What changed in this filing

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Item 9A. Controls and Procedures

2023-02-22 compared with 2022-02-16 · 112 added, 96 removed, 777 unchanged (21% of the section changed)

66 unchanged sentences

001-37425) and incorporated herein by reference.

3.2 Amended and Restated Bylaws of Wingstop Inc., filed as Exhibit 3.2 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 30, 2017 (File No.

001-37425) and incorporated herein by reference.

3.2 Amended and Restated Bylaws of Wingstop Inc., effective as of December 1, 2022, filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K (File No.

001-37425) on December 2, 2022 and incorporated herein by reference.

4.1 Form of Stock Certificate for Common Stock, filed as Exhibit 4.1 to the Company’s Registration Statement on Form S-1/A (Registration No.

333-203891) on June 2, 2015 and incorporated herein by reference.

4.2 Amended and Restated Base Indenture, dated as of October 30, 2020, by and between Wingstop Funding LLC, as Issuer, and Citibank, N.A., as Trustee and Securities Intermediary, filed as Exhibit 4.1 to the Current Report on Form 8-K (File No.

001-37425) of the Company on November 2, 2020 and incorporated herein by reference.

4.2 Second Amended and Restated Base Indenture, dated as of March 9, 2022, by and between Wingstop Funding LLC, as Issuer, and Citibank, N.A., as Trustee and Securities Intermediary, filed as Exhibit 4.2 to the Company’s Current Report on Form 8-K (File No.

001-37425) on March 10, 2022 and incorporated herein by reference.

4.3 Series 2020-1 Supplement to Base Indenture, dated as of October 30, 2020, by and between Wingstop Funding LLC, as Issuer of the Series 2020-1 fixed rate senior secured notes, Class A-2, and Series 2020-1 variable funding senior secured notes, Class A-1, and Citibank, N.A., as Trustee and Series 2020-1 Securities Intermediary, filed as Exhibit 4.2 to the Company's Current Report on Form 8-K (File No.

001-37425) of the Company on November 2, 2020 and incorporated herein by reference.

001-37425) on November 2, 2020 and incorporated herein by reference.

4.4 Series 2022-1 Supplement to Base Indenture, dated as of March 9, 2022, by and between Wingstop Funding LLC, as Issuer of the Series 2022-1 fixed rate senior secured notes, Class A-2, and Series 2022-1 variable funding senior secured notes, Class A-1, and Citibank, N.A., as Trustee and Series 2022-1 Securities Intermediary, filed as Exhibit 4.2 to the Company’s Current Report on Form 8-K (File No.

001-37425) on March 10, 2022 and incorporated herein by reference.

4.5 Description of Wingstop Inc.

Common Stock.

Common Stock, filed as Exhibit 4.4 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 25, 2021 (File No.

001-37425) and incorporated herein by reference.

10.1 Amended and Restated Guarantee and Collateral Agreement, dated as of October 30, 2020, by and among Wingstop Guarantor LLC and Wingstop Franchising LLC, each as a Guarantor, in favor of Citibank, N.A., as Trustee, filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K (File No.

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10.10† Wingstop Inc.

Amended and Restated Executive Severance Plan, effective as of February 26, 2019, filed as Exhibit 10.22 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 29, 2018 (File No.

001-37425) and incorporated herein by reference.

Amended and Restated Executive Severance Plan, effective May 26, 2022, filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No.

001-37425) on May 27, 2022 and incorporated herein by reference.

10.11† Form of Wingstop Inc.

Executive Severance Plan Participation Agreement, filed as Exhibit 10.21 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 29, 2018 (File No.

001-37425) and incorporated herein by reference.

Executive Severance Plan Participation Agreement, filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K (File No.

001-37425) on May 27, 2022 and incorporated herein by reference.

10.12† Amended and Restated Employment Agreement, dated November 13, 2019, by and between Wingstop Restaurants Inc.

6 unchanged sentences

001-37425) and incorporated herein by reference.

10.15† Offer Letter between Wingstop Inc.

and Michael J.

Skipworth, dated April 25, 2022, filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No.

001-37425) on April 29, 2022 and incorporated herein by reference.

