RED ROBIN GOURMET BURGERS INC 10-Q

ITEM 1. Financial Statements (unaudited) RED ROBIN GOURMET BURGERS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (in thousands, except for share amounts) October 4, 2020 December 29, 2019 Assets: Current assets: Cash and cash equivalents $ 27,367 $ 30,045 Accounts receivable, net 9,024 22,372 Inventories 24,496 26,424 Income tax receivable 63,066 5,308 Prepaid expenses and other current assets 11,652 21,338 Total current assets 135,605 105,487 Property and equipment, net 446,083 518,013 Right of use assets, net 415,948 426,248 Goodwill — 96,397 Intangible assets, net 25,440 29,975 Other assets, net 10,195 61,460 Total assets $ 1,033,271 $ 1,237,580 Liabilities and stockholders ' equity: Current liabilities: Accounts payable $ 18,940 $ 33,040 Accrued payroll and payroll-related liabilities 26,878 35,221 Unearned revenue 42,564 54,223 Current portion of lease obligations 62,032 42,699 Current portion of long-term debt 9,692 — Accrued liabilities and other 42,987 29,403 Total current liabilities 203,093 194,586 Long-term debt 206,375 206,875 Long-term portion of lease obligations 450,751 465,435 Other non-current liabilities 19,858 10,164 Total liabilities 880,077 877,060 Stockholders ' equity: Common stock; $ 0.001 par value: 45,000 shares authorized; 20,449 and 17,851 shares issued; 15,548 and 12,923 shares outstanding as of October 4, 2020 and December 29, 2019 20 18 Preferred stock, $ 0.001 par value: 3,000 shares authorized; no shares issued and outstanding as of October 4, 2020 and December 29, 2019 — — Treasury stock 4,901 and 4,928 shares, at cost, as of October 4, 2020 and December 29, 2019 ( 199,908 ) ( 202,313 ) Paid-in capital 242,048 213,922 Accumulated other comprehensive loss, net of tax ( 5,494 ) ( 4,373 ) Retained earnings 116,528 353,266 Total stockholders' equity 153,194 360,520 Total liabilities and stockholders ' equity $ 1,033,271 $ 1,237,580 See Notes to Condensed Consolidated Financial Statements. 1 T a b l e o f C o n t e n t s RED ROBIN GOURMET BURGERS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited) Twelve Weeks Ended Forty Weeks Ended (in thousands, except for share amounts) October 4, 2020 October 6, 2019 October 4, 2020 October 6, 2019 Revenues: Restaurant revenue $ 197,009 $ 289,862 $ 658,587 $ 992,764 Franchise and other revenues 3,469 4,360 9,078 19,305 Total revenues 200,478 294,222 667,665 1,012,069 Costs and expenses: Restaurant operating costs (excluding depreciation and amortization shown separately below): Cost of sales 46,037 69,017 155,243 235,119 Labor 74,344 104,870 255,652 354,302 Other operating 37,631 44,317 124,585 142,882 Occupancy 22,099 24,942 76,514 85,420 Depreciation and amortization 19,173 21,280 68,053 71,087 Selling, general, and administrative expenses 21,284 36,776 82,483 120,126 Pre-opening costs 89 — 245 319 Other charges 4,416 ( 1,757 ) 138,296 17,488 Total costs and expenses 225,073 299,445 901,071 1,026,743 Loss from operations ( 24,595 ) ( 5,223 ) ( 233,406 ) ( 14,674 ) Other expense: Interest expense, net and other 2,280 1,812 7,629 7,203 Loss before income taxes ( 26,875 ) ( 7,035 ) ( 241,035 ) ( 21,877 ) Income tax benefit ( 20,696 ) ( 5,214 ) ( 4,297 ) ( 21,676 ) Net loss $ ( 6,179 ) $ ( 1,821 ) $ ( 236,738 ) $ ( 201 ) Loss per share: Basic $ ( 0.40 ) $ ( 0.14 ) $ ( 16.98 ) $ ( 0.02 ) Diluted $ ( 0.40 ) $ ( 0.14 ) $ ( 16.98 ) $ ( 0.02 ) Weighted average shares outstanding: Basic 15,540 12,959 13,945 12,967 Diluted 15,540 12,959 13,945 12,967 Other comprehensive income (loss): Foreign currency translation adjustment $ 9 $ ( 262 ) $ ( 1,121 ) $ ( 185 ) Other comprehensive income (loss), net of tax 9 ( 262 ) ( 1,121 ) ( 185 ) Total comprehensive loss $ ( 6,170 ) $ ( 2,083 ) $ ( 237,859 ) $ ( 386 ) See Notes to Condensed Consolidated Financial Statements. 2 T a b l e o f C o n t e n t s RED ROBIN GOURMET BURGERS, INC. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS ' EQUITY (Unaudited) Common Stock Treasury Stock Accumulated Other Comprehensive Loss, net of tax Paid-in Capital Retained Earnings (in thousands) Shares Amount Shares Amount Total Balance, December 29, 2019 17,851 $ 18 4,928 $ ( 202,313 ) $ 213,922 $ ( 4,373 ) $ 353,266 $ 360,520 Exercise of options, issuance of restricted stock, shares exchanged for exercise and tax, and stock issued through employee stock purchase plan — — ( 39 ) 1,605 ( 1,388 ) — — 217 Acquisition of treasury stock — — 72 ( 1,635 ) — — — ( 1,635 ) Non-cash stock compensation — — — — 712 — — 712 Net loss — — — — — — ( 174,298 ) ( 174,298 ) Other comprehensive loss — — — — — ( 1,147 ) — ( 1,147 ) 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 Issuance of common stock, $0.001 par value, net of stock issuance costs — — — — ( 7 ) — — ( 7 ) Exercise of options, issuance of restricted stock, shares exchanged for exercise and tax, and stock issued through employee stock purchase plan — — ( 1 ) 37 ( 73 ) — — ( 36 ) Non-cash stock compensation — — — — 1,316 — — 1,316 Net loss — — — — — — ( 6,179 ) ( 6,179 ) Other comprehensive income — — — — — 9 — 9 Balance, October 4, 2020 20,449 $ 20 4,901 $ ( 199,908 ) $ 242,048 $ ( 5,494 ) $ 116,528 $ 153,194 See Notes to Condensed Consolidated Financial Statements. 3 T a b l e o f C o n t e n t s RED ROBIN GOURMET BURGERS, INC. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS ' EQUITY (Unaudited) Common Stock Treasury Stock Accumulated Other Comprehensive Loss, net of tax Paid-in Capital Retained Earnings (in thousands) Shares Amount Shares Amount Total Balance, December 30, 2018 17,851 $ 18 4,880 $ ( 201,505 ) $ 212,752 $ ( 4,801 ) $ 376,341 $ 382,805 Exercise of options, issuance of restricted stock, shares exchanged for exercise and tax, and stock issued through employee stock purchase plan — — ( 32 ) 1,344 ( 1,204 ) — — 140 Acquisition of treasury stock — — 31 ( 974 ) — — — ( 974 ) Non-cash stock compensation — — — — 477 — — 477 Net income — — — — — — 639 639 Other comprehensive loss — — — — — ( 329 ) — ( 329 ) Topic 842 transition impairment, net of tax — — — — — — ( 15,172 ) ( 15,172 ) 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 Exercise of options, issuance of restricted stock, shares exchanged for exercise and tax, and stock issued through employee stock purchase plan — — ( 1 ) 37 ( 44 ) — — ( 7 ) Acquisition of treasury stock — — 29 ( 959 ) — — — ( 959 ) Non-cash stock compensation — — — — 1,126 — — 1,126 Net loss — — — — — — ( 1,821 ) ( 1,821 ) Other comprehensive loss — — — — — ( 262 ) — ( 262 ) Balance, October 6, 2019 17,851 $ 18 4,894 $ ( 201,350 ) $ 213,141 $ ( 4,986 ) $ 360,968 367,791 See Notes to Condensed Consolidated Financial Statements. 4 T a b l e o f C o n t e n t s RED ROBIN GOURMET BURGERS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Forty Weeks Ended (in thousands) October 4, 2020 October 6, 2019 Cash flows from operating activities: Net loss $ ( 236,738 ) $ ( 201 ) Adjustments to reconcile net loss to net cash (used in) provided by operating activities: Depreciation and amortization 68,053 71,087 Gift card breakage ( 2,329 ) ( 4,899 ) Goodwill and restaurant asset impairment 116,193 14,064 Non-cash other charges ( 2,438 ) ( 11,135 ) Deferred income tax provision (benefit) 52,439 ( 27,477 ) Stock-based compensation expense 3,082 2,539 Other, net 639 665 Changes in operating assets and liabilities: Accounts receivable 13,250 14,059 Income tax receivable ( 57,756 ) 941 Prepaid expenses and other current assets 11,229 1,426 Lease assets, net of liabilities 19,194 ( 266 ) Trade accounts payable and accrued liabilities ( 9,864 ) ( 6,657 ) Unearned revenue ( 9,331 ) ( 12,564 ) Other operating assets and liabilities, net 11,976 35 Net cash (used in) provided by operating activities ( 22,401 ) 41,617 Cash flows from investing activities: Purchases of property, equipment, and intangible assets ( 14,870 ) ( 33,078 ) Proceeds from sales of real estate and property, plant, and equipment and other investing activities 739 178 Net cash used in investing activities ( 14,131 ) ( 32,900 ) Cash flows from financing activities: Borrowings of long-term debt 168,000 211,500 Payments of long-term debt and finance leases ( 159,004 ) ( 216,918 ) Purchase of treasury stock ( 1,635 ) ( 2,434 ) Debt issuance costs ( 2,952 ) — Proceeds from issuance of common stock, net of stock issuance costs 28,945 — Proceeds from exercise of stock options and employee stock purchase plan 666 696 Net cash provided by (used in) financing activities 34,020 ( 7,156 ) Effect of exchange rate changes on cash ( 166 ) 81 Net change in cash and cash equivalents ( 2,678 ) 1,642 Cash and cash equivalents, beginning of period 30,045 18,569 Cash and cash equivalents, end of period $ 27,367 $ 20,211 Supplemental disclosure of cash flow information Income taxes (refund received) paid $ ( 2,391 ) $ 3,140 Interest paid, net of amounts capitalized 7,514 7,799 Change in construction related payables $ 462 $ 3,902 See Notes to Condensed Consolidated Financial Statements. 