Document and Entity Information
3 Months Ended
Mar. 25, 2012
Apr. 25, 2012
Document Information [Line Items]
Document Type
10-Q
Amendment Flag
false
Document Period End Date
Mar. 25, 2012
Document Fiscal Year Focus
2012
Document Fiscal Period Focus
Q1
Trading Symbol
PZZA
Entity Registrant Name
PAPA JOHNS INTERNATIONAL INC
Entity Central Index Key
0000901491
Current Fiscal Year End Date
--12-30
Entity Filer Category
Large Accelerated Filer
Entity Common Stock, Shares Outstanding
23,822,608
Condensed Consolidated Balance Sheets(USD $)
In Thousands, unless otherwise specified
Mar. 25, 2012
Dec. 25, 2011
Current assets:
Cash and cash equivalents
$45,112
$18,9421
Accounts receivable, net
30,251
28,1691
Notes receivable, net
4,278
4,2211
Inventories
18,969
20,0911
Prepaid expenses
9,395
10,2101
Other current assets
4,342
3,5221
Deferred income taxes
6,858
7,6361
Total current assets
119,205
92,7911
Property and equipment, net
184,167
185,1321
Notes receivable, less current portion, net
11,498
11,5021
Goodwill
75,328
75,0851
Other assets
26,407
25,8721
Total assets
416,605
390,3821
Current liabilities:
Accounts payable
34,953
32,9661
Income and other taxes payable
13,819
3,9691
Accrued expenses and other current liabilities
46,468
44,1981
Total current liabilities
95,240
81,1331
Deferred revenue
8,478
4,7801
Long-term debt
50,000
51,4891
Other long-term liabilities
23,795
22,0141
Long-term accrued income taxes
3,993
3,5971
Deferred income taxes
7,264
9,1471
Stockholders' equity:
Preferred stock
  
  1
Common stock
368
3671
Additional paid-in capital
266,783
262,4561
Accumulated other comprehensive income
2,060
1,8491
Retained earnings
315,551
298,8071
Treasury stock
(366,822)
(353,826)1
Total stockholders' equity, net of noncontrolling interests
217,940
209,6531
Noncontrolling interests in subsidiaries
9,895
8,5691
Total stockholders' equity
227,835
218,2221
Total liabilities and stockholders' equity
$416,605
$390,3821
Condensed Consolidated Statements of Comprehensive Income (Unaudited)(USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended
Mar. 25, 2012
Mar. 27, 2011
Total revenues
$331,276
$312,467
General and administrative expenses
31,596
29,074
Other general expenses
5,674
781
Depreciation and amortization
7,927
8,312
Total costs and expenses
304,020
285,256
Operating income
27,256
27,211
Investment income
170
177
Interest expense
(288)
(608)
Income before income taxes
27,138
26,780
Income tax expense
9,068
9,231
Net income, including noncontrolling interests
18,070
17,549
Net income attributable to noncontrolling interests
(1,326)
(1,122)
Net income, net of noncontrolling interests
16,744
16,427
Basic earnings per common share
$0.70
$0.64
Earnings per common share - assuming dilution
$0.69
$0.64
Basic weighted average shares outstanding
24,053
25,484
Diluted weighted average shares outstanding
24,438
25,757
Comprehensive income
18,281
18,822
Domestic Company-owned Restaurant [Member]
Revenue from external customers
143,815
138,671
Cost of sales
32,456
32,100
Salaries and benefits
38,813
37,649
Advertising and related costs
12,699
12,789
Occupancy costs
7,898
7,869
Other operating expenses
20,418
19,915
Total costs and expenses
112,284
110,322
North America [Member]
Franchise royalties
20,518
19,731
Franchise and development fees
222
185
Domestic Commissaries [Member]
Revenue from external customers
137,610
127,672
All Other Segments [Member]
Other sales
12,258
13,447
International [Member]
Royalties and franchise and development fees
4,486
3,762
Operating expenses
10,392
7,728
International Restaurant and Commissaries [Member]
Revenue from external customers
12,367
8,999
Domestic Commissary and Other [Member]
Cost of sales
112,838
106,443
Salaries and benefits
9,003
9,011
Other operating expenses
14,306
13,585
Total costs and expenses
$136,147
$129,039
Consolidated Statements of Stockholders' Equity (Unaudited)(USD $)
In Thousands
Total
Common Stock
Additional Paid-In Capital
Accumulated Other Comprehensive Income
Retained Earnings
Treasury Stock
Noncontrolling Interests in Subsidiaries
Balance at Dec. 26, 2010
$207,200
$361
$245,380
$849
$243,152
$(291,048)
$8,506
Balance (in shares) at Dec. 26, 2010
25,439
Net income
17,549
16,427
1,122
Other comprehensive income
1,273
1,273
Exercise of stock options (in shares)
63
Exercise of stock options
1,314
1
1,313
Tax effect of equity awards
31
31
Acquisition of Company common stock
(4,119)
(4,119)
Acquisition of Company common stock (in shares)
(143)
Net contributions (distributions) - noncontrolling interests
(1,729)
(1,729)
Stock-based compensation expense
1,795
1,795
Other
102
(50)
152
Balance at Mar. 27, 2011
223,416
362
248,469
2,122
259,579
(295,015)
7,899
Balance (in shares) at Mar. 27, 2011
25,359
Balance at Dec. 25, 2011
218,2221
367
262,456
1,849
298,807
(353,826)
8,569
Balance (in shares) at Dec. 25, 2011
24,019
Net income
18,070
16,744
1,326
Other comprehensive income
211
211
Exercise of stock options (in shares)
116
Exercise of stock options
3,728
1
3,727
Tax effect of equity awards
(351)
(351)
Acquisition of Company common stock
(13,820)
(13,820)
Acquisition of Company common stock (in shares)
(372)
Stock-based compensation expense
1,694
1,694
Issuance of restricted stock (in shares)
30
Issuance of restricted stock
(591)
591
Other
81
(152)
233
Balance at Mar. 25, 2012
$227,835
$368
$266,783
$2,060
$315,551
$(366,822)
$9,895
Balance (in shares) at Mar. 25, 2012
23,793
Consolidated Statements of Cash Flows (Unaudited)(USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 25, 2012
Mar. 27, 2011
Operating activities
Net income, including noncontrolling interests
$18,070
$17,549
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for uncollectible accounts and notes receivable
547
39
Depreciation and amortization
7,927
8,312
Deferred income taxes
(1,057)
2,664
Stock-based compensation expense
1,694
1,795
Excess tax benefit on equity awards
(129)
(107)
Other
678
43
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable
(2,670)
(3,011)
Inventories
1,122
(28)
Prepaid expenses
815
(324)
Other current assets
(820)
85
Other assets and liabilities
764
(721)
Accounts payable
1,987
(4,818)
Income and other taxes payable
9,850
4,874
Accrued expenses and other current liabilities
1,221
296
Long-term accrued income taxes
396
366
Deferred revenue
3,698
(327)
Net cash provided by operating activities
44,093
26,687
Investing activities
Purchase of property and equipment
(6,403)
(4,823)
Loans issued
(687)
(165)
Repayments of loans issued
703
1,468
Other
5
Net cash used in investing activities
(6,382)
(3,520)
Financing activities
Net repayments on line of credit facility
(1,489)
(51,000)
Excess tax benefit on equity awards
129
107
Tax payments for restricted stock
(303)
Proceeds from exercise of stock options
3,728
1,314
Acquisition of Company common stock
(13,820)
(4,119)
Distributions to noncontrolling interests
(1,729)
Other
82
(10)
Net cash used in financing activities
(11,673)
(55,437)
Effect of exchange rate changes on cash and cash equivalents
132
(6)
Change in cash and cash equivalents
26,170
(32,276)
Cash and cash equivalents at beginning of period
18,9421
47,829
Cash and cash equivalents at end of period
$45,112
$15,553
Basis of Presentation
Basis of Presentation
1.  
Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation have been included. Operating results for the three months ended March 25, 2012 are not necessarily indicative of the results that may be expected for the fiscal year ended December 30, 2012. For further information, refer to the consolidated financial statements and footnotes thereto included in the Annual Report on Form 10-K for Papa John’s International, Inc. (referred to as the “Company”, “Papa John’s” or in the first person notations of “we”, “us” and “our”) for the year ended December 25, 2011.
Significant Accounting Policies
Significant Accounting Policies
2.  
Significant Accounting Policies

