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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

GENERAL

As of March 1, 2021, we owned and operated 210 restaurants located in 29 states as described in Item 2 - Properties - “Restaurant Locations” in this Form 10-K. Our proprietary craft beer is produced at several of our locations, our Temple, Texas brewpub locations and by independent third party brewers using our proprietary recipes. Our menu features BJ’s award‐winning, signature deep-dish pizza, our proprietary craft and other beers, as well as a wide selection of appetizers, entrées, pastas, sandwiches, specialty salads and desserts, including our Pizookie® dessert.

We intend to continue opening new BJ’s restaurants in high profile locations in both existing and new markets. Under normal circumstances and outside of the COVID-19 pandemic, most of our established restaurants operate close to full capacity during the peak demand periods, and given our relatively high average sales per productive square foot, over the long-term we do not expect to achieve sustained increases in comparable restaurant sales in excess of our increase in average check for our mature restaurants, assuming we are able to retain our customer traffic levels in those restaurants. However, as a result of the decreased sales in fiscal 2020 due to the COVID-19 pandemic, in the short-term, we do anticipate significant increases in comparable restaurant sales once our restaurants resume operations without restrictions. Therefore, we expect that the majority of any year-over-year revenue growth for fiscal 2021 will be derived from increases in comparable restaurant sales growth and that long-term growth will be derived from new restaurant openings and increases in our average check.

Newly opened restaurants typically experience inefficiencies in the form of higher cost of sales, labor and direct operating and occupancy costs for several months after their opening relative to our more mature, established restaurants. Accordingly, the number and timing of new restaurant openings have had, and are expected to continue to have, an impact on restaurant opening expenses, cost of sales, labor and occupancy and operating expenses. Additionally, restaurant openings in new markets may experience even greater inefficiencies for several months, if not longer, due to lower initial sales volumes, which results from initially low consumer awareness levels, and a lack of supply chain and other operating cost leverage until additional restaurants can be opened in those markets.

Our revenues are comprised of food and beverage sales at our restaurants. Revenues from restaurant sales are recognized when payment is tendered at the point of sale. Amounts paid with a credit card are recorded in accounts and other receivables until payment is collected. Gift card sales are recorded as a liability and recognized as revenues upon redemption in our restaurants. Estimated gift card breakage is recorded as revenue and recognized in proportion to our historical redemption pattern. The estimated gift card breakage is based on when the likelihood of redemption becomes remote, which has typically been 24 months after the original gift card issuance date. Our customer loyalty program enables participants to earn points for qualifying purchases that can be redeemed for food and beverages in the future. We allocate the transaction price between the goods delivered and the future goods that will be delivered, on a relative standalone selling price basis, and defer the revenues allocated to the points until such points are redeemed.

All of our restaurants are Company-owned. In calculating comparable restaurant sales, we include a restaurant in the comparable base once it has been open for 18 months. Customer traffic for our restaurants is estimated based on customer checks.

Cost of sales is comprised of food and beverage costs, including the cost to produce and distribute our proprietary craft beer, soda and ciders. The components of cost of sales are variable and typically fluctuate directly with sales volumes, but may be impacted by changes in commodity prices, a shift in sales mix to higher cost proteins or other higher cost items, or varying levels of promotional activities.

Labor and benefit costs include direct hourly and management wages, bonuses, payroll taxes, fringe benefits and stock-based compensation and workers’ compensation expense that is directly related to restaurant level employees.

Occupancy and operating expenses include restaurant supplies, credit card fees, third party delivery company commissions, marketing costs, fixed rent, percentage rent, common area maintenance charges, utilities, real estate taxes, repairs and maintenance and other related restaurant costs.

General and administrative costs include all corporate administrative functions that support existing operations and provide infrastructure to facilitate our future growth. Components of this category include corporate management, field supervision and corporate hourly staff salaries and related employee benefits (including stock-based compensation expense and cash-based incentive compensation), travel and relocation costs, information systems, the cost to recruit and train new restaurant management employees, corporate rent, certain brand marketing-related expenses and legal, professional and consulting fees.

Depreciation and amortization are composed primarily of depreciation of capital expenditures for restaurant and brewing equipment and leasehold improvements.

Restaurant opening expenses, which are expensed as incurred, consist of the costs of hiring and training the initial hourly work force for each new restaurant, travel, the cost of food and supplies used in training, grand opening promotional costs, the cost of the initial stock of operating supplies and other direct costs related to the opening of a restaurant, including rent during the construction and in-restaurant training period.

RESULTS OF OPERATIONS

The following table sets forth, for the years indicated, our Consolidated Statements of Operations expressed as percentages of total revenues. All fiscal years presented consist of 52 weeks with the exception of fiscal year 2016 which consists of 53 weeks. Percentages below may not reconcile due to rounding.

Fiscal Year

Restaurant operating costs (excluding depreciation and amortization):

Loss on disposal and impairment of assets 2.2 0.3 0.4 0.5 0.3

Gain on lease transactions, net (0.4 ) (0.4 ) — — —

Natural disaster and related — — — 0.1 —

Severance and legal settlements — — — — —

Other (expense) income:

Interest expense, net (0.9 ) (0.4 ) (0.4 ) (0.4 ) (0.2 )

Gain from legal settlements 0.3 — — — —

Total other (expense) income (0.5 ) (0.2 ) (0.5 ) (0.2 ) (0.1 )

(Loss) income before income taxes (11.6 ) 4.0 4.7 3.4 6.2

Income tax (benefit) expense (4.1 ) 0.1 0.1 (0.9 ) 1.6

52 WEEKS ENDED DECEMBER 29, 2020 (FISCAL 2020) COMPARED TO THE 52 WEEKS ENDED DECEMBER 31, 2019 (FISCAL 2019)

Revenues. Total revenues decreased by $382.9 million, or 33.0%, to $778.5 million during fiscal 2020, from $1.2 billion during fiscal 2019. The decrease in revenues primarily consisted of a 34.0%, or $384.4 million, decrease in comparable restaurant sales, coupled with a $6.2 million decrease related to our temporarily closed restaurants and the permanent closure of our smaller format restaurant in Balboa, California in November 2019, partially offset by a $7.6 million increase in sales from new restaurants not yet in our comparable restaurant sales base. The decrease in comparable restaurant sales and the temporary closures of four of our restaurants were due to the business disruptions resulting from the efforts to contain the COVID-19 pandemic, including government mandated closing or limiting of dine-in restaurant operations. All of our dine-in restaurant operations were closed from March to May. As dining rooms re-opened throughout fiscal 2020, they re-opened with reduced capacity and curfews resulting in lower sales. Additionally, in November 2020, rising COVID-19 cases caused many states to close and/or significantly reduce capacity for dine-in restaurant operations. In December 2020, California, where we operate 62 of our 210 restaurants, closed all dining rooms and outdoor patio seating limiting our sales in the state to only delivery and take-out.

Cost of Sales. Cost of sales decreased by $99.4 million, or 33.7%, to $195.6 million during fiscal 2020, from $295.0 million during fiscal 2019. This decrease was due to the reduction in sales as a result of the COVID-19 pandemic, partially offset by

costs related to the two new restaurants opened during fiscal 2020. As a percentage of revenues, cost of sales decreased to 25.1% for fiscal 2020 from 25.4% for the prior fiscal year. This percentage decrease is primarily due to favorable menu mix related to our limited menu as a result of the COVID-19 pandemic, which focused on our deep dish pizza and our family feast offerings, coupled with increased menu pricing and less promotional activity.

Labor and Benefits. Labor and benefit costs for our restaurants decreased by $118.7 million, or 28.0%, to $305.6 million during fiscal 2020, from $424.4 million during fiscal 2019. This decrease was due to the reduction in sales as a result of the COVID-19 pandemic, coupled with the reduction in labor hours and benefits resulting from our dining room closures, partially offset by expenses related to the two new restaurants opened during fiscal 2020, and our decision to pay accrued sick, vacation and emergency paid time off to the approximately 16,000 hourly restaurant employees who were temporarily laid off in late March 2020. As a percentage of revenues, labor and benefit costs increased to 39.3% for fiscal 2020 from 36.5% for the prior fiscal year. This percentage increase is primarily due to the deleveraging of certain fixed labor costs, including manager salaries and benefits, resulting from a lower revenue base, partially offset by less dining room and kitchen hourly labor as the majority of our sales moved to the off-premise channel, coupled with efficiencies from our limited menu offerings. Included in labor and benefits for fiscal 2020 and 2019 was approximately $2.8 million and $2.4 million, respectively, or 0.4% and 0.2%, of revenues, respectively, of stock-based compensation expense related to equity awards granted in accordance with our Gold Standard Stock Ownership Program for certain restaurant management employees.

Occupancy and Operating. Occupancy and operating expenses decreased by $35.5 million, or 13.8%, to $220.9 million during fiscal 2020, from $256.4 million during fiscal 2019. This decrease was primarily due to cost savings measures related to the COVID-19 pandemic, coupled with lower percentage rent and merchant credit card fees due to lower revenue, partially offset by higher commissions to third party delivery companies as a result of increased off-premise sales, costs for temporary patios, personal protective equipment and additional cleaning supplies, and expenses related to the two new restaurants opened during fiscal 2020. As a percentage of revenues, occupancy and operating expenses increased to 28.4% for fiscal 2020 from 22.1% for the prior fiscal year. This percentage increase was primarily due to the deleveraging of certain fixed operating and occupancy costs such as rent, insurance and property taxes over a lower revenue base as a result of the COVID-19 pandemic.