5 T a b l e o f C o n t e n t s RED ROBIN GOURMET BURGERS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Basis of Presentation and Recent Accounting Pronouncements 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 October 4, 2020, the Company owned and operated 444 restaurants located in 38 states. The Company also had 103 franchised full-service restaurants in 16 states and one Canadian province. The Company operates its business as one operating and one reportable segment. Basis of Presentation The accompanying unaudited condensed consolidated financial statements include the accounts of Red Robin and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. The Company's financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The results of operations for any interim period are not necessarily indicative of results for the full year. The accompanying condensed consolidated financial statements of Red Robin have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC"), including the instructions to Form 10-Q and Article 10 of Regulation S-X. Certain information and footnote disclosures normally included in the Company's annual consolidated financial statements on Form 10-K have been condensed or omitted. The condensed consolidated balance sheet as of December 29, 2019 has been derived from the audited consolidated financial statements as of that date, but does not include all disclosures required for audited annual financial statements. For further information, please refer to and read these interim condensed consolidated financial statements in conjunction with the Company's audited consolidated financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended December 29, 2019, filed with the SEC on February 25, 2020. Our current and prior year periods, period end dates, and number of weeks included in the period are summarized in the table below: Periods Period End Date Number of Weeks in Period Current and Prior Fiscal Quarters: Third Quarter 2020 October 4, 2020 12 Third Quarter 2019 October 6, 2019 12 Second Quarter 2020 July 12, 2020 12 Second Quarter 2019 July 14, 2019 12 First Quarter 2020 April 19, 2020 16 First Quarter 2019 April 21, 2019 16 Current and Prior Fiscal Years: Fiscal Year 2020 December 27, 2020 52 Fiscal Year 2019 December 29, 2019 52 Reclassifications Certain amounts presented in prior periods have been reclassified to conform with the current period presentation. As of December 29, 2019, the Company reclassified $ 5.3 million from Prepaid expenses and other current assets to Income tax receivable on the condensed consolidated balance sheets. For the forty weeks ended October 6, 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, $ 0.9 million from Prepaid expenses and other current assets to Income tax receivable, and $ 0.3 million from Other operating assets and liabilities, net to Lease assets, net of liabilities. 6 Table of Contents Recent Accounting Pronouncements Income Taxes In December 2019, the Financial Accounting Standards Board ("FASB") issued Update 2019-12, Income Taxes ("Topic 740") as part of its Simplification Initiative. This guidance provides amendments to simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. This guidance is effective for annual and interim reporting periods beginning after December 15, 2020, and early adoption is permitted. We are currently evaluating the full impact this guidance will have on our consolidated financial statements. 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. 