Papa Johns 2015 Annual Report Download - page 91

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78
16. Related Party Transactions (continued)
We had the following transactions with PJMF:
•
PJMF reimbursed Papa John’s $841,000, $634,000 and $2.2 million in 2015, 2014, and 2013,
respectively, for certain costs associated with national pizza giveaways awarded to our online
loyalty program customers.
•
PJMF reimbursed Papa John’s $1.4 million, $1.2 million, and $782,000 in 2015, 2014, and 2013,
respectively, for certain administrative services (i.e., marketing, accounting, and information
services), graphic design services, services and expenses of our founder as brand spokesman, and
for software maintenance fees.
17. 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 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.
Perrin v. Papa John’s International, Inc. and Papa John’s USA, Inc. is a conditionally certified collective
and class action filed in August 2009 in the United States District Court, Eastern District of Missouri
(“the Court”), alleging that delivery drivers were not properly reimbursed for mileage and expenses in
accordance with the Fair Labor Standards Act (“FLSA”). Approximately 3,900 drivers out of a potential
class size of 28,800 opted into the action. In December 2013, the Court granted a motion for class
certification in five additional states, which added approximately 15,000 plaintiffs to the case. The parties
reached a settlement in principle, which was preliminarily approved by the Court in September 2015.
With the preliminary settlement agreement, the Company recorded a pre-tax expense of $12.3 million in
June 2015 under the provisions of ASC 450, Contingencies. This amount is separately reported as Legal
settlement expense in the consolidated statements of income. The Court issued its final order approving
the settlement on January 12, 2016, with no changes to the previously recorded expense. The Company
then remitted funds to the administrator for the payment of claims and plaintiffs’ attorney fees. The
Company continues to deny any wrongdoing in this matter.
Leases
We lease office, retail and commissary space under operating leases, which have an average term of five
years and provide for at least one renewal. Certain leases further provide that the lease payments may be
increased annually based on the fixed rate terms or adjustable terms such as the Consumer Price Index.
PJUK, our subsidiary located in the United Kingdom, leases certain retail space, which is primarily
subleased to our franchisees. We also lease the tractors and trailers used by our distribution subsidiary,
PJFS, for an average period of seven years. Total lease expense was $36.2 million in 2015, $34.7 million
in 2014 and $33.2 million in 2013, net of sublease payments received.
We subleased certain sites to our franchisees and other third parties in 2015, 2014 and 2013 and received
payments of $6.5 million, $6.7 million and $4.9 million, respectively, which are netted against the
corresponding expense.