|
|
x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
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Delaware
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|
47-3494862
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(State or other jurisdiction of incorporation or organization)
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(IRS Employer Identification No.)
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|
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5501 LBJ Freeway, 5th Floor,
Dallas, Texas
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75240
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(Address of principal executive offices)
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(Zip Code)
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Larger accelerated filer
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¨
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Accelerated filer
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x
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Non-accelerated filer
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¨
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(Do not check if a smaller reporting company)
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Smaller reporting company
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¨
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Emerging growth company
|
x
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Page
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PART I
|
||
Item 1.
|
||
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||
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||
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||
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Item 2.
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Item 3.
|
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Item 4.
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||
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PART II
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Item 1.
|
||
Item 1A.
|
||
Item 2.
|
||
Item 3.
|
||
Item 4.
|
||
Item 5.
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||
Item 6.
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||
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||
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September 30,
2017 |
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December 31,
2016 |
||||
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(Unaudited)
|
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|
||||
Assets
|
|
|
|
|
|
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Current assets
|
|
|
|
|
|
||
Cash and cash equivalents
|
$
|
4,589
|
|
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$
|
3,750
|
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Accounts receivable, net
|
4,641
|
|
|
3,199
|
|
||
Prepaid expenses and other current assets
|
3,305
|
|
|
1,634
|
|
||
Advertising fund assets, restricted
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4,674
|
|
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2,533
|
|
||
Total current assets
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17,209
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11,116
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|
||
Property and equipment, net
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5,681
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4,999
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||
Goodwill
|
46,557
|
|
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45,128
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||
Trademarks
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32,700
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32,700
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Customer relationships, net
|
15,904
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16,914
|
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Other non-current assets
|
3,073
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|
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943
|
|
||
Total assets
|
$
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121,124
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|
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$
|
111,800
|
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Liabilities and stockholders' deficit
|
|
|
|
||||
Current liabilities
|
|
|
|
||||
Accounts payable
|
$
|
2,149
|
|
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$
|
1,458
|
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Other current liabilities
|
9,024
|
|
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9,241
|
|
||
Current portion of debt
|
3,500
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|
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3,500
|
|
||
