What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-11-03 compared with 2021-07-28 · 105 added, 90 removed, 277 unchanged (41% of the section changed)

14 unchanged sentences

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 Comprehensive Income.

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.

Prior to the first quarter of 2021, these expenses were presented within SG&A 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.

3 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 Twenty-Six Weeks Ended

2021 June 27,

2020 June 26,

2021 June 27,

Thirteen Weeks Ended Thirty-Nine Weeks Ended

September 25,

2021 September 26,

2020 September 25,

2021 September 26,

Domestic Franchised Activity:

2 unchanged sentences

Closures (1) (1) (1) (4)

Acquired by Company (3) (5) (3) (5)

Re-franchised by Company 6 5 6 7

4 unchanged sentences

Closures — — — —

Acquired by Company 3 5 3 5

Re-franchised to franchisees (6) (5) (6) (7)

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EBITDA and Adjusted EBITDA.

We define EBITDA as net income before interest expense, net, income tax expense, and depreciation and amortization.

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.

We define EBITDA as net income before interest expense, net, income tax expense (benefit), and depreciation and amortization.

We define Adjusted EBITDA as net income before interest expense, net, income tax expense (benefit), 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.

4 unchanged sentences

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

The following table sets forth our key performance indicators for the thirteen and thirty-nine weeks ended September 25, 2021 and September 26, 2020 (in thousands, except unit data):

Thirteen Weeks Ended Thirty-Nine Weeks Ended

September 25, 2021 September 26, 2020 September 25, 2021 September 26, 2020

Number of system-wide restaurants open at end of period 1,673 1,479 1,673 1,479

10 unchanged sentences

$ 8,579 $ 9,144 $ 33,051 $ 27,247

(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.

(1) The percentage of system-wide sales attributable to company-owned restaurants was 2.9% and 3.2% for the thirteen weeks ended September 25, 2021 and September 26, 2020, respectively, and was 3.1% and 3.4% for the thirty-nine weeks ended September 25, 2021 and September 26, 2020, respectively.

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

27 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 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,

The following table reconciles net income to EBITDA and Adjusted EBITDA for the thirteen and thirty-nine weeks ended September 25, 2021 and September 26, 2020 (in thousands):

Thirteen Weeks Ended Thirty-Nine Weeks Ended

September 25,

2021 September 26,

2020 September 25,

2021 September 26,

Net income $ 11,290 $ 10,081 $ 35,762 $ 29,716

Interest expense, net 3,724 4,405 11,230 12,764

Income tax expense 3,867 3,784 6,728 5,014

Income tax expense (benefit) 5,840 (185) 12,568 4,829

Depreciation and amortization 2,061 2,334 5,379 5,287

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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,

The following table reconciles net income to Adjusted net income and calculates adjusted earnings per diluted share for the thirteen and thirty-nine weeks ended September 25, 2021 and September 26, 2020 (in thousands):

Thirteen Weeks Ended Thirty-Nine Weeks Ended

September 25,

2021 September 26,

2020 September 25,

2021 September 26,

Net income $ 11,290 $ 10,081 $ 35,762 $ 29,716

2 unchanged sentences

Tax effect of adjustments (b)

856 296 856 780

Adjusted net income $ 8,579 $ 9,144 $ 33,051 $ 27,247

2 unchanged sentences

(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) 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.

(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 thirty-nine weeks ended September 25, 2021 and September 26, 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 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 September 25, 2021 compared to Thirteen Weeks Ended September 26, 2020

The following table sets forth our results of operations for the thirteen weeks ended September 25, 2021 and September 26, 2020 (dollars in thousands):

Thirteen Weeks Ended Increase / (Decrease)

2021 June 27,

September 25,

2021 September 26,

Royalty revenue, franchise fees and other $ 32,829 $ 28,806 $ 4,023 14.0 %

12 unchanged sentences

Interest expense, net 3,724 4,405 (681) (15.5) %

Other income (22) — (22) 100.0 %

Income before income tax expense 17,130 9,896 7,234 73.1 %

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

Income tax expense (benefit) 5,840 (185) 6,025 (3,256.8) %

Net income $ 11,290 $ 10,081 $ 1,209 12.0 %

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Total revenue.

