $ 8,521 $ ( 9,883 ) $ ( 48,432 )

Depreciation and Amortization by Segment

The following table presents depreciation and amortization by segment.

(In thousands) 2024 2023 2022

Property and equipment, net:

Domestic Company-owned restaurants $ 257,318 $ 238,658 $ 241,050

North America commissaries 161,303 149,920 149,218

International 32,083 16,080 14,642

All others 138,028 131,210 109,052

Unallocated corporate assets 253,959 254,425 236,132

Accumulated depreciation and amortization ( 559,879 ) ( 540,500 ) ( 526,238 )

Property and equipment, net $ 282,812 $ 249,793 $ 223,856

Expenditures for property and equipment:

Depreciation and amortization:

Domestic Company-owned restaurants $ 16,560 $ 14,184 $ 11,495

1 unchanged sentence

International 4,134 3,167 1,774

All others 18,664 18,296 18,645

Unallocated corporate 15,768 26,134 27,820

Total expenditures for property and equipment $ 76,620 $ 78,391 $ 68,559

All Other 22,396 15,572 12,681

Unallocated corporate expenses 10,537 15,121 12,783

Total depreciation and amortization $ 69,407 $ 64,090 $ 52,032

Disaggregation of Revenue

Our segments earn revenue from both external and internal customers.

No single external customer accounted for 10% or more of our total revenues.

We account for intercompany sales and transfers as if the sales or transfers were to third parties and subsequently eliminate the activity.

The accounting policies of our segments are the same as those described in Note 2.

Significant Accounting Policies.

In the following tables, revenues are disaggregated by major product line.

The tables also include a reconciliation of the disaggregated revenues by the reportable segment:

Reportable Segments

(In thousands) Year Ended December 31, 2023

Major Products/Services Lines Domestic Company-owned

The tables also include a reconciliation of the disaggregated revenues by the reportable segment (in thousands):

Year Ended December 29, 2024

Domestic Company-owned

restaurants North America franchising North America

commissaries International All others Total

commissaries International All Other Elimination of Intersegment Revenue Total

Company-owned restaurant sales $ 692,736 $ — $ — $ 31,930 $ — $ — $ 724,666

Franchise royalties and fees — 143,241 — 47,941 — ( 4,150 ) 187,032

Commissary sales — — 1,062,975 72,287 — 1,135,262

Commissary revenues — — 1,037,008 67,890 — ( 205,234 ) 899,664

Other revenues — — — 12,701 85,914 ( 14,933 ) 83,682

Eliminations — ( 4,267 ) ( 210,614 ) — ( 66,487 ) ( 281,368 )

Total segment revenues 726,362 144,550 852,361 182,487 229,953 2,135,713

International other revenues (a)

— — — ( 25,300 ) 25,300 —

Advertising funds revenue — — — 13,592 193,471 ( 42,720 ) 164,343

Total Revenues $ 692,736 $ 143,241 $ 1,037,008 $ 174,054 $ 279,385 $ ( 267,037 ) $ 2,059,387

Reportable Segments

(In thousands) Year Ended December 25, 2022

Major Products/Services Lines Domestic Company-owned

Year Ended December 31, 2023

Domestic Company-owned

restaurants North America franchising North America

commissaries International All others Total

commissaries International All Other Elimination of Intersegment Revenue Total

Company-owned restaurant sales $ 726,362 $ — $ — $ 34,463 $ — $ — $ 760,825

Franchise royalties and fees — 148,817 — 50,437 — ( 4,267 ) 194,987

Commissary sales — — 1,087,204 80,481 — 1,167,685

Commissary revenues — — 1,062,975 72,287 — ( 210,614 ) 924,648

Other revenues — — — 12,617 101,789 ( 16,369 ) 98,037

Eliminations — ( 4,122 ) ( 217,570 ) — ( 70,283 ) ( 291,975 )

Total segment revenues 708,389 137,399 869,634 158,682 227,999 2,102,103

International other revenues (a)

— — — ( 28,779 ) 28,779 —

Advertising funds revenue — — — 12,683 194,651 ( 50,118 ) 157,216

Total Revenues $ 726,362 $ 148,817 $ 1,062,975 $ 182,487 $ 296,440 $ ( 281,368 ) $ 2,135,713