Advertising fund liabilities, restricted
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4,674
|
|
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2,533
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|
||
Total current liabilities
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19,347
|
|
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16,732
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|
||
Long-term debt, net
|
136,685
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147,217
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Deferred revenues, net of current
|
8,545
|
|
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7,868
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|
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Deferred income tax liabilities, net
|
12,039
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12,304
|
|
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Other non-current liabilities
|
2,182
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|
|
2,307
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|
||
Total liabilities
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178,798
|
|
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186,428
|
|
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Commitments and contingencies (see note 7)
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|
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Stockholders' deficit
|
|
|
|
||||
Common stock, $0.01 par value; 100,000,000 shares authorized; 29,093,736 and 28,747,392 shares issued and outstanding as of September 30, 2017 and December 31, 2016, respectively
|
291
|
|
|
287
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|
||
Additional paid-in-capital
|
1,337
|
|
|
1,194
|
|
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Accumulated deficit
|
(59,302
|
)
|
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(76,109
|
)
|
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Total stockholders' deficit
|
(57,674
|
)
|
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(74,628
|
)
|
||
Total liabilities and stockholders' deficit
|
$
|
121,124
|
|
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$
|
111,800
|
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Thirteen Weeks Ended
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Thirty-Nine Weeks Ended
|
||||||||||||
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September 30,
2017 |
|
September 24,
2016 |
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September 30,
2017 |
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September 24,
2016 |
||||||||
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||||||||
Revenue:
|
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|
||||||
Royalty revenue and franchise fees
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$
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16,354
|
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$
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13,660
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$
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50,204
|
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$
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41,463
|
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Company-owned restaurant sales
|
9,672
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8,150
|
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27,063
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25,144
|
|
||||
Total revenue
|
26,026
|
|
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21,810
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77,267
|
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66,607
|
|
||||
Costs and expenses:
|
|
|
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|
||||||
Cost of sales
(1)
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7,823
|
|
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6,091
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|
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21,290
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|
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18,352
|
|
||||
Selling, general and administrative
|
8,144
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|
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8,893
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|
|
26,694
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|
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25,120
|
|
||||
Depreciation and amortization
|
881
|
|
|
746
|
|
|
2,407
|
|
|
2,187
|
|
||||
Total costs and expenses
|
16,848
|
|
|
15,730
|
|
|
50,391
|
|
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45,659
|
|
||||
Operating income
|
9,178
|
|
|
6,080
|
|
|
26,876
|
|
|
20,948
|
|
||||
Interest expense, net
|
1,302
|
|
|
1,390
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|
|
3,908
