Papa John’s(PZZA) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, comprehensive income, stockholders' deficit, and cash flows, with detailed notes on accounting policies and key financial events Condensed Consolidated Balance Sheets This section provides a snapshot of the company's assets, liabilities, and stockholders' deficit at specific reporting dates Condensed Consolidated Balance Sheet Highlights (in thousands): | Metric | June 29, 2025 | December 29, 2024 | | :-------------------------------- | :------------ | :---------------- | | Total Assets | $890,442 | $888,952 | | Total Liabilities | $1,306,304 | $1,302,265 | | Total Stockholders' Deficit | $(416,754) | $(414,216) | Condensed Consolidated Statements of Operations This section details the company's revenues, operating income, and net income over specific reporting periods Condensed Consolidated Statements of Operations Highlights (in thousands, except per share amounts): | Metric | Three Months Ended June 29, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 29, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total Revenues | $529,166 | $507,894 | $1,047,475 | $1,021,810 | | Operating Income | $24,490 | $28,226 | $48,455 | $61,944 | | Net Income Attributable to the Company | $9,531 | $12,243 | $18,753 | $26,879 | | Diluted Earnings Per Common Share | $0.28 | $0.37 | $0.56 | $0.82 | Condensed Consolidated Statements of Comprehensive Income This section presents net income and other comprehensive income components, reflecting total changes in equity from non-owner sources - Foreign currency translation adjustments contributed a gain of $3.6 million for the six months ended June 29, 2025, compared to a loss of $(0.4) million in the prior year period[15] - Interest rate swaps resulted in a loss of $(0.5) million for the six months ended June 29, 2025, compared to a gain of $1.0 million in the prior year period[15] Condensed Consolidated Statements of Comprehensive Income Highlights (in thousands): | Metric | Three Months Ended June 29, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 29, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income | $9,671 | $12,536 | $19,014 | $27,450 | | Other comprehensive income (loss), before tax | $1,975 | $253 | $3,165 | $575 | | Comprehensive income attributable to the Company | $11,104 | $12,439 | $21,242 | $27,324 | Condensed Consolidated Statements of Stockholders' Deficit This section outlines changes in stockholders' deficit, including net income, other comprehensive income, dividends, and stock-based compensation Key Changes in Stockholders' Deficit (in thousands, six months ended June 29, 2025): | Item | Amount | | :-------------------------------- | :------- | | Balance at December 29, 2024 | $(414,216) | | Net income | $18,753 | | Other comprehensive income, net of tax | $2,489 | | Dividends on common stock | $(30,602) | | Stock-based compensation expense | $7,493 | | Balance at June 29, 2025 | $(416,754) | Condensed Consolidated Statements of Cash Flows This section reports cash flows from operating, investing, and financing activities, showing changes in cash and cash equivalents Condensed Consolidated Statements of Cash Flows Highlights (in thousands, six months ended): | Activity | June 29, 2025 | June 30, 2024 | | :------------------------------------------ | :------------ | :------------ | | Net cash provided by operating activities | $66,843 | $41,957 | | Net cash used in investing activities | $(19,389) | $(23,841) | | Net cash used in financing activities | $(52,751) | $(34,428) | | Cash and cash equivalents at end of period | $33,299 | $24,305 | Notes to Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements 1. Basis of Presentation This note describes the preparation of unaudited interim financial statements in accordance with GAAP - The accompanying unaudited Condensed Consolidated Financial Statements are prepared in accordance with GAAP for interim financial information[24] - Operating results for the three and six months ended June 29, 2025, are not necessarily indicative of the results expected for the full fiscal year ending December 28, 2025[24] 2. Significant Accounting Policies This note details the key accounting policies, including recent changes and their retrospective application - The Company implemented financial statement changes in its 2024 Annual Report on Form 10-K, adopting ASU 2023-07, with presentation changes to the Condensed Consolidated Statements of