General and Administrative. General and administrative expenses decreased by $7.9 million, or 12.6%, to $54.7 million during fiscal 2020, from $62.5 million during fiscal 2019. This decrease was primarily due to less short-term incentive compensation and deferred compensation, meeting and related costs due to the closure of our Restaurant Support Center, travel, and additional cost savings measures related to the COVID-19 pandemic. The deferred compensation expense decrease is offset by lower other income included in “Other income (expense), net” on our Consolidated Statements of Operations related to a decrease in the cash surrender value of our life insurance policies under our deferred compensation plan. Included in general and administrative costs for fiscal 2020 and 2019 was approximately $7.0 million and $6.5 million, respectively, or 0.9% and 0.6% of revenues, respectively, of stock-based compensation expense. As a percentage of revenues, general and administrative expenses increased to 7.0% for fiscal 2020, from 5.4% for the prior fiscal year. This percentage increase was primarily due to deleveraging from a lower revenue base as a result of the COVID-19 pandemic.

Depreciation and Amortization. Depreciation and amortization increased by $1.1 million, or 1.6%, to $73.1 million during fiscal 2020, compared to $72.0 million during fiscal 2019. This increase was primarily due to depreciation expense related to the two new restaurants opened in fiscal 2020, partially offset by less depreciation due to the impairment and reduction of carrying value for five restaurants. As a percentage of revenues, depreciation and amortization increased to 9.4% for fiscal 2020 from 6.2% for the prior fiscal year. This increase was primarily due to a lower revenue base as a result of the COVID-19 pandemic.

Restaurant Opening. Restaurant opening expense decreased by $1.7 million, or 58.5%, to $1.2 million during fiscal 2020, compared to $2.9 million during fiscal 2019. This decrease is primarily due to the delay or cancelation of most of our restaurant openings for fiscal 2020. We opened two new restaurants during fiscal 2020, compared to seven new restaurants during fiscal 2019.

Loss on Disposal and Impairment of Assets. Loss on disposal and impairment of assets was $17.1 million during fiscal 2020, and $3.9 million during fiscal 2019.For fiscal 2020, these costs primarily related to the impairment and reduction in the carrying value of the long-lived and operating lease assets related to five of our restaurants, coupled with a charge to reserve for beer spoilage related to our fresh beer inventory due to the sudden decrease in draft beer sales as a result of the COVID-19 pandemic. Due to the uncertainty of when our restaurant dining rooms will re-open and at what sales and cash flow levels, we may incur additional impairment charges for our restaurants and our goodwill. For fiscal 2019, these costs were primarily related to the disposals of assets in conjunction with initiatives to keep our restaurants up to date.

Gain on Lease Transactions, Net. Gain on lease transactions, net, was $3.3 million during fiscal 2020, and $4.7 million during fiscal 2019. The gain in both fiscal 2020 and 2019 related to the sale of the land underlying two of our restaurants in each respective year. Prior to the adoption of Accounting Standards Update 2016-02, Leases Topic 842 on January 2, 2019, gain on lease transactions were amortized over the term of the lease.

Interest Expense, Net. Interest expense, net, increased by $2.5 million to $7.1 million during fiscal 2020, compared to $4.6 million during fiscal 2019. This increase was primarily due to a higher average debt balance during fiscal 2020, compared to fiscal 2019, coupled with a slightly higher interest rate.

Gain from Legal Settlements. Gain from legal settlements of $2.3 million during fiscal 2020 related to settlements pertaining to credit card interchange fees and handheld tablet maintenance.

Other Income, Net. Other income, net decreased by $0.5 million to $1.3 million during fiscal 2020, compared to $1.8 million during fiscal 2019. This decrease was primarily due to the decrease in the cash surrender value of certain life insurance policies under our deferred compensation plan. This decrease offsets the related deferred compensation expense impact included in “General and administrative” expenses on our Consolidated Statements of Operations.

Income Tax (Benefit) Expense. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was enacted. Intended to provide economic relief to those impacted by the COVID-19 pandemic, the CARES Act includes provisions, among others, allowing for the carryback of net operating losses generated in 2018, 2019 and 2020, refunds of alternative minimum tax credits, temporary modifications to the limitations placed on the tax deductibility of net interest expense, and technical amendments regarding the expensing of qualified improvement property (“QIP”). As a result of the CARES Act, the Company intends to carryback losses generated in 2020 and reduce taxes payable for accelerated depreciation on qualified improvements property in 2018 and 2019.

Our effective income tax rate for fiscal 2020, reflected a 35.6% tax benefit, compared to a 2.3% tax expense for fiscal 2019. The recorded tax benefit for fiscal 2020 was greater than the statutory income tax rate primarily due to FICA Tip Credits and the incremental benefit arising from the ability to carryback the 2020 loss to prior years when the tax rate was at 35%. The prior year effective tax rate was below the statutory rate primarily due to tax credits and excess tax deductions realized for share based compensation.

52 WEEKS ENDED DECEMBER 31, 2019 (FISCAL 2019) COMPARED TO THE 52 WEEKS ENDED JANUARY 1, 2019 (FISCAL 2018)

For discussion related to the results of operations and changes in financial condition for fiscal 2019 compared to fiscal 2018 refer to Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in our fiscal 2019 Form 10-K, which was filed with the United States Securities and Exchange Commission on February 25, 2020.

LIQUIDITY AND CAPITAL RESOURCES

The following table provides, for the periods indicated, a summary of our key liquidity measurements (dollar amounts in thousands):

As a result of uncertainties in the near-term outlook for our business caused by the COVID-19 pandemic, we reevaluated all aspects of our spending and continue to focus on cash flow generation. Currently, we have no intention to repurchase shares or pay dividends in the foreseeable future, or until it is determined that it is in the best interest of the Company and its shareholders and that it is permitted under our Credit Facility. We will review and, when appropriate, adjust our overall approach to capital allocation as we know more about the ultimate duration of the COVID-19 pandemic and how the post-pandemic recovery will unfold and affect revenues and costs at our restaurants.

Our $70 million private placement of common stock completed in May 2020, our completed $11.8 million sale-leaseback and lease restructurings and our $30 million sale (before commission and other fees) of common stock through our “at-the-market”(“ATM”) offering programcompleted in January 2021, have strengthened our financial position. Based on the current level of operations, the reduction of new restaurant openings, and other capital expenditure initiatives, we believe that our current cash and cash equivalents will be adequate to meet our capital expenditure and working capital needs for at least the next twelve months. As of December 29, 2020, we have approximately $51.7 million of cash on our balance sheet, with an additional $97.1 million of borrowings available under our Credit Facility, which was subsequently reduced by $20.0 million on January 15, 2021, when we amended our Credit Facility, and matures on November 18, 2022, and in January 2021 we raised an additional $30 million (before commission and other fees) from the sale of common stock through an “at-the-market”(“ATM”) offering program. See Note 8 and Note 15 in the accompanying Consolidated Financial Statements for further information on our Credit Facility. We are taking what we believe to be necessary and appropriate measures to control costs and maximize liquidity. Our future operating performance will be subject to future economic conditions and to financial, business and other factors, many of which are beyond our control.

Similar to many restaurant chains, we typically utilize operating lease arrangements (principally ground leases) for the majority of our restaurant locations. We believe our operating lease arrangements provide appropriate leverage for our capital structure in a financially efficient manner. However, we are not limited to the use of lease arrangements as our only method of opening new restaurants and from time to time have purchased the underlying land for new restaurants. We typically lease our restaurant locations for periods of 10 to 20 years under operating lease arrangements. Our rent structures vary from lease to lease, but generally provide for the payment of both minimum and contingent (percentage) rent based on sales, as well as other expenses related to the leases (for example, our pro-rata share of common area maintenance, property tax and insurance expenses). Many of our lease arrangements include the opportunity to secure tenant improvement allowances to partially offset the cost of developing and opening the related restaurants. Generally, landlords recover the cost of such allowances from increased minimum rents. However, there can be no assurance that such allowances will be available to us on each project. From time to time, we may also decide to purchase the underlying land for a new restaurant if that is the only way to secure a highly desirable site. Currently, we own the underlying land for our Texas brewpub locations. We also own two parcels of land adjacent to two of our restaurants. It is not our current strategy to own a large number of land parcels that underlie our restaurants. Therefore, in many cases we have subsequently entered into sale-leaseback arrangements for land parcels that we previously purchased. We disburse cash for certain site-related work, buildings, leasehold improvements, furnishings, fixtures and equipment to build our leased and owned premises. We own substantially all of the equipment, furniture and trade fixtures in our restaurants and currently plan to do so in the future.

CASH FLOWS

The following tables set forth, for the years indicated, our cash flows from operating, investing, and financing activities (dollar amounts in thousands):

Fiscal Year

Net cash provided by (used in) financing activities 24,445 (44,711 ) (72,565 )

Net increase (decrease) in cash and cash equivalents $ 29,270 $ (6,830 ) $ 4,889

Operating Cash Flows

Net cash provided by operating activities was $40.5 million during fiscal 2020, representing a $75.5 million decrease from the $116.0 million provided during fiscal 2019. The decrease over the prior year is primarily due to our net loss as compared to net income, coupled with the timing of accounts and other receivables collections, partially offset by the timing of payments related to accounts payable, accrued expenses and operating lease obligations due to rent deferrals.

Investing Cash Flows

Net cash used in investing activities was $35.7 million during fiscal 2020, representing a $42.4 million decrease from the $78.1 million used in fiscal 2019. The decrease over prior year is primarily due to the delay or cancelation of new restaurant openings, coupled with the suspension of certain discretionary capital expenditures due to the COVID-19 pandemic.

The following table provides, for the years indicated, the components of capital expenditures (dollar amounts in thousands):

Fiscal Year

Restaurant maintenance and key productivity initiatives 23,219 26,995 32,642

We opened two new restaurants during fiscal 2020. While we reduced capital expenditures for existing restaurants and we delayed or canceled the remainder of our new restaurant openings for fiscal 2020, we had incurred construction costs prior to the COVID-19 pandemic for additional restaurant locations. During fiscal 2021, we expect to open two new restaurants, for which we have entered into signed leases. As the country recovers from the COVID-19 pandemic, we will continue to evaluate our restaurant opening plans.

Financing Cash Flows

Net cash provided by financing activities was $24.4 million during fiscal 2020, representing a $69.2 million increase from the $44.7 million used in fiscal 2019. This increase is primarily due to net proceeds from the sale of our common stock through a private placement in May 2020 and lower repurchases of common stock. See Note 9 in the accompanying Consolidated Financial Statements for further information regarding our private placement.

See Note 8 and Note 15 in the accompanying Consolidated Financial Statements for further information on our Credit Facility. Prior to amending and restating our Credit Facility and subsequently modifying it (once in June 2020 and once in January 2021), in an abundance of caution and as a result of the current circumstances with the COVID-19 pandemic, we drew down all remaining amounts under our Line of Credit in late March 2020 before repaying back a portion of it. We have also been taking all necessary and appropriate steps to maximize our liquidity as we manage our business through the current environment. In addition to drawing down on our line of credit, we sold $70 million of our common stock on May 5, 2020, suspended certain discretionary capital spending, including delaying or cancelling the rest of our new restaurant openings for fiscal 2020, and have suspended future quarterly dividends and the repurchase of shares, as well as 401(k) plan employer matching contributions. Additionally, in January 2021, we completed the sale of an aggregate of 703,399 shares of common stock for proceeds of $30 million (before commission and other fees) through an “at-the-market” (“ATM”) offering program. See Note 15 in the accompanying Consolidated Financial Statements for further information on our ATM offering.While we believe we have sufficient liquidity with our current capital position for the next twelve months, we will continue to monitor and evaluate all financing alternatives as these unprecedented events evolve.

OFF-BALANCE SHEET ARRANGEMENTS

We do not participate in transactions that generate relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or variable interest entities (“VIEs”), which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow limited purposes. As of December 29, 2020, we are not involved in any off-balance sheet arrangements.

IMPACT OF INFLATION

Inflation on food, labor, energy and occupancy costs can significantly affect the profitability of our restaurant operations. Our profitability is dependent, among other things, on our ability to anticipate and react to changes in the cost of key operating resources, including food and other raw materials, labor, energy and other supplies and services. Substantial increases in costs and expenses could impact our operating results to the extent that such increases cannot be passed along to our restaurant customers. While we have taken steps to enter into agreements for some of the commodities used in our restaurant operations, there can be no assurance that future supplies and costs for such commodities will not fluctuate due to weather or other market conditions outside of our control. We are currently unable to contract for certain commodities, such as fluid dairy, fresh meat or seafood, and most fresh produce items for long periods of time. Consequently, such commodities can be subject to unforeseen supply and cost fluctuations.

A general shortage in the availability of qualified restaurant managers and hourly workers in certain geographic areas in which we operate has caused increases in the costs of recruiting and compensating such employees. Many of our restaurant employees are paid hourly rates subject to the federal, state or local minimum wage requirements. Numerous state and local governments have their own minimum wage and other regulatory requirements for employees that are generally greater than the federal minimum wage and are subject to annual increases based on changes in their local consumer price indices. Additionally, certain operating and other costs, including health benefits in compliance with the Patient Protection and

Affordable Care Act, taxes, insurance, COVID-19 pandemic related benefits, and other outside services continue to increase with the general level of inflation and may also be subject to other cost and supply fluctuations outside of our control.

While we have been able to partially offset inflation and other changes in the costs of key operating resources by gradually increasing prices of our menu items, coupled with more efficient purchasing practices, productivity improvements and greater economies of scale, there can be no assurance that we will be able to continue to do so in the future. From time to time, competitive conditions will limit our menu pricing flexibility. In addition, macroeconomic conditions that impact consumer discretionary spending for food away from home could make additional menu price increases imprudent. There can be no assurance that all of our future cost increases can be offset by higher menu prices or that higher menu prices will be accepted by our restaurant customers without any resulting changes in their visit frequencies or purchasing patterns. Many of the leases for our restaurants provide for contingent rent obligations based on a percentage of sales. As a result, rent expense will absorb a proportionate share of any menu price increases in our restaurants. There can be no assurance that we will continue to generate increases in comparable restaurant sales in amounts sufficient to offset inflationary or other cost pressures.

SEASONALITY AND ADVERSE WEATHER

Our business is impacted by weather and other seasonal factors that typically impact other restaurant operations. Holidays (and shifts in the holiday calendar) and severe weather including hurricanes, tornados, thunderstorms, snow and ice storms, prolonged extreme temperatures and similar conditions may impact restaurant sales volumes in some of the markets where we operate. Many of our restaurants are located in or near shopping centers and malls that typically experience seasonal fluctuations in sales. Quarterly results have been and will continue to be significantly impacted by the timing of new restaurant openings and their associated restaurant opening expenses. As a result of these and other factors, our financial results for any given quarter may not be indicative of the results that may be achieved for a full fiscal year.

CRITICAL ACCOUNTING POLICIES

Critical accounting policies require the greatest amount of subjective or complex judgments by management and are important to portraying our financial condition and results of operations. Judgments or uncertainties regarding the application of these policies may result in materially different amounts being reported under different conditions or using different assumptions. We consider the following policies to be the most critical in understanding the judgments that are involved in preparing our consolidated financial statements.

Leases

We determine if a contract contains a lease at inception. Our material operating leases consist of restaurant locations and office space. U.S. GAAP requires that our leases be evaluated and classified as operating or finance leases for financial reporting purposes. The classification evaluation begins at the commencement date, and the lease term used in the evaluation includes the non-cancellable period for which we have the right to use the underlying asset, together with renewal option periods when the exercise of the renewal option is reasonably certain and failure to exercise such option would result in an economic penalty. All of our restaurant leases and office space are classified as operating leases. We have elected to account for lease and non-lease components as a single lease component for office and beverage gas equipment. We do not have any finance leases.

We have elected the short-term lease recognition exemption for all classes of underlying assets. Leases with an initial term of 12 months or less that do not include an option to purchase the underlying asset that we are reasonably certain to exercise are not recorded on the balance sheet. Expense for short-term leases is recognized on a straight-line basis over the lease term.

We disburse cash for leasehold improvements, furniture and fixtures and equipment to build out and equip our leased premises. Tenant improvement allowance incentives may be available to partially offset the cost of developing and opening the related restaurants, pursuant to agreed-upon terms in our leases. Tenant improvement allowances can take the form of cash payments upon the opening of the related restaurants, full or partial credits against minimum or percentage rents otherwise payable by us, or a combination thereof. All tenant improvement allowances received by us are recorded as a contra operating lease asset and amortized over the term of the lease.

The lease term used for straight-line rent expense is calculated from the commencement date (the date we take possession of the premises) through the lease termination date (including any options where exercise is reasonably certain and failure to exercise such option would result in an economic penalty). We expense rent from commencement date through restaurant open date as preopening expense. Once a restaurant opens for business, we record straight-line rent expense plus any additional variable contingent rent expense to the extent it is due under the lease agreement.

restaurant opening will result in greater preopening rent expense recognized during the rent holiday period and lesser occupancy expense during the rest of the lease term (post-opening).

We record a lease liability equal to the present value of future payments discounted at the estimated fully collateralized incremental borrowing rate (discount rate) corresponding with the lease term. Our lease liability calculation is the total rent payable during the lease term, including rent escalations in which the amount of future rent is certain or fixed on the straight-line basis over the term of the lease (including the rent holiday period beginning upon our possession of the premises, and any fixed payments stated in the lease). A corresponding operating lease asset is also recorded equaling the initial amount of the lease liability, plus any lease payments made to the lessor before or at the lease commencement date and any initial direct costs incurred, less any lease incentives received. The difference between the minimum rents paid and the straight-line rent is reflected within the associated operating lease asset. Certain leases contain provisions that require additional rent payments based upon restaurant sales volume (“variable lease cost”). Contingent rent is accrued each period as the liabilities are incurred, in addition to the straight-line rent expense noted above. This results in some variability in occupancy expense as a percentage of revenues over the term of the lease in restaurants where we pay contingent rent.

Management makes judgments regarding the reasonably certain lease term for each restaurant property lease, which can impact the classification and accounting for a lease as finance or operating, the rent holiday and/or escalations in payments that are taken into consideration when calculating straight-line rent, and the term over which leasehold improvements for each restaurant are amortized. These judgments may produce materially different amounts of depreciation, amortization and rent expense than would be reported if different assumed lease terms were used.

Self-Insurance Liability

We retain large deductibles or self-insured retentions for a portion of our general liability insurance and our employee workers’ compensation programs. We maintain coverage with a third party insurer to limit our total exposure for these programs. The accrued liability associated with these programs is based on our estimate of the ultimate costs within our retention amount to settle known claims as well as claims incurred but not yet reported to us (“IBNR claims”) as of the balance sheet date. Our estimated liability is based on information provided by a third party actuary, combined with our judgments regarding a number of assumptions and factors, including the frequency and severity of claims, our claims development history, case jurisdiction, related legislation, and our claims settlement practice. Significant judgment is required to estimate IBNR claims as parties have yet to assert such claims. If actual claims trends, including the severity or frequency of claims, differ from our estimates, our financial results could be significantly impacted.

Property and Equipment

We record all property and equipment at cost. Property and equipment accounting requires us to estimate the useful lives of the assets for depreciation purposes and to select depreciation methods. We believe the useful lives reflect the actual economic life of the underlying assets. We have elected to use the straight-line method of depreciation over the estimated useful life of an asset or the lease term of the respective lease, whichever is shorter, for leasehold improvements. Renewals and betterments that materially extend the useful life of an asset are capitalized while maintenance and repair costs are charged to operating expense as incurred. Judgment is often required in the decision to distinguish between an asset which qualifies for capitalization versus an expenditure which is for maintenance and repairs. Internal costs associated with the acquisition, development and construction of our restaurants are capitalized and allocated to the projects which they relate. When property and equipment are sold or otherwise disposed of, the asset account and related accumulated depreciation and amortization accounts are relieved, and any gain or loss is included in earnings. Additionally, any interest capitalized for new restaurant construction would be included in “Property and equipment, net” on our Consolidated Balance Sheets.