Comprehensive Income

The Company adopted the required Accounting Standards Updates (“ASU”) Nos. 2011-05 and 2011-12, Comprehensive Income: Presentation of Comprehensive Income in the first quarter of 2012 on a retrospective basis. The updated guidance does not change the components of comprehensive income, but eliminates certain options for presenting comprehensive income in the financial statements. In accordance with this updated guidance, we are no longer permitted to present comprehensive income in our Consolidated Statements of Stockholders’ Equity. Instead, we are now required to present components of comprehensive income in either one continuous financial statement with two sections, net income and comprehensive income, or in two separate but consecutive statements. For the first quarter of 2012, we elected the one continuous financial statement approach.

Noncontrolling Interests

The Consolidation topic of the Accounting Standards Codification (“ASC”) requires all entities to report noncontrolling interests in subsidiaries as equity in the consolidated financial statements, but separate from the equity of the parent company. The Consolidation topic further requires that consolidated net income be reported at amounts attributable to the parent and the noncontrolling interest, rather than expensing the income attributable to the noncontrolling interest holder. Additionally, disclosures are required to clearly identify and distinguish between the interests of the parent company and the interests of the noncontrolling owners, including a disclosure on the face of the consolidated statements for income attributable to the noncontrolling interest holder.
 

Papa John’s had two joint venture arrangements as of March 25, 2012 and March 27, 2011, which were as follows:
 
   
Restaurants as
of March 25,
2012
  
Restaurants as
of March 27,
2011
Restaurant Locations
  
Papa John's Ownership*
    
Noncontrolling Interest
Ownership*
  
                           
Star Papa, LP
     76       75  
Texas
     51 %     49 %
Colonel's Limited, LLC
     52       52  
Maryland and Virginia
     70 %     30 %
                                   
                                   
*The ownership percentages were the same for both the 2012 and 2011 periods presented in the accompanying
  
consolidated financial statements.
                            
