What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2021-07-28 compared with 2021-04-28 · 160 added, 60 removed, 207 unchanged (52% of the section changed)

3 unchanged sentences

The statements in this discussion regarding industry outlook, our expectations regarding our future performance, liquidity and capital resources, and other non-historical statements are forward-looking statements.

These forward-looking statements are subject to risks and uncertainties, including, but not limited to, the risks and uncertainties described in “Special Note Regarding Forward-Looking Statements,” below and “Risk Factors” on page 11 of our Annual Report and in Part II, Item 1A.

of this Quarterly Report.

Our actual results may differ materially from those contained in or implied by any forward-looking statements.

3 unchanged sentences

Wingstop is the largest fast casual chicken wings-focused restaurant chain in the world, with over 1,600 locations worldwide.

We are dedicated to serving the world flavor through an unparalleled guest experience and offering of classic wings, boneless wings and tenders, always cooked to order and hand-sauced-and-tossed in 11 bold, distinctive flavors.

We are dedicated to serving the world flavor through an unparalleled guest experience and offering of classic wings and thighs, boneless wings and tenders, always cooked to order and hand-sauced-and-tossed in 11 bold, distinctive flavors.

The Company is primarily a franchisor, with approximately 98% of Wingstop’s restaurants currently owned and operated by independent franchisees.

1 unchanged sentence

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.

4 unchanged sentences

Management reviews the number of new restaurants, the number of closed restaurants, and the number of acquisitions and divestitures of restaurants to assess net new restaurant growth.

Thirteen Weeks Ended

2021 March 28,

Thirteen Weeks Ended Twenty-Six Weeks Ended

2021 June 27,

2020 June 26,

2021 June 27,

Domestic Franchised Activity:

2 unchanged sentences

Closures — (2) — (3)

Re-franchised by Company — 2 — 2

Restaurants end of period 1,415 1,244 1,415 1,244

1 unchanged sentence

Beginning of period 33 32 32 31

Openings 1 — 2 1

Closures — — — —

Re-franchised to franchisees — (2) — (2)

Restaurants end of period 34 30 34 30

2 unchanged sentences

Beginning of period 175 160 179 154

Openings 4 2 6 8

Closures (4) — (10) —

21 unchanged sentences

We define Adjusted EBITDA as net income before interest expense, net, income tax expense, and depreciation and amortization, with further adjustments for losses on debt extinguishment and refinancing transactions, transaction costs, costs and fees associated with investments in our strategic initiatives, gains and losses on the disposal of assets, and stock-based compensation expense.

Adjusted EBITDA may not be comparable to other similarly titled captions of

other companies due to differences in methods of calculation.

Adjusted EBITDA may not be comparable to other similarly titled captions of other companies due to differences in methods of calculation.

For a reconciliation of net income to EBITDA and Adjusted EBITDA and for further discussion of EBITDA and Adjusted EBITDA as non-GAAP measures and how we utilize them, see footnote 2 below.

The following table sets forth our key performance indicators for the thirteen weeks ended March 27, 2021 and March 28, 2020 (in thousands, except unit data):

Thirteen Weeks Ended

March 27, 2021 March 28, 2020

Adjusted Net Income and Adjusted Earnings Per Diluted Share.

We define Adjusted net income as net income adjusted for losses on debt extinguishment and refinancing transactions, transaction costs, costs and fees associated with investments in our strategic initiatives, gains and losses on the disposal of assets, and related tax adjustments.

We define Adjusted earnings per diluted share as Adjusted net income divided by weighted average diluted share count.

For a reconciliation of net income to Adjusted net income and for further discussion of Adjusted net income and Adjusted earnings per diluted share as non-GAAP measures and how we utilize them, see footnote 3 below.

The following table sets forth our key performance indicators for the thirteen and twenty-six weeks ended June 26, 2021 and June 27, 2020 (in thousands, except unit data):

Thirteen Weeks Ended Twenty-Six Weeks Ended

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

Number of system-wide restaurants open at end of period 1,624 1,436 1,624 1,436

8 unchanged sentences

$ 22,882 $ 20,888 $ 46,796 $ 37,245

(1) The percentage of system-wide sales attributable to company-owned restaurants was 3.1% and 3.4% for the thirteen weeks ended March 27, 2021 and March 28, 2020, respectively.