Operations and Cash Flows applied retrospectively[27] - An updated internal cost allocation methodology was implemented prospectively beginning December 29, 2024, resulting in a higher allocation of corporate expenses to North America franchising and International segments, with prior-period comparative information recast[28] - During the first quarter of 2025, a tornado caused $0.9 million in pre-tax expenses, primarily operating lease right-of-use asset impairment charges, at the Grand Prairie, Texas QC Center[44] - During the second quarter of 2025, a tornado caused $2.7 million in asset impairment charges and $1.5 million in additional operating expenses at the Louisville, Kentucky restaurant support center and QC Center, with anticipated insurance recovery[45] - The Company received $3.5 million in insurance proceeds during the three months ended June 29, 2025, related to the two tornado incidents[46] Recent Accounting Pronouncements This note discusses the impact and effective dates of recently issued accounting standards updates - ASU 2023-09, 'Improvements to Income Tax Disclosures,' is effective for fiscal years beginning after December 15, 2024, and is not expected to have a material impact on financial position or results of operations[48] - ASU No. 2024-03, 'Disaggregation of Income Statement Expenses,' is effective for fiscal years beginning after December 15, 2026, and the Company is assessing its impact[49] 3. Leases This note provides information on the company's lease arrangements, including subleases and contingent liabilities - The Company subleases approximately 340 Papa Johns restaurants to franchisees in the UK, recognizing $2.8 million and $5.4 million in sublease income for the three and six months ended June 29, 2025, respectively[50] - As of June 29, 2025, the Company is contingently liable for approximately 70 Domestic leases with an estimated maximum undiscounted payment of $9.1 million in case of nonpayment by primary lessees[51] 4. Papa John's Marketing Fund, Inc. This note describes the consolidated variable interest entity, PJMF, and its role in advertising and promotion - Papa John's Marketing Fund, Inc. (PJMF) is a consolidated variable interest entity (VIE) that operates at break-even, collecting contributions from Domestic restaurants for advertising and promotional programs[53] PJMF Assets and Liabilities (in thousands, June 29, 2025): | Category | Amount | | :-------------------------- | :------- | | Total Assets | $38,189 | | Total Liabilities | $48,235 | 5. Revenue Recognition This note details the company's revenue recognition policies and contract liabilities - The Company recognized $7.9 million and $17.7 million related to deferred revenue during the three and six months ended June 29, 2025, respectively[56] Contract Liabilities (in thousands): | Category | June 29, 2025 | December 29, 2024 | Change | | :-------------------------------- | :------------ | :---------------- | :----- | | Unearned franchise fees and royalties | $20,652 | $21,860 | $(1,208) | | Unredeemed gift card liabilities | $6,680 | $7,694 | $(1,014) | | Customer loyalty program obligations | $5,707 | $7,252 | $(1,545) | | Total contract liabilities | $33,039 | $36,806 | $(3,767) | 6. Common Stock This note provides information on outstanding common stock, share repurchase programs, and dividends - The Company had 32.8 million outstanding shares of common stock as of June 29, 2025[61] - Approximately $90.2 million remained available under the Company's share repurchase program as of June 29, 2025, with no activity during the three and six months ended June 29, 2025, or June 30, 2024[63] - Aggregate cash dividends of approximately $30.5 million ($0.92 per share) were paid for the six months ended June 29, 2025[65] - A third-quarter dividend of $0.46 per common share (approximately $15.4 million) was declared on August 1, 2025, payable on August 29, 2025[65] 7. Earnings per Share This note presents the basic and diluted earnings per common share calculations for various periods Earnings Per Common Share (EPS): | Metric | Three Months Ended June 29, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 29, 2025 | Six Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Basic EPS | $0.28 | $0.37 | $0.56 | $0.82 | | Diluted EPS | $0.28 | $0.37 | $0.56 | $0.82 | 8. Debt This note details the company's long-term debt, credit facilities, and interest rate management strategies - The Company amended its credit