10-Q 1 txrh-20220927x10q.htm 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 27, 2022

OR

  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from           to

Commission File Number 000-50972

Texas Roadhouse, Inc.

(Exact name of registrant specified in its charter)

Delaware

20-1083890

(State or other jurisdiction of

(IRS Employer

incorporation or organization)

Identification Number)

6040 Dutchmans Lane, Suite 200

Louisville, Kentucky 40205

(Address of principal executive offices) (Zip Code)

(502) 426-9984

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.001 per share

TXRH

NASDAQ Global Select Market

Indicate by check mark whether registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes     No  .

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulations S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes     No  .

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer  

Accelerated Filer  

Non-accelerated Filer  

Smaller Reporting Company  

Emerging Growth Company  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes    No  .

The number of shares of common stock outstanding were 66,914,751 on October 26, 2022.

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION

Item 1 — Financial Statements (Unaudited) — Texas Roadhouse, Inc. and Subsidiaries

3

Condensed Consolidated Balance Sheets —September 27, 2022 and December 28, 2021

3

Condensed Consolidated Statements of Income and Comprehensive Income — For the 13 and 39 Weeks Ended September 27, 2022 and September 28, 2021

4

Condensed Consolidated Statements of Stockholders’ Equity — For the 13 and 39 Weeks Ended September 27, 2022 and September 28, 2021

5

Condensed Consolidated Statements of Cash Flows — For the 39 Weeks Ended September 27, 2022 and September 28, 2021

7

Notes to Condensed Consolidated Financial Statements

8

Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations

17

Item 3 — Quantitative and Qualitative Disclosures About Market Risk

32

Item 4 — Controls and Procedures

33

PART II. OTHER INFORMATION

Item 1 — Legal Proceedings

34

Item 1A — Risk Factors

34

Item 2 — Unregistered Sales of Equity Securities and Use of Proceeds

34

Item 3 — Defaults Upon Senior Securities

34

Item 4 — Mine Safety Disclosures

34

Item 5 — Other Information

34

Item 6 — Exhibits

35

Signatures

36

2

PART I — FINANCIAL INFORMATION

ITEM 1 — FINANCIAL STATEMENTS

Texas Roadhouse, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands, except share and per share data)

(unaudited)

    

September 27, 2022

    

December 28, 2021

 

Assets

Current assets:

Cash and cash equivalents

$

185,315

$

335,645

Receivables, net of allowance for doubtful accounts of $53 at September 27, 2022 and $17 at December 28, 2021

 

37,804

 

161,358

Inventories, net

 

32,905

 

31,595

Prepaid income taxes

 

1,121

 

10,701

Prepaid expenses and other current assets

 

20,233

 

24,226

Total current assets

 

277,378

 

563,525

Property and equipment, net of accumulated depreciation of $943,087 at September 27, 2022 and $869,375 at December 28, 2021

 

1,237,345

 

1,162,441

Operating lease right-of-use assets, net

626,551

578,413

Goodwill

 

148,732

 

127,001

Intangible assets, net of accumulated amortization of $17,208 at September 27, 2022 and $15,092 at December 28, 2021

 

6,304

 

1,520

Other assets

 

68,741

 

79,052

Total assets

$

2,365,051

$

2,511,952

Liabilities and Stockholders’ Equity

Current liabilities:

Current portion of operating lease liabilities

$

24,977

$

21,952

Accounts payable

 

98,678

 

95,234

Deferred revenue-gift cards

 

182,265

 

300,657

Accrued wages and payroll taxes

 

85,846

 

64,716

Income taxes payable

1,391

85

Accrued taxes and licenses

 

37,391

 

33,375

Other accrued liabilities

 

85,145

 

86,125

Total current liabilities

 

515,693

 

602,144

Operating lease liabilities, net of current portion

672,774

622,892

Long-term debt

 

75,000

 

100,000

Restricted stock and other deposits

 

8,060

 

8,027

Deferred tax liabilities, net

 

16,770

 

11,734

Other liabilities

 

84,121

 

93,671

Total liabilities

 

1,372,418

 

1,438,468

Texas Roadhouse, Inc. and subsidiaries stockholders’ equity:

Preferred stock ($0.001 par value, 1,000,000 shares authorized; no shares issued or outstanding)

 

 

Common stock ($0.001 par value, 100,000,000 shares authorized, 66,914,586 and 69,382,418 shares issued and outstanding at September 27, 2022 and December 28, 2021, respectively)

 

67

 

69

Additional paid-in-capital

 

7,136

 

114,504

Retained earnings

 

970,372

 

943,551

Total Texas Roadhouse, Inc. and subsidiaries stockholders’ equity

 

977,575

 

1,058,124

Noncontrolling interests

 

15,058

 

15,360

Total equity

 

992,633

 

1,073,484

Total liabilities and equity

$

2,365,051

$

2,511,952

See accompanying notes to condensed consolidated financial statements.

