Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes ⌧x No ◻o

Indicate by check mark whether the registrant has submitted electronically every interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ⌧x No ◻o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large ~~accelerated~~Accelerated Filerx

Accelerated filer ☒o

~~Accelerated filer~~ ☐

Non-accelerated filer ☐o

Smaller reporting company ☐

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.o◻

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐o No ☒x

~~Table of Contents~~

INDEX

	~~Page No.~~
			Page No.
~~PART I.~~		~~FINANCIAL INFORMATION~~
PART I.		FINANCIAL INFORMATION
~~Item 1.~~		~~Financial Statements~~
Item 1.		Financial Statements

		Condensed Consolidated Balance Sheets — ~~September~~June 26 , 2022 and December 26, 2021 ~~and December 27, 2020~~	3

		Condensed Consolidated Statements of Operations — Three and ~~Nine~~ six months ended ~~September~~June 26 , 2022 and June 27 , 2021 ~~and September 27, 2020~~	4

		Condensed Consolidated Statements of Comprehensive Income — Three and ~~Nine~~six months ended ~~September~~June 26 , 2022 and June 27 , 2021 ~~and September 27, 2020~~	5

		Condensed Consolidated Statements of Stockholders’ Deficit — Three and ~~Nine~~ six months ended ~~September~~June 26 , 2022 and June 27 , 2021 ~~and September 27, 2020~~	6

		Condensed Consolidated Statements of Cash Flows — ~~Nine~~Six months ended ~~September~~June 26 , 2022 and June 27 , 2021 ~~and September 27, 2020~~	8

		Notes to Condensed Consolidated Financial Statements	9

Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations	25 26

Item 3.		Quantitative and Qualitative Disclosures About Market Risk	39 42

Item 4.		Controls and Procedures	40 43

PART II.		OTHER INFORMATION

Item 1.		Legal Proceedings	40 43

Item 1A.		Risk Factors	40 43

Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds	41 44

Item 6.		Exhibits	42 45

~~Table of Contents~~

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Papa John’s International, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

September 26,

December 27,
(In thousands, except per share amounts)

2021

2020

(Unaudited)

Assets

Current assets:

Cash and cash equivalents

$
105,813

$
130,204
Accounts receivable, net

79,534

90,135
Notes receivable, current portion

13,075

11,318
Income tax receivable

599

1,273
Inventories

33,490

30,265
Prepaid expenses and other current assets

39,249

43,212
Total current assets

271,760

306,407
Property and equipment, net

209,072

200,895
Finance lease right-of-use assets, net

21,917

16,840
Operating lease right-of-use assets

174,119

148,110
Notes receivable, less current portion, net

37,263

36,538
Goodwill

80,906

80,791
Deferred income taxes

13,926

10,800
Other assets

80,991

72,389
Total assets

$
889,954

$
872,770

Liabilities, Series B Convertible Preferred Stock, Redeemable noncontrolling interests and Stockholders’ deficit

Current liabilities:

Accounts payable

$
42,384

$
37,370
Income and other taxes payable

26,221

10,263
Accrued expenses and other current liabilities

201,528

174,563
Current deferred revenue

20,617

19,590
Current finance lease liabilities

4,914

3,545
Current operating lease liabilities

22,455

23,538
Current portion of long-term debt

—

20,000
Total current liabilities

318,119

288,869
Deferred revenue

12,471

13,664
Long-term finance lease liabilities

17,555

13,531
Long-term operating lease liabilities

157,359

124,666
Long-term debt, less current portion, net

414,915

328,292
Deferred income taxes

178

948
Other long-term liabilities

98,872

111,364
Total liabilities

1,019,469

881,334

Series B Convertible Preferred Stock; $0.01 par value; 0 shares authorized, issued or outstanding at September 26, 2021, compared to 260.0 shares authorized, 252.5 shares issued and outstanding at December 27, 2020

—

251,901
Redeemable noncontrolling interests

7,531

6,474

Stockholders’ deficit:

Common stock ($0.01 par value per share; issued 48,989 at September 26, 2021 and 45,288 at December 27, 2020)

490

453
Additional paid-in capital

440,742

254,103
Accumulated other comprehensive loss

(9,910)

(14,168)
Retained earnings

171,378

219,158
Treasury stock (12,806 shares at September 26, 2021 and 12,743 shares at December 27, 2020, at cost)

(755,035)

(741,724)
Total stockholders’ deficit

(152,335)

(282,178)
Noncontrolling interests in subsidiaries

15,289

15,239
Total Stockholders’ deficit

(137,046)

(266,939)
Total liabilities, Series B Convertible Preferred Stock, Redeemable noncontrolling interests and
Stockholders’ deficit

$
889,954

$
872,770

(In thousands, except per share amounts) June 26,
2022 December 26,
2021
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 52,124 $ 70,610
Accounts receivable, net 87,495 81,370
Notes receivable, current portion 8,333 12,352
Income tax receivable 4,017 9,386
Inventories 38,076 34,981
Prepaid expenses and other current assets 49,743 46,310
Total current assets 239,788 255,009
Property and equipment, net 225,382 223,856
Finance lease right-of-use assets, net 18,642 20,907
Operating lease right-of-use assets 176,719 176,256
Notes receivable, less current portion, net 19,703 35,504
Goodwill 70,731 80,632
Deferred income taxes 8,657 5,156
Other assets 76,650 88,384
Total assets $ 836,272 $ 885,704
Liabilities, Redeemable noncontrolling interests and Stockholders’ deficit
Current liabilities:
Accounts payable $ 40,845 $ 28,092
Income and other taxes payable 16,785 19,996
Accrued expenses and other current liabilities 146,213 190,116
Current deferred revenue 19,925 21,700
Current finance lease liabilities 5,224 4,977
Current operating lease liabilities 21,485 22,543
Total current liabilities 250,477 287,424
Deferred revenue 23,633 13,846
Long-term finance lease liabilities 14,252 16,580
Long-term operating lease liabilities 164,336 160,672
Long-term debt, less current portion, net 536,446 480,730
Deferred income taxes 236 258
Other long-term liabilities 79,516 93,154
Total liabilities 1,068,896 1,052,664
Redeemable noncontrolling interests 1,174 5,498
Stockholders’ deficit:
Common stock ($0.01 par value per share; issued 49,096 at June 26, 2022 and 49,002 at December 26, 2021) 491 490
Additional paid-in capital 442,255 445,126
Accumulated other comprehensive loss (11,034) (9,971)
Retained earnings 193,934 183,157
Treasury stock (13,848 shares at June 26, 2022 and 13,205 shares at December 26, 2021, at cost) (875,205) (806,472)
Total stockholders’ deficit (249,559) (187,670)
Noncontrolling interests in subsidiaries 15,761 15,212
Total Stockholders’ deficit (233,798) (172,458)
Total liabilities, Redeemable noncontrolling interests and Stockholders’ deficit $ 836,272 $ 885,704

See accompanying notes.

~~Table of Contents~~

Papa John’s International, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

~~(Unaudited)~~

Three Months Ended

Nine Months Ended

September 26,

September 27,

September 26,

September 27,
(In thousands, except per share amounts)

2021

2020

2021

2020

Revenues:

Domestic Company-owned restaurant sales

$
191,584

$
178,371

$
584,942

$
526,317
North America franchise royalties and fees

31,933

25,281

97,123

68,895
North America commissary revenues

189,224

181,338

560,743

504,379
International revenues

38,408

33,440

110,629

87,592
Other revenues

61,633

54,511

186,099

156,240
Total revenues

512,782

472,941

1,539,536

1,343,423
Costs and expenses:

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

Domestic Company-owned restaurant expenses

155,477

144,803

465,658

419,082
North America commissary expenses

175,399

167,937

518,310

466,676
International expenses

21,743

19,370

62,791

52,775
Other expenses

56,039

50,917

168,092

148,219
General and administrative expenses

54,070

52,601

157,779

148,680
Depreciation and amortization

11,477

12,764

36,830

37,436
Total costs and expenses

474,205

448,392

1,409,460

1,272,868
Operating income

38,577

24,549

130,076

70,555
Net interest expense

(3,979)

(3,636)

(11,275)

(11,230)
Income before income taxes

34,598

20,913

118,801

59,325
Income tax expense

4,057

4,516

19,387

11,984
Net income before attribution to noncontrolling interests

30,541

16,397

99,414

47,341
Net income attributable to noncontrolling interests

(1,285)

(689)

(4,021)

(2,576)
Net income attributable to the Company

$
29,256

$
15,708

$
95,393

$
44,765

Calculation of net income (loss) for earnings per share:

Net income attributable to the Company

$
29,256

$
15,708

$
95,393

$
44,765
Dividends on redemption of Series B Convertible Preferred Stock

—

—

(109,852)

—
Dividends paid to participating securities

(137)

(3,548)

(5,964)

(10,546)
Net income attributable to participating securities

(158)

(703)

—

(1,809)
Net income (loss) attributable to common shareholders

$
28,961

$
11,457

$
(20,423)

$
32,410

Basic earnings (loss) per common share

$
0.80

$
0.35

$
(0.59)

$
1.00
Diluted earnings (loss) per common share

$
0.79

$
0.35

$
(0.59)

$
0.99

Basic weighted average common shares outstanding

36,387

32,616

34,619

32,347
Diluted weighted average common shares outstanding

36,719

32,971

34,619

32,643

Dividends declared per common share

$
0.350

$
0.225

$
0.800

$
0.675

~~See accompanying notes.~~

(Unaudited)


	Three Months Ended				Six Months Ended
(In thousands, except per share amounts)	June 26, 2022		June 27, 2021		June 26, 2022		June 27, 2021

Revenues:
Domestic Company-owned restaurant sales	$	171,411	$	196,124	$	370,176	$	393,358
North America franchise royalties and fees	34,917		32,475		69,185		65,190
North America commissary revenues	219,383		186,641		429,062		371,519
International revenues	31,958		37,614		66,575		72,221
Other revenues	64,996		62,154		130,359		124,466
Total revenues	522,665		515,008		1,065,357		1,026,754
Costs and expenses:
Operating costs (excluding depreciation and amortization shown separately below):
Domestic Company-owned restaurant expenses	142,026		154,293		303,687		310,181
North America commissary expenses	204,470		172,227		401,560		342,911
International expenses	19,236		21,430		39,150		41,048
Other expenses	60,648		56,246		121,203		112,053
General and administrative expenses	44,646		53,698		110,584		103,709
Depreciation and amortization	12,735		12,477		24,674		25,353
Total costs and expenses	483,761		470,371		1,000,858		935,255
Refranchising and impairment loss	—		—		(11,160)		—
Operating income	38,904		44,637		53,339		91,499
Net interest expense	(6,081)		(3,649)		(10,344)		(7,296)
Income before income taxes	32,823		40,988		42,995		84,203
Income tax expense	7,093		7,398		5,838		15,330
Net income before attribution to noncontrolling interests	25,730		33,590		37,157		68,873
Net income attributable to noncontrolling interests	(297)		(1,336)		(1,230)		(2,736)
Net income attributable to the Company	$	25,433	$	32,254	$	35,927	$	66,137

Calculation of net income for earnings per share:
Net income attributable to the Company	$	25,433	$	32,254	$	35,927	$	66,137
Dividends on redemption of Series B Convertible Preferred Stock	—		(109,852)		—		(109,852)
Dividends paid to participating securities	(82)		(2,300)		(141)		(5,827)
Net income attributable to participating securities	(111)		—		(93)		—
Net income (loss) attributable to common shareholders	$	25,240	$	(79,898)	$	35,693	$	(49,542)

Basic earnings (loss) per common share	$	0.71	$	(2.30)	$	1.00	$	(1.47)
Diluted earnings (loss) per common share	$	0.70	$	(2.30)	$	0.99	$	(1.47)

Basic weighted average common shares outstanding	35,624		34,729		35,775		33,739
Diluted weighted average common shares outstanding	35,824		34,729		36,032		33,739

Dividends declared per common share	$	0.350	$	0.225	$	0.700	$	0.450

~~Table of Contents~~

Papa John’s International, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)

Three Months Ended

Nine Months Ended

September 26,

September 27,

September 26,

September 27,
(In thousands)

2021

2020

2021

2020

Net income before attribution to noncontrolling interests

$
30,541

$
16,397

$
99,414

$
47,341
Other comprehensive income (loss), before tax:

Foreign currency translation adjustments

(1,113)

1,721

383

(1,438)
Interest rate swaps (1)

1,535

1,647

5,147

(9,375)
Other comprehensive income (loss), before tax

422

3,368

5,530

(10,813)
Income tax effect:

Foreign currency translation adjustments

256

(395)

(88)

332
Interest rate swaps (2)

(353)

(379)

(1,184)

2,156
Income tax effect

(97)

(774)

(1,272)

2,488
Other comprehensive income (loss), net of tax

325

2,594

4,258

(8,325)
Comprehensive income before attribution to noncontrolling interests

30,866

18,991

103,672

39,016
Less: comprehensive (income), redeemable noncontrolling interests

(692)

(301)

(2,192)

(1,184)
Less: comprehensive (income), nonredeemable noncontrolling interests

(593)

(388)

(1,829)

(1,392)
Comprehensive income attributable to the Company

$
29,581

$
18,302

$
99,651

$
36,440


	Three Months Ended				Six Months Ended
(In thousands)	June 26, 2022		June 27, 2021		June 26, 2022		June 27, 2021

Net income before attribution to noncontrolling interests	$	25,730	$	33,590	$	37,157	$	68,873
Other comprehensive (loss) income, before tax:
Foreign currency translation adjustments	(4,109)		437		(4,970)		1,496
Interest rate swaps (1)	1,877		1,817		3,589		3,612
Other comprehensive (loss) income, before tax	(2,232)		2,254		(1,381)		5,108
Income tax effect:
Foreign currency translation adjustments	946		(100)		1,144		(344)
Interest rate swaps (2)	(432)		(418)		(826)		(831)
Income tax effect	514		(518)		318		(1,175)
Other comprehensive (loss) income, net of tax	(1,718)		1,736		(1,063)		3,933
Comprehensive income before attribution to noncontrolling interests	24,012		35,326		36,094		72,806
Less: comprehensive (income), redeemable noncontrolling interests	(18)		(713)		(528)		(1,500)
Less: comprehensive (income), nonredeemable noncontrolling interests	(279)		(623)		(702)		(1,236)
Comprehensive income attributable to the Company	$	23,715	$	33,990	$	34,864	$	70,070

_______________


(1)			Amounts reclassified out of accumulated other comprehensive loss into net interest expense include $(735) and $(200) for the three and six months ended June 26, 2022, respectively, and $(1,730) and $(3,439) for the three and six months ended June 27, 2021, respectively.
(2)			The income tax effects of amounts reclassified out of accumulated other comprehensive loss into net interest expense were $165 and $45 for the three and six months ended June 26, 2022, respectively, and $388 and $771 for the three and six months ended June 27, 2021, respectively.

~~(1)~~Amounts reclassified out of accumulated other comprehensive loss into net interest expense include ($1,644) and ($5,084) for the three and nine months ended September 26, 2021, respectively, and ($1,674) and ($3,376) for the three and nine months ended September 27, 2020, respectively.

~~(2)~~The income tax effects of amounts reclassified out of accumulated other comprehensive loss into net interest expense were $368 and $1,139 for the three and nine months ended September 26, 2021, respectively, and $378 and $763 for the three and nine months ended September 27, 2020, respectively.

See accompanying notes.

Papa John’s International, Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Deficit


	Papa John’s International, Inc.
(In thousands)	Common Stock Shares Outstanding	Common Stock		Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Treasury Stock		Noncontrolling Interests in Subsidiaries		Total Stockholders’ Deficit
For the three months ended June 26, 2022
Balance at March 27, 2022	35,675	$	491	$	436,225	$	(9,316)	$	181,124	$	(832,603)	$	15,635	$	(208,444)
Net income (1)	—	—		—		—		25,433		—		279		25,712
Other comprehensive (loss), net of tax	—	—		—		(1,718)		—		—		—		(1,718)
Cash dividends on common stock	—	—		48		—		(12,541)		—		—		(12,493)
Exercise of stock options	22	—		1,167		—		—		—		—		1,167
Acquisition of Company common stock	(452)	—		—		—		—		(42,762)		—		(42,762)
Stock-based compensation expense	—	—		4,925		—		—		—		—		4,925
Issuance of restricted stock	2	—		(81)		—		—		81		—		—
Tax payments for equity award issuances	(1)	—		(65)		—		—		—		—		(65)
Distributions to noncontrolling interests	—	—		—		—		—		—		(150)		(150)
Other	2	—		36		—		(82)		79		(3)		30
Balance at June 26, 2022	35,248	$	491	$	442,255	$	(11,034)	$	193,934	$	(875,205)	$	15,761	$	(233,798)

For the six months ended June 26, 2022
Balance at December 26, 2021	35,797	$	490	$	445,126	$	(9,971)	$	183,157	$	(806,472)	$	15,212	$	(172,458)
Net income (1)	—	—		—		—		35,927		—		702		36,629
Other comprehensive (loss), net of tax	—	—		—		(1,063)		—		—		—		(1,063)
Cash dividends on common stock	—	—		95		—		(25,196)		—		—		(25,101)
Exercise of stock options	39	—		1,908		—		—		—		—		1,908
Acquisition of Company common stock	(753)	—		—		—		—		(75,471)		—		(75,471)
Stock-based compensation expense	—	1		9,100		—		—		—		—		9,101
Issuance of restricted stock	229	—		(6,450)		—		—		6,450		—		—
Tax payments for equity award issuances	(70)	—		(7,527)		—		—		—		—		(7,527)
Distributions to noncontrolling interests	—	—		—		—		—		—		(150)		(150)
Other	6	—		3		—		46		288		(3)		334
Balance at June 26, 2022	35,248	$	491	$	442,255	$	(11,034)	$	193,934	$	(875,205)	$	15,761	$	(233,798)

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

Papa John’s International, Inc.


Common







Accumulated











Stock

Additional

Other

Noncontrolling

Total
(In thousands)

Shares

Common

Paid-In

Comprehensive

Retained

Treasury

Interests in

Stockholders’
For the three months ended September 26, 2021

Outstanding

Stock

Capital

Loss

Earnings

Stock

Subsidiaries

Deficit
Balance at June 27, 2021

36,215

$
489

$
435,608

$
(10,235)

$
154,769

$
(743,819)

$
15,290

$
(147,898)
Net income (1)

—

—

—

—

29,256

—

593

29,849
Other comprehensive income, net of tax

—

—

—

325

—

—

—

325
Cash dividends on common stock

—

—

48

—

(12,845)

—

—

(12,797)
Exercise of stock options

51

1

3,111

—

—

—

—

3,112
Acquisition of Company common stock

(103)

—

—

—

—

(12,367)

—

(12,367)
Stock-based compensation expense

—

—

4,317

—

—

—

—

4,317
Issuance of restricted stock

15

—

(873)

—

—

873

—

—
Tax effect of restricted stock awards

—

—

(1,423)

—

—

—

—

(1,423)
Distributions to noncontrolling interests

—

—

—

—

—

—

(594)

(594)
Other

5

—

(46)

—

198

278

—

430
Balance at September 26, 2021

36,183

$
490

$
440,742

$
(9,910)

$
171,378

$
(755,035)

$
15,289

$
(137,046)

For the nine months ended September 26, 2021

Balance at December 27, 2020

32,545

$
453

$
254,103

$
(14,168)

$
219,158

$
(741,724)

$
15,239

$
(266,939)
Net income (1)

—

—

—

—

95,393

—

1,829

97,222
Other comprehensive income, net of tax

—

—

—

4,258

—

—

—

4,258
Repurchase and conversion of Series B Convertible Preferred Stock

3,489

35

174,631

—

(110,498)

—

—

64,168
Cash dividends on common stock

—

—

110

—

(27,750)

—

—

(27,640)
Cash dividends on preferred stock

—

—

—

—

(4,121)

—

—

(4,121)
Exercise of stock options

199

2

11,209

—

—

—

—

11,211
Acquisition of Company common stock

(187)

—

—

—

—

(20,555)

—

(20,555)
Stock-based compensation expense

—

—

12,519

—

—

—

—

12,519
Issuance of restricted stock

125

—

(6,538)

—

—

6,538

—

—
Tax effect of restricted stock awards

—

—

(5,310)

—

—

—

—

(5,310)
Distributions to noncontrolling interests

—

—

—

—

—

—

(1,779)

(1,779)
Other

12

—

18

—

(804)

706

—

(80)
Balance at September 26, 2021

36,183

$
490

$
440,742

$
(9,910)

$
171,378

$
(755,035)

$
15,289

$
(137,046)

~~(1)~~

Net income to the Company for the three and nine months ended September 26, 2021 excludes $692 and $2,192, respectively, allocable to the redeemable noncontrolling interests for our joint venture arrangements.

At ~~September~~June 26, ~~2021,~~2022, the accumulated other comprehensive loss of ~~$9,910~~$11,034 was comprised of net unrealized foreign currency translation loss of ~~$3,499~~$8,696 and net unrealized loss on the interest rate swap agreements of ~~$6,411.~~

$2,338.

See accompanying notes.


	Papa John’s International, Inc.
(In thousands)	Common Stock Shares Outstanding	Common Stock		Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Treasury Stock		Noncontrolling Interests in Subsidiaries		Total Stockholders’ Deficit
For the three months ended June 27, 2021
Balance at March 28, 2021	32,681	$	453	$	251,285	$	(11,971)	$	242,119	$	(737,268)	$	15,282	$	(240,100)
Net income (1)	—	—		—		—		32,254		—		623		32,877
Other comprehensive income, net of tax	—	—		—		1,736		—		—		—		1,736
Repurchase and conversion of Series B Convertible Preferred Stock	3,489	35		174,631		—		(110,783)		—		—		63,883
Cash dividends on common stock	—	—		31		—		(7,471)		—		—		(7,440)
Cash dividends on preferred stock	—	—		—		—		(709)		—		—		(709)
Exercise of stock options	107	1		5,801		—		—		—		—		5,802
Acquisition of Company common stock	(68)	—		—		—		—		(6,921)		—		(6,921)
Stock-based compensation expense	—	—		4,089		—		—		—		—		4,089
Issuance of restricted stock	5	—		(294)		—		—		294		—		—
Tax payments for equity award issuances	—	—		(52)		—		—		—		—		(52)
Distributions to noncontrolling interests	—	—		—		—		—		—		(615)		(615)
Other	1	—		117		—		(641)		76		—		(448)
Balance at June 27, 2021	36,215	$	489	$	435,608	$	(10,235)	$	154,769	$	(743,819)	$	15,290	$	(147,898)

For the six months ended June 27, 2021
Balance at December 27, 2020	32,545	$	453	$	254,103	$	(14,168)	$	219,158	$	(741,724)	$	15,239	$	(266,939)
Net income (1)	—	—		—		—		66,137		—		1,236		67,373
Other comprehensive income, net of tax	—	—		—		3,933		—		—		—		3,933
Repurchase and conversion of Series B Convertible Preferred Stock	3,489	35		174,631		—		(110,783)		—		—		63,883
Cash dividends on common stock	—	—		62		—		(14,906)		—		—		(14,844)
Cash dividends on preferred stock	—	—		—		—		(4,121)		—		—		(4,121)
Exercise of stock options	148	1		8,099		—		—		—		—		8,100
Acquisition of Company common stock	(83)	—		—		—		—		(8,188)		—		(8,188)
Stock-based compensation expense	—	—		8,202		—		—		—		—		8,202
Issuance of restricted stock	109	—		(5,665)		—		—		5,665		—		—
Tax payments for equity award issuances	—	—		(3,887)		—		—		—		—		(3,887)
Distributions to noncontrolling interests	—	—		—		—		—		—		(1,185)		(1,185)
Other	7	—		63		—		(716)		428		—		(225)
Balance at June 27, 2021	36,215	$	489	$	435,608	$	(10,235)	$	154,769	$	(743,819)	$	15,290	$	(147,898)

~~Table of Contents~~

_______________

~~Papa John’s International, Inc.~~(1) Net income to the Company for the three and ~~Subsidiaries~~

~~Condensed Consolidated Statements of Stockholders’ Deficit (continued)~~

~~(Unaudited)~~

Papa John’s International, Inc.


