May 6, 2021 - 10-Q: Quarterly report pursuant to Section 13 or 15(d)

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 28, 2021

☐Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number: 0-21660

PAPA JOHN’S INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

Delaware		61-1203323
(State or other jurisdiction of		(I.R.S. Employer Identification
incorporation or organization)		number)

2002 Papa John’s Boulevard

Louisville, Kentucky 40299-2367

(Address of principal executive offices)

(502) 261-7272

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class:	Trading Symbol	Name of each exchange on which registered:
Common stock, $0.01 par value	PZZA	The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes ⌧ No ◻

Indicate by check mark whether the registrant has submitted electronically every interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ⌧ No ◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒		Accelerated filer ☐
Non-accelerated filer ☐		Smaller reporting company ☐
		Emerging growth company ☐

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.◻

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

At April 30, 2021, there were outstanding 33,074,641 shares of the registrant’s common stock, par value $0.01 per share.

Table of Contents

INDEX

		Page No.

PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements

	Condensed Consolidated Balance Sheets — March 28, 2021 and December 27, 2020	3

	Condensed Consolidated Statements of Operations — Three months ended March 28, 2021 and March 29, 2020	4

	Condensed Consolidated Statements of Comprehensive Income (Loss) — Three months ended March 28, 2021 and March 29, 2020	5

	Condensed Consolidated Statements of Stockholders’ Deficit — Three months ended March 28, 2021 and March 29, 2020	6

	Condensed Consolidated Statements of Cash Flows — Three months ended March 28, 2021 and March 29, 2020	8

	Notes to Condensed Consolidated Financial Statements	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	31

Item 4.	Controls and Procedures	32

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	32

Item 1A.	Risk Factors	32

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	33

Item 6.	Exhibits	34

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Papa John’s International, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets



	March 28,		December 27,
(In thousands, except per share amounts)	2021		2020
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	171,272	$	130,204
Accounts receivable, net		76,008		90,135
Notes receivable, current portion		10,687		11,318
Income tax receivable		707		1,273
Inventories		27,552		30,265
Prepaid expenses and other current assets		45,355		43,212
Total current assets		331,581		306,407
Property and equipment, net		195,083		200,895
Finance lease right-of-use assets, net		22,710		16,840
Operating lease right-of-use assets		166,976		148,110
Notes receivable, less current portion, net		35,966		36,538
Goodwill		81,019		80,791
Deferred income taxes		6,890		10,800
Other assets		78,060		72,389
Total assets	$	918,285	$	872,770

Liabilities, Series B Convertible Preferred Stock, Redeemable noncontrolling interests and Stockholders’ deficit
Current liabilities:
Accounts payable	$	32,020	$	37,370
Income and other taxes payable		25,308		10,263
Accrued expenses and other current liabilities		165,767		174,563
Current deferred revenue		19,807		19,590
Current finance lease liabilities		4,499		3,545
Current operating lease liabilities		24,322		23,538
Current portion of long-term debt		20,000		20,000
Total current liabilities		291,723		288,869
Deferred revenue		13,391		13,664
Long-term finance lease liabilities		18,533		13,531
Long-term operating lease liabilities		143,269		124,666
Long-term debt, less current portion, net		328,538		328,292
Deferred income taxes		267		948
Other long-term liabilities		104,601		111,364
Total liabilities		900,322		881,334

Series B Convertible Preferred Stock; $0.01 par value; 260.0 shares authorized, 252.5 shares issued and outstanding at March 28, 2021 and December 27, 2020		251,938		251,901
Redeemable noncontrolling interests		6,125		6,474

Stockholders’ deficit:
Common stock ($0.01 par value per share; issued 45,341 at March 28, 2021 and 45,288 at December 27, 2020)		453		453
Additional paid-in capital		251,285		254,103
Accumulated other comprehensive loss		(11,971)		(14,168)
Retained earnings		242,119		219,158
Treasury stock (12,660 shares at March 28, 2021 and 12,743 shares at December 27, 2020, at cost)		(737,268)		(741,724)
Total stockholders’ deficit		(255,382)		(282,178)
Noncontrolling interests in subsidiaries		15,282		15,239
Total Stockholders’ deficit		(240,100)		(266,939)
Total liabilities, Series B Convertible Preferred Stock, Redeemable noncontrolling interests and Stockholders’ deficit	$	918,285	$	872,770

See accompanying notes.