2. COVID-19 Pandemic Overview Due to the novel coronavirus ("COVID-19") pandemic, we continue to navigate an unprecedented time for our business and industry. During the third quarter 2020, the Company continued to expand outdoor seating capacity at reopened Company-owned restaurants in accordance with local limits. Reopening dining rooms and expanding seating capacity 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 and Prevention, 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. Franchise Revenue 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, which continued throughout the Company's third fiscal quarter. As of the end of the third quarter of 2020, the Company had resumed charging full royalty and advertising contributions to our franchisees. 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 . Rent 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 are engaging in ongoing constructive discussions with landlords regarding the potential restructuring of lease payments and rent concessions. As of October 4, 2020, the Company has contractually negotiated rent concessions with many of its landlords, with negotiations complete on approximately 50 % of its 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 a $ 2.2 million remeasurement to increase the lease liability and right-of-use asset resulting from contractual rent concessions under the FASB relief during the third fiscal quarter of 2020. 7 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. During the third fiscal quarter of 2020, it was concluded no leases changed classification between operating and finance. Based on updated discount rates, a $ 10.1 million remeasurement was recorded to increase the lease liability and a $ 9.9 million adjustment, net of broker's fees, was recorded to increase the right-of-use asset during the third fiscal quarter of 2020. Contractual rent concessions granted to the Company during the third fiscal quarter of 2020 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. Restaurant Assets During the twelve weeks ended October 4, 2020, the Company recognized $ 3.3 million of impairment related to assets at two permanently closed Company-owned restaurants. These impairment charges were included in Restaurant closure and refranchising costs in Other charges (gains) on the condensed consolidated statements of operation and comprehensive loss. Income Tax 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 net operating losses ("NOL's"). Upon filing of its 2019 federal tax return during the third quarter of 2020 and gaining further interpretations and expert technical guidance surrounding the application of the CARES Act, the Company recorded an additional $ 42.8 million in federal income tax receivables to Income tax receivable on the condensed consolidated balance sheets and recorded a related income tax benefit to the condensed consolidated statements of operation and comprehensive loss. After consideration for the adjustments of carrybacks due to the CARES Act, we have a combined federal and state valuation allowance of $ 67.1 million, which was recorded to Other assets, net on the condensed consolidated balance sheets. Subsequent to our third quarter balance sheet date, the Company received $ 49.4 million in cash tax refunds, including interest, and currently expects to receive between $ 12 million to $ 15 million of additional cash tax refunds within the next 12 months. A portion of this refund was used to make a $ 42 million repayment on the Company's credit facility on October 30, 2020. As of October 4, 2020, the Company had $ 9.7 million of net operating loss carryforwards for state income tax purposes that arose from the 2019 and 2020 tax years. The Company reclassified this amount from state tax current receivable which was recorded in Prepaid expenses and other current assets as of our second fiscal quarter of 2020, to state deferred tax asset which is recorded to Other Assets, net on the condensed consolidated balance sheets as a result of the CARES Act legislation and in conjunction with the filing of our state tax returns during our third fiscal quarter. Of these state net operating loss carryforwards, approximately $ 0.2 million may expire, if unused, in 2024. The remaining state net operating losses approximating $ 9.5 million may expire, if unused, through 2039 or in some cases will be retained for an indefinite period. The utilization of net operating loss carryforwards may be limited to 80% of taxable income in any given year. As states' CARES legislation continues to evolve these estimates may change. The total $ 67.1 million valuation allowance includes the $ 9.7 million state NOL's recorded as of October 4, 2020. 