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https://cdn.kscope.io/22bea9c25dbbc501b455b93e9f7caccd-pzza-20220925_g1.jpg
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 September 25, 2022
OR
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 as specified in its charter)
Delaware61-1203323
(State or other jurisdiction of(I.R.S. Employer Identification
incorporation or organization)number)
2002 Papa John’s Boulevard
Louisville, KY 40299-2367
(Address of principal executive offices)
(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 SymbolName of each exchange on which registered:
Common stock, $0.01 par valuePZZAThe NASDAQ Stock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes x No o
Indicate by check mark whether the registrant has submitted electronically every interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer x
Accelerated filer o
Non-accelerated filer o
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
At October 28, 2022, there were outstanding 35,328,153 shares of the registrant’s common stock, par value $0.01 per share.



INDEX
Page No.
i


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)September 25,
2022
December 26,
2021
(Unaudited)
Assets
Current assets:
Cash and cash equivalents$36,618 $70,610 
Accounts receivable, net95,855 81,370 
Notes receivable, current portion7,556 12,352 
Income tax receivable10,533 9,386 
Inventories42,448 34,981 
Prepaid expenses and other current assets46,514 46,310 
Total current assets239,524 255,009 
Property and equipment, net230,894 223,856 
Finance lease right-of-use assets, net22,692 20,907 
Operating lease right-of-use assets167,470 176,256 
Notes receivable, less current portion, net17,397 35,504 
Goodwill69,476 80,632 
Deferred income taxes4,969 5,156 
Other assets77,326 88,384 
Total assets$829,748 $885,704 
Liabilities, Redeemable noncontrolling interests and Stockholders’ deficit
Current liabilities:
Accounts payable$44,263 $28,092 
Income and other taxes payable18,171 19,996 
Accrued expenses and other current liabilities152,893 190,116 
Current deferred revenue19,925 21,700 
Current finance lease liabilities6,072 4,977 
Current operating lease liabilities22,403 22,543 
Total current liabilities263,727 287,424 
Deferred revenue22,987 13,846 
Long-term finance lease liabilities17,468 16,580 
Long-term operating lease liabilities155,952 160,672 
Long-term debt, less current portion, net548,753 480,730 
Deferred income taxes362 258 
Other long-term liabilities77,912 93,154 
Total liabilities1,087,161 1,052,664 
Redeemable noncontrolling interests1,206 5,498 
Stockholders’ deficit:
Common stock ($0.01 par value per share; issued 49,112 at September 25, 2022 and 49,002 at December 26, 2021)
491 490 
Additional paid-in capital444,643 445,126 
Accumulated other comprehensive loss(13,868)(9,971)
Retained earnings187,286 183,157 
Treasury stock (14,047 shares at September 25, 2022 and 13,205 shares at December 26, 2021, at cost)
(892,818)(806,472)
Total stockholders’ deficit(274,266)(187,670)
Noncontrolling interests in subsidiaries15,647 15,212 
Total Stockholders’ deficit (258,619)(172,458)
Total liabilities, Redeemable noncontrolling interests and Stockholders’ deficit$829,748 $885,704 
See accompanying notes.
1


Papa John’s International, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
Three Months EndedNine Months Ended
(In thousands, except per share amounts)September 25,
2022
September 26,
2021
September 25,
2022
September 26,
2021
Revenues:
Domestic Company-owned restaurant sales$166,050 $191,584 $536,226 $584,942 
North America franchise royalties and fees33,712 31,933 102,897 97,123 
North America commissary revenues216,115 189,224 645,177 560,743 
International revenues30,735 38,408 97,310 110,629 
Other revenues63,900 61,633 194,259 186,099 
Total revenues510,512 512,782 1,575,869 1,539,536 
Costs and expenses:
Operating costs (excluding depreciation and amortization shown separately below):
Domestic Company-owned restaurant expenses138,299 155,477 441,986 465,658 
North America commissary expenses203,129 175,399 604,689 518,310 
International expenses18,196 21,743 57,346 62,791 
Other expenses59,249 56,039 180,452 168,092 
General and administrative expenses57,935 54,070 168,519 157,779 
Depreciation and amortization13,338 11,477 38,012 36,830 
Total costs and expenses490,146 474,205 1,491,004 1,409,460 
Refranchising and impairment loss(905) (12,065) 
Operating income19,461 38,577 72,800 130,076 
Net interest expense(7,623)(3,979)(17,967)(11,275)
Income before income taxes11,838 34,598 54,833 118,801 
Income tax expense3,374 4,057 9,212 19,387 
Net income before attribution to noncontrolling interests8,464 30,541 45,621 99,414 
Net income attributable to noncontrolling interests(133)(1,285)(1,363)(4,021)
Net income attributable to the Company$8,331 $29,256 $44,258 $95,393 
Calculation of net income (loss) for earnings per share:
Net income attributable to the Company$8,331 $29,256 $44,258 $95,393 
Dividends on redemption of Series B Convertible Preferred Stock   (109,852)
Dividends paid to participating securities(86)(137)(228)(5,964)
Net income attributable to participating securities (158)(34) 
Net income (loss) attributable to common shareholders$8,245 $28,961 $43,996 $(20,423)
Basic earnings (loss) per common share $0.23 $0.80 $1.23 $(0.59)
Diluted earnings (loss) per common share$0.23 $0.79 $1.22 $(0.59)
Basic weighted average common shares outstanding35,259 36,387 35,602 34,619 
Diluted weighted average common shares outstanding35,448 36,719 35,840 34,619 
Dividends declared per common share$0.42 $0.35 $1.12 $0.80 
See accompanying notes.
2