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|
|
2,858
|
|
||||
Other expense, net
|
—
|
|
|
216
|
|
|
—
|
|
|
254
|
|
||||
Income before income tax expense
|
7,876
|
|
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4,474
|
|
|
22,968
|
|
|
17,836
|
|
||||
Income tax expense
|
2,864
|
|
|
1,721
|
|
|
6,161
|
|
|
6,714
|
|
||||
Net income
|
$
|
5,012
|
|
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$
|
2,753
|
|
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$
|
16,807
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$
|
11,122
|
|
|
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|
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|
|
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|
||||||||
Earnings per share
|
|
|
|
|
|
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|
||||||||
Basic
|
$
|
0.17
|
|
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$
|
0.10
|
|
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$
|
0.58
|
|
|
$
|
0.39
|
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Diluted
|
$
|
0.17
|
|
|
$
|
0.09
|
|
|
$
|
0.57
|
|
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$
|
0.38
|
|
|
|
|
|
|
|
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|
||||||||
Weighted average shares outstanding
|
|
|
|
|
|
|
|
||||||||
Basic
|
29,081
|
|
|
28,725
|
|
|
29,003
|
|
|
28,652
|
|
||||
Diluted
|
29,384
|
|
|
29,014
|
|
|
29,362
|
|
|
28,991
|
|
||||
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|
|
|
|
|
|
|
||||||||
Dividends per share
|
$
|
0.07
|
|
|
$
|
2.90
|
|
|
$
|
0.07
|
|
|
$
|
2.90
|
|
|
|
|
|
|
|
|
|
||||||||
(1)
exclusive of depreciation and amortization, shown separately
|
|
|
|
|
|
|
|
Thirty-Nine Weeks Ended
|
||||||
|
September 30,
2017 |
|
September 24,
2016 |
||||
|
|
|
|
||||
Operating activities
|
|
|
|
|
|
||
Net income
|
$
|
16,807
|
|
|
$
|
11,122
|
|
Adjustments to reconcile net income to cash provided by operating activities:
|
|
|
|
||||
Depreciation and amortization
|
2,407
|
|
|
2,187
|
|
||
Deferred income taxes
|
(265
|
)
|
|
(68
|
)
|
||
Stock-based compensation expense
|
894
|
|
|
392
|
|
||
Amortization of debt issuance costs
|
219
|
|
|
357
|
|
||
Changes in operating assets and liabilities:
|
|
|
|
||||
Accounts receivable
|
(1,442
|
)
|
|
875
|
|
||
Prepaid expenses and other assets
|
(951
|
)
|
|
(98
|
)
|
||
Accounts payable and other current liabilities
|
(331
|
)
|
|
961
|
|
||
Deferred revenue
|
769
|
|
|
201
|
|
||
Other non-current liabilities
|
(127
|
)
|
|
169
|
|
||
Cash provided by operating activities
|
17,980
|
|
|
16,098
|
|
||
|
|
|
|
||||
Investing activities
|
|
|
|
||||
Purchases of property and equipment
|
(1,834
|
)
|
|
(1,471
|
)
|
||
Acquisition of restaurants from franchisees
|
(3,949
|
)
|
|
—
|
|
||
Cash used in investing activities
|
(5,783
|
)
|
|
(1,471
|
)
|
||
|
|
|
|
||||
Financing activities
|
|
|
|
||||
Proceeds from exercise of stock options
|
1,301
|
|
|
459
|
|
||
Borrowings of long-term debt
|
3,500
|
|
|
165,000
|
|
||
Repayments of long-term debt
|
(14,125
|
)
|
|
(102,500
|
)
|
||
Payment of deferred financing costs
|
—
|
|
|
(1,180
|
)
|
||
Dividends paid
|
(2,034
|
)
|
|
(83,268
|
)
|
||
Cash used in financing activities
|
(11,358
|
)
|
|
(21,489
|
)
|
||
|
|
|
|
||||
Net change in cash and cash equivalents
|
839
|
|
|
(6,862
|
)
|
||
Cash and cash equivalents at beginning of period
|
3,750
|
|
|
10,690
|
|
||
Cash and cash equivalents at end of period
|
$
|
4,589
|
|
|
$
|
3,828
|
|
|
Thirteen Weeks Ended
|
|
Thirty-Nine Weeks Ended
|
||||||||
|
September 30,
2017 |
|
September 24,
2016 |
|
September 30,
2017 |
|
September 24,
2016 |
||||
Basic weighted average shares outstanding
|
29,081
|
|
|
28,725
|
|
|
29,003
|
|
|
28,652
|
|
Dilutive shares
|
303
|
|
|
289
|
|
|
359
|
|
|
339
|
|
Diluted weighted average shares outstanding
|
29,384
|
|
|
29,014
|
|
|
29,362
|
|
|
28,991
|
|
|
Fair Value
Hierarchy
|
|
September 30, 2017
|
|
December 31, 2016
|
||||||||||||
|
|
Carrying
Value
(2)
|
|
Fair Value
|
|
Carrying
Value
(2)
|
|
Fair Value
|
|||||||||
Senior Secured Credit Facility:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Term loan facility
(1)
|
Level 2
|
|
$
|
65,625
|
|
|
$
|
65,625
|
|
|
$
|
68,250
|
|
|
$
|
68,250
|
|
Revolving credit facility
(1)
|
Level 2
|
|
$
|
75,000
|
|
|
$
|
75,000
|
|
|
$
|
83,000
|
|
|
$
|
83,000
|
|
Remainder of fiscal year 2017
|
$
|
875
|
|
Fiscal year 2018
|
3,500
|
|
|
Fiscal year 2019
|
2,625
|
|
|
Fiscal year 2020
|
3,500
|
|
|
Fiscal year 2021
|
130,125
|
|
|
Total
|
$
|
140,625
|
|
Remainder of fiscal year 2017
|
$
|
446
|
|
Fiscal year 2018
|
1,783
|
|
|
Fiscal year 2019
|
1,561
|
|
|
Fiscal year 2020
|
1,436
|
|
|
Fiscal year 2021
|
1,282
|
|
|
Fiscal year 2022
|
1,226
|
|
|
Thereafter
|
4,038
|
|
|
Total
|
$
|
11,772
|
|
|
Stock Options
|
|
Weighted Average Exercise Price
|
|
Aggregate Intrinsic Value
|
|
Weighted Average Remaining Term
|
|||||
Outstanding - December 31, 2016
|
855
|
|
|
