UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period endedSeptember ~~24, 2019~~29, 2020

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 000-50972

Texas Roadhouse, Inc.

(Exact name of registrant specified in its charter)

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

6040 Dutchmans Lane, Suite 200

Louisville, Kentucky 40205

(Address of principal executive offices) (Zip Code)

(502) 426-9984

(Registrant’s telephone number, including area code)

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


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

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

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

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

Large Accelerated Filer ☒	Accelerated Filer ☐	Non-accelerated Filer ☐	Smaller Reporting Company ☐
			Emerging Growth Company ☐

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

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

The number of shares of common stock outstanding were ~~69,409,291~~69,482,522 on October ~~23, 2019.~~28, 2020.

Table of Contents

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION

Item 1 — Financial Statements (Unaudited) — Texas Roadhouse, Inc. and Subsidiaries		3
Condensed Consolidated Balance Sheets — September ~~24, 2019~~29, 2020 and December ~~25, 2018~~31, 2019		3
Condensed Consolidated Statements of Income and Comprehensive Income — For the 13 and 39 Weeks Ended September ~~24, 2019~~29, 2020 and September ~~25, 2018~~24, 2019		4
Condensed Consolidated Statement of Stockholders’ Equity — For the 13 and 39 Weeks Ended September ~~24, 2019~~29, 2020 and September ~~25, 2018~~24, 2019		5
Condensed Consolidated Statements of Cash Flows — For the 39 Weeks Ended September ~~24, 2019~~29, 2020 and September ~~25, 2018~~24, 2019		7
Notes to Condensed Consolidated Financial Statements		8
Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations		1716
Item 3 — Quantitative and Qualitative Disclosures About Market Risk		31
Item 4 — Controls and Procedures		3132

PART II. OTHER INFORMATION

Item 1 — Legal Proceedings		3233
Item 1A — Risk Factors		3233
Item 2 — Unregistered Sales of Equity Securities and Use of Proceeds		3234
Item 3 — Defaults Upon Senior Securities		3234
Item 4 — Mine Safety Disclosures		3234
Item 5 — Other Information		3335
Item 6 — Exhibits		3335

Signatures		3436

Table of Contents

PART I — FINANCIAL INFORMATION

ITEM 1 — FINANCIAL STATEMENTS

Texas Roadhouse, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands, except share and per share data)

(unaudited)


	September 24, 2019		December 25, 2018		September 29, 2020		December 31, 2019
Assets
Current assets:
Cash and cash equivalents	$	99,540	$	210,125	$	328,636	$	107,879
Receivables, net of allowance for doubtful accounts of $16 at September 24, 2019 and $34 at December 25, 2018		33,948		92,114
Receivables, net of allowance for doubtful accounts of $21 at September 29, 2020 and $12 at December 31, 2019						32,015		99,305
Inventories, net		17,198		18,827		19,889		20,267
Prepaid income taxes		—		7,569		3,968		2,015
Prepaid expenses		13,976		16,384
Prepaid expenses and other current assets						15,033		18,433
Total current assets		164,662		345,019		399,541		247,899
Property and equipment, net of accumulated depreciation of $663,493 at September 24, 2019 and $602,451 at December 25, 2018		1,020,167		956,676
Operating lease right-of-use asset		495,419		—
Property and equipment, net of accumulated depreciation of $744,378 at September 29, 2020 and $678,988 at December 31, 2019						1,076,924		1,056,563
Operating lease right-of-use assets, net						526,501		499,801
Goodwill		123,220		123,220		124,748		124,748
Intangible assets, net of accumulated amortization of $14,000 at September 24, 2019 and $13,416 at December 25, 2018		1,375		1,959
Intangible assets, net of accumulated amortization of $14,122 at September 29, 2020 and $14,141 at December 31, 2019						890		1,234
Other assets		50,718		42,402		59,407		53,320
Total assets	$	1,855,561	$	1,469,276	$	2,188,011	$	1,983,565
Liabilities and Stockholders’ Equity
Current liabilities:
Current portion of operating lease liabilities	$	16,748	$	—	$	18,635	$	17,263
Current maturities of long-term debt						50,000		—
Accounts payable		59,504		62,060		65,843		61,653
Deferred revenue-gift cards		107,200		192,242		146,470		209,258
Accrued wages		35,711		34,159		34,825		39,699
Income taxes payable		7,031		—		1,116		—
Accrued taxes and licenses		27,071		24,631		28,289		30,433
Dividends payable		20,863		17,904
Other accrued liabilities		58,144		54,146		51,224		58,914
Total current liabilities		332,272		385,142		396,402		417,220
Operating lease liabilities, net of current portion		532,480		—		567,480		538,710
Long-term debt						190,000		—
Restricted stock and other deposits		8,413		7,703		8,172		8,249
Deferred rent		—		48,079
Deferred tax liabilities, net		12,664		17,268		7,138		22,695
Other liabilities		61,035		50,376		100,316		65,522
Total liabilities		946,864		508,568		1,269,508		1,052,396
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, 69,507,763 and 71,617,510 shares issued and outstanding at September 24, 2019 and December 25, 2018, respectively)		70		72
Common stock ($0.001 par value, 100,000,000 shares authorized, 69,482,522 and 69,400,252 shares issued and outstanding at September 29, 2020 and December 31, 2019, respectively)						69		69
Additional paid-in-capital		140,445		257,388		140,659		140,501
Retained earnings		753,791		688,337		762,366		775,649
Accumulated other comprehensive loss		(331)		(228)		(178)		(225)
Total Texas Roadhouse, Inc. and subsidiaries stockholders’ equity		893,975		945,569		902,916		915,994
Noncontrolling interests		14,722		15,139		15,587		15,175
Total equity		908,697		960,708		918,503		931,169
Total liabilities and equity	$	1,855,561	$	1,469,276	$	2,188,011	$	1,983,565

See accompanying notes to condensed consolidated financial statements.

Table of Contents

Texas Roadhouse, Inc. and Subsidiaries

Condensed Consolidated Statements of Income and Comprehensive Income

(in thousands, except per share data)

(unaudited)



	13 Weeks Ended				39 Weeks Ended				13 Weeks Ended				39 Weeks Ended
	September 24, 2019		September 25, 2018		September 24, 2019		September 25, 2018		September 29, 2020		September 24, 2019		September 29, 2020		September 24, 2019
Revenue:
Restaurant and other sales	$	645,230	$	589,704	$	2,014,720	$	1,836,179	$	626,429	$	645,230	$	1,747,145	$	2,014,720
Franchise royalties and fees		5,259		4,891		16,205		15,358		4,756		5,259		12,989		16,205
Total revenue		650,489		594,595		2,030,925		1,851,537		631,185		650,489		1,760,134		2,030,925
Costs and expenses:
Restaurant operating costs (excluding depreciation and amortization shown separately below):
Cost of sales		205,158		191,990		650,136		598,824
Food and beverage										201,308		205,158		575,529		650,136
Labor		218,342		197,621		667,712		593,298		217,275		218,342		652,976		667,712
Rent		12,994		12,330		39,173		36,300		13,723		12,994		40,445		39,173
Other operating		100,742		91,946		306,355		279,182		102,978		100,742		296,615		306,355
Pre-opening		4,736		4,378		12,801		13,529		4,894		4,736		14,296		12,801
Depreciation and amortization		28,347		25,843		84,574		75,492		29,364		28,347		87,434		84,574
Impairment and closure		61		20		394		128
Impairment and closure, net										716		61		871		394
General and administrative		35,225		35,023		111,168		100,202		25,951		35,225		88,520		111,168
Total costs and expenses		605,605		559,151		1,872,313		1,696,955		596,209		605,605		1,756,686		1,872,313
Income from operations		44,884		35,444		158,612		154,582		34,976		44,884		3,448		158,612
Interest income (expense), net		81		(168)		1,526		(810)
Equity income from investments in unconsolidated affiliates		(154)		381		100		1,150
Interest expense (income), net										1,502		(81)		2,601		(1,526)
Equity income (loss) from investments in unconsolidated affiliates										1		(154)		(597)		100
Income before taxes	$	44,811	$	35,657	$	160,238	$	154,922	$	33,475	$	44,811	$	250	$	160,238
Provision for income taxes		6,785		5,398		23,331		22,321
Income tax expense (benefit)										3,072		6,785		(13,999)		23,331
Net income including noncontrolling interests		38,026		30,259	$	136,907	$	132,601		30,403		38,026	$	14,249	$	136,907
Less: Net income attributable to noncontrolling interests		1,495		1,134		5,141		4,708		1,173		1,495		2,543		5,141
Net income attributable to Texas Roadhouse, Inc. and subsidiaries	$	36,531	$	29,125	$	131,766	$	127,893	$	29,230	$	36,531	$	11,706	$	131,766
Other comprehensive loss, net of tax:
Foreign currency translation adjustment, net of tax of $40, $54, $35 and $46, respectively		(118)		(159)		(103)		(167)
Total other comprehensive loss, net of tax		(118)		(159)		(103)		(167)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment, net of tax of ($25), $40, ($16) and $35, respectively										74		(118)		47		(103)
Total comprehensive income	$	36,413	$	28,966	$	131,663	$	127,726	$	29,304	$	36,413	$	11,753	$	131,663
Net income per common share attributable to Texas Roadhouse, Inc. and subsidiaries:
Basic	$	0.53	$	0.41	$	1.86	$	1.79	$	0.42	$	0.53	$	0.17	$	1.86
Diluted	$	0.52	$	0.40	$	1.85	$	1.78	$	0.42	$	0.52	$	0.17	$	1.85
Weighted average shares outstanding:
Basic		69,573		71,508		70,896		71,429		69,446		69,573		69,410		70,896
Diluted		69,939		72,006		71,287		71,906		69,898		69,939		69,830		71,287
Cash dividends declared per share	$	0.30	$	0.25	$	0.90	$	0.75	$	—	$	0.30	$	0.36	$	0.90

See accompanying notes to condensed consolidated financial statements.

Table of Contents

Texas Roadhouse, Inc. and Subsidiaries

Condensed Consolidated Statement of Stockholders' Equity

(in thousands, except share and per share data)

(unaudited)


																For the 13 Weeks Ended September 29, 2020
																							Accumulated		Total Texas
																			Additional				Other		Roadhouse, Inc.
																	Par		Paid-in-		Retained		Comprehensive		and		Noncontrolling
																Shares	Value		Capital		Earnings		Loss		Subsidiaries		Interests		Total
Balance, June 30, 2020																69,403,969	$	69	$	135,068	$	733,136	$	(252)	$	868,021	$	14,698	$	882,719
Net income																—		—		—		29,230		—		29,230		1,173		30,403
Other comprehensive income, net of tax																—		—		—		—		74		74		—		74
Distributions to noncontrolling interest holders																—		—		—		—		—		—		(284)		(284)
Shares issued under share-based compensation plans including tax effects																113,453		—		—		—		—		—		—		—
Indirect repurchase of shares for minimum tax withholdings																(34,900)		—		(1,989)		—		—		(1,989)		—		(1,989)
Share-based compensation																—		—		7,580		—		—		7,580		—		7,580
Balance, September 29, 2020																69,482,522	$	69	$	140,659	$	762,366	$	(178)	$	902,916	$	15,587	$	918,503


	For the 13 Weeks Ended September 24, 2019															For the 13 Weeks Ended September 24, 2019
								Accumulated		Total Texas													Accumulated		Total Texas
				Additional				Other		Roadhouse, Inc.									Additional				Other		Roadhouse, Inc.
		Par		Paid-in-		Retained		Comprehensive		and		Noncontrolling					Par		Paid-in-		Retained		Comprehensive		and		Noncontrolling
	Shares	Value		Capital		Earnings		Loss		Subsidiaries		Interests		Total		Shares	Value		Capital		Earnings		Loss		Subsidiaries		Interests		Total
Balance, June 25, 2019	69,801,550	$	70	$	152,872	$	738,123	$	(213)	$	890,852	$	14,766	$	905,618	69,801,550	$	70	$	152,872	$	738,123	$	(213)	$	890,852	$	14,766	$	905,618
Net income	—		—		—		36,531		—		36,531		1,495		38,026	—		—		—		36,531		—		36,531		1,495		38,026
Other comprehensive loss, net of tax	—		—		—		—		(118)		(118)		—		(118)	—		—		—		—		(118)		(118)		—		(118)
Distributions to noncontrolling interest holders	—		—		—		—		—		—		(1,539)		(1,539)	—		—		—		—		—		—		(1,539)		(1,539)
Dividends declared ($0.30 per share)	—		—		—		(20,863)		—		(20,863)		—		(20,863)	—		—		—		(20,863)		—		(20,863)		—		(20,863)
Shares issued under share-based compensation plans including tax effects	94,010		—		—		—		—		—		—		—	94,010		—		—		—		—		—		—		—
Indirect repurchase of shares for minimum tax withholdings	(29,416)		—		(1,657)		—		—		(1,657)		—		(1,657)	(29,416)		—		(1,657)		—		—		(1,657)		—		(1,657)
Repurchase of shares of common stock	(358,381)		—		(18,913)		—		—		(18,913)		—		(18,913)	(358,381)		—		(18,913)		—		—		(18,913)				(18,913)
Share-based compensation	—		—		8,143		—		—		8,143		—		8,143	—		—		8,143		—		—		8,143		—		8,143
Balance, September 24, 2019	69,507,763	$	70	$	140,445	$	753,791	$	(331)	$	893,975	$	14,722	$	908,697	69,507,763	$	70	$	140,445	$	753,791	$	(331)	$	893,975	$	14,722	$	908,697


	For the 13 Weeks Ended September 25, 2018
								Accumulated		Total Texas
				Additional				Other		Roadhouse, Inc.
		Par		Paid-in-		Retained		Comprehensive		and		Noncontrolling
	Shares	Value		Capital		Earnings		Loss		Subsidiaries		Interests		Total
Balance, June 26, 2018	71,474,209	$	71	$	243,357	$	664,668	$	(47)	$	908,049	$	13,549	$	921,598
Net income	—		—		—		29,125		—		29,125		1,134		30,259
Other comprehensive loss, net of tax	—		—		—		—		(159)		(159)		—		(159)
Noncontrolling interest contribution	—		—		—		—		—		—		1,686		1,686
Distributions to noncontrolling interest holders	—		—		—		—		—		—		(1,279)		(1,279)
Acquisition of noncontrolling interest	—		—		(75)		—		—		(75)		(47)		(122)
Dividends declared ($0.25 per share)	—		—		—		(17,884)		—		(17,884)		—		(17,884)
Shares issued under share-based compensation plans including tax effects	102,171		1		(1)		—		—		—		—		—
Indirect repurchase of shares for minimum tax withholdings	(31,143)		—		(1,765)		—		—		(1,765)		—		(1,765)
Share-based compensation	—		—		8,964		—		—		8,964		—		8,964
Balance, September 25, 2018	71,545,237	$	72	$	250,480	$	675,909	$	(206)	$	926,255	$	15,043	$	941,298

See accompanying notes to condensed consolidated financial statements.

