What changed in this filing

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Item 9A. Controls and Procedures

2024-02-21 compared with 2023-02-22 · 74 added, 74 removed, 815 unchanged (15% of the section changed)

24 unchanged sentences

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 30, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2022 and December 25, 2021, the related consolidated statements of comprehensive income, stockholders’ deficit, and cash flows for each of the fiscal years in the three-year period ended December 31, 2022, and the related notes (collectively, the consolidated financial statements), and our report dated February 22, 2023 expressed an unqualified opinion on those consolidated financial statements.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 30, 2023 and December 31, 2022, the related consolidated statements of comprehensive income, stockholders’ deficit, and cash flows for each of the years in the three-year period ended December 30, 2023, and the related notes (collectively, the consolidated financial statements), and our report dated February 21, 2024 expressed an unqualified opinion on those consolidated financial statements.

Basis for Opinion

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Other Information

During the quarter ended December 30, 2023, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

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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.

and Charles Morrison, filed as Exhibit 10.18 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 28, 2019 (File No.

001-37425) and incorporated herein by reference.

10.12† Form of Indemnification Agreement, filed as Exhibit 10.16 to the Company’s Registration Statement on Form S-1/A (Registration No.

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Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

97.1*† W ingstop Inc.

Clawback Policy.

101.INS* Inline XBRL Instance Document (XBRL tags are embedded within the Inline XBRL document).

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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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We have audited the accompanying consolidated balance sheets of Wingstop Inc.

and subsidiaries (the Company) as of December 31, 2022 and December 25, 2021, the related consolidated statements of comprehensive income, stockholders’ deficit, and cash flows for each of the fiscal years in the three-year period ended December 31, 2022, and the related notes (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and December 25, 2021, and the results of its operations and its cash flows for each of the fiscal years in the three-year period ended December 31, 2022, in conformity with U.S.

and subsidiaries (the Company) as of December 30, 2023 and December 31, 2022, the related consolidated statements of comprehensive income, stockholders’ deficit, and cash flows for each of the years in the three-year period ended December 30, 2023, and the related notes (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 30, 2023 and December 31, 2022, and the results of its operations and its cash flows for each of the years in the three-year period ended December 30, 2023, in conformity with U.S.

generally accepted accounting principles.

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We identified the evaluation of the sufficiency of audit evidence obtained over royalty revenue and advertising fees as a critical audit matter.

This evaluation required especially challenging auditor judgement because such revenue streams are dependent upon the franchise restaurant sales reported by the franchised restaurants through the franchisees’ point-of-sale systems.

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

We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s revenue process, including controls over

(1) the royalty and advertising fund contribution rates and (2) the reconciliation of royalty revenue and advertising fees recognized with the amount of cash received from franchisees for royalty and advertising fees.

We involved IT professionals with specialized skills and knowledge who assisted in testing the information systems used in the revenue process.

We compared revenue recognized to cash received for the year for royalty revenue and advertising fees.

We sent third-party confirmations to a sample of franchisees regarding the amount of royalties and advertising fees that they owed to the Company.

In addition, we evaluated the overall sufficiency of the audit evidence obtained over royalty revenue and advertising fees.

This evaluation required subjective auditor judgement due to the highly automated nature of certain processes to record revenue that involve interfacing data across multiple IT systems.

The complexity of the IT environment required the involvement of IT professionals with specialized skills and knowledge.

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

We applied auditor judgement to determine the nature and extent of procedures to be performed over the processing and recording of revenue, including the

determination of IT systems for which those procedures were performed.

We evaluated the design and tested the operating effectiveness of certain internal controls related to the processing and recording of revenue.

We involved IT professionals with specialized skills and knowledge who assisted in testing certain general IT and automated internal controls over IT systems used for the processing and recording of revenue.

We compared revenue recognized to cash received for royalty revenue and advertising fees.

We confirmed with a sample of franchisees regarding the amount of royalties and advertising fees that they owed to the Company.