Adjusted net income (3)

$ 11,312 $ 10,006 $ 24,472 $ 18,102

(1) The percentage of system-wide sales attributable to company-owned restaurants was 2.8% and 3.3% for the thirteen weeks ended June 26, 2021 and June 27, 2020, respectively, and was 2.9% and 3.2% for the twenty-six weeks ended June 26, 2021 and June 27, 2020, respectively.

The remainder was generated by franchised restaurants, as reported by our franchisees.

(2) EBITDA and Adjusted EBITDA are supplemental measures of our performance that are not required by, or presented in accordance with, accounting principles generally accepted in the United States (“GAAP”).

EBITDA and Adjusted EBITDA should not be considered as an alternative to net income or any other performance measure derived in accordance with GAAP, or as an alternative to cash flows from operating activities as a measure of our liquidity.

(2) EBITDA and Adjusted EBITDA are supplemental measures of our performance that are not required by, or presented in accordance with, GAAP.

EBITDA and Adjusted EBITDA should not be considered as an alternative to net income or any other performance measure derived in accordance with GAAP, or as an alternative to cash flow from operating activities as a measure of our liquidity.

We caution investors that amounts presented in accordance with our definitions of EBITDA and Adjusted EBITDA may not be comparable to similar measures disclosed by our competitors, because not all companies and analysts calculate EBITDA and Adjusted EBITDA in the same manner.

10 unchanged sentences

In addition, the instruments governing our indebtedness use EBITDA (with additional adjustments) to measure our compliance with covenants, such as our fixed charge coverage, lease adjusted leverage, and debt incurrence.

EBITDA and Adjusted EBITDA have limitations as analytical tools and should not be considered in isolation, or as an alternative to, or a substitute for net income or other

financial statement data presented in our consolidated financial statements as indicators of financial performance.

EBITDA and Adjusted EBITDA have limitations as analytical tools and should not be considered in isolation, or as an alternative to, or a substitute for net income or other financial statement data presented in our consolidated financial statements as indicators of financial performance.

Some of the limitations are:

11 unchanged sentences

Each of the normal recurring adjustments and other adjustments described in this paragraph and in the reconciliation table below help management measure our core operating performance over time by removing items that are not related to day-to-day operations.

The following table reconciles net income to EBITDA and Adjusted EBITDA for the thirteen weeks ended March 27, 2021 and March 28, 2020 (in thousands):

Thirteen Weeks Ended

2021 March 28,

The following table reconciles net income to EBITDA and Adjusted EBITDA for the thirteen and twenty-six weeks ended June 26, 2021 and June 27, 2020 (in thousands):

Thirteen Weeks Ended Twenty-Six Weeks Ended

2021 June 27,

2020 June 26,

2021 June 27,

Net income $ 11,312 $ 11,539 $ 24,472 $ 19,635

4 unchanged sentences

Additional adjustments:

Stock-based compensation expense (a)

Gain on disposal of assets (a)

— (2,016) — (2,016)

Stock-based compensation expense (b)

2,456 1,969 4,772 3,300

Adjusted EBITDA $ 22,882 $ 20,888 $ 46,796 $ 37,245

(a) Includes non-cash, stock-based compensation.

(a) Represents a gain resulting from the re-franchise of company-owned restaurants to a franchisee which is included in Gain on sale of restaurants and other expenses, net in the Consolidated Statements of Comprehensive Income.

(b) Includes non-cash, stock-based compensation.

(3) Adjusted net income and adjusted earnings per diluted share are supplemental measures of operating performance that do not represent and should not be considered alternatives to net income and earnings per share, as determined by GAAP.

These measures have not been prepared in accordance with Article 11 of Regulation S-X promulgated under the Securities Act.

Management believes adjusted net income and adjusted earnings per diluted share supplement GAAP measures and enable management to more effectively evaluate the Company’s performance period-over-period and relative to competitors.

