Papa Johns 2011 Annual Report Download - page 21

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16
We have been and will continue to be subject to various types of litigation, including class action
litigation, which could subject us to significant damages or other remedies.
We face the risk of litigation from various parties, including our customers, franchisees and employees, in
the ordinary course of our business. We are party to various legal proceedings, including employment and
tort claims. We evaluate these claims and proceedings to assess the expected outcome and where
necessary to estimate the amount of potential losses to us. These assessments are based on the information
available to us at the time the estimates are made and require the use of a significant amount of judgment,
and actual outcomes or losses may materially differ from our estimates. Even if claims against us do not
have merit, the costs of defending or settling any such existing or future claims, or costs related to
damages should such claims be upheld in court, could significantly impact the Company’s earnings and
financial condition.
We may be subject to impairment charges.
Impairment charges are possible if our subsidiary located in the United Kingdom (“PJUK”) or previously
acquired domestic restaurants perform below our expectations. This would result in a decrease in our
reported asset value and reduction in our net income.
Our results of operations could be materially impacted as a result of the credit risk of operators of leases
for which we remain contingently liable.
We remain contingently liable for certain restaurant and commissary leases previously operated by us and
subsequently sold or refranchised in the ordinary course of business. While the new operators are the
primary obligors under such assigned leases, we could be liable in the event that an operator is unwilling
or unable to make any required payments under a lease. Continuing weakness in the economy and
difficulty in credit markets could make it difficult for operators to meet their contractual commitments. If
those operators default on the leases and we are unable to sublease the properties for which we remain
contingently liable, it could have a material impact on our results of operations.
Item 1B. Unresolved Staff Comments
None.