                                   

 
The income before income taxes attributable to the joint ventures for the three months ended March 25, 2012 and March 27, 2011 was as follows (in thousands):
 
   
March 25,
    
March 27,
  
   
2012
    
2011
  
             
Papa John's International, Inc.
   $ 2,043     $ 1,798  
Noncontrolling interests
     1,326       1,122  
Total income before income taxes
   $ 3,369     $ 2,920  
                 

The noncontrolling interest holders’ equity in the joint venture arrangements totaled $9.9 million as of March 25, 2012 and $8.6 million as of December 25, 2011.

Deferred Income Tax Accounts and Tax Reserves

We are subject to income taxes in the United States and several foreign jurisdictions. Significant judgment is required in determining our 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. We use an estimated annual effective rate based on expected annual income to determine our quarterly provision for income taxes. Discrete items are recorded in the quarter in which they occur.

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 is enacted. As a result, our effective tax rate may fluctuate. Valuation allowances are established when necessary on a jurisdictional basis to reduce deferred tax assets to the amounts we expect to realize. As of March 25, 2012, we had a net deferred tax liability of approximately $400,000.

Tax authorities periodically audit the Company. We record reserves for identified exposures. We evaluate these issues on a quarterly basis to adjust for events, such as court rulings or audit settlements, which may impact our ultimate payment for such exposures.
 

Subsequent Events

Effective April 23, 2012, the Company acquired 56 franchised Papa John’s restaurants in the Denver and Minneapolis markets, six of which were subsequently refranchised. The purchase price, which was paid in cash, was $5.1 million net of the divestiture proceeds from the six restaurants sold. The acquisition is not expected to have a material impact on our 2012 operating results.
 
Reclassifications

Certain prior year amounts in the Condensed Consolidated Balance Sheets and the Consolidated Statements of Cash Flows have been reclassified to conform to the current year presentation.
Accumulated Other Comprehensive Income (Loss)
Accumulated Other Comprehensive Income (Loss)
3.  
Accumulated Other Comprehensive Income (Loss)

Accumulated Other Comprehensive Income (Loss) is comprised of the following (in thousands):
 
   
Foreign
Currency
    
Interest
Rate
Swaps (a)
    
Defined
Pension
Plan
    
Accumulated
Other
Comprehensive Income
  
                         
Beginning balance - December 26, 2010
   $ 1,008     $ (159 )   $ -     $ 849  
Current period other comprehensive income
     1,114       159       -       1,273  
Ending balance - March 27, 2011
   $ 2,122     $ -     $ -     $ 2,122  
                                 
Beginning balance - December 25, 2011
   $ 1,872     $ 6     $ (29 )   $ 1,849  
Current period other comprehensive income (loss)
     291       (80 )     -       211  
Ending balance - March 25, 2012
   $ 2,163     $ (74 )   $ (29 )   $ 2,060  
                                 
(a) Amounts are shown net of tax of $89,000 and $47,000 for the three months ended March 27, 2011
  
     and March 25, 2012, respectively.
Fair Value Measurements and Disclosures
Fair Value Measurements and Disclosures
4.  
Fair Value Measurements and Disclosures

The Company is required to determine the fair value of financial assets and liabilities based on the price that would be received to sell the asset or paid to transfer the liability to a market participant. Assets and liabilities carried at fair value are required to be classified and disclosed in one of the following categories:

●  
Level 1: Quoted market prices in active markets for identical assets or liabilities.
●  
Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data.
●  
Level 3: Unobservable inputs that are not corroborated by market data.

Our financial assets and liabilities that were measured at fair value on a recurring basis as of March 25, 2012 and December 25, 2011 are as follows (in thousands):
 
   
Carrying
    
Fair Value Measurements
  
   
Value
    
Level 1
    
Level 2
    
Level 3
  
                         
March 25, 2012
                        
Financial assets:
                        
   Cash surrender value of life insurance policies *
   $ 12,341     $ 12,341     $ -     $ -  
                                 
Financial liabilities:
                                
   Interest rate swap
     118       -       118       -  
                             
December 25, 2011
                                
Financial assets:
                                
   Cash surrender value of life insurance policies *
   $ 11,387     $ 11,387     $ -     $ -  
   Interest rate swap
     11       -       11       -  
                                 
* Represents life insurance held in our non-qualified deferred compensation plan.
                  
                                 

There were no transfers among levels within the fair value hierarchy during the three months ended March 25, 2012.

The fair value of our interest rate swap is based on the sum of all future net present value cash flows. The future cash flows are derived based on the terms of our interest rate swap, as well as considering published discount factors, and projected London Interbank Offered Rates (“LIBOR”).
Debt
Debt
5.  
Debt

Our debt is comprised entirely of the revolving line of credit.  The balance was $50.0 million as of March 25, 2012 and $51.5 million as of December 25, 2011.

In September 2010, we entered into a five-year, $175.0 million unsecured revolving credit facility (“Credit Facility”). The Credit Facility was amended in November 2011 (the “Amended Credit Facility”), which extended the maturity date of the Credit Facility to November 30, 2016. Under the Amended Credit Facility, outstanding balances are charged interest at 75 basis points to 150 basis points over LIBOR or other bank developed rates at our option (previously charged 100 basis points to 175 basis points above LIBOR). The remaining availability under the Amended Credit Facility, reduced for outstanding letters of credit, approximated $111.5 million as of March 25, 2012. The fair value of the outstanding debt approximates the carrying value since the debt agreements are variable-rate instruments.