The following table reconciles net income to Adjusted net income and calculates adjusted earnings per diluted share for the thirteen and twenty-six weeks ended June 26, 2021 and June 27, 2020 (in thousands):

Thirteen Weeks Ended Twenty-Six Weeks Ended

2021 June 27,

2020 June 26,

2021 June 27,

Net income $ 11,312 $ 11,539 $ 24,472 $ 19,635

Gain on disposal of assets, net (a)

— (2,016) — (2,016)

Tax effect of adjustments (b)

Adjusted net income $ 11,312 $ 10,006 $ 24,472 $ 18,102

Weighted-average shares outstanding - diluted 29,873 29,793 29,859 29,751

Adjusted earnings per diluted share $ 0.38 $ 0.34 $ 0.82 $ 0.61

(b) Represents the tax effect of the aforementioned adjustments to reflect corporate income taxes at an assumed effective tax rate of 24% for the thirteen and twenty-six weeks ended June 26, 2021 and June 27, 2020, which includes provisions for U.S.

federal income taxes, and assumes the respective statutory rates for applicable state and local jurisdictions.

Results of Operations

Thirteen Weeks Ended March 27, 2021 compared to Thirteen Weeks Ended March 28, 2020

The following table sets forth our results of operations for the thirteen weeks ended March 27, 2021 and March 28, 2020 (dollars in thousands):

Thirteen Weeks Ended June 26, 2021 compared to Thirteen Weeks Ended June 27, 2020

The following table sets forth our results of operations for the thirteen weeks ended June 26, 2021 and June 27, 2020 (dollars in thousands):

Thirteen Weeks Ended Increase / (Decrease)

2021 March 28,

2021 June 27,

Royalty revenue, franchise fees and other $ 33,135 $ 27,858 $ 5,277 18.9 %

8 unchanged sentences

Depreciation and amortization 1,523 1,398 125 8.9 %

Gain on sale of restaurants and other expenses, net — (2,016) 2,016 (100.0) %

Total costs and expenses 55,097 46,568 8,529 18.3 %

2 unchanged sentences

Income before income tax expense 15,179 15,323 (144) (0.9) %

Income tax expense (benefit) 2,861 1,230 1,631 132.6 %

Income tax expense 3,867 3,784 83 2.2 %

Net income $ 11,312 $ 11,539 $ (227) (2.0) %

1 unchanged sentence

Total revenue.

During the thirteen weeks ended March 27, 2021, total revenue was $70.7 million, an increase of $15.3 million, or 27.5%, compared to $55.4 million in the comparable period in 2020.

Royalty revenue, franchise fees and other increased $7.4 million primarily due to domestic same store sales growth of 20.7% as well as 165 net franchise restaurant openings since March 28, 2020.

Advertising fees and related income increased $5.5 million due to the 30.0% increase in system-wide sales in the thirteen weeks ended March 27, 2021 compared to the thirteen weeks ended March 28, 2020.

Company-owned restaurant sales increased $2.3 million primarily due to company-owned same store sales growth of 13.4%, which was driven by both an increase in transaction size and an increase in transactions.

During the thirteen weeks ended June 26, 2021, total revenue was $74.0 million, an increase of $7.9 million, or 11.9%, compared to $66.1 million in the comparable period in 2020.

Royalty revenue, franchise fees and other increased $5.3 million primarily due to domestic same store sales growth of 2.1% as well as 184 net franchise restaurant openings since June 27, 2020.

Advertising fees increased $2.7 million due to the 15.8% increase in system-wide sales in the thirteen weeks ended June 26, 2021 compared to the thirteen weeks ended June 27, 2020.

Company-owned restaurant sales decreased slightly primarily due to a decline in company-owned same store sales of 3.1%, which was driven by both a decrease in transaction size and transactions.

The decrease was partially offset by the acquisition of one franchised restaurant in the fourth quarter of the prior year and the opening of two company-owned restaurants in the current fiscal year, resulting in additional sales of $0.6 million.

Cost of sales.

During the thirteen weeks ended March 27, 2021, cost of sales was $13.3 million, an increase of $2.1 million, or 18.8%, compared to $11.2 million in the comparable period in 2020.

Cost of sales as a percentage of company-owned restaurant sales was 75.6% in the thirteen weeks ended March 27, 2021, compared to 73.4% in the comparable period in 2020.

During the thirteen weeks ended June 26, 2021, cost of sales was $14.2 million, an increase of $0.8 million, or 6.1%, compared to $13.4 million in the comparable period in 2020.

Cost of sales as a percentage of company-owned restaurant sales was 77.7% in the thirteen weeks ended June 26, 2021, compared to 73.1% in the comparable period in 2020.

