Texas Roadhouse, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)


	26 Weeks Ended
	June 29, 2021		June 30, 2020
Cash flows from operating activities:
Net income (loss) including noncontrolling interests	$	144,355	$	(16,154)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		62,519		58,070
Deferred income taxes		2,948		(10,926)
Loss on disposition of assets		1,072		2,165
Impairment and closure costs		505		89
Equity income (loss) from investments in unconsolidated affiliates		(22)		598
Distributions of income received from investments in unconsolidated affiliates		401		184
Provision for doubtful accounts		(1)		16
Share-based compensation expense		19,817		14,490
Changes in operating working capital:
Receivables		50,143		69,004
Inventories		(3,270)		(2,835)
Prepaid expenses and other current assets		2,782		4,242
Other assets		(7,178)		(2,790)
Accounts payable		21,301		(91)
Deferred revenue—gift cards		(54,866)		(52,896)
Accrued wages and payroll taxes		19,855		(5,810)
Prepaid income taxes and income taxes payable		2,589		(6,524)
Accrued taxes and licenses		7,225		(6,099)
Other accrued liabilities		14,649		2,280
Operating lease right-of-use assets and lease liabilities		2,592		2,257
Other liabilities		9,430		12,575
Net cash provided by operating activities		296,846		61,845
Cash flows from investing activities:
Capital expenditures—property and equipment		(85,068)		(81,833)
Proceeds from sale leaseback transactions		3,285		2,167
Net cash used in investing activities		(81,783)		(79,666)
Cash flows from financing activities:
(Payments on) proceeds from revolving credit facility, net		(50,000)		240,000
Debt issuance costs		(708)		(641)
Distributions to noncontrolling interest holders		(4,423)		(1,847)
Proceeds from (payments on) restricted stock and other deposits, net		459		(165)
Indirect repurchase of shares for minimum tax withholdings		(12,195)		(7,302)
Repurchase of shares of common stock		—		(12,621)
Dividends paid to shareholders		(27,932)		(24,989)
Net cash (used in) provided by financing activities		(94,799)		192,435
Net increase in cash and cash equivalents		120,264		174,614
Cash and cash equivalents—beginning of period		363,155		107,879
Cash and cash equivalents—end of period	$	483,419	$	282,493
Supplemental disclosures of cash flow information:
Interest paid, net of amounts capitalized	$	2,078	$	1,223
Income taxes paid	$	18,351	$	388
Capital expenditures included in current liabilities	$	25,030	$	11,516

See accompanying notes to condensed consolidated financial statements.

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Texas Roadhouse, Inc. and Subsidiaries

~~Condensed Consolidated Statements of Cash Flows~~

~~(in thousands)~~

~~(unaudited)~~

39 Weeks Ended

September 26, 2017

September 27, 2016

Cash flows from operating activities:

Net income including noncontrolling interests

$
107,526

$
98,665

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

69,236

60,718

Deferred income taxes

(5,647)

(3,270)

Loss on disposition of assets

3,490

3,509

Impairment and closure costs

—

139

Equity income from investments in unconsolidated affiliates

(1,149)

(831)

Distributions of income received from investments in unconsolidated affiliates

585

1,765

Provision for doubtful accounts

19

9

Share-based compensation expense

18,826

18,347

Changes in operating working capital:

Receivables

31,129

23,373

Inventories

805

1,276

Prepaid expenses

1,689

1,985

Other assets

(5,729)

(3,003)

Accounts payable

(3,162)

(9,352)

Deferred revenue—gift cards

(59,302)

(46,146)

Accrued wages

3,541

(8,471)

Excess tax benefits from share-based compensation

—

(2,698)

Prepaid income taxes and income taxes payable

9,535

9,760

Accrued taxes and licenses

3,785

1,698

Other accrued liabilities

3,536

5,594

Deferred rent

4,158

3,412

Other liabilities

5,199

3,303

Net cash provided by operating activities

188,070

159,782

Cash flows from investing activities:

Capital expenditures—property and equipment

(117,037)

(113,219)

Acquisition of franchise restaurants, net of cash acquired

(16,528)

—

Net cash used in investing activities

(133,565)

(113,219)

Cash flows from financing activities:

Proceeds from revolving credit facility, net

—

25,000

Debt issuance costs

(476)

—

Proceeds from noncontrolling interest contribution

3,457

—

Repurchase of shares of common stock

—

(4,110)

Distributions to noncontrolling interest holders

(4,042)

(3,538)

Excess tax benefits from share-based compensation

—

2,698

Proceeds from stock option and other deposits, net

438

283

Indirect repurchase of shares for minimum tax withholdings

(10,097)

(7,927)

Principal payments on long-term debt and capital lease obligation

(555)

(106)

Proceeds from exercise of stock options

1,485

2,172

Dividends paid to shareholders

(43,223)

(38,656)

Net cash used in financing activities

(53,013)

(24,184)

Net increase in cash and cash equivalents

1,492

22,379

Cash and cash equivalents—beginning of period

112,944

59,334

Cash and cash equivalents—end of period

$
114,436

$
81,713

Supplemental disclosures of cash flow information:

Interest paid, net of amounts capitalized

$
948

$
201

Income taxes paid

$
37,271

$
35,849

Capital expenditures included in current liabilities

$
5,470

$
3,189

~~See accompanying notes to condensed consolidated financial statements.~~

~~Table of Contents~~

~~Texas Roadhouse, Inc. and Subsidiaries~~

Notes to Condensed Consolidated Financial Statements

(tabular amounts in thousands, except share and per share data)

(unaudited)

(1) Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include the accounts of Texas Roadhouse, Inc. ("TRI"), our wholly-owned subsidiaries and subsidiaries in which we have a controlling interest (collectively the "Company," "we," "our" and/or "us") as of ~~September 26, 2017~~June 29, 2021 and December ~~27, 2016~~29, 2020 and for the 13 and 3926 weeks ended ~~September 26, 2017~~June 29, 2021 and ~~September 27, 2016.~~ June 30, 2020.

As of ~~September 26, 2017,~~June 29, 2021, we owned and operated ~~455~~548 restaurants and franchised an additional 8599 restaurants in 49 states and ~~six~~10 foreign countries. Of the ~~455 company-owned~~548 company restaurants that were operating at ~~September 26, 2017, 437~~June 29, 2021, 528 were wholly-owned and 1820 were majority-owned. Of the 99 franchise restaurants, 69 were domestic restaurants and 30 were international restaurants.

As of ~~September 27, 2016,~~June 30, 2020, we owned and operated ~~422~~521 restaurants and franchised an additional 8596 restaurants in 49 states and ~~five~~10 foreign countries. Of the ~~422 company-owned~~521 company restaurants that were operating at ~~September 27, 2016, 406~~June 30, 2020, 501 were wholly-owned and 1620 were majority-owned. Of the 96 franchise restaurants, 70 were domestic restaurants and 26 were international restaurants.

As of ~~September 26, 2017~~June 29, 2021 and ~~September 27, 2016,~~June 30, 2020, we owned a 5.0% to 10.0% equity interest in 24 domesticfranchise restaurants. Additionally, as of ~~September 26, 2017~~June 29, 2021 and ~~September 27, 2016,~~June 30, 2020, we owned a 40% equity interest in ~~four~~3 and 4 non-Texas Roadhouse restaurants, respectively, as part of a joint venture agreement with a casual dining restaurant operator in China. The unconsolidated restaurants are accounted for using the equity method. Our investments in these unconsolidated affiliates are included in ~~Other~~other assets in our unaudited condensed consolidated balance sheets, and we record our percentage share of net income earned by these unconsolidated affiliates in our unaudited condensed consolidated statements of income (loss) and comprehensive income (loss) under ~~Equity~~equity income (loss) from investments in unconsolidated affiliates. All significant intercompany balances and transactions for these unconsolidated restaurants as well as the entities whose accounts have been consolidated have been eliminated.

We have made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reporting of revenue and expenses during the periods to prepare these unaudited condensed consolidated financial statements in conformity with U.S. generally accepted accounting principles ("GAAP"). Significant items subject to such estimates and assumptions include the carrying ~~amounts~~amount of property and equipment, ~~and~~ goodwill, obligations related to insurance reserves, leases and leasehold improvements, legal reserves, gift card ~~discounts~~breakage and ~~breakage~~third-party fees and income taxes. Actual results could differ from those estimates.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, necessary to present fairly our consolidated financial position, results of operations and cash flows for the periods presented. The unaudited condensed consolidated financial statements have been prepared in accordance with GAAP, except that certain information and footnotes have been condensed or omitted pursuant to rules and regulations of the Securities and Exchange Commission ~~("SEC"~~(the "SEC"). Operating results for the 13 and 3926 weeks ended ~~September 26, 2017~~June 29, 2021 are not necessarily indicative of the results that may be expected for the year ending December ~~26, 2017.~~28, 2021. The unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December ~~27, 2016.~~29, 2020.

Our significant interim accounting policies include the recognition of income taxes using an estimated annual effective tax rate.

~~(2) Share-based Compensation~~

On May 16, 2013, our stockholders approved the Texas Roadhouse, Inc. 2013 Long-Term Incentive Plan (the "Plan"). The Plan provides for the granting of incentive and non-qualified stock options to purchase shares of common

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~~stock, stock appreciation rights,~~Risks and ~~full value awards, including restricted stock, restricted stock units ("RSUs"), deferred stock units, performance stock~~Uncertainties

The Company continues to be subject to risks and ~~performance stock units ("PSUs"). This Plan replaced the Texas Roadhouse, Inc. 2004 Equity Incentive Plan.~~

~~The following table summarizes the share-based compensation expense recorded in the accompanying unaudited condensed consolidated statements of income and comprehensive income:~~

13 Weeks Ended

39 Weeks Ended


September 26, 2017

September 27, 2016

September 26, 2017

September 27, 2016

Labor expense

$
1,822

$
1,570

$
5,255

$
4,475

General and administrative expense

4,639

5,074

13,571

13,872

Total share-based compensation expense

$
6,461

$
6,644

$
18,826

$
18,347

~~Effective December 28, 2016, we adopted Accounting Standards Update No. 2016-09,~~ ~~Compensation – Stock Compensation~~ ("ASU 2016-09") which amends and simplifies the accounting for stock compensation. As a result of the adoption of ASU 2016-09, we made a change in our accounting for forfeitures to record as they occur and, as a result, we recorded a $0.1 million cumulative-effect reduction to retained earnings under the modified retrospective approach. We elected prospective transition for the requirement to classify excess tax benefits as an operating activity in the consolidated statement of cash flows. No prior periods have been adjusted. Additionally,uncertainties as a result of the ~~new guidance requirements,~~COVID-19 pandemic (the “pandemic”). These include state and local restrictions on ~~a prospective basis, all excess tax benefits and tax deficiencies are recognized within the income tax provision~~restaurants, some of which have limited capacity or seating in the ~~consolidated statements~~dining rooms while others have allowed To-Go or curbside service only. As of ~~income and comprehensive income in the period in which the restricted shares vest or options are exercised. See note 4 for further discussion.~~

Beginning in 2008, we changed the method by which we provide share-based compensation to our employees by granting RSUs as a form of share-based compensation. Prior to 2008, we issued stock options as share-based compensation to our employees. Beginning in 2015, we began granting PSUs to twoJune 29, 2021, nearly all of our executives. An RSU is the conditional right to receive one share of common stock upon satisfaction of the vesting requirement. A PSU is the conditional right to receive one share of common stock upon meeting defined performance obligations along with the satisfaction of the vesting requirement. Share-based compensation activity by type of grant as of September 26, 2017domestic company and ~~changes during the 39 weeks then ended are presented below.~~

~~Summary Details for RSUs~~

Weighted-Average

Weighted-Average


Grant Date Fair

Remaining Contractual

Aggregate

Shares

Value

Term (years)

Intrinsic Value

Outstanding at December 27, 2016

919,463

$
37.06

Granted

349,049

46.70

Forfeited

(35,041)

37.40

Vested

(404,505)

38.14

Outstanding at September 26, 2017

828,966

$
40.57

1.2

$
39,991

franchise locations were operating without restriction. As of September 26, 2017, with respect to unvested RSUs, there was $17.4 million of unrecognized compensation cost that is expected to be recognized over a weighted-average period of 1.2 years. The vesting terms of the RSUs range from 1.0 to 5.0 years. The total intrinsic value of RSUs vested during the 39 weeks ended September 26, 2017 and September 27, 2016 was $18.8 million and $17.4 million, respectively. The excess tax benefit, which was recognized within the income tax provision, associated with vested RSUs was $1.2 million for the 39 weeks ended September 26, 2017. The excess tax benefit associated with vested RSUs for the 39 weeks ended September 27, 2016 was $1.2 million which was recorded in additional paid-in-capital in the unaudited condensed consolidated balance sheets.

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~~Summary Details for PSUs~~

~~In 2015 and 2016, we granted PSUs to two~~June 30, 2020, nearly all of our ~~executives subject to an approximate one-year vesting term~~domestic company and the achievement of certain earnings targets, which determine the number of units to vest at the end of the vesting period. Share-based compensation is recognized for the number of units expected to vest at the end of the period and is expensed beginning on the grant date and through the performance period. For each grant, PSUs vest after meeting the performance and service conditions. franchise restaurants had re-opened their dining rooms under various limited capacity restrictions.

On November 19, 2015, we granted PSUs with a grant date fair value of approximately $3.9 million based on a grant date price per share of $34.11. On January 8, 2017, 188,237 shares vested related to this PSU grant and were distributed during the 13 weeks ended March 28, 2017. On November 9, 2016, we granted PSUs with a grant date fair value of approximately $4.6 million based on a grant date price per share of $39.88. As of September 26, 2017, with respect to unvested PSUs, there was $1.1 million of unrecognized compensation cost that is expected to be recognized over a weighted-average period of three months. Any distribution of vested PSUs as common stock related to the November 9, 2016 grants will occur in the first quarter of 2018. For the 39 weeks ended September 26, 2017, the excess tax benefit, recognized within the income tax provision, associated with vested PSUs was $0.8 million.

~~Summary Details for Stock Options~~

Weighted-

Weighted-Average


Average Exercise

Remaining Contractual

Aggregate

Shares

Price

Term (years)

Intrinsic Value

Outstanding at December 27, 2016

118,073

$
13.57

Granted

—

—

Cancelled/Expired

(2,836)

15.47

Exercised

(109,085)

13.61

Outstanding at September 26, 2017

6,152

$
11.93

0.1

$
223

Exercisable at September 26, 2017

6,152

$
11.93

0.1

$
223

No stock options vested during the 39 weeks ended September 26, 2017 or September 27, 2016. For the 39 weeks ended September 26, 2017 and September 27, 2016, the total intrinsic value of options exercised was $3.7 million and $5.3 million, respectively.

For the 39 weeks ended September 26, 2017 and September 27, 2016, cash received before tax withholdings from options exercised was $1.5 million and $2.2 million, respectively. The excess tax benefit, recognized within the income tax provision, associated with options exercised was $1.0 million for the 39 weeks ended September 26, 2017. The excess tax benefit for the 39 weeks ended September 27, 2016 was $1.5 million which was recorded in additional paid-in-capital in the unaudited condensed consolidated balance sheets.

~~(3) Long-term Debt and Obligation Under Capital Lease~~

~~Long-term debt consisted of the following:~~

September 26,

December 27,

2017

2016

Installment loan

$
—

$
550

Obligation under capital lease

1,993

1,998

Revolver

50,000

50,000

51,993

52,548

Less current maturities

9

167

$
51,984

$
52,381

~~The interest rate for our installment loan outstanding at December 27, 2016 was 10.46%. The installment loan was repaid during the 13 weeks ended September 26, 2017.~~

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~~During the 52 weeks ended December 27, 2016, we amended an existing lease at one restaurant location to acquire additional square footage.~~ As a result of these restrictions, we developed a hybrid operating model to accommodate our dining room restrictions together with enhanced To-Go. We continue to see increased sales in our To-Go program over pre-pandemic levels, even with dining rooms re-opened and operating with fewer restrictions, which has offset the decrease in dining room traffic. We cannot predict how long we will continue to be impacted by the pandemic, the extent to which our dining rooms will have to close again, or if the increased sales in our To-Go program will continue. The extent to which COVID-19 impacts our business, results of operations, or financial condition will depend on future developments which are outside of our control, including the efficacy and public acceptance of vaccination programs in curbing the spread of the virus, the introduction and spread of new variants of the virus, which may prove resistant to currently approved vaccines, and new or reinstated restrictions on our operations. In addition, significant items subject to estimates and assumptions including the carrying amount of property and equipment, goodwill, and lease related assets could be impacted.

(2) Recent Accounting Pronouncements

Income Taxes

(Accounting Standards Update 2019-12, "ASU 2019-12")

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which removed certain exceptions related to the approach for intraperiod tax allocations, the calculation of income taxes in interim periods, and the recognition of deferred taxes for investments. This guidance also simplified aspects of accounting for recognizing deferred taxes for taxable goodwill. We adopted ASU 2019-12 as of the beginning of our 2021 fiscal year. The adoption of this ~~amendment,~~standard did not have a significant impact on our condensed consolidated financial statements.

Reference Rate Reform

(Accounting Standards Update 2020-04, "ASU 2020-04")

In March 2020, the ~~lease qualified~~FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides temporary optional expedients and exceptions to the current guidance on contract modifications and hedge accounting. These changes are intended to simplify the market transition from the London Interbank Offered Rate ("LIBOR") and other interbank offered rates to alternative reference rates. This guidance is effective upon issuance to modifications made as ~~a capital lease.~~early as the beginning of the interim period through December 31, 2022. We are currently assessing the impact of this new standard on our condensed consolidated financial statements.

