What changed in this filing

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Item 1. Financial Statements

2023-11-03 compared with 2023-08-04 · 247 added, 203 removed, 575 unchanged (44% of the section changed)

3 unchanged sentences

(Amounts in thousands, except share data)

September 27,

Current assets:

30 unchanged sentences

Preferred stock, $ 0.01 par value, 100,000,000 shares authorized;

100,000 shares designated as Series A Preferred Stock;

none issued or outstanding

Common stock, $ 0.01 par value, 200,000,000 shares authorized;

35,643,747 and 37,008,061 shares issued and outstanding as June 28, 2023 and December 28, 2022, respectively

32,957,470 and 37,008,061 shares issued and outstanding as of September 27, 2023 and December 28, 2022, respectively

Additional paid-in-capital

8 unchanged sentences

Thirteen Weeks Ended

Twenty-Six Weeks Ended

June 28, 2023

June 29, 2022

June 28, 2023

June 29, 2022

Thirty-Nine Weeks Ended

September 27, 2023

September 28, 2022

September 27, 2023

September 28, 2022

Company-operated restaurant revenue

11 unchanged sentences

Depreciation and amortization

(Gain) loss on disposal of assets

Loss (gain) on disposal of assets

Gain on recovery of insurance proceeds, property, equipment and expenses

Loss (gain) on disposition of restaurants

Gain on disposition of restaurants

Impairment and closed-store reserves

12 unchanged sentences

Thirteen Weeks Ended

Twenty-Six Weeks Ended

June 28, 2023

June 29, 2022

June 28, 2023

June 29, 2022

Thirty-Nine Weeks Ended

September 27, 2023

September 28, 2022

September 27, 2023

September 28, 2022

Other comprehensive (loss) income

1 unchanged sentence

Unrealized net gains arising during the period from interest rate swap

Reclassifications of (gains) losses into net income

Reclassifications of gains into net income

Income tax benefit (expense)

5 unchanged sentences

(Amounts in thousands, except share data)

Thirteen Weeks Ended June 28, 2023

Thirteen Weeks Ended September 27, 2023

Comprehensive

1 unchanged sentence

(Loss) Income

Balance, March 29, 2023

Balance, June 28, 2023

Stock-based compensation

6 unchanged sentences

Forfeiture of common stock related to restricted shares

Other comprehensive loss, net of tax

Balance, June 28, 2023

Thirteen Weeks Ended June 29, 2022

Balance, September 27, 2023

Thirteen Weeks Ended September 28, 2022

Comprehensive

Stockholders’

Balance, March 30, 2022

(Loss) Income

Balance, June 29, 2022

Stock-based compensation

Issuance of common stock related to restricted shares

Issuance of common stock upon exercise of stock options

Shares repurchased for employee tax withholdings

Forfeiture of common stock related to restricted shares

Other comprehensive income, net of tax

Balance, June 29, 2022

Twenty-Six Weeks Ended June 28, 2023

Balance, September 28, 2022

Thirty-Nine Weeks Ended September 27, 2023

Comprehensive

11 unchanged sentences

Other comprehensive loss, net of tax

Balance, June 28, 2023

Twenty-Six Weeks Ended June 29, 2022

Balance, September 27, 2023

Thirty-Nine Weeks Ended September 28, 2022

Comprehensive

8 unchanged sentences

Other comprehensive income, net of tax

Balance, June 29, 2022

Balance, September 28, 2022

See notes to condensed consolidated financial statements (unaudited).

2 unchanged sentences

(Amounts in thousands)

Twenty-Six Weeks Ended

June 28, 2023

June 29, 2022

Thirty-Nine Weeks Ended

September 27, 2023

September 28, 2022

Cash flows from operating activities:

2 unchanged sentences

Stock-based compensation expense

Income tax receivable agreement income

Income tax receivable agreement expense (income)

Fire insurance proceeds for expenses paid and lost profit

26 unchanged sentences

Payment of obligations under finance leases

Net cash flows (used in) provided by financing activities

(Decrease) increase in cash and cash equivalents

Deferred financing costs for revolver loan

Net cash flows used in by financing activities

Decrease in cash and cash equivalents

Cash and cash equivalents, beginning of period

Cash and cash equivalents, end of period

Twenty-Six Weeks Ended

June 28, 2023

June 29, 2022

Thirty-Nine Weeks Ended

September 27, 2023

September 28, 2022

Supplemental cash flow information

11 unchanged sentences

(“EPL”), which develops, franchises, licenses, and operates quick-service restaurants under the name El Pollo Loco® and operates under one operating segment.

At June 28, 2023, the Company operated 188 and franchised 304 El Pollo Loco restaurants.

At September 27, 2023, the Company operated 171 and franchised 321 El Pollo Loco restaurants.

Basis of Presentation

22 unchanged sentences

Actual results could materially differ from those estimates.

The Company’s significant estimates include estimates for impairment of goodwill, intangible assets and property and equipment, insurance reserves, lease accounting matters, stock-based compensation, income tax receivable agreement liability, contingent liabilities and income tax valuation allowances.

During both the thirteen and twenty-six weeks ended June 28, 2023, the Company incurred $ 0.1 million in COVID-19 related expenses.

During the thirteen and twenty-six weeks ended June 29, 2022, the Company incurred $ 0.3 million and $ 2.6 million, respectively, in COVID-19 related expenses, primarily due to leaves of absence and overtime pay.

The Company may face future business disruption and related risks resulting from the uncertainty regarding a potential resurgence of COVID-19 or another pandemic, epidemic or infectious disease outbreak, or from broader macroeconomic trends, any of which could have a significant impact on our business.

While the Company believes the trend towards more moderate labor related costs and less inflationary pressure continues, the Company cannot determine the ultimate impact of a potential resurgence of COVID-19 (and related economic effects) and the current macroeconomic environment will have on the Company’s condensed consolidated financial condition, liquidity, and future results of operations.

Therefore, any prediction as to the ultimate materiality of the adverse impact on the Company’s condensed consolidated financial condition, liquidity, and future results of operations is uncertain.

The Company’s significant estimates include estimates for impairment of goodwill, intangible assets and property and equipment, insurance reserves, lease accounting matters, stock-based compensation, contingent liabilities and income tax valuation allowances.

Cash and Cash Equivalents

1 unchanged sentence

The Company’s principal liquidity and capital requirements are new restaurants, existing restaurant capital investments (remodels and maintenance), interest payments on its debt, lease obligations and working capital and general corporate needs.

At June 28, 2023, the Company’s total debt was $ 60.0 million.

At September 27, 2023, the Company’s total debt was $ 80.0 million.

The Company’s ability to make payments on its indebtedness and to fund planned capital expenditures depends on available cash and its ability to generate adequate cash flows in the future, which, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory, and other factors that are beyond the Company’s control.

Based on current operations, the Company believes that its cash flow from operations, available cash of $ 10.2 million at June 28, 2023 and the outstanding borrowing availability under the 2022 Revolver will be adequate to meet the Company’s liquidity needs for the next twelve months from the date of filing of these condensed consolidated financial statements.