Table of Contents

Papa John’s International, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(Unaudited)



	Three Months Ended
		March 28,	March 29,
(In thousands, except per share amounts)	2021		2020

Revenues:
Domestic Company-owned restaurant sales	$	197,234	$	161,440
North America franchise royalties and fees		32,715		19,440
North America commissary revenues		184,878		155,422
International revenues		34,607		26,059
Other revenues		62,312		47,498
Total revenues		511,746		409,859
Costs and expenses:
Operating costs (excluding depreciation and amortization shown separately below):
Domestic Company-owned restaurant expenses		155,888		129,111
North America commissary expenses		170,684		144,272
International expenses		19,618		15,101
Other expenses		55,807		45,957
General and administrative expenses		50,011		47,651
Depreciation and amortization		12,876		12,295
Total costs and expenses		464,884		394,387
Operating income		46,862		15,472
Net interest expense		(3,647)		(3,967)
Income before income taxes		43,215		11,505
Income tax expense		7,932		2,512
Net income before attribution to noncontrolling interests		35,283		8,993
Net income attributable to noncontrolling interests		(1,400)		(550)
Net income attributable to the Company	$	33,883	$	8,443

Calculation of net income for earnings per share:
Net income attributable to the Company	$	33,883	$	8,443
Dividends paid to participating securities and accretion		(3,527)		(3,471)
Net income attributable to participating securities		(3,243)		—
Net income attributable to common shareholders	$	27,113	$	4,972

Basic earnings per common share	$	0.83	$	0.15
Diluted earnings per common share	$	0.82	$	0.15

Basic weighted average common shares outstanding		32,756		32,093
Diluted weighted average common shares outstanding		33,090		32,320

Dividends declared per common share	$	0.225	$	0.225

See accompanying notes.

Table of Contents

Papa John’s International, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)



	Three Months Ended
	March 28,		March 29,
(In thousands)	2021		2020

Net income before attribution to noncontrolling interests	$	35,283	$	8,993
Other comprehensive income (loss), before tax:
Foreign currency translation adjustments		1,059		(2,825)
Interest rate swaps (1)		1,795		(10,919)
Other comprehensive income (loss), before tax		2,854		(13,744)
Income tax effect:
Foreign currency translation adjustments		(244)		650
Interest rate swaps (2)		(413)		2,511
Income tax effect		(657)		3,161
Other comprehensive income (loss), net of tax		2,197		(10,583)
Comprehensive income (loss) before attribution to noncontrolling interests		37,480		(1,590)
Less: comprehensive (income), redeemable noncontrolling interests		(787)		(176)
Less: comprehensive (income), nonredeemable noncontrolling interests		(613)		(374)
Comprehensive income (loss) attributable to the Company	$	36,080	$	(2,140)

(1)Amounts reclassified out of accumulated other comprehensive loss into net interest expense included ($1,709) and ($330) for the three months ended March 28, 2021 and March 29, 2020, respectively.

(2)The income tax effects of amounts reclassified out of accumulated other comprehensive loss into net interest expense were $385 and $80 for the three months ended March 28, 2021 and March 29, 2020, respectively.

See accompanying notes.

Table of Contents

Papa John’s International, Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Deficit

(Unaudited)


	Papa John’s International, Inc.
	Common					Accumulated
	Stock			Additional		Other						Noncontrolling		Total
(In thousands)	Shares	Common		Paid-In		Comprehensive		Retained		Treasury		Interests in		Stockholders’
For the three months ended March 28, 2021	Outstanding	Stock		Capital		Loss		Earnings		Stock		Subsidiaries		Deficit
Balance at December 27, 2020	32,545	$	453	$	254,103	$	(14,168)	$	219,158	$	(741,724)	$	15,239	$	(266,939)
Net income (1)	—		—		—		—		33,883		—		613		34,496
Other comprehensive income, net of tax	—		—		—		2,197		—		—		—		2,197
Cash dividends on common stock	—		—		31		—		(7,435)		—		—		(7,404)
Cash dividends on preferred stock	—		—		—		—		(3,412)		—		—		(3,412)
Exercise of stock options	41		—		2,298		—		—		—		—		2,298
Acquisition of Company common stock	(15)		—		—		—		—		(1,267)		—		(1,267)
Stock-based compensation expense	—		—		4,113		—		—		—		—		4,113
Issuance of restricted stock	104		—		(5,371)		—		—		5,371		—		—
Tax effect of restricted stock awards	—		—		(3,834)		—		—		—		—		(3,834)
Distributions to noncontrolling interests	—		—		—		—		—		—		(570)		(570)
Other	6		—		(55)		—		(75)		352		—		222
Balance at March 28, 2021	32,681	$	453	$	251,285	$	(11,971)	$	242,119	$	(737,268)	$	15,282	$	(240,100)

(1)	Net income to the Company for the three months ended March 28, 2021 excludes $787 allocable to the redeemable noncontrolling interests for our joint venture arrangements.

