UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June ~~26, 2022~~25, 2023

o Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number: 0-21660

PAPA JOHN’S INTERNATIONAL, INC.

(Exact name of ~~registrant~~Registrant as specified in its charter)


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

~~2002 Papa John’s Boulevard~~

~~Louisville, KY 40299-2367~~


2002 Papa John’s Boulevard
Louisville, KY						40299-2367
(Address of principal executive offices)						(Zip Code)

(502) 261-7272

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class:

Trading Symbol

Name of each exchange on which registered:

Common stock, $0.01 par value

PZZA

The NASDAQ Stock Market LLC

Indicate by check mark whether the ~~registrant~~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~~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~~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~~Registrant was required to submit such files). Yes x No o

Indicate by check mark whether the ~~registrant~~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 Filer~~x

~~Accelerated filer~~ o

Large Accelerated Filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

☐o

Emerging growth company

☐o

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~~Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

At July ~~29, 2022,~~28, 2023, there were ~~outstanding 35,347,234~~32,736,862 shares of the ~~registrant’s~~Registrant’s common stock ~~par value $0.01 per share.~~outstanding.

INDEX


		Page No.

PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements

	Condensed Consolidated Balance Sheets — June 26 25 , ~~2022~~2023 and December ~~26, 2021~~25, 2022	31

	Condensed Consolidated Statements of Operations — Three and six months ended Ju ne 2 5 , 2023 and June 26 2 6 , 2022 ~~and~~ ~~June 27, 2021~~	42

	Condensed Consolidated Statements of Comprehensive Income — Three and six months ended June 26 2 5 , 2023 and June 2 6 , 2022 ~~and~~ ~~June 27, 2021~~	53

	Condensed Consolidated Statements of Stockholders’ Deficit — Three and six months ended June 26 2 5 , 2023 and June 2 6 , 2022 ~~and~~ ~~June 27, 2021~~	64

	Condensed Consolidated Statements of Cash Flows — Three ~~Six~~ and si x months ended June 26 2 5 , 2023 and June 2 6 , 2022 ~~and~~ ~~June 27, 2021~~	86

	Notes to Condensed Consolidated Financial Statements	97

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2623

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4240

Item 4.	Controls and Procedures	4341

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	4341

Item 1A.	Risk Factors	4341

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4442

Item 6.	Exhibits	4543

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Papa John’s International, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets


(In thousands, except per share amounts)	(In thousands, except per share amounts)	June 26, 2022		December 26, 2021		(In thousands, except per share amounts)	June 25, 2023		December 25, 2022
		(Unaudited)					(Unaudited)
Assets	Assets					Assets
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	52,124	$	70,610	Cash and cash equivalents	$	43,772	$	47,373
Accounts receivable, net	Accounts receivable, net	87,495		81,370		Accounts receivable, net	94,255		102,533
Notes receivable, current portion	Notes receivable, current portion	8,333		12,352		Notes receivable, current portion	4,850		6,848
Income tax receivable	Income tax receivable	4,017		9,386		Income tax receivable	2,097		8,780
Inventories	Inventories	38,076		34,981		Inventories	37,515		41,382
Prepaid expenses and other current assets	Prepaid expenses and other current assets	49,743		46,310		Prepaid expenses and other current assets	56,086		44,123

Assets held for sale (a)						Assets held for sale (a)	3,427		—
Total current assets	Total current assets	239,788		255,009		Total current assets	242,002		251,039
Property and equipment, net	Property and equipment, net	225,382		223,856		Property and equipment, net	264,393		249,793
Finance lease right-of-use assets, net	Finance lease right-of-use assets, net	18,642		20,907		Finance lease right-of-use assets, net	34,418		24,941
Operating lease right-of-use assets	Operating lease right-of-use assets	176,719		176,256		Operating lease right-of-use assets	171,550		172,425
Notes receivable, less current portion, net	Notes receivable, less current portion, net	19,703		35,504		Notes receivable, less current portion, net	15,809		21,248
Goodwill	Goodwill	70,731		80,632		Goodwill	76,623		70,616
Deferred income taxes		8,657		5,156

Other assets	Other assets	76,650		88,384		Other assets	68,848		74,165
Total assets	Total assets	$	836,272	$	885,704	Total assets	$	873,643	$	864,227

Liabilities, Redeemable noncontrolling interests and Stockholders’ deficit	Liabilities, Redeemable noncontrolling interests and Stockholders’ deficit					Liabilities, Redeemable noncontrolling interests and Stockholders’ deficit
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	40,845	$	28,092	Accounts payable	$	55,351	$	62,316
Income and other taxes payable	Income and other taxes payable	16,785		19,996		Income and other taxes payable	8,148		8,766
Accrued expenses and other current liabilities	Accrued expenses and other current liabilities	146,213		190,116		Accrued expenses and other current liabilities	163,273		142,535
Current deferred revenue	Current deferred revenue	19,925		21,700		Current deferred revenue	19,587		21,272
Current finance lease liabilities	Current finance lease liabilities	5,224		4,977		Current finance lease liabilities	9,190		6,850
Current operating lease liabilities	Current operating lease liabilities	21,485		22,543		Current operating lease liabilities	25,715		23,418
Current portion of long-term debt						Current portion of long-term debt	15,529		—

Total current liabilities	Total current liabilities	250,477		287,424		Total current liabilities	296,793		265,157
Deferred revenue	Deferred revenue	23,633		13,846		Deferred revenue	21,726		23,204
Long-term finance lease liabilities	Long-term finance lease liabilities	14,252		16,580		Long-term finance lease liabilities	26,486		19,022
Long-term operating lease liabilities	Long-term operating lease liabilities	164,336		160,672		Long-term operating lease liabilities	159,170		160,905
Long-term debt, less current portion, net	Long-term debt, less current portion, net	536,446		480,730		Long-term debt, less current portion, net	768,820		597,069
Deferred income taxes		236		258

Other long-term liabilities	Other long-term liabilities	79,516		93,154		Other long-term liabilities	65,106		68,317
Total liabilities	Total liabilities	1,068,896		1,052,664		Total liabilities	1,338,101		1,133,674

Redeemable noncontrolling interests	Redeemable noncontrolling interests	1,174		5,498		Redeemable noncontrolling interests	1,021		1,217

Stockholders’ deficit:	Stockholders’ deficit:					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
Common stock ($0.01 par value per share; issued 49,209 at June 25, 2023 and 49,138 at December 25, 2022)						Common stock ($0.01 par value per share; issued 49,209 at June 25, 2023 and 49,138 at December 25, 2022)	492		491
Additional paid-in capital	Additional paid-in capital	442,255		445,126		Additional paid-in capital	445,964		449,829
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(11,034)		(9,971)		Accumulated other comprehensive loss	(7,289)		(10,135)
Retained earnings	Retained earnings	193,934		183,157		Retained earnings	207,461		195,856
Treasury stock (13,848 shares at June 26, 2022 and 13,205 shares at December 26, 2021, at cost)		(875,205)		(806,472)
Treasury stock (16,815 shares at June 25, 2023 and 14,402 shares at December 25, 2022, at cost)						Treasury stock (16,815 shares at June 25, 2023 and 14,402 shares at December 25, 2022, at cost)	(1,127,669)		(922,434)
Total stockholders’ deficit	Total stockholders’ deficit	(249,559)		(187,670)		Total stockholders’ deficit	(481,041)		(286,393)
Noncontrolling interests in subsidiaries	Noncontrolling interests in subsidiaries	15,761		15,212		Noncontrolling interests in subsidiaries	15,562		15,729
Total Stockholders’ deficit	Total Stockholders’ deficit	(233,798)		(172,458)		Total Stockholders’ deficit	(465,479)		(270,664)
Total liabilities, Redeemable noncontrolling interests and Stockholders’ deficit		$	836,272	$	885,704
Total Liabilities, Redeemable noncontrolling interests and Stockholders’ deficit						Total Liabilities, Redeemable noncontrolling interests and Stockholders’ deficit	$	873,643	$	864,227

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

See accompanying notes.

Papa John’s International, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(Unaudited)


	Three Months Ended				Six Months Ended
(In thousands, except per share amounts)	June 25, 2023		June 26, 2022		June 25, 2023		June 26, 2022

Revenues:
Domestic Company-owned restaurant sales	$	175,780	$	171,411	$	355,646	$	370,176
North America franchise royalties and fees	34,711		34,917		70,783		69,185
North America commissary revenues	206,980		219,383		419,546		429,062
International revenues	34,608		31,958		66,071		66,575
Other revenues	62,451		64,996		129,533		130,359
Total revenues	514,530		522,665		1,041,579		1,065,357
Costs and expenses:
Operating costs (excluding depreciation and amortization shown separately below):
Domestic Company-owned restaurant expenses	143,705		142,026		291,489		303,687
North America commissary expenses	190,468		204,470		386,883		401,560
International expenses	20,435		19,236		37,746		39,150
Other expenses	58,996		60,648		120,074		121,203
General and administrative expenses	50,324		44,646		102,268		110,584
Depreciation and amortization	15,690		12,735		30,411		24,674
Total costs and expenses	479,618		483,761		968,871		1,000,858
Refranchising and impairment loss	—		—		—		(11,160)
Operating income	34,912		38,904		72,708		53,339
Net interest expense	(11,275)		(6,081)		(20,296)		(10,344)
Income before income taxes	23,637		32,823		52,412		42,995
Income tax expense	5,778		7,093		12,007		5,838
Net income before attribution to noncontrolling interests	17,859		25,730		40,405		37,157
Net income attributable to noncontrolling interests	(91)		(297)		(261)		(1,230)
Net income attributable to the Company	$	17,768	$	25,433	$	40,144	$	35,927

Calculation of net income for earnings per share:
Net income attributable to the Company	$	17,768	$	25,433	$	40,144	$	35,927
Dividends paid to participating securities	—		(82)		—		(141)
Net income attributable to participating securities	—		(111)		—		(93)
Net income attributable to common shareholders	$	17,768	$	25,240	$	40,144	$	35,693

Basic earnings per common share	$	0.55	$	0.71	$	1.20	$	1.00
Diluted earnings per common share	$	0.54	$	0.70	$	1.20	$	0.99

Basic weighted average common shares outstanding	32,563		35,624		33,359		35,775
Diluted weighted average common shares outstanding	32,650		35,824		33,487		36,032

Dividends declared per common share	$	0.42	$	0.35	$	0.84	$	0.70

See accompanying notes.

Papa John’s International, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)


	Three Months Ended				Six Months Ended
(In thousands)	June 25, 2023		June 26, 2022		June 25, 2023		June 26, 2022

Net income before attribution to noncontrolling interests	$	17,859	$	25,730	$	40,405	$	37,157
Other comprehensive income (loss), before tax:
Foreign currency translation adjustments	405		(4,109)		1,847		(4,970)
Interest rate swaps (1)	1,514		1,877		1,850		3,589
Other comprehensive income (loss), before tax	1,919		(2,232)		3,697		(1,381)
Income tax effect:
Foreign currency translation adjustments	(93)		946		(425)		1,144
Interest rate swaps (2)	(349)		(432)		(426)		(826)
Income tax effect	(442)		514		(851)		318
Other comprehensive income (loss), net of tax	1,477		(1,718)		2,846		(1,063)
Comprehensive income before attribution to noncontrolling interests	19,336		24,012		43,251		36,094
Less: comprehensive income, redeemable noncontrolling interests	(59)		(18)		(105)		(528)
Less: comprehensive income, nonredeemable noncontrolling interests	(32)		(279)		(156)		(702)
Comprehensive income attributable to the Company	$	19,245	$	23,715	$	42,990	$	34,864

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

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

See accompanying notes.

Papa John’s International, Inc. and Subsidiaries

Condensed Consolidated Statements of ~~Operations~~Stockholders’ Deficit

(Unaudited)


	Papa John’s International, Inc.
(In thousands)	Common Stock Shares Outstanding	Common Stock		Additional Paid-In Capital		Accumulated Other Comprehensive Loss (2)		Retained Earnings		Treasury Stock (3)		Noncontrolling Interests in Subsidiaries		Total Stockholders’ Deficit

For the three months ended June 25, 2023
Balance at March 26, 2023	32,356	$	492	$	443,686	$	(8,766)	$	203,569	$	(1,130,136)	$	15,830	$	(475,325)
Net income (1)	—	—		—		—		17,768		—		32		17,800
Other comprehensive income (loss), net of tax	—	—		—		1,477		—		—		—		1,477
Dividends on common stock	—	—		54		—		(13,876)		—		—		(13,822)
Exercise of stock options	2	—		68		—		—		—		—		68

Stock-based compensation expense	—	—		4,601		—		—		—		—		4,601
Issuance of restricted stock	30	—		(1,933)		—		—		1,933		—		—
Tax effect of restricted stock awards	(1)	—		(109)		—		—		—		—		(109)
Distributions to noncontrolling interests	—	—		—		—		—		—		(300)		(300)
Other	7	—		(403)		—		—		534		—		131
Balance at June 25, 2023	32,394	$	492	$	445,964	$	(7,289)	$	207,461	$	(1,127,669)	$	15,562	$	(465,479)

For the six months ended June 25, 2023
Balance at December 25, 2022	34,736	$	491	$	449,829	$	(10,135)	$	195,856	$	(922,434)	$	15,729	$	(270,664)
Net income (1)	—	—		—		—		40,144		—		156		40,300
Other comprehensive income (loss), net of tax	—	—		—		2,846		—		—		—		2,846
Dividends on common stock	—	—		54		—		(28,539)		—		—		(28,485)
Exercise of stock options	17	1		682		—		—		—		—		683
Acquisition of Company common stock	(2,523)	—		—		—		—		(212,444)		—		(212,444)
Stock-based compensation expense	—	—		8,498		—		—		—		—		8,498
Issuance of restricted stock	227	—		(6,542)		—		—		6,542		—		—
Tax effect of restricted stock awards	(73)	—		(6,108)		—		—		—		—		(6,108)
Distributions to noncontrolling interests	—	—		—		—		—		—		(323)		(323)
Other	10	—		(449)		—		—		667		—		218
Balance at June 25, 2023	32,394	$	492	$	445,964	$	(7,289)	$	207,461	$	(1,127,669)	$	15,562	$	(465,479)

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

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

(3)

~~Papa John’s International, Inc. and Subsidiaries~~

~~Condensed Consolidated Statements~~Acquisition of ~~Comprehensive Income~~

~~(Unaudited)~~

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)~~Company common stock for the six months ended June 25, 2023 includes $2,804 of transaction costs directly attributable to share repurchases, including a 1% excise tax incurred under the Inflation Reduction Act of 2022.			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.

See accompanying notes.

Papa John’s International, Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Deficit (continued)

(Unaudited)


	Papa John’s International, Inc.
(In thousands)	Common Stock Shares Outstanding	Common Stock		Additional Paid-In Capital		Accumulated Other Comprehensive Loss (2)		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 income (loss), net of tax	—	—		—		(1,718)		—		—		—		(1,718)
Dividends on common stock	—	—		48		—		(12,623)		—		—		(12,575)
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 effect of restricted stock awards	(1)	—		(65)		—		—		—		—		(65)
Distributions to noncontrolling interests	—	—		—		—		—		—		(150)		(150)
Other	2	—		36		—		—		79		(3)		112
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 income (loss), net of tax	—	—		—		(1,063)		—		—		—		(1,063)
Dividends on common stock	—	—		95		—		(25,150)		—		—		(25,055)
Exercise of stock options	39	1		1,908		—		—		—		—		1,909
Acquisition of Company common stock	(753)	—		—		—		—		(75,471)		—		(75,471)
Stock-based compensation expense	—	—		9,100		—		—		—		—		9,100
Issuance of restricted stock	229	—		(6,450)		—		—		6,450		—		—
Tax effect of restricted stock awards	(70)	—		(7,527)		—		—		—		—		(7,527)
Distributions to noncontrolling interests	—	—		—		—		—		—		(150)		(150)
Other	6	—		3		—		—		288		(3)		288
Balance at June 26, 2022	35,248	$	491	$	442,255	$	(11,034)	$	193,934	$	(875,205)	$	15,761	$	(233,798)

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, respectively, allocable to the redeemable noncontrolling interests for our joint venture arrangements.