The table below presents the major components of cost of sales (dollars in thousands):

Thirteen Weeks Ended

March 27, 2021 March 28, 2020

June 26, 2021 June 27, 2020

In dollars As a % of company-owned restaurant sales In dollars As a % of company-owned restaurant sales

5 unchanged sentences

Total cost of sales $ 14,207 77.7 % $ 13,387 73.1 %

Food, beverage and packaging costs as a percentage of company-owned restaurant sales were 41.6% in the thirteen weeks ended March 27, 2021, compared to 36.0% in the comparable period in 2020.

The increase was primarily due to a 25.8% increase in the cost of bone-in chicken wings as compared to the prior year period.

Labor costs as a percentage of company-owned restaurant sales were 21.2% for the thirteen weeks ended March 27, 2021, compared to 23.1% in the comparable period in 2020.

The decrease as a percentage of company-owned restaurant sales was primarily due to our ability to leverage costs due to the increase in company-owned same store sales of 13.4%.

Other restaurant operating expenses as a percentage of company-owned restaurant sales were 15.0% for the thirteen weeks ended March 27, 2021, compared to 16.9% in the comparable period in 2020.

The decrease as a percentage of company-owned restaurant sales was a result of our ability to leverage costs due to the increase in company-owned same store sales of 13.4%.

Food, beverage and packaging costs as a percentage of company-owned restaurant sales were 43.9% in the thirteen weeks ended June 26, 2021, compared to 32.5% in the comparable period in 2020.

The increase was primarily due to a 64.8% increase in the cost of bone-in chicken wings as compared to the prior year period, in which we experienced unusually significant deflation in the cost of bone-in chicken wings.

Labor costs as a percentage of company-owned restaurant sales were 20.6% for the thirteen weeks ended June 26, 2021, compared to 25.6% in the comparable period in 2020.

Other restaurant operating expenses as a percentage of company-owned restaurant sales were 15.4% for the thirteen weeks ended June 26, 2021, compared to 16.8% in the comparable period in 2020.

The decrease as a percentage of company-owned restaurant sales was primarily a result of a decline in delivery fees as compared to the prior year period.

Advertising expenses.

During the thirteen weeks ended March 27, 2021, advertising expenses were $22.0 million, an increase of $5.0 million compared to $17.0 million in the comparable period in 2020.

During the thirteen weeks ended June 26, 2021, advertising expenses were $23.3 million, an increase of $2.9 million compared to $20.4 million in the comparable period in 2020.

Advertising expenses are recognized at the same time the related revenue is recognized, which does not necessarily correlate to the actual timing of the related advertising spend.

Selling, general and administrative (SG&A).

During the thirteen weeks ended March 27, 2021, SG&A expense was $13.8 million, an increase of $1.5 million compared to $12.2 million in the comparable period in 2020.

The increase in SG&A expense was primarily due to an increase of $0.9 million in headcount related expenses as we make investments to support our strategic initiatives, as well as an increase of $1.0 million in stock-based compensation expense.

These increases were partially offset by a decrease of $0.6 million related to certain organizational changes made in the prior year period.

During the thirteen weeks ended June 26, 2021, SG&A expense was $16.1 million, an increase of $2.7 million compared to $13.4 million in the comparable period in 2020.

The increase in SG&A expense was primarily due to an increase of $2.0 million in headcount related expenses to support the growth in our business, an increase of $0.5 million in stock-based compensation expense, and an increase of $1.0 million in professional fees to support the Company’s strategic initiatives.

These increases were partially offset by a decrease of $1.0 million related to a donation made in the prior year period to the National Restaurant Employee Relief Fund to support restaurant workers in times of need.

Depreciation and amortization.

During the thirteen weeks ended March 27, 2021, depreciation expense was $1.8 million, an increase of $0.2 million compared to $1.6 million in the comparable period in 2020.

During the thirteen weeks ended June 26, 2021, depreciation expense was $1.5 million, an increase of $0.1 million compared to $1.4 million in the comparable period in 2020.

Interest expense, net.

During the thirteen weeks ended March 27, 2021, interest expense, net was $3.8 million, a decrease of $0.4 million compared to $4.1 million of interest expense, net in the comparable period in 2020.

During the thirteen weeks ended June 26, 2021, interest expense, net was $3.7 million, a decrease of $0.5 million compared to $4.2 million of interest expense, net in the comparable period in 2020.

