May 5, 2022 - 10-Q: Quarterly report pursuant to Section 13 or 15(d)

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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 27, 2022

☐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 29, 2022, there were outstanding 35,794,906 shares of the registrant’s common stock, par value $0.01 per share.

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INDEX

		Page No.

PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements

	Condensed Consolidated Balance Sheets — March 27, 2022 and December 26, 2021	3

	Condensed Consolidated Statements of Operations — Three months ended March 27, 2022 and March 28, 2021	4

	Condensed Consolidated Statements of Comprehensive Income — Three months ended March 27, 2022 and March 28, 2021	5

	Condensed Consolidated Statements of Stockholders’ Deficit — Three months ended March 27, 2022 and March 28, 2021	6

	Condensed Consolidated Statements of Cash Flows — Three months ended March 27, 2022 and March 28, 2021	8

	Notes to Condensed Consolidated Financial Statements	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	38

Item 4.	Controls and Procedures	39

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	39

Item 1A.	Risk Factors	39

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40

Item 6.	Exhibits	41

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Papa John’s International, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets



	March 27,		December 26,
(In thousands, except per share amounts)	2022		2021
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	80,669	$	70,610
Accounts receivable, net		81,229		81,370
Notes receivable, current portion		9,108		12,352
Income tax receivable		10,537		9,386
Inventories		38,992		34,981
Prepaid expenses and other current assets		46,461		46,310
Assets held for sale		19,273		—
Total current assets		286,269		255,009
Property and equipment, net		216,253		223,856
Finance lease right-of-use assets, net		20,159		20,907
Operating lease right-of-use assets		177,767		176,256
Notes receivable, less current portion, net		22,634		35,504
Goodwill		71,593		80,632
Deferred income taxes		6,535		5,156
Other assets		84,416		88,384
Total assets	$	885,626	$	885,704

Liabilities, Redeemable noncontrolling interests and Stockholders’ deficit
Current liabilities:
Accounts payable	$	35,434	$	28,092
Income and other taxes payable		27,973		19,996
Accrued expenses and other current liabilities		156,203		190,116
Current deferred revenue		19,649		21,700
Current finance lease liabilities		5,190		4,977
Current operating lease liabilities		20,938		22,543
Liabilities held for sale		13,247		—
Total current liabilities		278,634		287,424
Deferred revenue		12,381		13,846
Long-term finance lease liabilities		15,696		16,580
Long-term operating lease liabilities		164,738		160,672
Long-term debt, less current portion, net		528,088		480,730
Deferred income taxes		—		258
Other long-term liabilities		89,210		93,154
Total liabilities		1,088,747		1,052,664

Redeemable noncontrolling interests		5,323		5,498

Stockholders’ deficit:
Common stock ($0.01 par value per share; issued 49,074 at March 27, 2022 and 49,002 at December 26, 2021)		491		490
Additional paid-in capital		436,225		445,126
Accumulated other comprehensive loss		(9,316)		(9,971)
Retained earnings		181,124		183,157
Treasury stock (13,399 shares at March 27, 2022 and 13,205 shares at December 26, 2021, at cost)		(832,603)		(806,472)
Total stockholders’ deficit		(224,079)		(187,670)
Noncontrolling interests in subsidiaries		15,635		15,212
Total Stockholders’ deficit		(208,444)		(172,458)
Total liabilities, Redeemable noncontrolling interests and Stockholders’ deficit	$	885,626	$	885,704

See accompanying notes.

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Papa John’s International, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(Unaudited)



	Three Months Ended
		March 27,	March 28,
(In thousands, except per share amounts)	2022		2021

Revenues:
Domestic Company-owned restaurant sales	$	198,765	$	197,234
North America franchise royalties and fees		34,268		32,715
North America commissary revenues		209,679		184,878
International revenues		34,617		34,607
Other revenues		65,363		62,312
Total revenues		542,692		511,746
Costs and expenses:
Operating costs (excluding depreciation and amortization shown separately below):
Domestic Company-owned restaurant expenses		161,661		155,888
North America commissary expenses		197,090		170,684
International expenses		19,914		19,618
Other expenses		60,555		55,807
General and administrative expenses		65,937		50,011
Depreciation and amortization		11,940		12,876
Total costs and expenses		517,097		464,884
Refranchising and impairment loss		(11,160)		—
Operating income		14,435		46,862
Net interest expense		(4,264)		(3,647)
Income before income taxes		10,171		43,215
Income tax (benefit) expense		(1,256)		7,932
Net income before attribution to noncontrolling interests		11,427		35,283
Net income attributable to noncontrolling interests		(933)		(1,400)
Net income attributable to the Company	$	10,494	$	33,883

Calculation of net income for earnings per share:
Net income attributable to the Company	$	10,494	$	33,883
Dividends paid to participating securities		(60)		(3,527)
Net income attributable to participating securities		—		(3,243)
Net income attributable to common shareholders	$	10,434	$	27,113

Basic earnings per common share	$	0.29	$	0.83
Diluted earnings per common share	$	0.29	$	0.82

Basic weighted average common shares outstanding		35,927		32,756
Diluted weighted average common shares outstanding		36,236		33,090

Dividends declared per common share	$	0.350	$	0.225

See accompanying notes.