Table of Contents

Texas Roadhouse, Inc. and Subsidiaries

Condensed Consolidated Statement of Stockholders' Equity

(in thousands, except share and per share data)

(unaudited)


																For the 39 Weeks Ended September 29, 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 income																—		—		—		11,706		—		11,706		2,543		14,249
Other comprehensive income, net of tax																—		—		—		—		47		47		—		47
Distributions to noncontrolling interest holders																—		—		—		—		—		—		(2,131)		(2,131)
Dividends declared ($0.36 per share)																—		—		—		(24,989)		—		(24,989)		—		(24,989)
Shares issued under share-based compensation plans including tax effects																501,930		—		—		—		—		—		—		—
Indirect repurchase of shares for minimum tax withholdings																(167,251)		—		(9,291)		—		—		(9,291)		—		(9,291)
Repurchase of shares of common stock																(252,409)		—		(12,621)		—		—		(12,621)		—		(12,621)
Share-based compensation																—		—		22,070		—		—		22,070		—		22,070
Balance, September 29, 2020																69,482,522	$	69	$	140,659	$	762,366	$	(178)	$	902,916	$	15,587	$	918,503


	For the 39 Weeks Ended September 24, 2019															For the 39 Weeks Ended September 24, 2019
								Accumulated		Total Texas													Accumulated		Total Texas
				Additional				Other		Roadhouse, Inc.									Additional				Other		Roadhouse, Inc.
		Par		Paid-in-		Retained		Comprehensive		and		Noncontrolling					Par		Paid-in-		Retained		Comprehensive		and		Noncontrolling
	Shares	Value		Capital		Earnings		Loss		Subsidiaries		Interests		Total		Shares	Value		Capital		Earnings		Loss		Subsidiaries		Interests		Total
Balance, December 25, 2018	71,617,510	$	72	$	257,388	$	688,337	$	(228)	$	945,569	$	15,139	$	960,708	71,617,510	$	72	$	257,388	$	688,337	$	(228)	$	945,569	$	15,139	$	960,708
Net income	—		—		—		131,766		—		131,766		5,141		136,907	—		—		—		131,766		—		131,766		5,141		136,907
Other comprehensive loss, net of tax	—		—		—		—		(103)		(103)		—		(103)	—		—		—		—		(103)		(103)		—		(103)
Distributions to noncontrolling interest holders	—		—		—		—		—		—		(4,885)		(4,885)	—		—		—		—		—		—		(4,885)		(4,885)
Acquisition of noncontrolling interest and other	—		—		(70)		—		—		(70)		(673)		(743)	—		—		(70)		—		—		(70)		(673)		(743)
Dividends declared ($0.90 per share)	—		—		—		(63,634)		—		(63,634)		—		(63,634)	—		—		—		(63,634)		—		(63,634)		—		(63,634)
Shares issued under share-based compensation plans including tax effects	527,927		—		—		—		—		—		—		—	527,927		—		—		—		—		—		—		—
Indirect repurchase of shares for minimum tax withholdings	(182,616)		—		(10,926)		—		—		(10,926)		—		(10,926)	(182,616)		—		(10,926)		—		—		(10,926)		—		(10,926)
Repurchase of shares of common stock	(2,455,058)		(2)		(130,963)		—		—		(130,965)		—		(130,965)	(2,455,058)		(2)		(130,963)		—		—		(130,965)		—		(130,965)
Cumulative effect of adoption of ASC 842, Leases, net of tax	—		—		—		(2,678)		—		(2,678)		—		(2,678)
Cumulative effect of adoption of ASC 842, Leases, net of tax																—		—		—		(2,678)		—		(2,678)		—		(2,678)
Share-based compensation	—		—		25,016		—		—		25,016		—		25,016	—		—		25,016		—		—		25,016		—		25,016
Balance, September 24, 2019	69,507,763	$	70	$	140,445	$	753,791	$	(331)	$	893,975	$	14,722	$	908,697	69,507,763	$	70	$	140,445	$	753,791	$	(331)	$	893,975	$	14,722	$	908,697


	For the 39 Weeks Ended September 25, 2018
								Accumulated		Total Texas
				Additional				Other		Roadhouse, Inc.
		Par		Paid-in-		Retained		Comprehensive		and		Noncontrolling
	Shares	Value		Capital		Earnings		Loss		Subsidiaries		Interests		Total
Balance, December 26, 2017	71,168,897	$	71	$	236,548	$	602,499	$	(39)	$	839,079	$	12,312	$	851,391
Net income	—		—		—		127,893		—		127,893		4,708		132,601
Other comprehensive loss, net of tax	—		—		—		—		(167)		(167)		—		(167)
Noncontrolling interest contribution	—		—		—		—		—		—		2,551		2,551
Contribution from executive officer	—		—		1,000		—		—		1,000		—		1,000
Distributions to noncontrolling interest holders	—		—		—		—		—		—		(4,481)		(4,481)
Acquisition of noncontrolling interest holders	—		—		(75)		—		—		(75)		(47)		(122)
Dividends declared ($0.75 per share)	—		—		—		(53,605)		—		(53,605)		—		(53,605)
Shares issued under share-based compensation plans including tax effects	580,861		1		(1)		—		—		—		—		—
Indirect repurchase of shares for minimum tax withholdings	(204,521)		—		(11,812)		—		—		(11,812)		—		(11,812)
Cumulative effect of adoption of ASC 606, Revenue from Contracts with Customers, net of tax	—		—		—		(878)		—		(878)		—		(878)
Share-based compensation	—		—		24,820		—		—		24,820		—		24,820
Balance, September 25, 2018	71,545,237	$	72	$	250,480	$	675,909	$	(206)	$	926,255	$	15,043	$	941,298

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				39 Weeks Ended
	September 24, 2019		September 25, 2018		September 29, 2020		September 24, 2019
Cash flows from operating activities:
Net income including noncontrolling interests	$	136,907	$	132,601	$	14,249	$	136,907
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		84,574		75,492		87,434		84,574
Deferred income taxes		(3,660)		2,146		(15,572)		(3,660)
Loss on disposition of assets		4,138		4,339		2,107		4,138
Impairment and closure costs		26		—		799		26
Contribution from executive officer		—		1,000
Equity income from investments in unconsolidated affiliates		(100)		(1,150)
Equity loss (income) from investments in unconsolidated affiliates						597		(100)
Distributions of income received from investments in unconsolidated affiliates		495		521		205		495
Provision for doubtful accounts		(18)		16		9		(18)
Share-based compensation expense		25,016		24,820		22,070		25,016
Changes in operating working capital:
Receivables		59,002		41,676		67,281		59,002
Inventories		1,629		(30)		378		1,629
Prepaid expenses		2,408		315
Prepaid expenses and other current assets						5,045		2,408
Other assets		(9,297)		(6,582)		(6,185)		(9,297)
Accounts payable		(5,854)		918		(771)		(5,854)
Deferred revenue—gift cards		(85,042)		(68,680)		(62,788)		(85,042)
Accrued wages		1,552		3,267		(4,874)		1,552
Prepaid income taxes and income taxes payable		14,600		235		(837)		14,600
Accrued taxes and licenses		2,440		2,838		(2,144)		2,440
Other accrued liabilities		(1,772)		2,593		504		(1,772)
Operating lease right-of-use assets and lease liabilities		4,367		—		3,519		4,367
Deferred rent		—		4,144
Other liabilities		10,586		5,100		35,009		10,586
Net cash provided by operating activities		241,997		225,579		146,035		241,997
Cash flows from investing activities:
Capital expenditures—property and equipment		(144,917)		(110,906)		(117,521)		(144,917)
Proceeds from sale of property and equipment		351		—		32		351
Proceeds from sale leaseback transaction						2,167		—
Net cash used in investing activities		(144,566)		(110,906)		(115,322)		(144,566)
Cash flows from financing activities:
Proceeds from noncontrolling interest contribution		—		2,551
Proceeds from revolving credit facility						240,000		—
Debt issuance costs						(641)		—
Distributions to noncontrolling interest holders		(4,885)		(4,481)		(2,131)		(4,885)
Acquisition of noncontrolling interest		(743)		—		—		(743)
Proceeds from restricted stock and other deposits, net		176		14
(Repayments) proceeds from restricted stock and other deposits, net						(283)		176
Indirect repurchase of shares for minimum tax withholdings		(10,926)		(11,812)		(9,291)		(10,926)
Principal payments on long-term debt and finance lease obligation		—		(50,007)
Repurchase of shares of common stock		(130,963)		—		(12,621)		(130,963)
Dividends paid to shareholders		(60,675)		(50,666)		(24,989)		(60,675)
Net cash used in financing activities		(208,016)		(114,401)
Net (decrease) increase in cash and cash equivalents		(110,585)		272
Net cash provided by (used in) financing activities						190,044		(208,016)
Net increase (decrease) in cash and cash equivalents						220,757		(110,585)
Cash and cash equivalents—beginning of period		210,125		150,918		107,879		210,125
Cash and cash equivalents—end of period	$	99,540	$	151,190	$	328,636	$	99,540
Supplemental disclosures of cash flow information:
Interest paid, net of amounts capitalized	$	238	$	568	$	1,654	$	238
Income taxes paid	$	12,391	$	19,940	$	2,419	$	12,391
Capital expenditures included in current liabilities	$	16,934	$	9,415	$	12,164	$	16,934

See accompanying notes to condensed consolidated financial statements.

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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 ~~24, 2019~~29, 2020 and December ~~25, 2018~~31, 2019 and for the 13 and 39 weeks ended September ~~24, 2019~~29, 2020 and September ~~25, 2018.~~24, 2019.

As of September 29, 2020, we owned and operated 526 restaurants and franchised an additional 97 restaurants in 49 states and 10 foreign countries. Of the 526 company restaurants that were operating at September 29, 2020, 506 were wholly-owned and 20 were majority-owned. Of the 97 franchise restaurants, 70 were domestic restaurants and 27 were international restaurants. Included within these restaurant totals are 3 international franchise restaurants that remain temporarily closed due to the global COVID-19 pandemic (the "pandemic"). These stores continue to be included in the above totals as we believe they will re-open once it is considered safe to do so.

As of September 24, 2019, we owned and operated 502 restaurants and franchised an additional 95 restaurants in 49 states and 10 foreign countries. Of the 502 company restaurants that were operating at September 24, 2019, 482 were wholly-owned and 20 were majority-owned. Of the 95 franchise restaurants, 70 were domestic restaurants and 25 were international restaurants.

As of September 25, 2018, we owned and operated 479 restaurants and franchised an additional 91 restaurants in 49 states and 8 foreign countries. Of the 479 company restaurants that were operating at September 25, 2018, 460 were wholly-owned and 19 ~~were majority-owned. Of the 91 franchise restaurants, 70 were domestic restaurants and 21 were international restaurants.~~

As of September ~~24, 2019~~29, 2020 and September ~~25, 2018,~~24, 2019, we owned a 5.0% to 10.0% equity interest in 24 domestic franchise restaurants. Additionally, as of September ~~24, 2019~~29, 2020 and September ~~25, 2018,~~24, 2019, we owned a 40% equity interest in 4 non-Texas Roadhouse restaurants 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 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 and comprehensive income under equity income 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 amount of property and equipment, goodwill, obligations related to insurance reserves, leases and leasehold improvements, legal reserves, gift card breakage and ~~third party~~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 39 weeks ended September ~~24, 2019~~29, 2020 are not necessarily indicative of the results that may be expected for the year ending December ~~31, 2019.~~29, 2020. 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 ~~25, 2018.~~31, 2019.

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

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~~(2) Recent Accounting Pronouncements~~

~~Leases~~

~~(Accounting Standards Codification 842, "ASC 842")~~

~~On December 26, 2018, we adopted ASC 842,~~ ~~Leases~~~~, which requires an entity to recognize a right-of-use asset~~Risks and ~~a lease liability for virtually all leases.~~ As further described in note 3, we lease land and/or buildings for the majority of our restaurants under non-cancelable lease agreements. We adopted ASC 842 using a modified retrospective approach. As a result, the comparative financial information has not been updated and the required disclosures prior to the date of adoption have not been updated and continue to be reported under the accounting standards in effect for those periods.

~~ASC 842 also permitted the election of certain practical expedients upon adoption. We elected the transition package of practical~~ expedients which allowed us to carryforward the historical lease classification. We also elected the practical expedient to not separate lease and non-lease components for all leases entered into after the date of adoption. Finally, we elected the hindsight practical expedient which required us to assess the lease term for all existing leases. This resulted in extending the terms for certain existing leases in which renewal options had already been exercised or were reasonably certain of being exercised and shortening the terms for certain existing leases in which renewal options were not reasonably certain of being exercised. As a result of the hindsight election, we recorded a ~~$2.7~~ ~~million reduction, net of tax, to retained earnings as of the first day of fiscal 2019 to reflect the change in lease terms.~~Uncertainties

The ~~adoption~~Company is subject to risks and uncertainties as a result of the pandemic. On March 13, 2020, the pandemic was declared a National Public Health Emergency. Shortly after the national emergency declaration, state and local officials began placing restrictions on restaurants, some of which allowed To-Go or curbside service only while others limited capacity in the dining room. By March 31, 2020, the last day of our Q1 2020 fiscal quarter, all of our domestic company and franchise restaurants were under state or local order which only allowed for To-Go or curbside service. Beginning in early May 2020, state and local guidelines began to allow dining rooms to re-open, typically at a limited capacity. By September 29, 2020, the last day of our Q3 2020 fiscal quarter, nearly all of our 526 company-owned restaurants had re-opened their dining rooms under various limited capacity restrictions.

We continue to monitor state and local plans as they move along their phased approach to allow restaurants to re-open at full capacity. We have developed a hybrid operating model that accommodates our limited capacity dining rooms together with enhanced To-Go, which includes a curbside and/or drive-up operating model, as permitted by local guidelines. This includes design changes to our building to better accommodate the increased To-Go sales and the expansion of outdoor seating areas where allowed. We also have installed booth partitions in all of our restaurants as an added safety measure for our guests. In addition, we have increased our already strict sanitation requirements, are conducting daily health and temperature checks for all employees before they begin their shift and are requiring personal protective equipment to be worn by all restaurant employees at all times. As we work through the various limited capacity phases at each of our locations, the safety of our employees and guests remains our top priority.

As a result of the temporary dining room closures and the subsequent limited capacity restrictions for in-person dining, we have experienced a significant decrease in traffic which has impacted our operating results. While nearly all of our dining rooms have re-opened, a significant portion continue to operate under capacity restrictions that severely limit the number of guests we can serve. In addition, while we have seen significant sales growth in our To-Go program, even with dining rooms re-opened, we currently do not expect these sales will generate a similar profit margin and cash flows to our normal operating model. We expect our operating results to continue to be impacted until at least such time that state and local restrictions are lifted, and our dining rooms can re-open at full capacity. We cannot predict how long the pandemic will last, how long it will take until all state and local restrictions will be lifted, or if dining rooms will be required to close again in whole or in part in areas severely impacted by the pandemic. In addition, we cannot predict the overall impact on the economy or consumer spending habits. The extent of this ~~standard had a significant impact on our consolidated balance sheet. There was no significant~~re-opening process will determine the significance of the impact to our financial condition, financial results, and liquidity in future periods. In addition, significant items subject to estimates and assumptions including the carrying amount of ~~operations or cash flows. This standard did not have a significant impact on our liquidity or on our compliance with our financial covenants associated with our credit facility.~~property and equipment, goodwill, and lease related assets could be impacted.