Based on current operations, the Company believes that its cash flow from operations, available cash of $ 13.8 million at September 27, 2023 and the outstanding borrowing availability under the 2022 Revolver will be adequate to meet the Company’s liquidity needs for the next twelve months from the date of filing of these condensed consolidated financial statements.

Subsequent Events

Subsequent to the quarter-end, on November 2, 2023, the Company announced that Laurance Roberts, the Company’s Chief Executive Officer and President, is leaving his position as Chief Executive Officer and President and as a member of the Company’s Board of Directors effective as of the close of business on November 3, 2023.

In connection with Mr.

Roberts’ departure, the Board has appointed Maria Hollandsworth as interim Chief Executive Officer and President of the Company, effective as of November 4, 2023.

Hollandsworth currently serves as Chief Operating Officer of the Company and will continue in that role during her tenure as interim Chief Executive Officer and President.

To help facilitate the transition from Mr.

Roberts to Ms.

Hollandsworth, the Company has retained Mr.

Roberts as a consultant from November 4, 2023 through December 28, 2023 pursuant to a Release and Consulting Agreement dated November 1, 2023 between the Company and Mr.

Further, on October 31, 2023, the Company’s Board of Directors approved a share repurchase program under which the Company is authorized to repurchase up to $ 20.0 million of shares of the Company’s common stock.

The repurchase program will terminate on March 31, 2025, may be modified, suspended or discontinued at any time, and does not obligate the Company to acquire any particular number of shares.

Lastly, the Company paid down $ 9.0 million on its 2022 Revolver and outstanding borrowings as of November 2, 2023 were $ 71.0 million.

Concentration of Risk

1 unchanged sentence

The Company has never experienced any losses related to these balances.

The Company had one supplier to whom amounts due totaled 30.9 % and 41.7 % of the Company’s accounts payable at June 28, 2023 and December 28, 2022, respectively.

Purchases from the Company’s largest supplier totaled 27.8 % and 27.3 % of total expenses for the thirteen and twenty-six weeks ended June 28, 2023, respectively, and 27.4 % and 28.5 % of total expenses for the thirteen and twenty-six weeks e nded June 29, 2022, respectively.

Company-operated and franchised restaurants in the greater Los Angeles area generated, in the aggregate, approximately 70.9 % and 70.8 % of total revenue for the thirteen and twenty-six weeks ended June 28, 2023, respectively, and 70.9 % for both the thirteen and twenty-six weeks ended June 29, 2022.

The Company had no supplier for which amounts due totaled more than 10.0% of the Company’s accounts payable at September 27, 2023.

As of December 28, 2022, the Company had one supplier to whom amounts due totaled 41.7 % of the Company’s accounts payable.

Purchases from the Company’s largest supplier totaled 26.6 % and 27.0 % of total expenses for the thirteen and thirty-nine weeks ended September 27, 2023, respectively, and 28.4 % and 28.5 % of total expenses for the thirteen and thirty-nine weeks ended September 28, 2022, respectively.

Company-operated and franchised restaurants in the greater Los Angeles area generated, in the aggregate, approximately 71.6 % and 71.1 % of total revenue for the thirteen and thirty-nine weeks ended September 27, 2023, respectively, and 71.9 % and 71.2 % for the thirteen and thirty-nine weeks ended September 28, 2022, respectively.

Goodwill and Indefinite Lived Intangible Assets

1 unchanged sentence

Goodwill represents the excess of cost over fair value of net identified assets acquired in business combinations accounted for under the purchase method.

The Company does not amortize its goodwill and indefinite-lived intangible assets.

does not amortize its goodwill and indefinite-lived intangible assets.

Goodwill resulted from the acquisition of certain franchise locations.

1 unchanged sentence

The amount of goodwill included in the cost basis of the asset sold is determined based on the relative fair value of the portion of the reporting unit disposed of compared to the fair value of the reporting unit retained.

The fair value of the

portion of the reporting unit disposed of in a refranchising is determined by reference to the discounted value of the future cash flows expected to be generated by the restaurant and retained by the franchisee, which includes a deduction for the anticipated, future royalties the franchisee will pay the Company associated with the franchise agreement entered into simultaneously with the refranchising transition.

The Company reports as one reporting unit.

The fair value of the portion of the reporting unit disposed of in a refranchising is determined by reference to the discounted value of the future cash flows expected to be generated by the restaurant and retained by the franchisee, which includes a deduction for the anticipated, future royalties the franchisee will pay the Company associated with the franchise agreement entered into simultaneously with the refranchising transition.

The fair value of the reporting unit retained is based on the price a willing buyer would pay for the reporting unit and includes the value of franchise agreements.

As such, the fair value of the reporting unit retained can include expected cash flows from future royalties from those restaurants currently being refranchised, future royalties from existing franchise businesses and company restaurant operations.

The Company did no t record any decrement to goodwill related to the disposition of restaurants in fiscal 2023 and 2022.

The Company did no t record any decrement to goodwill related to the disposition of restaurants in fiscal 2022 or the thirty-nine weeks ended September 27, 2023.

The Company performs an annual impairment test for goodwill during the fourth fiscal quarter of each year, or more frequently if impairment indicators arise.

10 unchanged sentences

These assumptions are subject to change as a result of changing economic and competitive conditions.

The Company determined that there were no indicators of potential impairment of its goodwill and indefinite-lived intangible assets during the thirteen and twenty-six weeks ended June 28, 2023.

Accordingly, the Company did no t record any impairment to its goodwill or indefinite-lived intangible assets during the thirteen and twenty-six weeks ended June 28, 2023.

The Company determined that, in connection with the sale of 18 units, there were indicators of potential impairment of its goodwill and indefinite-lived intangible assets during the thirteen and thirty-nine weeks ended September 27, 2023.

After completing the impairment analysis, the Company did no t record any impairment to its goodwill or indefinite-lived intangible assets during the thirteen and thirty-nine weeks ended September 27, 2023.

Fair Value Measurements

8 unchanged sentences

In other words, the instruments are not measured at fair value on an ongoing basis, but are subject to fair value adjustments only in certain circumstances (e.g., when there is evidence of impairment).