Common







Accumulated











Stock

Additional

Other

Noncontrolling

Total
(In thousands)

Shares

Common

Paid-In

Comprehensive

Retained

Treasury

Interests in

Stockholders’
For the three months ended September 27, 2020

Outstanding

Stock

Capital

Loss

Earnings

Stock

Subsidiaries

Deficit
Balance at June 28, 2020

32,349

$
451

$
243,577

$
(21,104)

$
212,104

$
(742,600)

$
15,724

$
(291,848)
Net income (2)

—

—

—

—

15,708

—

388

16,096
Other comprehensive income, net of tax

—

—

—

2,594

—

—

—

2,594
Cash dividends on common stock

—

—

78

—

(7,414)

—

—

(7,336)
Cash dividends on preferred stock

—

—

—

—

(3,412)

—

—

(3,412)
Exercise of stock options

131

1

7,499

—

—

—

—

7,500
Stock-based compensation expense

—

—

4,328

—

—

—

—

4,328
Issuance of restricted stock

2

—

(105)

—

—

105

—

—
Tax effect of restricted stock awards

—

—

(86)

—

—

—

—

(86)
Distributions to noncontrolling interests

—

—

—

—

—

—

(697)

(697)
Other

3

—

(81)

—

(75)

172

—

16
Balance at September 27, 2020

32,485

$
452

$
255,210

$
(18,510)

$
216,911

$
(742,323)

$
15,415

$
(272,845)

For the nine months ended September 27, 2020

Balance at December 29, 2019

31,894

$
447

$
219,047

$
(10,185)

$
205,697

$
(747,327)

$
15,665

$
(316,656)
Cumulative effect of adoption of ASU 2016-13 (1)

—

—

—

—

(1,066)

—

—

(1,066)
Adjusted Balance at December 30, 2019

31,894

$
447

$
219,047

$
(10,185)

$
204,631

$
(747,327)

$
15,665

$
(317,722)
Net income (2)

—

—

—

—

44,765

—

1,392

46,157
Other comprehensive loss, net of tax

—

—

—

(8,325)

—

—

—

(8,325)
Cash dividends on common stock

—

—

210

—

(22,066)

—

—

(21,856)
Cash dividends on preferred stock

—

—

—

—

(10,237)

—

—

(10,237)
Exercise of stock options

505

5

29,199

—

—

—

—

29,204
Stock-based compensation expense

—

—

13,071

—

—

—

—

13,071
Issuance of restricted stock

79

—

(4,573)

—

—

4,573

—

—
Tax effect of restricted stock awards

—

—

(1,665)

—

—

—

—

(1,665)
Distributions to noncontrolling interests

—

—

—

—

—

—

(1,642)

(1,642)
Other

7

—

(79)

—

(182)

431

—

170
Balance at September 27, 2020

32,485

$
452

$
255,210

$
(18,510)

$
216,911

$
(742,323)

$
15,415

$
(272,845)

six months ended June 27, 2021 excludes $713 and $1,500 allocable to the redeemable noncontrolling interests for our joint venture arrangements.

~~(1)~~

As of December 30, 2019, the Company adopted Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”.

~~(2)~~

Net income to the Company for the three and nine months ended September 27, 2020 excludes $301 and $1,184, respectively, allocable to the redeemable noncontrolling interests for our joint venture arrangements.

At ~~September~~June 27, ~~2020,~~2021, the accumulated other comprehensive loss of ~~$18,510~~$10,235 was comprised of net unrealized foreign currency translation loss of ~~$6,705~~$2,641 and net unrealized loss on the interest rate swap agreements of ~~$11,805.~~

$7,594.

See accompanying notes.

Papa John’s International, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

Nine Months Ended

September 26,

September 27,
(In thousands)

2021

2020

Operating activities

Net income before attribution to noncontrolling interests

$
99,414

$
47,341
Adjustments to reconcile net income to net cash provided by operating activities:

Benefit for allowance for credit losses on accounts and notes receivable

(920)

(334)
Depreciation and amortization

36,830

37,436
Deferred income taxes

(5,113)

(4,696)
Stock-based compensation expense

12,519

13,071
Other

1,052

1,233
Changes in operating assets and liabilities, net of acquisitions:

Accounts receivable

5,955

(4,378)
Income tax receivable

674

3,131
Inventories

(3,217)

(1,173)
Prepaid expenses and other current assets

11,277

14,393
Other assets and liabilities

(8,627)

18,080
Accounts payable

5,014

3,147
Income and other taxes payable

15,958

2,435
Accrued expenses and other current liabilities

24,001

40,112
Deferred revenue

(1,193)

(1,251)
Net cash provided by operating activities

193,624

168,547
Investing activities

Purchases of property and equipment

(41,328)

(24,269)
Notes issued

(14,637)

(13,240)
Repayments of notes issued

15,352

8,906
Acquisitions, net of cash acquired

(699)

—
Other

121

15
Net cash used in investing activities

(41,191)

(28,588)
Financing activities

Proceeds from issuance of senior notes

400,000

—
Repayment of term loan

(340,000)

(15,000)
Net proceeds (repayments) of revolving credit facilities

15,000

(5,000)
Debt issuance costs

(9,179)

—
Proceeds from exercise of stock options

11,211

29,204
Dividends paid to common stockholders

(27,640)

(21,856)
Dividends paid to preferred stockholders

(6,394)

(10,237)
Tax payments for equity award issuances

(5,310)

(1,665)
Repurchase of Series B Convertible Preferred Stock

(188,647)

—
Acquisition of Company common stock

(20,555)

—
Distributions to noncontrolling interests

(2,914)

(1,778)
Other

(2,630)

(1,105)
Net cash used in financing activities

(177,058)

(27,437)
Effect of exchange rate changes on cash and cash equivalents

234

(383)
Change in cash and cash equivalents

(24,391)

112,139
Cash and cash equivalents at beginning of period

130,204

27,911
Cash and cash equivalents at end of period

$
105,813

$
140,050


	Six Months Ended
(In thousands)		June 26, 2022		June 27, 2021

Operating activities
Net income before attribution to noncontrolling interests		$	37,157	$	68,873
Adjustments to reconcile net income to net cash provided by operating activities:
Provision (benefit) for allowance for credit losses on accounts and notes receivable		15,558		(1,200)
Depreciation and amortization		24,674		25,353
Refranchising and impairment loss		11,160		—
Deferred income taxes		(2,993)		(1,397)
Stock-based compensation expense		9,100		8,202
Other		(2,071)		467
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable		(9,177)		13,299
Income tax receivable		5,369		189
Inventories		(3,815)		430
Prepaid expenses and other current assets		(3,901)		1,092
Other assets and liabilities		(5,379)		(11,380)
Accounts payable		12,742		(5,874)
Income and other taxes payable		(3,175)		18,500
Accrued expenses and other current liabilities		(37,456)		12,123
Deferred revenue		(2,208)		(647)
Net cash provided by operating activities		45,585		128,030
Investing activities
Purchases of property and equipment		(30,744)		(21,543)
Notes issued		(1,098)		(5,263)
Repayments of notes issued		6,743		7,922
Acquisitions, net of cash acquired		(1,250)		(699)
Proceeds from refranchising, net of cash transferred		13,588		—
Other		238		116
Net cash used in investing activities		(12,523)		(19,467)
Financing activities
Net proceeds of revolving credit facilities		55,000		85,000
Proceeds from exercise of stock options		1,908		8,100
Repurchase of Series B Convertible Preferred Stock		—		(188,647)
Acquisition of Company common stock		(75,471)		(8,188)
Dividends paid to common stockholders		(25,101)		(14,844)
Dividends paid to preferred stockholders		—		(6,394)
Tax payments for equity award issuances		(7,526)		(3,887)

Distributions to noncontrolling interests		(835)		(2,320)
Repayments of term loan		—		(10,000)
Other		1,348		(1,691)
Net cash used in financing activities		(50,677)		(142,871)
Effect of exchange rate changes on cash and cash equivalents		(871)		317
Change in cash and cash equivalents		(18,486)		(33,991)
Cash and cash equivalents at beginning of period		70,610		130,204
Cash and cash equivalents at end of period		$	52,124	$	96,213

See accompanying notes.

Papa John’s International, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

~~September~~

June 26, ~~2021~~

1.	~~Basis of Presentation~~

2022

1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete annual financial statements. In the opinion of management, all adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation have been included. Operating results for the three and ~~nine~~six months ended ~~September~~June 26, ~~2021~~2022 are not necessarily indicative of the results that may be expected for the fiscal year ending December ~~26, 2021.~~25, 2022. For further information, refer to the consolidated financial statements and footnotes thereto included in the Annual Report on Form 10-K for Papa John’s International, Inc. (referred to as the “Company”, “Papa John’s” or in the first-person notations of “we”, “us” and “our”) for the year ended December ~~27, 2020.~~

2.	~~Significant Accounting Policies~~

26, 2021.

2. Significant Accounting Policies

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Significant items that are subject to such estimates and assumptions include allowance for credit losses on accounts and notes receivable, ~~intangible assets,~~ contract assets and contract liabilities, including the online customer loyalty program obligation and gift card breakage, right-of-use assets and lease liabilities, 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.

Variable Interest Entity

Papa John’s 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. PJMF 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. PJMF is a variable interest entity (“VIE”) that funds its operations with ongoing financial support and contributions from the domestic restaurants, of which approximately ~~80%~~80 percent are franchised (85 percent following the divestiture of the Company’s interest in 1 joint venture in the second quarter that included 90 restaurants as discussed in Note 10) and does not have sufficient equity to fund its operations without these ongoing financial contributions. Based on an assessment of the governance structure and operating procedures of PJMF, the Company determined it has the power to control certain significant activities of PJMF, and therefore, is the primary beneficiary. The Company has consolidated PJMF in its financial results in accordance with Accounting Standards Codification (“ASC”) 810, ~~“Consolidations.~~“Consolidations.”

Noncontrolling Interests

Papa John’s has 4 joint venture arrangements in which there are noncontrolling interests held by third parties that include ~~188~~98 and ~~192~~188 restaurants at ~~September~~June 26, 2022 and June 27, 2021, respectively. As further described in Note 10, we divested our 51 percent interest in 1 joint venture that owned 90-restaurants in the second quarter of 2022. The assets and ~~September 27, 2020, respectively.~~

liabilities associated with this joint venture arrangement were classified as held for sale at the end of the first quarter of 2022.

Consolidated net income is required to be reported separately at amounts attributable to both the Company and the noncontrolling interests. Additionally, disclosures are required to clearly identify and distinguish between the interests of the Company and the interests of the noncontrolling owners, including a disclosure on the face of the Condensed Consolidated Statements of Operations of net income attributable to noncontrolling interests.

~~Table of Contents~~

Net income attributable to these joint ventures for the three and ~~nine~~six months ended ~~September~~June 26, ~~2021~~2022 and ~~September~~June 27, ~~2020~~2021 was as follows (in thousands):

Three Months Ended

Nine Months Ended

September 26,

September 27,

September 26,

September 27,


2021

2020

2021

2020

Papa John’s International, Inc.

$
2,171

$
1,292

$
6,816

$
4,743
Noncontrolling interests

1,285

689

4,021

2,576
Total net income

$
3,456

$
1,981

$
10,837

$
7,319


	Three Months Ended				Six Months Ended
	June 26, 2022		June 27, 2021		June 26, 2022		June 27, 2021

Papa John’s International, Inc.	$	706	$	2,296	$	2,327	$	4,645
Noncontrolling interests	297		1,336		1,230		2,736
Total net income	$	1,003	$	3,632	$	3,557	$	7,381

The following summarizes the redemption feature, location and related accounting within the Condensed Consolidated Balance Sheets for these joint venture arrangements:

Type of Joint Venture Arrangement

Location within the Balance Sheets

Recorded Value

Joint ventures with no redemption feature

Permanent equity

Carrying value

Joint ventures with option to require the Company to purchase the noncontrolling interest - not currently redeemable or redemption not probable

Temporary equity

Carrying value

Deferred Income Tax Accounts and Tax Reserves

We are subject to income taxes in the United States and several foreign jurisdictions. Significant judgment is required in determining Papa John’s provision for income taxes and the related assets and liabilities. The provision for income taxes includes income taxes paid, currently payable or receivable and those deferred. We use an estimated annual effective rate based on expected annual income to determine our quarterly provision for income taxes. The effective income tax rate includes the estimated domestic state effective income tax rate and applicable foreign income tax rates. The effective income tax rate is also impacted by various permanent items and credits, net of any related valuation allowances, and can vary based on changes in estimated annual income. Discrete items are recorded in the quarter in which they occur.

Deferred tax assets and liabilities are determined based on differences between financial reporting and tax basis of assets and liabilities and are measured using enacted tax rates and laws that are expected to be in effect when the differences reverse. Deferred tax assets are also recognized for the estimated future effects of tax attribute carryforwards (e.g., net operating losses, capital losses, and foreign tax credits). The effect on deferred taxes of changes in tax rates is recognized in the period in which the new tax rate is enacted. Valuation allowances are established when necessary on a jurisdictional basis to reduce deferred tax assets to the amounts we expect to realize.

Tax authorities periodically audit the Company. We record reserves and related interest and penalties for identified exposures as income tax expense. We evaluate these issues on a quarterly basis to adjust for events, such as statute of limitations expirations, court or state rulings or audit settlements, which may impact our ultimate payment for such exposures.

Fair Value Measurements and Disclosures

The Company determines the fair value of financial assets and liabilities based on the price that would be received to sell the asset or paid to transfer the liability to a market participant. Certain assets and liabilities are measured at fair value on a recurring basis and are required to be classified and disclosed in one of the following three categories:

●

~~Level 1: Quoted market prices in active markets for identical assets or liabilities.~~

●

~~Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data.~~

●

~~Level 3: Unobservable inputs that are not corroborated by market data.~~

•Level 1: Quoted market prices in active markets for identical assets or liabilities.

•Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data.

•Level 3: Unobservable inputs that are not corroborated by market data.

~~Table of Contents~~

Fair value is a market-based measurement, not an entity-specific measurement. Considerable judgment is required to interpret market data to estimate fair value; accordingly, the fair values presented do not necessarily indicate what the Company or its debtholders could realize in a current market exchange.

Our financial assets and liabilities that were measured at fair value on a recurring basis as of ~~September~~June 26, 2022 and December 26, 2021 ~~and December 27, 2020~~ are as follows:


			Fair Value Measurements
(in thousands)	Carrying Value		Level 1		Level 2		Level 3
June 26, 2022
Financial assets:
Cash surrender value of life insurance policies (a)	$	29,514	$	29,514	$	—	$	—
Interest rate swaps (b)	$	672	$	—	$	672	$	—



December 26, 2021
Financial assets:
Cash surrender value of life insurance policies (a)	$	41,904	$	41,904	$	—	$	—

Financial liabilities:
Interest rate swaps (b)	$	5,536	$	—	$	5,536	$	—

_______________

(a)

Carrying

Fair Value Measurements

(in thousands)

Value

Level 1

Level 2

Level 3

September 26, 2021

Financial assets:

Cash surrender value of life insurance policies (a)

$
40,482

$
40,482

$
—

$
—

Financial liabilities:

Interest rate swaps (b)

8,162

—

8,162

—

December 27, 2020

Financial assets:

Cash surrender value of life insurance policies (a)

$
37,578

$
37,578

$
—

$
—

Financial liabilities:

Interest rate swaps (b)

13,452

—

13,452

—

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

(b)The fair value of our interest rate swaps is based on the sum of all future net present value cash flows. The future cash flows are derived based on the terms of our interest rate swaps, as well as considering published discount factors, and projected London Interbank Offered Rates (“LIBOR”).

~~(a)~~

~~Represents life insurance policies held in our non-qualified deferred compensation plan.~~

~~(b)~~

The fair value of our interest rate swaps is based on the sum of all future net present value cash flows. The future cash flows are derived based on the terms of our interest rate swaps, as well as considering published discount factors, and projected London Interbank Offered Rates (“LIBOR”).

The fair value of certain assets and liabilities approximates carrying value because of the short-term nature of the accounts, including cash and cash equivalents, accounts receivable, net of allowances, and accounts payable. The carrying value of notes receivable, net of allowances, also approximates fair value. The Company’s revolving credit facilities ~~and term debt~~ under ~~the Previous Credit Facility~~its credit agreement approximate carrying value due to ~~their~~its variable market-based interest rate. The Company’s 3.875% senior notes are classified as a Level 2 fair value measurement since the Company estimates the fair value by using recent trading transactions, and ~~have~~has the following estimated fair values and carrying values (excluding the impact of unamortized debt issuance costs) as of ~~September~~June 26, 2022 and December 26, 2021, ~~and December 27, 2020,~~ respectively:

September 26, 2021

December 27, 2020

Carrying

Fair

Carrying

Fair
(in thousands)

Value

Value

Value

Value
3.875% Senior Notes

$
400,000

$
401,000

$
—

$
—


	June 26, 2022				December 26, 2021
(in thousands)	Carrying Value		Fair Value		Carrying Value		Fair Value
3.875% Senior Notes	$	400,000	$	332,000	$	400,000	$	396,000

Allowance for Credit Losses

Estimates of expected credit losses, even if remote, are 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. Credit quality is monitored through the timing of payments compared to the prescribed payment terms and known facts regarding the financial condition of the franchisee or customer. Account and note balances are charged off against the allowance after recovery efforts have ceased.

~~Table of Contents~~

The following table summarizes changes in our allowances for credit losses for accounts receivable and notes receivable:

(in thousands)

Accounts Receivable

Notes Receivable
Balance at December 27, 2020

$
3,622

$
3,211
Current period benefit for expected credit losses

(80)

(563)
Write-offs charged against the allowance

(1,212)

(843)
Recoveries collected

—

(277)
Balance at September 26, 2021

$
2,330

$
1,528

(in thousands) Accounts Receivable Notes Receivable
Balance at December 26, 2021 $ 2,364 $ 1,500
Current period provision for expected credit losses (1) 3,019 12,534
Write-offs charged against the allowance (275) —
Recoveries collected — (14)
Balance at June 26, 2022 $ 5,108 $ 14,020


			(1)			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.

3. Leases

Lessor Operating Leases

We sublease certain retail space to our franchisees in the United Kingdom which are primarily operating leases. At ~~September~~June 26, ~~2021,~~2022, we leased and subleased approximately ~~410~~436 Papa John’s ~~restaurants~~restaurant properties to franchisees in the United Kingdom. The initial lease terms on the franchised sites in the United Kingdom are generally 15 years. The Company has the option to negotiate an extension toward the end of the lease term at the landlord’s discretion. Rental income, primarily derived from properties leased and subleased to franchisees in the United Kingdom, is recognized on a straight-line basis over the respective operating lease terms. We recognized total sublease income of ~~$9.0~~$3.0 million and ~~$7.6~~$6.0 million for the three and six months ended June 26, 2022, respectively, and $3.3 million and $6.1 million for the three and six months ended June 27, 2021, respectively, within Other revenues in the Condensed Consolidated Statements of ~~Operations for the nine months ended September 26, 2021 and September 27, 2020, respectively.~~

Operations.

Lease Guarantees

As a result of assigning our interest in obligations under property leases as a condition of the refranchising of certain restaurants, we are contingently liable for payment of 71approximately 62 domestic leases. These leases have varying terms, the latest of which expires in 2036. As of ~~September~~June 26, ~~2021,~~2022, the estimated maximum amount of undiscounted payments the Company could be required to make in the event of nonpayment by the primary lessees was ~~$12.1~~$10.2 million. This contingent liability is not included in the Condensed Consolidated Balance Sheet as it is not probable to occur. The fair value of the guarantee is not material.

Supplemental Cash Flow & Other Information

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

Nine Months Ended
(in thousands)

September 26, 2021

September 27, 2020
Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from finance leases

$
864

$
435
Financing cash flows from finance leases

3,358

1,438
Operating cash flows from operating leases (a)

28,830

27,965
Right-of-use assets obtained in exchange for new finance lease liabilities

9,190

1,056
Right-of-use assets obtained in exchange for new operating lease liabilities (b)

52,462

18,421
Cash received from sublease income

8,728

7,641

(a) Included within the change in Other assets and liabilities within the Condensed Consolidated Statements of Cash Flows offset by non-cash operating lease right-of-use asset amortization and lease liability accretion.
(b) Includes right-of-use assets of approximately $21.8 million for the nine months ended September 26, 2021 associated with the lease commencement of our Atlanta, Georgia corporate office.


	Six Months Ended
(in thousands)		June 26, 2022		June 27, 2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from finance leases		$	510	$	574
Financing cash flows from finance leases		2,508		2,188
Operating cash flows from operating leases (a)		18,363		19,139
Right-of-use assets obtained in exchange for new finance lease liabilities		569		8,393
Right-of-use assets obtained in exchange for new operating lease liabilities (b)		31,369		35,115
Cash received from sublease income		5,623		5,890

(a)Included within the change in Other assets and liabilities within the Condensed Consolidated Statements of Cash Flows offset by non-cash operating lease right-of-use asset amortization and lease liability accretion.
(b)Includes right-of-use assets of approximately $14.3 million for the six months ended June 27, 2021 associated with the lease commencement of our Atlanta, Georgia corporate office.

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4. Papa John’s Marketing Fund, Inc.

PJMF collects a percentage of revenues from Company-owned and franchised restaurants in the United States, for the purpose of designing and administering advertising and promotional programs for all participating domestic restaurants. Contributions and expenditures are reported on a gross basis in the Condensed Consolidated Statements of Operations within Other revenues and Other expenses.

Assets and liabilities of PJMF, which are restricted in their use, included in the Condensed Consolidated Balance Sheets were as follows (in thousands):

September 26,

December 27,

2021

2020

Assets

Current assets:

Cash and cash equivalents

$
32,629

$
9,394
Accounts receivable, net

13,078

23,711
Income tax receivable

191

192
Prepaid expenses and other current assets

1,802

1,914
Total current assets

47,700

35,211
Deferred income taxes

595

588
Total assets

$
48,295

$
35,799

Liabilities

Current liabilities:

Accounts payable

$
9,810

$
5,429
Income and other taxes payable

2

2
Accrued expenses and other current liabilities

39,663

32,578
Current deferred revenue

3,235

3,938
Total current liabilities

52,710

41,947
Deferred revenue

1,881

2,419
Total liabilities

$
54,591

$
44,366


	June 26, 2022		December 26, 2021

Assets
Current assets:
Cash and cash equivalents	$	16,886	$	24,481
Accounts receivable, net	13,523		14,150
Income tax receivable	44		300
Prepaid expenses and other current assets	2,012		1,718
Total current assets	32,465		40,649
Deferred income taxes	592		614
Total assets	$	33,057	$	41,263


Liabilities
Current liabilities:
Accounts payable	$	278	$	140
Income and other taxes payable	2		2
Accrued expenses and other current liabilities	32,805		40,154
Current deferred revenue	3,479		4,317
Total current liabilities	36,564		44,613
Deferred revenue	1,978		2,478
Total liabilities	$	38,542	$	47,091

5. Revenue Recognition

Contract Balances

Our contract liabilities primarily relate to franchise fees, unredeemed gift card liabilities, and loyalty program obligations, which we classify as Deferred revenue on the Condensed Consolidated Balance Sheets. During the three and ~~nine~~six months ended ~~September~~June 26, ~~2021,~~2022, the Company recognized ~~$9.2~~$8.3 million and ~~$27.3~~$17.6 million in revenue, respectively, related to deferred revenue, compared to ~~$8.4~~$9.0 million and ~~$24.7~~$18.2 million for the three and ~~nine~~six months ended ~~September~~June 27, ~~2020.~~

2021.

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

Contract Liabilities

September 26, 2021

December 27, 2020

Change
Franchise fees and unredeemed gift card liabilities

$
17,949

$
19,890

$
(1,941)
Customer loyalty program obligations

15,139

13,364

1,775
Total contract liabilities

$
33,088

$
33,254

$
(166)


	Contract Liabilities
	June 26, 2022		December. 26, 2021		Change
Franchise fees and unredeemed gift card liabilities	$	30,306	$	20,410	$	9,896
Customer loyalty program obligations	13,252		15,136		(1,884)
Total contract liabilities	$	43,558	$	35,546	$	8,012

Our contract assets consist primarily of equipment incentives provided to franchisees. Equipment incentives are related to the future value of commissary revenue the Company will receive over the term of the incentive agreement. As of ~~September~~June 26, ~~2021~~2022 and December ~~27, 2020,~~26, 2021, the contract assets were approximately ~~$5.6~~$7.4 million and ~~$5.1~~$5.8 million, respectively. For the three and ~~nine~~six months ended ~~September~~June 26, ~~2021,~~2022, revenue was reduced approximately ~~$0.8~~$1.1 million

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and ~~$2.2~~$1.9 million ~~respectively,~~ for the amortization of contract assets over the applicable contract terms. Contract assets are included in Prepaid expenses and other current assets and Other assets on the Condensed Consolidated Balance Sheets.

Transaction Price Allocated to the Remaining Performance Obligations

The following table (in thousands) includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied at the end of the reporting period.

Performance Obligations by Period

Less than 1 Year

1-2 Years

2-3 Years

3-4 Years

4-5 Years

Thereafter

Total
Franchise fees

$
2,242

$
2,003

$
1,766

$
1,550

$
1,294

$
2,477

$
11,332


	Performance Obligations by Period
	Less than 1 Year		1-2 Years		2-3 Years		3-4 Years		4-5 Years		Thereafter		Total
Franchise fees	$	3,198	$	2,989	$	2,811	$	2,604	$	2,324	$	7,888	$	21,814

Approximately ~~$1.5~~$3.0 million of area development fees related to unopened stores and international unearned royalties are included in Deferred revenue. Timing of revenue recognition is dependent upon the timing of store openings and franchisees’ revenues. Gift card liabilities of approximately ~~$5.1~~$5.4 million, included in Deferred revenue, will be recognized in Company-owned restaurant revenues when gift cards are redeemed. The Company will recognize redemption fee revenue in Other revenues when cards are redeemed at franchised restaurant locations.