agreement on March 26, 2025, establishing a $200.0 million Term Loan and a $600.0 million senior secured revolving credit facility (PJI Revolving Facility), maturing on March 26, 2030[71] - Approximately $466.2 million remained available under the PJI Revolving Facility as of June 29, 2025[73] - During the three months ended June 29, 2025, the Company executed two new interest rate swaps, each with notional values of $50.0 million, to replace maturing swaps and mitigate interest rate exposure[76] Long-term Debt, Net (in thousands, June 29, 2025): | Category | Amount | | :-------------------------- | :------- | | Senior Notes | $400,000 | | Term Loan | $200,000 | | Revolving Facilities | $133,804 | | Outstanding debt | $733,804 | | Unamortized debt issuance costs | $(7,523) | | Total long-term debt, net | $726,281 | 9. Restructuring This note outlines the International Transformation Plan, including restaurant closures, refranchising, and associated costs - The International Transformation Plan involved strategic restaurant closures and divestitures in the UK, resulting in the closure of 43 Company-owned and 32 franchised underperforming UK restaurants during 2024 and 2025[82] - The Company completed the refranchising of 60 formerly Company-owned restaurants in 2024[83] - Total estimated pre-tax costs for the International Transformation Plan are approximately $35 million, with $34.1 million incurred through the second quarter of 2025, and the remainder expected in 2025[84] International Transformation Costs (in thousands): | Cost Category | Three Months Ended June 29, 2025 | Six Months Ended June 29, 2025 | | :------------------------------------ | :------------------------------- | :----------------------------- | | Professional services and other related costs | $780 | $2,214 | | Loss on franchisee notes receivable | $1,050 | $2,161 | | Long-lived asset impairment charges | $801 | $801 | | Total international transformation costs | $2,451 | $4,631 | 10. Litigation, Commitments and Contingencies This note discloses ongoing legal proceedings, commitments, and contingent liabilities affecting the company - The Company reached a $5.0 million settlement in principle for the 'In re Papa John's Employee & Franchise Employee Antitrust Litigation' class action, recorded in Q1 2022 and accrued as of June 29, 2025[87] 11. Segment Information This note provides financial data for the company's reportable segments, evaluated by adjusted EBITDA - The Company has four reportable segments: Domestic Company-owned restaurants, North America franchising, North America commissaries, and International operations[88] - The Chief Executive Officer, as the chief operating decision maker (CODM), evaluates segment performance and allocates resources based on adjusted EBITDA[90] Segment Adjusted EBITDA (in thousands, three months ended June 29, 2025): | Segment | Adjusted EBITDA | | :-------------------------------- | :-------------- | | Domestic Company-owned restaurants | $9,864 | | North America franchising | $26,843 | | North America commissaries | $19,652 | | International | $5,637 | | Total Segment adjusted EBITDA | $61,996 | Segment Adjusted EBITDA (in thousands, six months ended June 29, 2025): | Segment | Adjusted EBITDA | | :-------------------------------- | :-------------- | | Domestic Company-owned restaurants | $14,896 | | North America franchising | $54,091 | | North America commissaries | $39,004 | | International | $11,019 | | Total Segment adjusted EBITDA | $119,010 | 12. Subsequent Events This note reports significant events occurring after the balance sheet date, including new legislation and asset sales - On July 4, 2025, the 'One Big Beautiful Bill Act' was signed into U.S. law, which is expected to have a material impact on current and deferred tax assets/liabilities and a favorable impact on cash taxes paid in 2025[101] - On July 18, 2025, the Company entered an agreement to sell its 70% interest in a consolidated joint venture (85 Domestic Company-owned restaurants) for approximately $25 million, expecting an estimated pre-tax gain of $15 million to $20 million[102] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial condition, operational results, strategic priorities, recent developments, liquidity, capital resources, and market trends Overview This section provides a high-level summary of the company's global restaurant operations and revenue streams - As of June 29, 2025, Papa John's operates 5,989 