3. Revenue Disaggregation of revenue In the following table, revenue is disaggregated by type of good or service (in thousands): Twelve Weeks Ended Forty Weeks Ended October 4, 2020 October 6, 2019 October 4, 2020 October 6, 2019 Restaurant revenue $ 197,009 $ 289,862 $ 658,587 $ 992,764 Franchise revenue (1) 2,584 3,727 5,861 13,479 Gift card breakage 523 580 2,329 4,899 Other revenue 362 53 888 927 Total revenues $ 200,478 $ 294,222 $ 667,665 $ 1,012,069 ——————————————————— (1) The decrease in Franchise revenue is driven by the temporary abatement and non-collection of franchise payments. See Note 2, COVID-19 Pandemic , for further discussion. Table of Contents Contract liabilities Components of Unearned revenue in the accompanying condensed consolidated balance sheets are as follows (in thousands): October 4, 2020 December 29, 2019 Unearned gift card revenue $ 31,514 $ 43,544 Deferred loyalty revenue $ 11,050 $ 10,679 Revenue recognized in the condensed consolidated statements of operations and comprehensive loss 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): Forty Weeks Ended October 4, 2020 October 6, 2019 Gift card revenue $ 16,191 $ 19,400 4. Leases 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 October 4, 2020 and December 29, 2019 as follows (in thousands): October 4, 2020 Finance Operating Total Right of use assets, net $ 11,463 $ 404,485 $ 415,948 Current portion of lease obligations 1,122 60,910 62,032 Long-term portion of lease obligations 12,666 438,085 450,751 Total $ 13,788 $ 498,995 $ 512,783 December 29, 2019 Finance Operating Total Right of use assets, net $ 7,552 $ 418,696 $ 426,248 Current portion of lease obligations 725 41,974 42,699 Long-term portion of lease obligations 8,822 456,613 465,435 Total $ 9,547 $ 498,587 $ 508,134 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): Twelve Weeks Ended Forty Weeks Ended October 4, 2020 October 6, 2019 October 4, 2020 October 6, 2019 Operating lease cost $ 14,992 $ 17,298 $ 51,931 $ 58,412 Finance lease cost: Amortization of right of use assets 227 193 615 634 Interest on lease liabilities 150 122 412 416 Total finance lease cost $ 377 $ 315 $ 1,027 $ 1,050 Variable lease cost 5,902 6,653 19,207 22,185 Total $ 21,271 $ 24,266 $ 72,165 $ 81,647 9 Table of Contents Maturities of our lease liabilities as of October 4, 2020 were as follows (in thousands): Finance Leases Operating Leases Total Remainder of 2020 $ 548 $ 29,370 $ 29,918 2021 1,450 76,091 77,541 2022 1,570 73,899 75,469 2023 1,449 71,855 73,304 2024 1,469 69,883 71,352 Thereafter 11,686 396,286 407,972 Total future lease liability $ 18,172 $ 717,384 $ 735,556 Less imputed interest 4,384 218,389 222,773 Fair value of lease liability $ 13,788 $ 498,995 $ 512,783 Supplemental cash flow information related to leases is as follows (in thousands, except other information): Forty Weeks Ended October 4, 2020 October 6, 2019 Cash flows from operating activities Cash paid related to lease liabilities Operating leases $ 33,034 $ 58,930 Finance leases 412 383 Cash flows from financing activities Cash paid related to lease liabilities Finance leases 196 686 Cash paid for amounts included in the measurement of lease liabilities: $ 33,642 $ 59,999 Right of use assets obtained in exchange for operating lease obligations $ 31,731 $ 10,396 Right of use assets obtained in exchange for finance lease obligations $ 4,581 $ 1,669 Other information related to operating leases as follows: Weighted average remaining lease term 10.33 years 10.84 years Weighted average discount rate 7.12 % 7.33 % Other information related to finance leases as follows: Weighted average remaining lease term 11.93 years 11.63 years Weighted average discount rate 4.93 % 4.71 % 5. Goodwill and Intangible Assets The following table presents goodwill as of October 4, 2020 and December 29, 2019 (in thousands): Balance, December 29, 2019 $ 96,397 Foreign currency translation adjustment ( 983 ) Goodwill impairment (1) ( 95,414 ) Balance, October 4, 2020 $ — ——————————————————— (1) See Note 2, COVID-19 Pandemic , for further discussion of goodwill impairment recognized during the forty weeks ended October 4, 2020. 