What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2022-02-25 compared with 2021-02-26 · 270 added, 299 removed, 830 unchanged (41% of the section changed)

18 unchanged sentences

ITEM 9B—OTHER INFORMATION

ITEM 9C—DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

ITEM 10—DIRECTORS, EXECUTIV E OFFICERS AND CORPORATE GOVERNANCE

16 unchanged sentences

Plans not approved by stockholders

(1) Total number of shares consists of 793,563 restricted stock units and 79,000 performance stock units.

(1) Total number of shares consist of 558,183 restricted stock units and 31,952 performance stock units.

Shares in this column are excluded from the Shares Available for Future Grants column.

6 unchanged sentences

Consolidated Financial Statements

Reports of Independent Registered Public Accounting Firm

Reports of Independent Registered Public Accounting Firm (PCAOB ID:

Consolidated Balance Sheets as of December 28, 2021 and December 29, 2020

7 unchanged sentences

Bylaws of Registrant (incorporated by reference to Exhibit 3.3 to the Registration Statement on Form S-1 of Registrant (File No.

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.

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.

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.

Form of Indemnification Agreement for Director and Executive Officer

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.

10 unchanged sentences

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.

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.

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.

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.

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.

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.

Amended and Restated Form of Restricted Stock Unit Award Agreement under the Texas Roadhouse, Inc.

7 unchanged sentences

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.

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.

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.

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.

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.

Assignment and Assumption Agreement between Texas Roadhouse Holdings LLC and Texas Roadhouse, Inc.

2 unchanged sentences

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.

First Amendment to 2018 Employment Agreement between Texas Roadhouse Management Corp.

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.

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.

First Amendment to 2018 Employment Agreement between Texas Roadhouse Management Corp.

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.

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.

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.

1 unchanged sentence

Employment Agreement between Registrant and Gerald L.

Morgan entered into as of December 17, 2020

Morgan entered into as of December 17, 2020 (incorporated by reference to Exhibit 10.33 to the Registrant’s Annual Report on Form 10-K for the year ended December 29, 2020 (File No.

Employment Agreement between Registrant and W.

Kent Taylor entered into as of December 30, 2020

Employment Agreement between Registrant and Doug Thompson entered into as of December 30, 2020

Kent Taylor entered into as of December 30, 2020 (incorporated by reference to Exhibit 10.34 to the Registrant’s Annual Report on Form 10-K for the year ended December 29, 2020 (File No.

Employment Agreement between Registrant and Doug Thompson entered into as of December 30, 2020 (incorporated by reference to Exhibit 10.35 to the Registrant’s Annual Report on Form 10-K for the year ended December 29, 2020 (File No.

Employment Agreement between Registrant and S.

Chris Jacobsen entered into as of December 30, 2020

Employment Agreement between Registrant and Tonya Robinson entered into as of December 30, 2020

Chris Jacobsen entered into as of December 30, 2020 (incorporated by reference to Exhibit 10.36 to the Registrant’s Annual Report on Form 10-K for the year ended December 29, 2020 (File No.

Employment Agreement between Registrant and Tonya Robinson entered into as of December 30, 2020 (incorporated by reference to Exhibit 10.37 to the Registrant’s Annual Report on Form 10-K for the year ended December 29, 2020 (File No.

Employment Agreement between Registrant and Christopher C.

Colson entered into as of March 31, 2021 (incorporated by reference to Exhibit 10.6 of the Registrant’s Quarterly Report on Form 10-Q for the period ended March 30, 2021 (File No.

First Amendment to Employment Agreement between Texas Roadhouse Management Corp.

and Gerald L.

Morgan dated March 31, 2021, with a retroactive effective date of March 18, 2021 (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K dated March 31, 2021 (File No.

Employment Agreement between Registrant and Regina A.

Tobin entered into as of June 15, 2021 with an effective date of June 30, 2021 (incorporated by reference to Exhibit 10.3 of the Registrant’s Quarterly Report on Form 10-Q for the period ended June 29, 2021 (File No.

Employment Agreement between Registrant and Hernan E.