The Credit Facility contains customary affirmative and negative covenants, including financial covenants requiring the maintenance of specified fixed charges and leverage ratios. At March 25, 2012, we were in compliance with these covenants.

In August 2011, we entered into a new interest rate swap agreement that provides for a fixed rate of 0.53%, as compared to LIBOR, with a notional amount of $50.0 million. The new interest rate swap agreement expires in August 2013. We had two interest rate swap agreements that expired in January 2011. The previous swap agreements provided for fixed rates of 4.98% and 3.74%, as compared to LIBOR, with each having a notional amount of $50.0 million.

Our swaps are derivative instruments that are designated as cash flow hedges because the swaps provide a hedge against the effects of rising interest rates on borrowings. The effective portion of the gain or loss on the swap is reported as a component of accumulated other comprehensive income and reclassified into earnings in the same period or periods during which the swap affects earnings. Gains or losses on the swap representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current earnings. Amounts payable or receivable under the swap are accounted for as adjustments to interest expense. As of March 25, 2012, the swap is a highly effective cash flow hedge.
 

The weighted average interest rates for our revolving credit facilities, including the impact of the swap agreements, were 1.3% and 3.3% for the three months ended March 25, 2012 and March 27, 2011, respectively. Interest paid, including payments made or received under the swaps, was $249,000 and $878,000 for the three months ended March 25, 2012 and March 27, 2011, respectively. As of March 25, 2012, the portion of the $118,000 interest rate swap liability that would be reclassified into earnings during the next twelve months as interest expense approximates $83,000.
Calculation of Earnings Per Share
Calculation of Earnings Per Share
6.  
Calculation of Earnings Per Share

The calculations of basic earnings per common share and earnings per common share – assuming dilution are as follows (in thousands, except per-share data):

   
Three Months Ended
  
   
March 25,
    
March 27,
  
   
2012
    
2011
  
             
Basic earnings per common share:
            
Net income, net of noncontrolling interests
   $ 16,744     $ 16,427  
Weighted average shares outstanding
     24,053       25,484  
Basic earnings per common share
   $ 0.70     $ 0.64  
                 
Earnings per common share - assuming dilution:
                
Net income, net of noncontrolling interests
   $ 16,744     $ 16,427  
                 
Weighted average shares outstanding
     24,053       25,484  
Dilutive effect of outstanding equity awards
     385       273  
Diluted weighted average shares outstanding
     24,438       25,757  
Earnings per common share - assuming dilution
   $ 0.69     $ 0.64  

Shares subject to options to purchase common stock with an exercise price greater than the average market price for the quarter were not included in the computation of earnings per common share – assuming dilution because the effect would have been antidilutive. The weighted average number of shares subject to the antidilutive options was 439,000 for the three months ended March 27, 2011 (none for the three months ended March 25, 2012).
Commitments and Contingencies
Commitments and Contingencies
7.  
Commitments and Contingencies

In connection with the 2006 sale of our former Perfect Pizza operations in the United Kingdom, we remain contingently liable for payment under approximately 40 lease agreements, primarily associated with Perfect Pizza restaurant sites for which the Perfect Pizza franchisor was primarily liable. As the initial party to the lease agreements, we are liable to the extent the primary obligor does not satisfy its payment obligations.
 
On August 1, 2011 the High Court of Justice Chancery Division, Birmingham District Registry entered an order placing Perfect Pizza in administration, thereby providing Perfect Pizza with protection from its creditors in accordance with UK insolvency law. On the same date, the administrators entered into an agreement to sell substantially all of the business and assets of Perfect Pizza. In accordance with the terms of the agreement, the buyer has an option period up to nine months to determine which Perfect Pizza leases they will assume.
 
The buyer is finalizing its lease assessment. Based on communications with the buyer, we believe we will remain contingently liable for the majority of these leases, which have varying terms with most expiring by the end of 2015. The estimated maximum amount of undiscounted rental payments we would be required to make in the event of non-payment under all such leases is approximately $2.0 million, net of amounts previously reserved in 2011 of aproximately $800,000.

We are subject to claims and legal actions in the ordinary course of business. We believe that all such claims and actions currently pending against us are either adequately covered by insurance or would not have a material adverse effect on us if decided in a manner unfavorable to us.
Segment Information
Segment Information
8.  
Segment Information

We have defined six reportable segments: domestic Company-owned restaurants, domestic commissaries, North America franchising, international operations, variable interest entities (“VIEs”) and “all other” units.

The domestic Company-owned restaurant segment consists of the operations of all domestic (“domestic” is defined as contiguous United States) Company-owned restaurants and derives its revenues principally from retail sales of pizza and side items, such as breadsticks, cheesesticks, chicken strips, chicken wings, dessert pizza, and soft drinks to the general public. The domestic commissary segment consists of the operations of our regional dough production and product distribution centers and derives its revenues principally from the sale and distribution of food and paper products to domestic Company-owned and franchised restaurants. The North America franchising segment consists of our franchise sales and support activities and derives its revenues from sales of franchise and development rights and collection of royalties from our franchisees located in the 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 our franchise sales and support activities, which derive revenues from sales of franchise and development rights and the collection of royalties from our international franchisees. International franchisees are defined as all franchise operations outside of the United States and Canada. BIBP Commodities, Inc., a franchisee-owned corporation, which operated through February 2011, was a VIE in which we were deemed the primary beneficiary, and is the only activity reflected in the VIE segment. All other business units that do not meet the quantitative thresholds for determining reportable segments, which are not operating segments, we refer to as our “all other” segment, which consists of operations that derive revenues from the sale, principally to Company-owned and franchised restaurants, of printing and promotional items, risk management services, and information systems and related services used in restaurant operations, including our online and other technology-based ordering platforms.