restaurants globally, comprising 554 Company-owned and 5,435 franchised locations across 50 countries[104] - Revenues are derived from Company-owned restaurant sales, franchise royalties and fees, sales of food and paper products to franchisees, marketing fund contributions, and technology service fees[104] Recent Developments and Trends This section highlights key strategic investments, marketing initiatives, and restaurant development efforts - The Company is investing up to an additional $25 million in marketing throughout 2025 to enhance its 'BETTER INGREDIENTS. BETTER PIZZA' platform and value perception[106] - Strategic investments in technology infrastructure include a partnership with Google Cloud and the development of new omnichannel experiences, including a new app for iOS and Android[106] - A three-year waiver of PJMF contributions is offered for new restaurants opened in 2025 to accelerate domestic development[107] - In Q2 2025, 45 new restaurants were opened systemwide (19 North America, 26 International)[107] International Transformation Plan This section provides an update on the final stages of the International Transformation Plan and its associated costs - The International Transformation Plan is in its final stages, expected to be completed during 2025, with total estimated pre-tax costs of approximately $35 million ($34.1 million incurred through Q2 2025)[108] Global Restaurant Sales and Unit Information This section presents comparable sales growth, system-wide restaurant sales growth, and unit count information - Total restaurants at the end of Q2 2025 were 5,989, with a trailing four quarters net restaurant growth of 106 units[112] Comparable Sales Growth (Decline) (excluding foreign currency): | Segment | Three Months Ended June 29, 2025 | Six Months Ended June 29, 2025 | | :-------------------------------- | :------------------------------- | :----------------------------- | | Domestic Company-owned restaurants | 0.3% | (2.1)% | | North America franchised restaurants | 1.0% | (0.7)% | | North America restaurants | 0.9% | (1.0)% | | International restaurants | 3.7% | 3.5% | | Total comparable sales growth (decline) | 1.6% | 0.1% | System-wide Restaurant Sales Growth (Decline) (excluding foreign currency): | Segment | Three Months Ended June 29, 2025 | Six Months Ended June 29, 2025 | | :-------------------------------- | :------------------------------- | :----------------------------- | | Domestic Company-owned restaurants | 1.5% | (0.8)% | | North America franchised restaurants | 2.7% | 1.1% | | North America restaurants | 2.5% | 0.7% | | International restaurants | 6.6% | 6.1% | | Total global system-wide restaurant sales growth (decline) | 3.5% | 2.1% | Results of Operations This section analyzes the company's financial performance, including revenue, costs, expenses, and segment results Financial Statement Updates This section details retrospective presentation changes and updates to internal cost allocation methodologies - Presentation changes to the Condensed Consolidated Statements of Operations and Cash Flows were applied retrospectively due to the adoption of ASU 2023-07[113] - The internal cost allocation methodology was updated, resulting in a higher allocation of corporate expenses to North America franchising and International segments, with prior-period comparative information recast[114] Revenues This section provides a detailed breakdown and analysis of the company's revenue streams and their changes - Company-owned restaurant sales decreased primarily due to declines in UK Company-owned restaurant revenues from closures and refranchising, partially offset by a $2.6 million increase in Domestic Company-owned restaurant revenue for the three months ended June 29, 2025[118] - Franchise royalties and fees increased due to growth in North America franchised equivalent units and International comparable sales[120] - Commissary revenues increased due to higher prices and transaction volumes[123] - Other revenues increased due to higher revenues generated from technology services, resulting from an increase in the technology fee charged to franchisees[124] Revenue Components (in thousands): | Revenue Type | Three Months Ended June 29, 2025 | Three Months Ended June 30, 2024 | % Change QTD | Six Months Ended June 29, 2025 | Six Months Ended June 30, 2024 | % Change YTD | | :-------------------------- | :------------------------------- | :------------------------------- | :----------- | :----------------------------- | :----------------------------- | :----------- | | Company-owned