What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2020-08-11 compared with 2020-06-10 · 141 added, 130 removed, 322 unchanged (46% of the section changed)

3 unchanged sentences

(In thousands, except per share amounts)

April 19, 2020 December 29, 2019

July 12, 2020 December 29, 2019

Current assets:

15 unchanged sentences

Unearned revenue 43,938 54,223

Short-term portion of lease obligations 49,654 42,699

Short-term debt 9,692 —

Current portion of lease obligations 62,068 42,699

Current portion of long-term debt 9,692 —

Accrued liabilities and other 44,250 29,403

9 unchanged sentences

20,449 and 17,851 shares issued;

12,890 and 12,923 shares outstanding as of April 19, 2020 and December 29, 2019

15,547 and 12,923 shares outstanding as of July 12, 2020 and December 29, 2019

Preferred stock, $ 0.001 par value:

3,000 shares authorized;

no shares issued and outstanding as of April 19, 2020 and December 29, 2019

Treasury stock 4,961 and 4,928 shares, at cost, as of April 19, 2020 and December 29, 2019

no shares issued and outstanding as of July 12, 2020 and December 29, 2019

Treasury stock 4,902 and 4,928 shares, at cost, as of July 12, 2020 and December 29, 2019

( 199,945 ) ( 202,313 )

9 unchanged sentences

(In thousands, except per share amounts)

Sixteen Weeks Ended

April 19, 2020 April 21, 2019

Twelve Weeks Ended Twenty-Eight Weeks Ended

July 12, 2020 July 14, 2019 July 12, 2020 July 14, 2019

Restaurant revenue $ 160,144 $ 302,418 $ 461,578 $ 702,902

14 unchanged sentences

Total costs and expenses 211,704 320,833 675,998 727,298

(Loss) income from operations ( 158,229 ) 3,401

Loss from operations ( 50,582 ) ( 12,852 ) ( 208,811 ) ( 9,451 )

Other expense:

Interest expense, net and other 1,979 2,153 5,349 5,391

(Loss) income before income taxes ( 161,599 ) 163

Loss before income taxes ( 52,561 ) ( 15,005 ) ( 214,160 ) ( 14,842 )

Income tax provision (benefit) 3,700 ( 15,986 ) 16,399 ( 16,462 )

6 unchanged sentences

Diluted 13,741 13,043 13,262 13,047

Other comprehensive (loss) income:

Other comprehensive income (loss):

Foreign currency translation adjustment $ 17 $ 406 $ ( 1,130 ) $ 77

Other comprehensive loss, net of tax ( 1,147 ) ( 329 )

Other comprehensive income (loss), net of tax 17 406 ( 1,130 ) 77

Total comprehensive (loss) income $ ( 56,244 ) $ 1,387 $ ( 231,689 ) $ 1,697

14 unchanged sentences

Balance, April 19, 2020 17,851 $ 18 4,961 $ ( 202,343 ) $ 213,246 $ ( 5,520 ) $ 178,968 $ 184,369

Issuance of common stock, $ 0.001 par value, net of stock issuance costs

2,598 2 — — 28,723 — — 28,725

Exercise of options, issuance of restricted stock, shares exchanged for exercise and tax, and stock issued through employee stock purchase plan — — ( 59 ) 2,398 ( 2,228 ) — — 170

Non-cash stock compensation — — — — 1,071 — — 1,071

Net loss — — — — — — ( 56,261 ) ( 56,261 )

Other comprehensive income — — — — — 17 — 17

Balance, July 12, 2020 20,449 $ 20 4,902 $ ( 199,945 ) $ 240,812 $ ( 5,503 ) $ 122,707 $ 158,091

See Notes to Condensed Consolidated Financial Statements.

RED ROBIN GOURMET BURGERS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS ' EQUITY

(In thousands)

Common Stock Treasury Stock Accumulated

10 unchanged sentences

Balance, April 21, 2019 17,851 $ 18 4,879 $ ( 201,135 ) $ 212,025 $ ( 5,130 ) $ 361,808 $ 367,586

Exercise of options, issuance of restricted stock, shares exchanged for exercise and tax, and stock issued through employee stock purchase plan — — ( 30 ) 1,208 ( 907 ) — — 301

Acquisition of treasury stock — — 17 ( 501 ) — — — ( 501 )

Non-cash stock compensation — — — — 941 — — 941

Net income — — — — — — 981 981

Other comprehensive income — — — — — 406 — 406

Balance July 14, 2019 17,851 $ 18 4,866 $ ( 200,428 ) $ 212,059 $ ( 4,724 ) $ 362,789 $ 369,714

See Notes to Condensed Consolidated Financial Statements.