Generally, we evaluate performance and allocate resources based on profit or loss from operations before income taxes and eliminations. Certain administrative and capital costs are allocated to segments based upon predetermined rates or actual estimated resource usage. We account for intercompany sales and transfers as if the sales or transfers were to third parties and eliminate the activity in consolidation.

Our reportable segments are business units that provide different products or services. Separate management of each segment is required because each business unit is subject to different operational issues and strategies. No single external customer accounted for 10% or more of our consolidated revenues.
 

Our segment information is as follows (in thousands):

   
Three Months Ended
  
   
March 25, 2012
    
March 27, 2011
  
Revenues from external customers:
            
Domestic Company-owned restaurants
   $ 143,815     $ 138,671  
Domestic commissaries
     137,610       127,672  
North America franchising
     20,740       19,916  
International
     16,853       12,761  
All others
     12,258       13,447  
Total revenues from external customers
   $ 331,276     $ 312,467  
                 
Intersegment revenues:
                
Domestic commissaries
   $ 41,537     $ 38,100  
North America franchising
     549       548  
International
     54       47  
Variable interest entities
     -       25,117  
All others
     3,021       2,555  
Total intersegment revenues
   $ 45,161     $ 66,367  
                 
Income (loss) before income taxes:
                
Domestic Company-owned restaurants
   $ 12,321     $ 10,883  
Domestic commissaries
     11,166       9,554  
North America franchising
     18,140       18,009  
International
     272       (816 )
All others
     395       (378 )
Unallocated corporate expenses
     (15,166 )     (9,769 )
Elimination of intersegment profits
     10       (703 )
Total income before income taxes
   $ 27,138     $ 26,780  
                 
Property and equipment:
                
Domestic Company-owned restaurants
   $ 177,423          
Domestic commissaries
     87,014          
International
     18,047          
All others
     41,053          
Unallocated corporate assets
     133,452          
Accumulated depreciation and amortization
     (272,822 )        
Net property and equipment
   $ 184,167
Significant Accounting Policies (Policies)
Comprehensive Income
Comprehensive Income

The Company adopted the required Accounting Standards Updates (“ASU”) Nos. 2011-05 and 2011-12, Comprehensive Income: Presentation of Comprehensive Income in the first quarter of 2012 on a retrospective basis. The updated guidance does not change the components of comprehensive income, but eliminates certain options for presenting comprehensive income in the financial statements. In accordance with this updated guidance, we are no longer permitted to present comprehensive income in our Consolidated Statements of Stockholders’ Equity. Instead, we are now required to present components of comprehensive income in either one continuous financial statement with two sections, net income and comprehensive income, or in two separate but consecutive statements. For the first quarter of 2012, we elected the one continuous financial statement approach.
Noncontrolling Interests
Noncontrolling Interests

The Consolidation topic of the Accounting Standards Codification (“ASC”) requires all entities to report noncontrolling interests in subsidiaries as equity in the consolidated financial statements, but separate from the equity of the parent company. The Consolidation topic further requires that consolidated net income be reported at amounts attributable to the parent and the noncontrolling interest, rather than expensing the income attributable to the noncontrolling interest holder. Additionally, disclosures are required to clearly identify and distinguish between the interests of the parent company and the interests of the noncontrolling owners, including a disclosure on the face of the consolidated statements for income attributable to the noncontrolling interest holder.
 

Papa John’s had two joint venture arrangements as of March 25, 2012 and March 27, 2011, which were as follows:
 
   
Restaurants as
of March 25,
2012
  
Restaurants as
of March 27,
2011
Restaurant Locations
  
Papa John's Ownership*
    
Noncontrolling Interest
Ownership*
  
                           
Star Papa, LP
     76       75  
Texas
     51 %     49 %
Colonel's Limited, LLC
     52       52  
Maryland and Virginia
     70 %     30 %
                                   
                                   
*The ownership percentages were the same for both the 2012 and 2011 periods presented in the accompanying
  
consolidated financial statements.
                            
                                   

 
The income before income taxes attributable to the joint ventures for the three months ended March 25, 2012 and March 27, 2011 was as follows (in thousands):
 
   
March 25,
    
March 27,
  
   
2012
    
2011
  
             
Papa John's International, Inc.
   $ 2,043     $ 1,798  
Noncontrolling interests
     1,326       1,122  
Total income before income taxes
   $ 3,369     $ 2,920  
                 

The noncontrolling interest holders’ equity in the joint venture arrangements totaled $9.9 million as of March 25, 2012 and $8.6 million as of December 25, 2011.
Deferred Income Tax Accounts and Tax Reserves
Deferred Income Tax Accounts and Tax Reserves

We are subject to income taxes in the United States and several foreign jurisdictions. Significant judgment is required in determining our 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. We use an estimated annual effective rate based on expected annual income to determine our quarterly provision for income taxes. Discrete items are recorded in the quarter in which they occur.