The Company applies the practical expedient in ASC ~~606-10-50-14~~606, "Revenue Recognition" and does not disclose information about remaining performance obligations that have original expected durations of one year or less.

6. Common Stock ~~and Series B Convertible Preferred Stock~~

Shares Authorized and Outstanding

The Company has authorized 5.0 million shares of preferred stock (of which ~~NaN~~none were issued or outstanding at ~~September~~June 26, ~~2021~~2022 and December ~~27, 2020, respectively)~~26, 2021) and 100.0 million shares of common stock as of ~~September~~June 26, ~~2021~~2022 and December ~~27, 2020, respectively.~~26, 2021. There were ~~36.2~~35.2 million shares of ~~the Company’s~~ common stock outstanding, net of repurchased shares of common stock at ~~September~~June 26, ~~2021~~2022, compared to ~~32.5~~35.8 million shares at December ~~27, 2020.~~

During the second quarter of 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. Additionally, 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 Convertible Preferred Stock in the Condensed Consolidated Statement of Operations, which reduced net income attributable to common stockholders during the second quarter of26, 2021. ~~Diluted earnings per share for the nine months ended September 26, 2021 was reduced by $3.14 as a result of this transaction.~~

On August 3, 2021, the Company filed a Certificate of Elimination (the “Certificate of Elimination”) with the Secretary of State of the State of Delaware to eliminate the Series B Preferred Stock. No shares of Series B Preferred Stock were issued or outstanding following the repurchase and conversion thereof in the second quarter of 2021. Effective upon filing, the Certificate of Elimination eliminated from the Company’s Amended and Restated Certificate of Incorporation all matters set forth in the Certificate of Designation with respect to the Series B Preferred Stock. The shares that were designated to such series were returned to the status of authorized but unissued shares of preferred stock, par value $0.01 per share, of the Company, without designation as to series.

~~Table of Contents~~

Share Repurchase Program

Our Board of Directors has authorized the repurchase of up to $75.0 million of common stock under a share repurchase program that began on November 4, 2020 and is effective through December 26, 2021. Through September 26, 2021, a total of approximately 219,000 shares with an aggregate cost of $23.3 million and an average price of $106.16 per share were repurchased under this program. Funding for the share repurchase program has been provided through our operating cash flows. Subsequent to September 26, 2021, we acquired an additional 158,000 shares at an aggregate cost of $19.8 million and an average price of $125.50 per share. Approximately $31.9 million remained available under this share repurchase program as of October 29, 2021.

~~Subsequent to the end of the third quarter, on~~

On October 28, 2021, our Board of Directors approved a ~~new~~ share repurchase program with an indefinite duration for up to $425.0 million of the Company’s common ~~stock, with an indefinite duration.~~stock. This ~~represents approximately 9.4% of the Company’s currently outstanding common stock based on the closing stock price as of October 29, 2021. The new~~ share repurchase program ~~will initially operate~~operated alongside ~~the Company’s existing~~our previous $75.0

million share repurchase authorization, which ~~expires~~began on November 4, 2020 and expired on December 26, 2021.

The following table summarizes our repurchase activity under our share repurchase programs for the three and six months ended June 26, 2022 and June 27, 2021:


(in thousands, except average price per share)	Total Number of Shares Purchased	Average Price Paid per Share		Aggregate Cost of Shares Purchased		Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
Three Months Ended
June 26, 2022	452	$	94.56	$	42,762	$	349,329
June 27, 2021	68	$	101.21	$	6,921	$	64,110

(in thousands, except average price per share)	Total Number of Shares Purchased	Average Price Paid per Share		Aggregate Cost of Shares Purchased		Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
Six Months Ended
June 26, 2022	753	$	100.23	$	75,471	$	349,329
June 27, 2021	83	$	98.23	$	8,188	$	64,110

The timing and volume of share repurchases under the Company’s share repurchase programs may be executed at the discretion of management on an opportunistic basis, subject to market and business conditions, regulatory requirements and other factors, or pursuant to trading plans or other arrangements. Repurchases under the programs may be made through open market, block, and privately negotiated transactions, including Rule 10b5-1 plans, at times and in such amounts as management deems appropriate. Repurchases under the 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.

Dividends

The Company recorded dividends of approximately ~~$33.2~~$25.1 million ($0.70 per share) for the ~~nine~~six months ended ~~September~~June 26, ~~2021 consisting of the following:~~

●

~~$27.6 million paid to common stockholders ($0.80 per share);~~

●

~~$3.0 million in preferred dividends on the Series B Preferred Stock (3.6% of the investment per annum);~~

●

~~$1.5 million of common stock deemed dividend distributions in conjunction with the repurchase and conversion of the Series B Preferred Stock; and~~

●

~~$1.1 million in common stock “pass-through” dividends paid to Series B Preferred Stockholders on an as-converted basis ($0.45 per share).~~

2022. On ~~October 28, 2021,~~August 2, 2022, our Board of Directors declared a ~~fourth~~second quarter dividend of ~~$0.35~~$0.42 per common share of(approximately $14.9 million in the aggregate), which ~~approximately $12.8 million will be paid to common stockholders. The common share dividend~~ will be paid on ~~November 19, 2021~~August 26, 2022 to stockholders of record as of the close of business on ~~November 9, 2021.~~August 15, 2022. The declaration and payment of any future dividends will be at the discretion of our Board of Directors.

7. Earnings ~~(Loss)~~ Per Share

We compute earnings ~~(loss)~~ per share using the two-class method. The two-class method requires an earnings allocation formula that determines earnings ~~(loss)~~ per share for common shareholders and participating security holders according to dividends declared and participating rights in undistributed earnings. The shares of the Company’s former Series B Convertible Preferred Stock ("Series B Preferred ~~Stock,~~Stock"), all of which were repurchased by the Company or converted into shares of common stock during ~~the second quarter of~~ 2021, and 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 ~~(loss)~~ attributable to common shareholders. Additionally, any accretion to the redemption value for the Series B Preferred Stock ~~or cash payments in excess of their respective carrying values upon redemption~~ was treated as a deemed dividend in the two-class earnings per share calculation.

~~Table of Contents~~

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

Three Months Ended

Nine Months Ended

September 26,

September 27,

September 26,

September 27,

2021

2020

2021

2020

Basic earnings (loss) per common share

Net income attributable to the Company

$
29,256

$
15,708

$
95,393

$
44,765
Dividends on redemption of Series B Convertible Preferred Stock

—

—

(109,852)

—
Dividends paid to participating securities

(137)

(3,548)

(5,964)

(10,546)
Net income attributable to participating securities

(158)

(703)

—

(1,809)
Net income (loss) attributable to common shareholders

$
28,961

$
11,457

$
(20,423)

$
32,410

Basic weighted average common shares outstanding

36,387

32,616

34,619

32,347
Basic earnings (loss) per common share

$
0.80

$
0.35

$
(0.59)

$
1.00

Diluted earnings (loss) per common share

Net income (loss) attributable to common shareholders

$
28,961

$
11,457

$
(20,423)

$
32,410

Weighted average common shares outstanding

36,387

32,616

34,619

32,347
Dilutive effect of outstanding equity awards (a)

332

355

—

296
Diluted weighted average common shares outstanding (b)

36,719

32,971

34,619

32,643
Diluted earnings (loss) per common share

$
0.79

$
0.35

$
(0.59)

$
0.99
follows:


	Three Months Ended				Six Months Ended
	June 26, 2022		June 27, 2021		June 26, 2022		June 27, 2021
Basic earnings (loss) per common share (in thousands, except per share data)
Net income attributable to the Company	$	25,433	$	32,254	$	35,927	$	66,137
Dividends on redemption of Series B Convertible Preferred Stock	—		(109,852)		—		(109,852)
Dividends paid to participating securities	(82)		(2,300)		(141)		(5,827)
Net income attributable to participating securities	(111)		—		(93)		—
Net income (loss) attributable to common shareholders	$	25,240	$	(79,898)	$	35,693	$	(49,542)

Basic weighted average common shares outstanding	35,624		34,729		35,775		33,739
Basic earnings (loss) per common share	$	0.71	$	(2.30)	$	1.00	$	(1.47)

Diluted earnings (loss) per common share (in thousands, except per share data)
Net income (loss) attributable to common shareholders	$	25,240	$	(79,898)	$	35,693	$	(49,542)

Weighted average common shares outstanding	35,624		34,729		35,775		33,739
Dilutive effect of outstanding equity awards (a)	200		—		257		—
Diluted weighted average common shares outstanding	35,824		34,729		36,032		33,739
Diluted earnings (loss) per common share	$	0.70	$	(2.30)	$	0.99	$	(1.47)

_______________

~~(a)~~
(a)			Excludes ~~132~~63 and 42 equity awards for the ~~nine~~three and six months ended ~~September 27, 2020,~~June 26, 2022, respectively, as the effect of including such awards would have been ~~anti-dilutive.~~

~~(b)~~

The Company had 252.5 shares of Series B Preferred Stock outstanding at September 27, 2020 (0ne at September 26, 2021). For the fully diluted calculation, the Series B Preferred stock dividends were added back to net income attributable to common shareholders. The Company then applied the if-converted method to calculate dilution on the Series B Preferred Stock, which resulted in 5.0 million additional common shares for September 27, 2020. This calculation was anti-dilutive (none for the ~~September~~three and six months ended June 27, ~~2020 period and as such was excluded.~~2021).

8.	~~Debt~~

8. Debt

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

September 26,

December 27,

2021

2020
Outstanding debt

$
425,000

$
350,000
Unamortized debt issuance costs

(10,085)

(1,708)
Current portion of long-term debt

—

(20,000)
Total long-term debt, net

$
414,915

$
328,292

Our outstanding debt as of September 26, 2021 was $425.0 million, which was comprised of $400.0 million outstanding under our 3.875% senior notes due 2029 (the “Notes”) and $25.0 million under the PJI Revolving Facility (as defined below). Including outstanding letters of credit, the remaining availability under the PJI Revolving Facility was approximately $572.3 million as of September 26, 2021.


	June 26, 2022		December 26, 2021
Senior notes	$	400,000	$	400,000
Revolving facilities	145,000		90,000
Outstanding debt	$	545,000	$	490,000
Unamortized debt issuance costs	(8,554)		(9,270)
Total long-term debt, net	$	536,446	$	480,730

Senior Notes

On September 14, 2021, the Company issued $400.0 million of ~~Notes~~3.875% senior notes (the “Notes”) which will mature on September 15, 2029. The Notes are guaranteed by each of the Company’s existing and future domestic restricted subsidiaries that are guarantors or borrowers under the Amended Credit Agreement (as defined below) or other certain indebtedness. The Notes were offered and sold either to persons reasonably believed to be “qualified institutional buyers” pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), or to persons outside the United States under Regulation S of

~~Table of Contents~~

~~the Securities Act.~~ Interest on the Notes ~~will be~~is payable semi-annually in cash in arrears on March 15 and September 15 of each year ~~commencing on March 15, 2022,~~ at a fixed interest rate of 3.875% per annum. ~~In connection with the Notes, the Company recorded $7.1 million of debt issuance costs, which are being amortized into net interest expense over the term of the Notes.~~

The net proceeds from the Notes, together with borrowings under the Amended Credit Agreement (as defined below), were used to repay outstanding revolver and term loan borrowings under the Company’s Previous Credit Agreement (as defined below).

The Company may redeem the Notes, in whole or in part, at any time on or after September 15, 2024 at established redemption prices ranging from 97 to 194 basis points depending on when the Notes are redeemed. At any time prior to September 15, 2024, the Company may also redeem up to 40% of the Notes with net cash proceeds of certain equity offerings at a redemption price equal to 103.875% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest, excluding the redemption date. In addition, at any time prior to September 15, 2024, the Company may

redeem the Notes, in whole or in part, at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest and an applicable “make-whole” premium. The Notes also contain customary redemption provisions related to asset sales and certain change of control transactions.

The Indenture governing the Notes contains customary events of default, including, among other things, payment default, failure to comply with covenants or agreements contained in the Indenture or the Notes and certain provisions related to bankruptcy events. The Indenture also contains customary negative covenants.

Amended Credit Agreement

~~Concurrently with the closing of the Notes, the Company entered into an~~

The Company’s amended and restated credit agreement, dated September 14, 2021 (the “Amended Credit Agreement”) ~~replacing the previous $800.0 million credit agreement (“Previous Credit Agreement”). The Amended Credit Agreement~~ provides for a senior secured revolving credit facility in an aggregate available principal amount of $600.0 million (the “PJI Revolving Facility”), of which up to $40.0 million is available as swingline loans and up to $80.0 million is available as letters of credit. The PJI Revolving Facility will mature on September 14, 2026. ~~In connection with~~The remaining availability under the ~~Amended Credit Agreement, the Company recorded $2.1~~PJI Revolving Facility was approximately $455.0 million as of ~~debt issuance costs, which are being amortized into net interest expense over the term of the Amended Credit Agreement.~~

June 26, 2022.

Up to $50.0 million of the PJI Revolving Facility may be advanced in certain agreed foreign currencies, including Euros, Pounds Sterling, Canadian Dollars, Japanese Yen, and Mexican Pesos. Additionally, the Amended Credit Agreement includes an accordion feature allowing for a future increase of the PJI Revolving Facility and/or incremental term loans in an aggregate amount of up to $500.0 million, subject to certain conditions, including obtaining commitments from one or more new or existing lenders to provide such increased amounts and ongoing compliance with financial covenants.

Loans under the PJI Revolving Facility accrue interest at a per annum rate equal to, at the Company’s election, either a LIBOR rate plus a margin ranging from 1.25% to 2.00% or a base rate (generally determined according to the greater of a prime rate, federal funds rate plus 0.50%, or a LIBOR rate plus 1.00%) plus a margin ranging from 0.25% to 1.00%. In each case, the actual margin is determined according to a ratio of the Company’s total indebtedness to earnings before interest, taxes, depreciation, and amortization (“EBITDA”) for the then most recently ended 4 quarter period (the “Leverage Ratio”). An unused commitment fee ranging from 18 to 30 basis points per annum, determined according to the Leverage Ratio, applies to the ~~unutilized~~underutilized commitments under the PJI Revolving Facility. Loans outstanding under the PJI Revolving Facility may be prepaid at any time without premium or penalty, subject to customary breakage costs in the case of borrowings for which a LIBOR rate election is in effect. The Amended Credit Agreement also contain provisions specifying alternative interest rate calculations to be used at such time as LIBOR ceases to be available as a benchmark for establishing the interest rate on floating interest rate borrowings.

The Amended Credit Agreement contains customary affirmative and negative covenants that, among other things, require customary reporting obligations, and restrict, subject to certain exceptions, the ~~incurrence~~occurrence of additional indebtedness and liens, the consummation of certain mergers, consolidations, sales of assets and similar transactions, the making of investments, equity distributions and other restricted payments, and transactions with affiliates. ~~In addition, the~~The Company

~~Table of Contents~~

~~will be~~ is also subject to the following financial covenants: (1) a maximum Leverage Ratio of 5.25 to 1.00, subject to the Company’s election to increase the maximum Leverage Ratio by 0.50 to 1.00 in connection with material acquisitions if the Company satisfies certain requirements, and (2) a minimum interest coverage ratio defined as EBITDA plus consolidated rental expense to consolidated interest expense plus consolidated rental expense of 2.00 to 1.00. We were in compliance with these financial covenants at ~~September~~June 26, ~~2021.~~

2022.

Obligations under the Amended Credit Agreement are guaranteed by certain direct and indirect material domestic subsidiaries of the Company (the “Guarantors”) and are secured by a security interest in substantially all of the capital stock and equity interests of the Company’s and the Guarantors’ domestic and first tier material foreign subsidiaries. The Amended Credit Agreement contains customary events of default including, among other things, payment defaults, breach of covenants, cross acceleration to material indebtedness, bankruptcy-related defaults, judgment defaults, and the occurrence of certain change of control events. The occurrence of an event of default may result in the termination of the PJI Revolving Facility, acceleration of repayment obligations and the exercise of remedies by the Lenders with respect to the ~~subsidiary guarantors.~~

Guarantors.

PJMF Revolving Facility

PJMF has a $20.0 million 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. The PJMF Revolving Facility is secured by substantially all assets of PJMF. The PJMF Revolving Facility matures on September 30, 2022. The borrowings

under the PJMF Revolving Facility accrue interest at a variable rate of the one-month LIBOR plus 1.75%. ~~The applicable interest rates on the PJMF Revolving Facility were 1.9% and 2.7% for the three and nine months ended September 27, 2020, respectively.~~ There was 0no debt outstanding under the PJMF Revolving Facility as of ~~September~~June 26, ~~2021~~2022 or December ~~27, 2020.~~26, 2021. The PJMF operating results and the related debt outstanding do not impact the financial covenants under the ~~PJI~~Amended Credit Agreement.

Derivative Financial Instruments

As of ~~September~~June 26, ~~2021,~~2022, we have the following interest rate swap agreements with a total notional value of $350.0 million:

Effective Dates

Floating Rate Debt

Fixed Rates

April 30, 2018 through April 30, 2023

$
55
million

2.33
%
April 30, 2018 through April 30, 2023

$
35
million

2.36
%
April 30, 2018 through April 30, 2023

$
35
million

2.34
%
January 30, 2018 through August 30, 2022

$
100
million

1.99
%
January 30, 2018 through August 30, 2022

$
75
million

1.99
%
January 30, 2018 through August 30, 2022

$
50
million

2.00
%

~~In September 2021, we de-designated $350.0 million of our~~


Effective Dates	Floating Rate Debt		Fixed Rates
April 30, 2018 through April 30, 2023	$	55 million	2.33%
April 30, 2018 through April 30, 2023	$	35 million	2.36%
April 30, 2018 through April 30, 2023	$	35 million	2.34%
January 30, 2018 through August 30, 2022	$	100 million	1.99%
January 30, 2018 through August 30, 2022	$	75 million	1.99%
January 30, 2018 through August 30, 2022	$	50 million	2.00%

Our interest rate swaps were de-designated as cash flow hedges following the issuance of the Notes. For these de-designated hedges, the portion of gains or losses on the derivative instruments previously recognized in accumulated other comprehensive loss (“AOCL”) will be reclassified into earnings as adjustments to interest expense on a straight-line basis over the remaining life of the originally hedged transactions.

The following table provides information on the location and amounts of our swaps in the accompanying condensed consolidated financial statements (in thousands):

Interest Rate Swap Derivatives

Fair Value

Fair Value

September 26,

December 27,
Balance Sheet Location

2021

2020
Other current and long-term liabilities

$
8,162

$
13,452


	Interest Rate Swap Derivatives
Balance Sheet Location	Fair Value June 26, 2022		Fair Value December 26, 2021
Other current and long-term assets	$	672	$	—
Other current and long-term liabilities	$	—	$	5,536

~~Table of Contents~~

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

Location of Gain

Amount of Gain

Derivatives -

Amount of Gain or

or (Loss)

or (Loss)

Total Net Interest Expense
Cash Flow

(Loss) Recognized

Reclassified from

Reclassified from

on Condensed
Hedging

in AOCL

AOCL into

AOCL into

Consolidated Statements
Relationships

on Derivative

Income

Income

of Operations
Interest rate swaps for the three months ended:
September 26, 2021

$
1,182

Interest expense

$
(1,644)

$
(3,979)
September 27, 2020

$
1,268

Interest expense

$
(1,674)

$
(3,636)

Interest rate swaps for the nine months ended:
September 26, 2021

$
3,963

Interest expense

$
(5,084)

$
(11,275)
September 27, 2020

$
(7,219)

Interest expense

$
(3,376)

$
(11,230)


Derivatives - Cash Flow Hedging Relationships	Amount of Gain or (Loss) Recognized in AOCL on Derivative		Location of (Loss) or Gain Reclassified from AOCL into Income	Amount of (Loss) or Gain Reclassified from AOCL into Income		Total Net Interest Expense on Condensed Consolidated Statements of Operations
Interest rate swaps for the three months ended:
June 26, 2022	$	1,445	Interest expense	$	(735)	$	(6,081)
June 27, 2021	$	1,399	Interest expense	$	(1,730)	$	(3,649)

Interest rate swaps for the six months ended:
June 26, 2022	$	2,763	Interest Expense	$	(200)	$	(10,344)
June 27, 2021	$	2,781	Interest Expense	$	(3,439)	$	(7,296)

Interest paid, including payments made or received under the swaps, was ~~$4.1~~$2.4 million and ~~$3.9~~$3.6 million for the three months ended ~~September~~June 26, ~~2021~~2022 and ~~September~~June 27, ~~2020,~~2021, respectively, and ~~$11.1~~$12.6 million and ~~$12.0~~$7.1 million for the ~~nine~~six months ended ~~September~~June 26, 2022 and June 27, 2021, respectively.

9. Commitments and ~~September 27, 2020, respectively.~~

Contingencies

Litigation

9.	~~Commitments and Contingencies~~

~~Litigation~~

The Company is involved in a number of lawsuits, claims, investigations and proceedings, including those specifically identified below, consisting of intellectual property, employment, consumer, commercial and other matters arising in the ordinary course of business. In accordance with ASC 450, “Contingencies” the Company has made accruals with respect to these matters where appropriate, which are reflected in the Company’s condensed consolidated financial statements. We review these provisions at least quarterly and adjust them to reflect the impact of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular case.

In re Papa John’s Employee & Franchise Employee Antitrust Litigation

is a putative class action filed in December 2018 in the United States District Court for the Western District of Kentucky. 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 (the “Legal 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 Condensed Consolidated Statements of Operations in the first quarter of 2022. The proposed settlement is subject to approval by the District Court and contains certain customary contingencies. The Company continues to deny any liability or wrongdoing in this matter.

Durling et al v. Papa John’s International, ~~Inc.~~Inc., is a conditionally certified collective action filed in May 2016 in the United States District Court for the Southern District of New York, alleging that corporate restaurant delivery drivers were not properly reimbursed for vehicle mileage and expenses in accordance with the Fair Labor Standards Act. In July 2018, the District Court granted a motion to certify a conditional corporate collective class and the opt-in notice process has been completed. As of the close of the opt-in period on October 29, 2018, 9,571 drivers opted into the collective class. The Company continues to deny any liability or wrongdoing in this matter and intends to vigorously defend this action. The Company has 0tnot recorded any liability related to this lawsuit as of ~~September~~June 26, ~~2021~~2022 as it does not believe a loss is probable or reasonably estimable.

~~10. Strategic Corporate Reorganization for Long-term Growth~~

On September 17, 2020, we announced plans to open an office in Atlanta, Georgia located in Three Ballpark Center at The Battery Atlanta. 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 will continue to operate in our Louisville, Kentucky office, which remains critical to our success. We also maintain an office outside of London, United Kingdom, where our international operations are managed. ~~All affected employees were either offered an opportunity to continue~~In connection with the ~~organization or were offered~~divestiture, we recorded a ~~severance package. As a result, we expect to incur certain~~ one-time, ~~corporate reorganization costs~~non-cash charge of ~~approximately $17.0 to $20.0~~$8.4 million related to employee severance and transition, recruitment and relocation, and third party and other costs through 2021. Of these costs, we have cumulatively incurred approximately $15.3 million through September 26, 2021 which include $8.3 million of employee severance and other employee transition costs, $4.0 million of recruiting and professional fees, $2.9 million of relocation costs, and $1.0 million of other costs, offset by ($0.9) million of stock-based compensation forfeitures on unvested awards.

~~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 recognizedRefranchising Loss in ~~the period incurred. All strategic corporate reorganization costs have been recorded in General and administrative expenses on~~ the Condensed Consolidated Statement of ~~Operations.~~

AsOperations, which reflects net sale proceeds of ~~September 26, 2021~~$14.0 million, the noncontrolling interest of $4.2 million, and ~~December 27, 2020,~~ the ~~estimate~~recognition of ~~incurred but unpaid strategic corporate reorganization costs are included in Accrued expenses and other current liabilities on~~an unearned royalty stream of $12.2 million to be recognized as revenue over the ~~Condensed Consolidated Balance Sheets. The following table summarizes~~10-year term of the ~~activity for the nine months ended September 26, 2021:~~

Balance at

Balance at

December 27,

September 26,

2020

Charges

Payments

2021
Employee severance and other employee transition costs
$
4,615

$
3,576

$
(7,235)

$
956
Recruiting and professional fees

145

2,431

(2,576)

—
Relocation costs

101

2,608

(1,677)

1,032
Other costs

—

749

(749)

—
Total strategic corporate reorganization liability
$
4,861

$
9,364

$
(12,237)

$
1,988

~~We expect to recognize additional costs associated~~franchise agreement executed concurrent with the ~~corporate reorganization~~disposition in accordance with ASC 810, “Consolidation.” The $8.4 million of the one-time, non-cash refranchising loss was recorded in the ~~remainder~~first quarter of ~~2021~~2022 and realized upon consummation of ~~approximately $2.0~~the sale in the second quarter.

