Papa Johns 2013 Annual Report Download

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Note: International Locations as of December 30, 2012
2012 Markets entered – Azerbaijan, Guam, Lebanon
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Table of contents

  • Page 1
    ANNUAL REPORT 2013 BETTER IN G DI RE ENTS. B ET TE RP IZZA.

  • Page 2
    ... Cynthia McClellan SVP, Information Systems and Project Management Office Sean A. Muldoon SVP, R&D, QA and Supply Chain R. Shane Hutchins SVP, PJ Food Service, Inc. Caroline Miller Oyler SVP, Legal Affairs Robert Smith VP, Global Human Resources Robert C. Kraut SVP, Chief Marketing Officer

  • Page 3
    ...international success. With 28% combined ownership of the company's stock, our Board and senior management team are highly vested in the continued long-term success of Papa John's. $1.70 $1.50 $1.30 Earnings Per Share $1.55 $1.29 $1.10 $0.90 $0.70 $0.50 2009 2010 $1.08 $0.92 $0.69 2011 2012 2013...

  • Page 4
    ... ORDERING app* 2012 NATIONWIDE ONLINE ORDERING INDUSTRY FIRST 2001 1st LOCAL SPECIAL ONLINE OFFERS* ANDROID ORDERING app* 2011 $ $2 BILLION IN U.S. DIGITAL SALES* DIGITAL LOYALTY REWARDS PROGRAM NATIONWIDE 24/7 "PLAN AHEAD" ONLINE ORDERING* 24/7 INDUSTRY FIRST 2006 1st NATIONWIDE MOBILE...

  • Page 5
    ... John's Source: Street & Smith's Sports Business Journal, Nov. 25, 2013 issue Strong Business Model: Papa John's success in 2013 continued to be supported by our winning and straightforward business model - investing in opportunities that pose minimal risk and present great potential for reward...

  • Page 6
    ฀ UNITED฀STATES฀ SECURITIES฀AND฀EXCHANGE฀COMMISSION SECURITIES฀AND฀EXCHANGE฀COMMISSION฀ Washington,฀D.C.฀฀20549฀ ฀ FORM฀10-K฀ (Mark฀One)฀฀ [X]฀ Annual฀Report฀pursuant฀to฀Section Annual฀Report฀pursuant฀to฀Section฀13฀or฀15(d)฀of฀the...

  • Page 7
    ...computed฀ by฀ reference฀ to฀ the฀ closing฀ sale฀ price฀ on฀The฀ NASDAQ฀ Stock฀ Market฀ as฀ of฀ the฀ last฀ business฀ day฀ of฀ the฀ Registrant's฀ most฀recently฀completed฀second฀fiscal฀quarter,฀June฀30,฀2013,฀was฀$1,042,454,017.฀ As฀of...

  • Page 8
    ...Statement฀Schedules 86฀ 86฀ ฀ 87฀ 87฀ 87 Page 1฀ 10฀ 16฀ 16฀ 18฀ 19฀ Business Risk฀Factors Unresolved฀Staff฀Comments฀ ฀ Properties Legal฀Proceedings Mine฀Safety฀Disclosures฀ ฀ Market฀for฀Registrant's฀Common฀Equity,฀Related฀Stockholder...

  • Page 9
    ...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.฀฀At฀December฀29,฀2013...

  • Page 10
    ...training฀ locations฀across฀ the฀ United฀ States฀ and฀ internationally.฀ We฀ offer฀ performance-based฀ financial฀ incentives฀ to฀ corporate฀ and฀ restaurant฀ team฀members฀at฀various฀levels.฀ ฀ Marketing.฀Our฀domestic฀marketing฀strategy฀consists...

  • Page 11
    ...in฀China,฀with฀an฀average฀ investment฀cost฀of฀approximately฀$225,000.฀ ฀ We฀define฀a฀"traditional"฀domestic฀Papa฀John's฀restaurant฀as฀a฀delivery฀and฀carryout฀unit฀that฀services฀a฀ defined฀ trade฀ area.฀ We฀ consider฀ the฀ location...

  • Page 12
    ...Co-op's฀members.฀The฀contribution฀rate฀for฀Co-ops฀may฀generally฀not฀be฀below฀2.0%฀ of฀sales฀without฀approval฀from฀Papa฀John's.฀ ฀ The฀ restaurant-level฀ and฀ Co-op฀ marketing฀ efforts฀ are฀ supported฀ by฀ media,฀ print,฀ digital฀ and...

  • Page 13
    ...air฀time฀for฀Papa฀John's฀national฀television฀commercials,฀buys฀digital฀media฀such฀as฀ banner฀ advertising,฀ paid฀ search-engine฀ advertising,฀ mobile฀ marketing,฀ social฀ media฀ advertising฀ and฀ marketing,฀ and฀ SMS฀ text฀ and฀ email,฀ in...

  • Page 14
    ... of฀ December฀ 29,฀ 2013,฀ there฀ were฀ 3,705฀ franchised฀ Papa฀ John's฀ restaurants฀ operating฀in฀all฀50฀states฀and฀34฀countries.฀During฀2013,฀356฀(152฀North฀America฀and฀204฀international)฀ franchised฀ Papa฀ John's฀ restaurants฀ were...