The decrease was due to the refinancing of our securitized financing facility on October 30, 2020, which increased our outstanding debt by $162.4 million and reduced our interest rate from 4.97% to 2.84%.

Income tax expense.

During the thirteen weeks ended March 27, 2021, we recognized an income tax expense of $2.9 million yielding an effective tax rate of 17.9%, compared to an effective tax rate of 13.2% in the prior year period.

The increase in the effective tax rate was due to the impact of excess tax benefits associated with stock options exercised in the prior year period.

During the thirteen weeks ended June 26, 2021, we recognized income tax expense of $3.9 million yielding an effective tax rate of 25.5%, compared to an effective tax rate of 24.7% in the prior year period.

The slight increase in the effective tax rate was primarily due to the impact of certain stock awards issued during the period.

Twenty-Six Weeks Ended June 26, 2021 compared to Twenty-Six Weeks Ended June 27, 2020

The following table sets forth our results of operations for the twenty-six weeks ended June 26, 2021 and June 27, 2020 (dollars in thousands):

Twenty-Six Weeks Ended Increase / (Decrease)

2021 June 27,

Royalty revenue, franchise fees and other $ 64,741 $ 52,057 $ 12,684 24.4 %

Advertising fees 44,097 35,937 8,160 22.7 %

Company-owned restaurant sales 35,852 33,547 2,305 6.9 %

Total revenue 144,690 121,541 23,149 19.0 %

Costs and expenses:

Cost of sales (1)

27,486 24,563 2,923 11.9 %

Advertising expenses 45,328 37,420 7,908 21.1 %

Selling, general and administrative 29,852 25,613 4,239 16.6 %

Depreciation and amortization 3,318 2,953 365 12.4 %

Gain on sale of restaurants and other expenses, net — (2,016) 2,016 (100.0) %

Total costs and expenses 105,984 88,533 17,451 19.7 %

Operating income 38,706 33,008 5,698 17.3 %

Interest expense, net 7,506 8,359 (853) (10.2) %

Income before income tax expense 31,200 24,649 6,551 26.6 %

Income tax expense 6,728 5,014 1,714 34.2 %

Net income $ 24,472 $ 19,635 $ 4,837 24.6 %

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

Total revenue.

During the twenty-six weeks ended June 26, 2021, total revenue was $144.7 million, an increase of $23.1 million, or 19.0%, compared to $121.5 million in the comparable period in 2020.

Royalty revenue, franchise fees and other increased $12.7 million primarily due to domestic same store sales growth of 10.4% as well as 184 net franchise restaurant openings since June 27, 2020.

Advertising fees increased $8.2 million due to the 22.3% increase in system-wide sales in the twenty-six weeks ended June 26, 2021 compared to the twenty-six weeks ended June 27, 2020.

Company-owned restaurant sales increased $2.3 million primarily due to company-owned same store sales growth of 4.3%, which was driven by both an increase in transaction size and an increase in transactions.

Also contributing to the increase was the acquisition of one franchised restaurant in the fourth quarter of the prior year and the opening of two company-owned restaurants in the current fiscal year, resulting in additional sales of $1.0 million.

Cost of sales.

During the twenty-six weeks ended June 26, 2021, cost of sales was $27.5 million, an increase of $2.9 million, or 11.9%, compared to $24.6 million in the comparable period in 2020.

Cost of sales as a percentage of company-owned restaurant sales was 76.7% in the twenty-six weeks ended June 26, 2021, compared to 73.2% in the comparable period in 2020.

The table below presents the major components of cost of sales (dollars in thousands):

Twenty-Six Weeks Ended

June 26, 2021 June 27, 2020

In dollars As a % of company-owned restaurant sales In dollars As a % of company-owned restaurant sales

Cost of sales:

Food, beverage and packaging costs $ 15,327 42.8 % $ 11,431 34.1 %

Labor costs 7,502 20.9 % 8,211 24.5 %

Other restaurant operating expenses 5,448 15.2 % 5,652 16.8 %

Vendor rebates (791) (2.2) % (731) (2.2) %

Total cost of sales $ 27,486 76.7 % $ 24,563 73.2 %

Food, beverage and packaging costs as a percentage of company-owned restaurant sales were 42.8% in the twenty-six weeks ended June 26, 2021, compared to 34.1% in the comparable period in 2020.