The following non-financial instruments were measured at fair value, on a nonrecurring basis, as of and for the thirteen and twenty-six weeks ended June 28, 2023, reflecting certain property and equipment assets and right-of-use (“ROU”) assets for which an impairment loss was recognized during the corresponding periods, as discussed under Note 2, “Property and Equipment” and immediately below under “Impairment of Long-Lived Assets and ROU Assets” (in thousands):

The following non-financial instruments were measured at fair value, on a nonrecurring basis, as of and for the thirteen and thirty-nine weeks ended September 27, 2023, reflecting certain property and equipment assets and right-of-use (“ROU”) assets for which an impairment loss was recognized during the corresponding periods, as discussed under Note 2, “Property and Equipment” and immediately below under “Impairment of Long-Lived Assets and ROU Assets” (in thousands):

Thirteen Weeks

Twenty-Six Weeks

Fair Value Measurements at June 28, 2023 Using

Ended June 28, 2023

Thirty-Nine Weeks

Fair Value Measurements at September 27, 2023 Using

Ended September 27, 2023

Impairment Losses

Certain property and equipment, net

Certain ROU assets, net

The following non-financial instruments were measured at fair value on a nonrecurring basis as of and for the thirteen and twenty-six weeks ended June 29, 2022, reflecting certain property and equipment assets and ROU assets for which an impairment loss was recognized during the corresponding periods, as discussed immediately below under “Impairment of Long-Lived Assets and ROU Assets” (in thousands):

The following non-financial instruments were measured at fair value on a nonrecurring basis as of and for the thirteen and thirty-nine weeks ended September 28, 2022, reflecting certain property and equipment assets and ROU assets for which an impairment loss was recognized during the corresponding periods, as discussed immediately below under “Impairment of Long-Lived Assets and ROU Assets” (in thousands):

Thirteen Weeks

Twenty-Six Weeks

Fair Value Measurements at June 29, 2022 Using

Ended June 29, 2022

Thirty-Nine Weeks

Fair Value Measurements at September 28, 2022 Using

Ended September 28, 2022

Impairment Losses

1 unchanged sentence

Certain property and equipment, net

Certain ROU assets, net

Impairment of Long-Lived Assets and ROU Assets

6 unchanged sentences

If actual performance does not achieve the projections, or if the assumptions used change in the future, the Company may be required to recognize impairment charges in future periods, and such charges could be material.

The Company determined that triggering events occurred for certain restaurants during the twenty-six weeks ended June 28, 2023 that required an impairment review of certain of the Company’s long-lived and ROU assets.

Based on the results of the analysis, the Company recorded non-cash impairment charges of less than $ 0.1 million for both the thirteen and twenty-six weeks ended June 28, 2023, primarily related to the carrying value of the ROU assets of one restaurant in California.

The Company recorded a non-cash impairment charge of $ 0.2 million and $ 0.3 million for the thirteen and twenty-six weeks ended June 29, 2022, respectively, primarily related to the long-lived assets of one restaurant in California .

Given the inherent uncertainty in projecting results for newer restaurants in newer markets, as well as the impact of COVID-19 (and related economic effects) and the current macroeconomic environment, the Company is monitoring the recoverability of the carrying value of the assets of several restaurants on an ongoing basis.

The Company determined that triggering events occurred for certain restaurants during the thirty-nine weeks ended September 27, 2023 that required an impairment review of certain of the Company’s long-lived and ROU assets.

Based on the results of the analysis, the Company recorded non-cash impairment charges of $ 1.0 million for both the thirteen and thirty-nine weeks ended September 27, 2023, primarily related to the carrying value of the ROU assets of one restaurant in California and the carrying value of the long-lived assets of one restaurant in Nevada.

The Company recorded a non-cash impairment charge of $ 0.1 million and $ 0.4 million for the thirteen and thirty-nine weeks ended September 28, 2022, respectively, primarily related to the carrying value of the long-lived assets of one restaurant in California.

Given the inherent uncertainty in projecting results for newer restaurants in newer

markets, as well as the impact of COVID-19 (and related economic effects) and the current macroeconomic environment, the Company is monitoring the recoverability of the carrying value of the assets of several restaurants on an ongoing basis.

For these restaurants, if expected performance is not realized, an impairment charge may be recognized in future periods, and such charge could be material.

1 unchanged sentence

When a restaurant is closed, the Company will evaluate the ROU asset for impairment, based on anticipated sublease recoveries.

The remaining value of the ROU asset is amortized on a straight-line basis, with the expense recognized in

closed-store reserve expense.

The remaining value of the ROU asset is amortized on a straight-line basis, with the expense recognized in closed-store reserve expense.

Additionally, any property tax and common area maintenance (“CAM”) payments relating to closed restaurants are included within closed-store expense.

During both the thirteen and twenty-six weeks ended June 28, 2023, the Company recognized less than $ 0.1 million of closed-store reserve expense related to the amortization of ROU assets, property taxes and CAM payments for its closed locations.

During both the thirteen and twenty-six weeks ended June 29, 2022, the Company recognized $ 0.1 million of closed-store reserve expense primarily related to the amortization of ROU assets, property taxes and CAM payments for its closed locations.

During both the thirteen and thirty-nine weeks ended September 27, 2023, the Company recognized $ 0.1 million of closed-store reserve expense related to the amortization of ROU assets, property taxes and CAM payments for its closed locations.

During the thirteen and thirty-nine weeks ended September 28, 2022, the Company recognized less than $ 0.1 million and $ 0.2 million, respectively, of closed-store reserve expense primarily related to the amortization of ROU assets, property taxes and CAM payments for its closed locations.

Derivative Financial Instruments

12 unchanged sentences

The Company recognized gains of $ 0.2 million, related to the reimbursement of property and equipment and expenses incurred and $ 0.2 million related to the reimbursement of lost profits.

The gain on recovery of insurance proceeds and reimbursement of lost profits, net of the related costs, is included in the accompanying condensed consolidated statements of income, for the twenty-six weeks ended June 28, 2023, as a reduction of company restaurant expenses.

The gain on recovery of insurance proceeds and reimbursement of lost profits, net of the related costs, is included in the accompanying condensed consolidated statements of income, for the thirty-nine weeks ended September 27, 2023, as a reduction of company restaurant expenses.

The Company received from the insurance company cash of $ 0.4 million, net of the insurance deductible, during fiscal 2023.

Gain on Disposition of Restaurants

During the thirteen and thirty-nine weeks ended September 27, 2023, the Company completed the sale of 17 and 18 restaurants, respectively, within California, Utah and Texas to existing franchisees.

The Company has determined that these restaurant dispositions represent multiple element arrangements, and as a result, the cash consideration received was allocated to the separate elements based on their relative standalone selling price.

Cash proceeds included upfront consideration for the sale of the restaurants and franchise fees.

The cash consideration per restaurant related to franchise fees is consistent with the amounts stated in the related franchise agreements, which are charged for separate standalone arrangements.

The Company initially defers and subsequently recognizes the franchise fees over the term of the franchise agreement.

During the thirteen and thirty-nine weeks ended September 27, 2023, these sales resulted in cash proceeds of $ 7.5 million and $ 7.7 million, respectively, and a net gain on sale of restaurant of $ 4.9 million and $ 5.0 million, respectively.

Since the date of their sale, these restaurants are now included in the total number of franchised El Pollo Loco restaurants.

The provision for income taxes, income taxes payable and deferred income taxes is determined using the asset and liability method.

11 unchanged sentences

The Company’s policy is to recognize interest and penalties related to income tax matters in income tax expense.

The Company had no accrual for interest or penalties at June 28, 2023 or at December 28, 2022.

