Texas Roadhouse, Inc. 10-K

ITEM 9A—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 December 29, 2020. Changes in internal control There were no significant changes to the Company’s internal control over financial reporting that occurred during the quarter ended December 29, 2020 that materially affected or are reasonably likely to materially affect, our internal control over financial reporting. Management’s Report on Internal Control over Financial Reporting Under Section 404 of the Sarbanes-Oxley Act of 2002, our management is required to assess the effectiveness of the Company’s internal control over financial reporting as of the end of each fiscal year and report, based on that assessment, whether the Company’s internal control over financial reporting is effective. Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. As defined in Exchange Act Rule 13a-15(f), internal control over financial reporting is a process designed by, or under the supervision of, our principal executive and principal financial officers and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Therefore, internal control over financial reporting determined to be effective can provide only reasonable assurance with respect to financial statement preparation and may not prevent or detect all misstatements. Under the supervision and with the participation of our management, including our CEO and CFO, we assessed the effectiveness of the Company’s internal control over financial reporting as of the end of the period covered by this report. In this assessment, the Company applied criteria based on the "Internal Control—Integrated Framework (2013)" issued by the Committee of Sponsoring Organizations of the Treadway Commission. These criteria are in the areas of control environment, risk assessment, control activities, information and communication, and monitoring. The Company’s assessment included documenting, evaluating and testing the design and operating effectiveness of its internal control over financial reporting. Based upon this evaluation, our management concluded that our internal control over financial reporting was effective as of December 29, 2020. KPMG LLP, the independent registered public accounting firm that audited our Consolidated Financial Statements included in the Annual Report on Form 10-K, has also audited the effectiveness of the Company’s internal control over financial reporting as of December 29, 2020 as stated in their report at F-3. ITEM 9B—OTHER INFORMATION None. ​ 57 Table of Contents PART III ITEM 10—DIRECTORS, EXECUTIV E OFFICERS AND CORPORATE GOVERNANCE Information regarding our directors is incorporated herein by reference to the information set forth under "Election of Directors" in our Definitive Proxy Statement to be dated on or about April 2, 2021. Information regarding our executive officers has been included in Part I of this Annual Report under the caption "Executive Officers of the Company." Information regarding our corporate governance is incorporated herein by reference to the information set forth in our Definitive Proxy Statement to be dated on or about April 2, 2021. ITEM 11—EXECUTIVE COMPENSATION Incorporated by reference from our Definitive Proxy Statement to be dated on or about April 2, 2021. ITEM 12—SECURITY OWNERSHI P OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS Incorporated by reference from our Definitive Proxy Statement to be dated on or about April 2, 2021. Equity Compensation Plan Information As of December 29, 2020, shares of common stock authorized for issuance under our equity compensation plans are summarized in the following table. See note 14 to the Consolidated Financial Statements for a description of the plans. ​ ​ ​ ​ ​ ​ ​ Shares to Be Shares ​ ​ Issued Upon ​ Available for Plan Category ​ Vest Date (1) ​ Future Grants Plans approved by stockholders 872,563 ​ 2,340,630 ​ Plans not approved by stockholders — ​ — ​ Total 872,563 ​ 2,340,630 ​ (1) Total number of shares consists of 793,563 restricted stock units and 79,000 performance stock units. Shares in this column are excluded from the Shares Available for Future Grants column. No stock options were outstanding as of December 29, 2020. ​ ITEM 13—CERTAIN RELATIONSHIP S AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE Incorporated by reference from our Definitive Proxy Statement to be dated on or about April 2, 2021. ITEM 14—PRINCIPAL ACCOUNTING FEES AND SERVICES Incorporated by reference from our Definitive Proxy Statement to be dated on or about April 2, 2021. ​ 58 Table of Contents PART IV ITEM 15—EXHIBITS, FINANCIA L STATEMENT SCHEDULES 1. Consolidated Financial Statements ​ Description ​ Page Number in Report Reports of Independent Registered Public Accounting Firm ​ F-1 Consolidated Balance Sheets as of December 29, 2020 and December 31, 2019 ​ F-5 Consolidated Statements of Income and Comprehensive Income for the years ended December 29, 2020, December 31, 2019 and December 25, 2018 ​ F-6 Consolidated Statements of Stockholders’ Equity for the years ended December 29, 2020, December 31, 2019 and December 25, 2018 ​ F-7 Consolidated Statements of Cash Flows for the years ended December 29, 2020, December 31, 2019 and December 25, 2018 ​ F-8 Notes to Consolidated Financial Statements ​ F-9 2. Financial Statement Schedules Omitted due to inapplicability or because required information is shown in our Consolidated Financial Statements or notes thereto. 3. Exhibits ​ Exhibit No. ​ Description 3.1 ​ Amended and Restated Certificate of Incorporation of Registrant (incorporated by reference to Exhibit 3.1 of the Registrant’s Quarterly Report on Form 10-Q for the period ended June 28, 2016) (File No. 000- 50972) 3.2 ​ Bylaws of Registrant (incorporated by reference to Exhibit 3.3 to the Registration Statement on Form S-1 of Registrant (File No. 333-115259)) 4.1 ​ Registration Rights Agreement, dated as of May 7, 2004, among Registrant and others (incorporated by reference to Exhibit 4.3 to the Registration Statement on Form S-1 of Registrant (File No. 333-115259)) 4.2 ​ Description of Securities (incorporated by reference to Exhibit 4.2 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2019 (File No. 000-50972)) 10.1 ​ Form of Director and Executive Officer Indemnification Agreement (incorporated by reference to Exhibit 10.9 to the Registration Statement on Form S-1 of Registrant (File No. 333-115259)) 10.2 ​ Form of Limited Partnership Agreement and Operating Agreement for certain company-managed Texas Roadhouse restaurants, including schedule of the owners of such restaurants and the aggregate interests held by directors, executive officers and 5% stockholders who are parties to such an agreement (incorporated by reference to Exhibit 10.10 to the Registration Statement on Form S-1 of Registrant (File No. 333-115259)) 10.3 ​ Form of Franchise Agreement and Preliminary Agreement for a Texas Roadhouse restaurant franchise, including schedule of directors, executive officers and 5% stockholders which have entered into either agreement (incorporated by reference to Exhibit 10.14 to the Registration Statement on Form S-1 of Registrant (File No. 333-115259)) 10.4 ​ Schedule of the owners of company-managed Texas Roadhouse restaurants and the aggregate interests held by directors, executive officers and 5% stockholders who are parties to Limited Partnership Agreements and Operating Agreements as of December 29, 2020 the form of which is set forth in Exhibit 10.2 of this Form 10-K 10.5 ​ Schedule of the directors, executive officers and 5% stockholders which have entered into Franchise Agreements or Preliminary Agreements for a Texas Roadhouse Franchise as of December 29, 2020 the form of which is set forth in Exhibit 10.3 of this Form 10-K 10.6* ​ Texas Roadhouse, Inc. 2013 Long-Term Incentive Plan (incorporated by reference from Appendix A to the Texas Roadhouse, Inc. Proxy Statement on Schedule 14A filed with the Securities and Exchange Commission on April 5, 2013 (File No. 000-50972)) 59 Table of Contents ​ Exhibit No. ​ Description 10.7* ​ Form of Restricted Stock Unit Award under the Texas Roadhouse, Inc. 2013 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.2 of Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 25, 2013 (File No. 000-50972)) 10.8* ​ Texas Roadhouse, Inc. Cash Bonus Plan for cash incentive awards granted pursuant to the Texas Roadhouse, Inc. 2013 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.3 of Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 25, 2013 (File No. 000-50972)) 10.9* ​ Employment Agreement between the Registrant and W. Kent Taylor entered into as of December 26, 2017 (incorporated by reference to Exhibit 10.25 to the Registrant’s Annual Report on Form 10-K for the year ended December 25, 2018 (File No. 000-50972)) 10.10* ​ Employment Agreement between the Registrant and S. Chris Jacobsen entered into as of December 26, 2017 (incorporated by reference to Exhibit 10.28 to the Registrant’s Annual Report on Form 10-K for the year ended December 26, 2017 (File No. 000-50972)) 10.11* ​ Form of Performance Stock Unit Award Agreement under the Texas Roadhouse, Inc. 2013 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.36 to the Registrant’s Annual Report on Form 10-K for the year ended December 29, 2015 (File No. 000-50972)) 10.12* ​ Employment Agreement between Texas Roadhouse Management Corp. and Tonya Robinson entered into as of May 18, 2018 (incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 26, 2018 (File No. 000-50972)) 10.13* ​ Employment Agreement between Texas Roadhouse Management Corp. and Doug Thompson entered into as of August 23, 2018 (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 25, 2018 (File No. 000-50972)) 10.14* ​ Amended and Restated Form of Restricted Stock Unit Award Agreement under the Texas Roadhouse, Inc. 2013 Long-Term Incentive Plan for officers (incorporated by reference to Exhibit 10.40 to the Registrant’s Annual Report on Form 10-K for the year ended December 30, 2014 (File No. 000-50972)) 10.15* ​ Amended and Restated Form of Restricted Stock Unit Award Agreement under the Texas Roadhouse, Inc. 2013 Long-Term Incentive Plan for non-officers (incorporated by reference to Exhibit 10.41 to the Registrant’s Annual Report on Form 10-K for the year ended December 30, 2014 (File No. 000-50972)) 10.16* ​ Second Amended and Restated Deferred Compensation Plan of Texas Roadhouse Management Corp., as amended December 19, 2007 and December 31, 2008 (incorporated by reference to Exhibit 10.42 to the Registrant’s Annual Report on Form 10-K for the year ended December 30, 2014 (File No. 000-50972)) 10.17* ​ Third Amended and Restated Deferred Compensation Plan of Texas Roadhouse Management Corp., effective January 1, 2010 (incorporated by reference to Exhibit 10.43 to the Registrant’s Annual Report on Form 10-K for the year ended December 30, 2014 (File No. 000-50972)) 10.18* ​ Form of Nonqualified Stock Option Agreement under Texas Roadhouse, Inc. 2013 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.47 to the Registrant’s Annual Report on Form 10-K for the year ended December 29, 2015 (File No. 000-50972)) 10.19 ​ Master Lease Agreement dated October 26, 2018 between Paragon Centre Holdings, LLC and Texas Roadhouse Holdings LLC (incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 25, 2018 (File No. 000-50972)) 10.20 ​ Consent Decree dated March 31, 2017, among Texas Roadhouse, Inc., Texas Roadhouse Holdings LLC, Texas Roadhouse Management Corp. and the EEOC (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated March 31, 2017 (File No. 000-50972)) 10.23 ​ Amended and Restated Credit Agreement dated as of August 7, 2017, by and among Texas Roadhouse Inc., and the lenders named therein and JPMorgan Chase Bank, N.A., as Administrative Agent (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated August 7, 2017 (File No. 000-50972)) 10.24* ​ Consulting Agreement and General Release of Claims between Scott M. Colosi and Texas Roadhouse, Inc., Texas Roadhouse Holdings LLC and Texas Roadhouse Management Corp. entered into July 3, 2019 (incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K dated July 3, 2019 (File No. 000-50972)) 60 Table of Contents ​ Exhibit No. ​ Description 10.25* ​ Executive Transition and Consulting Agreement between Celia Catlett and Texas Roadhouse, Inc., Texas Roadhouse Holdings LLC and Texas Roadhouse Management Corp. entered into on August 21, 2019 (incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K dated August 21, 2019 (File No. 000-50972)) 10.26 ​ Assignment and Assumption Agreement between Texas Roadhouse Holdings LLC and Texas