(3) Long-term Debt

On ~~August 7, 2017,~~May 4, 2021, we entered into ~~the Amended and Restated Credit Agreement (the "Amended Credit Agreement") with respect~~an agreement to amend our revolving credit facility with a syndicate of commercial lenders led by JPMorgan Chase Bank, N.A., and PNC Bank, N.A.~~, and Wells Fargo Bank, N.A.~~ The amended revolving credit facility remains an unsecured, revolving credit agreement ~~under which we may borrow~~and has a borrowing capacity of up to $300.0 million with the option to increase by an additional $200.0 million subject to certain limitations, including approval by the syndicate of lenders. The amendment also extended the maturity date to May 1, 2026.

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(5) Income Taxes

Our effective tax rate was 12.4% and 14.2% for the 13 and 26 weeks ended June 29, 2021, respectively. For these periods we recognized income tax ~~rate~~expense using an estimated effective annual tax rate. Our effective tax benefit was 31.2% and 51.4% for the 13 and 26 weeks ended June 30, 2020, respectively. For these periods we recognized income tax benefit using a discrete tax calculation as we were unable to reliably estimate our full year effective income tax rate. This was primarily due to the inability to estimate the increased impact of the FICA tip and Work opportunity tax credits on our effective tax rate ~~for the 13 and 39 weeks ended September 26, 2017 and September 27, 2016 is~~ as ~~follows:~~

13 Weeks Ended


39 Weeks Ended


September 26, 2017

September 27, 2016


September 26, 2017

September 27, 2016

Tax at statutory federal rate

35.0
%
35.0
%

35.0
%
35.0
%

State and local tax, net of federal benefit

3.4

3.5

3.4

3.5

FICA tip tax credit

(7.1)

(7.1)

(7.1)

(6.9)

Work opportunity tax credit

(0.9)

(0.9)

(0.8)

(0.8)

Stock compensation

(0.9)

—

(2.0)

—

Net income attributable to noncontrolling interests

(1.1)

(1.1)

(1.1)

(0.9)

Other

0.4

0.4

0.3

0.1

Total

28.8
%
29.8
%

27.7
%
30.0
%

As a result of the ~~adoption~~significant decrease in our pre-tax income. The impact of ~~ASU 2016-09~~,~~excess~~these credits was the primary driver of the difference between our statutory and effective tax ~~benefits~~rates for all periods presented. Additionally, the FICA tip and Work opportunity tax ~~deficiencies from share-based compensation are recognized within the income~~credits exceeded our federal tax ~~provision~~liability for fiscal year 2020 but we expect to fully utilize these credits in ~~the period in which the restricted shares vest or options are exercised. During the 13 weeks ended September 26, 2017, we recognized $0.4 million as an income~~our 2021 tax benefit, which resulted in a 0.9% impact on the tax rate. During the 39 weeks ended September 26, 2017, we recognized $3.0 million as an income tax benefit, which resulted in a 2.0% impact on the tax rate. Prior to the adoption of ASU 2016-09, excess tax benefits and deficiencies were recognized in additional paid-in capital in the unaudited condensed consolidated balance sheets. year.

~~During the first quarter of 2017, we adopted ASU 2015-17,~~ ~~Balance Sheet Classification of Deferred Taxes, which required deferred tax assets and liabilities to be classified as noncurrent on our condensed consolidated balance sheets. We adopted ASU 2015-17 on a prospective basis.~~

(6)

Commitments and Contingencies

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~~(5)Commitments and Contingencies~~

The estimated cost of completing capital project commitments at ~~September 26, 2017~~June 29, 2021 and December ~~27, 2016~~29, 2020 was ~~approximately $150.6~~$119.3 million and ~~$157.5~~$95.9 million, respectively.

As of ~~September 26, 2017~~June 29, 2021 and December ~~27, 2016,~~29, 2020, we were contingently liable for ~~$15.8~~$12.6 million and ~~$16.4~~$13.0 million, respectively, for ~~seven~~7 lease guarantees, listed in the table below. These amounts represent the maximum potential liability of future payments under the guarantees. In the event of default, the indemnity and default clauses in our assignment agreements govern our ability to pursue and recover damages incurred. No material liabilities have been recorded as of ~~September 26, 2017~~June 29, 2021 and December ~~27, 2016~~29, 2020 as the likelihood of default was deemed to be less than probable and the fair value of the guarantees is not considered significant.


	Lease Assignment Date	Current Lease Term Expiration
Everett, Massachusetts (1)~~(2)~~	September 2002	February 2023
Longmont, Colorado (1)	October 2003	May ~~2019~~2029
Montgomeryville, Pennsylvania (1)	October 2004	March ~~2021~~2026
Fargo, North Dakota (1)~~(2)~~	February 2006	July ~~2021~~2026
Logan, Utah (1)	January 2009	August ~~2019~~2024
Irving, Texas ~~(3)~~(2)	December 2013	December ~~2019~~2024
Louisville, Kentucky (2)(3)~~(4)~~	December 2013	November 2023

(1)

~~(1)~~

Real estate lease agreements for restaurant locations which we entered into before granting franchise rights to those restaurants. We have subsequently assigned the leases to the franchisees, but remain contingently liable under the terms of the lease if the franchisee defaults.

(2)

~~(2)~~

~~As discussed in note 7, these restaurants are owned, in whole or part, by certain officers, directors and 5% shareholders of the Company.~~

~~(3)~~

Leases associated with non-Texas Roadhouse restaurants which were sold. The leases were assigned to the acquirer, but we remain contingently liable under the terms of the lease if the acquirer defaults.

(3)

~~(4)~~

We may be released from liability after the initial contractual lease term expiration contingent upon certain conditions being met by the acquirer.

During the 13 and 3926 weeks ended ~~September 26, 2017,~~June 29, 2021, we bought most of our beef from ~~three~~3 suppliers. ~~Although there are a limited number of beef suppliers, we believe that other suppliers could provide a similar product on comparable terms.~~ ~~A change in suppliers, however, could cause supply shortages and/or higher costs to secure adequate supplies and a possible loss of sales, which would affect operating results adversely.~~ We have no material minimum purchase commitments with our vendors that extend beyond a year.

We and the U.S. Equal Employment Opportunity Commission entered into a consent decree dated March 31, 2017 (the "Consent Decree") to settle the lawsuit styled Equal Employment Opportunity Commission v. Texas Roadhouse, Inc., Texas Roadhouse Holdings LLC and Texas Roadhouse Management Corp. in the United States District Court, District of Massachusetts, Civil Action Number 1:11-cv-11732 (the "Lawsuit"). The Consent Decree resolves the issues litigated in the Lawsuit. Under the Consent Decree, among other terms, we have established a fund of $12.0 million, from which awards of monetary relief, allocated as wages for tax purposes, may be made to eligible claimants in accordance with procedures set forth in the Consent Decree. We recorded a pre-tax charge of $14.9 million ($9.2 million after-tax) related to the Lawsuit and Consent Decree. The pre-tax charge includes $12.6 million of costs associated with the legal settlement and $2.3 million of legal fees associated with the defense of the case during the 13 weeks ended March 28, 2017. The pre-tax charge was recorded in general and administrative expense in our unaudited condensed consolidated statements of income and comprehensive income.

Occasionally, we are a defendant in litigation arising in the ordinary course of our business, including "slip and fall" accidents, employment related claims, claims related to our service of alcohol, and claims from guests or employees alleging illness, injury or food quality, health or operational concerns. None of these types of litigation, most of which are covered by insurance, has had a material adverse effect on us during the periods covered by this report and, as of the date of this report, we are not party to any litigation that we believe could have a material adverse effect on our business.

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~~(6) Acquisitions~~

On December 28, 2016, we acquired four franchise restaurants in Florida and Georgia. Pursuant to the terms of the acquisition agreements, we paid a total purchase price of $16.5 million, net of cash acquired. Two of the acquired restaurants are wholly-owned and the remaining two restaurants are majority-owned. These acquisitions are consistent with our long-term strategy to increase net income and earnings per share.

~~These transactions were accounted for using the purchase method as defined in ASC 805,~~ ~~Business Combinations~~ ~~("ASC 805"). Based on a purchase price of $16.5 million, $4.5 million of goodwill was generated by the acquisition, which is not amortizable for book purposes, but is deductible for tax purposes.~~

~~The purchase price has been allocated as follows:~~

Current assets

$
170

Property and equipment

12,281

Goodwill

4,469

Current liabilities

(392)

$
16,528

Pro forma results of operations and revenue and earnings for the 39 weeks ended September 26, 2017 have not been presented because the effect of the acquisitions was not material to our consolidated financial position, results of operations or cash flows.

(7) Related Party Transactions

As of ~~September 26, 2017~~June 29, 2021 and ~~September 27, 2016,~~June 30, 2020, we had 103 franchise restaurants and 2 majority-owned company restaurants owned in ~~whole or~~ part by ~~certain~~current officers ~~directors and 5% stockholders~~ of the Company. ~~For both 13 week periods ended September 26, 2017 and September 27, 2016, these~~These franchise entities paid us fees of ~~approximately $0.5 million. For~~$0.5 million and $0.2 million for the ~~39 week periods~~13 weeks ended ~~September 26, 2017~~June 29, 2021 and ~~September 27, 2016, these~~June 30, 2020, respectively. These franchise entities paid us fees of ~~approximately $1.6~~$0.9 million and ~~$1.5~~$0.4 million for the 26 weeks ended June 29, 2021 and June 30, 2020, respectively. ~~As disclosed in note 5, we are contingently liable on leases which are related to two of these restaurants.~~

(8) Earnings Per Share

The share and net income per share data for all periods presented are based on the historical weighted-average shares outstanding. The diluted earnings per share calculations show the effect of the weighted-average restricted stock ~~options and RSUs outstanding~~units from our equity incentive plans, except during loss periods as ~~discussed in note 2.~~

~~For both 13 week periods ended September 26, 2017 and September 27, 2016, there were no shares of nonvested~~the effect would be anti-dilutive. Performance stock that were outstanding, but not included in the computation of diluted earnings per share because their inclusion would have had an anti-dilutive effect. For the 39 week periods ended September 26, 2017 and September 27, 2016, there were 7,960 and six shares of nonvested stock, respectively, that had an anti-dilutive effect. For all periods presented, there were no outstanding options that had an anti-dilutive effect.

~~PSUs~~units are not included in the diluted earnings per share calculation until the performance-based criteria have been met. ~~See note 2~~

For the 13 and 26 weeks ended June 29, 2021, there were 52,620 and 27,186 weighted-average shares of nonvested stock, respectively, that were outstanding but not included in the computation of diluted earnings per share because they would have had an anti-dilutive effect. For the 13 and 26 weeks ended June 30, 2020, there were 367,968 and 400,291 weighted-average shares of nonvested stock, respectively, that were outstanding but not included in the computation of diluted earnings per share because they would have had an anti-dilutive effect. This included all outstanding restricted stock unit grants as the Company was in a net loss position for ~~further discussion of PSUs.~~both periods.

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The following table sets forth the calculation of earnings per share and weighted-average shares outstanding (in thousands) as presented in the accompanying unaudited condensed consolidated statements of income (loss) and comprehensive ~~income:~~income (loss):



	13 Weeks Ended				26 Weeks Ended
	June 29, 2021		June 30, 2020		June 29, 2021		June 30, 2020
Net income (loss) attributable to Texas Roadhouse, Inc. and subsidiaries	$	75,480	$	(33,553)	$	139,630	$	(17,524)
Basic EPS:
Weighted-average common shares outstanding		69,790		69,361		69,713		69,391
Basic EPS	$	1.08	$	(0.48)	$	2.00	$	(0.25)
Diluted EPS:
Weighted-average common shares outstanding		69,790		69,361		69,713		69,391
Dilutive effect of nonvested stock		371		-		437		-
Shares-diluted		70,161		69,361		70,150		69,391
Diluted EPS	$	1.08	$	(0.48)	$	1.99	$	(0.25)

13 Weeks Ended

39 Weeks Ended


September 26, 2017

September 27, 2016

September 26, 2017

September 27, 2016

Net income attributable to Texas Roadhouse, Inc. and subsidiaries

$
31,014

$
25,675

$
102,908

$
94,873

Basic EPS:

Weighted-average common shares outstanding

71,067

70,477

70,939

70,338

Basic EPS

$
0.44

$
0.36

$
1.45

$
1.35

Diluted EPS:

Weighted-average common shares outstanding

71,067

70,477

70,939

70,338

Dilutive effect of stock options and nonvested stock

465

504

510

560

Shares-diluted

71,532

70,981

71,449

70,898

Diluted EPS

$
0.43

$
0.36

$
1.44

$
1.34

(9) Fair Value Measurements

~~ASC~~Accounting Standards Codification ("ASC") 820, Fair Value Measurements and Disclosures ("("ASC 820"), establishes a framework for measuring fair value and expands disclosures about fair value measurements. ASC 820 establishes a three-level hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs in measuring fair value. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability on the measurement date.

Level 1

Inputs based on quoted prices in active markets for identical assets.

Level 2

Inputs other than quoted prices included within Level 1 that are observable for the assets, either directly or indirectly.

Level 3

Inputs that are unobservable for the asset.

~~Level 1Inputs based on quoted prices in active markets for identical assets.~~12

~~Level 2Inputs other than quoted prices included within Level 1 that are observable for the assets, either directly or indirectly.~~Table of Contents

~~Level 3Inputs that are unobservable for the asset.~~

There were no0 transfers among levels within the fair value hierarchy during the 13 and 3926 weeks ended ~~September 26, 2017.~~June 29, 2021.

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The following table presents the fair values for our financial assets and liabilities measured on a recurring basis:


	Fair Value Measurements
	Level	September 26, 2017		December 27, 2016

						Fair Value Measurements
						Level	June 29, 2021		December 29, 2020
Deferred compensation plan—assets	1	$	26,966	$	21,951	1	$	62,948	$	55,633
Deferred compensation plan—liabilities	1		(26,980)		(22,128)	1	$	(62,868)	$	(55,614)

The Second Amended and Restated Deferred Compensation Plan of Texas Roadhouse Management Corp.~~, as~~ (as amended, ~~(the~~the "Deferred Compensation Plan") is a nonqualified deferred compensation plan which allows highly compensated employees to defer receipt of a portion of their compensation and contribute such amounts to ~~one~~1 or more investment funds held in a rabbi trust. We report the amounts of the rabbi trust in other assets and the corresponding liability in other liabilities in our unaudited condensed consolidated financial statements. These investments are considered trading securities and are reported at fair value based on quoted market prices. The realized and unrealized holding gains and losses related to these investments, as well as the offsetting compensation expense, are recorded in general and administrative expense in the unaudited condensed consolidated statements of income (loss) and comprehensive ~~income.~~income (loss).

The following table presents the fair value of our assets measured on a nonrecurring basis:


	Fair Value Measurements					Total loss
						13 Weeks Ended				26 Weeks Ended
		June 29,		December 29,		June 29,		June 30,		June 29,		June 30,
	Level	2021		2020		2021		2020		2021		2020
Long-lived assets held for sale	3	$	1,175	$	1,645	$	—	$	—	$	(470)	$	—
Goodwill	3	$	—	$	2,625	$	—	$	—	$	—	$	—
Investments in unconsolidated affiliates	3	$	1,000	$	1,531	$	—	$	—	$	(531)	$	(528)

Long-lived assets held for sale include land and building at a site that was relocated. These assets are included in prepaid expenses and other current assets in our unaudited condensed consolidated balance sheets. These assets are valued using a Level 3 input. This resulted in a loss of $0.5 million which is included in impairment and closure, net in our unaudited condensed consolidated statement of income and comprehensive income for the 26 weeks ended June 29, 2021.

Goodwill includes two restaurants whose carrying values were determined to be in excess of their fair values as part of our most recent annual goodwill impairment assessment in 2020. In determining the fair value, multiple valuation approaches were utilized which considered the historical results and anticipated future trends of operations for these restaurants. We consider this a Level 3 input.

Investments in unconsolidated affiliates include a 40% equity interest in a joint venture in China that was reduced to fair value. This asset is valued using a Level 3 input, i.e., the amount we expect to receive upon the sale of this investment. This resulted in a loss of $0.5 million which is included in equity income from investments in unconsolidated affiliates in our unaudited condensed consolidated statement of income and comprehensive income for the 26 weeks ended June 29, 2021.

At ~~September 26, 2017~~June 29, 2021 and December ~~27, 2016,~~29, 2020, the fair values of cash and cash equivalents, accounts receivable and accounts payable approximated their carrying values based on the short-term nature of these instruments. ~~The~~At June 29, 2021 and December 29, 2020, the fair value of our revolving credit facility ~~at September 26, 2017 and December 27, 2016~~ approximated its carrying value since it is a variable rate credit facility (Level 2).

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(10) Share Based Compensation

~~(10)~~On May 13, 2021, our stockholders approved the Texas Roadhouse, Inc. 2021 Long-Term Incentive Plan (the "Plan"). The Plan provides for the granting of various forms of equity awards including options, stock appreciation rights, full value awards, and performance-based awards. This Plan replaced the 2013 Long-Term Incentive Plan and no subsequent awards will be granted under the 2013 Plan.

The Company provides restricted stock units ("RSUs") to employees as a form of share-based compensation. An RSU is the conditional right to receive one share of common stock upon satisfaction of the vesting requirement. In addition to RSUs, the Company provides performance stock units ("PSUs") to certain executives as a form of share-based compensation. A PSU is the conditional right to receive one share of common stock upon meeting a performance obligation along with the satisfaction of the vesting requirement. The following table summarizes the share-based compensation recorded in the accompanying unaudited condensed consolidated statements of income (loss) and comprehensive income (loss):



	13 Weeks Ended				26 Weeks Ended
	June 29, 2021		June 30, 2020		June 29, 2021		June 30, 2020
Labor expense	$	2,495	$	2,532	$	5,079	$	4,920
General and administrative expense		7,414		4,711		14,738		9,570
Total share-based compensation expense	$	9,909	$	7,243	$	19,817	$	14,490

We grant PSUs to certain executives which are generally subject to a one-year vesting and the achievement of certain earnings targets, which determine the number of units to vest at the end of the vesting period. Share-based compensation expense is recognized for the number of units expected to vest at the end of the period and is expensed beginning on the grant date and through the performance period. For each grant, PSUs vest after meeting the performance and service conditions. There were 0 PSUs that vested during the 13 weeks ended June 29, 2021 and June 30, 2020. The total intrinsic value of PSUs vested during the 26 weeks ended June 29, 2021 and June 30, 2020 was $0.4 million and $5.4 million, respectively.