Impairment of Reacquired Master Franchise Rights

In the first quarter of 2022, the Company recorded an impairment of $2.8 million for reacquired franchise rights due to ~~$5.0 million.~~

the financial and operational impact of the conflict in Ukraine and government actions taken in response to that conflict, including, but not limited to, international sanctions. The reacquired franchise rights were previously acquired from a former master franchisee and capitalized by the Company.

~~Table of Contents~~

11. Segment Information

~~11.~~

~~Segment Information~~

We have 4 reportable segments: 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 (“domestic” is defined as contiguous United States) Company-owned restaurants and derives its revenues principally from retail sales of pizza, Papadias, which are flatbread-style sandwiches, and side items, including breadsticks, cheesesticks, chicken poppers and wings, dessert items and canned or bottled beverages. The North America commissary

segment consists of the operations of our regional dough production and product distribution centers and derives its revenues principally from the sale and distribution of food and paper products to domestic Company-owned and franchised restaurants in the United States and Canada. The North America franchising segment consists of our franchise sales and support activities and derives its revenues from sales of franchise and development rights and collection of royalties from our franchisees located in the United States and Canada. The international segment principally consists of distribution sales to franchised Papa John’s restaurants located in the United Kingdom and our franchise sales and support activities, which derive revenues from sales of franchise and development rights and the collection of royalties from our international franchisees. 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 and intercompany eliminations. 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. ~~NaN~~No single external customer accounted for 10% or more of our consolidated revenues.

~~Table of Contents~~

Our segment information is as follows:

Three Months Ended

Nine Months Ended

September 26,

September 27,

September 26,

September 27,
(In thousands)


2021

2020

2021

2020
Revenues:

Domestic Company-owned restaurants

$
191,584

$
178,371

$
584,942

$
526,317
North America franchising

31,933

25,281

97,123

68,895
North America commissaries

189,224

181,338

560,743

504,379
International

46,880

40,328

135,761

106,846
All others

53,161

47,623

160,967

136,986
Total revenues

$
512,782

$
472,941

$
1,539,536

$
1,343,423

Intersegment revenues:

North America franchising

$
1,037

$
824

$
3,138

$
2,291
North America commissaries

53,454

50,306

158,952

142,169
All others

18,522

27,168

56,613

66,509
Total intersegment revenues

$
73,013

$
78,298

$
218,703

$
210,969

Operating income:

Domestic Company-owned restaurants

$
9,480

$
8,439

$
40,165

$
33,852
North America franchising

29,830

23,353

90,791

62,855
North America commissaries

9,598

8,208

29,089

24,579
International

9,618

7,986

26,665

16,836
All others

3,848

3,193

14,860

5,030
Unallocated corporate expenses

(23,158)

(26,921)

(70,937)

(71,978)
Elimination of intersegment losses (profits)

(639)

291

(557)

(619)
Total operating income

$
38,577

$
24,549

$
130,076

$
70,555

Property and equipment, net:

Domestic Company-owned restaurants

$
237,155

North America commissaries

147,186

International

15,026

All others

103,054

Unallocated corporate assets

229,359

Accumulated depreciation and amortization

(522,708)

Total property and equipment, net

$
209,072

Three Months Ended Six Months Ended
(In thousands) June 26,
2022 June 27,
2021 June 26,
2022 June 27,
2021
Revenues:
Domestic Company-owned restaurants $ 171,411 $ 196,124 $ 370,176 $ 393,358
North America franchising 34,917 32,475 69,185 65,190
North America commissaries 219,383 186,641 429,062 371,519
International 39,282 46,277 81,989 88,881
All others 57,672 53,491 114,945 107,806
Total revenues $ 522,665 $ 515,008 $ 1,065,357 $ 1,026,754
Intersegment revenues:
North America franchising $ 1,048 $ 1,041 $ 2,101 $ 2,101
North America commissaries 52,754 53,428 111,261 105,498
All others 15,889 18,943 35,268 38,091
Total intersegment revenues $ 69,691 $ 73,412 $ 148,630 $ 145,690
Operating income:
Domestic Company-owned restaurants (1) $ 5,924 $ 15,361 $ 7,912 $ 30,685
North America franchising 32,624 30,518 64,761 60,961
North America commissaries 10,957 9,778 20,292 19,491
International (2) 7,306 8,683 11,761 17,047
All others 2,187 4,894 5,906 11,012
Unallocated corporate expenses (3) (19,344) (24,617) (56,454) (47,779)
Elimination of intersegment (profits) losses (750) 20 (839) 82
Total operating income $ 38,904 $ 44,637 $ 53,339 $ 91,499
Property and equipment, net:
Domestic Company-owned restaurants $ 225,755
North America commissaries 151,648
International 15,157
All others 118,496
Unallocated corporate assets 240,431
Accumulated depreciation and amortization (526,105)
Total property and equipment, net $ 225,382


(1)			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 six months ended June 26, 2022. See Note 10 for additional information.


(2)			Includes $3.5 million of one-time, non-cash reserves for certain accounts receivable and impairments of reacquired franchise rights for the six months ended June 26, 2022. See Notes 2 and 10 for additional information.


(3)			Unallocated corporate expenses include $13.9 million of one-time, non-cash reserves of certain notes receivable, $5.0 million for the Legal Settlement, and $1.5 million of advisory fees and severance costs associated with the transition of certain executives for the six months ended June 26, 2022. Unallocated corporate expense includes $3.3 million and $7.2 million of reorganization costs for the three and six months ended June 27, 2021. See Notes 2 and 9 for additional information.

~~Table of Contents~~

Disaggregation of Revenue

In the following tables, revenues are disaggregated by major product/service line. The tables also include a reconciliation of the disaggregated revenues by the reportable segment (in thousands):

Reportable Segments

Three Months Ended September 26, 2021
Major Products/Services Lines

Domestic Company-owned restaurants

North America franchising

North America commissaries

International

All others

Total
Company-owned restaurant sales

$
191,584

$
-

$
-

$
-

$
-

$
191,584
Franchise royalties and fees

-

32,970

-

14,031

-

47,001
Commissary sales

-

-

242,678

24,377

-

267,055
Other revenues

-

-

-

8,472

71,683

80,155
Eliminations

-

(1,037)

(53,454)

-

(18,522)

(73,013)
Total segment revenues

$
191,584

$
31,933

$
189,224

$
46,880

$
53,161

$
512,782
International other revenues (1)

-

-

-

(8,472)

8,472

-
Total revenues

$
191,584

$
31,933

$
189,224

$
38,408

$
61,633

$
512,782

Reportable Segments

Three Months Ended September 27, 2020
Major Products/Services Lines

Domestic Company-owned restaurants

North America franchising

North America commissaries

International

All others

Total
Company-owned restaurant sales

$
178,371

$
-

$
-

$
-

$
-

$
178,371
Franchise royalties and fees

-

26,105

-

10,703

-

36,808
Commissary sales

-

-

231,644

22,737

-

254,381
Other revenues

-

-

-

6,888

74,791

81,679
Eliminations

-

(824)

(50,306)

-

(27,168)

(78,298)
Total segment revenues

$
178,371

$
25,281

$
181,338

$
40,328

$
47,623

$
472,941
International other revenues (1)

-

-

-

(6,888)

6,888

-
Total revenues

$
178,371

$
25,281

$
181,338

$
33,440

$
54,511

$
472,941

Reportable Segments

Nine Months Ended September 26, 2021
Major Products/Services Lines

Domestic Company-owned restaurants

North America franchising

North America commissaries

International

All others

Total
Company-owned restaurant sales

$
584,942

$
-

$
-

$
-

$
-

$
584,942
Franchise royalties and fees

-

100,261

-

39,396

-

139,657
Commissary sales

-

-

719,695

71,233

-

790,928
Other revenues

-

-

-

25,132

217,580

242,712
Eliminations

-

(3,138)

(158,952)

-

(56,613)

(218,703)
Total segment revenues

$
584,942

$
97,123

$
560,743

$
135,761

$
160,967

$
1,539,536
International other revenues (1)

-

-

-

(25,132)

25,132

-
Total revenues

$
584,942

$
97,123

$
560,743

$
110,629

$
186,099

$
1,539,536

Reportable Segments

Nine Months Ended September 27, 2020
Major Products/Services Lines

Domestic Company-owned restaurants

North America franchising

North America commissaries

International

All others

Total
Company-owned restaurant sales

$
526,317

$
-

$
-

$
-

$
-

$
526,317
Franchise royalties and fees

-

71,186

-

27,962

-

99,148
Commissary sales

-

-

646,548

59,630

-

706,178
Other revenues

-

-

-

19,254

203,495

222,749
Eliminations

-

(2,291)

(142,169)

-

(66,509)

(210,969)
Total segment revenues

$
526,317

$
68,895

$
504,379

$
106,846

$
136,986

$
1,343,423
International other revenues (1)

-

-

-

(19,254)

19,254

-
Total revenues

$
526,317

$
68,895

$
504,379

$
87,592

$
156,240

$
1,343,423

Reportable Segments
Three Months Ended June 26, 2022
Major Products/Services Lines Domestic Company-owned restaurants North America franchising North America commissaries International All others Total
Company-owned restaurant sales $ 171,411 $ — $ — $ — $ — $ 171,411
Franchise royalties and fees — 35,965 — 12,043 — 48,008
Commissary sales — — 272,137 19,915 — 292,052
Other revenues — — — 7,324 73,561 80,885
Eliminations — (1,048) (52,754) — (15,889) (69,691)
Total segment revenues $ 171,411 $ 34,917 $ 219,383 $ 39,282 $ 57,672 $ 522,665
International other revenues (1) — — — (7,324) 7,324 —
Total revenues $ 171,411 $ 34,917 $ 219,383 $ 31,958 $ 64,996 $ 522,665
Reportable Segments
Three Months Ended June 27, 2021
Major Products/Services Lines Domestic Company-owned restaurants North America franchising North America commissaries International All others Total
Company-owned restaurant sales $ 196,124 $ — $ — $ — $ — $ 196,124
Franchise royalties and fees — 33,516 — 13,156 — 46,672
Commissary sales — — 240,069 24,458 — 264,527
Other revenues — — — 8,663 72,434 81,097
Eliminations — (1,041) (53,428) — (18,943) (73,412)
Total segment revenues $ 196,124 $ 32,475 $ 186,641 $ 46,277 $ 53,491 $ 515,008
International other revenues (1) — — — (8,663) 8,663 —
Total revenues $ 196,124 $ 32,475 $ 186,641 $ 37,614 $ 62,154 $ 515,008
Reportable Segments
Six Months Ended June 26, 2022
Major Products/Services Lines Domestic Company-owned restaurants North America franchising North America commissaries International All others Total
Company-owned restaurant sales $ 370,176 $ — $ — $ — $ — $ 370,176
Franchise royalties and fees — 71,286 — 25,478 — 96,764
Commissary sales — — 540,323 41,097 — 581,420
Other revenues — — — 15,414 150,213 165,627
Eliminations — (2,101) (111,261) — (35,268) (148,630)
Total segment revenues $ 370,176 $ 69,185 $ 429,062 $ 81,989 $ 114,945 $ 1,065,357
International other revenues (1) — — — (15,414) 15,414 —
Total revenues $ 370,176 $ 69,185 $ 429,062 $ 66,575 $ 130,359 $ 1,065,357

~~Table of Contents~~



	Reportable Segments
	Six Months Ended June 27, 2021
Major Products/Services Lines	Domestic Company-owned restaurants		North America franchising		North America commissaries		International		All others		Total
Company-owned restaurant sales	$	393,358	$	—	$	—	$	—	$	—	$	393,358
Franchise royalties and fees	—		67,291		—		25,364		—		92,655
Commissary sales	—		—		477,017		46,857		—		523,874
Other revenues	—		—		—		16,660		145,897		162,557
Eliminations	—		(2,101)		(105,498)		—		(38,091)		(145,690)
Total segment revenues	$	393,358	$	65,190	$	371,519	$	88,881	$	107,806	$	1,026,754
International other revenues (1)	—		—		—		(16,660)		16,660		—
Total revenues	$	393,358	$	65,190	$	371,519	$	72,221	$	124,466	$	1,026,754

~~(1)~~
(1)			Other revenues as reported in the Condensed Consolidated Statements of Operations include ~~$8.5~~$7.3 million and ~~$25.1~~$15.4 million of revenue for the three and ~~nine~~six months ended ~~September~~June 26, ~~2021,~~2022, respectively, and ~~$6.9~~$8.7 million and ~~$19.3~~$16.7 million ~~of revenue~~ for the three and ~~nine~~six months ended ~~September~~June 27, ~~2020,~~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 United Kingdom that provide no significant contribution to operating income but must be reported on a gross basis under accounting requirements. The related expenses for these Other revenues are reported in Other expenses in the Condensed Consolidated Statements of Operations.

12. Related Party Transactions

Endorsement Agreement

On April 10, 2022, the Company and PJMF entered into an Endorsement Agreement (the “Endorsement Agreement”), effective March 15, 2022, with ABG-Shaq, LLC (“ABG-Shaq”), an entity affiliated with Shaquille O’Neal, for the personal services of Mr. O’Neal. Mr. O’Neal is a non-independent director of the Company.

The Endorsement Agreement replaces the previous Endorsement Agreement, effective March 15, 2019, by and between the Company, PJMF and ABG-Shaq, as amended (the “Prior Endorsement Agreement”) which expired by its terms on March 15, 2022. The terms of the Endorsement Agreement, which are detailed below, are substantially similar to the Prior Endorsement Agreement.

Pursuant to the Endorsement Agreement, the Company and PJMF 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. Mr. O’Neal will also provide brand ambassador services related to appearances, social media and public relations matters. The Endorsement Agreement also renewed the offering of the co-branded extra-large pizza product developed among the Company, PJMF and ABG-Shaq under the Prior Endorsement Agreement, and provides that 1 U.S. dollar for each unit of the co-branded pizza sold in the United States will be donated to The Papa John’s Foundation for Building Community and 1 Canadian dollar for each unit sold in Canada will be donated to a charity mutually agreed-upon between the parties.

As consideration for the rights and services granted under the Endorsement Agreement, the Company and PJMF agreed to pay to ABG-Shaq aggregate cash payments of $5.625 million over the three years of the Endorsement Agreement. The Company and PJMF will also pay ABG-Shaq a royalty fee for the co-branded pizza product if the total amount of royalties in a given contract year (calculated as $0.20 per co-branded pizza sold) exceeds the contractual cash payment for that year, in which case the amount of the royalty payment will be the excess of the royalties over the cash payment amount. The Company and PJMF will also pay expenses related to the marketing and personal services provided by Mr. O’Neal.

In addition, the Company agreed to grant 55,898 restricted stock units (the “RSUs”) to Mr. O’Neal (as agent of ABG) under the Company’s 2018 Omnibus Incentive Plan. The RSUs will vest into an equivalent number of shares of the Company’s common stock according to the following vesting schedule:

•33% (18,632) of the RSUs will vest on April 12, 2023;

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

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

The initial term of the Endorsement Agreement ends on March 15, 2025, with an option for a one-year extension upon the parties’ mutual agreement. The Endorsement Agreement also includes customary exclusivity, termination, and indemnification clauses.

~~Table of Contents~~

Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

Papa John’s International, Inc. (referred to as the “Company,” “Papa John’s” or in the first-person notations of “we,” “us” and “our”) began operations in 1984. As of ~~September~~June 26, ~~2021,~~2022, there were ~~5,569~~5,571 Papa John’s restaurants ~~(591~~in operation, consisting of 519 Company-owned and ~~4,978 franchised)~~5,052 franchised restaurants operating in 5049 countries and territories. Our revenues are ~~principally~~ 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,~~rights. Additionally, we derive revenues from sales to franchisees of various items including food and paper products from our domestic Quality Control Centers (“QC Centers”), operation of our international QC Center in the United Kingdom, contributions received ~~from franchisees for domestic and international~~by Papa John’s Marketing Fund (“PJMF”) which is our national marketing ~~funds we control, revenues for~~fund, printing and promotional items and information systems equipment, and software and related ~~services used in their operations.~~

services.

Recent Developments and Trends

Innovation. The Company launched Epic Pepperoni Stuffed Crust Pizza and Spicy Pepperoni Rolls in the second quarter of 2022. Epic Pepperoni Stuffed Crust Pizza features original, fresh, never-frozen, dough hand-stuffed with our signature pepperoni and melted cheese, then baked into a seasoned crust, which is finished with Papa John's signature pizza sauce, more cheese, and topped off with more pepperoni. Spicy Pepperoni Rolls feature signature pizza sauce and pepperoni rolled up with jalapenos and creamy melty cheese on our fresh dough. These offers are in addition to our first quarter launch of NY Style pizza which features eight oversized slices on a thin, foldable crust. These 2022 launches have proven to be popular with customers and highly incremental to revenues. Our digital innovation through Papa Rewards, our loyalty program, allows us to directly engage our customers with targeted personalized offers with the goal of driving higher frequency, higher ticket and higher customer satisfaction. Continued investment in one-to-one marketing capabilities is important to our business plan for 2022 and beyond. In the second quarter, we promoted exclusive members-only access to Epic Pepperoni Stuffed Crust before its launch, successfully adding nearly 150,000 new members during the one-week early access period.

Growth Strategy. The ~~Company delivered its ninth consecutive quarter of system-wide sales growth and~~Company’s goal continues to ~~expand~~be to take market share in the pizza category while leveraging our differentiated strategy and premium position to protect margins in the face of accelerating commodity and labor inflation. We currently expect our 2022 global development outlook to be between 280 and 320 net new restaurants. Our view of our long-term unit opportunity, both domestically and internationally, continues to expand as ~~evidenced~~we sign historic deals to develop within key areas and we expect to open between 1,400 and 1,800 net new Papa John’s restaurants worldwide by our comparable sales and restaurant unit growth. Our two-year comparable sales were 30.7% in North America and 29.0% internationally for the third quarter, driven by menu innovation and customer retention. Additionally, new store openings continued to accelerate in the third quarter with the opening of 46 restaurants, net (169 net unit growth for the nine months ended September 26, 2021). Our expanding development pipeline is on track to be a key long-term growth driver, with the largest domestic development deal in the history of the Company and an expanding international partnership both being announced in the third quarter. We plan to focus on the continued strategy execution of innovation across our platforms to drive sustainable growth this year and beyond.

~~Capital Allocation Strategy.~~ During the quarter we executed on a key component of our capital allocation strategy with the issuance of $400.0 million of 3.875% senior notes which will mature on September 15, 2029 and the concurrent refinancing of our revolving credit facility. Subsequent to the end of 2025, relative to the quarter, we announced a new $425.0 million share repurchase program to further enhance shareholder returns as we continue to invest in our long-term growth. These initiatives, paired with our previously announced annual dividend rate increase and the repurchase and conversionstart of all of our Series B Convertible Preferred Stock (the “Series B Preferred Stock”) in the second quarter, strengthen our financial position, optimize our capital structure and provide value to our shareholders.

2022.

~~Coronavirus (“COVID-19”)~~Restaurant Staffing and Related Market ~~Impact.~~Impact~~The COVID-19 outbreak~~. Throughout the first six months of 2022, our restaurants continued to navigate a challenging staffing environment. This has ~~presented evolving risks~~impacted customer service and, ~~developments domestically~~in limited cases, our ability to deliver or take orders. Our integrations with the aggregator marketplaces and ~~internationally, as well as new opportunities for~~ our ~~business. Our delivery and carryout model positioned~~nationwide integrations with Delivery-as-a-Service providers have been key tools allowing us to continue to ~~experience~~serve our customers during peak times. Though these Delivery-as-a-Service transactions are slightly lower margin versus using our own drivers, they are incremental, profitable orders that otherwise may have gone unfulfilled. Papa Call, our centralized order taking and customer service center is another example of our long-term investment to make our team members productive and help them focus on making and delivering great pizza. We will continue to invest capital in technology innovations that can make our teams more productive. Further, we remain focused on continuing to hire great employees and reducing turnover by providing competitive compensation, a great working environment, benefits and compelling career paths. Our goal is to be the employer of choice in our industry, and we've taken many actions to create a strong ~~demand~~culture and support our people. In the second quarter of 2022, we released our 2021 Corporate Responsibility Report, outlining our progress against our priorities to create a positive impact on people, pizza and the planet that sets us up for long-term success. Papa John's is the first major publicly traded pizza chain to announce that our ~~products. Increased demand partly driven by~~executive compensation plan now includes Environmental Social and Governance metrics.

Suspension of Franchisee Support in Russia. During the ~~pandemic contributed~~first quarter of 2022, the Company recognized $17.4 million ($0.48 loss per diluted share) on a pre-tax basis in one-time, non-cash charges related to reserves for certain loans and impairments of reacquired franchised rights due to the conflict in Ukraine and subsequent international government actions and sanctions, which were recorded as Refranchising and impairment loss of $2.8 million and General and administrative expenses of $14.6 million. All assets related to the franchised operations in Russia have been fully reserved or impaired thus, no additional Russia-related charges for reserves, write-offs, or impairments are recorded on the Condensed Consolidated Balance Sheet.

Refranchising loss. On March 28, 2022, the Company sold its 51 percent controlling interest in a joint venture between Papa Johns and Blue and Silver Ventures, Ltd. ("Blue and Silver Ventures"). Sun Holdings, a leading multi-brand franchisee operator and one of Papa John’s largest domestic franchise partners, has assumed control of the 90 Papa John’s restaurants in Texas that operated under the joint venture. The Company recorded a one-time, non-cash $8.4 million impairment loss related to the divestiture in the first quarter of 2022 and realized upon consummation of the sale in the second quarter.

Inflation. The differentiated brand positioning of Papa John's has been critical to our ~~strong sustainable comparable sales growth during~~success over the ~~third quarter. To ensure~~past 2.5 years as we ~~can~~have been nimble and adapted our strategy to a constantly changing environment. It's no less important today as we adjust to a new more inflationary and uncertain environment with rising costs and consumers increasingly seeking out value. As consumer sentiment continues to soften, pizza offers tremendous value relative to other quick service restaurants. Using Papa Rewards, we are also able to target more price-sensitive customers with high-value promotions. At the same time, we will continue ~~to meet the demand~~our successful strategy of letting our customers, especially those who are less price sensitive, to self-select into our premium-priced innovation. However, with unprecedented inflation, we ~~continue~~have begun to ~~monitor~~take some pricing. This has helped partially offset higher food, labor, and fuel costs in our supply chain and ~~labor force availability.~~restaurants. Our ~~ability to attract and retain hourly employees in our restaurants~~ticket growth has ~~become more challenging, especially as the job market has become more competitive. We have continued to support these efforts~~predominantly come through new ~~hiring, referral~~premium products and ~~appreciation bonuses~~add-ons over the past few years. This has afforded us more room to strategically raise prices in the Company’s corporate restaurants and supply chain, holding national recruiting events, supplementing delivery drivers with delivery aggregator partnerships as needed and technology advancements. We expect staffing and labor challenges to be a priority focus for us and we expect to continue investing in these initiatives during the remainder of the year. We continue to focusthis inflationary environment. Papa John's has unique pricing flexibility given our value proposition is focused on the safety of our team members, franchisees, and customers. The Company has taken steps to mitigate the impact of the COVID-19 pandemic by implementing extra health and safety measures across our business, including No Contact Delivery and enhanced cleaning and sanitization measures, for the protection of both our customers and team members.

We believe the pandemic has accelerated our previously announced efforts to innovate and bring new and former customers to the Papa John’s system. We believe that as the pandemic-related restrictions are lifted we will benefit in the long-term from the increase in customers we have experienced during the duration of the pandemic due to our menu innovation, customer loyalty programs and our offerings of high-quality pizza and other menu items. ~~Due to the substantial uncertainty related to the effects of the pandemic, its duration and the related market impacts, including the economic stimulus activity, we are unable to predict the~~delivering premium value, not hitting specific impact the pandemic and related restrictions (including the lifting or re-imposing of restrictions due to the Delta variant or otherwise) will have on our results of operations, liquidity or long-term financial

low price points.

~~Table of Contents~~

condition, including whether and to what extent the increased demand for our products will continue. For a discussion of the risks to our business presented by the COVID-19 pandemic, see the risk factors disclosed in the Company’s Annual Report on Form-10-K for the fiscal year ended December 27, 2020.

~~Strategic Corporate Reorganization for Long-term Growth.~~ In the third quarter of 2020, we announced plans to open an office in Atlanta, Georgia located in Three Ballpark Center at The Battery Atlanta. The Atlanta office is part of a broader strategic reorganization of corporate functions reflecting the Company’s ongoing transformation into a brand and culture that can effectively and efficiently deliver on the Company’s purpose, values and strategic business priorities. Affected employees who did not relocate to Atlanta were offered a separation package. As a result, we expect to incur certain one-time corporate reorganization costs of approximately $17.0 to $20.0 million related to employee severance and transition, recruitment and relocation and other third-party costs through 2021. Of that amount, we have incurred costs of approximately $15.3 million as of September 26, 2021 ($6.0 million in 2020 and $2.2 million and $9.4 million for the three and nine months ended September 26, 2021, respectively). See “Items Impacting Comparability; Non-GAAP Measures” for additional information.