Impairment of Long-Lived Assets

We assess the potential impairment of our long-lived assets whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. The assets are generally reviewed for impairment on a restaurant by restaurant basis, or at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets. We used the undiscounted cash flow method and assessed the recoverability by comparing the carrying value of the asset to the undiscounted cash flows expected to be generated by the assets. We determine that a restaurant’s long-lived assets are impaired if the forecasted undiscounted cash flows is less than the carrying value of the restaurant’s assets. As a result of this analysis, we determined five of our restaurants were impaired and during fiscal 2020, we recorded a $13.7 million charge to operating income for the amount by which the carrying value of the restaurant’s assets exceeded its fair value estimated using the discounted cash flow method. We are unable to predict how long these conditions will persist, what additional measures may be introduced by governments, or what effect any such additional measures may have on our business. Any measure that encourages potential customers to stay in their homes, engage in social distancing or avoid larger gatherings of people is highly likely to be harmful to the dining industry in general and, consequently, our business, which may result in additional impairment charges.

Income Taxes

We utilize the liability method of accounting for income taxes. Deferred income taxes are recognized based on the tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts at each year-end based on enacted tax laws and statutory tax rates applicable to the periods in which differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. The provision for income taxes represents the tax payable for the period and the change during the period in deferred tax assets and liabilities.

We provide for income taxes based on our expected federal and state tax liabilities. Our estimates include, but are not limited to, effective federal, state and local income tax rates, allowable tax credits for items such as FICA taxes paid on reported tip income and estimates related to depreciation expense allowable for tax purposes. We usually file our income tax returns several months after our fiscal year-end. All tax returns are subject to audit by federal and state governments for years after the returns are filed, and could be subject to differing interpretations of the tax laws.

We recognize the impact of a tax position in our financial statements if that position is more likely than not of being sustained through an audit, based on the technical merits of the position. Interest and penalties related to uncertain tax positions are included in income tax expense.

Stock-Based Compensation

Under our shareholder approved stock-based compensation plan, we have granted incentive stock options, non-qualified stock options, and restricted stock units that generally vest over three to five years. Incentive and non-qualified stock options expire ten years from the date of grant. We have also granted performance-based restricted stock units under our shareholder approved stock-based compensation plan that vests after three years based on achievement of certain performance targets. Stock-based compensation is measured in accordance with U.S. GAAP based on the estimated fair value of the awards granted. To value stock options on the grant date, we utilize the Black-Scholes option-pricing model which requires us to make certain assumptions and judgments regarding the inputs. These judgments include expected volatility, risk free interest rate, expected option life, and dividend yield. These estimations and judgments are determined by us using many different variables that, in many cases, are outside of our control. The changes in these variables or trends, including stock price volatility and risk free interest rate, may significantly impact the grant date fair value resulting in a significant impact to our financial results. The tax benefits resulting from tax deductions in excess of the compensation cost recognized (excess tax benefits) are classified as “Cash flows from financing activities” within our accompanying Consolidated Statements of Cash Flows and “Income tax (benefit) expense” within our accompanying Consolidated Statements of Operations for the period realized.

CONTRACTUAL OBLIGATIONS AND COMMITMENTS

The following table summarizes our future estimated cash payments under existing contractual obligations as of December 29, 2020, including estimated cash payments due by period (in thousands).

Payments Due by Period

Total Less Than 1 Year 2-3 Years 4-5 Years After 5 Years

Contractual Obligations:

Other Obligations:

Additionally, we have entered into lease agreements related to future restaurants with commencement dates subsequent to December 29, 2020. Our aggregate future commitment relating to these leases is $19.9 million and is not included in operating leases above.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The following discussion of market risks contains “forward-looking” statements. Actual results may differ materially from the following discussion based on general conditions in the financial and commodity markets.

Interest Rate Risk

As of December 29. 2020, we have a $235 million Credit Facility, of which $116.8 million is currently outstanding and carries interest at a floating rate. We utilize the Credit Facility principally for letters of credit that are required to support our self-insurance programs, to fund a portion of our announced share repurchase program, which is currently suspended, and for working capital and construction requirements, as needed. We are exposed to interest rate risk through fluctuations in interest rates on our obligations under the Credit Facility. Based on our current outstanding balance, a hypothetical 1% change in the interest rates under our Credit Facility would have an approximate $0.9 million annual impact on our net (loss) income.

Food and Commodity Price Risks

We purchase food and other commodities for use in our operations based upon market prices established with our suppliers. Many of the commodities purchased by us can be subject to volatility due to market supply and demand factors outside of our control, whether contracted for or not. Costs can also fluctuate due to government regulation. To manage this risk in part, we attempt to enter into fixed-price purchase commitments, with terms typically up to one year, for some of our commodity requirements. However, it may not be possible for us to enter into fixed-price contracts for certain commodities or we may choose not to enter into fixed-price contracts for certain commodities. We believe that substantially all of our food and supplies are available from several sources, which helps to diversify our overall commodity cost risk. We also believe that we have some flexibility and ability to increase certain menu prices, or vary certain menu items offered or promoted, in response to food commodity price increases. Some of our commodity purchase arrangements may contain contractual features that limit the price paid by establishing certain price floors or caps. We do not use financial instruments to hedge commodity prices, since our purchase arrangements with suppliers, to the extent that we can enter into such arrangements, help control the ultimate cost that we pay.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See the Consolidated Financial Statements and other data attached hereto beginning on page F-1 of this Annual Report on Form 10-K.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures pursuant to Rules 13a-15 and 15d-15 promulgated under the Securities Exchange Act of 1934 as amended, as of the end of the period covered by this report. Based

on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 29,2020, our disclosure controls and procedures are designed and are effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There has not been any change in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during our fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 29, 2020, based on the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (“COSO”). Based on that evaluation, our management concluded that our internal control over financial reporting was effective as of December 29, 2020.

Ernst & Young LLP, the independent registered public accounting firm has independently assessed the effectiveness of our internal control over financial reporting and its report is included herein.

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of BJ’s Restaurants, Inc.

Opinion on Internal Control over Financial Reporting

We have audited BJ’s Restaurants, Inc.’s internal control over financial reporting as of December 29, 2020, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, BJ’s Restaurants, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 29, 2020, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of BJ’s Restaurants, Inc. as of December 29, 2020 and December 31, 2019, and the related consolidated statements of operations, shareholders’ equity and cash flows for each of the three years in the period ended December 29, 2020 and the related notes (collectively referred to as the “financial statements”) of the Company and our report dated March 1, 2021 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

Irvine, California

March 1, 2021

Inherent Limitations on Effectiveness of Controls

Our management, including the Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of control effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

ITEM 9B. OTHER INFORMATION

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

We have adopted a Code of Business Ethics and a Code of Business Conduct to promote honest and ethical conduct of our business, professional and personal relationships. The Code of Business Ethics covers all executives, including our principal executive officer, principal financial officer and principal accounting officer. The Code of Business Conduct is applicable to all directors, executives and other employees. A copy of our Code of Integrity, Ethics and Conduct is available on our website http://investors.bjsrestaurants.com under Corporate Governance. We intend to post any amendments to or waivers from our Code of Business Ethics and Code of Business Conduct at this website location.

Information with respect to our executive officers is included in Part I, Item 1 of this Annual Report on Form 10-K. Other information required by this Item is hereby incorporated by reference to the information contained in the Proxy Statement relating to the Annual Meeting of Shareholders, which we expect to be filed with the SEC no later than 120 days after the close of the year ended December 29, 2020.

ITEM 11. EXECUTIVE COMPENSATION

The information required by this Item is incorporated herein by reference to the information contained in the Proxy Statement relating to the Annual Meeting of Shareholders, which we expect to file with the SEC no later than 120 days after the close of the year ended December 29, 2020.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

See Part II, Item 5 – “Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities – Stock-Based Compensation Plan Information” for certain information regarding our equity compensation plans.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) (1) CONSOLIDATED FINANCIAL STATEMENTS

The following documents are contained in Part II, Item 8 of this Annual Report on Form 10-K:

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets at December 29, 2020 and December 31, 2019

Consolidated Statements of Operations for Each of the Three Fiscal Years in the Period Ended December 29, 2020

Consolidated Statements of Shareholders’ Equity for Each of the Three Fiscal Years in the Period Ended December 29, 2020

Consolidated Statements of Cash Flows for Each of the Three Fiscal Years in the Period Ended December 29, 2020

Notes to the Consolidated Financial Statements

(2) FINANCIAL STATEMENT SCHEDULES

All schedules are omitted because they are not applicable or the required information is shown in the Consolidated Financial Statements or notes thereto.

(3) EXHIBITS

Exhibit Number Description

21 List of Significant Subsidiaries.

23.1 Consent of Independent Registered Public Accounting Firm.

101.SCH Inline XBRL Taxonomy Extension Schema Document.

101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document.

Exhibit Number Description

101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document.

ITEM 16. FORM 10-K SUMMARY

Not applicable.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on our behalf by the undersigned, thereunto duly authorized.

BJ’S RESTAURANTS, INC.

By: /s/ Gregory A. Trojan

Pursuant to the requirements of the Securities and Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signature Capacity Date

By: /s/ GREGORY A. TROJAN

By: /s/ GREGORY S. LEVIN

By: /s/ JACOB J. GUILD

By: /s/ PETER A. BASSI

Peter A. Bassi Lead Independent Director March 1, 2021

By: /s/ LARRY D. BOUTS

Larry D. Bouts Director March 1, 2021

By: /s/ BINA CHAURASIA

Bina Chaurasia Director March 1, 2021

By: /s/ JAMES A. DAL POZZO

James A. Dal Pozzo Director March 1, 2021

By: /s/ GERALD W. DEITCHLE

Gerald W. Deitchle Chairman of the Board and Director March 1, 2021

By: /s/ NOAH A. ELBOGEN

Noah A. Elbogen Director March 1, 2021

By: /s/ LEA ANNE S. OTTINGER

Lea Anne S. Ottinger Director March 1, 2021

By: /s/ KEITH E. PASCAL

Keith E. Pascal Director March 1, 2021

By: /s/ JANET M. SHERLOCK

Janet M. Sherlock Director March 1, 2021

By: /s/ PATRICK D. WALSH

Patrick D. Walsh Director March 1, 2021

BJ’S RESTAURANTS, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Page

Report of Independent Registered Public Accounting Firm F-1

Consolidated Balance Sheets at December 29, 2020 and December 31, 2019 F‐3

Notes to Consolidated Financial Statements F‐8

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors of BJ’s Restaurants, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of BJ’s Restaurants, Inc. (the Company) as of December 29, 2020 and December 31, 2019, and the related consolidated statements of operations, shareholders’ equity and cash flows for each of the three years in the period ended December 29, 2020, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company at December 29, 2020 and December 31, 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 29, 2020, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 29, 2020, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated March 1, 2021, expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Impairment of Long-lived Assets

F-1

Workers’ Compensation and General Liability Reserve

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2001.

Irvine, California

March 1, 2021

F-2

BJ’S RESTAURANTS, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands)

Assets

Current assets:

Prepaid expenses and other current assets 9,325 8,912

Deferred income taxes 6,227 —

Liabilities and Shareholders’ Equity

Current liabilities:

Deferred income taxes, net — 20,164

Commitments and contingencies (Note 7)

Shareholders’ equity:

Preferred stock, 5,000 shares authorized, none issued or outstanding — —

The accompanying notes are an integral part of these consolidated financial statements.

F-3

BJ’S RESTAURANTS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

Fiscal Year

Restaurant operating costs (excluding depreciation and amortization):

Gain on lease transactions, net (3,278 ) (4,731 ) —

Other (expense) income:

Gain from legal settlements 2,284 — —

Net (loss) income per share:

Weighted average number of shares outstanding:

The accompanying notes are an integral part of these consolidated financial statements.

F-4

BJ’S RESTAURANTS, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(In thousands)

Common Stock Capital Retained

Shares Amount Surplus Earnings Total

Stock-based compensation — — 8,584 — 8,584

Dividends paid or payable, $0.45 per share — — — (9,730 ) (9,730 )

Stock-based compensation — — 9,212 — 9,212

Cumulative effect of adopting lease standard — — — 19,502 19,502

Dividends paid or payable, $0.49 per share — — — (10,178 ) (10,178 )

Exercise of stock options 1 36 (9 ) — 27

Stock-based compensation — — 9,820 — 9,820

Adjustment to dividends previously accrued — — — 28 28

The accompanying notes are an integral part of these consolidated financial statements.

F-5

BJ’S RESTAURANTS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

Fiscal Year

Cash flows from operating activities:

Amortization of financing costs 85 — —

Gain on lease transactions, net (3,278 ) — —

Changes in assets and liabilities:

Landlord contribution for tenant improvements — — (752 )

Prepaid expenses and other current assets (573 ) (1,393 ) 3,060

Deferred rent — — 2,601

Deferred lease incentives — — 1,421

Cash flows from investing activities:

Cash flows from financing activities:

Payments of debt issuance costs (743 ) — —

Proceeds from issuance of common stock, net 67,342 — —

Issuance of restricted stock units (817 ) (1,014 ) (383 )

Net cash provided by (used in) financing activities 24,445 (44,711 ) (72,565 )

Net increase (decrease) in cash and cash equivalents 29,270 (6,830 ) 4,889

The accompanying notes are an integral part of these consolidated financial statements.

F-6

BJ’S RESTAURANTS, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

Fiscal Year

Supplemental disclosure of cash flow information:

Cash paid for interest, net of capitalized interest $ 5,946 $ 3,992 $ 4,158

Cash paid for operating lease obligations $ 46,303 $ 51,175 $ —

Supplemental disclosure of non-cash investing and financing activities:

Tenant improvement allowance receivable $ 4,163 $ 3,238 $ 3,704

Stock-based compensation capitalized $ 29 $ 294 $ 328

F-7

BJ’S RESTAURANTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. The Company and Summary of Significant Accounting Policies

Description of Business

BJ’s Restaurants, Inc. (referred to herein as the “Company,” “BJ’s,” “we,” “us” and “our”) was incorporated in California on October 1, 1991, to assume the management of five “BJ’s Chicago Pizzeria” restaurants and to develop additional BJ’s restaurants. As of December 29, 2020, we owned and operated 210 restaurants located in 29 states, one of which was temporarily closed due the COVID-19 pandemic.During fiscal 2020, we opened two new restaurants. Several of our locations, in addition to our two brewpub locations in Texas, brew our signature, proprietary craft BJ’s beer. All of our other restaurants receive their BJ’s beer either from one of our restaurant brewing operations, our Texas brewpubs and/or independent third party brewers using our proprietary recipes.

Basis of Presentation

The accompanying consolidated financial statements include the accounts of BJ’s Restaurants, Inc. and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. The financial statements presented herein include all material adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary for a fair statement of the financial condition, results of operations and cash flows for the period.

The consolidated financial statements and accompanying notes have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). The Company had no components of other comprehensive income (loss) during any of the years presented, as such; a consolidated statement of comprehensive income (loss) is not presented.

The preparation of financial statements in conformity U.S. GAAP requires management to make estimates and assumptions for the reporting period and as of the financial statement date. These estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses. Actual results could differ from those estimates.

Our fiscal year consists of 52 or 53 weeks and ends on the Tuesday closest to December 31 for financial reporting purposes. Fiscal year 2020, 2019, and 2018 ended on December 29, 2020, December 31, 2019, and January 1, 2019, respectively, and consisted of 52 weeks of operations.

Segment Disclosure

The Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 280, Segment Reporting, establishes standards for disclosures about products and services, geographic areas and major customers. We currently operate in one operating segment: casual dining company-owned restaurants. Additionally, we operate in one geographic area: the United States of America.

Recently Adopted Accounting Standards

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This update requires companies to measure credit losses utilizing a methodology that reflects expected credit losses and requires a consideration of a broader range of reasonable and supportable information to estimate credit losses. We adopted ASU 2016-13 on January 1, 2020. The adoption of this standard did not have a material impact on our consolidated financial statements.

In August 2018, the FASB issued Accounting Standards Update (“ASU”) 2018-15, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40). This update clarifies the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. We adopted ASU 2016-13 on January 1, 2020. The adoption of this standard did not have a material impact on our consolidated financial statements.

Cash and Cash Equivalents

Cash and cash equivalents consist of highly liquid investments and money market funds with an original maturity of three months or less when purchased. Cash and cash equivalents are stated at cost, which approximates fair market value.

F-8

Concentration of Credit Risk

Financial instruments which subject us to a concentration of credit risk principally consist of cash and cash equivalents and receivables. We currently maintain our day-to-day operating cash balances with a major financial institution. At times, our operating cash balances may be in excess of the FDIC insurance limit.

Inventories

Inventories are comprised primarily of food and beverage products and are stated at the lower of cost (first-in, first-out) or net realizable value.

Property and Equipment

Property and equipment are recorded at cost and depreciated over their estimated useful lives. Leasehold improvements are amortized over the estimated useful life of the asset or the lease term, including reasonably assured renewal periods or exercised options, of the respective lease, whichever is shorter. Renewals and betterments that materially extend the life of an asset are capitalized while maintenance and repair costs are expensed as incurred. When property and equipment are sold or otherwise disposed of, the asset accounts and related accumulated depreciation or amortization accounts are relieved, and any gain or loss is included in earnings.

Depreciation and amortization are recorded using the straight-line method over the following estimated useful lives:

Furniture and fixtures 10 years

Equipment 5‐10 years

Brewing equipment 10-20 years

Building improvements the shorter of 20 years or the remaining lease term

Leasehold improvements the shorter of the useful life or the lease term,

including reasonably assured renewal periods

Goodwill

We perform impairment testing annually, during the fourth quarter, and more frequently if factors and circumstances indicate impairment may have occurred. When evaluating goodwill for impairment, we first perform a qualitative assessment to determine whether it is more likely than not that the fair value of our reporting unit is less than its carrying value. We currently have one reporting unit, which is casual dining company-owned restaurants in the United States of America. If it is concluded that the fair value of our reporting unit is less than the goodwill carrying value, we estimate the fair value of the reporting unit and compare it to the carrying value of the reporting unit, including goodwill. If the carrying value of the reporting unit is greater than the estimated fair value, an impairment charge is recorded for the difference between the implied fair value of goodwill and its carrying amount. To calculate the implied fair value of the reporting unit’s goodwill, the fair value of the reporting unit is first allocated to all of the other assets and liabilities of that unit based on their relative fair values. The excess of the reporting unit’s fair value over the amount assigned to its other assets and liabilities is the implied fair value of goodwill. An impairment loss would be recognized when the carrying amount of goodwill exceeds its implied fair value. This adjusted carrying value becomes the new goodwill accounting basis value. Based on our impairment assessment, we did not record any impairment to goodwill during fiscal 2020, 2019 or 2018.