10.16 Class A-1 Note Purchase Agreement, dated as of March 9, 2022, by and among Wingstop Funding LLC, as Issuer, each of Wingstop Guarantor LLC and Wingstop Franchising LLC, each as a Guarantor, Wingstop Restaurants Inc., as Manager, the conduit investors party thereto, the financial institutions party thereto, certain funding agents, Morgan Stanley Asset Funding Inc., as Administrative Agent and Morgan Stanley Bank, N.A., as L/C Provider, filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No.

001-37425) on March 10, 2022 and incorporated herein by reference.

21.1* List of Subsidiaries of Wingstop Inc.

23.1* Consent of KPMG LLP, independent registered public accounting firm.

24.1* Powers of Attorney (included on the signature page to this Annual Report on Form 10-K)

31.1* Certification of Chief Executive Officer, pursuant to Rule 13a-14(a) or 15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

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** The certifications attached as Exhibits 32.1 and 32.2 furnished herewith are not deemed “filed” with the SEC and are not to be incorporated by reference into any filing of Wingstop Inc.

under the Securities Act or the Exchange Act, whether made before or after the date of this Annual Report on Form 10-K, irrespective of any general incorporation language contained in such filing except to the extent the registrant specifically incorporates it by reference.

under the Securities Act or the Exchange Act, whether made

before or after the date of this Annual Report on Form 10-K, irrespective of any general incorporation language contained in such filing except to the extent the registrant specifically incorporates it by reference.

† Indicates management contract or compensatory plan or arrangement.

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Wingstop Inc.

/s/ Charles R.

Chairman and Chief Executive Officer (Principal Executive Officer and duly authorized officer)

/s/ Michael J.

President and Chief Executive Officer (Principal Executive Officer)

February 22, 2023

Pursuant to the requirements of the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Name Title Date

/s/ Charles R.

Morrison Chairman and Chief Executive Officer February 16, 2022

Morrison (Principal Executive Officer)

/s/ Michael J.

Skipworth President and Chief Executive Officer, Director February 22, 2023

Skipworth (Principal Executive Officer)

Kaleida Chief Financial Officer February 22, 2023

Kaleida (Principal Financial and Accounting Officer)

/s/ Lynn Crump-Caine Lead Independent Director February 16, 2022

/s/ Lynn Crump-Caine Chair of the Board February 22, 2023

Lynn Crump-Caine

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McDonald Director February 22, 2023

Smith Director February 22, 2023

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

103 unchanged sentences

Depreciation and amortization 10,899 7,943 7,518

Gain on sale of restaurants and other expenses, net ( 3,497 ) ( 3,093 ) —

Loss (gain) on disposal of assets 1,164 ( 3,497 ) ( 3,093 )

Total costs and expenses 265,588 208,746 191,421

1 unchanged sentence

Interest expense, net 21,230 14,984 16,782

Loss on debt extinguishment and refinancing transactions — 13,665 —

Other income ( 135 ) — —

Loss on debt extinguishment and financing transactions 814 — 13,665

Other (income) expense 573 ( 135 ) —

Income before income tax expense 69,316 58,907 26,943

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Dividends per share $ 4.72 $ 0.62 $ 5.50

Other comprehensive income (loss)

Other comprehensive loss

Currency translation adjustment $ ( 381 ) $ ( 256 ) $ —

Other comprehensive income (loss) ( 256 ) — —

Other comprehensive loss ( 381 ) ( 256 ) —

Comprehensive income $ 52,566 $ 42,402 $ 23,306

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

Adjustment for ASC 842 adoption — — — 154 — 154

Net income — — — 23,306 — 23,306

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Dividends declared on common stock and equivalents — — ( 10,335 ) ( 8,746 ) — ( 19,081 )

Currency translation adjustment — — — — ( 256 ) ( 256 )

Balance at December 25, 2021 29,837,454 299 463 ( 310,031 ) ( 256 ) ( 309,525 )

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Stock-based compensation expense 4,200 9,631 8,558

Gain on disposal of assets ( 3,497 ) ( 3,093 ) —

Loss on debt extinguishment and refinancing transactions — 13,665 —

Loss (gain) on disposal of assets 1,164 ( 3,497 ) ( 3,093 )

Loss on debt extinguishment 814 — 13,665

Amortization of debt issuance costs 1,939 1,401 1,567

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Proceeds from sales of assets 4,063 7,207 4,800

Payments for investments (Note 10) ( 4,163 ) — —

Payments for investments ( 997 ) ( 4,163 ) —

Cash used in investing activities ( 28,683 ) ( 29,853 ) ( 7,987 )

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Dividends paid ( 141,279 ) ( 19,822 ) ( 163,792 )

Cash used in financing activities ( 23,389 ) ( 19,448 ) ( 14,617 )

Cash provided by (used in) financing activities 103,254 ( 23,389 ) ( 19,448 )

Net increase (decrease) in cash, cash equivalents, and restricted cash 150,809 ( 4,364 ) 38,095

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As of December 31, 2022, the Company had a total of 1,959 restaurants in its system.