At March 28, 2021, the accumulated other comprehensive loss of $11,971 was comprised of net unrealized foreign currency translation loss of $2,977 and net unrealized loss on the interest rate swap agreements of $8,994.

See accompanying notes.

Table of Contents

Papa John’s International, Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Deficit (continued)

(Unaudited)


	Papa John’s International, Inc.
	Common					Accumulated
	Stock			Additional		Other						Noncontrolling		Total
(In thousands)	Shares	Common		Paid-In		Comprehensive		Retained		Treasury		Interests in		Stockholders’
For the three months ended March 29, 2020	Outstanding	Stock		Capital		Loss		Earnings		Stock		Subsidiaries		Deficit
Balance at December 29, 2019	31,894	$	447	$	219,047	$	(10,185)	$	205,697	$	(747,327)	$	15,665	$	(316,656)
Cumulative effect of adoption of ASU 2016-13 (1)	—		—		—		—		(1,066)		—		—		(1,066)
Adjusted balance at December 30, 2019	31,894	$	447	$	219,047	$	(10,185)	$	204,631	$	(747,327)	$	15,665	$	(317,722)
Net income (2)	—		—		—		—		8,443		—		374		8,817
Other comprehensive loss, net of tax	—		—		—		(10,583)		—		—		—		(10,583)
Cash dividends on common stock	—		—		55		—		(7,292)		—		—		(7,237)
Cash dividends on preferred stock	—		—		—		—		(3,412)		—		—		(3,412)
Exercise of stock options	27		1		1,240		—		—		—		—		1,241
Stock-based compensation expense	—		—		3,950		—		—		—		—		3,950
Issuance of restricted stock	47		—		(2,707)		—		—		2,707		—		—
Tax effect of restricted stock awards	—		—		(1,383)		—		—		—		—		(1,383)
Distributions to noncontrolling interests	—		—		—		—		—		—		(30)		(30)
Other	3		—		(15)		—		(83)		157		—		59
Balance at March 29, 2020	31,971	$	448	$	220,187	$	(20,768)	$	202,287	$	(744,463)	$	16,009	$	(326,300)

(1)	As of December 30, 2019, the Company adopted Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”.

(2)	Net income to the Company at March 29, 2020 excludes $176 allocable to the redeemable noncontrolling interests for our joint venture arrangements.

At March 29, 2020, the accumulated other comprehensive loss of $20,768 was comprised of net unrealized foreign currency translation loss of $7,774 and net unrealized loss on the interest rate swap agreements of $12,994.

See accompanying notes.

Table of Contents

Papa John’s International, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)



	Three Months Ended
	March 28,		March 29,
(In thousands)	2021		2020

Operating activities
Net income before attribution to noncontrolling interests	$	35,283	$	8,993
Adjustments to reconcile net income to net cash provided by operating activities:
(Credit) provision for allowance for credit losses on accounts and notes receivable		(1,098)		768
Depreciation and amortization		12,876		12,295
Deferred income taxes		2,586		1,185
Stock-based compensation expense		4,113		3,950
Other		325		234
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable		13,349		(1,839)
Income tax receivable		566		932
Inventories		2,721		(2,281)
Prepaid expenses and other current assets		711		5,586
Other assets and liabilities		(7,901)		2,670
Accounts payable		(5,350)		4,604
Income and other taxes payable		15,045		568
Accrued expenses and other current liabilities		(9,736)		(1,903)
Deferred revenue		(273)		(2,028)
Net cash provided by operating activities		63,217		33,734
Investing activities
Purchases of property and equipment		(7,076)		(5,933)
Notes issued		(3,417)		(7,413)
Repayments of notes issued		4,864		3,790
Acquisitions, net of cash acquired		(699)		—
Other		29		1
Net cash used in investing activities		(6,299)		(9,555)
Financing activities
Repayments of term loan		(5,000)		(5,000)
Net proceeds of revolving credit facilities		5,000		640
Proceeds from exercise of stock options		2,298		1,241
Dividends paid to common stockholders		(7,404)		(7,237)
Dividends paid to preferred stockholders		(3,412)		(3,412)
Tax payments for equity award issuances		(3,834)		(1,383)
Acquisition of Company common stock		(1,267)		—
Distributions to noncontrolling interests		(1,705)		(30)
Other		(756)		(350)
Net cash used in financing activities		(16,080)		(15,531)
Effect of exchange rate changes on cash and cash equivalents		230		(183)
Change in cash and cash equivalents		41,068		8,465
Cash and cash equivalents at beginning of period		130,204		27,911
Cash and cash equivalents at end of period	$	171,272	$	36,376

See accompanying notes.

