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 ended~~June~~ March 30, ~~2020~~2021

☐ 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 ~~69,403,969~~69,742,548 on ~~July 29, 2020.~~April 28, 2021.

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 — ~~June~~March 30, ~~2020~~2021 and December ~~31, 2019~~29, 2020		3
Condensed Consolidated Statements of Income ~~(Loss)~~ and Comprehensive Income ~~(Loss)~~ — For the 13 ~~and 26~~ Weeks Ended ~~June~~March 30, ~~2020~~2021 and ~~June 25, 2019~~March 31, 2020		4
Condensed Consolidated Statement of Stockholders’ Equity — For the 13 ~~and 26~~ Weeks Ended ~~June~~March 30, ~~2020~~2021 and ~~June 25, 2019~~March 31, 2020		5
Condensed Consolidated Statements of Cash Flows — For the 2613 Weeks Ended ~~June~~March 30, ~~2020~~2021 and ~~June 25, 2019~~March 31, 2020		76
Notes to Condensed Consolidated Financial Statements		87
Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations		1615
Item 3 — Quantitative and Qualitative Disclosures About Market Risk		3128
Item 4 — Controls and Procedures		3229

PART II. OTHER INFORMATION

Item 1 — Legal Proceedings		3330
Item 1A — Risk Factors		3330
Item 2 — Unregistered Sales of Equity Securities and Use of Proceeds		3430
Item 3 — Defaults Upon Senior Securities		3430
Item 4 — Mine Safety Disclosures		3530
Item 5 — Other Information		3530
Item 6 — Exhibits		3531

Signatures		3632

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)


	June 30, 2020		December 31, 2019		March 30, 2021		December 29, 2020
Assets
Current assets:
Cash and cash equivalents	$	282,493	$	107,879	$	495,646	$	363,155
Receivables, net of allowance for doubtful accounts of $28 at June 30, 2020 and $12 at December 31, 2019		30,285		99,305
Receivables, net of allowance for doubtful accounts of $20 at March 30, 2021 and $11 at December 29, 2020						37,742		98,418
Inventories, net		23,102		20,267		23,362		22,364
Prepaid income taxes		9,306		2,015		—		4,502
Prepaid expenses		14,191		18,433
Prepaid expenses and other current assets						20,868		22,212
Total current assets		359,377		247,899		577,618		510,651
Property and equipment, net of accumulated depreciation of $723,320 at June 30, 2020 and $678,988 at December 31, 2019		1,072,173		1,056,563
Property and equipment, net of accumulated depreciation of $788,580 at March 30, 2021 and $763,700 at December 29, 2020						1,093,790		1,088,623
Operating lease right-of-use assets, net		517,260		499,801		537,826		530,625
Goodwill		124,748		124,748		127,001		127,001
Intangible assets, net of accumulated amortization of $14,020 at June 30, 2020 and $14,141 at December 31, 2019		993		1,234
Intangible assets, net of accumulated amortization of $14,541 at March 30, 2021 and $14,341 at December 29, 2020						2,071		2,271
Other assets		55,933		53,320		68,422		65,990
Total assets	$	2,130,484	$	1,983,565	$	2,406,728	$	2,325,161
Liabilities and Stockholders’ Equity
Current liabilities:
Current portion of operating lease liabilities	$	17,913	$	17,263	$	19,890	$	19,271
Current maturities of long-term debt		50,000		—		50,000		50,000
Accounts payable		63,363		61,653		86,131		66,977
Deferred revenue-gift cards		156,362		209,258		182,358		232,812
Accrued wages		33,889		39,699
Accrued wages and payroll taxes						69,878		51,982
Income taxes payable		767		—		9,412		2,859
Accrued taxes and licenses		24,334		30,433		32,310		24,751
Other accrued liabilities		55,614		58,914		58,185		57,666
Total current liabilities		402,242		417,220		508,164		506,318
Operating lease liabilities, net of current portion		557,543		538,710		580,005		572,171
Long-term debt		190,000		—		190,000		190,000
Restricted stock and other deposits		8,339		8,249		7,516		7,481
Deferred tax liabilities, net		11,760		22,695		3,823		2,802
Other liabilities		77,881		65,522		107,202		103,338
Total liabilities		1,247,765		1,052,396		1,396,710		1,382,110
Texas Roadhouse, Inc. and subsidiaries stockholders’ equity:
Preferred stock ($0.001 par value, 1,000,000 shares authorized; 0 shares issued or outstanding)		—		—		—		—
Common stock ($0.001 par value, 100,000,000 shares authorized, 69,403,969 and 69,400,252 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively)		69		69
Common stock ($0.001 par value, 100,000,000 shares authorized, 69,742,520 and 69,561,861 shares issued and outstanding at March 30, 2021 and December 29, 2020, respectively)						70		70
Additional paid-in-capital		135,068		140,501		147,604		145,626
Retained earnings		733,136		775,649		846,065		781,915
Accumulated other comprehensive loss		(252)		(225)		(118)		(106)
Total Texas Roadhouse, Inc. and subsidiaries stockholders’ equity		868,021		915,994		993,621		927,505
Noncontrolling interests		14,698		15,175		16,397		15,546
Total equity		882,719		931,169		1,010,018		943,051
Total liabilities and equity	$	2,130,484	$	1,983,565	$	2,406,728	$	2,325,161

See accompanying notes to condensed consolidated financial statements.

Table of Contents

Texas Roadhouse, Inc. and Subsidiaries

Condensed Consolidated Statements of Income ~~(Loss)~~ and Comprehensive Income ~~(Loss)~~

(in thousands, except per share data)

(unaudited)



	13 Weeks Ended					26 Weeks Ended				13 Weeks Ended
	June 30, 2020			June 25, 2019		June 30, 2020		June 25, 2019		March 30, 2021		March 31, 2020
Revenue:
Restaurant and other sales	$	473,090		$	684,373	$	1,120,716	$	1,369,490	$	794,923	$	647,626
Franchise royalties and fees		3,335			5,455		8,233		10,946		5,706		4,898
Total revenue		476,425			689,828		1,128,949		1,380,436		800,629		652,524
Costs and expenses:
Restaurant operating costs (excluding depreciation and amortization shown separately below):
Cost of sales		164,041			221,266		374,221		444,978
Food and beverage											251,482		210,180
Labor		194,622			225,490		435,701		449,370		258,036		241,079
Rent		13,251			13,051		26,722		26,179		14,452		13,471
Other operating		89,348			103,811		193,637		205,613		123,379		104,289
Pre-opening		4,290			4,197		9,402		8,065		4,268		5,112
Depreciation and amortization		29,016			28,454		58,070		56,227		30,869		29,054
Impairment and closure, net		(440)			316		155		333		504		595
General and administrative		29,615			39,960		62,569		75,943		36,712		32,954
Total costs and expenses		523,743	��		636,545		1,160,477		1,266,708		719,702		636,734
(Loss) income from operations		(47,318)			53,283		(31,528)		113,728
Interest expense (income), net		1,030			(691)		1,099		(1,445)
Equity (loss) income from investments in unconsolidated affiliates		(90)			141		(598)		254
(Loss) income before taxes	$	(48,438)		$	54,115	$	(33,225)	$	115,427
Income tax (benefit) expense		(15,132)			7,427		(17,071)		16,546
Net (loss) income including noncontrolling interests		(33,306)			46,688	$	(16,154)	$	98,881
Income from operations											80,927		15,790
Interest expense, net											1,460		69
Equity loss from investments in unconsolidated affiliates											(217)		(508)
Income before taxes										$	79,250	$	15,213
Income tax expense (benefit)											12,820		(1,939)
Net income including noncontrolling interests											66,430		17,152
Less: Net income attributable to noncontrolling interests		247			1,843		1,370		3,646		2,280		1,123
Net (loss) income attributable to Texas Roadhouse, Inc. and subsidiaries	$	(33,553)		$	44,845	$	(17,524)	$	95,235
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustment, net of tax of $(4), $28, $9 and ($5), respectively		10			(82)		(27)		15
Total comprehensive (loss) income	$	(33,543)		$	44,763	$	(17,551)	$	95,250
Net (loss) income per common share attributable to Texas Roadhouse, Inc. and subsidiaries:
Net income attributable to Texas Roadhouse, Inc. and subsidiaries										$	64,150	$	16,029
Other comprehensive loss, net of tax:
Foreign currency translation adjustment, net of tax of $4 and $13, respectively											(12)		(37)
Total comprehensive income										$	64,138	$	15,992
Net income per common share attributable to Texas Roadhouse, Inc. and subsidiaries:
Basic	$	(0.48)		$	0.63	$	(0.25)	$	1.33	$	0.92	$	0.23
Diluted	$	(0.48)		$	0.63	$	(0.25)	$	1.32	$	0.91	$	0.23
Weighted average shares outstanding:
Basic		69,361			71,362		69,391		71,558		69,637		69,422
Diluted		69,361			71,733		69,391		71,961		70,137		69,852
Cash dividends declared per share	$	—		$	0.30	$	0.36	$	0.60	$	—	$	0.36

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 June 30, 2020










Accumulated

Total Texas




Additional

Other

Roadhouse, Inc.

Par

Paid-in-

Retained

Comprehensive

and

Noncontrolling

Shares

Value

Capital

Earnings

Loss

Subsidiaries

Interests

Total

Balance, March 31, 2020

69,310,804

$
69

$
129,796

$
766,689

$
(262)

$
896,292

$
14,451

$
910,743

Net (loss) income

—

—

—

(33,553)

—

(33,553)

247

(33,306)

Other comprehensive income, net of tax

—

—

—

—

10

10

—

10

Shares issued under share-based compensation plans including tax effects

136,685

—

—

—

—

—

—

—

Indirect repurchase of shares for minimum tax withholdings

(43,520)

—

(1,971)

—

—

(1,971)

—

(1,971)

Share-based compensation

—

—

7,243

—

—

7,243

—

7,243

Balance, June 30, 2020

69,403,969

$
69

$
135,068

$
733,136

$
(252)

$
868,021

$
14,698

$
882,719

For the 13 Weeks Ended June 25, 2019










Accumulated

Total Texas




Additional

Other

Roadhouse, Inc.