The Company's restaurant base is 98 % franchised, with 1,695 franchised locations (including 197 international locations) and 36 company-owned restaurants as of December 25, 2021.

The Company's restaurant base is 98 % franchised, with 1,916 franchised restaurants (including 238 international restaurants) and 43 company-owned restaurants as of December 31, 2022.

The Company operates as a single segment for reporting purposes.

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The Company uses a 52/53-week fiscal year that ends on the last Saturday of the calendar year.

Fiscal years 2021, 2020, and 2019 each consisted of 52 weeks.

Fiscal year 2022 consists of 53-weeks, while 2021 and 2020 each consisted of 52-weeks.

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Restricted cash includes cash and cash equivalents held for future principal and interest payments as required by the Company's debt agreements (see Note 11).

The Company also has Advertising fund restricted cash, which can only be used for activities that promote the Wingstop brand.

The Company also has Advertising fund restricted cash, which can only be used for activities related to the promotion of the Wingstop brand.

Cash, cash equivalents, and restricted cash within the Consolidated Balance Sheets that are included in the Consolidated Statements of Cash Flows as of December 31, 2022 and December 25, 2021 were as follows (in thousands):

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(f) Inventories

Inventories, which consist of food and beverage products, paper goods, and supplies, are valued at the lower of cost (first-in, first-out) or market.

Inventories, which consist of food and beverage products, paper goods, and supplies, are valued at the lower of cost (first-in, first-out) or net realizable value.

(g) Property and Equipment

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The Company’s indefinite-lived intangible assets consist of goodwill and trademarks, which are not subject to amortization.

We generally record goodwill in connection with the acquisition of restaurants from franchisees.

On an annual basis (October 1 st of each fiscal year) and whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable, the Company reviews the recoverability of goodwill and indefinite-lived intangible assets.

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Initial and renewal franchise fees are payable by the franchisee prior to the restaurant opening or at the time of a renewal of an existing franchise agreement.

The Company's franchise agreement royalties, inclusive of Ad Fund contributions, represent sales-based royalties that are related entirely to the Company's performance obligation under the franchise agreement and are recognized as franchised restaurant sales occur.

Additionally, initial and renewal franchise fees are recognized as revenue on a straight-line basis over the term of the respective agreement.

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The Company administers the Ad Fund, for which a percentage of gross sales is collected from domestic restaurant franchisees and company-owned restaurants to be used for various forms of advertising for the Wingstop brand.

Under this program, domestic franchisees contributed 4 % of gross sales for fiscal years 2021, 2020, and 2019.

Effective the first day of the fiscal second quarter of 2022, domestic franchisees contribution rates to the national advertising fund increased to 5 %, up from 4 %, of gross sales.

The national advertising fund contribution rate was 4 % for fiscal years 2021 and 2020.

The Company administers and directs the development of all advertising and promotion programs in the Ad Fund for which it collects advertising contributions in accordance with the provisions of its franchise agreements.

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The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period of the change.

The Company files a consolidated federal income tax return including all of its subsidiaries.

The Company files a consolidated federal income tax return including all of its wholly-owned subsidiaries.

Judgment is required in evaluating the Company’s uncertain tax positions and determining the Company’s income tax expense.

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Subsequent to the end of fiscal year 2022, on February 21, 2023, the Company’s board of directors declared a quarterly dividend of $ 0.19 per share of common stock, to be paid on March 31, 2023 to stockholders of record as of March 10, 2023, totaling approximately $ 5.7 million.

Separate from the Company's regular dividend program, the Company declared and paid special dividends of $ 148.4 million, or $ 5.00 per share of common stock, in fiscal year 2020.

No special dividends were declared or paid during fiscal years 2021 and 2019.

Separate from the Company's regular dividend program, the Company declared and paid special dividends of $ 119.5 million, or $ 4.00 per share of common stock, in fiscal year 2022, and $ 148.4 million, or $ 5.00 per share of common stock, in fiscal year 2020.