The increase was primarily due to a 44.9% increase in the cost of bone-in chicken wings as compared to the prior year period, in which we experienced unusually significant deflation in the cost of bone-in chicken wings.

Labor costs as a percentage of company-owned restaurant sales were 20.9% for the twenty-six weeks ended June 26, 2021, compared to 24.5% in the comparable period in 2020.

The decrease as a percentage of company-owned restaurant sales was primarily due to a decrease in incentive pay provided to team members in response to the COVID-19 pandemic during the prior year period, as well as our ability to leverage costs due to the increase in company-owned same store sales of 4.3%.

Other restaurant operating expenses as a percentage of company-owned restaurant sales were 15.2% for the twenty-six weeks ended June 26, 2021, compared to 16.8% in the comparable period in 2020.

The decrease as a percentage of company-owned restaurant sales was primarily a result of our ability to leverage costs due to the increase in company-owned same store sales of 4.3%.

Advertising expenses.

During the twenty-six weeks ended June 26, 2021, advertising expenses were $45.3 million, an increase of $7.9 million compared to $37.4 million in the comparable period in 2020.

Advertising expenses are recognized at the same time the related revenue is recognized, which does not necessarily correlate to the actual timing of the related advertising spend.

Selling, general and administrative (SG&A).

During the twenty-six weeks ended June 26, 2021, SG&A expense was $29.9 million, an increase of $4.2 million compared to $25.6 million in the comparable period in 2020.

The increase in SG&A expense was primarily due to a an increase of $1.9 million in headcount related expenses to support the growth in our business, an increase of $1.5 million in stock-based compensation expense, and an increase of $1.2 million in professional fees to support the Company’s strategic initiatives.

Depreciation and amortization.

During the twenty-six weeks ended June 26, 2021, depreciation expense was $3.3 million, an increase of $0.3 million compared to $3.0 million in the comparable period in 2020.

The increase in depreciation and amortization was primarily due to additional capital expenditures related to investments in technology.

Interest expense, net.

During the twenty-six weeks ended June 26, 2021, interest expense, net was $7.5 million, a decrease of $0.9 million compared to $8.4 million of interest expense, net in the comparable period in 2020.

The decrease in interest expense, net was due to the refinancing of our securitized financing facility on October 30, 2020, which increased our outstanding debt by $162.4 million and reduced our interest rate from 4.97% to 2.84%.

Income tax expense.

During the twenty-six weeks ended June 26, 2021, we recognized income tax expense of $6.7 million yielding an effective tax rate of 21.6%, compared to an effective tax rate of 20.3% in the prior year period.

The slight increase in the effective tax rate was primarily due to the impact of certain stock awards issued during the period.

Liquidity and Capital Resources

4 unchanged sentences

We believe our sources of liquidity and capital will be sufficient to finance our continued operations and growth strategy for at least the next twelve months.

The following table shows summary cash flows information for the thirteen weeks ended March 27, 2021 and March 28, 2020 (in thousands):

Thirteen Weeks Ended

2021 March 28,

The following table shows summary cash flows information for the twenty-six weeks ended June 26, 2021 and June 27, 2020 (in thousands):

Twenty-Six Weeks Ended

2021 June 27,

Net cash provided by (used in):

4 unchanged sentences

Operating activities .

Our cash flows from operating activities are principally driven by sales at both franchise restaurants and company-owned restaurants, as well as franchise and development fees.

Our cash flow from operating activities are principally driven by sales at both franchise restaurants and company-owned restaurants, as well as franchise and development fees.

We collect franchise royalties from our franchise owners on a weekly basis.

Restaurant-level operating costs at our company-owned restaurants, unearned franchise and development fees, and corporate overhead costs also impact our cash flows from operating activities.

Net cash provided by operating activities was $13.8 million in the thirteen weeks ended March 27, 2021, an increase of $1.3 million from cash provided by operating activities of $12.5 million in the thirteen weeks ended March 28, 2020.

Restaurant-level operating costs at our company-owned restaurants, unearned franchise and development fees, and corporate overhead costs also impact our cash flow from operating activities.

Net cash provided by operating activities was $31.6 million in the twenty-six weeks ended June 26, 2021, an increase of $6.0 million from cash provided by operating activities of $25.6 million in the twenty-six weeks ended June 27, 2020.