2 unchanged sentences

(In thousands)

Sixteen Weeks Ended

April 19, 2020 April 21, 2019

Twenty-Eight Weeks Ended

July 12, 2020 July 14, 2019

Cash flows from operating activities:

2 unchanged sentences

Depreciation and amortization 48,880 49,807

Gift card breakage ( 1,806 ) ( 4,320 )

Goodwill and restaurant asset impairment 116,193 14,064

5 unchanged sentences

Accounts receivable 13,211 12,132

Inventories 1,484 ( 728 )

Prepaid expenses and other current assets ( 18,807 ) 3,459

13 unchanged sentences

Debt issuance costs ( 2,952 ) —

Proceeds from issuance of common stock, net of stock issuance costs 29,675 —

Proceeds from exercise of stock options and employee stock purchase plan 666 693

13 unchanged sentences

Red Robin Gourmet Burgers, Inc., a Delaware corporation, together with its subsidiaries ("Red Robin" or the "Company"), primarily operates, franchises, and develops full-service restaurants in North America.

As of April 19, 2020 , the Company owned and operated 452 restaurants located in 38 states.

The Company also had 102 franchised full-service restaurants in 16 states and one Canadian province as of April 19, 2020 .

As of July 12, 2020, the Company owned and operated 450 restaurants located in 38 states.

The Company also had 102 franchised full-service restaurants in 16 states and one Canadian province as of July 12, 2020.

The Company operates its business as one operating and one reportable segment.

13 unchanged sentences

Current and Prior Fiscal Quarters:

Second Quarter 2020 July 12, 2020 12

Second Quarter 2019 July 14, 2019 12

First Quarter 2020 April 19, 2020 16

5 unchanged sentences

Certain amounts presented in prior periods have been reclassified to conform with the current period presentation.

For the sixteen weeks ended April 21, 2019, the Company reclassified the following within net cash (used in) provided by operating activities on the condensed consolidated statements of cash flows:

$ 3.7 million from Other, net to Lease assets, net of liabilities presented in the changes to operating assets and liabilities, $0.8 million from Other, net to Deferred income tax provision (benefit) presented in the adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities, and $0.7 million from Prepaid expense and other current assets to Inventories presented in the changes to operating assets and liabilities.

Going Concern

Under ASC 205-40, Presentation of Financials Statements – Going Concern, the Company is required to assess whether substantial doubt is raised in that conditions or events indicate that it is probable the Company will be unable to meet its obligations when they come due within one year from the financial statement issuance date.

The assessment also includes the Company's consideration of any management plans to alleviate such substantial doubt.

The conditions related to the COVID-19 pandemic have had a material adverse impact on the Company's revenues, profitability, and cash flows.

Pursuant to the terms of the First Amendment to the Credit Agreement and Waiver (the "Amendment") to the Company's Amended and Restated Credit Agreement (the "Credit Facility"), further described in Note 2, COVID-19 Pandemic , the lenders thereto agreed, among other things, to waive the existing events of default under the Credit Facility related to the Company's failure to comply with the financial covenants as of the end of the fiscal quarter ended April 19, 2020.

In addition, the lenders agreed to (a) suspend the application of the lease adjusted leverage ratio financial covenant (the "Leverage Ratio Covenant") and the fixed charge coverage ratio financial covenant (the "FCCR Covenant"), in each case, for the fiscal quarters ending on July 12, 2020, October 4, 2020 and December 27, 2020 and (b) increase the maximum leverage permitted for purposes of the Leverage Ratio Covenant for each of the first three fiscal quarters ending in 2021;

provided that the Company issues new equity (or convertible debt) generating net cash proceeds of at least $ 25 million.

The Company is actively evaluating options for raising equity capital in order to satisfy the requirements of the Amendment.

If the Company is unable to raise sufficient equity capital within the timeframe prescribed by the Amendment, and is unable to obtain a further waiver or amendment to the Credit Facility, then the Company could experience an event of default under the Credit Facility, which could have a material adverse effect on the Company's liquidity, financial condition, and results of operations.

We cannot make any assurance regarding the likelihood, certainty, or exact timing of the Company's ability to raise capital or execute further amendments to the Credit Facility.

As a result, under applicable accounting standards, the Company concluded, because the equity raise is outside of management's control, substantial doubt exists surrounding the Company's ability to meet its obligations within one year of the financial statement issuance date and to continue as a going concern.

The condensed consolidated financial statements included in this Quarterly Report on Form 10-Q do not include any adjustments that might result from the outcome of this uncertainty.

For the twenty-eight weeks ended July 14, 2019, the Company reclassified the following within net cash (used in) provided by operating activities on the condensed consolidated statements of cash flows:

$ 14.1 million from Non-cash other charges to Goodwill and restaurant asset impairment and $ 1.5 million from Other operating assets and liabilities, net to Lease assets, net of liabilities.

Going Concern - Substantial Doubt Resolved

As required by ASC Topic 205-40, Presentation of Financial Statements - Going Concern , management has assessed the Company's ability to continue as a going concern for one year from the financial statement issuance date for the fiscal quarter ended July 12, 2020.

On May 29, 2020, the Company obtained the First Amendment to the Credit Agreement and Waiver (the "Amendment") to the Company's Amended and Restated Credit Agreement (the "Credit Facility").

The Amendment provided relief from our existing events of default under the Credit Facility and provided covenant relief subject to the successful completion of a $ 25 million capital raise on or before November 13, 2020, as further disclosed in Note 8, Borrowings .