3

Texas Roadhouse, Inc. and Subsidiaries

Condensed Consolidated Statements of Income and Comprehensive Income

(in thousands, except per share data)

(unaudited)

13 Weeks Ended

39 Weeks Ended

    

September 27, 2022

    

September 28, 2021

    

September 27, 2022

    

September 28, 2021

 

Revenue:

Restaurant and other sales

$

986,999

$

862,757

$

2,986,028

$

2,550,124

Franchise royalties and fees

6,299

6,186

19,362

18,236

Total revenue

 

993,298

 

868,943

 

3,005,390

 

2,568,360

Costs and expenses:

Restaurant operating costs (excluding depreciation and amortization shown separately below):

Food and beverage

 

342,032

298,164

1,026,469

845,150

Labor

 

330,219

286,593

985,132

832,776

Rent

 

16,703

15,089

49,785

44,497

Other operating

 

146,036

127,769

442,714

386,754

Pre-opening

 

5,701

6,740

15,315

17,327

Depreciation and amortization

 

33,735

31,627

101,775

94,146

Impairment and closure, net

 

772

29

537

550

General and administrative

 

42,812

41,234

132,319

114,807

Total costs and expenses

 

918,010

 

807,245

 

2,754,046

 

2,336,007

Income from operations

 

75,288

 

61,698

 

251,344

 

232,353

Interest expense, net

 

85

604

877

3,039

Equity income from investments in unconsolidated affiliates

 

190

266

1,069

288

Income before taxes

$

75,393

$

61,360

$

251,536

$

229,602

Income tax expense

 

11,430

7,144

35,708

31,031

Net income including noncontrolling interests

63,963

54,216

$

215,828

$

198,571

Less: Net income attributable to noncontrolling interests

 

1,635

1,610

5,879

6,335

Net income attributable to Texas Roadhouse, Inc. and subsidiaries

$

62,328

$

52,606

$

209,949

$

192,236

Other comprehensive income, net of tax:

Foreign currency translation adjustment, net of tax of $-, $-, $- and ($3), respectively

10

Total comprehensive income

$

62,328

$

52,606

$

209,949

$

192,246

Net income per common share attributable to Texas Roadhouse, Inc. and subsidiaries:

Basic

$

0.93

$

0.75

$

3.09

$

2.76

Diluted

$

0.93

$

0.75

$

3.08

$

2.74

Weighted average shares outstanding:

Basic

 

66,886

69,808

67,875

69,745

Diluted

 

67,159

70,146

68,140

70,148

Cash dividends declared per share

$

0.46

$

0.40

$

1.38

$

0.80

See accompanying notes to condensed consolidated financial statements.

4

Texas Roadhouse, Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders' Equity

(in thousands, except share and per share data)

(unaudited)

For the 13 Weeks Ended September 27, 2022

    

    

    

    

    

Accumulated

    

Total Texas

    

    

 

Additional

Other

Roadhouse, Inc.

 

Par

Paid-in-

Retained

Comprehensive

and

Noncontrolling

 

Shares

Value

Capital

Earnings

Loss

Subsidiaries

Interests

Total

 

Balance, June 28, 2022

 

66,853,296

$

67

$

$

938,825

$

$

938,892

$

15,127

$

954,019

Net income

 

 

 

 

62,328

 

 

62,328

 

1,635

 

63,963

Distributions to noncontrolling interest holders

 

 

 

 

 

 

 

(1,704)

 

(1,704)

Dividends declared ($0.46 per share)

 

 

 

 

(30,781)

 

 

(30,781)

 

 

(30,781)

Shares issued under share-based compensation plans including tax effects

 

88,641

 

 

 

 

 

 

 

Indirect repurchase of shares for minimum tax withholdings

 

(27,351)

 

 

(2,444)

 

 

 

(2,444)

 

 

(2,444)

Share-based compensation

 

 

 

9,580

 

 

 

9,580

 

 

9,580

Balance, September 27, 2022

 

66,914,586

$

67

$

7,136

$

970,372

$

$

977,575

$

15,058

$

992,633

For the 13 Weeks Ended September 28, 2021

    

    

    

    

    

Accumulated

    

Total Texas

    

    

Additional

Other

Roadhouse, Inc.