Roadhouse, Inc. dated October 26, 2018 (incorporated by reference to Exhibit 10.27 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2019 (File No. 000-50972)) 10.27 ​ First Amendment to Paragon Centre Master Lease Agreement between Paragon Centre Holdings, LLC and Texas Roadhouse, Inc. dated December 13, 2019 (incorporated by reference to Exhibit 10.28 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2019 (File No. 000-50972)) 10.28* ​ First Amendment to 2018 Employment Agreement between Texas Roadhouse Management Corp. and W. Kent Taylor dated March 24, 2020 (incorporated by reference to Exhibit 10.1 the Registrant's Current Report on 8-K dated March 24, 2020 (File No. 000-50972)) 10.29* ​ First Amendment to 2018 Employment Agreement between Texas Roadhouse Management Corp. and Doug Thompson dated April 6, 2020 (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on 8-K dated April 6, 2020 (File No. 000-50972)) 10.30* ​ First Amendment to 2018 Employment Agreement between Texas Roadhouse Management Corp. and S. Chris Jacobsen dated April 6, 2020 (incorporated by reference to Exhibit 10.2 to the Registrant's Current Report on 8-K dated April 6, 2020 (File No. 000-50972)) 10.31* ​ First Amendment to 2018 Employment Agreement between Texas Roadhouse Management Corp. and Tonya Robinson dated April 6, 2020 (incorporated by reference to Exhibit 10.3 to the Registrant's Current Report on 8-K dated April 6, 2020 (File No. 000-50972)) 10.32 ​ First Amendment to Amended and Restated Credit Agreement, dated as of May 11, 2020, by and among Texas Roadhouse, Inc., and the lenders named therein and JPMorgan Chase Bank, N.A. as Administrative Agent (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on 8-K dated May 11, 2020 (File No. 000-50972)) 10.33* ​ Employment Agreement between Registrant and Gerald L. Morgan entered into as of December 17, 2020 10.34* ​ Employment Agreement between Registrant and W. Kent Taylor entered into as of December 30, 2020 10.35* ​ Employment Agreement between Registrant and Doug Thompson entered into as of December 30, 2020 10.36* ​ Employment Agreement between Registrant and S. Chris Jacobsen entered into as of December 30, 2020 10.37* ​ Employment Agreement between Registrant and Tonya Robinson entered into as of December 30, 2020 21.1 ​ List of Subsidiaries 23.1 ​ Consent of KPMG LLP, Independent Registered Public Accounting Firm 31.1 ​ Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2 ​ Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1 ​ Certification of Chief 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 Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 101 ​ The following financial statements from the Texas Roadhouse, Inc. Annual Report on Form 10-K for the year ended December 29, 2020, filed February 26, 2021, formatted in inline eXtensible Business Reporting Language (iXBRL): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Income and Comprehensive Income, (iii) Consolidated Statements of Stockholders’ Equity, (iv) Consolidated Statements of Cash Flows, and (v) the Notes to the Consolidated Financial Statements. 104 ​ Cover page, formatted in iXBRL and contained in Exhibit 101. 61 Table of Contents * Management contract or compensatory plan or arrangement required to be filed as an exhibit to Form 10-K. ​ ITEM 16. FORM 10-K SUMMARY Not applicable. ​ 62 Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ​ TEXAS ROADHOUSE, INC. ​ ​ ​ By: /s/ W. Kent Taylor ​ ​ W. Kent Taylor ​ ​ Chairman of the Company, Chief Executive ​ ​ Officer, Director ​ Date: February 26, 2021 ​ Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Annual Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date ​ ​ ​ ​ ​ /s/ W. Kent Taylor W. Kent Taylor ​ Chairman of the Company, Chief Executive Officer, Director (Principal Executive Officer) ​ February 26, 2021 ​ ​ ​ ​ ​ /s/ Tonya R. Robinson Tonya R. Robinson ​ Chief Financial Officer (Principal Financial Officer) (Principal Accounting Officer) ​ February 26, 2021 ​ ​ ​ ​ ​ /s/ Michael A. Crawford Michael A. Crawford ​ Director ​ February 26, 2021 ​ ​ ​ ​ ​ /s/ Gregory N. Moore Gregory N. Moore ​ Director ​ February 26, 2021 ​ ​ ​ ​ ​ /s/ Curtis A. Warfield ​ Director ​ February 26, 2021 Curtis A. Warfield ​ ​ ​ ​ ​ ​ ​ ​ ​ /s/ Kathleen M. Widmer Kathleen M. Widmer ​ Director ​ February 26, 2021 ​ ​ ​ ​ ​ /s/ James R. Zarley James R. Zarley ​ Director ​ February 26, 2021 ​ ​ ​ 63 Table of Contents Report of Independent Registered Public Accounting Firm ​ To the Stockholders and Board of Directors Texas Roadhouse, Inc.: Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of Texas Roadhouse, Inc. and subsidiaries (the Company) as of December 29, 2020 and December 31, 2019, the related consolidated statements of income and comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 29, 2020, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 29, 2020 and December 31, 2019, and the results of its operations and its cash flows for each of the years in the three-year period ended December 29, 2020, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 29, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 26, 2021 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting. Change in Accounting Principle As discussed in Note 2 to the consolidated financial statements, effective December 26, 2018, the Company changed its method of accounting for leases due to the adoption of Financial Accounting Standards Board Accounting Standard Codification Topic 842, Leases . Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Potential indicators of impairment of long-lived assets ​ As discussed in Notes 2 and 16 to the consolidated financial statements, the Company assesses long-lived assets, primarily related to restaurants held and used in the business, including property and equipment and F-1 Table of Contents right-of-use assets, for potential impairment whenever events or changes in circumstances indicate that the carrying amount of a restaurant, or asset group, may not be recoverable. Trailing 12-month cash flows under predetermined amounts at the individual restaurant level are the Company’s primary indicator that the carrying amount of a restaurant may not be recoverable. Property and equipment, net of accumulated depreciation, and the operating lease right-of-use asset, net as of December 29, 2020 were $1,088.6 million and $530.6 million, respectively. ​ We identified the assessment of the Company’s determination of potential indicators of impairment of long-lived assets as a critical audit matter. Subjective auditor judgement was required to evaluate the events or circumstances indicating the carrying amount of an asset group may not be recoverable, including the determination of the cash flow thresholds, the utilization of the trailing 12-month cash flows to identify a potential impairment trigger, and the consideration of the impact of the pandemic on the Company’s cash flows. ​ The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s long-lived asset impairment process, including controls relating to determination and identification of potential indicators of impairment. We evaluated the Company’s methodology of using trailing 12-month cash flow results under predetermined thresholds at the individual restaurant level as a potential indicator of impairment. Specifically, we evaluated the Company’s assessment of the factors considered, including the cash flows at the individual restaurant level and the cash flow thresholds used in the Company’s analysis, as well as the impact of the pandemic. We tested that those restaurants with trailing 12-month cash flows were evaluated for potential impairment triggers and we compared the trailing 12-month cash flows to historical financial data. We also assessed other events and circumstances that could have been indicative of a potential impairment trigger by reviewing management’s development reports and related meeting minutes and the board of directors meeting minutes. ​ /s/ KPMG LLP We have served as the Company’s auditor since 1998. Louisville, Kentucky February 26, 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ F-2 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and Board of Directors Texas Roadhouse, Inc.: Opinion on Internal Control Over Financial Reporting We have audited Texas Roadhouse, Inc. and subsidiaries (the Company) internal control over financial reporting as of December 29, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 29, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 29, 2020 and December 31, 2019, the related consolidated statements of income and comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 29, 2020, and the related notes (collectively, the consolidated financial statements), and our report dated February 26, 2021 expressed an unqualified opinion on those consolidated financial statements. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become F-3 Table of Contents inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ KPMG LLP Louisville, Kentucky February 26, 2021 ​ ​ ​ ​ ​ F-4 Table of Contents Texas Roadhouse, Inc. and Subsidiaries Consolidated Balance Sheet s (in thousands, except share and per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 29, 2020 ​ December 31, 2019 Assets ​ ​ ​ ​ ​ ​ ​ ​ Current assets: ​ ​ ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ ​ $ 363,155 ​ $ 107,879 ​ Receivables, net of allowance for doubtful accounts of $ 11 at December 29, 2020 and $ 12 at December 31, 2019 ​ ​ 98,418 ​ 99,305 ​ Inventories, net ​ ​ 22,364 ​ 20,267 ​ Prepaid income taxes ​ ​ 4,502 ​ 2,015 ​ Prepaid expenses and other current assets ​ ​ 22,212 ​ 18,433 ​ Total current assets ​ ​ 510,651 ​ 247,899 ​ Property and equipment, net of accumulated depreciation of $ 763,700 at December 29, 2020 and $ 678,988 at December 31, 2019 ​ ​ 1,088,623 ​ 1,056,563 ​ Operating lease right-of-use assets, net ​ ​ ​ 530,625 ​ ​ 499,801 ​ Goodwill ​ ​ 127,001 ​ 124,748 ​ Intangible assets, net of accumulated amortization of $ 14,341 at December 29, 2020 and $ 14,141 at December 31, 2019 ​ ​ 2,271 ​ 1,234 ​ Other assets ​ ​ 65,990 ​ 53,320 ​ Total assets ​ ​ $ 2,325,161 ​ $ 1,983,565 ​ Liabilities and Stockholders’ Equity ​ ​ ​ ​ ​ ​ ​ ​ Current liabilities: ​ ​ ​ ​ ​ ​ ​ ​ Current portion of operating lease liabilities ​ ​ $ 19,271 ​ $ 17,263 ​ Current maturities of long-term debt ​ ​ ​ 50,000 ​ ​ — ​ Accounts payable ​ ​ ​ 66,977 ​ ​ 61,653 ​ Deferred revenue-gift cards ​ ​ 232,812 ​ 209,258 ​ Accrued wages and payroll taxes ​ ​ 51,982 ​ 39,699 ​ Income taxes payable ​ ​ ​ 2,859 ​ ​ — ​ Accrued taxes and licenses ​ ​ 24,751 ​ 30,433 ​ Other accrued liabilities ​ ​ 57,666 ​ 58,914 ​ Total current liabilities ​ ​ 506,318 ​ 417,220 ​ Operating lease liabilities, net of current portion ​ ​ ​ 572,171 ​ ​ 538,710 ​ Long-term debt ​ ​ 190,000 ​ — ​ Restricted stock and other deposits ​ ​ 7,481 ​ 8,249 ​ Deferred tax liabilities, net ​ ​ 2,802 ​ 22,695 ​ Other liabilities ​ ​ 103,338 ​ 65,522 ​ Total liabilities ​ ​ 1,382,110 ​ 1,052,396 ​ Texas Roadhouse, Inc. and subsidiaries stockholders’ equity: ​ ​ ​ ​ ​ ​ ​ ​ Preferred stock ($ 0.001 par value, 1,000,000 shares authorized; no shares issued or outstanding) ​ ​ — ​ — ​ Common stock ( $ 0.001 par value, 100,000,000 shares authorized, 69,561,861 and 69,400,252 shares issued and outstanding at December 29, 2020 and December 31, 2019, respectively) ​ ​ 70 ​ 69 ​ Additional paid-in-capital ​ ​ 145,626 ​ 140,501 ​ Retained earnings ​ ​ 781,915 ​ 775,649 ​ Accumulated other comprehensive loss ​ ​ ( 106 ) ​ ( 225 ) ​ Total Texas Roadhouse, Inc. and subsidiaries stockholders’ equity ​ ​ 927,505 ​ 915,994 ​ Noncontrolling interests ​ ​ 15,546 ​ 15,175 ​ Total equity ​ ​ 943,051 ​ 931,169 ​ Total liabilities and equity ​ ​ $ 2,325,161 ​ $ 1,983,565 ​ ​ See accompanying notes to Consolidated Financial Statements. ​ F-5 Table of Contents Texas Roadhouse, Inc. and Subsidiaries Consolidated Statements of Income and Comprehensive Incom e (in thousands, except per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year Ended ​ ​ ​ December 29, December 31, December 25, ​ 2020 ​ 2019 ​ 2018 Revenue: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Restaurant and other sales ​ ​ $ 2,380,177 ​ $ 2,734,177 ​ $ 2,437,115 ​ Franchise royalties and fees ​ ​ ​ 17,946 ​ ​ 21,986 ​ ​ 20,334 ​ Total revenue ​ ​ 2,398,123 ​ 2,756,163 ​ 2,457,449 ​ Costs and expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Restaurant operating costs (excluding depreciation and amortization shown separately below): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Food and beverage ​ ​ 780,646 ​ 883,357 ​ 795,300 ​ Labor ​ ​ 875,764 ​ 905,614 ​ 793,384 ​ Rent ​ ​ 54,401 ​ 52,531 ​ 48,791 ​ Other operating ​ ​ 403,726 ​ 418,448 ​ 375,477 ​ Pre-opening ​ ​ 20,099 ​ 20,156 ​ 19,051 ​ Depreciation and amortization ​ ​ 117,877 ​ 115,544 ​ 101,216 ​ Impairment and closure, net ​ ​ 2,263 ​ ( 899 ) ​ 278 ​ General and administrative ​ ​ 119,503 ​ 149,389 ​ 136,163 ​ Total costs and expenses ​ ​ 2,374,279 ​ 2,544,140 ​ 2,269,660 ​ Income from operations ​ ​ 23,844 ​ 212,023 ​ 187,789 ​ Interest expense (income), net ​ ​ 4,091 ​ ( 1,514 ) ​ 591 ​ Equity (loss) income from investments in unconsolidated affiliates ​ ​ ( 500 ) ​ 378 ​ 1,353 ​ Income before taxes ​ ​ ​ 19,253 ​ ​ 213,915 ​ ​ 188,551 ​ Income tax (benefit) expense ​ ​ ( 15,672 ) ​ 32,397 ​ 24,257 ​ Net income including noncontrolling interests ​ ​ ​ 34,925 ​ ​ 181,518 ​ ​ 164,294 ​ Less: Net income attributable to noncontrolling interests ​ ​ 3,670 ​ 7,066 ​ 6,069 ​ Net income attributable to Texas Roadhouse, Inc. and subsidiaries ​ ​ $ 31,255 ​ $ 174,452 ​ $ 158,225 ​ Other comprehensive income (loss), net of tax: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Foreign currency translation adjustment, net of tax of ($ 40 ), ($ 1 ) and $ 53 , respectively ​ ​ ​ 119 ​ ​ 3 ​ ​ ( 189 ) ​ Total comprehensive income ​ ​ $ 31,374 ​ $ 174,455 ​ $ 158,036 ​ Net income per common share attributable to Texas Roadhouse, Inc. and subsidiaries: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic ​ ​ $ 0.45 ​ $ 2.47 ​ $ 2.21 ​ Diluted ​ ​ $ 0.45 ​ $ 2.46 ​ $ 2.20 ​ Weighted average shares outstanding: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic ​ ​ 69,438 ​ 70,509 ​ 71,467 ​ Diluted ​ ​ 69,893 ​ 70,916 ​ 71,964 ​ Cash dividends declared per share ​ ​ $ 0.36 ​ $ 1.20 ​ $ 1.00 ​ ​ See accompanying notes to Consolidated Financial Statements. ​ F-6 Table of Contents Texas Roadhouse, Inc. and Subsidiaries Consolidated Statements of Stockholders’ Equit y (tabular amounts in thousands, except share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated Total Texas ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ ​ ​ ​ Other ​ Roadhouse, Inc. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Par ​ Paid-in- ​ Retained ​ Comprehensive ​ and ​ Noncontrolling ​ ​ ​ ​ ​ Shares ​ Value ​ Capital ​ Earnings ​ Loss ​ Subsidiaries ​ Interests ​ Total Balance, December 26, 2017 71,168,897 ​ $ 71 ​ $ 236,548 ​ $ 602,499 ​ $ ( 39 ) ​ $ 839,079 ​ $ 12,312 ​ $ 851,391 ​ Net income — ​ — ​ — ​ 158,225 ​ — ​ 158,225 ​ 6,069 ​ 164,294 ​ Other comprehensive loss, net of tax — ​ — ​ — ​ — ​ ( 189 ) ​ ( 189 ) ​ — ​ ( 189 ) ​ Noncontrolling interests contribution ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 2,551 ​ ​ 2,551 ​ Distributions to noncontrolling interest holders — ​ — ​ — ​ — ​ — ​ — ​ ( 5,746 ) ​ ( 5,746 ) ​ Acquisition of noncontrolling interest ​ — ​ ​ — ​ ​ ( 75 ) ​ ​ ​ ​ ​ ​ ​ ​ ( 75 ) ​ ​ ( 47 ) ​ ​ ( 122 ) ​ Contribution from executive officer ​ — ​ ​ — ​ ​ 1,000 ​ ​ ​ ​ ​ ​ ​ ​ 1,000 ​ ​ — ​ ​ 1,000 ​ Dividends declared ($ 1.00 per share) — ​ — ​ — ​ ( 71,509 ) ​ — ​ ( 71,509 ) ​ — ​ ( 71,509 ) ​ Shares issued under share-based compensation plans including tax effects 684,804 ​ 1 ​ ( 1 ) ​ — ​ — ​ — ​ — ​ — ​ Indirect repurchase of shares for minimum tax withholdings ( 236,191 ) ​ — ​ ( 14,067 ) ​ — ​ — ​ ( 14,067 ) ​ — ​ ( 14,067 ) ​ Cumulative effect of adoption of ASC 606, Revenue from Contracts with Customers , net of tax ​ — ​ ​ — ​ ​ — ​ ​ ( 878 ) ​ ​ — ​ ​ ( 878 ) ​ ​ — ​ ​ ( 878 ) ​ Share-based compensation — ​ — ​ 33,983 ​ — ​ — ​ 33,983 ​ — ​ 33,983 ​ Balance, December 25, 2018 71,617,510 ​ $ 72 ​ $ 257,388 ​ $ 688,337 ​ $ ( 228 ) ​ $ 945,569 ​ $ 15,139 ​ $ 960,708 ​ Net income — ​ — ​ — ​ 174,452 ​ — ​ 174,452 ​ 7,066 ​ 181,518 ​ Other comprehensive income, net of tax ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 3 ​ ​ 3 ​ ​ — ​ ​ 3 ​ Distributions to noncontrolling interest holders — ​ — ​ — ​ — ​ — ​ — ​ ( 6,357 ) ​ ( 6,357 ) ​ Acquisition of noncontrolling interest and other ​ — ​ ​ — ​ ​ ( 70 ) ​ ​ — ​ ​ — ​ ​ ( 70 ) ​ ​ ( 673 ) ​ ​ ( 743 ) ​ Dividends declared ($ 1.20 per share) — ​ — ​ — ​ ( 84,462 ) ​ — ​ ( 84,462 ) ​ — ​ ( 84,462 ) ​ Shares issued under share-based compensation plans including tax effects 617,395 ​ — ​ — ​ — ​ — ​ — ​ — ​ — ​ Indirect repurchase of shares for minimum tax withholdings ( 209,408 ) ​ — ​ ( 12,471 ) ​ — ​ — ​ ( 12,471 ) ​ — ​ ( 12,471 ) ​ Repurchase of shares of common stock ​ ( 2,625,245 ) ​ ​ ( 3 ) ​ ​ ( 139,846 ) ​ ​ — ​ ​ — ​ ​ ( 139,849 ) ​ ​ — ​ ​ ( 139,849 ) ​ Cumulative effect of adoption of ASC 842, Leases, net of tax ​ — ​ ​ — ​ ​ — ​ ​ ( 2,678 ) ​ ​ — ​ ​ ( 2,678 ) ​ ​ — ​ ​ ( 2,678 ) ​ Share-based compensation — ​ — ​ 35,500 ​ — ​ — ​ 35,500 ​ — ​ 35,500 ​ Balance, December 31, 2019 69,400,252 ​ $ 69 ​ $ 140,501 ​ $ 775,649 ​ $ ( 225 ) ​ $ 915,994 ​ $ 15,175 ​ $ 931,169 ​ Net income — ​ — ​ — ​ 31,255 ​ — ​ 31,255 ​ 3,670 ​ 34,925 ​ Other comprehensive income, net of tax ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 119 ​ ​ 119 ​ ​ — ​ ​ 119 ​ Noncontrolling interests contribution ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 133 ​ ​ 133 ​ Distributions to noncontrolling interest holders — ​ — ​ — ​ — ​ — ​ — ​ ( 3,432 ) ​ ( 3,432 ) ​ Dividends declared ($ 0.36 per share) — ​ — ​ — ​ ( 24,989 ) ​ — ​ ( 24,989 ) ​ — ​ ( 24,989 ) ​ Shares issued under share-based compensation plans including tax effects 615,181 ​ 1 ​ ( 1 ) ​ — ​ — ​ — ​ — ​ — ​ Indirect repurchase of shares for minimum tax withholdings ( 201,163 ) ​ — ​ ( 11,684 ) ​ — ​ — ​ ( 11,684 ) ​ — ​ ( 11,684 ) ​ Repurchase of shares of common stock ​ ( 252,409 ) ​ ​ — ​ ​ ( 12,621 ) ​ ​ — ​ ​ — ​ ​ ( 12,621 ) ​ ​ — ​ ​ ( 12,621 ) ​ Share-based compensation — ​ — ​ 29,431 ​ — ​ — ​ 29,431 ​ — ​ 29,431 ​ Balance, December 29, 2020 69,561,861 ​ $ 70 ​ $ 145,626 ​ $ 781,915 ​ $ ( 106 ) ​ $ 927,505 ​ $ 15,546 ​ $ 943,051 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ See accompanying notes to Consolidated Financial Statements. ​ F-7 Table of Contents Texas Roadhouse, Inc. and Subsidiaries Consolidated Statements of Cash Flow s (in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 29, December 31, December 25, ​ ​ 2020 ​ 2019 ​ 2018 Cash flows from operating activities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income including noncontrolling interests ​ ​ $ 34,925 ​ $ 181,518 ​ $ 164,294 ​ Adjustments to reconcile net income to net cash provided by operating activities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Depreciation and amortization ​ ​ 117,877 ​ 115,544 ​ 101,216 ​ Deferred income taxes ​ ​ ( 19,932 ) ​ 6,335 ​ 12,319 ​ Loss on disposition of assets ​ ​ 3,144 ​ 5,885 ​ 6,008 ​ Impairment and closure costs ​ ​ 2,290 ​ ( 1,283 ) ​ 105 ​ Contribution from executive officer ​ ​ ​ — ​ ​ — ​ ​ 1,000 ​ Equity loss (income) from investments in unconsolidated affiliates ​ ​ 500 ​ ( 378 ) ​ ( 1,353 ) ​ Distributions of income received from investments in unconsolidated affiliates ​ ​ 329 ​ 1,837 ​ 656 ​ Provision for doubtful accounts ​ ​ ( 1 ) ​ ( 22 ) ​ ( 9 ) ​ Share-based compensation expense ​ ​ 29,431 ​ 35,500 ​ 33,983 ​ Changes in operating working capital: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Receivables ​ ​ 1,058 ​ ( 5,774 ) ​ ( 15,597 ) ​ Inventories ​ ​ ( 2,017 ) ​ ( 1,414 ) ​ ( 2,495 ) ​ Prepaid expenses and other current assets ​ ​ ( 2,133 ) ​ ( 2,049 ) ​ ( 3,023 ) ​ Other assets ​ ​ ( 12,698 ) ​ ( 12,823 ) ​ ( 4,290 ) ​ Accounts payable ​ ​ 490 ​ 407 ​ 8,882 ​ Deferred revenue—gift cards ​ ​ 23,458 ​ 16,991 ​ 35,519 ​ Accrued wages and payroll taxes ​ ​ 12,283 ​ 5,540 ​ 4,481 ​ Prepaid income taxes and income taxes payable ​ ​ 372 ​ 5,554 ​ ( 8,581 ) ​ Accrued taxes and licenses ​ ​ ( 5,700 ) ​ 5,802 ​ 2,634 ​ Other accrued liabilities ​ ​ 4,099 ​ ( 3,773 ) ​ 7,569 ​ Operating lease right-of-use assets and lease liabilities ​ ​ 4,635 ​ 5,826 ​ — ​ Deferred rent ​ ​ ​ — ​ ​ — ​ ​ 5,938 ​ Other liabilities ​ ​ 38,028 ​ 15,075 ​ 3,612 ​ Net cash provided by operating activities ​ ​ 230,438 ​ 374,298 ​ 352,868 ​ Cash flows from investing activities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Capital expenditures—property and equipment ​ ​ ( 154,401 ) ​ ( 214,340 ) ​ ( 155,980 ) ​ Acquisition of franchise restaurants, net of cash acquired ​ ​ ​ ( 10,580 ) ​ ​ ( 1,536 ) ​ ​ ( 2,165 ) ​ Proceeds from sale of property and equipment ​ ​ ​ 1,709 ​ ​ 1,056 ​ ​ — ​ Proceeds from sale leaseback transaction ​ ​ 2,167 ​ — ​ — ​ Net cash used in investing activities ​ ​ ( 161,105 ) ​ ( 214,820 ) ​ ( 158,145 ) ​ Cash flows from financing activities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Proceeds from revolving credit facility ​ ​ ​ 240,000 ​ ​ — ​ ​ — ​ Debt issuance costs ​ ​ ​ ( 641 ) ​ ​ — ​ ​ — ​ Proceeds from noncontrolling interest contribution ​ ​ ​ 133 ​ ​ — ​ ​ 2,551 ​ Distributions to noncontrolling interest holders ​ ​ ( 3,432 ) ​ ( 6,357 ) ​ ( 5,746 ) ​ Acquisition of noncontrolling interest ​ ​ ​ — ​ ​ ( 743 ) ​ ​ ( 122 ) ​ (Repayments) proceeds from restricted stock and other deposits, net ​ ​ ( 823 ) ​ 62 ​ 418 ​ Indirect repurchase of shares for minimum tax withholdings ​ ​ ( 11,684 ) ​ ( 12,471 ) ​ ( 14,067 ) ​ Repurchase of shares of common stock ​ ​ ​ ( 12,621 ) ​ ​ ( 139,849 ) ​ ​ — ​ Principal payments on long-term debt ​ ​ ​ — ​ ​ — ​ ​ ( 50,000 ) ​ Dividends paid to shareholders ​ ​ ( 24,989 ) ​ ( 102,366 ) ​ ( 68,550 ) ​ Net cash provided by (used in) financing activities ​ ​ 185,943 ​ ( 261,724 ) ​ ( 135,516 ) ​ Net increase (decrease) in cash and cash equivalents ​ ​ 255,276 ​ ( 102,246 ) ​ 59,207 ​ Cash and cash equivalents—beginning of period ​ ​ 107,879 ​ 210,125 ​ 150,918 ​ Cash and cash equivalents—end of period ​ ​ $ 363,155 ​ $ 107,879 ​ $ 210,125 ​ Supplemental disclosures of cash flow information: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest paid, net of amounts capitalized ​ ​ $ 3,890 ​ $ 738 ​ $ 896 ​ Income taxes paid ​ ​ $ 3,776 ​ $ 20,440 ​ $ 20,519 ​ Capital expenditures included in current liabilities ​ ​ $ 14,808 ​ $ 15,416 ​ $ 7,332 ​ ​ See accompanying notes to Consolidated Financial Statements. ​ F-8 Table of Contents Texas Roadhouse, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Tabular amounts in thousands, except share and per share data) (1) Description of Business The accompanying 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 December 29, 2020 and December 31, 2019 and for each of the years in the three-year period ended December 29, 2020. As of December 29, 2020, we owned and operated 537 restaurants and franchised an additional 97 restaurants in 49 states and ten foreign countries. Of the 537 company restaurants that were operating at December 29, 2020, 517 were wholly-owned and 20 were majority-owned. Of the 97 franchise restaurants, 69 were domestic and 28 were international restaurants. As of December 31, 2019, we owned and operated 514 restaurants and franchised an additional 97 restaurants in 49 states and ten foreign countries. Of the 514 company restaurants that were operating at December 31, 2019, 494 were wholly-owned and 20 were majority-owned. Of the 97 franchise restaurants, 69 were domestic and 28 were international restaurants . Risks and Uncertainties The Company is subject to risks and uncertainties as a result of the COVID-19 pandemic (the "pandemic"). On March 13, 2020, the pandemic was declared a National Public Health Emergency. Shortly after the national emergency declaration, state and local officials began placing restrictions on restaurants, some of which allowed To-Go or curbside service only while others limited capacity in the dining room. By late March 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. While all of our dining rooms were able to re-open in some capacity, many were required to close again in areas more severely impacted by the pandemic. As of December 29, 2020, 82 % of our company restaurants had their dining rooms operating under various limited capacity restrictions. Our remaining restaurants were limited to outdoor and/or To-Go or curbside service only. In response to the impact of the pandemic on our restaurant operations, we have developed a hybrid operating model that accommodates our limited capacity dining rooms together with enhanced To-Go, which includes a curbside and/or drive-up operating model, as permitted by local guidelines. This includes design changes to our building to better accommodate the increased To-Go sales and the expansion of outdoor seating areas where allowed. We also have installed booth partitions in all of our restaurants as an added safety measure for