  • Page 15
    ...฀ Marketing฀ Solutions฀ ("Preferred,"฀ our฀ wholly-owned฀print฀and฀promotions฀subsidiary).฀ ฀ In฀ 2014,฀ we฀ plan฀ to฀ continue฀ domestic฀ franchise฀ support฀ initiatives.฀ We฀ believe฀ the฀ support฀ programs฀ have฀mitigated฀potential฀unit...

  • Page 16
    ...with฀international฀business฀directors฀ who฀are฀responsible฀for฀supporting฀one฀or฀more฀franchisees.฀The฀international฀business฀directors฀report฀to฀ regional฀ vice฀ presidents.฀ Additional฀ levels฀ of฀ senior฀ management฀ and฀ corporate฀ staff...

  • Page 17
    ...฀have฀a฀franchise฀advisory฀council฀in฀the฀ United฀ Kingdom฀ ("UK฀ FAC").฀ The฀ FAC฀ and฀ UK฀ FAC฀ and฀ subcommittees฀ hold฀ regular฀ meetings฀ to฀ discuss฀new฀product฀and฀marketing฀ideas,฀operations,฀growth฀and฀other฀business฀issues...

  • Page 18
    ... affect฀ Papa฀ John's฀ as฀ well฀ as฀ others฀ within฀ the฀ restaurant฀industry.฀As฀we฀expand฀internationally,฀we฀are฀subject฀to฀applicable฀laws฀in฀each฀jurisdiction฀ where฀franchised฀units฀are฀established.฀ ฀ Trademarks,฀Copyrights฀and...

  • Page 19
    ...฀ pricing฀ or฀ other฀ marketing฀ initiatives฀ or฀ promotional฀ strategies,฀ including฀new฀product฀and฀concept฀developments,฀by฀one฀or฀more฀of฀our฀major฀competitors฀can฀have฀a฀ rapid฀and฀adverse฀impact฀on฀our฀sales฀and฀earnings฀and...

  • Page 20
    ...฀high฀levels฀of฀ the฀ cost,฀ of฀ cheese฀ or฀ other฀ commodities฀ could฀ adversely฀ affect฀ the฀ profitability฀ of฀ our฀ system-wide฀ restaurant฀operations,฀particularly฀if฀we฀are฀unable฀to฀increase฀the฀selling฀price฀of฀our฀products...

  • Page 21
    ... operations฀ are฀ subject฀ to฀ increased฀ risks฀ and฀ other฀ factors฀ that฀ may฀ make฀ it฀ more฀ difficult฀to฀achieve฀or฀maintain฀profitability฀or฀meet฀planned฀growth฀rates.฀ ฀ Our฀international฀operations฀could฀be฀negatively฀impacted...

  • Page 22
    ...฀on฀our฀Papa฀John's฀brand฀name฀and฀rely฀on฀a฀combination฀of฀trademarks,฀copyrights,฀service฀ marks฀and฀similar฀intellectual฀property฀rights฀to฀protect฀and฀promote฀our฀brand.฀We฀believe฀the฀success฀of฀ our฀ business฀ depends฀ on...

  • Page 23
    ...from฀our฀digital฀ordering฀business.฀ ฀฀ We฀are฀subject฀to฀a฀number฀of฀privacy฀and฀data฀protection฀laws฀and฀regulations.฀Our฀business฀requires฀the฀ collection฀ and฀ retention฀ of฀ large฀ volumes฀ of฀ internal฀ and฀ customer฀ data...

  • Page 24
    ... Item฀2.฀฀Properties฀ ฀ As฀of฀December฀29,฀2013,฀there฀were฀4,428฀Papa฀John's฀restaurants฀system-wide.฀The฀following฀tables฀ provide฀the฀locations฀of฀our฀restaurants.฀We฀define฀"North฀America"฀as฀the฀United฀States฀and฀Canada฀and...

  • Page 25
    ...Papa฀John's฀Restaurants...฀ 665฀ Canada...฀ -฀ ฀฀฀฀฀Total฀North฀America฀Papa฀John's฀Restaurants...฀ 665฀ ฀ International฀Restaurants:฀ ฀ Azerbaijan...฀ -฀ Bahrain...฀ -฀ Cayman฀Islands...฀ -฀ Chile...฀ -฀ China...฀ Franchised฀ ...

  • Page 26
    ...฀ locations:฀ Raleigh,฀NC;฀Denver,฀CO;฀Phoenix,฀AZ;฀Des฀Moines,฀IA;฀Portland,฀OR;฀฀Pittsburgh,฀ PA;฀ and฀ Cranbury,฀ NJ.฀ ฀ Our฀ remaining฀ three฀ locations฀ are฀ in฀ buildings฀ we฀ own,฀ located฀ in:฀ Orlando,฀ FL;฀ Dallas,฀ TX...