(2) Recent Accounting Pronouncements

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. We adopted ASU 2016-13 ~~is effective for annual periods~~as of the beginning ~~after December 15, 2019 (our~~of our 2020 fiscal ~~year), and for interim periods within those years, with early~~year. The adoption ~~permitted for annual periods beginning after December 15, 2018. We are currently assessing the impact~~ of this ~~new~~ standard did not have a significant impact on our condensed consolidated financial statements.

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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 Test 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. We adopted ASU 2017-04 ~~is effective for annual and interim periods for fiscal years~~as of the beginning ~~after December 15, 2019 (our~~of our 2020 fiscal ~~year) and will be applied on a prospective basis. Early~~year. The 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 did not have a significant impact on our condensed consolidated financial statements.

~~Table of Contents~~

Fair Value Measurement

(Accounting Standards Update 2018-13, "ASU 2018-13")

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement, which changes disclosure requirements for fair value measurements. We adopted ASU 2018-13 as of the beginning of our 2020 fiscal year. The adoption of this standard did not have a significant impact on our condensed consolidated financial statements.

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 removes 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 simplifies aspects of accounting for recognizing deferred taxes for taxable goodwill. ASU 2019-12 is effective for fiscal years beginning after December 15, ~~2019~~2020 (our ~~2020~~2021 fiscal year) and for interim periods within those years, with early adoption permitted. We are currently assessing the impact of this new standard on our consolidated financial statements.

~~(3) Leases~~Reference Rate Reform

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

~~We recognize right-of-use assets~~In March 2020, the 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 ~~lease liabilities for both real estate and equipment leases that have a term in excess of one year. As of September 24, 2019, these amounts were as follows (in thousands):~~

Leases

Real estate

Equipment

Total
Operating lease right-of-use assets
$
491,687

$
3,732

$
495,419

Current portion of operating lease liabilities

15,502

1,246

16,748
Operating lease liabilities, net of current portion

529,994

2,486

532,480
Total operating lease liabilities
$
545,496

$
3,732

$
549,228

~~Information related to our real estate leases as of and for the 13 and 39 week periods ended September 24, 2019 was as follows (in thousands):~~

13 Weeks Ended

39 Weeks Ended
Real estate costs

September 24, 2019

September 24, 2019
Operating lease
$
13,837

$
40,751
Variable lease

378

1,228
Short-term lease

30

90
Total lease costs
$
14,245

$
42,069

Real estate lease liability maturity analysis

Total
2019

$
12,657
2020

51,896
2021

52,708
2022

53,547
2023

53,494
Thereafter

756,067
Total

$
980,369
Less interest

434,873
Total discounted operating lease liabilities

$
545,496

~~Table of Contents~~

13 Weeks Ended

39 Weeks Ended
Real estate leases other information

September 24, 2019

September 24, 2019
Cash paid for amounts included in measurement of operating lease liabilities
$
12,268

$
36,384
Right-of-use assets obtained in exchange for new operating lease liabilities
$
14,229

$
41,102
Weighted-average remaining lease term (years)

17.88
Weighted-average discount rate

6.78

~~Operating lease payments exclude $11.2~~ ~~million of minimum lease payments for executed real estate leases that we have not yet taken possession.~~ ~~In addition~~exceptions to the ~~above operating leases,~~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 ~~of September 24, 2019 we had 1 finance lease with a right-of-use asset balance and lease liability balance of $1.8 million and $2.1~~ ~~million, respectively. The right-of-use asset balance is included~~early as ~~a component of other assets and~~ the ~~lease liability balance as a component of other liabilities in the unaudited condensed consolidated balance sheets.~~

~~We lease land and/or buildings for the majority of our restaurants under non-cancelable lease agreements. These leases typically have initial terms ranging from~~ ~~10 to 15 years, and certain renewal options for one or more five-year~~ ~~periods. When determining the lease term, we include option periods for which failure to renew the lease imposes a penalty on us in such an amount that renewal appears, at the inception~~beginning of the ~~lease, to be reasonably certain. The primary penalty to which we~~interim period through December 31, 2022. We are ~~subject is~~currently assessing the ~~economic detriment associated with the existence~~impact of leasehold improvements which might become impaired if we choose not to continue the use of the leased property. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants that would impact lease classification.

Beginning in 2019, we recognize operating lease right-of-use assets and operating lease liabilities for real estate leases, including our restaurant leases and Support Center lease, as well as certain restaurant equipment leases based on the present value of the lease payments over the lease term. We estimate the present value basedthis new standard on our incremental borrowing rate which corresponds to the underlying lease term. In addition, operating lease right-of-use assets are reduced for accrued rent and increased for any initial direct costs recognized at lease inception. For leases commencing in 2019 and later, we account for lease and non-lease components as a single lease component.

Certain of our operating leases contain predetermined fixed escalations of the minimum rent over the lease term. For these leases, we recognize the related rent expense on a straight-line basis over the lease term. We may receive rent concessions or leasehold improvement incentives upon opening a restaurant that is subject to a lease which we consider when determining straight-line rent expense. We also may receive rent holidays, which would begin on the possession date and end when the store opens, during which no cash rent payments are typically due under the terms of the lease. Rent holidays are included in the lease term when determining straight-line rent expense. In recognizing straight-line rent expense, we record the difference between amounts charged to operations and amounts paid as accrued rent. Straight-line rent expense is included as an operating lease cost in the table above.

Certain of our operating leases contain clauses that provide for additional contingent rent based on a percentage of sales greater than certain specified target amounts. We recognize contingent rent expense prior to the achievement of the specified target that triggers the contingent rent, provided achievement of the target is considered probable. In addition, certain of our operating leases have variable escalations of the minimum rent that depend on an index or rate. We recognize variable rent expense when the escalation is determinable. Contingent rent and variable rent expense are included as variable lease costs in the table above.

~~Table of Contents~~

The following is a schedule of future minimum lease payments required for real estate and equipment operating leases that have a remaining term in excess of one year as of December 25, 2018 (in thousands):

Operating Leases
2019
$
50,030
2020

49,582
2021

49,917
2022

50,237
2023

49,854
Thereafter

677,710
Total
$
927,330

~~Rent expense for operating leases consisted of the following for the 13 and 39 week periods ended September 25, 2018 (in thousands):~~

13 Weeks Ended

39 Weeks Ended

September 25, 2018

September 25, 2018
Minimum rent—occupancy

$
12,101

$
35,470
Contingent rent

229

830
Rent expense, occupancy

12,330

36,300
Minimum rent—equipment and other

1,491

4,435
Rent expense

$
13,821

$
40,735

consolidated financial statements.

~~(4)~~(3) Long-term Debt

On August 7, 2017, we entered into the Amended and Restated Credit Agreement (the "Amended Credit Agreement") with respect to our revolving credit facility with a syndicate of commercial lenders led by JPMorgan Chase Bank, N.A., PNC Bank, N.A., and Wells Fargo Bank, N.A. The revolving credit facility remains an unsecured, revolving credit agreement under which we may borrow 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 revolving credit facility ~~until~~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 revolving credit facility. The maturity date for the incremental revolving credit facility is May 10, 2021. The maturity date for the original revolving credit facility remains August 5, 2022.

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Rate that may be substituted for LIBOR. Subsequent to our Q1 2021 fiscal quarter, we are required to pay interest on outstanding borrowings at LIBOR plus a margin of 0.875% to 2.25% and to pay a commitment fee of 0.125% to 0.40% depending on our consolidated net leverage ~~ratio, or~~ratio. As of September 29, 2020, we had $190.0 million outstanding on the ~~Alternate Base Rate,~~original revolving credit facility and $1.8 million of availability, net of $8.2 million of outstanding letters of credit. This outstanding amount is included as long-term debt on our condensed consolidated balance sheet.

The terms of the amendment also require us to pay interest on outstanding borrowings of the incremental revolving credit facility at LIBOR, which is ~~the highest~~subject to a floor of 1.0%, plus a margin of 2.25% and to pay a commitment fee of 0.50% per year on any unused portion of the issuing banks’ prime lending rate, the Federal Reserve Bank of New York rate plus 0.50% or the Adjusted Eurodollar Rate for a one month interest period on such day plus 1.0%. In April 2018, we paid off our outstandingincremental revolving credit facility through the maturity date. As of ~~$50.0~~September 29, 2020, we had $50.0 million outstanding and $32.5 ~~million.~~ million of availability on the incremental revolving credit facility. This outstanding amount is included as current maturities of long-term debt on our condensed consolidated balance sheet.

The weighted-average interest rate for the ~~amended~~$240.0 million of combined borrowings on our revolving credit facility as of September ~~24, 2019 and December 25, 2018~~29, 2020 was ~~2.92% and 3.81%, respectively. As of September 24, 2019, we had $191.8 million of availability, net of $8.2 million of outstanding letters of credit.~~1.98%.

The lenders’ obligation to extend credit pursuant to the Amended Credit Agreement depends on us maintaining certain financial ~~covenants, including a minimum consolidated fixed charge coverage ratio of 2.00~~covenants. The amendment 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 ~~amended~~ revolving credit facility ~~except for~~also modified the ~~incurrence of secured indebtedness that in~~financial covenants through the ~~aggregate is equal to or greater than $125.0 million and 20~~%end of our ~~consolidated tangible net worth.~~Q1 2021 fiscal quarter. We were in compliance with all financial covenants as of September ~~24, 2019.~~29, 2020.

~~Table of Contents~~

(5)(4) Revenue

The following table disaggregates our revenue by major source (in thousands):


	13 weeks ended				39 weeks ended				13 weeks ended				39 weeks ended
	September 24, 2019		September 25, 2018		September 24, 2019		September 25, 2018		September 29, 2020		September 24, 2019		September 29, 2020		September 24, 2019
Restaurant and other sales	$	645,230	$	589,704	$	2,014,720	$	1,836,179	$	626,429	$	645,230	$	1,747,145	$	2,014,720
Franchise royalties		4,645		4,249		14,316		13,069		4,141		4,645		11,195		14,316
Franchise fees		614		642		1,889		2,289		615		614		1,794		1,889
Total revenue	$	650,489	$	594,595	$	2,030,925	$	1,851,537	$	631,185	$	650,489	$	1,760,134	$	2,030,925

We record deferred revenue for gift cards which includes cards that have been sold but not yet redeemed, a breakage adjustment for a percentage of gift cards that are not expected to be redeemed, and fees paid on gift cards sold through ~~third party~~third-party retailers. When the gift cards are redeemed, we recognize restaurant sales and reduce deferred revenue. We amortize breakage and ~~third party~~third-party fees consistent with the historic redemption pattern of the associated gift card ~~and~~or on actual redemptions in periods where redemptions do not align with historic redemption patterns. We recognize these amounts as a component of other sales. As of September ~~24, 2019~~29, 2020 and December ~~25, 2018,~~31, 2019, our deferred revenue balance related to gift cards was $~~107.2~~146.5 million and ~~$192.2~~$209.3 million, respectively. We recognized sales of $15.2 million and $101.3 million for the 13 and 39 weeks ended September 29, 2020, respectively, related to the amount in deferred revenue as of December 31, 2019. We recognized sales of $15.8 million and $120.8 million for the 13 and 39 weeks ended September 24, 2019, respectively, related to the amount in deferred revenue as of December 25, 2018. ~~We recognized sales of~~ ~~$12.9 million and $99.3 million for the 13 and 39 weeks ended September 25, 2018, respectively, related to the amount in deferred revenue as of December 26, 2017.~~

~~(6)~~(5) Income Taxes

~~A reconciliation of the statutory federal income tax rate to our effective tax rate for the 13 and 39 weeks ended September 24, 2019 and September 25, 2018 is as follows:~~

13 Weeks Ended


39 Weeks Ended


September 24, 2019

September 25, 2018


September 24, 2019

September 25, 2018

Tax at statutory federal rate

21.0
%
21.0
%

21.0
%
21.0
%

State and local tax, net of federal benefit

3.6

3.8

3.6

3.8

FICA tip tax credit

(9.2)

(8.3)

(9.7)

(9.1)

Work opportunity tax credit

(1.5)

(1.9)

(1.4)

(1.5)

Stock compensation

0.1

(1.4)

(0.2)

(1.4)

Net income attributable to noncontrolling interests

(0.6)

(1.2)

(0.6)

(0.8)

Officers compensation

1.0

2.3

1.1

1.4

Other

0.7

0.8

0.8

1.0

Total

15.1
%
15.1
%

14.6
%
14.4
%

~~Our effective tax rate was 15.1% for both of~~For the 13 week periods ended September 29, 2020 and September 24, 2019, we recognized income tax expense of 9.2% and 15.1%, respectively. For the 39 week periods ended September 29, 2020 and September ~~25, 2018. The Q3~~24, 2019, we recognized income tax benefit of $14.0 million and income tax expense of $23.3 million, respectively. For the 39 week period ended September 29, 2020, due to the impact of tax credits on near break-even pre-tax income, the effective tax rate is not meaningful. For the 13 and 39 week periods ended September 29, 2020, we recognized income tax expense (benefit) using a discrete tax calculation as we were unable to reliably estimate our full year effective income tax rate. This was ~~unchanged compared to Q3 2018~~primarily due to ~~lower non-deductible officers’ compensation offset by lower excess~~the inability to estimate the increased impact of the FICA tip and Work opportunity tax ~~benefits related to our share-based compensation program. For the 39 weeks ended September 24, 2019~~credits on our effective tax rate ~~increased~~as a result of the significant decrease in pre-tax income.

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The effective tax rate decreased for the 13 and 39 week periods ended September 29, 2020 primarily due to ~~14.6% compared to 14.4%~~the impact of FICA tip and Work opportunity tax credits as a higher percentage of pre-tax income. In addition, the impact of these credits was the primary driver of the difference between our statutory and effective tax rates in both periods. Additionally, these credits exceeded our federal tax liability for the 39 ~~weeks~~week period ended September ~~25, 2018. This increase was primarily driven~~29, 2020, but we expect to utilize these credits in the current or future years or by ~~lower excess tax benefits related~~carrying back to our ~~share-based compensation program partially offset by higher FICA tip credits.~~2019 tax year.

~~(7)~~(6)

Commitments and Contingencies

The estimated cost of completing capital project commitments at September ~~24, 2019~~29, 2020 and December ~~25, 2018~~31, 2019 was ~~$166.5~~$110.5 million and ~~$168.3~~$119.0 million, respectively. At the onset of the pandemic, we delayed construction on all restaurants that were not substantially complete. As of September 29, 2020, 18 restaurants had either resumed construction or were approved to resume construction. The estimated cost of completing these 18 restaurants at September 29, 2020 was $46.3 million.

