What changed in this filing

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Item 1. Financial Statements

2021-07-28 compared with 2021-04-28 · 100 added, 51 removed, 203 unchanged (43% of the section changed)

34 unchanged sentences

100,000,000 shares authorized;

29,736,838 and 29,687,123 shares issued and outstanding as of March 27, 2021 and December 26, 2020, respectively

29,743,375 and 29,687,123 shares issued and outstanding as of June 26, 2021 and December 26, 2020, respectively

Additional paid-in-capital 594 421

Accumulated deficit ( 332,052 ) ( 342,028 )

Retained deficit ( 323,026 ) ( 342,028 )

Accumulated other comprehensive loss ( 109 ) —

Total stockholders' deficit ( 322,243 ) ( 341,310 )

3 unchanged sentences

AND SUBSIDIARIES

Consolidated Statements of Operations

Consolidated Statements of Comprehensive Income

(amounts in thousands, except per share data)

Thirteen Weeks Ended

2021 March 28,

Thirteen Weeks Ended Twenty-Six Weeks Ended

2021 June 27,

2020 June 26,

2021 June 27,

Royalty revenue, franchise fees and other $ 33,135 $ 27,858 $ 64,741 $ 52,057

8 unchanged sentences

Depreciation and amortization 1,523 1,398 3,318 2,953

Gain on sale of restaurants and other expenses, net — ( 2,016 ) — ( 2,016 )

Total costs and expenses 55,097 46,568 105,984 88,533

11 unchanged sentences

Dividends per share $ 0.14 $ 0.11 $ 0.28 $ 0.22

Other comprehensive income (loss)

Currency translation adjustment $ ( 109 ) $ — $ ( 109 ) $ —

Other comprehensive income (loss) ( 109 ) — ( 109 ) —

Comprehensive income $ 11,203 $ 11,539 $ 24,363 $ 19,635

(1) Cost of sales includes all operating expenses of company-owned restaurants, including advertising expenses, and excludes depreciation and amortization, which are presented separately.

3 unchanged sentences

Consolidated Statements of Stockholders' Deficit

For the Thirteen Weeks Ended March 28, 2020 and March 27, 2021

For the Twenty-Six Weeks Ended June 27, 2020 and June 26, 2021

(amounts in thousands, except share data)

1 unchanged sentence

Paid-In Capital

Accumulated Deficit Total Stockholders’ Deficit

Retained Deficit Accumulated Other Comprehensive Loss Total Stockholders’ Deficit

Balance at December 28, 2019 29,457,228 $ 295 $ 552 $ ( 210,275 ) $ — $ ( 209,428 )

Adjustment for ASC 842 adoption — — — — —

Net income — — — 8,096 — 8,096

4 unchanged sentences

Balance at March 28, 2020 29,583,394 296 219 ( 203,463 ) — ( 202,948 )

Net income — — — 11,539 — 11,539

Shares issued under stock plans 13,057 — 57 — — 57

Tax payments for restricted stock upon vesting ( 104 ) — — ( 12 ) — ( 12 )

Stock-based compensation expense — — 1,969 — — 1,969

Dividends declared on common stock and equivalents — — ( 2,202 ) ( 1,075 ) — ( 3,277 )

Balance at June 27, 2020 29,596,347 $ 296 $ 43 $ ( 193,011 ) $ — ( 192,672 )

Shares Amount Additional

Paid-In Capital Accumulated Deficit Total Stockholders’ Deficit

Paid-In Capital Retained Deficit Accumulated Other Comprehensive Loss Total Stockholders’ Deficit

Balance at December 26, 2020 29,687,123 $ 297 $ 421 $ ( 342,028 ) $ — $ ( 341,310 )

5 unchanged sentences

Balance at March 27, 2021 29,736,838 298 26 ( 332,052 ) — ( 331,728 )

Net income — — — 11,312 — 11,312

Shares issued under stock plans 6,613 — — — — —

Tax payments for restricted stock upon vesting ( 76 ) — — ( 11 ) — ( 11 )

Stock-based compensation expense — — 2,456 — — 2,456

Dividends declared on common stock and equivalents — — ( 1,888 ) ( 2,275 ) — ( 4,163 )

Currency translation adjustment — — — — ( 109 ) ( 109 )

Balance at June 26, 2021 29,743,375 $ 298 $ 594 $ ( 323,026 ) $ ( 109 ) ( 322,243 )

See accompanying notes to consolidated financial statements.