$
|
5.14
|
|
|
$
|
20,905
|
|
|
6.8
|
Granted
|
—
|
|
|
$
|
—
|
|
|
|
|
|
||
Exercised
|
(325
|
)
|
|
$
|
4.00
|
|
|
|
|
|
||
Canceled
|
(109
|
)
|
|
$
|
7.12
|
|
|
|
|
|
||
Outstanding - September 30, 2017
|
421
|
|
|
$
|
5.52
|
|
|
$
|
11,679
|
|
|
5.9
|
|
Restricted Stock Units
|
|
Weighted Average Grant Date Fair Value
|
|
Performance Stock Units
|
|
Weighted Average Grant Date Fair Value
|
||||||
Outstanding - December 31, 2016
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
—
|
|
Granted
|
105
|
|
|
27.02
|
|
|
94
|
|
|
27.52
|
|
||
Released
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||
Canceled
|
(11
|
)
|
|
26.30
|
|
|
(8
|
)
|
|
26.30
|
|
||
Outstanding - September 30, 2017
|
94
|
|
|
$
|
27.10
|
|
|
86
|
|
|
$
|
27.63
|
|
|
Thirteen Weeks Ended
|
|
Thirty-Nine Weeks Ended
|
||||||||||||
|
September 30,
2017 |
|
September 24,
2016 |
|
September 30,
2017 |
|
September 24,
2016 |
||||||||
Revenue:
|
|
|
|
|
|
|
|
||||||||
Franchise segment
|
$
|
16,354
|
|
|
$
|
13,660
|
|
|
$
|
50,204
|
|
|
$
|
41,463
|
|
Company segment
|
9,672
|
|
|
8,150
|
|
|
27,063
|
|
|
25,144
|
|
||||
Total segment revenue
|
$
|
26,026
|
|
|
$
|
21,810
|
|
|
$
|
77,267
|
|
|
$
|
66,607
|
|
|
|
|
|
|
|
|
|
||||||||
Segment Profit:
|
|
|
|
|
|
|
|
||||||||
Franchise segment
|
$
|
8,251
|
|
|
$
|
6,199
|
|
|
$
|
23,792
|
|
|
$
|
18,794
|
|
Company segment
|
927
|
|
|
1,236
|
|
|
3,084
|
|
|
4,211
|
|
||||
Total segment profit
|
9,178
|
|
|
7,435
|
|
|
26,876
|
|
|
23,005
|
|
||||
Corporate and other
(1)
|
—
|
|
|
1,355
|
|
|
—
|
|
|
2,057
|
|
||||
Interest expense, net
|
1,302
|
|
|
1,390
|
|
|
3,908
|
|
|
2,858
|
|
||||
Other (income) expense, net
|
—
|
|
|
216
|
|
|
—
|
|
|
254
|
|
||||
Income before taxes
|
$
|
7,876
|
|
|
$
|
4,474
|
|
|
$
|
22,968
|
|
|
$
|
17,836
|
|
|
Final Purchase Price Allocation
|
||
Inventory
|
$
|
16
|
|
Property and equipment
|
183
|
|
|
Reacquired franchise rights
|
2,323
|
|
|
Goodwill
|
1,429
|
|
|
Gift card liability
|
(2
|
)
|
|
Total purchase price
|
$
|
3,949
|
|
|
Thirteen Weeks Ended
|
|
Thirty-Nine Weeks Ended
|
||||||||
|
September 30,
2017 |
|
September 24,
2016 |
|
September 30,
2017 |
|
September 24,
2016 |
||||
Domestic Franchised Activity:
|
|
|
|
|
|
|
|
||||
Beginning of period
|
946
|
|
|
831
|
|
|
901
|
|
|
767
|
|
Openings
|
28
|
|
|
31
|
|
|
79
|
|
|
96
|
|
Closures
|
(1
|
)
|
|
—
|
|
|
(7
|
)
|
|
(1
|
)
|
Acquired by Company
|
(2
|
)
|
|
—
|
|
|
(2
|
)
|
|
—
|
|
Restaurants end of period
|
971
|
|
|
862
|
|
|
971
|
|
|
862
|
|
|
|
|
|
|
|
|
|
||||
Domestic Company-Owned Activity:
|
|
|
|
|
|
|
|
||||
Beginning of period
|
21
|
|
|
20
|
|
|
21
|
|
|
19
|
|
Openings
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
Closures
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Acquired from franchisees
|
2
|
|
|
—
|
|
|
2
|
|
|
—
|
|
Restaurants end of period
|
23
|
|
|
20
|
|
|
23
|
|
|
20
|
|
|
|
|
|
|
|
|
|
||||
Total Domestic Restaurants
|
994
|
|
|
882
|
|
|
994
|
|
|
882
|
|
|
|
|
|
|
|
|
|
||||
International Franchised Activity:
|
|
|
|
|
|
|
|
||||
Beginning of period
|
89
|
|
|
63
|
|
|
76
|
|
|
59
|
|
Openings
|
5
|
|
|
4
|
|
|
20
|
|
|
11
|
|
Closures
|
—
|
|
|
—
|
|
|
(2
|
)
|
|
(3
|
)
|
Restaurants end of period
|
94
|
|
|
67
|
|
|
94
|
|
|
67
|
|
|
|
|
|
|
|
|
|
||||
Total System-wide Restaurants
|
1,088
|
|
|
949
|
|
|
1,088
|
|
|
949
|
|
|
Thirteen Weeks Ended
|
|
Thirty-Nine Weeks Ended
|
||||||||||||
|
September 30, 2017
|
|
September 24, 2016
|
|
September 30, 2017
|
|
September 24, 2016
|
||||||||
Number of system-wide restaurants open at end of period
|
1,088
|
|
|
949
|
|
|
1,088
|
|
|
949
|
|
||||
System-wide sales
(1)
|
$
|
274,021
|
|
|
$
|
235,975
|
|
|
$
|
802,420
|
|
|
$
|
707,077
|
|
Domestic restaurant AUV
|
$
|
1,102
|
|
|
$
|
1,126
|
|
|
$
|
1,102
|
|
|
$
|
1,126
|
|
System-wide domestic same store sales growth
|
4.1
|
%
|
|
4.1
|
%
|
|
1.7
|
%
|
|
3.9
|
%
|
||||
Company-owned domestic same store sales growth
|
5.5
|
%
|
|
4.8
|
%
|
|
0.5
|
%
|
|
6.9
|
%
|
||||
Total revenue
|
$
|
26,026
|
|
|
$
|
21,810
|
|
|
$
|
77,267
|
|
|
$
|
66,607
|
|
Net income
|
$
|
5,012
|
|
|
$
|
2,753
|
|
|
$
|
16,807
|
|
|
$
|
11,122
|
|
Adjusted EBITDA
(2)
|
$
|
10,412
|
|
|
$
|
8,319
|
|
|
$
|
30,177
|
|
|
$
|
25,545
|
|
|
•
|
as a measurement of operating performance because they assist us in comparing the operating performance of our restaurants on a consistent basis, as they remove the impact of items not directly resulting from our core operations;
|
•
|
for planning purposes, including the preparation of our internal annual operating budget and financial projections;
|
•
|
to evaluate the performance and effectiveness of our operational strategies;
|
•
|
to evaluate our capacity to fund capital expenditures and expand our business; and
|
•
|
to calculate incentive compensation payments for our employees, including assessing performance under our annual incentive compensation plan and determining the vesting of performance shares.