Par

Paid-in-

Retained

Comprehensive

and

Noncontrolling

Shares

Value

Capital

Earnings

Loss

Subsidiaries

Interests

Total

Balance, March 26, 2019

71,827,836

$
72

$
259,050

$
714,502

$
(131)

$
973,493

$
14,654

$
988,147

Net income

—

—

—

44,845

—

44,845

1,843

46,688

Other comprehensive loss, net of tax

—

—

—

—

(82)

(82)

—

(82)

Distributions to noncontrolling interest holders

—

—

—

—

—

—

(1,731)

(1,731)

Dividends declared ($0.30 per share)

—

—

—

(21,224)

—

(21,224)

—

(21,224)

Shares issued under share-based compensation plans including tax effects

103,289

—

—

—

—

—

—

—

Indirect repurchase of shares for minimum tax withholdings

(32,898)

—

(1,869)

—

—

(1,869)

—

(1,869)

Repurchase of shares of common stock

(2,096,677)

(2)

(112,050)

—

—

(112,052)

(112,052)

Share-based compensation

—

—

7,741

—

—

7,741

—

7,741

Balance, June 25, 2019

69,801,550

$
70

$
152,872

$
738,123

$
(213)

$
890,852

$
14,766

$
905,618

~~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 March 30, 2021
																							Accumulated		Total Texas
																			Additional				Other		Roadhouse, Inc.
																	Par		Paid-in-		Retained		Comprehensive		and		Noncontrolling
																Shares	Value		Capital		Earnings		Loss		Subsidiaries		Interests		Total
Balance, December 29, 2020																69,561,861	$	70	$	145,626	$	781,915	$	(106)	$	927,505	$	15,546	$	943,051
Net income																—		—		—		64,150		—		64,150		2,280		66,430
Other comprehensive loss, net of tax																—		—		—		—		(12)		(12)		—		(12)
Distributions to noncontrolling interest holders																—		—		—		—		—		—		(1,429)		(1,429)
Shares issued under share-based compensation plans including tax effects																269,918		—		—		—		—		—		—		—
Indirect repurchase of shares for minimum tax withholdings																(89,259)		—		(7,930)		—		—		(7,930)		—		(7,930)
Share-based compensation																—		—		9,908		—		—		9,908		—		9,908
Balance, March 30, 2021																69,742,520	$	70	$	147,604	$	846,065	$	(118)	$	993,621	$	16,397	$	1,010,018


	For the 26 Weeks Ended June 30, 2020															For the 13 Weeks Ended March 31, 2020
								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 31, 2019	69,400,252	$	69	$	140,501	$	775,649	$	(225)	$	915,994	$	15,175	$	931,169	69,400,252	$	69	$	140,501	$	775,649	$	(225)	$	915,994	$	15,175	$	931,169
Net (loss) income	—		—		—		(17,524)		—		(17,524)		1,370		(16,154)
Net income																—		—		—		16,029		—		16,029		1,123		17,152
Other comprehensive loss, net of tax	—		—		—		—		(27)		(27)		—		(27)	—		—		—		—		(37)		(37)		—		(37)
Distributions to noncontrolling interest holders	—		—		—		—		—		—		(1,847)		(1,847)	—		—		—		—		—		—		(1,847)		(1,847)
Dividends declared ($0.36 per share)	—		—		—		(24,989)		—		(24,989)		—		(24,989)	—		—		—		(24,989)		—		(24,989)		—		(24,989)
Shares issued under share-based compensation plans including tax effects	388,477		—		—		—		—		—		—		—	251,792		—		—		—		—		—		—		—
Indirect repurchase of shares for minimum tax withholdings	(132,351)		—		(7,302)		—		—		(7,302)		—		(7,302)	(88,831)		—		(5,331)		—		—		(5,331)		—		(5,331)
Repurchase of shares of common stock	(252,409)		—		(12,621)		—		—		(12,621)		—		(12,621)	(252,409)		—		(12,621)		—		—		(12,621)				(12,621)
Share-based compensation	—		—		14,490		—		—		14,490		—		14,490	—		—		7,247		—		—		7,247		—		7,247
Balance, June 30, 2020	69,403,969	$	69	$	135,068	$	733,136	$	(252)	$	868,021	$	14,698	$	882,719


	For the 26 Weeks Ended June 25, 2019
								Accumulated		Total Texas
				Additional				Other		Roadhouse, Inc.
		Par		Paid-in-		Retained		Comprehensive		and		Noncontrolling
	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
Net income	—		—		—		95,235		—		95,235		3,646		98,881
Other comprehensive income, net of tax	—		—		—		—		15		15		—		15
Distributions to noncontrolling interest holders	—		—		—		—		—		—		(3,346)		(3,346)
Acquisition of noncontrolling interest holders	—		—		(70)		—		—		(70)		(673)		(743)
Dividends declared ($0.60 per share)	—		—		—		(42,771)		—		(42,771)		—		(42,771)
Shares issued under share-based compensation plans including tax effects	433,917		—		—		—		—		—		—		—
Indirect repurchase of shares for minimum tax withholdings	(153,200)		—		(9,269)		—		—		(9,269)		—		(9,269)
Repurchase of shares of common stock	(2,096,677)		(2)		(112,050)		—		—		(112,052)		—		(112,052)
Cumulative effect of adoption of ASC 842, Leases, net of tax	—		—		—		(2,678)		—		(2,678)		—		(2,678)
Share-based compensation	—		—		16,873		—		—		16,873		—		16,873
Balance, June 25, 2019	69,801,550	$	70	$	152,872	$	738,123	$	(213)	$	890,852	$	14,766	$	905,618

Balance, March 31, 2020																69,310,804	$	69	$	129,796	$	766,689	$	(262)	$	896,292	$	14,451	$	910,743

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

Table of Contents

Texas Roadhouse, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)


	26 Weeks Ended				13 Weeks Ended
	June 30, 2020		June 25, 2019		March 30, 2021		March 31, 2020
Cash flows from operating activities:
Net (loss) income including noncontrolling interests	$	(16,154)	$	98,881
Net income including noncontrolling interests					$	66,430	$	17,152
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		58,070		56,227		30,869		29,054
Deferred income taxes		(10,926)		(2,734)		1,025		433
Loss on disposition of assets		2,165		2,322		324		1,446
Impairment and closure costs		89		312		494		624
Equity loss (income) from investments in unconsolidated affiliates		598		(254)
Equity loss from investments in unconsolidated affiliates						217		508
Distributions of income received from investments in unconsolidated affiliates		184		346		122		184
Provision for doubtful accounts		16		(19)		9		60
Share-based compensation expense		14,490		16,873		9,908		7,247
Changes in operating working capital:
Receivables		69,004		53,894		60,791		74,504
Inventories		(2,835)		920		(998)		(54)
Prepaid expenses		4,242		1,215
Prepaid expenses and other current assets						874		(1,249)
Other assets		(2,790)		(7,653)		(2,786)		7,573
Accounts payable		(91)		(299)		19,937		(22,214)
Deferred revenue—gift cards		(52,896)		(72,685)		(50,454)		(56,997)
Accrued wages		(5,810)		1,733
Accrued wages and payroll taxes						17,896		(14,087)
Prepaid income taxes and income taxes payable		(6,524)		12,152		11,055		(2,414)
Accrued taxes and licenses		(6,099)		(381)		7,559		(10,995)
Other accrued liabilities		2,280		13,749		(643)		(3,023)
Operating lease right-of-use assets and lease liabilities		2,257		2,799		1,520		1,365
Other liabilities		12,575		9,618		3,864		(7,401)
Net cash provided by operating activities		61,845		187,016		178,013		21,716
Cash flows from investing activities:
Capital expenditures—property and equipment		(81,833)		(87,782)		(38,666)		(46,672)
Proceeds from sale leaseback transaction		2,167		—
Proceeds from sale leaseback transactions						2,192		2,167
Net cash used in investing activities		(79,666)		(87,782)		(36,474)		(44,505)
Cash flows from financing activities:
Proceeds from revolving credit facility		240,000		—		—		190,000
Debt issuance costs		(641)		—
Distributions to noncontrolling interest holders		(1,847)		(3,346)		(1,429)		(1,847)
Acquisition of noncontrolling interest		—		(743)
Proceeds from restricted stock and other deposits, net		(165)		340		311		304
Indirect repurchase of shares for minimum tax withholdings		(7,302)		(9,269)		(7,930)		(5,331)
Repurchase of shares of common stock		(12,621)		(112,050)		—		(12,621)
Dividends paid to shareholders		(24,989)		(39,452)		—		(24,989)
Net cash provided by (used in) financing activities		192,435		(164,520)
Net increase (decrease) in cash and cash equivalents		174,614		(65,286)
Net cash (used in) provided by financing activities						(9,048)		145,516
Net increase in cash and cash equivalents						132,491		122,727
Cash and cash equivalents—beginning of period		107,879		210,125		363,155		107,879
Cash and cash equivalents—end of period	$	282,493	$	144,839	$	495,646	$	230,606
Supplemental disclosures of cash flow information:
Interest paid, net of amounts capitalized	$	1,223	$	367	$	1,195	$	186
Income taxes paid	$	388	$	7,128	$	740	$	51
Capital expenditures included in current liabilities	$	11,516	$	15,267	$	14,519	$	13,545

See accompanying notes to condensed consolidated financial statements.

Table of Contents

Texas Roadhouse, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

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

(unaudited)

(1) Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include the accounts of Texas Roadhouse, Inc. ("TRI"), our wholly-owned subsidiaries and subsidiaries in which we have a controlling interest (collectively the "Company," "we," "our" and/or "us") as of ~~June~~March 30, ~~2020~~2021 and December ~~31, 2019~~29, 2020 and for the 13 ~~and 26~~ weeks ended ~~June~~March 30, ~~2020~~2021 and ~~June 25, 2019.~~March 31, 2020.

As of ~~June~~March 30, ~~2020,~~2021, we owned and operated ~~521~~540 restaurants and franchised an additional 9697 restaurants in 49 states and 10 foreign countries. Of the ~~521~~540 company restaurants that were operating at ~~June~~March 30, ~~2020, 501~~2021, 520 were wholly-owned and 20 were majority-owned. Of the 9697 franchise restaurants, 7069 were domestic restaurants and 2628 were international restaurants. Included within these restaurant totals are ~~1 company restaurant and 5~~4 international franchise restaurants that ~~remain~~have been 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 ~~June 25, 2019,~~March 31, 2020, we owned and operated ~~498~~519 restaurants and franchised an additional 9398 restaurants in 49 states and 10 foreign countries. Of the ~~498~~519 company restaurants that were operating at ~~June 25, 2019, 478~~March 31, 2020, 499 were wholly-owned and 20 were majority-owned. Of the 9398 franchise restaurants, 70 were domestic restaurants and 2328 were international restaurants. As of March 31, 2020, 1 company restaurant and 22 international restaurants were temporarily closed due to the pandemic.

As of ~~June~~March 30, ~~2020~~2021 and ~~June 25, 2019,~~March 31, 2020, we owned a 5.0% to 10.0% equity interest in 24 domestic franchise restaurants. Additionally, as of ~~June~~March 30, ~~2020~~2021 and ~~June 25, 2019,~~March 31, 2020, 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 ~~(loss)~~ and comprehensive income ~~(loss)~~ 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 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 (the "SEC"). Operating results for the 13 ~~and 26~~ weeks ended ~~June~~March 30, ~~2020~~2021 are not necessarily indicative of the results that may be expected for the year ending December ~~29, 2020.~~28, 2021. The unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December ~~31, 2019.~~

29, 2020.

Table of Contents

Risks and Uncertainties

The Company iscontinues to be subject to risks and uncertainties as a result of the pandemic. ~~On March 13, 2020, the COVID-19 pandemic was declared a National Public Health Emergency. Shortly after the national emergency declaration,~~These include state and local ~~officials began placing~~ restrictions on restaurants, some of which have limited capacity in the dining rooms while others have allowed To-Go or curbside service ~~only while others limited capacity in the dining room. By~~only. As of March ~~31, 2020, the last day of our Q1 2020 fiscal quarter,~~30, 2021, all of our domestic company and franchise ~~restaurants~~locations had re-opened their dining rooms under various limited capacity restrictions. As of March 31, 2020, all of our domestic company and franchise locations 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 June 30, 2020, the last day of our Q2 2020 fiscal quarter,~~ ~~499 of our 521~~ company-owned restaurants had re-opened their dining rooms under various limited capacity restrictions. Our remaining restaurants, with the exception of one that is temporarily closed, are limited to outdoor dining and/or To-Go or curbside service only.

WeAs a result of these capacity restrictions, we continue to ~~monitor state and local plans as they move along their phased approach to re-open their economies. We have developed a~~utilize our 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-Go. We continue to ~~our building to better accommodate the~~see increased ~~To-Go~~ sales and the expansion of outdoor seating areas where allowed. We also 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 re-opening 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 many of our dining rooms have re-opened, the capacity restrictions severely limit the number of guests we can serve. In addition, while we have seen significant sales growth in our To-Go program, even ~~in those stores~~ with dining rooms re-opened, ~~we currently do not expect these sales will generate a similar profit margin and cash flows~~which has offset the decrease in dining room traffic due 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.the limited capacity restrictions. 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~~the extent to which our dining rooms will ~~be required~~have to close again, or if the increased sales in ~~areas severely impacted by the pandemic. In addition, we cannot predict the overall impact on the economy or consumer spending habits.~~our To-Go program will continue. The extent of this ~~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 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 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.

~~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

~~Table of Contents~~

~~unit’s carrying value exceeds its fair value, not to exceed the carrying amount of the goodwill.~~ ~~We adopted ASU 2017-04 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.~~

~~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.~~2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which ~~removes~~removed certain exceptions related to the approach for intraperiod tax allocations, the calculation of income taxes in interim periods, and the recognition of deferred taxes for investments. This guidance also ~~simplifies~~simplified aspects of accounting for recognizing deferred taxes for taxable goodwill. ~~ASU 2019-12 is effective for fiscal years beginning after December 15, 2020 (our 2021 fiscal year) and for interim periods within those years, with early~~The adoption ~~permitted. We are currently assessing the impact~~ of this ~~new~~ standard did not have a significant impact on our condensed consolidated financial statements.

Reference Rate Reform

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

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

(3) Long-term Debt

On August 7, 2017, we entered into ~~the Amended and Restated Credit Agreement (the "Amended Credit Agreement")~~an 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~~is 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, including approval by the syndicate of lenders. On May 11, 2020, we amended the revolving credit facility 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.

Table of Contents

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 2.25% and to pay a commitment fee of 0.125% to 0.40% depending on our consolidated net leverage ratio. As of ~~June~~March 30, ~~2020,~~2021, 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.

~~Table of Contents~~

The terms of the amendment also require us to pay interest on outstanding borrowings 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 ~~June~~March 30, ~~2020,~~2021, 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 unaudited condensed consolidated balance sheet.

The weighted-average interest rate for the $240.0 million of combined borrowings on our revolving credit facility as of ~~June~~March 30, ~~2020~~2021 was ~~2.01%~~1.95%.

The lenders’ obligation to extend credit pursuant to the ~~Amended Credit Agreement~~revolving credit facility depends on us maintaining certain financial covenants. The amendment to the revolving credit facility also modified the financial covenants through the end of our Q1 2021 fiscal quarter. We were in compliance with all financial covenants as of ~~June~~March 30, ~~2020.~~2021.

As further discussed in note 12, subsequent to the end of the quarter, we further amended the revolving credit facility. The amendment increased our borrowing capacity and extended the maturity date of the revolving credit facility.

(4) Revenue

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


	13 weeks ended				26 weeks ended				13 weeks ended
	June 30, 2020		June 25, 2019		June 30, 2020		June 25, 2019		March 30, 2021		March 31, 2020
Restaurant and other sales	$	473,090	$	684,373	$	1,120,716	$	1,369,490	$	794,923	$	647,626
Franchise royalties		2,766		4,814		7,054		9,671		4,973		4,287
Franchise fees		569		641		1,179		1,275		733		611
Total revenue	$	476,425	$	689,828	$	1,128,949	$	1,380,436	$	800,629	$	652,524

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 retailers. When the gift cards are redeemed, we recognize restaurant sales and reduce deferred revenue. We amortize breakage and third-party fees consistent with the historic redemption pattern of the associated gift card or on actual redemptions in periods where redemptions do not align with historic redemption patterns. We recognize these amounts as a component of other sales. As of ~~June~~March 30, ~~2020~~2021 and December ~~31, 2019,~~29, 2020, our deferred revenue balance related to gift cards was $~~156.4~~182.4 million and ~~$209.3~~$232.8 million, respectively. We recognized sales of $~~12.6 million and $86.1~~71.4 million for the 13 ~~and 26~~ weeks ended ~~June~~March 30, 2021 related to the amount in deferred revenue as of December 29, 2020. We recognized sales of $73.5 million for the 13 weeks ended March 31, 2020 ~~respectively,~~ related to the amount in deferred revenue as of December 31, 2019. ~~We recognized sales of~~ ~~$26.6 million and $105.0 million for the 13 and 26 weeks ended June 25, 2019, respectively, related to the amount in deferred revenue as of December 25, 2018.~~

Table of Contents

(5) Income Taxes

A reconciliation of the statutory federal income tax rate to our effective tax rate for the 13 weeks ended March 30, 2021 and March 31, 2020 is as follows:


	13 Weeks Ended
	March 30, 2021		March 31, 2020
Tax at statutory federal rate	21.0	%	21.0	%
State and local tax, net of federal benefit	3.8		3.8
FICA tip tax credit	(7.3)		(33.1)
Work opportunity tax credit	(0.8)		(4.4)
Stock compensation	(1.6)		(0.8)
Net income attributable to noncontrolling interests	(0.2)		(1.2)
Officers compensation	0.8		0.3
Other	0.5		1.7
Total	16.2	%	(12.7)	%

For the 13 ~~week periods~~weeks ended ~~June~~March 30, ~~2020 and June 25, 2019,~~2021, we recognized ~~an income tax benefit of 31.2% and~~ income tax expense using an estimated effective annual tax rate. This resulted in an effective tax rate of ~~13.7%, respectively. For the 26 week periods ended June 30, 2020 and June 25, 2019, we recognized an income tax benefit of 51.4% and income tax expense of 14.3%, respectively.~~16.2%. For the 13 ~~and 26 week periods~~weeks ended ~~June 30,~~March 31, 2020, we recognized income tax ~~benefit~~expense using a discrete tax calculation as we were unable to reliably estimate our full year effective income tax rate. This was primarily due to the inability to estimate the increased impact ofon the FICA tip and Work opportunity tax credits on our effective tax rate as a result of the significant decrease in our pre-tax income.

~~The~~ This resulted in an effective tax rate ~~decreased for~~benefit of 12.7%. Additionally, the ~~13 and 26 week periods ended June 30, 2020, respectively, primarily due to a pre-tax loss in both periods. As a result, the impact of our~~ FICA tip and Work opportunity tax credits had a more significant impact to our effective tax rate. 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 ~~both the 13 and 26 week periods ended June 30,~~fiscal year 2020 but we expect to fully utilize these credits in ~~the current or future years or by carrying back to~~ our ~~2019~~2021 tax year.

~~Table of Contents~~

(6)

Commitments and Contingencies

The estimated cost of completing capital project commitments at ~~June~~March 30, ~~2020~~2021 and December ~~31, 2019~~29, 2020 was ~~$133.2~~$120.1 million and ~~$119.0~~$95.9 million, respectively. ~~At the onset of the pandemic, we delayed construction on all restaurants that were not substantially complete. As of June 30, 2020,~~ ~~14 restaurants, including 1~~ ~~relocation site, had either resumed construction or were approved to resume construction. The estimated cost of completing these~~ ~~14 restaurants at June 30, 2020 was $29.3 million.~~

As of ~~June~~March 30, ~~2020~~2021 and December ~~31, 2019,~~29, 2020, we were contingently liable for ~~$13.5~~$12.8 million and ~~$13.9~~$13.0 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 ~~June~~March 30, ~~2020~~2021 and December ~~31, 2019~~29, 2020 as the likelihood of default was deemed to be less than probable and the fair value of the guarantees is not considered significant.

Table of Contents


	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~~2026
Fargo, North Dakota (1)	February 2006	July ~~2021~~2026
Logan, Utah (1)	January 2009	August 2024
Irving, Texas ~~(3)~~(2)	December 2013	December 2024
Louisville, Kentucky (2)(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 7, this restaurant is owned, in part, by our 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)~~(3)

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 26~~ weeks ended ~~June~~March 30, ~~2020,~~2021, we bought most of our beef from 3 suppliers. 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.

(7) Related Party Transactions

As of ~~June~~March 30, ~~2020~~2021 and ~~June 25, 2019,~~March 31, 2020, we had 62 franchise restaurants and 12 majority-owned company ~~restaurant~~restaurants owned in part by ~~certain~~current officers of the Company. For both of the 13 ~~week periods~~weeks ended ~~June~~March 30, ~~2020~~2021 and ~~June 25, 2019,~~March 31, 2020, these franchise entities paid us fees of $0.2 million and $0.3 million, respectively. For the 26 week periods ended June 30, 2020 and June 25, 2019, these franchise entities paid us fees of $0.5 million and $0.7 million, respectively. As disclosed in note 6, we are contingently liable on a lease related to 1$0.2 ~~of these franchise restaurants.~~million.

~~Table of Contents~~

(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, 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 weeks ended March 30, 2021 and ~~26 week periods ended June 30,~~March 31, 2020, there were ~~367,968~~4,827 and ~~400,291~~41,581 shares of nonvested stock, respectively, that were outstanding but not included in the computation of diluted earnings per share because they would have had an anti-dilutive effect. ~~This included all outstanding RSU grants as the Company was in a net loss position for both periods. For the 13 and 26 week periods ended June 25, 2019, there were~~ ~~14,925 and 4,469 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.~~

Table of Contents

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



	13 Weeks Ended				26 Weeks Ended				13 Weeks Ended
	June 30, 2020		June 25, 2019		June 30, 2020		June 25, 2019		March 30, 2021		March 31, 2020
Net (loss) income attributable to Texas Roadhouse, Inc. and subsidiaries	$	(33,553)	$	44,845	$	(17,524)	$	95,235
Net income attributable to Texas Roadhouse, Inc. and subsidiaries									$	64,150	$	16,029
Basic EPS:
Weighted-average common shares outstanding		69,361		71,362		69,391		71,558		69,637		69,422
Basic EPS	$	(0.48)	$	0.63	$	(0.25)	$	1.33	$	0.92	$	0.23
Diluted EPS:
Weighted-average common shares outstanding		69,361		71,362		69,391		71,558		69,637		69,422
Dilutive effect of nonvested stock		—		371		—		403		500		430
Shares-diluted		69,361		71,733		69,391		71,961		70,137		69,852
Diluted EPS	$	(0.48)	$	0.63	$	(0.25)	$	1.32	$	0.91	$	0.23

(9) Fair Value Measurements

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

Level 1

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

Level 2

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

Level 3

Inputs that are unobservable for the asset.

There were 0 transfers among levels within the fair value hierarchy during the 13 ~~and 26~~ weeks ended ~~June~~March 30, ~~2020.~~2021.

~~Table of Contents~~

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	June 30, 2020		December 31, 2019		Level	March 30, 2021		December 29, 2020
Deferred compensation plan—assets	1	$	45,542	$	44,623	1	$	58,605	$	55,633
Deferred compensation plan—liabilities	1		(45,473)		(44,679)	1	$	(58,528)	$	(55,614)

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 ~~(loss)~~ and comprehensive ~~income (loss).~~income.

Table of Contents

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


	Fair Value Measurements					Total gain (loss)				Fair Value Measurements					Total loss
						13 Weeks Ended		26 Weeks Ended							13 Weeks Ended
		June 30,		December 31,		June 30,		June 30,			March 30,		December 29,		March 30,		March 31,
	Level	2020		2019		2020		2020		Level	2021		2020		2021		2020
Long-lived assets held for use	1	$	—	$	1,684	$	—	$	—
Operating lease right-of-use assets	3	$	—	$	611	$	—	$	(501)
Long-lived assets held for sale										3	$	1,175	$	1,645	$	(470)	$	—
Goodwill										3	$	—	$	2,625	$	—	$	—
Investments in unconsolidated affiliates	3	$	2,000	$	—	$	—	$	(528)	3	$	1,000	$	1,531	$	(531)	$	(528)

Long-lived assets held for ~~use~~sale include ~~leasehold improvements for one restaurant~~land and building at a site that was ~~subject to~~relocated. These assets are included in prepaid expenses and other current assets in our unaudited condensed consolidated balance sheets. These assets are valued using a ~~forced relocation. This restaurant was relocated in February 2020 at which time the contractually negotiated amount~~Level 3 input, i.e., information from broker listings discounted for ~~these assets was received.~~

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.estimated selling costs. This resulted in a loss of ~~$0.5~~$0.5 million which is included in impairment and closure, net in our unaudited condensed consolidated statements of income ~~(loss)~~ and comprehensive income ~~(loss)~~ for the 2613 weeks ended ~~June~~March 30, ~~2020. At December 31, 2019, operating lease right-of-use assets include~~2021.