~~Table of Contents~~

Global Restaurant Sales Information

“Comparable sales” represents the change in year-over-year sales for the same base of restaurants for the same fiscal periods. Comparable sales exclude sales of restaurants that were not open during both the current and prior year fiscal periods and franchisees for which we suspended corporate support during the quarter ended March 27, 2022. “Global system-wide restaurant sales” represents total restaurant sales for all Company-owned and franchised stores open during the comparable periods, and “Global system-wide restaurant sales growth” represents the change in ~~such~~total system restaurant sales year-over-year. For the three and six months ended June 26, 2022, global system-wide restaurant sales growth excludes franchisees for which we suspended corporate support during the quarter ended March 27, 2022.

Also, for the three and six months ended June 26, 2022, both Comparable sales growth and System-wide restaurant sales growth for Domestic Company-owned restaurants and North America franchised restaurants have been adjusted to reflect the impact of refranchising 90-restaurants during the second quarter of 2022.

We believe North America, international and global restaurant and comparable sales growth and Global system-wide restaurant sales information is useful in analyzing our results since our franchisees pay royalties and marketing fund contributions that are based on a percentage of franchise sales. Comparable sales and Global system-wide restaurant sales results for restaurants operating outside of the United States are reported on a constant dollar basis, which excludes the impact of foreign currency translation. Franchise sales also generate commissary revenue in the United States and in certain international markets. Franchise restaurant and comparable sales growth information is also useful for comparison to industry trends and evaluating the strength of our brand. Management believes the presentation of franchise restaurant sales growth, excluding the impact of foreign currency, provides investors with useful information regarding underlying sales trends and the impact of new unit growth without being impacted by swings in the external factor of foreign currency. Franchise restaurant sales are not included in the Company’s revenues.

Three Months Ended

Nine Months Ended


September 26, 2021

September 27, 2020

September 26, 2021

September 27, 2020
Comparable sales growth:

Domestic Company-owned restaurants

7.4%

18.2%

11.6%

15.6%
North America franchised restaurants

6.8%

25.6%

12.3%

20.0%
North America restaurants

6.9%

23.8%

12.1%

19.0%
International restaurants

8.3%

20.7%

17.1%

9.4%
Total comparable sales growth

7.3%

23.0%

13.4%

16.5%
System-wide restaurant sales growth:

(excluding the impact of foreign currency)

Domestic Company-owned restaurants

7.3%

8.3%

11.1%

7.3%
North America franchised restaurants

8.0%

26.2%

13.1%

20.4%
North America restaurants

7.9%

21.8%

12.7%

17.3%
International restaurants

21.4%

22.9%

28.2%

12.2%
Total global system-wide restaurant sales growth

11.2%

22.1%

16.2%

16.0%

Restaurant Progression

Three Months Ended

Nine Months Ended


September 26, 2021

September 27, 2020

September 26, 2021

September 27, 2020
North America Company-owned:

Beginning of period

589

598

588

598
Opened

2

—

2

1
Closed

—

(1)

—

(2)
Acquired

—

—

1

—
End of period

591

597

591

597
North America franchised:

Beginning of period

2,720

2,686

2,701

2,690
Opened

21

14

57

38
Closed

(9)

(11)

(25)

(39)
Sold

—

—

(1)

—
End of period

2,732

2,689

2,732

2,689
International franchised:

Beginning of period

2,214

2,063

2,111

2,107
Opened

71

40

210

83
Closed

(39)

(29)

(75)

(116)
End of period

2,246

2,074

2,246

2,074
Total restaurants – end of period

5,569

5,360

5,569

5,360

Trailing four quarters net store growth

209

17

~~Table of Contents~~

Three Months Ended Six Months Ended
June 26,
2022 June 27,
2021 June 26,
2022 June 27,
2021
Comparable sales growth (decline):
    Domestic Company-owned restaurants (1.5)% 5.6% (1.3)% 13.8%
    North America franchised restaurants 1.4% 5.2% 2.1% 15.1%
    North America restaurants 0.9% 5.2% 1.4% 14.8%
    International restaurants (8.0)% 21.2% (3.6)% 22.2%
    Total comparable sales growth (1.4)% 9.0% 0.1% 16.6%
System-wide restaurant sales growth (decline):
(excluding the impact of foreign currency)
    Domestic Company-owned restaurants 1.2% 5.2% 8.9% 13.1%
    North America franchised restaurants 2.7% 6.4% 1.4% 15.8%
    North America restaurants 2.4% 6.2% 2.8% 15.2%
    International restaurants 3.4% 35.7% 8.3% 32.2%
    Total global system-wide restaurant sales growth 2.6% 12.2% 4.2% 19.0%

Restaurant Progression Three Months Ended Six Months Ended
June 26,
2022 June 27,
2021 June 26,
2022 June 27,
2021
North America Company-owned:
Beginning of period 608 589 600 588
Opened 1 — 8 —
Acquired — — 1 1
Refranchised (90) — (90) —
End of period 519 589 519 589
North America franchised:
Beginning of period 2,746 2,709 2,739 2,701
Opened 17 24 32 36
Closed (16) (13) (23) (16)
Refranchised 90 — 90 —
Sold — — (1) (1)
End of period 2,837 2,720 2,837 2,720
International franchised:
Beginning of period 2,170 2,170 2,311 2,111
Opened 72 71 127 139
Closed (27) (27) (35) (36)
Suspended (a) — — (188) —
End of period 2,215 2,214 2,215 2,214
Total restaurants – end of period 5,571 5,523 5,571 5,523
Trailing four quarters net store growth (b) 236 176

(a)Represents all franchised restaurants located in Russia, for which the Company has suspended corporate support.

(b)Excludes suspended restaurants.

Results of Operations

The following table sets forth the various components of our Condensed Consolidated Statements of Operations expressed as a percentage of total revenues, except operating costs which are expressed as a percentage of the associated revenue component.

Three Months Ended

September 26, 2021

September 27, 2020

% of Related

% of Related

Increase
($ in thousands)

Revenues

Revenues

(Decrease)
Revenues:

Domestic Company-owned restaurant sales

$
191,584

$
178,371

North America franchise royalties and fees

31,933

25,281

North America commissary revenues

189,224

181,338

International revenues

38,408

33,440

Other revenues

61,633

54,511

Total revenues

512,782

472,941

Costs and expenses:

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

Domestic Company-owned restaurant expenses

155,477

81.2%

144,803

81.1%

0.1%
North America commissary expenses

175,399

92.7%

167,937

92.6%

0.1%
International expenses

21,743

56.6%

19,370

57.9%

(1.3)%
Other expenses

56,039

90.9%

50,917

93.4%

(2.5)%
General and administrative expenses

54,070

10.5%

52,601

11.1%

(0.6)%
Depreciation and amortization

11,477

2.2%

12,764

2.7%

(0.5)%
Total costs and expenses

474,205

92.5%

448,392

94.8%

(2.3)%
Operating income

38,577

7.5%

24,549

5.2%

2.3%
Net interest expense

(3,979)

(0.8)%

(3,636)

(0.8)%

0.0%
Income before income taxes

$
34,598

6.7%

$
20,913

4.4%

2.3%

Nine Months Ended

September 26, 2021

September 27, 2020

% of Related

% of Related

Increase
($ in thousands)

Revenues

Revenues

(Decrease)
Revenues:

Domestic Company-owned restaurant sales

$
584,942

$
526,317

North America franchise royalties and fees

97,123

68,895

North America commissary revenues

560,743

504,379

International revenues

110,629

87,592

Other revenues

186,099

156,240

Total revenues

1,539,536

1,343,423

Costs and expenses:

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

Domestic Company-owned restaurant expenses

465,658

79.6%

419,082

79.6%

0.0%
North America commissary expenses

518,310

92.4%

466,676

92.5%

(0.1)%
International expenses

62,791

56.8%

52,775

60.3%

(3.5)%
Other expenses

168,092

90.3%

148,219

94.9%

(4.6)%
General and administrative expenses

157,779

10.2%

148,680

11.1%

(0.9)%
Depreciation and amortization

36,830

2.4%

37,436

2.8%

(0.4)%
Total costs and expenses

1,409,460

91.6%

1,272,868

94.7%

(3.1)%
Operating income

130,076

8.4%

70,555

5.3%

3.1%
Net interest expense

(11,275)

(0.7)%

(11,230)

(0.8)%

0.1%
Income before income taxes

$
118,801

7.7%

$
59,325

4.5%

3.2%


	Three Months Ended
	June 26, 2022				June 27, 2021
($ in thousands)			% of Related Revenues				% of Related Revenues		Increase (Decrease)
Revenues:
Domestic Company-owned restaurant sales	$	171,411			$	196,124			(12.6)	%
North America franchise royalties and fees	34,917				32,475				7.5	%
North America commissary revenues	219,383				186,641				17.5	%
International revenues	31,958				37,614				(15.0)	%
Other revenues	64,996				62,154				4.6	%
Total revenues	522,665				515,008				1.5	%
Costs and expenses:
Operating costs (excluding depreciation and amortization shown separately below):
Domestic Company-owned restaurant expenses	142,026		82.9%		154,293		78.7%		4.2%
North America commissary expenses	204,470		93.2%		172,227		92.3%		0.9%
International expenses	19,236		60.2%		21,430		57.0%		3.2%
Other expenses	60,648		93.3%		56,246		90.5%		2.8%
General and administrative expenses	44,646		8.5%		53,698		10.4%		(1.9)%
Depreciation and amortization	12,735		2.4%		12,477		2.4%		—%
Total costs and expenses	483,761		92.6%		470,371		91.3%		1.2%

Operating income	38,904		7.4%		44,637		8.7%		(1.2)%
Net interest expense	(6,081)		(1.2)	%	(3,649)		(0.7)	%	(0.5)	%
Income before income taxes	$	32,823	6.3%		$	40,988	8.0%		(1.7)%


	Six Months Ended
	June 26, 2022				June 27, 2021
($ in thousands)			% of Related Revenues				% of Related Revenues		Increase (Decrease)
Revenues:
Domestic Company-owned restaurant sales	$	370,176			$	393,358			(5.9)	%
North America franchise royalties and fees	69,185				65,190				6.1	%
North America commissary revenues	429,062				371,519				15.5	%
International revenues	66,575				72,221				(7.8)	%
Other revenues	130,359				124,466				4.7	%
Total revenues	1,065,357				1,026,754				3.8	%
Costs and expenses:
Operating costs (excluding depreciation and amortization shown separately below):
Domestic Company-owned restaurant expenses	303,687		82.0%		310,181		78.9%		3.2%
North America commissary expenses	401,560		93.6%		342,911		92.3%		1.3%
International expenses	39,150		58.8%		41,048		56.8%		2.0%
Other expenses	121,203		93.0%		112,053		90.0%		2.9%
General and administrative expenses	110,584		10.4%		103,709		10.1%		0.3%
Depreciation and amortization	24,674		2.3%		25,353		2.5%		(0.2)%
Total costs and expenses	1,000,858		93.9%		935,255		91.1%		2.9%
Refranchising and impairment loss	(11,160)		(1.0)	%	—		—	%	(1.0)	%
Operating income	53,339		5.0%		91,499		8.9%		(3.9)%
Net interest expense	(10,344)		(1.0)	%	(7,296)		(0.7)	%	(0.3)	%
Income before income taxes	$	42,995	4.0%		$	84,203	8.2%		(4.2)%

~~Table of Contents~~

Revenues

~~Revenues~~

Consolidated revenues increased ~~$39.8~~$7.7 million, or ~~8.4%~~1.5% to ~~$512.8~~$522.7 million, and ~~$196.1~~$38.6 million, or ~~14.6%~~3.8% to ~~$1.54~~$1.1 billion for the three and ~~nine~~six months ended ~~September~~June 26, ~~2021,~~2022, respectively, compared to prior year comparable periods. Excluding the impact of the Company refranchising its 51% ownership in a 90-restaurant consolidated joint venture, consolidated revenues increased $25.6 million, or 5.2%, and $56.9 million, or 5.7%, for the three and six months ended June 26, 2022, respectively.

Domestic Company-owned restaurant sales decreased $24.7 million, or 12.6%, and $23.2 million, or 5.9% for the three and six months ended June 26, 2022, respectively, compared to the prior year comparable periods.

Excluding the impact of refranchising, Domestic Company-owned restaurant sales increased ~~$13.2~~$2.0 million, or ~~7.4%~~1.2%, and ~~$58.6~~$3.0 million, or ~~11.1%~~0.9%, for the three and ~~nine~~six months ended ~~September~~June 26, ~~2021,~~2022, respectively, primarily due to innovations and strategic pricing actions to help offset food and labor inflation.

North America franchise royalties and fees increased $2.4 million, or 7.5%, and $4.0 million, or 6.1% for the three and six months ended June 26, 2022, respectively, compared to ~~the~~ prior year comparable periods. ~~The increases were~~Excluding the impact of refranchising, North America franchise royalties and fees increased $1.1 million, or 3.3%, and $2.7 million, or 4.0% for the three and six months ended June 26, 2022, respectively, primarily due to positive comparable sales increases of ~~7.4%~~1.4% and ~~11.6%~~2.1% for the three and ~~nine~~six months ended ~~September~~June 26, ~~2021, respectively. Comparable sales for the nine-month period were significantly impacted by new product innovation, including the successful launch~~2022, and higher equivalent units of our new Epic Stuffed Crust pizza in the first quarter of 2021. In addition, the increases are partly due to higher demand that has been sustained during the pandemic, which was not reflected in the first quarter of 2020. “Comparable sales” represents the change in year-over-year sales4.9% and 3.4% for the same ~~base~~periods, respectively.

“Equivalent units” represents the number of restaurants open at the beginning of a given period, adjusted for restaurants opened, closed, acquired or sold during the ~~same fiscal periods.~~

North America franchise royalties and fees increased $6.7 million, or 26.3%, and $28.2 million, or 41.0% for the three and nine months ended September 26, 2021, respectively, compared to the prior year comparable periods. The increases were primarily due to positive comparable sales increases of 6.8% and 12.3% for the three and nine months ended September 26, 2021, respectively. Additionally, the three and nine months ended September 26, 2021 benefited fromperiod on a higher effective royalty rate and higher franchise royalties of $3.5 million and $14.3 million, respectively, compared to the prior comparable periods primarily as a result of ending our temporary franchise assistance program in the third quarter of 2020. The franchise assistance program was above and beyond the level of franchise assistance the Company would incur in the ordinary course of its business.

weighted average basis.

North America franchise restaurant sales, excluding the impact of refranchising, increased ~~8.0%~~2.7% to ~~$693.9~~$753.8 million and ~~13.1%~~1.4% to ~~$2.11~~$1.5 billion for the three and ~~nine~~six months ended ~~September~~June 26, ~~2021,~~2022, respectively, compared to the prior year comparable periods. North America franchise restaurant sales are not included in Company revenues; however, our North America franchise royalties are derived from these sales.

North America commissary revenues increased ~~$7.9~~$32.7 million, or ~~4.3%,~~17.5% and ~~$56.4~~$57.5 million, or ~~11.2%,~~15.5% for the three and ~~nine~~six months ended ~~September~~June 26, ~~2021,~~2022, respectively, compared to the prior year comparable periods primarily due to higher ~~volumes. The nine-month period also included higher~~ pricing ~~on higher commodities.~~

as a result of increased underlying costs associated with commodity price increases, partially offset by lower volumes.

International revenues ~~increased $5.0~~decreased $5.7 million, or ~~14.9%,~~15.0% and ~~$23.0~~$5.6 million, or ~~26.3%,~~7.8% for the three and ~~nine~~six months ended ~~September~~June 26, ~~2021,~~2022, respectively, compared to ~~the~~ prior year comparable periods, primarily due to ~~higher royalties from increased equivalent units~~lower United Kingdom ("PJUK") commissary revenues and ~~higher~~royalties. Additionally, international comparable sales ~~of 8.3%~~revenues decreased 8.0% and ~~17.1%~~3.6% for the three and ~~nine~~six months ended ~~September~~June 26, ~~2021, respectively. International revenues also increased $2.1 million and $7.9 million for three and nine months ended September 26, 2021 due~~2022. The overall declines in our international revenue performance were largely attributable to ~~favorable foreign exchange rates. “Equivalent units” represents the number of restaurants open at the beginning of~~ a ~~given period, adjusted for restaurants opened, closed, acquired or sold during the period on a weighted average basis.~~

contracting PJUK market where consumer sentiment is reaching historical lows.

International franchise restaurant sales increased ~~21.4%~~ to ~~$320.3~~$281.3 million and ~~28.2% to $906.7~~$585.9 million for the three and ~~nine~~six months ended ~~September~~June 26, ~~2021, respectively, excluding~~2022, respectively. Excluding the impact of foreign currency, ~~primarily due to increases in comparable~~international franchise restaurant sales increased 3.4% and ~~equivalent units.~~8.3% for the three and six months ended June 26, 2022, respectively. International franchise restaurant sales are not included in Company revenues; however, our international royalty revenue is derived from these sales.

Other revenues increased ~~$7.1~~$2.8 million, or ~~13.1%~~4.6%, and ~~$29.9~~$5.9 million, or ~~19.1%~~4.7%, for the three and ~~nine~~six months ended ~~September~~June 26, ~~2021,~~2022, respectively, compared to the prior year comparable ~~periods. The increases were~~periods primarily due to ~~higher marketing fund revenues from an increase in franchise sales and~~ higher revenues from our technology ~~platform, including our mobile ordering business which benefited from~~services attributable to increased ~~restaurant sales.~~

North America systemwide comparable sales and equivalent units.

~~Table of Contents~~

Costs and Expenses

Total costs and expenses were approximately ~~$474.2~~$483.8 million, or ~~92.5%~~92.6% of total revenues for the three months ended ~~September~~June 26, ~~2021,~~2022, as compared to ~~$448.4~~$470.4 million or ~~94.8%~~91.3% of related revenues for the prior year comparable period. For the ~~nine~~six months ended ~~September~~June 26, ~~2021,~~2022, total costs and expenses were approximately ~~$1.41~~$1.0 billion or ~~91.6%~~93.9% of total revenues, as compared to ~~$1.27 billion,~~$935.3 million, or ~~94.7%~~91.1% of total revenues for the prior year comparable period. The ~~decreases~~increases in total costs and expenses, as a percentage of revenues, were primarily due to the following:

Domestic Company-owned restaurant expenses were ~~$155.5~~$142.0 million, or ~~81.2%~~82.9% of related revenues for the three months ended ~~September~~June 26, ~~2021,~~2022, as compared to ~~$144.8~~$154.3 million, or ~~81.1%~~78.7% of related revenues for the prior year comparable period. For the ~~nine~~six months ended ~~September~~June 26, ~~2021,~~2022, Domestic Company-owned restaurant expenses were ~~$465.7~~$303.7 million or ~~79.6%~~82.0% of related revenues, compared to expenses of ~~$419.1~~$310.2 million or ~~79.6%~~78.9% of related revenues for the prior year comparable period. The expenses, as a percentage of revenues, ~~were relatively flat~~increased 4.2% and 3.2%, respectively, due to higher food cost attributable to rising commodity prices, which accelerated in the second quarter, and increased labor expense as ~~labor and commodities pressures were offset by leveraging fixed costs on~~staffing levels recover at a higher ~~revenues.~~

cost. Our strategic pricing actions implemented in the first six months of 2022 helped reduce the impact of the underlying cost pressures.

North America commissary expenses were ~~$175.4~~$204.5 million, or ~~92.7%~~93.2% of related revenues for the three months ended ~~September~~June 26, ~~2021,~~2022, as compared to ~~$167.9~~$172.2 million, or 92.6% of related revenues for the prior year comparable period. North America commissary expenses were $518.3 million, or 92.4% of related revenues, for the nine months ended September 26, 2021, compared to $466.7 million, or 92.5% of related revenues, for the prior year comparable period.

International expenses were $21.7 million, or 56.6% of related revenues for the three months ended September 26, 2021 compared to expenses of $19.4 million, or 57.9% of related revenues for the prior year comparable period. International expenses were $62.8 million, or 56.8% of related revenues, for the nine months ended September 26, 2021, compared to $52.8 million, or 60.3% of related revenues for the prior year comparable period. The 1.3% and 3.5% decreases in expenses as a percentage of revenues were primarily due to lower operating costs on higher royalties due to 8.3% and 17.1% increases in comparable sales for the three and nine months ended September 26, 2021, respectively.

~~Other expenses were $56.0 million, or 90.9% of related revenues for the three months ended September 26, 2021 compared to expenses of $50.9 million, or 93.4%~~92.3% of related revenues for the prior year comparable period. For the ~~nine~~six months ended ~~September~~June 26, ~~2021, Other~~2022, North America commissary expenses were ~~$168.1~~$401.6 million, or ~~90.3%~~93.6% of related revenues, as compared to ~~$148.2~~$342.9 million, or ~~94.9%~~92.3% of related revenues for the prior year comparable period. The ~~2.5% and 4.6% decreases in~~ expenses, as a percentage of related revenues, increased 0.9% and 1.3%, respectively, primarily due to rising commodity prices, principally in cheese, proteins and wheat, and higher delivery cost.

International expenses were $19.2 million, or 60.2% of related revenues for the three months ended June 26, 2022, as compared to $21.4 million, or 57.0% of related revenues for the prior year comparable period. For the six months ended June 26, 2022, International expenses were $39.2 million, or 58.8% of related revenues, compared to $41.0 million, or 56.8% of related revenues for the prior year comparable period. The expenses as a percentage of related revenues, increased 3.2% and 2.0%, respectively, primarily due to higher ~~margins from~~commodity costs in the PJUK commissary.

Other expenses were $60.6 million, or 93.3% of related revenues for the three months ended June 26, 2022, as compared to $56.2 million, or 90.5% of related revenues for the prior year comparable period. For the six months ended June 26, 2022, Other expenses were $121.2 million, or 93.0% of related revenues, compared to $112.1 million, or 90.0% of related revenues for the prior year comparable period. The expenses as a percentage of related revenues, increased 2.8% and 2.9%

respectively, primarily due to timing of expenditures on technology platform initiatives to further enhance our ~~online~~digital capabilities and ~~mobile ordering business from higher comparable sales.~~

the customer experience.

General and administrative expenses (“G&A”) were ~~$54.1~~$44.6 million, or ~~10.5%~~8.5% of revenues ~~and $157.8~~three months ended June 26, 2022, compared to $53.7 million, or ~~10.2%~~10.4% of revenues for the ~~three and nine~~prior year comparable period. For the six months ended ~~September~~June 26, ~~2021, respectively,~~2022, G&A was $110.6 million, or 10.4% of revenues, compared to ~~$52.6 million and $148.7~~$103.7 million, or ~~11.1%~~10.1% of revenues for ~~both comparable periods in~~ the prior ~~year.~~year comparable periods.

For the three and six months ended June 26, 2022, G&A consisted of the following (in thousands):

Three Months Ended

Nine Months Ended

Sep. 26,

Sep. 27,

Sep. 26,

Sep. 27,

2021

2020

2021

2020
Administrative expenses (a)
$
51,398

$
43,680

$
148,533

$
134,532
Strategic corporate reorganization costs (b)

2,153

—

9,364

—
Other general expenses (c)

519

8,921

(118)

14,148
General and administrative expenses
$
54,070

$
52,601

$
157,779

$
148,680

~~(a)~~

The increases in administrative expenses of $7.7 million and $14.0 million for the three and nine months ended September 26, 2021, respectively, compared to the prior year comparable periods were primarily due to higher professional and legal fees and travel and labor costs.

~~(b)~~

~~Represents strategic reorganization costs associated with our new office in Atlanta. See “Note 10” of “Notes to Condensed Consolidated Financial Statements” for additional information.~~

~~(c)~~

The decreases in other general expenses of $8.4 million and $14.3 million for the three and nine months ended September 26, 2021, respectively, were primarily due to our marketing fund investments of $10.0 million and


	Three Months Ended				Six Months Ended
	June 26, 2022		June 27, 2021		June 26, 2022		June 27, 2021
Administrative expenses (a)	$	42,889	$	51,052	$	88,979	$	97,135
Special items (b) (c)	1,507		3,328		21,143		7,211
Other general expenses	250		(682)		461		(637)
General and administrative expenses	$	44,646	$	53,698	$	110,583	$	103,709

~~Table of Contents~~(a)

~~$15.0 million for the three- and nine-month periods of 2020, respectively, which were part of our previously announced franchise assistance program that concluded in the third quarter of 2020.~~

~~Depreciation and amortization expense was $11.5 million, or 2.2% of revenues, and $36.8 million, or 2.4% of revenues, for~~For both the three and ~~nine~~six months ended ~~September~~June 26, ~~2021, respectively, compared to $12.8~~2022, Administrative expenses decreased $8.2 million or 2.7% of revenues, and $37.4 million, or 2.8% of revenues, for the prior year comparable periods, respectively. The 0.5% and 0.4% decreases in expenses as a percentage of revenues, respectively, were primarily due to the timing of fully depreciated assets.