No special dividends were declared or paid during fiscal year 2021.

(4) Fair Value Measurements

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Level 2 $ 475,200 $ 406,462 $ 477,600 $ 480,676

Investments (Note 10) (2)

2022-1 Class A-2 Senior Secured Notes (1)

Level 2 $ 249,375 $ 215,709 $ — $ —

(1) The fair value of long-term debt was estimated using available market information.

(2) The fair values of our investments were not significant and were based on our review of information provided by the investment managers or investees.

Investments in bonds of LPH (Note 10) (2)

Level 3 $ 3,196 $ 3,906 $ 4,151 $ 4,151

(1) The fair value of the 2020-1 and 2022-1 Class A-2 Senior Secured Notes was estimated using available market information.

(2) The fair value approximates discounted cash flows using current market rates for debt investments with similar maturities and credit risk.

(5) Accounts Receivable, net

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Vendor rebates receivable $ 3,610 $ 2,319

Royalties receivable (net of allowance for doubtful accounts of $ 0 and $ 1,053 , respectively)

Royalties receivable 3,811 2,758

Other receivables, net 2,040 1,916

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9,038 7,038 6.0

Proprietary software (1)

Noncompete agreements (1)

accumulated amortization ( 21,931 ) ( 19,795 )

2 unchanged sentences

(1) Included within Other non-current assets net of associated accumulated amortization within the Consolidated Balance Sheets.

Amortization expense for definite-lived intangibles was $ 2.3 million, in fiscal years 2021 and 2020, and $ 2.4 million in fiscal year 2019.

Amortization expense for definite-lived intangibles was $ 2.2 million in fiscal year 2022, and $ 2.3 million in fiscal years 2021 and 2020.

Estimated amortization expense, principally related to customer relationships, for the five succeeding fiscal years and the aggregate thereafter is (in thousands):

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Current portion of deferred revenues 4,476 3,664

Taxes payable 6,401 1,808

Short term lease liability 2,283 2,443

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Foreign tax credits ( 328 ) ( 263 ) ( 191 )

Increase (decrease) in unrecognized tax benefit 296 102 ( 128 )

Increase in unrecognized tax benefit 337 296 102

Other ( 1,027 ) 203 530

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Other 2,493 452

Net operating loss carryforwards and credits 1,082 987

Net operating loss carry-forwards and credits 1,061 1,082

Valuation allowance ( 577 ) ( 577 )

15,504 12,190

Deferred tax liabilities:

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The Company recorded accrued interest related to the unrecognized tax benefits and penalties as a component of the provision for income taxes recognized in the Consolidated Statement of Comprehensive Income.

At December 25, 2021 and December 26, 2020, the amount of unrecognized tax benefits was $ 1,055,000 and $ 794,000 , respectively, which, if ultimately recognized, would reduce the Company’s effective tax rate.

At December 31, 2022 and December 25, 2021, the amount of unrecognized tax benefits was $ 1.3 million and $ 1.1 million, respectively, which, if ultimately recognized, would reduce the Company’s effective tax rate.

(10) 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.

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 are recorded on an amortized cost basis.

The fair value of the bonds approximates the current carrying value and was determined using Level 3 inputs.

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 of the investee will be recorded in Other income on the Consolidated Statements of Comprehensive Income.

The company recorded adjustments of $ 12,000 to the carrying amount in 2021.

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 of the investee will be recorded in Other income (expense) on the Consolidated Statements of Comprehensive Income.

(11) Debt Obligations

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2020-1 Class A-2 Senior Secured Notes $ 475,200 477,600

2022-1 Class A-2 Senior Secured Notes 249,375 —

Debt issuance costs, net of amortization ( 10,429 ) ( 8,206 )

1 unchanged sentence

Long-term debt, net $ 706,846 $ 469,394

As of December 25, 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 has elected to suspend payments following the principal payment made in the third quarter of 2021, and the entire outstanding balance of $ 477.6 million of the Class A-2 notes has been classified as long-term debt due after fiscal year 2026.

As of December 31, 2022, the scheduled principal payments on debt were as follows (in thousands):

Fiscal year 2023 $ 7,300

6 unchanged sentences

Securitized Financing Facility

In October 2020, the Company completed a transaction to refinance its previous securitized financing facility with a new securitized financing facility, pursuant to which the Issuer issued $ 480.0 million of its Series 2020-1 2.84 % Fixed Rate Senior Notes, Class A-2 (the “2020 Class A-2 Notes”) with an anticipated term of seven years .