our guests. In addition, we have increased our already strict sanitation requirements, are conducting daily health and temperature checks for all employees before they begin their shift and are requiring personal protective equipment to be worn by all restaurant employees at all times. As we work through the local regulations at each of our locations, the safety of our employees and guests remains our top priority. ​ As a result of the dining room restrictions and temporary closures, we have experienced a significant decrease in traffic which has impacted our operating results. While the majority of our dining rooms have re-opened, a significant portion continue to operate under capacity restrictions that severely limit the number of guests we can serve. In addition, while we have seen significant sales growth in our To-Go program, even with dining rooms re-opened, we currently do not expect these sales will generate a similar profit margin and cash flows to our normal operating model. We expect our operating results to continue to be impacted until at least such time that all state and local restrictions are lifted, and our dining rooms can operate at full capacity. We cannot predict how long the pandemic will last, how long it will take until all state and local restrictions will be lifted, or the extent to which our dining rooms will have to close again. In addition, we cannot predict the overall impact on the economy or consumer spending habits. The extent of these dining room restrictions and temporary closures 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. F-9 Table of Contents Texas Roadhouse, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Tabular amounts in thousands, except share and per share data) (2) Summary of Significant Accounting Policies (a) Principles of Consolidation As of December 29, 2020 and December 31, 2019, we owned a 5.0 % to 10.0 % equity interest in 24 restaurants. Additionally, as of December 29, 2020 and December 31, 2019, we owned a 40 % equity interest in four non-Texas Roadhouse restaurants as part of a joint venture agreement with a casual dining restaurant operator in China. The unconsolidated restaurants are accounted for using the equity method. Our investments in these unconsolidated affiliates are included in other assets in our consolidated balance sheets, and we record our percentage share of net income earned by these unconsolidated affiliates in our consolidated statements of income and comprehensive income under equity (loss) 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. ​ (b) Fiscal Year We utilize a 52 or 53 week accounting period that typically ends on the last Tuesday in December. We utilize a 13 week accounting period for quarterly reporting purposes, except in years containing 53 weeks when the fourth quarter contains 14 weeks. Fiscal years 2020 and 2018 were 52 weeks in length and fiscal year 2019 was 53 weeks in length. In fiscal year 2019, the 53 rd week added $ 59.0 million to restaurant and other sales and $ 0.10 to $ 0.11 to diluted earnings per share in our consolidated statements of income and comprehensive income. ​ (c) Cash and Cash Equivalents We consider all highly liquid debt instruments with original maturities of three months or less to be cash equivalents. Cash and cash equivalents also included receivables from credit card companies, which amounted to $ 18.1 million and $ 22.4 million at December 29, 2020 and December 31, 2019, respectively, because the balances are settled within two to three business days. ​ (d) Receivables Receivables consist principally of amounts due from retail gift card providers, certain franchise restaurants for reimbursement of labor costs, pre-opening and other expenses, and franchise restaurants for royalty fees. Receivables are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is our best estimate of the amount of probable credit losses in our existing accounts receivable. We determine the allowance based on historical write-off experience. We review our allowance for doubtful accounts quarterly. Past due balances over 120 days are reviewed individually for collectability. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. ​ (e) Inventories Inventories, consisting principally of food, beverages and supplies, are valued at the lower of cost (first-in, first-out) or net realizable value. ​ (f) Property and Equipment Property and equipment are stated at cost. Expenditures for major renewals and betterments are capitalized while expenditures for maintenance and repairs are expensed as incurred. Depreciation is computed on property and equipment, including assets located on leased properties, over the shorter of the estimated useful lives of the related assets or the underlying lease term using the straight-line method. In most cases, assets on leased properties are depreciated over a period of time which includes both the initial term of the lease and one or more option periods. See note 2(g) for further discussion of leases. F-10 Table of Contents Texas Roadhouse, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Tabular amounts in thousands, except share and per share data) The estimated useful lives are: ​ ​ ​ ​ ​ Land improvements 10 - 25 years Buildings and leasehold improvements 10 - 25 years ​ Furniture, fixtures and equipment 3 - 10 years ​ ​ The cost of purchasing transferable liquor licenses through open markets in jurisdictions with a limited number of authorized liquor licenses are capitalized as indefinite-lived assets and included in Property and equipment, net. Repairs and maintenance expense amounted to $ 25.2 million, $ 27.9 million and $ 29.7 million for the years ended December 29, 2020, December 31, 2019 and December 25, 2018, respectively. These costs are included in other operating costs in our consolidated statements of income and comprehensive income. ​ (g) Leases We lease land and/or buildings for the majority of our restaurants under non-cancelable lease agreements which have initial terms and one or more option periods. In addition, certain of these leases contain pre-determined fixed escalations of the minimum rent over the lease term. ​ Beginning in 2019 with the adoption of ASC 842, Leases , we recognize operating lease right-of-use assets and operating lease liabilities for these leases based on the present value of the lease payments over the lease term. In addition, for those leases with fixed escalations, we recognize the related rent expense on a straight-line basis over the lease term. See note 8 for further discussion of leases. ​ (h) Goodwill Goodwill represents the excess of cost over fair value of assets of businesses acquired. In accordance with the provisions of Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 350, Intangibles—Goodwill and Other ("ASC 350"), we perform tests to assess potential impairments at the reporting unit level, which we define as the individual restaurant level. These tests are performed on an annual basis, or sooner if an event or other circumstance indicates that goodwill may be impaired. Prior to 2019, this annual assessment occurred at the end of each fiscal year. In 2019, we changed the annual assessment date to the beginning of our fourth quarter. As our primary indicator of impairment is a decrease in cash flows and because we have a significant number of reporting units with goodwill, an earlier evaluation date allows us to more timely identify potential impairments. This change was not due to any goodwill impairment concerns within any of our reporting units. In addition, we determined this did not represent a material change to a method of applying an accounting principle. The determination of impairment consists of two steps. First, we determine the fair value of the reporting unit and compare it to its carrying amount. The fair value of the reporting unit may be based on several valuation approaches including capitalization of earnings, discounted cash flows, comparable public company market multiples and comparable acquisition market multiples. Second, if the carrying amount of the reporting unit exceeds its fair value, an impairment loss is recognized for any excess of the carrying amount over the fair value of the reporting unit. The valuation approaches used to determine fair value are subject to key judgments and assumptions that are sensitive to change such as judgments and assumptions about appropriate revenue growth rates, operating margins, weighted average cost of capital and comparable company and acquisition market multiples. In estimating the fair value using the capitalization of earnings method or discounted cash flows, we consider the period of time the restaurant has been open, the trend of operations over such period and future periods, expectations of future sales growth and terminal value. Assumptions about important factors such as the trend of future operations and sales growth are limited to those that are supportable based upon the plans for the restaurant and actual results at comparable restaurants. When developing these key judgments and assumptions, we consider economic, operational and market conditions that could impact fair value. The judgments and assumptions used are consistent with what we believe hypothetical market F-11 Table of Contents Texas Roadhouse, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Tabular amounts in thousands, except share and per share data) participants would use. However, estimates are inherently uncertain and represent only our reasonable expectations regarding future developments. If the estimates used in performing the impairment test prove inaccurate, the fair value of the restaurants may ultimately prove to be significantly lower, thereby causing the carrying value to exceed the fair value and resulting in an impairment. In 2020, as a result of our annual goodwill impairment analysis, we recorded goodwill impairment of $ 1.1 million related to two reporting units. In 2019 and 2018, we determined that there was no goodwill impairment. Refer to note 7 for additional information related to goodwill and intangible assets. ​ (i) Other Assets Other assets consist primarily of deferred compensation plan assets, investments in unconsolidated affiliates and deposits. For further discussion of the deferred compensation plan, see note 15. ​ (j) Impairment or Disposal of Long-lived Assets In accordance with ASC 360, Property, Plant and Equipment , long-lived assets related to each restaurant to be held and used in the business, such as property and equipment, operating lease right-of-use assets and intangible assets subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of a restaurant may not be recoverable. For the purposes of this evaluation, we define the asset group at the individual restaurant level. When we evaluate the restaurants, cash flows are the primary indicator of impairment. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the restaurant to estimated undiscounted future cash flows expected to be generated by the restaurant. Under our policies, trailing 12-month cash flow results under a predetermined amount at the individual restaurant level signals potential impairment. In our evaluation of restaurants that do not meet the cash flow threshold, we estimate future undiscounted cash flows from operating the restaurant over its estimated useful life, which can be for a period of over 20 years . In the estimation of future cash flows, we consider the period of time the restaurant has been open, the trend of operations over such period and future periods and expectations of future sales growth. Assumptions about important factors such as the trend of future operations and sales growth are limited to those that are supportable based upon the plans for the restaurant and actual results at comparable restaurants. If the carrying amount of the restaurant exceeds its estimated undiscounted future cash flows, an impairment charge is recognized by the amount by which the carrying amount exceeds the estimated fair value of the assets. We generally measure fair value by discounting estimated future cash flows. When fair value is measured by discounting estimated future cash flows, the assumptions used are consistent with what we believe hypothetical market participants would use. We also use a discount rate that is commensurate with the risk inherent in the projected cash flows. The adjusted carrying amounts of assets to be held and used are depreciated over their remaining useful life. See note 16 for further discussion of amounts recorded as part of our impairment analysis. ​ (k) Insurance Reserves We self-insure a significant portion of expected losses under our health, workers’ compensation, general liability, employment practices liability, and property insurance programs. We purchase insurance for individual claims that exceed the retention amounts listed below: ​ ​ ​ ​ ​ ​ ​ Employment practices liability/Class Action $ 500,000 / $ 2,500,000 Workers' compensation ​ $ 350,000 ​ General liability ​ $ 1,000,000 ​ Property ​ $ 250,000 ​ Employee healthcare ​ $ 350,000 ​ ​ We record a liability for unresolved claims and for an estimate of incurred but not reported claims based on historical experience. The estimated liability is based on a number of assumptions and factors regarding economic F-12 Table of Contents Texas Roadhouse, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Tabular amounts in thousands, except share and per share data) conditions, the frequency and severity of claims and claim development history and settlement practices. Our assumptions are reviewed, monitored, and adjusted when warranted by changing circumstances. ​ (l) Segment Reporting We consider our restaurant and franchising operations as similar and have aggregated them into a single reportable segment. The majority of the restaurants operate in the U.S. within the casual dining segment of the restaurant industry, providing similar products to similar customers. The restaurants also possess similar pricing structures, resulting in similar long-term expected financial performance characteristics. As of December 29, 2020, we operated 537 restaurants, each as a single operating segment, and franchised an additional 97 restaurants. Revenue from external customers is derived principally from food and beverage sales. We do not rely on any major customers as a source of revenue. ​ (m) Revenue Recognition We recognize revenue from restaurant sales when food and beverage products are sold. Deferred revenue primarily represents our liability for gift cards that have been sold, but not yet redeemed. When the gift cards are redeemed, we recognize restaurant sales and reduce deferred revenue. We also recognize revenue from our franchising of Texas Roadhouse restaurants. This includes franchise royalties, initial and upfront franchise fees, fees paid to our domestic marketing and advertising fund, and fees for supervisory and administrative services. We recognize revenue in accordance with ASC 606, Revenue from Contracts with Customers . This ASC requires an entity to allocate the transaction price received from customers to each separate and distinct performance obligation and recognize revenue as these performance obligations are satisfied. We recognize sales-based royalties as franchise restaurant sales occur. For initial and upfront franchise fees from international development agreements, because the services we provide related to these fees do not contain separate and distinct performance obligations from the franchise right, these fees are recognized on a straight-line basis over the term of the associated franchise agreement. For further discussion of revenue, see note 3. (n) Income Taxes We account for income taxes in accordance with ASC 740, Income Taxes , under which deferred assets and liabilities are recognized based upon anticipated future tax consequences attributable to differences between financial statement carrying values of assets and liabilities and their respective tax bases. We recognize both interest and penalties on unrecognized tax benefits as part of income tax expense. A valuation allowance is established to reduce the carrying value of deferred tax assets if it is considered more likely than not that such assets will not be realized. Any change in the valuation allowance would be charged to income in the period such determination was made. For all years presented, no valuation allowances have been recorded. (o) Advertising We have a domestic system-wide marketing and advertising fund. We maintain control of the marketing and advertising fund and, as such, have consolidated the fund’s activity for all the years presented. Domestic company and franchise restaurants are required to remit a designated portion of sales, currently 0.3 % , to the advertising fund. Advertising contributions related to company restaurants are recorded as a component of other operating costs. Advertising contributions received from our franchisees are recorded as a component of franchise royalties and fees in our consolidated statements of income and comprehensive income. Other costs related to local restaurant area marketing initiatives are included in other operating costs in our consolidated statements of income and comprehensive income. These costs and the company restaurant contribution amounted to $ 13.8 million, $ 18.3 million and $ 17.1 million for the years ended December 29, 2020, December 31, 2019 and December 25, 2018, respectively. F-13 Table of Contents Texas Roadhouse, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Tabular amounts in thousands, except share and per share data) (p) 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. ​ (q) Use of Estimates We have made a number of estimates and assumptions relating to the reporting of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reporting of revenue and expenses during the period to prepare these consolidated financial statements in conformity with 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. (r) Comprehensive Income ASC 220, Comprehensive Income , establishes standards for reporting and the presentation of comprehensive income and its components in a full set of financial statements. Comprehensive income consists of net income and foreign currency translation adjustments which are excluded from net income under GAAP. Foreign currency translation adjustment represents the unrealized impact of translating the financial statements of our foreign investment. This amount is not included in net income and would only be realized upon the disposition of our investment. (s) Fair Value of Financial Instruments Fair value is defined as the price that we would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants on the measurement date. We use a three-tier fair value hierarchy based upon observable and non-observable inputs that prioritizes the information used to develop our assumptions regarding fair value. Fair value measurements are separately disclosed by level within the fair value hierarchy. Refer to note 15 for further discussion of fair value measurement. (t) 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 consolidated financial statements. F-14 Table of Contents Texas Roadhouse, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Tabular amounts in thousands, except share and per share data) Goodwill (Accounting Standards Update 2017-04, "ASU 2017-04") In January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which simplifies the accounting for goodwill impairment and is expected to reduce the cost and complexity of accounting for goodwill. ASU 2017-04 removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. Instead, goodwill impairment will be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of the goodwill. We adopted ASU 2017-04 as of the beginning of our 2020 fiscal year. The adoption of this standard did not have a significant impact on our 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 consolidated financial statements. Income Taxes (Accounting Standards Update 2019-12, "ASU 2019-12") ​ In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which removes certain exceptions related to the approach for intraperiod tax allocations, the calculation of income taxes in interim periods, and the recognition of deferred taxes for investments. This guidance also simplifies aspects of accounting for recognizing deferred taxes for taxable goodwill. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020 (our 2021 fiscal year) and for interim periods within those years, with early adoption permitted. We are currently assessing the impact of this new standard on our consolidated financial statements. ​ 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 consolidated financial statements. ​ ​ (3) Revenue The following table disaggregates our revenue by major source (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year Ended ​ ​ ​ December 29, 2020 ​ December 31, 2019 ​ December 25, 2018 Restaurant and other sales ​ ​ $ 2,380,177 ​ $ 2,734,177 ​ $ 2,437,115 Franchise royalties ​ ​ ​ 15,542 ​ ​ 19,445 ​ ​ 17,443 Franchise fees ​ ​ ​ 2,404 ​ ​ 2,541 ​ ​ 2,891 Total revenue ​ ​ $ 2,398,123 ​ $ 2,756,163 ​ $ 2,457,449 ​ F-15 Table of Contents Texas Roadhouse, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Tabular amounts in thousands, except share and per share data) Restaurant sales include the sale of food and beverage products to our customers. We recognize this revenue when the products are sold. All sales taxes collected from customers and remitted to governmental authorities are accounted for on a net basis and therefore are excluded from revenue in the consolidated statements of income and comprehensive income. Other sales include the amortization of gift card breakage and fees associated with third party gift card sales. We record deferred revenue for gift cards that have been sold but not yet redeemed. When the gift cards are redeemed, we recognize restaurant sales and reduce deferred revenue. For some of the gift cards that are sold, the likelihood of redemption is remote. When the likelihood of a gift card's redemption is determined to be remote, we record a breakage adjustment and reduce deferred revenue by the amount never expected to be redeemed. We use historic gift card redemption patterns to determine when the likelihood of a gift card's redemption becomes remote and have determined that 4 % of the value of the gift cards sold by the Company and our third party retailers will never be redeemed. This breakage adjustment is recorded 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. In addition, we incur fees on all gift cards that are sold through third party retailers. These fees are also deferred and recorded consistent with the historic redemption pattern of the associated gift cards or on actual redemptions in periods where redemptions do not align with historic redemption patterns. For the years ended December 29, 2020 and December 31, 2019, we recognized gift card fees, net of gift card breakage income, of $ 6.8 million and $ 9.1 million, respectively. Total deferred revenue related to our gift cards is included in deferred revenue-gift cards in our consolidated balance sheets and includes the full value of unredeemed gift cards less the amortized portion of the breakage rates and the unamortized portion of third party fees. As of December 29, 2020 and December 31, 2019, our deferred revenue balance related to gift cards was $ 232.8 million and $ 209.3 million, respectively. This change was primarily due to the sale of additional gift cards partially offset by the redemption of gift cards. We recognized restaurant sales of $ 115.5 million for the year ended December 29, 2020 related to the amount in deferred revenue as of December 31, 2019. We recognized restaurant sales of $ 135.2 million for the year ended December 31, 2019 related to the amount in deferred revenue as of December 25, 2018. Franchise royalties include continuing fees received from our franchising of Texas Roadhouse restaurants. We execute franchise agreements for each franchise restaurant which sets out the terms of our arrangement with the franchisee. These agreements require the franchisee to pay ongoing royalties of generally 4.0 % of gross sales from our domestic franchisees, along with royalties paid to us by our international franchisees. Franchise royalties are recognized as revenue as the corresponding franchise restaurant sales occur. Franchise fees are all remaining fees from our franchisees including initial fees, upfront fees from international agreements, fees paid to our domestic marketing and advertising fund, and fees for supervisory and administrative services. Our franchise agreements typically require the franchisee to pay an initial, non-refundable fee. Subject to our approval and payment of a renewal fee, a franchisee may generally renew the franchise agreement upon its expiration. These initial fees and renewal fees are deferred and recognized over the term of the agreement. We also enter into area development agreements for the development of international Texas Roadhouse restaurants. Upfront fees from development agreements are deferred and recognized on a pro-rata basis over the term