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

~~_______________~~

~~(1) Net income to the Company for the three and six months ended June 27, 2021 excludes $713 and $1,500 allocable to the redeemable noncontrolling interests for our joint venture arrangements.~~

At June 27, 2021, the accumulated other comprehensive loss of $10,235 was comprised of net unrealized foreign currency translation loss of $2,641 and net unrealized loss on the interest rate swap agreements of $7,594.

See accompanying notes.

Papa John’s International, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)


		Six Months Ended						Six Months Ended
(In thousands)	(In thousands)		June 26, 2022		June 27, 2021		(In thousands)		June 25, 2023		June 26, 2022

Operating activities	Operating activities						Operating activities
Net income before attribution to noncontrolling interests	Net income before attribution to noncontrolling interests		$	37,157	$	68,873	Net income before attribution to noncontrolling interests		$	40,405	$	37,157
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:						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)
Provision for allowance for credit losses on accounts and notes receivable							Provision for allowance for credit losses on accounts and notes receivable		595		15,558
Depreciation and amortization	Depreciation and amortization		24,674		25,353		Depreciation and amortization		30,411		24,674
Refranchising and impairment loss	Refranchising and impairment loss		11,160		—		Refranchising and impairment loss		—		11,160
Deferred income taxes	Deferred income taxes		(2,993)		(1,397)		Deferred income taxes		3,664		(2,993)
Stock-based compensation expense	Stock-based compensation expense		9,100		8,202		Stock-based compensation expense		8,498		9,100
Other	Other		(2,071)		467		Other		(452)		(2,071)
Changes in operating assets and liabilities, net of acquisitions:	Changes in operating assets and liabilities, net of acquisitions:						Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable	Accounts receivable		(9,177)		13,299		Accounts receivable		4,299		(9,177)
Income tax receivable	Income tax receivable		5,369		189		Income tax receivable		6,683		5,369
Inventories	Inventories		(3,815)		430		Inventories		4,109		(3,815)
Prepaid expenses and other current assets	Prepaid expenses and other current assets		(3,901)		1,092		Prepaid expenses and other current assets		46		(3,901)
Other assets and liabilities	Other assets and liabilities		(5,379)		(11,380)		Other assets and liabilities		140		(5,379)
Accounts payable	Accounts payable		12,742		(5,874)		Accounts payable		(8,174)		12,742
Income and other taxes payable	Income and other taxes payable		(3,175)		18,500		Income and other taxes payable		(514)		(3,175)
Accrued expenses and other current liabilities	Accrued expenses and other current liabilities		(37,456)		12,123		Accrued expenses and other current liabilities		7,203		(37,456)
Deferred revenue	Deferred revenue		(2,208)		(647)		Deferred revenue		(3,178)		(2,208)
Net cash provided by operating activities	Net cash provided by operating activities		45,585		128,030		Net cash provided by operating activities		93,735		45,585
Investing activities	Investing activities						Investing activities
Purchases of property and equipment	Purchases of property and equipment		(30,744)		(21,543)		Purchases of property and equipment		(34,759)		(30,744)
Notes issued	Notes issued		(1,098)		(5,263)		Notes issued		(4,374)		(1,098)
Repayments of notes issued	Repayments of notes issued		6,743		7,922		Repayments of notes issued		3,224		6,743
Acquisitions, net of cash acquired	Acquisitions, net of cash acquired		(1,250)		(699)		Acquisitions, net of cash acquired		—		(1,250)
Proceeds from refranchising, net of cash transferred	Proceeds from refranchising, net of cash transferred		13,588		—		Proceeds from refranchising, net of cash transferred		—		13,588
Other	Other		238		116		Other		182		238
Net cash used in investing activities	Net cash used in investing activities		(12,523)		(19,467)		Net cash used in investing activities		(35,727)		(12,523)
Financing activities	Financing activities						Financing activities

Net proceeds of revolving credit facilities	Net proceeds of revolving credit facilities		55,000		85,000		Net proceeds of revolving credit facilities		186,529		55,000

Proceeds from exercise of stock options	Proceeds from exercise of stock options		1,908		8,100		Proceeds from exercise of stock options		682		1,908
Repurchase of Series B Convertible Preferred Stock			—		(188,647)
Acquisition of Company common stock	Acquisition of Company common stock		(75,471)		(8,188)		Acquisition of Company common stock		(210,348)		(75,471)
Dividends paid to common stockholders	Dividends paid to common stockholders		(25,101)		(14,844)		Dividends paid to common stockholders		(28,485)		(25,101)
Dividends paid to preferred stockholders			—		(6,394)
Tax payments for equity award issuances	Tax payments for equity award issuances		(7,526)		(3,887)		Tax payments for equity award issuances		(6,108)		(7,526)

Distributions to noncontrolling interests	Distributions to noncontrolling interests		(835)		(2,320)		Distributions to noncontrolling interests		(323)		(835)
Repayments of term loan			—		(10,000)

Other	Other		1,348		(1,691)		Other		(3,567)		1,348
Net cash used in financing activities	Net cash used in financing activities		(50,677)		(142,871)		Net cash used in financing activities		(61,620)		(50,677)
Effect of exchange rate changes on cash and cash equivalents	Effect of exchange rate changes on cash and cash equivalents		(871)		317		Effect of exchange rate changes on cash and cash equivalents		11		(871)
Change in cash and cash equivalents	Change in cash and cash equivalents		(18,486)		(33,991)		Change in cash and cash equivalents		(3,601)		(18,486)
Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period		70,610		130,204		Cash and cash equivalents at beginning of period		47,373		70,610
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period		$	52,124	$	96,213	Cash and cash equivalents at end of period		$	43,772	$	52,124

See accompanying ~~notes~~.notes.

Papa John’s International, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

June ~~26, 2022~~25, 2023

1. Basis of Presentation

The accompanying unaudited ~~condensed consolidated financial statements~~Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP” or “U.S. 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 six months ended June ~~26, 2022~~25, 2023 are not necessarily indicative of the results that may be expected for the fiscal year ending December ~~25, 2022.~~31, 2023. For further information, refer to the consolidated financial statements and footnotes thereto included in the Annual Report on Form 10-K for Papa John’s International, Inc. (referred to as the ~~“Company”,~~“Company,” “Papa ~~John’s”~~John’s,” “Papa Johns” or in the first-person notations of ~~“we”,~~“we,” “us” and “our”) for the year ended December ~~26, 2021.~~25, 2022.

In discussions of our business, “Domestic” is defined as within the contiguous United States, “North America” includes Canada, and “International” includes the rest of the world other than North America.

2. Significant Accounting Policies

~~Use~~Principles of ~~Estimates~~Consolidation

The ~~preparation~~accompanying Condensed Consolidated Financial Statements include the accounts of ~~condensed consolidated financial statements in conformity with GAAP requires management to make estimates~~Papa John’s International, Inc. and ~~assumptions that affect the amounts reported in the condensed consolidated financial statements~~its subsidiaries. All intercompany balances and accompanying notes. Significant items that are subject to such estimates and assumptions include allowance for credit losses on accounts and notes receivable, 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.transactions have been eliminated.

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 and Canada 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~~North America restaurants, of which approximately 8085 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~~Consolidation.”

Use of Estimates

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 the allowance for credit losses on accounts and notes receivable, intangible assets, contract assets and contract liabilities including the customer loyalty program obligation, right-of-use assets and lease liabilities, unredeemed gift card 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.

Noncontrolling Interests

Papa John’s has joint venture arrangements in which there are noncontrolling interests held by third parties that ~~include~~included 98 ~~and 188~~ restaurants at June ~~26, 2022~~25, 2023 and June ~~27, 2021,~~26, 2022, respectively. As further described in ~~Note 10,~~“Note 10. Divestitures” we divested our 51 percent interest in 1one joint venture in Texas that owned ~~90-restaurants~~90 restaurants in the second quarter of 2022. ~~The assets and 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.

Net income attributable to these joint ventures for the three and six months ended June ~~26, 2022~~25, 2023 and June ~~27, 2021~~26, 2022 was as follows (in thousands):


		Three Months Ended				Six Months Ended
		June 26, 2022		June 27, 2021		June 26, 2022		June 27, 2021			Three Months Ended				Six Months Ended
											June 25, 2023		June 26, 2022		June 25, 2023		June 26, 2022
Papa John’s International, Inc.	Papa John’s International, Inc.	$	706	$	2,296	$	2,327	$	4,645	Papa John’s International, Inc.	$	228	$	706	$	625	$	2,327
Noncontrolling interests	Noncontrolling interests	297		1,336		1,230		2,736		Noncontrolling interests	91		297		261		1,230
Total net income	Total net income	$	1,003	$	3,632	$	3,557	$	7,381	Total net income	$	319	$	1,003	$	886	$	3,557

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 Condensed Consolidated 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~~the 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 and liabilities are netted by tax jurisdiction. 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 ofdue to 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. Deferred tax assets and liabilities are recorded within Other assets and Other long-term liabilities on the Condensed Consolidated Balance Sheets.

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.

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 June ~~26, 2022~~25, 2023 and December ~~26, 2021~~25, 2022 are as follows:


				Fair Value Measurements									Fair Value Measurements
(in thousands)		Carrying Value		Level 1		Level 2		Level 3
June 26, 2022
(In thousands)										(In thousands)	Carrying Value		Level 1		Level 2		Level 3
June 25, 2023										June 25, 2023
Financial assets:										Financial assets:
Cash surrender value of life insurance policies (a)										Cash surrender value of life insurance policies (a)	$	27,228	$	27,228	$	—	$	—

Financial liabilities:										Financial liabilities:
Interest rate swaps (b)										Interest rate swaps (b)	$	15	$	—	$	15	$	—

December 25, 2022										December 25, 2022
Financial assets:	Financial assets:									Financial assets:
Cash surrender value of life insurance policies (a)	Cash surrender value of life insurance policies (a)	$	29,514	$	29,514	$	—	$	—	Cash surrender value of life insurance policies (a)	$	30,120	$	30,120	$	—	$	—
Interest rate swaps (b)	Interest rate swaps (b)	$	672	$	—	$	672	$	—	Interest rate swaps (b)	$	986	$	—	$	986	$	—

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

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 under ~~its~~the Company’s credit agreement approximate carrying value due to ~~its~~their variable market-based interest rate. The Company’s 3.875% senior notes are classified as a Level 2 fair value measurement since the Company estimates the fair value by using recent trading transactions, and ~~has~~have the following estimated fair values and carrying values (excluding the impact of unamortized debt issuance costs) as of June ~~26, 2022~~25, 2023 and December ~~26, 2021, respectively:~~25, 2022:


		June 26, 2022				December 26, 2021					June 25, 2023				December 25, 2022
(in thousands)		Carrying Value		Fair Value		Carrying Value		Fair Value
(In thousands)										(In thousands)	Carrying Value		Fair Value		Carrying Value		Fair Value
3.875% Senior Notes	3.875% Senior Notes	$	400,000	$	332,000	$	400,000	$	396,000	3.875% Senior Notes	$	400,000	$	335,000	$	400,000	$	339,500

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.

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 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


(In thousands)	Accounts Receivable		Notes Receivable
Balance at December 25, 2022	$	6,718	$	14,499
Current period provision for expected credit losses, net	568		27
Write-offs charged against the allowance	(753)		(147)
Balance at June 25, 2023	$	6,533	$	14,379


			~~(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~~The Company subleases certain retail space to our franchisees in the United Kingdom (“UK”), which are primarily operating leases. At June ~~26, 2022,~~25, 2023, we leased and subleased ~~approximately 436~~368 Papa ~~John’s restaurant properties~~Johns restaurants to franchisees in the ~~United Kingdom.~~UK. The initial lease terms on the franchised sites in the ~~United Kingdom~~UK 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. The initial lease terms of the franchisee subleases are generally five to ten years. Rental income, primarily derived from properties leased and subleased to franchisees in the ~~United Kingdom,~~UK, is recognized on a straight-line basis over the respective operating lease terms. WeThe Company recognized total sublease income of $2.7 million and $5.6 million for the three and six months ended June 25, 2023, respectively, and $3.0 million and $6.0 million for the three and six months ended June 26, 2022, respectively, ~~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.

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 ~~approximately 62~~50 domestic leases. These leases have varying terms, the latest of which expires in 2036. As of June ~~26, 2022,~~25, 2023, the estimated maximum amount of undiscounted payments the Company could be required to make in the event of nonpayment by the primary lessees was ~~$10.2~~$8.2 million. This contingent liability is not included in the Condensed Consolidated Balance ~~Sheet~~Sheets 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:


		Six Months Ended					Six Months Ended
(in thousands)			June 26, 2022		June 27, 2021
(In thousands)								(In thousands)	June 25, 2023		June 26, 2022
Cash paid for amounts included in the measurement of lease liabilities:	Cash paid for amounts included in the measurement of lease liabilities:							Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from finance leases	Operating cash flows from finance leases		$	510	$	574		Operating cash flows from finance leases	$	702	$	510
Financing cash flows from finance leases	Financing cash flows from finance leases		2,508		2,188			Financing cash flows from finance leases	$	3,669	$	2,508
Operating cash flows from operating leases (a)	Operating cash flows from operating leases (a)		18,363		19,139			Operating cash flows from operating leases (a)	$	18,738	$	18,363
Right-of-use assets obtained in exchange for new finance lease liabilities	Right-of-use assets obtained in exchange for new finance lease liabilities		569		8,393			Right-of-use assets obtained in exchange for new finance lease liabilities	$	14,129	$	569
Right-of-use assets obtained in exchange for new operating lease liabilities ~~(b)~~	Right-of-use assets obtained in exchange for new operating lease liabilities ~~(b)~~		31,369		35,115			Right-of-use assets obtained in exchange for new operating lease liabilities ~~(b)~~	$	12,128	$	31,369
Cash received from sublease income	Cash received from sublease income		5,623		5,890			Cash received from sublease income	$	5,278	$	5,623

(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.

___________________________________

(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.

4.Papa John’s Marketing Fund, Inc.

PJMF, which is a consolidated VIE where the Company has been identified as the primary beneficiary, collects a percentage of revenues from Company-owned and franchised restaurants in the United States, for the purpose of designing and administering advertising and promotional programs for all participating ~~domestic~~Domestic restaurants. Contributions and expenditures are reported on a gross basis in the Condensed Consolidated Statements of Operations within Other revenues and Other expenses. PJMF also has a wholly-owned subsidiary, Papa Card, Inc., which administers the Company’s gift card programs.

Assets and liabilities of PJMF, which are ~~restricted in their use, included~~utilized solely for the Company’s advertising and promotional programs, were as follows in the Condensed Consolidated Balance Sheets ~~were as follows~~ (in thousands):


		June 26, 2022		December 26, 2021
							June 25, 2023		December 25, 2022
Assets	Assets					Assets
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	16,886	$	24,481	Cash and cash equivalents	$	4,337	$	17,174
Accounts receivable, net	Accounts receivable, net	13,523		14,150		Accounts receivable, net	13,722		14,780
Income tax receivable	Income tax receivable	44		300		Income tax receivable	56		—
Prepaid expenses and other current assets	Prepaid expenses and other current assets	2,012		1,718		Prepaid expenses and other current assets	15,230		1,815
Total current assets	Total current assets	32,465		40,649		Total current assets	33,345		33,769
Deferred income taxes	Deferred income taxes	592		614		Deferred income taxes	655		655
Total assets	Total assets	$	33,057	$	41,263	Total assets	$	34,000	$	34,424

Liabilities	Liabilities					Liabilities
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	278	$	140	Accounts payable	$	741	$	12,428
Income and other taxes payable	Income and other taxes payable	2		2		Income and other taxes payable	2		8
Accrued expenses and other current liabilities	Accrued expenses and other current liabilities	32,805		40,154		Accrued expenses and other current liabilities	29,000		17,928
Current portion of long-term debt						Current portion of long-term debt	15,529		—
Current deferred revenue	Current deferred revenue	3,479		4,317		Current deferred revenue	3,648		4,395
Total current liabilities	Total current liabilities	36,564		44,613		Total current liabilities	48,920		34,759
Deferred revenue	Deferred revenue	1,978		2,478		Deferred revenue	2,282		2,503
Total liabilities	Total liabilities	$	38,542	$	47,091	Total liabilities	$	51,202	$	37,262

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 six months ended June ~~26, 2022,~~25, 2023, the Company recognized ~~$8.3~~$7.9 million and ~~$17.6~~$16.3 million in revenue, respectively, related to deferred revenue compared to ~~$9.0~~$8.3 million and ~~$18.2~~$17.6 million for the three and six months ended June ~~27, 2021.~~26, 2022.

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


		Contract Liabilities							Contract Liabilities
		June 26, 2022		December. 26, 2021		Change			June 25, 2023		December 25, 2022		Change
Franchise fees and unredeemed gift card liabilities	Franchise fees and unredeemed gift card liabilities	$	30,306	$	20,410	$	9,896	Franchise fees and unredeemed gift card liabilities	$	28,409	$	30,710	$	(2,301)
Customer loyalty program obligations	Customer loyalty program obligations	13,252		15,136		(1,884)		Customer loyalty program obligations	12,904		13,766		(862)
Total contract liabilities	Total contract liabilities	$	43,558	$	35,546	$	8,012	Total contract liabilities	$	41,313	$	44,476	$	(3,163)

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 June ~~26, 2022~~25, 2023 and December ~~26, 2021,~~25, 2022, the contract assets were approximately ~~$7.4~~$7.0 million and ~~$5.8~~$6.2 million, respectively. For the three and six months ended June 25, 2023, revenue was reduced approximately $0.9 million and $1.8 million, respectively, for the amortization of contract assets over the applicable contract terms. For the three and six months ended June 26, 2022, revenue was reduced approximately $1.1 million and $1.9 million, respectively, for the amortization of contract assets over the applicable contract terms. 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 $ 3,198 $ 2,989 $ 2,811 $ 2,604 $ 2,324 $ 7,888 $ 21,814


	Performance Obligations by Period
	Less than 1 Year		1-2 Years		2-3 Years		3-4 Years		4-5 Years		Thereafter		Total
Franchise fees	$	3,172	$	2,823	$	2,635	$	2,380	$	2,087	$	6,054	$	19,151

~~Approximately $3.0~~At June 25, 2023, approximately $3.5 million of area development fees related to unopened stores and international unearned royalties are included in Deferred revenue. Timing of revenue recognition is dependent upon the timing of store openings and franchisees’ revenues. Gift card liabilities of approximately ~~$5.4~~$5.9 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, "“Revenue ~~Recognition~~Recognition”" and does not disclose information about remaining performance obligations that have original expected durations of one year or less.

6. Common Stock

Shares Authorized and Outstanding

The Company has authorized ~~5.0 million shares of preferred stock (of which none were issued or outstanding at June 26, 2022 and December 26, 2021) and~~ 100.0 million shares of common stock as of June ~~26, 2022~~25, 2023 and December ~~26, 2021. There were 35.2 million~~25, 2022. The Company’s outstanding shares of common stock outstanding, net of repurchased shares of common stock held as treasury stock, were 32.4 million shares at June ~~26, 2022,~~25, 2023, compared to ~~35.8~~34.7 million shares at December ~~26, 2021.~~25, 2022.

Share Repurchase Program

On October 28, 2021, our Board of Directors (the “Board”) approved a share repurchase program with an indefinite duration for up to $425.0 million of the Company’s common stock. ~~This share repurchase program operated alongside our previous $75.0~~

~~million share repurchase authorization, which began on November 4, 2020 and expired on December 26, 2021.~~ The following table summarizes our repurchase activity under our share repurchase programs for the three and six months ended June ~~26, 2022~~25, 2023 and June ~~27, 2021:~~26, 2022:


(in thousands, except average price per share)		Total Number of Shares Purchased		Average Price Paid per Share				Aggregate Cost of Shares Purchased						Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
(In thousands, except average price per share)						(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	Three Months Ended		Total Number of Shares Purchased							Average Price Paid per Share						Aggregate Cost of Shares Purchased							Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs				Three Months Ended
June 25, 2023						June 25, 2023							—					$	—		$	—					$	90,160
June 26, 2022	June 26, 2022	452				$	94.56				$	42,762					$	349,329		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
(In thousands, except average price per share)						(In thousands, except average price per share)					Total Number of Shares Purchased							Average Price Paid per Share			Aggregate Cost of Shares Purchased (a)			Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
Six Months Ended	Six Months Ended		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 25, 2023						June 25, 2023							2,523					$	83.10		$	209,640					$	90,160
June 26, 2022	June 26, 2022	753				$	100.23				$	75,471					$	349,329		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~~(a) Aggregate cost of ~~$19.5~~shares purchased for the six months ended June 25, 2023 excludes $2.8 million ~~and an average~~of transaction costs directly attributable to share repurchases, including a 1% excise tax incurred under the Inflation Reduction Act of 2022. Of these costs, $2.1 million were classified as non-cash financing activities during the six months ended June 25, 2023.

The shares repurchased during the six months ended June 25, 2023 included 2,176,928 shares repurchased on March 1, 2023 from certain funds affiliated with, or managed by, Starboard Value LP (collectively, “Starboard”), at a price of ~~$85.15~~$82.52 per ~~share. Approximately $329.8 million remained available under~~share, for aggregate consideration of $179.6 million. The transaction was negotiated by an independent committee of the Board of Directors formed for the purpose of evaluating a possible transaction involving Starboard, and was approved by the full Board of Directors upon such independent committee’s recommendation. Starboard’s Chief Executive Officer is Jeffrey Smith, who previously served as the Company’s ~~share repurchase program as~~Chairman of ~~July 29, 2022.~~the Board until his resignation on March 1, 2023.

The timing and volume of share repurchases under the Company’s share repurchase programs may be executed at the discretion of management on an opportunistic basis, subject to market and business conditions, 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~~paid dividends of ~~approximately $25.1~~approximately $28.5 million ($~~0.70~~0.84 per share) ~~for~~for the six months ended June ~~26, 2022.~~ 25, 2023. On ~~August 2, 2022,~~July 31, 2023, our Board of Directors approved a 9.5% increase in the Company’s dividend rate per common share from $1.68 on an annual basis to $1.84 on an annual basis and subsequently declared a ~~second~~third quarter dividend of ~~$0.42~~$0.46 per common share (approximately ~~$14.9~~$15.1 million in the aggregate), which will be paid on August ~~26, 2022~~25, 2023 to stockholders of record as of the close of business on August ~~15, 2022.~~14, 2023. The ~~declaration~~declaration and payment of any future dividends will be at the discretion of our ~~Board of Directors.~~Board.

7. Earnings ~~Per~~per Share

We compute earnings per share using the two-class method. The two-class method requires an earnings allocation formula that determines earnings per share for common shareholders and participating security holders according to dividends declared and participating rights in undistributed earnings. The shares of the Company’s former Series B Convertible Preferred Stock ("Series B Preferred Stock"), all of which were repurchased by the Company or converted into shares of common stock during 2021, and time-basedTime-based restricted stock awards are participating securities because holders of such shares have non-forfeitable dividend rights and participate in undistributed earnings with common stock. Under the two-class method, total dividends provided to the holders of participating securities and undistributed earnings allocated to participating securities, are subtracted from net income attributable to the Company in determining net income attributable to common shareholders. ~~Additionally, any accretion to the redemption value for the Series B Preferred Stock was treated as a deemed dividend in the two-class~~

Basic earnings per common share ~~calculation.~~

are computed by dividing net income attributable to common shareholders by the weighted-average common shares outstanding. Diluted earnings per common share are computed by dividing the net income attributable to common shareholders by the diluted weighted average common shares outstanding. Diluted weighted average common shares outstanding consist of basic weighted average common shares outstanding plus weighted average awards outstanding under our equity compensation plans, which are dilutive securities.

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


		Three Months Ended				Six Months Ended					Three Months Ended				Six Months Ended
		June 26, 2022		June 27, 2021		June 26, 2022		June 27, 2021			June 25, 2023		June 26, 2022		June 25, 2023		June 26, 2022
Basic earnings (loss) per common share (in thousands, except per share data)
Basic earnings per common share										Basic earnings per common share
Net income attributable to the Company	Net income attributable to the Company	$	25,433	$	32,254	$	35,927	$	66,137	Net income attributable to the Company	$	17,768	$	25,433	$	40,144	$	35,927
Dividends on redemption of Series B Convertible Preferred Stock		—		(109,852)		—		(109,852)
Dividends paid to participating securities	Dividends paid to participating securities	(82)		(2,300)		(141)		(5,827)		Dividends paid to participating securities	—		(82)		—		(141)
Net income attributable to participating securities	Net income attributable to participating securities	(111)		—		(93)		—		Net income attributable to participating securities	—		(111)		—		(93)
Net income (loss) attributable to common shareholders		$	25,240	$	(79,898)	$	35,693	$	(49,542)
Net income attributable to common shareholders										Net income attributable to common shareholders	$	17,768	$	25,240	$	40,144	$	35,693

Basic weighted average common shares outstanding	Basic weighted average common shares outstanding	35,624		34,729		35,775		33,739		Basic weighted average common shares outstanding	32,563		35,624		33,359		35,775
Basic earnings (loss) per common share		$	0.71	$	(2.30)	$	1.00	$	(1.47)
Basic earnings per common share										Basic earnings per common share	$	0.55	$	0.71	$	1.20	$	1.00

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)
Diluted earnings per common share										Diluted earnings per common share
Net income attributable to common shareholders										Net income attributable to common shareholders	$	17,768	$	25,240	$	40,144	$	35,693

Weighted average common shares outstanding	Weighted average common shares outstanding	35,624		34,729		35,775		33,739		Weighted average common shares outstanding	32,563		35,624		33,359		35,775
Dilutive effect of outstanding equity awards (a)	Dilutive effect of outstanding equity awards (a)	200		—		257		—		Dilutive effect of outstanding equity awards (a)	87		200		128		257
Diluted weighted average common shares outstanding	Diluted weighted average common shares outstanding	35,824		34,729		36,032		33,739		Diluted weighted average common shares outstanding	32,650		35,824		33,487		36,032
Diluted earnings (loss) per common share		$	0.70	$	(2.30)	$	0.99	$	(1.47)
Diluted earnings per common share										Diluted earnings per common share	$	0.54	$	0.70	$	1.20	$	0.99

___________________________________

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


~~(a)~~			Excludes 63 and 42 equity awards for the three and six months ended June 26, 2022, respectively, as the effect of including such awards would have been anti-dilutive (none for the three and six months ended June 27, 2021).

8. Debt

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


		June 26, 2022		December 26, 2021			June 25, 2023		December 25, 2022
Senior notes	Senior notes	$	400,000	$	400,000	Senior notes	$	400,000	$	400,000
Revolving facilities(a)	Revolving facilities(a)	145,000		90,000		Revolving facilities(a)	391,529		205,000
Outstanding debt	Outstanding debt	$	545,000	$	490,000	Outstanding debt	$	791,529	$	605,000
Unamortized debt issuance costs	Unamortized debt issuance costs	(8,554)		(9,270)		Unamortized debt issuance costs	(7,180)		(7,931)
Current portion of long-term debt						Current portion of long-term debt	(15,529)		—
Total long-term debt, net	Total long-term debt, net	$	536,446	$	480,730	Total long-term debt, net	$	768,820	$	597,069

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

Senior Notes

On September 14, 2021, the Company issued $400.0 million of 3.875% senior notes (the “Notes”) which will mature on September 15, 2029. Interest on the Notes is payable semi-annually in cash in arrears on March 15 and September 15 of each year at a fixed interest rate of 3.875% per annum.

~~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~~ Refer 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%~~Note 12 of the ~~Notes with net cash proceeds of certain equity offerings at a redemption price equal to 103.875%~~consolidated financial statements in our Annual Report on Form 10-K for the year ended December 25, 2022. for further description of the ~~principal amount of~~provisions and covenant requirements under 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~~Senior Notes.

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

The Company’s amended and restated credit agreement, dated September 14, 2021 (the ~~“Amended Credit~~“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. The remaining availability under the PJI Revolving Facility was approximately ~~$455.0~~$224.0 million as of June ~~26, 2022.~~

Up25, 2023. Refer to ~~$50.0 million~~Note 12 of the ~~PJI Revolving Facility may be advanced~~consolidated financial statements in ~~certain agreed foreign currencies, including Euros, Pounds Sterling, Canadian Dollars, Japanese Yen, and Mexican Pesos. Additionally,~~our Annual Report on Form 10-K for the ~~Amended Credit Agreement includes an accordion feature allowing~~year ended December 25, 2022 for ~~a future increase~~further description 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 amountsprovisions and ~~ongoing compliance with financial covenants.~~

~~Loans~~covenant requirements 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 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 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 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 June 26, 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 Guarantors.Agreement.

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.~~2023, but is subject to annual amendments. The borrowings

under the PJMF Revolving Facility accrue interest at a variable rate of ~~the one-month~~a one month LIBOR plus ~~1.75%~~1.60%. ~~There~~The applicable interest rate on the PJMF Revolving facility was no6.8% for the three months ended June 25, 2023. As of June 25, 2023, the principal amount of debt outstanding under the PJMF Revolving Facility was approximately $15.5 million and is classified as Current portion of ~~June 26, 2022 or December 26, 2021.~~long-term debt in the Condensed Consolidated Balance Sheets. The PJMF operating results and the related debt outstanding do not impact the financial covenants under the ~~Amended~~ Credit Agreement.

Derivative Financial Instruments

During the three months ended June 25, 2023, the Company executed a new interest rate swap with an initial notional value of $100.0 million to replace the Company’s prior interest swaps, which had a notional value of $125.0 million and matured on April 30, 2023. The objective of the interest rate swap is to mitigate the Company’s exposure to the impact of interest rate changes associated with our variable rate debt under the PJI Revolving Facility. We have designated the interest rate swap as a cash flow hedge and will assess hedge effectiveness at regular intervals through the maturity date of June 30, 2025. The interest rate swaps are marked to market at each reporting date, and any unrealized gains or losses are included in Accumulated other comprehensive loss in the Condensed Consolidated Balance Sheets and reclassified to Net interest

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

As of June ~~26, 2022,~~25, 2023, we have the following interest rate swap ~~agreements with a total notional value of $350.0 million:~~agreements:

Effective Dates

Floating Rate Debt

Fixed Rates

~~April~~June 23, 2023 through June 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~~2025

50 million

~~2.00%~~4.55%

June 23, 2023 through June 30, 2025

50 million

4.55%

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 current and expired swaps in the accompanying condensed consolidated financial statements (in thousands):

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


	Interest Rate Swap Derivatives
Balance Sheet Location	Fair Value June 25, 2023		Fair Value December 25, 2022
Other current assets	$	—	$	986
Other long-term liabilities	$	15	$	—

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


Derivatives - Cash Flow Hedging Relationships	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		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:	Interest rate swaps for the three months ended:								Interest rate swaps for the three months ended:
June 25, 2023									June 25, 2023	$	1,165	Interest expense	$	(36)	$	(11,275)
June 26, 2022	June 26, 2022	$	1,445	Interest expense	$	(735)	$	(6,081)	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:	Interest rate swaps for the six months ended:								Interest rate swaps for the six months ended:
June 25, 2023									June 25, 2023	$	1,424	Interest Expense	$	(243)	$	(20,296)
June 26, 2022	June 26, 2022	$	2,763	Interest Expense	$	(200)	$	(10,344)	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 ~~$2.4~~$5.7 million and ~~$3.6~~$2.4 million for the three months ended June 25, 2023 and June 26, 2022, ~~and June 27, 2021,~~ respectively, and ~~$12.6~~$16.6 million and ~~$7.1~~$12.6 million for the six months ended June 25, 2023 and June 26, 2022, ~~and June 27, 2021,~~ respectively.