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 is enacted. As a result, our effective tax rate may fluctuate. Valuation allowances are established when necessary on a jurisdictional basis to reduce deferred tax assets to the amounts we expect to realize. As of March 25, 2012, we had a net deferred tax liability of approximately $400,000.

Tax authorities periodically audit the Company. We record reserves for identified exposures. We evaluate these issues on a quarterly basis to adjust for events, such as court rulings or audit settlements, which may impact our ultimate payment for such exposures.
Subsequent Events
Subsequent Events

Effective April 23, 2012, the Company acquired 56 franchised Papa John’s restaurants in the Denver and Minneapolis markets, six of which were subsequently refranchised. The purchase price, which was paid in cash, was $5.1 million net of the divestiture proceeds from the six restaurants sold. The acquisition is not expected to have a material impact on our 2012 operating results.
Reclassifications
Reclassifications

Certain prior year amounts in the Condensed Consolidated Balance Sheets and the Consolidated Statements of Cash Flows have been reclassified to conform to the current year presentation.
Significant Accounting Policies (Tables)
Schedule of Joint Venture Arrangements
Papa John’s had two joint venture arrangements as of March 25, 2012 and March 27, 2011, which were as follows:
 
   
Restaurants as
of March 25,
2012
  
Restaurants as
of March 27,
2011
Restaurant Locations
  
Papa John's Ownership*
    
Noncontrolling Interest
Ownership*
  
                           
Star Papa, LP
     76       75  
Texas
     51 %     49 %
Colonel's Limited, LLC
     52       52  
Maryland and Virginia
     70 %     30 %
                                   
                                   
*The ownership percentages were the same for both the 2012 and 2011 periods presented in the accompanying
  
consolidated financial statements.
                            
                                   
Schedule of Pre-Tax Income Attributable to Noncontrolling Interest
The income before income taxes attributable to the joint ventures for the three months ended March 25, 2012 and March 27, 2011 was as follows (in thousands):
 
   
March 25,
    
March 27,
  
   
2012
    
2011
  
             
Papa John's International, Inc.
   $ 2,043     $ 1,798  
Noncontrolling interests
     1,326       1,122  
Total income before income taxes
   $ 3,369     $ 2,920  
                 
Accumulated Other Comprehensive Income (Loss) (Tables)
Schedule of Accumulated Other Comprehensive Income (Loss)
Accumulated Other Comprehensive Income (Loss) is comprised of the following (in thousands):
 
   
Foreign
Currency
    
Interest
Rate
Swaps (a)
    
Defined
Pension
Plan
    
Accumulated
Other
Comprehensive Income
  
                         
Beginning balance - December 26, 2010
   $ 1,008     $ (159 )   $ -     $ 849  
Current period other comprehensive income
     1,114       159       -       1,273  
Ending balance - March 27, 2011
   $ 2,122     $ -     $ -     $ 2,122  
                                 
Beginning balance - December 25, 2011
   $ 1,872     $ 6     $ (29 )   $ 1,849  
Current period other comprehensive income (loss)
     291       (80 )     -       211  
Ending balance - March 25, 2012
   $ 2,163     $ (74 )   $ (29 )   $ 2,060  
                                 
(a) Amounts are shown net of tax of $89,000 and $47,000 for the three months ended March 27, 2011
  
     and March 25, 2012, respectively.
Fair Value Measurements and Disclosures (Tables)
Schedule of Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis
Our financial assets and liabilities that were measured at fair value on a recurring basis as of March 25, 2012 and December 25, 2011 are as follows (in thousands):
   
Carrying
    
Fair Value Measurements
  
   
Value
    
Level 1
    
Level 2
    
Level 3
  
                         
March 25, 2012
                        
Financial assets:
                        
   Cash surrender value of life insurance policies *
   $ 12,341     $ 12,341     $ -     $ -  
                                 
Financial liabilities:
                                
   Interest rate swap
     118       -       118       -  
                             
December 25, 2011
                                
Financial assets:
                                
   Cash surrender value of life insurance policies *
   $ 11,387     $ 11,387     $ -     $ -  
   Interest rate swap
     11       -       11       -  
                                 
* Represents life insurance held in our non-qualified deferred compensation plan.
                  
                                 
Calculation of Earnings Per Share (Tables)
Schedule of Earnings Per Share, Basic and Diluted
The calculations of basic earnings per common share and earnings per common share – assuming dilution are as follows (in thousands, except per-share data):

   
Three Months Ended
  
   
March 25,
    
March 27,
  
   
2012
    
2011
  
             
Basic earnings per common share:
            
Net income, net of noncontrolling interests
   $ 16,744     $ 16,427  
Weighted average shares outstanding
     24,053       25,484  
Basic earnings per common share
   $ 0.70     $ 0.64  
                 
Earnings per common share - assuming dilution:
                