As of the issuance date of our first quarter 2020 financial statements, the Company disclosed, as required under applicable accounting standards, that substantial doubt existed surrounding the Company's ability to meet its obligations within one year of the issuance date of the first quarter Form 10-Q because the capital raise was outside of management's control at the time.

On June 17, 2020, the Company issued 2.6 million shares of common stock raising proceeds of $ 28.7 million, net of stock issuance costs, through its at-the-market equity offering.

The equity raise satisfied the terms of the Amendment, and management expects to remain in compliance with the Credit Facility covenants for at least twelve months from the issuance of the July 12, 2020 Form 10-Q.

Management has concluded there is not a substantial doubt regarding the Company’s ability to continue as a going concern.

Recent Accounting Pronouncements

5 unchanged sentences

We reviewed all other recently issued accounting pronouncements and concluded they were either not applicable or not expected to have a significant impact on the Company's condensed consolidated financial statements.

Recently Adopted Accounting Standards

Current and Expected Credit Losses

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Update 2016-13, Financial Instruments - Credit Losses (“Topic 326”), subsequently amended by various standard updates.

This guidance replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information when determining credit loss estimates and requires financial assets to be measured net of expected credit losses at the time of initial recognition.

The Company performed an analysis to determine the impact on our condensed consolidated financial statements and recognized an immaterial adjustment to Accounts Receivable, Net on our condensed consolidated balance sheets upon adoption during the first quarter of 2020.

We performed an update to our analysis in the context of the COVID-19 pandemic and recognized an additional immaterial adjustment related to our franchise receivables.

COVID-19 Pandemic

Due to the novel coronavirus ("COVID-19") pandemic, we have navigated and continue to navigate an unprecedented time for our business and industry as we collectively work to combat the global crisis.

With the health, safety, and well-being of Red Robin's Team Members, Guests, and communities as our top priority, we immediately shifted our restaurants to an off-premise model and are strictly adhering to US Centers for Disease Control ("CDC"), state, and local guidelines as we have begun to reopen our dining rooms to our Guests and Team Members.

The COVID-19 pandemic has had a material effect on our business, and we expect the impact from COVID-19 will continue to negatively affect our business through the remainder of fiscal year 2020.

Due to the novel coronavirus ("COVID-19") pandemic, we have navigated and continue to navigate an unprecedented time for our business and industry as we collectively work to maintain the stable operation of our business.

During the second quarter of 2020, the Company began re-opening dining rooms at Company-owned restaurants in accordance with local limits with re-opened restaurants operating at no higher than 50% occupant capacity.

Re-opening dining rooms was executed with the health, safety, and well-being of Red Robin's Team Members, Guests, and communities in mind, and strict adherence to US Centers for Disease Control ("CDC"), state, and local guidelines as our top priority.

The COVID-19 pandemic has had a material adverse effect on our business, and we expect the impact from COVID-19 will continue to negatively affect our business through the remainder of fiscal year 2020.

Franchise Revenue

In response to COVID-19's effect on our franchisee's operations, we temporarily abated franchise royalty payments and advertising contributions effective March 20, 2020.

During periods of abated payments, franchise revenue is not recognized under GAAP or collected from our franchise partners.

Franchised restaurants operate under contractual arrangements with the Company, and the payments specified in the franchise contracts will be accounted for under ASC Topic 606, Revenue from Contracts with Customers .

In response to the impact of COVID-19 on our operations, beginning April 1, 2020 the Company has not made full lease payments under its existing lease agreements.

In response to COVID-19's effect on our franchise operations, we temporarily abated franchise royalty payments and advertising contributions effective March 20, 2020.

During periods of abated payments, franchise revenue was not recognized or collected from our franchisees.

Abated royalty payments and advertising contributions will not be collected by the Company.

The Company began charging and collecting partial franchise royalty payments and advertising contributions during the latter half of the second fiscal quarter of 2020.

Franchised restaurants operate under contractual arrangements with the Company, and the payments specified in the franchise contracts are accounted for under ASC Topic 606, Revenue from Contracts with Customers .

In response to the impact of COVID-19 on our operations, beginning April 1, 2020 the Company stopped making full lease payments under its existing lease agreements.

During the suspension of payments, the Company continued to recognize expenses and liabilities for lease obligations and corresponding right-of-use assets on the balance sheet in accordance with ASC Topic 842 .

We have engaged in ongoing constructive discussions with landlords regarding the potential restructuring of lease payments and rent concessions.

We will elect to recognize any contractual rent concessions reached in the future as a variable credit to rent expense as opposed to a lease modification consistent with the relief issued by the Financial Accounting Standards Board titled ASC Topic 842 and ASC Topic 840:

Accounting for Lease Concessions Related to the Effects of the COVID-19 Pandemic.

Contractual rent concessions expected to be agreed to cannot be reasonably determined at this time based on the status of discussions with our landlords.

The Company determined the sustained decrease in our stock price coupled with the closure of our dining rooms and significant decline to the equity value of our peers and overall U.S.

stock market represented a goodwill impairment triggering event.

We performed a quantitative analysis as of our first quarter ended April 19, 2020 to determine if impairment to our goodwill existed for our one reporting unit.