3 unchanged sentences

(amounts in thousands)

Thirteen Weeks Ended

2021 March 28,

Twenty-Six Weeks Ended

2021 June 27,

Operating activities

4 unchanged sentences

Stock-based compensation expense 4,772 3,300

(Gain)/Loss on disposal of assets — ( 2,016 )

Amortization of debt issuance costs 711 815

9 unchanged sentences

Purchases of property and equipment ( 8,258 ) ( 2,670 )

Proceeds from sales of assets — 2,300

Payments for investments (Note 6) ( 4,163 ) —

Cash used in investing activities ( 12,421 ) ( 370 )

9 unchanged sentences

Cash, cash equivalents, and restricted cash at end of period $ 66,655 $ 55,438

Supplemental information:

Accrued capital expenditures $ 6,325 $ —

See accompanying notes to consolidated financial statements.

5 unchanged sentences

Wingstop Inc., together with its consolidated subsidiaries (collectively, “Wingstop” or the “Company”), is in the business of franchising and operating Wingstop restaurants.

As of March 27, 2021, the Company had 1,371 domestic franchised restaurants and 175 international franchised restaurants.

As of March 27, 2021, the Company owned and operated 33 restaurants.

As of June 26, 2021, the Company had 1,415 domestic franchised restaurants and 175 international franchised restaurants.

As of June 26, 2021, the Company owned and operated 34 restaurants.

Basis of presentation.

The accompanying unaudited consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial information.

Consequently, financial information and disclosures normally included in financial statements prepared annually in accordance with accounting principles generally accepted in the United States have been condensed or omitted.

Balance sheet amounts are as of March 27, 2021 and December 26, 2020, and operating results are for the thirteen weeks ended March 27, 2021 and March 28, 2020.

Balance sheet amounts are as of June 26, 2021 and December 26, 2020, and operating results are for the thirteen and twenty-six weeks ended June 26, 2021 and June 27, 2020.

The foreign currency translation adjustment included in the Consolidated Statements of Comprehensive Income represents the unrealized impact of translating our foreign investment.

This amount is not included in Net Income and would only be realized upon disposition of our investment.

The related Accumulated other comprehensive loss is presented in the Consolidated Balance Sheets.

In the Company’s opinion, all necessary adjustments have been made for the fair presentation of the results of the interim periods presented.

4 unchanged sentences

Cash, Cash Equivalents, and Restricted Cash.

Cash, cash equivalents, and restricted cash within the Consolidated Balance Sheets and the Consolidated Statements of Cash Flows as of March 27, 2021 and December 26, 2020 were as follows (in thousands):

March 27, 2021 December 26, 2020

Cash, cash equivalents, and restricted cash within the Consolidated Balance Sheets and the Consolidated Statements of Cash Flows as of June 26, 2021 and December 26, 2020 were as follows (in thousands):

June 26, 2021 December 26, 2020

Cash and cash equivalents $ 43,504 $ 40,858

2 unchanged sentences

Total cash, cash equivalents, and restricted cash $ 66,655 $ 59,270

Recently issued accounting pronouncements.

We reviewed all recently issued accounting pronouncements and concluded that they were either not applicable or not expected to have a significant impact on our consolidated financial statements.

Change in presentation.

Beginning in the first quarter of 2021, headcount related expenses that support our national advertising fund are presented within “Advertising expenses” on the Consolidated Statements of Operations.

Prior to the first quarter of 2021, these expenses were presented within “Selling, general and administrative expenses.” Prior period amounts have been reclassified to conform to the current presentation.

This reclassification had no impact on operating income, balance sheets or statements of cash flows.

Headcount related expenses associated with the national advertising fund totaled $ 2.1 million for each of the thirteen weeks ended March 27, 2021 and March 28, 2020.

Headcount related expenses associated with the national advertising fund were $ 1.9 million and $ 1.8 million for the thirteen weeks ended June 26, 2021 and June 27, 2020, respectively, and were $ 4.0 million and $ 3.9 million for the twenty-six weeks ended June 26, 2021 and June 27, 2020, respectively.

Recently issued accounting pronouncements.

We reviewed all recently issued accounting pronouncements and concluded that they were either not applicable or not expected to have a significant impact on our consolidated financial statements.

(2) Earnings per Share

1 unchanged sentence

Diluted earnings per share reflects the potential dilution that could occur if securities convertible into, or other contracts to issue, common stock were exercised or converted into common stock.