In addition, we evaluated the overall sufficiency of the audit evidence obtained over royalty revenue and advertising fees by assessing the results of procedures performed.

We have served as the Company’s auditor since 2019.

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Depreciation and amortization 13,239 10,899 7,943

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

Loss on disposal of assets 95 1,164 ( 3,497 )

Total costs and expenses 347,461 265,588 208,746

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Dividends per share $ 0.82 $ 4.72 $ 0.62

Other comprehensive loss

Other comprehensive income (loss)

Currency translation adjustment $ 296 $ ( 381 ) $ ( 256 )

Other comprehensive loss ( 381 ) ( 256 ) —

Other comprehensive income (loss) 296 ( 381 ) ( 256 )

Comprehensive income $ 70,471 $ 52,566 $ 42,402

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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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Dividends declared on common stock and equivalents — — ( 16,239 ) ( 8,490 ) — ( 24,729 )

Purchases of common stock ( 645,952 ) ( 7 ) ( 391 ) ( 125,878 ) — ( 126,276 )

Currency translation adjustment — — — — 296 296

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Proceeds from exercise of stock options 951 3,315 748

Purchases of common stock ( 125,401 ) — —

Borrowings of long-term debt — 250,000 —

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

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

Fiscal years 2023, 2022, and 2021 included 52, 53, and 52 weeks, respectively.

The 53 rd week in fiscal 2022 fell in the fourth fiscal quarter.

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Improvements to leased properties are depreciated over the shorter of their useful life or the lease term, which includes a fixed, non-cancelable lease term plus any reasonably assured renewal periods.

See Note 6 for additional information.

(h) Impairment or Disposal of Long-Lived Assets

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(k) Revenue Recognition

Revenues consist primarily of royalties, national advertising fund (the "Ad Fund") contributions, initial and renewal franchise fees, and upfront fees from development agreements and international territory agreements.

Revenues consist primarily of royalties, national advertising fund (the "Ad Fund") contributions (advertising fees), initial and renewal franchise fees, and upfront fees from development agreements and international territory agreements.

The Company's performance obligations under its franchise agreements consist of (a) a franchise license, (b) pre-opening services, such as training, and (c) ongoing services, such as management of the Ad Fund contributions, development of training materials and menu items, and restaurant monitoring.

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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 national advertising fund contribution rate was 4 % for fiscal year 2021.

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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When contributions to the Ad Fund exceed the related advertising expenses, advertising costs are accrued up to the amount of the related contributions.

Ad Fund contributions and expenditures are reported on a gross basis on the Consolidated Statements of Comprehensive Income, which are largely offsetting and therefore do not impact the Company's reported net income in years when contributions to the Ad Fund exceed advertising expenses incurred.

Beginning in the first quarter of 2021, headcount-related expenses for employees that provide services directly to the Ad 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.

Prior period amounts have been reclassified to conform to the current presentation.

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

Headcount-related expenses associated with the Ad Fund were $ 9.9 million, $ 8.6 million, and $ 7.9 million in fiscal years 2022, 2021, and 2020, respectively.

Ad Fund contributions and expenditures are reported on a gross basis on the Consolidated Statements of Comprehensive Income.

Advertising expenses incurred by company-owned restaurants are included within Cost of sales in the Consolidated Statements of Comprehensive Income.

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(q) Recent Accounting Pronouncements

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

In November 2023, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standard Update (“ASU”) 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosure .

The ASU updates reportable segment disclosure requirements, primarily through requiring enhanced disclosures about significant segment expenses and

information used to assess segment performance.

The ASU is effective for fiscal years beginning after December 15, 2023, with early adoption permitted.

We are currently evaluating the impact of adopting this ASU on our disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures .

The ASU includes amendments requiring enhanced income tax disclosures, primarily related to standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction.

The guidance is effective for fiscal years beginning after December 15, 2024, with early adoption permitted, and can be applied either prospectively or retrospectively.

We are currently evaluating the impact of adopting this ASU on our disclosures.