We used a blended approach in calculating fair value of our one reporting unit including the income approach, market approach, and market capitalization approach.

This analysis resulted in full impairment of our goodwill balance totaling $ 95.4 million recognized during the sixteen weeks ended April 19, 2020 included in Other charges on the condensed consolidated statement of operations and comprehensive (loss) income.

The goodwill impairment was measured as the amount by which the carrying amount of the reporting unit, including goodwill, exceeded its fair value.

We are engaging in ongoing constructive discussions with landlords regarding the potential restructuring of lease payments and rent concessions.

As of July 12, 2020, the Company has contractually negotiated rent concessions on certain leases.

The types of rent concessions the Company has negotiated include early termination, early renewal, rent deferral, and rent abatement.

For contractual rent concessions that do not substantially change the total cash flows of the lease, the Company has elected to account for these concessions assuming the existing lease agreements provide enforceable rights and obligations consistent with the relief issued by the Financial Accounting Standards Board titled ASC Topic 842 and ASC Topic 840:

Accounting for Lease Concessions Related to the Effects of the COVID-19 Pandemic ("FASB Relief") .

For leases where the rent concession did not substantially change the total cash flows, the concession was accounted for as a remeasurement to the lease liability based on the original discount rate with a corresponding adjustment to the right-of-use asset.

Additionally, the classification of the leases was not reassessed.

The Company recorded an immaterial remeasurement to the lease liability and right-of-use asset resulting from contractual rent concessions under the FASB relief during the second fiscal quarter of 2020.

For contractual rent concessions that substantially changed the total cash flows of the lease and did not qualify for the FASB relief, we applied the modification framework in accordance with ASC Topic 842 , Leases .

The Company reassessed lease classification for rent concessions that did not qualify for the FASB relief, and it was concluded one lease changed from finance to operating and two leases changed from operating to finance.

Based on updated discount rates, a $ 21.7 million remeasurement was recorded to increase the lease liability, a $ 21.7 million adjustment was recorded to increase the right-of-use asset, and an immaterial loss was recorded in Occupancy on the condensed consolidated statements of operations and comprehensive (loss) income.

Contractual rent concessions granted to the Company did not grant the right to use additional assets not included in the original lease contracts, so no separate contracts were accounted for as part of the rent concession modifications.

We performed a goodwill impairment analysis during the first quarter of 2020 resulting in full impairment of our goodwill balance totaling $ 95.4 million.

The goodwill impairment is included in Other charges on the condensed consolidated statements of operations and comprehensive (loss) income for the twenty-eight weeks ended July 12, 2020 and was measured as the amount by which the carrying amount of the reporting unit, including goodwill, exceeded its fair value.

Restaurant Assets

The Company determined the triggering event described above also represented a restaurant asset impairment triggering event.

The Company recognized $ 15.5 million of impairment related to restaurant assets during the sixteen weeks ended April 19, 2020 included in Other charges on the condensed consolidated statement of operations and comprehensive (loss) income resulting from the continuing and projected future results of 24 Company-owned restaurants.

During the twelve weeks ended July 12, 2020, the Company recognized $ 5.3 million of impairment related to restaurant assets included in Other charges on the condensed consolidated statements of operations and comprehensive (loss) income resulting from the continuing and projected future results of 6 Company-owned restaurants.

Restaurant asset impairment of $ 2.3 million was related to 4 permanently closed Company-owned restaurants and included in Restaurant closure and refranchising costs in Note 7, Other Charges .

Additional restaurant asset impairment was recognized during the twelve weeks ended July 12, 2020 due to changes in management's forecast.

Although current fiscal year to date results continue to align with management's forecast, the increase in reported COVID-19 cases across the United States and factors associated with the pandemic have changed management's expectation on the timing of the Company's recovery and projected results in future fiscal periods at certain restaurants.

If reported COVID-19 cases continue to increase or other factors associated with the pandemic continue to develop, management's forecast could change in future periods requiring additional restaurant asset impairment.

The Company recognized $ 15.5 million of impairment related to restaurant assets during the first quarter of 2020 resulting from the continuing and projected future results of 24 Company-owned restaurants.

The restaurant asset impairment is included in Other charges on the condensed consolidated statements of operations and comprehensive (loss) income for the twenty-eight weeks ended July 12, 2020.

Recoverability of restaurant assets, including restaurant sites, leasehold improvements, information technology systems, right-of-use assets, amortizable intangible assets, and other fixed assets, to be held and used is measured by a comparison of the carrying amount of the assets to the future undiscounted net cash flows expected to be generated by the assets.

Identifiable cash flows are measured at the lowest level for which they are largely independent of the cash flows of other groups of assets and liabilities, generally at the restaurant level.

Each restaurant's past and present operating performance was reviewed in combination with projected future results primarily through projected undiscounted cash flows that included management's expectation of future financial impacts from COVID-19.

Each restaurant's past and present operating performance was reviewed in combination with projected future results primarily through projected undiscounted cash flows that included management's current expectation of future financial impacts from COVID-19.