|
•
|
such measures do not reflect our cash expenditures, or future requirements for capital expenditures or contractual commitments;
|
•
|
such measures do not reflect changes in, or cash requirements for, our working capital needs;
|
•
|
such measures do not reflect the interest expense, or the cash requirements necessary to service interest or principal payments on our debt;
|
•
|
such measures do not reflect our tax expense or the cash requirements to pay our taxes;
|
•
|
although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future and such measures do not reflect any cash requirements for such replacements; and
|
•
|
other companies in our industry may calculate such measures differently than we do, limiting their usefulness as comparative measures.
|
|
Thirteen Weeks Ended
|
|
Thirty-Nine Weeks Ended
|
||||||||||||
|
September 30,
2017 |
|
September 24,
2016 |
|
September 30,
2017 |
|
September 24,
2016 |
||||||||
Net income
|
$
|
5,012
|
|
|
$
|
2,753
|
|
|
$
|
16,807
|
|
|
$
|
11,122
|
|
Interest expense, net
|
1,302
|
|
|
1,390
|
|
|
3,908
|
|
|
2,858
|
|
||||
Income tax expense
|
2,864
|
|
|
1,721
|
|
|
6,161
|
|
|
6,714
|
|
||||
Depreciation and amortization
|
881
|
|
|
746
|
|
|
2,407
|
|
|
2,187
|
|
||||
EBITDA
|
$
|
10,059
|
|
|
$
|
6,610
|
|
|
$
|
29,283
|
|
|
$
|
22,881
|
|
Additional adjustments:
|
|
|
|
|
|
|
|
||||||||
Transaction costs
(a)
|
—
|
|
|
1,570
|
|
|
—
|
|
|
2,272
|
|
||||
Stock-based compensation expense
(b)
|
353
|
|
|
139
|
|
|
894
|
|
|
392
|
|
||||
Adjusted EBITDA
|
$
|
10,412
|
|
|
$
|
8,319
|
|
|
$
|
30,177
|
|
|
$
|
25,545
|
|
|
|
Thirteen Weeks Ended
|
|
Increase / (Decrease)
|
|||||||||||
|
September 30,
2017 |
|
September 24,
2016 |
|
$
|
|
%
|
|||||||
Revenue:
|
|
|
|
|
|
|
|
|||||||
Royalty revenue and franchise fees
|
$
|
16,354
|
|
|
$
|
13,660
|
|
|
$
|
2,694
|
|
|
19.7
|
%
|
Company-owned restaurant sales
|
9,672
|
|
|
8,150
|
|
|
1,522
|
|
|
18.7
|
%
|
|||
Total revenue
|
26,026
|
|
|
21,810
|
|
|
4,216
|
|
|
19.3
|
%
|
|||
Costs and expenses:
|
|
|
|
|
|
|
|
|||||||
Cost of sales
(1)
|
7,823
|
|
|
6,091
|
|
|
1,732
|
|
|
28.4
|
%
|
|||
Selling, general and administrative
|
8,144
|
|
|
8,893
|
|
|
(749
|
)
|
|
(8.4
|
)%
|
|||
Depreciation and amortization
|
881
|
|
|
746
|
|
|
135
|
|
|
18.1
|
%
|
|||
Total costs and expenses
|
16,848
|
|
|
15,730
|
|
|
1,118
|
|
|
7.1
|
%
|
|||
Operating income
|
9,178
|
|
|
6,080
|
|
|
3,098
|
|
|
51.0
|
%
|
|||
Interest expense, net
|
1,302
|
|
|
1,390
|
|
|
(88
|
)
|
|
(6.3
|
)%
|
|||
Other expense, net
|
—
|
|
|
216
|
|
|
(216
|
)
|
|
(100.0
|
)%
|
|||
Income before income tax expense
|
7,876
|
|
|
4,474
|
|
|
3,402
|
|
|
76.0
|
%
|
|||
Income tax expense
|
2,864
|
|
|
1,721
|
|
|
1,143
|
|
|
66.4
|
%
|
|||
Net income
|
$
|
5,012
|
|
|
$
|
2,753
|
|
|
$
|
2,259
|
|
|
82.1
|
%
|
|
|
Thirteen Weeks Ended
|
|||||||||||||
|
September 30,
2017 |
|
As a % of company-owned restaurant sales
|
|
September 24,
2016 |
|
As a % of company-owned restaurant sales
|
|||||||
Cost of sales:
|
|
|
|
|
|
|
|
|||||||
Food, beverage and packaging costs
|
$
|
4,136
|
|
|
42.8
|
%
|
|
$
|
2,932
|
|
|
36.0
|
%
|
|
Labor costs
|
2,295
|
|
|
23.7
|
%
|
|
1,934
|
|
|
23.7
|
%
|
|||
Other restaurant operating expenses
|
1,634
|
|
|
16.9
|
%
|
|
1,438
|
|
|
17.6
|
%
|
|||
Vendor rebates
|
(242
|
)
|
|
(2.5
|
)%
|
|
(213
|
)
|
|
(2.6
|
)%
|
|||
Total cost of sales
|
$
|
7,823
|
|
|
80.9
|
%
|
|
$
|
6,091
|
|
|
74.7
|
%
|
|
Thirteen Weeks Ended
|
|
Increase / (Decrease)
|
|||||||||||
|
September 30,
2017 |
|
September 24,
2016 |
|
$
|
|
%
|
|||||||
Revenue:
|
|
|
|
|
|
|
|
|||||||
Franchise segment
|
$
|
16,354
|
|
|
$
|
13,660
|
|
|
$
|
2,694
|
|
|
19.7
|
%
|
Company segment
|
9,672
|
|
|
8,150
|
|
|
1,522
|
|
|
18.7
|
%
|
|||
Total segment revenue
|
$
|
26,026
|
|
|
$
|
21,810
|
|
|
$
|
4,216
|
|
|
19.3
|
%
|
|
|
|
|
|
|
|
|
|||||||
Segment Profit:
|
|
|
|
|
|
|
|
|||||||
Franchise segment
|
$
|
8,251
|
|
|
$
|
6,199
|
|
|
$
|
2,052
|
|
|
33.1
|
%
|
Company segment
|
927
|
|
|
1,236
|
|
|
(309