Table of Contents

Papa John’s International, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

March 28, 2021

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 (“GAAP”) 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 GAAP for complete annual 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 28, 2021 are not necessarily indicative of the results that may be expected for the fiscal year ending December 26, 2021. 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 27, 2020.

2.	Significant Accounting Policies

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Significant items that are subject to such estimates and assumptions include allowance for doubtful accounts and notes receivable, intangible assets, contract assets and contract liabilities, including the online customer loyalty program obligation and gift card breakage, right-of-use assets and lease liabilities, insurance reserves and tax reserves. Although management bases its estimates on historical experience and assumptions that are believed to be reasonable under the circumstances, actual results could significantly differ from these estimates.

Variable Interest Entity

Papa John’s domestic restaurants, both Company-owned and franchised, participate in Papa John’s Marketing Fund, Inc. (“PJMF”), a nonstock corporation designed to operate at break-even as it spends all annual contributions received from the system. PJMF collects a percentage of revenues from Company-owned and franchised restaurants in the United States for the purpose of designing and administering advertising and promotional programs. PJMF is a variable interest entity (“VIE”) that funds its operations with ongoing financial support and contributions from the domestic restaurants, of which approximately 80% are franchised, and does not have sufficient equity to fund its operations without these ongoing financial contributions. Based on an assessment of the governance structure and operating procedures of PJMF, the Company determined it has the power to control certain significant activities of PJMF, and therefore, is the primary beneficiary. The Company has consolidated PJMF in its financial results in accordance with Accounting Standards Codification (“ASC”) 810, “Consolidations.”

Noncontrolling Interests

Papa John’s has four joint venture arrangements in which there are noncontrolling interests held by third parties that include 188 and 192 restaurants at March 28, 2021 and March 29, 2020, respectively.

Consolidated net income is required to be reported separately at amounts attributable to both the Company and the noncontrolling interests. Additionally, disclosures are required to clearly identify and distinguish between the interests of the Company and the interests of the noncontrolling owners, including a disclosure on the face of the Condensed Consolidated Statements of Operations of net income attributable to noncontrolling interests.

Table of Contents

Net income attributable to these joint ventures for the three months ended March 28, 2021 and March 29, 2020 was as follows (in thousands):



	Three Months Ended
	March 28,		March 29,
	2021		2020

Papa John’s International, Inc.	$	2,349	$	1,131
Noncontrolling interests		1,400		550
Total net income	$	3,749	$	1,681

The following summarizes the redemption feature, location and related accounting within the Condensed Consolidated Balance Sheets for these joint venture arrangements:



Type of Joint Venture Arrangement	Location within the Balance Sheets	Recorded Value

Joint ventures with no redemption feature	Permanent equity	Carrying value
Joint ventures with option to require the Company to purchase the noncontrolling interest - not currently redeemable or redemption not probable	Temporary equity	Carrying value

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 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. We use an estimated annual effective rate based on expected annual income to determine our quarterly provision for income taxes. The effective income tax rate includes the estimated domestic state effective income tax rate and applicable foreign income tax rates. The effective income tax rate is also impacted by various permanent items and credits, net of any related valuation allowances, and can vary based on changes in estimated annual income. 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 attribute carryforwards (e.g., net operating losses, capital losses, and foreign tax credits). 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.

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 on a quarterly basis to adjust for events, such as statute of limitations expirations, court or state rulings or audit settlements, which may impact our ultimate payment for such exposures.

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. Fair value is a market-based measurement, not an entity-specific measurement. The fair value of certain assets and liabilities approximates carrying value because of the short-term nature of the accounts, including cash and cash equivalents, accounts receivable, net of allowances, and accounts payable. The carrying value of notes receivable, net of allowances, also approximates fair value. The fair value of the amount outstanding under our term debt approximates the carrying value due to the variable market-based interest rate (Level 2).