Par

Paid-in-

Retained

Comprehensive

and

Noncontrolling

Shares

Value

Capital

Earnings

Loss

Subsidiaries

Interests

Total

Balance, June 29, 2021

 

69,830,389

$

70

$

153,248

$

893,613

$

(96)

$

1,046,835

$

15,848

$

1,062,683

Net income

 

 

 

 

52,606

 

 

52,606

 

1,610

 

54,216

Distributions to noncontrolling interest holders

 

 

 

 

 

 

 

(2,025)

 

(2,025)

Dividends declared ($0.40 per share)

 

 

 

 

(27,917)

 

 

(27,917)

 

 

(27,917)

Shares issued under share-based compensation plans including tax effects

 

94,971

 

 

 

 

 

 

 

Indirect repurchase of shares for minimum tax withholdings

 

(28,925)

 

 

(2,647)

 

 

 

(2,647)

 

 

(2,647)

Repurchase of shares of common stock

(161,034)

(14,683)

(14,683)

(14,683)

Share-based compensation

 

 

 

10,980

 

 

 

10,980

 

 

10,980

Balance, September 28, 2021

 

69,735,401

$

70

$

146,898

$

918,302

$

(96)

$

1,065,174

$

15,433

$

1,080,607

See accompanying notes to condensed consolidated financial statements

5

Texas Roadhouse, Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders' Equity

(in thousands, except share and per share data)

(unaudited)

For the 39 Weeks Ended September 27, 2022

    

    

    

    

    

Accumulated

    

Total Texas

    

    

 

Additional

Other

Roadhouse, Inc.

 

Par

Paid-in-

Retained

Comprehensive

and

Noncontrolling

 

Shares

Value

Capital

Earnings

Loss

Subsidiaries

Interests

Total

 

Balance, December 28, 2021

 

69,382,418

$

69

$

114,504

$

943,551

$

$

1,058,124

$

15,360

$

1,073,484

Net income

 

 

 

 

209,949

 

 

209,949

 

5,879

 

215,828

Noncontrolling interests contribution

(5,841)

(5,841)

Acquisition of noncontrolling interest

(1,395)

(1,395)

(340)

(1,735)

Dividends declared ($1.38 per share)

 

 

 

 

(93,328)

 

 

(93,328)

 

 

(93,328)

Shares issued under share-based compensation plans including tax effects

 

390,996

 

 

 

 

 

 

 

Indirect repurchase of shares for minimum tax withholdings

 

(124,823)

 

 

(11,108)

 

 

 

(11,108)

 

 

(11,108)

Repurchase of shares of common stock

(2,734,005)

(2)

(123,057)

(89,800)

(212,859)

(212,859)

Share-based compensation

 

 

 

28,192

 

 

 

28,192

 

 

28,192

Balance, September 27, 2022

 

66,914,586

$

67

$

7,136

$

970,372

$

$

977,575

$

15,058

$

992,633

For the 39 Weeks Ended September 28, 2021

    

    

    

    

    

Accumulated

    

Total Texas

    

    

Additional

Other

Roadhouse, Inc.

Par

Paid-in-

Retained

Comprehensive

and

Noncontrolling

Shares

Value

Capital

Earnings

Loss

Subsidiaries

Interests

Total

Balance, December 29, 2020

 

69,561,861

$

70

$

145,626

$

781,915

$

(106)

$

927,505

$

15,546

$

943,051

Net income

 

 

 

 

192,236

 

 

192,236

 

6,335

 

198,571

Other comprehensive income, net of tax

10

10

10

Distributions to noncontrolling interest holders

 

 

 

 

 

 

 

(6,448)

 

(6,448)

Dividends declared ($0.80 per share)

 

 

 

 

(55,849)

 

 

(55,849)

 

 

(55,849)

Shares issued under share-based compensation plans including tax effects

 

493,479

 

 

 

 

 

 

 

Indirect repurchase of shares for minimum tax withholdings

 

(158,905)

 

 

(14,842)

 

 

 

(14,842)

 

 

(14,842)

Repurchase of shares of common stock

(161,034)

(14,683)

(14,683)

(14,683)

Share-based compensation

 

 

 

30,797

 

 

 

30,797

 

 

30,797

Balance, September 28, 2021

 

69,735,401

$

70

$

146,898

$

918,302

$

(96)

$

1,065,174

$

15,433

$

1,080,607

See accompanying notes to condensed consolidated financial statements

6

Texas Roadhouse, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

39 Weeks Ended

    