Net income, net of noncontrolling interests
   $ 16,744     $ 16,427  
                 
Weighted average shares outstanding
     24,053       25,484  
Dilutive effect of outstanding equity awards
     385       273  
Diluted weighted average shares outstanding
     24,438       25,757  
Earnings per common share - assuming dilution
   $ 0.69     $ 0.64
Segment Information (Tables)
Schedule of Segment Reporting Information, by Segment
Our segment information is as follows (in thousands):

   
Three Months Ended
  
   
March 25, 2012
    
March 27, 2011
  
Revenues from external customers:
            
Domestic Company-owned restaurants
   $ 143,815     $ 138,671  
Domestic commissaries
     137,610       127,672  
North America franchising
     20,740       19,916  
International
     16,853       12,761  
All others
     12,258       13,447  
Total revenues from external customers
   $ 331,276     $ 312,467  
                 
Intersegment revenues:
                
Domestic commissaries
   $ 41,537     $ 38,100  
North America franchising
     549       548  
International
     54       47  
Variable interest entities
     -       25,117  
All others
     3,021       2,555  
Total intersegment revenues
   $ 45,161     $ 66,367  
                 
Income (loss) before income taxes:
                
Domestic Company-owned restaurants
   $ 12,321     $ 10,883  
Domestic commissaries
     11,166       9,554  
North America franchising
     18,140       18,009  
International
     272       (816 )
All others
     395       (378 )
Unallocated corporate expenses
     (15,166 )     (9,769 )
Elimination of intersegment profits
     10       (703 )
Total income before income taxes
   $ 27,138     $ 26,780  
                 
Property and equipment:
                
Domestic Company-owned restaurants
   $ 177,423          
Domestic commissaries
     87,014          
International
     18,047          
All others
     41,053          
Unallocated corporate assets
     133,452          
Accumulated depreciation and amortization
     (272,822 )        
Net property and equipment
   $ 184,167
Significant Accounting Policies (Narrative) (Detail)(USD $)
1 Months Ended
Mar. 25, 2012
Entity
Dec. 25, 2011
Mar. 27, 2011
Entity
Apr. 30, 2012
Subsequent Event [Member]
Location
Apr. 23, 2012
Subsequent Event [Member]
Noncontrolling Interest [Line Items]
Number of joint venture arrangements
2
2
Stockholders' equity attributable to noncontrolling interest
$9,895,000
$8,569,0001
Net deferred tax liability
400,000
Number of restaurants acquired
56
Number of restaurants sold
6
Purchase price of restaurants, cash paid
$5,100,000
Significant Accounting Policies (Joint Venture Arrangements) (Detail)
Mar. 25, 2012
Location
Mar. 27, 2011
Location
Star Papa LP [Member]
Noncontrolling Interest [Line Items]
Number of Restaurants
76
75
Papa John's Ownership
51.00%1
Noncontrolling Interest Ownership
49.00%1
Colonel's Limited LLC [Member]
Noncontrolling Interest [Line Items]
Number of Restaurants
52
52
Papa John's Ownership
70.00%1
Noncontrolling Interest Ownership
30.00%1
Significant Accounting Policies (Pre-Tax Income Attributable to Joint Ventures) (Detail)(USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 25, 2012
Mar. 27, 2011
Noncontrolling Interest [Line Items]
Noncontrolling interests
$1,326
$1,122
Total income before income taxes
27,138
26,780
Corporate Joint Venture [Member]
Noncontrolling Interest [Line Items]
Total income before income taxes, net of noncontrolling interests
2,043
1,798
Noncontrolling interests
1,326
1,122
Total income before income taxes
$3,369
$2,920
Comprehensive Income (Schedule of Accumulated Other Comprehensive Income (Loss)) (Detail)(USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 25, 2012
Mar. 27, 2011
Comprehensive Income (Loss) [Line Items]
Accumulated other comprehensive income beginning balance
$1,8491
$849
Current period other comprehensive income
211
1,273
Accumulated other comprehensive income ending balance
2,060
2,122
Defined pension plan beginning balance
(29)
Current period other comprehensive income
  
