General and Administrative Expenses ("G&A")
G&A, as a percentage of total revenue, decreased to 5.4% in 2019 compared to 5.5% in 2018. The decrease was
primarily due to the benefit of the 53rd week, lower claims administration costs related to a previously disclosed legal
settlement and an increase in average unit volume. These decreases were partially offset by increased costs from the
expansion of our regional operations support structure and increased marketing expenses due to decreased contributions
from company restaurants.
G&A, as a percentage of total revenue, decreased to 5.5% in 2018 compared to 5.6% in 2017. The decrease was
primarily due to a pre-tax charge of $14.9 million ($9.2 million after-tax), or $0.13 per diluted share, related to the
settlement of a legal matter in 2017 and the benefit of an increase in average unit volume. This decrease was offset by
higher incentive compensation costs, higher managing partner conference costs, and reclassifications of $7.4 million
made in conjunction with the implementation of the new revenue recognition accounting guidance as previously
described.
We are currently subject to various claims and contingencies that arise from time to time in the ordinary course of
business, including those related to litigation, business transactions, employee-related matters and taxes, among others.
See note 13 to the Consolidated Financial Statements for further discussion of these matters.
Interest Income (Expense), Net
Interest income was $1.5 million in 2019 compared to interest expense of $0.6 million in 2018. Net interest
expense decreased to $0.6 million in 2018 compared to $1.6 million in 2017. These changes were primarily driven by
earnings on our cash and cash equivalents as well as paying off our outstanding credit facility of $50.0 million in
April 2018.
Income Taxes
Our effective tax rate increased to 15.1% in 2019 compared to 12.9% in 2018 primarily due to lower excess tax
benefits related to our share-based compensation program partially offset by lower non-deductible officers’
compensation. In addition, the prior year tax rate benefitted from an adjustment related to tax reform that we recorded in
conjunction with the filing of our 2017 tax return. See note 9 to the Consolidated Financial Statements for a
reconciliation of the statutory federal income tax rate to our effective tax rate. For 2020, we expect the effective tax rate
to be 14.0% to 15.0%.
Our effective tax rate decreased to 12.9% in 2018 compared to 26.1% in 2017 primarily due to new tax legislation
that was enacted in late 2017. As a result of the new tax legislation, significant tax changes were enacted including the
reduction of the federal corporate tax rate from 35.0% to 21.0%. These changes were generally effective at the
beginning of our 2018 fiscal year.
Liquidity and Capital Resources
The following table presents a summary of our net cash provided by (used in) operating, investing and financing
activities (in thousands):
Fiscal Year
2019 2018 2017
Net cash provided by operating activities..... ....... $ 374,298 $ 352,868 $ 286,373
Net cash used in investing activities......... ....... (214,820) (158,145) (178,156)
Net cash used in financing activities......... ....... (261,724) (135,516) (70,243)
Net (decrease) increase in cash and cash equivalents... $ (102,246) $ 59,207 $ 37,974Net cash provided by operating activities was $374.3 million in 2019 compared to $352.9 million in 2018. The
increase was primarily due to an increase in net income and depreciation and amortization expense. The increase in net
income was primarily driven by increased restaurant margin dollars. This was partially offset by a decrease in working
capital along with a decrease in deferred income taxes. The decrease in working capital was primarily due to a decrease
in deferred revenue related to gift cards partially offset by a decrease in prepaid income taxes.