~~Operating Income by Segment~~

~~Operating income increased approximately $14.0 million and $59.5 million for the three and nine months ended September 26, 2021, respectively,~~ compared to the prior year comparable ~~periods. Operating income is summarized~~periods primarily due to lower incentive compensation costs, partially offset by higher labor, travel, and occupancy cost associated with the re-opening of corporate headquarters in the ~~following table on a reporting segment basis. Alongside~~first quarter of 2022.

(b)For the ~~GAAP operating income data, we have included “adjusted” operating income to exclude Special items.~~three months ended June 26, 2022, Special items ~~impacting operating income~~include a $1.5 million charge related to advisory fees and severance costs associated with the transition of certain executives.

For the six months ended June 26, 2022, Special items include a one-time, non-cash provisions of $14.6 million on accounts receivable and notes receivable in connection with the conflict in Ukraine and related government actions, a charge of $5.0 million associated with a legal settlement. See “Note 2” of “Notes to Condensed Consolidated Financial Statements” for further information regarding one-time, non-cash provision recorded in the first quarter of 2022 and see “Note 9” of “Notes to Condensed Consolidated Financial Statements” for further discussion regarding the legal settlement.

(c)For the three and six months ended June 27, 2021, Special items of $3.3 million and $7.2 million, respectively, include strategic ~~corporate~~ reorganization costs associated with our new office in Atlanta ~~Georgia.~~which concluded at the end of 2021.

Depreciation and amortization expense was $12.7 million, or 2.4% of revenues three months ended June 26, 2022, compared to $12.5 million, or 2.4% of revenues for the prior year comparable period. For the six months ended June 26, 2022, Depreciation and amortization expense was $24.7 million, or 2.3% of revenues, compared to$25.4 million, or 2.5% of revenues, for the prior year comparable periods.

Operating Income by Segment

Operating income decreased $5.7 million to $38.9 million and decreased $38.2 million to $53.3 million for the three and six months ended June 26, 2022, respectively, compared to the prior year comparable periods.

The following table summarizes Operating income on a reporting segment basis. Along with reported Operating Income, “Adjusted” Operating income, which excludes Special items, has been presented. The reconciliation of GAAP to non-GAAP financial results, as well as the Special items, are included in “Items Impacting Comparability; Non-GAAP Measures.” We believe this non-GAAP measure is important for comparability purposes.

Three Months Ended

Reported

Special

Adjusted

Reported

Adjusted


Sep. 26,

items

Sep. 26,

Sep. 27,

Increase
(In thousands)

2021

in 2021

2021

2020

(Decrease)

Domestic Company-owned restaurants

$
9,480

$
—

$
9,480

$
8,439

$
1,041
North America franchising

29,830

—

29,830

23,353

6,477
North America commissaries

9,598

—

9,598

8,208

1,390
International

9,618

—

9,618

7,986

1,632
All others

3,848

—

3,848

3,193

655
Unallocated corporate expenses

(23,158)

2,153

(21,005)

(26,921)

5,916
Elimination of intersegment losses (profits)

(639)

—

(639)

291

(930)
Total

$
38,577

$
2,153

$
40,730

$
24,549

$
16,181

Nine Months Ended


Reported

Special

Adjusted

Reported

Adjusted

Sep. 26,

items

Sep. 26,

Sep. 27,

Increase
(In thousands)

2021

in 2021

2021

2020

(Decrease)

Domestic Company-owned restaurants

$
40,165

$
—

$
40,165

$
33,852

$
6,313
North America franchising

90,791

—

90,791

62,855

27,936
North America commissaries

29,089

—

29,089

24,579

4,510
International

26,665

—

26,665

16,836

9,829
All others

14,860

—

14,860

5,030

9,830
Unallocated corporate expenses

(70,937)

9,364

(61,573)

(71,978)

10,405
Elimination of intersegment losses (profits)

(557)

—

(557)

(619)

62
Total

$
130,076

$
9,364

$
139,440

$
70,555

$
68,885

~~The increase in operating income, excluding~~


	Three Months Ended
(In thousands)	Reported June 26, 2022		Special items in 2022 (a)		Adjusted June 26, 2022		Reported June 27, 2021		Special items in 2021 (b)		Adjusted June 27, 2021		Adjusted Increase (Decrease)

Domestic Company-owned restaurants	$	5,924	$	—	$	5,924	$	15,361	$	—	$	15,361	$	(9,437)
North America franchising	32,624		—		32,624		30,518		—		30,518		2,106
North America commissaries	10,957		—		10,957		9,778		—		9,778		1,179
International	7,306		—		7,306		8,683		—		8,683		(1,377)
All others	2,187		—		2,187		4,894		—		4,894		(2,707)
Unallocated corporate expenses	(19,344)		1,507		(17,837)		(24,617)		3,328		(21,289)		3,452
Elimination of intersegment losses (profits)	(750)		—		(750)		20		—		20		(770)
Total	$	38,904	$	1,507	$	40,411	$	44,637	$	3,328	$	47,965	$	(7,554)

(a) For the three months ended June 26, 2022, Special items impacting Operating income include a charge of ~~$16.2~~$1.5 million charge related to advisory fees and severance costs associated with the transition of certain executives.

(b) For the three months ended June 27, 2021, Special items impacted Operating income include a charge of $3.3 million related to strategic reorganization costs associated with our new office in Atlanta.


	Six Months Ended
(In thousands)	Reported June 26, 2022		Special items in 2022 (a)		Adjusted June 26, 2022		Reported June 27, 2021		Special items in 2021 (b)		Adjusted June 27, 2021		Adjusted Increase (Decrease)

Domestic Company-owned restaurants	$	7,912	$	8,412	$	16,324	$	30,685	$	—	$	30,685	$	(14,361)
North America franchising	64,761		—		64,761		60,961		—		60,961		3,800
North America commissaries	20,292		—		20,292		19,491		—		19,491		801
International	11,761		3,515		15,276		17,047		—		17,047		(1,771)
All others	5,906		—		5,906		11,012		—		11,012		(5,106)
Unallocated corporate expenses	(56,454)		20,376		(36,078)		(47,779)		7,211		(40,568)		4,490
Elimination of intersegment losses (profits)	(839)		—		(839)		82		—		82		(921)
Total	$	53,339	$	32,303	$	85,642	$	91,499	$	7,211	$	98,710	$	(13,068)

(a) For the six months ended June 26, 2022, Special items impacting Operating income include a one-time, non-cash provisions of $14.6 million on accounts receivable and notes receivable in connection with the conflict in Ukraine and related government actions, a charge of $5.0 million associated with a legal settlement an $8.4 million refranchising loss associated with the sale of our ownership interest in a joint venture including 90-restaurants, $2.8 million for the impairment of certain reacquired franchise rights and a charge of $1.5 million charge related to advisory fees and severance costs associated with the transition of certain executives.

(b) For the six months ended June 27, 2021, Special items impacting Operating income include a charge of $7.2 million related to strategic reorganization costs associated with our new office in Atlanta which concluded at the end of 2021.

Excluding the impact of special items, Operating income decreased $7.6 million, or ~~65.9%,~~15.7% and ~~$68.9~~$13.1 million, or ~~97.6%,~~13.2% for the ~~three-~~three and ~~nine-~~six month ~~periods in 2021, respectively,~~ended June 26, 2022, respectively. These decreases were primarily due to the following:

●

Domestic Company-owned restaurants increased $1.0 million and $6.3 million for the three and nine months ended September 26, 2021, respectively, as compared to the prior year comparable periods primarily due to higher

•Domestic Company-owned restaurants decreased $9.4 million and $14.4 million for the three and six months ended June 26, 2022, respectively. Excluding the impact of the Company refranchising its 51% ownership in a 90-restaurant consolidated joint venture in the second quarter, Domestic Company-owned restaurants decreased $6.8 million and $11.7 million primarily due to higher commodity and labor cost, partially offset by higher revenues related to strategic pricing actions from higher equivalent units.

•North America franchising increased $2.1 million and $3.8 million for the three and six months ended June 26, 2022, respectively. Excluding the impact of the above mentioned refranchising, North America franchising increased $1.2 million and $2.9 million primarily due to positive comparable sales of 1.4% and 2.1% for three and six months ended June 26, 2022, respectively.

•North America commissaries increased $1.2 million and $0.8 million for the three and six months ended June 26, 2022, respectively, primarily due to higher pricing as a result of increased underlying costs associated with commodity price increases, partially offset by lower volumes

•International decreased $1.4 million and $1.8 million for the three and six months ended June 26, 2022, respectively, primarily due to lower United Kingdom ("PJUK") commissary revenues and royalties attributed to lower comparable sales, which declined 8.0% and 3.6%, for the three and six months ended June 26, 2022, respectively.

•All Others, which primarily includes our online and mobile ordering business and our marketing funds, decreased $2.7 million and $5.1 million for the three and six months ended June 26, 2022 compared to the prior year comparable periods primarily due to timing of expenditures for technology support initiatives.

•Unallocated corporate expenses decreased $3.5 million and $4.5 million for the three and six months ended June 26, 2022, respectively. The decrease for the six months ended June 26, 2022, compared to prior year

comparable period primarily due to lower incentive compensation costs, partially offset by higher labor, travel, and occupancy cost associated with the re-opening of corporate headquarters in the first quarter of 2022.

Refranchising and Impairment loss

~~Table~~On March 28, 2022, we refranchised our 51 percent ownership interest in a 90-restaurant consolidated joint venture between Papa Johns and Blue and Silver Ventures in Texas for cash proceeds of ~~Contents~~

$14.0 million, net of transaction costs. We recorded a one-time, non-cash charge of $8.4 million in the first quarter related to the divestiture. The Company also recorded an impairment loss of $2.8 million for reacquired franchise rights due to the financial and operational impact of the conflict in Ukraine and government actions taken in response to that conflict, including, but not limited to, international sanctions.

~~profits from comparable sales increases of 7.4% and 11.6%, respectively. These increases were partially offset by higher commodities costs and labor initiatives.~~

●

North America franchising increased $6.5 million and $27.9 million for the three and nine months ended September 26, 2021, respectively, primarily due to higher comparable sales of 6.8% and 12.3% for the three- and nine- month periods, respectively. The three and nine months ended September 26, 2021 also benefited from higher effective royalty rates as compared to the comparable periods primarily due to higher franchise royalties of $3.5 million and $14.3 million, respectively, as a result of our temporary royalty reduction program concluding in the third quarter of 2020, which was above and beyond the level of franchise assistance the Company would incur in the ordinary course of its business.

●

~~North America commissaries increased $1.4 million and $4.5 million for the three and nine months ended September 26, 2021, respectively, primarily due to higher profits from higher volumes.~~

●

International increased approximately $1.6 million and $9.8 million for the three and nine months ended September 26, 2021, respectively, primarily due to higher royalty revenue from comparable sales of 8.3% and 17.1%, respectively, and increased equivalent units.

●

All Others, which primarily includes our online and mobile ordering business and our marketing funds, increased $655,000 and $9.8 million for the three and nine months ended September 26, 2021, respectively, compared to the prior year comparable periods primarily due to higher revenues from our technology platform, including our mobile ordering business.

●

Unallocated corporate expenses decreased approximately $5.9 million and $10.4 million for the three and nine months ended September 26, 2021, respectively. These decreases were primarily due to our discretionary marketing fund investments of $10.0 million and $15.0 million for the three and nine months ended September 27, 2020, respectively, which were part of our previously announced franchise assistance program that concluded in the third quarter of 2020. These decreases were partially offset by higher professional and legal fees and travel and labor costs.

Net Interest Expense

Net interest expense increased ~~$343,000~~$2.4 million, or 66.7%, and $3.0 million, or 41.8% for ~~the~~ three and six months ended ~~September~~June 26, ~~2021 (consistent for the nine-month periods)~~2022, respectively due to higher average outstanding debt on our revolving credit ~~facility drawn to partially fund the repurchase and conversion of our Series B Preferred Stock, partially offset by lower interest rates.~~facility. Total debt outstanding was ~~$425.0~~$545 million and ~~$350.0~~$490 million as of ~~September~~June 26, 2022 and December 26, 2021, ~~and December 27, 2020,~~ respectively.

Income Before Income Taxes

For the reasons discussed above, income before income taxes ~~increased~~decreased approximately ~~$13.7~~$8.2 million, or ~~65.4%~~19.9%, and ~~$59.5~~$41.2 million, or ~~100.3%~~48.9%, for the three and ~~nine~~six months ended ~~September~~June 26, ~~2021,~~2022, respectively, over the prior year comparable periods.

Income Tax Expense

~~The~~

Our effective income tax rates were ~~11.7%~~21.6% and ~~16.3%~~13.6% for ~~the~~ three and ~~nine~~six months ended ~~September~~June 26, ~~2021 representing decreases of 9.9%~~2022 compared to 18.0% and ~~3.9%, respectively, from~~18.2% for the prior year comparable periods. The ~~decreases~~decrease in the effective ~~rates were primarily due to~~rate for the ~~finalization of our 2020 federal income tax return, which resulted in a $2.7 million benefit to tax expense, including immaterial prior year true-up adjustments, and~~six months ended June 26, 2022 was caused by higher excess tax benefits ~~from~~generated by stock option exercises and vesting of restricted shares ~~vesting activity.~~

in addition to an overall decrease in pre-tax income.

Quarter Ended Six Months Ended
June 26, 2022 June 27, 2021 June 26, 2022 June 27, 2021
Income before income taxes $32,823 $40,988 $42,995 $84,203
Income tax expense $7,093 $7,398 $5,838 $15,330
Effective tax rate 21.6% 18.0% 13.6% 18.2%

Diluted Earnings (Loss) Per Common Share

Diluted earnings per common share was ~~$0.79~~$0.70 for the three months ended ~~September~~June 26, ~~2021,~~2022, compared to diluted ~~earnings~~loss per common share of ~~$0.35~~$(2.30) in the prior year comparable period. For the ~~nine~~six months ended ~~September~~June 26, ~~2021,~~2022, diluted earnings per common share was $0.99, compared to diluted loss per common share ~~was $0.59, compared to diluted earnings per share~~ of ~~$0.99~~$(1.47) for the prior year comparable period. Excluding the impact of Special items, adjusted diluted earnings per common share were ~~$0.83~~$0.74 and ~~$2.76~~$1.69 for the three and ~~nine~~six months ended ~~September~~June 26, ~~2021, respectively.~~2022, respectively, compared to adjusted diluted earnings per common share of $0.93 and $1.94 for the prior year comparable periods. Diluted ~~loss~~earnings per common share for the ~~nine~~six months ended ~~September~~June 26, 2022 included Special items of $25.0 million, net of tax, primarily related to refranchising losses associated with the divestiture of our controlling interest in the joint venture with Blue and Silver Ventures, impairment losses of certain loans and reacquired franchised rights, and the Legal Settlement. Diluted earnings per common share for the six months ended June 27, 2021 included Special items of ~~$3.14 from a~~$115.4 million, net of tax, primarily due to reorganization costs and the reduction in net income attributable to common shareholders related to the

~~Table of Contents~~

repurchase and conversion of all shares of ~~previously outstanding~~ the Company's former Series B Convertible Preferred Stock ("Series B Preferred ~~Stock during the second quarter. This reduction reflects~~Stock") in May 2021. These reductions reflect the excess of the one-time cash payment over the carrying value of the Series B Preferred Stock. See “Items Impacting Comparability; Non-GAAP Measures” for additional information.

Impact of Inflation

Given the accelerating inflationary environment and short-term commodity volatility experienced in the three and six months ended June 26, 2022, there have been and may continue to be increases in food costs and labor costs which have and could further impact our profitability. Inflationary factors such as increased food costs, increased labor and employee health and benefit costs, increased rent costs and increased energy costs have and may continue to adversely affect our operating costs and profitability. Severe sustained increases in inflation could affect the global and U.S. economies and could have an adverse impact on our business, financial condition and results of operations. To the extent permitted by competition, increased costs are recovered through a combination of selective menu price increases, product mix, and/or implementing operational improvements.

Items Impacting Comparability; Non-GAAP Measures

The table below reconciles our GAAP financial results to our adjusted financial results, which are non-GAAP ~~measures (collectively defined as “Special items”).~~measures. We present these non-GAAP measures because we believe the Special items ~~in 2021~~ impact the comparability of our results of ~~operations.~~

Three Months Ended

Nine Months Ended

September 26,

September 27,

September 26,

September 27,
(In thousands, except per share amounts)

2021

2020

2021

2020

GAAP operating income

$
38,577

$
24,549

$
130,076

$
70,555
Strategic corporate reorganization costs (1)

2,153

—

9,364

—
Adjusted operating income

$
40,730

$
24,549

$
139,440

$
70,555

GAAP net income/(loss) attributable to common shareholders

$
28,961

$
11,457

$
(20,423)

$
32,410
Strategic corporate reorganization costs (1)

2,153

—

9,364

—
Repurchase and conversion of Series B Preferred Stock (2)

—

—

109,852

—
Tax effect of strategic corporate reorganization costs (3)

(483)

—

(2,098)

—
Adjusted net income attributable to common shareholders

$
30,631

$
11,457

$
96,695

$
32,410

GAAP diluted earnings/(loss) per common share

$
0.79

$
0.35

$
(0.59)

$
0.99
Strategic corporate reorganization costs (1)

0.05

—

0.27

—
Repurchase and conversion of Series B Preferred Stock (2)

—

—

3.14

—
Tax effect of strategic corporate reorganization costs (3)

(0.01)

—

(0.06)

—
Adjusted diluted earnings per share

$
0.83

$
0.35

$
2.76

$
0.99

operations.

See “Note 2”, “Note 9”, and “Note 10” of “Notes to Condensed Consolidated Financial Statements,” for additional information about the Special items.


	Three Months Ended				Six Months Ended
(In thousands, except per share amounts)	June 26, 2022		June 27, 2021		June 26, 2022		June 27, 2021

GAAP operating income	$	38,904	$	44,637	$	53,339	$	91,499
Refranchising and impairment loss (1)	—		—		25,796		—
Legal settlement (2)	—		—		5,000		—
Strategic corporate reorganization costs (3)	—		3,328		—		7,211
Other costs (4)	1,507		—		1,507		—
Adjusted operating income	$	40,411	$	47,965	$	85,642	$	98,710

GAAP net income attributable to common shareholders	$	25,240	$	(79,898)	$	35,693	$	(49,542)
Refranchising and impairment loss (1)	—		—		25,796		—
Legal settlement (2)	—		—		5,000		—
Strategic corporate reorganization costs (3)	—		3,328		—		7,211
Other costs (4)	1,507		—		1,507		—
Repurchase and conversion of Series B Preferred Stock	—		109,852		—		109,852
Tax effect of Non-GAAP adjustment on special items (4)	(339)		(745)		(7,269)		(1,615)
Adjusted net income attributable to common shareholders	$	26,408	$	32,537	$	60,727	$	65,906

GAAP diluted earnings per common share	$	0.70	$	(2.30)	$	0.99	$	(1.47)
Refranchising and impairment loss (1)	—		—		0.72		—
Legal settlement (2)	—		—		0.14		—
Strategic corporate reorganization costs (3)	—		0.10		—		0.22
Other costs (4)	0.05		—		0.04		—
Repurchase and conversion of Series B Preferred Stock	—		3.15		—		3.23
Tax effect of Non-GAAP adjustment on special items (5)	(0.01)		(0.02)		(0.20)		(0.04)
Adjusted diluted earnings per common share	$	0.74	$	0.93	$	1.69	$	1.94

(Note) The above table does not include the impact of ~~the~~ allocation of undistributed earnings to participating securities for Special items.

~~(1)~~

(1)Includes on a pre-tax basis (a) a one-time, non-cash charge of $8.4 million ($0.23 loss per diluted share) associated with the refranchising of the Company’s controlling interest in the 90-restaurant joint venture, recorded as Refranchising and impairment loss; and (b) $17.4 million ($0.48 million loss per diluted share) in one-time, non-cash expense related to the reserve of certain loans and impairment of reacquired franchised rights related to the reserve of certain loans and impairment of reacquired franchised rights related to the conflict in Ukraine and subsequent international government actions and sanctions, which were recorded as Refranchising and impairment loss of $2.8 million and General and administrative expenses of $14.6 million.

(2)Represents an accrual of the Legal Settlement, recorded in General and administrative expenses.

(3)Represents strategic corporate reorganization costs associated with our new office in Atlanta, Georgia.

(4)Other costs of $1.5 million for the second quarter of 2022 include advisory fees and severance costs associated with the transition of certain executives.

(5)~~Represents strategic corporate reorganization costs associated with our new office in Atlanta, Georgia.~~

~~(2)~~

~~Represents the one-time charge related to the repurchase and conversion of all shares of Series B Preferred Stock and includes related professional fees incurred as part of the transaction.~~

~~(3)~~

The tax effect for strategic corporate reorganization costs was calculated by applying the 2021 marginal tax rate of 22.4%. There was no tax effect on the repurchase and conversion of the Series B Preferred Stock as the one-time charge was non-deductible for tax purposes.

The tax effect for Special items was calculated by applying the marginal tax rate of 22.5% and 22.4% for the three and six months ended June 26, 2022 and June 27, 2021, respectively.

The 2022 non-GAAP adjusted results shown above and within this document, which exclude Special items, should not be construed as a substitute for or a better indicator of the Company’s performance than the Company’s GAAP results. Management believes presenting certain financial information excluding Special items is important for purposes of comparison to prior year results. In addition, management uses these metrics to evaluate the Company’s underlying operating performance and to analyze trends.

~~Table of Contents~~

Liquidity and Capital Resources

Cash Flows

The table below summarizes our cash flows from continuing operations for the six months ended June 26, 2022 and June 27, 2021:

Six Months Ended
June 26,
2022 June 27,
2021
Total cash provided by (used in):
Operating activities $ 45,585 $ 128,030
Investing activities (12,523) (19,467)
Financing activities (50,677) (142,871)
Change in cash and cash equivalents, excluding the impact of foreign currency $ (17,615) $ (34,308)

Operating Activities

Cash flow provided by operating activities was $45.6 million for the six months ended June 26, 2022 compared to $128.0 million for the corresponding period of 2021. The decrease of $82.4 million was primarily reflects lower cash flow from operating activities as a result of overall business performance, lower accrued expenses, and the impact of timing of certain marketing payments.

Investing Activities

Cash flow used in investing activities was $12.5 million for the six months ended June 26, 2022 compared to $19.5 million for the same period in 2021, or a decrease of $6.9 million. The decrease in cash flow used in investing activities was primarily due to an increase in capital expenditures, partly offset by $14.0 million in proceeds, net of transaction costs, from the impact of refranchising 90-restaurants in the first quarter of 2022.

Our capital expenditures consisted primarily of capital investments for existing stores, new store locations and capital expenditures for strategic initiatives. We estimate that our capital expenditures during 2022 will be approximately $75 million to $85 million. This estimate includes the acquisition of sites and construction costs for new Company-owned stores that have opened or that we expect to open during 2022. We intend to fund our capital expenditures with cash generated by operations and borrowings under our senior secured revolving credit facility with an aggregate available principal amount of the $600 million (the "PJI Revolving Facility"), as necessary.

Financing Activities

Cash flow used in financing activities was $50.7 million the six months ended June 26, 2022 compared to $142.9 million for the same period of 2021. The decrease of $92.2 million in cash flow used in financing activities reflects payment of cash consideration for the repurchase and conversion of all of the Company’s Series B Preferred Stock outstanding in 2021, offset by increased repurchases of Company common stock and a decrease in proceeds from our revolving credit facility.

Debt

Our outstanding debt as of ~~September~~June 26, ~~2021~~2022 was ~~$425.0~~$545.0 million, which was comprised of $400.0 million outstanding under our 3.875% senior notes ~~due 2029~~ (the ~~“Notes”~~"Notes") and ~~$25.0~~$145.0 million under the PJI Revolving ~~Facility (as defined below). Including outstanding letters of credit, the remaining~~Facility. Remaining availability under the PJI Revolving Facility was approximately ~~$572.3~~$455.0 million as of ~~September~~June 26, ~~2021.~~

2022.