Papa John’s International, Inc. and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
Three Months EndedNine Months Ended
(In thousands)September 25,
2022
September 26,
2021
September 25,
2022
September 26,
2021
Net income before attribution to noncontrolling interests$8,464 $30,541 $45,621 $99,414 
Other comprehensive (loss) income, before tax:
Foreign currency translation adjustments(4,849)(1,113)(9,819)383 
Interest rate swaps (1)
1,169 1,535 4,758 5,147 
Other comprehensive (loss) income, before tax(3,680)422 (5,061)5,530 
Income tax effect:
Foreign currency translation adjustments1,114 256 2,258 (88)
Interest rate swaps (2)
(268)(353)(1,094)(1,184)
Income tax effect846 (97)1,164 (1,272)
Other comprehensive (loss) income, net of tax(2,834)325 (3,897)4,258 
Comprehensive income before attribution to noncontrolling interests5,630 30,866 41,724 103,672 
Less: comprehensive (income), redeemable noncontrolling interests(31)(692)(559)(2,192)
Less: comprehensive (income), nonredeemable noncontrolling interests(102)(593)(804)(1,829)
Comprehensive income attributable to the Company$5,497 $29,581 $40,361 $99,651 
_______________
(1)
Amounts reclassified out of accumulated other comprehensive loss into net interest expense include $1,650 and $1,850 for the three and nine months ended September 25, 2022, respectively, and $1,644 and $5,084 for the three and nine months ended September 26, 2021, respectively.
(2)
The income tax effects of amounts reclassified out of accumulated other comprehensive loss into net interest expense were $371 and $416 for the three and nine months ended September 25, 2022, respectively, and $368 and $1,139 for the three and nine months ended September 26, 2021, respectively.
See accompanying notes.
3


Papa John’s International, Inc. and Subsidiaries
Condensed Consolidated Statements of Stockholders’ Deficit
(Unaudited)
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 September 25, 2022
Balance at June 26, 202235,248 $491 $442,255 $(11,034)$193,934 $(875,205)$15,761 $(233,798)
Net income (1)
— — — — 8,331 — 102 8,433 
Other comprehensive (loss), net of tax— — — (2,834)— — — (2,834)
Cash dividends on common stock— — 57 — (14,906)— — (14,849)
Exercise of stock options16 — 823 — — — — 823 
Acquisition of Company common stock(229)— — — — (19,529)— (19,529)
Stock-based compensation expense— — 5,146 — — — — 5,146 
Issuance of restricted stock50 — (1,671)— — 1,760 — 89 
Tax payments for equity award issuances(22)— (1,900)— — — — (1,900)
Distributions to noncontrolling interests— — — — — — (216)(216)
Other2 — (67)— (73)156 — 16 
Balance at September 25, 202235,065 $491 $444,643 $(13,868)$187,286 $(892,818)$15,647 $(258,619)
For the nine months ended September 25, 2022
Balance at December 26, 202135,797 $490 $445,126 $(9,971)$183,157 $(806,472)$15,212 $(172,458)
Net income (1)
— — — — 44,258 — 804 45,062 
Other comprehensive (loss), net of tax— — — (3,897)— — — (3,897)
Cash dividends on common stock— — 153 — (40,102)— — (39,949)
Exercise of stock options55 2,730 — — — — 2,731 
Acquisition of Company common stock(982)— — — — (95,000)— (95,000)
Stock-based compensation expense—  14,246 — — — — 14,246 
Issuance of restricted stock279 — (8,122)— — 8,210 — 88 
Tax payments for equity award issuances(92)— (9,426)— — — — (9,426)
Distributions to noncontrolling interests— — — — — — (366)(366)
Other8 — (64)— (27)444 (3)350 
Balance at September 25, 202235,065 $491 $444,643 $(13,868)$187,286 $(892,818)$15,647 $(258,619)
_______________
(1)    Net income to the Company for the three and nine months ended September 25, 2022 excludes income of $31 and $559 allocable to the redeemable noncontrolling interests for our joint venture arrangements.
At September 25, 2022, the accumulated other comprehensive loss of $13,868 was comprised of net unrealized foreign currency translation loss of $12,430 and net unrealized loss on the interest rate swap agreements of $1,438.
See accompanying notes.

4


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
Retained
Earnings
Treasury
Stock
Noncontrolling
Interests in
Subsidiaries
Total
Stockholders’
Deficit
For the three months ended September 26, 2021
Balance at June 27, 202136,215 $489 $435,608 $(10,235)$154,769 $(743,819)$15,290 $(147,898)
Net income (1)
— — — — 29,256 — 593 29,849 
Other comprehensive income, net of tax— — — 325 — — — 325 
Cash dividends on common stock— — 48 — (12,845)— — (12,797)
Exercise of stock options51 1 3,111 — — — — 3,112 
Acquisition of Company common stock(103)— — — — (12,367)— (12,367)
Stock-based compensation expense— — 4,317 — — — — 4,317 
Issuance of restricted stock15 — (873)— — 873 —  
Tax payments for equity award issuances— — (1,423)— — — — (1,423)
Distributions to noncontrolling interests— — — — — — (594)(594)
Other5 — (46)— 198 278 — 430 
Balance at September 26, 202136,183 $490 $440,742 $(9,910)$171,378 $(755,035)$15,289 $(137,046)
For the nine months ended September 26, 2021
Balance at December 27, 202032,545 $453 $254,103 $(14,168)$219,158 $(741,724)$15,239 $(266,939)
Net income (1)
— — — — 95,393 — 1,829 97,222 
Other comprehensive income, net of tax— — — 4,258 — — — 4,258 
Repurchase and conversion of Series B Convertible Preferred Stock3,489 35 174,631 — (110,498)— — 64,168 
Cash dividends on common stock— — 110 — (27,750)— — (27,640)
Cash dividends on preferred stock— — — — (4,121)— — (4,121)
Exercise of stock options199 2 11,209 — — — — 11,211 
Acquisition of Company common stock(187)— — — — (20,555)— (20,555)
Stock-based compensation expense— — 12,519 — — — — 12,519 
Issuance of restricted stock125 — (6,538)— — 6,538 —  
Tax payments for equity award issuances— — (5,310)— — — — (5,310)
Distributions to noncontrolling interests— — — — — — (1,779)(1,779)
Other12 — 18 — (804)706 — (80)
Balance at September 26, 202136,183 $490 $440,742 $(9,910)$171,378 $(755,035)$15,289 $(137,046)

(1)    Net income to the Company for the three and nine months ended September 26, 2021 excludes $692 and $2,192 allocable to the redeemable noncontrolling interests for our joint venture arrangements.
At September 26, 2021, the accumulated other comprehensive loss of $9,910 was comprised of net unrealized foreign currency translation loss of $3,499 and net unrealized loss on the interest rate swap agreements of $6,411.
See accompanying notes.
5


Papa John’s International, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended
(In thousands)September 25,
2022
September 26,
2021
Operating activities
Net income before attribution to noncontrolling interests$45,621 $99,414 
Adjustments to reconcile net income to net cash provided by operating activities:
Provision (benefit) for allowance for credit losses on accounts and notes receivable18,576 (920)
Depreciation and amortization38,012 36,830 
Refranchising and impairment loss12,065  
Deferred income taxes519 (5,113)
Stock-based compensation expense14,246 12,519 
Other(466)1,052 
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable(19,584)5,955 
Income tax receivable(1,146)674 
Inventories(8,185)(3,217)
Prepaid expenses and other current assets2,065 11,277 
Other assets and liabilities(4,919)(8,627)
Accounts payable16,188 5,014 
Income and other taxes payable(1,789)15,958 
Accrued expenses and other current liabilities(32,404)24,001 
Deferred revenue(2,246)(1,193)
Net cash provided by operating activities76,553 193,624 
Investing activities
Purchases of property and equipment(48,424)(41,328)
Notes issued(2,248)(14,637)
Repayments of notes issued8,125 15,352 
Acquisitions, net of cash acquired(1,346)(699)
Proceeds from refranchising, net of cash transferred13,588  
Other76 121 
Net cash used in investing activities(30,229)(41,191)
Financing activities
Proceeds from issuance of senior notes 400,000 
Net proceeds of revolving credit facilities66,999 15,000 
Debt issuance costs (9,179)
Proceeds from exercise of stock options2,730 11,211 
Repurchase of Series B Convertible Preferred Stock (188,647)
Acquisition of Company common stock(95,000)(20,555)
Dividends paid to common stockholders(39,949)(27,640)
Dividends paid to preferred stockholders (6,394)
Tax payments for equity award issuances(9,426)(5,310)
Distributions to noncontrolling interests(1,090)(2,914)
Repayments of term loan (340,000)
Other(3,480)(2,630)
Net cash used in financing activities(79,216)(177,058)
Effect of exchange rate changes on cash and cash equivalents(1,100)234 
Change in cash and cash equivalents(33,992)(24,391)
Cash and cash equivalents at beginning of period70,610 130,204 
Cash and cash equivalents at end of period$36,618 $105,813 
See accompanying notes.
6


Papa John’s International, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
September 25, 2022
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete annual financial statements. In the opinion of management, all adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation have been included. Operating results for the three and nine months ended September 25, 2022 are not necessarily indicative of the results that may be expected for the fiscal year ending December 25, 2022. For further information, refer to the consolidated financial statements and footnotes thereto included in the Annual Report on Form 10-K for Papa John’s International, Inc. (referred to as the “Company”, “Papa John’s” or in the first-person notations of “we”, “us” and “our”) for the year ended December 26, 2021.
2.