9. Litigation, 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~~these provisions to reflect the impact of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular case.

Durling et al v. Papa John’s International, Inc., is a conditionally certified collective action filed in May 2016 in the United States District Court for the Southern District of New York, alleging that corporate restaurant delivery drivers were not properly reimbursed for vehicle mileage and expenses in accordance with the Fair Labor Standards Act. In July 2018,

the District Court granted a motion to certify a conditional corporate collective class and the opt-in notice process has been completed. As of the close of the opt-in period on October 29, 2018, 9,571 drivers opted into the collective class. On September 30, 2022, the parties reached a settlement in principle to resolve the case. On December 19, 2022, the District Court granted preliminary approval of the settlement, and following a hearing on July 27, 2023, the District Court granted final approval of the settlement. Pursuant to the terms of the settlement, which contemplated a total aggregate settlement amount of no more than $20.0 million subject to a claims-made process, all claims in the action will be dismissed, the litigation will be terminated, and the Company will receive a release. The settlement also includes resolution of a companion case, Hubbard, et al. v. Papa John’s International, Inc., pending in the United States District Court for the Western District of Kentucky. The settlement is subject to a claims-made process whereby unclaimed funds revert to the Company, and the Company is only responsible for payments to class and collective action members who timely submitted a claim form. The Company is still awaiting a final accounting from the settlement administrator. On January 18, 2023, the Company remitted $5.0 million to the settlement administrator as partial funding of the settlement in accordance with the terms of the applicable settlement agreement. The remainder of the settlement amount will be paid to the settlement administrator on or prior to August 10, 2023 in accordance with the settlement terms. As of June 25, 2023, $5.0 million remains in Accrued expenses and other accrued liabilities in the Condensed Consolidated Balance Sheets. The Company continues to deny any liability or wrongdoing in this matter.

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~~administrative expenses in the Condensed Consolidated Statements of Operations in the first quarter of ~~2022.~~2022 and remained accrued in Accrued expenses and other accrued liabilities in the Condensed Consolidated Balance Sheets as of June 25, 2023. The proposed settlement is subject to approval by the District Court and contains certain customary contingencies. The Company continues to deny any liability or wrongdoing in this matter.

~~Durling et al v. Papa John’s International, Inc~~., is a conditionally certified collective action filed in May 2016 in the United States District Court for the Southern District of New York, alleging that corporate restaurant delivery drivers were not properly reimbursed for vehicle mileage and expenses in accordance with the Fair Labor Standards Act. In July 2018, the District Court granted a motion to certify a conditional corporate collective class and the opt-in notice process has been completed. 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 not recorded any liability related to this lawsuit as of June 26, 2022 as it does not believe a loss is probable or reasonably estimable.

10. Divestitures

Refranchising Loss

On March 28, 2022, we refranchised our 51% ownership interest in a 90-restaurant consolidated joint venture in Texas for $14.0 million, net of transaction costs.

In connection with the divestiture, we recorded a one-time, non-cash charge of $8.4 million ~~as a~~in Refranchising ~~Loss~~and impairment loss in the Condensed Consolidated ~~Statement~~Statements of Operations, which reflects net sale proceeds of $14.0 million, the noncontrolling interest of $4.2 million, and the recognition of an unearned royalty stream of $12.2 million to be recognized as revenue over the 10-year term of the franchise agreement executed concurrent with the disposition in accordance with ASC 810, “Consolidation.” The $8.4 million of the one-time, non-cash refranchising loss was recorded in the first quarter of 2022 and realized upon consummation of the sale in the second ~~quarter.~~quarter of 2022.

Impairment of Reacquired Master Franchise Rights

In the first quarter of 2022, the Company recorded an impairment of $2.8 million in Refranchising and impairment lossin the Condensed Consolidated Statements of Operations 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. The reacquired franchise rights were previously acquired from a former master franchisee and capitalized by the Company.

11. Segment Information

We have 4four reportable segments: ~~domestic~~Domestic Company-owned restaurants, North America franchising, North America commissaries, and ~~international~~International operations. The ~~domestic~~Domestic Company-owned restaurant segment consists of the operations of all ~~domestic (“domestic” is defined as contiguous United States)~~Domestic 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~~North America commissary segment ~~principally~~ 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 International segment consists of the operations of all Company-owned restaurants located in the UK, as well as distribution sales to franchised Papa John’s restaurants located in the ~~United Kingdom~~UK and our franchise sales and support activities, which derive revenues from sales of franchise and development rights and the collection of royalties from our ~~international~~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.~~income. Certain administrative and capital costs are allocated to segments based upon predetermined rates or estimated resource usage. We account for intercompany sales and transfers as if the sales or transfers were to third parties and eliminate the activity in consolidation.

Our reportable segments are business units that provide different products or services. Separate management of each segment is required because each business unit is subject to different operational issues and strategies. No single external customer accounted for 10% or more of our consolidated revenues.

2118

~~Our~~The following tables present our segment ~~information is~~information.


	Three Months Ended				Six Months Ended
(In thousands)	June 25, 2023		June 26, 2022		June 25, 2023		June 26, 2022
Revenues:
Domestic Company-owned restaurants	$	175,780	$	171,411	$	355,646	$	370,176
North America franchising	34,711		34,917		70,783		69,185
North America commissaries	206,980		219,383		419,546		429,062
International	41,354		39,282		80,058		81,989
All others	55,705		57,672		115,546		114,945
Total revenues	$	514,530	$	522,665	$	1,041,579	$	1,065,357

Intersegment revenues:
North America franchising	$	1,025	$	1,048	$	2,077	$	2,101
North America commissaries	51,586		52,754		103,403		111,261
International	869		—		869		—
All others	16,348		15,889		33,183		35,268
Total intersegment revenues	$	69,828	$	69,691	$	139,532	$	148,630

Operating income:
Domestic Company-owned restaurants (a)	$	6,641	$	5,924	$	13,291	$	7,912
North America franchising	32,111		32,624		65,511		64,761
North America commissaries	10,397		10,957		21,127		20,292
International (b)	3,763		7,306		10,995		11,761
All others	1,343		2,187		4,500		5,906
Unallocated corporate expenses (c)	(19,701)		(19,344)		(43,067)		(56,454)
Elimination of intersegment (profits) losses	358		(750)		351		(839)
Total operating income	$	34,912	$	38,904	$	72,708	$	53,339


Property and equipment, net:
Domestic Company-owned restaurants	$	242,089
North America commissaries	155,681
International	27,748
All others	139,114
Unallocated corporate assets	248,387
Accumulated depreciation and amortization	(548,626)
Total property and equipment, net	$	264,393

___________________________________

(a) The six months endedJune 26, 2022 includes a one-time, non-cash charge of $8.4 million associated with the refranchising of the Company’s ownership interest in a 90-restaurant joint venture, recorded as ~~follows:~~Refranchising and impairment loss. See “Note 10. Divestitures” for additional information.

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
(b) The three and six months ended June 25, 2023 includes $1.3 million of costs associated with repositioning the UK portfolio as well as transaction costs related to the acquisition of stores from franchisees. The six months endedJune 26, 2022 includes $3.5 million of one-time, non-cash reserves for certain accounts receivable and impairments of reacquired franchise rights. See “Notes 2. Significant Accounting Policies” and “10. Divestitures” for additional information.


~~(1)~~(c) The three and six months ended June 25, 2023 includes $0.7 million and $2.0 million, respectively, of severance and related costs associated with the transition of certain executives. The three months ended June 26, 2022 includes $1.5 million of advisory fees and severance costs associated with the transition of certain executives.The six months endedJune 26, 2022 includes $13.9 million of one-time, non-cash reserves of certain notes receivable, $5.0 million for certain legal settlements, and $1.5 million of advisory fees and severance costs associated with the transition of certain executives. See “Notes 2. Significant Accounting Policies” and “9. Litigation, Commitments and Contingencies” for additional information.			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.

2219

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													Reportable Segments
		Three Months Ended June 26, 2022													Three Months Ended June 25, 2023
Major Products/Services Lines	Major Products/Services Lines	Domestic Company-owned restaurants		North America franchising		North America commissaries		International		All others		Total		Major Products/Services Lines	Domestic Company-owned restaurants		North America franchising		North America commissaries		International		All others		Total
Company-owned restaurant sales	Company-owned restaurant sales	$	171,411	$	—	$	—	$	—	$	—	$	171,411	Company-owned restaurant sales	$	175,780	$	—	$	—	$	3,018	$	—	$	178,798
Franchise royalties and fees	Franchise royalties and fees	—		35,965		—		12,043		—		48,008		Franchise royalties and fees	—		35,736		—		12,196		—		47,932
Commissary sales	Commissary sales	—		—		272,137		19,915		—		292,052		Commissary sales	—		—		258,566		20,263		—		278,829
Other revenues	Other revenues	—		—		—		7,324		73,561		80,885		Other revenues	—		—		—		6,746		72,053		78,799
Eliminations	Eliminations	—		(1,048)		(52,754)		—		(15,889)		(69,691)		Eliminations	—		(1,025)		(51,586)		(869)		(16,348)		(69,828)
Total segment revenues	Total segment revenues	$	171,411	$	34,917	$	219,383	$	39,282	$	57,672	$	522,665	Total segment revenues	175,780		34,711		206,980		41,354		55,705		514,530
International other revenues (1)		—		—		—		(7,324)		7,324		—
International other revenues (a)														International other revenues (a)	—		—		—		(6,746)		6,746		—
Total revenues	Total revenues	$	171,411	$	34,917	$	219,383	$	31,958	$	64,996	$	522,665	Total revenues	$	175,780	$	34,711	$	206,980	$	34,608	$	62,451	$	514,530

		Reportable Segments													Reportable Segments
		Three Months Ended June 27, 2021													Three Months Ended June 26, 2022
Major Products/Services Lines	Major Products/Services Lines	Domestic Company-owned restaurants		North America franchising		North America commissaries		International		All others		Total		Major Products/Services Lines	Domestic Company-owned restaurants		North America franchising		North America commissaries		International		All others		Total
Company-owned restaurant sales	Company-owned restaurant sales	$	196,124	$	—	$	—	$	—	$	—	$	196,124	Company-owned restaurant sales	$	171,411	$	—	$	—	$	—	$	—	$	171,411
Franchise royalties and fees	Franchise royalties and fees	—		33,516		—		13,156		—		46,672		Franchise royalties and fees	—		35,965		—		12,043		—		48,008
Commissary sales	Commissary sales	—		—		240,069		24,458		—		264,527		Commissary sales	—		—		272,137		19,915		—		292,052
Other revenues	Other revenues	—		—		—		8,663		72,434		81,097		Other revenues	—		—		—		7,324		73,561		80,885
Eliminations	Eliminations	—		(1,041)		(53,428)		—		(18,943)		(73,412)		Eliminations	—		(1,048)		(52,754)		—		(15,889)		(69,691)
Total segment revenues	Total segment revenues	$	196,124	$	32,475	$	186,641	$	46,277	$	53,491	$	515,008	Total segment revenues	171,411		34,917		219,383		39,282		57,672		522,665
International other revenues (1)		—		—		—		(8,663)		8,663		—
International other revenues (a)														International other revenues (a)	—		—		—		(7,324)		7,324		—
Total revenues	Total revenues	$	196,124	$	32,475	$	186,641	$	37,614	$	62,154	$	515,008	Total revenues	$	171,411	$	34,917	$	219,383	$	31,958	$	64,996	$	522,665

		Reportable Segments													Reportable Segments
		Six Months Ended June 26, 2022													Six Months Ended June 25, 2023
Major Products/Services Lines	Major Products/Services Lines	Domestic Company-owned restaurants		North America franchising		North America commissaries		International		All others		Total		Major Products/Services Lines	Domestic Company-owned restaurants		North America franchising		North America commissaries		International		All others		Total
Company-owned restaurant sales	Company-owned restaurant sales	$	370,176	$	—	$	—	$	—	$	—	$	370,176	Company-owned restaurant sales	$	355,646	$	—	$	—	$	3,018	$	—	$	358,664
Franchise royalties and fees	Franchise royalties and fees	—		71,286		—		25,478		—		96,764		Franchise royalties and fees	—		72,860		—		24,687		—		97,547
Commissary sales	Commissary sales	—		—		540,323		41,097		—		581,420		Commissary sales	—		—		522,949		39,235		—		562,184
Other revenues	Other revenues	—		—		—		15,414		150,213		165,627		Other revenues	—		—		—		13,987		148,729		162,716
Eliminations	Eliminations	—		(2,101)		(111,261)		—		(35,268)		(148,630)		Eliminations	—		(2,077)		(103,403)		(869)		(33,183)		(139,532)
Total segment revenues	Total segment revenues	$	370,176	$	69,185	$	429,062	$	81,989	$	114,945	$	1,065,357	Total segment revenues	355,646		70,783		419,546		80,058		115,546		1,041,579
International other revenues (1)		—		—		—		(15,414)		15,414		—
International other revenues (a)														International other revenues (a)	—		—		—		(13,987)		13,987		—
Total revenues	Total revenues	$	370,176	$	69,185	$	429,062	$	66,575	$	130,359	$	1,065,357	Total revenues	$	355,646	$	70,783	$	419,546	$	66,071	$	129,533	$	1,041,579

2320


		Reportable Segments													Reportable Segments
		Six Months Ended June 27, 2021													Six Months Ended June 26, 2022
Major Products/Services Lines	Major Products/Services Lines	Domestic Company-owned restaurants		North America franchising		North America commissaries		International		All others		Total		Major Products/Services Lines	Domestic Company-owned restaurants		North America franchising		North America commissaries		International		All others		Total
Company-owned restaurant sales	Company-owned restaurant sales	$	393,358	$	—	$	—	$	—	$	—	$	393,358	Company-owned restaurant sales	$	370,176	$	—	$	—	$	—	$	—	$	370,176
Franchise royalties and fees	Franchise royalties and fees	—		67,291		—		25,364		—		92,655		Franchise royalties and fees	—		71,286		—		25,478		—		96,764
Commissary sales	Commissary sales	—		—		477,017		46,857		—		523,874		Commissary sales	—		—		540,323		41,097		—		581,420
Other revenues	Other revenues	—		—		—		16,660		145,897		162,557		Other revenues	—		—		—		15,414		150,213		165,627
Eliminations	Eliminations	—		(2,101)		(105,498)		—		(38,091)		(145,690)		Eliminations	—		(2,101)		(111,261)		—		(35,268)		(148,630)
Total segment revenues	Total segment revenues	$	393,358	$	65,190	$	371,519	$	88,881	$	107,806	$	1,026,754	Total segment revenues	370,176		69,185		429,062		81,989		114,945		1,065,357
International other revenues ~~(1)~~(a)	International other revenues ~~(1)~~(a)	—		—		—		(16,660)		16,660		—		International other revenues ~~(1)~~(a)	—		—		—		(15,414)		15,414		—
Total revenues	Total revenues	$	393,358	$	65,190	$	371,519	$	72,221	$	124,466	$	1,026,754	Total revenues	$	370,176	$	69,185	$	429,062	$	66,575	$	130,359	$	1,065,357

___________________________________


~~(1)~~(a) Other revenues as reported in the Condensed Consolidated Statements of Operations include $6.7 million and $14.0 million of revenues for the three and six months ended June 25, 2023, respectively, and $7.3 million and $15.4 million for the three and six months ended June 26, 2022, respectively, that are part of the International reporting segment. 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.			Other revenues as reported in the Condensed Consolidated Statements of Operations include $7.3 million and $15.4 million of revenue for the three and six months ended June 26, 2022, respectively, and $8.7 million and $16.7 million for the three and six months ended June 27, 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. Acquisitions

UK Franchisee Acquisition

On June 2, 2023 (the “Acquisition Date”), the Company acquired 91 Papa Johns restaurants previously operated by the M25 division of Drake Food Service International in the United Kingdom (referred to as “DFSI”), the Company's largest franchisee, for total consideration of approximately $13.7 million. The acquisition establishes a portfolio of Company-owned restaurants in the UK market and enables the Company to implement operating model enhancements in the restaurants including revenue management capabilities, product and technological innovation and operational efficiencies to improve sales and restaurant-level profitability. The acquisition represents a part of the Company’s investments to reposition our UK portfolio and drive initiatives for future growth and profitability in the Company’s largest market outside of North America. During the three months ended June 25, 2023, the Company incurred $1.3 million of acquisition-related costs, which were recorded within General and administrative expenses and within the International segment in the Condensed Consolidated Statements of Operations. The results of DFSI’s operations after the Acquisition Date are included in the Company’s Condensed Consolidated Statements of Operations. The revenues and income before income taxes were recorded within the International segment and were not material to the Company’s Condensed Consolidated Statements of Operations during the three months ended June 25, 2023.