Long-Lived Assets

F-9

As a result of this analysis, we determined five of our restaurants were impaired and during fiscal 2020, we recorded a $13.7 million charge to operating income for the amount by which the carrying value of the restaurant’s assets exceeded its fair value estimated using the discounted cash flow method. We did not incur an impairment expense in fiscal 2019 or 2018.

Self-Insurance Liability

We retain large deductibles or self-insured retentions for a portion of our general liability insurance and our employee workers’ compensation programs. We maintain coverage with a third party insurer to limit our total exposure for these programs. The accrued liability associated with these programs is based on our estimate of the ultimate costs within our retention amount to settle known claims as well as claims incurred but not yet reported to us (“IBNR claims”) as of the balance sheet dates. Our estimated liability is based on information provided by a third party actuary, combined with our judgments regarding a number of assumptions and factors, including the frequency and severity of claims, our claims development history, case jurisdiction, related legislation, and our claims settlement practice. Significant judgment is required to estimate IBNR claims as parties have yet to assert such claims. If actual claims trends, including the severity or frequency of claims, differ from our estimates, our financial results could be significantly impacted.

Revenue Recognition

Revenues from food and beverage sales at restaurants are recognized when payment is tendered at the point of sale. Amounts paid with a credit card are recorded in accounts and other receivables until payment is collected from the credit card processor. We sell gift cards which do not have an expiration date and we do not deduct non-usage fees from outstanding gift card balances. Gift card sales are recorded as a liability and recognized as revenues upon redemption in our restaurants. Deferred gift card revenue, included in “Accrued expenses” on the accompanying Consolidated Balance Sheets, was $17.3 million and $19.1 million as of December 29, 2020 and December 31, 2019, respectively.

Estimated gift card breakage is recorded as “Revenues” on our Consolidated Statements of Operations and recognized in proportion to our historical redemption pattern. The estimated gift card breakage is based on when the likelihood of redemption becomes remote, which has typically been 24 months after the original gift card issuance date.

Our “BJ’s Premier Rewards Plus” customer loyalty program enables participants to earn points for qualifying purchases that can be redeemed for food and beverages in the future. We allocate the transaction price between the goods delivered and the future goods that will be delivered, on a relative standalone selling price basis, and defer the revenues allocated to the points, less expected expirations, until such points are redeemed. We temporarily suspended loyalty point expirations in response to the COVID-19 pandemic and resumed expirations during the quarter ended September 29, 2020.

Cost of Sales

Sales Taxes

Revenues are presented net of sales tax collected. The obligations to the appropriate tax authorities are included in other accrued expenses until the taxes are remitted to the appropriate taxing authorities.

Advertising Costs

Advertising costs are expensed as incurred. Advertising expense for fiscal 2020, 2019, and 2018 was approximately $13.2 million, $25.2 million and $24.5 million, respectively. Advertising costs are primarily included in “Occupancy and operating” expenses on our Consolidated Statements of Operations.

Income Taxes

F-10

months after our fiscal year-end. All tax returns are subject to audit by federal and state governments for years after the returns are filed and could be subject to differing interpretations of the tax laws.

Restaurant Opening Expense

Restaurant payroll, supplies, training, other start-up costs and rent expense incurred prior to the opening of a new restaurant are expensed as incurred.

Leases

There is potential for variability in the rent holiday period, which begins on the commencement date and ends on the restaurant open date, during which no cash rent payments are typically due under the terms of the lease. Factors that may affect the length of the rent holiday period generally pertain to construction related delays. Extension of the rent holiday period due to delays in restaurant opening will result in greater preopening rent expense recognized during the rent holiday period and lesser occupancy expense during the rest of the lease term (post-opening).

F-11

Net (Loss) Income Per Share

Basic net (loss) income per share is computed by dividing net (loss) income by the weighted average number of common shares outstanding during the period. Diluted net loss per share excludes the dilutive effect of equity awards. Diluted net (loss) income per share reflects the potential dilution that could occur if in-the-money warrants or stock options issued by us to sell common stock at set prices were exercised and if restrictions on restricted stock units (“RSUs”) issued by us were to lapse (collectively, equity awards) using the treasury stock method. Performance-based RSUs are considered contingent shares; therefore, at each reporting date we determine the probable number of shares that will vest and we include these contingently issuable shares in our diluted net (loss) income per share calculation. Once theses performance-based RSUs vest, they are included in our basic net (loss) income per share calculation.

The following table presents a reconciliation of basic and diluted net (loss) income per share, including the number of dilutive equity awards that were included in the dilutive net (loss) income per share computation (in thousands):

Fiscal Year

Numerator:

Denominator:

Dilutive effect of equity awards — 307 626

At December 29, 2020, December 31, 2019, and January 1, 2019, there were approximately 1.1 million, 0.5 million, and 0.03 million shares of common stock equivalents, respectively, that have been excluded from the calculation of diluted net (loss) income per share because they are anti-dilutive. Additionally, at December 29, 2020, there were warrants to purchase 875,000 shares, which were dilutive.

Stock‐Based Compensation

Under our shareholder approved stock-based compensation plan, we have granted incentive stock options, non-qualified stock options, and restricted stock units that generally vest over three to five years. Incentive and non-qualified stock options expire ten years from the date of grant. We have also granted performance-based restricted stock units under our shareholder approved stock-based compensation plan that vest after three years based on achievement of certain performance targets. Stock-based compensation is measured in accordance with U.S. GAAP based on the estimated fair value of the awards granted. To value stock options on the grant date, we utilize the Black-Scholes option-pricing model which requires us to make certain assumptions and judgments regarding the inputs. These judgments include expected volatility, risk free interest rate, expected option life, and dividend yield. These estimations and judgments are determined by us using many different variables that, in many cases, are outside of our control. The changes in these variables or trends, including stock price volatility and risk free interest rate, may significantly impact the grant date fair value resulting in a significant impact to our financial results. The tax benefits resulting from tax deductions in excess of the compensation cost recognized (excess tax benefits) are classified as “Cash flows from financing activities” within our Consolidated Statements of Cash Flows and “Income tax (benefit) expense” within the Consolidated Statements of Operations for the period realized.

2. Revenue Recognition

The liability related to our gift cards and loyalty program, included in “Accrued expenses,” on our Consolidated Balance Sheets were as follows (in thousands):

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Revenue recognized on our Consolidated Statements of Operations for the redemption of gift cards and loyalty rewards deferred at the beginning of each respective fiscal year were as follows (in thousands):

Fiscal Year

Revenue recognized from customer loyalty program $ 8,734 $ 9,363 $ 7,326

3. Accounts and Other Receivables

Accounts and other receivables consisted of the following (in thousands):

Tenant improvement allowances 4,163 3,238

4. Property and Equipment

Property and equipment consisted of the following (in thousands):

Less accumulated depreciation and amortization (661,486 ) (584,572 )

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5. Accrued Expenses

Accrued expenses consisted of the following (in thousands):

Workers’ compensation and general liability 20,365 21,667

Insurance related 4,267 —

6. Leases

Lease costs included in “Occupancy and operating” on the Consolidated Statements of Operations consisted of the following (in thousands):

Fiscal Year Fiscal Year

Weighted-average lease term and discount rate as of December 29, 2020 were as follows:

Weighted-average remaining lease term 12.4 Years

Weighted-average discount rate 5.6%

Operating lease obligation maturities as of December 29, 2020 were as follows (in thousands):

Less: imputed interest (149,406 )

Present value of operating lease obligations $ 493,678

In response to the impact of the COVID-19 pandemic on our operations, beginning April 1, 2020, we suspended the payment of rent and did not make lease payments under our existing lease agreements for the majority of our leases. During the suspension of payments, we continued to recognize expenses and liabilities for lease obligations and corresponding lease assets on the balance sheet in accordance with ASU 2016-02, Leases (Topic 842). We commenced the payment of rent on July 1, 2020.

We have negotiated restructuring of lease payments and rent concessions for the majority of our leases. The negotiated concessions primarily take the form of rent deferrals (full or partial) or abatements. In accordance with the relief issued in April 2020 by the FASB titled ASC Topic 842 and ASC Topic 840, Accounting for Lease Concessions Related to the Effects of the

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COVID-19 Pandemic, we did not recognize contractual rent concessions as a lease contract modification when the total payments required by the modified contract were substantially the same or less than total payments required by the original contract. Lease concessions that provided a substantial increase in the rights of the lessor or our obligations under the lease wereaccounted for as lease modifications in accordance with ASC Topic 842.

7. Commitments and Contingencies

Legal Proceedings

We are subject to lawsuits, administrative proceedings and demands that arise in the ordinary course of our business and which typically involve claims from customers, employees and others related to operational, employment, real estate and intellectual property issues common to the foodservice industry. A number of these claims may exist at any given time. We are self-insured for a portion of our general liability, employee workers’ compensation and employment practice liability insurance requirements. We maintain coverage with a third party insurer to limit our total exposure. We believe that most of our customer claims will be covered by our general liability insurance, subject to coverage limits and the portion of such claims that are self-insured. Punitive damages awards and employee unfair practice claims, however, are not covered by our general liability insurance. To date, we have not been ordered to pay punitive damages with respect to any claims, but there can be no assurance that punitive damages will not be awarded with respect to any future claims. We could be affected by adverse publicity resulting from allegations in lawsuits, claims and proceedings, regardless of whether these allegations are valid or whether we are ultimately determined to be liable. We currently believe that the final disposition of these type of lawsuits, proceedings and claims will not have a material adverse effect on our financial position, results of operations or liquidity. It is possible, however, that our future results of operations for a particular quarter or fiscal year could be impacted by changes in circumstances relating to lawsuits, proceedings or claims.

Letters of Credit

We have irrevocable standby letters of credit outstanding, as required under our workers’ compensation insurance arrangements, of $21.1 million as of December 29, 2020. Our standby letters of credit automatically renew each October 31 for one year unless 30 days’ notice, prior to such renewal date, is given by the financial institution that provides the letters. The standby letters of credit issued under our Credit Facility reduce the amount available for borrowing.