The Company did no t recognize interest or penalties during the thirteen and twenty-six weeks ended June 28, 2023 and June 29, 2022, respectively, since there were no material unrecognized tax benefits.

The Company had no accrual for interest or penalties at September 27, 2023 or at December 28, 2022.

The Company did no t recognize interest or penalties during the thirteen and thirty-nine weeks ended September 27, 2023 and September 28, 2022, respectively, since there were no material unrecognized tax benefits.

Management believes no significant changes to the amount of unrecognized tax benefits will occur within the next twelve months.

On July 30, 2014, the Company entered into the income tax receivable agreement (the “TRA”), which calls for the Company to pay to its pre-initial public offering (“IPO”) stockholders 85 % of the savings in cash that the Company realizes in its income taxes as a result of utilizing its net operating losses (“NOLs”) and other tax attributes attributable to preceding periods.

For the thirteen and twenty-six weeks ended June 28, 2023, the Company recorded income tax receivable agreement expense of $ 0.1 million and income tax receivable agreement income of less than $ 0.1 million , respectively, and for the thirteen and twenty-six weeks ended June 29, 2022, the Company recorded income tax receivable agreement income of $ 0.2 million and $ 0.3 million, respectively, in each case, related to the amortization of interest expense related to the total expected TRA payments and changes in estimates for actual tax returns filed and future forecasted taxable income.

For the quarter ended June 28, 2023, the Company recorded an income tax provision of $ 2.7 million, reflecting an estimated effective tax rate of 27.9 %.

For the quarter ended June 29, 2022, the Company recorded an income tax provision of $ 3.1 million, reflecting an estimated effective tax rate of approximately 30.0 %.

For the year-to-date period ended June 28, 2023, the Company recorded an income tax provision of $ 4.7 million, reflecting an estimated effective tax rate of approximately 28.1 % .

For the year-to-date period ended June 29, 2022, the Company recorded an income tax provision of $ 4.0 million, reflecting an estimated effective tax rate of approximately 30.0 % .

The difference between the 21.0 % statutory rate and the effective tax rate of 28.1 % for the year-to-date period ended June 28, 2023 is primarily a result of state taxes , a non-deductible executive compensation, partially offset by a Work Opportunity Tax Credit benefit .

For both the thirteen and thirty-nine weeks ended September 27, 2023, the Company recorded income tax receivable agreement expense of $ 0.1 million, and for the thirteen and thirty-nine weeks ended September 28, 2022, the Company recorded income tax receivable agreement income of less than $ 0.1 million and $ 0.3 million, respectively, in each case, related to the amortization of interest expense related to the total expected TRA payments and changes in estimates for actual tax returns filed and future forecasted taxable income.

For the quarter ended September 27, 2023, the Company recorded an income tax provision of $ 3.0 million, reflecting an estimated effective tax rate of 24.4 %.

For the quarter ended September 28, 2022, the Company recorded an income tax provision of $ 1.8 million, reflecting an estimated effective tax rate of approximately 26.2 %.

For the year-to-date period ended September 27, 2023, the Company recorded an income tax provision of $ 7.7 million, reflecting an estimated effective tax rate of approximately 26.5 % .

For the year-to-date period ended September 28, 2022, the Company recorded an income tax provision of $ 5.7 million, reflecting an estimated effective tax rate of approximately 28.7 % .

The difference between the 21.0 % statutory rate and the effective tax rate of 26.5 % for the year-to-date period ended September 27, 2023 is primarily a result of state taxes , a non-deductible executive compensation, partially offset by a Work Opportunity Tax Credit benefit .

PROPERTY AND EQUIPMENT

The costs and related accumulated depreciation and amortization of major classes of property and equipment are as follows (in thousands):

June 28, 2023

September 27, 2023

December 28, 2022

3 unchanged sentences

accumulated depreciation and amortization

Depreciation expense was $ 3.7 million and $ 3.6 million for the thirteen weeks ended June 28, 2023 and June 29, 2022, respectively, and $ 7.3 million and $ 7.2 million for the twenty-six weeks ended June 28, 2023 and June 29, 2022, respectively .

Based on the Company’s review of its long-lived assets for impairment, the Company did no t record any non-cash impairment charges for the thirteen and twenty-six weeks ended June 28, 2023.

During the thirteen and twenty-six weeks ended June 29, 2022, the Company recorded non-cash impairment charges of $ 0.2 million and $ 0.3 million , respectively, primarily related to the carrying value of the long-lived assets of one restaurant in California.

Depreciation expense was $ 3.9 million and $ 3.5 million for the thirteen weeks ended September 27, 2023 and September 28, 2022, respectively, and $ 11.3 million and $ 10.7 million for the thirty-nine weeks ended September 27, 2023 and September 28, 2022, respectively .

Based on the Company’s review of its long-lived assets for impairment, the Company recorded non-cash impairment charges of $ 1.0 million for both the thirteen and thirty-nine weeks ended September 27, 2023, primarily related to the carrying value of the long-lived assets of one restaurant in Nevada.

During the thirteen and thirty-nine weeks ended September 28, 2022, the Company recorded non-cash impairment charges of $ 0.1 million and $ 0.4 million , respectively, primarily related to the carrying value of the long-lived assets of one restaurant in California.

See Note 1, “Basis of Presentation and Summary of Significant Accounting Policies – Impairment of Long-Lived Assets and ROU Assets” for additional information.

STOCK-BASED COMPENSATION

At June 28, 2023, options to purchase 1,226,687 shares of common stock were outstanding, including 566,533 vested and 660,154 unvested.

At September 27, 2023, options to purchase 1,169,959 shares of common stock were outstanding, including 480,160 vested and 689,799 unvested.

Unvested options vest over time;

however, upon a change in control, the Board of Directors may accelerate vesting.

At June 28, 2023, there were no premium options, which are options granted above the stock price at date of grant, that were outstanding.

A summary of stock option activity as of June 28, 2023 and changes during the twenty-six weeks ended June 28, 2023 is as follows:

At September 27, 2023, there were no premium options, which are options granted above the stock price at date of grant, that were outstanding.

A summary of stock option activity as of September 27, 2023 and changes during the thirty-nine weeks ended September 27, 2023 is as follows:

Weighted-Average

6 unchanged sentences

Forfeited, cancelled or expired

Outstanding - June 28, 2023

Vested and expected to vest at June 28, 2023

Exercisable at June 28, 2023

Outstanding – September 27, 2023

Vested and expected to vest at September 27, 2023

Exercisable at September 27, 2023

The fair value of each stock option was estimated on the grant date using an exercise price of the closing stock price on the day prior to date of grant and the Black-Scholes option-pricing model with the following weighted average assumptions:

June 28, 2023

June 29, 2022

September 27, 2023

September 28, 2022

Expected volatility

2 unchanged sentences

Expected dividends

At June 28, 2023, the Company had total unrecognized compensation expense of $ 3.0 million related to unvested stock options, which it expects to recognize over a weighted-average period of 3.33 years.