Preliminary Acquisition Accounting

The DFSI acquisition has been accounted for as a business combination. As such, the Company concluded that the consideration was measured at fair value and has recorded the preliminary estimated fair value of the assets acquired and liabilities assumed as of the Acquisition Date. Total consideration was approximately $13.7 million, substantially all of which was pre-existing accounts receivable and notes receivable and was classified as a noncash investing transaction within the Condensed Consolidated Statements of Cash Flows during the six months ended June 25, 2023. Assets acquired include approximately $9.1 million of property and equipment, net, $0.3 million of inventories and other assets and $4.3 million of goodwill.

The total goodwill recognized in conjunction with the DFSI acquisition, all of which is expected to be deductible for tax purposes, has been assigned to the International operating segment. The purchase price exceeded the fair value of the net assets acquired, which resulted in the recognition of goodwill, primarily due to synergies created from expected future benefits stemming from implementation of the Company’s operational capabilities and further control of the Company’s brand name in our most prominent international market. Goodwill also includes certain other benefits that do not qualify for recognition as intangible assets, such as an assembled workforce.

2421

~~12. Related Party Transactions~~

~~Endorsement Agreement~~

~~On April 10, 2022,~~The amounts recorded as a result of our preliminary acquisition accounting are subject to change and further refinement. The Company is still finalizing certain working capital adjustments with the sellers, assessing the condition and finalizing the fair value of acquired property and equipment, and gathering information regarding leases and other assets. The Company ~~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~~expects these items to be finalized prior to the ~~personal services of Mr. O’Neal. Mr. O’Neal is a non-independent director~~one-year anniversary date of the ~~Company.~~acquisition.

The ~~Endorsement Agreement replaces~~following summarizes changes in the ~~previous Endorsement Agreement, effective March 15, 2019,~~Company’s goodwill by ~~and between~~reportable segment (in thousands):


	Domestic Company-owned restaurants		International		All others		Total
Balance at December 25, 2022	$	55,507	$	14,673	$	436	$	70,616
Acquisitions (a)	1,102		4,274		—		5,376

Foreign currency adjustments	—		631		—		631
Balance at June 25, 2023	$	56,609	$	19,578	$	436	$	76,623

(s) Goodwill from acquisitions during the ~~Company, PJMF and ABG-Shaq,~~six months ended June 25, 2023 include $4.3 million from the DFSI acquisition described above 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, solelywell 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~~$1.1 million related to ~~appearances, social media and public relations matters.~~a Domestic store acquisition. The ~~Endorsement Agreement also renewed~~Domestic acquisition was classified as a noncash investing transaction within the ~~offering~~Condensed Consolidated Statements of Cash Flows during 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;~~six months ended June 25, 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.

2522

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”~~John’s,” “Papa Johns” or in the first-person notations of “we,” “us” and “our”) operates and franchises pizza delivery and carryout restaurants and, in certain international markets, dine-in and delivery restaurants under the trademark “Papa John’s.” Papa John’s began operations in 1984. As of June ~~26, 2022,~~25, 2023, there were ~~5,571~~5,780 Papa John’s restaurants in operation, consisting of ~~519~~612 Company-owned and ~~5,052~~5,168 franchised restaurants operating in 4948 countries and territories. Our revenues are derived from retail sales of pizza and other food and beverage products to the general public by Company-owned restaurants, franchise royalties, and sales of franchise and development rights. Additionally, we derive revenues from sales to franchisees of various items including food and paper products from our ~~domestic~~Domestic Quality Control Centers (“QC Centers”), operation of our ~~international~~International QC Center in the ~~United~~(United Kingdom (“UK”), contributions received by Papa John’s Marketing Fund (“PJMF”) which is our national marketing fund, printing and promotional items and information systems equipment, and software and related services. We believe that in addition to supporting both Company and franchised profitability and growth, these activities contribute to product quality and consistency throughout the Papa John’s system.

Recent Developments and Trends

~~Innovation.~~The Company ~~launched Epic Pepperoni Stuffed Crust Pizza~~has focused on executing strategic priorities and ~~Spicy Pepperoni Rolls in~~building a foundation for long-term success, while navigating a challenging macroeconomic environment. Our progress and significant transactions during 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 offers2023 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.described below.

Growth Strategy. The ~~Company’s goal~~Company delivered its sixteenth consecutive quarter of Global system-wide restaurant sales growth and continues to expand both domestically and internationally. This growth will be fueled by continued product innovation and our development strategy.

Our expanding development pipeline is a key long-term growth driver as we believe there is significant opportunity to ~~take market share in the pizza category while leveraging~~offer our differentiated, ~~strategy and~~ premium position to ~~protect margins~~more customers globally and domestically. In the second quarter of 2023, we opened 47 net new restaurants, for global unit growth of 0.8%. We expect this growth to accelerate in ~~the face of accelerating commodity and labor inflation. We currently expect our 2022~~2023 with global development ~~outlook~~ to be between ~~280 and 320~~270 to 310 net new ~~restaurants. Our view of~~units. In April 2023, we announced our ~~long-term unit opportunity, both domestically and internationally, continues~~future expansion into India through a development agreement to ~~expand as we sign historic deals to develop within key areas and~~open 650 new restaurants in India by 2033. Going forward we expect annual net new unit growth to ~~open~~be between 5% and 7%. This would imply net new unit growth of 1,150 to 1,400 units between 2022 and 2025, compared with our previous expectation of 1,400 to 1,800 net new ~~Papa John’s restaurants worldwide by the end~~units during this same time. This slightly lower rate of ~~2025, relative to the start of 2022.~~growth takes into consideration continued global economic pressures.

~~Restaurant Staffing~~Operational Initiatives. We launched the “Back to BETTER” initiative in late 2022, which focuses on improving operational execution at the store level in order to drive better financial performance. We have aligned the organization on improving out-the-door times, overall customer satisfaction, increasing orders and ~~Related Market Impact. Throughout~~optimization. Running BETTER operations is intended to increase customer and employee satisfaction, as well as drive customer loyalty. We are seeing improvement in our restaurant level operating margins, and we experienced a 2.8% increase in comparable sales for Domestic Company-owned restaurants for the first six months of ~~2022,~~2023. We expect this initiative to continue throughout 2023.

UK Market Conditions. Macroeconomic conditions in the UK,the largest region in our ~~restaurants continued~~International segment, continue to present challenges in light of ongoing inflation and rising interest rates. Against this backdrop, the Company and franchisees have experienced declines in sales and profitability in the UK market. While uncertain how long these conditions will last, the Company is committed to its presence in the UK and is invested in the Company’s long-term success in this region. As we navigate this challenging economic environment, we recently established a ~~challenging staffing environment. This has impacted customer service and,~~Company-owned restaurant portfolio in ~~limited cases, our ability to deliver or take orders. Our integrations with~~ the ~~aggregator marketplaces and our nationwide integrations with Delivery-as-a-Service providers have been key tools~~UK, allowing us to continue to 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,build 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 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 executive compensation plan now includes Environmental Social and Governance metrics.

~~Suspension of Franchisee Support in Russi~~a. During the 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 duesimilar model to the ~~conflict~~one we have created in ~~Ukraine~~the US. This model enables us to scale our capabilities with franchisees in the UK, and ~~subsequent international government actions~~worldwide, including revenue management capabilities, product and ~~sanctions, which were recorded as Refranchising~~technological innovation and ~~impairment loss of $2.8 million~~operational efficiencies to improve sales and ~~General and administrative expenses of $14.6 million. All assets related to~~restaurant-level profitability over 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.longer term.

2623

~~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 success over the past 2.5 years as we 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 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 have begun to take some pricing. This has helped partially offset higher food, labor, and fuel costs in our supply chain and restaurants. Our ticket growth has predominantly come through new premium products and add-ons over the past few years. This has afforded us more room to strategically raise prices in this inflationary environment. Papa John's has unique pricing flexibility given our value proposition is focused on delivering premium value, not hitting specific low price points.

Global Restaurant Sales and Unit Information

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

“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 ~~quarter ended March 27, 2022.~~period on a weighted average basis.

~~Also, for the three~~We believe Domestic Company-owned, North America franchised, and ~~six months ended June 26, 2022, both~~International 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~~(decline) 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~~Comparable sales growth (decline) and Global system-wide 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~~Global system-wide 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		Six Months Ended
Amounts below exclude the impact of foreign currency	June 25, 2023	June 26, 2022	June 25, 2023	June 26, 2022
Comparable sales growth (decline):
Domestic Company-owned restaurants	2.2%	(1.5)%	2.8%	(1.3)%
North America franchised restaurants	(2.3)%	1.4%	(1.6)%	2.1%
North America restaurants	(1.4)%	0.9%	(0.7)%	1.4%
International restaurants	(0.7)%	(8.0)%	(3.3)%	(3.6)%
Total comparable sales growth (decline)	(1.3)%	(1.4)%	(1.3)%	0.1%
System-wide restaurant sales growth (decline):
Domestic Company-owned restaurants	2.5%	1.2%	3.7%	8.9%
North America franchised restaurants	(0.6)%	2.7%	0.1%	1.4%
North America restaurants	—%	2.4%	0.8%	2.8%
International restaurants (a)	8.6%	3.4%	5.8%	8.3%
Total global system-wide restaurant sales growth (decline)	2.0%	2.6%	2.0%	4.2%

_______________________________

(a)The six months ended June 25, 2023 and June 26, 2022 exclude the impact of franchisee suspended restaurants.


Restaurant Progression	Three Months Ended			Six Months Ended
	June 25, 2023		June 26, 2022	June 25, 2023	June 26, 2022
North America Company-owned:
Beginning of period	520		608	522	600
Opened	—		1	—	8
Closed	—		—	(2)	—
Sold	—		—	—	—
Acquired	1		—	1	1
Refranchised	—		(90)	—	(90)
End of period	521		519	521	519
North America franchised:
Beginning of period	2,864		2,746	2,854	2,739
Opened	13		17	29	32
Closed	(8)		(16)	(14)	(23)
Sold	(1)		—	(1)	(1)

Refranchised	—		90	—	90
End of period	2,868		2,837	2,868	2,837
International Company-owned
Beginning of period	—		—	—	—



Acquired	91		—	91	—


End of period	91	91	—	91	—
International franchised:
Beginning of period	2,349		2,170	2,330	2,311
Opened	55		72	98	127
Closed	(13)		(27)	(37)	(35)



Sold	(91)		—	(91)	—
Suspended (a)	—		—	—	(188)
End of period	2,300		2,215	2,300	2,215
Total restaurants – end of period	5,780		5,571	5,780	5,571

Trailing four quarters net store growth (b)	209		236

___________________________________

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~~As previously disclosed, the Company has suspended corporate support for all franchised restaurants located in ~~Russia, for which the Company has~~Russia. These suspended ~~corporate support.~~restaurants are excluded from net unit growth calculations.

(b)Excludes suspended restaurants.

Results of Operations

Revenues

The following table sets forth the various components of ~~our~~Revenues from the 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.~~Operations.

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)%


	Three Months Ended				Six Months Ended				Increase (Decrease)
(Dollars in thousands)	June 25, 2023		June 26, 2022		June 25, 2023		June 26, 2022		QTD		YTD
Revenues:
Domestic Company-owned restaurant sales	$	175,780	$	171,411	$	355,646	$	370,176	2.5	%	(3.9)	%
North America franchise royalties and fees	34,711		34,917		70,783		69,185		(0.6)	%	2.3	%
North America commissary revenues	206,980		219,383		419,546		429,062		(5.7)	%	(2.2)	%
International revenues	34,608		31,958		66,071		66,575		8.3	%	(0.8)	%
Other revenues	62,451		64,996		129,533		130,359		(3.9)	%	(0.6)	%
Total revenues	$	514,530	$	522,665	$	1,041,579	$	1,065,357	(1.6)	%	(2.2)	%

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)%

~~Revenues~~

~~Consolidated revenues increased $7.7 million, or 1.5% to $522.7 million, and $38.6 million, or 3.8% to $1.1 billion for~~For the three and six months ended June ~~26,~~25, 2023, the discussion of changes in revenues below for International, Other revenues, Domestic Company-owned restaurants and North America franchised restaurants include explanations of the impact to the comparable results for the acquisition of 91 stores in the UK in 2023 (the “2023 acquisition”) and for the refranchising of 90 restaurants during the second quarter of 2022 ~~respectively,~~(the “2022 refranchising”). See “Note 12. Acquisitions” and “Note 10. Divestitures”of the “Notes to Condensed Consolidated Financial Statements”for additional information.

Total revenues decreased $8.1 million or 1.6% to $514.5 million for the three months ended June 25, 2023 and decreased $23.8 million or 2.2% to $1.0 billion for the six months ended June 25, 2023, as compared to each prior year comparable ~~periods.~~period. Excluding the ~~impact~~impacts of the ~~Company~~2023 acquisition and the 2022 refranchising, ~~its 51% ownership in a 90-restaurant consolidated joint venture, consolidated~~total revenues ~~increased $25.6~~decreased $9.8 million or ~~5.2%,~~1.9% and ~~$56.9~~decreased $7.6 million, or ~~5.7%~~0.7%, for the three and six months ended June ~~26, 2022,~~25, 2023, respectively.

Domestic Company-owned restaurant sales ~~decreased $24.7~~increased $4.4 million, or ~~12.6%, and $23.2 million, or 5.9%~~2.5% for the three months ended June 25, 2023 and decreased $14.5 million, or 3.9% for the six months ended June ~~26, 2022, respectively,~~25, 2023, as compared to the prior year comparable periods. Excluding the impact of refranchising in the second quarter of 2022, Domestic Company-owned restaurant sales increased ~~$2.0~~$12.8 million, or ~~1.2%~~3.7%, for the six months ended June 25, 2023. The increases for the three and ~~$3.0 million, or 0.9%,~~six month periods were primarily due to comparable sales growth of 2.2% and 2.8% for the three and six months ended June ~~26, 2022, respectively, primarily due to innovations and strategic pricing actions to help offset food and labor inflation.~~25, 2023, respectively.

North America franchise royalties and fees ~~increased $2.4~~decreased $0.2 million, or ~~7.5%,~~0.6% for the three months ended June 25, 2023 and ~~$4.0~~increased $1.6 million, or ~~6.1%~~2.3% for the six months ended June 25, 2023, as compared to each prior year comparable period. Excluding the impact of the 2022 refranchising, North America franchise royalties increased $0.2 million or 0.3%, for the six months ended June 25, 2023. Comparable sales for the three and six months ended June ~~26, 2022, respectively, compared to prior year comparable periods. Excluding the impact of refranchising, North America franchise royalties~~25, 2023 were negative 2.3% and ~~fees increased $1.1 million, or 3.3%~~negative 1.6%, ~~and $2.7 million, or 4.0%~~respectively. Equivalent units were negative 1.5% for the ~~three~~second quarter and negative 0.1% for the six months ended June ~~26, 2022, respectively, primarily due to positive comparable sales increases~~25, 2023, excluding the impact of ~~1.4% and 2.1% for~~ the ~~three and six months ended June 26, 2022, and higher equivalent units of 4.9% and 3.4% for the same 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 period on a weighted average basis.