If the restaurant assets were determined to be impaired through comparison of the assets carrying value to its undiscounted cash flows, the Company compared the carrying amount of each restaurant's assets to its fair value as estimated by management to calculate the impairment amount.

2 unchanged sentences

The restaurant asset impairment charges represent the excess of the carrying amount over the estimated fair value of the restaurant assets calculated using a discounted cash flow projection model.

Additional restaurant asset impairment may be required to be recognized if the COVID-19 pandemic continues to negatively impact our business.

Valuation Allowance on Deferred Tax Assets

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

The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.

Management considers the future reversals of existing deferred tax liabilities and projected taxable income, including whether future originating deductible temporary differences are likely to be realized.

The March 19, 2020 passage of the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") created an opportunity for the Company to carry back 2019 and 2020 projected net operating losses ("NOL's") to generate up to $12 million of projected cash tax refunds within the next 12 months.

As a result, $ 35 million of federal and state tax receivables are recorded in Prepaid expenses and other current assets on the condensed consolidated balance sheets as of July 12, 2020 and are expected to generate projected cash tax refunds in the range of $ 14 million to $ 17 million within the next 12 months.

The remaining receivables will be carried forward as allowed under applicable taxing jurisdictions.

As a result of these projected NOL carrybacks, approximately $ 58 million of the previously utilized FICA tip tax credits will be reinstated.

As of April 19, 2020 the existing $ 52 million FICA tip credit carryforwards will be utilized based on projected future taxable income, however they are anticipated to be replaced by originating FICA tip credits that are not projected to be utilized in the carry forward period.

As of July 12, 2020, the existing $ 79 million FICA tip credit carryforwards will be utilized based on projected future taxable income, however they are anticipated to be replaced by originating FICA tip credits that are not projected to be utilized in the carry forward period.

Therefore, a $ 79 million valuation allowance has been established for the FICA tip credit carryforwards.

$ 27 million of the valuation allowance was recognized during the twelve weeks ended July 12, 2020.

To the extent future actual taxable income exceeds the current projections, the FICA tip credit carryforwards may become realizable.

During the first quarter ended April 19, 2020, the Company made draws of $ 94 million on its revolving line of credit to provide operating liquidity while our restaurant dining rooms remain closed due to the COVID-19 pandemic.

As of April 19, 2020, our credit facility was fully drawn.

Subsequent Event - Credit Agreement Amendment

On May 29, 2020, the Company entered into the Amendment which amends the Company's Credit Facility as follows:

• increased the pricing under the Credit Facility for (a) the period of the Amendment Effective Date through the first interest determination date occurring after the fiscal quarter ending on or about April 18, 2021 to LIBOR (subject to a 1.00 % LIBOR floor) plus 3.25 % and (b) periods thereafter to the amounts set forth in a grid included in the Amendment (to which a 1.00 % LIBOR floor shall apply);

• waived the existing events of default under the Credit Facility related to the Company's failure to comply with the financial covenants as of April 19, 2020

• suspended the application of (a) the Lease Ratio Covenant and (b) the FCCR Covenant, in each case, for the fiscal quarter ending on July 12, 2020;

• if the Company issues new equity (or convertible debt) generating net cash proceeds of at least $ 25 million (the "Minimum Capital Event"), (a) suspend the application of the Leverage Ratio Covenant and FCCR Covenant, in each case, for the fiscal quarters ending on October 4, 2020 and December 27, 2020 and (b) increase the maximum leverage permitted for purposes of the Leverage Ratio Covenant for each of the first three fiscal quarters ending in 2021;

• Additionally, (a) the Leverage Ratio Covenant will be calculated using a seasonally adjusted annualized consolidated EBITDA for the applicable period since the beginning of fiscal year 2021 and (b) the FCCR Covenant will be calculated only for the applicable period since the beginning of fiscal year 2021;

• added a minimum liquidity covenant, measured as of the last day of each fiscal month, that applies during the period commencing on the Amendment Effective Date through March 21, 2021;

• subject to limited exceptions, prohibit expansion capital expenditures, restricted payments, acquisitions, and other investments until the later of (a) the Company's delivery of a compliance certificate for the fiscal quarter ending on or about July 11, 2021 demonstrating compliance with the financial covenants then in effect and (b) the Company satisfying an agreed ratio under its Leverage Ratio Covenant for the most recently ended fiscal quarter or fiscal year, as applicable;

• added a maximum cash balance limitation requiring revolver repayments (but with no associated permanent reduction in the revolver) to the extent that the Company's consolidated cash on hand exceeds $ 30 million as of the end of any fiscal month;

• revised the conditions precedent to the revolver borrowings so that certain effects of COVID-19 are excluded for purposes of certain representations and warranties that must be true and correct as conditions to revolving borrowings;

• required mandatory prepayments from net cash proceeds of equity (or convertible debt) issuances that exceed amounts set forth in the Amendment;

• provided for certain additional financial reporting requirements under the Credit Facility.