|
)
|
|
(25.0
|
)%
|
|||
Total segment profit
|
$
|
9,178
|
|
|
$
|
7,435
|
|
|
$
|
1,743
|
|
|
23.4
|
%
|
|
Thirty-Nine Weeks Ended
|
|
Increase / (Decrease)
|
|||||||||||
|
September 30,
2017 |
|
September 24,
2016 |
|
$
|
|
%
|
|||||||
Revenue:
|
|
|
|
|
|
|
|
|||||||
Royalty revenue and franchise fees
|
$
|
50,204
|
|
|
$
|
41,463
|
|
|
$
|
8,741
|
|
|
21.1
|
%
|
Company-owned restaurant sales
|
27,063
|
|
|
25,144
|
|
|
1,919
|
|
|
7.6
|
%
|
|||
Total revenue
|
77,267
|
|
|
66,607
|
|
|
10,660
|
|
|
16.0
|
%
|
|||
Costs and expenses:
|
|
|
|
|
|
|
|
|||||||
Cost of sales
(1)
|
21,290
|
|
|
18,352
|
|
|
2,938
|
|
|
16.0
|
%
|
|||
Selling, general and administrative
|
26,694
|
|
|
25,120
|
|
|
1,574
|
|
|
6.3
|
%
|
|||
Depreciation and amortization
|
2,407
|
|
|
2,187
|
|
|
220
|
|
|
10.1
|
%
|
|||
Total costs and expenses
|
50,391
|
|
|
45,659
|
|
|
4,732
|
|
|
10.4
|
%
|
|||
Operating income
|
26,876
|
|
|
20,948
|
|
|
5,928
|
|
|
28.3
|
%
|
|||
Interest expense, net
|
3,908
|
|
|
2,858
|
|
|
1,050
|
|
|
36.7
|
%
|
|||
Other expense, net
|
—
|
|
|
254
|
|
|
(254
|
)
|
|
(100.0
|
)%
|
|||
Income before income tax expense
|
22,968
|
|
|
17,836
|
|
|
5,132
|
|
|
28.8
|
%
|
|||
Income tax expense
|
6,161
|
|
|
6,714
|
|
|
(553
|
)
|
|
(8.2
|
)%
|
|||
Net income
|
$
|
16,807
|
|
|
$
|
11,122
|
|
|
$
|
5,685
|
|
|
51.1
|
%
|
|
|
Thirty-Nine Weeks Ended
|
|||||||||||||
|
September 30,
2017 |
|
As a % of company-owned restaurant sales
|
|
September 24,
2016 |
|
As a % of company-owned restaurant sales
|
|||||||
Cost of sales:
|
|
|
|
|
|
|
|
|||||||
Food, beverage and packaging costs
|
$
|
11,002
|
|
|
40.7
|
%
|
|
$
|
9,357
|
|
|
37.2
|
%
|
|
Labor costs
|
6,535
|
|
|
24.1
|
%
|
|
5,541
|
|
|
22.0
|
%
|
|||
Other restaurant operating expenses
|
4,431
|
|
|
16.4
|
%
|
|
4,194
|
|
|
16.7
|
%
|
|||
Vendor rebates
|
(678
|
)
|
|
(2.5
|
)%
|
|
(740
|
)
|
|
(2.9
|
)%
|
|||
Total cost of sales
|
$
|
21,290
|
|
|
78.7
|
%
|
|
$
|
18,352
|
|
|
73.0
|
%
|
|
Thirty-Nine Weeks Ended
|
|
Increase / (Decrease)
|
|||||||||||
|
September 30,
2017 |
|
September 24,
2016 |
|
$
|
|
%
|
|||||||
Revenue:
|
|
|
|
|
|
|
|
|||||||
Franchise segment
|
$
|
50,204
|
|
|
$
|
41,463
|
|
|
$
|
8,741
|
|
|
21.1
|
%
|
Company segment
|
27,063
|
|
|
25,144
|
|
|
1,919
|
|
|
7.6
|
%
|
|||
Total segment revenue
|
$
|
77,267
|
|
|
$
|
66,607
|
|
|
$
|
10,660
|
|
|
16.0
|
%
|
|
|
|
|
|
|
|
|
|||||||
Segment Profit:
|
|
|
|
|
|
|
|
|||||||
Franchise segment
|
$
|
23,792
|
|
|
$
|
18,794
|
|
|
$
|
4,998
|
|
|
26.6
|
%
|
Company segment
|
3,084
|
|
|
4,211
|
|
|
(1,127
|
)
|
|
(26.8
|
)%
|
|||
Total segment profit
|
$
|
26,876
|
|
|
$
|
23,005
|
|
|
$
|
3,871
|
|
|
16.8
|
%
|
|
Thirty-Nine Weeks Ended
|
||||||
|
September 30,
2017 |
|
September 24,
2016 |
||||
Net cash provided by (used in):
|
|
|
|
||||
Operating activities
|
$
|
17,980
|
|
|
$
|
16,098
|
|
Investing activities
|
(5,783
|
)
|
|
(1,471
|
)
|
||
Financing activities
|
(11,358
|
)
|
|
(21,489
|
)
|
||
Net change in cash and cash equivalents
|
$
|
839
|
|
|
$
|
(6,862
|
)
|
•
|
overall macroeconomic conditions may impact our ability to successfully execute our growth strategy and franchise and open new restaurants that are profitable and to increase our revenue and operating profits;
|
•
|
the impact of the operating results of our and our franchisees’ existing restaurants on our financial performance;
|
•
|
the impact of new restaurant openings on our financial performance;
|
•
|
our ability to recruit and contract with qualified franchisees and to open new franchise restaurants;
|
•
|
our ability to develop and maintain the Wingstop brand, including through effective advertising and marketing and the support of our franchisees’ and the negative impact of actions of a franchisee, acting as an independent third party, could have on our financial performance or brand;
|
•
|
concerns regarding food safety and food-borne illness and other health concerns;
|
•
|