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As of September ~~24, 2019~~29, 2020 and December ~~25, 2018,~~31, 2019, we were contingently liable for ~~$14.1~~$13.3 million and ~~$14.8~~$13.9 million, respectively, for 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 ~~24, 2019~~29, 2020 and December ~~25, 2018~~31, 2019 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 2029
Montgomeryville, Pennsylvania (1)	October 2004	March 2021
Fargo, North Dakota (1)~~(2)~~	February 2006	July 2021
Logan, Utah (1)	January 2009	August 2024
Irving, Texas (3)	December 2013	December ~~2019~~2024
Louisville, Kentucky (3)(4)	December 2013	November 2023

(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)	As discussed in note ~~8, these restaurants are~~7, this restaurant is owned, in part, by our ~~founder or the former president of the company.~~founder.

(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.

(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 39 weeks ended September ~~24, 2019,~~29, 2020, we bought most of our beef from 3 suppliers.~~A change in suppliers 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.

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.

~~(8)~~(7) Related Party Transactions

As of September 29, 2020 and September 24, 2019, we had 96 franchise restaurants and 1 majority-owned company restaurant owned in part by certain officers ~~or the former president of the Company. As of September 25, 2018, we had~~ 10 ~~franchise restaurants owned in part by certain officers~~ of the Company. For both of the 13 week periods ended September ~~24, 2019~~29, 2020 and September ~~25, 2018,~~24, 2019, these franchise entities paid us fees of $~~0.5~~0.3 million. For ~~both of~~ the 39 week periods ended ~~September 24, 2019 and September 25, 2018, these franchise entities paid us fees of~~ ~~$1.6~~ ~~million. As disclosed in note 7, we are contingently liable on leases related to~~ 2 ~~of these franchise restaurants.~~

In addition, for the 13 weeks ended June 26, 2018, our founder made a personal contribution of $1.0 million to cover a portion of the planned expenses incurred as part of the 2018 annual managing partner conference which marked our 25th anniversary. This amount was recorded as general and administrative expense on the unaudited condensed consolidated statement of income and as additional paid-in-capital on the unaudited condensed consolidated statement of stockholders’ equity.

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September 29, 2020 and September 24, 2019, these franchise entities paid us fees of $0.8 million and $1.0 million, respectively. As disclosed in note 6, we are contingently liable on a lease related to 1 of these franchise restaurants.

~~(9)~~(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 units from our equity incentive ~~plans.~~plans, except during loss periods as the effect would be anti-dilutive. Performance stock units are not included in the diluted earnings per share calculation until the performance-based criteria have been met.

For the 13 week periods ended September 29, 2020 and September 24, 2019, ~~and September 25, 2018,~~ there were ~~22,302~~4,570 and 022,302 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 39 week periods ended September 29, 2020 and September 24, 2019, ~~and September 25, 2018,~~ there were ~~5,384~~21,957 and ~~220~~5,384 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.

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 and comprehensive income:



	13 Weeks Ended				39 Weeks Ended				13 Weeks Ended				39 Weeks Ended
	September 24, 2019		September 25, 2018		September 24, 2019		September 25, 2018		September 29, 2020		September 24, 2019		September 29, 2020		September 24, 2019
Net income attributable to Texas Roadhouse, Inc. and subsidiaries	$	36,531	$	29,125	$	131,766	$	127,893	$	29,230	$	36,531	$	11,706	$	131,766
Basic EPS:
Weighted-average common shares outstanding		69,573		71,508		70,896		71,429		69,446		69,573		69,410		70,896
Basic EPS	$	0.53	$	0.41	$	1.86	$	1.79	$	0.42	$	0.53	$	0.17	$	1.86
Diluted EPS:
Weighted-average common shares outstanding		69,573		71,508		70,896		71,429		69,446		69,573		69,410		70,896
Dilutive effect of nonvested stock		366		498		391		477		452		366		420		391
Shares-diluted		69,939		72,006		71,287		71,906		69,898		69,939		69,830		71,287
Diluted EPS	$	0.52	$	0.40	$	1.85	$	1.78	$	0.42	$	0.52	$	0.17	$	1.85

~~(10)~~(9) Fair Value Measurements

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.

There were 0 transfers among levels within the fair value hierarchy during the 13 and 39 weeks ended September ~~24, 2019.~~29, 2020.

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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					Fair Value Measurements
	Level	September 24, 2019		December 25, 2018		Level	September 29, 2020		December 31, 2019
Deferred compensation plan—assets	1	$	41,053	$	31,632	1	$	49,175	$	44,623
Deferred compensation plan—liabilities	1		(41,128)		(31,721)	1		(49,150)		(44,679)

The Second Amended and Restated Deferred Compensation Plan of Texas Roadhouse Management ~~Corp., as~~Corp (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 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 and comprehensive income.

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


	Fair Value Measurements					Total gain (loss)
						13 Weeks Ended		39 Weeks Ended
		September 29,		December 31,		September 29,		September 29,
	Level	2020		2019		2020		2020
Long-lived assets held for use	1	$	—	$	1,684	$	—	$	—
Long-lived assets held for sale	3	$	1,645	$	—	$	(432)	$	(432)
Operating lease right-of-use assets	3	$	—	$	611	$	—	$	(501)
Investments in unconsolidated affiliates	3	$	2,000	$	—	$	—	$	(528)

Long-lived assets held for use include leasehold improvements for one restaurant that was subject to a forced relocation. This restaurant was relocated in February 2020 at which time the contractually negotiated amount for these assets was received.

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 condensed consolidated balance sheets. These assets are valued using a Level 3 input, i.e., information from broker listings discounted for estimated selling costs. This resulted in a loss of $0.4 million which is included in impairment and closure, net in our unaudited condensed consolidated statements of income and comprehensive income for the 13 and 39 weeks ended September 29, 2020.

Operating lease right-of-use assets include the lease related assets for one underperforming store that was permanently closed in April 2020 and one store that was relocated in February 2020. Both of these assets were reduced to a fair value of zero in Q1 2020. This resulted in a loss of $0.5 million which is included in impairment and closure, net in our unaudited condensed consolidated statements of income and comprehensive income for the 39 weeks ended September 29, 2020. At December 31, 2019, operating lease right-of-use assets include the lease related assets for the underperforming store noted above.

Investments in unconsolidated affiliates include a 40% equity interest in a China joint venture 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 statements of income and comprehensive income for the 39 weeks ended September 29, 2020.

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At September ~~24, 2019~~29, 2020 and December ~~25, 2018,~~31, 2019, 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. At September 29, 2020, the fair value of our revolving credit facility approximated its carrying value since it is a variable rate credit facility (Level 2).

(10) 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 various forms of equity awards including options, stock appreciation rights, full value awards, and performance based awards. 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 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 and comprehensive income:



	13 Weeks Ended				39 Weeks Ended
	September 29, 2020		September 24, 2019		September 29, 2020		September 24, 2019
Labor expense	$	2,480	$	2,164	$	7,400	$	6,513
General and administrative expense		5,100		5,979		14,670		18,503
Total share-based compensation expense	$	7,580	$	8,143	$	22,070	$	25,016

We grant PSUs to all of our executives 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 week periods ended September 29, 2020 and September 24, 2019. The total intrinsic value of PSUs vested during the 39 week periods ended September 29, 2020 and September 24, 2019 was $5.4 million and $8.8 million, respectively.

On January 8, 2020, 95,946 shares vested related to the January 2019 PSU grant and were distributed during the 13 weeks ending March 31, 2020. This included 77,000 granted shares and 18,946 incremental shares due to the grant exceeding the initial 100% target. With respect to unvested PSUs, we recognized expense of $0.4 million during the 13 and 39 weeks ended September 29, 2020. At September 29, 2020, with respect to unvested PSUs, there was $0.1 million of unrecognized compensation cost that is expected to be recognized over a weighted-average period of 0.3 years.

(11) Stock Repurchase Program

For the 13 week period ended September 29, 2020, we did not repurchase any shares of our common stock. For the 39 week period ended September 29, 2020, we paid $12.6 million to repurchase 252,409 shares of our common stock. For the 13 week period ended September 24, 2019, we paid $18.9 million to repurchase 358,381 shares of our common stock. For the 39 week period ended September 24, 2019, we paid $131.0 million to repurchase 2,455,058 shares of our common stock. ~~This includes repurchases of $80.7 million under the new~~On March 17, 2020, we suspended all share repurchase ~~program and repurchases of $50.3 million under the previous stock repurchase program. We did not repurchase any shares of common stock during the 13 and 39 week periods ended September 25, 2018.~~ activity. As of September ~~24, 2019,~~29, 2020, we had $~~169.3~~147.8 million remaining under our authorized stock repurchase program.

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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 ~~25, 2018,~~31, 2019, and in Part II, Item 1A in this Form 10-Q, 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, 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.

RECENT DEVELOPMENTS

On March 13, 2020, the novel coronavirus ("COVID-19") pandemic (the "pandemic") was declared a National Public Health Emergency. Shortly after the national emergency declaration, state and local officials began placing restrictions on restaurants, some of which allowed To-Go or curbside service only while others limited capacity in the dining room. By March 31, 2020, the last day of our Q1 2020 fiscal quarter, all of our domestic company and franchise restaurants were under state or local order which only allowed for To-Go or curbside service. Beginning in early May 2020, state and local guidelines began to allow dining rooms to re-open, typically at a limited capacity. By September 29, 2020, the last day of our Q3 2020 fiscal quarter, nearly all of our company-owned restaurants had re-opened their dining rooms under various limited capacity restrictions.

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flows to our normal operating model. We expect our operating results to continue to be impacted until at least such time that state and local restrictions are lifted, and our dining rooms can re-open at full capacity. We cannot predict how long the pandemic will last, how long it will take until all state and local restrictions will be lifted, or if dining rooms will be required to close again in whole or in part in areas severely impacted by the pandemic. In addition, we cannot predict the overall impact on the economy or consumer spending habits. The impact on our operating results as well as the operational and financial measures we have implemented in response to the pandemic have been included throughout this report.

In response to the pandemic, the Company and our Board of Directors implemented the following measures in 2020 to enhance financial flexibility:

Decreased the number of planned new restaurants for the remainder of 2020;

Suspended all quarterly cash dividends occurring after March 27, 2020;

Suspended all share repurchase activity;

Expanded the capacity of the revolving credit facility and increased the borrowings by $240 million; and,

Decreased compensation including voluntary reductions of salary and bonus for the executive and leadership teams to make relief grants available for restaurant employees. Each non-employee member of the Board of Directors also volunteered to forgo their director and committee fees along with any cash retainers effective April 1, 2020 and continuing throughout fiscal 2020.

Effective March 27, 2020, legislation referred to as the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") was passed 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 September 29, 2020, the Company had deferred $30.0 million in payroll taxes which is included in other liabilities in our 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 relief pay for hourly restaurant employees provided by the Company in the first half of 2020 qualified for this tax credit. In our Q3 2020 fiscal quarter, we recorded $4.5 million related to this credit which is included in labor expense in our condensed consolidated statements of income and comprehensive income.

Finally, the CARES Act provided for small business loans that were forgivable if certain criteria were met. The Company did not pursue any of these loans on behalf of company restaurants as we believe we have sufficient alternatives for raising capital if needed.

OVERVIEW

Texas Roadhouse, Inc. is a growing restaurant company operating predominately in the casual dining segment. Our founder, chairman, chief executive officer and president, 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 ~~597~~ 623 restaurants in 49 states and ten foreign countries. As of September ~~24, 2019,~~29, 2020, our ~~597~~623 restaurants included:

●

~~502~~526 "company restaurants," of which ~~482~~506 were wholly-owned and 20 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 ~~502~~526 restaurants we

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owned as of September ~~24, 2019,~~29, 2020, we operated ~~474~~493 as Texas Roadhouse restaurants and operated 2631 as Bubba’s 33 restaurants. In addition, we operated two restaurants outside of the casual dining segment.

●

9597 "franchise restaurants," 24 of which we have a 5.0% to 10.0% ownership interest. The income derived from our minority interests in these franchise restaurants is reported in the line item entitled "Equity income (loss) from investments in unconsolidated affiliates" in our unaudited condensed consolidated statements of income and comprehensive income. Additionally, we provided various management services to these 24 franchise restaurants, as well as six additional franchise restaurants in which we have no ownership interest. All of the franchise restaurants are operated as Texas Roadhouse restaurants. Of the 9597 franchise restaurants, 70 were domestic restaurants and 2527 were international restaurants. As of September 29, 2020, three international restaurants remain temporarily closed due to the pandemic but continue to be included in the above total.

We have contractual arrangements that grant us the right to acquire at pre-determined formulas the remaining equity interests in 18 of the 20 majority-owned company restaurants and 67 of the 70 domestic franchise restaurants.

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

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Presentation of Financial and Operating Data

Throughout this report, the 13 weeks ended September ~~24, 2019~~29, 2020 and September ~~25, 2018~~24, 2019 are referred to as Q3 ~~2019~~2020 and Q3 ~~2018,~~2019, respectively. The 39 weeks ended September ~~24, 2019~~29, 2020 and September ~~25, 2018~~24, 2019 are referred to as ~~2019~~2020 YTD and ~~2018 YTD, respectively.~~2019 YTD. Fiscal year 2020 will be 52 weeks in length, while the quarters for the year will be 13 weeks in length. Fiscal year 2019 ~~will be~~was 53 weeks in length and, as such, the fourth quarter of fiscal 2019 ~~will be~~was 14 weeks in length. ~~Fiscal year 2018 was 52 weeks in length, while the quarters for the year were 13 weeks in length.~~

~~As further noted in note 2 to our unaudited condensed consolidated financial statements, in Q1 2019 we adopted Accounting Standards Codification 842,~~ ~~Leases (~~~~"ASC 842")~~, which required an entity to recognize a right-of-use asset and a lease liability for virtually all leases. We adopted this standard using a modified retrospective approach. As a result, the comparative financial information has not been updated and the required disclosures prior to the date of adoption have not been updated and continue to be reported under the accounting standards in effect for those periods. The adoption of this standard had a significant impact on our consolidated balance sheet. There was no significant impact to our results of operations or cash flows related to the adoption of this standard.

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. In recent years, we have relocated several existing Texas Roadhouse locations once the associated lease expired or as a result of eminent domain which allows us to move to a better site, update them to a current prototypical design, and/or obtain more favorable lease terms. We continue to evaluate these opportunities particularly as it relates to older locations with strong sales. Our ability to expand our restaurant base is influenced by many factors beyond our control and, therefore, we may not be able to achieve our anticipated growth.

In ~~2019~~2020 YTD, ~~we opened 11~~13 company restaurants, including ~~one~~three Bubba’s 33, ~~restaurant, while~~were opened. At the onset of the pandemic, we delayed construction on all restaurants that were not substantially complete. As of September 29, 2020, 18 restaurants had either resumed construction or were approved to resume construction soon. We currently expect as many as eight of these restaurants will open in Q4 2020 and the remaining 10 are expected to open in the first half of 2021. The Company’s development pipeline also includes an additional 15 restaurants that are fully approved or in permitting. To the 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 expenditures accordingly.