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Papa John’s International, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)



	Three Months Ended
	March 27,		March 28,
(In thousands)	2022		2021

Net income before attribution to noncontrolling interests	$	11,427	$	35,283
Other comprehensive income, before tax:
Foreign currency translation adjustments		(861)		1,059
Interest rate swaps (1)		1,712		1,795
Other comprehensive income, before tax		851		2,854
Income tax effect:
Foreign currency translation adjustments		198		(244)
Interest rate swaps (2)		(394)		(413)
Income tax effect		(196)		(657)
Other comprehensive income, net of tax		655		2,197
Comprehensive income before attribution to noncontrolling interests		12,082		37,480
Less: comprehensive (income), redeemable noncontrolling interests		(510)		(787)
Less: comprehensive (income), nonredeemable noncontrolling interests		(423)		(613)
Comprehensive income attributable to the Company	$	11,149	$	36,080

(1)	Amounts reclassified out of accumulated other comprehensive loss into net interest expense include $535 and ($1,709) for the three months ended March 27, 2022 and March 28, 2021, respectively.

(2) The income tax effects of amounts reclassified out of accumulated other comprehensive loss into net interest expense were ($120) and $385 for the three months ended March 27, 2022 and March 28, 2021, respectively.

See accompanying notes.

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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 27, 2022	Outstanding	Stock		Capital		Loss		Earnings		Stock		Subsidiaries		Deficit
Balance at December 26, 2021	35,797	$	490	$	445,126	$	(9,971)	$	183,157	$	(806,472)	$	15,212	$	(172,458)
Net income (1)	—		—		—		—		10,494		—		423		10,917
Other comprehensive income, net of tax	—		—		—		655		—		—		—		655
Cash dividends on common stock	—		—		47		—		(12,655)		—		—		(12,608)
Exercise of stock options	17		—		741		—		—		—		—		741
Acquisition of Company common stock	(301)		—		—		—		—		(32,709)		—		(32,709)
Stock-based compensation expense	—		1		4,175		—		—		—		—		4,176
Issuance of restricted stock	228		—		(6,369)		—		—		6,369		—		—
Tax payments for equity award issuances	(69)		—		(7,461)		—		—		—		—		(7,461)
Other	3		—		(34)		—		128		209		—		303
Balance at March 27, 2022	35,675	$	491	$	436,225	$	(9,316)	$	181,124	$	(832,603)	$	15,635	$	(208,444)

(1)	Net income to the Company for the three months ended March 27, 2022 excludes $510 allocable to the redeemable noncontrolling interests for our joint venture arrangements.

At March 27, 2022, the accumulated other comprehensive loss of $9,316 was comprised of net unrealized foreign currency translation loss of $5,533 and net unrealized loss on the interest rate swap agreements of $3,783.

See accompanying notes.

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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 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.

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Papa John’s International, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)



	Three Months Ended
	March 27,		March 28,
(In thousands)	2022		2021

Operating activities
Net income before attribution to noncontrolling interests	$	11,427	$	35,283
Adjustments to reconcile net income to net cash provided by operating activities:
Provision (benefit) for allowance for credit losses on accounts and notes receivable		15,167		(1,098)
Depreciation and amortization		11,940		12,876
Refranchising and impairment loss		11,160		—
Deferred income taxes		(1,817)		2,586
Stock-based compensation expense		4,176		4,113
Other		(2,135)		325
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable		(2,503)		13,349
Income tax receivable		(1,151)		566
Inventories		(4,731)		2,721
Prepaid expenses and other current assets		77		711
Other assets and liabilities		(654)		(7,901)
Accounts payable		7,359		(5,350)
Income and other taxes payable		8,013		15,045
Accrued expenses and other current liabilities		(29,469)		(9,736)
Deferred revenue		(1,465)		(273)
Net cash provided by operating activities		25,394		63,217
Investing activities
Purchases of property and equipment		(10,233)		(7,076)
Notes issued		(272)		(3,417)
Repayments of notes issued		3,432		4,864
Acquisitions, net of cash acquired		(1,250)		(699)
Other		8		29
Net cash used in investing activities		(8,315)		(6,299)
Financing activities
Net proceeds of revolving credit facilities		47,000		5,000
Proceeds from exercise of stock options		741		2,298
Acquisition of Company common stock		(32,709)		(1,267)
Dividends paid to common stockholders		(12,608)		(7,404)
Dividends paid to preferred stockholders		—		(3,412)
Tax payments for equity award issuances		(7,461)		(3,834)
Distributions to noncontrolling interests		(685)		(1,705)
Repayments of term loan		—		(5,000)
Other		(1,065)		(756)
Net cash used in financing activities		(6,787)		(16,080)
Effect of exchange rate changes on cash and cash equivalents		(233)		230
Change in cash and cash equivalents		10,059		41,068
Cash and cash equivalents at beginning of period		70,610		130,204
Cash and cash equivalents at end of period	$	80,669	$	171,272

See accompanying notes.