  • Page 27
    ...฀v.฀Papa฀John's฀International,฀Inc.฀and฀Papa฀John's฀USA,฀Inc.฀is฀a฀conditionally฀certified฀collective฀ action฀filed฀in฀August฀2009฀in฀the฀United฀States฀District฀Court,฀Eastern฀District฀of฀Missouri,฀alleging฀that฀ delivery฀ drivers...

  • Page 28
    ...฀ First฀Elected฀ Executive฀Officer฀ 1985฀ ฀ 2009฀ 2013฀ 2005฀ 2012฀ Lance฀F.฀Tucker฀ 44฀ 2011฀ ฀ (a)฀Ages฀are฀as฀of฀January฀1,฀2014.฀ ฀ John฀H.฀Schnatter฀created฀the฀Papa฀John's฀concept฀and฀started฀operations฀in฀1984...

  • Page 29
    ...฀held฀the฀positions฀of฀Chief฀of฀Staff฀and฀Senior฀ Vice฀President,฀Strategic฀Planning฀from฀June฀2010฀to฀February฀2011,฀after฀serving฀as฀Chief฀of฀Staff฀and฀ Vice฀ President,฀ Strategic฀ Planning฀ since฀ June฀ 2009.฀ Mr.฀ Tucker...

  • Page 30
    ... for฀ the฀ quarters฀ indicated,฀ the฀ high฀ and฀ low฀ sales฀ prices฀ of฀ our฀ common฀stock,฀as฀reported฀by฀The฀NASDAQ฀Stock฀Market,฀and฀dividends฀declared฀per฀common฀share.฀ All฀sales฀prices฀have฀been฀adjusted฀to฀reflect฀a฀two...

  • Page 31
    ...-for-one฀stock฀split,฀(in฀thousands,฀except฀per฀share฀amounts):฀ ฀ Total Number฀ of฀Shares Purchased 146 1,034 101 Average Price Paid฀per Share $35.33 $38.59 $43.47 Total฀Number of฀Shares฀Purchased as฀Part฀of฀Publicly Announced฀Plans or฀Programs 101,913...

  • Page 32
    ...per฀share฀data) Dec.฀29, 2013 Income฀Statement฀Data North฀America฀revenues: ฀฀Domestic฀Company-owned฀restaurant฀sales ฀฀Franchise฀royalties฀(2) ฀฀Franchise฀and฀development฀fees ฀฀Domestic฀commissary฀sales ฀฀Other฀sales International฀revenues...

  • Page 33
    ...paper฀products,฀printing฀and฀promotional฀items,฀risk฀management฀ services,฀and฀information฀systems฀and฀related฀services฀used฀in฀their฀operations.฀ ฀ New฀unit฀openings฀in฀2013฀were฀386฀as฀compared฀to฀368฀in฀2012฀and฀321฀in฀2011...

  • Page 34
    ...promotional฀ items,฀ risk฀ management฀services฀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...

  • Page 35
    ...฀ of฀ grant.฀ The฀ expected฀ dividend฀ yield฀ was฀ estimated฀ as฀ the฀ annual฀ dividend฀ divided฀ by฀ the฀ market฀ price฀ of฀ the฀ Company's฀ shares฀ on฀ the฀ date฀ of฀ grant.฀ Expected฀ volatility฀was฀estimated฀by฀using฀the฀Company...

  • Page 36
    ...United฀States฀and฀several฀foreign฀jurisdictions.฀Significant฀ judgment฀ is฀ required฀ in฀ determining฀ Papa฀ John's฀ provision฀ for฀ income฀ taxes฀ and฀ the฀ related...income฀tax฀issues฀in฀2013฀and฀2011,฀respectively.฀In฀2012,฀we฀recognized...

  • Page 37
    ...฀marketing฀payment฀to฀the฀Papa฀John's฀Marketing฀Fund฀("PJMF"),฀ an฀ unconsolidated฀ nonstock฀ corporation฀ designed฀ to฀ operate฀ at฀ break฀ even฀ for฀ the฀ purpose฀ of฀ designing฀ and฀ administering฀ advertising฀ and฀ promotional฀ programs...

  • Page 38
    ...฀ non-GAAP฀ measures฀ to฀ allocate฀ resources,฀ and฀ analyze฀ trends฀ and฀ underlying฀ operating฀ performance.฀ Annual฀ cash฀ bonuses,฀ and฀ certain฀ long-term฀ incentive฀ programs฀ for฀ various฀levels฀of฀management,฀are฀based฀on฀financial...

  • Page 39
    ...฀฀ Dec.฀29, 2013 Income฀Statement฀Data: North฀America฀revenues: Domestic฀Company-owned฀restaurant฀sales Franchise฀royalties Franchise฀and฀development฀fees Domestic฀commissary฀sales Other฀sales International฀revenues: Royalties฀and฀franchise฀and฀development...

  • Page 40
    ...Closed End฀of฀period North฀America฀franchised: Beginning฀of฀period Opened Closed Acquired฀from฀Company Sold฀to฀Company End฀of฀period International฀franchised: Beginning฀of฀period Opened Closed End฀of฀period Total฀Papa฀John's฀restaurants฀-฀end฀of฀period...