restaurant sales | $178,989 | $184,640 | (3.1)% | $352,870 | $375,891 | (6.1)% | | Franchise royalties and fees | $48,302 | $46,552 | 3.8% | $96,358 | $93,705 | 2.8% | | Commissary revenues | $234,576 | $214,322 | 9.5% | $463,517 | $431,834 | 7.3% | | Other revenues | $23,136 | $20,410 | 13.4% | $46,893 | $41,345 | 13.4% | | Advertising funds revenue | $44,163 | $41,970 | 5.2% | $87,837 | $79,035 | 11.1% | | Total revenues | $529,166 | $507,894 | 4.2% | $1,047,475 | $1,021,810 | 2.5% | Costs and Expenses This section analyzes the various cost and expense categories, highlighting key drivers of changes - Cost of sales increased due to higher volumes for Domestic QC Centers, higher food costs for Domestic Company-owned restaurants, and higher local advertising costs, partially offset by lower costs from UK Company-owned restaurants due to restructuring[127] - General and administrative expenses increased by $17.9 million for the three months ended June 29, 2025, primarily due to $8.6 million in incremental marketing investments and a $3.7 million increase from higher incentive compensation[130] - Depreciation and amortization expenses increased due to higher depreciation related to investments in technology platforms[131] Costs and Expenses (in thousands): | Expense Type | Three Months Ended June 29, 2025 | Three Months Ended June 30, 2024 | % Change QTD | Six Months Ended June 29, 2025 | Six Months Ended June 30, 2024 | % Change YTD | | :-------------------------- | :------------------------------- | :------------------------------- | :----------- | :----------------------------- | :----------------------------- | :----------- | | Cost of sales | $371,716 | $363,038 | 2.4% | $738,212 | $730,704 | 1.0% | | General and administrative expenses | $70,118 | $57,046 | 22.9% | $135,285 | $114,923 | 17.7% | | Depreciation and amortization | $18,819 | $17,594 | 7.0% | $37,162 | $35,268 | 5.4% | | Advertising funds expense | $44,023 | $41,990 | 4.8% | $88,361 | $78,971 | 11.9% | | Total costs and expenses | $504,676 | $479,668 | 5.2% | $999,020 | $959,866 | 4.1% | Segment Financial Performance This section evaluates the adjusted EBITDA performance of each reportable segment - Domestic Company-owned restaurants' adjusted EBITDA decreased due to higher food and labor costs and a 2.1% decline in comparable sales for the six months ended June 29, 2025[135] - North America commissaries' adjusted EBITDA increased due to higher prices, partially offset by higher food costs, salaries, benefits, and rent[137] - International adjusted EBITDA increased due to reduced operating losses from UK Company-owned restaurants in the prior year, when more restaurants were owned and operated[138] Segment Adjusted EBITDA (in thousands): | Segment | Three Months Ended June 29, 2025 | Three Months Ended June 30, 2024 | Change QTD | Six Months Ended June 29, 2025 | Six Months Ended June 30, 2024 | Change YTD | | :-------------------------------- | :------------------------------- | :------------------------------- | :--------- | :----------------------------- | :----------------------------- | :--------- | | Domestic Company-owned restaurants | $9,864 | $13,474 | $(3,610) | $14,896 | $28,413 | $(13,517) | | North America franchising | $26,843 | $27,207 | $(364) | $54,091 | $55,714 | $(1,623) | | North America commissaries | $19,652 | $15,042 | $4,610 | $39,004 | $32,217 | $6,787 | | International | $5,637 | $3,713 | $1,924 | $11,019 | $7,906 | $3,113 | Items Below Operating Income This section covers financial items reported below operating income, including interest expense and income taxes Net Interest Expense This section details changes in net interest expense, primarily influenced by average interest rates - Net interest expense decreased by $0.3 million and $1.3 million for the three and six months ended June 29, 2025, respectively, primarily due to lower average interest rates[140] Income Tax Expense This section analyzes the effective tax rate and its drivers for the reporting periods - The higher effective tax rate for the three months ended June 29, 2025, was primarily due to lower pretax book income and tax shortfall from vesting of restricted shares[141] Effective Tax Rate: | Period | June 29, 2025 | June 30, 2024 | | :-------------------------- | :------------ | :------------ | | Three Months Ended | 30.5% | 27.7% | | Six Months Ended | 31.6% | 31.3% | Net Income Attributable to Noncontrolling Interests This section reports the portion of net income allocated to noncontrolling interests - Net income attributable to noncontrolling interests was $0.1 million and $0.3 million for the three and six months ended June 29, 2025, respectively[143] Diluted Earnings Per Common Share This section presents both GAAP and non-GAAP diluted earnings per common share Diluted Earnings Per Common Share: | Metric | Three Months Ended June 29, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 29, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Diluted EPS | $0.28 | $0.37 | $0.56 | $0.82 | | Adjusted Diluted EPS (non-GAAP) | $0.41 | $0.61 | $0.77 | $1.28 | Non-GAAP Measures This section defines and reconciles non-GAAP financial measures used for performance assessment and incentive plans - The Company uses non-GAAP measures (adjusted EBITDA, adjusted net income, adjusted diluted EPS) to assess operating performance, allocate resources, and administer incentive plans[146] Adjusted Non-GAAP Financial Measures (in thousands, except per share amounts): | Metric | Three Months Ended June 29, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 29, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Adjusted EBITDA | $52,615 | $58,920 | $102,239 | $119,485 | | Adjusted net income attributable to common shareholders | $13,523 | $20,083 | $25,335 | $42,090 | | Adjusted diluted earnings per common share | $0.41 | $0.61 | $0.77 | $1.28 | Liquidity and Capital Resources This section discusses the company's cash flows, capital priorities, debt covenants, and future capital expenditures - Primary liquidity sources are cash flows from operations and borrowings under the Second Amended and Restated Credit Agreement[150] - Capital priorities include investing for growth, maintaining a strong balance sheet, and returning capital to shareholders[151] - Net cash provided by operating activities increased by $24.9 million to $66.8 million for the six months ended June 29, 2025, primarily due to favorable timing of collections and marketing spend[153] - Estimated capital expenditures for 2025 are $75 million to $85 million, including $8 million to $13 million for tornado damage rebuilding, with anticipated insurance recovery[155] - Approximately $90.2 million remained available under the share repurchase program as of June 29, 2025, with no activity in Q2/H1 2025 or 2024[164] - The 'One Big Beautiful Bill Act' is anticipated to result in an estimated $10 million to $15 million reduction in cash taxes paid during the second half of 2025[167] Financial Covenants as of June 29, 2025: | Covenant | Permitted Ratio | Actual Ratio | | :-------------------- | :-------------- | :----------- | | Leverage ratio | Not to exceed 5.25 to 1.0 | 3.4 to 1.0 | | Interest coverage ratio | Not less than 2.00 to 1.0 | 3.0 to 1.0 | Free Cash Flow (in thousands, six months ended): | Metric | June 29, 2025 | June 30, 2024 | | :-------------------------------- | :------------ | :------------ | | Net cash provided by operating activities | $66,843 | $41,957 | | Purchases of property and equipment | $(30,305) | $(29,155) | | Free cash flow | $36,538 | $12,802 | Impact of Inflation and Macroeconomic Trends This section addresses the effects of inflation, rising costs, and macroeconomic trends on the company's operations - The Company has experienced price increases in food items, labor, benefits, fuel, and other energy costs, impacting profitability directly and indirectly[172] - Strategies to mitigate inflationary pressures include compensating menu price increases (subject to competitive pressure) and expense control measures[172] - Proposed tariffs are not currently expected to significantly impact the domestic business, as a substantial proportion of ingredients are sourced domestically[172] Forward-Looking Statements This section cautions readers about the inherent risks and uncertainties associated with forward-looking statements - Forward-looking statements are subject to various risks, uncertainties, and assumptions, including macroeconomic conditions, labor costs, supply chain disruptions, cyber-attacks, geopolitical conflicts, and changes in consumer behavior[173] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section outlines the company's exposure to interest rate, foreign currency, and commodity price risks, along with management strategies Interest Rate Risk This section discusses the