For the calculation of diluted earnings per share, the basic weighted average number of shares is increased by the dilutive effect of the exercise and vesting of stock options and restricted stock units, respectively, as determined using the treasury stock method.

For the calculation of diluted earnings per share, the basic weighted average number of shares is increased by the dilutive effect

WINGSTOP INC.

1 unchanged sentence

Notes to Consolidated Financial Statements

of the exercise and vesting of stock options and restricted stock units, respectively, as determined using the treasury stock method.

Basic weighted average shares outstanding is reconciled to diluted weighted average shares outstanding as follows (in thousands):

Thirteen Weeks Ended

2021 March 28,

Thirteen Weeks Ended Twenty-Six Weeks Ended

2021 June 27,

2020 June 26,

2021 June 27,

Basic weighted average shares outstanding 29,739 29,588 29,722 29,538

1 unchanged sentence

Diluted weighted average shares outstanding 29,873 29,793 29,859 29,751

For the thirteen weeks ended March 27, 2021 and March 28, 2020, equity awards representing approximately 5,000 and 4,000 shares, respectively, were excluded from the dilutive earnings per share calculation because the effect would have been anti-dilutive.

For the thirteen weeks ended June 26, 2021 and June 27, 2020, equity awards representing approximately 8,000 and 1,000 shares, respectively, were excluded from the dilutive earnings per share calculation because the effect would have been anti-dilutive.

For the twenty-six weeks ended June 26, 2021 and June 27, 2020, equity awards representing approximately 7,000 and 1,000 shares, respectively, were excluded from the dilutive earnings per share calculation because the effect would have been anti-dilutive.

(3) Dividends

On February 16, 2021, the Company’s Board of Directors declared a quarterly dividend of $ 0.14 per share of common stock for stockholders of record as of March 5, 2021, which was paid on March 26, 2021, totaling $ 4.2 million.

Subsequent to the first quarter, on April 27, 2021, the Company’s Board of Directors declared a quarterly dividend of $ 0.14 per share of common stock for stockholders of record as of May 14, 2021.

The regular quarterly dividend is to be paid on June 4, 2021, totaling approximately $ 4.2 million.

In each of the first two quarters of 2021, the Company’s Board of Directors declared a quarterly dividend of $ 0.14 per share of common stock, which, in the aggregate, totaled $ 8.4 million, or $ 0.28 per share of common stock, and which was paid during the twenty-six weeks ended June 26, 2021.

Subsequent to the second quarter, on July 27, 2021, the Company’s Board of Directors declared a quarterly dividend of $ 0.17 per share of common stock for stockholders of record as of August 13, 2021.

The regular quarterly dividend is to be paid on September 3, 2021, totaling approximately $ 5.1 million.

(4) Fair Value Measurements

6 unchanged sentences

Fair value of debt is determined on a non-recurring basis, which results are summarized as follows (in thousands):

March 27, 2021 December 26, 2020

June 26, 2021 December 26, 2020

Fair Value Carrying

4 unchanged sentences

The Company also measures certain non-financial assets (primarily long-lived assets, intangible assets, and goodwill) at fair value on a non-recurring basis in connection with its periodic evaluations of such assets for potential impairment.

(5) Income Taxes

Income tax expense and the effective tax rate were $ 2.9 million and 17.9 %, respectively, for the thirteen weeks ended March 27, 2021, and $ 1.2 million and 13.2 %, respectively, for the thirteen weeks ended March 28, 2020.

The increase in the effective tax rate is primarily due to $ 1.2 million in tax benefits resulting from the recognition of excess tax benefits associated with stock options exercised during the thirteen weeks ended March 28, 2020.

WINGSTOP INC.

1 unchanged sentence

Notes to Consolidated Financial Statements

(5) Income Taxes

Income tax expense and the effective tax rate were $ 3.9 million and 25.5 %, respectively, for the thirteen weeks ended June 26, 2021, and $ 3.8 million and 24.7 %, respectively, for the thirteen weeks ended June 27, 2020.

Income tax expense and the effective tax rate were $ 6.7 million and 21.6 %, respectively, for the twenty-six weeks ended June 26, 2021, and $ 5.0 million and 20.3 %, respectively, for the twenty-six weeks ended June 27, 2020.