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

(2) Earnings Per Share

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

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

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

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

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We had approximately 0 , 19,000 , and 3,000 equity awards outstanding at December 30, 2023, December 31, 2022, and December 25, 2021, respectively, that were excluded from the dilutive earnings per share calculation because the effect would have been anti-dilutive.

(3) Dividends

(3) Stockholders’ Deficit

In connection with the Company's regular dividend program, the Company declared and paid dividends of $ 24.4 million, or $ 0.82 per common share, in fiscal year 2023, $ 21.5 million, or $ 0.72 per common share, in fiscal year 2022, and $ 18.5 million, or $ 0.62 per common share, in fiscal year 2021.

Subsequent to the end of fiscal year 2023, on February 20, 2024, the Company’s board of directors declared a quarterly dividend of $ 0.22 per share of common stock, to be paid on March 29, 2024 to stockholders of record as of March 8, 2024, totaling approximately $ 6.5 million.

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.

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.

No special dividends were declared or paid during fiscal years 2023 and 2021.

Share Repurchase Program

On August 16, 2023, the Company’s Board of Directors approved a new share repurchase program with authorization to purchase up to $ 250.0 million of its outstanding shares of common stock (the “Share Repurchase Authorization”).

On August 23, 2023, the Company entered into an accelerated share repurchase agreement (the “ASR Agreement”) with a third-party financial institution to repurchase $ 125.0 million of the Company’s common stock as part of the Share Repurchase Authorization.

Under the ASR Agreement, the Company paid the financial institution $ 125.0 million in cash and received and retired a total of 645,952 shares of common stock at an average share price of $ 193.51 .

Final settlement of the ASR occurred on December 21, 2023.

The total number of shares repurchased under the ASR Agreement was based on the daily volume-weighted average share price during the valuation period specified in the ASR Agreement, less a discount and subject to adjustments.

As of December 30, 2023, $ 125.0 million remained available under the Share Repurchase Authorization.

(4) Fair Value Measurements

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

Amortization expense for definite-lived intangibles was $ 2.2 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):

Amortization expense for definite-lived intangibles was $ 2.7 million in fiscal year 2023, $ 2.2 million in fiscal year 2022, and $ 2.3 million in fiscal year 2021.

Estimated amortization expense, for the five succeeding fiscal years and the aggregate thereafter is (in thousands):

Fiscal year 2024 $ 2,898

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Prepaid expenses $ 3,567 $ 2,735

Federal income tax receivable — 1,117

Inventories 535 389

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Foreign tax expense 610 328 263

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

Foreign tax and other tax credits ( 1,760 ) ( 1,001 ) ( 385 )

Increase in unrecognized tax benefit 398 337 296

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The state net operating loss carry forwards begin to expire in 2030.

The Company had a valuation allowance of $ 577,000 against its deferred tax assets as of December 31, 2022 and December 25, 2021.

The Company had a valuation allowance of $ 0.6 million against its deferred tax assets as of December 30, 2023 and December 31, 2022.

In assessing whether a deferred tax asset will be realized, the Company considers whether it is more likely than not that either some portion or all of the deferred tax assets will not be realized.

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Balance as of December 30, 2023 $ 1,701

As of December 31, 2022 and December 25, 2021, the accrued interest and penalties on the unrecognized tax benefits were $ 547,000 and $ 429,000 , respectively, excluding any related income tax benefits.

As of December 30, 2023 and December 31, 2022, the accrued interest and penalties on the unrecognized tax benefits were $ 0.7 million and $ 0.5 million, respectively, excluding any related income tax benefits.

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.

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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 (expense) on the Consolidated Statements of Comprehensive Income.

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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 Company’s existing revolving financing facility of Series 2020-1 Class A-1 Notes was terminated in connection with the 2022 issuance.

No borrowings were outstanding under the 2022 Variable Funding Notes as of December 30, 2023.

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.

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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.

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 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 30, 2023, 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.

During the first quarter of 2022, as a result of the termination of the 2020 variable funding note facility, 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.