our and our franchisees’ reliance on vendors, suppliers and distributors or changes in food and supply costs, including any increase in the prices of the ingredients most critical to our menu, particularly bone-in chicken wings;
|
•
|
our and our franchisees’ ability to compete with many other restaurants and to increase domestic same store sales and average weekly sales;
|
•
|
our ability to successfully meet or exceed the expectations of securities analysts or investors concerning our annual or quarterly operating results, domestic same store sales or average weekly sales;
|
•
|
our expansion into new markets may present increased risks due to our unfamiliarity with those areas;
|
•
|
the reliability of our, our franchisees’ and our licensees’ information technology systems and network security, including costs resulting from breaches of security of confidential guest, franchisee or employee information;
|
•
|
legal complaints, litigation or regulatory compliance, including changes in laws impacting the franchise business model;
|
•
|
our and our franchisees’ ability to attract and retain qualified employees while also controlling labor costs;
|
•
|
potential fluctuations in our annual or quarterly operating results and the impact of significant adverse weather conditions and other disasters;
|
•
|
disruptions in our and our franchisees’ ability to utilize computer systems to process transactions and manage our business;
|
•
|
health concerns arising from outbreaks of viruses, including the impact of a pandemic spread of avian flu on our and our franchisees’ supply of chicken;
|
•
|
our and our franchisees’ ability to obtain and maintain required licenses and permits or to comply with alcoholic beverage or food control regulations;
|
•
|
our ability to maintain insurance that provides adequate levels of coverage against claims;
|
•
|
our and our franchisees’ ability to successfully operate in unfamiliar markets and markets where there may be limited or no market recognition of our brand, including the impact that our expansion into international markets has on our exposure to risk factors over which neither we nor our franchisees have control;
|
•
|
the potential impact opening new restaurants in existing markets could have on sales at existing restaurants;
|
•
|
the effectiveness of our advertising and marketing campaigns, which may not be successful;
|
•
|
food safety issues, which may adversely impact our or our franchisees’ business;
|
•
|
changes in consumer preferences, including changes caused by diet and health concerns or government regulation;
|
•
|
the continued service of our executive officers;
|
•
|
our ability to successfully open new franchised Wingstop restaurants for which we have signed commitments;
|
•
|
our stated sales to investment ratio and average unlevered cash-on-cash return may not be indicative of future results of any new franchised restaurant;
|
•
|
our ability to protect our intellectual property;
|
•
|
our ability to generate or raise capital on acceptable terms in the future, including our ability to incur additional debt and other restrictions under the terms of our existing senior secured credit facility;
|
•
|
the JOBS Act allowing us to postpone the date by which we must comply with certain laws and regulations intended to protect investors and to reduce the amount of information we provide in our reports filed with the SEC until the end of our fiscal year 2017, at which time we expect to no longer qualify as an emerging growth company;
|
•
|
the costs and time requirements as a result of operating as a public company, including our ability to maintain adequate internal control over financial reporting in order to comply with applicable reporting obligations;
|
•
|
fluctuations in exchange rates on our revenue;
|
•
|
future impairment charges; and
|
•
|
the impact of anti-takeover provisions in our charter documents and under Delaware law, which could make an acquisition of us more difficult, limit attempts by our stockholders to replace or remove our current management and limit the market price of our common stock.