Income tax expense for the thirteen and twenty-six weeks ended June 26, 2021 included $ 0.1 million and $ 1.5 million, respectively, in tax benefits resulting from the recognition of excess tax benefits from stock-based compensation, as compared to $ 0.2 million and $ 1.5 million in tax benefits for the thirteen and twenty-six weeks ended June 27, 2020, respectively.

(6) Investments

In the second quarter of 2021, a wholly-owned subsidiary of the Company acquired a 20 % non-controlling interest in Wingstop’s United Kingdom master franchisee , Lemon Pepper Holdings Ltd., (“LPH”) for an aggregate amount of $ 4.2 million.

Substantially all of the investment consisted of bonds issued by a subsidiary of LPH, which do not have a readily determinable fair value and are recorded at cost with adjustments for observable changes in prices resulting from orderly transactions for the identical or a similar investment of the same issuer or impairments within long-term other assets in the Company’s consolidated balance sheet.

In addition, the Company received 20 % of the outstanding stock, which will be accounted for using the equity method of accounting, under which the Company’s share of the income (loss) of the investee will be recorded in our results of operations in “Other operating income, net.” The Company did not record any adjustments to the carrying amount of $ 4.2 million in the second quarter ended June 26, 2021 .

(7) Debt Obligations

Long-term debt consisted of the following components (in thousands):

March 27, 2021 December 26, 2020

June 26, 2021 December 26, 2020

2020-1 Class A-2 Senior Secured Notes $ 478,800 $ 480,000

5 unchanged sentences

and (ii) Series 2020-1 Variable Funding Senior Notes, Class A-1 (the “2020 Variable Funding Notes” and together with the Class A-2 Notes, the “2020 Notes”), which permit borrowings of up to a maximum principal amount of $ 50 million which may be used to borrow amounts on a revolving basis and to issue letters of credit.

As of March 27, 2021 and December 26, 2020, the Company had $ 480.0 million of 2020 Class A-2 Notes outstanding.

There were no borrowings outstanding under the 2020 Variable Funding Notes as of March 27, 2021 and December 26, 2020.

Further, as of March 27, 2021 and December 26, 2020, $ 3.5 million and $ 4.9 million, respectively, of letters of credit were outstanding against the 2020 Variable Funding Notes, which relate primarily to interest reserves required under the base indenture and related supplemental indenture.

There were no amounts drawn down on the letters of credit as of March 27, 2021 or December 26, 2020.

As of June 26, 2021 and December 26, 2020, the Company had $ 478.8 million and $ 480.0 million of 2020 Class A-2 Notes outstanding, respectively.

There were no borrowings outstanding under the 2020 Variable Funding Notes as of June 26, 2021 and December 26, 2020.

Further, as of June 26, 2021 and December 26, 2020, $ 3.5 million and $ 4.9 million, respectively, of letters of credit were outstanding against the 2020 Variable Funding Notes, which relate primarily to interest reserves required under the base indenture and related supplemental indenture.

There were no amounts drawn down on the letters of credit as of June 26, 2021 or December 26, 2020.

As of June 26, 2021, the Company’s leverage ratio under the Class A-2 Notes was less than 5.0 x.

Per the terms of the Company’s debt agreements, principal payments can be suspended at the borrower’s election until the repayment date as long as the Company maintains a leverage ratio of less than 5.0 x.

Accordingly, the Company expects to suspend payments following the principal payment due in the third quarter, and the remaining outstanding balance of the Class A-2 notes has been classified as long-term debt.

The 2020 Notes were issued in a securitization transaction pursuant to which certain of the Company’s domestic and foreign revenue-generating assets, consisting principally of franchise-related agreements and intellectual property, were contributed or otherwise transferred to the Issuer and certain other limited-purpose, bankruptcy-remote, wholly owned indirect subsidiaries of the Company that act as guarantors of the Notes and that have pledged substantially all of their assets.

WINGSTOP INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(8) Commitments and Contingencies

2 unchanged sentences

(9) Stock-Based Compensation

During the thirteen weeks ended March 27, 2021, the Company granted stock options to purchase 42,703 shares of common stock and 18,540 restricted stock units (“RSUs”) to certain employees.

During the twenty-six weeks ended June 26, 2021, the Company granted stock options to purchase 42,703 shares of common stock and 19,967 restricted stock units (“RSUs”) to certain employees.

The stock options vest in equal annual amounts over a three-year period subsequent to the grant date, and have a maximum contractual term of ten years .