A summary of restricted share activity as of June 28, 2023 and changes during the twenty-six weeks ended June 28, 2023 is as follows:

At September 27, 2023, the Company had total unrecognized compensation expense of $ 3.0 million related to unvested stock options, which it expects to recognize over a weighted-average period of 3.18 years.

A summary of restricted share activity as of September 27, 2023 and changes during the thirty-nine weeks ended September 27, 2023 is as follows:

Weighted-Average

1 unchanged sentence

Forfeited, cancelled, or expired

Unvested shares at June 28, 2023

At June 28, 2023, the Company had unrecognized compensation expense of $ 6.2 million related to unvested restricted shares, which it expects to recognize over a weighted-average period of 2.71 years.

Total stock-based compensation expense was $ 0.8 million and $ 1.6 million for the thirteen and twenty-six weeks ended June 28, 2023, respectively, and $ 1.0 million and $ 1.8 million for the thirteen and twenty-six weeks ended June 29, 2022, respectively.

On October 11, 2022, the Company’s Board of Directors approved a share repurchase program (the “2022 Stock Repurchase Plan”) under which the Company is authorized to repurchase up to $ 20.0 million of shares of its common stock.

The 2022 Stock Repurchase Plan will terminate on March 28, 2024, may be modified, suspended or discontinued at any time, and does not obligate the Company to acquire any particular number of shares.

Under the 2022 Stock Repurchase Plan, the Company is permitted to repurchase its common stock from time to time, in amounts and at prices that the Company deemed appropriate, subject to market conditions and other considerations.

The Company’s repurchases will be executed using open market purchases, including pursuant to Rule 10b5-1 trading plans, and/or through privately negotiated transactions.

For the thirteen and twenty-six weeks ended June 28, 2023, the Company repurchased 1,272,287 and 1,824,636 shares of common stock, respectively, under the 2022 Stock Repurchase Plan, using open market purchases, for total consideration of approximately $ 11.9 million and $ 18.1 million, respectively.

Unvested shares at September 27, 2023

At September 27, 2023, the Company had unrecognized compensation expense of $ 5.4 million related to unvested restricted shares, which it expects to recognize over a weighted-average period of 2.66 years.

Total stock-based compensation expense was $ 0.9 million and $ 2.5 million for the thirteen and thirty-nine weeks ended September 27, 2023, respectively, and $ 1.0 million and $ 2.8 million for the thirteen and thirty-nine weeks ended September 28, 2022, respectively.

On October 11, 2022, the Company’s Board of Directors approved a share repurchase program (the “2022 Stock Repurchase Plan”) under which the Company was authorized to repurchase up to $ 20.0 million of shares of its common stock through March 28, 2024.

Under the 2022 Stock Repurchase Plan, the Company was permitted to repurchase its common stock from time to time, in amounts and at prices that the Company deemed appropriate, subject to market conditions and other considerations.

Pursuant to the 2022 Stock Repurchase Plan, the Company was authorized to effect repurchases using open market purchases, including pursuant to Rule 10b5-1 trading plans, and/or through privately negotiated transactions.

For the thirteen and thirty-nine weeks ended September 27, 2023, the Company repurchased 206,214 and 2,030,850 shares of common stock, respectively, under the 2022 Stock Repurchase Plan, using open market purchases, for total consideration of approximately $ 1.9 million and $ 20.0 million, respectively.

The common stock repurchased under 2022 Stock Repurchase Plan were retired upon repurchase.

As of June 28, 2023, $ 1.9 million remained available for repurchases under the 2022 Stock Repurchase Plan of which the entire balance has been completed subsequent to period end.

The 2022 Stock Repurchase Plan commenced on January 9, 2023, and was completed on July 12, 2023.

On August 7, 2023, the Company entered into a Stock Repurchase Agreement (the “Repurchase Agreement”) with FS Equity Partners V, L.P.

and FS Affiliates V, L.P.

(together, the “Sellers”), pursuant to which the Company agreed to purchase an aggregate of 2,500,000 shares of the Company’s common stock from the Sellers at a price of $ 10.63 per share, representing the closing price of such shares as listed on Nasdaq on August 7, 2023, for a total purchase price of $ 26.6 million.

The repurchase was completed in August 2023.

Prior to the repurchase, Freeman Spogli & Co.

(“Freeman Spogli”), collectively with the Sellers and certain other funds managed by Freeman Spogli, was the Company’s largest stockholder.

In addition, John Roth, a director of the Company until his resignation on August 16, 2023, is a general partner of Freeman Spogli and its chief executive officer.

LONG-TERM DEBT

On July 27, 2022, the Company refinanced and terminated its credit agreement (the “2018 Credit Agreement”) among EPL, as borrower, the Company and Intermediate, as guarantors, Bank of America, N.A., as administrative agent, swingline lender, and letter of credit issuer, the lenders party thereto, and the other parties thereto, which provided for a $ 150.0 million five-year senior secured revolving credit facility (the “2018 Revolver”).

The 2018 Revolver was refinanced pursuant to a credit agreement (the “2022 Credit Agreement”) among EPL, as borrower, the Company and Intermediate, as guarantors, Bank of America, N.A., as administrative agent, swingline lender, and letter of credit issuer, the lenders party thereto, and the other parties thereto, which provides for a $ 150.0 million five-year senior secured revolving credit facility (the “2022 Revolver”).

revolving credit facility (the “2022 Revolver”).

In connection with the refinancing, the 2018 Credit Agreement was terminated.

9 unchanged sentences

Borrowings under the 2022 Revolver may be repaid and reborrowed.

The interest rate range was 6.22 % to 8.50 % and 5.69 % to 8.50 % for the thirteen and twenty-six weeks ended June 28, 2023, under the 2022 Revolver, respectively, and 1.70 % to 2.87 % and 1.35 % to 2.87 % for the thirteen and twenty-six weeks ended June 29, 2022 under the 2018 Revolver, r espectively.

The interest rate range was 6.74 % to 6.93 % and 5.69 % to 8.50 % for the thirteen and thirty-nine weeks ended September 27, 2023, under the 2022 Revolver, respectively, and 2.87 % to 6.00 % and 1.35 % to 6.00 % for the thirteen and thirty-nine weeks ended September 28, 2022, respectively, under the 2022 Revolver and 2018 Revolver .

The 2022 Credit Agreement contains certain financial covenants.

The Company was in compliance with the financial covenants as of June 28, 2023.

At June 28, 2023, $ 9.8 million of letters of credit and $ 60.0 million in borrowings under the 2022 Revolver were outstanding.

The Company had $ 80.2 million in borrowing availability under the 2022 Revolver at June 28, 2023.

The Company was in compliance with the financial covenants as of September 27, 2023.

At September 27, 2023, the Company had $ 80.0 million in outstanding borrowings under the 2022 Revolver and $ 9.8 million of letters of credit that further reduce the amount available under the line of credit to $ 60.2 million in borrowing availability.