company's exposure to interest rate fluctuations and its use of interest rate swaps - The Company is exposed to interest rate changes on its PJI Revolving Facility and PJMF Revolving Facility[175] - Interest rate risk is minimized through the utilization of interest rate swaps, which are derivative financial instruments[175] Foreign Currency Exchange Rate Risk This section details the company's exposure to foreign currency fluctuations, primarily from international operations - The Company is exposed to foreign currency exchange rate fluctuations from its International operations, primarily in the UK, which accounted for approximately 8.3% and 8.0% of revenues for the three and six months ended June 29, 2025, respectively[177] - Foreign currency exchange rate fluctuations had a favorable impact of approximately $2.0 million on International revenues and $0.1 million on operating income for the six months ended June 29, 2025[178] - The Company has not historically hedged its exposure to foreign currency fluctuations[178] Commodity Price Risk This section addresses the company's exposure to commodity price volatility, especially for food and paper products - The Company is exposed to commodity price fluctuations for food and paper products, with cheese being the largest ingredient cost[179] - Pricing agreements with vendors, including forward pricing for a portion of cheese purchases, are used to manage commodity price risk[179] Item 4. Controls and Procedures This section confirms the effectiveness of disclosure controls and procedures and reports on changes in internal control over financial reporting Disclosure Controls and Procedures This section confirms the effectiveness of the company's disclosure controls and procedures as of the reporting date - The Company's disclosure controls and procedures were evaluated and deemed effective as of June 29, 2025[180] Changes in Internal Control Over Financial Reporting This section reports no material changes in internal control over financial reporting during the fiscal quarter - There were no material changes in the Company's internal control over financial reporting during the fiscal quarter ended June 29, 2025[181] PART II. OTHER INFORMATION Item 1. Legal Proceedings This section incorporates legal proceedings details from the financial statement notes, confirming involvement in lawsuits and accruals - The Company is involved in various lawsuits, claims, investigations, and proceedings arising in the ordinary course of business, with appropriate accruals reflected in the financial statements[182] Item 1A. Risk Factors This section confirms no material changes to the risk factors previously disclosed in the Annual Report on Form 10-K - There have been no material changes to the risk factors disclosed in the Company's Annual Report on Form 10-K for the fiscal year ended December 29, 2024[183] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section updates on the share repurchase program and details stock repurchases for tax withholding obligations Share Repurchase Program This section provides an update on the company's share repurchase program and remaining authorization - Approximately $90.2 million remained available under the Company's $425.0 million share repurchase program as of June 29, 2025, with no activity during the three months ended June 29, 2025[184] Repurchases of Stock for Tax Withholdings This section details common stock acquisitions from employees to satisfy tax withholding obligations - The Company acquired approximately 2,000 shares of its common stock from employees during the fiscal quarter ended June 29, 2025, to satisfy minimum tax withholding obligations upon vesting of restricted stock[186] Item 5. Other Information This section discloses Rule 10b5-1 trading plans adopted by directors and executive officers Rule 10b5-1 Trading Plans of Directors and Executive Officers This section details the adoption of Rule 10b5-1 trading plans by company executives - Ravi Thanawala, Chief Financial Officer & EVP, International, adopted a Rule 10b5-1(c) trading plan on May 29, 2025, for the sale of up to 15,400 shares of common stock[187] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including certifications, plan amendments, and iXBRL financial statements - Exhibits include certifications from the Chief Executive Officer and Chief Financial Officer, an amendment to the 2018 Omnibus Incentive Plan, and financial statements formatted in iXBRL[189]