2023 acquisition.

North America franchise restaurant sales ~~excluding the impact of refranchising, increased 2.7%~~decreased 0.8% to ~~$753.8~~$747.7 million ~~and 1.4% to $1.5 billion~~ for the three ~~and six~~ months ended June ~~26, 2022, respectively,~~25, 2023 compared to the prior year comparable ~~periods.~~period. Excluding the impact of 2022 refranchising, North America franchise restaurant sales decreased 0.1% to $1.5 billion for the six months ended June 25, 2023 compared to the prior year comparable period. North America franchise restaurant sales are not included in Company revenues; however, our North America franchise royalties are derived from these sales.

North America commissary revenues ~~increased $32.7~~decreased $12.4 million, or ~~17.5%~~5.7% for the three months ended June 25, 2023 and ~~$57.5~~decreased $9.5 million, or ~~15.5%~~2.2% for the six months ended June 25, 2023, compared to the prior year comparable periods. Excluding the impact of the 2022 refranchising, North America commissary revenues decreased $17.6 million, or 4.0% for the six months ended June 25, 2023. The declines in North America commissary revenues were primarily a result of lower volumes in the 2023 periods and declining commodity prices during the second quarter of 2023.

International revenues increased $2.7 million, or 8.3% for the three months ended June 25, 2023 and decreased $0.5 million, or 0.8% for the six months ended June 25, 2023, compared to the prior year comparable periods, respectively. Excluding the impact of the 2023 acquisition, revenues increased $0.7 million, or 2.0%, and decreased $2.5 million, or 3.8%, for the three and six months ended June 26, 2022, respectively, compared to the prior year comparable periods primarily due to higher pricing as a result of increased underlying costs associated with commodity price increases, partially offset25, 2023, respectively. Our International revenues were pressured by lower ~~volumes.~~

~~International revenues decreased $5.7 million, or 15.0%~~comparable sales of 0.7% and ~~$5.6 million, or 7.8%~~3.3% for the three and six months ended June ~~26, 2022, respectively, compared~~25, 2023 related to ~~prior year comparable periods, primarily due to lower United Kingdom ("PJUK") commissary revenues and royalties. Additionally, international comparable sales revenues decreased 8.0% and 3.6% for~~inflationary pressures in the ~~three and six months ended June 26, 2022. The overall declines in our international revenue performance~~UK market. These decreases were ~~largely attributable to a contracting PJUK market where consumer sentiment is reaching historical lows.~~offset by positive foreign currency fluctuations.

International franchise restaurant sales increased $19.2 million to ~~$281.3~~$300.5 million and ~~$585.9~~increased $8.0 million to $594.0 million for the three and six months ended June ~~26, 2022,~~25, 2023, respectively. Excluding the impact of the 2023 acquisition and the previously disclosed suspended restaurants and foreign currency ~~international~~fluctuations, International franchise restaurant sales increased ~~3.4%~~8.6% and ~~8.3%~~5.8% for the three and six months ended June ~~26, 2022,~~25, 2023, respectively. International franchise restaurant sales are not included in Company revenues; however, our international royalty revenue is derived from these sales.

Other revenues, ~~increased $2.8~~which primarily includes our national marketing funds, online and mobile ordering business and our wholly-owned print and promotions subsidiary, decreased $2.5 million, or ~~4.6%~~3.9%, and ~~$5.9~~decreased $0.8 million, or ~~4.7%~~0.6%, for the three and six months ended June ~~26, 2022,~~25, 2023, respectively, compared to the prior year comparable ~~periods~~periods. The decreases were primarily due to ~~higher~~decreases in franchise sales resulting in lower marketing fund revenues ~~from our~~and technology ~~services attributable to increased North America systemwide comparable sales and equivalent units.~~fees.

Costs and Expenses

The following table sets forth the various components of Costs and expenses from the Condensed Consolidated Statements of Operations, expressed as a percentage of the associated revenue component.


(Dollars in thousands)	Three Months Ended
	June 25, 2023		% of Related Revenues		June 26, 2022		% of Related Revenues		Increase (Decrease) in % of Revenues
Costs and expenses:
Operating costs (excluding depreciation and amortization shown separately below):
Domestic Company-owned restaurant expenses	$	143,705	81.8	%	$	142,026	82.9	%	(1.1)	%
North America commissary expenses	190,468		92.0	%	204,470		93.2	%	(1.2)	%
International expenses	20,435		59.0	%	19,236		60.2	%	(1.2)	%
Other expenses	58,996		94.5	%	60,648		93.3	%	1.2	%
General and administrative expenses	50,324		9.8	%	44,646		8.5	%	1.3	%
Depreciation and amortization	15,690		3.0	%	12,735		2.4	%	0.6	%
Total costs and expenses	479,618		93.2	%	483,761		92.6	%	0.6	%

Operating income	$	34,912	6.8	%	$	38,904	7.4	%	(0.6)	%


(Dollars in thousands)	Six Months Ended
	June 25, 2023		% of Related Revenues		June 26, 2022		% of Related Revenues		Increase (Decrease) in % of Revenues
Costs and expenses:
Operating costs (excluding depreciation and amortization shown separately below):
Domestic Company-owned restaurant expenses	$	291,489	82.0	%	$	303,687	82.0	%	—	%
North America commissary expenses	386,883		92.2	%	401,560		93.6	%	(1.4)	%
International expenses	37,746		57.1	%	39,150		58.8	%	(1.7)	%
Other expenses	120,074		92.7	%	121,203		93.0	%	(0.3)	%
General and administrative expenses	102,268		9.8	%	110,584		10.4	%	(0.6)	%
Depreciation and amortization	30,411		2.9	%	24,674		2.3	%	0.6	%
Total costs and expenses	968,871		93.0	%	1,000,858		93.9	%	(0.9)	%
Refranchising and impairment loss	—		—	%	(11,160)		(1.0)	%	1.0	%
Operating income	$	72,708	7.0	%	$	53,339	5.0	%	2.0	%

Total costs and expenses were ~~approximately~~$479.6 million or 93.2% of total revenues for the three months ended June 25, 2023, as compared to $483.8 million or 92.6% of total revenues for the prior year comparable period. For the six months ended June 25, 2023, total costs and expenses were $968.9 million or 93.0% of total revenues, as compared to $1.0 billion, or 93.9% of total revenues for the prior year comparable period. The changes in total costs and expenses, as percentages of revenues, were primarily due to the following:

Domestic Company-owned restaurant expenses were $143.7 million or 81.8% of related revenues for the three months ended June ~~26, 2022, as~~25, 2023, compared to ~~$470.4~~expenses of $142.0 million or ~~91.3%~~82.9% of related revenues for the prior year period resulting from decreases in certain commodity expenses. For the six months ended June 25, 2023 Domestic Company-owned restaurant expenses were $291.5 million or 82.0% of related revenues compared to $303.7 million or 82.0% of related revenues for the prior year comparable period.

North America commissary expenses were $190.5 million or 92.0% of related revenues for the three months ended June 25, 2023 compared to expenses of $204.5 million or 93.2% of related revenues for the prior year comparable period. For the six months ended June ~~26, 2022, total costs and~~25, 2023 North America commissary expenses were ~~approximately $1.0 billion~~$386.9 million, or ~~93.9%~~92.2% of ~~total~~related revenues as compared to ~~$935.3~~$401.6 million or ~~91.1%~~93.6% of ~~total~~related revenues for the prior year ~~comparable~~ period. The ~~increases in total costs and~~ expenses, as a percentage of related revenues, ~~were~~decreased 1.2% and 1.4% for the three and six months ended June 25, 2023, respectively, primarily due to lower volumes and lower pricing in the ~~following:~~second quarter of 2023 driven by commodity price declines.

~~Domestic Company-owned restaurant~~International expenses were ~~$142.0~~$20.4 million or ~~82.9%~~59.0% of related revenues for the three months ended June ~~26, 2022,~~25, 2023 as compared to ~~$154.3~~$19.2 million, or ~~78.7%~~60.2% of related revenues for the prior year comparable period. For the six months ended June ~~26, 2022, Domestic Company-owned restaurant~~25, 2023, International expenses were ~~$303.7~~$37.7 million, or ~~82.0%~~57.1% of related revenues, compared to expenses of $310.2 million or 78.9% of related revenues for the prior year comparable period. The expenses, as a percentage of revenues, 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 staffing levels recover at a higher 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 $204.5 million, or 93.2% of related revenues for the three months ended June 26, 2022,~~ as compared to ~~$172.2~~$39.2 million, or 92.3% of related revenues for the prior year comparable period. For the six months ended June 26, 2022, North America commissary expenses were $401.6 million, or 93.6% of related revenues, compared to $342.9 million, or 92.3%58.8% of related revenues for the prior year comparable period. The expenses, as a percentage of related revenues, ~~increased 0.9%~~decreased 1.3% and ~~1.3%~~1.7%, respectively, primarily due to ~~rising commodity prices, principally~~lower volumes in ~~cheese, proteins and wheat, and higher delivery cost.~~our international commissary.

~~International~~Other expenses were ~~$19.2~~$59.0 million or ~~60.2%~~94.5% of related revenues for the three months ended June ~~26, 2022,~~25, 2023 as compared to ~~$21.4~~$60.6 million or ~~57.0%~~93.3% of related revenues for the prior year comparable period. For the six months ended June ~~26, 2022, International~~25, 2023, Other expenses were ~~$39.2~~$120.1 million, or ~~58.8%~~92.7% of related revenues, compared to ~~$41.0~~$121.2 million, or ~~56.8%~~93.0% of related revenues for the prior year comparable period. ~~The~~Other expenses, as a percentage of related revenues, ~~increased 3.2%~~decreased 1.2% and ~~2.0%~~0.3%, ~~respectively, primarily due to higher 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 digital capabilities and the customer experience.

General and Administrative Expenses

General and administrative ~~expenses~~ (“G&A”) expenses were $50.3 million, or 9.8% of revenues for the three months ended June 25, 2023, compared to $44.6 million, or 8.5% of revenues ~~three~~for the prior year period. For the six months ended June ~~26, 2022,~~25, 2023, G&A expenses were $102.3 million or 9.8% of revenues, compared to ~~$53.7~~$110.6 million or 10.4% of revenues for the prior year comparable period. ~~For~~G&A expenses consisted of the ~~six months ended June 26, 2022, G&A was $110.6 million, or 10.4% of revenues, compared to $103.7 million, or 10.1% of revenues for the prior year comparable periods.~~following:


(Dollars in thousands)	Three Months Ended				Six Months Ended
	June 25, 2023		June 26, 2022		June 25, 2023		June 26, 2022
Administrative expenses (a)	$	48,401	$	42,889	$	98,237	$	88,979
UK repositioning and acquisition-related costs (b)	1,308		—		1,308
Legal settlement accruals (c)	—		—		—		5,000
Specific accounts receivable and notes receivable provisions (d)	—		—		—		14,636
Other costs (e)	661		1,507		2,017		1,507
Other general expenses, net	(46)		250		706		462
General and administrative expenses	$	50,324	$	44,646	$	102,268	$	110,584

___________________________________

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

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

~~(a)For both the three~~25, 2023, administrative expenses increased $5.5 million and ~~six months ended June 26, 2022, Administrative expenses decreased $8.2~~$9.3 million ~~compared to the prior year comparable periods~~ primarily due to ~~lower~~higher costs from our franchise operating conference in the second quarter of 2023 and higher incentive compensation costs, partially offset by lower travel. The six month period also included higher labor ~~travel, and occupancy cost associated with the re-opening of corporate headquarters in the first quarter of 2022.~~costs.

(b)~~For the three months ended June 26, 2022, Special items include a $1.5 million charge related to advisory fees and severance~~Represents costs associated with repositioning the ~~transition~~UK portfolio as well as transaction costs related to acquisition of ~~certain executives.~~stores from franchisees.

~~For the six months ended June 26, 2022, Special items include~~(c)Represents an accrual of a certain legal settlement, recorded in General and administrative expenses. See “Note 9. Litigation, Commitments and Contingencies” for further information.

(d)Represents a one-time, non-cash ~~provisions~~provision 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~~2022.

(e)Represents severance and ~~see “Note 9”~~related costs associated with the transition of ~~“Notes to Condensed Consolidated Financial Statements” for further discussion regarding the legal settlement.~~

~~(c)For~~certain executives incurred during the three and six months ended June ~~27, 2021, Special items of $3.3 million~~25, 2023 and ~~$7.2 million, respectively, include strategic reorganization costs associated with our new office in Atlanta which concluded at the end of 2021.~~June 26, 2022.

Depreciation and Amortization.

Depreciation and amortization expense was ~~$12.7~~$15.7 million or ~~2.4%~~3.0% of revenues for the three months ended June ~~26, 2022,~~25, 2023, compared to ~~$12.5~~$12.7 million or 2.4% of revenues for the prior year comparable period. For the six months ended June ~~26, 2022,~~25, 2023, Depreciation and amortization expense was $30.4 million, or 2.9% of revenues compared to $24.7 million, or 2.3% ~~of revenues, 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~~period. The increases were primarily due to ~~$38.9 million and decreased $38.2 million~~higher depreciation expense related 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 includedour investments in ~~“Items Impacting Comparability; Non-GAAP Measures.” We believe this non-GAAP measure is important for comparability purposes.~~technology support initiatives.

3229

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)
Refranchising and Impairment Loss

~~(a) For the three months ended June 26, 2022, Special items impacting Operating income include a charge of $1.5 million charge related to advisory fees~~There was no Refranchising 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~~impairment loss during the six months ended June ~~26, 2022, Special items impacting Operating income include a one-time, non-cash provisions of $14.6~~25, 2023. Refranchising and impairment loss was $11.2 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 15.7% and $13.1 million, or 13.2% for the three and six month ended June 26, 2022, respectively. These decreases were primarily due to the following:

•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~~consisting of ~~corporate headquarters in the first quarter of 2022.~~

~~Refranchising and Impairment loss~~

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 $14.0 million, net of transaction costs. We recorded a one-time, non-cash charge ofan $8.4 million inloss on the ~~first quarter related to the divestiture. The Company also recorded~~2022 refranchising and an impairment loss of $2.8 million for reacquired franchise rights due to the financial and operational impact of the conflict in Ukraine and government actions taken in response to that ~~conflict, including, but not limited~~conflict. See “Note 10. Divestitures” of “Notes to ~~international sanctions.~~Condensed Consolidated Financial Statements” for additional information on these items.

Operating Income by Segment

Operating income is summarized in the following table on a reporting segment basis. Adjusted operating income, a non-GAAP measure, is also presented below. See “Non-GAAP Measures” for a reconciliation to the most comparable U.S. GAAP measure. We believe this non-GAAP measure is important for comparability purposes.


	Three Months Ended June 25, 2023						Three Months Ended June 26, 2022
(In thousands)	Reported		Adjustments (a)		Adjusted		Reported		Adjustments (a)		Adjusted		Reported Increase (Decrease)		Adjusted Increase (Decrease)
Domestic Company-owned restaurants	$	6,641	$	—	$	6,641	$	5,924	$	—	$	5,924	$	717	$	717
North America franchising	32,111		—		32,111		32,624		—		32,624		(513)		(513)
North America commissaries	10,397		—		10,397		10,957		—		10,957		(560)		(560)
International	3,763		1,308		5,071		7,306		—		7,306		(3,543)		(2,235)
All others	1,343		—		1,343		2,187		—		2,187		(844)		(844)
Unallocated corporate expenses	(19,701)		661		(19,040)		(19,344)		1,507		(17,837)		(357)		(1,203)
Elimination of intersegment (profits)	358		—		358		(750)		—		(750)		1,108		1,108
Total	$	34,912	$	1,969	$	36,881	$	38,904	$	1,507	$	40,411	$	(3,992)	$	(3,530)


	Six Months Ended June 25, 2023						Six Months Ended June 26, 2022
(In thousands)	Reported		Adjustments (a)		Adjusted		Reported		Adjustments (a)		Adjusted		Reported Increase (Decrease)		Adjusted Increase (Decrease)
Domestic Company-owned restaurants	$	13,291	$	—	$	13,291	$	7,912	$	8,412	$	16,324	$	5,379	$	(3,033)
North America franchising	65,511		—		65,511		64,761		—		64,761		750		750
North America commissaries	21,127		—		21,127		20,292		—		20,292		835		835
International	10,995		1,308		12,303		11,761		3,515		15,276		(766)		(2,973)
All others	4,500		—		4,500		5,906		—		5,906		(1,406)		(1,406)
Unallocated corporate expenses	(43,067)		2,017		(41,050)		(56,454)		20,376		(36,078)		13,387		(4,972)
Elimination of intersegment (profits)	351		—		351		(839)		—		(839)		1,190		1,190
Total	$	72,708	$	3,325	$	76,033	$	53,339	$	32,303	$	85,642	$	19,369	$	(9,609)

(a) See “Non-GAAP Measures” below for a detail of the adjustments in each period and for a reconciliation to the most comparable U.S. GAAP measure.