Maturities, Borrowings and Paydowns

On July 27, 2022, the Company refinanced and terminated the 2018 Revolver pursuant to the 2022 Credit Agreement.

During the twenty-six weeks ended June 28, 2023 the Company paid down $ 8.0 million on the 2022 Revolver.

During the thirteen weeks ended June 28, 2023 the Company borrowed $ 2.0 million on the 2022 Revolver.

No amounts were paid on the 2018 Revolver during the twenty-six weeks ended June 29, 2022.

There are no required principal payments prior to maturity for the 2022 Revolver.

During the thirteen and thirty-nine weeks ended September 27, 2023 the Company borrowed $ 23.0 million and $ 25.0 million, respectively, and paid down $ 3.0 million and $ 11.0 million, respectively, on the 2022 Revolver.

During both the thirteen and thirty-nine weeks ended September 28, 2022 the Company paid down $ 20.0 million on the 2022 Revolver.

No amounts were borrowed on the 2022 Revolver during the thirty-nine weeks ended September 28, 2022.

There are no required principal payments prior to maturity for the 2022 Revolver which matures on July 27, 2027.

Interest Rate Swap

1 unchanged sentence

The objective of the interest rate swap was to reduce the Company’s exposure to interest rate risk for a portion of its variable-rate interest payments on its borrowings under the 2018 Revolver.

The interest rate swap was designated as a cash flow hedge, as the changes in the future cash flows of the swap were expected to offset changes in expected future interest payments on the related variable-rate debt, in accordance with Accounting Standards Codification (“ASC”) 815 “Derivatives and Hedging.”

The interest rate swap was designated as a cash flow hedge, as the changes in the future cash

flows of the swap were expected to offset changes in expected future interest payments on the related variable-rate debt, in accordance with Accounting Standards Codification (“ASC”) 815 “Derivatives and Hedging.”

In connection with the Company’s entry into the 2022 Credit Agreement, it terminated the interest rate swap on July 28, 2022 which was previously used to hedge interest rate risk.

2 unchanged sentences

The remaining amount in AOCI related to the hedging relationship was reclassified into earnings when the hedged forecasted transaction was reported in earnings.

As of June 28, 2023, there were no estimated net gains to be included in AOCI related to the Company’s cash flow hedge that would be reclassified into earnings, based on current Term SOFR interest rates.

As of September 27, 2023, there were no estimated net gains to be included in AOCI related to the Company’s cash flow hedge that would be reclassified into earnings, based on current Term SOFR interest rates.

The following table summarizes the effect of the Company’s cash flow hedge accounting on the condensed consolidated statements of income (in thousands):

Thirteen Weeks Ended

Twenty-Six Weeks Ended

June 28, 2023

June 29, 2022

June 28, 2023

June 29, 2022

Thirty-Nine Weeks Ended

September 27, 2023

September 28, 2022

September 27, 2023

September 28, 2022

Interest expense on hedged portion of debt

Interest (income) expense on interest rate swap

Interest income on interest rate swap

Interest (income) expense on debt and derivatives, net

The following table summarizes the effect of the Company’s cash flow hedge accounting on AOCI for the thirteen and twenty-six weeks ended June 28, 2023 and June 29, 2022 (in thousands):

The following table summarizes the effect of the Company’s cash flow hedge accounting on AOCI for the thirteen and thirty-nine weeks ended September 27, 2023 and September 28, 2022 (in thousands):

Thirteen Weeks Ended

Twenty-Six Weeks Ended

(Gain) Loss Reclassified from

Thirty-Nine Weeks Ended

Gain Reclassified from

Net Gain Recognized in OCI

AOCI into Interest (Income) Expense

AOCI into Interest Income

Net Gain Recognized in OCI

AOCI into Interest (Income) Expense

June 28, 2023

June 29, 2022

June 28, 2023

June 29, 2022

June 28, 2023

June 29, 2022

June 28, 2023

June 29, 2022

AOCI into Interest Income

September 27, 2023

September 28, 2022

September 27, 2023

September 28, 2022

September 27, 2023

September 28, 2022

September 27, 2023

September 28, 2022

Interest rate swap

2 unchanged sentences

Other accrued expenses and current liabilities consist of the following (in thousands):

June 28, 2023

September 27, 2023

December 28, 2022

8 unchanged sentences

Other noncurrent liabilities consist of the following (in thousands):

June 28, 2023

September 27, 2023

December 28, 2022

10 unchanged sentences

These contracts have terms extending through the end of 2024.

At June 28, 2023, the Company’s total estimated commitment to purchase chicken was $ 24.4 million.

At September 27, 2023, the Company’s total estimated commitment to purchase chicken was $ 14.9 million.

Contingent Lease Obligations

1 unchanged sentence

These leases have various terms, the latest of which expires in 2038 .

As of June 28, 2023, the potential amount of undiscounted payments the Company could be required to make in the event of non-payment by the primary lessee was $ 4.0 million.

The present value of these potential payments discounted at the Company’s estimated pre-tax cost of debt at June 28, 2023 was $ 2.7 million.

As of September 27, 2023, the potential amount of undiscounted payments the Company could be required to make in the event of non-payment by the primary lessee was $ 3.9 million.

The present value of these potential payments discounted at the Company’s estimated pre-tax cost of debt at September 27, 2023 was $ 2.6 million.

The Company’s franchisees are primarily liable on the leases.

2 unchanged sentences

Employment Agreements

As of June 28, 2023, the Company had employment agreements with two of the officers of the Company.

As of September 27, 2023, the Company had employment agreements with two of the officers of the Company.

These agreements provide for minimum salary levels, possible annual adjustments for cost-of-living changes, and incentive bonuses that are payable under certain business conditions.

4 unchanged sentences

EARNINGS PER SHARE

Basic earnings per share (“EPS”) is calculated using the weighted-average number of shares of common stock outstanding during the thirteen and twenty-six weeks ended June 28, 2023 and June 29, 2022.

Basic earnings per share (“EPS”) is calculated using the weighted-average number of shares of common stock outstanding during the thirteen and thirty-nine weeks ended September 27, 2023 and September 28, 2022.

Diluted EPS is calculated using the weighted-average number of shares of common stock outstanding and potentially dilutive during the period, using the treasury stock method.

1 unchanged sentence

Thirteen Weeks Ended

Twenty-Six Weeks Ended

June 28, 2023

June 29, 2022

June 28, 2023

June 29, 2022

Thirty-Nine Weeks Ended

September 27, 2023

September 28, 2022

September 27, 2023

September 28, 2022

Weighted-average shares outstanding—basic

5 unchanged sentences

Thirteen Weeks Ended

Twenty-Six Weeks Ended

June 28, 2023

June 29, 2022

June 28, 2023

June 29, 2022

Thirty-Nine Weeks Ended

September 27, 2023

September 28, 2022

September 27, 2023

September 28, 2022

Weighted-average shares outstanding—basic

5 unchanged sentences

The Trimaran Group intends to subsequently liquidate or distribute its remaining assets and wind up.