As conditions to the Amendment, the Company (a) repaid the revolving loans, so that the amount of the Company's consolidated cash on hand did not exceed $ 30 million as of the Amendment Effective Date totaling $ 59 million and (b) paid certain customary amendment fees to the lenders under the Credit Facility totaling approximately $ 1.1 million which will be capitalized as deferred loan fees and amortized over the remaining term of the Credit Facility.

The Company's $ 90 million deferred tax assets are recorded net of the $ 79 million valuation allowance in Other assets, net on the condensed consolidated balance sheets as of July 12, 2020.

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

The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.

Disaggregation of revenue

In the following table, revenue is disaggregated by type of good or service (in thousands):

Sixteen Weeks Ended

April 19, 2020 April 21, 2019

Twelve Weeks Ended Twenty-Eight Weeks Ended

July 12, 2020 July 14, 2019 July 12, 2020 July 14, 2019

Restaurant revenue $ 160,144 $ 302,418 $ 461,578 $ 702,902

Franchise revenue (1)

380 4,389 3,277 9,752

Gift card breakage 392 639 1,806 4,320

6 unchanged sentences

Components of Unearned revenue in the accompanying condensed consolidated balance sheets are as follows (in thousands):

April 19, 2020 December 29, 2019

July 12, 2020 December 29, 2019

Unearned gift card revenue $ 33,306 $ 43,544

1 unchanged sentence

Revenue recognized in the condensed consolidated statements of operations and comprehensive (loss) income for the redemption of gift cards that were included in the liability balance at the beginning of the fiscal year was as follows (in thousands):

Sixteen Weeks Ended

April 19, 2020 April 21, 2019

Twenty-Eight Weeks Ended

July 12, 2020 July 14, 2019

Gift card revenue $ 12,990 $ 18,380

Leases are included in right-of-use assets, net, short-term portion of lease obligations, and long-term portion of lease liabilities on our condensed consolidated balance sheet as of April 19, 2020 and December 29, 2019 as follows (in thousands):

April 19, 2020 Finance Operating Total

Leases are included in right-of-use assets, net, current portion of lease obligations, and long-term portion of lease liabilities on our condensed consolidated balance sheet as of July 12, 2020 and December 29, 2019 as follows (in thousands):

July 12, 2020 Finance Operating Total

Right of use assets, net $ 11,340 $ 404,560 $ 415,900

Short-term portion of lease obligations 738 48,916 49,654

Current portion of lease obligations 1,070 60,998 62,068

Long-term portion of lease obligations 12,532 442,756 455,288

2 unchanged sentences

Right of use assets, net $ 7,552 $ 418,696 $ 426,248

Short-term portion of lease obligations 725 41,974 42,699

Current portion of lease obligations 725 41,974 42,699

Long-term portion of lease obligations 8,822 456,613 465,435

1 unchanged sentence

The components of lease expense, including variable lease costs primarily consisting of common area maintenance charges and real estate taxes, are included in Occupancy on our condensed consolidated statement of operations as follows (in thousands):

Sixteen Weeks Ended

April 19, 2020 April 21, 2019

Twelve Weeks Ended Twenty-Eight Weeks Ended

July 12, 2020 July 14, 2019 July 12, 2020 July 14, 2019

Operating lease cost $ 14,949 $ 17,442 $ 36,939 $ 41,114

5 unchanged sentences

Total $ 20,246 $ 24,407 $ 50,894 $ 57,381

Maturities of our lease liabilities as of April 19, 2020 were as follows (in thousands):

Maturities of our lease liabilities as of July 12, 2020 were as follows (in thousands):

Finance Leases Operating Leases Total

9 unchanged sentences

Supplemental cash flow information related to leases is as follows (in thousands, except other information):

Sixteen Weeks Ended

April 19, 2020 April 21, 2019

Twenty-Eight Weeks Ended

July 12, 2020 July 14, 2019

Cash flows from operating activities

16 unchanged sentences

Goodwill and Intangible Assets

The following table presents goodwill as of April 19, 2020 and December 29, 2019 (in thousands):

The following table presents goodwill as of July 12, 2020 and December 29, 2019 (in thousands):

Balance, December 29, 2019 $ 96,397

1 unchanged sentence

Goodwill impairment (1)

Balance, April 19, 2020 $ —

Balance, July 12, 2020 $ —

———————————————————

(1) See Note 2, COVID-19 Pandemic , for further discussion of goodwill impairment recognized during the sixteen weeks ended April 19, 2020.

The following table presents intangible assets as of April 19, 2020 and December 29, 2019 (in thousands):

April 19, 2020 December 29, 2019

(1) See Note 2, COVID-19 Pandemic , for further discussion of goodwill impairment recognized during the twenty-eight weeks ended July 12, 2020.

The following table presents intangible assets as of July 12, 2020 and December 29, 2019 (in thousands):

July 12, 2020 December 29, 2019

Amount Accumulated

4 unchanged sentences

Franchise rights $ 50,584 $ ( 36,192 ) $ 14,392 $ 53,336 $ ( 35,896 ) $ 17,440

Favorable leases 13,001 ( 8,957 ) 4,044 13,001 ( 8,794 ) 4,207

Leasehold interests 13,001 ( 9,056 ) 3,945 13,001 ( 8,794 ) 4,207

Liquor licenses and other 10,633 ( 9,893 ) 740 10,737 ( 9,869 ) 868

4 unchanged sentences

(Loss) Earnings Per Share

Basic earnings per share amounts are calculated by dividing net (loss) income by the weighted-average number of shares of common stock outstanding during the period.