  • Page 41
    ...%฀(*) (In฀thousands) North฀America฀Revenues: Domestic฀company-owned฀restaurant฀sales Franchise฀royalties Franchise฀and฀development฀fees Domestic฀commissary฀sales Other฀sales International฀Revenues: Royalties฀and฀franchise฀and฀development฀fees Restaurant฀and...

  • Page 42
    ...888 (In฀thousands) Domestic฀company-owned฀restaurants฀ Domestic฀commissaries฀ North฀America฀franchising฀ International฀ All฀others Unallocated฀corporate฀expenses Elimination฀of฀intersegment฀profits Total฀income฀before฀income฀taxes (a) The฀53rd฀week฀of...

  • Page 43
    ... online฀ and฀ mobile฀ ordering฀ ("eCommerce")฀ business฀ due฀ to฀ higher฀ online฀ volumes.฀ This฀ increase฀ was฀ somewhat฀ offset฀ by฀ reduced฀ operating฀ results฀ at฀ our฀ wholly-owned฀ print฀ and฀ promotions฀ subsidiary,฀ Preferred฀ Marketing...

  • Page 44
    ... primarily฀ due฀ to฀ higher฀ expenses฀ associated฀ with฀ our฀ online฀ customer฀loyalty฀program.฀฀ ฀ Diluted฀earnings฀per฀common฀share฀were฀$1.55฀in฀2013,฀compared฀to฀$1.29฀in฀2012,฀an฀increase฀of฀$0.26,฀ or฀ 20.2%.฀ As฀ previously...

  • Page 45
    ... in฀ franchised฀ units฀ and฀ the฀ 7.5%฀ increase฀ in฀ comparable฀ sales,฀ calculated฀ on฀ a฀ constant฀ dollar฀ basis.฀ Our฀ PJUK฀ operations฀ represented฀ 48%฀ of฀ international฀ revenues฀ in฀ 2013฀ and฀ 51%฀ in฀ 2012฀ and฀ our฀ China...

  • Page 46
    ...and฀meats,฀as฀well฀as฀lower฀national฀ promotion฀pricing.฀2012฀also฀included฀various฀supplier฀incentives,฀as฀previously฀noted Salaries฀ and฀ benefits฀ were฀ 0.3%฀ lower฀ as฀ a฀ percentage฀ of฀ sales฀ in฀ 2013,฀ primarily฀ due฀ to฀ the...

  • Page 47
    ...฀ with฀ our฀ online฀ customer฀ loyalty฀ program.฀ ฀ Depreciation฀ and฀ amortization฀ was฀ $35.1฀ million,฀ or฀ 2.4%฀ of฀ revenues฀ for฀ 2013,฀ as฀ compared฀ to฀ $32.8฀ million,฀ or฀ 2.4%฀ of฀ revenues,฀ for฀ 2012.฀ ฀ The฀ increase...

  • Page 48
    ...฀ North฀America฀franchising฀ International฀ All฀others Unallocated฀corporate฀expenses฀(c) Elimination฀of฀intersegment฀profits Income฀before฀income฀taxes 38,114 34,317 69,332 3,063 2,889 48,958 362 98,395 (a) 2011 52฀weeks 28,980 30,532 66,222 165 441 39...

  • Page 49
    ...฀in฀our฀online฀and฀ mobile฀ ordering฀ ("eCommerce")฀ business.฀ This฀ improvement฀ was฀ somewhat฀ offset฀ by฀ reduced฀ operating฀ results฀ at฀ our฀ wholly-owned฀ print฀ and฀ promotions฀ subsidiary,฀ Preferred฀ Marketing฀ Solutions฀("Preferred...

  • Page 50
    ... certain฀ sales฀ targets,฀ including฀ driving฀ comparable฀ sales,฀ transactions฀ and฀ online฀ sales.฀ Other฀ incentives฀ offered฀are฀included฀in฀the฀North฀America฀Franchising฀segment.฀฀ (d) The฀ Perfect฀ Pizza฀ lease฀ obligation฀ relates฀ to...

  • Page 51
    ...฀ in฀online฀sales,฀partially฀offset฀by฀a฀decline฀in฀sales฀at฀Preferred.฀ ฀ International฀franchise฀restaurant฀sales฀were฀$388.4฀million฀in฀2012,฀compared฀to฀$320.0฀million฀in฀2011.฀฀ International฀ franchise฀ restaurant฀ sales฀ are...

  • Page 52
    ...higher฀ online฀fees฀and฀higher฀online฀sales฀volumes.฀฀ ฀ International฀ operating฀ expenses฀ were฀ relatively฀ consistent฀ at฀ 84.6%฀ of฀ international฀ restaurant฀ and฀ commissary฀ sales฀in฀ 2012฀as฀ compared฀ to฀ 84.5%฀in฀ 2011.฀The...