The increase is the result of increased operating income associated with the increased sales over the prior period, partially offset by the timing of changes in working capital.

Investing activities .

Our net cash used in investing activities was $2.8 million in the thirteen weeks ended March 27, 2021, an increase of $1.3 million from cash used in investing activities of $1.6 million in the thirteen weeks ended March 28, 2020.

The increase in cash used in investing activities was primarily due to an increase in capital expenditures to support our strategic initiatives.

Our net cash used in investing activities was $12.4 million in the twenty-six weeks ended June 26, 2021, an increase of $12.1 million from cash used in investing activities of $0.4 million in the twenty-six weeks ended June 27, 2020.

The increase in cash used in investing activities was primarily due to an increase in capital expenditures related to our investments in technology and the remodel of our corporate headquarters building, as well as a payment of $4.2 million related to a foreign investment in LPH (see Note 6 in the notes to our unaudited consolidated financial statements included elsewhere in this Quarterly Report).

Financing activities .

Our net cash used in financing activities was $6.4 million in the thirteen weeks ended March 27, 2021, a change of $18.6 million from cash provided by financing activities of $12.3 million in the thirteen weeks ended March 28, 2020.

The change was primarily due to additional borrowings under our 2018 Variable Funding Notes (as defined below) of $16.0 million in the thirteen weeks ended March 28, 2020, as well as an increase in the amount of our regular dividend in June 2020.

Our net cash used in financing activities was $11.8 million in the twenty-six weeks ended June 26, 2021, a change of $20.8 million from cash provided by financing activities of $9.0 million in the twenty-six weeks ended June 27, 2020.

The change was primarily due to borrowings under our 2018 Variable Funding Notes (as defined below) of $16.0 million in the twenty-six weeks ended June 27, 2020, which is partially offset by an increase in the amount of our regular dividend in June 2020.

Securitized financing facility .

3 unchanged sentences

The 2020 Class A-2 Notes are generally subject to 1% annual amortization, bear interest at a fixed rate of 2.84% per annum, and have an anticipated repayment date of December 2027.

We paid a quarterly cash dividend of $0.14 per share of common stock, aggregating $4.2 million, during the first quarter of 2021.

On April 27, 2021, the Company’s Board of Directors approved a dividend of $0.14 per share, to be paid on June 4, 2021 to stockholders of record as of May 14, 2021, totaling approximately $4.2 million.

We paid a quarterly cash dividend of $0.14 per share of common stock in each of the first two quarters of 2021, resulting in aggregate dividend payments of $8.4 million during the twenty-six weeks ended June 26, 2021.

On July 27, 2021, the Company’s Board of Directors approved a dividend of $0.17 per share, to be paid on September 3, 2021 to stockholders of record as of August 13, 2021, totaling approximately $5.1 million.

We do not currently expect the restrictions in our debt instruments to impact our ability to make regular quarterly dividends pursuant to our quarterly dividend program.

1 unchanged sentence

Contractual Obligations

During the thirteen weeks ended March 27, 2021, there were no material changes to our contractual obligations disclosed in the contractual obligations section of Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report.

During the thirteen weeks ended June 26, 2021, there were no material changes to our contractual obligations disclosed in the contractual obligations section of Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report.

For additional information regarding our long-term debt and our commitments and contingencies, see Note 10, Debt Obligations and Note 12, Commitments and Contingencies in our Annual Report and the corresponding Notes 7 and 8 in the notes to our unaudited consolidated financial statements included elsewhere in this Quarterly Report.

2 unchanged sentences

Although the letters of credit are off-balance sheet, the obligations to which they relate are reflected as liabilities in the Consolidated Balance Sheet.

Outstanding letters of credit totaled $3.5 million at March 27, 2021.

Outstanding letters of credit totaled $3.5 million at June 26, 2021.

We do not believe these arrangements have or are likely to have a material effect on our results of operations, financial condition, revenues or expenses, capital expenditures or liquidity.

19 unchanged sentences

• risks associated with changes in food and supply costs;

• risks associated with the availability and cost of labor;

• our relationships with, and the performance of, our franchisees, as well as actions by franchisees that could harm our business;

25 unchanged sentences

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 2. Management’s Discussion and Analysis