10 Table of Contents The following table presents intangible assets as of October 4, 2020 and December 29, 2019 (in thousands): October 4, 2020 December 29, 2019 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount Intangible assets subject to amortization: Franchise rights $ 50,584 $ ( 36,813 ) $ 13,771 $ 53,336 $ ( 35,896 ) $ 17,440 Leasehold interests 13,001 ( 9,155 ) 3,846 13,001 ( 8,794 ) 4,207 Liquor licenses and other 9,961 ( 9,598 ) 363 10,737 ( 9,869 ) 868 $ 73,546 $ ( 55,566 ) $ 17,980 $ 77,074 $ ( 54,559 ) $ 22,515 Indefinite-lived intangible assets: Liquor licenses and other $ 7,460 $ — $ 7,460 $ 7,460 $ — $ 7,460 Intangible assets, net $ 81,006 $ ( 55,566 ) $ 25,440 $ 84,534 $ ( 54,559 ) $ 29,975 6. Loss Per Share Basic loss per share amounts are calculated by dividing net loss by the weighted-average number of shares of common stock outstanding during the period. Diluted loss 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. Potentially dilutive shares are excluded from the computation in periods in which they have an anti-dilutive effect. Diluted loss per share reflects the potential dilution that could occur if holders of options exercised their options into common stock. The Company uses the treasury stock method to calculate the effect of outstanding stock options. Basic weighted average shares outstanding is reconciled to diluted weighted average shares outstanding as follows (in thousands): Twelve Weeks Ended Forty Weeks Ended October 4, 2020 October 6, 2019 October 4, 2020 October 6, 2019 Basic weighted average shares outstanding 15,540 12,959 13,945 12,967 Dilutive effect of stock options and awards — — — — Diluted weighted average shares outstanding 15,540 12,959 13,945 12,967 Awards excluded due to anti-dilutive effect on diluted loss per share 895 358 480 405 7. Other Charges (Gains) Other charges (gains) consist of the following (in thousands): Twelve Weeks Ended Forty Weeks Ended October 4, 2020 October 6, 2019 October 4, 2020 October 6, 2019 Goodwill impairment $ — $ — $ 95,414 $ — Restaurant asset impairment — — 20,779 14,064 Restaurant closure and refranchising costs (gains) 3,982 ( 3,922 ) 12,990 ( 2,617 ) Litigation contingencies — — 4,500 — Board and stockholder matter costs 4 1,311 2,453 2,463 COVID-19 related costs 430 — 1,279 — Severance and executive transition — 594 881 2,958 Executive retention — 260 — 620 Other charges (gains) $ 4,416 $ ( 1,757 ) $ 138,296 $ 17,488 We performed a goodwill impairment analysis during the first quarter of 2020 resulting in full impairment of our goodwill balance. The goodwill impairment was measured as the amount by which the carrying amount of the reporting unit, including goodwill, exceeded its fair value. 11 Table of Contents The Company recognized non-cash impairment charges related to restaurant assets at 30 and 29 Company-owned restaurants during the forty weeks ended October 4, 2020 and October 6, 2019 resulting from quantitative impairment analyses. Additionally, the Company recognized non-cash impairment charges of $ 3.3 million and $ 5.7 million resulting from two and six restaurant closures during the twelve and forty weeks ended October 4, 2020 included within Restaurant closure and refranchising costs. Restaurant closure and refranchising costs (gains) include the restaurant operating costs of the Company-owned restaurants that remained temporarily closed due to the COVID-19 pandemic. Gains are driven by early lease terminations on previously closed restaurants. 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 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. 8. Borrowings Total borrowings as of October 4, 2020 and December 29, 2019 were $ 216.1 million and $ 206.9 million. As of October 4, 2020, the current portion of long-term borrowings was $ 9.7 million; no borrowings as of December 29, 2019 were classified as current. As of October 4, 2020, the Company had outstanding borrowings under its credit facility of $ 215.2 million, in addition to amounts issued under letters of credit of $ 7.9 million. The amounts issued under letters of credit reduce the amount available under the facility but were not recorded as debt. As of December 29, 2019, the Company had outstanding borrowings under the prior credit facility of $ 206 million, in addition to amounts issued under letters of credit of $ 7.5 million. Loan origination costs associated with the Company's credit facility are included as deferred costs in Other assets, net in the accompanying condensed consolidated balance sheets. Unamortized debt issuance costs were $ 3.5 million and $ 1 million as of October 4, 2020 and December 29, 2019. 