On January 8, 2021, 5,199 shares vested related to the January 2020 PSU grant and were distributed during the 13 weeks ended March 30, 2021. With respect to unvested PSUs, we recognized expense of $1.8 million and $4.1 million during the 13 and 26 weeks ended June 29, 2021, respectively. As of June 29, 2021, with respect to unvested PSUs, there was $3.8 million of unrecognized compensation cost that is expected to be recognized over a weighted-average period of 0.5 years.

(11) Stock Repurchase Program

WeFor both of the 13 weeks ended June 29, 2021 and June 30, 2020, we did not repurchase any shares of our common ~~stock during~~stock. For the ~~13 and 39 week periods~~26 weeks ended ~~September~~June 29, 2021, we did not repurchase any shares of our common stock. For the 26 ~~2017.~~ weeks ended June 30, 2020, we paid $12.6 million to repurchase 252,409 shares of our common stock. On March 17, 2020, we suspended all share repurchase activity. As of ~~September 26, 2017,~~June 29, 2021, we had ~~approximately~~ $~~69.9~~147.8 million remaining under our authorized stock repurchase program. For the 13 week period ended September 27, 2016, we did not repurchase any shares of common stock. For the 39 week period ended September 27, 2016, we paid approximately $4.1 million to repurchase 114,700 shares of our common stock.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

CAUTIONARY STATEMENT

This report contains forward-looking statements based on our current expectations, estimates and projections about our industry and certain assumptions made by us.These statements include, but are not limited to, statements related to the potential impact of the COVID-19/Coronavirus outbreak and other non-historical statements. Words such as "anticipates," "expects," "intends," "plans," "believes," "seeks," "estimates," "may," "will" and variations of these words or similar expressions are intended to identify forward-looking statements. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. Such statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Therefore, our actual results could differ materially and adversely from those expressed in any forward-looking statements as a result of various factors. The section entitled "Risk Factors" in our Annual Report on Form 10-K for the year ended December ~~27, 2016,~~29, 2020, and in Part II, Item 1A in this Form 10-Q, ~~and~~along with disclosures in our other Securities and Exchange Commission ("SEC") filings discuss some of the important risk factors that may affect our business, results of operations, or financial condition. You should carefully consider those risks, in addition to the other information in this report, and in our other filings with the SEC, before deciding to invest in our Company or to maintain or increase your investment. We undertake no obligation to revise or update publicly any forward-looking statements, ~~for any reason.~~except as may be required by applicable law. The information contained in this Form 10-Q is not a complete description of our business or the risks associated with an investment in our common stock. We urge you to carefully review and consider the various disclosures made by us in this report and in our other reports filed with the SEC that discuss our business in greater detail and advise interested parties of certain risks, uncertainties and other factors that may affect our business, results of operations or financial condition.

~~OVERVIEW~~COVID-19 Impact

The Company continues to be subject to risks and uncertainties as a result of the COVID-19 pandemic (the “pandemic”). These include state and local restrictions on restaurants, some of which have limited capacity or seating in the dining rooms while others have allowed To-Go or curbside service only. As of June 29, 2021, nearly all of our domestic company and franchise locations were operating without restriction. As of June 30, 2020, nearly all of our domestic company and franchise restaurants had re-opened their dining rooms under various limited capacity restrictions.

As a result of these restrictions, we developed a hybrid operating model to accommodate our dining room restrictions together with enhanced To-Go. We continue to see increased sales in our To-Go program over pre-pandemic levels, even with dining rooms re-opened and operating with fewer restrictions, which has offset the decrease in dining room traffic. We cannot predict how long we will continue to be impacted by the pandemic, the extent to which our dining rooms will have to close again, or if the increased sales in our To-Go program will continue. The extent of the impact on our operations will depend on future developments which are outside of our control, including the efficacy and public acceptance of vaccination programs in curbing the spread of the virus, the introduction and spread of new variants of the virus, which may prove resistant to currently approved vaccines, and new or reinstated restrictions on our operations.

In addition, as our dining rooms have returned to operating without restriction, our ability to attract and retain restaurant-level employees has become more challenging. This is due to an increasingly competitive job market in certain parts of the country which has also impacted some of our suppliers. To the extent these challenges continue, we could experience increased labor costs and increased costs to source product and services.

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As a result of the pandemic, legislation referred to as the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") was passed in 2020 to benefit companies that were significantly impacted by the pandemic. This legislation allowed for the deferral of the social security portion of the employer portion of FICA payroll taxes from the date of enactment through the end of 2020. Amounts are required to be repaid in equal installments at the end of 2021 and 2022. As of December 29, 2020, the Company had deferred $47.3 million in payroll taxes with the amount due in 2021 included in accrued wages and payroll taxes and the amount due in 2022 included in other liabilities in our unaudited condensed consolidated balance sheets.

The CARES Act also allowed for an Employee Retention Credit for companies severely impacted by the pandemic to encourage the retention of full-time employees. This refundable payroll tax credit was available for any company that had fully or partially suspended operations due to government order or experienced a significant decline in gross receipts and had employees who were paid but did not actually work. The Company provided various forms of relief pay for hourly restaurant employees that qualified for this tax credit. In 2021, we recorded $1.2 million related to this credit which is included in labor expense in our unaudited condensed consolidated statement of income and comprehensive income. Based on the operating status of our restaurants as of June 29, 2021, we currently do not expect to qualify for any further credits going forward.

OVERVIEW

Texas Roadhouse, Inc. is a growing restaurant company operating predominately in the casual dining segment. Our late founder, ~~chairman and chief executive officer ("CEO"),~~ W. Kent Taylor, started the business in 1993 with the opening of the first Texas Roadhouse restaurant in Clarksville, Indiana. Since then, we have grown to ~~540 company and franchise~~ 647 restaurants in 49 states and ~~six~~ten foreign countries. ~~Our mission statement is "Legendary Food, Legendary Service~~®." Our operating strategy is designed to position each of our restaurants as the local hometown favorite for a broad segment of consumers seeking high quality, affordable meals served with friendly, attentive service. As of ~~September 26, 2017,~~June 29, 2021, our ~~540~~647 restaurants included:

●

~~455~~548 "company restaurants," of which ~~437~~528 were wholly-owned and 1820 were majority-owned. The results of operations of company restaurants are included in our unaudited condensed consolidated statements of income and comprehensive income. The portion of income attributable to noncontrolling interests in company restaurants that are not wholly-owned is reflected in the line item entitled "Net income attributable to noncontrolling interests" in our unaudited condensed consolidated statements of income and comprehensive income. Of the ~~455~~548 restaurants we owned ~~and operated~~ as of ~~September 26, 2017,~~June 29, 2021, we operated ~~433~~511 as Texas Roadhouse restaurants, ~~and operated 20~~34 as Bubba’s 33 ~~restaurants. In addition, we operated two~~ restaurants ~~outside of the casual dining segment.~~

and three as Jaggers restaurants.

●

8599 "franchise restaurants," 24 of which we have a 5.0% to 10.0% ownership interest. The income derived from our minority interests in these 24 franchise restaurants is reported in the line item entitled "Equity income from investments in unconsolidated affiliates" in our unaudited condensed consolidated statements of income and comprehensive income. Additionally, we provide various management services to these 24 franchise restaurants, as well as ~~six~~five additional franchise restaurants in which we have no ownership interest. All of the franchise restaurants are operated as Texas Roadhouse restaurants.

Of the 99 franchise restaurants, 69 were domestic restaurants and 30 were international restaurants.

We have contractual arrangements ~~which~~that grant us the right to acquire at pre-determined formulas the remaining equity interests in 1618 of the 1820 majority-owned company restaurants and 6665 of the 69 domestic franchise restaurants.

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Throughout this report, we use the term "restaurants" to include Texas Roadhouse and Bubba’s 33, unless otherwise noted.

Presentation of Financial and Operating Data

Throughout this report, the 13 weeks ended ~~September 26, 2017~~June 29, 2021 and ~~September 27, 2016~~June 30, 2020 are referred to as ~~Q3 2017~~Q2 2021 and ~~Q3 2016,~~Q2 2020, respectively. The 3926 weeks ended ~~September 26, 2017~~June 29, 2021 and ~~September 27, 2016~~June 30, 2020 are referred to as ~~2017~~2021 YTD and ~~2016~~2020 YTD, respectively. Fiscal years 2021 and 2020 will be 52 weeks in length, while the quarters for the year will be 13 weeks in length.

~~Long-term~~16

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Long-Term Strategies to Grow Earnings Per Share and Create Shareholder Value

While our short-term strategies have changed due to the temporary change in our business model due to the pandemic, our long-term strategies remain unchanged. Our long-term strategies with respect to increasing net income and earnings per share, along with creating shareholder value, include the following:

Expanding Our Restaurant Base.We ~~will~~ continue to evaluate opportunities to develop restaurants in existing markets and in new domestic and international markets. Domestically, we ~~will~~ remain focused primarily on markets where we believe a significant demand for our restaurants exists because of population size, income levels, and the presence of shopping and entertainment centers and a significant employment base. ~~Our ability~~In recent years, we have relocated several existing Texas Roadhouse locations at or near the end of the associated lease or as a result of eminent domain which allows us to ~~expand~~move to a better site, update them to a current prototypical design, construct a larger building with more seats and greater number of available parking spaces, and/or obtain more favorable lease terms. We continue to evaluate these opportunities particularly as it relates to older locations with strong sales. In addition, at our ~~restaurant base is influenced~~high volume restaurants, we continue to look for opportunities to increase our dining room capacity by ~~many factors beyond~~adding on to our ~~control and, therefore, we may not be able~~existing building and/or to ~~achieve~~increase our ~~anticipated growth.~~parking capacity by leasing or purchasing property that adjoins our site.

In ~~2017~~2021 YTD, ~~we opened 20~~11 company restaurants, ~~while our franchise partners opened~~including three ~~restaurants.~~Bubba’s 33, were opened. We currently plan to open 26 ~~or 27~~to 29 company restaurants across all concepts in ~~2017 including four Bubba’s 33 restaurants. In addition,~~2021. To the extent that state and local guidelines begin to significantly reduce capacity and/or re-close dining rooms, we ~~anticipate that~~could pull back on development and reduce capital expenditures accordingly. We currently expect our ~~existing~~ franchise partners will open as many as five ~~primarily international,~~ Texas Roadhouse restaurants, ~~during 2017.~~primarily international, in 2021.

Our average capital investment for the 2118 Texas Roadhouse restaurants opened during ~~2016,~~2020, including ~~pre‑opening~~pre-opening expenses and a capitalized rent factor, was ~~$5.0~~ $6.3 million. We expect our average capital investment for Texas Roadhouse restaurants opening in ~~2017~~2021 to be approximately ~~$5.2~~$5.4 million. ~~For 2016, the~~Our average capital investment for the three Bubba’s 33 restaurants opened during 2020, including pre-opening expenses and a capitalized rent factor, ~~for the nine Bubba’s 33 restaurants opened during the year~~ was ~~$6.6~~$7.3 million. We expect our average capital investment for Bubba’s 33 restaurants ~~opened~~opening in ~~2017~~2021 to be approximately ~~$6.1~~$7.1 million. The decrease in investment costs for both concepts is primarily due to higher building and site work costs in 2020 related to construction delays from the pandemic.

We remain focused on driving sales and managing restaurant investment costs to maintain our restaurant development in the future. Our capital investment (including cash and non-cash costs) for new restaurants varies significantly depending on a number of factors including, but not limited to: the square footage, layout, scope of required site work, geographical location, type of construction labor, ~~(union or non-union),~~ local permitting requirements, hook-up fees, our ability to negotiate with landlords, and cost of liquor and other ~~licenses~~licenses.

We have entered into area development and ~~hook-up fees and geographical location.~~

~~We may, at our discretion, add~~ franchise restaurants, domestically and/or internationally, primarily with franchisees who have demonstrated prior success with Texas Roadhouse or other restaurant concepts and in markets in which the franchisee demonstrates superior knowledge of the demographics and restaurant operating conditions. In conjunction with this strategy, we signed our first international franchise development agreement in 2010agreements for the development and operation of Texas Roadhouse restaurants in ~~eight~~numerous foreign countries and one U.S. territory. We currently have signed franchise and/or development agreements in nine countries in the Middle East over a 10-year period. In 2015, we amended our agreement in the Middle East to add one country to the territory. In addition to the Middle East, we currently have signed franchise development agreements for the development of Texas Roadhouse restaurants inas well as Taiwan, the Philippines, Mexico, China, South Korea, Brazil and ~~China. We currently have 10~~Puerto Rico. As of June 29, 2021, we had 15 restaurants ~~open~~ in ~~four~~five countries in the Middle East, ~~three~~four restaurants open in Taiwan, ~~and~~five in the Philippines, three in South Korea, two in ~~the Philippines~~Mexico and one in China for a total of 1530 restaurants in ~~six~~ten foreign countries. ~~Additionally,~~For the existing international agreements, the franchisee is required to pay us a franchise fee for each restaurant to be opened, royalties on the gross sales of each restaurant and a development fee for our grant of development rights in ~~2010, we entered into a joint venture~~the named countries. We anticipate that the specific business terms of any future franchise agreement with a casual dining restaurant operator in China for a minority ownership in four non‑Texas Roadhouse restaurants, all of which are currently open. We continue to explore opportunities in other countries for international ~~expansion. We may also look~~restaurants might vary significantly from the standard terms of our domestic agreements and from the terms of existing international agreements, depending on the territory to ~~acquire domestic franchise restaurants under terms favorable~~be franchised and the extent of franchisor-provided services to us and our stockholders. In Q1 2017, we acquired four franchise restaurants located in Florida and Georgia for an aggregate purchase price of $16.5 million. Additionally, from time to time, we will evaluate potential mergers, acquisitions, joint ventures or other strategic initiatives to acquire or develop additional concepts domestically and/or internationally.each franchisee.

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Maintaining and/or Improving ~~Restaurant Level~~Restaurant-Level Profitability.We plan to maintain, or possibly increase, restaurant-level profitability (restaurant margin) through a combination of increased comparable restaurant sales and operating cost management. In general, we continue to balance the impacts of inflationary pressures with our value positioning as we remain focused on our long-term success. This may create a challenge in terms of maintaining and/or increasing ~~restaurant margin, as a percentage of restaurant sales,~~restaurant-level profitability (restaurant margin), in any given year, depending on the level of inflation we experience. Restaurant margin is not a U.S. generally accepted accounting principle ("GAAP") measure and should not be considered in isolation, or as an alternative to income from operations. See further discussion

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of restaurant margin below. In addition to restaurant margin, as a percentage of restaurant and other sales, we also focus on the growth of restaurant margin dollars per store week as a measure of restaurant-level profitability. In terms of driving ~~higher guest traffic counts,~~comparable restaurant sales, we remain focused on encouraging repeat visits by our guests and attracting new guests through our continued commitment to operational standards relating to food and service quality. To attract new guests and increase the frequency of visits of our existing guests, we also continue to drive various localized marketing programs, focus on speed of service and increase throughput by adding seats inand parking at certain restaurants. In addition, with the increase in To-Go sales in prior years and the significant increase during the pandemic, we have made changes to our building layout to better accommodate higher To-Go volumes at our restaurants.

We also continue to look for ways through various strategic initiatives to drive awareness of our brands and increase sales and profitability. At the onset of the pandemic, we began selling ready-to-grill steaks for customers to prepare at home. While we reduced our store-level offerings around ready-to-grill once our dining rooms began to re-open in mid-2020, based on the success of this program we developed Texas Roadhouse Butcher Shop. This on-line platform allows for the purchase and delivery of similar quality steaks that are available in our restaurants. This platform launched in Q4 2020.

We also further expanded our retail business in 2021 with the introduction of our Margarita Mixer, which was available in Q1 2021, and our canned Margarita Seltzer, which will be available in several flavors, and rolled out in Q2 2021 in test markets. These Texas Roadhouse-branded products are subject to royalty-based license agreements.

Leveraging Our Scalable Infrastructure.To support our growth, we ~~continue to make~~have made investments in our ~~infrastructure. Over~~infrastructure over the past several years, ~~we have made significant investments in our infrastructure,~~ including information and accounting systems, real estate, human resources, legal, marketing, international and restaurant operations, including the development of new concepts. ~~Our goal is for general and administrative costs to increase at a slower growth rate than our revenue.~~ Whether we ~~can~~are able to leverage our infrastructure in future years by growing our general and administrative costs at a slower rate than our revenue will depend, in part, on our new restaurant openings, our comparable restaurant sales growth rate going forward and the level of investment we continue to make in our infrastructure.

Returning Capital to Shareholders. We continue to ~~pay dividends and~~ evaluate opportunities to return capital to our shareholders ~~through repurchases~~including the payment of dividends and repurchase of common stock. In 2011, our Board of Directors declared our first quarterly dividend of $0.08 per share of common ~~stock. We have~~stock which we consistently ~~grown our per share dividend each year since that time and our long-term strategy includes increasing our regular quarterly dividend amount~~grew over time. On ~~August 31, 2017,~~March 24, 2020, the Board of Directors voted to suspend the payment of quarterly cash dividends on the Company’s common stock, effective with respect to dividends occurring after the quarterly cash dividend of $0.36 paid on March 27, 2020. This was done to preserve cash flow due to the pandemic. On April 28, 2021, our Board of Directors ~~declared~~reinstated the payment of a quarterly cash dividend of ~~$0.21~~$0.40 per share of common stock. This payment was distributed on June 4, 2021 to shareholders of record at the close of business on May 19, 2021. The declaration and payment of cash dividends on our common stock is at the discretion of our Board of Directors, and any decision to declare a dividend will be based on many factors, including, but not limited to, earnings, financial condition, applicable covenants under our revolving credit facility, other contractual restrictions, the extent that state and local guidelines begin to significantly reduce capacity and/or re-close dining rooms, and other factors deemed relevant.