1 unchanged sentence

The RSUs granted to certain employees generally vest in equal annual amounts over a three-year period, subsequent to the grant date and had a weighted-average grant-date fair value of $ 130.16 per unit.

In addition, the Company granted 30,137 performance stock units (“PSUs”) to certain employees during the thirteen weeks ended March 27, 2021.

In addition, the Company granted 31,564 performance stock units (“PSUs”) to certain employees during the twenty-six weeks ended June 26, 2021.

Of the total PSUs granted, 25,623 PSUs are subject to a service condition and a performance vesting condition based on return on incremental invested capital (“ROI PSUs”).

4 unchanged sentences

Total compensation cost for the PSUs is determined based on the most likely outcome of the performance condition and the number of awards expected to vest based on the outcome.

WINGSTOP INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Total compensation expense related to all share-based awards was $ 2.3 million and $ 1.3 million for the thirteen weeks ended March 27, 2021 and March 28, 2020, respectively, and was included in Selling, general and administrative expense in the Consolidated Statements of Operations.

Total compensation expense related to all share-based awards was $ 4.8 million and $ 3.3 million for the twenty-six weeks ended June 26, 2021 and June 27, 2020, respectively, and was included in Selling, general and administrative (“SG&A”) expense in the Consolidated Statements of Comprehensive Income.

(10) Revenue from Contracts with Customers

The following table represents a disaggregation of revenue from contracts with customers for the thirteen weeks ended March 27, 2021 and March 28, 2020 (in thousands):

Thirteen Weeks Ended

March 27, 2021 March 28, 2020

The following table represents a disaggregation of revenue from contracts with customers for the thirteen and twenty-six weeks ended June 26, 2021 and June 27, 2020 (in thousands):

Thirteen Weeks Ended Twenty-Six Weeks Ended

June 26, 2021 June 27, 2020 June 26, 2021 June 27, 2020

Royalty revenue $ 30,414 $ 25,447 $ 59,223 $ 46,755

3 unchanged sentences

Deferred revenue is reduced as fees are recognized in revenue over the term of the franchise license for the respective restaurant.

As the term of the franchise license is typically ten years , substantially all of the franchise fee revenue recognized in the thirteen weeks ended March 27, 2021 was included in the deferred revenue balance as of December 26, 2020.

Approximately $ 9.7 million and $ 9.8 million of deferred revenue as of March 27, 2021 and December 26, 2020, respectively, relates to restaurants that have not yet opened, so the fees are not yet being amortized.

As the term of the franchise license is typically ten years , substantially all of the franchise fee revenue recognized in the thirteen and twenty-six weeks ended June 26, 2021 was included in the deferred revenue balance as of December 26, 2020.

Approximately $ 9.9 million and $ 9.8 million of deferred revenue as of June 26, 2021 and December 26, 2020, respectively, relates to restaurants that have not yet opened, so the fees are not yet being amortized.

The weighted average remaining amortization period for deferred franchise and renewal fees related to open restaurants is 7.2 years.

The Company did not have any material contract assets as of March 27, 2021.

(10) Refranchising of Company-owned Restaurants

The Company did not have any material contract assets as of June 26, 2021.

WINGSTOP INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(11) Acquisitions and Refranchising of Company-owned Restaurants

During the first fiscal quarter 2021, the Company entered into an arrangement to re-franchise six company-owned restaurants in the Colorado market for a total purchase price of approximately $ 6.7 million.

This transaction is subject to customary closing conditions, and the Company expects the transaction to close in the third fiscal quarter 2021.

The assets associated with these restaurants held for sale totaled $ 4.3 million and were included in Prepaid expenses and other current assets on the Consolidated Balance Sheet as of March 27, 2021.

The assets associated with these restaurants held for sale totaled $ 4.5 million and were included in Prepaid expenses and other current assets on the Consolidated Balance Sheet as of June 26, 2021.

Subsequent to the end of second fiscal quarter 2021, the company acquired two existing restaurants from franchisees.

The total purchase price was $ 3.9 million and was funded by cash flow from operations.

The restaurant acquisitions will be accounted for as business combinations.

The Company is still determining the estimated fair value of assets acquired and liabilities assumed.

The excess of the purchase price over the aggregate fair value of assets acquired will be allocated to goodwill.

The results of operations of these locations will be included in our Consolidated Statements of Comprehensive Income as of the respective dates of acquisition.

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

What changed 10-Q

Item 1. Financial Statements