Basic (loss) earnings per share amounts are calculated by dividing net (loss) income by the weighted-average number of shares of common stock outstanding during the period.

Diluted (loss) earnings per share amounts are calculated based upon the weighted-average number of shares of common stock and potentially dilutive shares of common stock outstanding during the period.

3 unchanged sentences

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

Sixteen Weeks Ended

April 19, 2020 April 21, 2019

Twelve Weeks Ended Twenty-Eight Weeks Ended

July 12, 2020 July 14, 2019 July 12, 2020 July 14, 2019

Basic weighted average shares outstanding 13,741 12,970 13,262 12,969

4 unchanged sentences

Other charges consist of the following (in thousands):

Sixteen Weeks Ended

April 19, 2020 April 21, 2019

Twelve Weeks Ended Twenty-Eight Weeks Ended

July 12, 2020 July 14, 2019 July 12, 2020 July 14, 2019

Goodwill impairment $ — $ — $ 95,414 $ —

Restaurant asset impairment 5,281 14,064 20,779 14,064

Restaurant closure and refranchising costs 7,602 1,001 9,008 1,305

Litigation contingencies — — 4,500 —

Board and stockholder matter costs 967 1,152 2,449 1,152

Restaurant closure and refranchising costs 1,406 304

Severance and executive transition — 370 881 2,364

COVID-19 related charges 198 —

COVID-19 related costs 651 — 849 —

Executive retention — 260 — 360

Other charges $ 14,501 $ 16,847 $ 133,880 $ 19,245

The Company recognized non-cash impairment charges related to goodwill and restaurant assets at 24 restaurant locations resulting from quantitative impairment analyses;

The Company recognized non-cash impairment charges related to goodwill and assets at 10 and 34 Company-owned restaurants during the twelve and twenty-eight weeks ended July 14, 2020 resulting from quantitative impairment analyses;

see Note 2, COVID-19 Pandemic, for further discussion.

Non-cash impairment charges resulting from restaurant closures are included within Restaurant closure and refranchising costs.

Restaurant closure and refranchising costs include the restaurant operating costs of the 35 Company-owned restaurants that remained temporarily closed due to the COVID-19 pandemic.

Litigation contingencies include legal settlement costs related to two class action employment cases.

Severance and executive transition in 2020 primarily relates to severance costs associated with the reduction in force of restaurant support center Team Members.

COVID-19 related charges include the costs of purchasing personal protective equipment for restaurant Team Members.

Total borrowings as of April 19, 2020 and December 29, 2019 were $ 290.9 million and $ 206.9 million.

As of April 19, 2020 , short-term borrowings were $ 9.7 million;

no borrowings as of December 29, 2019 were classified as short-term.

On January 10, 2020, the Company replaced its prior credit facility with a new Amended and Restated Credit Agreement (the "Credit Facility") which provides for a $ 161.5 million revolving line of credit and a $ 138.5 million term loan for a total borrowing capacity of $ 300 million.

In addition, the Credit Facility allows for the issuance of $ 25 million in letters of credit, swingline loans up to $ 15 million, and the option to increase the borrowing capacity by up to an additional $ 100 million subject to lenders' participation.

The Credit Facility will mature on January 10, 2025.

In connection with the termination of the prior credit facility and new borrowings under the Credit Facility, the Company paid off all outstanding borrowings, accrued interest, and fees under the prior credit facility.

Borrowings refinanced under the Credit Facility totaled $ 186.6 million, net of loan origination fees.

No amortization is required with respect to the revolving line of credit, and the term loans require quarterly principal payments at a rate of 7.0 % per annum of the original principal balance.

Borrowings under the revolving line of credit and term loans denominated in U.S.

Dollars, are subject to rates based on the London Interbank Offered Rate (“LIBOR”) plus a spread as defined in the credit agreement filed as Exhibit 10.1 to Form 8-K filed with the SEC on January 13, 2020.

COVID-19 related costs include the costs of purchasing personal protective equipment for restaurant Team Members and Guests and emergency sick pay provided to restaurant Team Members during the pandemic.

Total borrowings as of July 12, 2020 and December 29, 2019 were $ 207.5 million and $ 206.9 million.

As of July 12, 2020, the current portion of long-term borrowings was $ 9.7 million;

no borrowings as of December 29, 2019 were classified as current.

Borrowings under the Credit Facility are subject to interest rates based on the London Interbank Offered Rate ("LIBOR").

The publication of LIBOR is expected to discontinue in December 2021, however, we anticipate an amended credit agreement will be executed at the new applicable interest rate.

As of April 19, 2020 , the Company had outstanding borrowings under the Credit Facility of $ 290.0 million, in addition to amounts issued under letters of credit of $ 7.5 million.

The Credit Facility will mature on January 10, 2025.