Reportable Segments

(In thousands) Year Ended December 26, 2021

Major Products/Services Lines Domestic Company-owned

Year Ended December 25, 2022

Domestic Company-owned

restaurants North America franchising North America

commissaries International All others Total

commissaries International All Other Elimination of Intersegment Revenue Total

Company-owned restaurant sales $ 708,389 $ — $ — $ — $ — $ — $ 708,389

Franchise royalties and fees — 141,521 — 49,422 — ( 4,122 ) 186,821

Commissary sales — — 976,698 97,623 — 1,074,321

Commissary revenues — — 1,087,204 80,481 — ( 217,570 ) 950,115

Other revenues — — — 14,135 107,194 ( 19,683 ) 101,646

Eliminations — ( 4,179 ) ( 215,393 ) — ( 75,366 ) ( 294,938 )

Total segment revenues 778,323 129,310 761,305 184,099 215,384 2,068,421

International other revenues (a)

— — — ( 33,328 ) 33,328 —

Advertising funds revenue — — — 14,644 191,088 ( 50,600 ) 155,132

Total Revenues $ 708,389 $ 141,521 $ 1,087,204 $ 158,682 $ 298,282 $ ( 291,975 ) $ 2,102,103

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(a) Other revenues as reported in the Consolidated Statements of Operations include $ 25.3 million, $ 28.8 million and $ 33.3 million of revenue for the years ended December 31, 2023, December 25, 2022, and December 26, 2021 respectively, that are part of the International reporting segment.

These amounts include marketing fund contributions and sublease rental income from International franchisees in the UK 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 Consolidated Statements of Operations.

UK Franchisee Acquisitions

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

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

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

The Company acquired an additional 27 Papa Johns restaurants in the United Kingdom in the third quarter of 2023 for total consideration of approximately $ 1.5 million.

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

During 2023, as part of our investment to reposition our UK business, the Company acquired a portfolio of 118 previously franchised Papa Johns restaurants in the UK market (collectively referred to as the “UK franchisee acquisitions”).

During the year ended December 31, 2023, the Company incurred $ 2.1 million of acquisition and transition costs related to the UK franchisee acquisitions.

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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 preliminary estimated fair value of the assets acquired and liabilities assumed as of the respective acquisition dates.

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 and is classified as a noncash investing transaction within the Consolidated Statements of Cash Flows for the year ended December 31, 2023.

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

No measurement period adjustments related to the UK franchisee acquisitions have been recorded during the year ended December 31, 2023

The Company recorded acquisition accounting adjustments of $ 0.1 million during the year ended December 29, 2024 to increase property and equipment to fair value as a result of the finalization of our valuation of acquired property and equipment.

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.

The purchase price exceeded the fair value of the net assets acquired, which resulted in the recognition of goodwill, primarily due to expected future benefits stemming from 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.

Domestic Acquisitions

During the year ended December 31, 2023, we acquired ten Domestic restaurants for a total purchase price of $ 4.1 million, which was classified as cash used in investing activities within the Consolidated Statements of Cash Flows.

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

Acquired assets recorded within the Consolidated Balance Sheets as of December 31, 2023 primarily included restaurant property and equipment of $ 1.6 million, reacquired franchise rights of $ 1.3 million, and goodwill of $ 1.1 million.

These amounts include measurement period adjustments to increase property and equipment and reduce reacquired franchise rights by $ 0.2 million, which were recorded during the fourth quarter of 2023.

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

The Company is finalizing its valuation of acquired property and equipment as well as gathering and assessing information regarding leases and other assets.

The Company expects all outstanding items to be finalized prior to the one-year anniversary date of the respective acquisitions.

Subsequent Events

In February 2024, as the next phase of the International Transformation Plan discussed in Note 16, “Restructuring,” the Board of Directors approved a plan to close approximately 50 underperforming Company-owned restaurants in the United Kingdom during the first six months of 2024.

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 us to focus on improving profitability across our remaining portfolio of Company-owned restaurants and franchisee base in the UK.

As a result of this decision, the Company expects to incur restructuring charges of approximately $ 10.0 million to $ 15.0 million, which will be recognized during 2024 within our International segment.

These charges are expected to primarily consist of lease right-of-use asset and fixed asset impairment charges, employee severance, and other related expenses.

The estimated range of restructuring charges is based on management's best estimate at the time of this filing and is subject to change as additional information becomes available.

The actual charges may differ from the estimates due to various factors, including the evaluation of our ability to sublease the closed restaurant properties and the number of employees affected by the restaurant closures.

We acquired one Domestic restaurant during the year ended December 29, 2024 and ten Domestic restaurants during the year ended December 31, 2023.

Cash payments, net of cash acquired related to these acquisitions were $ 0.1 million and $ 4.1 million during the years ended December 29, 2024 and December 31, 2023, respectively, which were classified as cash used in investing activities within the Consolidated Statements of Cash Flows.

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

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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-K

Item 8. Financial Statements and Supplementary Data