9. Fair Value Measurements Assets and Liabilities Measured at Fair Value on a Recurring Basis 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 October 4, 2020 and December 29, 2019 (in thousands): October 4, 2020 Level 1 Level 2 Level 3 Assets: Investments in rabbi trust $ 6,232 $ 6,232 $ — $ — Total assets measured at fair value $ 6,232 $ 6,232 $ — $ — December 29, 2019 Level 1 Level 2 Level 3 Assets: Investments in rabbi trust $ 7,337 $ 7,337 $ — $ — Total assets measured at fair value $ 7,337 $ 7,337 $ — $ — 12 Table of Contents Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis Assets and liabilities recognized or disclosed at fair value on the condensed consolidated financial statements on a nonrecurring basis include items such as property, plant and equipment, right of use assets, goodwill, and other intangible assets. These assets are measured at fair value if determined to be impaired. The Company has measured non-financial assets for impairment using continuing and projected future cash flows, 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 36 Company-owned restaurants with carrying values of $ 61.4 million. We determined the fair value of these long-lived restaurant assets to be $ 34.9 million. During fiscal year 2019, we impaired long-lived assets at 29 Company-owned restaurants with carrying values of $ 17.3 million. We determined the fair value of these long-lived restaurant assets to be $ 2.2 million. Disclosures of Fair Value of Other Assets and Liabilities The Company's liability under its credit facility is carried at historical cost in the accompanying condensed consolidated balance sheets. Due to market interest rates decreasing during fiscal year 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 October 4, 2020 were $ 215.2 million and $ 218.6 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. 10. Commitments and Contingencies On July 14, 2017, a current hourly employee filed a class action lawsuit alleging that the Company failed to provide required meal breaks and rest periods and failed to reimburse business expenses, among other claims. The case is styled Manuel Vigueras v. Red Robin International, Inc. and is currently pending before the United States District Court in Santa Ana, California. In a related action, on September 21, 2017, a companion case, styled Genny Vasquez v. 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 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. The Company is in the process of finalizing the settlement agreement, which will then be submitted to the court for approval. Court approval is required before any settlement agreement between the parties becomes final. An additional $ 4.5 million was accrued to reach the $ 8.5 million settlement amount during the first fiscal quarter of 2020. Amounts recorded in the periods presented for litigation contingencies are disclosed in Note 7, Other Charges . In the normal course of business, there are various claims in process, matters in litigation, and other contingencies. These include employment-related claims and claims alleging illness, injury, or other food quality, health, or operational issues. Evaluating contingencies related to litigation is a complex process involving subjective judgment on the potential outcome of future events, and the ultimate resolution of litigated claims may differ from our current analysis. We review the adequacy of accruals and disclosures pertaining to litigation matters each quarter in consultation with legal counsel, and we assess the probability and range of possible losses associated with contingencies for potential accrual in the consolidated financial statements. While it is not possible to predict the outcome of these claims with certainty, management is of the opinion that adequate provision for potential losses associated with these matters has been made in the condensed consolidated financial statements. 13 Table of Contents