In 2020 YTD, our franchise partners opened ~~six restaurants, including five~~one domestic restaurant, one international restaurant and closed two international restaurants. We currently ~~plan to open approximately 22 company restaurants in 2019 including as many as three Bubba’s 33 restaurants. In addition, we anticipate that~~expect our franchise partners will open as many as ~~eight Texas Roadhouse~~five restaurants ~~primarily international,~~ in ~~2019. In Q2 2019, our franchise partners closed two international locations, one of which is expected to re-open in a new location in late 2019 or early~~ 2020.

~~Our average capital investment for the 23 Texas Roadhouse restaurants opened during 2018, including pre-opening expenses and a capitalized rent factor, was $5.2~~ million. We expect our average capital investment for Texas Roadhouse restaurants opening in 2019 to be approximately $5.4 million. The increase in our estimated 2019 average capital investment is due to an increase in building and site improvement costs.

Our average capital investment for the five Bubba’s 33 restaurants opened during 2018, including pre-opening expenses and a capitalized rent factor, was $7.1 million. This includes higher costs at one urban site in New Jersey. Excluding this site, the average capital investment would have been $6.5 million. We expect our average capital investment for Bubba’s 33 restaurants opened in 2019 to be approximately $6.6 million. We continue to evaluate our Bubba’s 33 prototypical asset design.

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

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significantly depending on a number of factors including, but not limited to: the square footage, layout, scope of required site work, type of construction labor, local permitting requirements, our ability to negotiate with landlords, cost of liquor and other licenses and hook-up fees and geographical location.

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We have entered into area development and franchise agreements for the development and operation of Texas Roadhouse restaurants in ~~several~~numerous foreign countries. We currently have signed franchise and/or development agreements in nine countries in the Middle East as well as Taiwan, the Philippines, Mexico, China and South Korea. As of September ~~24, 2019,~~29, 2020, we had 15 restaurants ~~open~~ in five countries in the Middle East, ~~three~~four restaurants open in Taiwan, ~~four~~five in the Philippines and one each in Mexico, China and South Korea for a total of 2527 restaurants in ten foreign countries. Due to the pandemic, three of our international locations were temporarily closed as of September 29, 2020. 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~~and/or a development fee for our grant of development rights in the named countries. We anticipate that the specific business terms of any future franchise agreement for international 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 be franchised and the extent of franchisor-provided services to each franchisee.

Maintaining and/or Improving Restaurant Level Profitability. 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-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 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 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 and parking at certain restaurants. In addition, with the increase in To-Go sales in prior years and the significant increase in the current year due to the pandemic, we are currently testing changes to our building layout to help better accommodate higher To-Go volumes at our restaurants.

In addition, we continue to look for ways through various strategic initiatives to drive awareness of our brands and increase profitability. At the onset of the pandemic, we began selling ready-to-grill steaks and pork 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, based on the success of this program we have developed Texas Roadhouse Butcher Shop. This on-line platform allows for the purchase and delivery of the same hand-cut steaks that are available in our restaurants. This platform launched in our Q4 2020 fiscal quarter.

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. ~~In addition, in Q4 2018 we increased our number of regional market partners, market partners, and regional support teams.~~ Whether we 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~~including the payment of dividends and repurchases of common stock. In 2011, our Board of Directors declared our first quarterly dividend of $0.08 per share of common stock. ~~We have consistently grown our per share dividend each year since that time and our long-term strategy includes increasing our regular quarterly dividend amount over time.~~ On ~~August 15, 2019,~~February 20, 2020, our Board of Directors declared a quarterly dividend of ~~$0.30~~$0.36 per share of common stock ~~representing a 20% increase compared~~which was paid on March 27, 2020. On 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 March 27, 2020. This was done to preserve cash flow due to the ~~quarterly dividend declared in the prior year period.~~pandemic. 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

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condition, applicable covenants under our revolving credit facility, other contractual restrictions and other factors deemed relevant. We are currently evaluating when we will resume the payment of cash dividends.

In 2008, our Board of Directors approved our first stock repurchase program. From inception through September ~~24, 2019,~~29, 2020, we have paid ~~$347.5~~$369.0 million through our authorized stock repurchase programs to repurchase ~~17,299,909~~17,722,505 shares of our common stock at an average price per share of ~~$20.09.~~$20.82. On May 31, 2019, our Board of Directors approved a stock repurchase program under which we may repurchase up to $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 May 22, 2014. All repurchases to date have been made through open market transactions. ~~For 2019~~In 2020 YTD, we paid ~~$131.0~~$12.6 million to repurchase ~~2,455,058~~252,409 shares of our common stock. ~~This includes repurchases of $80.7 million under~~The Company suspended all share repurchase activity on March 17, 2020 in order to preserve cash flow due to the ~~new repurchase program and repurchases of $50.3 million under the previous stock repurchase program.~~pandemic. As of September ~~24, 2019, $169.3~~29, 2020, $147.8 million remains authorized for stock repurchases. We are currently evaluating when we will resume the repurchase of shares.

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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 costs, which are defined below, before the restaurant opens. Typically, new Texas Roadhouse restaurants open with an initial 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 period of operation and increase to a steady level approximately three to six months after opening.

Comparable Restaurant Sales Growth. Comparable restaurant sales growth reflects the change in restaurant sales for 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 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 can affect the per person average check amount.

Average Unit Volume. Average unit volume represents the average quarterly or annual restaurant sales for ~~company~~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 restaurants were open during the reporting period. Store weeks include weeks in which a restaurant is temporarily closed.

Restaurant 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. Restaurant margin is not a measurement determined in accordance with GAAP and should not be considered in isolation, or as an alternative, to income from operations. This non-GAAP measure is not indicative of overall company performance and profitability in that this measure does not accrue directly to the benefit of shareholders due to the nature of the costs 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 as presented may not be comparable to other similarly titled measures of other companies in our

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industry. A reconciliation of income from operations to restaurant margin is included in the Results of 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 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~~third-party gift card sales net of the amortization of gift card breakage income. These amounts are generally amortized over a period consistent with the historic redemption pattern of the associated gift cards.

Franchise Royalties and Fees. Franchise royalties consist of royalties, as defined in our franchise agreements, paid to us by domestic and international franchisees. Domestic and international franchisees also typically pay an initial

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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 royalties and 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-owned restaurants. Approximately half of ~~which approximately half~~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 management 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 fees and general liability insurance. Profit-sharing incentive compensation expenses earned by our restaurant managing partners and market partners are also included in restaurant other operating expenses.

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.

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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. G&A also includes legal fees, settlement charges and share-based compensation expense related to executive officers, support center employees, and market partners, and the realized and unrealized holding gains and losses related to the investments in our deferred compensation plan.

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

Equity Income (Loss) from Unconsolidated Affiliates. As of September ~~24, 2019~~29, 2020 and September ~~25, 2018,~~24, 2019, we owned a 5.0% to 10.0% equity interest in 24 domestic franchise restaurants. Additionally, as of September ~~24, 2019~~29, 2020 and September ~~25, 2018,~~24, 2019, we owned a 40% equity interest in four non-Texas Roadhouse restaurants as part of a joint venture agreement with a casual dining restaurant operator in China. Equity income (loss) from unconsolidated affiliates represents our percentage share of net income earned by these unconsolidated affiliates.

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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 29, 2020 and September 24, 2019 ~~and September 25, 2018~~ included 20 ~~and 19~~ majority-owned restaurants, ~~respectively,~~ all of which were open.

Q3 ~~2019~~2020 Financial Highlights

Total revenue ~~increased $55.9~~decreased $19.3 million, or ~~9.4%~~3.0%, to $631.2 million in Q3 2020 compared to $650.5 million in Q3 2019 ~~compared to $594.6 million in Q3 2018~~ primarily due to ~~an increase~~a decrease in average unit ~~volume~~volumes driven by a decrease in comparable restaurant sales. While store weeks increased 4.6%, comparable restaurant sales ~~growth combined with~~decreased 6.3%. The decrease in average unit volumes is primarily due to our dining rooms operating under various limited capacity restrictions due to the ~~opening of new restaurants. Store weeks and comparable restaurant sales increased 5.0% and 4.4%, respectively, at company restaurants in Q3 2019.~~pandemic.

Restaurant margin dollars ~~increased $12.2~~decreased $16.8 million, or ~~12.7%~~15.6%, to $91.1 million in Q3 2020 compared to $108.0 million in Q3 2019 ~~compared to $95.8 million in Q3 2018~~ and restaurant margin, as a percentage of restaurant and other sales, ~~increased~~decreased to 14.5% in Q3 2020 compared to 16.7% in Q3 ~~2019 compared to 16.2% in Q3 2018.~~2019. The ~~increase~~decrease in restaurant margin, as a percentage of restaurant and other sales, was ~~primarily~~ due to lower ~~cost of~~ sales ~~due to the benefit of higher average check more than offsetting the impact of inflation. This was partially offset by~~along with higher labor, other operating costs ~~due to higher average wage rates~~ and ~~prior staffing initiatives to~~food and beverage costs. In addition, restaurant margin was pressured by the increase ~~sales.~~in To-Go sales which typically result in a less profitable transaction. See further discussion of the specific drivers included below.

Net income ~~increased $7.4~~decreased $7.3 million, or ~~25.4%~~20.0%, to $29.2 million in Q3 2020 compared to $36.5 million in Q3 2019 ~~compared to $29.1 million in Q3 2018~~ primarily due to ~~higher~~lower restaurant margin dollars partially offset by ~~higher depreciation~~lower general and ~~amortization expense and higher income tax expense.~~administrative expenses. Diluted earnings per share ~~increased 29.1%~~decreased 19.9% to $0.42 in Q3 2020 from $0.52 in Q3 ~~2019 from $0.40 in Q3 2018.~~2019.

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Results of Operations



	13 Weeks Ended				39 Weeks Ended				13 Weeks Ended				39 Weeks Ended
	September 24, 2019		September 25, 2018		September 24, 2019		September 25, 2018		September 29, 2020		September 24, 2019		September 29, 2020		September 24, 2019
	$	%	$	%	$	%	$	%	$	%	$	%	$	%	$	%

	(In thousands)				(In thousands)				(In thousands)				(In thousands)
Consolidated Statements of Income:
Revenue:
Restaurant and other sales	645,230	99.2	589,704	99.2	2,014,720	99.2	1,836,179	99.2	626,429	99.2	645,230	99.2	1,747,145	99.3	2,014,720	99.2
Franchise royalties and fees	5,259	0.8	4,891	0.8	16,205	0.8	15,358	0.8	4,756	0.8	5,259	0.8	12,989	0.7	16,205	0.8
Total revenue	650,489	100.0	594,595	100.0	2,030,925	100.0	1,851,537	100.0	631,185	100.0	650,489	100.0	1,760,134	100.0	2,030,925	100.0
Costs and expenses:
(As a percentage of restaurant and other sales)
Restaurant operating costs (excluding depreciation and amortization shown separately below):
Cost of sales	205,158	31.8	191,990	32.6	650,136	32.3	598,824	32.6
Food and beverage									201,308	32.1	205,158	31.8	575,529	32.9	650,136	32.3
Labor	218,342	33.8	197,621	33.5	667,712	33.1	593,298	32.3	217,275	34.7	218,342	33.8	652,976	37.4	667,712	33.1
Rent	12,994	2.0	12,330	2.1	39,173	1.9	36,300	2.0	13,723	2.2	12,994	2.0	40,445	2.3	39,173	1.9
Other operating	100,742	15.6	91,946	15.6	306,355	15.2	279,182	15.2	102,978	16.4	100,742	15.6	296,615	17.0	306,355	15.2
(As a percentage of total revenue)
Pre-opening	4,736	0.7	4,378	0.7	12,801	0.6	13,529	0.7	4,894	0.8	4,736	0.7	14,296	0.8	12,801	0.6
Depreciation and amortization	28,347	4.4	25,843	4.3	84,574	4.2	75,492	4.1	29,364	4.7	28,347	4.4	87,434	5.0	84,574	4.2
Impairment and closure	61	NM	20	NM	394	NM	128	NM
Impairment and closure, net									716	NM	61	NM	871	NM	394	NM
General and administrative	35,225	5.4	35,023	5.9	111,168	5.5	100,202	5.4	25,951	4.1	35,225	5.4	88,520	5.0	111,168	5.5
Total costs and expenses	605,605	93.1	559,151	94.0	1,872,313	92.2	1,696,955	91.7	596,209	94.5	605,605	93.1	1,756,686	99.8	1,872,313	92.2
Income from operations	44,884	6.9	35,444	6.0	158,612	7.8	154,582	8.3	34,976	5.5	44,884	6.9	3,448	0.2	158,612	7.8
Interest income (expense), net	81	0.0	(168)	(0.0)	1,526	0.1	(810)	(0.0)
Equity income from investments in unconsolidated affiliates	(154)	(0.0)	381	0.1	100	0.0	1,150	0.1
Interest expense (income), net									1,502	0.2	(81)	(0.0)	2,601	0.1	(1,526)	(0.1)
Equity income (loss) from investments in unconsolidated affiliates									1	NM	(154)	NM	(597)	NM	100	NM
Income before taxes	44,811	6.9	35,657	6.0	160,238	7.9	154,922	8.4	33,475	5.3	44,811	6.9	250	0.0	160,238	7.9
Provision for income taxes	6,785	1.0	5,398	0.9	23,331	1.1	22,321	1.2
Income tax expense (benefit)									3,072	0.5	6,785	1.0	(13,999)	(0.8)	23,331	1.1
Net income including noncontrolling interests	38,026	5.8	30,259	5.1	136,907	6.7	132,601	7.2	30,403	4.8	38,026	5.8	14,249	0.8	136,907	6.7
Net income attributable to noncontrolling interests	1,495	0.2	1,134	0.2	5,141	0.3	4,708	0.3	1,173	0.2	1,495	0.2	2,543	0.1	5,141	0.3
Net income attributable to Texas Roadhouse, Inc. and subsidiaries	36,531	5.6	29,125	4.9	131,766	6.5	127,893	6.9	29,230	4.6	36,531	5.6	11,706	0.7	131,766	6.5

NM — Not meaningful

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									Reconciliation of Income from Operations to Restaurant Margin
									(in thousands)
									13 Weeks Ended				39 Weeks Ended
		Reconciliation of Income from Operations to Restaurant Margin							September 29, 2020		September 24, 2019		September 29, 2020		September 24, 2019
	13 Weeks Ended				39 Weeks Ended
	September 24, 2019		September 25, 2018		September 24, 2019		September 25, 2018
Income from operations	$	44,884	$	35,444	$	158,612	$	154,582	$	34,976	$	44,884	$	3,448	$	158,612

Less:
Franchise royalties and fees		5,259		4,891		16,205		15,358		4,756		5,259		12,989		16,205

Add:
Pre-opening		4,736		4,378		12,801		13,529		4,894		4,736		14,296		12,801
Depreciation and amortization		28,347		25,843		84,574		75,492		29,364		28,347		87,434		84,574
Impairment and closure		61		20		394		128
Impairment and closure, net										716		61		871		394
General and administrative		35,225		35,023		111,168		100,202		25,951		35,225		88,520		111,168
Restaurant margin	$	107,994	$	95,817	$	351,344	$	328,575	$	91,145	$	107,994	$	181,580	$	351,344

Restaurant margin $/store week	$	16,591	$	15,464	$	18,153	$	17,871	$	13,384	$	16,591	$	8,956	$	18,153
Restaurant margin (as a percentage of restaurant and other sales)		16.7%		16.2%		17.4%		17.9%		14.5%		16.7%		10.4%		17.4%

See above for the definition of restaurant margin.