In 2008, our Board of Directors approved our first stock repurchase program. From inception through ~~September 26, 2017,~~June 29, 2021, we have paid ~~$216.6~~$369.0 million through our authorized stock repurchase programs to repurchase ~~14,844,851~~17,722,505 shares of our common stock at an average price per share of ~~$14.59.~~$20.82. On May ~~22, 2014,~~31, 2019, our Board of Directors approved a stock repurchase program under which we may repurchase up to ~~$100.0~~$250.0 million of our common stock. This stock repurchase program has no expiration date and replaced a previous stock repurchase program which was approved on ~~February 16, 2012.~~May 22, 2014. All repurchases to date have been made through open market transactions. The Company has not yet resumed the repurchase of shares since suspending repurchase activity at the onset of the pandemic but currently expects to resume in the second half of 2021, subject to the same factors set forth regarding the continued payment of dividends. As of ~~September 26, 2017, $69.9~~June 29, 2021, $147.8 million remains authorized for stock repurchases.

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Key Measures We Use to Evaluate Our Company

Key measures we use to evaluate and assess our business include the following:

Number of Restaurant Openings. Number of restaurant openings reflects the number of restaurants opened during a particular fiscal period. For company restaurant openings, we incur ~~pre‑opening~~pre-opening costs, which are defined below, before the restaurant opens. Typically, new ~~Texas Roadhouse~~ restaurants open with an initial ~~start‑up~~start-up period of higher than normalized sales volumes, which decrease to a steady level approximately three to six months after opening. However, although sales volumes are generally higher, so are initial costs, resulting in restaurant margins that are generally lower during the ~~start‑up~~start-up period of operation and increase to a steady level approximately three to six months after opening.

Comparable Restaurant ~~Sales Growth.~~ Sales. Comparable restaurant sales ~~growth~~ reflects the change in restaurant sales for ~~company-owned~~company restaurants over the same period in prior years for the comparable restaurant base. We define the comparable restaurant base to include those restaurants open for a full 18 months before the beginning of the period measured excluding restaurants permanently closed during the period. Comparable restaurant sales ~~growth~~ can be impacted by

~~Table of Contents~~

changes in guest traffic counts or by changes in the per person average check amount. Menu price changes, ~~and~~ the mix of menu items sold, and the mix of dine-in versus To-Go sales can affect the per person average check amount.

Average Unit Volume. Average unit volume represents the average quarterly or annual restaurant sales for ~~company-owned~~Texas Roadhouse restaurants open for a full six months before the beginning of the period measured excluding restaurants permanently closed during the period. Historically, average unit volume growth is less than comparable restaurant sales growth which indicates that newer restaurants are operating with sales levels lower than the company average. At times, average unit volume growth may be more than comparable restaurant sales growth which indicates that newer restaurants are operating with sales levels higher than the company average.

Store Weeks.Store weeks represent the number of weeks that our ~~company-owned~~company restaurants were open during the ~~period measured.~~reporting period. Store weeks include weeks in which a restaurant is temporarily closed.

Restaurant ~~Margin~~.Margin. Restaurant margin (in dollars and as a percentage of restaurant and other sales) represents restaurant and other sales less restaurant-level operating costs, including ~~cost of sales,~~food and beverage costs, labor, rent and other operating costs. ~~Depreciation~~Restaurant margin is not a measurement determined in accordance with GAAP and ~~amortization expense, substantially all~~should not be considered in isolation, or as an alternative, to income from operations. This non-GAAP measure is not indicative of ~~which relates~~overall company performance and profitability in that this measure does not accrue directly to ~~restaurant-level assets, is excluded from restaurant operating~~the benefit of shareholders due to the nature of the costs ~~and is shown separately as it represents a non-cash charge for the investment in our restaurants.~~excluded. Restaurant margin is widely regarded as a useful metric by which to evaluate restaurant-level operating efficiency and performance. In calculating restaurant margin, we exclude certain non-restaurant-level costs that support operations, including pre-opening and general and administrative expenses, but do not have a direct impact on restaurant-level operational efficiency and performance. We also exclude depreciation and amortization expense, substantially all of which relates to restaurant-level assets, as it represents a non-cash charge for the investment in our restaurants. We also exclude impairment and closure expense as we believe this provides a clearer perspective of the Company’s ongoing operating performance and a more useful comparison to prior period results. Restaurant margin ~~is not a measurement determined in accordance with U.S. generally accepted accounting principles ("GAAP") and should~~as presented may not be ~~considered in isolation, or as an alternative,~~comparable to ~~income from operations or~~ other similarly titled measures of other ~~companies. Restaurant margin, as a percentage~~companies in our industry. A reconciliation of ~~restaurant sales, may fluctuate based on many factors, including, but not limited~~income from operations to ~~inflationary pressures, commodity costs and wage rates. As such, we also focus on the growth of~~ restaurant margin ~~dollars per store week as a measure~~is included in the Results of ~~restaurant-level profitability as it provides additional insight on operating performance.~~Operations section below.

Other Key Definitions

Restaurant and Other Sales.Restaurant sales include gross food and beverage sales, net of promotions and discounts, for all ~~company-owned~~company restaurants. Sales taxes collected from customers and remitted to governmental authorities are accounted for on a net basis and therefore are excluded from restaurant sales in the unaudited condensed consolidated statements of income and comprehensive income. Other sales include the amortization of fees associated with our third-party gift card sales net of the amortization of gift card breakage income. These amounts are amortized consistent with the historic redemption pattern of the associated gift card or on actual redemptions in periods where redemptions do not align with historic redemption patterns. Other sales also include sales related to our non-royalty-based retail products.

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Franchise Royalties and Fees.Franchise royalties consist of royalties, as defined in our franchise ~~agreements,~~agreement, paid to us by our domestic and international franchisees. Franchise royalties also include sales related to our royalty-based retail products. Domestic and/or international franchisees also typically pay an initial franchise fee and/or development fee for each new restaurant or territory. The terms of the international agreements may vary significantly from our domestic agreements. Franchise fees also include advertising fees paid by domestic franchisees to our system-wide marketing and advertising fund and management fees paid by certain domestic franchisees for supervisory and administrative services that we perform.

~~Restaurant Cost~~Food and Beverage Costs. Food and beverage costs consists of ~~Sales.~~ ~~Restaurant cost~~the costs of ~~sales consists~~raw materials and ingredients used in the preparation of food and beverage ~~costs~~products sold in our company restaurants. Approximately half of ~~which approximately 50%~~our food and beverage costs relates to beef costs.

Restaurant Labor Expenses.Restaurant labor expenses include all direct and indirect labor costs incurred in operations except for profit-sharing incentive compensation expenses earned by our restaurant managing partners and market partners. These profit-sharing expenses are reflected in restaurant other operating expenses. Restaurant labor expenses also include share-based compensation expense related to restaurant-level employees.

Restaurant Rent Expense. Restaurant rent expense includes all rent, except pre-opening rent, associated with the leasing of real estate and includes base, percentage and straight-line rent expense.

Restaurant Other Operating Expenses. Restaurant other operating expenses consist of all other restaurant-level operating costs, the major components of which are utilities, dining room and To-Go supplies, local store advertising, repairs and maintenance, equipment rent, property taxes, credit card ~~and gift card~~ fees and general liability ~~insurance offset by gift card breakage income. Profit-sharing~~insurance. Profit sharing incentive compensation expenses earned by our restaurant managing partners and market partners are also included in restaurant other operating expenses.

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Pre-opening Expenses.Pre-opening expenses, which are charged to operations as incurred, consist of expenses incurred before the opening of a new or relocated restaurant and are comprised principally of opening team and training team compensation and benefits, travel expenses, rent, food, beverage and other initial supplies and expenses. On average, over 70% of total pre-opening costs incurred per restaurant opening relate to the hiring and training of employees. Pre-opening costs vary by location depending on many factors, including the size and physical layout of each location; the number of management and hourly employees required to operate each restaurant; the availability of qualified restaurant staff members; the cost of travel and lodging for different geographic areas; the timing of the restaurant opening; and the extent of unexpected delays, if any, in obtaining final licenses and permits to open the restaurants.

Depreciation and Amortization Expenses. Depreciation and amortization expenses ("D&A") include the depreciation of fixed assets and amortization of intangibles with definite lives, substantially all of which relates to restaurant-level assets.

Impairment and Closure ~~Costs.~~ Costs, Net. Impairment and closure costs, net include any impairment of long-lived assets, including property and equipment, operating lease right-of-use assets and goodwill, and expenses associated with the closure of a restaurant. Closure costs also include any gains or losses associated with a relocated restaurant or the sale of a closed restaurant and/or assets held for sale as well as lease costs associated with closed or relocated restaurants.

General and Administrative Expenses.General and administrative expenses ("G&A") are comprised of expenses associated with corporate and administrative functions that support development and restaurant operations and provide an infrastructure to support future growth including certain advertising costs ~~incurred less amounts remitted by franchise restaurants. Supervision and accounting fees received from certain franchise restaurants are offset against G&A.~~incurred. G&A also includes legal fees, settlement charges and share-based compensation expense related to executive officers, ~~support center~~Support Center employees, and ~~area managers, including~~ market ~~partners. The~~partners, and the realized and unrealized holding gains and losses related to the investments in our deferred compensation ~~plan, as well as offsetting compensation expense, are also recorded in G&A.~~plan.

Interest Expense, Net. Interest expense, net includes ~~the cost of~~interest expense on our debt or financing obligations including the amortization of loan fees reduced by ~~interest income and capitalized interest. Interest income includes~~ earnings on cash and cash equivalents.

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Equity Income (Loss) from Unconsolidated Affiliates.Equity Income (loss) includes our percentage share of net income (loss) earned by unconsolidated affiliates. As of ~~September 26, 2017~~June 29, 2021 and ~~September 27, 2016,~~June 30, 2020, we owned a 5.0% to 10.0% equity interest in 24 domestic franchise restaurants. Additionally, as of ~~September 26, 2017~~June 29, 2021 and ~~September 27, 2016,~~June 30, 2020, we owned a 40% equity interest in three and four non-Texas Roadhouse restaurants, respectively, as part of a joint venture agreement with a casual dining restaurant operator in China. ~~Equity income from unconsolidated affiliates represents our percentage share of net income earned by these unconsolidated affiliates.~~

Net Income Attributable to Noncontrolling Interests.Net income attributable to noncontrolling interests represents the portion of income attributable to the other owners of the majority-owned restaurants. Our consolidated subsidiaries ~~at September 26, 2017 and September 27, 2016 included 18 and 16~~include 20 majority-owned restaurants ~~respectively,~~for all ~~of which were open.~~periods presented.

~~Q3 2017~~Q2 2021 Financial Highlights

Total revenue increased ~~$58.9~~$422.4 million ~~or 12.2%,~~ to ~~$540.5~~$898.8 million in ~~Q3 2017~~Q2 2021 compared to ~~$481.6~~$476.4 million in ~~Q3 2016~~Q2 2020 primarily due to ~~the opening of new restaurants combined with~~ an increase in average unit ~~volume~~volumes driven by an increase in comparable restaurant sales, ~~growth.~~along with an increase in store weeks. Store weeks and comparable restaurant sales increased ~~8.1%~~5.1% and ~~4.5%~~80.2%, respectively, at company restaurants in ~~Q3 2017.~~Q2 2021. The increase in comparable restaurant sales was primarily due to the re-opening of dining rooms, all of which were open for the entire Q2 2021 period, the continued easing of dining room capacity and seating restrictions, and continued strong To-Go sales.

Restaurant margin dollars increased ~~$9.0~~$146.4 million to ~~$95.6~~$158.2 million in ~~Q3 2017~~Q2 2021 compared to ~~$86.6~~$11.8 million in ~~Q3 2016 while restaurant~~Q2 2020. Restaurant margin, as a percentage of restaurant and other sales, ~~decreased~~increased to ~~17.8%~~17.7% in ~~Q3 2017~~Q2 2021 compared to ~~18.1%~~2.5% in ~~Q3 2016.~~Q2 2020. The ~~decrease~~increase in restaurant margin ~~as a percentage~~was due to higher sales and the prior year impact of ~~restaurant sales, was~~the pandemic, which significantly impacted our entire Q2 2020 period.

Net income increased $109.0 million to $75.5 million in Q2 2021 compared to net loss of $33.6 million in Q2 2020 primarily due to higher labor costs as a result of higher average wage rates, current staffing initiatives, and a change in our compensation structure. Higher labor costs were partially offset by commodity deflation of approximately 2.0% driven by lower food costs, primarily beef.

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~~Net income increased $5.3 million, or 20.8%, to $31.0 million in Q3 2017 compared to $25.7 million in Q3 2016 primarily due to an increase in~~ restaurant margin dollars partially offset by higher ~~depreciation costs.~~income tax expense. Diluted earnings (loss) per share increased to $1.08 in ~~Q3 2017 by 19.9% to $0.43~~Q2 2021 from ~~$0.36~~($0.48) in ~~Q3 2016.~~Q2 2020.

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Results of Operations



	13 Weeks Ended				26 Weeks Ended
	June 29, 2021		June 30, 2020		June 29, 2021		June 30, 2020
	$	%	$	%	$	%	$	%

	(In thousands)				(In thousands)
Consolidated Statements of Income:
Revenue:
Restaurant and other sales	892,444	99.3	473,090	99.3	1,687,367	99.3	1,120,716	99.3
Franchise royalties and fees	6,344	0.7	3,335	0.7	12,050	0.7	8,233	0.7
Total revenue	898,788	100.0	476,425	100.0	1,699,417	100.0	1,128,949	100.0
Costs and expenses:
(As a percentage of restaurant and other sales)
Restaurant operating costs (excluding depreciation and amortization shown separately below):
Food and beverage	295,504	33.1	164,041	34.7	546,986	32.4	374,221	33.4
Labor	288,147	32.3	194,622	41.1	546,183	32.4	435,701	38.9
Rent	14,956	1.7	13,251	2.8	29,408	1.7	26,722	2.4
Other operating	135,606	15.2	89,348	18.9	258,985	15.3	193,637	17.3
(As a percentage of total revenue)
Pre-opening	6,319	0.7	4,290	0.9	10,587	0.6	9,402	0.8
Depreciation and amortization	31,650	3.5	29,016	6.1	62,519	3.7	58,070	5.1
Impairment and closure, net	17	NM	(440)	NM	521	NM	155	NM
General and administrative	36,861	4.1	29,615	6.2	73,573	4.3	62,569	5.5
Total costs and expenses	809,060	90.0	523,743	109.9	1,528,762	90.0	1,160,477	102.8
Income (loss) from operations	89,728	10.0	(47,318)	(9.9)	170,655	10.0	(31,528)	(2.8)
Interest expense, net	975	0.1	1,030	0.2	2,435	0.1	1,099	0.1
Equity income (loss) from investments in unconsolidated affiliates	239	NM	(90)	NM	22	NM	(598)	NM
Income (loss) before taxes	88,992	9.9	(48,438)	(10.2)	168,242	9.9	(33,225)	(2.9)
Income tax expense (benefit)	11,067	1.2	(15,132)	(3.2)	23,887	1.4	(17,071)	(1.5)
Net income (loss) including noncontrolling interests	77,925	8.7	(33,306)	(7.0)	144,355	8.5	(16,154)	(1.4)
Net income attributable to noncontrolling interests	2,445	0.3	247	0.1	4,725	0.3	1,370	0.1
Net income (loss) attributable to Texas Roadhouse, Inc. and subsidiaries	75,480	8.4	(33,553)	(7.0)	139,630	8.2	(17,524)	(1.6)

13 Weeks Ended

39 Weeks Ended

September 26, 2017

September 27, 2016

September 26, 2017

September 27, 2016


$

%

$

%

$

%

$

%

(In thousands)

(In thousands)

Consolidated Statements of Income:

Revenue:

Restaurant sales

536,341

99.2

477,617

99.2

1,661,821

99.2

1,493,531

99.2

Franchise royalties and fees

4,166

0.8

4,020

0.8

12,634

0.8

12,473

0.8

Total revenue

540,507

100.0

481,637

100.0

1,674,455

100.0

1,506,004

100.0

Costs and expenses:

(As a percentage of restaurant sales)

Restaurant operating costs (excluding depreciation and amortization shown separately below):

Cost of sales

176,498

32.9

161,886

33.9

545,862

32.8

506,565

33.9

Labor

169,355

31.6

145,301

30.4

514,287

30.9

442,861

29.7

Rent

11,257

2.1

10,266

2.1

33,238

2.0

30,477

2.0

Other operating

83,679

15.6

73,583

15.4

254,176

15.3

227,082

15.2

(As a percentage of total revenue)

Pre-opening

4,548

0.8

5,017

1.0

14,302

0.9

14,253

0.9

Depreciation and amortization

23,534

4.4

20,941

4.3

69,236

4.1

60,718

4.0

Impairment and closure

2

NM

13

NM

13

NM

54

NM

General and administrative

26,123

4.8

26,162

5.4

94,594

5.6

82,933

5.5

Total costs and expenses

494,996

91.6

443,169

92.0

1,525,708

91.1

1,364,943

90.6

Income from operations

45,511

8.4

38,468

8.0

148,747

8.9

141,061

9.4

Interest expense, net

500

0.1

288

0.1

1,211

0.1

902

0.1

Equity income from investments in unconsolidated affiliates

(359)

(0.1)

(4)

NM

(1,149)

(0.1)

(831)

(0.1)

Income before taxes

45,370

8.4

38,184

7.9

148,685

8.9

140,990

9.4

Provision for income taxes

13,046

2.4

11,381

2.4

41,159

2.5

42,325

2.8

Net income including noncontrolling interests

32,324

6.0

26,803

5.6

107,526

6.4

98,665

6.6

Net income attributable to noncontrolling interests

1,310

0.2

1,128

0.2

4,618

0.3

3,792

0.3

Net income attributable to Texas Roadhouse, Inc. and subsidiaries

31,014

5.7

25,675

5.3

102,908

6.1

94,873

6.3

NM — Not meaningful

13 Weeks Ended

39 Weeks Ended

September 26, 2017

September 27, 2016

September 26, 2017

September 27, 2016

$

%

$

%

$

%

$

%

(As a percentage of restaurant sales)

Restaurant margin ($ in thousands)

95,552

17.8

86,581

18.1

314,258

18.9

286,546

19.2

Restaurant margin $/store week

16,284

15,953

18,140

17,866

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	Reconciliation of Income (Loss) from Operations to Restaurant Margin
	(in thousands)
	13 Weeks Ended				26 Weeks Ended
	June 29, 2021		June 30, 2020		June 29, 2021		June 30, 2020


Income (loss) from operations	$	89,728	$	(47,318)	$	170,655	$	(31,528)

Less:
Franchise royalties and fees		6,344		3,335		12,050		8,233

Add:
Pre-opening		6,319		4,290		10,587		9,402
Depreciation and amortization		31,650		29,016		62,519		58,070
Impairment and closure, net		17		(440)		521		155
General and administrative		36,861		29,615		73,573		62,569
Restaurant margin	$	158,231	$	11,828	$	305,805	$	90,435

Restaurant margin $/store week	$	22,333	$	1,754	$	21,719	$	6,717
Restaurant margin (as a percentage of restaurant and other sales)		17.7%		2.5%		18.1%		8.1%

See ~~page 18~~above for the definition of restaurant margin.