  • Page 53
    ... is฀ primarily฀ a฀ result฀ of฀ 2011฀ including฀ higher฀ costs฀ related฀ to฀ our฀ online฀ customer฀ loyalty฀program.฀฀ ฀ Depreciation฀ and฀ amortization฀ was฀ $32.8฀ million,฀ or฀ 2.4%฀ of฀ revenues฀ for฀ 2012,฀ as฀ compared฀ to฀ $32...

  • Page 54
    ... of฀ property฀ and฀ equipment฀ in฀ 2013฀ and฀ 2012฀ primarily฀ relate฀ to฀ expenditures฀on฀equipment฀for฀New฀Jersey฀dough฀production,฀technology฀investments,฀including฀ our฀new฀domestic฀POS฀system,฀("FOCUS"),฀and฀China฀new฀store฀builds...

  • Page 55
    ... the฀ stock฀ split,฀ for฀ the฀ last฀ three฀ years฀ (in฀ thousands,฀except฀average฀price฀per฀share):฀ ฀ Number฀of฀ Average฀ Fiscal฀ Shares฀ Total฀Cash฀ Price฀Per฀ Year Repurchased Paid Share 2011 4,168 $65,323 $15.67 2012 4,552 $106,095 $23.31 2013...

  • Page 56
    ...-looking฀ statements฀ may฀ relate฀ to฀ projections฀ or฀ guidance฀ concerning฀ business฀performance,฀revenue,฀earnings,฀contingent฀liabilities,฀resolution฀of฀litigation,฀commodity฀costs,฀ profit฀ margins,฀ unit฀ growth,฀ capital฀ expenditures,฀ and...

  • Page 57
    ...,฀but฀are฀not฀limited฀to aggressive฀changes฀in฀pricing฀or฀other฀marketing฀or฀promotional฀strategies฀by฀competitors฀which฀ may฀ adversely฀ affect฀ sales;฀ and฀ new฀ product฀ and฀ concept฀ developments฀ by฀ food฀ industry฀ competitors...

  • Page 58
    ...of฀ our฀total฀revenues฀are฀derived฀from฀sales฀to฀customers฀and฀royalties฀outside฀the฀United฀States.฀฀ ฀ Commodity฀Price฀Risk฀ ฀ In฀ the฀ ordinary฀ course฀ of฀ business,฀ the฀ food฀ and฀ paper฀ products฀ we฀ purchase,฀ including...

  • Page 59
    ...฀ (United฀ States),฀Papa฀ John's฀ International,฀ Inc.฀ and฀ Subsidiaries'฀ internal฀ control฀ over฀ financial฀ reporting฀ as฀ of฀ December฀ 29,฀ 2013,฀ based฀ on฀ criteria฀ established฀ in฀ Internal฀ Control-Integrated฀ Framework฀ issued฀ by...

  • Page 60
    Papa฀John's฀International,฀Inc.฀and฀Subsidiaries Consolidated฀Statements฀of฀Income (In฀thousands,฀except฀per฀share฀amounts) December฀29, 2013 ฀North฀America฀revenues: Domestic฀Company-owned฀restaurant฀sales Franchise฀royalties Franchise฀and฀development...

  • Page 61
    Papa฀John's฀International,฀Inc.฀and฀S ubsidiaries Consolidated฀S tatements฀of฀Comprehensive฀Income (In฀thousands) December฀29,฀ 2013...฀plan...December฀30,฀ 2012 66,002 1,128 114 45 1,059 1,110 42 16 1,084 25 65,977 4,342 61,635 December฀25,฀ 2011 58,467 ...

  • Page 62
    ...฀per฀share;฀issued฀42,796฀in฀2013฀and฀74,176฀in฀2012) Additional฀paid-in฀capital Accumulated฀other฀comprehensive฀income฀ Retained฀earnings Treasury฀stock฀(1,129฀shares฀in฀2013฀and฀29,694฀shares฀in฀2012,฀at฀cost) Total฀stockholders'฀equity...

  • Page 63
    Papa฀John's฀International,฀Inc.฀and฀Subsidiaries฀ Consolidated฀Statements฀of฀Stockholders'฀Equity฀ ฀ Common฀ Stock฀ Shares Outstanding 50,878 1,144 4,168 184 48,038 864 4,552 132 44,482 570 3,536 138 13 41,667 Papa฀John's฀International,฀Inc. ...

  • Page 64
    ... Accrued฀expenses฀and฀other฀current฀liabilities Deferred฀revenue Net฀cash฀provided฀by฀operating฀activities Investing฀activities Purchases฀of฀property฀and฀equipment Loans฀issued Repayments฀of฀loans฀issued Acquisitions,฀net฀of฀cash฀acquired Proceeds...

  • Page 65
    ...owned฀ and฀ franchised,฀ participate฀ in฀ Papa฀ John's฀ Marketing฀Fund,฀Inc.฀("PJMF"),฀a฀nonstock฀corporation฀designed฀to฀operate฀at฀break-even฀for฀the฀purpose฀ of฀ designing฀ and฀ administering฀ advertising฀ and฀ promotional฀ programs฀ for...

  • Page 66
    ...฀ of฀ food,฀ promotional฀ items฀ and฀ supplies฀ sold฀to฀franchised฀restaurants฀located฀in฀the฀United฀States฀and฀are฀recognized฀as฀revenue฀upon฀shipment฀of฀ the฀related฀ products฀to฀ the฀ franchisees.฀ Information฀ services,฀ including...

  • Page 67
    ...due฀ from฀ franchisees฀ for฀ purchases฀ of฀ food,฀ paper฀ products,฀ restaurant฀equipment,฀printing฀and฀promotional฀items,฀risk฀management฀services,฀information฀systems฀and฀ related฀ services,฀ and฀ royalties.฀ Credit฀ is฀ extended฀ based฀ on...

  • Page 68
    ...฀the฀risk฀and฀nature฀of฀our฀PJUK฀ reporting฀unit's฀cash฀flow฀and฀the฀rates฀of฀return฀market฀participants฀would฀require฀to฀invest฀their฀capital฀ in฀the฀PJUK฀reporting฀unit.฀ ฀ Subsequent฀ to฀ completing฀ our฀ annual฀ qualitative...

  • Page 69
    ...the฀Company.฀We฀record฀reserves฀and฀related฀interest฀and฀penalties฀for฀ identified฀exposures฀as฀income฀tax฀expense.฀We฀evaluate฀these฀issues฀and฀adjust฀for฀events,฀such฀as฀statute฀ of฀limitations฀expirations,฀court฀rulings฀or฀audit...

  • Page 70
    ...noncontrolling฀interests Location฀within฀the฀฀ Joint฀Venture฀ Redemption฀Feature฀ Consolidated฀Balance฀Sheet฀ Recorded฀value Colonel's฀Limited,฀LLC฀ Mandatorily฀redeemable฀ Other฀long-term฀liabilities฀ Redemption฀value฀ Star฀Papa,฀LP฀ Redeemable...

  • Page 71
    ...฀cash฀and฀cash฀equivalents.฀฀ ฀ We฀repurchased฀3.5฀million฀and฀4.6฀million฀shares฀of฀our฀common฀stock฀for฀$118.6฀million฀and฀$106.1฀ million฀in฀2013฀and฀2012,฀respectively.฀ ฀ Subsequent฀to฀year฀end฀through฀February฀18,฀2014...

  • Page 72
    ... to฀ options฀ to฀ purchase฀ common฀ stock฀ with฀ an฀ exercise฀ price฀ greater฀ than฀ the฀ average฀ market฀price฀for฀the฀year฀were฀not฀included฀in฀the฀computation฀of฀earnings฀per฀common฀share฀-฀assuming฀ dilution฀because฀the฀effect...

  • Page 73
    ...฀rate฀swap,฀as฀well฀as฀considering฀ published฀discount฀factors,฀and฀projected฀London฀Interbank฀Offered฀Rates฀("LIBOR There฀were฀no฀transfers฀among฀levels฀within฀the฀fair฀value฀hierarchy฀during฀fiscal฀2013฀or฀2012.฀ ฀ ฀ ฀ 65

  • Page 74
    ...2011:฀ ฀ Noncontrolling฀ Number฀of฀ Restaurant Papa฀John's฀ Interest Restaurants Locations Ownership฀ Ownership฀ December฀29,฀2013 Star฀Papa,฀LP Colonel's฀Limited,฀LLC PJ฀Minnesota,฀LLC PJ฀Denver,฀LLC December฀30,฀2012 Star฀Papa,฀LP Colonel's฀Limited...

  • Page 75
    ...฀and฀include฀the฀following฀joint฀ventures The฀Star฀Papa,฀LP฀agreement฀contains฀a฀redemption฀feature฀that฀is฀... equity฀ to฀ "Stockholders'฀ equity"฀ in฀ the฀ consolidated฀ balance฀ sheet฀ at฀ December฀29,฀2013,฀at฀carrying฀value.฀ ...

  • Page 76
    7.฀฀Acquisitions฀ ฀ During฀2012,฀we฀acquired฀56฀franchised฀Papa฀John's฀restaurants฀located฀in฀the฀Denver฀and฀Minneapolis฀ markets.฀ The฀ purchase฀ price,฀ which฀ was฀ paid฀ in฀ cash,฀ was฀ $5.2฀ million฀ net฀ of฀ divestiture฀ ...

  • Page 77
    ...฀ years฀ 2011-2013,฀ we฀ performed฀ a฀ qualitative฀ analysis฀ for฀ our฀ domestic฀ Company-owned฀ restaurants฀ and฀ our฀ China฀ reporting฀ unit.฀ For฀ our฀ PJUK฀ reporting฀ unit,฀ which฀ is฀ included฀ in฀ the฀ international฀reporting฀segment...

  • Page 78
    ...฀statements฀(in฀thousands):฀ Liability฀Derivatives Fair฀Value Fair฀Value Dec.฀29,฀ Dec.฀30,฀ 2013 2012 Balance฀Sheet฀Location Interest฀rate฀swaps Other฀long-term฀liabilities 76 104 There฀were฀no฀derivatives฀that฀were฀not฀designated฀as฀hedging...