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.

During the thirteen weeks ended September 25, 2021, total revenue was $65.8 million, an increase of $1.8 million, or 2.8%, compared to $64.0 million in the comparable period in 2020.

Royalty revenue, franchise fees and other increased $4.0 million primarily due to domestic same store sales growth of 3.9% as well as 193 net franchise restaurant openings since September 26, 2020.

Advertising fees decreased $4.1 million due to a $6.9 million rebate of advertising surplus that was returned to franchisees during the third quarter of 2021 in an effort to mitigate increased food and labor costs.

This was partially offset by an increase in advertising fees related to the 16.7% increase in system-wide sales in the thirteen weeks ended September 25, 2021 compared to the thirteen weeks ended September 26, 2020.

Company-owned restaurant sales increased $1.9 million primarily due to the acquisition of three franchised restaurants in the third quarter of 2021 and the opening of three new company-owned restaurants since the prior year comparable period.

Cost of sales.

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.

During the thirteen weeks ended September 25, 2021, cost of sales was $15.2 million, an increase of $3.4 million, or 28.8%, compared to $11.8 million in the comparable period in 2020.

Cost of sales as a percentage of company-owned restaurant sales was 87.5% in the thirteen weeks ended September 25, 2021, compared to 76.0% in the comparable period in 2020.

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

Thirteen Weeks Ended

June 26, 2021 June 27, 2020

September 25, 2021 September 26, 2020

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

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Total cost of sales $ 15,206 87.5 % $ 11,804 76.0 %

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.

Food, beverage and packaging costs as a percentage of company-owned restaurant sales were 48.1% in the thirteen weeks ended September 25, 2021, compared to 36.4% in the comparable period in 2020.

The increase was primarily due to a 48.9% 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 20.6% 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.

Labor costs as a percentage of company-owned restaurant sales were 24.6% for the thirteen weeks ended September 25, 2021, compared to 25.4% in the comparable period in 2020.

The decrease as a percentage of company-owned restaurant sales was primarily due to incentive pay provided to team members in response to the COVID-19 pandemic during the prior year period.

This was partially offset by a highly competitive labor market that resulted in increases in company-owned restaurant wages and hiring and training costs during the thirteen weeks ended September 25, 2021.

Other restaurant operating expenses as a percentage of company-owned restaurant sales were 17.1% for the thirteen weeks ended September 25, 2021, compared to 16.2% in the comparable period in 2020.

The increase as a percentage of company-owned restaurant sales was primarily a result of pre-opening expenses related to our investment in opening company-owned restaurants in Manhattan, as well as repairs and maintenance in our company-owned restaurants.

These increases were partially offset by a decrease in advertising contributions, due to a rebate of national advertising surplus received during the thirteen weeks ended September 25, 2021.

Advertising expenses.

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.

During the thirteen weeks ended September 25, 2021, advertising expenses were $16.2 million, a decrease of $4.0 million compared to $20.2 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 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.

During the thirteen weeks ended September 25, 2021, SG&A expense was $15.0 million, a decrease of $1.5 million compared to $16.5 million in the comparable period in 2020.

The decrease in SG&A expense was primarily due to a decrease of $3.4 million in variable-based compensation expense, inclusive of stock-based compensation expense, and $0.5 million related to COVID-19 and support provided to international franchisees in the prior year comparable period.

These decreases were partially offset by an increase in headcount-related expenses of $1.2 million to support the growth in our business, as well as an increase of $0.8 million in travel expenses.

Depreciation and amortization.

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.

During the thirteen weeks ended September 25, 2021, depreciation expense was $2.1 million, a decrease of $0.3 million compared to $2.3 million in the comparable period in 2020.

Interest expense, net.

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.

During the thirteen weeks ended September 25, 2021, interest expense, net was $3.7 million, a decrease of $0.7 million compared to $4.4 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 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,

During the thirteen weeks ended September 25, 2021, we recognized income tax expense of $5.8 million yielding an effective tax rate of 34.1%, compared to an effective tax rate of (1.9)% in the prior year period.

The increase in the effective tax rate was primarily due to the impact of nondeductible expenses for executive compensation, as well as the impact of excess tax benefits associated with stock options exercised in the prior year comparable period.

Thirty-Nine Weeks Ended September 25, 2021 compared to Thirty-Nine Weeks Ended September 26, 2020

The following table sets forth our results of operations for the thirty-nine weeks ended September 25, 2021 and September 26, 2020 (dollars in thousands):

Thirty-Nine Weeks Ended Increase / (Decrease)

September 25,

2021 September 26,

Royalty revenue, franchise fees and other $ 97,570 $ 80,863 $ 16,707 20.7 %

12 unchanged sentences

Interest expense, net 11,230 12,764 (1,534) (12.0) %

Other income (22) — (22) 100.0 %

Income before income tax expense 48,330 34,545 13,785 39.9 %

3 unchanged sentences

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.

During the thirty-nine weeks ended September 25, 2021, total revenue was $210.5 million, an increase of $24.9 million, or 13.4%, compared to $185.5 million in the comparable period in 2020.

Royalty revenue, franchise fees and other increased $16.7 million primarily due to domestic same store sales growth of 8.1% as well as 193 net franchise restaurant openings since September 26, 2020.

Advertising fees increased $4.1 million due to the 20.4% increase in system-wide sales in the thirty-nine weeks ended September 25, 2021 compared to the thirty-nine weeks ended September 26, 2020.

This was partially offset by a $6.9 million rebate of advertising surplus that was returned to franchisees during the third quarter of 2021 in an effort to mitigate increased food and labor costs.

Company-owned restaurant sales increased $4.2 million primarily due to company-owned same store sales growth of 2.9%, which was driven by an increase in transaction size.

Also contributing to the increase was the acquisition of three franchised restaurants in the third quarter of the current year and the opening of three new company-owned restaurants since the prior year comparable period, resulting in additional sales of $2.4 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.

During the thirty-nine weeks ended September 25, 2021, cost of sales was $42.7 million, an increase of $6.3 million, or 17.4%, compared to $36.4 million in the comparable period in 2020.

Cost of sales as a percentage of company-owned restaurant sales was 80.2% in the thirty-nine weeks ended September 25, 2021, compared to 74.1% 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

Thirty-Nine Weeks Ended

September 25, 2021 September 26, 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 $ 42,692 80.2 % $ 36,367 74.1 %

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.

Food, beverage and packaging costs as a percentage of company-owned restaurant sales were 44.5% in the thirty-nine weeks ended September 25, 2021, compared to 34.8% in the comparable period in 2020.

The increase was primarily due to a 46.4% 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%.

Labor costs as a percentage of company-owned restaurant sales were 22.1% for the thirty-nine weeks ended September 25, 2021, compared to 24.8% in the comparable period in 2020.

The decrease as a percentage of company-owned restaurant sales was primarily due to incentive pay provided to team members in response to the COVID-19 pandemic during the prior year period, partially offset by a highly competitive labor market that resulted in increases in company-owned restaurant wages and hiring and training costs during the thirty-nine weeks ended September 25, 2021.

Other restaurant operating expenses as a percentage of company-owned restaurant sales were 15.8% for the thirty-nine weeks ended September 25, 2021, compared to 16.6% in the comparable period in 2020.

The decrease as a percentage of company-owned restaurant sales was primarily due to a decrease in delivery fees and security fees, partially offset by an increase in pre-opening expenses related to our investment in opening company-owned restaurants in Manhattan.

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.

During the thirty-nine weeks ended September 25, 2021, advertising expenses were $61.6 million, an increase of $3.9 million compared to $57.7 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.

During the thirty-nine weeks ended September 25, 2021, SG&A expense was $44.9 million, an increase of $2.7 million compared to $42.2 million in the comparable period in 2020.

The increase in SG&A expense was primarily due to an increase of $3.2 million in headcount related expenses to support the growth in our business, inclusive of stock-based compensation expense, an increase of $2.1 million in professional fees to support the Company’s strategic initiatives, and an increase of $0.6 million in travel expense.

These increases were partially offset by a decrease of $1.7 million in variable-based compensation expense, $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, and $0.5 million related to COVID-19 and support provided to international franchisees in the prior year comparable period.

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.

During the thirty-nine weeks ended September 25, 2021, depreciation expense was $5.4 million, an increase of $0.1 million compared to $5.3 million in the comparable period in 2020.

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.

During the thirty-nine weeks ended September 25, 2021, interest expense, net was $11.2 million, a decrease of $1.5 million compared to $12.8 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.

During the thirty-nine weeks ended September 25, 2021, we recognized income tax expense of $12.6 million yielding an effective tax rate of 26.0%, compared to an effective tax rate of 14.0% in the prior year 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 twenty-six weeks ended June 26, 2021 and June 27, 2020 (in thousands):

Twenty-Six Weeks Ended

2021 June 27,

The following table shows summary cash flows information for the thirty-nine weeks ended September 25, 2021 and September 26, 2020 (in thousands):

Thirty-Nine Weeks Ended

September 25,

2021 September 26,

Net cash provided by (used in):

7 unchanged sentences

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.

Net cash provided by operating activities was $54.0 million in the thirty-nine weeks ended September 25, 2021, an increase of $7.3 million from cash provided by operating activities of $46.8 million in the thirty-nine weeks ended September 26, 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 $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).

Our net cash used in investing activities was $18.4 million in the thirty-nine weeks ended September 25, 2021, an increase of $13.8 million from cash used in investing activities of $4.6 million in the thirty-nine weeks ended September 26, 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 accompanying notes to our unaudited consolidated financial statements included elsewhere in this Quarterly Report).

Financing activities .

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.

Our net cash used in financing activities was $18.3 million in the thirty-nine weeks ended September 25, 2021, a change of $23.4 million from cash provided by financing activities of $5.1 million in the thirty-nine weeks ended September 26, 2020.

The change was primarily due to borrowings under our 2018 Variable Funding Notes (as defined below) of $16.0 million in the thirty-nine weeks ended September 26, 2020, which is partially offset by an increase in the amount of dividends paid as compared to the prior year period.

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 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.

During the third fiscal quarter of 2021, the Company had a leverage

ratio under the Class A-2 Notes of less than 5.0x.

Per the terms of the Company’s debt agreements, principal payments are not due until the repayment date as long as the Company maintains a leverage ratio of less than 5.0x.

Accordingly, the Company has elected to suspend payments following the principal payment made in the third quarter of 2021.

We paid a quarterly cash dividend of $0.14 per share of common stock in each of the first two quarters of 2021, and a quarterly cash dividend of $0.17 per share of common stock in the third quarter of 2021, resulting in aggregate dividend payments of $13.4 million, or $0.45 per share of common stock, during the thirty-nine weeks ended September 25, 2021.

On November 2, 2021, the Company’s Board of Directors approved a dividend of $0.17 per share, to be paid on December 10, 2021 to stockholders of record as of November 19, 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.

However, any future declarations of dividends, as well as the amount and timing of such dividends, are subject to capital availability and the discretion of our Board of Directors, which must evaluate, among other things, whether cash dividends are in the best interest of our stockholders.

Contractual Obligations

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.

Off-Balance Sheet Arrangements

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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 June 26, 2021.

Outstanding letters of credit totaled $3.5 million at September 25, 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.

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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