On August 7, 2023, the Company entered into the “Repurchase Agreement with the Sellers, pursuant to which the Company agreed to purchase an aggregate of 2,500,000 shares of the Company’s common stock from the Sellers at a price of $ 10.63 per share, representing the closing price of such shares as listed on Nasdaq on August 7, 2023, for a total purchase price of $ 26.6 million.

The repurchase was completed in August 2023.

Prior to the repurchase, Freeman Spogli, collectively with the Sellers and certain other funds managed by Freeman Spogli, was the Company’s largest stockholder.

In addition, John Roth, a director of the Company until his resignation on August 16, 2023, is a general partner of Freeman Spogli and its chief executive officer.

REVENUE FROM CONTRACTS WITH CUSTOMERS

11 unchanged sentences

A portion of the transaction price is allocated to loyalty points, if necessary, on a pro-rata basis, based on stand-alone selling price, as determined by menu pricing and loyalty points terms.

As of both June 28, 2023 and December 28, 2022, the revenue allocated to loyalty points that have not been redeemed was $ 0.5 million, which is reflected in the Company’s accompanying condensed consolidated balance sheets within other accrued expenses and current liabilities.

As of September 27, 2023 and December 28, 2022, the revenue allocated to loyalty points that have not been redeemed was $ 0.6 million and $ 0.5 million, respectively, which is reflected in the Company’s accompanying condensed consolidated balance sheets within other accrued expenses and current liabilities.

The Company expects the loyalty points to be redeemed and recognized over a one-year period.

22 unchanged sentences

As the Company is considered the principal in this relationship, payment for the hardware is considered revenue, and is received upon transfer of the goods from the Company to the franchisee.

As of June 28, 2023, there were no performance obligations related to hardware services that were unsatisfied or partially satisfied.

As of September 27, 2023, there were no performance obligations related to hardware services that were unsatisfied or partially satisfied.

Disaggregated revenue

1 unchanged sentence

Thirteen Weeks Ended

Twenty-Six Weeks Ended

June 28, 2023

June 29, 2022

June 28, 2023

June 29, 2022

Thirty-Nine Weeks Ended

September 27, 2023

September 28, 2022

September 27, 2023

September 28, 2022

Core Market (1) :

13 unchanged sentences

Thirteen Weeks Ended

Twenty-Six Weeks Ended

June 28, 2023

June 29, 2022

June 28, 2023

June 29, 2022

Thirty-Nine Weeks Ended

September 27, 2023

September 28, 2022

September 27, 2023

September 28, 2022

Greater Los Angeles area market

1 unchanged sentence

Contract balances

The following table provides information about the change in the franchise contract liability balances during the twenty-six weeks ended June 28, 2023 and June 29, 2022 (in thousands):

The following table provides information about the change in the franchise contract liability balances during the thirty-nine weeks ended September 27, 2023 and September 28, 2022 (in thousands):

December 28, 2022

1 unchanged sentence

Additional contract liability

June 28, 2023

September 27, 2023

December 29, 2021

1 unchanged sentence

Additional contract liability

June 29, 2022

September 28, 2022

The Company’s franchise contract liability includes development fees, initial franchise and license fees, franchise renewal fees, lease subsidies and royalty discounts and is included within other accrued expenses and current liabilities and other noncurrent liabilities within the accompanying condensed consolidated balance sheets.

The Company receives area development fees from franchisees when they execute multi-unit area development agreements.

Initial franchise and license fees, or franchise renewal fees, are received from franchisees upon the execution of, or renewal of, a franchise agreement.

Initial franchise and license fees, or franchise renewal fees, are received from franchisees upon the execution of, or renewal of, a franchise

Revenue is recognized from these agreements as the underlying performance obligation is satisfied, which is over the term of the agreement.

The following table illustrates the estimated revenue to be recognized in future periods related to performance obligations under the applicable contracts that are unsatisfied as of June 28, 2023 (in thousands):

Franchise revenues:

Changes in the loyalty rewards program liability included in deferred revenue within other accrued expenses and current liabilities on the condensed consolidated balance sheets were as follows (in thousands):

June 28, 2023

September 27, 2023

December 28, 2022

3 unchanged sentences

Loyalty rewards liability, ending balance

The Company expects all loyalty points revenue related to performance obligations unsatisfied as of June 28, 2023 to be recognized within one year .

The Company expects all loyalty points revenue related to performance obligations unsatisfied as of September 27, 2023 to be recognized within one year .

The gift card liability included in other accrued expenses and current liabilities on the condensed consolidated balance sheets was as follows (in thousands):

June 28, 2023

September 27, 2023

December 28, 2022

2 unchanged sentences

Thirteen Weeks Ended

Twenty-Six Weeks Ended

June 28, 2023

June 29, 2022

June 28, 2023

June 29, 2022

Thirty-Nine Weeks Ended

September 27, 2023

September 28, 2022

September 27, 2023

September 28, 2022

Revenue recognized from gift card liability balance at the beginning of the year

4 unchanged sentences

Additionally, the Company has various contracts with vendors that have been determined to contain an embedded lease in accordance with Topic 842.

As of June 28, 2023, the Company had one lease that it had entered into, but had not yet commenced.

As of September 27, 2023, the Company had one lease that it had entered into, but had not yet commenced.

The Company does not have control of the property until lease commencement.

9 unchanged sentences

Furthermore, there are no residual value guarantees and no restrictions imposed by the lease.

During the thirteen and twenty-six weeks ended June 28, 2023, the Company reassessed the lease terms on 10 and 22 restaurants, respectively, due to certain triggering events, such as the addition of significant leasehold improvements with useful lives that extend past the current lease expiration, the decision to terminate a lease, or the decision to renew.

As a result of the reassessment, an additional $ 3.5 million and $ 13.6 million of ROU asset and lease liabilities for the thirteen and twenty-six weeks ended June 28, 2023, respectively, were recognized and will be amortized over the new lease term.

During the thirteen and twenty-six weeks ended June 29, 2022, the Company reassessed the lease terms on nine and 13 restaurants, respectively, due to certain triggering events, such as the addition of significant leasehold improvements with useful lives that extend past the current lease expiration, the decision to terminate a lease, or the decision to renew.

This reassessment resulted in an additional $ 6.0 million and $ 8.5 million of ROU asset and lease liabilities for the thirteen and twenty-six weeks ended June 29, 2022, respectively, which were recognized and will be amortized over the new lease term.

The reassessments had an impact on the original lease classification of one property during the thirteen weeks ended June 29, 2022 which represented $ 0.7 million of the $ 6.0 million total additional ROU asset and lease liabilities for the period.

During the thirteen and thirty-nine weeks ended September 27, 2023, the Company reassessed the lease terms on five and 27 restaurants, respectively, due to certain triggering events, such as the addition of significant leasehold improvements with useful lives that extend past the current lease expiration, the decision to terminate a lease, or the decision to renew.