of the individual restaurant franchise agreement as restaurants under the development agreement are opened. Our domestic franchise agreement also requires our franchisees to remit 0.3 % of sales to our system-wide marketing and advertising fund. These amounts are recognized as revenue as the corresponding franchise restaurant sales occur. Finally, we perform supervisory and administrative services for certain franchise restaurants for which we receive management fees, which are recognized as the services are performed. Total deferred revenue related to our franchise agreements is included in other liabilities in our consolidated balance sheets and was $ 1.9 million as of December 29, 2020 and December 31, 2019. We recognized revenue of $ 0.4 million and $ 0.3 million for the years ended December 29, 2020 and December 31, 2019, respectively, related to the amounts in deferred revenue as of December 31, 2019 and December 25, 2018, respectively. ​ F-16 Table of Contents Texas Roadhouse, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Tabular amounts in thousands, except share and per share data) (4) Acquisitions In late 2020, we separately acquired two franchise restaurants. Pursuant to the terms of the acquisition agreements, we paid a total purchase price of $ 10.6 million. These transactions were accounted for using the purchase method as defined in ASC 805, Business Combinations ( " ASC 805 " ). These acquisitions generated goodwill of $ 3.3 million, which is not amortizable for book purposes, but is deductible for tax purposes. We also acquired an intangible reacquired franchise right asset of $ 1.6 million which will be amortized over 3.4 years based on the remaining term of the franchise agreement. ​ In late 2019, we acquired one franchise restaurant which was subsequently relocated. Pursuant to the terms of the acquisition agreement, we paid a total purchase price of $ 1.5 million and accounted for this transaction using the purchase method as defined in ASC 805. This acquisition generated goodwill of $ 1.5 million, which is not amortizable for book purposes, but is deductible for tax purposes. These acquisitions are consistent with our long-term strategy to increase net income and earnings per share. Pro forma results of operations and revenue and earnings for the years ended December 29, 2020 and December 31, 2019 have not been presented because the effect of the acquisitions was not material to our consolidated financial position, results of operations or cash flows. (5) Long-term Debt On August 7, 2017, we entered into the Amended and Restated Credit Agreement (the "Amended Credit Agreement") with respect to our revolving credit facility with a syndicate of commercial lenders led by JPMorgan Chase Bank, N.A., PNC Bank, N.A., and Wells Fargo Bank, N.A. The amended revolving credit facility remains an unsecured, revolving credit agreement under which we may borrow up to $ 200.0 million with the option to increase the amended 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. The terms of the amendment require us to pay interest on outstanding borrowings of the original revolving credit facility at the London Interbank Offered Rate ("LIBOR") plus a margin of 1.50 % and to pay a commitment fee of 0.25 % per year on any unused portion of the amended 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 December 29, 2020, we had $ 190.0 million outstanding on the original revolving credit facility and $ 1.8 million of availability, net of $ 8.2 million of outstanding letters of credit. This outstanding amount is included as long-term debt on our 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 December 29, 2020, we had $ 50.0 million outstanding and $ 32.5 million of availability on the incremental revolving credit facility. This outstanding amount is included as current maturities of long-term debt on our consolidated balance sheet. ​ The weighted-average interest rate for the $ 240.0 million of combined borrowings on our revolving credit facility as of December 29, 2020 was 1.98 % . The weighted-average interest rate for the amended revolving credit facility as of December 31, 2019 was 2.64 %. F-17 Table of Contents Texas Roadhouse, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Tabular amounts in thousands, except share and per share data) The lenders’ obligation to extend credit pursuant to the Amended Credit Agreement 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 December 29, 2020. (6) Property and Equipment, Net Property and equipment were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 29, December 31, ​ ​ 2020 ​ 2019 Land and improvements ​ $ 143,482 ​ $ 135,708 ​ Buildings and leasehold improvements ​ 1,003,014 ​ 922,036 ​ Furniture, fixtures and equipment ​ 661,878 ​ 614,920 ​ Construction in progress ​ 32,362 ​ 51,924 ​ Liquor licenses ​ 11,587 ​ 10,963 ​ ​ ​ 1,852,323 ​ 1,735,551 ​ Accumulated depreciation and amortization ​ ( 763,700 ) ​ ( 678,988 ) ​ ​ ​ $ 1,088,623 ​ $ 1,056,563 ​ ​ For the year ended December 29, 2020, the amount of interest capitalized in connection with restaurant construction was $ 0.3 million. There was no interest capitalized in connection with restaurant construction for the year ended December 31, 2019. For the year ended December 25, 2018, the amount of interest capitalized in connection with restaurant construction was $ 0.1 million. (7) Goodwill and Intangible Assets The changes in the carrying amount of goodwill and intangible assets are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ Goodwill ​ Intangible Assets ​ Balance as of December 25, 2018 (1) $ 123,220 ​ $ 1,959 ​ Additions 1,528 ​ ​ — ​ Amortization expense — ​ ​ ( 725 ) ​ Disposals and other, net — ​ — ​ Impairment — ​ — ​ Balance as of December 31, 2019 $ 124,748 ​ $ 1,234 ​ Additions 3,329 ​ ​ 1,600 ​ Amortization expense — ​ ​ ( 563 ) ​ Disposals and other, net — ​ ​ — ​ Impairment ( 1,076 ) ​ ​ — ​ Balance as of December 29, 2020 $ 127,001 ​ $ 2,271 ​ (1) Net of $ 4.8 million of accumulated goodwill impairment losses. ​ Intangible assets consist of reacquired franchise rights. The gross carrying amount and accumulated amortization of the intangible assets at December 29, 2020 were $ 16.6 million and $ 14.3 million, respectively. As of December 31, 2019, the gross carrying amount and accumulated amortization of the intangible assets was $ 15.4 million and $ 14.1 million, respectively. We amortize reacquired franchise rights on a straight-line basis over the remaining term of the franchise operating agreements, which varies by restaurant. Amortization expense for the next five years is expected to range from $ 0.1 million to $ 0.8 million. As further discussed in note 16, as a result of our 2020 goodwill impairment analysis, we determined that goodwill related to two restaurants was impaired. Refer to note 4 for discussion of the F-18 Table of Contents Texas Roadhouse, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Tabular amounts in thousands, except share and per share data) acquisitions completed for the years ended December 29, 2020 and December 31, 2019. (8) Leases We recognize right-of-use assets and lease liabilities for both real estate and equipment leases that have a term in excess of one year . As of December 29, 2020 and December 31, 2019, these amounts were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 29, 2020 ​ Real estate ​ Equipment ​ Total Operating lease right-of-use assets $ 526,746 ​ $ 3,879 ​ $ 530,625 ​ ​ ​ ​ ​ ​ ​ ​ ​ Current portion of operating lease liabilities ​ 17,850 ​ ​ 1,421 ​ ​ 19,271 Operating lease liabilities, net of current portion ​ 569,713 ​ ​ 2,458 ​ ​ 572,171 Total operating lease liabilities $ 587,563 ​ $ 3,879 ​ $ 591,442 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, 2019 ​ Real estate ​ Equipment ​ Total Operating lease right-of-use assets $ 495,903 ​ $ 3,898 ​ $ 499,801 ​ ​ ​ ​ ​ ​ ​ ​ ​ Current portion of operating lease liabilities ​ 15,966 ​ ​ 1,297 ​ ​ 17,263 Operating lease liabilities, net of current portion ​ 536,109 ​ ​ 2,601 ​ ​ 538,710 Total operating lease liabilities $ 552,075 ​ $ 3,898 ​ $ 555,973 ​ ​ ​ ​ ​ ​ ​ ​ ​ F-19 Table of Contents Texas Roadhouse, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Tabular amounts in thousands, except share and per share data) ​ Information related to our real estate leases as of and for the fiscal year ended December 29, 2020 and December 31, 2019 was as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year Ended Real estate costs ​ ​ ​ ​ December 29, 2020 ​ ​ December 31, 2019 Operating lease ​ ​ ​ $ 58,425 ​ $ 54,844 Variable lease ​ ​ ​ ​ 1,479 ​ ​ 1,590 Short-term lease ​ ​ ​ ​ 90 ​ ​ 120 Total lease costs ​ ​ ​ $ 59,994 ​ $ 56,554 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Real estate lease liability maturity analysis ​ ​ ​ ​ ​ ​ ​ As of December 29, 2020 2021 ​ ​ ​ ​ ​ ​ ​ 56,201 2022 ​ ​ ​ ​ ​ ​ ​ 57,225 2023 ​ ​ ​ ​ ​ ​ ​ 57,259 2024 ​ ​ ​ ​ ​ ​ ​ 57,353 2025 ​ ​ ​ ​ ​ ​ ​ 55,491 Thereafter ​ ​ ​ ​ ​ ​ ​ 762,744 Total ​ ​ ​ ​ ​ ​ $ 1,046,273 Less interest ​ ​ ​ ​ ​ ​ ​ 458,710 Total discounted operating lease liabilities ​ ​ ​ ​ ​ ​ $ 587,563 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year Ended Real estate leases other information ​ ​ ​ ​ December 29, 2020 ​ ​ December 31, 2019 Cash paid for amounts included in measurement of operating lease liabilities ​ ​ ​ $ 52,904 ​ $ 49,018 Right-of-use assets obtained in exchange for new operating lease liabilities ​ ​ ​ $ 50,322 ​ $ 51,220 Weighted-average remaining lease term (years) ​ ​ ​ ​ 17.78 ​ ​ 17.82 Weighted-average discount rate ​ ​ ​ ​ 6.71 ​ ​ 6.77 ​ Operating lease payments exclude $ 15.1 million of minimum lease payments for executed real estate leases that we have not yet taken possession. In addition to the above operating leases, as of December 29, 2020 we had one finance lease with a right-of-use asset balance and lease liability balance of $ 1.7 million and $ 2.1 million, respectively. The right-of-use asset balance is included as a component of other assets and the lease liability balance as a component of other liabilities in the consolidated balance sheets. In 2020, we entered into a sale leaseback transaction involving land that had recently been acquired. The sale generated proceeds of $ 2.2 million and no gain or loss was recognized on the transaction. The resulting operating lease is included in the operating lease right-of-use assets and lease liabilities noted above. ​ We recognize operating lease right-of-use assets and operating lease liabilities for real estate leases, including our restaurant leases and Support Center lease, as well as certain restaurant equipment leases based on the present value of the lease payments over the lease term. We estimate the present value based on our incremental borrowing rate which corresponds to the underlying lease term. In addition, operating lease right-of-use assets are reduced for accrued rent F-20 Table of Contents Texas Roadhouse, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Tabular amounts in thousands, except share and per share data) and increased for any initial direct costs recognized at lease inception. For leases commencing in 2019 and later, we account for lease and non-lease components as a single lease component. ​ Certain of our operating leases contain predetermined fixed escalations of the minimum rent over the lease term. For these leases, we recognize the related rent expense on a straight-line basis over the lease term. We may receive rent concessions or leasehold improvement incentives upon opening a restaurant that is subject to a lease which we consider when determining straight-line rent expense. We also may receive rent holidays, which would begin on the possession date and end when the store opens, during which no cash rent payments are typically due under the terms of the lease. Rent holidays are included in the lease term when determining straight-line rent expense. In recognizing straight-line rent expense, we record the difference between amounts charged to operations and amounts paid as accrued rent. Straight-line rent expense is included as an operating lease cost in the table above. Certain of our operating leases contain clauses that provide for additional contingent rent based on a percentage of sales greater than certain specified target amounts. We recognize contingent rent expense prior to the achievement of the specified target that triggers the contingent rent, provided achievement of the target is considered probable. In addition, certain of our operating leases have variable escalations of the minimum rent that depend on an index or rate. For these leases, we recognize operating lease right-of-use assets and operating lease liabilities based on the index or rate at the commencement date. Any subsequent changes to the index or rate are recognized as variable rent expense when the escalation is determinable. Contingent rent and variable rent expense are included as variable lease costs in the table above. Rent expense for operating leases for the fiscal year ended December 25, 2018 consisted of the following: ​ ​ ​ ​ ​ Minimum rent—occupancy ​ $ 47,741 Contingent rent ​ 1,050 Rent expense, occupancy ​ 48,791 Minimum rent—equipment and other ​ 6,176 Rent expense ​ $ 54,967 ​ ​ (9) Income Taxes Components of our income tax (benefit) expense for the years ended December 29, 2020, December 31, 2019 and December 25, 2018 are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year Ended ​ December 29, 2020 December 31, 2019 December 25, 2018 Current: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Federal ​ $ ( 648 ) ​ $ 15,643 ​ $ 2,934 ​ State ​ 4,505 ​ 10,050 ​ 8,794 ​ Foreign ​ ​ 403 ​ ​ 369 ​ ​ 210 ​ Total current ​ 4,260 ​ 26,062 ​ 11,938 ​ Deferred: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Federal ​ ( 16,859 ) ​ ​ 4,396 ​ 11,909 ​ State ​ ( 3,073 ) ​ ​ 1,939 ​ 410 ​ Total deferred ​ ( 19,932 ) ​ 6,335 ​ 12,319 ​ Income tax (benefit) expense ​ $ ( 15,672 ) ​ $ 32,397 ​ $ 24,257 ​ ​ Our pre-tax income is substantially derived from domestic restaurants. F-21 Table of Contents Texas Roadhouse, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Tabular amounts in thousands, except share and per share data) A reconciliation of the statutory federal income tax rate to our effective tax rate for December 29, 2020, December 31, 2019 and December 25, 2018 is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year Ended ​ ​ ​ ​ December 29, 2020 ​ December 31, 2019 ​ December 25, 2018 ​ Tax at statutory federal rate ​ ​ 21.0 % 21.0 % 21.0 % State and local tax, net of federal benefit ​ ​ 3.6 ​ 3.8 ​ 3.6 ​ FICA tip tax credit ​ ​ ( 92.5 ) ​ ( 9.4 ) ​ ( 9.6 ) ​ Work opportunity tax credit ​ ​ ( 12.4 ) ​ ( 1.5 ) ​ ( 1.5 ) ​ Stock compensation ​ ​ ( 2.3 ) ​ ( 0.1 ) ​ ( 1.4 ) ​ Net income attributable to noncontrolling interests ​ ​ ( 3.0 ) ​ ( 0.6 ) ​ ( 0.8 ) ​ Officers compensation ​ ​ 2.6 ​ 1.2 ​ 1.7 ​ Other ​ ​ 1.6 ​ 0.7 ​ ( 0.1 ) ​ Total ​ ​ ( 81.4 ) % 15.1 % 12.9 % ​ Our effective tax rate was a benefit of 81.4 % in 2020 compared to expense of 15.1 % in 2019. This was primarily due to the impact of FICA tip and Work opportunity tax credits on lower pre-tax income. Additionally, these credits exceeded our federal tax liability in 2020 but we expect to utilize these credits in future years or by carrying back to our 2019 tax year. Our effective tax rate increased to 15.1 % in 2019 compared to 12.9 % in 2018 primarily due to lower excess tax benefits related to our share-based compensation program partially offset by lower non-deductible officer compensation. In addition, the prior year tax rate benefitted from an adjustment related to tax reform that we recorded in conjunction with the filing of our 2017 tax return. Components of deferred tax liabilities, net are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 29, 2020 December 31, 2019 Deferred tax assets: ​ ​ ​ ​ ​ ​ ​ Deferred revenue—gift cards ​ $ 26,692 ​ $ 16,122 ​ Insurance reserves ​ ​ 5,998 ​ ​ 4,774 ​ Long-term deferred payroll taxes ​ ​ 5,995 ​ ​ — ​ Other reserves ​ 705 ​ 601 ​ Share-based compensation ​ 5,621 ​ 5,510 ​ Operating lease liabilities ​ ​ 146,803 ​ ​ 137,744 ​ Deferred compensation ​ 12,778 ​ 10,503 ​ Tax credit carryforwards ​ ​ 10,360 ​ ​ 1,710 ​ Other assets ​ 2,119 ​ 2,482 ​ Total deferred tax asset ​ 217,071 ​ 179,446 ​ Deferred tax liabilities: ​ ​ ​ ​ ​ ​ ​ Property and equipment ​ ( 71,263 ) ​ ( 63,777 ) ​ Goodwill and intangibles ​ ( 6,896 ) ​ ( 6,241 ) ​ Operating lease right-of-use asset ​ ​ ( 131,718 ) ​ ​ ( 123,813 ) ​ Other liabilities ​ ​ ( 9,996 ) ​ ​ ( 8,310 ) ​ Total deferred tax liability ​ ( 219,873 ) ​ ( 202,141 ) ​ Net deferred tax liability ​ $ ( 2,802 ) ​ $ ( 22,695 ) ​ ​ ​ F-22 Table of Contents Texas Roadhouse, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Tabular amounts in thousands, except share and per share data) As of December 29, 2020, we have federal tax credit carryforwards of $ 10.2 million expiring in 2040 and state tax credit carryforwards of $ 0.2 million expiring in 2023. The federal tax credits include FICA tip and Work opportunity tax credits that exceeded credit limitations in the current year. We expect to generate sufficient earnings in future periods and/or may implement tax planning strategies that would allow us to fully utilize these credits. As such, we have not provided any valuation allowances for these credits, or any of our other deferred tax assets, as their realization is more likely than not. A reconciliation of the beginning and ending liability for unrecognized tax benefits, all of which would impact the effective tax rate if recognized, is as follows: ​ ​ ​ ​ ​ ​ Balance at December 25, 2018 ​ $ 1,482 ​ Additions to tax positions related to prior years ​ 16 ​ Additions to tax positions related to current year ​ ​ 362 ​ Reductions due to statute expiration ​ ​ ( 314 ) ​ Reductions due to exam settlements ​ — ​ Balance at December 31, 2019 ​ 1,546 ​ Additions to tax positions related to prior years ​ ​ 148 ​ Additions to tax positions related to current year ​ 389 ​ Reductions due to statute expiration ​ ( 421 ) ​ Reductions due to exam settlement ​ ​ — ​ Balance at December 29, 2020 ​ $ 1,662 ​ ​ As of December 29, 2020 and December 31, 2019, the total amount of accrued penalties and interest related to uncertain tax provisions was not material. All entities for which unrecognized tax benefits exist as of December 29, 2020 possess a December tax year-end. As a result, as of December 29, 2020, the tax years ended December 26, 2017, December 25, 2018 and December 31, 2019 remain subject to examination by all tax jurisdictions. As of December 29, 2020, no audits were in process by a tax jurisdiction that, if completed during the next twelve months, would be expected to result in a material change to our unrecognized tax benefits. Additionally, as of December 29, 2020, no event occurred that is likely to result in a significant increase or decrease in the unrecognized tax benefits through December 28, 2021. (10) Preferred Stock Our Board of Directors is authorized, without further vote or action by the holders of common stock, to issue from time to time up to an aggregate of 1,000,000 shares of preferred stock in one or more series. Each series of preferred stock will have the number of shares, designations, preferences, voting powers, qualifications and special or relative rights or privileges as shall be determined by the Board of Directors, which may include, but are not limited to, dividend rights, voting rights, redemption and sinking fund provisions, liquidation preferences, conversion rights and preemptive rights. There were no shares of preferred stock outstanding at December 29, 2020 and December 31, 2019. (11) Stockholders’ Equity 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 are 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 year ended December 29, 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. For the year ended December 31, 2019, we paid $ 139.8 F-23 Table of Contents Texas Roadhouse, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Tabular amounts in thousands, except share and per share data) million to repurchase 2,625,245 shares of our common stock. This includes repurchases of $ 89.6 million under the new repurchase program and repurchases of $ 50.2 million under the previous stock repurchase program. We did not repurchase any shares of common stock during the year ended December 25, 2018. As of December 29, 2020, we had $ 147.8 million remaining under our authorized stock repurchase program. (12) 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 outstanding from our equity incentive plans. Performance stock units are not included in the diluted earnings per share calculation until the performance-based criteria have been met. See note 14 for further discussion of our equity incentive plans. For the years ended December 29, 2020, December 31, 2019, and December 25, 2018, the shares of non-vested stock that were not included because they would have had an anti-dilutive effect were not significant. The following table sets forth the calculation of earnings per share and weighted average shares outstanding (in thousands) as presented in the accompanying consolidated statements of income and comprehensive income: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year Ended ​ ​ December 29, December 31, December 25, ​ 2020 ​ 2019 ​ 2018 Net income attributable to Texas Roadhouse, Inc. and subsidiaries ​ $ 31,255 ​ $ 174,452 ​ $ 158,225 ​ Basic EPS: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted-average common shares outstanding ​ 69,438 ​ 70,509 ​ 71,467 ​ Basic EPS ​ $ 0.45 ​ $ 2.47 ​ $ 2.21 ​ Diluted EPS: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted-average common shares outstanding ​ 69,438 ​ 70,509 ​ 71,467 ​ Dilutive effect of nonvested stock ​ 455 ​ 407 ​ 497 ​ Shares-diluted ​ 69,893 ​ 70,916 ​ 71,964 ​ Diluted EPS ​ $ 0.45 ​ $ 2.46 ​ $ 2.20 ​ ​ ​ (13) Commitments and Contingencies The estimated cost of completing capital project commitments at December 29, 2020 and December 31, 2019 was $ 95.9 million and $ 119.0 million, respectively. As of December 29, 2020 and December 31, 2019, we are contingently liable for $ 13.0 million and $ 13.9 million, respectively, for seven leases 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 December 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. ​ F-24 Table of Contents Texas Roadhouse, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Tabular amounts in thousands, except share and per share data) ​ ​ ​ ​ ​ ​ ​ 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 2026 ​ Fargo, North Dakota (1) February 2006 July 2026 ​ Logan, Utah (1) January 2009 August 2024 ​ Irving, Texas (3) ​ December 2013 ​ December 2024 ​ Louisville, Kentucky (3)(4) ​ December 2013 ​ November 2023 ​ (1) Real estate lease agreements for restaurant locations which we entered into before granting franchise rights to those restaurants. We have subsequently assigned the leases to the franchisees, but remain contingently liable, under the terms of the lease, if the franchisee defaults. (2) As discussed in note 17, this restaurant is owned in part by our founder. (3) Leases associated with restaurants which were sold. The leases were assigned to the acquirer, but we remain contingently liable under the terms of the lease if the acquirer defaults. (4) We may be released from liability after the initial contractual lease term expiration contingent upon certain conditions being met by the acquirer. ​ During the year ended December 29, 2020, we bought most of our beef from three suppliers. Although there are a limited number of beef suppliers, we believe that other suppliers could provide a similar product on comparable terms. A change in suppliers, however, could cause supply shortages, higher costs to secure adequate supplies and a possible loss of sales, which would affect operating results adversely. We have no material minimum purchase commitments with our vendors that extend beyond a year. Occasionally, we are a defendant in litigation arising in the ordinary course of 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 effect on us 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. (14) 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. This plan replaced the Texas Roadhouse, Inc. 2004 Equity Incentive Plan. The Company provides restricted stock units ("RSUs") to employees as a form of share-based compensation. An RSU is the conditional right to receive one share of common stock upon satisfaction of the vesting requirement. In addition to RSUs, the Company provides performance stock units ("PSUs") to 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 consolidated statements of income and comprehensive income: ​ F-25 Table of Contents Texas Roadhouse, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Tabular amounts in thousands, except share and per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year Ended ​ ​ ​ December 29, December 31, December 25, ​ 2020 ​ 2019 ​ 2018 Labor expense ​ ​ $ 10,081 ​ $ 9,032 ​ $ 8,463 ​ General and administrative expense ​ ​ 19,350 ​ 26,468 ​ 25,520 ​ Total share-based compensation expense ​ ​ $ 29,431 ​ $ 35,500 ​ $ 33,983 ​ ​ Share- based compensation activity by type of grant as of December 29, 2020 and changes during the period then ended are presented below. For both RSUs and PSUs, we do not estimate forfeitures as we record them as they occur. Summary Details for RSUs ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted-Average Weighted-Average ​ ​ ​ ​ ​ ​ Grant Date Fair ​ Remaining Contractual ​ Aggregate ​ ​ Shares ​ Value ​ Term (years) ​ Intrinsic Value Outstanding at December 31, 2019 836,427 ​ $ 55.20 ​ ​ ​ ​ ​ ​ Granted 501,575 ​ ​ 57.43 ​ ​ ​ ​ ​ ​ Forfeited ( 25,204 ) ​ ​ 54.76 ​ ​ ​ ​ ​ ​ Vested ( 519,235 ) ​ ​ 55.60 ​ ​ ​ ​ ​ ​ Outstanding at December 29, 2020 793,563 ​ $ 56.37 0.9 ​ $ 62,667 ​ ​ As of December 29, 2020, with respect to unvested RSUs, there was $ 19.2 million of unrecognized compensation cost that is expected to be recognized over a weighted-average period of 0.9 years. The vesting terms of the RSUs range from 1.0 to 5.0 years. The total intrinsic value of RSUs vested during the years ended December 29, 2020, December 31, 2019 and December 25, 2018 was $ 30.5 million, $ 27.8 million and $ 32.1 million, respectively. The excess tax benefit associated with vested RSUs for the years ended December 29, 2020, December 31, 2019 and December 25, 2018 was $ 0.4 million, $ 0.3 million and $ 1.9 million, respectively, which was recognized in the income tax provision. Summary Details for PSUs ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted-Average Weighted-Average ​ ​ ​ ​ ​ ​ Grant Date Fair ​ Remaining Contractual ​ Aggregate ​ ​ Shares ​ Value ​ Term (years) ​ Intrinsic Value Outstanding at December 31, 2019 77,000 ​ $ 61.86 ​ ​ ​ ​ ​ Granted 79,000 ​ ​ 55.98 ​ ​ ​ ​ ​ Incremental Performance Shares (1) ​ 18,946 ​ ​ 61.86 ​ ​ ​ ​ ​ Forfeited — ​ ​ — ​ ​ ​ ​ ​ Vested ( 95,946 ) ​ ​ 61.86 ​ ​ ​ ​ ​ Outstanding at December 29, 2020 79,000 ​ $ 55.98 0.1 ​ $ 6,238 (1) Additional shares from the January 2019 PSU grant that vested in January 2020 due to exceeding the initial 100 % target. We grant PSUs to certain of our executives subject to a one-year vesting and the achievement of certain earnings targets, which determine the number of units to vest at the end of the vesting period. Share-based compensation expense is recognized for the number of units expected to vest at the end of the period and is expensed beginning on the grant date and through the performance period. For each grant, PSUs vest after meeting the performance and service conditions. The total intrinsic value of PSUs vested during the years ended December 29, 2020, December 31, 2019 and December 25, 2018 was $ 5.4 million, $ 8.8 million and $ 8.9 million, respectively. On January 8, 2021, 5,199 shares vested related to the January 2020 PSU grant and are expected to be distributed during the 13 weeks ending March 30, 2021. As of December 29, 2020, with respect to unvested PSUs, the amount of unrecognized compensation cost that is expected to be recognized over a weighted-average period of 0.1 year was not F-26 Table of Contents Texas Roadhouse, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Tabular amounts in thousands, except share and per share data) significant. There was no allowable excess tax benefit associated with vested PSUs for the years ended December 29, 2020 and December 31, 2019. The excess tax benefit associated with vested PSUs for the year ended December 25, 2018 was $ 0.7 million which was recognized within the income tax provision. (15) Fair Value Measurement 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 no transfers among levels within the fair value hierarchy during the year ended December 29, 2020. The following table presents the fair values for our financial assets and liabilities measured on a recurring basis: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value Measurements ​ Level December 29, 2020 December 31, 2019 Deferred compensation plan—assets 1 ​ $ 55,633 ​ $ 44,623 ​ Deferred compensation plan—liabilities 1 ​ $ ( 55,614 ) ​ $ ( 44,679 ) ​ ​ The Second Amended and Restated Deferred Compensation Plan of Texas Roadhouse Management Corp., as amended, (the "Deferred Compensation Plan") is a nonqualified deferred compensation plan which allows highly compensated employees to defer receipt of a portion of their compensation and contribute such amounts to one or more investment funds held in a rabbi trust. We report the accounts of the rabbi trust in other assets and the corresponding liability in other liabilities in our 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 consolidated statements of income and comprehensive income. The following table presents the fair value of our assets measured on a nonrecurring basis: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value Measurements ​ Total gain (loss) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year Ended ​ ​ December 29, December 31, December 29, ​ December 31, ​ ​ Level ​ 2020 ​ 2019 ​ 2020 2019 Long-lived assets held for sale ​ 3 ​ $ 1,645 ​ $ — ​ $ ( 432 ) ​ $ — Long-lived assets held for use 1 ​ $ — ​ $ 1,684 ​ $ ( 364 ) ​ $ 1,190 Operating lease right-of-use assets 3 ​ $ — ​ $ 611 ​ $ ( 413 ) ​ $ ( 1,144 ) Goodwill ​ 3 ​ $ 2,625 ​ $ — ​ $ ( 1,076 ) ​ $ — Investments in unconsolidated affiliates ​ 3 ​ $ 1,531 ​ $ — ​ $ ( 1,091 ) ​ $ — ​ Long-lived assets held for sale include land and building at a site that was relocated. These assets are included in prepaid expenses and other current assets in our consolidated balance sheets. These assets are valued using a Level 3 input, i.e., information from broker listings discounted for estimated selling costs. This resulted in a loss of $ 0.4 million which is included in impairment and closure, net in our consolidated statements of income and comprehensive income. ​ Long-lived assets held for use as of December 29, 2020 include leasehold improvements for one restaurant F-27 Table of Contents Texas Roadhouse, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Tabular amounts in thousands, except share and per share data) scheduled to be relocated in 2021. These assets were reduced to a fair value of zero in 2020. This resulted in a loss of $ 0.4 million which is included in impairment and closure, net in our consolidated statements of income and comprehensive income. Long-lived assets held for use as of December 31, 2019 include leasehold improvements for one restaurant that was subject to a forced relocation. This restaurant was relocated in February 2020 at which time the contractually negotiated amount for these assets was received. ​ Operating lease right-of-use assets as of December 29, 2020 include the lease related assets for one restaurant that relocated in February 2020 and one restaurant scheduled to be relocated in 2021. These assets were reduced to a fair value of zero in 2020. This resulted in a loss of $ 0.4 million which is included in impairment and closure, net in our consolidated statements of income and comprehensive income. Operating lease right-of-use assets as of December 31, 2019, include the lease related assets for one store that was permanently closed in April 2020. ​ Goodwill includes two restaurants whose carrying values were determined to be in excess of their fair values as part of our annual goodwill impairment assessment. In determining the fair value, multiple valuation approaches were utilized which considered the historical results and anticipated future trends of operations for these restaurants. We consider this a Level 3 input. This resulted in a loss of $ 1.1 million which is included in impairment and closure, net in our consolidated statements of income and comprehensive income. ​ Investments in unconsolidated affiliates include a 40 % equity interest in a China joint venture. This asset is valued using a Level 3 input, i.e., the amount we expect to receive upon the sale of this investment. This resulted in a loss of $ 1.1 million which is included in equity (loss) income from investments in unconsolidated affiliates in our consolidated statements of income and comprehensive income. ​ At December 29, 2020 and December 31, 2019, the fair values of cash and cash equivalents, accounts receivable and accounts payable approximated their carrying values based on the short-term nature of these instruments. At 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). (16) Impairment and Closure Costs We recorded impairment and closure costs of $ 2.3 million, ($ 0.9 ) million and $ 0.3 million for the years ended December 29, 2020, December 31, 2019 and December 25, 2018. ​ Impairment and closure costs in 2020 included $ 1.2 million related to the impairment of the fixed assets and operating lease right-of-use assets at four restaurants, all of which have relocated or are scheduled to be relocated. In addition, in 2020, we recorded goodwill impairment of $ 1.1 million related to two restaurants. ​ Impairment and closure costs in 2019 included a gain of $ 2.6 million related to the forced relocation of one restaurant. This included a gain of $ 1.2 million related to the leasehold improvements and a gain of $ 1.4 million to settle a favorable operating lease. Also, in 2019, we recorded a charge of $ 1.1 million related to the impairment of the operating lease right-of-use asset at an underperforming restaurant. The remaining costs of $ 0.6 million related to costs associated with the relocation of restaurants. ​ Impairment and closure costs in 2018 were related to costs associated with the relocation of restaurants. (17) Related Party Transactions As of December 29, 2020, we had seven franchise restaurants and two majority-owned company restaurants owned in part by certain of our officers. These franchise entities paid us fees of $ 1.6 million for the year ended December 29, 2020. As of December 31, 2019 and December 25, 2018, we had six franchise restaurants and one majority-owned company restaurant owned in part by certain of our officers. These franchise entities paid us fees of $ 1.4 million and $ 1.3 million for the years ended December 31, 2019 and December 25, 2018, respectively. As discussed in note 13, we F-28 Table of Contents Texas Roadhouse, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Tabular amounts in thousands, except share and per share data) are contingently liable on a lease related to one of these franchise restaurants. On December 3, 2018, we acquired one franchise restaurant owned in part by our founder. This entity paid us fees of $ 0.1 million for the year ended December 25, 2018. In addition, in 2018, our founder made a personal contribution of $ 1.0 million to cover a portion of the planned expenses incurred as part of the annual managing partner conference which marked our 25th anniversary. This amount was recorded as general and administrative expense on the consolidated statements of income and comprehensive income and as additional paid-in-capital on the consolidated statements of stockholders’ equity. (18) Selected Quarterly Financial Data (unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2020 ​ First Second Third Fourth ​ ​ ​ ​ Quarter ​ Quarter ​ Quarter ​ Quarter ​ Total Revenue ​ $ 652,524 ​ $ 476,425 ​ $ 631,185 ​ $ 637,989 ​ $ 2,398,123 ​ Total costs and expenses ​ $ 636,734 ​ $ 523,743 ​ $ 596,209 ​ $ 617,593 ​ $ 2,374,279 ​ Income (loss) from operations ​ $ 15,790 ​ $ ( 47,318 ) ​ $ 34,976 ​ $ 20,396 ​ $ 23,844 ​ Net income (loss) attributable to Texas Roadhouse, Inc. and subsidiaries ​ $ 16,029 ​ $ ( 33,553 ) ​ $ 29,230 ​ $ 19,549 ​ $ 31,255 ​ Basic earnings (loss) per common share ​ $ 0.23 ​ $ ( 0.48 ) ​ $ 0.42 ​ $ 0.28 ​ $ 0.45 ​ Diluted earnings (loss) per common share ​ $ 0.23 ​ $ ( 0.48 ) ​ $ 0.42 ​ $ 0.28 ​ $ 0.45 ​ Cash dividends declared per share ​ $ 0.36 ​ $ - ​ $ - ​ $ - ​ $ 0.36 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2019 ​ First Second Third Fourth ​ ​ ​ ​ Quarter ​ Quarter ​ Quarter ​ Quarter ​ Total Revenue ​ $ 690,608 ​ $ 689,828 ​ $ 650,489 ​ $ 725,238 ​ $ 2,756,163 ​ Total costs and expenses ​ $ 630,163 ​ $ 636,545 ​ $ 605,605 ​ $ 671,827 ​ $ 2,544,140 ​ Income from operations ​ $ 60,445 ​ $ 53,283 ​ $ 44,884 ​ $ 53,411 ​ $ 212,023 ​ Net income attributable to Texas Roadhouse, Inc. and subsidiaries ​ $ 50,390 ​ $ 44,845 ​ $ 36,531 ​ $ 42,686 ​ $ 174,452 ​ Basic earnings per common share ​ $ 0.70 ​ $ 0.63 ​ $ 0.53 ​ $ 0.61 ​ $ 2.47 ​ Diluted earnings per common share ​ $ 0.70 ​ $ 0.63 ​ $ 0.52 ​ $ 0.61 ​ $ 2.46 ​ Cash dividends declared per share ​ $ 0.30 ​ $ 0.30 ​ $ 0.30 ​ $ 0.30 ​ $ 1.20 ​ ​ The fourth quarter of 2019 includes an estimated impact of $ 0.10 to $ 0.11 per diluted share for the 53 rd week. ​ ​ F-29