  
Defined pension plan ending balance
(29)
Interest rate swaps beginning balance
6
(159)
Current period other comprehensive income (loss)
(80)2
1592
Current period other comprehensive income (loss), tax
(47)
89
Interest rate swaps ending balance
(74)
Foreign currency beginning balance
1,872
1,008
Current period other comprehensive income
291
1,114
Foreign currency ending balance
$2,163
$2,122
Fair Value Measurements (Schedule of Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis) (Detail)(USD $)
In Thousands, unless otherwise specified
Mar. 25, 2012
Dec. 25, 2011
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash surrender value of life insurance policies
$12,3411
$11,3871
Interest rate swap assets
11
Interest rate swap liabilities
118
Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash surrender value of life insurance policies
12,3411
11,3871
Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Interest rate swap assets
11
Interest rate swap liabilities
$118
Fair Value Measurements (Narrative) (Detail)(USD $)
3 Months Ended
Mar. 25, 2012
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Transfers among levels within the fair value hierarchy
$0
Debt - Narrative (Detail)(USD $)
3 Months Ended 12 Months Ended
Mar. 25, 2012
Mar. 27, 2011
Dec. 26, 2010
Contract
Dec. 25, 2011
Debt Instrument [Line Items]
Revolving line of credit
$50,000,000
$51,500,000
Number of interest rate derivatives held
2
Interest rate swap agreement, expiration date
Jan. 31, 2011
Weighted average interest rate for credit facility borrowings, including the impact of interest rate swaps
1.30%
3.30%
Interest paid
249,000
878,000
Interest rate swap liabilities
118,000
Interest rate swap liability, portion to be reclassified into earnings during the next twelve months
83,000
Amended Credit Facility [Member]
Debt Instrument [Line Items]
Line of credit facility, maximum borrowing capacity
175,000,000
Line of credit facility, term
5 years
Interest margin rate on debt, minimum
0.75%
Interest margin rate on debt, maximum
1.50%
Line of credit facility, remaining borrowing capacity, after reduction for outstanding letters of credit
111,500,000
Line of credit facility initiation date
Nov. 30, 2011
Line of credit facility, maturity date
Nov. 30, 2016
Credit Facility [Member]
Debt Instrument [Line Items]
Line of credit facility, maximum borrowing capacity
175,000,000
Line of credit facility, term
5 years
Interest margin rate on debt, minimum
1.00%
Interest margin rate on debt, maximum
1.75%
Line of credit facility initiation date
Sep. 02, 2010
0.53% Interest Rate Swap Agreement [Member]
Debt Instrument [Line Items]
Derivative, fixed interest rate
0.53%
Floating rate debt
50,000,000
Number of interest rate derivatives held
1
Interest rate swap agreement, initiation date
Aug. 30, 2011
Interest rate swap agreement, expiration date
Aug. 30, 2013
4.98% Interest Rate Swap Agreement [Member]
Debt Instrument [Line Items]
Derivative, fixed interest rate
4.98%
Floating rate debt
50,000,000
3.74% Interest Rate Swap Agreement [Member]
Debt Instrument [Line Items]
Derivative, fixed interest rate
3.74%
Floating rate debt
$50,000,000
Calculation of Earnings Per Share (Detail)(USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended
Mar. 25, 2012
Mar. 27, 2011
Basic earnings per common share:
Net income, net of noncontrolling interests
$16,744
$16,427
Weighted average shares outstanding
24,053
25,484
Basic earnings per common share
$0.70
$0.64
Earnings per common share - assuming dilution:
Net income, net of noncontrolling interests
$16,744
$16,427
Weighted average shares outstanding
24,053
25,484
Dilutive effect of outstanding equity awards
385
273
Diluted weighted average shares outstanding
24,438
25,757
Earnings per common share - assuming dilution
$0.69
$0.64
Calculation of Earnings Per Share - Narrative (Detail) (Stock Options [Member])
3 Months Ended
Mar. 25, 2012
Mar. 27, 2011
Stock Options [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share, amount
0
439,000
Commitments and Contingencies (Detail)(USD $)
12 Months Ended
Dec. 25, 2011
Mar. 25, 2012
Contract
Loss Contingencies [Line Items]
Number of lease agreements the company is contingently liable
40
Estimated amount of undiscounted payments, maximum
$2,000,000
Other general expenses, remaining rentals, taxes and insurance related to leases
$800,000
Majority Expiration [Member]
Loss Contingencies [Line Items]
Lease expiration, year
2015
Segment Information - Narrative (Detail)
3 Months Ended
Mar. 25, 2012
Entity
Segment Reporting Information [Line Items]
Reportable segments, number
6
Concentration risk, percentage
10.00%
Concentration risk, number
0
Segment Information (Detail)(USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 25, 2012
Mar. 27, 2011
Dec. 25, 2011
Segment Reporting Information [Line Items]
Revenue from external customers
$331,276
$312,467
Intersegment revenues
45,161
66,367
Income (loss) before income taxes
27,138
26,780
Accumulated depreciation and amortization
(272,822)
Net property and equipment
184,167
185,1321
Domestic Company-owned Restaurants [Member]
Segment Reporting Information [Line Items]
Revenue from external customers
143,815
138,671
Income (loss) before income taxes
12,321
10,883
Property and equipment, gross
177,423
Domestic Commissaries [Member]
Segment Reporting Information [Line Items]
Revenue from external customers
137,610
127,672
Intersegment revenues
41,537
38,100
Income (loss) before income taxes
11,166
9,554
Property and equipment, gross
87,014
North America Franchising [Member]
Segment Reporting Information [Line Items]
Revenue from external customers
20,740
19,916
Intersegment revenues
549
548
Income (loss) before income taxes
18,140
18,009
International [Member]
Segment Reporting Information [Line Items]
Revenue from external customers
16,853
12,761
Intersegment revenues
54
47
Income (loss) before income taxes
272
(816)
Property and equipment, gross
18,047
All Other Segments [Member]
Segment Reporting Information [Line Items]
Other sales
12,258
13,447
Intersegment revenues
3,021
2,555
Income (loss) before income taxes
395
(378)
Property and equipment, gross
41,053
Variable Interest Entity, Primary Beneficiary [Member]
Segment Reporting Information [Line Items]
Intersegment revenues
25,117
Unallocated Amount to Segment [Member]
Segment Reporting Information [Line Items]
Income (loss) before income taxes
(15,166)
(9,769)
Property and equipment, gross
133,452
Intersegment Elimination [Member]
Segment Reporting Information [Line Items]
Income (loss) before income taxes
$10
$(703)