Operating income was $34.9 million and $72.7 million for the three andsix months ended June 25, 2023, respectively, compared to $38.9 million and $53.3 million for the prior year comparable periods, a decrease of $4.0 million and increase of $19.4 million, respectively. Adjusted operating income was $36.9 million and $76.0 million for the three and six months ended June 25, 2023, respectively, compared to $40.4 million and $85.6 million for the prior year comparable periods,

decreases of $3.5 million and $9.6 million, respectively. The decreases in adjusted operating income in 2023 compared to 2022 were primarily due to the following:

•Domestic Company-owned restaurants increased $0.7 million and decreased $3.0 million for the three and six months ended June 25, 2023, respectively. The three month period increase of $0.7 million was primarily due to higher revenues from comparable sales growth of 2.2% and margin improvement from labor efficiencies. Excluding the impact of the 2022 refranchising, the six month period decreased $0.8 million as higher compensation, insurance and utility costs in 2023 were partially offset by comparable sales growth of 2.8%.

•North America franchising decreased $0.5 million and increased $0.8 million for the three and six months ended June 25, 2023, respectively. Excluding the impact of the 2022 refranchising, North America franchising decreased $0.6 million. The decreases were primarily due to 2.3% and 1.6% decreases in comparable sales, respectively and equivalent units decreases of 1.5% and 0.1%, respectively.

•North America commissaries decreased $0.6 million and increased $0.8 million for the three and six months ended June 25, 2023, respectively. The three month period decrease of $0.6 million was primarily due to lower volumes. Excluding the impact of the 2022 refranchising for the six month period, North America commissaries increased $0.5 million primarily due to declining commodity prices during the second quarter of 2023, lower delivery costs, partially offset by lower volumes.

•International decreased $2.2 million and $3.0 million for the three and six months ended June 25, 2023, respectively. Excluding the impact of the 2023 acquisition, International decreased $2.1 million and $2.8 million, primarily due to lower UK restaurant and commissary revenues and royalties attributed to lower comparable sales, which declined 0.7% and 3.3%, for the three andsix months ended June 25, 2023, respectively.

•All Others, which primarily includes our online and mobile ordering business and our marketing funds, decreased $0.8 million and $1.4 million for the three and six months ended June 25, 2023, respectively, compared to the prior year comparable periods, primarily due to higher depreciation expense related to our investments in technology support initiatives.

•Unallocated corporate expenses increased $1.2 million and $5.0 million for the three and six months ended June 25, 2023, respectively. The increases are primarily due to higher costs for our franchise operating conference in the second quarter of 2023, higher labor and incentive compensation costs, insurance costs and higher depreciation expense related to our investments in technology support initiatives.

Items Below Operating Income

The following table sets forth the various items below Operating income from the Condensed Consolidated Statements of Operations:


	Three Months Ended				Six Months Ended				Increase (Decrease)
(In thousands, except per share amounts)	June 25, 2023		June 26, 2022		June 25, 2023		June 26, 2022		QTD		YTD
Operating income	$	34,912	$	38,904	$	72,708	$	53,339	$	(3,992)	$	19,369
Net interest expense	(11,275)		(6,081)		(20,296)		(10,344)		(5,194)		(9,952)
Income before income taxes	23,637		32,823		52,412		42,995		(9,186)		9,417
Income tax expense	5,778		7,093		12,007		5,838		(1,315)		6,169
Net income before attribution to noncontrolling interests	17,859		25,730		40,405		37,157		(7,871)		3,248
Net income attributable to noncontrolling interests	(91)		(297)		(261)		(1,230)		206		969
Net income attributable to the Company	$	17,768	$	25,433	$	40,144	$	35,927	$	(7,665)	$	4,217

Calculation of net income for earnings per share:
Net income attributable to the Company	$	17,768	$	25,433	$	40,144	$	35,927	$	(7,665)	$	4,217
Dividends paid to participating securities	—		(82)		—		(141)		82		141
Net income attributable to participating securities	—		(111)		—		(93)		111		93
Net income attributable to common shareholders	$	17,768	$	25,240	$	40,144	$	35,693	$	(7,472)	$	4,451

Basic earnings per common share	$	0.55	$	0.71	$	1.20	$	1.00	$	(0.16)	$	0.20
Diluted earnings per common share	$	0.54	$	0.70	$	1.20	$	0.99	$	(0.16)	$	0.21

Net Interest Expense

Net interest expense increased ~~$2.4~~$5.2 million and $10.0 million, or ~~66.7%,~~85.4% and $3.0 million, or 41.8% for three and six months ended June 26, 2022, respectively due to higher average outstanding debt on our revolving credit facility. Total debt outstanding was $545 million and $490 million as of June 26, 2022 and December 26, 2021, respectively.

~~Income Before Income Taxes~~

~~For the reasons discussed above, income before income taxes decreased approximately $8.2 million, or 19.9%, and $41.2 million, or 48.9%,~~96.2% for the three and six months ended June ~~26,~~25, 2023, respectively, due primarily to higher average outstanding debt as well as an increase in the LIBOR rate. The higher outstanding debt on our senior secured revolving credit facility (“the PJI Revolving Facility”) was primarily utilized to finance share repurchases in the first quarter of 2023. Total debt outstanding was $791.5 million and $605.0 million as of June 25, 2023 and December 25, 2022, ~~respectively, over the prior year comparable periods.~~

respectively.

Income Tax Expense (Benefit)

Our effective income tax rates were ~~21.6%~~24.4% and ~~13.6%~~22.9% for threeandsix months ended June ~~26, 2022~~25, 2023, compared to ~~18.0%~~income tax rates of 21.6% and ~~18.2%~~13.6% for the prior year comparable periods. The ~~decrease in the~~lower effective tax rate for thesix months ended June 26, 2022 was caused by higher excess tax benefits generated by stock option exercises and vesting of restricted shares in ~~addition~~2022 along with a lower pre-tax income.


	Quarter Ended						Six Months Ended
(Dollars in thousands)	June 25, 2023			June 26, 2022			June 25, 2023			June 26, 2022
Income before income taxes	$	23,637		$	32,823		$	52,412		$	42,995
Income tax expense (benefit)	$	5,778		$	7,093		$	12,007		$	5,838
Effective tax rate	24.4		%	21.6		%	22.9		%	13.6		%

Net Income Attributable to ~~an overall~~Noncontrolling Interests

Net income attributable to noncontrolling interests was $0.1 million and $0.3 million for the three andsix months ended June 25, 2023, compared with $0.3 million and $1.2 million for the prior year comparable period. The decrease was due to the refranchising of our 51% ownership interest 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%
a 90-restaurant consolidated joint venture in Texas on March 28, 2022.

Diluted Earnings ~~(Loss)~~ Per Common Share

Diluted earnings per common share was $0.70 for the three months ended June 26, 2022, compared to diluted loss per common share of $(2.30) in the prior year comparable period. For the six months ended June 26, 2022, diluted earnings per common share was $0.99, compared to diluted loss per common share of $(1.47) for the prior year comparable period. Excluding the impact of Special items, adjusted diluted earnings per common share were $0.74$0.54 and ~~$1.69~~$1.20 for the three and six months ended June ~~26, 2022,~~25, 2023, respectively, compared to $0.70 and $0.99 for the prior year comparable period, representing a decrease of $0.16 and an increase of $0.21 for the three andsix months ended June 25, 2023, respectively. Adjusted diluted earnings per common share, a non-GAAP measure, was $0.59 and $1.28 for the three and six months ended June 25, 2023, compared to adjusted diluted earnings per common share of ~~$0.93~~$0.74 and ~~$1.94~~$1.69 for the prior year comparable ~~periods. Diluted earnings per common share~~periods, representing decreases of $0.15 and $0.41, respectively. See “Non-GAAP Measures” for additional information.

Non-GAAP Measures

In addition to the ~~six months ended June 26, 2022 included Special items~~results provided in accordance with U.S. GAAP, we provide certain non-GAAP measures, which present results on an adjusted basis. These are supplemental measures of ~~$25.0 million, net of tax, primarily related to refranchising losses associated~~performance that are not required by or presented in accordance with U.S. GAAP and include 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 $115.4 million, net of tax, primarily due to reorganization costs and the reduction infollowing: adjusted operating income, adjusted net income attributable to common shareholders ~~related~~and adjusted diluted earnings per common share. We believe that our non-GAAP financial measures enable investors to assess the ~~repurchase~~operating performance of our business relative to our performance based on U.S. GAAP results and ~~conversion~~relative to other companies. We believe that the disclosure of ~~all shares~~these non-GAAP measures is useful to investors as they reflect metrics that our management team and Board utilize to evaluate our operating performance, allocate resources and administer employee incentive plans. The most directly comparable U.S. GAAP measures to adjusted operating income, adjusted net income attributable to common shareholders and adjusted diluted earnings per common share are operating income, net income attributable to common shareholders and diluted earnings per common share, respectively. These non-GAAP measures should not be construed as a substitute for or a better indicator of the Company's former Series B Convertible Preferred Stock ("Series B Preferred 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.

Company’s

3634

~~Items Impacting Comparability; Non-GAAP Measures~~

performance than the Company’s U.S. GAAP results. The table below reconciles our GAAP financial results to our ~~adjusted~~non-GAAP financial ~~results, which are non-GAAP~~ measures. ~~We present these non-GAAP measures because we believe~~


	Three Months Ended				Six Months Ended
(In thousands, except per share amounts)	June 25, 2023		June 26, 2022		June 25, 2023		June 26, 2022
Operating income	$	34,912	$	38,904	$	72,708	$	53,339
UK repositioning and acquisition-related costs (a)	1,308		—		1,308		—
Refranchising and impairment losses (b)	—		—		—		25,796
Legal settlement (c)	—		—		—		5,000


Other costs (d)	661		1,507		2,017		1,507
Adjusted operating income	$	36,881	$	40,411	$	76,033	$	85,642

Net income attributable to common shareholders	$	17,768	$	25,240	$	40,144	$	35,693
UK repositioning and acquisition-related costs (a)	1,308		—		1,308		—
Refranchising and impairment losses (b)	—		—		—		25,796
Legal settlement (c)	—		—		—		5,000


Other costs (d)	661		1,507		2,017		1,507
Tax effect of adjustments (e)	(449)		(339)		(758)		(7,269)
Adjusted net income attributable to common shareholders (f)	$	19,288	$	26,408	$	42,711	$	60,727

Diluted earnings per common share	$	0.54	$	0.70	$	1.20	$	0.99
UK repositioning and acquisition-related costs (a)	0.04		—		0.04		—
Refranchising and impairment losses (b)	—		—		—		0.72
Legal settlement (c)	—		—		—		0.14


Other costs (d)	0.02		0.05		0.06		0.04
Tax effect of adjustments (e)	(0.01)		(0.01)		(0.02)		(0.20)
Adjusted diluted earnings per common share (f)	$	0.59	$	0.74	$	1.28	$	1.69

(a)Represents costs associated with repositioning the ~~Special items impact~~UK portfolio as well as transaction costs related to the ~~comparability~~acquisition of ~~our results~~stores from franchisees.

(b)Refranchising and impairment losses consisted of ~~operations~~. ~~See “Note 2”, “Note 9”, and “Note 10” of “Notes to Condensed Consolidated Financial Statements,” for additional information about~~ the ~~Special items.~~following pre-tax adjustments:

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 allocation of undistributed earnings to participating securities for Special items.~~


	Six Months Ended
(In thousands)	June 26, 2022
Refranchising impairment loss (1)	$	8,412
Ukraine-related charge (2)	17,384

Total adjustment	$	25,796

(1)~~Includes on a pre-tax basis (a)~~Represents a one-time, non-cash charge of $8.4 million ($0.23 loss per diluted share) recorded in the first quarter of 2022 associated with the refranchising of the Company’s controlling interest in the 90-restaurant joint venture, recorded as Refranchising and impairment ~~loss; and (b)~~loss.

(2) Represents a one-time non-cash charge of $17.4 million ($0.48 ~~million~~ loss per diluted share) ~~in one-time, non-cash expense related to the reserve of certain loans~~on accounts receivable, notes receivable, and impairment of reacquired franchised rights ~~related to the reserve of certain loans and impairment of reacquired franchised rights related to~~in connection with the conflict in Ukraine and ~~subsequent international~~related government actions ~~and sanctions,~~in the first quarter of 2022, which were recorded as Refranchising and impairment loss of $2.8 million and General and administrative expenses of $14.6 million.

~~(2)~~(c)Represents an accrual of a certain legal settlement, recorded in General and administrative expenses. See “Note 9. Litigation, Commitments and Contingencies” for further information.

(d)Represents severance and related costs associated with the ~~Legal Settlement,~~transition of certain executives incurred during the three and six months ended June 25, 2023 and June 26, 2022, which were recorded in General and administrative expenses.

~~(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)~~(e)The tax effect ~~for Special items~~on non-GAAP adjustments was calculated by applying the marginal tax ~~rate~~rates of ~~22.5%~~22.8% and ~~22.4%~~22.5% for the three and ~~six months~~six-month periods ended June 25, 2023 and June 26, 2022, ~~and June 27, 2021,~~ respectively.

(f)Amounts shown exclude the impact of allocation of undistributed earnings to participating securities.

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~~we present free cash flow in this report, which is a non-GAAP measure. Please see “Liquidity and Capital Resources – Free Cash Flow” for a discussion of why we believe free cash flow provides useful information regarding our financial condition and results of operations, and a reconciliation of free cash flow to ~~evaluate~~ the ~~Company’s underlying operating performance and to analyze trends.~~most directly comparable U.S. GAAP measure.

Liquidity and Capital Resources

Our primary sources of liquidity and capital resources are cash flows from operations and borrowings under our credit facility. Our principal uses of cash are operating expenses, capital expenditures, and returning value to our shareholders in the form of cash dividends and share repurchases. Our capital priorities are:

•investing for growth

•maintaining a strong balance sheet, and

•returning capital to shareholders

The Company believes that its balances of cash and cash equivalents and borrowing capacity, along with cash generated by operations, will be sufficient to satisfy its cash requirements, cash dividends, interest payments and share repurchases over the next twelve months and beyond.

Cash Flows

The table below summarizes our cash flows ~~from continuing operations~~ for the six months ended June 25, 2023 and June 26, 2022 (in thousands):


	Six Months Ended
	June 25, 2023		June 26, 2022
Total cash provided by (used in):
Operating activities	$	93,735	$	45,585
Investing activities	(35,727)		(12,523)
Financing activities	(61,620)		(50,677)
Change in cash and cash equivalents, excluding the effect of exchange rate changes on cash and cash equivalents	$	(3,612)	$	(17,615)

Operating Activities

Total cash provided by operating activities was $93.7 million for the six months ended June 25, 2023 compared to $45.6 million for the corresponding period of 2022. The increase of $48.2 million primarily reflects favorable working capital changes, principally related to higher incentive compensation payments during the six months ended June 26, 2022 and ~~June 27, 2021:~~other current liabilities, as well as lower inventory and accounts receivable balances primarily due to lower volumes.