~~On September 14, 2021, the Company issued $400.0 million of Notes which will mature on September 15, 2029. Concurrently with the closing of the Notes, the Company entered into an~~

Our amended and restated credit agreement, (the “Amended Credit Agreement”) replacing the previous $800.0 million credit agreement (“Previous Credit Agreement”). The Amended Credit Agreement provides for a senior secured revolving credit facility in an aggregate available principal amount of $600.0 million (the “PJI Revolving Facility”), of which up to $40.0 million is available as swingline loans and up to $80.0 million is available as letters of credit. The PJI Revolving Facility will mature ondated September 14, ~~2026.~~

~~The net proceeds from the Notes, together with borrowings under the PJI Revolving Facility, were used to repay outstanding revolver and term loan borrowings under the Company’s Previous~~2021 (the "Amended Credit ~~Agreement.~~

~~As of September 26, 2021, we have the following interest rate swap agreements with a total notional value of $350.0 million:~~


~~Effective Dates~~	~~Floating Rate Debt~~		~~Fixed Rates~~
~~April 30, 2018 through April 30, 2023~~	$	~~55 million~~	~~2.33~~	%
~~April 30, 2018 through April 30, 2023~~	$	~~35 million~~	~~2.36~~	%
~~April 30, 2018 through April 30, 2023~~	$	~~35 million~~	~~2.34~~	%
~~January 30, 2018 through August 30, 2022~~	$	~~100 million~~	~~1.99~~	%
~~January 30, 2018 through August 30, 2022~~	$	~~75 million~~	~~1.99~~	%
~~January 30, 2018 through August 30, 2022~~	$	~~50 million~~	~~2.00~~	%

In September 2021, we de-designated $350.0 million of our interest rate swaps as cash flow hedges following the issuance of the Notes. For these de-designated hedges, the portion of gains or losses on the derivative instruments previously recognized in accumulated other comprehensive loss will be reclassified into earnings as adjustments to interest expense on a straight-line basis over the remaining life of the originally hedged transactions.

~~Our Amended Credit Agreement~~Agreement") contains affirmative and negative covenants ~~including~~that, among other things, require customary reporting obligations and restrict, subject to certain exceptions, the occurrence of additional indebtedness and liens, the consummation of certain mergers, consolidations, sales of assets and similar transactions, the making of investments, equity distributions and other restricted payments, and transactions with affiliates. The Company is also subject to certain financial covenants, as shown in the following ~~financial covenants:~~

table, that could restrict or impose constraints on the liquidity of our business:

Permitted Ratio

Actual Ratio as of

June 26, 2022

~~Permitted Ratio~~

~~September 26, 2021~~

Leverage ratio

Not to exceed 5.25 to 1.0

~~1.9~~2.3 to 1.0

Interest coverage ratio

Not less than 2.00 to 1.0

~~5.0~~4.5 to 1.0

Our leverage ratio is defined as outstanding debt divided by consolidated earnings before interest, taxes, depreciation and amortization (“EBITDA”) for the most recent four fiscal quarters. Our interest coverage ratio is defined as the sum of consolidated EBITDA and consolidated rental expense for the most recent four fiscal quarters divided by the sum of consolidated interest expense and consolidated rental expense for the most recent four fiscal quarters. We were in compliance with all financial covenants as of ~~September~~June 26, ~~2021.~~

2022.

In addition, the Indenture governing the Notes contains customary covenants that, among other things and subject to certain exceptions, limit our ability and the ability of certain of our subsidiaries to: incur additional indebtedness and guarantee indebtedness; pay dividends or make other distributions or repurchase or redeem our capital stock; prepay, redeem or repurchase certain debt; issue certain preferred stock or similar equity securities; make loans and investments; sell assets; incur liens; enter into transactions with affiliates; enter into agreements restricting our subsidiaries’ ability to pay dividends; and consolidate, merge or sell all or substantially all of our assets.

Papa John’s Marketing Fund, Inc. (“PJMF”), our national marketing fund, has a $20.0 million 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. There was 0no debt outstanding under the PJMF Revolving Facility as of ~~September~~June 26, ~~2021~~2022 or December ~~27, 2020.~~26, 2021. The PJMF operating results and the related debt outstanding do not impact the financial covenants under the ~~PJI~~Amended Credit Agreement.

Share Repurchases

~~Table of Contents~~

~~Cash Flows~~

Cash flow provided by operating activities was $193.6 million for the nine months ended September 26, 2021 compared to $168.5 million for the corresponding period of 2020. The increase of $25.1 million was primarily due to higher net income, offset by unfavorable working capital.

Cash flow used in investing activities was $41.2 million for the nine months ended September 26, 2021 compared to $28.6 million for the same period in 2020, or an increase of $12.6 million. The increase in cash flow used in investing activities was primarily due to an increase in capital expenditures.

Cash flow used in financing activities was $177.1 million for the nine months ended September 26, 2021 compared to $27.4 million for the same period of 2020. The increase of $149.7 million in cash flow used in financing activities was primarily due to the payment of cash consideration to affiliates of Starboard Value LP and certain franchisees for the repurchase and conversion of all of the Company’s Series B Preferred Stock outstanding which occurred during the second quarter of 2021, offset by net proceeds from the issuanceAs part of our ~~Notes~~long-term growth and ~~refinancing of~~capital allocation strategy, we are committed to investing in share repurchases to provide ongoing value and enhanced returns to our ~~revolving credit facility in the third quarter of 2021.~~

~~Dividends~~

~~The Company recorded dividends of approximately $33.2 million for the nine months ended September 26, 2021 consisting of the following:~~

●

~~$27.6 million paid to common stockholders ($0.80 per share);~~

●

~~$3.0 million in preferred dividends on the Series B Preferred Stock (3.6% of the investment per annum);~~

●

~~$1.5 million of common stock deemed dividend distributions in conjunction with the repurchase and conversion of the Series B Preferred Stock; and~~

●

~~$1.1 million in common stock “pass-through” dividends paid to Series B Preferred Stockholders on an as-converted basis ($0.45 per share).~~

shareholders. On October 28, 2021, our Board of Directors approved a share repurchase program with an indefinite duration for up to $425.0 million of the Company’s common stock. The 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 under these programs for the three and six months ended June 26, 2022 and June 27, 2021:


(in thousands, except average price per share)	Total Number of Shares Purchased	Average Price Paid per Share		Aggregate Cost of Shares Purchased		Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
Three Months Ended
June 26, 2022	452	$	94.56	$	42,762	$	349,329
June 27, 2021	68	$	101.21	$	6,921	$	64,110

(in thousands, except average price per share)	Total Number of Shares Purchased	Average Price Paid per Share		Aggregate Cost of Shares Purchased		Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
Six Months Ended
June 26, 2022	753	$	100.23	$	75,471	$	349,329
June 27, 2021	83	$	98.23	$	8,188	$	64,110

Subsequent to June 26, 2022, we acquired an additional 229,000 shares at an aggregate cost of $19.5 million. Approximately $329.8 million remained available under the Company’s share repurchase program as of July 29, 2022.

The Company utilizes a written trading plan under Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, from time to time to facilitate the repurchase of shares of our common stock under this share repurchase program. There can be no assurance that we will repurchase shares of our common stock either through a Rule 10b5-1 trading plan or otherwise.

Dividends

The Company recorded dividends of approximately $25.1 million ($0.70 per share) for the six months ended June 26, 2022. On August 2, 2022, our Board of Directors declared a ~~fourth~~second quarter dividend of ~~$0.35~~$0.42 per common share of(approximately $14.9 million in the aggregate), which ~~approximately $12.8 million will be paid to common stockholders. The common share dividend~~ will be paid on ~~November 19, 2021~~August 26, 2022 to stockholders of record as of the close of business on ~~November 9, 2021.~~August 15, 2022. The declaration and payment of any future dividends will be at the discretion of our Board of Directors.

~~Table of Contents~~

Free Cash Flow

Free cash flow, a non-GAAP measure, is defined as net cash provided by operating activities (from the Condensed Consolidated Statements of Cash Flows) less the purchases of property and equipment and dividends paid to preferred stockholders. We view free cash flow as an important financial measure because it is one factor that management uses in determining the amount of cash available for discretionary investment. Free cash flow is not a term defined by GAAP, and as a result, our measure of free cash flow might not be comparable to similarly titled measures used by other companies. Free cash flow should not be construed as a substitute for or a better indicator of the Company’s performance than the Company’s GAAP measures. See “Items Impacting Comparability; Non-GAAP Measures” for a discussion of free cash flow.

The Company’s free cash flow was as follows for the ~~nine-month~~six-months periods of ~~2021~~2022 and ~~2020~~2021 (in thousands):

Nine Months Ended

September 26,

September 27,

2021

2020

Net cash provided by operating activities

$
193,624

$
168,547
Purchases of property and equipment

(41,328)

(24,269)
Dividends paid to preferred stockholders (1)

(6,394)

(10,237)
Free cash flow

$
145,902

$
134,041

~~(1) Excludes $188.6 million~~


	Six Months Ended
	June 26, 2022		June 27, 2021

Net cash provided by operating activities	$	45,585	$	128,030
Purchases of property and equipment	(30,744)		(21,543)
Dividends paid to preferred stockholders	—		(6,394)
Free cash flow	$	14,841	$	100,093

Cash Requirements

There have been no material changes in our cash requirements other than in the ordinary course of ~~cash consideration paid~~business since the end of 2021. Refer to “Cash Requirements” presented within “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the ~~repurchase and conversion of the Series B Preferred Stock in the second quarter of~~fiscal year ended December 26, 2021.

for additional information regarding our cash requirements.

~~Table of Contents~~

Forward-Looking Statements

Certain matters discussed in this Quarterly Report on Form 10-Q and other Company communications that are not statements of historical fact constitute forward-looking statements within the meaning of the federal securities laws. Generally, the use of words such as “expect,” “intend,” “estimate,” “believe,” “anticipate,” “will,” “forecast,” "outlook", “plan,” “project,” or similar words identify forward-looking statements that we intend to be included within the safe harbor protections provided by the federal securities laws. Such forward-looking statements include or may relate to projections or guidance concerning business performance, revenue, earnings, cash flow, earnings per share, share repurchases, the current economic environment, the financial impact of the temporary business ~~opportunities,~~ disruptions and ~~temporary~~ changes in demand we are experiencing related to the current outbreak of the ~~novel~~ coronavirus ~~disease (COVID-19),~~pandemic, commodity and labor costs, currency fluctuations, profit margins, unit growth, unit level performance, capital expenditures, restaurant and franchise development, the duration of changes in consumer behavior caused by the pandemic, ~~reorganization costs~~labor shortages and ~~the related organizational, employment and real estate changes from opening our new office in Atlanta,~~price increases,

inflation, royalty relief, the effectiveness of our menu innovations and other business initiatives, marketing efforts, liquidity, compliance with debt covenants, impairments, strategic decisions and actions, dividends, effective tax rates, regulatory changes and impacts, adoption of new accounting standards, and other financial and operational measures. Such statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions, which are difficult to predict and many of which are beyond our control. Therefore, actual outcomes and results may differ materially from those matters expressed or implied in such forward-looking statements. The risks, uncertainties and assumptions that are involved in our forward-looking statements include, but are not limited to:

●

the ability of the Company to manage difficulties and opportunities associated with or related to the COVID-19 pandemic, including risks related to: the impact of governmental restrictions on freedom of movement and business operations including quarantines, social distancing requirements and mandatory business closures; changes in consumer demand or behavior; labor shortages at Company and/or franchised stores; impact of delayed new store openings, both domestically and internationally; our ability to navigate changing governmental programs and regulations relating to the pandemic; and the increased risk of phishing, ransomware and other cyber-attacks;

●

our ability to successfully implement or fully realize the anticipated benefits of our corporate reorganization and new office in Atlanta, Georgia and corporate reorganization in the timeframes we desire or within the expected range of expenses, or at all. In addition, turnover in our support teams due to our relocation to Georgia could distract our employees, decrease employee morale, harm our reputation, and negatively impact the overall performance of our corporate support teams;

●

the uncertainty of whether and to what extent the increase in demand for our products that we are currently experiencing during the COVID-19 pandemic will continue following a cessation of the effects of the virus in the future;

●

increased costs for branding initiatives and launching new advertising and marketing campaigns and promotions to improve consumer sentiment and sales trends, and the risk that such initiatives will not be effective;

●

~~risks related to social media, including publicity adversely and rapidly impacting our brand and reputation;~~

●

aggressive changes in pricing or other marketing or promotional strategies by competitors, which may adversely affect sales and profitability; and new product and concept developments by food industry competitors;

●

changes in consumer preferences or consumer buying habits, including the growing popularity of delivery aggregators, as well as changes in general economic conditions or other factors that may affect consumer confidence and discretionary spending, including higher unemployment;

●

the adverse impact on the Company or our results caused by global health concerns, product recalls, food quality or safety issues, incidences of foodborne illness, food contamination and other general public health concerns about our Company-owned or franchised restaurants or others in the restaurant industry;

●

~~the effectiveness of our technology investments and changes in unit-level operations;~~

●

the ability of the Company and its franchisees to meet planned growth targets and operate new and existing restaurants profitably, including difficulties finding qualified franchisees, store level employees or suitable sites;

●

increases in labor costs, food costs or sustained higher other operating costs. This could include increased employee compensation, including as a result of changes in minimum wage, benefits, insurance, tax rates, new regulatory requirements or increasing compliance costs;

•the ability of the Company to manage difficulties and opportunities associated with or related to the coronavirus pandemic, including governmental restrictions, changes in consumer demand or behavior, vaccine mandates and changing governmental programs and regulations relating to the pandemic;

•the ability of the Company to manage labor shortages at Company and/or franchised stores and our quality control centers;

•increases in labor costs, food costs or sustained higher other operating costs, including as a result of supply chain disruption, inflation or climate change;

•the potential for delayed new store openings, both domestically and internationally;

•the increased risk of phishing, ransomware and other cyber-attacks;

•risks to the global economy and our business related to the conflict in Ukraine;

•increased costs for branding initiatives and launching new advertising and marketing campaigns and promotions to boost consumer sentiment and sales trends, and the risk that such initiatives will not be effective;

•risks related to social media, including publicity adversely and rapidly impacting our brand and reputation;

•aggressive changes in pricing or other marketing or promotional strategies by competitors, which may adversely affect sales and profitability; and new product and concept developments by food industry competitors;

•changes in consumer preferences or consumer buying habits, including the growing popularity of delivery aggregators, as well as changes in general economic conditions or other factors that may affect consumer confidence and discretionary spending, including higher unemployment;

•the adverse impact on the Company or our results caused by global health concerns, product recalls, food quality or safety issues, incidences of foodborne illness, food contamination and other general public health concerns about our Company-owned or franchised restaurants or others in the restaurant industry;

•the effectiveness of our technology investments and changes in unit-level operations;

•the ability of the Company and its franchisees to meet planned growth targets and operate new and existing restaurants profitably, including difficulties finding qualified franchisees, store level employees or suitable sites;

•increases in labor costs, food costs or sustained higher other operating costs, including as a result of supply chain disruption and inflation. This could also include increased employee compensation, including as a result of labor shortages, changes in minimum wage, benefits, insurance, tax rates, new regulatory requirements or increasing compliance costs;

•increases in insurance claims and related costs for programs funded by the Company up to certain retention limits, including medical, owned and non-owned vehicles, workers’ compensation, general liability and property;

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

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

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

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

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

•changes in Federal or state income, general and other tax laws, rules and regulations and changes in generally accepted accounting principles.

~~Table of Contents~~

●

increases in insurance claims and related costs for programs funded by the Company up to certain retention limits, including medical, owned and non-owned vehicles, workers’ compensation, general liability and property;

●

disruption of our supply chain or commissary operations which could be caused by our sole source of supply of mozzarella cheese, desserts, garlic cups or limited source of suppliers for other key ingredients or more generally due to weather, natural disasters including drought, disease, or geopolitical or other disruptions beyond our control, including COVID-19;

●

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

●

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

●

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

●

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

●

~~changes in Federal or state income, general and other tax laws, rules and regulations and changes in generally accepted accounting principles.~~

For a discussion of these and other risks that may cause actual results to differ from expectations, refer to “Part I. Item 1A. – Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 26, 2021 and “Part II. Item IA. – Risk Factors” in our Quarterly Report on Form 10-Q for the quarter end March 27, ~~2020.~~2022, as well as subsequent filings. We undertake no obligation to update publicly any forward-looking statements, whether as a result of future events, new information or otherwise, except as required by law.

~~Table of Contents~~

Item 3.~~Quantitative~~3.Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

We are exposed to the impact of interest rate changes on our PJI Revolving Facility. We attempt to minimize interest rate risk exposure by fixing our interest rate through the utilization of interest rate swaps, which are derivative financial instruments. ~~As previously mentioned, these~~The interest rate swaps ~~were eligible for hedge accounting for part of the period and~~ were de-designated following the issuance of the ~~Notes.~~Notes in the third quarter of 2021. Our swaps are entered into with financial institutions that participate in the PJI Revolving Facility. By using a derivative instrument to hedge exposures to changes in interest rates, we expose ourselves to credit risk due to the possible failure of the counterparty to perform under the terms of the derivative contract. We do not enter into contracts for trading purposes and do not use leveraged instruments. The market risks associated with our debt obligations as of ~~September~~June 26, ~~2021~~2022 have not changed from those reported in “Part II. Item 7A. Quantitative and Qualitative Disclosure About Market Risk” in our Annual Report on Form 10-K for the fiscal year ended December ~~27, 2020.~~26, 2021. See “Note 8” of “Notes to Condensed Consolidated Financial Statements” for additional information on our debt obligations and derivative instruments.

Foreign Currency Exchange Rate Risk

We are exposed to foreign currency exchange rate fluctuations from our operations outside of the United States, which can adversely impact our revenues, net income and cash flows. Our international operations principally consist of distribution sales to franchised Papa John’s restaurants located in the United Kingdom and our franchise sales and support activities, which derive revenues from sales of franchise and development rights and the collection of royalties from our international franchisees. Approximately, 7%6.1% and 6.2% of our revenues were derived from these operations for the three and ~~nine~~six months ended ~~September~~June 26, ~~2021~~2022, respectively, as compared to 7.3% and ~~September 27, 2020.~~

7.0% for the prior year comparable periods.

We have not historically hedged our exposure to foreign currency fluctuations. Foreign currency exchange rate fluctuations had ~~a favorable~~an unfavorable impact of approximately ~~$2.1~~$3.2 million and ~~$7.9~~$4.4 million on International revenues for the three and ~~nine~~six months ended ~~September~~June 26, ~~2021,~~2022, respectively, and a favorable impact of ~~approximately $650,000~~$3.8 million and ~~an unfavorable impact of approximately $1.4~~$5.8 million for the three and ~~nine~~six months ended ~~September~~June 27, ~~2020,~~2021, respectively. Foreign currency exchange rate fluctuations had ~~a favorable~~an unfavorable impact of approximately ~~$400,000~~$0.4 million and ~~$1.7~~$1.0 million on operating income for the three and ~~nine~~six months ended ~~September~~June 26, ~~2021,~~2022, respectively, and ~~an unfavorable~~a favorable impact of ~~$120,000~~$0.9 million and ~~$1.1~~$1.4 million on operating income for the three and ~~nine~~six months ended ~~September~~June 27, ~~2020,~~2021, respectively.

Commodity Price Risk

In the ordinary course of business, the food and paper products we purchase, including cheese (our largest individual food cost item), are subject to seasonal fluctuations, weather, availability, demand and other factors that are beyond our control. We have pricing agreements with some of our vendors, including forward pricing agreements for a portion of our cheese purchases for our domestic Company-owned restaurants, which are accounted for as normal purchases; however, we remain exposed to on-going commodity volatility.

~~Table of Contents~~

The following table presents the actual average block price for cheese by quarter through the ~~third~~second quarter of ~~2021~~2022 and the projected average block price by quarter for ~~2021~~2022 (based on the ~~October~~July 29, ~~2021~~2022 Chicago Mercantile Exchange cheese futures market prices):

2021

2020

Projected

Actual


Block Price

Block Price

Quarter 1

$
1.676

$
1.857
Quarter 2

1.680

1.679
Quarter 3

1.676

2.262
Quarter 4

1.780

2.235
Full Year

$
1.703
*
$
2.008


	2022			2021
	Projected Block Price			Actual Block Price

Quarter 1	$	1.966		$	1.676
Quarter 2	2.296			1.680
Quarter 3	2.018			1.676
Quarter 4	2.085			1.786
Full Year	$	2.091	*	$	1.705

*The full year estimate is based on futures prices and does not include the impact of forward pricing agreements we have for a portion of our cheese purchases for our domestic Company-owned restaurants. Additionally, the price charged to restaurants can vary somewhat by quarter from the actual block price based upon our monthly pricing mechanism.

Item 4. Controls and Procedures

Under the supervision and with the participation of the Company’s management, including its chief executive officer and chief financial officer, the Company has evaluated the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based upon this evaluation, the chief executive officer and chief financial officer have concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were effective.

Changes in Internal Control Over Financial Reporting

During the most recently completed fiscal quarter, there was no change made in the Company’s internal control over financial reporting (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

The Company is involved in a number of lawsuits, claims, investigations and proceedings consisting of intellectual property, employment, consumer, commercial and other matters arising in the ordinary course of business. In accordance with Financial Accounting Standards Board Accounting Standards Codification 450, “Contingencies”, the Company has made accruals with respect to these matters, where appropriate, which are reflected in the Company’s condensed consolidated financial statements. We review these provisions at least quarterly and adjust these provisions to reflect the impact of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular case. The legal proceedings described in Note 9 of “Notes to ~~the~~ Condensed Consolidated Financial Statements” within “Part I. Item 1. Financial Statements” of this Form 10-Q are incorporated herein by reference.

Item 1A. Risk Factors

~~There~~

Except as set forth in "Part II. Item IA - Risk Factors" in our Quarterly Report on Form 10-Q for the quarter ended March 27, 2022, there have been no material changes to the risk factors disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended December ~~27, 2020.~~ 26, 2021.

Like other businesses, we have experienced some increased costs for transportation, energy, and commodities due in part to the negative impact of the military conflict in Ukraine on the global economy. Further escalation of geopolitical tensions, including increased trade barriers or restrictions on global trade, could result in, among other things, cyberattacks, supply disruptions, lower consumer demand, and changes to foreign exchange rates and financial markets, any of which may adversely affect our business and supply chain. In addition, the effects of the ongoing conflict could heighten many of our

known risks described in Part I, Item 1A, "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended December 26, 2021.

~~Table of Contents~~

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Share Repurchase Program

~~Our~~

On October 28, 2021, our Board of Directors ~~has authorized the repurchase of up to $75.0 million of common stock under~~approved a share repurchase program ~~that began on November 4, 2020 and is effective through December 26, 2021. Through September 26, 2021, a total of 219,000 shares~~ with an ~~aggregate cost~~indefinite duration for up to $425.0 million of ~~$23.3 million and an average price of $106.16 per share were repurchased under this program.~~the Company’s common stock. Funding for the share repurchase program ~~has been~~is provided through our operating cash ~~flows. Subsequent to September 26, 2021, we acquired an additional 158,000 shares at an aggregate cost of $19.8 million. Approximately $31.9~~flows and our $600.0 million ~~remained available for repurchase of common stock under this authorization as of October 29, 2021.~~

PJI Revolving Facility.

The following table summarizes our repurchase activity under this share repurchase program by fiscal period during the three months ended ~~September~~June 26, ~~2021~~2022 (in thousands, except per share amounts):

Total Number

Maximum Dollar

Total

Average

of Shares Purchased

Value of Shares

Number

Price

as Part of Publicly

that May Yet Be

of Shares

Paid per

Announced Plans

Purchased Under the
Fiscal Period


Purchased

Share

or Programs

Plans or Programs

6/28/2021 - 7/25/2021

41

$
104.47

157

$
59,800
7/26/2021 - 8/22/2021

—

$
—

—

$
—
8/23/2021 - 9/26/2021

62

$
129.42

219

$
51,743


Fiscal Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
3/28/2022 - 4/24/2022	168	$	103.94	168	$	374,655
4/25/2022 - 5/22/2022	102	$	96.24	102	$	364,800
5/23/2022 - 6/26/2022	182	$	84.98	182	$	349,329
Total	452	$	94.56	452	$	349,329

Subsequent to June 26, 2022, we acquired an additional 229,000 shares at an aggregate cost of $19.5 million and an average price of $85.15 per share. Approximately $329.8 million remained available under the ~~end of the third quarter, on October 28, 2021, our Board of Directors approved a new~~Company’s share repurchase program ~~for up to $425.0 million~~as of the Company’s common stock, with an indefinite duration. The new share repurchase program will initially operate alongside the Company’s existing $75.0 million share repurchase authorization, which expires on December 26, 2021.

July 29, 2022.

Repurchases of Stock for Tax Withholdings

During the fiscal quarter ended ~~September~~June 26, ~~2021,~~2022, the Company acquired approximately ~~11,500~~750 shares of its common stock from employees to satisfy minimum tax withholding obligations that arose upon (i) vesting of restricted stock granted pursuant to approved plans and (ii) distribution of shares of common stock issued pursuant to deferred compensation obligations.

~~Table of Contents~~

Item 6. Exhibits

~~Exhibit~~
Exhibit Number			Description

~~3.1~~10.1			~~Certificate of Elimination of Series B Convertible Preferred Stock of~~Amendment to Employment Agreement, dated April 7, 2022, by and between Papa John’s International, Inc.~~, effective August 3, 2021.~~ and Robert Lynch. Exhibit ~~3.1~~10.1 to our ~~report~~Quarterly Report on Form 10-Q ~~for the fiscal quarter ended June 27,2021~~as filed on May 5, 2022 is incorporated herein by reference.