Restaurant Unit Activity


	Total	Texas Roadhouse	Bubba's 33	Other	Total	Texas Roadhouse	Bubba's 33	Other
Balance at December 25, 2018	582	555	25	2
Balance at December 31, 2019					611	581	28	2
Company openings	11	10	1	—	13	10	3	—
Company closings					(1)	(1)	—	—
Franchise openings - Domestic	1	1	—	—	1	1	—	—
Franchise openings - International	5	5	—	—	1	1	—	—
Franchise closings - International	(2)	(2)	—	—	(2)	(2)	—	—
Balance at September 24, 2019	597	569	26	2
Balance at September 29, 2020					623	590	31	2


	September 24, 2019	September 25, 2018	September 29, 2020	September 24, 2019
Company - Texas Roadhouse	474	453	493	474
Company - Bubba's 33	26	24	31	26
Company - Other	2	2	2	2
Franchise - Texas Roadhouse - U.S.	70	70	70	70
Franchise - Texas Roadhouse - International	25	21	27	25
Total(1)	597	570	623	597

(1)	Includes three international franchise locations that are temporarily closed.

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Q3 ~~2019~~2020 (13 weeks) compared to Q3 ~~2018~~2019 (13 weeks) and ~~2019~~2020 YTD (39 weeks) compared to ~~2018~~2019 YTD (39 weeks)

Restaurant and Other Sales. Restaurant and other sales ~~increased~~decreased by ~~9.4%~~2.9% in Q3 ~~2019~~2020 as compared to Q3 ~~2018~~2019 and by ~~9.7%~~13.3% in ~~2019~~2020 YTD as compared to ~~2018~~2019 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.


	Q3 2019			Q3 2018			2019 YTD			2018 YTD			Q3 2020			Q3 2019			2020 YTD			2019 YTD
Company Restaurants:
Increase in store weeks		5.0	%		5.6	%		5.3	%		6.1	%		4.6	%		5.0	%		4.7	%		5.3	%
Increase in average unit volume		4.0	%		4.8	%		4.2	%		4.7	%
(Decrease) increase in average unit volume														(7.0)	%		4.0	%		(16.0)	%		4.2	%
Other(1)		0.5	%		(0.2)	%		0.4	%		-	%		(0.6)	%		0.5	%		(2.0)	%		0.4	%
Total increase in restaurant sales		9.5	%		10.2	%		9.9	%		10.8	%
Total (decrease) increase in restaurant sales														(3.0)	%		9.5	%		(13.3)	%		9.9	%
Other sales(2)		(0.1)	%		(0.3)	%		(0.2)	%		(0.3)	%		0.1	%		(0.1)	%		0.0	%		(0.2)	%
Total increase in restaurant and other sales		9.4	%		9.9	%		9.7	%		10.5	%
Total (decrease) increase in restaurant and other sales														(2.9)	%		9.4	%		(13.3)	%		9.7	%

Store weeks		6,509			6,196			19,355			18,386			6,810			6,509			20,274			19,355
Comparable restaurant sales growth		4.4	%		5.5	%		4.8	%		5.4	%
Comparable restaurant sales														(6.3)	%		4.4	%		(16.0)	%		4.8	%

Texas Roadhouse restaurants only:
Comparable restaurant sales growth		4.2	%		5.5	%		4.7	%		5.3	%
Comparable restaurant sales														(6.5)	%		4.2	%		(15.8)	%		4.7	%
Average unit volume (in thousands)	$	1,304		$	1,254		$	4,118		$	3,953		$	1,211		$	1,302		$	3,433		$	4,088


Weekly sales by group:
Comparable restaurants (441 and 417 units, respectively)	$	100,578		$	97,137
Average unit volume restaurants (23 units for both periods)(3)	$	95,324		$	85,217
Restaurants less than six months old (10 and 13 units, respectively )	$	107,347		$	96,347
Comparable restaurants (464 and 441 units, respectively)													$	93,659		$	100,578
Average unit volume restaurants (19 and 23 units, respectively)(3)													$	80,556		$	95,324
Restaurants less than six months old (10 units for both periods)													$	93,616		$	107,347

(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)

Other sales, for Q3 2020, represented $3.3 million related to the amortization of third-party gift card fees net of $1.7 million related to the amortization of gift card breakage income. For Q3 2019, other sales represented $3.5 million related to the amortization of ~~third party~~third-party gift card fees net of $1.6 million related to the amortization of gift card breakage income. For ~~Q3 2018,~~2020 YTD, other sales ~~represented $2.7~~represent $12.8 million related to ~~the~~ amortization of third party gift card fees net of ~~$1.5~~$6.4 million related to the amortization of gift card breakage income. For 2019 YTD, other sales represent $15.2 million related to amortization of third party gift card fees net of $7.6 million related to the amortization of gift card breakage income. ~~For 2018 YTD, other sales represent $11.0 million related to the amortization of third party gift card fees net of $6.5 million related to the amortization of gift card breakage income.~~ The ~~increase~~decrease in all amounts is primarily due to ~~continued growth~~a decrease in ~~our third party~~ gift card ~~program.~~redemptions.

(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~~decrease in restaurant sales for ~~all periods presented were~~Q3 2020 and 2020 YTD is primarily attributable to ~~an increase in store weeks from~~ the ~~opening of new restaurants combined with an increase~~decrease in average unit ~~volume~~volumes, driven by ~~comparable restaurant sales growth. Comparable restaurant sales growth for all periods presented was due to an increase~~a decline in ~~our guest traffic counts and an increase in our per person average check as shown in the table below.~~

Q3 2019


Q3 2018


2019 YTD


2018 YTD

Guest traffic counts

1.5
%

4.0
%

2.0
%

4.2
%

Per person average check

2.9
%

1.5
%

2.8
%

1.2
%

Comparable restaurant sales growth

4.4
%

5.5
%

4.8
%

5.4
%

~~Year-over-year sales for newer restaurants included in our average unit volume, but excluded from our~~ comparable restaurant sales, partially offset by an increase in store weeks. In March, we temporarily closed our dining rooms and shifted to a To-Go only model as a result of the ~~impact~~pandemic. Our expanded To-Go model, which includes a curbside and/or drive-up operating model, allows guests to order via phone, through our mobile app, on-line, or once on site. In addition to our regular menu, we also added family value packs which include four entrees with an assortment of ~~positive comparable restaurant sales growth for all periods presented.~~sides. We also added ready-to-grill steaks and pork that allow customers to order their preferred cut of meat to prepare at home. In May, many state and local guidelines began easing restrictions by allowing restaurants to open with various limited capacity restrictions. As the dining rooms were allowed to re-open, we implemented a hybrid operating model with limited capacity dining rooms together with enhanced To-Go, which includes a curbside and/or drive-up operating model, as permitted by local guidelines. With this implementation we

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significantly reduced our offerings around the family value packs and the ready-to-grill steaks and pork. As of September 29, 2020, nearly all of our company-owned restaurants had re-opened their dining rooms under various limited capacity restrictions. Comparable restaurant sales decreased 13.0%, 6.6% and 0.5% for our July, August and September periods, respectively. The improvement per month was primarily driven by the continued easing of the dining room capacity restrictions throughout the country. In addition, we continue to see significant sales growth in our To-Go program which represented 23.3% of total sales at company restaurants in Q3 2020.

~~The increases~~As a result of the significant change in our operating model in the first half of 2020, including the closure of our dining rooms and expansion of our menu to include family value packs and ready-to-grill steaks and pork, we do not believe that our per person average check and guest traffic counts provide a meaningful comparison to the prior year period. As such, these amounts have not been disclosed for ~~the periods presented were primarily driven by menu price increases taken~~2020. In addition, in ~~2019, 2018 and 2017. In Q2 2019,~~late October 2020 we ~~took~~implemented a menu price increase of approximately ~~1.5%. In 2018, we increased menu prices in~~1.0% which was the first quarter and fourth quarter by approximately 0.8% and 1.7%, respectively. In 2017, we increased menu prices in the second quarter and fourth quarter by approximately 0.5% and 0.3%, respectively. These menu price increases wereincrease taken as a result of inflationary pressures, primarily commodities and/or labor. We currently plan to take an additional price increase of approximately 1.9% in November 2019 and may take additional pricing in 2020 if needed.

In 2019, we plan to open approximately 22 company restaurants. While the majority of our restaurant growth in 2019 will be Texas Roadhouse restaurants, we currently expect to open as many as three Bubba’s 33 restaurants. We opened ten Texas Roadhouse restaurants and one Bubba’s 33 restaurant in 2019 YTD. We have begun construction for ~~all of our expected 2019 openings.~~2020.

In 2020 ~~we plan to open at least 30~~YTD, 13 company restaurants, including three Bubba’s 33, were opened. At the onset of the pandemic, we delayed construction on all restaurants that were not substantially complete. As of September 29, 2020, 18 restaurants had either resumed construction or were approved to resume construction soon. We currently expect as many as eight ~~Bubba’s 33 restaurants. We expect~~of these ~~openings~~restaurants will ~~help grow restaurant store weeks by 3.5%~~open in Q4 2020 and the remaining 10 are expected to ~~4.5%, including~~open in the ~~negative impact~~first half of ~~lapping~~2021. The Company’s development pipeline also includes an additional 15 restaurants that are fully approved or in permitting. To the 53extent 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 expenditures accordingly.^rd ~~week from 2019.~~

Franchise Royalties and Fees. Franchise royalties and fees ~~increased~~decreased by ~~$0.4~~$0.5 million, or by ~~7.5%~~9.6%, in Q3 ~~2019~~2020 from Q3 ~~2018~~2019 and ~~increased by $0.8~~decreased $3.2 million, or by ~~5.5%~~19.8%, in ~~2019~~2020 YTD from ~~2018~~2019 YTD. The ~~increases~~decreases in both periods were ~~attributable~~due to ~~an increase in~~lower average unit volume, ~~at domestic restaurants,~~ driven by comparable restaurant sales ~~growth,~~decreases at domestic and international franchise stores partially offset by the opening of new franchise restaurants. ~~These increases were partially offset by a decrease in average unit volume at international restaurants, driven by a decrease in comparable~~Comparable restaurant sales at ~~those locations.~~domestic and international franchise stores decreased 11.2% and 19.5% for Q3 2020 and 2020 YTD, respectively. These comparable sales decreases include the impact of international locations that were temporarily closed during both periods including three as of the end of Q3 2020.

~~Franchise comparable restaurant sales increased 2.4%~~Additionally, in 2020 YTD, we waived royalties of $0.3 million for international franchisees in countries that were significantly impacted by the pandemic. We also made royalty deferral arrangements for many of our domestic and ~~3.0% in Q3 2019~~international franchisees. The majority of these royalty waiver and ~~2019 YTD, respectively, which included an increase in domestic franchise comparable restaurant sales~~deferral arrangements were through the end of ~~3.2% and 4.0% in Q3 2019 and 2019 YTD, respectively. Franchise restaurant count activity is shown in the restaurant activity table above.~~ our Q2 2020 fiscal quarter.

Our existing domestic franchise restaurant partners opened ~~six~~one Texas Roadhouse ~~restaurants~~restaurant in ~~2019 YTD, including five international restaurants.~~2020 YTD. In addition, our existing international franchise restaurant partners opened one restaurant and closed two ~~international~~ restaurants in 2019 YTD, one of which is expected to re-open at a new location in late 2019 or early 2020. We anticipate our franchise partners will open as many as eight Texas Roadhouse restaurants, primarily international, in both 2019 and 2020.2020 YTD.

~~Restaurant Cost of Sales.~~Food and Beverage Costs. ~~Restaurant cost of sales,~~Food and beverage costs, as a percentage of restaurant and other sales, ~~decreased~~increased to 32.1% in Q3 2020 from 31.8% in Q3 2019 ~~from 32.6%~~and increased to 32.9% in ~~Q3 2018 and decreased to~~2020 YTD from 32.3% in 2019 ~~YTD from 32.6% in 2018~~ YTD. ~~These decreases were~~For Q3 2020, the increase was primarily due to ~~the benefit of~~higher commodity inflation and a shift to higher priced but lower gross margin menu ~~pricing actions~~items partially offset by menu pricing actions. For 2020 YTD, the increase was primarily due to higher commodity inflation. Commodity inflation ofwas approximately ~~0.8%~~3.0% and ~~1.5%~~2.3% for Q3 ~~2019~~2020 and ~~2019~~2020 YTD, ~~respectively.~~respectively, primarily driven by higher beef costs.

For 2019, we currently expect commodity cost inflation to be 1.5% to 2.0% with fixed price contracts for approximately 55% of our overall food costs for Q4 2019 and the remainder subject to floating market prices.

For 2020, we currently expect commodity cost inflation to be 1.0% to 2.0% with fixed price contracts for approximately 30% of our overall food costs and the remainder subject to floating market prices.

Restaurant Labor Expenses. Restaurant labor expenses, as a percentage of restaurant and other sales, increased to 34.7% in Q3 2020 compared to 33.8% in Q3 2019 ~~compared to 33.5% in Q3 2018~~ and increased to 37.4% in 2020 YTD from 33.1% in 2019 ~~YTD compared to 32.3%~~YTD. The increase in ~~2018 YTD. These increases were~~both periods was primarily ~~attributable~~due to higher ~~average~~ wage rates, increased benefits provided to our hourly restaurant employees related to the pandemic, higher costs associated with health insurance, and ~~prior staffing initiatives to increase sales partially offset by the benefit from an increase~~a decrease in average unit volume. These increases were partially offset by employee retention payroll tax credits of $4.5 million recognized in Q3 2020 related to relief pay paid to our hourly restaurant employees as well as a decrease in workers’ compensation costs.

~~For 2019, we expect labor dollars per store week growth of 6.0% to 7.0%, including the impact of traffic growth,~~Higher wage rates in both periods were due to ~~ongoing labor market pressures, prior staffing initiatives, increased investment in our people and increases in state-mandated minimum and~~a significant number of employees moving from a tipped wage ~~rates. In 2020, we anticipate our labor costs will continue~~rate to ~~be pressured by mid-single digit inflation~~a non-tipped wage rate due to the ~~ongoing labor market pressures~~significant increase in To-Go sales. In addition, we incurred costs of $1.8 million and ~~increases in state-mandated wage rates discussed above. These increases may or may not be offset by additional menu price adjustments.~~

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$17.2 million in Q3 2020 and 2020 YTD, respectively, for relief pay and enhanced benefits for our hourly employees. The relief pay was based on their level of hours worked prior to the pandemic and indexed for tenure. In addition, we enhanced certain sick pay and accrued vacation benefits and also provided a premium holiday on health insurance. Higher health insurance costs in both periods were due to rate and enrollment increases as well as higher claim costs. In Q3 2020 and 2020 YTD, claim costs increased $1.2 million and $2.5 million, respectively, primarily due to unfavorable claims experience.