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~~Investing Activities

~~Cash flow provided by operating~~Total cash used in investing activities was ~~$45.6~~$35.7 million for the six months ended June ~~26, 2022~~25, 2023 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,~~2022, or ~~a decrease~~an increase of ~~$6.9~~$23.2 million. The ~~decrease~~increase in cash ~~flow~~ used in investing activities was primarily due to an increase in capital expenditures ~~partly offset by~~as well as cash proceeds of $14.0 million, ~~in proceeds,~~ net of transaction costs, received from the ~~impact of~~2022 refranchising ~~90-restaurants in~~during the ~~first quarter of~~six months ended June 26, 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~~2023 will be approximately ~~$75~~$80 million to ~~$85~~$90 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.~~2023. 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~~PJI Revolving ~~Facility"),~~Facility, as necessary.

Financing Activities

~~Cash flow~~Total cash used in financing activities was ~~$50.7~~$61.6 million for the six months ended June ~~26, 2022~~25, 2023 compared to ~~$142.9~~$50.7 million for the same period of ~~2021. The decrease~~2022, an increase of ~~$92.2~~$10.9 million. In 2023, cash used for financing activities includes outflows of $210.3 million in share repurchases and $28.5 million of common stock dividends paid, partially offset by net borrowings of $171.0 million from the PJI Revolving Facility and $15.5 million from the PJMF revolving line of credit (the “PJMF Revolving Facility”). In 2022, cash ~~flow~~ used infor financing activities ~~reflects payment~~includes outflows of ~~cash consideration for the repurchase~~$75.5 million in share repurchases and ~~conversion~~$25.1 million of ~~all of the Company’s Series B Preferred Stock outstanding in 2021,~~common dividends paid, partially offset by ~~increased repurchases~~net borrowings of ~~Company common stock and a decrease in proceeds~~$55.0 million from ~~our revolving credit facility.~~the PJI Revolving Facility.

Debt

Our outstanding debt as of June ~~26, 2022~~25, 2023 was ~~$545.0~~$791.5 million, which was comprised of $400.0 million ~~outstanding under~~of our 3.875% senior notes (the ~~"Notes"~~“Notes”) and ~~$145.0~~$391.5 million outstanding under the PJI Revolving Facility and the PJMF Revolving Facility. Remaining availability under the PJI Revolving Facility was approximately ~~$455.0~~$224.0 million as of June ~~26, 2022.~~

25, 2023.

Our ~~amended and restated credit agreement,~~Credit Agreement, dated September 14, 2021, ~~(the "Amended Credit Agreement")~~ contains affirmative and negative covenants that, among other things, require customary reporting obligations and restrict, subject to certain exceptions, the ~~occurrence~~incurrence of additional indebtedness and liens, the consummation of certain mergers, consolidations, sales of assets and similar transactions, the making of investments, equity distributions and other restricted payments, and transactions with affiliates. The Company is also subject to certain financial covenants, as shown in the following table, that could restrict or impose constraints on the liquidity of our business:

Permitted Ratio

Actual Ratio as of June ~~26, 2022~~25, 2023

Leverage ratio

Not to exceed 5.25 to 1.0

~~2.3~~3.4 to 1.0

Interest coverage ratio

Not less than 2.00 to 1.0

~~4.5~~3.5 to 1.0

Our leverage ratio is defined as outstanding debt divided by ~~consolidated earnings before interest, taxes, depreciation and amortization (“EBITDA”)~~Consolidated EBITDA (as defined in the Credit Agreement) for the most recent four fiscal quarters. Our interest coverage ratio is defined as the sum of ~~consolidated~~Consolidated EBITDA and consolidated rental expense for the most recent four fiscal quarters divided by the sum of consolidated interest expense and consolidated rental expense for the most recent four fiscal quarters. We were in compliance with all financial covenants as of June ~~26, 2022.~~25, 2023.

In addition, the Indenture governing the Notes contains customary covenants that, among other things and subject to certain exceptions, limit our ability and the ability of certain of our subsidiaries to: 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,~~ The PJMF Revolving Facility consists of~~has~~ a ~~$20.0~~$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 no debt~~Debt outstanding under the PJMF Revolving Facility was approximately $15.5 million as of June ~~26, 2022 or December 26, 2021.~~25, 2023. The PJMF operating results and the related debt outstanding do not impact the financial covenants under the ~~Amended~~ Credit ~~Agreement~~Agreement..

Refer to Note 12 of the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 25, 2022 for additional information.

Share Repurchases

As part of our long-term growth and capital allocation strategy, we are committed to investing in share repurchases to provide ongoing value and enhanced returns to our 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~~25, 2023 and June ~~27, 2021:~~26, 2022:

(in thousands, except average price per share) Total
Number
of Shares
Purchased Average
Price
Paid per
Share Aggregate
Cost of
Shares
Purchased Maximum Dollar
Value of Shares
that May Yet Be
Purchased Under the
Plans or Programs
Three Months Ended
June 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


(In thousands, except average price per share)	Total Number of Shares Purchased	Average Price Paid per Share		Aggregate Cost of Shares Purchased		Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
Three Months Ended
June 25, 2023	—	$	—	$	—	$	90,160
June 26, 2022	452	$	94.56	$	42,762	$	349,329

(In thousands, except average price per share)	Total Number of Shares Purchased	Average Price Paid per Share		Aggregate Cost of Shares Purchased (a)		Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
Six Months Ended
June 25, 2023	2,523	$	83.10	$	209,640	$	90,160
June 26, 2022	753	$	100.23	$	75,471	$	349,329

~~Subsequent to~~(a) The shares repurchased during the six months ended June ~~26, 2022,~~ ~~we acquired an additional 229,000~~25, 2023 included 2,176,928 shares repurchased on March 1, 2023 from certain funds affiliated with, or managed by, Starboard Value LP at ana price of $82.52 per share for aggregate ~~cost~~consideration of ~~$19.5~~$179.6 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~~paid aggregate dividends to common stockholders of ~~approximately~~$28.5 million ($0.84 per share) and $25.1 million ($0.70 per share) for the six months ended June 25, 2023 and June 26, ~~2022.~~2022, respectively. ~~On August 2, 2022,~~On July 31, 2023, our Board of Directors declared a ~~second~~third quarter dividend of ~~$0.42~~$0.46 per common share (approximately ~~$14.9~~$15.1 million in the aggregate), which will be paid on August ~~26, 2022~~25, 2023 to stockholders of record as of the close of business on August ~~15, 2022.~~14, 2023. The declaration and payment of any future dividends will be at the discretion of our Board of Directors.

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.~~equipment. 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 ~~six-months~~six month periods of ~~2022~~2023 and ~~2021~~2022 (in thousands):


		Six Months Ended
		June 26, 2022		June 27, 2021			Six Months Ended
							June 25, 2023		June 26, 2022
Net cash provided by operating activities	Net cash provided by operating activities	$	45,585	$	128,030	Net cash provided by operating activities	$	93,735	$	45,585
Purchases of property and equipment	Purchases of property and equipment	(30,744)		(21,543)		Purchases of property and equipment	(34,759)		(30,744)
Dividends paid to preferred stockholders		—		(6,394)
Free cash flow	Free cash flow	$	14,841	$	100,093	Free cash flow	$	58,976	$	14,841

Cash Requirements

There have been no material changes in our cash requirements other than in the ordinary course of business since the end of ~~2021.~~2022. Refer to ~~“Cash Requirements”~~“Contractual Obligations” 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 fiscal year ended December ~~26, 2021~~25, 2022 for additional information regarding our cash requirements.

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"~~“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 disruptions and changes in demand we are experiencing related to the current outbreak of the coronavirus pandemic,~~ commodity and labor costs, currency fluctuations, profit margins, net unit growth, unit level performance, capital expenditures, restaurant and franchise development, ~~the duration of changes in consumer behavior caused by the pandemic,~~ labor shortages, ~~and price~~labor cost increases,

inflation, royalty relief, franchisee support, the effectiveness of our menu innovations and other business initiatives, investments in product and digital innovation, marketing efforts and investments, liquidity, compliance with debt covenants, impairments, strategic decisions and actions, dividends, effective tax rates, regulatory changes and impacts, investments in the UK market, adoption of new accounting standards, and other financial and operational measures. Such 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~~challenging macroeconomic conditions in the United States and ~~opportunities associated with or related to~~internationally, including the ~~coronavirus pandemic, including governmental restrictions, changes in consumer demand or behavior, vaccine mandates and changing governmental programs and regulations relating to the pandemic;~~United Kingdom;

•the ability of the Company to manage staffing and labor shortages at Company and/or franchised ~~stores~~restaurants 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;~~Ukraine and other international conflicts;

•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 a possible economic recession or downturn that could, among other things, reduce consumer spending or demand and result in changing consumer practices;

•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~~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;

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

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

•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~~These and other ~~risks that may cause actual results to differ from expectations, refer to~~risk factors are discussed in detail in “Part I. Item 1A. – Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December ~~26, 2021 and~~25, 2022, as updated by “Part II. Item ~~IA. –~~1A. - Risk Factors” in ~~our~~this Quarterly Report on Form 10-Q ~~for~~and they may be updated from time to time in our future reports filed with the ~~quarter end March 27, 2022, as well as subsequent filings.~~Securities and Exchange Commission. We undertake no obligation to update publicly any forward-looking statements, whether as a result of future events, new information or otherwise, except as required by law.

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 and PJMF 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. ~~The interest rate swaps were de-designated following the issuance of the 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 June ~~26, 2022~~25, 2023 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 ~~26, 2021.~~25, 2022. See “Note 8”8. Debt” 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~~International operations ~~principally~~ consist of distribution sales to franchised Papa John’s restaurants located in the ~~United Kingdom~~UK and our franchise sales and support activities, which derive revenues from sales of franchise and development rights and the collection of royalties from our ~~international franchisees.~~International franchisees, as well as Company-owned restaurants located in the UK. Approximately ~~6.1%~~6.7% and ~~6.2%~~6.3% of our revenues were derived from these operations for the three and six months ended June ~~26, 2022,~~25, 2023, respectively, as compared to ~~7.3%~~6.1% and ~~7.0%~~6.2% for the prior year comparable periods.

We have not historically hedged our exposure to foreign currency fluctuations. Foreign currency exchange rate fluctuations had an unfavorable impact of approximately ~~$3.2~~$0.1 million and ~~$4.4~~$3.0 million on International revenues for the three and six months ended June ~~26, 2022, respectively,~~25, 2023, and ~~a favorable~~an unfavorable impact of ~~$3.8~~$3.2 million and ~~$5.8~~$4.4 million for the three and six months ended June ~~27, 2021, respectively.~~26, 2022. Foreign currency exchange rate fluctuations had a favorable impact of approximately $0.2 million and an unfavorable impact of ~~approximately~~$0.5 million on operating income for the three and six months ended June 25, 2023, respectively, and an unfavorable impact of $0.4 million and $1.0 million on operating income for the three and six months ended June 26, 2022, ~~respectively, and a favorable impact of $0.9 million and $1.4 million on operating income for the three and six months ended June 27, 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)~~ingredient cost), 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~~Domestic Company-owned restaurants, which are accounted for as normal purchases; however, we remain exposed to ~~on-going~~ongoing commodity volatility.

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The following table presents the actual average block price for cheese by quarter through the second quarter of ~~2022~~2023 and the projected average block price by quarter for ~~2022~~2023 (based on the July ~~29, 2022~~28, 2023 Chicago Mercantile Exchange cheese futures market prices):


		2022			2021
		Projected Block Price			Actual Block Price			2023			2022
								Projected Block Price			Actual Block Price
Quarter 1	Quarter 1	$	1.966		$	1.676	Quarter 1	$	1.960		$	1.966
Quarter 2	Quarter 2	2.296			1.680		Quarter 2	1.668			2.296
Quarter 3	Quarter 3	2.018			1.676		Quarter 3	1.723			1.938
Quarter 4	Quarter 4	2.085			1.786		Quarter 4	1.948			2.066
Full Year	Full Year	$	2.091	*	$	1.705	Full Year	$	1.825	(a)	$	2.067

___________________________________


(a)			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~~Chief Executive Officer and ~~chief financial officer,~~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~~Chief Executive Officer and ~~chief financial officer~~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”~~“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~~“Note 9. Litigation, Commitments and Contingencies” of “Notes to 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

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,~~below, 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 ~~26, 2021.~~25, 2022.

~~Like other businesses, we~~We have ~~experienced some~~recently acquired Company-owned restaurants in the United Kingdom, and are subject to increased ~~costs for transportation, energy,~~risks presented by owning and ~~commodities due~~operating stores internationally

We recently acquired formerly-franchised Papa Johns restaurants located in ~~part to~~ the ~~negative impact~~United Kingdom, and may purchase additional restaurants in the UK. Previously, all of the ~~military conflict~~Papa Johns stores located in ~~Ukraine on~~our International operations segment were franchised. As a result, the ~~global economy. Further escalation~~Company is exposed to risks of ~~geopolitical tensions,~~owning and operating stores located in the United Kingdom, including ~~increased trade barriers or restrictions on global trade, could result in, among other things, cyberattacks, supply disruptions, lower consumer demand,~~those related to business licensing and ~~changes to foreign exchange rates~~administrative challenges, international economic 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~~political

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~~known~~conditions, currency regulations and fluctuations, compliance with international privacy and information security laws and regulations, the ability to adapt to differing cultures or consumer preferences, diverse government regulations and tax systems, the ability to identify, attract and retain experienced management and employee populations, and other legal, financial or regulatory impediments to the development or operation of the restaurants.

In addition, the acquisition and operation of stores in the UK by the Company may exacerbate many of the same risks ~~described in Part I, Item 1A,~~ ~~"Risk Factors"~~generally applicable to our International business, as detailed in our Annual Report on Form 10-K for the fiscal year ended December ~~26, 2021.~~25, 2022.

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

Share Repurchase Program

On October 28, 2021, our Board of Directors approved a share repurchase program with an indefinite duration for up to $425.0 million of the Company’s common stock. Funding for the share repurchase program iswas provided through our operating cash flows and our $600.0 million PJI Revolving Facility.

The following table summarizes our repurchase activity ~~under this share repurchase program~~ by fiscal period during the three months ended June ~~26, 2022~~25, 2023 (in thousands, except per share amounts):

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


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
3/27/2023 - 4/22/2023	—	$	—	—	$	90,160
4/23/2023 - 5/21/2023	—	$	—	—	$	90,160
5/22/2023 - 6/25/2023	—	$	—	—	$	90,160
Total	—	$	—	—	$	90,160

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 Company’s share repurchase program as of July 29, 2022.

Repurchases of Stock for Tax Withholdings

During the fiscal quarter ended June ~~26, 2022,~~25, 2023, the Company acquired approximately ~~750~~1,000 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.

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Item 6. Exhibits


Exhibit Number						Description

~~10.1~~10.1**						Amendment No. 1, dated as of May 30, 2023, to ~~Employment~~Amended and Restated Credit Agreement, dated ~~April 7, 2022, by and between~~as of September 14, 2021, among Papa John’s International, Inc., each of the guarantors and ~~Robert Lynch.~~lenders party thereto, and JPMorgan Chase Bank, N.A., as administrative agent. ~~Exhibit 10.1 to our Quarterly Report on Form 10-Q as filed on May 5, 2022 is incorporated herein by reference.~~

~~10.2~~						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. ~~Exhibit 10.1 to our report on Form 8-K as filed on April 13, 2022 is incorporated herein by reference~~.

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 June ~~26, 2022,~~25, 2023, filed on August ~~4, 2022,~~3, 2023, 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).

** Filed herewith.

SIGNATURE

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


			PAPA JOHN’S INTERNATIONAL, INC.
			(Registrant)


Date: ~~August. 4, 2022~~August 3, 2023			/s/ ~~Ann B. Gugino~~Ravi Thanawala
			~~Ann B. Gugino~~Ravi Thanawala
			Chief Financial Officer

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	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


	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)