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Papa John’s International, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

March 27, 2022

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 27, 2022 are not necessarily indicative of the results that may be expected for the fiscal year ending December 25, 2022. 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 26, 2021.

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 credit losses on 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 (85% following the divestiture of the Company’s interest in one joint venture subsequent to the end of the first quarter that included 90 restaurants as discussed in Note 10) 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 restaurants at March 27, 2022 and March 28, 2021. Subsequent to the end of the first quarter, the Company divested its interest in one joint venture that included 90 restaurants. See Note 10 for additional information.

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

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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.

Net income attributable to these joint ventures for the three months ended March 27, 2022 and March 28, 2021 was as follows (in thousands):



	Three Months Ended
	March 27,		March 28,
	2022		2021

Papa John’s International, Inc.	$	1,621	$	2,349
Noncontrolling interests		933		1,400
Total net income	$	2,554	$	3,749

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.

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Fair Value Measurements and Disclosures

The Company determines 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. 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 three 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.

Fair value is a market-based measurement, not an entity-specific measurement. Considerable judgment is required to interpret market data to estimate fair value; accordingly, the fair values presented do not necessarily indicate what the Company or its debtholders could realize in a current market exchange.

Our financial assets and liabilities that were measured at fair value on a recurring basis as of March 27, 2022 and December 26, 2021 are as follows:


	Carrying		Fair Value Measurements
(in thousands)	Value		Level 1		Level 2		Level 3
March 27, 2022
Financial assets:
Cash surrender value of life insurance policies (a)	$	34,205	$	34,205	$	—	$	—

Financial liabilities:
Interest rate swaps (b)	$	1,528	$	—	$	1,528	$	—

December 26, 2021
Financial assets:
Cash surrender value of life insurance policies (a)	$	41,904	$	41,904	$	—	$	—

Financial liabilities:
Interest rate swaps (b)	$	5,536	$	—	$	5,536	$	—

(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”).

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 Company’s revolving credit facilities under its credit agreement approximate carrying value due to its variable market-based interest rate. The Company’s 3.875%senior notes are classified as a Level 2 fair value measurement since the Company estimates the fair value by using recent trading transactions, and has the following estimated fair values and carrying values (excluding the impact of unamortized debt issuance costs) as of March 27, 2022 and December 26, 2021, respectively:


	March 27, 2022				December 26, 2021
	Carrying		Fair		Carrying		Fair
(in thousands)	Value		Value		Value		Value
3.875% Senior Notes	$	400,000	$	362,000	$	400,000	$	396,000

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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 26, 2021	$	2,364	$	1,500
Current period provision for expected credit losses (1)		2,613		12,560
Write-offs charged against the allowance		(126)		—
Recoveries collected		—		(6)
Balance at March 27, 2022	$	4,851	$	14,054

(1)

The Company recorded $14.6 million of one-time, non-cash reserves for certain accounts receivable and notes receivable primarily associated with a master franchisee with operations principally in Russia.

3. Leases

Lessor Operating Leases

We sublease certain retail space to our franchisees in the United Kingdom which are primarily operating leases. At March 27, 2022, we leased and subleased approximately 430 Papa John’s restaurant properties 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 $3.0 million and $2.8 million within Other revenues in the Condensed Consolidated Statements of Operations for the three months ended March 27, 2022 and March 28, 2021, 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 approximately 65 domestic leases. These leases have varying terms, the latest of which expires in 2036. As of March 27, 2022, the estimated maximum amount of undiscounted payments the Company could be required to make in the event of nonpayment by the primary lessees was $10.8 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.

Subsequent to quarter-end, we refranchised 90 Company-owned restaurants held in a consolidated joint venture in Texas through the sale of our 51% ownership in the joint venture, as discussed in Note 10. As part of this transaction, we are contingently liable for payment of 12 of the 90 domestic leases, and the estimated maximum amount of undiscounted payments the Company could be required to make in the event of nonpayment by the primary lessees for these stores is approximately $1.6 million.

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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 27, 2022		March 28, 2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from finance leases	$	262	$	278
Financing cash flows from finance leases		1,241		1,059
Operating cash flows from operating leases (a)		9,612		9,483
Right-of-use assets obtained in exchange for new finance lease liabilities		569		7,014
Right-of-use assets obtained in exchange for new operating lease liabilities (b)		20,801		28,428
Cash received from sublease income		3,092		2,987

(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 for the three months ended March 28, 2021 associated with the lease commencement of our Atlanta, Georgia corporate office.

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 27,	December 26,
	2022	2021

Assets
Current assets:
Cash and cash equivalents	$

Form: 10-Q

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