The employee retention payroll tax credit of $4.5 million was a credit made available through the CARES Act and related to the relief pay for our hourly employees that was paid during the first half of 2020. The decrease in workers’ compensation expense was due to changes in our claims development history included in our quarterly actuarial reserve estimate that resulted in a favorable adjustment of $1.8 million.

Restaurant Rent Expense. Restaurant rent expense, as a percentage of restaurant and other sales, ~~decreased~~increased to 2.2% in Q3 2020 compared to 2.0% in Q3 2019 ~~compared~~and increased to ~~2.1%~~2.3% in ~~Q3 2018 and decreased~~2020 YTD compared to 1.9% in 2019 ~~YTD compared~~YTD. These increases were due to ~~2.0%~~the decrease in ~~2018 YTD. Higher~~average unit volume along with higher rent expense, as a percentage of restaurant and other sales, at our newer ~~restaurants was more than offset by the benefit from an increase in average unit volume.~~restaurants.

Restaurant Other Operating Expenses. Restaurant other operating expenses, as a percentage of restaurant and other sales, ~~remained unchanged at~~increased to 16.4% in Q3 2020 compared to 15.6% in Q3 2019 and ~~Q3 2018 and~~increased to 17.0% in 2020 YTD compared to 15.2% in 2019 ~~YTD and 2018~~ YTD. ~~For Q3 2019 compared~~These increases were due to ~~Q3 2018, higher marketing and advertising expense, higher credit card expense and higher incentive compensation were offset by lower utilities expense along with the benefit from an increase~~a decrease in average unit ~~volume. For 2019 YTD compared to 2018 YTD,~~volume and higher supplies expense, general liability insurance expense, and ~~higher supplies expense were~~equipment rental fees partially offset by lower ~~utilities~~losses on remodeling projects, advertising, and laundry and linen expense. Higher supplies expense ~~and lower incentive compensation expense along with the benefit from~~was due to an increase in To-Go supplies, personal protective equipment, and other costs to support our current hybrid operating model. The increase in general liability insurance expense was due to changes in our claims development history included in our quarterly actuarial reserve estimate that resulted in an unfavorable adjustment of $1.4 million. This compared to a favorable adjustment of $1.1 million in the prior year period. In addition, due to the significant decrease in average unit ~~volume.~~volumes, expenses that are largely fixed including utilities, property taxes, and other outside services increased as a percentage of restaurant and other sales.

Restaurant Pre-opening Expenses. Pre-opening expenses increased to $4.9 million in Q3 2020 from $4.7 million in Q3 2019 ~~from $4.4~~and increased to $14.3 million in ~~Q3 2018 and decreased~~2020 YTD compared to $12.8 million in 2019 ~~YTD from $13.5 million in 2018~~ YTD. These ~~variances~~increases were primarily due to the timing of restaurant openings as average pre-opening expenses incurred for each restaurant remained relatively unchanged.

~~Overall, we plan to open approximately 22 company restaurants in 2019 compared to 28 company restaurants in 2018.~~ 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 to 4.7% in Q3 2020 compared to 4.4% in Q3 2019 ~~compared~~and increased to ~~4.3%~~5.0% in ~~Q3 2018 and increased~~2020 YTD compared to 4.2% in 2019 ~~YTD compared to 4.1% in 2018~~ YTD. These increases were primarily due to a decrease in average unit volume and higher depreciation at new ~~restaurants~~restaurants.

Impairment and ~~accelerated depreciation on restaurants~~Closure Costs, Net. Impairment and closure costs, net was $0.7 million in Q3 2020 and $0.9 million in 2020 YTD. For Q3 2020, impairment and closure costs, net was primarily related to an impairment of long-lived assets held for sale of $0.4 million. These assets include land and building at a site that ~~are being~~was relocated. ~~These increases were partially offset by an increase in average unit volume.~~For 2020 YTD, impairment and closure costs, net also includes the impairment of the operating lease right-of-use assets for one underperforming restaurant and one restaurant that was relocated as well as a favorable lease settlement for the underperforming restaurant.

General and Administrative Expenses. G&A, as a percentage of total revenue, decreased to 4.1% in Q3 2020 compared to 5.4% in Q3 2019 ~~compared~~and decreased to ~~5.9%~~5.0% in ~~Q3 2018 and increased~~2020 YTD compared to 5.5% in 2019 YTD. These decreases were primarily driven by lower salary and incentive compensation costs, the sale of a legal claim for $3.0 million, and lower travel costs partially offset by a decrease in average unit volume. The decrease in 2020 YTD compared to ~~5.4% in 2018 YTD. For Q3~~ 2019 ~~compared to Q3 2018, the decrease was primarily~~YTD also included lower managing partner conference costs, due to ~~lower incentive compensation costs and lower claims administration costs related to~~the cancellation of the 2020 conference, partially offset by a previously disclosed legal settlement ~~along with the benefit~~ of an increase in average unit volume. For 2019 YTD compared to 2018 YTD, the increase was primarily due to increased marketing expenses due to decreased contributions from company restaurants partially offset by lower claims administration costs related to a previously disclosed legal settlement and an increase in average unit volume.

~~Interest Income (Expense), Net.~~~~Interest income was $0.1 million in Q3 2019 compared to interest expense of $0.2 million in Q3 2018. Interest income was~~ $1.5 million in 2019 YTD compared to interest expense of $0.8 million in 2018 YTD. These increases were primarily driven by earnings on our cash and cash equivalents as well as paying off our outstanding credit facility of $50.0 million in April 2018.

~~Equity Income from Unconsolidated Affiliates.~~ Equity income was a loss of $0.2 million in Q3 2019 compared to income of $0.4 million in Q3 2018. Equity income was $0.1 million in 2019 YTD compared to $1.2 million in 2018 YTD. These decreases were primarily due to a decrease in earnings and a one-time charge we recorded in Q3 2019 related to our foreign joint venture.

~~Income Tax Expense.~~ Our effective tax rate remained unchanged at 15.1% in Q3 2019 compared to Q3 2018 primarily due to lower non-deductible officers’ compensation offset by lower excess tax benefits related to our share-based compensation program. Our effective tax rate increased to 14.6% in 2019 YTD compared to 14.4% in 2018 YTD primarily due to lower excess tax benefits related to our share-based compensation program partially offset by higher FICA tip credits. For both 2019 and 2020, we expect the effective tax rate to be 14.0% to 15.0%.million.

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As a result of the pandemic, our executive and leadership teams voluntarily agreed to reductions of salary and bonus for all or part of the remainder of our fiscal year 2020. Also, each non-employee member of our Board of Directors has volunteered to forgo their director and committee fees and any cash retainers for the remainder of our fiscal year 2020.

Interest Expense (Income), Net.Interest expense was $1.5 million in Q3 2020 compared to interest income of $0.1 million in Q3 2019. Interest expense was $2.6 million in 2020 YTD compared to interest income of $1.5 million in 2019 YTD. The increase in interest expense for both periods is primarily driven by additional borrowings on our credit facility along with reduced earnings on our cash and cash equivalents.

Equity Income (Loss) from Unconsolidated Affiliates. Equity income was $1,000 in Q3 2020 compared to equity loss of $0.2 million in Q3 2019. Equity loss was $0.6 million in 2020 YTD compared to equity income of $0.1 million in 2019 YTD. The increase in Q3 2020 was primarily due to a charge recorded in Q3 2019 related to our foreign joint venture partially offset by decreased profitability from our unconsolidated affiliates due to the pandemic. The decrease in 2020 YTD compared to 2019 YTD was also primarily due to decreased profitability from our unconsolidated affiliates due to the pandemic.

Income Tax (Benefit) Expense. Our effective tax rate was 9.2% in Q3 2020 compared to 15.1% in Q3 2019. The decrease was primarily due to FICA tip and Work opportunity tax credits as a higher percentage of pre-tax income. Our effective tax rate was a benefit of $14.0 million in 2020 YTD compared to expense of $23.3 million in 2019 YTD. The decrease was primarily due to the impact of the FICA tip and Work opportunity tax credits on lower pre-tax income. Additionally, these credits exceeded our federal tax liability in 2020 YTD but we expect to utilize these credits in the current or future years or by carrying back to our 2019 tax year.

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				39 Weeks Ended
	September 24, 2019		September 25, 2018		September 29, 2020		September 24, 2019
Net cash provided by operating activities	$	241,997	$	225,579	$	146,035	$	241,997
Net cash used in investing activities		(144,566)		(110,906)		(115,322)		(144,566)
Net cash used in financing activities		(208,016)		(114,401)
Net (decrease) increase in cash and cash equivalents	$	(110,585)	$	272
Net cash provided by (used in) financing activities						190,044		(208,016)
Net increase (decrease) in cash and cash equivalents					$	220,757	$	(110,585)

Net cash provided by operating activities was $146.0 million in 2020 YTD compared to $242.0 million in 2019 ~~compared to $225.6 million in 2018.~~YTD. This ~~increase~~decrease was primarily due to ~~an increase~~a decrease in net income ~~changes in working capital and non-cash items such as depreciation and amortization~~ and a decrease in deferred income ~~taxes. The increase in cash generated from~~taxes partially offset by changes in working ~~capital was primarily due to an increase in income taxes payable partially offset by a decrease in accounts payable.~~capital.

~~Our~~Typically, 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. As previously discussed, our restaurants temporarily closed their dining rooms due to the pandemic and, as of the end of the quarter, nearly all of our company-owned restaurants had re-opened their dining rooms under various limited capacity restrictions. We expect that our cash provided by operations will continue to be significantly impacted until such time that our dining rooms can re-open at full capacity.

Net cash used in investing activities was $115.3 million in 2020 YTD compared to $144.6 million in 2019 ~~compared to $110.9 million in 2018.~~YTD. The ~~increase~~decrease was primarily due to ~~an increase~~a decrease in capital ~~expenditures.~~expenditures partially offset by the proceeds received related to a sale leaseback transaction at one location. The ~~increase~~decrease in capital expenditures was primarily due to a delay in our development schedule due to the ~~relocation of existing restaurants~~pandemic and decreased expenditures related to the ~~remodeling~~remodel of our ~~support center~~Support Center office.

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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. As of September ~~24, 2019,~~29, 2020, we had developed ~~146~~147 of the ~~502~~526 company restaurants on land in which we own.

The following table presents a summary of capital expenditures (in thousands):


	2019 YTD		2018 YTD		2020 YTD		2019 YTD
New company restaurants	$	68,161	$	64,237	$	55,081	$	68,161
Refurbishment of existing restaurants		41,636		39,280		37,222		41,636
Relocation of existing restaurants		15,315		851		17,381		15,315
Capital expenditures related to Support Center office		19,805		6,538		7,837		19,805
Total capital expenditures	$	144,917	$	110,906	$	117,521	$	144,917

~~Our future capital requirements~~At the onset of the pandemic, we delayed construction on all restaurants that were not substantially complete. As of September 29, 2020, 18 restaurants had either resumed construction or were approved to resume construction soon. We currently expect as many as eight of these restaurants will ~~primarily depend on the number of new restaurants we~~ open ~~the timing of those openings~~in Q4 2020 and the ~~restaurant prototype developed~~remaining 10 are expected to open in ~~a given fiscal year. These requirements will include costs directly related~~the first half of 2021. The Company’s development pipeline also includes an additional 15 restaurants that are fully approved or in permitting. To the extent that state and local guidelines begin to ~~opening new restaurants~~ significantly reduce capacity and/or ~~relocating existing restaurants~~re-close dining rooms, we could pull back on development and ~~may also include costs necessary to ensure that our infrastructure is able to support a larger restaurant base. In 2019, we expect our~~reduce capital expenditures to be approximately $200.0 million, the majority of which will relate to planned restaurant openings, including approximately 22 restaurant openings in 2019 and the refurbishment of existing restaurants. This amount excludes any cash used for franchise acquisitions. We intend to satisfy our capital requirements over the next 12 months with cash on hand, netexpenditure spend accordingly.

Net cash provided by ~~operating~~financing activities ~~and, if needed, funds available under our amended credit facility. For 2019, we anticipate net cash provided by operating activities will exceed capital expenditures, which we plan~~was $190.0 million in 2020 YTD compared to ~~use, along with cash on hand, to pay dividends and repurchase common stock.~~

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~~Net~~ cash used in financing activities ~~was~~of $208.0 million in 2019 ~~compared to $114.4 million in 2018.~~YTD. The increase is primarily due to ~~an increase in share repurchases along with an increase in dividends paid. This was partially offset by the repayment of~~increased borrowings under our revolving credit facility offset by a decrease in ~~Q2 2018.~~share repurchases and dividends paid.

In light of the current uncertainty in the global markets resulting from the pandemic and notwithstanding our healthy cash balance previously described in our Annual Report on Form 10-K for fiscal year ended December 31, 2019, in March 2020 we increased our borrowings by $190.0 million as a precautionary measure in order to bolster our cash position and enhance financial flexibility. On May 11, 2020, we amended the revolving credit facility to increase the amount available under the facility by $82.5 million and drew down $50.0 million of the increased amount. The proceeds from these borrowings, which totaled $240.0 million, are being used for general corporate purposes, including, without limitation, working capital, capital expenditures in the ordinary course of business, or other lawful corporate purposes, all in accordance with and subject to the terms and conditions of the facility. If the pandemic continues to adversely impact our business for a significant period of time, we may need to further increase the credit facility and/or seek other sources of liquidity. There is no guarantee that we can increase the credit facility or that additional liquidity will be readily available or available at favorable terms.

On May 31, 2019, our Board of Directors approved a stock repurchase program under which we may repurchase up to $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 May 22, 2014. All repurchases to date under our stock repurchase 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 ~~2019~~2020 YTD, we paid ~~$131.0~~$12.6 million to repurchase ~~2,455,058~~252,409 shares of our common stock. On March 17, 2020, we suspended all share repurchase activity. As of September 29, 2020, $147.8 million remains authorized for stock repurchases. We are currently evaluating when we will resume the repurchase of shares.

On ~~August 15, 2019,~~February 20, 2020, our Board of Directors authorized the payment of a cash dividend of ~~$0.30~~$0.36 per share of common stock. The payment of this dividend totaling ~~$20.9~~$25.0 million was distributed on ~~September~~March 27, ~~2019~~2020 to shareholders of record at the close of business on ~~September~~March 11, ~~2019. The declared dividend is included as a liability in our unaudited condensed consolidated balance sheet as~~2020. On March 24, 2020, the Board of ~~September 24, 2019.~~Directors voted to suspend the payment of quarterly cash dividends of the Company’s common stock, effective with respect to dividends occurring after March 27, 2020. We are currently evaluating when we will resume the payment of cash dividends.

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We paid distributions of $2.1 million and $4.9 million to equity holders of all 20 majority-owned company restaurants in 2020 YTD and 2019 ~~YTD. In 2018~~ YTD, ~~we paid distributions of $4.5 million to equity holders of all 19 majority-owned company restaurants.~~respectively.

The terms of the ~~Amended Credit Agreement~~amendment require us to pay interest on outstanding borrowings of the original revolving credit facility at ~~the London Interbank Offered Rate~~LIBOR plus a margin of ~~0.875% to 1.875%~~1.50% and to pay a commitment fee of ~~0.125% to 0.30%~~0.25% per year on any unused portion of the revolving credit facility ~~in each case depending on~~through the end of our ~~consolidated net leverage ratio, or the~~Q1 2021 fiscal quarter. The amendment also provides an Alternate Base Rate that may be substituted for LIBOR. As of September 29, 2020, we had $190.0 million outstanding on the original revolving credit facility and $1.8 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.

The terms of the amendment also require us to pay interest on outstanding borrowings of the incremental revolving credit facility at LIBOR, which is ~~the highest~~subject to a floor of 1.0%, plus a margin of 2.25% and to pay a commitment fee of 0.50% per year on any unused portion of the issuing banks’ prime lending rate, the Federal Reserve Bank of New York rate plus 0.50% or the Adjusted Eurodollar Rate for a one month interest period on such day plus 1.0%. In April 2018, we paid off our outstandingincremental revolving credit facility through the maturity date. As of September 29, 2020, we had $50.0 ~~million.~~ million outstanding and $32.5 million of availability on the incremental revolving credit facility. This outstanding amount is included as current maturities of long-term debt on our unaudited condensed consolidated balance sheet.

The weighted-average interest rate for the revolving credit facility as of September ~~24, 2019 and December 25, 2018~~29, 2020 was ~~2.92% and 3.81%, respectively. As of September 24, 2019, we had $191.8 million of availability, net of $8.2 million of outstanding letters of credit.~~1.98%.

The lenders’ obligation to extend credit pursuant to the Amended Credit Agreement depends on us maintaining certain financial ~~covenants, including a minimum consolidated fixed charge coverage ratio of 2.00~~covenants. The amendment 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~~also modified the ~~incurrence of secured indebtedness that in~~financial covenants through the ~~aggregate is equal to or greater than $125.0 million and 20%~~end of our ~~consolidated tangible net worth.~~Q1 2021 fiscal quarter. We were in compliance with all financial covenants as of September ~~24, 2019.~~29, 2020.

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Contractual Obligations

The following table summarizes the amount of payments due under specified contractual obligations as of September ~~24, 2019~~29, 2020 (in thousands):


	Payments Due by Period										Payments Due by Period
			Less than						More than				Less than						More than
	Total		1 year		1 - 3 Years		3 - 5 Years		5 years		Total		1 year		1 - 3 Years		3 - 5 Years		5 years
Long-term debt obligation											$	240,000	$	50,000	$	190,000	$	—	$	—
Obligation under finance lease	$	2,108	$	—	$	—	$	—	$	2,108		2,119		—		—		—		2,119
Interest on finance lease		5,007		278		560		568		3,601
Interest(1)												11,563		4,499		3,178		571		3,315
Operating lease obligations		980,369		51,492		105,912		107,121		715,844		1,039,391		55,273		113,348		112,270		758,500
Capital obligations		166,469		166,469		—		—		—		110,542		110,542		—		—		—
Total contractual obligations(1)	$	1,153,953	$	218,239	$	106,472	$	107,689	$	721,553
Total contractual obligations(2)											$	1,403,615	$	220,314	$	306,526	$	112,841	$	763,934

(1)

Includes interest on our revolving credit facility and interest on a finance lease. Uses interest rates on our revolving credit facility as of September 29, 2020 for our variable rate debt. We assumed $240.0 million remains outstanding on our revolving credit facility through the respective maturity date for all borrowings. We assumed a constant interest rate until maturity on our finance lease.

(2)	Unrecognized tax benefits under ASC 740, Income Taxes, are immaterial and excluded from this amount.

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We have no material minimum purchase commitments with our vendors that extend beyond a year. See ~~notes 4 and 7~~note 6 to the unaudited condensed consolidated financial statements for a discussion of contractual obligations.

Off-Balance Sheet Arrangements

We do not have any material off-balance sheet arrangements.

Guarantees

As of September ~~24, 2019~~29, 2020 and December ~~25, 2018,~~31, 2019, we are contingently liable for ~~$14.1~~$13.3 million and ~~$14.8~~$13.9 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 ~~24, 2019~~29, 2020 and December ~~25, 2018~~31, 2019 as the likelihood of default was deemed to be less than probable and the fair value of the guarantees is not considered significant.


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

(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)	As discussed in note 87 to the unaudited condensed consolidated financial statements, ~~these restaurants are~~this restaurant is owned, in part, by our ~~founder or the former president of the company.~~founder.

(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.

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

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET 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. On May 11, 2020, we amended the revolving credit facility to provide for an incremental revolving credit facility of up to $82.5 million and to modify the financial covenants through the end of our Q1 2021 fiscal quarter. 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 1.50% and to pay a commitment fee of 0.25% per year on any unused portion of the revolving credit facility through the end of our Q1 2021 fiscal quarter. The amendment also provides an Alternate Base Rate that may be substituted for LIBOR. Subsequent to our Q1 2021 fiscal quarter, we are required to pay interest on outstanding borrowings at LIBOR plus a margin of 0.875% to ~~1.875%,~~2.25% and to pay a commitment fee of 0.125% to 0.40% depending on our consolidated net leverage ratio, or the Alternate Base Rate, which is the highest of the issuing banks’ prime lending rate, the Federal Reserve Bank of New York rate plus 0.50% or the Adjusted Eurodollar Rate for a one month interest period on such day plus 1.0%.ratio. As of September ~~24, 2019,~~29, 2020, we had no$190.0 million outstanding on our amended credit agreement. This outstanding amount is included as long-term debt on our condensed consolidated balance sheet.

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The terms of the amendment also require us to pay interest on outstanding borrowings ~~under~~of the incremental revolving credit facility at LIBOR, which is subject to a floor of 1.0%, plus a margin of 2.25% and to pay a commitment fee of 0.50% per year on any unused portion of the incremental revolving credit facility through the maturity date. As of September 29, 2020, we had $50.0 million outstanding and $32.5 million of availability on the incremental revolving credit facility. This outstanding amount is included as current maturities of long-term debt on our condensed consolidated balance sheet.

The weighted-average interest rate for the $240.0 million of combined borrowings on our revolving credit ~~facility.~~facility as of September 29, 2020 was 1.98%. Should interest rates based on these variable rate borrowings increase by one percentage point, our estimated annual interest expense would increase by $2.4 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 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 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.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and 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) and 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 ~~24, 2019.~~29, 2020.

Changes in Internal Control

~~On December 26, 2018, the Company adopted ASC 842,~~ ~~Leases~~. As a result, changes to processes and procedures occurred that affected the Company’s internal control over financial reporting. While we believe the Company’s internal control over financial reporting for affected processes and procedures is effective, we will continue to evaluate and monitor these changes and assess the effectiveness of our internal control over financial reporting as of the end of our fiscal year.

~~Except for the changes noted above, there~~There were no ~~other~~ significant changes in the Company’s internal control over financial reporting that occurred during the period covered by this report 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

ITEM 1. LEGAL PROCEEDINGS

ITEM 1A. RISK FACTORS

Information regarding risk factors appears in our Annual Report on Form 10-K for the year ended December ~~25, 2018,~~31, 2019, 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~~

The following risk ~~factors previously disclosed~~factor is in addition to our ~~Form 10-K~~risk factors for the year ended December ~~25, 2018.~~31, 2019 that could affect our business, financial condition, or results of operations. Careful consideration should be given to the risks described below. If any of the risks and uncertainties described below actually occur, our business, financial condition and results of operations, and the trading price of our common stock could be materially and adversely affected.

The novel coronavirus ("COVID-19") pandemic has disrupted and is expected to continue to disrupt our business, which has and could continue to materially affect our business, financial condition, and results of operations, for an extended period of time.

On March 13, 2020, the COVID-19 pandemic (the "pandemic") was declared a National Public Health Emergency. Shortly after the national emergency declaration, state and local officials began placing restrictions on restaurants, some of which allowed To-Go or curbside service only, while others limited capacity in the dining room. By March 31, 2020, the last day of our Q1 2020 fiscal quarter, all of our domestic company and franchise restaurants were under state or local order which only allowed for To-Go or curbside service. Beginning in early May 2020, state and local guidelines began to allow dining rooms to re-open, typically at a limited capacity. By September 29, 2020, the last day of our Q3 2020 fiscal quarter, nearly all of our company-owned restaurants had re-opened their dining rooms under various limited capacity restrictions.

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The pandemic has also adversely affected our ability to open new restaurants. At the onset of the pandemic, we delayed construction on all restaurants that were not substantially complete. As of September 29, 2020, 18 restaurants had either resumed construction or were approved to resume construction. These changes may have a material adverse effect on our ability to grow our business, particularly if we delay construction on these sites again in future periods.

In March 2020, we borrowed $190.0 million under our Amended Credit Agreement in order to enhance our financial flexibility. The Amended Credit Agreement also provides us the option to increase the credit facility by $200.0 million subject to certain limitations, including approval by the syndicate of lenders, set forth in the Amended Credit Agreement. On May 11, 2020, as a precautionary measure to further enhance financial flexibility, we amended the revolving credit facility to increase the amount available under the facility by $82.5 million and drew down $50.0 million of this amount. If the pandemic continues to adversely impact our business for a significant period of time, we may need to further increase the credit facility and/or seek other sources of liquidity. There is no guarantee that we can increase the credit facility or that additional liquidity will be readily available or available at favorable terms.

Our suppliers could be adversely impacted by the pandemic. If our supplier’s employees are unable to work, whether because of illness, quarantine, limitations on travel or other government restrictions in connection with the pandemic, we could face shortages of food items or other supplies at our restaurants and our operations and sales could be adversely impacted by such interruptions.

The temporary closure of our dining rooms and subsequent re-opening at limited capacity has resulted in decreased staffing levels at our restaurants. We have taken compensation actions to support certain restaurant employees during the pandemic, but those actions may not be enough to compensate them until such time that our dining rooms can re-open at full capacity. Those restaurant employees might seek and find other employment during the interruption, which could have a material adverse effect on our ability to properly staff our restaurants with experienced team members once we resume our normal operations.

Our restaurant operations could be further disrupted if a significant number of restaurants have employees diagnosed with COVID-19 resulting in some or all of the restaurant’s employees being quarantined and our restaurant facilities having to be disinfected. If a significant percentage of our workforce is unable to work, whether because of illness or required quarantine, our operations may be negatively impacted which could have a material adverse effect on our business.

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

On May 31, 2019, our Board of Directors approved a stock repurchase program which authorized us to repurchase up to $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 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 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 ~~2019 YTD,~~the 13 weeks ended September 29, 2020, we did not repurchase any shares of common stock. For the 39 weeks ended September 29, 2020, we paid ~~$131.0~~$12.6 million to repurchase ~~2,455,058~~252,409 shares of our common stock. ~~This includes repurchases~~On March 17, 2020, we suspended all share repurchase activity in order to enhance our financial flexibility as a result of ~~$80.7 million under~~ the ~~new repurchase program and repurchases of $50.3 million under the previous stock repurchase program.~~pandemic. As of September ~~24, 2019, $169.3~~29, 2020, $147.8 million remains authorized for stock repurchases.

~~The following table includes information regarding purchases of our common stock made by us during the 13 weeks ended September 24, 2019 in connection with the repurchase programs described above:~~

Maximum Number

(or Approximate

Total Number of

Dollar Value)

Shares Purchased

of Shares that

Total Number

Average

as Part of Publicly

May Yet Be

of Shares

Price Paid

Announced Plans

Purchased Under the

Period

Purchased

per Share

or Programs

Plans or Programs

June 26 to July 23

232,335

$
53.37

232,335

$
175,777,897

July 24 to August 20

31,000

$
51.46

31,000

$
174,182,657

August 21 to September 24

95,046

$
51.74

95,046

$
169,265,039

Total

358,381

358,381

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

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ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

Exhibit No.		Description

~~10.1~~		Executive Transition and Consulting Agreement between Celia Catlett and Texas Roadhouse, Inc., Texas Roadhouse Holdings LLC and Texas Roadhouse Management Corp. entered into on August 21, 2019 (incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K dated August 21, 2019 (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

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 ~~1, 2019~~6, 2020	By:	/s/ W. KENT TAYLOR
		W. Kent Taylor
		Chairman, Chief Executive Officer and President (principal executive officer)


Date: November ~~1, 2019~~6, 2020	By:	/s/ TONYA R. ROBINSON
		Tonya R. Robinson
		Chief Financial Officer
		(principal financial officer)
		(principal accounting officer)

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	Leases
	Real estate		Equipment		Total
Operating lease right-of-use assets	$	491,687	$	3,732	$	495,419

Current portion of operating lease liabilities		15,502		1,246		16,748
Operating lease liabilities, net of current portion		529,994		2,486		532,480
Total operating lease liabilities	$	545,496	$	3,732	$	549,228


		13 Weeks Ended		39 Weeks Ended
Real estate costs		September 24, 2019		September 24, 2019
Operating lease	$	13,837	$	40,751
Variable lease		378		1,228
Short-term lease		30		90
Total lease costs	$	14,245	$	42,069


Real estate lease liability maturity analysis				Total
2019			$	12,657
2020				51,896
2021				52,708
2022				53,547
2023				53,494
Thereafter				756,067
Total			$	980,369
Less interest				434,873
Total discounted operating lease liabilities			$	545,496

		13 Weeks Ended		39 Weeks Ended
Real estate leases other information		September 24, 2019		September 24, 2019
Cash paid for amounts included in measurement of operating lease liabilities	$	12,268	$	36,384
Right-of-use assets obtained in exchange for new operating lease liabilities	$	14,229	$	41,102
Weighted-average remaining lease term (years)				17.88
Weighted-average discount rate				6.78


	Operating Leases
2019	$	50,030
2020		49,582
2021		49,917
2022		50,237
2023		49,854
Thereafter		677,710
Total	$	927,330


					Maximum Number
					(or Approximate
				Total Number of	Dollar Value)
				Shares Purchased	of Shares that
	Total Number	Average		as Part of Publicly	May Yet Be
	of Shares	Price Paid		Announced Plans	Purchased Under the
Period	Purchased	per Share		or Programs	Plans or Programs
June 26 to July 23	232,335	$	53.37	232,335	$	175,777,897
July 24 to August 20	31,000	$	51.46	31,000	$	174,182,657
August 21 to September 24	95,046	$	51.74	95,046	$	169,265,039

Total	358,381			358,381