~~NM — Not meaningful~~

Restaurant Unit Activity


	Total	Texas Roadhouse	Bubba's 33	Jaggers
Balance at December 29, 2020	634	600	31	3
Company openings	11	8	3	—
Company closings	—	—	—	—
Franchise openings - Domestic	—	—	—	—
Franchise openings - International	2	2	—	—
Franchise closings - International	—	—	—	—
Balance at June 29, 2021	647	610	34	3


	June 29, 2021	June 30, 2020
Company - Texas Roadhouse	511	489
Company - Bubba's 33	34	30
Company - Jaggers	3	2
Franchise - Texas Roadhouse - U.S.	69	70
Franchise - Texas Roadhouse - International	30	26
Total	647	617

2023

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~~Restaurant Unit Activity~~

Total

Texas Roadhouse

Bubba's 33

Jaggers
Balance at December 27, 2016

517

499

16

2
Company openings

20

16

4

—
Franchise openings - Domestic

1

1

—

—
Franchise openings - International

2

2

—

—
Balance at September 26, 2017

540

518

20

2

~~Q3 2017~~Q2 2021 (13 weeks) compared to ~~Q3 2016~~Q2 2020 (13 weeks) and ~~2017~~2021 YTD ~~(39~~(26 weeks) compared to ~~2016~~2020 YTD ~~(39~~(26 weeks)

Restaurant and Other Sales.Restaurant and other sales increased by ~~12.3%~~88.6% in ~~Q3 2017 as~~Q2 2021 compared to ~~Q3 2016~~Q2 2020 and ~~by 11.3%~~50.6% in ~~2017~~2021 YTD compared to ~~2016~~2020 YTD. The following table summarizes certain key drivers and/or attributes of restaurant and other sales at company restaurants for the periods presented. Company restaurant count activity is shown in the restaurant unit activity table above.


	Q2 2021			Q2 2020			2021 YTD			2020 YTD
Company Restaurants:
Increase in store weeks		5.1	%		4.4	%		4.6	%		4.8	%
Increase (decrease) in average unit volume		78.0	%		(32.5)	%		43.1	%		(20.4)	%
Other(1)		6.0	%		(2.9)	%		2.9	%		(2.6)	%
Total increase (decrease) in restaurant sales		89.1	%		(31.0)	%		50.6	%		(18.2)	%
Other sales(2)		(0.5)	%		0.1	%		0.0	%		0.0	%
Total increase (decrease) in restaurant and other sales		88.6	%		(30.9)	%		50.6	%		(18.2)	%

Store weeks		7,085			6,742			14,080			13,463
Comparable restaurant sales		80.2	%		(32.8)	%		44.5	%		(20.5)	%

Texas Roadhouse restaurants only:
Comparable restaurant sales		79.0	%		(32.4)	%		43.9	%		(20.2)	%
Average unit volume (in thousands)	$	1,664		$	935		$	3,175		$	2,219

Weekly sales by group:
Comparable restaurants (476 and 454 units, respectively)	$	128,716		$	72,005
Average unit volume restaurants (19 and 20 units, respectively)(3)	$	110,459		$	69,174
Restaurants less than six months old (16 and 15 units, respectively)	$	134,822		$	61,781

Q3 2017

Q3 2016

2017 YTD

2016 YTD

Company Restaurants:

Increase in store weeks

8.1
%

7.6
%

8.0
%

8.1
%

Increase in average unit volume

3.9
%

2.8
%

3.1
%

3.7
%

Other(1)

0.3
%

(0.3)
%

0.2
%

(0.4)
%

Total increase in restaurant sales

12.3
%

10.1
%

11.3
%

11.4
%

Store weeks

5,868

5,427

17,324

16,039

Comparable restaurant sales growth

4.5
%

3.4
%

4.0
%

4.2
%

Texas Roadhouse restaurants only:

Comparable restaurant sales growth

4.6
%

3.5
%

4.0
%

4.2
%

Average unit volume (in thousands)

$
1,197

$
1,152

$
3,776

$
3,663

Weekly sales by group:

Comparable restaurants (396 and 368 units, respectively)

$
92,712

$
89,079

Average unit volume restaurants (21 and 24 units, respectively)(2)

$
79,891

$
80,390

Restaurants less than six months old (16 units for each period)

$
93,419

$
84,539

(1)

~~(1)~~

Includes the impact of the year-over-year change in sales volume of all non-Texas Roadhouse restaurants, along with Texas Roadhouse restaurants open less than six months before the beginning of the period measured and, if applicable, the impact of restaurants permanently closed or acquired during the period.

(2)

~~(2)~~

Other sales, for Q2 2021, primarily represented $6.4 million related to the amortization of third-party gift card fees net of $2.7 million related to the amortization of gift card breakage income. For Q2 2020, other sales primarily represented $1.7 million related to the amortization of third-party gift card fees net of $1.0 million related to the amortization of gift card breakage income. For 2021 YTD, other sales primarily represented $14.1 million related to amortization of third party gift card fees net of $6.4 million related to the amortization of gift card breakage income. For 2020 YTD, other sales primarily represented $9.5 million related to amortization of third party gift card fees net of $4.7 million related to the amortization of gift card breakage income.

(3)

Average unit volume restaurants include restaurants open a full six and up to 18 months before the beginning of the period ~~measured.~~

measured, excluding sales from restaurants permanently closed during the period.

The ~~increases~~increase in restaurant sales for ~~all periods presented were~~Q2 2021 and 2021 YTD is primarily ~~attributable~~due to ~~the opening of new restaurants combined with~~ an increase in average unit ~~volume~~volumes, driven by an increase in comparable restaurant sales, ~~growth.~~along with an increase in store weeks. The increase in comparable restaurant sales was primarily driven by the re-opening of our dining rooms, the continued easing of dining room capacity and seating restrictions, and continued strong To-Go sales. Comparable restaurant sales ~~growth for all periods presented was due to an increase~~increased 80.2% in ~~our~~Q2 2021, which included guest traffic ~~counts~~count growth of 58.6% and ~~an increase in our~~ per person average check ~~as shown in the table below.~~

Q3 2017


Q3 2016


2017 YTD


2016 YTD

Guest traffic counts

3.5
%

2.0
%

3.2
%

2.7
%

Per person average check

1.0
%

1.4
%

0.8
%

1.5
%

Comparable restaurant sales growth

4.5
%

3.4
%

4.0
%

4.2
%

~~Table~~growth of ~~Contents~~

~~Year-over-year sales for newer restaurants included in our average unit volume, but excluded from our comparable~~21.6%. Comparable restaurant sales ~~partially offset the impact~~increased 44.5% in YTD 2021, which included guest traffic count growth of ~~positive comparable restaurant sales growth in Q3 2017~~32.0% and ~~2017 YTD.~~

~~The increases in our~~ per person average check growth of 12.5%.

As of June 29, 2021, nearly all of our company restaurants were operating without restriction. As of June 30, 2020, nearly all of our company restaurants had re-opened their dining rooms under various limited capacity restrictions. To-Go sales as a percentage of restaurant sales were 16.9% and 19.5% for Q2 2021 and 2021 YTD, respectively, compared

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to 57.1% and 31.3% for Q2 2020 and 2020 YTD. The prior year periods were significantly impacted by the ~~periods presented~~closure of our dining rooms. As of July 2, 2021, all of our company restaurants were ~~primarily driven by~~operating without restriction.

In addition, in April 2021 and October 2020, we implemented menu price increases ~~taken in 2017, 2016~~of approximately 1.75% and ~~2015. In 2016 and 2015, we increased menu prices in the fourth quarter by approximately~~ 1.0% ~~and approximately 2.0%~~, respectively. We expect to take additional pricing in Q4 2021.

In ~~May 2017,~~2021 YTD, we ~~took~~opened 11 company restaurants, including three Bubba's 33 restaurants. As of June 29, 2021, an additional ~~price increase of 0.5%. These menu price increases~~17 restaurants were taken as a result of inflationary pressures, primarily commodities and/or labor. In Q3 2017 and 2017 YTD, average guest check did not increase in line with the menu price increases implemented as some guests shifted to lower priced menu items and/or purchased fewer beverages.

~~In 2017, we~~under construction. We currently plan to open 26 ~~or 27~~to 29 company restaurants ~~including four Bubba’s 33 restaurants. We opened 20 restaurants~~across all concepts in ~~2017 YTD including 16 Texas Roadhouse restaurants~~2021. To the extent that state and ~~four Bubba’s 33 restaurants. We have begun construction for all of our expected 2017 openings. Additionally,~~local guidelines begin to significantly reduce capacity and/or re-close dining rooms, we ~~currently plan to open approximately 30 company restaurants in 2018, including up to seven Bubba’s 33 restaurants.~~could pull back on development and reduce capital expenditures accordingly.

Franchise Royalties and Fees.Franchise royalties and fees increased by ~~$0.1~~$3.0 million, or by ~~3.6%~~90.2%, in ~~Q3 2017 from Q3 2016~~Q2 2021 compared to Q2 2020 and ~~$0.2~~increased $3.8 million, or by ~~1.3%,~~46.4% in ~~2017~~2021 YTD ~~from 2016~~compared to 2020 YTD. The ~~increases in Q3 2017 and 2017 YTD were attributable~~increase was due to ~~an increase in~~higher average unit ~~volume at domestic restaurants,~~volumes, driven by comparable restaurant sales ~~growth, and the opening of new franchise restaurants. These~~ increases ~~were partially offset by the loss of royalties associated with the acquisition of four franchise restaurants in Q1 2017 and a decrease in average unit volume~~ at ~~international restaurants, driven by a decrease in comparable~~domestic stores. Comparable restaurant sales at ~~those locations.~~

~~Franchise comparable restaurant sales increased 2.8% and 2.9% in Q3 2017 and 2017 YTD, which included an increase in~~ domestic franchise ~~comparable restaurant sales of 4.7%~~stores increased 76.5% and ~~4.0%,~~41.1% in Q2 2021 and 2021 YTD, respectively. ~~Franchise restaurant count activity is shown in the restaurant activity table above. In 2017, we~~

We anticipate that our existing franchise ~~restaurant~~ partners will open as many as five ~~primarily international, Texas Roadhouse restaurants, three of which opened in 2017 YTD. Additionally, we currently anticipate our franchise partners will open as many as seven~~ Texas Roadhouse restaurants, primarily international, in ~~2018.~~2021.

~~Restaurant Cost of Sales.~~ ~~Restaurant cost of sales,~~Food and Beverage Costs.Food and beverage costs, as a percentage of restaurant and other sales, decreased to ~~32.9%~~33.1% in ~~Q3 2017 from 33.9%~~Q2 2021 compared to 34.7% in ~~Q3 2016~~Q2 2020 and decreased to ~~32.8%~~32.4% in ~~2017~~2021 YTD ~~from 33.9%~~compared to 33.4% in ~~2016~~2020 YTD. ~~These~~The decreases were primarily ~~attributable~~due to the benefit of a higher guest check amount partially offset by commodity ~~deflation~~inflation. Commodity inflation was approximately 6.5% and ~~menu pricing actions. Commodity deflation of approximately 2.0% in Q3 2017~~4.4% for Q2 2021 and ~~2.1% in 2017~~2021 YTD, ~~was~~respectively, primarily driven by ~~lower food costs, primarily beef. Recent menu pricing actions are summarized in our discussion of restaurant sales above.~~ higher beef costs.

For ~~the remainder of 2017,~~2021, we ~~have~~currently expect commodity cost inflation to be approximately 7.0% with fixed price contracts for approximately ~~60%~~50% of our ~~overall food~~remaining forecasted costs ~~with~~and the remainder subject to ~~fluctuating~~floating market prices. ~~We expect approximately 2.0% food cost deflation in 2017.~~

In 2018, we expect commodity costs to be relatively flat. However, for 2018, we only have fixed price contracts for approximately 30% of our overall food costs with the remainder subject to fluctuating market prices.

Restaurant Labor Expenses. Restaurant labor expenses, as a percentage of restaurant and other sales, ~~increased~~decreased to ~~31.6%~~32.3% in ~~Q3 2017~~Q2 2021 compared to ~~30.4%~~41.1% in ~~Q3 2016~~Q2 2020 and ~~increased~~decreased to ~~30.9%~~32.4% in ~~2017~~2021 YTD compared to ~~29.7%~~38.9% in ~~2016~~2020 YTD. ~~These increases were~~The decrease in both periods was primarily ~~attributable~~due to higher average wage rates, current staffing initiatives, and a change in our compensation structure, as discussed below, partially offset by lower workers’ compensation expense as well as the benefit from an increase in average unit ~~volume. Lower workers’ compensation expense was driven~~volumes as well as lapping several items related to 2020 including labor inefficiencies as we converted to our hybrid operating model, and relief payments and increased benefits provided to our hourly employees. In 2021, the benefit of a higher guest check amount and employee retention payroll tax credits of $0.2 million and $1.2 million for Q2 2021 and 2021 YTD, respectively, also contributed to the decrease. These decreases were partially offset by ~~a $1.5 million reduction in workers’ compensation costs recorded in Q3 2017 compared to a $0.3 million reduction in costs recorded in Q3 2016~~higher wage rates primarily due to ~~changes in our claims development history.~~

In 2016, the Department of Labor published changes related to the Fair Labor Standards Act ("FLSA") which would have resulted in changes to the threshold for overtime pay. The changes were scheduled to go into effect on December 1, 2016, however, in late November a federal judge blocked the implementation of the changes. Despite the injunction, we continuedlabor market pressures along with ~~the implementation of the changes to our overtime policies as originally planned.~~

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~~For the remainder of 2017, we expect approximately 7.0% to 8.0% inflation due to~~ increases in state-mandated minimum and tipped ~~wages~~wage rates.

In Q2 2021 and ~~increased competition~~2021 YTD, we incurred costs of $1.9 million and $3.4 million, respectively, for ~~qualified workers, as well as by the impact of changes~~relief pay and enhanced benefits for our restaurant-level managers and hourly employees. This compared to $4.7 million and $15.4 million in Q2 2020 and 2020 YTD, respectively, for relief pay and enhanced benefits for our ~~compensation structure as discussed above. We expect the changes~~hourly employees.

Health insurance costs were higher in Q2 2021 compared to ~~our compensation structure~~Q2 2020 primarily due to ~~increase our 2017 labor costs by $4.5~~favorable claims experience in Q2 2020 that resulted in a $1.0 million ~~to $5.5 million, which is included~~decrease in ~~our 7.0% to 8.0% inflation guidance. These increases may or may not be offset by additional menu price adjustments or guest traffic growth.~~claim costs.

Restaurant Rent Expense.Restaurant rent expense, as a percentage of restaurant and other sales, ~~remained relatively unchanged at 2.1%~~decreased to 1.7% in ~~Q3 2017~~Q2 2021 compared to 2.8% in Q2 2020 and ~~Q3 2016 as well as 2.0%~~decreased to 1.7% in ~~2017~~2021 YTD ~~and 2016~~compared to 2.4% in 2020 YTD. ~~For both periods,~~The decrease was due to the ~~benefit from an~~ increase in average unit ~~volume was~~volumes partially offset by higher rent expense, as a percentage of restaurant and other sales, at our newer restaurants.

Restaurant Other Operating Expenses.Restaurant other operating expenses, as a percentage of restaurant and other sales, ~~increased~~decreased to ~~15.6%~~15.2% in ~~Q3 2017~~Q2 2021 compared to ~~15.4%~~18.9% in ~~Q3 2016~~Q2 2020 and ~~increased~~decreased to 15.3% in ~~2017~~2021 YTD compared to ~~15.2%~~17.3% in ~~2016~~2020 YTD. ~~In Q3 2017, higher general liability insurance and higher costs associated with remodels were partially offset by lower costs associated with utilities and lower bonus expense along with an~~This decrease was primarily due to the increase in average unit ~~volume. In 2017 YTD, higher general liability insurance was~~volumes and lower To-Go supplies partially offset by ~~lower bonus expense along with~~ an increase in incentive compensation. The lower supplies expense was due to the prior year periods having significantly higher To-Go sales due to the closure of our dining rooms. Higher incentive compensation expense

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was due to higher restaurant profitability. In addition, due to the significant increase in our average unit ~~volume. Higher general liability insurance was driven by~~volumes, expenses that are largely fixed, including utilities, property taxes, and other outside services decreased as a ~~$1.5 million reduction to general liability insurance costs recorded in Q3 2016 compared to a $0.2 million reduction in costs recorded in Q3 2017 due to changes in our claims development history.~~ percentage of restaurant and other sales.