September 27, 2022

    

September 28, 2021

Cash flows from operating activities:

Net income including noncontrolling interests

$

215,828

$

198,571

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

 

101,775

 

94,146

Deferred income taxes

 

5,246

 

(435)

Loss on disposition of assets

 

3,635

 

2,312

Impairment and closure costs

 

772

 

512

Equity income from investments in unconsolidated affiliates

 

(1,069)

 

(288)

Distributions of income received from investments in unconsolidated affiliates

 

817

 

729

Provision for doubtful accounts

 

36

 

3

Share-based compensation expense

 

28,192

 

30,797

Changes in operating working capital:

Receivables

 

123,551

 

46,395

Inventories

 

(990)

 

(5,420)

Prepaid expenses and other current assets

 

2,831

 

5,311

Other assets

 

10,313

 

(11,553)

Accounts payable

 

1,941

 

13,667

Deferred revenue—gift cards

 

(119,338)

 

(72,142)

Accrued wages and payroll taxes

 

21,130

 

(8,120)

Prepaid income taxes and income taxes payable

 

10,886

 

2,078

Accrued taxes and licenses

 

4,016

 

8,700

Other accrued liabilities

 

(8,916)

 

27,252

Operating lease right-of-use assets and lease liabilities

 

3,950

 

5,797

Other liabilities

 

(9,549)

 

10,397

Net cash provided by operating activities

 

395,057

 

348,709

Cash flows from investing activities:

Capital expenditures—property and equipment

 

(174,194)

(139,001)

Acquisition of franchise restaurants, net of cash acquired

(33,069)

Proceeds from sale of investment in unconsolidated affiliate

316

Proceeds from the sale of property and equipment

 

2,262

 

Proceeds from sale leaseback transactions

9,078

5,588

Net cash used in investing activities

 

(195,607)

 

(133,413)

Cash flows from financing activities:

Payments on revolving credit facility, net

(25,000)

(50,000)

Debt issuance costs

(708)

Distributions to noncontrolling interest holders

 

(5,841)

(6,448)

Acquisition of noncontrolling interest

(1,735)

Proceeds from restricted stock and other deposits, net

 

91

642

Indirect repurchase of shares for minimum tax withholdings

 

(11,108)

(14,842)

Repurchase of shares of common stock

 

(212,859)

(14,683)

Dividends paid to shareholders

 

(93,328)

(55,849)

Net cash used in financing activities

 

(349,780)

 

(141,888)

Net (decrease) increase in cash and cash equivalents

 

(150,330)

 

73,408

Cash and cash equivalents—beginning of period

 

335,645

363,155

Cash and cash equivalents—end of period

$

185,315

$

436,563

Supplemental disclosures of cash flow information:

Interest paid, net of amounts capitalized

$

1,091

$

2,632

Income taxes paid

$

19,591

$

29,388

Capital expenditures included in current liabilities

$

32,468

$

28,363

See accompanying notes to condensed consolidated financial statements.

7

Texas Roadhouse, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(tabular amounts in thousands, except share and per share data)

(unaudited)

(1)  Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include the accounts of Texas Roadhouse, Inc. ("TRI"), our wholly-owned subsidiaries and subsidiaries in which we have a controlling interest (collectively the "Company," "we," "our" and/or "us") as of September 27, 2022 and December 28, 2021 and for the 13 and 39 weeks ended September 27, 2022 and September 28, 2021.

As of September 27, 2022, we owned and operated 587 restaurants and franchised an additional 98 restaurants in 49 states and ten foreign countries. Of the 587 company restaurants that were operating at September 27, 2022, there were 567 wholly-owned restaurants and 20 majority-owned restaurants. Of the 587 restaurants that we owned as of September 27, 2022, we operated 545 as Texas Roadhouse restaurants, 38 as Bubba’s 33 restaurants and four as Jaggers restaurants. Of the 98 Texas Roadhouse franchise restaurants, there were 62 domestic restaurants and 36 international restaurants.

As of September 28, 2021, we owned and operated 555 restaurants and franchised an additional 99 restaurants in 49 states and ten foreign countries. Of the 555 company restaurants that were operating at September 28, 2021, there were 535 wholly-owned restaurants and 20 majority-owned restaurants. Of the 555 restaurants that we owned as of September 28, 2021, we operated 517 as Texas Roadhouse restaurants, 35 as Bubba’s 33 restaurants and three as Jaggers restaurants. Of the 99 Texas Roadhouse franchise restaurants, there were 69 domestic restaurants and 30 international restaurants.