8. Long-Term Debt

Line of Credit

On April 30, 2020, we entered into an Amended Credit Facility (“Credit Facility”) with Bank of America, N.A. (“BofA”) and JPMorgan Chase Bank, N.A., to amend and restate our existing unsecured revolving line of credit (the “Line of Credit”) in response to disruptions arising from the COVID-19 pandemic and to modify certain financial covenants through the first quarter of fiscal 2021. On June 15, 2020, we further modified our Credit Facility to reduce our Line of Credit by $15.0 million, extend the maturity date by one year, change certain interest rates and reset select covenant levels. On January 15, 2021, we once again amended our Credit Facility to further reduce our Line of Credit by $20.0 million, change certain interest rates and reset selected covenant levels. See Note 15 for further information.

As of December 29, 2020, our Credit Facility matures on November 18, 2022, and provides us with revolving loan commitments totaling $235 million (reduced to $215 million effective January 15, 2021), of which $50 million may be used for the issuance of letters of credit. Availability under the Credit Facility is reduced by outstanding letters of credit, which are used to support our self-insurance programs. As of December 29, 2020, there were borrowings of $116.8 million and letters of credit totaling approximately $21.1 million outstanding under the Credit Facility. Available borrowings under the Credit Facility were $97.1 million as of December 29, 2020.

Borrowings under the Line of Credit bear interest at an annual rate equal to either (a) LIBOR plus a percentage not to exceed 3.00% (with a floor on LIBOR of 1.00%), or (b) a percentage not to exceed 2.00% above a Base Rate equal to the highest of (i) the Federal Funds Rate plus 1/2 of 1.00%, (ii) BofA’s Prime Rate, or (iii) one-month LIBOR plus 1.00%, in either case depending on the level of lease and debt obligations of the Company as compared to EBITDA and lease expenses. The weighted average interest rate during fiscal 2020 was approximately 3.7%.

The Credit Facility is secured by the Company’s assets and contains provisions requiring us to maintain compliance with certain covenants, including a fixed charge coverage ratio and a lease adjusted leverage ratio. As of December, 29, 2020, we were in violation of these two covenants; however, this was cured in conjunction with our amendment on January 15, 2021, whereby the testing of the fixed charge coverage ratio and lease adjusted leverage ratio have been suspended until the third quarter of fiscal 2021. They will be tested based upon our earnings during the third quarter of fiscal 2021. Under a new financial covenant, there will be a one-time test of our earnings based upon results as of the end of the second fiscal quarter of

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2021. Additionally, the financial covenant pertaining to liquidity will continue to be tested monthly through December 2021, and we will be required to meet a monthly fixed amount. Lastly, we are also subject to certain limits on capital expenditures for fiscal 2021 and 2022, with relief from the spending limits being granted if we satisfy certain financial covenant levels.

Pursuant to the Line of Credit, we are required to pay certain customary fees and expenses associated with maintenance and use of the Line of Credit, including letter of credit issuance fees, unused commitment fees and interest on the Line of Credit, which are payable monthly. Interest expense and commitment fees under the Credit Facility were approximately $7.1 million, $4.6 million and $4.8 million, for fiscal 2020, 2019 and 2018, respectively. We also capitalized approximately $0.1 and $0.3 million of interest expense related to new restaurant construction during fiscal 2020 and 2019, respectively. Additionally, for fiscal 2020, we capitalized approximately $0.8 million of fees related to the amended and modified credit agreement, which will be amortized over the remaining term of the Credit Facility.

9. Shareholders’ Equity

Private Placement

On May 5, 2020, we completed the sale of $70 million of our common stock to certain funds and accounts advised by T. Rowe Price Associates, Inc., acting as investment adviser, and to Act III Holdings, LLC (“Act III,” and collectively “the investors”). The investors purchased a total of 3,500,000 shares of BJ’s Restaurants common stock for $20.00 per share in a private placement under Section 4(2) of the Securities Act of 1933, as amended. The Company also issued a five year warrant to purchase 875,000 shares of our common stock with an exercise price of $27.00 per share to Act III. The warrant expires on May 4, 2025, five years following the issuance. In addition, Act III was granted the right to nominate one director to the Company’s Board of Directors for so long as certain ownership thresholds are satisfied. Subsequently on November 24, 2020, our agreement with Act III was amended whereby Act III now has the right to designate one person to serve as an observer at meetings of the Board of Directors and at meetings of the Governance and Nominating Committee of the Board of Directors when and if they do not have a director serving as a member of the Board of Directors.

We valued the common stock and the warrant issued based on their relative fair values. The fair value of the warrant was estimated using the Black-Scholes pricing model. We recorded the net proceeds of $64.0 million related to the 3,500,000 shares of common stock to “Retained earnings” on our Consolidated Balance Sheets and the net proceeds of $3.4 million related to the warrant to “Capital surplus” on our Consolidated Balance Sheets.

Preferred Stock

We are authorized to issue 5.0 million shares of one or more series of preferred stock and we are authorized to determine the rights, preferences, privileges and restrictions to be granted to, or imposed upon, any such series, including the voting rights, redemption provisions (including sinking fund provisions), dividend rights, dividend rates, liquidation rates, liquidation preferences, conversion rights and the description and number of shares constituting any wholly unissued series of preferred stock. No shares of preferred stock were issued or outstanding at December 29, 2020 or December 31, 2019. We currently have no plans to issue shares of preferred stock.

Common Stock

Shareholders are entitled to one vote for each share of common stock held of record. Pursuant to the requirements of California law, shareholders are entitled to accumulate votes in connection with the election of directors. Shareholders of our outstanding common stock are entitled to receive dividends if and when declared by the Board of Directors.

Cash Dividends

Due to the COVID-19 pandemic, our Board of Directors suspended quarterly cash dividends in fiscal 2020 until it is determined that resumption of dividend payments is in the best interest of the Company and its shareholders and is permitted by our Credit Facility. As such, there were no cash dividends paid in fiscal 2020.

Stock Repurchases

During fiscal 2020, we repurchased and retired approximately 0.5 million shares of our common stock at an average price of $30.33 per share for a total of $15.0 million, which is recorded as a reduction in common stock, with any excess charged to retained earnings. As of December 29, 2020, we have approximately $24.4 million remaining under the current $500 million share repurchase plan approved by our Board of Directors. We have suspended our repurchase program until the Board determines that resumption of repurchases is in the best interest of the Company and its shareholders and is permitted by our Credit Facility.

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10. Income Taxes

Income tax (benefit) expense for the last three fiscal years consists of the following (in thousands):

Fiscal Year

Current:

Deferred:

Income tax (benefit) expense for the last three fiscal years differs from the amount that would result from applying the federal statutory rate as follows:

Fiscal Year

Income tax at statutory rates (21.0 )% 21.0 % 21.0 %

State income taxes, net of federal benefit (5.2 ) 3.0 3.3

Permanent differences 0.3 (0.6 ) (5.1 )

Income tax credits (5.1 ) (20.1 ) (16.0 )

Prior year tax credit true-up (0.4 ) (0.7 ) (0.8 )

Benefit from net operating loss carryback (5.2 ) — —

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The components of the deferred income tax asset (liability) consist of the following (in thousands):

Deferred income tax asset:

Deferred revenues 5 20

Valuation allowance (802 ) (282 )

Deferred income tax asset, net of valuation allowance 182,591 161,920

Deferred income tax liability:

Net deferred income tax asset (liability) $ 6,227 $ (20,164 )

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was enacted. Intended to provide economic relief to those impacted by the COVID-19 pandemic, the CARES Act includes provisions, among others, allowing for the carryback of net operating losses generated in 2018, 2019 and 2020, refunds of alternative minimum tax credits, temporary modification to the limitations placed on the tax deductibility of net interest expense, and technical amendments regarding the expensing of qualified improvement property (“QIP”). As a result of the CARES Act, the Company is able to carryback losses generated in 2020 and reduce taxes payable for accelerated depreciation on qualified improvements property in 2018 and 2019.

At December 29, 2020, we had federal and California income tax credit carryforwards of approximately $27.6 million and $0.8 million, respectively, consisting primarily of the credit for FICA taxes paid on reported employee tip income and California enterprise zone credits. The FICA tax credits will begin to expire in 2035 and the California enterprise zone credits will begin to expire in 2023.

At December 29, 2020, we have federal net operating losses (“NOLs”) of approximately $33.2 million that will be carried back to taxable income year of 2015. In addition, we have state NOLs of approximately $89.4 million that will expire over various periods beginning 2021 through 2040.

As of December 29, 2020, and December 31, 2019, we have recorded a valuation allowance against certain state net operating loss and tax credit carryforwards of $0.8 million and $0.3 million, respectively, net of the federal benefit which are not more likely than not to be realized prior to expiration. We recognize interest and penalties related to uncertain tax positions in income tax expense. As of December 29, 2020 and December 31, 2019, we had accrued $0.1 million for interest and penalties with respect to uncertain tax positions.

As of December 29, 2020, our accrual for unrecognized tax benefits was approximately $1.3 million, of which approximately $1.0 million, if reversed would impact our effective tax rate. We anticipate no change in our liability for unrecognized tax benefits within the next twelve-month period.

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A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):

Fiscal Year

Gross unrecognized tax benefits at beginning of year $ 1,345 $ 1,532 $ 1,516

Increases for tax positions taken in prior years 190 10 69

Decreases for tax positions taken in prior years (291 ) (5 ) (49 )

Increases for tax positions taken in the current year 89 130 87

Lapse in statute of limitations — (322 ) (91 )

Gross unrecognized tax benefits at end of year $ 1,333 $ 1,345 $ 1,532

Our uncertain tax positions are related to tax years that remain subject to examination by tax agencies. As of December 29, 2020, the earliest tax year still subject to examination by the Internal Revenue Service is 2015. The earliest year still subject to examination by a significant state or local taxing jurisdiction is 2015.

11. Stock-Based Compensation Plans

Our current shareholder approved stock-based compensation plan is the BJ’s Restaurants, Inc. Equity Incentive Plan, (as amended from time to time, “the Plan”). Under the Plan, we may issue shares of our common stock to employees, officers, directors and consultants. We have granted incentive stock options, non-qualified stock options, restricted stock and performance and time-based restricted stock units. Stock options and stock appreciation rights, if any, are charged against the Plan share reserve on the basis of one share for each share granted. Certain other types of grants, including grants of restricted stock and RSUs, are currently charged against the Plan share reserve on the basis of 1.5 shares for each share granted. The Plan also contains other limits on the terms of incentive grants such as limits on the number that can be granted to an employee during any fiscal year. All options granted under the Plan expire within 10 years of their date of grant.

Under the Plan, we issue time-based and performance-based RSUs and non-qualified stock options to vice presidents and above on an annual basis, as well as new hires who are given the option between receiving their full grant as a time-based RSU or split half and half between non-qualified stock options and time-based RSUs. We issue time-based RSUs to other select support employees, and we issue time-based RSUs to non-employee members of our Board of Directors. We also issue RSUs, and previously issued non-qualified stock options, in connection with the BJ’s Gold Standard Stock Ownership Program (the “GSSOP”). The GSSOP is a long-term equity incentive program for our restaurant general managers, executive kitchen managers, directors of operations and directors of kitchen operations. GSSOP grants are dependent on the length of each participant’s service with us and position. All GSSOP participants are required to remain in good standing during their vesting period.

The Plan permits our Board of Directors to set the vesting terms and exercise period for awards at their discretion. Stock options and time-based RSUs vest ratably over one, three or five years for non-GSSOP participants and either cliff vest at five years or cliff vest at 33% on the third anniversary and 67% on the fifth anniversary for GSSOP participants. Performance-based RSUs generally cliff vest on the third anniversary of the grant date in an amount from 0% to 150% of the grant quantity, dependent on the level of performance target achievement.

On September 4, 2020, our Board of Directors approved special fully-vested restricted stock grants to the Restaurant Support Center employees whose salaries were reduced due to the COVID-19 pandemic. These grants were in amounts designed to approximate the value of the foregone cash compensation resulting from the salary reductions, which was approximately $0.8 million. In order to effect the grants, the Board of Directors approved an amendment to the Plan to permit the immediate vesting of grants of no more than 62,500 shares of restricted stock, and to clarify that other restricted stock grants that are not performance based may not have vesting terms of less than 12 months.

The following table presents the stock-based compensation recognized within our consolidated financial statements (in thousands):

Fiscal Year

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Stock Options

Stock options were issued primarily in January 2020 prior to the COVID-19 pandemic impact on the volatility of our stock, as well as the suspension of quarterly cash dividends by the Board of Directors. The fair value of each stock option grant was estimated on the grant date using the Black‐Scholes option-pricing model with the following weighted average assumptions:

Fiscal Year

Risk free interest rate 1.6 % 2.5 % 2.3 %

Expected option life 5 years 5 years 5 years

Dividend yield 1.5 % 1.5 % 1.5 %

The exercise price of our stock options under our stock-based compensation plan is required to equal or exceed the fair value of our common stock at market close on the option grant date or the most recent trading day when grants take place on market holidays. The following table presents stock option activity:

Options Outstanding Options Exercisable

Information relating to significant option groups outstanding as of December 29, 2020, is as follows (shares in thousands):

Options Outstanding Options Exercisable

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As of December 29, 2020, total unrecognized stock-based compensation expense related to non-vested stock options was approximately $1.7 million, which is generally expected to be recognized over the next five years.

Time-Based Restricted Stock Units

The following table presents time-based restricted stock unit activity:

Shares (in thousands) Weighted Average Fair Value

The fair value of our time-based RSUs is equal to the fair value of our common stock at market close on the date of grant or the most recent trading day when grants take place on market holidays. The fair value of each time-based RSU is expensed over the vesting period (e.g., one, three or five years). As of December 29, 2020, total unrecognized stock-based compensation expense related to non-vested RSUs was approximately $9.6 million, which is generally expected to be recognized over the next five years.

Performance-Based Restricted Stock Units

The following table presents performance-based restricted stock unit activity:

Shares (in thousands) Weighted Average Fair Value

Vested or released — $ —

Vested or released (28 ) $ 42.41

Vested or released (29 ) $ 35.95

The fair value of our performance-based RSUs is equal to the fair value of our common stock at market close on the date of grant or the most recent trading day when grants take place on market holidays. The fair value of each performance-based RSU is expensed based on management’s current estimate of the level that the performance goal will be achieved. As of December 29, 2020, based on the target level of performance, the total unrecognized stock-based compensation expense related to non-vested performance-based RSUs was approximately $1.5 million, which is generally expected to be recognized over the next three years.

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12. Employee Benefit Plans

We maintain a voluntary, contributory 401(k) plan for eligible employees. Employees may elect to contribute up to the IRS maximum for the plan year. Additionally, eligible participants may also elect catch-up contributions as provided for by the IRS. Our executive officers and other highly compensated employees are not eligible to participate in the 401(k) plan. Employee contributions are matched by us at a rate of 33% for the first 6% of deferred earnings; however, due to the COVID-19 pandemic, employer matching was suspended during fiscal 2020. We contributed approximately $0.2 million in fiscal 2020 and approximately $0.6 million in fiscal 2019 and 2018.

We also maintain a non-qualified deferred compensation plan (the “DCP”) for our executive officers and other highly compensated employees, as defined in the DCP, who are otherwise ineligible for participation in our 401(k) plan. The DCP allows participating employees to defer the receipt of a portion of their base compensation and up to 100% of their eligible bonuses. Additionally, the DCP allows for a voluntary company match as determined by our compensation committee. During fiscal 2020, there were no Company contributions made or accrued. We pay for related administrative costs, which were not material during fiscal 2020. Employee deferrals are deposited into a rabbi trust and the funds are generally invested in individual variable life insurance contracts owned by us that are specifically designed to informally fund savings plans of this nature. Our investment in variable life insurance contracts, reflected in “Other assets, net” on our Consolidated Balance Sheets, was $13.4 million and $11.4 million as of December 29, 2020 and December 31, 2019, respectively. Our obligation to participating employees, included in “Other liabilities” on the accompanying Consolidated Balance Sheets, was $13.3 million and $11.2 million as of December 29, 2020 and December 31, 2019, respectively. All income and expenses related to the rabbi trust are reflected in our Consolidated Statements of Operations.

13. Related Party Transactions

James Dal Pozzo, the Chairman of the Board of the Jacmar Companies (“Jacmar”), is a member of our Board of Directors. Jacmar, through its affiliation with Distribution Market Advantage (“DMA”), a consortium of large, regional food distributors located throughout the United States, was our largest distributor of food, beverage, paper products and supplies from 2006 through June 30, 2020, when our contract with DMA expired. Effective June 1, 2020, after conducting an extensive request for proposal process and evaluation, we entered into an agreement with US Foods, replacing DMA. The new agreement expires in July 2023.

Through June 30, 2020, Jacmar serviced our restaurants in California and Nevada, while other DMA distributors serviced our restaurants in all other states. Under the terms of our agreement with DMA, Jacmar was required to sell products to us at the same prices as the other DMA distributors. Jacmar did not provide us with any produce, liquor, wine or beer products, all of which were provided by other third party vendors and included in “Cost of sales” on the Consolidated Statements of Operations. Effective July 1, 2020, with the expiration of our DMA agreement, Jacmar is no longer considered a related party.

The cost of food, beverage, paper products and supplies provided by Jacmar included within restaurant operating costs consisted of the following (in thousands):

Fiscal Year

Cost of sales:

Occupancy and operating:

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The amounts included in accounts payables related to Jacmar consisted of the following (in thousands):

14. Selected Consolidated Quarterly Financial Data (Unaudited)

Our summarized unaudited consolidated quarterly financial data is as follows (in thousands, except per share data):

Basic net loss per share (1) $ (0.22 ) $ (1.38 ) $ (0.30 ) $ (0.81 )

Diluted net loss per share (1) $ (0.22 ) $ (1.38 ) $ (0.30 ) $ (0.81 )

Cash dividends declared per common share $ — $ — $ — $ —

Cash dividends declared per common share $ 0.12 $ 0.12 $ 0.12 $ 0.13

15. Subsequent Events

On January 15, 2021, we entered into an Amendment No. 2 and Waiver to Third Amended and Restated Credit Agreement to reduce our Line of Credit by $20.0 million to $215 million, change certain pricing, such as the adjusted leverage ratio, and modified applicable covenants and/or reset selected covenant levels. See Note 8 for further information.

On January 21, 2021, we sold 703,399 shares of our common stock at $42.65 per share for gross cash proceeds of $30.0 million (before commission and other fees) through an “at-the market” (“ATM”) offering program.

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BJRI US Equity

BJRI · 10-K · period ended 2020-12-29

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

ITEM 9A. CONTROLS AND PROCEDURES

ITEM 9B. OTHER INFORMATION

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

ITEM 11. EXECUTIVE COMPENSATION

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

ITEM 16. FORM 10-K SUMMARY

BJRI US Equity☆

BJRI · 10-K · period ended 2020-12-29

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

ITEM 9A. CONTROLS AND PROCEDURES

ITEM 9B. OTHER INFORMATION

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

ITEM 11. EXECUTIVE COMPENSATION

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

ITEM 16. FORM 10-K SUMMARY

BJRI US Equity