~~4.1~~10.2			~~Indenture dated September 14, 2021,~~Endorsement Agreement executed April 10, 2022, and effective March 15, 2022, by and among, on the one hand, ABG-Shaq, LLC, for the personal services of Shaquille O’Neal, and, on the other hand, Papa John’s Marketing Fund, Inc. and Papa John’s International, Inc.~~, each of the guarantors party thereto and Truist Bank, as trustee. Exhibit 4.1 to our report on Form 8-K as filed on September 14, 2021 is incorporated herein by reference~~.

~~4.2~~	~~Form of 3.875% Senior Notes due 2029. Exhibit 4.2 to our report on Form 8-K as filed on September 14, 2021 is incorporated herein by reference.~~

~~10.1~~	Amended and Restated Credit Agreement, dated September 14, 2021, among Papa John’s International, Inc., each of the guarantors and lenders party thereto, and JPMorgan Chase Bank, Inc., as administrative agent. Exhibit 10.1 to our report on Form 8-K as filed on ~~September 14, 2021 is incorporated by reference.~~

~~10.2~~	Amendment No. 2 to the March 15, 2019 Endorsement Agreement for personal services of Shaquille O’Neal by and among ABG-Shaq, LLC, Papa John’s Marketing Fund, Inc. and Papa John’s International, Inc., effective July 29, 2021. Exhibit 10.2 to our report on Form 10-Q for the fiscal quarter ended June 27, 2021April 13, 2022 is incorporated herein by ~~reference.~~reference .

~~10.3~~		~~Papa John’s International, Inc. Nonqualified Deferred Compensation Plan, as amended and restated effective October 28, 2021.~~

31.1		Certification of Chief Executive Officer Pursuant to Exchange Act Rule 13a-15(e), As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2			Certification of Chief Financial Officer Pursuant to Exchange Act Rule 13a-15(e), As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1			Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2			Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101			Financial statements from the quarterly report on Form 10-Q of Papa John’s International, Inc. for the quarter ended ~~September~~June 26, ~~2021,~~2022, filed on ~~November~~August 4, ~~2021,~~2022, formatted in iXBRL: (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statements of Comprehensive Income, (iv) the Condensed Consolidated Statements of Stockholders’ Deficit, (v) the Condensed Consolidated Statements of Cash Flows and (vi) the Notes to Condensed Consolidated Financial Statements.

104			Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

~~Table of Contents~~

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	PAPA JOHN’S INTERNATIONAL, INC.
	(Registrant)	~~(Registrant)~~


Date: ~~November~~August. 4, ~~2021~~ 2022		/s/ Ann B. Gugino
		Ann B. Gugino
		Chief Financial Officer

~~Delaware~~	~~61-1203323~~
Delaware		61-1203323
(State or other jurisdiction of		(I.R.S. Employer Identification
incorporation or organization)		number)



	September 26,		December 27,
(In thousands, except per share amounts)	2021		2020
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	105,813	$	130,204
Accounts receivable, net		79,534		90,135
Notes receivable, current portion		13,075		11,318
Income tax receivable		599		1,273
Inventories		33,490		30,265
Prepaid expenses and other current assets		39,249		43,212
Total current assets		271,760		306,407
Property and equipment, net		209,072		200,895
Finance lease right-of-use assets, net		21,917		16,840
Operating lease right-of-use assets		174,119		148,110
Notes receivable, less current portion, net		37,263		36,538
Goodwill		80,906		80,791
Deferred income taxes		13,926		10,800
Other assets		80,991		72,389
Total assets	$	889,954	$	872,770

Liabilities, Series B Convertible Preferred Stock, Redeemable noncontrolling interests and Stockholders’ deficit
Current liabilities:
Accounts payable	$	42,384	$	37,370
Income and other taxes payable		26,221		10,263
Accrued expenses and other current liabilities		201,528		174,563
Current deferred revenue		20,617		19,590
Current finance lease liabilities		4,914		3,545
Current operating lease liabilities		22,455		23,538
Current portion of long-term debt		—		20,000
Total current liabilities		318,119		288,869
Deferred revenue		12,471		13,664
Long-term finance lease liabilities		17,555		13,531
Long-term operating lease liabilities		157,359		124,666
Long-term debt, less current portion, net		414,915		328,292
Deferred income taxes		178		948
Other long-term liabilities		98,872		111,364
Total liabilities		1,019,469		881,334

Series B Convertible Preferred Stock; $0.01 par value; 0 shares authorized, issued or outstanding at September 26, 2021, compared to 260.0 shares authorized, 252.5 shares issued and outstanding at December 27, 2020		—		251,901
Redeemable noncontrolling interests		7,531		6,474

Stockholders’ deficit:
Common stock ($0.01 par value per share; issued 48,989 at September 26, 2021 and 45,288 at December 27, 2020)		490		453
Additional paid-in capital		440,742		254,103
Accumulated other comprehensive loss		(9,910)		(14,168)
Retained earnings		171,378		219,158
Treasury stock (12,806 shares at September 26, 2021 and 12,743 shares at December 27, 2020, at cost)		(755,035)		(741,724)
Total stockholders’ deficit		(152,335)		(282,178)
Noncontrolling interests in subsidiaries		15,289		15,239
Total Stockholders’ deficit		(137,046)		(266,939)
Total liabilities, Series B Convertible Preferred Stock, Redeemable noncontrolling interests and Stockholders’ deficit	$	889,954	$	872,770



	Three Months Ended				Nine Months Ended
		September 26,	September 27,		September 26,		September 27,
(In thousands, except per share amounts)	2021		2020		2021		2020

Revenues:
Domestic Company-owned restaurant sales	$	191,584	$	178,371	$	584,942	$	526,317
North America franchise royalties and fees		31,933		25,281		97,123		68,895
North America commissary revenues		189,224		181,338		560,743		504,379
International revenues		38,408		33,440		110,629		87,592
Other revenues		61,633		54,511		186,099		156,240
Total revenues		512,782		472,941		1,539,536		1,343,423
Costs and expenses:
Operating costs (excluding depreciation and amortization shown separately below):
Domestic Company-owned restaurant expenses		155,477		144,803		465,658		419,082
North America commissary expenses		175,399		167,937		518,310		466,676
International expenses		21,743		19,370		62,791		52,775
Other expenses		56,039		50,917		168,092		148,219
General and administrative expenses		54,070		52,601		157,779		148,680
Depreciation and amortization		11,477		12,764		36,830		37,436
Total costs and expenses		474,205		448,392		1,409,460		1,272,868
Operating income		38,577		24,549		130,076		70,555
Net interest expense		(3,979)		(3,636)		(11,275)		(11,230)
Income before income taxes		34,598		20,913		118,801		59,325
Income tax expense		4,057		4,516		19,387		11,984
Net income before attribution to noncontrolling interests		30,541		16,397		99,414		47,341
Net income attributable to noncontrolling interests		(1,285)		(689)		(4,021)		(2,576)
Net income attributable to the Company	$	29,256	$	15,708	$	95,393	$	44,765

Calculation of net income (loss) for earnings per share:
Net income attributable to the Company	$	29,256	$	15,708	$	95,393	$	44,765
Dividends on redemption of Series B Convertible Preferred Stock		—		—		(109,852)		—
Dividends paid to participating securities		(137)		(3,548)		(5,964)		(10,546)
Net income attributable to participating securities		(158)		(703)		—		(1,809)
Net income (loss) attributable to common shareholders	$	28,961	$	11,457	$	(20,423)	$	32,410

Basic earnings (loss) per common share	$	0.80	$	0.35	$	(0.59)	$	1.00
Diluted earnings (loss) per common share	$	0.79	$	0.35	$	(0.59)	$	0.99

Basic weighted average common shares outstanding		36,387		32,616		34,619		32,347
Diluted weighted average common shares outstanding		36,719		32,971		34,619		32,643

Dividends declared per common share	$	0.350	$	0.225	$	0.800	$	0.675


	Papa John’s International, Inc.
	Common					Accumulated
	Stock			Additional		Other						Noncontrolling		Total
(In thousands)	Shares	Common		Paid-In		Comprehensive		Retained		Treasury		Interests in		Stockholders’
For the three months ended September 26, 2021	Outstanding	Stock		Capital		Loss		Earnings		Stock		Subsidiaries		Deficit
Balance at June 27, 2021	36,215	$	489	$	435,608	$	(10,235)	$	154,769	$	(743,819)	$	15,290	$	(147,898)
Net income (1)	—		—		—		—		29,256		—		593		29,849
Other comprehensive income, net of tax	—		—		—		325		—		—		—		325
Cash dividends on common stock	—		—		48		—		(12,845)		—		—		(12,797)
Exercise of stock options	51		1		3,111		—		—		—		—		3,112
Acquisition of Company common stock	(103)		—		—		—		—		(12,367)		—		(12,367)
Stock-based compensation expense	—		—		4,317		—		—		—		—		4,317
Issuance of restricted stock	15		—		(873)		—		—		873		—		—
Tax effect of restricted stock awards	—		—		(1,423)		—		—		—		—		(1,423)
Distributions to noncontrolling interests	—		—		—		—		—		—		(594)		(594)
Other	5		—		(46)		—		198		278		—		430
Balance at September 26, 2021	36,183	$	490	$	440,742	$	(9,910)	$	171,378	$	(755,035)	$	15,289	$	(137,046)

For the nine months ended September 26, 2021
Balance at December 27, 2020	32,545	$	453	$	254,103	$	(14,168)	$	219,158	$	(741,724)	$	15,239	$	(266,939)
Net income (1)	—		—		—		—		95,393		—		1,829		97,222
Other comprehensive income, net of tax	—		—		—		4,258		—		—		—		4,258
Repurchase and conversion of Series B Convertible Preferred Stock	3,489		35		174,631		—		(110,498)		—		—		64,168
Cash dividends on common stock	—		—		110		—		(27,750)		—		—		(27,640)
Cash dividends on preferred stock	—		—		—		—		(4,121)		—		—		(4,121)
Exercise of stock options	199		2		11,209		—		—		—		—		11,211
Acquisition of Company common stock	(187)		—		—		—		—		(20,555)		—		(20,555)
Stock-based compensation expense	—		—		12,519		—		—		—		—		12,519
Issuance of restricted stock	125		—		(6,538)		—		—		6,538		—		—
Tax effect of restricted stock awards	—		—		(5,310)		—		—		—		—		(5,310)
Distributions to noncontrolling interests	—		—		—		—		—		—		(1,779)		(1,779)
Other	12		—		18		—		(804)		706		—		(80)
Balance at September 26, 2021	36,183	$	490	$	440,742	$	(9,910)	$	171,378	$	(755,035)	$	15,289	$	(137,046)


	Carrying		Fair Value Measurements
(in thousands)	Value		Level 1		Level 2		Level 3
September 26, 2021
Financial assets:
Cash surrender value of life insurance policies (a)	$	40,482	$	40,482	$	—	$	—

Financial liabilities:
Interest rate swaps (b)		8,162		—		8,162		—

December 27, 2020
Financial assets:
Cash surrender value of life insurance policies (a)	$	37,578	$	37,578	$	—	$	—

Financial liabilities:
Interest rate swaps (b)		13,452		—		13,452		—



(in thousands)	Accounts Receivable		Notes Receivable
Balance at December 27, 2020	$	3,622	$	3,211
Current period benefit for expected credit losses		(80)		(563)
Write-offs charged against the allowance		(1,212)		(843)
Recoveries collected		—		(277)
Balance at September 26, 2021	$	2,330	$	1,528


(in thousands)	Accounts Receivable		Notes Receivable
Balance at December 26, 2021	$	2,364	$	1,500
Current period provision for expected credit losses (1)	3,019		12,534
Write-offs charged against the allowance	(275)		—
Recoveries collected	—		(14)
Balance at June 26, 2022	$	5,108	$	14,020


	Contract Liabilities
		September 26, 2021		December 27, 2020		Change
Franchise fees and unredeemed gift card liabilities	$	17,949	$	19,890	$	(1,941)
Customer loyalty program obligations		15,139		13,364		1,775
Total contract liabilities	$	33,088	$	33,254	$	(166)


		Performance Obligations by Period
	Less than 1 Year		1-2 Years		2-3 Years		3-4 Years		4-5 Years		Thereafter		Total
Franchise fees	$	2,242	$	2,003	$	1,766	$	1,550	$	1,294	$	2,477	$	11,332


Effective Dates	Floating Rate Debt			Fixed Rates
April 30, 2018 through April 30, 2023	$	55	million	2.33	%
April 30, 2018 through April 30, 2023	$	35	million	2.36	%
April 30, 2018 through April 30, 2023	$	35	million	2.34	%
January 30, 2018 through August 30, 2022	$	100	million	1.99	%
January 30, 2018 through August 30, 2022	$	75	million	1.99	%
January 30, 2018 through August 30, 2022	$	50	million	2.00	%


	Interest Rate Swap Derivatives
	Fair Value		Fair Value
	September 26,		December 27,
Balance Sheet Location	2021		2020
Other current and long-term liabilities	$	8,162	$	13,452



			Location of Gain		Amount of Gain
Derivatives -	Amount of Gain or		or (Loss)		or (Loss)		Total Net Interest Expense
Cash Flow	(Loss) Recognized		Reclassified from		Reclassified from		on Condensed
Hedging	in AOCL		AOCL into		AOCL into		Consolidated Statements
Relationships	on Derivative		Income		Income		of Operations
Interest rate swaps for the three months ended:
September 26, 2021	$	1,182		Interest expense	$	(1,644)	$	(3,979)
September 27, 2020	$	1,268		Interest expense	$	(1,674)	$	(3,636)

Interest rate swaps for the nine months ended:
September 26, 2021	$	3,963		Interest expense	$	(5,084)	$	(11,275)
September 27, 2020	$	(7,219)		Interest expense	$	(3,376)	$	(11,230)


	Balance at						Balance at
	December 27,						September 26,
	2020		Charges		Payments		2021
Employee severance and other employee transition costs	$	4,615	$	3,576	$	(7,235)	$	956
Recruiting and professional fees		145		2,431		(2,576)		—
Relocation costs		101		2,608		(1,677)		1,032
Other costs		—		749		(749)		—
Total strategic corporate reorganization liability	$	4,861	$	9,364	$	(12,237)	$	1,988


	Reportable Segments
	Three Months Ended September 26, 2021
Major Products/Services Lines		Domestic Company-owned restaurants		North America franchising		North America commissaries		International		All others		Total
Company-owned restaurant sales	$	191,584	$	-	$	-	$	-	$	-	$	191,584
Franchise royalties and fees		-		32,970		-		14,031		-		47,001
Commissary sales		-		-		242,678		24,377		-		267,055
Other revenues		-		-		-		8,472		71,683		80,155
Eliminations		-		(1,037)		(53,454)		-		(18,522)		(73,013)
Total segment revenues	$	191,584	$	31,933	$	189,224	$	46,880	$	53,161	$	512,782
International other revenues (1)		-		-		-		(8,472)		8,472		-
Total revenues	$	191,584	$	31,933	$	189,224	$	38,408	$	61,633	$	512,782

	Reportable Segments
	Three Months Ended September 27, 2020
Major Products/Services Lines		Domestic Company-owned restaurants		North America franchising		North America commissaries		International		All others		Total
Company-owned restaurant sales	$	178,371	$	-	$	-	$	-	$	-	$	178,371
Franchise royalties and fees		-		26,105		-		10,703		-		36,808
Commissary sales		-		-		231,644		22,737		-		254,381
Other revenues		-		-		-		6,888		74,791		81,679
Eliminations		-		(824)		(50,306)		-		(27,168)		(78,298)
Total segment revenues	$	178,371	$	25,281	$	181,338	$	40,328	$	47,623	$	472,941
International other revenues (1)		-		-		-		(6,888)		6,888		-
Total revenues	$	178,371	$	25,281	$	181,338	$	33,440	$	54,511	$	472,941

		Reportable Segments
		Nine Months Ended September 26, 2021
Major Products/Services Lines		Domestic Company-owned restaurants		North America franchising		North America commissaries		International		All others		Total
Company-owned restaurant sales	$	584,942	$	-	$	-	$	-	$	-	$	584,942
Franchise royalties and fees		-		100,261		-		39,396		-		139,657
Commissary sales		-		-		719,695		71,233		-		790,928
Other revenues		-		-		-		25,132		217,580		242,712
Eliminations		-		(3,138)		(158,952)		-		(56,613)		(218,703)
Total segment revenues	$	584,942	$	97,123	$	560,743	$	135,761	$	160,967	$	1,539,536
International other revenues (1)		-		-		-		(25,132)		25,132		-
Total revenues	$	584,942	$	97,123	$	560,743	$	110,629	$	186,099	$	1,539,536

	Reportable Segments
	Nine Months Ended September 27, 2020
Major Products/Services Lines		Domestic Company-owned restaurants		North America franchising		North America commissaries		International		All others		Total
Company-owned restaurant sales	$	526,317	$	-	$	-	$	-	$	-	$	526,317
Franchise royalties and fees		-		71,186		-		27,962		-		99,148
Commissary sales		-		-		646,548		59,630		-		706,178
Other revenues		-		-		-		19,254		203,495		222,749
Eliminations		-		(2,291)		(142,169)		-		(66,509)		(210,969)
Total segment revenues	$	526,317	$	68,895	$	504,379	$	106,846	$	136,986	$	1,343,423
International other revenues (1)		-		-		-		(19,254)		19,254		-
Total revenues	$	526,317	$	68,895	$	504,379	$	87,592	$	156,240	$	1,343,423


	Reportable Segments
	Three Months Ended June 26, 2022
Major Products/Services Lines	Domestic Company-owned restaurants		North America franchising		North America commissaries		International		All others		Total
Company-owned restaurant sales	$	171,411	$	—	$	—	$	—	$	—	$	171,411
Franchise royalties and fees	—		35,965		—		12,043		—		48,008
Commissary sales	—		—		272,137		19,915		—		292,052
Other revenues	—		—		—		7,324		73,561		80,885
Eliminations	—		(1,048)		(52,754)		—		(15,889)		(69,691)
Total segment revenues	$	171,411	$	34,917	$	219,383	$	39,282	$	57,672	$	522,665
International other revenues (1)	—		—		—		(7,324)		7,324		—
Total revenues	$	171,411	$	34,917	$	219,383	$	31,958	$	64,996	$	522,665

	Reportable Segments
	Three Months Ended June 27, 2021
Major Products/Services Lines	Domestic Company-owned restaurants		North America franchising		North America commissaries		International		All others		Total
Company-owned restaurant sales	$	196,124	$	—	$	—	$	—	$	—	$	196,124
Franchise royalties and fees	—		33,516		—		13,156		—		46,672
Commissary sales	—		—		240,069		24,458		—		264,527
Other revenues	—		—		—		8,663		72,434		81,097
Eliminations	—		(1,041)		(53,428)		—		(18,943)		(73,412)
Total segment revenues	$	196,124	$	32,475	$	186,641	$	46,277	$	53,491	$	515,008
International other revenues (1)	—		—		—		(8,663)		8,663		—
Total revenues	$	196,124	$	32,475	$	186,641	$	37,614	$	62,154	$	515,008

	Reportable Segments
	Six Months Ended June 26, 2022
Major Products/Services Lines	Domestic Company-owned restaurants		North America franchising		North America commissaries		International		All others		Total
Company-owned restaurant sales	$	370,176	$	—	$	—	$	—	$	—	$	370,176
Franchise royalties and fees	—		71,286		—		25,478		—		96,764
Commissary sales	—		—		540,323		41,097		—		581,420
Other revenues	—		—		—		15,414		150,213		165,627
Eliminations	—		(2,101)		(111,261)		—		(35,268)		(148,630)
Total segment revenues	$	370,176	$	69,185	$	429,062	$	81,989	$	114,945	$	1,065,357
International other revenues (1)	—		—		—		(15,414)		15,414		—
Total revenues	$	370,176	$	69,185	$	429,062	$	66,575	$	130,359	$	1,065,357


Restaurant Progression	Three Months Ended				Nine Months Ended
	September 26, 2021		September 27, 2020		September 26, 2021		September 27, 2020
North America Company-owned:
Beginning of period		589		598		588		598
Opened		2		—		2		1
Closed		—		(1)		—		(2)
Acquired		—		—		1		—
End of period		591		597		591		597
North America franchised:
Beginning of period		2,720		2,686		2,701		2,690
Opened		21		14		57		38
Closed		(9)		(11)		(25)		(39)
Sold		—		—		(1)		—
End of period		2,732		2,689		2,732		2,689
International franchised:
Beginning of period		2,214		2,063		2,111		2,107
Opened		71		40		210		83
Closed		(39)		(29)		(75)		(116)
End of period		2,246		2,074		2,246		2,074
Total restaurants – end of period		5,569		5,360		5,569		5,360

Trailing four quarters net store growth		209		17


Restaurant Progression	Three Months Ended		Six Months Ended
	June 26, 2022	June 27, 2021	June 26, 2022	June 27, 2021
North America Company-owned:
Beginning of period	608	589	600	588
Opened	1	—	8	—
Acquired	—	—	1	1
Refranchised	(90)	—	(90)	—
End of period	519	589	519	589
North America franchised:
Beginning of period	2,746	2,709	2,739	2,701
Opened	17	24	32	36
Closed	(16)	(13)	(23)	(16)
Refranchised	90	—	90	—
Sold	—	—	(1)	(1)
End of period	2,837	2,720	2,837	2,720
International franchised:
Beginning of period	2,170	2,170	2,311	2,111
Opened	72	71	127	139
Closed	(27)	(27)	(35)	(36)
Suspended (a)	—	—	(188)	—
End of period	2,215	2,214	2,215	2,214
Total restaurants – end of period	5,571	5,523	5,571	5,523

Trailing four quarters net store growth (b)	236	176



	Three Months Ended				Nine Months Ended
		Sep. 26,		Sep. 27,		Sep. 26,		Sep. 27,
		2021		2020		2021		2020
Administrative expenses (a)	$	51,398	$	43,680	$	148,533	$	134,532
Strategic corporate reorganization costs (b)		2,153		—		9,364		—
Other general expenses (c)		519		8,921		(118)		14,148
General and administrative expenses	$	54,070	$	52,601	$	157,779	$	148,680


	Three Months Ended
	Reported		Special		Adjusted		Reported		Adjusted
	Sep. 26,		items		Sep. 26,		Sep. 27,		Increase
(In thousands)	2021		in 2021		2021		2020		(Decrease)

Domestic Company-owned restaurants	$	9,480	$	—	$	9,480	$	8,439	$	1,041
North America franchising		29,830		—		29,830		23,353		6,477
North America commissaries		9,598		—		9,598		8,208		1,390
International		9,618		—		9,618		7,986		1,632
All others		3,848		—		3,848		3,193		655
Unallocated corporate expenses		(23,158)		2,153		(21,005)		(26,921)		5,916
Elimination of intersegment losses (profits)		(639)		—		(639)		291		(930)
Total	$	38,577	$	2,153	$	40,730	$	24,549	$	16,181

	Nine Months Ended
	Reported		Special		Adjusted		Reported		Adjusted
	Sep. 26,		items		Sep. 26,		Sep. 27,		Increase
(In thousands)	2021		in 2021		2021		2020		(Decrease)

Domestic Company-owned restaurants	$	40,165	$	—	$	40,165	$	33,852	$	6,313
North America franchising		90,791		—		90,791		62,855		27,936
North America commissaries		29,089		—		29,089		24,579		4,510
International		26,665		—		26,665		16,836		9,829
All others		14,860		—		14,860		5,030		9,830
Unallocated corporate expenses		(70,937)		9,364		(61,573)		(71,978)		10,405
Elimination of intersegment losses (profits)		(557)		—		(557)		(619)		62
Total	$	130,076	$	9,364	$	139,440	$	70,555	$	68,885


	Quarter Ended		Six Months Ended
	June 26, 2022	June 27, 2021	June 26, 2022	June 27, 2021

Income before income taxes	$32,823	$40,988	$42,995	$84,203
Income tax expense	$7,093	$7,398	$5,838	$15,330
Effective tax rate	21.6%	18.0%	13.6%	18.2%


	2021			2020
	Projected			Actual
	Block Price			Block Price

Quarter 1	$	1.676		$	1.857
Quarter 2		1.680			1.679
Quarter 3		1.676			2.262
Quarter 4		1.780			2.235
Full Year	$	1.703	*	$	2.008


				Total Number	Maximum Dollar
	Total	Average		of Shares Purchased	Value of Shares
	Number	Price		as Part of Publicly	that May Yet Be
	of Shares	Paid per		Announced Plans	Purchased Under the
Fiscal Period	Purchased	Share		or Programs	Plans or Programs

6/28/2021 - 7/25/2021	41	$	104.47	157	$	59,800
7/26/2021 - 8/22/2021	—	$	—	—	$	—
8/23/2021 - 9/26/2021	62	$	129.42	219	$	51,743