As of December 30, 2023, the Company’s leverage ratio under the 2020 Class A-2 Notes and the 2022 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 elected to suspend payments following the principal payment made in the second quarter of 2023, and the entire outstanding balance of the 2020 Class A-2 Notes and the 2022 Class A-2 Notes has been classified as long-term debt due after fiscal year 2026.

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.

The Company has operating leases for office and retail space, as well as equipment.

The Company has operating leases for retail space, as well as equipment.

The Company's leases have remaining terms of 10.0 years to 0.1 years, some of which include options to extend the lease term for up to ten years .

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The Company sponsors a 401(k) profit sharing plan for all employees who are eligible based upon age and length of service.

The Company made matching contributions of approximately $ 920,000 , $ 670,000 , and $ 735,000 for fiscal years 2022, 2021, and 2020, respectively.

The Company made matching contributions of approximately $ 1.1 million, $ 0.9 million, and $ 0.7 million for fiscal years 2023, 2022, and 2021, respectively.

(15) Stock-Based Compensation

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The Company recognized approximately $ 15.6 million, $ 4.2 million, and $ 9.6 million in stock compensation expense, net of forfeitures, for fiscal years 2023, 2022, and 2021, respectively, with a corresponding increase to additional paid-in-capital.

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

The Company recognized forfeitures of $ 1.3 million and $ 6.6 million for fiscal years 2023 and 2022, respectively.

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

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As of December 30, 2023, there was $ 0.3 million of total unrecognized stock compensation expense related to non-vested stock options, which will be recognized over a weighted average period of approximately 0.9 years.

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

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.

The Company used the simplified method for determining the expected life of the options.

The risk-free rate for periods within the expected life of the option is based on the U.S.

Treasury yield curve in effect at the time of grant.

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 3.7 years 4.2 years 4.2 years

Expected dividend yield 0.4 % 0.4 % 0.5 %

Expected volatility 44.1 % 41.8 % 34.4 %

Weighted-average grant date fair value $ 49.10 $ 42.51 $ 22.99

Restricted Stock Units

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Vested amounts may range from 0 % to a maximum of 250 % of targeted amounts depending on the achievement of performance measures at the end of each vesting period.

Such performance measures are based on the Company meeting certain Adjusted EBITDA profitability targets, return on incremental investment targets, or sales targets for the vesting period.

Such performance measures are based on the Company meeting net new restaurant targets, return on incremental investment targets, or sales targets for the vesting period.

The fair value of PSUs is based on the closing price on the date of grant.

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

Certain of the PSUs granted in fiscal year 2020 are subject to a service condition and a market condition linked to the level of total stockholder return received by the Company ’ s stockholders during the performance period measured against the companies in the S&P 600 Restaurant Index.

These PSUs were valued based on a Monte Carlo simulation model to reflect the impact of the total stockholder return market condition.

The probability of satisfying a market condition is considered in the estimation of the grant-date fair value, and the compensation cost is not reversed if the market condition is not achieved, provided the requisite service has been provided.

The following table summarizes activity related to performance stock units:

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

Units granted 46 $ 127.20

Units granted (a)

Units vested ( 35 ) $ 88.00

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Nonvested performance stock units at December 30, 2023 81 $ 151.03

(a) Includes 18,000 incremental PSUs earned with respect to the PSUs granted in fiscal year 2020 and vested in fiscal year 2023 at greater than 100% of target based on performance.

As of December 30, 2023, total unrecognized compensation expense related to unvested PSUs was $ 14.2 million, which is expected to be recognized over a weighted average period of 1.4 years.

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(16) Restaurant Transactions

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 Company acquired three restaurants from franchisees during each of the fiscal years ended December 30, 2023, December 31, 2022 and December 25, 2021.

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

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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 $ 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.

Approximately $ 9.3 million and $ 7.7 million of deferred revenue as of December 30, 2023 and December 31, 2022, respectively, relates to restaurants that were 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 7.1 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