Mujica entered into as of June 15, 2021 with an effective date of June 30, 2021 (incorporated by reference to Exhibit 10.4 of the Registrant’s Quarterly Report on Form 10-Q for the period ended June 29, 2021 (File No.

Second Amendment to Amended and Restated Credit Agreement dated as of May 4, 2021 by and among Texas Roadhouse, Inc.

and the lenders named therein and JPMorgan Chase Bank, N.A.

as Administrative Agent (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K dated May 4, 2021 (File No.

Texas Roadhouse, Inc.

2021 Long-Term Incentive Plan (incorporated by reference from Appendix A to the Texas Roadhouse, Inc.

Proxy Statement on Schedule 14A filed with the Securities and Exchange Commission on April 2, 2021 (File No.

Form of Texas Roadhouse, Inc.

2021 Long-Term Incentive Plan Performance Stock Unit Award Agreement (incorporated by reference to Exhibit 10.1 of Registrant's Current Report on Form 8-K dated June 15, 2021 (File No.

Form of Texas Roadhouse, Inc.

2021 Long-Term Incentive Plan Restricted Stock Unit Award Agreement (Officers) (incorporated by reference to Exhibit 10.1 of Registrant's Current Report on Form 8-K dated June 15, 2021 (File No.

Form of Texas Roadhouse, Inc.

2021 Long-Term Incentive Plan Restricted Stock Unit Award Agreement (Member of Board of Directors) (incorporated by reference to Exhibit 10.1 of Registrant's Current Report on Form 8-K dated June 15, 2021 (File No.

Separation Agreement between Registrant and Douglas W.

Thompson entered into as of December 3, 2021 (incorporated by reference to Exhibit 10.1 of Registrant's Current Report on Form 8-K dated December 3, 2021(File No.

List of Subsidiaries

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TEXAS ROADHOUSE, INC.

Chairman of the Company, Chief Executive

/s/ Gerald L.

President, Chief Executive

Officer, Director

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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.

Chairman of the Company, Chief Executive Officer, Director

/s/ Gerald L.

President, Chief Executive Officer, Director

(Principal Executive Officer)

4 unchanged sentences

February 25, 2022

/s/ G regory N.

Chairman of the Board, Director

February 25, 2022

/s/ Michael A.

February 25, 2022

/s/ Gregory N.

February 25, 2022

13 unchanged sentences

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 28, 2021, 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 25, 2022 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

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Potential indicators of impairment of long-lived assets

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.

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 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.

1 unchanged sentence

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.

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 and the utilization of the trailing 12-month cash flows to identify a potential impairment trigger.

The following are the primary procedures we performed to address this critical audit matter.

1 unchanged sentence

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.

12 unchanged sentences

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.

82 unchanged sentences

Income before taxes

Income tax (benefit) expense

Income tax expense (benefit)

Net income including noncontrolling interests

2 unchanged sentences

and subsidiaries

Other comprehensive income (loss), net of tax:

Other comprehensive income, net of tax:

Foreign currency translation adjustment, net of tax of ($ 36 ), ($ 40 ) and ($ 1 ), respectively

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Balance, December 25, 2018

Other comprehensive loss, net of tax

Noncontrolling interests contribution

Other comprehensive income, net of tax

Distributions to noncontrolling interest holders

Acquisition of noncontrolling interest

Contribution from executive officer

Acquisition of noncontrolling interest and other

Dividends declared ($ 1.20 per share)

1 unchanged sentence

Indirect repurchase of shares for minimum tax withholdings

Cumulative effect of adoption of ASC 606, Revenue from Contracts with Customers , net of tax

Repurchase of shares of common stock

( 2,625,245 )

Cumulative effect of adoption of ASC 842, Leases, net of tax

Share-based compensation

1 unchanged sentence

Other comprehensive income, net of tax

Noncontrolling interests contribution

Distributions to noncontrolling interest holders

Acquisition of noncontrolling interest and other

Dividends declared ($ 0.36 per share)

2 unchanged sentences

Repurchase of shares of common stock

( 2,625,245 )