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

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, ori.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~~loss from investments in unconsolidated affiliates in our unaudited condensed consolidated statements of income ~~(loss)~~ and comprehensive income ~~(loss)~~ for the 2613 weeks ended ~~June~~March 30, ~~2020.~~2021.

At ~~June~~March 30, ~~2020~~2021 and December ~~31, 2019,~~29, 2020, the fair values of cash and cash equivalents, accounts receivable and accounts payable approximated their carrying values based on the short-term nature of these instruments. At ~~June~~March 30, 2021 and December 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

~~Table of Contents~~

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 ~~(loss)~~ and comprehensive ~~income (loss):~~income:



	13 Weeks Ended				26 Weeks Ended				13 Weeks Ended
	June 30, 2020		June 25, 2019		June 30, 2020		June 25, 2019		March 30, 2021		March 31, 2020
Labor expense	$	2,532	$	2,213	$	4,920	$	4,349	$	2,584	$	2,388
General and administrative expense		4,711		5,528		9,570		12,524		7,324		4,859
Total share-based compensation expense	$	7,243	$	7,741	$	14,490	$	16,873	$	9,908	$	7,247

We grant PSUs to certain of our executives which are generally subject to a one-year vesting and the achievement of certain earnings targets, which determine the number of units to vest at the end of the vesting period. Share-based compensation expense is recognized for the number of units expected to vest at the end of the period and is expensed beginning on the grant date and through the performance period. For each grant, PSUs vest after meeting the

Table of Contents

performance and service conditions. ~~There were 0 PSUs that vested during the 13 week periods ended June 30, 2020 and June 25, 2019.~~ The total intrinsic value of PSUs vested during the ~~26 week periods~~13 weeks ended ~~June~~March 30, 2021 and March 31, 2020 ~~and June 25, 2019~~ was ~~$5.4~~$0.4 million and ~~$8.8~~$3.3 million, respectively.

On January 8, ~~2020, 95,946~~2021, 5,199 shares vested related to the January ~~2019~~2020 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.~~30, 2021. With respect to unvested PSUs, ~~at June~~we recognized expense of $2.3 million during the 13 weeks ended March 30, ~~2020, 0~~ ~~expense~~2021. At March 30, 2021, with respect to unvested PSUs, there was ~~recognized as we estimate the payout ratio will be zero. As a result, there is~~ 0$3.3 million of unrecognized compensation cost that is expected to be recognized ~~for the remainder~~over a weighted-average period of ~~the year.~~0.8 years.

(11) Stock Repurchase Program

For the 13 ~~week period~~weeks ended ~~June~~March 30, ~~2020,~~2021, we did not repurchase any shares of our common stock. For the ~~26 week period~~13 weeks ended ~~June 30,~~March 31, 2020, we paid ~~$12.6~~$12.6 million to repurchase 252,409 ~~shares of our common stock.~~ ~~For the 13 and 26 week periods ended June 25, 2019, we paid approximately $112.1 million to repurchase 2,096,677~~ shares of our common stock. On March 17, 2020, we suspended all share repurchase activity. As of ~~June~~March 30, ~~2020,~~2021, we had $147.8million remaining under our authorized stock repurchase program.

(12) Subsequent Event

As discussed in note 3, we are party to a revolving credit facility under which we may borrow up to $200.0 million with the option to increase by an additional $200.0 million. On May 11, 2020, we amended the revolving credit facility to provide for an incremental credit facility of up to $82.5 million. As of March 30, 2021 and December 29, 2020, we had $190.0 million outstanding on the original credit facility and $50.0 million outstanding on the incremental credit facility.

On May 4, 2021, we entered into an agreement to further amend our revolving credit facility with the same syndicate of commercial lenders. This amendment increased the amount we may borrow to $300.0 million with the option to increase by an additional $200.0 million and extended the maturity date to May 1, 2026. As part of the amendment, the $190.0 million on the original credit facility remained outstanding and the $50.0 million on the incremental credit facility was repaid.

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

1514

Table of Contents

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 ~~31, 2019,~~29, 2020, 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~~COVID-19 Impact

~~On March 13, 2020,~~The Company continues to be subject to risks and uncertainties as a result of the ~~novel coronavirus (~~"COVID-19") pandemic (the "pandemic") ~~was declared a National Public Health Emergency. Shortly after the national emergency declaration,~~. These include state and local ~~officials began placing~~ restrictions on restaurants, some of which have limited capacity in the dining rooms while others have allowed To-Go or curbside service ~~only while others limited capacity in the dining room. By~~only. As of March ~~31, 2020, the last day of our Q1 2020 fiscal quarter,~~30, 2021, all of our domestic company and franchise ~~restaurants~~locations had re-opened their dining rooms under various limited capacity restrictions. As of March 31, 2020, all of our domestic company and franchise locations 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 June 30, 2020, the last day of our Q2 2020 fiscal quarter, 499 of our 521 company-owned restaurants had re-opened their dining rooms under various limited capacity restrictions. Our remaining restaurants, with the exception of one that is temporarily closed, are limited to outdoor dining and/or To-Go or curbside service only.

WeAs a result of these capacity restrictions, we continue to ~~monitor state and local plans as they move along their phased approach to re-open their economies. We have developed a~~utilize our 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-Go. We continue to ~~our building to better accommodate the~~see 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 re-opening phases at each of our locations, the safety of our employees and guests remains our top priority.

~~Table of Contents~~

~~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.~~the limited capacity restrictions. 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~~the extent to which our dining rooms will ~~be required~~have to close again, or if the increased sales 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 document.~~To-Go program will continue.

~~In response to~~As a result of the pandemic, ~~the Company and its 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 has also volunteered to forgo their director and committee fees along with any cash retainers effective immediately 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 in 2020 to benefit companies that were significantly impacted by the pandemic. This legislation allowed for the deferral of the social security portion of the employer portion of FICA payroll taxes from the date of enactment through the end of 2020. Amounts are required to be repaid in equal installments at the end of 2021 and 2022. ~~In addition,~~As of December 29, 2020, the Company had deferred $47.3 million in payroll taxes with the amount due in 2021 included in accrued wages and payroll taxes and the amount due in 2022 included in other liabilities in our unaudited condensed consolidated balance sheets.

The CARES Act ~~provided~~also allowed for ~~small business loans~~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

Table of Contents

and had employees who were ~~forgivable if certain criteria were met.~~paid but did not actually work. The Company ~~did not pursue any~~provided various forms of ~~these loans on behalf~~relief pay for hourly restaurant employees that qualified for this tax credit. In our Q1 2021 fiscal quarter, we recorded $1.0 million related to this credit which is included in labor expense in our unaudited condensed consolidated statements of ~~company restaurants as we believe we have sufficient alternatives for raising capital if needed.~~income and comprehensive income.

OVERVIEW

Texas Roadhouse, Inc. is a growing restaurant company operating predominately in the casual dining segment. Our late 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 ~~617~~637 restaurants in 49 states and ten foreign countries. As of ~~June~~March 30, ~~2020,~~2021, our ~~617~~637 restaurants included:

●

~~521~~540 "company restaurants," of which ~~501~~520 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 ~~(loss)~~ and comprehensive ~~income (loss).~~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 ~~(loss)~~ and comprehensive ~~income (loss).~~income. Of the ~~521~~540 restaurants we owned as of ~~June~~March 30, ~~2020,~~2021, we operated ~~489~~505 as Texas Roadhouse restaurants, ~~and operated 30~~32 as Bubba’s 33 ~~restaurants. In addition, we operated two~~ restaurants ~~outside of the casual dining segment. As of June 30, 2020, one company restaurant remains temporarily closed due to the pandemic but continues to be included in the above total.~~and three as Jaggers restaurants.

●

9697 "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 ~~(loss) income~~loss from investments in unconsolidated affiliates" in our unaudited condensed consolidated statements of income ~~(loss)~~ and comprehensive ~~income (loss).~~income. Additionally, we ~~provided~~provide various management services to these 24 franchise restaurants, as well as ~~six~~five additional franchise restaurants in which we have no ownership interest. All of the franchise restaurants are operated as Texas Roadhouse restaurants. Of the 9697 franchise restaurants, 7069 were domestic restaurants and 2628 were international restaurants. As of ~~June~~March 30, ~~2020, five~~2021, four international restaurants ~~remain~~were temporarily closed due to the pandemic but continue to be included in the above total.

~~Table of Contents~~

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 6765 of the 7069 domestic franchise restaurants.

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

Presentation of Financial and Operating Data

Throughout this report, the 13 weeks ended ~~June~~March 30, ~~2020~~2021 and ~~June 25, 2019~~March 31, 2020 are referred to as Q2Q1 2021 and Q1 2020, ~~and Q2 2019,~~ respectively. The 26 weeks ended June 30, 2020 and June 25, 2019 are referred to as 2020 YTD and 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 was 53 weeks in length and, as such, the fourth quarter of fiscal 2019 was 14 weeks in length.

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~~at or near the end of 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. In addition, at our high volume restaurants, we continue to look for opportunities to increase our dining room capacity by adding on to our existing

Table of Contents

building and/or to increase our parking capacity by leasing or purchasing property that adjoins our site. 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 ~~2020 YTD, eight~~Q1 2021, three company restaurants, including ~~two~~one Bubba’s 33, were opened while one company restaurant closed. At the onset of the pandemic, we delayed construction on all restaurants that were not substantially complete. As of June 30, 2020, 14 restaurants, including one relocation site, had either resumed construction or were approved to resume construction.opened. We currently ~~expect as many as six of these~~plan to open 25 to 30 company restaurants ~~will open~~across all concepts in ~~Q3 2020.~~2021. 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 one domestic restaurant and closed two international restaurants.~~ We currently expect our franchise partners will open ~~four~~as many as six Texas Roadhouse restaurants, primarily international, in ~~2020.~~2021.

Our average capital investment for the 18 Texas Roadhouse restaurants opened during 2020, including pre-opening expenses and a capitalized rent factor, was $6.2 million. We expect our average capital investment for Texas Roadhouse restaurants opening in 2021 to be approximately $5.5 million. Our average capital investment for the three Bubba’s 33 restaurants opened during 2020, including pre-opening expenses and a capitalized rent factor, was $7.3 million. We expect our average capital investment for Bubba’s 33 restaurants opening in 2021 to be approximately $6.9 million. The decrease in investment costs for both concepts is primarily due to higher building and site work costs in 2020 related to construction delays from the pandemic.

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

We have entered into area development and franchise agreements for the development and operation of Texas Roadhouse restaurants in ~~several~~numerous foreign ~~countries.~~countries and one U.S. territory. We currently have signed franchise and/or development agreements in nine countries in the Middle East as well as Taiwan, the Philippines, Mexico, China, South Korea, Brazil and ~~South Korea.~~Puerto Rico. As of ~~June~~March 30, ~~2020,~~2021, we had 15 restaurants in five countries in the Middle East, ~~three~~four restaurants open in Taiwan, five in the Philippines, two in South Korea and one each in Mexico ~~China~~ and ~~South Korea~~China for a total of 2628 restaurants in ten foreign countries. Due to the pandemic, ~~five~~four of our international ~~locations~~restaurants were temporarily closed as of ~~June~~March 30, ~~2020. As of August 7, 2020, four of these locations remain closed.~~2021. 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/or~~and a development fee for our grant

~~Table of Contents~~

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 during 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 ~~focus~~look for ways through various strategic initiatives to drive awareness of our brands and increase sales and profitability. At the onset of the pandemic, we began selling ready-to-grill steaks for customers to prepare at home. While we reduced our store-level offerings around ready-to-grill once our dining rooms began to re-

Table of Contents

open in mid-2020, based on ~~driving To-Go sales~~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-trimmed quality steaks that are available in our restaurants. This platform launched in Q4 2020.

We also further expanded our retail business in 2021 with the introduction of our Margarita Mixer, which ~~has significantly contributed~~was available in Q1 2021, and our canned Margarita Seltzer, available in several flavors, which will be available beginning in Q2 2021. These Texas Roadhouse-branded products are subject to ~~our sales growth in prior years.~~license agreements for which we will receive royalties.

Leveraging Our Scalable Infrastructure. To support our growth, we have made investments in our infrastructure over the past several years, including information and accounting systems, real estate, human resources, legal, marketing, international and restaurant operations, including the development of new concepts. 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 evaluate opportunities to return capital to our shareholders including the payment of dividends and ~~repurchases~~repurchase of common stock. In 2011, our Board of Directors declared our first quarterly dividend of $0.08 per share of common ~~stock. On February 20, 2020, our Board of Directors declared a quarterly dividend of $0.36 per share of common~~ stock which ~~was paid on March 27, 2020.~~we consistently grew over time. 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 the quarterly cash dividend of $0.36 paid on March 27, 2020. This was done to preserve cash flow due to the pandemic. On April 28, 2021, our Board of Directors reinstated the payment of a quarterly cash dividend of $0.40 per share of common stock. This payment will be distributed on June 4, 2021 to shareholders of record at the close of business on May 19, 2021. The declaration and payment of cash dividends on our common stock is at the discretion of our Board of Directors, and any decision to declare a dividend will be based on many factors, including, but not limited to, earnings, financial condition, applicable covenants under our revolving credit facility, other contractual restrictions and other factors deemed relevant. ~~We do not expect~~To the extent that state and local guidelines begin to ~~resume~~significantly reduce capacity and/or re-close dining rooms, we could suspend the payment of cash ~~dividends until our cash flows from operations have stabilized.~~dividends.

In 2008, our Board of Directors approved our first stock repurchase program. From inception through ~~June~~March 30, ~~2020,~~2021, we have paid $369.0 million through our authorized stock repurchase programs to repurchase 17,722,505 shares of our common stock at an average price per share of $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. ~~In 2020 YTD, we paid $12.6 million to repurchase 252,409 shares of our common stock.~~ The Company suspended all share repurchase activity on March 17, 2020 in order to preserve cash flow due to the pandemic. As of ~~June~~March 30, ~~2020,~~2021, $147.8 million remains authorized for stock repurchases. We ~~do not expect to~~are currently evaluating when we will resume the repurchase of ~~shares until our cash flows from operations have stabilized.~~shares.

~~Table of Contents~~

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.~~Sales. 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

Table of Contents

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

Average Unit Volume. Average unit volume represents the average quarterly or annual restaurant sales for 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 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 ~~(loss)~~ and comprehensive ~~income (loss).~~income. Other sales include the amortization of fees associated with our third-party gift card sales net of the amortization of gift card breakage income. These amounts are ~~generally~~ amortized ~~over a period~~ consistent with the historic redemption pattern of the associated gift ~~cards.~~card or on actual redemptions in periods where redemptions do not align with historic redemption patterns. Other sales also include sales related to our non-royalty-based retail products.

Franchise Royalties and Fees. Franchise royalties consist of royalties, as defined in our franchise ~~agreements,~~agreement, paid to us by our domestic and international franchisees. Franchise royalties also include sales related to our royalty-based retail products. Domestic ~~and~~and/or international franchisees also typically pay an initial

~~Table of Contents~~

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 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

Table of Contents

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

General and Administrative Expenses. General and administrative expenses ("G&A") are comprised of expenses associated with corporate and administrative functions that support development and restaurant operations and provide an infrastructure to support future growth including certain advertising costs incurred. G&A also includes legal fees, settlement charges and share-based compensation expense related to executive officers, ~~support center~~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 Expense, ~~(Income),~~ Net. Interest expense, ~~(income),~~ net includes interest expense on our debt or financing obligations including the amortization of loan fees reduced by earnings on cash and cash equivalents.

Equity ~~(Loss) Income~~Loss from Unconsolidated Affiliates. Equity loss includes our percentage share of net income earned by unconsolidated affiliates. As of ~~June~~March 30, ~~2020~~2021 and ~~June 25, 2019,~~March 31, 2020, we owned a 5.0% to 10.0% equity interest in 24 domestic franchise restaurants. Additionally, as of ~~June~~March 30, ~~2020~~2021 and ~~June 25, 2019,~~March 31, 2020, we owned a 40% equity interest in four non-Texas Roadhouse restaurants as part of a joint venture agreement with a casual

~~Table of Contents~~

dining restaurant operator in China. ~~Equity (loss) income from unconsolidated affiliates represents our percentage share of net income earned by these unconsolidated affiliates.~~

Net Income Attributable to Noncontrolling Interests. Net income attributable to noncontrolling interests represents the portion of income attributable to the other owners of the majority-owned restaurants. Our consolidated subsidiaries ~~at June 30, 2020 and June 25, 2019 included~~include 20 majority-owned restaurants for all ~~of which were open.~~periods presented.

~~Q2 2020~~Q1 2021 Financial Highlights

Total revenue ~~decreased $213.4~~increased $148.1 million ~~or 30.9%,~~ to ~~$476.4~~$800.6 million in ~~Q2 2020~~Q1 2021 compared to ~~$689.8~~$652.5 million in ~~Q2 2019~~Q1 2020 primarily due to ~~a decrease~~an increase in average unit volumes driven by ~~a decrease~~an increase in comparable restaurant ~~sales. While store~~sales combined with the opening of new restaurants. Store weeks ~~increased 4.4%,~~and comparable restaurant sales ~~decreased 32.8%. The decrease in average unit volumes is primarily due to the temporary closure of our dining rooms~~increased 4.1% and ~~subsequent re-opening~~18.5%, respectively, at ~~limited capacity related to the pandemic.~~

Restaurant margin dollars decreased $108.9 million, or 90.2%, to $11.8 million in Q2 2020 compared to $120.8 million in Q2 2019 and restaurant margin, as a percentage of restaurant and other sales, decreased to 2.5% in Q2 2020 compared to 17.6% in Q2 2019. The decrease in restaurant margin, as a percentage of restaurant and other sales, was due to lower sales along with higher labor, other operating costs and cost of sales. See further discussion of the specific drivers included below.

Net income decreased $78.4 million, or 174.8%, to a net loss of $33.6 million in Q2 2020 compared to net income of $44.8 million in Q2 2019 primarily due to lower restaurant margin dollars partially offset by lower income taxes and lower general and administrative expenses. Diluted (loss) earnings per share decreased 177.4% to ($0.48) in Q2 2020 from $0.63 in Q2 2019.

2220

Table of Contents

company restaurants in Q1 2021. The increase in average unit volume was primarily due to the re-opening of dining rooms, all of which had re-opened by the end of Q1 2021, the continued easing of dining room capacity restrictions, and strong To-Go sales.

Restaurant margin dollars increased $69.0 million to $147.6 million in Q1 2021 compared to $78.6 million in Q1 2020. Restaurant margin, as a percentage of restaurant and other sales, increased to 18.6% in Q1 2021 compared to 12.1% in Q1 2020. The increase in restaurant margin was due to higher sales and the prior year impact of the pandemic, which began to significantly impact our operations in March 2020.

Net income increased $48.1 million to $64.2 million in Q1 2021 compared to $16.0 million in Q1 2020 primarily due to higher restaurant margin dollars partially offset by higher income tax expense. Diluted earnings per share increased to $0.91 in Q1 2021 from $0.23 in Q1 2020.

Results of Operations



	13 Weeks Ended				26 Weeks Ended				13 Weeks Ended
	June 30, 2020		June 25, 2019		June 30, 2020		June 25, 2019		March 30, 2021		March 31, 2020
	$	%	$	%	$	%	$	%	$	%	$	%

	(In thousands)				(In thousands)				(In thousands)
Consolidated Statements of Income (Loss):
Consolidated Statements of Income:
Revenue:
Restaurant and other sales	473,090	99.3	684,373	99.2	1,120,716	99.3	1,369,490	99.2	794,923	99.3	647,626	99.2
Franchise royalties and fees	3,335	0.7	5,455	0.8	8,233	0.7	10,946	0.8	5,706	0.7	4,898	0.8
Total revenue	476,425	100.0	689,828	100.0	1,128,949	100.0	1,380,436	100.0	800,629	100.0	652,524	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	164,041	34.7	221,266	32.3	374,221	33.4	444,978	32.5
Food and beverage									251,482	31.6	210,180	32.5
Labor	194,622	41.1	225,490	32.9	435,701	38.9	449,370	32.8	258,036	32.5	241,079	37.2
Rent	13,251	2.8	13,051	1.9	26,722	2.4	26,179	1.9	14,452	1.8	13,471	2.1
Other operating	89,348	18.9	103,811	15.2	193,637	17.3	205,613	15.0	123,379	15.5	104,289	16.1
(As a percentage of total revenue)
Pre-opening	4,290	0.9	4,197	0.6	9,402	0.8	8,065	0.6	4,268	0.5	5,112	0.8
Depreciation and amortization	29,016	6.1	28,454	4.1	58,070	5.1	56,227	4.1	30,869	3.9	29,054	4.5
Impairment and closure, net	(440)	NM	316	NM	155	NM	333	NM	504	NM	595	NM
General and administrative	29,615	6.2	39,960	5.8	62,569	5.5	75,943	5.5	36,712	4.6	32,954	5.1
Total costs and expenses	523,743	109.9	636,545	92.3	1,160,477	102.8	1,266,708	91.8	719,702	89.9	636,734	97.6
(Loss) income from operations	(47,318)	(9.9)	53,283	7.7	(31,528)	(2.8)	113,728	8.2
Interest expense (income), net	1,030	0.2	(691)	(0.1)	1,099	0.1	(1,445)	(0.1)
Equity (loss) income from investments in unconsolidated affiliates	(90)	(0.0)	141	0.0	(598)	(0.1)	254	0.0
(Loss) income before taxes	(48,438)	(10.2)	54,115	7.8	(33,225)	(2.9)	115,427	8.4
Income tax (benefit) expense	(15,132)	(3.2)	7,427	1.1	(17,071)	(1.5)	16,546	1.2
Net (loss) income including noncontrolling interests	(33,306)	(7.0)	46,688	6.8	(16,154)	(1.4)	98,881	7.2
Income from operations									80,927	10.1	15,790	2.4
Interest expense, net									1,460	0.2	69	0.0
Equity loss from investments in unconsolidated affiliates									(217)	NM	(508)	NM
Income before taxes									79,250	9.9	15,213	2.3
Income tax expense (benefit)									12,820	1.6	(1,939)	(0.3)
Net income including noncontrolling interests									66,430	8.3	17,152	2.6
Net income attributable to noncontrolling interests	247	0.1	1,843	0.3	1,370	0.1	3,646	0.3	2,280	0.3	1,123	0.2
Net (loss) income attributable to Texas Roadhouse, Inc. and subsidiaries	(33,553)	(7.0)	44,845	6.5	(17,524)	(1.6)	95,235	6.9
Net income attributable to Texas Roadhouse, Inc. and subsidiaries									64,150	8.0	16,029	2.5

NM — Not meaningful

2321

Table of Contents


	Reconciliation of (Loss) Income from Operations to Restaurant Margin								Reconciliation of Income from Operations to Restaurant Margin
	(in thousands)								(in thousands)
	13 Weeks Ended				26 Weeks Ended				13 Weeks Ended
	June 30, 2020		June 25, 2019		June 30, 2020		June 25, 2019		March 30, 2021		March 31, 2020


(Loss) income from operations	$	(47,318)	$	53,283	$	(31,528)	$	113,728
Income from operations									$	80,927	$	15,790

Less:
Franchise royalties and fees		3,335		5,455		8,233		10,946		5,706		4,898

Add:
Pre-opening		4,290		4,197		9,402		8,065		4,268		5,112
Depreciation and amortization		29,016		28,454		58,070		56,227		30,869		29,054
Impairment and closure, net		(440)		316		155		333		504		595
General and administrative		29,615		39,960		62,569		75,943		36,712		32,954
Restaurant margin	$	11,828	$	120,755	$	90,435	$	243,350	$	147,574	$	78,607

Restaurant margin $/store week	$	1,754	$	18,692	$	6,717	$	18,943	$	21,097	$	11,695
Restaurant margin (as a percentage of restaurant and other sales)		2.5%		17.6%		8.1%		17.8%		18.6%		12.1%

See above for the definition of restaurant margin.

Restaurant Unit Activity


	Total	Texas Roadhouse	Bubba's 33	Other	Total	Texas Roadhouse	Bubba's 33	Jaggers
Balance at December 31, 2019	611	581	28	2
Balance at December 29, 2020					634	600	31	3
Company openings	8	6	2	—	3	2	1	—
Company closings	(1)	(1)	—	—	—	—	—	—
Franchise openings - Domestic	1	1	—	—	—	—	—	—
Franchise openings - International	—	—	—	—	—	—	—	—
Franchise closings - International	(2)	(2)	—	—	—	—	—	—
Balance at June 30, 2020	617	585	30	2
Balance at March 30, 2021					637	602	32	3


	June 30, 2020	June 25, 2019	March 30, 2021	March 31, 2020
Company - Texas Roadhouse	489	471	505	488
Company - Bubba's 33	30	25	32	29
Company - Other	2	2
Company - Jaggers			3	2
Franchise - Texas Roadhouse - U.S.	70	70	69	70
Franchise - Texas Roadhouse - International(1)	26	23	28	28
Total ~~(1)~~	617	591	637	617

(1)	Includes ~~one domestic company-owned and five~~four international franchise locations that ~~are~~were temporarily closed.

2422

Table of Contents

~~Q2 2020~~Q1 2021 (13 weeks) compared to ~~Q2 2019~~Q1 2020 (13 ~~weeks) and 2020 YTD (26 weeks) compared to 2019 YTD (26~~ weeks)

Restaurant and Other Sales. Restaurant and other sales ~~decreased~~increased by ~~30.9%~~22.7% in ~~Q2 2020~~Q1 2021 as compared to ~~Q2 2019 and by 18.2% in 2020 YTD compared to 2019 YTD.~~Q1 2020. The following table summarizes certain key drivers and/or attributes of restaurant and other sales at company restaurants for the periods presented. Company restaurant count activity is shown in the restaurant unit activity table above.


	Q2 2020			Q2 2019			2020 YTD			2019 YTD			Q1 2021			Q1 2020
Company Restaurants:
Increase in store weeks		4.4	%		5.2	%		4.8	%		5.4	%		4.1	%		5.3	%
(Decrease) increase in average unit volume		(32.5)	%		4.2	%		(20.4)	%		4.4	%
Increase (decrease) in average unit volume														17.5	%		(8.5)	%
Other(1)		(2.9)	%		0.4	%		(2.6)	%		0.2	%		1.0	%		(2.1)	%
Total (decrease) increase in restaurant sales		(31.0)	%		9.8	%		(18.2)	%		10.0	%
Total increase (decrease) in restaurant sales														22.6	%		(5.3)	%
Other sales(2)		0.1	%		(0.1)	%		0.0	%		(0.1)	%		0.1	%		(0.2)	%
Total (decrease) increase in restaurant and other sales		(30.9)	%		9.7	%		(18.2)	%		9.9	%
Total increase (decrease) in restaurant and other sales														22.7	%		(5.5)	%

Store weeks		6,742			6,460			13,463			12,846			6,995			6,721
Comparable restaurant sales growth		(32.8)	%		4.7	%		(20.5)	%		5.0	%
Comparable restaurant sales														18.5	%		(8.4)	%

Texas Roadhouse restaurants only:
Comparable restaurant sales growth		(32.4)	%		4.6	%		(20.2)	%		4.9	%
Comparable restaurant sales														18.3	%		(8.2)	%
Average unit volume (in thousands)	$	935		$	1,384		$	2,218		$	2,786		$	1,509		$	1,284


Weekly sales by group:
Comparable restaurants (454 and 434 units, respectively)	$	72,005		$	107,590
Average unit volume restaurants (20 units for both periods)(3)	$	69,174		$	98,426
Restaurants less than six months old (15 and 17 units, respectively)	$	61,781		$	115,233
Comparable restaurants (473 and 452 units, respectively)													$	116,816		$	98,979
Average unit volume restaurants (18 and 20 units, respectively)(3)													$	96,780		$	91,373
Restaurants less than six months old (14 and 16 units, respectively)													$	117,833		$	97,353

(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 ~~Q2 2020,~~Q1 2021, primarily represented ~~$1.7~~$7.7 million related to the amortization of third-party gift card fees net of ~~$1.0~~$3.6 million related to the amortization of gift card breakage income. For ~~Q2 2019,~~Q1 2020, other sales primarily represented ~~$4.7~~$7.8 million related to the amortization of third-party gift card fees net of ~~$2.3~~$3.7 million related to the amortization of gift card breakage income.For 2020 YTD, other sales represent $9.5 million related to amortization of third party gift card fees net of $4.7 million related to the amortization of gift card breakage income. For 2019 YTD, other sales represent $11.7 million related to amortization of third party gift card fees net of $6.0 million related to the amortization of gift card breakage income. The decrease in all amounts is primarily due to a decrease in gift card redemptions.

(3)	Average unit volume restaurants include restaurants open a full six and up to 18 months before the beginning of the period measured, excluding sales from restaurants permanently closed during the period.

The ~~decrease~~increase in restaurant sales for ~~Q2 2020 and 2020 YTD~~Q1 2021 is primarily attributable to ~~the decrease~~an increase in average unit volumes, driven by ~~a decline~~an increase in comparable restaurant sales, ~~partially offset by~~along with an increase in store weeks. ~~In March, we temporarily closed~~The increase in comparable restaurant sales was primarily driven by the re-opening of our dining rooms, the continued easing of dining room capacity restrictions, and ~~shifted~~strong To-Go sales. Comparable restaurant sales increased 18.5%, which included guest traffic count growth of 13.0% and per person average check growth of 5.5%.

As of March 30, 2021, all of our company restaurants had re-opened their dining rooms. While all of our dining rooms have re-opened, they continue to aoperate under limited capacity restrictions. For our January, February and March periods, comparable restaurant sales decreased 0.3%, decreased 3.5% and increased 64.1%, respectively. In addition, To-Go ~~only model~~sales as a ~~result~~percentage of ~~the 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.~~ restaurant sales were 22.3% and 12.8% for Q1 2021 and Q1 2020, respectively.

In addition, ~~to our regular~~in late October 2020, we implemented a menu price increase of approximately 1.0% which was the only increase taken for 2020. In late April 2021, we ~~also added family value packs which include four entrees with an assortment~~implemented a menu price increase of ~~sides~~approximately 1.75%. We ~~also added ready-to-grill steaks and pork that allow customers to order their~~may take additional pricing in 2021 if needed.

2523

Table of Contents

~~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,~~Q1 2021, 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 significantly reduced our offerings around the family value packs and the ready-to-grill steaks and pork. As of June 30, 2020, 499 of our company-owned restaurants were open at limited capacity. ~~Comparable restaurant sales decreased 46.7%, 41.9% and 14.1% for our April, May and June periods, respectively. The improvement per month was driven by the re-opening of our dining rooms.~~

As a result of this significant change in our operating model, 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 Q2 2020 or 2020 YTD.

We opened six Texas Roadhouse restaurants and two Bubba’s 33 restaurants in 2020 YTD. At the onset of the pandemic, we delayed construction on all restaurants that were not substantially complete. As of June 30, 2020, 14three company restaurants, including one ~~relocation site, had either resumed construction or~~Bubba's 33 restaurant. As of March 30, 2021, an additional 15 restaurants were ~~approved to resume~~under construction. We currently ~~expect as many as six of these~~plan to open 25 to 30 company restaurants ~~will open~~across all concepts in ~~Q3 2020.~~2021. 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.

Franchise Royalties and Fees. Franchise royalties and fees ~~decreased~~increased by ~~$2.1~~$0.8 million, or by ~~38.9%~~16.5%, in ~~Q2 2020~~Q1 2021 from ~~Q2 2019 and decreased $2.7 million, or by 24.8%, in 2020 YTD from 2019 YTD.~~Q1 2020. The ~~decreases in both periods were~~increase was due to ~~lower~~higher average unit volume, driven by comparable restaurant ~~sales decreases~~increases at domestic ~~and international franchise stores partially offset by the opening of new franchise restaurants.~~stores. Comparable restaurant sales at domestic ~~and international~~ franchise stores ~~decreased 38.2% and 23.4%~~increased 15.2% for Q2 2020 and 2020 YTD, respectively. These comparable sales decreases include the impact of international locations that were temporarily closed during both periods including five as of the end of the quarter.Q1 2021.

~~Additionally, in Q2 2020 and 2020 YTD, we waived royalties of $0.1 million and $0.3 million, respectively, for international franchisees in countries~~We anticipate that ~~were significantly impacted by the pandemic. We also made royalty deferral arrangements for many of~~ our domestic and international franchisees. We believe collection of these royalties remains probable and have continued to record royalty revenue related to these deferred royalties. The majority of these royalty waiver and deferral arrangements were through the end of our Q2 2020 fiscal quarter.

~~Our~~ existing franchise ~~restaurant~~ partners ~~opened one domestic~~will open as many as six Texas Roadhouse ~~restaurant and closed two~~restaurants, primarily international, ~~franchise restaurants~~ in ~~2020 YTD.~~2021.

~~Restaurant Cost of Sales.~~Food and Beverage Costs. ~~Restaurant cost of sales,~~Food and beverage costs, as a percentage of restaurant and other sales, ~~increased~~decreased to ~~34.7%~~31.6% in ~~Q2 2020 from 32.3% in Q2 2019 and increased to 33.4% in 2020 YTD~~Q1 2021 from 32.5% in ~~2019 YTD. These increases were~~Q1 2020. The decrease was primarily due to the ~~mix~~benefit of ~~menu items sold~~a higher guest check amount partially offset by commodity inflation of 1.8%.

For 2021, we currently expect commodity cost inflation to be approximately 4.0% with fixed price contracts for approximately 50% of our overall food costs and ~~higher commodity inflation. Commodity inflation was approximately 2.9% and 2.0% for Q2 2020 and 2020 YTD, respectively, primarily driven by higher beef costs.~~the remainder subject to floating market prices.

Restaurant Labor Expenses.Restaurant labor expenses, as a percentage of restaurant and other sales, ~~increased~~decreased to ~~41.1%~~32.5% in ~~Q2 2020~~Q1 2021 compared to ~~32.9%~~37.2% in ~~Q2 2019 and increased to 38.9% in 2020 YTD from 32.8% in 2019 YTD.~~Q1 2020. The ~~increase in both periods~~decrease was primarily due to ~~higher wage rates,~~an increase in average unit volume as well as lapping several items related to Q1 2020 including labor inefficiencies as we converted to our hybrid operating model, relief payments and increased benefits provided to our hourly ~~restaurant~~ employees, ~~related~~and higher health insurance costs. In Q1 2021, the benefit of a higher guest check amount and employee retention payroll tax credits of $1.0 million also contributed to the ~~pandemic,~~decrease. These decreases were partially offset by higher ~~costs associated~~wage rates primarily due to labor market pressures along with ~~health insurance,~~increases in state-mandated minimum and ~~a decrease in average unit volume.~~tipped wage rates.

~~Higher wage rates in both periods were due to a significant number of employees moving from a tipped wage rate to a non-tipped wage due to the significant increase in To-Go sales.~~ In ~~addition,~~Q1 2021, we incurred costs of ~~$4.7~~$1.5 million ~~and $15.4 million in Q2 2020 and 2020 YTD, respectively,~~ for relief pay and enhanced benefits ~~for~~to our hourly ~~employees. This pay was based on their level~~employees compared to $10.7 million in Q1 2020 at the onset 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. Finally, higher health~~pandemic.

Health insurance costs were lower in ~~both periods were~~Q1 2021 compared to Q1 2020 primarily due to ~~rate and enrollment increases. In Q2 2020, these costs were partially offset~~

~~Table of Contents~~

by a ~~decrease~~$2.3 million increase in claim costs ~~of $1.0 million. In 2020 YTD, claim~~in Q1 2020. The increase in claims costs ~~increased $1.3 million~~was primarily ~~due to~~driven by unfavorable claims ~~experience in Q1 2020.~~experience.

Restaurant Rent Expense. Restaurant rent expense, as a percentage of restaurant and other sales, ~~increased~~decreased to ~~2.8%~~1.8% in ~~Q2 2020~~Q1 2021 compared to ~~1.9%~~2.1% in ~~Q2 2019 and increased to 2.4% in 2020 YTD compared to 1.9% in 2019 YTD. These increases were~~Q1 2020. The decrease was due to the ~~decrease~~increase in average unit volume ~~along with~~partially offset by higher rent expense, as a percentage of restaurant and other sales, at our newer restaurants.

Restaurant Other Operating Expenses. Restaurant other operating expenses, as a percentage of restaurant and other sales, ~~increased~~decreased to ~~18.9%~~15.5% in ~~Q2 2020~~Q1 2021 compared to ~~15.2%~~16.1% in ~~Q2 2019 and increased to 17.3% in 2020 YTD compared to 15.0% in 2019 YTD. These increases were~~Q1 2020. This decrease was due to ~~a decrease~~an increase in average unit ~~volumes and higher supplies expense,~~volume partially offset by ~~lower laundry~~an increase in supplies and ~~linen~~incentive compensation expense. Higher supplies expense was due to an increase in To-Go supplies, increased cost and usage of personal protective equipment and other costs to support our ~~current~~ hybrid operating model. Higher incentive compensation expense was primarily due to higher restaurant profitability. In addition, due to the significant ~~decrease~~increase in our average unit volumes, expenses that are largely fixed, including utilities, property taxes, and other outside services ~~increased~~decreased as a percentage of restaurant and other sales.

Restaurant Pre-opening Expenses. Pre-opening expenses ~~increased~~decreased to $4.3 million in ~~Q2 2020~~Q1 2021 from ~~$4.2~~$5.1 million in ~~Q2 2019 and increased to $9.4 million in 2020 YTD compared to $8.1 million in 2019 YTD. These increases were~~Q1 2020. This decrease was primarily due to the timing of restaurant openings as average pre-opening expenses incurred for each restaurant remained relatively unchanged. Pre-opening costs will fluctuate from quarter to quarter based on the specific pre-opening costs incurred for each restaurant, the number and timing of restaurant openings and the number and timing of restaurant managers hired.

Depreciation and Amortization Expense. D&A, as a percentage of total revenue, ~~increased~~decreased to ~~6.1%~~3.9% in ~~Q2 2020~~Q1 2021 compared to ~~4.1%~~4.5% in ~~Q2 2019 and increased to 5.1% in 2020 YTD compared to 4.1% in 2019 YTD. These increases were~~Q1 2020. The decrease was primarily due to ~~a decrease~~an increase in average unit volume ~~and~~partially offset by higher depreciation at new restaurants.

Table of Contents

Impairment and Closure Costs, Net. Impairment and closure costs, net was ~~($0.4)~~$0.5 million in ~~Q2 2020 and $0.2~~Q1 2021 compared to $0.6 million in ~~2020 YTD.~~Q1 2020. For Q2Q1 2021, impairment and closure costs, net included the impairment of land and building at a site that was relocated and are currently classified as assets held for sale. For Q1 2020, impairment and closure costs, net ~~includes a gain related to a favorable lease settlement for one underperforming restaurant that was closed in April 2020. For 2020 YTD, impairment and closure costs, net includes~~included the impairment of the operating lease right-of-use assets for ~~the~~an underperforming restaurant and a restaurant that was ~~closed in April 2020 and one restaurant that was relocated during the period.~~relocated.

General and Administrative Expenses. G&A, as a percentage of total revenue, ~~increased~~decreased to ~~6.2%~~4.6% in ~~Q2 2020~~Q1 2021 compared to ~~5.8%~~5.1% in ~~Q2 2019 and remained unchanged at 5.5% in 2020 YTD compared to 2019 YTD.~~Q1 2020. The ~~increase in Q2 2020 compared to Q2 2019 is~~decrease was primarily driven by ~~a decrease~~an increase in average unit volume and ~~a legal settlement of $1.5 million,~~lower travel and meeting expenses partially offset by ~~lower managing partner conference costs due to the cancellation of the 2020 conference, lower salary~~higher incentive and ~~incentive~~performance-based compensation costs and ~~lower travel costs. In 2020 YTD compared to 2019 YTD, the decrease in average unit volume and the~~ legal settlement expenses. Travel and meeting expenses were ~~offset by~~ lower ~~managing partner conference costs, lower salary and incentive compensation expense, and lower travel costs.~~

Asdue to fewer in-person meetings as a result of the ~~pandemic, our executive~~pandemic. Higher incentive and ~~leadership teams voluntarily agreed~~performance-based compensation costs were due 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.increase in profitability.

Interest Expense, ~~(Income),~~ Net. Interest expense, net was ~~$1.0~~$1.5 million in ~~Q2 2020~~Q1 2021 compared to ~~interest income of $0.7~~$0.1 million in ~~Q2 2019. Interest expense was $1.1 million in 2020 YTD compared to interest income of $1.4 million in 2019 YTD.~~Q1 2020. The increase in interest expense, ~~for both periods is~~net was primarily driven by additional borrowings on our credit facility along with reduced earnings on our cash and cash equivalents.

Equity ~~(Loss) Income~~loss from Unconsolidated Affiliates. Equity loss was ~~$0.1~~$0.2 million in ~~Q2 2020~~Q1 2021 compared to $0.5 million in Q1 2020 due to increased profitability from our unconsolidated affiliates. This equity income ~~of $0.1 million in Q2 2019. Equity loss~~ was ~~$0.6 million in 2020 YTD compared to equity income of $0.3 million in 2019 YTD. The decrease in 2020 YTD compared to 2019 YTD was due to~~more than offset by an impairment charge ~~recorded in Q1 2020~~ related to our investment in a foreign joint ~~venture.~~ venture that was recorded in both Q1 2021 and Q1 2020.

~~Table of Contents~~

Income Tax Expense (Benefit) ~~Expense.~~. Our effective tax rate ~~was a benefit of 31.2%~~increased to 16.2% in ~~Q2 2020~~Q1 2021 compared to an ~~expense of 13.7% in Q2 2019 and was a~~effective tax rate benefit of ~~51.4%~~12.7% in Q1 2020 ~~YTD compared to expense of 14.3% in 2019 YTD~~ primarily due to the significant ~~decrease~~increase in ~~our~~ pre-tax income. ~~As a result, the impact of~~In Q1 2020, our FICA tip and Work opportunity tax credits ~~had a more significant impact to our effective tax rate. Additionally, these credits~~ exceeded our federal tax liability which resulted in ~~Q2 2020 and 2020 YTD but we expect to utilize these credits in the current or future years or by carrying back to our 2019~~a tax ~~year.~~rate benefit.

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):


	26 Weeks Ended				13 Weeks Ended
	June 30, 2020		June 25, 2019		March 30, 2021		March 31, 2020
Net cash provided by operating activities	$	61,845	$	187,016	$	178,013	$	21,716
Net cash used in investing activities		(79,666)		(87,782)		(36,474)		(44,505)
Net cash provided by (used in) financing activities		192,435		(164,520)
Net increase (decrease) in cash and cash equivalents	$	174,614	$	(65,286)
Net cash (used in) provided by financing activities						(9,048)		145,516
Net increase in cash and cash equivalents					$	132,491	$	122,727

Net cash provided by operating activities was ~~$61.8~~$178.0 million in ~~2020 YTD~~Q1 2021 compared to ~~$187.0~~$21.7 million in ~~2019 YTD.~~Q1 2020. This ~~decrease~~increase was primarily due to ~~a decrease~~favorable changes in working capital and an increase in net income. Working capital changes include increases in accounts payable, accrued wages and payroll taxes, accrued taxes and licenses and income taxes payable.

~~Typically, our~~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, the majority of our restaurants have re-opened at limited capacity. We expect that our cash provided by operations will continue to be significantly below our historic levels until such time that our dining rooms can re-open at full capacity.

Net cash used in investing activities was ~~$79.7~~$36.5 million in ~~2020 YTD~~Q1 2021 compared to ~~$87.8~~$44.5 million in ~~2019 YTD.~~Q1 2020. The decrease was ~~primarily~~ due to a decrease in capital expenditures, ~~partially offset~~primarily driven by the proceeds received related to a sale leaseback transaction at one location. The decrease in capital expenditures was primarily due to decreased expenditures related to the remodel of our Support Center office and a delay in our development schedule due to the pandemic. This was partially offset by increased expenditures relating to the relocation of existing restaurants. In 2020 YTD, three restaurants have been relocated and one additional relocation is scheduled in late 2020.fewer stores being relocated.

We require capital principally for the development of new company restaurants, the refurbishment or relocation of existing restaurants and the acquisition of franchise restaurants, if any. We either lease our restaurant site locations under operating leases for periods of five to 30 years (including renewal periods) or purchase the land when appropriate. AsIn addition, as of ~~June~~March 30, ~~2020,~~2021, we had developed ~~147~~148 of the ~~521~~540 company restaurants on land in which we own.

Table of Contents

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


	2020 YTD		2019 YTD		Q1 2021		Q1 2020
New company restaurants	$	31,525	$	36,502	$	22,975	$	19,124
Refurbishment of existing restaurants		28,077		27,621		13,742		12,902
Relocation of existing restaurants		14,746		9,557		705		11,188
Capital expenditures related to Support Center office		7,485		14,102		1,244		3,458
Total capital expenditures	$	81,833	$	87,782	$	38,666	$	46,672

~~At the onset of the pandemic,~~In 2021, we ~~delayed construction on~~expect our capital expenditures to be $210.0 million to $220.0 million and we currently plan to open 25 to 30 restaurants across all ~~restaurants that were not substantially complete. As of June 30, 2020, 14 restaurants, including one relocation site, had either resumed construction or were approved to resume~~

~~Table of Contents~~

~~construction. We currently expect as many as six of these restaurants will open in Q3 2020.~~concepts. 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 ~~expenditure~~ spend accordingly. As of March 30, 2021, the estimated cost of completing capital project commitments over the next 12 months was approximately $120.1 million. See note 6 to the unaudited condensed consolidated financial statements for a discussion of contractual obligations.

Net cash used in financing activities was $9.0 million in Q1 2021 compared to net cash provided by financing activities ~~was $192.4~~of $145.5 million in ~~2020 YTD compared to cash used in financing activities of $164.5 million in 2019 YTD.~~Q1 2020. The ~~increase~~decrease is primarily due to ~~increased~~ borrowings under our revolving credit facility ~~as well as a decrease~~ in Q1 2020 offset by share repurchases and dividends ~~paid.~~paid in Q1 2020.

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 expendituresflexibility in ~~the ordinary course of business, or other lawful corporate purposes, all in accordance with and subject~~response 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.pandemic.

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 2020 YTD, we paid $12.6 million to repurchase 252,409 shares of our common stock.~~ On March 17, 2020, we suspended all share repurchase activity. As of ~~June~~March 30, ~~2020,~~2021, $147.8 million remains authorized for stock repurchases. We ~~do not expect to~~are currently evaluating when we will resume the repurchase of ~~shares until our cash flows from operations have stabilized.~~shares.

On ~~March 17,~~February 20, 2020, our Board of Directors authorized the payment of a cash dividend of $0.36 per share of common stock. The payment of this dividend totaling $25.0 million was distributed on March 27, 2020 to shareholders of record at the close of business on March 11, 2020. On March 24, 2020, the Board of 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 do not expect~~On April 28, 2021, our Board of Directors reinstated the payment of a quarterly cash dividend of $0.40 per share of common stock. This payment will be distributed on June 4, 2021 to ~~resume~~shareholders of record at the close of business on May 19, 2021. To the extent that state and local guidelines begin to significantly reduce capacity and/or re-close dining rooms, we could suspend the payment of cash ~~dividends until our cash flows from operations have stabilized.~~dividends.

We paid distributions of ~~$1.8~~$1.4 million ~~and $3.3~~to equity holders of 16 of our 20 majority-owned company restaurants in Q1 2021. We paid distributions of $1.8 million to equity holders of all 20 majority-owned company restaurants in ~~2020 YTD and 2019 YTD, respectively. No distributions were paid in Q2~~Q1 2020.

On August 7, 2017, we entered into ~~the Amended and Restated Credit Agreement (the "Amended Credit Agreement")~~an 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~~is 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, including approval by the syndicate of lenders. On May 11, 2020, we amended the revolving credit facility 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 iswas May 10, 2021. The maturity date for the original revolving credit facility ~~remains~~remained August 5, 2022.

Table of Contents

The terms of the amendment require us to pay interest on outstanding borrowings of the original revolving credit facility at 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. As of ~~June~~March 30, ~~2020,~~2021, we had $190.0 million outstanding on the original

~~Table of Contents~~

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 weighted-average interest rate for the revolving credit facility as of ~~June~~March 30, ~~2020~~2021 was ~~2.01%~~1.95%.

~~Contractual Obligations~~

~~The following table summarizes~~On May 4, 2021, we entered into an agreement to further amend our revolving credit facility with the same syndicate of commercial lenders. This amendment increased the amount we may borrow to $300.0 million with the option to increase by an additional $200.0 million and extended the maturity date to May 1, 2026. As part of ~~payments due under specified contractual obligations as of June 30, 2020 (in thousands):~~

Payments Due by Period

Less than

More than


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

2,116

—

—

—

2,116

Interest(1)

12,973

4,977

4,039

571

3,386

Operating lease obligations

1,018,189

54,071

110,946

110,465

742,707

Capital obligations

133,244

133,244

—

—

—

Total contractual obligations(2)

$
1,406,522

$
242,292

$
304,985

$
111,036

$
748,209

~~(1)~~

Includes interest on our revolving credit facility and interest on a finance lease. Uses interest rates on our revolving credit facility as of June 30, 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.~~

~~We have no material minimum purchase commitments with our vendors that extend beyond a year. See note 6 to~~ the ~~unaudited condensed consolidated financial statements for a discussion of contractual obligations.~~amendment, the $190.0 million on the original credit facility remained outstanding and the $50.0 million on the incremental credit facility was repaid.

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

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

3027

Table of Contents

Guarantees

As of ~~June~~March 30, ~~2020~~2021 and December ~~31, 2019,~~29, 2020, we are contingently liable for ~~$13.5~~$12.8 million and ~~$13.9~~$13.0 million, respectively, for seven lease guarantees, listed in the table below. These amounts represent the maximum potential liability of future payments under the guarantees. In the event of default, the indemnity and default clauses in our assignment agreements govern our ability to pursue and recover damages incurred. No material liabilities have been recorded as of ~~June~~March 30, ~~2020~~2021 and December ~~31, 2019~~29, 2020 as the likelihood of default was deemed to be less than probable and the fair value of the guarantees is not considered significant.


	Lease	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~~2026
Fargo, North Dakota (1)	February 2006	July ~~2021~~2026
Logan, Utah (1)	January 2009	August 2024
Irving, Texas ~~(3)~~(2)	December 2013	December 2024
Louisville, Kentucky (2)(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 7 to the unaudited condensed consolidated financial statements, this restaurant is owned, in part, by our founder.~~

~~(3)~~

~~(4)~~(3)

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

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~~. 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 2.25% and to pay a commitment fee of 0.125% to 0.40% depending on our consolidated net leverage ratio. As of ~~June~~March 30, ~~2020,~~2021, we had $190.0 million outstanding on our amended credit agreement. 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 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 ~~June~~March 30, ~~2020,~~2021, 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 unaudited condensed consolidated balance sheet.

The weighted-average interest rate for the $240.0 million of combined borrowings on our revolving credit facility as of ~~June~~March 30, ~~2020~~2021 was ~~2.01%~~1.95%. 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.

3128

Table of Contents

On May 4, 2021, we entered into the Amended and Restated Credit Agreement (the "Amended Credit Agreement") with respect to our revolving credit facility. The Amended Credit Agreement increased the amount we may borrow to $300.0 million with the option to increase by an additional $200.0 million and extended the maturity date to May 1, 2026. As part of the Amended Credit Agreement, the $190.0 million on the original credit facility remained outstanding and the $50.0 million on the incremental credit facility was repaid.

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

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 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 ~~June~~March 30, ~~2020.~~2021.

Changes in Internal Control

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

3229

Table of Contents

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 ~~31, 2019,~~29, 2020, under the heading "Special Note Regarding Forward-looking Statements" and in the Form 10-K Part I, Item 1A, Risk Factors.

~~The following~~ There have been no material changes from the risk ~~factor is~~factors previously disclosed in ~~addition to~~ our ~~risk factors~~Form 10-K for the year ended December 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 June 30, 2020, the last day of our Q2 2020 fiscal quarter, 499 of our 521 company-owned restaurants had re-opened their dining rooms under various limited capacity restrictions. Our remaining restaurants, with the exception of one that is temporarily closed, are limited to outdoor dining and/or To-Go or curbside service only. As of August 7, 2020, 497 of our 523 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 re-open their economies. 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 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 re-opening phases at each of our locations, the safety of our employees and guests remains our top priority.

~~Table of Contents~~

all state and local restrictions will be lifted, or if dining rooms will be required to close again in areas severely impacted by the pandemic. In addition, we cannot predict the overall impact on the economy or consumer spending habits.

~~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 June 30, 2020, 14 restaurants, including one relocation site, 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.29, 2020.

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 the 13 weeks ended ~~June~~March 30, ~~2020,~~2021, we did not repurchase any shares of ~~common stock. For the 26 weeks ended June 30, 2020, we paid $12.6 million to repurchase 252,409 shares of our~~ common stock. On March 17, 2020, we suspended all share repurchase activity in order to enhance our financial flexibility as a result of the pandemic. As of ~~June~~March 30, ~~2020,~~2021, $147.8 million remains authorized for stock repurchases.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

~~Table of Contents~~

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

Table of Contents

ITEM 6. EXHIBITS

Exhibit No.		Description

10.1		~~First Amendment to 2018~~ Employment Agreement between Texas Roadhouse Management Corp. and ~~Doug Thompson~~W. Kent Taylor entered into as of ~~April 6,~~December 30, 2020 (incorporated by reference to Exhibit ~~10.1~~10.34 to the ~~Registrant’s Current~~Registrant's Annual Report on Form ~~8-K dated April 6,~~10-K for the year ended December 29, 2020 (File No. 000-50972))
10.2		~~First Amendment~~Employment Agreement between Texas Roadhouse Management Corp. and Doug Thompson entered into as of December 30, 2020 (incorporated by reference to ~~2018~~ Exhibit 10.35 to the Registrant's Annual Report on Form 10-K for the year ended December 29, 2020 (File No. 000-50972))
10.3		Employment Agreement between Texas Roadhouse Management Corp. and S. Chris Jacobsen entered into as of ~~April 6,~~December 30, 2020 (incorporated by reference to Exhibit ~~10.2~~10.36 to the ~~Registrant’s Current~~Registrant's Annual Report on Form ~~8-K dated April 6, 2020 (File No. 000-50972))~~
~~10.3~~		~~First Amendment to 2018 Employment Agreement between Texas Roadhouse Management Corp. and Tonya Robinson entered into as of April 6, 2020 (incorporated by reference to Exhibit 10.3 to~~10-K for the ~~Registrant’s Current Report on Form 8-K dated April 6,~~year ended December 29, 2020 (File No. 000-50972))
10.4		Employment Agreement between Texas Roadhouse Management Corp. and Tonya Robinson entered into as of December 30, 2020 (incorporated by reference to Exhibit 10.37 to the Registrant's Annual Report on Form 10-K for the year ended December 29, 2020 (File No. 000-50972))
10.5		First Amendment to Employment Agreement between Texas Roadhouse Management Corp. and Gerald L. Morgan dated March 31, 2021 and having a retroactive effective date of March 18, 2021 (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K dated April 2, 2021 (File No. 000-50972))
10.6		Employment Agreement between Texas Roadhouse Management Corp. and Christopher C. Colson entered into as of March 31, 2021
10.7		Second Amendment to Amended and Restated Credit Agreement dated as of May ~~11, 2020~~4, 2021 by and among Texas Roadhouse, Inc., and the lenders named therein and ~~JP Morgan~~JPMorgan Chase Bank, N.A., as Administrative Agent (incorporated by reference to Exhibit 10.1 to the ~~Registrant’s~~Registrant's Current Report on Form 8-K dated May ~~11, 2020~~4, 2021 (File No. 000-50972))
31.1		Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1		Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2		Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS		XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		XBRL Taxonomy Extension Label Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

3531

Table of Contents

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: ~~August~~May 7, ~~2020~~2021	By:	/s/ ~~W. KENT TAYLOR~~GERALD L. MORGAN
		~~W. Kent Taylor~~Gerald L. Morgan
		~~Chairman,~~ Chief Executive Officer and President (principal executive officer)


Date: ~~August~~May 7, ~~2020~~2021	By:	/s/ TONYA R. ROBINSON
		Tonya R. Robinson
		Chief Financial Officer
		(principal financial officer)
		(principal accounting officer)

3632


	Payments Due by Period
			Less than						More than
	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		2,116		—		—		—		2,116
Interest(1)		12,973		4,977		4,039		571		3,386
Operating lease obligations		1,018,189		54,071		110,946		110,465		742,707
Capital obligations		133,244		133,244		—		—		—
Total contractual obligations(2)	$	1,406,522	$	242,292	$	304,985	$	111,036	$	748,209