Table of Contents

Certain assets and liabilities are measured at fair value on a recurring basis and 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 28, 2021 and December 27, 2020 are as follows (in thousands):


	Carrying		Fair Value Measurements
	Value		Level 1		Level 2		Level 3
March 28, 2021
Financial assets:
Cash surrender value of life insurance policies (a)	$	38,721	$	38,721	$	—	$	—

Financial liabilities:
Interest rate swaps (b)		11,615		—		11,615		—

December 27, 2020
Financial assets:
Cash surrender value of life insurance policies (a)	$	37,578	$	37,578	$	—	$	—

Financial liabilities:
Interest rate swaps (b)		13,452		—		13,452		—

(a)	Represents life insurance policies held in our non-qualified deferred compensation plan.

(b)	The fair value of our interest rate swaps 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 swaps, as well as considering published discount factors, and projected London Interbank Offered Rates (“LIBOR”).

Allowance for Credit Losses

Estimates of expected credit losses, even if remote, are based upon historical account write-off trends, facts about the current financial condition of the debtor, forecasts of future operating results based upon current trends of select operating metrics, and macroeconomic factors. Credit quality is monitored through the timing of payments compared to the prescribed payment terms and known facts regarding the financial condition of the franchisee or customer. Account and note balances are charged off against the allowance after recovery efforts have ceased.

The following table summarizes changes in our allowances for credit losses for accounts receivable and notes receivable:



(in thousands)	Accounts Receivable		Notes Receivable
Balance at December 27, 2020	$	3,622	$	3,211
Current period credit for expected credit losses		(307)		(531)
Write-offs charged against the allowance		(978)		(843)
Recoveries collected		—		(260)
Balance at March 28, 2021	$	2,337	$	1,577

Table of Contents

3. Leases

Lessor Operating Leases

We sublease certain retail space to our franchisees in the United Kingdom which are primarily operating leases. At March 28, 2021, we leased and subleased approximately 390 Papa John’s restaurants to franchisees in the United Kingdom. The initial lease terms on the franchised sites in the United Kingdom are generally 15 years. The Company has the option to negotiate an extension toward the end of the lease term at the landlord’s discretion. Rental income, primarily derived from properties leased and subleased to franchisees in the United Kingdom, is recognized on a straight-line basis over the respective operating lease terms. We recognized total sublease income of $2.8 million and $2.5 million for the three months ended March 28, 2021 and March 29, 2020, respectively.

Lease Guarantees

As a result of assigning our interest in obligations under property leases as a condition of the refranchising of certain restaurants, we are contingently liable for payment of 80 domestic leases. These leases have varying terms, the latest of which expires in 2036. As of March 28, 2021, the estimated maximum amount of undiscounted payments the Company could be required to make in the event of nonpayment by the primary lessees was $13.6 million. This contingent liability is not included in the Condensed Consolidated Balance Sheet as it is not probable to occur. The fair value of the guarantee is not material.

Supplemental Cash Flow & Other Information

Supplemental cash flow information related to leases for the periods reported is as follows:


	Three Months Ended
(in thousands)		March 28, 2021		March 29, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from finance leases	$	278	$	151
Financing cash flows from finance leases		1,059		466
Operating cash flows from operating leases (a)		9,483		9,480
Right-of-use assets obtained in exchange for new finance lease liabilities		7,014		19
Right-of-use assets obtained in exchange for new operating lease liabilities (b)		28,428		7,451
Cash received from sublease income		2,987		2,494

(a) Included within the change in Other assets and liabilities within the Condensed Consolidated Statements of Cash Flows offset by non-cash operating lease right-of-use asset amortization and lease liability accretion.
(b) Includes right-of-use assets of approximately $14.5 million associated with the lease commencement of our Atlanta, Georgia corporate office.

Table of Contents

4. Papa John’s Marketing Fund, Inc.

PJMF collects a percentage of revenues from Company-owned and franchised restaurants in the United States, for the purpose of designing and administering advertising and promotional programs for all participating domestic restaurants. Contributions and expenditures are reported on a gross basis in the Condensed Consolidated Statements of Operations within Other revenues and Other expenses.

Assets and liabilities of PJMF, which are restricted in their use, included in the Condensed Consolidated Balance Sheets were as follows (in thousands):



	March 28,		December 27,
	2021		2020

Assets
Current assets:
Cash and cash equivalents	$	23,922	$	9,394
Accounts receivable, net		13,003		23,711

Form: 10-Q

Documents