The Issuer also entered into a revolving financing facility of Series 2020-1 Variable Funding Senior Notes, Class A-1 (the “2020 Variable Funding Notes,” and together with the 2020 Class A-2 Notes, the “2020 Notes”), which permits borrowings of up to a maximum principal amount of $ 50 million, which may be used to issue letters of credit.

A portion of the proceeds of the 2020 Class A-2 Notes was used to repay the principal outstanding on the previous securitized financing facility and to pay related transaction fees and expenses.

The additional net proceeds were used to strengthen the Company's liquidity position and for general corporate purposes, which included a return of capital to the Company’s stockholders in 2020.

No borrowings were outstanding under the 2020 Variable Funding Notes as of December 25, 2021.

The 2020 Notes were issued in a securitization transaction, which is guaranteed by certain limited-purpose, bankruptcy-remote, wholly-owned indirect subsidiaries of the Company and secured by a security interest in substantially all of their assets, including certain domestic and foreign revenue-generating assets, consisting principally of franchise-related agreements and intellectual property.

On March 9, 2022, the Company completed a securitized financing transaction, in which Wingstop Funding LLC, a limited purpose, bankruptcy-remote, indirect wholly owned subsidiary of the Company (the “Issuer”), issued $ 250 million of its Series 2022-1 3.734 % Fixed Rate Senior Secured Notes, Class A-2 (the “2022 Class A-2 Notes”).

The Issuer also entered into a revolving financing facility of Series 2022-1 Variable Funding Senior Notes, Class A-1 (the “2022 Variable Funding Notes,” and together with the 2022 Class A-2 Notes, the “2022 Notes”), which permits borrowings of up to a maximum principal amount of $ 200 million, subject to certain borrowing conditions, a portion of which may be used to issue letters of credit.

The proceeds from the securitized financing transaction were used to pay related transaction fees and expenses, strengthen the Company's liquidity position and for general corporate purposes, which included a return of capital to the Company’s stockholders.

In addition to the 2022 Notes, the Company’s outstanding debt consists of its existing Series 2020-1 2.84 % Fixed Rate Senior Secured Notes, Class A-2 (the “2020 Notes”), which have an anticipated repayment date of December 2027.

The Company’s existing revolving financing facility of Series 2020-1 Class A-1 Notes (“the 2020 Variable Funding Notes”) was terminated in connection with the 2022 issuance.

As of December 25, 2021, $ 3.5 million of letters of credit were outstanding against the 2020 Variable Funding Notes, which related primarily to required interest reserves, and there were no amounts drawn down on the letters of credit as of December 25, 2021.

No borrowings were outstanding under either the 2020 Variable Funding Notes or the 2022 Variable Funding Notes as of December 31, 2022.

The 2022 Notes were issued in a securitization transaction, which is guaranteed by certain limited-purpose, bankruptcy-remote, wholly owned indirect subsidiaries of the Company and secured by a security interest in substantially all of their assets, including certain domestic and foreign revenue-generating assets, consisting principally of franchise-related agreements, intellectual property, and vendor rebate contracts.

The 2022 Notes were issued pursuant to a base indenture and related supplemental indentures (collectively, the “Indenture”).

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The requirement to make such quarterly principal payments on the 2022 Class A-2 Notes is subject to certain financial conditions set forth in the Indenture.

The legal final maturity date of the 2020 Notes is in December of 2050, but, unless earlier prepaid to the extent permitted under the Indenture, the anticipated repayment date of the 2020 Class A-2 Notes is December 2027.

The legal final maturity date of the 2022 Notes is in March of 2052, but, unless earlier prepaid to the extent permitted under the Indenture, the anticipated repayment date of the 2022 Class A-2 Notes is March 2029.

If the Issuer has not repaid or refinanced the 2022 Class A-2 Notes prior to the anticipated repayment date, additional interest will accrue on the 2022 Notes.

The 2020 Variable Funding Notes accrue interest at a variable rate based on (i) the prime rate, (ii) the Eurodollar rate for U.S.

Dollars (or a benchmark replacement), or (iii) with respect to advances made by conduit investors, the weighted average cost of, or related to, the issuance of commercial paper allocated to fund or maintain such advances, in each case plus any applicable margin, as more fully set forth in the 2020 Variable Funding Note Purchase Agreement, dated October 30, 2020.

There is a commitment fee on the unused portion of the 2020 Variable Funding Notes facility, which is 30 basis points based on the utilization under the 2020 Variable Funding Notes facility.

As of December 25, 2021, $ 3.5 million of letters of credit were outstanding against the 2020 Variable Funding Notes, which relate primarily to interest reserves required under the indenture.

There were no amounts drawn down on the letters of credit as of December 25, 2021.

During the fourth quarter of 2020, as a result of the repayment of the remaining $ 332.8 million of principal outstanding on the previous securitized financing facility, the Company recorded a loss on debt extinguishment of $ 13.7 million, consisting of a $ 5.4 million write-off of previously capitalized financing costs associated and $ 8.2 million of make-whole interest premium costs associated with the early repayment of the previous securitized financing facility.

Total debt issuance costs incurred and capitalized in connection with the issuance of the 2020 Notes were $ 10.4 million.

The 2020 Notes are subject to a series of covenants and restrictions customary for transactions of this type, including (i) that the Issuer maintains specified reserve accounts to be used to make required payments in respect of the 2020 Notes, (ii) provisions relating to optional and mandatory prepayments and the related payment of specified amounts, including specified make-whole payments in the case of the 2020 Class A-2 Notes under certain circumstances, (iii) certain indemnification payments in the event, among other things, that the assets pledged as collateral for the 2020 Notes are in stated ways defective or ineffective, and (iv) covenants relating to recordkeeping, access to information, and similar matters.

The 2020 Notes are also subject to customary rapid amortization events provided for in the indenture, including events tied to failure to maintain stated debt service coverage ratios, the sum of global gross sales for specified restaurants being below certain levels on certain measurement dates, certain change of control and manager termination events, an event of default, and the failure to repay or

refinance the 2020 Class A-2 Notes on the applicable scheduled maturity date.

The 2022 Variable Funding Notes accrue interest at a variable rate based on (i) the prime rate, (ii) the overnight federal funds rates, (iii) the secured overnight financing rate, or (iv) with respect to advances made by conduit investors, the weighted average cost of, or related to, the issuance of commercial paper allocated to fund or maintain such advances, in each case plus any applicable margin, as more fully set forth in the 2022 Variable Funding Note Purchase Agreement, dated March 9, 2022, and the indenture supplement.

Commitment fees and other usage fees apply to the 2022 Variable Funding Notes facility depending on the type of borrowing requested.

There is a 60 -basis points draw fee on borrowings requested pursuant to the terms of the 2022 Variable Fund Notes.

Additionally, during a commitment availability period, there is a 30 -basis point commitment fee on the committed portion of the 2022 Variable Funding Notes.

The 2020 Notes and the 2022 Notes (together, the “Notes”) are subject to a series of covenants and restrictions customary for transactions of this type, including (i) that the Issuer maintains specified reserve accounts to be used to make required payments in respect of the Notes, (ii) provisions relating to optional and mandatory prepayments and the related payment of specified amounts, including specified make-whole payments in the case of the Notes under certain circumstances, (iii) certain indemnification payments in the event, among other things, that the assets pledged as collateral for the Notes are in stated ways defective or ineffective, and (iv) covenants relating to recordkeeping, access to information, and similar matters.

The Notes are also subject to customary rapid amortization events provided for in the indenture, including events tied to failure to maintain

stated debt service coverage ratios, the sum of global gross sales for specified restaurants being below certain levels on certain measurement dates, certain change of control and manager termination events, an event of default, and the failure to repay or refinance the Notes on the applicable scheduled maturity date.

The Notes are also subject to certain customary events of default, including events relating to non-payment of required interest, principal or other amounts due on or with respect to the Notes, failure to comply with covenants within certain time frames, certain bankruptcy events, breaches of specified representations and warranties, failure of security interests to be effective, and certain judgments.

As of December 31, 2022, the Company was in compliance with all financial covenants.

During the first quarter of 2022, as a result of the termination of the 2020 Variable Funding Notes, the Company recorded a loss on debt extinguishment of $ 0.8 million related to the write-off of previously capitalized financing costs.

Total debt issuance costs incurred and capitalized in connection with the issuance of the 2022 Notes were $ 5.5 million.

As of December 25, 2021, the Company’s leverage ratio was less than 5.0 x, and accordingly, per the terms of the applicable debt agreements, the Company elected to suspend principal payments and classified the balance of the 2020 Notes as long-term debt.

Subsequent to the closing of the 2022 Notes, the Company had a leverage ratio of greater than 5.0 x and, accordingly, the Company resumed making scheduled amortization payments on the notes in the third quarter of 2022.

The 2020 Class A-2 Notes and the 2022 Class A-2 Notes are generally subject to 1 % annual amortization.

During the fourth quarter of 2020, as a result of the repayment of the remaining principal outstanding on the previous 2018 securitized financing facility, the Company recorded a loss on debt extinguishment of $ 13.7 million, consisting of a $ 5.4 million write-off of previously capitalized financing costs associated and $ 8.2 million of make-whole interest premium costs associated with the early repayment of the previous securitized financing facility.

Total debt issuance costs incurred and capitalized in connection with the issuance of the 2020 Notes were $ 10.4 million.

The Company determines whether an arrangement is a lease at inception.

8 unchanged sentences

2022 December 25,

2021 December 26, 2020

Operating lease cost (1)

6 unchanged sentences

2022 December 25,

2021 December 26, 2020

Operating cash flow information:

3 unchanged sentences

Supplemental balance sheet information related to our operating leases is as follows (in thousands):

Balance Sheet Classification December 25, 2021 December 26, 2020

Balance Sheet Classification December 31,

2022 December 25,

Right-of-use assets Other non-current assets $ 15,613 $ 15,032

3 unchanged sentences

2022 December 25,

Weighted average remaining lease term of operating leases 7.4 years 4.0 years

2021 December 26, 2020

Weighted average remaining lease term of operating leases 7.5 years 7.4 years 4.0 years

Weighted average discount rate of operating leases 3.86 % 3.81 % 3.58 %

12 unchanged sentences

In the opinion of management, the amount of ultimate liability with respect to those actions should not have a material adverse impact on financial position, results of operations, or cash flows.

The Company’s use of any forward pricing arrangements varies substantially from time to time and these arrangements tend to cover relatively short periods (i.e., typically 12 months or less).

Such contracts are used in the normal purchases of our food products and not for speculative purposes.

The Company does not enter into futures contracts or other derivative instruments.

(14) Employee Benefit Plan

3 unchanged sentences

The Wingstop Inc.

2015 Omnibus Equity Incentive Plan (the "2015 Plan"), was adopted in June 2015 and is the only plan under which the Company currently grants awards.

2015 Omnibus Equity Incentive Plan (as amended, the "2015 Plan"), was adopted in June 2015 and is the only plan under which the Company currently grants awards.

The 2015 Plan provides for the grant or award of stock options, stock appreciation rights, restricted stock awards, restricted stock units, performance unit awards, performance share awards, cash-based awards and other stock-based awards to employees, directors, and other eligible persons.

Awards issued under the 2015 Plan expire ten years from the date of the grant.

Stock options issued under the 2015 Plan expire ten years from the date of the grant.

As of December 31, 2022, there were approximately 1.5 million shares available for future grants under the 2015 Plan.

In the event of a change in control of the Company (as defined in the 2015 Plan and unless otherwise determined by the board of directors or the Compensation Committee of the board of directors), each outstanding award will become fully vested immediately prior to the change in control and shall be exchanged for cash.

In the event of a change in control of the Company (as defined in the 2015 Plan) in connection with which the board of directors or the Compensation Committee of the board of directors determines prior to such change in control that outstanding awards will be honored or assumed or new rights substituted therefore (as required by the Plan), each outstanding award will continue to vest in accordance with its terms.

In the event the outstanding awards are not assumed or new rights substituted therefore in connection with the transaction, the awards will become fully vested and, to the extent applicable, exercisable immediately prior to the change in control and shall be exchanged for cash.

Stock-based compensation is measured at the grant date, based on the fair value of the award, and is recognized as an expense over the requisite employee service period.

The Company recognized approximately $ 9.6 million, $ 8.6 million, and $ 7.0 million in stock compensation expense for fiscal years 2021, 2020, and 2019, respectively, with a corresponding increase to

additional paid-in-capital.

The Company recognized approximately $ 4.2 million, $ 9.6 million, and $ 8.6 million in stock compensation expense, net of forfeitures, for fiscal years 2022, 2021, and 2020, respectively, with a corresponding increase to additional paid-in-capital.

The Company recognized forfeitures of $ 6.6 million during fiscal year 2022.

Stock compensation expense is included in Selling, general and administrative in the Consolidated Statements of Comprehensive Income.

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The estimated fair value of each option granted is determined using the Black-Scholes option-pricing model.

Expected volatilities are based on volatilities from publicly traded companies operating in the Company’s industry.

Expected volatilities are based on the historical volatility of the Company’s share price.

The expected life of options granted is management’s best estimate using recent and expected transactions.

3 unchanged sentences

The weighted-average assumptions used in the model were as follows:

2022 2021 2020

Risk-free interest 1.7 % 0.6 % 0.7 %

Expected life 4.2 years 4.2 years

Expected life 3.7 years 4.2 years 4.2 years

Expected dividend yield 0.4 % 0.4 % 0.5 %

2 unchanged sentences

Restricted Stock Units

Restricted stock units are granted to employees and vest in equal annual amounts over a three year period.

Restricted stock units are granted to employees and generally vest in equal annual amounts over a three year period.

The fair value of restricted stock units is based on the closing price on the date of grant.

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The weighted-average grant date fair value of restricted stock units granted was $ 116.30 , $ 138.38 , and $ 94.12 in fiscal years 2022, 2021, and 2020, respectively.

total fair value of restricted stock units that vested in fiscal years 2021, 2020, and 2019 was $ 1.9 million, $ 1.8 million, and $ 1.8 million, respectively.

During fiscal year 2019, there was a modification to certain awards resulting in additional compensation expense of $ 0.7 million over the remaining term of the awards.

The total fair value of restricted stock units that vested in fiscal years 2022, 2021, and 2020 was $ 2.0 million, $ 1.9 million, and $ 1.8 million, respectively.

Performance Stock Units

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Nonvested performance stock units at December 25, 2021 136 $ 101.77

Units granted (a)

Units vested (a)

( 121 ) $ 54.83

Units granted 46 $ 127.20

Units vested ( 23 ) $ 74.38

Units forfeited ( 94 ) $ 106.30

Nonvested performance stock units at December 31, 2022 65 $ 122.75

(a) Includes 61,000 incremental PSUs granted in fiscal year 2018 that vested in fiscal year 2021 at greater than 100% of target based on performance.

As of December 31, 2022, total unrecognized compensation expense related to unvested PSUs was $ 6.9 million, which is expected to be recognized over a weighted average period of 1.8 years.

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(16) Restaurant Transactions

During fiscal year 2021, the Company completed the sale of six company-owned restaurants in the Colorado market to one existing franchisee for aggregate proceeds of $ 7.2 million.

In connection with the sale of the restaurants, the Company recorded a $ 3.5 million pre-tax gain on the sale of the related assets and liabilities, which was net of a $ 80,000 reduction in goodwill.

The net gain on these restaurant sales was recorded in Gain on sale of restaurants and other expense, net in the Consolidated Statements of Comprehensive Income as of December 25, 2021.

The Company acquired three restaurants from franchisees during the fiscal year ended December 25, 2021, six restaurants during the fiscal year ended December 26, 2020 and one restaurant during the fiscal year ended December 28, 2019.

The Company acquired three restaurants from franchisees during the fiscal year ended December 31, 2022, three restaurants from franchisees during the fiscal year ended December 25, 2021 and six restaurants from franchisees during the fiscal year ended December 26, 2020.

The total purchase prices are reflected in the table below and were all funded by cash flows from operations.

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Total purchase price $ 7,809 $ 4,876 $ 6,735

The results of operations of these locations are included in the Consolidated Statements of Comprehensive Income since the date of acquisition.

The results of operations of these restaurants are included in the Consolidated Statements of Comprehensive Income since the date of acquisition.

The acquisitions were accounted for as business combinations.

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As the term of the franchise license is typically ten years , substantially all of the franchise fee revenue recognized in the current fiscal year was included in the deferred revenue balance as of December 31, 2022.

Approximately $ 10.4 million and $ 9.8 million of deferred revenue as

of December 25, 2021 and December 26, 2020, respectively, relates to restaurants that have not yet opened, so the fees are not yet being amortized.

Approximately $ 7.7 million and $ 10.4 million of deferred revenue as of December 31, 2022 and December 25, 2021, 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.

1 unchanged sentence

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

What changed 10-K

Item 9A. Controls and Procedures