Restaurant Pre-opening Expenses.Pre-opening expenses ~~decreased~~increased to ~~$4.5~~$6.3 million in ~~Q3 2017 from $5.0~~Q2 2021 compared to $4.3 million in ~~Q3 2016~~Q2 2020 and ~~remained relatively unchanged at $14.3~~increased to $10.6 million in ~~2017~~2021 YTD ~~and 2016~~compared to $9.4 million in 2020 YTD. These ~~variances~~increases were primarily due to the timing of restaurant ~~openings.~~

~~Overall, we plan to open 26 or 27 company-owned restaurants~~openings as well as a slight increase in ~~2017 compared to 30 company-owned restaurants in 2016.~~average pre-opening expenses incurred. Pre-opening costs will fluctuate from quarter to quarter based on the specific pre-opening costs incurred for each restaurant, the number and timing of restaurant openings and the number and timing of restaurant managers hired.

Depreciation and Amortization Expense.D&A, as a percentage of total revenue, ~~increased~~decreased to ~~4.4%~~3.5% in ~~Q3 2017~~Q2 2021 compared to ~~4.3%~~6.1% in ~~Q3 2016~~Q2 2020 and ~~increased~~decreased to ~~4.1%~~3.7% in ~~2017~~2021 YTD compared to ~~4.0%~~5.1% in ~~2016~~2020 YTD. ~~These increases were~~The decrease was primarily due to ~~higher depreciation, as a percentage of revenue, at new restaurants and increased re-investment in equipment at older restaurants. This increase was partially offset by the benefit of~~ an increase in average unit ~~volume.~~volumes partially offset by higher depreciation at new restaurants.

Impairment and Closure Costs, Net. Impairment and closure costs, net was not significant in Q2 2021 compared to ($0.4) million in Q2 2020 and was $0.5 million in 2021 YTD compared to $0.2 million in 2020 YTD. For 2021 YTD, impairment and closure costs, net included the ~~remainder~~impairment of ~~2017~~land and ~~2018, we expect D&A,~~building at a site that was relocated and are currently classified as assets held for sale. For Q2 2020 and 2020 YTD, impairment and closure costs, net includes a ~~percentage of revenue, to continue to be higher than the prior year due to an increase in our capitalized costs~~gain related to ~~restaurants opened~~a favorable lease settlement for one underperforming restaurant that was closed in ~~2016 and 2017, along with an increase~~April 2020. In addition, 2020 YTD also includes the impairment of one restaurant that was relocated in ~~the level of reinvestment in our existing restaurants.~~February 2020.

General and Administrative Expenses. G&A, as a percentage of total revenue, decreased to ~~4.8%~~4.1% in ~~Q3 2017~~Q2 2021 compared to ~~5.4%~~6.2% in ~~Q3 2016~~Q2 2020 and ~~increased~~decreased to ~~5.6%~~4.3% in ~~2017~~2021 YTD compared to 5.5% in ~~2016~~2020 YTD. ~~In Q3 2017, the decrease was~~These decreases were primarily driven by ~~lower costs associated with incentive and share-based compensation, along with~~ an increase in average unit ~~volume. In 2017~~volumes and lower legal settlement expense partially offset by higher incentive and performance-based compensation costs and higher travel costs. Lower legal settlement expense was primarily related to lapping a $1.5 million legal settlement in the prior year. Higher incentive and performance-based compensation costs were due to the increase in profitability.

Interest Expense, Net.Interest expense, net was $1.0 million in both Q2 2021 and Q2 2020 and was $2.4 million and $1.1 million in 2021 YTD and 2020 YTD, respectively. The increase in interest expense, net in the 2021 YTD period was primarily driven by additional borrowings on our credit facility in March 2020 along with reduced earnings on our cash and cash equivalents.

Equity Income (Loss) from Unconsolidated Affiliates. Equity income was $0.2 million in Q2 2021 compared to a loss of $0.1 million in Q2 2020 and was not significant in 2021 YTD compared to a loss of $0.6 million in 2020 YTD. The increase in both periods is due to increased profitability from our unconsolidated affiliates offset by impairment charges related to our investment in a foreign joint venture that were recorded in both Q1 2021 and Q1 2020.

Income Tax Expense (Benefit). Our effective tax rate increased to 12.4% in Q2 2021 compared to an effective tax rate benefit of 31.2% in Q2 2020 and increased to 14.2% in 2021 YTD compared to an effective tax rate benefit of 51.4% in 2020 YTD. The increase in both periods was primarily due to ~~a pre-tax charge of $14.9 million ($9.2 million after-tax) related to legal fees and~~ the ~~settlement of a legal matter in March 2017 partially offset by lower incentive and share-based compensation and an~~significant increase in ~~average unit volume.~~pre-tax income. In ~~addition, Q3 2016~~both periods of 2020, our FICA tip and ~~2016 YTD also included charges of $1.2 million ($0.8 million after-tax) and $6.7 million ($4.1 million after-tax), respectively, related to the settlement of~~Work opportunity tax credits exceeded our federal tax liability which resulted in a ~~legal matter.~~

~~Interest Expense, Net.~~ Interest expense increased to $0.5 million in Q3 2017 compared to $0.3 million in Q3 2016 and increased to $1.2 million in 2017 YTD compared to $0.9 million in 2016 YTD. These increases were due to higher interest rates.

~~Income Tax Expense.~~ ~~Our effective~~ tax rate ~~decreased to 28.8% in Q3 2017 compared to 29.8% in Q3 2016 and decreased to 27.7% in 2017 YTD compared to 30.0% in 2016 YTD primarily due to the adoption of Accounting Standards Update 2016-09,~~ ~~Compensation – Stock Compensation.~~ ~~As a result of the new guidance requirements, excess tax benefits and tax deficiencies from share-based compensation are recognized within the income tax provision. During~~benefit.

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Q3 2017, we recognized $0.4 million, or $0.01 per share, as an income tax benefit. During 2017 YTD, we recognized $3.0 million, or $0.04 per share, as an income tax benefit. For the remainder of 2017, we expect the effective tax rate to be approximately 28.0%. For 2018, we expect the effective tax rate to be between 28.0% and 29.0%.

Liquidity and Capital Resources

The following table presents a summary of our net cash provided by (used in) operating, investing and financing activities (in thousands):


	39 Weeks Ended
	September 26, 2017		September 27, 2016

					26 Weeks Ended
					June 29, 2021		June 30, 2020
Net cash provided by operating activities	$	188,070	$	159,782	$	296,846	$	61,845
Net cash used in investing activities		(133,565)		(113,219)		(81,783)		(79,666)
Net cash used in financing activities		(53,013)		(24,184)
Net cash (used in) provided by financing activities						(94,799)		192,435
Net increase in cash and cash equivalents	$	1,492	$	22,379	$	120,264	$	174,614

Net cash provided by operating activities was ~~$188.1~~$296.8 million in ~~2017~~2021 YTD compared to ~~$159.8~~$61.8 million in ~~2016~~2020 YTD. This increase was primarily due to an increase in net income and ~~non-cash items such as depreciation and amortization expense along with an increase~~favorable changes in working capital. ~~The increase~~Working capital changes include increases in ~~working capital was attributed to an increase in cash flows related to a change in the payment timing of~~ accrued wages inand payroll taxes, accounts payable, accrued taxes and licenses and other accrued liabilities. These changes were primarily due to our operations stabilizing compared to the prior year ~~along with a decrease in receivables~~period. This was partially offset by a ~~change~~decrease in ~~deferred revenue related~~accounts receivable which was primarily due to third-party gift ~~cards.~~ card sales.

Our operations have not required significant working capital and, like many restaurant companies, we have been able to operate with negative working capital. Sales are primarily for cash, and restaurant operations do not require significant inventories or receivables. In addition, we receive trade credit for the purchase of food, beverages and supplies, thereby reducing the need for incremental working capital to support growth.

Net cash used in investing activities was ~~$133.6~~$81.8 million in ~~2017~~2021 YTD compared to ~~$113.2~~$79.7 million in ~~2016~~2020 YTD. The increase was ~~primarily~~ due to ~~the acquisition of four franchise restaurants in Q1 2017 for a purchase price of $16.5 million, along with~~ an increase in capital ~~expenditures. The~~expenditures, primarily driven by an increase in ~~capital expenditures~~new company restaurants. This was ~~primarily~~ due to ~~increased spending related~~the delay in our development schedule in 2020 due to ~~new restaurant openings.~~ the pandemic. This increase was partially offset by fewer stores being relocated.

We require capital principally for the development of new company restaurants, the refurbishment or relocation of existing restaurants and the acquisition of franchise restaurants, if any. We either lease our restaurant site locations under operating leases for periods of five to 30 years (including renewal periods) or purchase the land when appropriate. AsIn addition, as of ~~September 26, 2017,~~June 29, 2021, we had developed ~~140~~148 of the ~~455~~548 company restaurants on land ~~which~~that we own.

The following table presents a summary of capital expenditures ~~related to the development of new restaurants and the refurbishment of existing restaurants~~ (in thousands):

2017 YTD

2016 YTD

New company restaurants

$
78,943

$
75,231

Refurbishment of existing restaurants(1)

38,094

37,988

Total capital expenditures

$
117,037

$
113,219

Restaurant-related repairs and maintenance expense(2)

$
18,956

$
16,501

~~(1)~~

~~Includes minimal capital expenditures related to the support center office.~~

~~(2)~~

~~These amounts were expensed as incurred.~~


	2021 YTD		2020 YTD
New company restaurants	$	48,282	$	31,525
Refurbishment of existing restaurants		29,712		28,077
Relocation of existing restaurants		4,694		14,746
Capital expenditures related to Support Center office		2,380		7,485
Total capital expenditures	$	85,068	$	81,833

Our future capital requirements will primarily depend on the number of new restaurants we open, the timing of those openings and the restaurant prototype developed in a given fiscal year. These requirements will include costs directly related to opening new restaurants and may also include costs necessary to ensure that our infrastructure is able to support a larger restaurant base. In ~~2017,~~2021, we expect our capital expenditures to be approximately ~~$170.0~~$200.0 million and we currently plan to open 26 to 29 restaurants across all concepts. To the

~~Table~~ extent that state and local guidelines begin to significantly reduce capacity and/or re-close dining rooms, we could pull back on development and reduce capital spend accordingly. As of ~~Contents~~

~~majority~~June 29, 2021, the estimated cost of which will relate to planned restaurant openings, including 26 or 27 restaurant openings in 2017. These amounts exclude any cash used for franchise acquisitions. In Q1 2017, we acquired four franchise restaurants for an aggregate purchase price of $16.5completing capital project commitments over the next 12 months was approximately $119.3 million. See note 6 into the unaudited condensed consolidated financial statements for ~~further~~a discussion of these acquisitions. We intend to satisfy our capital requirements over the next 12 months with cash on hand, net cash provided by operating activities and, if needed, funds available under our revolving credit facility. For 2017, we anticipate net cash provided by operating activities will exceed capital expenditures. We currently anticipate this excess will be used to pay dividends, as approved by our Board of Directors, repurchase common stock, and/or repay borrowings under our revolving credit facility.contractual obligations.

Net cash used in financing activities was ~~$53.0~~$94.8 million in ~~2017~~2021 YTD compared to ~~$24.2~~net cash provided by financing activities of $192.4 million in ~~2016~~2020 YTD. The ~~increase~~decrease is primarily due to the change in borrowings onunder our revolving credit facility ~~that occurred in Q1 2016 and an increase in dividends paid. These increases were~~ partially offset by ~~a decrease in spending on~~ share repurchases ~~along with proceeds from noncontrolling interest contributions.~~in Q1 2020.

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In 2021 YTD, we refinanced our revolving credit facility and repaid $50.0 million that was previously outstanding. In 2020 YTD, we increased our borrowings by $240.0 million as a precautionary measure in order to bolster our cash position and enhance financial flexibility in response to the pandemic.

On May ~~22, 2014,~~31, 2019, our Board of Directors approved a stock repurchase program under which we may repurchase up to ~~$100.0~~$250.0 million of our common stock. This stock repurchase program has no expiration date and replaced a previous stock repurchase program which was approved on ~~February 16, 2012.~~May 22, 2014. All repurchases to date under our stock repurchase ~~program~~programs have been made through open market transactions. The timing and the amount of any repurchases will be determined by management under parameters established by the Board of Directors, based on an evaluation of our stock price, market conditions and other corporate considerations. ~~During 2017 YTD, we made no share repurchases and had approximately $69.9~~The Company has not yet resumed the repurchase of shares since suspending repurchase activity at the onset of the pandemic but currently expects to resume in the second half of 2021. As of June 29, 2021, $147.8 million ~~remaining under our~~remains authorized for stock ~~repurchase program as of September 26, 2017.~~repurchases.

On ~~August 31, 2017,~~April 28, 2021, our Board of Directors ~~authorized~~reinstated the payment of a quarterly cash dividend of ~~$0.21~~$0.40 per share of common stock. The payment of this dividend totaling $27.9 million was distributed on June 4, 2021 to shareholders of record at the close of business on May 19, 2021. This was the first dividend since the Board of Directors voted to suspend the payment of quarterly cash dividends at the onset of the pandemic. Prior to this suspension, the last dividend was authorized on February 20, 2020 and was $0.36 per share of common stock. The payment of this dividend totaling ~~$14.9~~$25.0 million was distributed on ~~September 29, 2017~~March 27, 2020 to shareholders of record at the close of business on ~~September 13, 2017. The declared dividend is included as a liability in our unaudited condensed consolidated balance sheet as of September 26, 2017.~~March 11, 2020.

We paid distributions of ~~$4.0~~$4.4 million to equity holders of 1718 of our 1820 majority-owned company restaurants in ~~2017~~2021 YTD. ~~In 2016 YTD, we~~We paid ~~$3.5~~distributions of $1.8 million to equity holders of all ~~our 16~~20 majority-owned company ~~restaurants.~~restaurants in 2020 YTD.

On ~~August 7, 2017~~May 4, 2021, we entered into ~~the Amended and Restated Credit Agreement (the "Amended Credit Agreement") with respect~~an agreement to amend our revolving credit facility with a syndicate of commercial lenders led by JPMorgan Chase Bank, N.A., and PNC Bank, N.A.~~, and Wells Fargo Bank, N.A.~~ The amended revolving credit facility remains an unsecured, revolving credit agreement ~~under which we may borrow~~and has a borrowing capacity of up to $300.0 million with the option to increase by an additional $200.0 million subject to certain limitations, including approval by the syndicate of lenders. The amendment also extended the maturity date to May 1, 2026.

Prior to the amendment, our original revolving credit facility had a borrowing capacity of up to $200.0 million with the option to increase ~~the revolving credit facility~~ by an additional $200.0 million subject to certain ~~limitations. The Amended Credit Agreement extends~~limitations, including approval by the ~~maturity date~~syndicate of ~~our~~lenders. On May 11, 2020, we amended the original revolving credit facility ~~until August 5, 2022.~~to provide for an incremental revolving credit facility of up to $82.5 million. This amount reduced the additional $200.0 million that was available under the original revolving credit facility.

As of May 4, 2021, before the amendment, we had $190.0 million outstanding on the original revolving credit facility and $50.0 million outstanding on the incremental revolving credit facility. As part of the amendment, the $190.0 million remained outstanding on the amended revolving credit facility and the $50.0 million was repaid.

The terms of the ~~Amended Credit Agreement~~amendment require us to pay interest on outstanding borrowings at ~~the London Interbank Offered Rate~~LIBOR plus a margin of 0.875% to 1.875% and to pay a commitment fee of 0.125% to 0.30% per year on any unused portion of the revolving credit facility, in each case depending on our leverage ~~ratio, or the~~ratio. The amendment also provides an Alternate Base Rate that may be substituted for LIBOR.

As of June 29, 2021, we had $190.0 million outstanding on the amended revolving credit facility and $101.8 million of availability, net of $8.2 million of outstanding letters of credit. This outstanding amount is included as long-term debt on our unaudited condensed consolidated balance sheet.

As of December 29, 2020, we had $190.0 million outstanding on the original revolving credit facility which is included as long-term debt on our unaudited condensed consolidated balance sheet. In addition, we had $50.0 million outstanding on the ~~highest~~incremental revolving credit facility which is included as current maturities of ~~the issuing banks’ prime lending rate, the Federal Funds rate plus 0.50% or the Adjusted Eurodollar Rate for a one month interest period~~long-term debt on ~~such day plus 1.0%.~~ our unaudited condensed consolidated balance sheet.

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The weighted-average interest rate for the ~~revolving credit facility~~$190.0 million outstanding as of ~~September 26, 2017 and December 27, 2016~~June 29, 2021 was ~~2.11% and 1.57%, respectively. As of September 26, 2017, we had $50.0 million outstanding under~~0.98%. The weighted-average interest rate for the ~~revolving credit facility and $142.9~~$240.0 million of ~~availability, net~~combined borrowings as of ~~$7.1 million of outstanding letters of credit.~~December 29, 2020 was 1.98%.

The lenders’ obligation to extend credit pursuant to the ~~Amended Credit Agreement~~revolving credit facility depends on us maintaining certain financial covenants, including a minimum consolidated fixed charge coverage ratio of 2.00 to 1.00 and a maximum consolidated leverage ratio of 3.00 to 1.00. The Amended Credit Agreement permits us to incur additional secured or unsecured indebtedness outside the revolving credit facility, except for the incurrence of secured indebtedness that in the aggregate is equal to or greater than $125.0 million and 20% of our consolidated tangible net worth.covenants. We were in compliance with all financial covenants as of ~~September 26, 2017.~~June 29, 2021.