On May 29, 2020, the Company entered into the First Amendment to the Credit Agreement and Waiver (the "Amendment") which set forth the following:

increased pricing under the Credit Facility, waiver of the lease adjusted leverage covenant ratio ("LALR ratio") and fixed charge coverage covenant ratio ("FCC ratio") for the remainder of fiscal year 2020, adjustments allowable during the first three fiscal quarters of 2021 to the LALR ratio, including increasing the maximum LALR ratio permitted and allowing the use of a seasonally adjusted annualized consolidated EBITDA in the LALR ratio calculation, and to the FCC ratio, including only being calculated for applicable periods since the beginning of 2021, and added various other additional covenant requirements.

The covenant relief in the Amendment was contingent on the Company raising capital of at least $ 25 million.

As a result of the Amendment, the Company repaid $ 59 million on the revolving line of credit such that the amount of the Company's consolidated cash on hand did not exceed $ 30 million as of the Amendment Effective Date;

paid certain customary amendment fees to lenders and advisors totaling approximately $ 1.9 million, which were capitalized as deferred loan fees and will be amortized over the remaining term of the Credit Facility;

and issued 2.6 million shares of common stock raising proceeds of $ 28.7 million, net of stock issuance costs, which were used to pay down the revolving line of credit as required by the Amendment.

As of July 12, 2020, the Company had outstanding borrowings under the Credit Facility of $ 206.6 million, in addition to amounts issued under letters of credit of $ 7.5 million.

The amounts issued under letters of credit reduce the amount available under the facility but were not recorded as debt.

1 unchanged sentence

Loan origination costs associated with the Credit Facility are included as deferred costs in Other assets, net in the accompanying condensed consolidated balance sheets.

Unamortized debt issuance costs were $ 1.7 million and $ 1.0 million as of April 19, 2020 and December 29, 2019.

On May 29, 2020, the Company entered into the First Amendment to the Credit Agreement and Waiver;

see Note 2, COVID-19 Pandemic , for further discussion.

Unamortized debt issuance costs were $ 3.7 million and $ 1.0 million as of July 12, 2020 and December 29, 2019.

Fair Value Measurements

1 unchanged sentence

The carrying amounts of the Company's cash and cash equivalents, accounts receivable, accounts payable, and current accrued expenses and other liabilities approximate fair value due to the short term nature or maturity of the instruments.

The following tables present the Company’s assets measured at fair value on a recurring basis included in Other assets, net on the accompanying condensed consolidated balance sheets as of April 19, 2020 and December 29, 2019 (in thousands):

April 19, 2020 Level 1 Level 2 Level 3

The following tables present the Company's assets measured at fair value on a recurring basis included in Other assets, net on the accompanying condensed consolidated balance sheets as of July 12, 2020 and December 29, 2019 (in thousands):

July 12, 2020 Level 1 Level 2 Level 3

Investments in rabbi trust $ 6,022 $ 6,022 $ — $ —

6 unchanged sentences

These assets are measured at fair value if determined to be impaired.

As of April 19, 2020 , the Company measured non-financial assets for impairment using continuing and projected future cash flows, as discussed in Note 2, COVID-19 Pandemic , which were based on significant inputs not observable in the market and thus represented a level 3 fair value measurement.

Based on our restaurant asset impairment analysis, we impaired long-lived assets at 24 Company-owned restaurants with carrying values of $ 34.6 million.

As of July 12, 2020, the Company measured non-financial assets for impairment using continuing and projected future cash flows, as discussed in Note 2, COVID-19 Pandemic , which were based on significant inputs not observable in the market and thus represented a level 3 fair value measurement.

Based on our restaurant asset impairment analyses during fiscal year 2020, we impaired long-lived assets at 34 Company-owned restaurants with carrying values of $ 58 million.

We determined the fair value of these long-lived restaurant assets to be $ 34.9 million.

2 unchanged sentences

The Company's liability under its Credit Facility is carried at historical cost in the accompanying condensed consolidated balance sheets.

The carrying value of the Credit Facility approximates fair value as the interest rate on this instrument approximates current market rates.

Due to market interest rates decreasing during the second fiscal quarter of 2020, the Company determined the carrying value of the liability under its Credit Facility did not approximate fair value.

The carrying value and fair value of the Credit Facility as of July 12, 2020 were $ 206.6 million and $ 217.6 million.

As of December 29, 2019, the carrying value of the Credit Facility approximated fair value as the interest rate on the instrument approximated current market rates.

The interest rate on the Credit Facility represents a level 2 fair value input.

6 unchanged sentences

Red Robin International, Inc.

was filed and is currently pending in California Superior Court in Santa Ana, California and involves claims under the California Private Attorneys’ General Act (“PAGA”) that partially overlap in the claims made in the Vigueras matter.

was filed and is currently pending in California Superior Court in Santa Ana, California and involves claims under the California Private Attorneys' General Act that partially overlap the claims made in the Vigueras matter.

In the first quarter of 2020, the Company reached a tentative settlement agreement resolving all claims and the cost of class administration in both cases for an aggregate $ 8.5 million.

9 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements