Papa Johns 2015 Annual Report Download - page 43

30
Insurance Reserves
Our insurance programs for workers’ compensation, owned and non-owned automobiles, general liability,
property, and health insurance coverage provided to our employees are funded by the Company up to
certain retention levels. Retention limits generally range from $100,000 to $500,000 per occurrence.
Losses are accrued based upon undiscounted estimates of the aggregate retained liability for claims
incurred using certain third-party actuarial projections and our claims loss experience. The estimated
insurance claims losses could be significantly affected should the frequency or ultimate cost of claims
differ significantly from historical trends used to estimate the insurance reserves recorded by the
Company. See “Note 12” of “Notes to Consolidated Financial Statements” for additional information.
Deferred Income Tax Accounts and Tax Reserves
Papa John’s is subject to income taxes in the United States and several foreign jurisdictions. Significant
judgment is required in determining Papa John’s provision for income taxes and the related assets and
liabilities. The provision for income taxes includes income taxes paid, currently payable or receivable and
those deferred.
Deferred tax assets and liabilities are determined based on differences between financial reporting and tax
basis of assets and liabilities, and are measured using enacted tax rates and laws that are expected to be in
effect when the differences reverse. Deferred tax assets are also recognized for the estimated future
effects of tax loss carryforwards. The effect on deferred taxes of changes in tax rates is recognized in the
period in which the new tax rate is enacted. Valuation allowances are established when necessary on a
jurisdictional basis to reduce deferred tax assets to the amounts we expect to realize. As of December 27,
2015, we had a net deferred income tax liability of approximately $2.2 million.
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 and adjust for events, such as statute
of limitations expirations, court rulings or audit settlements, which may impact our ultimate payment for
such exposures. We recognized increases in income tax expense of $731,000 in 2015 and $117,000 in
2014 and a decrease in income tax expense of $909,000 in 2013 associated with the finalization of certain
income tax matters. See “Note 15” of “Notes to Consolidated Financial Statements” for additional
information.
Fiscal Year
Our fiscal year ends on the last Sunday in December of each year. All fiscal years presented in the
accompanying consolidated financial statements consist of 52 weeks.
Two-for-One Stock Split
The Company completed a two-for-one stock split of the Company’s outstanding shares of stock in
December 2013 effected in the form of a stock dividend. Shareholders of record on December 12, 2013
received one additional share for each outstanding share of stock held on the record date. The stock
dividend was distributed effective December 27, 2013. All share and per-share amounts have been
adjusted to reflect the stock split.