|
Exhibit No.
|
Description
|
3.1
|
|
3.2
|
|
10.1*
|
|
10.2*
|
|
31.1*
|
|
31.2*
|
|
32.1**
|
|
32.2**
|
|
101 INS*
|
XBRL Instance Document
|
101 SCH*
|
XBRL Taxonomy Extension Schema Document
|
101 CAL*
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
101 DEF*
|
XBRL Taxonomy Extension Definition Linkbase Document
|
101 LAB*
|
XBRL Taxonomy Extension Label Linkbase Document
|
101 PRE*
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
|
|
|
|
Wingstop Inc.
|
|
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(Registrant)
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|
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Date:
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November 3, 2017
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By:
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/s/ Charles R. Morrison
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|
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Chairman and Chief Executive Officer
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(Principal Executive Officer)
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|
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Date:
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November 3, 2017
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By:
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/s/ Michael J. Skipworth
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|
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Chief Financial Officer
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|
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(Principal Financial and Accounting Officer)
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(c)
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Confidential Information
.
|
WINGSTOP RESTAURANTS INC.
|
|
EXECUTIVE
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|
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By:
/s/ Charles R. Morrison
|
|
/s/ Michael Skipworth
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Name:
Charles R. Morrison
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|
Michael Skipworth
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Title:
Chief Executive Officer
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Date:
August 25, 2017
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|
Date:
August 25, 2017
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WINGSTOP INC.
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By:
/s/ Darryl R. Marsch
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Darryl R. Marsch
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Sr. VP, General Counsel & Secretary
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1.
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I have reviewed this Quarterly Report on Form 10-Q of Wingstop Inc.;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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d.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date:
|
November 3, 2017
|
|
|
By:
|
/s/ Charles R. Morrison
|
|
Chairman and Chief Executive Officer
|
|
(Principal Executive Officer)
|
|
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of Wingstop Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date:
|
November 3, 2017
|
|
|
By:
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/s/ Michael J. Skipworth
|
|
Chief Financial Officer
|
|
(Principal Financial and Accounting Officer)
|
(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
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(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Date:
|
November 3, 2017
|
|
|
By:
|
/s/ Charles R. Morrison
|
|
Chairman and Chief Executive Officer
|
|
(Principal Executive Officer)
|
|
|
(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Date:
|
November 3, 2017
|
|
|
By:
|
/s/ Michael J. Skipworth
|
|
Chief Financial Officer
|
|
(Principal Financial and Accounting Officer)
|
|
|