  • Page 79
    ...฀-฀ Cash฀Flow฀ Hedging฀ Relationships Interest฀rate฀swaps: ฀฀฀2013 ฀฀฀2012 ฀฀฀2011 Amount฀of฀Gain฀ or฀(Loss)฀ Recognized฀in฀ Accumulated฀ OCI฀on฀ Derivative฀ (Effective฀ Portion) Location฀of฀Gain฀ Amount฀of฀Gain฀ or฀(Loss)฀ or...

  • Page 80
    ...฀income฀recorded฀on฀franchisee฀loans฀was฀approximately฀$527,000฀in฀2013,฀$631,000฀ in฀ 2012฀ and฀ $665,000฀in฀ 2011฀ and฀ is฀ reported฀ in฀investment฀income฀ in฀the฀ accompanying฀ consolidated฀ statements฀of฀income.฀ ฀ Based฀ on...

  • Page 81
    ...฀consist฀of฀the฀following฀(in฀thousands):฀ ฀ 2013 2012 Salaries,฀benefits฀and฀bonuses 20,166 22,370 Purchases 10,349 9,903 Insurance฀reserves,฀current 7,907 11,532 Rent 7,024 6,314 Customer฀loyalty฀program 1,682 1,137 Consulting฀and฀professional฀fees...

  • Page 82
    ...at฀U.S.฀federal฀statutory฀rate State฀and฀local฀income฀taxes Foreign฀income฀taxes Settlement฀of฀certain฀tax฀issues Income฀of฀consolidated฀partnerships attributable฀to฀noncontrolling฀interests Non-qualified฀deferred฀compensation plan฀(income)฀loss Tax...

  • Page 83
    ...฀with฀franchisees฀owned฀by฀related฀parties,฀ PJMF฀and฀Papa฀Card,฀Inc.฀(in฀thousands):฀ ฀ 2013 2012 2011 Revenues฀from฀affiliates: ฀฀฀Commissary฀sales 2,426 23,145 22,132 ฀฀฀Other฀sales 482 2,394 2,352 ฀฀฀Franchise฀royalties 351 3,771...

  • Page 84
    ...฀v.฀Papa฀John's฀International,฀Inc.฀and฀Papa฀John's฀USA,฀Inc.฀is฀a฀conditionally฀certified฀collective฀ action฀filed฀in฀August฀2009฀in฀the฀United฀States฀District฀Court,฀Eastern฀District฀of฀Missouri,฀alleging฀that฀ delivery฀ drivers...

  • Page 85
    ...sites฀to฀our฀Papa฀John's฀franchisees฀located฀in฀the฀United฀Kingdom฀in฀2013,฀2012฀ and฀2011฀and฀received฀payments฀of฀$4.9฀million,฀$3.8฀million฀and฀$3.7฀million,฀respectively,฀which฀are฀ netted฀with฀international฀operating฀expenses...

  • Page 86
    ...29,฀2013,฀which฀includes฀4.0฀million฀ shares฀transferred฀from฀the฀Papa฀John's฀International,฀Inc.฀2008฀Omnibus฀Incentive฀Plan.฀Option฀awards฀ are฀granted฀with฀an฀exercise฀price฀equal฀to฀the฀market฀price฀of฀the฀Company's฀stock฀at...

  • Page 87
    ...฀a฀compounded฀annual฀growth฀rate฀of฀earnings฀ per฀share฀and฀the฀achievement฀of฀certain฀sales฀and฀unit฀growth฀metrics.฀The฀fair฀value฀of฀both฀time-฀and฀ performance-based฀ restricted฀ stock฀ is฀ based฀ on฀ the฀ market฀ price฀ of...

  • Page 88
    18.฀฀Equity฀Compensation฀(continued)฀ ฀ Information฀ pertaining฀ to฀ restricted฀ stock฀ activity฀ during฀ 2013,฀ 2012฀ and฀ 2011฀ is฀ as฀ follows฀ (shares฀ in฀ thousands):฀ Weighted Average Grant-Date Fair฀Value 13.31 14.54 13.50 13.64 14.10 18....

  • Page 89
    ... United฀ States฀ and฀ Canada.฀ The฀ international฀ operations฀ segment฀principally฀consists฀of฀our฀Company-owned฀restaurants฀and฀distribution฀sales฀to฀franchised฀Papa฀ John's฀restaurants฀located฀in฀the฀United฀Kingdom,฀Mexico฀and฀China฀and...

  • Page 90
    ...taxes: Domestic฀Company-owned฀restaurants Domestic฀commissaries฀ North฀America฀franchising International All฀others Unallocated฀corporate฀expenses Elimination฀of฀intersegment฀profits Total฀income฀before฀income฀taxes 2013 2012 2011 635,317 578,870 82,873 88,640...

  • Page 91
    ...International All฀others Unallocated฀corporate Total฀expenditures฀for฀property฀and฀equipment 2013 2012 2011...2012 1st 2nd 3rd 4th Total฀revenues Operating฀income Net฀income฀attributable฀to฀the฀Company Basic฀earnings฀per฀common฀share Earnings฀per฀common฀share...