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~~Contractual Obligations~~

Guarantees

~~The following table summarizes the amount of payments due under specified contractual obligations as of September 26, 2017 (in thousands):~~

Payments Due by Period

Less than

More than


Total

1 year

1 - 3 Years

3 - 5 Years

5 years

Long-term debt obligations

$
51,993

$
9

22

50,030

1,932

Interest(1)

10,777

1,280

2,588

2,525

4,384

Operating lease obligations

839,920

45,037

90,067

89,885

614,931

Capital obligations

150,629

150,629

—

—

—

Total contractual obligations(2)

$
1,053,319

$
196,955

$
92,677

$
142,440

$
621,247

~~(1)~~

Uses interest rates as of September 26, 2017 for our variable rate debt. We assumed $50.0 million remains outstanding on the revolving credit facility until the expiration date. We calculated interest rate payments on the revolving credit facility using an interest rate of 2.11%, which was the interest rate associated with our revolving credit facility at September 26, 2017.

~~(2)~~

~~Unrecognized tax benefits under Accounting Standards Codification 740 are immaterial and, therefore, are excluded from this amount.~~

We have no material minimum purchase commitments with our vendors that extend beyond a year. See note 5 to the unaudited condensed consolidated financial statements for a discussion of contractual obligations.

~~Off-Balance Sheet Arrangements~~

~~Except for operating leases (primarily restaurant leases), we do not have any material off-balance sheet arrangements.~~

~~Guarantees~~

As of ~~September 26, 2017~~June 29, 2021 and December ~~27, 2016,~~29, 2020, we are contingently liable for ~~$15.8~~$12.6 million and ~~$16.4~~$13.0 million, respectively, for seven lease guarantees, listed in the table below. These amounts represent the maximum potential liability of future payments under the guarantees. In the event of default, the indemnity and default clauses in our assignment agreements govern our ability to pursue and recover damages incurred. No material liabilities have been recorded as of ~~September 26, 2017~~June 29, 2021 and December ~~27, 2016~~29, 2020 as the likelihood of default was deemed to be less than probable and the fair value of the guarantees is not considered significant.

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	Lease	Current Lease
	~~Lease~~Assignment Date	~~Current Lease~~Term Expiration
	~~Assignment Date~~	~~Term Expiration~~
Everett, Massachusetts (1)~~(2)~~	September 2002	February 2023
Longmont, Colorado (1)	October 2003	May ~~2019~~2029
Montgomeryville, Pennsylvania (1)	October 2004	March ~~2021~~2026
Fargo, North Dakota (1)~~(2)~~	February 2006	July ~~2021~~2026
Logan, Utah (1)	January 2009	August ~~2019~~2024
Irving, Texas ~~(3)~~(2)	December 2013	December ~~2019~~2024
Louisville, Kentucky (2)(3)~~(4)~~	December 2013	November 2023

(1)

~~(1)~~

(2)

~~(2)~~

~~As discussed in note 7 to the unaudited condensed consolidated financial statements, these restaurants are owned, in whole or part, by certain officers, directors and 5% shareholders of the Company.~~

~~(3)~~

(3)

~~(4)~~

We may be released from liability after the initial contractual lease term expiration contingent upon certain conditions being met by the acquirer.

~~Recently Issued Accounting Standards~~

~~Revenue Recognition~~

~~(Accounting Standards Update 2014‑09, "ASU 2014‑09")~~

~~In May 2014, the FASB issued ASU 2014-09,~~ ~~Revenue from Contracts with Customers~~, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in GAAP when it becomes effective. In July 2015, the FASB approved a one-year deferral of the effective date of the new revenue standard. ASU 2014-09 is now effective for fiscal years beginning on or after December 15, 2017 (our 2018 fiscal year), including interim periods within those annual periods, with early adoption permitted in the first quarter of 2017. The standard permits the use of either the full retrospective or cumulative-effect transition method. In March and April 2016, the FASB issued the following amendments to clarify the implementation guidance: ASU No. 2016-08, ~~Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)~~ ~~and ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing. Additionally, on December 21, 2016, the FASB issued ASU No. 2016-20,~~ ~~Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers~~, which provides disclosure relief and clarifies the scope and application of the new revenue standard and related cost guidance. The standard will not impact our recognition of sales from company-owned restaurants or our recognition of continuing fees from franchisees, which are based on a percentage of franchise sales. Under this standard, initial franchise fees and upfront fees from international development agreements will be recognized over the life of the applicable franchise agreements. We currently recognize initial franchise fees when the related services have been provided, which is generally upon the opening of the restaurant, and upfront fees on a pro-rata basis as restaurants under the development agreement are opened. In addition, certain transactions that were previously recorded as a reduction of expense will be classified as revenue. These include breakage income from our gift card program which is currently recognized as a reduction of other operating expense and advertising contributions received from our franchisees which are currently recognized as a reduction of general and administrative expense. We continue to evaluate the standard’s impact on other transactions currently not classified as revenue. We currently expect to use the cumulative-effect method of adoption and do not believe this adoption will have a material impact on our consolidated statements of income and comprehensive income.

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~~Leases~~

~~(Accounting Standards Update 2016-02, "ASU 2016-02")~~

~~In February 2016, the FASB issued ASU 2016-02,~~ ~~Leases~~, which requires an entity to recognize a right-of-use asset and a lease liability for virtually all leases. This update also requires additional disclosures about the amount, timing, and uncertainty of cash flows arising from leases. ASU 2016-02 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018 (our 2019 fiscal year). Early adoption is permitted. A modified retrospective approach is required for all leases existing or entered into after the beginning of the earliest comparative period in the consolidated financial statements.

We had operating leases with remaining rental payments of approximately $839.9 million as of September 26, 2017. The discounted minimum remaining rental payments will be the starting point for determining the right-of-use asset and lease liability. While we are still in the process of assessing the impact of this new standard on our consolidated financial position, results of operations and cash flows, we expect the adoption of this standard will have a material impact on our consolidated balance sheets due to the recognition of the right-of-use asset and lease liability related to operating leases. While the new standard is also expected to impact the measurement and presentation of elements of expenses and cash flows related to leasing arrangements, we do not presently believe there will be a material impact on our consolidated statements of income and comprehensive income or our consolidated statement of cash flows.

~~Financial Instruments~~

~~(Accounting Standards Update 2016-13, "ASU 2016-13")~~

~~In June 2016, the FASB issued ASU 2016-13,~~ ~~Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments~~, which requires measurement and recognition of expected versus incurred losses for financial assets held. ASU 2016-13 is effective for annual periods beginning after December 15, 2019 (our 2020 fiscal year), with early adoption permitted for annual periods beginning after December 15, 2018. We are currently assessing the impact of this new standard on our consolidated financial position, results of operations and cash flows.

~~Statement of Cash Flows~~

~~(Accounting Standards Update 2016-15, "ASU 2016-15")~~

~~In August 2016, the FASB issued ASU 2016-15,~~ ~~Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments~~, which adds and/or clarifies guidance on the classification of certain cash receipts and payments in the statement of cash flows. ASU 2016-15 is effective for annual periods beginning after December 15, 2017 (our 2018 fiscal year) and interim periods within those annual periods. Early adoption is permitted. We do not expect the adoption of this guidance will have a material impact on our consolidated financial position, results of operations or cash flows.

~~Income Taxes~~

~~(Accounting Standards Update 2016-16, "ASU 2016-16")~~

~~In October 2016, the FASB issued ASU 2016-16,~~ ~~Income Taxes (Topic 740)~~, which addresses the income tax consequences of intra-entity transfers of assets other than inventory. Current GAAP prohibits the recognition of current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party. This standard will require recognition of current and deferred income taxes resulting from an intra-entity transfer of an asset other than inventory when the transfer occurs. ASU 2016-16 is effective for annual and interim periods beginning after December 15, 2017 (our 2018 fiscal year). Early adoption is permitted. We do not expect the adoption of this guidance will have a material impact on our consolidated financial position, results of operations or cash flows.

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~~Goodwill~~

~~(Accounting Standards Update 2017-04, "ASU 2017-04")~~

~~In January 2017, the FASB issued ASU 2017-04,~~ ~~Intangibles – Goodwill and Other (Topic 350): Simplifying the Text for Goodwill Impairment,~~ which simplifies the accounting for goodwill impairment and is expected to reduce the cost and complexity of accounting for goodwill. ASU 2017-04 removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. Instead, goodwill impairment will be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of the goodwill. ASU 2017-04 is effective for fiscal years beginning after December 15, 2019 (our 2020 fiscal year) and will be applied on a prospective basis. Early adoption is permitted for interim and annual goodwill impairment tests performed on testing dates after January 1, 2017. We are currently assessing the impact of this new standard on our consolidated financial position, results of operations and cash flows.

~~Compensation – Stock Compensation~~

~~(Accounting Standards Update 2017-09, "ASU 2017-09")~~

~~In May 2017, the FASB issued ASU 2017-09,~~ ~~Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting~~, which clarifies when a change in the terms or conditions of a share-based payment award must be accounted for as a modification. ASU 2017-09 requires modification accounting if the fair value, vesting condition or the classification of the award is not the same immediately before and after a change in the terms and conditions of the award. ASU 2017-09 is effective for annual and interim periods beginning after December 15, 2017 (our 2018 fiscal year). Early adoption is permitted. We do not expect the adoption of this guidance will have a material impact on our consolidated financial position, results of operations or cash flows.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET ~~RISK~~RISK

We are exposed to market risk from changes in interest rates on variable rate debt and changes in commodity prices. Our exposure to interest rate fluctuations is limited to our outstanding bank debt. The terms of the amended revolving credit facility require us to pay interest on outstanding borrowings at London Interbank Offering Rate ("LIBOR") plus a margin of 0.875% to 1.875%, and pay a commitment fee of 0.125% to 0.30% per year on any unused portion of the revolving credit facility, in each case depending on our leverage ~~ratio, or the~~ratio. The amended revolving credit facility also provides an Alternate Base Rate ~~which is the highest~~that may be substituted for LIBOR. As of ~~the issuing banks’ prime lending rate, the Federal Funds rate plus 0.50% or the Adjusted Eurodollar Rate for a one month interest period on such day plus 1.0%. At September 26, 2017,~~June 29, 2021, we had ~~$50.0~~$190.0 million outstanding ~~under the revolving credit facility, which bears interest at 87.5 to 187.5 basis points (depending~~ on our ~~leverage ratios) over LIBOR.~~ amended credit agreement. This outstanding amount is included as long-term debt on our unaudited condensed consolidated balance sheet.

The weighted-average interest rate for the $190.0 million outstanding on our revolving credit facility ~~at September 26, 2017~~as of June 29, 2021 was ~~2.11%~~0.98%. Should interest rates based on ~~this~~these variable rate ~~borrowing~~borrowings increase by one percentage point, our estimated annual interest expense would increase by ~~$0.5~~$1.9 million.

In an effort to secure high quality, low cost ingredients used in the products sold in our restaurants, we employ various purchasing and pricing contract techniques. When purchasing certain types of commodities, we may be subject to prevailing market conditions resulting in unpredictable price volatility. For certain commodities, we may also enter into contracts for terms of one year or less that are either fixed price agreements or fixed volume agreements where the

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price is negotiated with reference to fluctuating market prices. We currently do not use financial instruments to hedge commodity prices, but we will continue to evaluate their effectiveness. Extreme and/or long term increases in commodity prices could adversely affect our future results, especially if we are unable, primarily due to competitive reasons, to increase menu prices. Additionally, if there is a time lag between the increasing commodity prices and our ability to increase menu prices or if we believe the commodity price increase to be short in duration and we choose not to pass on the cost increases, our ~~short‑term~~short-term financial results could be negatively affected.

We are subject to business risk as our beef supply is highly dependent upon three vendors. To date, the pandemic has not had a significant impact on our ability to source product from our suppliers. If these vendors ~~were~~are unable to fulfill their obligations under their contracts, we may encounter supply shortages and/or higher costs to secure adequate supplies and a possible loss of sales, any of which would harm our business.

~~Table of Contents~~

ITEM 4. CONTROLS AND ~~PROCEDURES~~PROCEDURES

Evaluation of ~~disclosure controls~~Disclosure Controls and ~~procedures~~Procedures

We have evaluated the effectiveness of the design and operation of our disclosure controls and procedures pursuant to, and as defined in, Rules ~~13a‑15(e)~~13a-15(e) and ~~15d‑15(e)~~15d-15(e) under the Securities Exchange Act of 1934, as amended, as of the end of the period covered by this report. Based on the evaluation, performed under the supervision and with the participation of our management, including the Chief Executive Officer (the "CEO") and the Chief Financial Officer (the "CFO"), our management, including the CEO and CFO, concluded that our disclosure controls and procedures were effective as of ~~September 26, 2017.~~June 29, 2021.

Changes in ~~internal control~~Internal Control

There were no significant changes in the Company’s internal control over financial reporting that occurred during the ~~period covered by this report~~13 weeks ended June 29, 2021 that materially affected or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II — OTHER ~~INFORMATION~~INFORMATION

ITEM 1. LEGAL ~~PROCEEDINGS~~PROCEEDINGS

ITEM 1A. RISK ~~FACTORS~~FACTORS

Information regarding risk factors appears in our Annual Report on Form 10-K for the year ended December ~~27, 2016,~~29, 2020, under the heading "Special Note Regarding Forward-looking Statements" and in the Form 10-K Part I, Item 1A, Risk Factors. There have been no material changes from the risk factors previously disclosed in our Form 10-K for the year ended December ~~27, 2016.~~29, 2020.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF ~~PROCEEDS~~PROCEEDS

On May ~~22, 2014,~~31, 2019, our Board of Directors approved a stock repurchase program which authorized us to repurchase up to ~~$100.0~~$250.0 million of our common stock. For the 13 and 39 weeks ended September 26, 2017, we did not repurchase any shares of common stock. As of September 26, 2017, we had approximately $69.9 million remaining under our authorized repurchase program. This stock repurchase program has no expiration date and replaced a previous stock repurchase program which was approved on ~~February 16, 2012.~~May 22, 2014. The previous program authorized us to repurchase up to $100.0 million of our common stock and did not have an expiration date. All repurchases to date under our stock repurchase ~~program~~programs have been made through open market transactions. The timing and the amount of any repurchases through this program will be determined by management under parameters established by our Board of Directors, based on an evaluation of our stock price, market conditions and other corporate considerations. For the 26 weeks ended June 29, 2021, we did not repurchase any shares of common stock. On March 17, 2020, we suspended all share repurchase activity in order to enhance our financial flexibility as a result of the pandemic. As of June 29, 2021, $147.8 million remains authorized for stock repurchases.

ITEM 3. DEFAULTS UPON SENIOR ~~SECURITIES~~SECURITIES

None.

ITEM 4. MINE SAFETY ~~DISCLOSURES~~DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS

Exhibit No.		Description

10.1		First Amendment to Employment Agreement between Texas Roadhouse Management Corp. and Gerald L. Morgan dated March 31, 2021, with a retroactive effective date of March 18, 2021 (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K dated March 31, 2021 (File No. 000-50972))
10.2		Employment Agreement between Texas Roadhouse Management Corp. and Christopher C. Colson entered into as of March 31, 2021 (incorporated by reference to Exhibit 10.6 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 30, 2021 (File No. 000-50972))
10.3		Employment Agreement between Texas Roadhouse Management Corp. and Regina A. Tobin entered into as of June 15, 2021, with an effective date of June 30, 2021
10.4		Employment Agreement between Texas Roadhouse Management Corp. and Hernan E. Mujica entered into as of June 15, 2021, with an effective date of June 30, 2021
10.5		Second Amendment to Amended and Restated Credit Agreement dated as of ~~August 7, 2017,~~May 4, 2021 by and among Texas Roadhouse, Inc., and the lenders named therein and JPMorgan Chase Bank, N.A., as Administrative Agent (incorporated by reference to Exhibit 10.1 to the ~~Registrant’s~~Registrant's Current Report on Form 8-K dated ~~August 7, 2017~~May 4, 2021 (File No. 000-50972))
10.6		Texas Roadhouse, Inc. 2021 Long-Term Incentive Plan (incorporated by reference from Appendix A to the Texas Roadhouse, Inc. Proxy Statement on Schedule 14A filed with the Securities and Exchange Commission on April 2, 2021 (File No. 000-50972))
10.7		Form of Texas Roadhouse, Inc. 2021 Long-Term Incentive Plan Performance Stock Unit Award Agreement (incorporated by reference to Exhibit 10.1 of Registrant's Current Report on Form 8-K dated June 15, 2021 (File No. 000-50972))
10.8		Form of Texas Roadhouse, Inc. 2021 Long-Term Incentive Plan Restricted Stock Unit Award Agreement (Officers) (incorporated by reference to Exhibit 10.1 of Registrant's Current Report on Form 8-K dated June 15, 2021 (File No. 000-50972))
10.9		Form of Texas Roadhouse, Inc. 2021 Long-Term Incentive Plan Restricted Stock Unit Award Agreement (Member of Board of Directors) (incorporated by reference to Exhibit 10.1 of Registrant's Current Report on Form 8-K dated June 15, 2021 (File No. 000-50972))
31.1		Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2		Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS		XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		XBRL Taxonomy Extension Label Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

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SIGNATURES

~~SIGNATURES~~

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	TEXAS ROADHOUSE, INC.