The Company has been subject to risks and uncertainties as a result of the global COVID-19 pandemic. These include federal, state and local restrictions on restaurants, some of which limited capacity or seating in the dining rooms while others allowed to-go or curbside service only. As of September 27, 2022 and September 28, 2021, all of our company and franchise locations were operating without restriction.

As of September 27, 2022 and September 28, 2021, we owned a 5.0% to 10.0% equity interest in 23 and 24 domestic franchise restaurants, respectively. Additionally, as of September 28, 2021, we owned a 40% equity interest in two non-Texas Roadhouse restaurants as part of a joint venture agreement with a casual dining restaurant operator in China. These unconsolidated restaurants are accounted for using the equity method. Our investments in these unconsolidated affiliates are included in other assets in our unaudited condensed consolidated balance sheets, and we record our percentage share of net income earned by these unconsolidated affiliates in our unaudited condensed consolidated statements of income and comprehensive income under equity income from investments in unconsolidated affiliates. The investment balance related to our joint venture agreement in China was fully impaired in late 2021 as the related restaurants closed. All significant intercompany balances and transactions for these unconsolidated restaurants as well as the entities whose accounts have been consolidated have been eliminated.

We have made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reporting of revenue and expenses during the periods to prepare these unaudited condensed consolidated financial statements in conformity with U.S. generally accepted accounting principles ("GAAP"). Significant items subject to such estimates and assumptions include the carrying amount of property and equipment, goodwill, obligations related to insurance reserves, leases and leasehold improvements, legal reserves, gift card breakage and third party fees and income taxes. Actual results could differ from those estimates.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, necessary to present fairly our consolidated financial statements for the periods presented. The unaudited condensed consolidated financial statements have been prepared in accordance with GAAP, except that certain information and footnotes have been condensed or omitted pursuant to rules and regulations of the Securities and Exchange Commission. Operating results for the 13 and 39 weeks ended

8

September 27, 2022 are not necessarily indicative of the results that may be expected for the year ending December 27, 2022. The unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 28, 2021.

Our significant interim accounting policies include the recognition of income taxes using an estimated annual effective tax rate.

(2) Recent Accounting Pronouncements

Reference Rate Reform

(Accounting Standards Update 2020-04, "ASU 2020-04")

In March 2020, the Financial Accounting Standards Board issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides temporary optional expedients and exceptions to the current guidance on contract modifications and hedge accounting. These changes are intended to simplify the market transition from the London Interbank Offered Rate ("LIBOR") and other interbank offered rates to alternative reference rates. This guidance is effective upon issuance to modifications made as early as the beginning of the interim period through December 31, 2022. We do not anticipate that the impact of adopting this standard will be material to our condensed consolidated financial statements.

(3)   Long-term Debt

On May 4, 2021, we entered into an agreement to amend our revolving credit facility with a syndicate of commercial lenders led by JPMorgan Chase Bank, N.A. and PNC Bank, N.A. The amended revolving credit facility remains an unsecured, revolving credit agreement and has a borrowing capacity of up to $300.0 million with the option to increase by an additional $200.0 million subject to certain limitations, including approval by the syndicate of lenders. The amendment also extended the maturity date to May 1, 2026.

The terms of the amendment require us to pay interest on outstanding borrowings at LIBOR plus a margin of 0.875% to 1.875% and pay a commitment fee of 0.125% to 0.30% per year on any unused portion of the revolving credit facility, in each case depending on our leverage ratio. The amendment also provides an Alternate Base Rate that may be substituted for LIBOR.

As of September 27, 2022, we had $75.0 million outstanding on the amended revolving credit facility and $213.3 million of availability, net of $11.7 million of outstanding letters of credit. As of December 28, 2021, we had $100.0 million outstanding on the amended revolving credit facility and $189.1 million of availability, net of $10.9 million of outstanding letters of credit. These outstanding amounts are included as long-term debt on our unaudited condensed consolidated balance sheets.

The weighted-average interest rate for the $75.0 million outstanding as of September 27, 2022 was 3.69%. ​The weighted-average interest rate for the $190.0 million outstanding as of September 28, 2021 was 0.96%.

The lenders’ obligation to extend credit pursuant to the amended revolving credit facility depends on us maintaining certain financial covenants. We were in compliance with all financial covenants as of September 27, 2022.

9

(4) Revenue

The following table disaggregates our revenue by major source (in thousands):

13 weeks Ended

39 weeks Ended

September 27, 2022

September 28, 2021

September 27, 2022

September 28, 2021