  • Page 92
    ...฀ 1992฀ framework฀established฀in฀ Internal฀Control฀-฀Integrated฀Framework,฀our฀management฀concluded฀that฀our฀ internal฀control฀over฀financial฀reporting฀was฀effective฀as฀of฀December฀29,฀2013.฀ ฀ Ernst฀ &฀ Young฀ LLP,฀ an฀ independent...

  • Page 93
    ...฀the฀period฀ended฀December฀29,฀2013฀of฀Papa฀John's฀International,฀Inc.฀ and฀Subsidiaries฀and฀our฀report฀dated฀February฀25,฀2014฀expressed฀an฀unqualified฀opinion฀thereon s/฀Ernst฀&฀Young฀LLP฀ ฀ Louisville,฀Kentucky฀ ฀ February฀25...

  • Page 94
    ...฀affect,฀the฀Company's฀internal฀control฀ over฀financial฀reporting.฀ ฀ Item฀9B.฀Other฀Information฀ ฀ None.฀ ฀ PART฀III฀ ฀ Item฀10.฀฀Directors,฀Executive฀Officers฀and฀Corporate฀Governance฀ ฀ Information฀regarding฀executive฀officers฀is...

  • Page 95
    ...฀ and฀ Related฀ Stockholder฀Matters฀ ฀ The฀following฀table฀provides฀information฀as฀of฀December฀29,฀2013฀regarding฀the฀number฀of฀shares฀of฀the฀ Company's฀common฀stock฀that฀may฀be฀issued฀under฀the฀Company's฀equity฀compensation฀plans...

  • Page 96
    ...฀ the฀ years฀ ended฀ December฀ 29,฀ 2013,฀ December฀30,฀2012฀and฀December฀25,฀2011 Consolidated฀Balance฀Sheets฀as฀of฀December฀29,฀2013฀and฀December฀30,฀2012 Consolidated฀ Statements฀ of฀ Stockholders'฀ Equity฀ for฀ the฀ years฀ ended...

  • Page 97
    ...,฀฀2013:...ended฀December฀30,฀฀2012: ฀฀฀Deducted฀from...ended฀December฀25,฀฀2011: ฀฀฀Deducted฀from...฀schedules฀...related฀ instructions฀ or฀ are฀ inapplicable฀ and,฀ therefore,฀have฀been฀omitted.฀ ฀ (a)(3)฀ Exhibits:฀ ฀ The฀exhibits฀listed...

  • Page 98
    ...report฀ to฀ be฀ signed฀ on฀ its฀ behalf฀ by฀ the฀ undersigned,฀ thereunto฀ duly฀ authorized.฀ ฀ Date:฀฀February฀25,฀2014฀ ฀ ฀ PAPA฀JOHN'S฀INTERNATIONAL,฀INC By:฀฀ /s/฀John฀H.฀Schnatter John... /s/฀W.฀Kent฀Taylor W.฀Kent฀Taylor฀ ...

  • Page 99
    ...Amended฀December฀21,฀2012.฀ Papa฀ John's฀ International,฀ Inc.฀ Deferred฀ Compensation฀ Plan,฀ as฀ amended฀ through฀ December฀ 5,฀ 2012.฀ Exhibit฀ 10.1฀ to฀ our฀ report฀ on฀ Form฀ 10-K฀ as฀ filed฀ on฀ February฀ 28,฀ 2013฀is฀incorporated...

  • Page 100
    ...on฀ April฀23,฀2013฀is฀incorporated฀herein฀by฀reference.฀ ฀ Employment฀ Agreement฀ between฀ Papa฀ John's฀ International,฀ Inc.฀ and฀ Christopher฀ J.฀ Sternberg฀ dated฀ March฀ 5,฀ 2012.฀ Exhibit฀ 10.2฀ to฀ our฀ Report฀ on฀ Form฀ 8-K฀ as...

  • Page 101
    ... this฀ Annual฀ Report฀ on฀ Form฀ 10-K฀ are฀ not฀ contained฀ herein.฀ The฀ Company฀ will฀ furnish฀ a฀copy฀ of฀ any฀ of฀ the฀ Exhibits฀ to฀ a฀stockholder฀ upon฀ written฀ request฀ to฀Investor฀ Relations,฀ Papa฀John's฀International,฀Inc...

  • Page 102
    ...at: Papa John's International, Inc. 2002 Papa John's Boulevard Louisville, Kentucky 40299 Independent Public Accountants Ernst & Young LLP Transfer Agent Computershare Shareholder Services 211 Quality Circle, Suite 210 College Station, TX 77845 www.computershare.com/investor 800-622-6757 (US, Canada...

  • Page 103
    ...Costa Rica Chile Panama Colombia Ecuador Peru Note: 2013 Markets entered - Guatemala Egypt Saudi Arabia Malaysia Kuwait Bahrain Qatar United Arab Emirates Oman Guam Philippines BETTER IN G DI RE ENTS. B ET Note: International Locations as of December 30, 2012 2012 Markets entered - Azerbaijan...