Date: ~~November 3, 2017~~August 6, 2021	By:	/s/ ~~W. KENT TAYLOR~~GERALD L. MORGAN
		~~W. Kent Taylor~~Gerald L. Morgan
		Chief Executive Officer and President (principal executive officer)


Date: ~~November 3, 2017~~August 6, 2021	By:	/s/ ~~SCOTT M. COLOSI~~TONYA R. ROBINSON
		~~Scott M. Colosi~~Tonya R. Robinson
		~~President,~~ Chief Financial Officer
		(principal financial officer)
		(~~chief~~principal accounting officer)

Delaware		20-1083890
(State or other jurisdiction of		(IRS Employer
incorporation or organization)		Identification Number)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 per share	TXRH	NASDAQ Global Select Market

Large ~~accelerated filer~~ Accelerated Filer ☒	Accelerated ~~filer~~ Filer ☐	Non-accelerated ~~filer~~ Filer ☐	Smaller ~~reporting company~~ Reporting Company ☐
~~(Do not check if a smaller reporting company)~~			Emerging ~~growth company~~ Growth Company ☐

PART I. FINANCIAL INFORMATION

Item 1 — Financial Statements (Unaudited) — Texas Roadhouse, Inc. and Subsidiaries		3
Condensed Consolidated Balance Sheets — ~~September 26, 2017~~June 29, 2021 and December ~~27, 2016~~29, 2020		3
Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) — For the 13 and 3926 Weeks Ended ~~September 26, 2017~~June 29, 2021 and ~~September 27, 2016~~June 30, 2020		4
Condensed Consolidated Statement of Stockholders’ Equity — For the 3913 and 26 Weeks Ended ~~September 26, 2017~~June 29, 2021 and June 30, 2020		5
Condensed Consolidated Statements of Cash Flows — For the 3926 Weeks Ended ~~September 26, 2017~~June 29, 2021 and ~~September 27, 2016~~June 30, 2020		6
~~Notes to Condensed Consolidated Financial Statements~~		7
Notes to Condensed Consolidated Financial Statements		8
Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations		15
Item 3 — Quantitative and Qualitative Disclosures About Market Risk		29
Item 4 — Controls and Procedures		30

PART II. OTHER INFORMATION

Item 1 — Legal Proceedings		31
Item 1A — Risk Factors		31
Item 2 — Unregistered Sales of Equity Securities and Use of Proceeds		31
Item 3 — Defaults Upon Senior Securities		31
Item 4 — Mine Safety Disclosures		31
Item 5 — Other Information		31
Item 6 — Exhibits		32

Signatures		33




	September 26, 2017		December 27, 2016
Assets
Current assets:
Cash and cash equivalents	$	114,436	$	112,944
Receivables, net of allowance for doubtful accounts of $52 at September 26, 2017 and $33 at December 27, 2016		24,979		56,127
Inventories, net		15,453		16,088
Prepaid income taxes		—		954
Prepaid expenses		10,461		12,150
Deferred tax assets, net		—		1,996
Total current assets		165,329		200,259
Property and equipment, net of accumulated depreciation of $512,061 at September 26, 2017 and $457,102 at December 27, 2016		886,972		830,054
Goodwill		121,040		116,571
Intangible assets, net of accumulated amortization of $12,445 at September 26, 2017 and $11,753 at December 27, 2016		2,930		3,622
Other assets		36,448		29,465
Total assets	$	1,212,719	$	1,179,971
Liabilities and Stockholders’ Equity
Current liabilities:
Current maturities of long-term debt and obligation under capital lease	$	9	$	167
Accounts payable		48,979		50,789
Deferred revenue-gift cards		70,648		129,558
Accrued wages		29,580		26,039
Income taxes payable		8,581		—
Accrued taxes and licenses		23,483		19,698
Dividends payable		14,931		13,418
Other accrued liabilities		42,058		39,858
Total current liabilities		238,269		279,527
Long-term debt and obligation under capital lease, excluding current maturities		51,984		52,381
Stock option and other deposits		7,549		7,491
Deferred rent		40,261		36,103
Deferred tax liabilities, net		4,707		12,268
Other liabilities		39,157		33,959
Total liabilities		381,927		421,729
Texas Roadhouse, Inc. and subsidiaries stockholders’ equity:
Preferred stock ($0.001 par value, 1,000,000 shares authorized; no shares issued or outstanding)		—		—
Common stock ($0.001 par value, 100,000,000 shares authorized, 71,101,654 and 70,619,737 shares issued and outstanding at September 26, 2017 and December 27, 2016, respectively)		71		71
Additional paid-in-capital		229,909		219,626
Retained earnings		588,826		530,723
Accumulated other comprehensive loss		(63)		(194)
Total Texas Roadhouse, Inc. and subsidiaries stockholders’ equity		818,743		750,226
Noncontrolling interests		12,049		8,016
Total equity		830,792		758,242
Total liabilities and equity	$	1,212,719	$	1,179,971


	June 29, 2021		December 29, 2020
Assets
Current assets:
Cash and cash equivalents	$	483,419	$	363,155
Receivables, net of allowance for doubtful accounts of $10 at June 29, 2021 and $11 at December 29, 2020		48,600		98,418
Inventories, net		25,634		22,364
Prepaid income taxes		5,161		4,502
Prepaid expenses and other current assets		18,959		22,212
Total current assets		581,773		510,651
Property and equipment, net of accumulated depreciation of $816,085 at June 29, 2021 and $763,700 at December 29, 2020		1,117,393		1,088,623
Operating lease right-of-use assets, net		547,387		530,625
Goodwill		127,001		127,001
Intangible assets, net of accumulated amortization of $14,731 at June 29, 2021 and $14,341 at December 29, 2020		1,881		2,271
Other assets		73,510		65,990
Total assets	$	2,448,945	$	2,325,161
Liabilities and Stockholders’ Equity
Current liabilities:
Current portion of operating lease liabilities	$	20,578	$	19,271
Current maturities of long-term debt		—		50,000
Accounts payable		89,300		66,977
Deferred revenue-gift cards		177,946		232,812
Accrued wages and payroll taxes		71,837		51,982
Income taxes payable		6,107		2,859
Accrued taxes and licenses		31,976		24,751
Other accrued liabilities		82,064		57,666
Total current liabilities		479,808		506,318
Operating lease liabilities, net of current portion		590,443		572,171
Long-term debt		190,000		190,000
Restricted stock and other deposits		7,490		7,481
Deferred tax liabilities, net		5,753		2,802
Other liabilities		112,768		103,338
Total liabilities		1,386,262		1,382,110
Texas Roadhouse, Inc. and subsidiaries stockholders’ equity:
Preferred stock ($0.001 par value, 1,000,000 shares authorized; 0 shares issued or outstanding)		—		—
Common stock ($0.001 par value, 100,000,000 shares authorized, 69,830,389 and 69,561,861 shares issued and outstanding at June 29, 2021 and December 29, 2020, respectively)		70		70
Additional paid-in-capital		153,248		145,626
Retained earnings		893,613		781,915
Accumulated other comprehensive loss		(96)		(106)
Total Texas Roadhouse, Inc. and subsidiaries stockholders’ equity		1,046,835		927,505
Noncontrolling interests		15,848		15,546
Total equity		1,062,683		943,051
Total liabilities and equity	$	2,448,945	$	2,325,161



	13 Weeks Ended				39 Weeks Ended
	September 26, 2017		September 27, 2016		September 26, 2017		September 27, 2016
Revenue:
Restaurant sales	$	536,341	$	477,617	$	1,661,821	$	1,493,531
Franchise royalties and fees		4,166		4,020		12,634		12,473
Total revenue		540,507		481,637		1,674,455		1,506,004
Costs and expenses:
Restaurant operating costs (excluding depreciation and amortization shown separately below):
Cost of sales		176,498		161,886		545,862		506,565
Labor		169,355		145,301		514,287		442,861
Rent		11,257		10,266		33,238		30,477
Other operating		83,679		73,583		254,176		227,082
Pre-opening		4,548		5,017		14,302		14,253
Depreciation and amortization		23,534		20,941		69,236		60,718
Impairment and closure		2		13		13		54
General and administrative		26,123		26,162		94,594		82,933
Total costs and expenses		494,996		443,169		1,525,708		1,364,943
Income from operations		45,511		38,468		148,747		141,061
Interest expense, net		500		288		1,211		902
Equity income from investments in unconsolidated affiliates		(359)		(4)		(1,149)		(831)
Income before taxes		45,370		38,184	$	148,685	$	140,990
Provision for income taxes		13,046		11,381		41,159		42,325
Net income including noncontrolling interests		32,324		26,803	$	107,526	$	98,665
Less: Net income attributable to noncontrolling interests		1,310		1,128		4,618		3,792
Net income attributable to Texas Roadhouse, Inc. and subsidiaries	$	31,014	$	25,675	$	102,908	$	94,873
Other comprehensive income (loss), net of tax:
Unrealized gain on derivatives, net of tax of ($-), ($-), ($-) and ($18), respectively		—		—		—		27
Foreign currency translation adjustment, net of tax of ($55), ($18), ($82) and $7, respectively		88		29		131		(11)
Total other comprehensive income, net of tax		88		29		131		16
Total comprehensive income	$	31,102	$	25,704	$	103,039	$	94,889
Net income per common share attributable to Texas Roadhouse, Inc. and subsidiaries:
Basic	$	0.44	$	0.36	$	1.45	$	1.35
Diluted	$	0.43	$	0.36	$	1.44	$	1.34
Weighted average shares outstanding:
Basic		71,067		70,477		70,939		70,338
Diluted		71,532		70,981		71,449		70,898
Cash dividends declared per share	$	0.21	$	0.19	$	0.63	$	0.57


	For the 13 Weeks Ended June 29, 2021
								Accumulated		Total Texas
				Additional				Other		Roadhouse, Inc.
		Par		Paid-in-		Retained		Comprehensive		and		Noncontrolling
	Shares	Value		Capital		Earnings		Loss		Subsidiaries		Interests		Total
Balance, March 30, 2021	69,742,520	$	70	$	147,604	$	846,065	$	(118)	$	993,621	$	16,397	$	1,010,018
Net income	—		—		—		75,480		—		75,480		2,445		77,925
Other comprehensive income, net of tax	—		—		—		—		22		22		—		22
Distributions to noncontrolling interest holders	—		—		—		—		—		—		(2,994)		(2,994)
Dividends declared ($0.40 per share)	—		—		—		(27,932)		—		(27,932)		—		(27,932)
Shares issued under share-based compensation plans including tax effects	128,590		—		—		—		—		—		—		—
Indirect repurchase of shares for minimum tax withholdings	(40,721)		—		(4,265)		—		—		(4,265)		—		(4,265)
Share-based compensation	—		—		9,909		—		—		9,909		—		9,909
Balance, June 29, 2021	69,830,389	$	70	$	153,248	$	893,613	$	(96)	$	1,046,835	$	15,848	$	1,062,683


	For the 13 Weeks Ended June 30, 2020
								Accumulated		Total Texas
				Additional				Other		Roadhouse, Inc.
		Par		Paid-in-		Retained		Comprehensive		and		Noncontrolling
	Shares	Value		Capital		Earnings		Loss		Subsidiaries		Interests		Total
Balance, March 31, 2020	69,310,804	$	69	$	129,796	$	766,689	$	(262)	$	896,292	$	14,451	$	910,743
Net (loss) income	—		—		—		(33,553)		—		(33,553)		247		(33,306)
Other comprehensive income, net of tax	—		—		—		—		10		10		—		10
Shares issued under share-based compensation plans including tax effects	136,685		—		—		—		—		—		—		—
Indirect repurchase of shares for minimum tax withholdings	(43,520)		—		(1,971)		—		—		(1,971)		—		(1,971)
Share-based compensation	—		—		7,243		—		—		7,243		—		7,243
Balance, June 30, 2020	69,403,969	$	69	$	135,068	$	733,136	$	(252)	$	868,021	$	14,698	$	882,719


								Accumulated		Total Texas
				Additional				Other		Roadhouse, Inc.
		Par		Paid-in-		Retained		Comprehensive		and		Noncontrolling
	Shares	Value		Capital		Earnings		Loss		Subsidiaries		Interests		Total
Balance, December 27, 2016	70,619,737	$	71	$	219,626	$	530,723	$	(194)	$	750,226	$	8,016	$	758,242
Net income	—		—		—		102,908		—		102,908		4,618		107,526
Other comprehensive income, net	—		—		—		—		131		131		—		131
Noncontrolling interests contribution	—		—		—		—		—		—		3,457		3,457
Distributions to noncontrolling interest holders	—		—		—		—		—		—		(4,042)		(4,042)
Dividends declared and paid ($0.42 per share)	—		—		—		(29,805)		—		(29,805)		—		(29,805)
Dividends declared ($0.21 per share)	—		—		—		(14,931)		—		(14,931)		—		(14,931)
Shares issued under share-based compensation plans	701,827		1		1,484		—		—		1,485		—		1,485
Indirect repurchase of shares for minimum tax withholdings	(219,910)		(1)		(10,096)		—		—		(10,097)		—		(10,097)
Cumulative effect of change in accounting principle	—		—		69		(69)		—		—		—		—
Share-based compensation	—		—		18,826		—		—		18,826		—		18,826
Balance, September 26, 2017	71,101,654	$	71	$	229,909	$	588,826	$	(63)	$	818,743	$	12,049	$	830,792


	For the 26 Weeks Ended June 29, 2021
								Accumulated		Total Texas
				Additional				Other		Roadhouse, Inc.
		Par		Paid-in-		Retained		Comprehensive		and		Noncontrolling
	Shares	Value		Capital		Earnings		Loss		Subsidiaries		Interests		Total
Balance, December 29, 2020	69,561,861	$	70	$	145,626	$	781,915	$	(106)	$	927,505	$	15,546	$	943,051
Net income	—		—		—		139,630		—		139,630		4,725		144,355
Other comprehensive income, net of tax	—		—		—		—		10		10		—		10
Distributions to noncontrolling interest holders	—		—		—		—		—		—		(4,423)		(4,423)
Dividends declared ($0.40 per share)	—		—		—		(27,932)		—		(27,932)		—		(27,932)
Shares issued under share-based compensation plans including tax effects	398,508		—		—		—		—		—		—		—
Indirect repurchase of shares for minimum tax withholdings	(129,980)		—		(12,195)		—		—		(12,195)		—		(12,195)
Share-based compensation	—		—		19,817		—		—		19,817		—		19,817
Balance, June 29, 2021	69,830,389	$	70	$	153,248	$	893,613	$	(96)	$	1,046,835	$	15,848	$	1,062,683


	For the 26 Weeks Ended June 30, 2020
								Accumulated		Total Texas
				Additional				Other		Roadhouse, Inc.
		Par		Paid-in-		Retained		Comprehensive		and		Noncontrolling
	Shares	Value		Capital		Earnings		Loss		Subsidiaries		Interests		Total
Balance, December 31, 2019	69,400,252	$	69	$	140,501	$	775,649	$	(225)	$	915,994	$	15,175	$	931,169
Net (loss) income	—		—		—		(17,524)		—		(17,524)		1,370		(16,154)
Other comprehensive loss, net of tax	—		—		—		—		(27)		(27)		—		(27)
Distributions to noncontrolling interest holders	—		—		—		—		—		—		(1,847)		(1,847)
Dividends declared ($0.36 per share)	—		—		—		(24,989)		—		(24,989)		—		(24,989)
Shares issued under share-based compensation plans including tax effects	388,477		—		—		—		—		—		—		—
Indirect repurchase of shares for minimum tax withholdings	(132,351)		—		(7,302)		—		—		(7,302)		—		(7,302)
Repurchase of shares of common stock	(252,409)				(12,621)		—		—		(12,621)		—		(12,621)
Share-based compensation	—		—		14,490		—		—		14,490		—		14,490
Balance, June 30, 2020	69,403,969	$	69	$	135,068	$	733,136	$	(252)	$	868,021	$	14,698	$	882,719


		Weighted-Average		Weighted-Average
		Grant Date Fair		Remaining Contractual	Aggregate
	Shares	Value		Term (years)	Intrinsic Value
Outstanding at December 27, 2016	919,463	$	37.06
Granted	349,049		46.70
Forfeited	(35,041)		37.40
Vested	(404,505)		38.14
Outstanding at September 26, 2017	828,966	$	40.57	1.2	$	39,991


		Weighted-		Weighted-Average
		Average Exercise		Remaining Contractual	Aggregate
	Shares	Price		Term (years)	Intrinsic Value
Outstanding at December 27, 2016	118,073	$	13.57
Granted	—		—
Cancelled/Expired	(2,836)		15.47
Exercised	(109,085)		13.61
Outstanding at September 26, 2017	6,152	$	11.93	0.1	$	223
Exercisable at September 26, 2017	6,152	$	11.93	0.1	$	223


	September 26,		December 27,
	2017		2016
Installment loan	$	—	$	550
Obligation under capital lease		1,993		1,998
Revolver		50,000		50,000
		51,993		52,548
Less current maturities		9		167
	$	51,984	$	52,381





Current assets	$	170
Property and equipment		12,281
Goodwill		4,469
Current liabilities		(392)
	$	16,528


	Total	Texas Roadhouse	Bubba's 33	Jaggers
Balance at December 27, 2016	517	499	16	2
Company openings	20	16	4	—
Franchise openings - Domestic	1	1	—	—
Franchise openings - International	2	2	—	—
Balance at September 26, 2017	540	518	20	2


	Q3 2017			Q3 2016			2017 YTD			2016 YTD
Company Restaurants:
Increase in store weeks		8.1	%		7.6	%		8.0	%		8.1	%
Increase in average unit volume		3.9	%		2.8	%		3.1	%		3.7	%
Other(1)		0.3	%		(0.3)	%		0.2	%		(0.4)	%
Total increase in restaurant sales		12.3	%		10.1	%		11.3	%		11.4	%

Store weeks		5,868			5,427			17,324			16,039
Comparable restaurant sales growth		4.5	%		3.4	%		4.0	%		4.2	%

Texas Roadhouse restaurants only:
Comparable restaurant sales growth		4.6	%		3.5	%		4.0	%		4.2	%
Average unit volume (in thousands)	$	1,197		$	1,152		$	3,776		$	3,663

Weekly sales by group:
Comparable restaurants (396 and 368 units, respectively)	$	92,712		$	89,079
Average unit volume restaurants (21 and 24 units, respectively)(2)	$	79,891		$	80,390
Restaurants less than six months old (16 units for each period)	$	93,419		$	84,539


	Payments Due by Period
			Less than						More than
	Total		1 year		1 - 3 Years		3 - 5 Years		5 years
Long-term debt obligations	$	51,993	$	9		22		50,030		1,932
Interest(1)		10,777		1,280		2,588		2,525		4,384
Operating lease obligations		839,920		45,037		90,067		89,885		614,931
Capital obligations		150,629		150,629		—		—		—
Total contractual obligations(2)	$	1,053,319	$	196,955	$	92,677	$	142,440	$	621,247