Cumulative effect of adoption of ASC 842, Leases, net of tax

Share-based compensation

1 unchanged sentence

Other comprehensive income, net of tax

Noncontrolling interests contribution

Distributions to noncontrolling interest holders

17 unchanged sentences

Impairment and closure costs

Contribution from executive officer

Equity loss (income) from investments in unconsolidated affiliates

11 unchanged sentences

Operating lease right-of-use assets and lease liabilities

Deferred rent

Other liabilities

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Proceeds from sale of property and equipment

Proceeds from sale leaseback transaction

Proceeds from sale leaseback transactions

Net cash used in investing activities

Cash flows from financing activities:

Proceeds from revolving credit facility

(Payments on) proceeds from revolving credit facility, net

Debt issuance costs

2 unchanged sentences

Acquisition of noncontrolling interest

(Repayments) proceeds from restricted stock and other deposits, net

Proceeds from (payments on) restricted stock and other deposits, net

Indirect repurchase of shares for minimum tax withholdings

Repurchase of shares of common stock

Principal payments on long-term debt

Dividends paid to shareholders

Net cash provided by (used in) financing activities

Net increase (decrease) in cash and cash equivalents

Net cash (used in) provided by financing activities

Net (decrease) increase in cash and cash equivalents

Cash and cash equivalents—beginning of period

22 unchanged sentences

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.

The Company has been subject to risks and uncertainties as a result of the COVID-19 pandemic (the "pandemic").

These include federal, state and local restrictions on restaurants, some of which have limited capacity or seating in the dining rooms while others have allowed to-go or curbside service only.

As of December 28, 2021, all of our domestic company and franchise locations were operating without restriction.

As of December 29, 2020, all of our domestic company and franchise locations were operating their dining rooms under various limited capacity restrictions or were limited to outdoor and/or to-go or curbside service only .

As a result of these restrictions, we developed a hybrid operating model to accommodate our dining room restrictions together with enhanced to-go.

We continue to see sales in our to-go program higher than pre-pandemic levels, even with dining rooms operating without restriction.

We cannot predict how long we will continue to be impacted by the pandemic, the extent to which our dining rooms will have to close again or otherwise have limited seating, or if the increased sales in our to-go program will continue.

The extent to which COVID-19 impacts our business, results of operations, or financial condition will depend on future developments which are outside of our control.

This includes, without limitation, the efficacy and public acceptance of vaccination programs and/or testing mandates in curbing the spread of the virus, the introduction and spread of new variants of the virus, which may prove resistant to currently approved vaccines, and new or reinstated restrictions or regulations on our operations.

In addition, significant items subject to estimates and assumptions including the carrying amount of property and equipment, goodwill, and lease related assets could be impacted.

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

1 unchanged sentence

As of December 28, 2021 and December 29, 2020, 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.

Additionally, 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 were 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.

The investment balance related to our joint venture agreement in China was fully impaired in 2021 as the related restaurants closed during the year.

All significant intercompany balances and transactions for these unconsolidated restaurants as well as the entities whose accounts have been consolidated have been eliminated.

Texas Roadhouse, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

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

(b) Fiscal Year

3 unchanged sentences

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.

Operating segments are defined as components of a company that engage in business activities from which it may earn revenues and incur expenses, and for which separate financial information is available and is regularly reviewed by the chief operating decision maker (“CODM”), to assess the performance of the individual segments and make decisions about resources to be allocated to the segments.

The Company’s operating segments have been identified in accordance with the provisions of Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") ASC 280, Segment Reporting .

Historically, the Company identified each restaurant as an operating segment and aggregated them into a single reportable segment.

In 2021, due to a change in our management reporting structure, we have identified our concepts as separate operating segments.

These operating segments include Texas Roadhouse, Bubba’s 33, Jaggers and our retail initiatives.

In addition, we have identified Texas Roadhouse and Bubba’s 33 as reportable segments.

This change did not have an impact on our consolidated operating results.

For further discussion of segment reporting, see note 18.

(d) 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 $ 26.4 million and $ 18.1 million at December 28, 2021 and December 29, 2020, respectively, because the balances are settled within two to three business days.

(d) Receivables

(e) 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.

5 unchanged sentences

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

(f) 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

(g) Property and Equipment

Property and equipment are stated at cost.

1 unchanged sentence

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.

In most cases, assets on leased properties are

Texas Roadhouse, Inc.

2 unchanged sentences

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

depreciated over a period of time which includes both the initial term of the lease and one or more option periods.

See note 2(h) for further discussion of leases.

The estimated useful lives are:

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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.

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.

The present value is based on our incremental borrowing rate which considers our credit rating for a secured or collateralized instrument.

In addition, for those leases with fixed escalations, we recognize the related rent expense on a straight-line basis over the lease term.

1 unchanged sentence

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

In accordance with ASC 350, Intangibles—Goodwill and Other ("ASC 350"), goodwill is not subject to amortization and is evaluated for impairment on an annual basis, or sooner if an event or other circumstance indicates that goodwill may be impaired.

The annual assessment date is the first day of our fourth quarter.

ASC 350 requires that goodwill be tested for impairment at the reporting unit level, or the level of internal reporting that reflects the way in which an entity manages its businesses.

A reporting unit is defined as an operating segment, or one level below an operating segment.

Historically, we designated our operating segment and reporting unit to be at the same level which we defined to be the individual restaurant.

In 2021, we changed the designation of our operating segment and reporting unit to be at the concept level.

As a result of this change, we performed the goodwill impairment analysis at both the individual restaurant and concept level to substantiate that our goodwill was not impaired under either reporting unit definition.

As stated in ASC 350, an entity may first assess qualitative factors in order to determine if it is necessary to perform the quantitative test.

In 2021, we elected to perform a qualitative assessment for our annual review of goodwill.

This review included evaluating factors such as macroeconomic conditions, industry and market considerations, cost factors, changes in management or key personnel, sustained decreases in share price and the overall financial performance of the Company’s reporting units at both the individual restaurant and concept level.

As a result of the qualitative assessment, no indicators of impairment were identified, and no additional indicators of impairment were identified through the end of the fourth quarter that would require additional testing.

Texas Roadhouse, Inc.

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(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.

In 2019, we determined that there was no goodwill impairment.

Refer to note 7 for additional information related to goodwill and intangible assets.

(i) Other Assets

(j) 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

(k) 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.

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See note 16 for further discussion of amounts recorded as part of our impairment analysis.

(k) Insurance Reserves

(l) 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.

5 unchanged sentences

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

The estimated liability is based on a number of assumptions and factors regarding economic 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.

Texas Roadhouse, Inc.

2 unchanged sentences

(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

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These costs and the company restaurant contribution amounted to $ 21.1 million, $ 13.8 million and $ 18.3 million for the years ended December 28, 2021, December 29, 2020 and December 31, 2019, respectively.

(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 U.S.

generally accepted accounting principle (“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

Texas Roadhouse, Inc.

2 unchanged sentences

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

(p) Pre-opening Expenses

(q) Use of Estimates

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.

improvements, legal reserves, gift card breakage and third party fees and income taxes.

Actual results could differ from those estimates.

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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.

In 2021, we fully impaired our foreign investment and recognized the corresponding foreign currency translation adjustment of $ 0.1 million in net income.

(s) Fair Value of Financial Instruments

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(t) Recent Accounting Pronouncements

Financial Instruments

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

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.

Texas Roadhouse, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

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

(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.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes, which removed certain exceptions related to the approach for intraperiod tax allocations, the calculation of income taxes in interim periods, and the recognition of deferred taxes for investments.

This guidance also simplified aspects of accounting for recognizing deferred taxes for taxable goodwill.

We adopted ASU 2019-12 as of the beginning of our 2021 fiscal year.

The adoption of this standard did not have a significant impact on our consolidated financial statements.

(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

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We are currently assessing the impact of this new standard on our consolidated financial statements .

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

Texas Roadhouse, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

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

The following table disaggregates our revenue by major source:

Fiscal Year Ended

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Total revenue

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.

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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.

We use historic gift card redemption patterns to determine when the likelihood of a gift card's redemption becomes remote.

In the current year, a shift in our historic redemption pattern indicated that the percentage of gift cards sold that are not expected to be redeemed had changed from 4.0 % to 4.5 % .

As a result, we adjusted the breakage recognized for all gift cards that had not been fully amortized and recorded a favorable breakage adjustment of $ 4.8 million.

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.

For the years ended December 28, 2021, December 29, 2020 and December 31, 2019, we recognized gift card fees, net of gift card breakage income, of $ 6.1 million, $ 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.

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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.

Upfront fees from

Texas Roadhouse, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

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

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.

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We recognized revenue of $ 0.3 million and $ 0.4 million for the years ended December 28, 2021 and December 29, 2020, respectively, related to the amounts in deferred revenue as of December 29, 2020 and December 31, 2019, respectively.

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.

In 2021, we did not acquire any franchise restaurants.

In 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 transactions were accounted for using the purchase method as defined in ASC 805, Business Combinations .

These acquisitions generated goodwill of $ 3.3 million, which is not amortizable for book purposes, but is deductible for tax purposes.

The goodwill was assigned to the Texas Roadhouse reportable segment.

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.

On May 4, 2021, we entered into an agreement to amend our revolving credit facility with a syndicate of commercial lenders led by JPMorgan Chase Bank, N.A.

and PNC Bank, N.A.

The amended revolving credit facility remains an unsecured, revolving credit agreement and has a borrowing capacity of up to $ 300.0 million with the option to increase by an additional $ 200.0 million subject to certain limitations, including approval by the syndicate of lenders.

The amendment also extended the maturity date to May 1, 2026.

Prior to the amendment, our original revolving credit facility had a borrowing capacity of up to $ 200.0 million with the option to increase by an additional $ 200.0 million subject to certain limitations, including approval by the syndicate of lenders.

On May 11, 2020, we amended the original 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 original revolving credit facility.

The terms of the amended revolving credit facility require us to pay interest on outstanding borrowings at LIBOR plus a margin of 0.875 % to 1.875 % and pay a commitment fee of 0.125 % to 0.30 % per year on any unused portion of the amended revolving credit facility, in each case depending on our leverage ratio.

The agreement also provides an Alternate Base Rate that may be substituted for LIBOR.

As of December 28, 2021, we had $ 100.0 million outstanding on the amended revolving credit facility and $ 189.1 million of availability, net of $ 10.9 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 %.

As of December 29, 2020, we had $ 190.0 million outstanding on the original revolving credit facility which is included as long-term debt on our consolidated balance sheet.

In addition, we had $ 50.0 million outstanding on the incremental revolving credit facility which is included as current maturities of long-term debt on our consolidated balance sheet.

The weighted-average interest rate for the $ 100.0 million outstanding as of December 28, 2021 was 0.98 % .

The weighted-average interest rate for the $ 240.0 million of combined borrowings as of December 29, 2020 was 1.98 %.

Texas Roadhouse, Inc.

2 unchanged sentences

(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.

The lenders’ obligation to extend credit pursuant to the amended revolving credit facility depends on us maintaining certain financial covenants.

We were in compliance with all financial covenants as of December 28, 2021 and December 29, 2020.

(6) Property and Equipment, Net

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Accumulated depreciation and amortization

For the year ended December 29, 2020, the amount of interest capitalized in connection with restaurant construction was $ 0.3 million.

For the years ended December 28, 2021 and December 29, 2020, the amount of interest capitalized in connection with restaurant construction was $ 0.2 million and $ 0.3 million, respectively.

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

All of our goodwill and intangible assets reside within the Texas Roadhouse reportable segment.

The changes in the carrying amount of goodwill and intangible assets are as follows:

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Amortization expense for the next five years is expected to range from $ 0.1 million to $ 0.7 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

Refer to note 4 for discussion of the acquisitions completed for the year ended December 29, 2020.

Texas Roadhouse, Inc.

2 unchanged sentences

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

acquisitions completed for the years ended December 29, 2020 and December 31, 2019.

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 .

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(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):

Information related to our real estate operating leases as of and for the fiscal year ended December 28, 2021 and December 29, 2020 was as follows:

Fiscal Year Ended

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Total lease costs

Real estate lease liability maturity analysis

Real estate lease liabilities maturity analysis

As of December 28, 2021

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Weighted-average discount rate

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.

Operating lease payments exclude $ 13.7 million of future minimum lease payments for executed real estate leases of which we have not yet taken possession.

In addition to the above operating leases, as of December 28, 2021, we had two finance leases with a right-of-use asset balance and lease liability balance of $ 2.2 million and $ 2.7 million, respectively.

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 2021, we entered into three sale leaseback transactions involving land that had recently been acquired.

These sales generated proceeds of $ 5.6 million and no gain or loss was recognized on the transactions.

The resulting operating leases are included in the operating lease right-of-use assets and lease liabilities noted above.

In 2020, we entered into a sale leaseback transaction involving land that had recently been acquired.

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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

Texas Roadhouse, Inc.

2 unchanged sentences

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

and increased for any initial direct costs recognized at lease inception.

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 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.

For these leases, we recognize the related total 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.

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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

Contingent rent

Rent expense, occupancy

Minimum rent—equipment and other

(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:

Components of our income tax expense (benefit) for the years ended December 28, 2021, December 29, 2020 and December 31, 2019 are as follows:

Fiscal Year Ended

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Total deferred

Income tax (benefit) expense

Income tax expense (benefit)

Our pre-tax income is substantially derived from domestic restaurants.

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Officers compensation

Our effective tax rate was a benefit of 81.4 % in 2020 compared to expense of 15.1 % in 2019.

Our effective tax rate increased to 13.5 % compared to an effective tax rate benefit of 81.4 % in 2020.

The increase was primarily due to the significant increase in pre-tax income.

In 2020, our FICA tip and Work opportunity tax credits exceeded our federal tax liability which resulted in a tax rate benefit.

Our effective tax rate was a benefit 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.

Although these credits exceeded our federal tax liability in 2020, we expect to utilize these credits in future years.

Components of deferred tax liabilities, net are as follows:

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Insurance reserves

Long-term deferred payroll taxes

Deferred payroll taxes

Other reserves

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Net deferred tax liability

As of December 28, 2021 and December 29, 2020, we had tax credit carryforwards of $ 3.6 million and $ 10.4 million, respectively, primarily related to FICA tip and Work opportunity tax credit carryforwards that exceeded credit limitations.

These federal carryforwards expire in 2041.

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

Texas Roadhouse, Inc.

2 unchanged sentences

(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.

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:

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Balance at December 28, 2021

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.

As of December 28, 2021 and December 29, 2020, the total amount of accrued penalties and interest related to uncertain tax provisions was recognized as a part of income tax expense and these amounts were not material.

All entities for which unrecognized tax benefits exist as of December 28, 2021 possess a December tax year-end.

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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.

In response to the impact of the pandemic on our restaurant operations, on March 17, 2020, we suspended all share repurchase activity.

We resumed share repurchases on August 2, 2021.

For the year ended December 28, 2021, we paid $ 51.6 million to repurchase 584,932 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

For the year ended December 29, 2020, we paid $ 12.6 million to repurchase 252,409 shares of our common stock.

As of December 28, 2021, we had $ 96.1 million remaining under our authorized stock repurchase program.

Texas Roadhouse, Inc.

2 unchanged sentences

(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

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For the years ended December 28, 2021, December 29, 2020, and December 31, 2019, 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:

The following table sets forth the calculation of earnings per share and weighted average shares outstanding as presented in the accompanying consolidated statements of income and comprehensive income:

Fiscal Year Ended

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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.

No liabilities have been recorded as of December 28, 2021 as the likelihood of default was deemed to be less than probable and the fair value of the guarantees is not considered significant.

Texas Roadhouse, Inc.

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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.

(2) Leases associated with non-Texas Roadhouse restaurants which were sold.

The leases were assigned to the acquirer, but we remain contingently liable under the terms of the lease if the acquirer defaults.

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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.

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On May 13, 2021, our stockholders approved the Texas Roadhouse, Inc.

2013 Long-Term Incentive Plan (the "Plan").

2021 Long-Term Incentive Plan (the “Plan”).

The Plan provides for the granting of various forms of equity awards including options, stock appreciation rights, full value awards, and performance-based awards.

This plan replaced the Texas Roadhouse, Inc.

2004 Equity Incentive Plan.

The Company provides restricted stock units ("RSUs") to employees as a form of share-based compensation.

This Plan replaced the 2013 Long-Term Incentive Plan and no subsequent awards will be granted under the 2013 Plan.

The Company provides restricted stock units (“RSUs”) to employees as a form of share-based compensation.

An RSU is the conditional right to receive one share of common stock upon satisfaction of the vesting requirement.

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Share- based compensation activity by type of grant as of December 28, 2021 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.

We recognize expense for RSUs and PSUs over the vesting term based on the grant date fair value of the award.

We do not estimate forfeitures as we record them as they occur.

Summary Details for RSUs

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Outstanding at December 29, 2020

Incremental Performance Shares (1)

Performance shares adjustment (1)

Outstanding at December 28, 2021

(1) Additional shares from the January 2019 PSU grant that vested in January 2020 due to exceeding the initial 100 % target.

(1) Adjustment to actual payout amount of 6.58 % from the January 2020 PSU grant that vested in January 2021.

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.

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

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.

There was no allowable excess tax benefit associated with vested PSUs for the years ended December 28, 2021, December 29, 2020 and December 31, 2019.

(15) Fair Value Measurement

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Fair Value Measurements

Total gain (loss)

Fiscal Year Ended

Long-lived assets held for sale

Long-lived assets held for use

Operating lease right-of-use assets

Investments in unconsolidated affiliates

Long-lived assets held for sale include land and building at a site that was relocated.

Long-lived assets held for sale include land and building at a site that was relocated and had a carrying amount of $ 1.2 million and $ 1.6 million as of December 28, 2021 and December 29, 2020, respectively.

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

These are valued using a Level 3 input, i.e., information from broker listings.

We recorded a loss of $ 0.5 million and $ 0.4 million for the years ended December 28, 2021 and December 29, 2020, respectively, which is included in impairment and closure, net in our consolidated statements of income and comprehensive income.

Goodwill includes two restaurants whose carrying amounts were determined to be in excess of their fair values as part of our annual goodwill impairment assessment in 2020 and had a carrying amount of $ 2.6 million as of December

Texas Roadhouse, Inc.

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(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.

Investments in unconsolidated affiliates include a 40 % equity interest in a joint venture in China that had a carrying amount of zero and $ 1.5 million as of December 28, 2021 and December 29, 2020, respectively.

We recorded a loss of $ 1.5 million and $ 1.1 million for the years ended December 28, 2021 and December 29, 2020, respectively, which is included in equity (loss) income from investments in unconsolidated affiliates in our consolidated statements of income and comprehensive income.

This joint venture included four non-Texas Roadhouse restaurants, all of which closed in 2021.

At December 28, 2021 and December 29, 2020, the fair values of cash and cash equivalents, accounts receivable and accounts payable approximated their carrying values based on the short-term nature of these instruments.

At 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).

At December 28, 2021 and December 29, 2020, the fair value of our amended 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.

We recorded impairment and closure costs of $ 0.7 million, $ 2.3 million and ($ 0.9 ) million for the years ended December 28, 2021, December 29, 2020 and December 31, 2019, respectively.

Impairment and closure costs in 2021 included $ 0.7 million related to the impairment of the fixed assets and operating lease right-of-use assets at two restaurants, both of which have relocated or are scheduled to be relocated.

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.

In addition, in 2020, we recorded goodwill impairment of $ 1.1 million related to two restaurants.

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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

As of December 28, 2021, December 29, 2020 and December 31, 2019, we had three franchise restaurants and one majority-owned company restaurant owned in part by current officers of the Company.

These franchise entities paid us fees of $ 1.7 million, $ 0.9 million and $ 0.7 million as of December 28, 2021, December 29, 2020, and December 31, 2019, respectively.

Texas Roadhouse, Inc.

2 unchanged sentences

(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)

Total costs and expenses

Income (loss) from operations

Net income (loss) attributable to Texas Roadhouse, Inc.

(18) Segment Information

We manage our restaurant and franchising operations by concept and as a result have identified Texas Roadhouse, Bubba's 33, Jaggers, and our retail initiatives as separate operating segments.

Our reportable segments are Texas Roadhouse and Bubba's 33.

The Texas Roadhouse reportable segment includes the results of our domestic company Texas Roadhouse restaurants and domestic and international franchise Texas Roadhouse restaurants.

The Bubba's 33 reportable segment includes the results of our domestic company Bubba's 33 restaurants.

Our remaining operating segments, which include the results of our domestic company Jaggers restaurants and the results of our retail initiatives, are included in Other.

In addition, Corporate-related segment assets, depreciation and amortization, and capital expenditures are also included in Other.

Management uses restaurant margin as the measure for assessing performance of our segments.

Restaurant margin (in dollars and as a percentage of restaurant and other sales) represents restaurant and other sales less restaurant-level operating costs, including food and beverage costs, labor, rent and other operating costs.

Restaurant margin also includes sales and operating costs related to our non-royalty based retail initiatives.

Restaurant margin is used by our CODM to evaluate restaurant-level operating efficiency and performance.

In calculating restaurant margin, we exclude certain non-restaurant-level costs that support operations, including pre-opening and general and administrative expenses, but do not have a direct impact on restaurant-level operational efficiency and performance.

We also exclude depreciation and amortization expense, substantially all of which relates to restaurant-level assets, as it represents a non-cash charge for the investment in our restaurants.

We also exclude impairment and closure expense as we believe this provides a clearer perspective of the Company’s ongoing operating performance and a more useful comparison to prior period results.

Restaurant margin as presented may not be comparable to other similarly titled measures of other companies in our industry.

Restaurant and other sales for all operating segments are derived primarily from food and beverage sales.

We do not rely on any major customer as a source of sales and the customers and assets of our reportable segments are located predominantly in the United States.

There are no material transactions between reportable segments.

The following tables reconcile our segment results to our consolidated results reported in accordance with GAAP:

Fiscal Year Ended December 28, 2021

Texas Roadhouse

Restaurant and other sales

Restaurant operating costs (excluding depreciation and amortization)

Restaurant margin

Depreciation and amortization

Segment assets

Capital expenditures

Texas Roadhouse, Inc.

and Subsidiaries

Basic earnings (loss) per common share

Diluted earnings (loss) per common share

Cash dividends declared per share

Total costs and expenses

Notes to Consolidated Financial Statements

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

Fiscal Year Ended December 29, 2020

Texas Roadhouse

Restaurant and other sales

Restaurant operating costs (excluding depreciation and amortization)

Restaurant margin

Depreciation and amortization

Segment assets

Capital expenditures

Fiscal Year Ended December 31, 2019

Texas Roadhouse

Restaurant and other sales

Restaurant operating costs (excluding depreciation and amortization)

Restaurant margin

Depreciation and amortization

Capital expenditures

A reconciliation of restaurant margin to income from operations is presented below.

We do not allocate interest expense (income) and equity (loss) income from investments in unconsolidated affiliates to reportable segments.

Fiscal Year Ended

December 28, 2021

December 29, 2020

December 31, 2019

Restaurant margin

Franchise royalties and fees

Depreciation and amortization

Impairment and closure, net

General and administrative

Income from operations

Net income attributable to Texas Roadhouse, Inc.

and subsidiaries

Basic earnings per common share

Diluted earnings per common share

Cash dividends declared per share

The fourth quarter of 2019 includes an estimated impact of $ 0.10 to $ 0.11 per diluted share for the 53 rd week.

(19) Subsequent Events

On December 29, 2021, the first day of our 2022 fiscal year, we completed the acquisition of seven franchise restaurants.

Pursuant to the terms of the acquisition agreements, we paid an aggregate purchase price of approximately $ 27.0 million.

We expect to complete the preliminary purchase price allocations relating to these transactions in the first quarter of fiscal 2022.

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

What changed 10-K

Item 9A. Controls and Procedures