As a result of the reassessment, an additional $ 1.9 million and $ 15.4 million of ROU asset and lease liabilities for the thirteen and thirty-nine weeks ended September 27, 2023, respectively, were recognized and will be amortized over the new lease term.

During the thirteen and thirty-nine weeks ended September 28, 2022, the Company reassessed the lease terms on five and 18 restaurants, respectively, due to certain triggering events, such as the addition of significant leasehold improvements with useful lives that extend past the current lease expiration, the decision to terminate a lease, or the decision to renew.

This reassessment resulted in an additional $ 2.0 million and $ 10.5 million of ROU asset and lease liabilities for the thirteen and thirty-nine weeks ended September 28, 2022, respectively, which were recognized and will be amortized over the new lease term.

The reassessments had an impact on the original lease classification of one property during the thirty-nine weeks ended September 28, 2022 which represented $ 0.7 million of the $ 10.5 million total additional ROU asset and lease liabilities for the period.

Additionally, as the Company adopted all practical expedients available under Topic 842, no reallocation between lease and non-lease components was necessary.

4 unchanged sentences

The Company does not have any related party leases.

During the twenty-six weeks ended June 28, 2023, the Company recorded a less than $ 0.1 million non-cash impairment charge primarily related to the carrying value of ROU assets of one restaurant in California.

The Company did no t record any non-cash impairment charge for the twenty-six weeks ended June 29, 2022.

See Note 1, “Basis of Presentation and

Summary of Significant Accounting Policies – Impairment of Long-Lived Assets and ROU Assets” for additional information.

During the thirty-nine weeks ended September 27, 2023, the Company recorded a less than $ 0.1 million non-cash impairment charge primarily related to the carrying value of ROU assets of one restaurant in California.

During the thirty-nine weeks ended September 28, 2022, the Company recorded a less than $ 0.1 million non-cash impairment charge related to the carrying value of ROU assets of one restaurant in California.

See Note 1, “Basis of Presentation and Summary of Significant Accounting Policies – Impairment of Long-Lived Assets and ROU Assets” for additional information.

Leases of equipment primarily consist of restaurant equipment, copiers and vehicles.

11 unchanged sentences

Thirteen Weeks Ended

June 28, 2023

June 29, 2022

September 27, 2023

September 28, 2022

Finance lease cost:

6 unchanged sentences

Total lease cost

Twenty-Six Weeks Ended

June 28, 2023

June 29, 2022

Thirty-Nine Weeks Ended

September 27, 2023

September 28, 2022

Finance lease cost:

8 unchanged sentences

Thirteen Weeks Ended

Twenty-Six Weeks Ended

June 28, 2023

June 29, 2022

June 28, 2023

June 29, 2022

Thirty-Nine Weeks Ended

September 27, 2023

September 28, 2022

September 27, 2023

September 28, 2022

Lease cost – Occupancy and other operating expenses

4 unchanged sentences

Total lease cost

During the twenty-six weeks ended June 28, 2023 and June 29, 2022, the Company had the following cash and non-cash activities associated with its leases (dollars in thousands):

Twenty-Six Weeks Ended June 28, 2023

Twenty-Six Weeks Ended June 29, 2022

During the thirty-nine weeks ended September 27, 2023 and September 28, 2022, the Company had the following cash and non-cash activities associated with its leases (dollars in thousands):

Thirty-Nine Weeks Ended September 27, 2023

Thirty-Nine Weeks Ended September 28, 2022

Cash paid for amounts included in the measurement of lease liabilities

12 unchanged sentences

Weighted-average discount rate—operating leases

Information regarding the Company’s minimum future lease obligations as of June 28, 2023 is as follows (in thousands):

Information regarding the Company’s minimum future lease obligations as of September 27, 2023 is as follows (in thousands):

Finance Leases

19 unchanged sentences

Additionally, there are no related party leases.

The Company received $ 0.1 million of lease income from company-owned locations for each of the thirteen weeks ended June 28, 2023 and June 29, 2022.

The Company received $ 0.1 million and $ 0.2 million of lease income from company-owned locations for the twenty-six weeks ended June 28, 2023 and June 29, 2022, respectively.

The Company received $ 0.1 million of lease income from company-owned locations for each of the thirteen weeks ended September 27, 2023 and September 28, 2022.

The Company received $ 0.2 million and $ 0.3 million of lease income from company-owned locations for the thirty-nine weeks ended September 27, 2023 and September 28, 2022, respectively.

SHAREHOLDER RIGHTS AGREEMENT

On August 8, 2023, the Company’s Board of Directors declared a dividend of one preferred share purchase right (a “Right”) for each share of common stock, par value $ 0.01 per share, of the Company (the “Common Shares”) outstanding on August 18, 2023 to the stockholders of record on that date.

In connection with the distribution of the Rights, the Company entered into a Rights Agreement (the “Rights Agreement”), dated as of August 8, 2023, between the Company and Equiniti Trust Company, LLC, as rights agent.

Each Right entitles the registered holder to purchase from the Company one one-thousandth of a share of Series A Preferred Stock, par value $ 0.01 per share, of the Company (the “Preferred Shares”) at a price of $ 53.75 per one one-thousandth of a Preferred Share represented by a Right, subject to adjustment.

Under the Rights Agreement, the Rights will generally be exercisable only in the event that a person or group of affiliated or associated persons (such person or group being an “Acquiring Person”), other than certain exempt persons, acquires (or commences a tender offer or exchange offer the consummation of which would result in) beneficial ownership of 12.5 % or more of the outstanding Common Shares.

In such case (with certain limited exceptions), each

holder of a Right (other than the Acquiring Person, whose Rights shall become void) will have the right to receive, upon exercise at the then current exercise price of the Right, Common Shares (or, if the Board so elects, cash, securities, or other property) having a value equal to two times the exercise price of the Right.

At any time after any person or group becomes an Acquiring Person, the Board may exchange the Rights at an exchange ratio of one Common Share per Right (subject to adjustment).

If, at any time after a person or group becomes an Acquiring Person, (i) the Company engages in a consolidation or merger and, in connection there with all or part of the Common Shares are or will be changed into or exchanged for stock or other securities of any other person or cash or any other property;

or (ii) 50 % or more of the Company’s consolidated assets or earning power are sold, then each holder of a Right will thereafter have the right to receive, upon exercise at the then current exercise price of the Right, that number of shares of common stock of the acquiring company having a market value of two times the exercise price of the Right.

At any time prior to the time any person or group becomes an Acquiring Person, the Board may redeem the Rights at a price of $ 0.001 per Right (the “Redemption Price”).

Immediately upon any redemption of the Rights, the right to exercise the Rights will terminate and the only right of the holders of Rights will be to receive the Redemption Price.

Until a Right is exercised, the holder thereof, as such, will have no rights as a stockholder of the Company, including, without limitation, the right to vote or to receive dividends.

The Rights will expire at the close of business on August 7, 2024.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements