Item 2. Management’s Discussion and Analysis
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Management's Discussion and Analysis of Financial Condition and Results of Operations provides a narrative of our financial performance and condition that should be read in conjunction with the accompanying Condensed Consolidated Financial Statements. All comparisons under this heading between 2021 and 2020 refer to the sixteen weeks ended April 18, 2021 and April 19, 2020, unless otherwise indicated.
Overview
Description of Business
Red Robin Gourmet Burgers, Inc., a Delaware corporation, together with its subsidiaries ("Red Robin," "we," "us," "our," or the "Company"), primarily operates, franchises, and develops full-service restaurants with 543 locations in North America. As of April 18, 2021, the Company owned 440 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.
Company Response to COVID-19 Pandemic
Due to the novel coronavirus ("COVID-19") pandemic, we continue to navigate an unprecedented time for our business and industry. During first quarter 2021, the Company continued to expand dine-in seating capacity at 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 with strict adherence to US Centers for Disease Control and Prevention, state, and local guidelines as our top priority. The Company continues to maintain a disciplined focus on execution to provide our Guests a consistent quality experience each and every time they visit. We are pleased to be able to demonstrate that we can sustain high Guest satisfaction scores as we continue to expand our operating capacity with the recovery and opening of dining rooms at higher capacities. This is achieved through a combination of our Total Guest Experience hospitality model ("TGX"), off-premises enhancements, and our new management labor model.
As our dining rooms have continued to reopen, sales and the Guest experience have been positively impacted by our new TGX hospitality model. We expect to build further sales momentum from additional seating expansion from increasing capacities at our restaurants, including use of outdoor seating to cater to our Guests that prefer a more distanced full service dining option, or prefer to dine outside.
As the implications of the COVID-19 pandemic have begun to ease with approved vaccines being distributed and administered, certain states in which we operate have lifted mandatory mask mandates. In States with mask mandates still in place, we continue to require Guests to wear face coverings at all locations while entering, exiting, and walking around our restaurants, and face masks are provided for Guests who arrive without one to ensure we are enabling the mutual safety of our Guests and Team Members.
We remain focused on consistently delivering a great Guest experience, sustaining off-premises sales levels, and expanding seating capacity to continue to drive our improving sales. Notably, restaurants with reopened dining rooms are sustaining off-premises sales mix of over two times pre-pandemic levels, demonstrating the enduring and growing popularity of Red Robin for off-premises occasions.
As of the end of our fiscal fifth period, all Company-owned restaurants have re-opened indoor dining rooms with varying levels of capacity. Notably, these restaurants have sustained off-premises sales that are more than double pre-pandemic levels, even in comparable Company-owned restaurants that are able to operate at full indoor capacity. As of April 18, 2021, total Company-owned restaurants included 12 restaurants that have remained closed since the onset of the COVID-19 pandemic; of these restaurants, 10 will permanently close and two will re-open in 2021. Restaurant operating level expenses incurred for these restaurants during the temporary closures have been recorded in Restaurant closure and refranchising costs in Other charges; see Note 6, Other Charges, in the Notes to the Condensed Consolidated Financial Statements in Part 1, Item 1 of this Quarterly Report on Form 10-Q.
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Selected operating metrics are presented below for the Company's 28 day accounting periods through the fourth period of fiscal year 2021, and the four weeks that comprise our fiscal fifth period of 2021 are as follows:
Period Ended (2)
Company-owned Restaurants 24-Jan 21-Feb (3)
21-Mar 18-Apr 16-May (6)
Net comparable (1) restaurant revenues
(26.7)% (22.9)% 21.9% 165.9% 102.6%
Net comparable (1) restaurant revenues compared to Fiscal Year 2019
N/A (4)
N/A (4)
(8.5)% 0.0% (3.3)%
Average weekly net sales per restaurant $39,701 $41,384 $53,240 $55,600 $52,731
Number of comparable Company-owned restaurants (1)
413 411 410 410 410
Company-owned restaurants with closed dining rooms (1)
114 57 9 6 0
Average weekly off-premises net sales per restaurant $20,896 $18,696 $20,056 $19,894 $19,078
Open system capacity (5)
40.0% 41.0% 48.0% 61.0% 65.0%
(1) Comparable restaurants are those Company-owned restaurants that have operated five full fiscal quarters as of the period presented. Restaurant count shown is as of the end of the period presented.
(2) The periods ended January 24, February 21, March 21, and April 18, 2021 comprise the Company's first fiscal quarter. The period ended May 16, 2021 falls within our second fiscal quarter of 2021, and amounts presented for the period are preliminary and subject to closing adjustments.
(3) Period includes the impact of reduced traffic due to winter weather in February of approximately 2% to 3%.
(4) This metric is presented to compare current year operating results to periods that are not impacted by the COVID-19 pandemic. There was no meaningful COVID-19 impact in P1 or P2 of 2020.
(5) Represents the percentage of indoor seating of Company-owned restaurants with open dining rooms, as of the end of the period presented.
(6) Period includes the impact of limited operating hours, in part due to staffing shortages.
Financial and Operational Highlights
The following summarizes the operational and financial highlights during the sixteen weeks ended April 18, 2021:
Restaurant Revenue, compared to the same period in the prior year, is presented in the table below:
(millions)
Restaurant Revenue for the sixteen weeks ended April 19, 2020
$ 301.4
Increase/(decrease) in comparable restaurant revenue 28.3
Increase/(decrease) from closed restaurants (11.0)
Total increase/(decrease) 17.3
Restaurant Revenue for the sixteen weeks ended April 18, 2021
$ 318.7
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Restaurant revenues and operating costs as a percentage of restaurant revenue for the period are detailed in the table below:
Sixteen Weeks
Ended 2021 compared to 2020 Sixteen Weeks Ended 2021 compared to 2019 (1)
April 18, 2021 April 19, 2020 Increase/(Decrease) 4/21/2019 (1)
Increase/(Decrease)
Restaurant revenue (millions) $ 318.7 $ 301.4 5.7 % $ 400.5 (20.4) %
Restaurant operating costs: (Percentage of Restaurant Revenue) (Basis Points) (Percentage of Restaurant Revenue) (Basis Points)
Cost of sales 21.7 % 23.4 % (170) 23.4 % (170)
Labor 35.0 % 39.3 % (430) 35.7 % (70)
Other operating 18.1 % 17.3 % 80 13.9 % 420
Occupancy 9.4 % 11.2 % (180) 8.7 % 70
Total 84.3 % 91.2 % (690) 81.7 % 250
(1) Presented for improved comparability to pre COVID-19 operations.
Certain percentage and basis point amounts in the table above do not total due to rounding as well as restaurant operating costs being expressed as a percentage of restaurant revenue and not total revenues.
The following table summarizes Net Loss, loss per diluted share, and adjusted loss per diluted share for the sixteen weeks ended April 18, 2021 and April 19, 2020;
Sixteen Weeks Ended
April 18, 2021 April 19, 2020
Net loss as reported $ (8,713) $ (174,298)
Loss per share - diluted:
Net loss as reported $ (0.56) $ (13.51)
Restaurant closure and refranchising costs 0.16 0.11
Restaurant asset impairment 0.08 1.20
Litigation contingencies 0.07 0.35
COVID-19 related costs 0.03 0.02
Board and stockholder matter costs 0.01 0.11
Severance and executive transition — 0.07
Goodwill impairment — 7.40
Income tax effect (0.09) (2.41)
Adjusted loss per share - diluted $ (0.30) $ (6.66)
Weighted average shares outstanding
Basic 15,579 12,903
Diluted 15,579 12,903
We believe the non-GAAP measure of adjusted loss per diluted share gives the reader additional insight into the ongoing operational results of the Company, and it is intended to supplement the presentation of the Company's financial results in accordance with GAAP.
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Restaurant Data
The following table details restaurant unit data for our Company-owned and franchised locations for the periods indicated:
Sixteen Weeks Ended
April 18, 2021 April 19, 2020
Company-owned:
Beginning of period 443 454
Closed during the period (1)
(3) (2)
End of period 440 452
Franchised:
Beginning of period 103 102
End of period 103 102
Total number of restaurants 543 554
________________________________________________________
(1) In addition to the permanent closures during the sixteen weeks ended April 18, 2021, total Company-owned restaurants included 12 restaurants that have remained closed since the onset of the COVID-19 pandemic; of these restaurants, 10 will permanently close and two will re-open in 2021.
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The following table presents total Company-owned and franchised restaurants by state or province as of April 18, 2021:
Company-Owned Restaurants (1)
Franchised Restaurants
State:
Arkansas 2 2
Alaska — 3
Alabama 4 —
Arizona 18 1
California 64 —
Colorado 22 —
Connecticut — 3
Delaware — 5
Florida 21 —
Georgia 6 —
Iowa 5 —
Idaho 8 —
Illinois 22 —
Indiana 13 —
Kansas — 5
Kentucky 4 —
Louisiana 2 —
Massachusetts 4 3
Maryland 13 —
Maine 2 —
Michigan — 20
Minnesota 4 —
Missouri 8 3
Montana — 2
North Carolina 17 —
Nebraska 4 —
New Hampshire 3 —
New Jersey 12 1
New Mexico 3 —
Nevada 6 —
New York 16 —
Ohio 18 2
Oklahoma 5 —
Oregon 15 5
Pennsylvania 11 21
Rhode Island 1 —
South Carolina 4 —
South Dakota 1 —
Tennessee 11 —
Texas 21 9
Utah 1 6
Virginia 20 —
Washington 38 —
Wisconsin 11 —
Province:
British Columbia — 12
Total 440 103
———————————————————
(1) Includes 12 Company-owned restaurants that remained closed due to the COVID-19 pandemic as of April 18, 2021.
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Results of Operations
Operating results for each fiscal period presented below are expressed as a percentage of total revenues, except for the components of restaurant operating costs, which are expressed as a percentage of restaurant revenue.
This information has been prepared on a basis consistent with our audited 2020 annual financial statements, and, in the opinion of management, includes all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the information for the periods presented. Our operating results may fluctuate significantly as a result of a variety of factors, and operating results for any period presented are not necessarily indicative of results for a full fiscal year.
Sixteen Weeks Ended
April 18, 2021 April 19, 2020 April 21, 2019 (1)
Revenues:
Restaurant revenue 97.7 % 98.5 % 97.7 %
Franchise and other revenues 2.3 % 1.5 % 2.3 %
Total revenues 100.0 % 100.0 % 100.0 %
Costs and expenses:
Restaurant operating costs (exclusive of depreciation and amortization shown separately below):
Cost of sales 21.7 % 23.4 % 23.4 %
Labor 35.0 % 39.3 % 35.7 %
Other operating 18.1 % 17.3 % 13.9 %
Occupancy 9.4 % 11.2 % 8.7 %
Total restaurant operating costs 84.3 % 91.2 % 81.7 %
Depreciation and amortization 7.9 % 9.3 % 6.9 %
Selling, general and administrative 9.4 % 13.6 % 11.7 %
Pre-opening and acquisition costs — % — % 0.1 %
Other charges 1.7 % 39.0 % 0.6 %
Loss from operations (1.3) % (51.7) % 0.8 %
Interest expense, net and other 1.3 % 1.1 % 0.8 %
Loss before income taxes (2.7) % (52.8) % — %
Income tax benefit 0.0 % 4.1 % (0.1) %
Net loss (2.7) % (56.9) % 0.2 %
___________________________________
(1) Presented for improved comparability to pre COVID-19 operations.
Certain percentage amounts in the table above do not total due to rounding as well as restaurant operating costs being expressed as a percentage of restaurant revenue and not total revenues.
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Revenues
Sixteen Weeks Ended
(Revenues in thousands) April 18, 2021 April 19, 2020 Percent Change
Restaurant revenue $ 318,677 $ 301,434 5.7 %
Franchise royalties, fees and other revenue 7,598 4,631 64.1 %
Total revenues $ 326,275 $ 306,065 6.6 %
Average weekly net sales volumes in Company-owned restaurants $ 46,515 $ 41,785 11.3 %
Total operating weeks 6,851 7,214 (5.0) %
Net sales per square foot $ 119 $ 109 9.5 %
Restaurant revenue for the sixteen weeks ended April 18, 2021, which comprises primarily food and beverage sales, increased $17.3 million, or 5.7 %, as compared to the first quarter of 2020. The increase was due to a $28.3 million, or 10.0%, increase in comparable restaurant revenue, partially offset by a $11.0 million decrease primarily from closed restaurants. The comparable restaurant revenue increase was driven by a 4.4% increase in Guest count and a 5.6% increase in average Guest check. The increase in average Guest check resulted from a 3.7% increase in pricing, a 1.3% increase in menu mix and a 0.6% increase from lower discounting. The increase in menu mix was primarily driven by higher sales of appetizers and Gourmet burgers, partially offset by lower beverage mix. Off-premises sales increased 75.5% and comprised 41.7% of total food and beverage sales during first quarter 2021.
Average weekly net sales volumes represent the total restaurant revenue for all Company-owned Red Robin restaurants for each time period presented, divided by the number of operating weeks in the period. Comparable restaurant revenues are comprised of Company-owned restaurants that have operated five full quarters as of the end of the period presented. The Company-owned restaurants that were temporarily closed due to the COVID-19 pandemic were not included in the comparable base for the sixteen weeks ended April 18, 2021 or April 19, 2020. Fluctuations in average weekly net sales volumes for Company-owned restaurants reflect the effect of comparable restaurant revenue changes as well as the performance of new and acquired restaurants during the period, the average square footage of our restaurants, as well as the impact of changing capacity limitations in response to COVID-19 levels in a given locality. Net sales per square foot represents the total restaurant revenue for Company-owned restaurants included in the comparable base divided by the total square feet of Company-owned restaurants included in the comparable base.
Franchise and other revenue increased $3.0 million for the sixteen weeks ended April 18, 2021 compared to the sixteen weeks ended April 19, 2020 due to charging and collecting royalty payments and advertising contributions from our franchisees for first fiscal quarter of 2021; during the same period in 2020, the Company temporary abated all franchisee royalty and advertising contribution payments in response to COVID-19's effect on our franchisee's operations. Our franchisees reported a comparable restaurant revenue increase of 15.1% for the sixteen weeks ended April 18, 2021 compared to the same period in 2020.
Cost of Sales
Sixteen Weeks Ended
(In thousands, except percentages) April 18, 2021 April 19, 2020 Percent Change
Cost of sales $ 69,166 $ 70,426 (1.8) %
As a percent of restaurant revenue 21.7 % 23.4 % (1.7) %
Cost of sales, which comprises of food and beverage costs, is variable and generally fluctuates with sales volume. Cost of sales as a percentage of restaurant revenue decreased 170 basis points for the sixteen weeks ended April 18, 2021 as compared to the same period in 2020. The decrease was primarily driven by favorable commodity costs and rebates.
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Labor
Sixteen Weeks Ended
(In thousands, except percentages) April 18, 2021 April 19, 2020 Percent Change
Labor $ 111,659 $ 118,566 (5.8) %
As a percent of restaurant revenue 35.0 % 39.3 % (4.3) %
Labor costs include restaurant-level hourly wages and management salaries as well as related taxes and benefits. For the sixteen weeks ended April 18, 2021, labor as a percentage of restaurant revenue decreased 430 basis points compared to the same period in 2020. The decrease was primarily driven by a more efficient management labor structure, staffing shortages, and simplifying our menu resulting in reduced kitchen labor hours, partially offset by higher wage rates.
Other Operating
Sixteen Weeks Ended
(In thousands, except percentages) April 18, 2021 April 19, 2020 Percent Change
Other operating $ 57,712 $ 52,291 10.4 %
As a percent of restaurant revenue 18.1 % 17.3 % 0.8 %
Other operating costs include costs such as equipment repairs and maintenance costs, restaurant supplies, utilities, restaurant technology, and other miscellaneous costs. For the sixteen weeks ended April 18, 2021, other operating costs as a percentage of restaurant revenue increased 80 basis points as compared to the same period in 2020. The increase was primarily due to higher third party delivery commissions and supply costs driven by higher off-premises sales.
Occupancy
Sixteen Weeks Ended
(In thousands, except percentages) April 18, 2021 April 19, 2020 Percent Change
Occupancy $ 30,100 $ 33,657 (10.6) %
As a percent of restaurant revenue 9.4 % 11.2 % (1.8) %
Occupancy costs include fixed rents, property taxes, common area maintenance charges, general liability insurance, contingent rents, and other property costs. Occupancy costs incurred prior to opening our new restaurants are included in pre-opening costs. For the sixteen weeks ended April 18, 2021, occupancy costs as a percentage of restaurant revenue decreased 180 basis points compared to the same period in 2020 primarily due to savings from permanently closed restaurants and restructuring of lease payments and rent concessions.
Our fixed rents for the sixteen weeks ended April 18, 2021 and April 19, 2020 were $21.1 million and $21.6 million, a decrease of $0.5 million due to savings from permanently closed restaurants and restructuring of lease payments and rent concessions.
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Depreciation and Amortization
Sixteen Weeks Ended
(In thousands, except percentages) April 18, 2021 April 19, 2020 Percent Change
Depreciation and amortization $ 25,888 $ 28,320 (8.6) %
As a percent of total revenues 7.9 % 9.3 % (1.4) %
Depreciation and amortization includes depreciation on capital expenditures for restaurants and corporate assets as well as amortization of acquired franchise rights, leasehold interests, and certain liquor licenses. For the sixteen weeks ended April 18, 2021, depreciation and amortization expense as a percentage of revenue decreased 140 basis points over the same period in 2020 primarily due to net closed Company-owned restaurants, and sales leverage.
Selling, General, and Administrative
Sixteen Weeks Ended
(In thousands, except percentages) April 18, 2021 April 19, 2020 Percent Change
Selling, general, and administrative $ 30,610 $ 41,502 (26.2) %
As a percent of total revenues 9.4 % 13.6 % (4.2) %
Selling, general, and administrative costs include all corporate and administrative functions. Components of this category include marketing and advertising costs; restaurant support center, regional, and franchise support salaries and benefits; travel; professional and consulting fees; corporate information systems; legal expenses; office rent; training; and board of directors expenses.
Selling, general, and administrative costs in the sixteen weeks ended April 18, 2021 decreased $10.9 million, or 26.2%, as compared to the same period in 2020. The decrease was primarily driven by reduced marketing due to capacity limitations and a shift to an all-digital marketing strategy, which has enabled us to communicate with our guests in a more compelling and cost effective way, as well as a decrease in travel and entertainment costs and a permanent reduction in force in 2020, partially offset by higher Team Member benefit costs.
Pre-opening Costs
Sixteen Weeks Ended
(In thousands, except percentages) April 18, 2021 April 19, 2020 Percent Change
Pre-opening costs $ — $ 153 (100.0) %
As a percent of total revenues — % — % — %
Pre-opening costs, which are expensed as incurred, comprise the costs related to preparing restaurants to introduce Donatos® and other initiatives, as well as direct costs, including labor, occupancy, training, and marketing, incurred related to opening new restaurants and hiring the initial work force. Our pre-opening costs fluctuate from period to period, depending upon, but not limited to, the number of restaurants where Donatos® has been introduced, the number of restaurant openings, the size of the restaurants being opened, and the location of the restaurants. Pre-opening costs for any given quarter will typically include expenses associated with restaurants opened during the quarter as well as expenses related to restaurants opening in subsequent quarters.
We incurred pre-opening costs during the sixteen weeks ended April 19, 2020 related to the rollout of Donatos®. The Company expects to continue its roll out of Donatos® in 2021 to approximately 120 restaurants, including approximately 40 restaurants in our second fiscal quarter, and approximately 80 restaurants in the second half of the fiscal year.
Interest Expense, Net and Other
Interest expense, net and other was $4.3 million for the sixteen weeks ended April 18, 2021, an increase of $0.9 million, or 26.5%, compared to the same period in 2020. The increase was primarily related to a higher weighted average interest rate for the quarter as well as the partial write off of approximately $1.2 million of deferred financing charges related to the modification of our revolver in conjunction with the execution of the Second Amendment on February 25, 2021, partially offset by a lower average outstanding debt balance compared to the same period in 2020. Our weighted average interest rate was 6.3% for the sixteen weeks ended April 18, 2021 as compared to 4.3% for the same period in 2020.
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Provision for Income Taxes
The effective tax rate for the sixteen weeks ended April 18, 2021 was a 0.6% expense, compared to a 7.9% expense for the sixteen weeks ended April 19, 2020. The decrease in tax expense for the sixteen weeks ended April 18, 2021 is primarily due to the recognition of a smaller valuation allowance during the first quarter of 2021. The Company will be able to carry back federal and state net operating losses that are expected to generate approximately $16 million of cash tax refunds during 2021.
Liquidity and Capital Resources
Cash and cash equivalents increased $6.2 million to $22.3 million as of April 18, 2021, from $16.1 million at the beginning of the fiscal year. As the Company continues to recover from the COVID-19 pandemic and generates operating cash flow, we expect to begin using available cash flow from operations to pay down debt, maintain existing restaurants and infrastructure, and execute on our long-term strategic initiatives. As of April 18, 2021, the Company had approximately $107 million in liquidity, including cash on hand and available borrowing capacity under its credit facility.
Cash Flows
The table below summarizes our cash flows from operating, investing, and financing activities for each period presented (in thousands):
Sixteen Weeks Ended
April 18, 2021 April 19, 2020
Net cash provided by (used in) provided by operating activities $ 18,932 $ (13,320)
Net cash used in investing activities (5,400) (8,703)
Net cash (used in) provided by financing activities (7,393) 81,738
Effect of exchange rate changes on cash 29 (840)
Net change in cash and cash equivalents $ 6,168 $ 58,875
Operating Cash Flows
Net cash flows provided by (used in) operating activities increased $32.3 million to $18.9 million for the sixteen weeks ended April 18, 2021. The changes in net cash provided by (used in) operating activities are primarily attributable to a $29.3 million increase in profit from operations, defined as the change in operating margins from comparable and non-comparable restaurants, lower accounts receivable and higher accounts payable balances due to the timing of operational receipts and payments, deferral of payroll tax payments under the CARES Act, as well as other changes in working capital as presented in the Condensed Consolidated Statements of Cash Flows.
Investing Cash Flows
Net cash flows used in investing activities decreased $3.3 million to $5.4 million for the sixteen weeks ended April 18, 2021, as compared to $8.7 million for the same period in 2020. The decrease is primarily due to targeted investment in restaurant technology and restaurant improvement capital in line with the Company's emphasis on strategic capital and cost management.
The following table lists the components of our capital expenditures, net of currency translation, for the sixteen weeks ended April 18, 2021 and April 19, 2020 (in thousands):
Sixteen Weeks Ended
April 18, 2021 April 19, 2020
Restaurant improvement capital and other $ 2,429 $ 6,656
Investment in technology infrastructure and other 2,269 2,090
Donatos ® expansion
702 —
Total capital expenditures $ 5,400 $ 8,746
Financing Cash Flows
Net cash flows used in financing activities increased $89.1 million to $7.4 million for the sixteen weeks ended April 18, 2021, as compared to net cash flows provided by financing activities of $81.7 million in the same period in 2020. The decrease is due to a $91.0 million decrease in net draws made on long-term debt, a decrease in cash used to repurchase the Company's common stock due to the temporary suspension of the Company's share repurchase program, and a decrease in cash used for debt issuance costs.
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Credit Facility
As of April 18, 2021, the Company had outstanding borrowings under the credit facility of $163.3 million, of which $9.7 million was classified as current, in addition to amounts issued under letters of credit of $8.6 million. Amounts issued under letters of credit reduce the amount available under the credit facility but are not recorded as debt. As of April 18, 2021, the Company had $84.4 million of available borrowing capacity under its credit facility. Net payments during the sixteen weeks ended April 18, 2021 totaled $6.4 million, and net draws during the first quarter of 2020 totaled $84.0 million.
Covenants
We are subject to a number of customary covenants under our credit facility, including limitations on additional borrowings, acquisitions, stock repurchases, sales of assets, and dividend payments. As discussed in Note 7, Borrowings , in the Notes to the Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q, we entered into the Second Amendment on February 25, 2021, which waives compliance with the lease adjusted leverage ratio financial covenant ("LALR ratio") and fixed charge coverage ratio financial covenant ("FCC ratio") for the first two fiscal quarters of 2021, and provides for adjustments during the third and fourth fiscal quarter of 2021 and the first and second fiscal quarters of 2022 for the LALR and FCC ratios and related calculations. The Company is currently in compliance with applicable covenants, and forecasts compliance in the next twelve calendar months as the LALR ratio and FCC ratio become applicable.
Debt Outstanding
Total debt outstanding decreased $6.4 million to $164.2 million at April 18, 2021 , from $170.6 million at December 27, 2020, due to net payments of $6.4 million on the credit facility during the sixteen weeks ended April 18, 2021 .
Working Capital
We typically maintain current liabilities in excess of our current assets which results in a working capital deficit. We are able to operate with a working capital deficit because restaurant sales are primarily conducted on a cash or credit card basis. Rapid turnover of inventory results in limited investment in inventories, and cash from sales is usually received before related payables for food, supplies, and payroll become due. In addition, receipts from the sale of gift cards are received well in advance of related redemptions. Rather than maintain higher cash balances that would result from this pattern of operating cash flows, we typically utilize operating cash flows in excess of those required for currently-maturing liabilities to pay for capital expenditures, debt repayment, or to repurchase stock as allowed. When necessary, we utilize our credit facility to satisfy short-term liquidity requirements. We believe our future cash flows generated from restaurant operations combined with our remaining borrowing capacity under the credit facility will be sufficient to satisfy any working capital deficits and our planned capital expenditures.
Share Repurchase
On August 9, 2018, the Company's board of directors authorized the Company's current share repurchase program of up to a total of $75 million of the Company's common stock. The share repurchase authorization was effective as of August 9, 2018, and will terminate upon completing repurchases of $75 million of common stock unless otherwise terminated by the board. Pursuant to the repurchase program, purchases may be made from time to time at the Company's discretion and the Company is not obligated to acquire any particular amount of common stock. From the date of the current program approval through April 18, 2021, we have repurchased a total of 226,500 shares at an average price of $29.14 per share for an aggregate amount of $6.6 million. Accordingly, as of April 18, 2021, we had $68.4 million of availability under the current share repurchase program.
Effective March 14, 2020, the Company temporarily suspended its share repurchase program to provide additional liquidity during the COVID-19 pandemic. Our ability to repurchase shares is limited to conditions set forth by our lenders in the Second Amendment to our credit facility prohibiting us from repurchasing additional shares until the first fiscal quarter of 2022 at the earliest and not until we deliver a covenant compliance certificate demonstrating a lease adjusted leverage ratio less than or equal to 5.00:1.00.
Inflation
The primary inflationary factors affecting our operations are food, labor costs, energy costs, and materials used in the construction of new restaurants. A large number of our restaurant personnel are paid at rates based on the applicable minimum wage, and increases in the minimum wage rates have directly affected our labor costs in recent years. Many of our leases require us to pay taxes, maintenance, repairs, insurance, and utilities, all of which are generally subject to inflationary increases. Labor cost inflation had a negative impact on our financial condition and results of operations during the sixteen weeks ended April 18, 2021. Uncertainties related to fluctuations in costs, including energy costs, commodity prices, annual indexed or potential minimum wage increases, and construction materials make it difficult to predict what impact, if any, inflation may continue to have on our business, but it is anticipated inflation will have a negative impact on labor and commodity costs for the remainder of 2021.
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Seasonality
Our business is subject to seasonal fluctuations. Prior to the COVID-19 pandemic, sales in most of our restaurants have been higher during the summer months and winter holiday season and lower during the fall season. As a result, our quarterly operating results and comparable restaurant revenue may fluctuate significantly as a result of seasonality. Accordingly, results for any one quarter are not necessarily indicative of results to be expected for any other quarter, and comparable restaurant sales for any particular future period may decrease.
Contractual Obligations
There were no other material changes outside the ordinary course of business to our contractual obligations since the filing of the Company's Annual Report on Form 10-K for the fiscal year ended December 27, 2020, except for lease obligations as a result of contractual rent concessions negotiated by the Company during the fiscal quarter ended April 18, 2021, and long-term debt obligations resulting from the changes to our Credit Facility in February 2021 as previously discussed in Note 7, Borrowings , of Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q, Contractual long-term debt payments as of April 19, 2020 are as follows (in thousands):
Payments Due by Period
Total 2021 2022-2023 2024-2025 2026 and Thereafter
Long-term debt obligations (1)
$ 179,833 $ 13,512 $ 165,348 $ 65 $ 908
(1) Long-term debt obligations primarily represent minimum required principal payments under our Credit Facility including estimated interest of $15.4 million based on a 5.50% average borrowing interest rate.
See the maturity of lease liabilities table in Note 4, Leases , in the Notes to the Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Critical Accounting Policies and Estimates
Critical accounting policies and estimates are those we believe are both significant and that require us to make difficult, subjective, or complex judgments, often because we need to estimate the effect of inherently uncertain matters. We base our estimates and judgments on historical experiences and various other factors we believe to be appropriate under the circumstances. Actual results may differ from these estimates, including our estimates of future restaurant level cash flows, which are subject to the current economic environment and future impact from the COVID-19 pandemic, and we might obtain different results if we use different assumptions or conditions. We had no significant changes in our critical accounting policies and estimates which were disclosed in our Annual Report on Form 10-K for the fiscal year ended December 27, 2020.
Recently Issued and Recently Adopted Accounting Standards
See Note 1, Basis of Presentation and Recent Accounting Pronouncements , of Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Forward-Looking Statements
Certain information and statements contained in this report are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the "PSLRA") codified at Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Exchange Act. Forward-looking statements include statements regarding our expectations, beliefs, intentions, plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements which are other than statements of historical facts. These statements may be identified, without limitation, by the use of forward-looking terminology such as "anticipate," "assume," "believe," "could," "estimate," "expect," "future," "intend," "may," "plan," "project," "will," "continue," and similar expressions. Forward-looking statements may relate to, among other things: (i) our business objectives and strategic plans, including projected growth in Guest traffic and revenue, planned improvements in operational efficiencies, gross margins, and expense management and enhancements to our restaurant environments and Guest engagement; (ii) our expectations about pricing strategy and average check size; (iii) our ability to hire, train, and retain Team Members; (iv) investments in information technology systems and anticipated related benefits; (v) our expectations about restaurant operating costs, including commodity and food prices and labor and energy costs; (vi) anticipated legislation and other regulation of our business; (vii) recent initiatives such as changes to our service model and our partnership with Donato's®; (viii) our expectations about future cash flows, liquidity, future capital expenditures and other capital deployment opportunities, and taxes; (ix) our expectations regarding competition; and (x) our expectations regarding
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demand and business recovery, consumer preferences, and consumer discretionary spending.
Although we believe the expectations reflected in our forward-looking statements are based on reasonable assumptions, such expectations may prove to be materially incorrect due to known and unknown risks and uncertainties.
In some cases, information regarding certain important factors that could cause actual results to differ materially from a forward-looking statement appears together with such statement. In addition, the factors described under Risk Factors, as well as other possible factors not listed, could cause actual results to differ materially from those expressed in forward-looking statements, including, without limitation, the following:
• the impact of COVID-19 on our results of operations, supply chain, and liquidity;
• the effectiveness of the Company's strategic initiatives, including alternative labor models, service, and operational improvement initiatives;
• our ability to staff, train, and retain our workforce for service execution;
• the effectiveness of the Company's marketing strategies and promotions;
• menu changes, including the anticipated sales growth, costs, and timing of the Donatos® expansion;
• the implementation, rollout, and timing of technology solutions in our restaurants and at our restaurant support center, in addition to digital platforms that are accessed by our Guests;
• our ability to achieve revenue and cost savings from off-premise sales and other initiatives;
• competition in the casual dining market and discounting by competitors;
• changes in consumer spending trends and habits;
• changes in the cost and availability of key food products, distribution, labor, and energy;
• general economic conditions, including changes in consumer disposable income, weather conditions, and related events in regions where our restaurants are operated;
• the adequacy of cash flows and the cost and availability of capital or credit facility borrowings;
• the impact of federal, state, and local regulation of the Company's business;
• changes in federal, state, or local laws and regulations affecting the operation of our restaurants, including minimum wages, consumer health and safety, health insurance coverage, nutritional disclosures, and employment eligibility-related documentation requirements; and
• costs and other effects of legal claims by Team Members, franchisees, customers, vendors, stockholders, and others, including negative publicity regarding food safety or cyber security.
All forward-looking statements speak only as of the date made. All subsequent written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by the cautionary statements. Except as required by law, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which it is made or to reflect the occurrence of anticipated or unanticipated events or circumstances.
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.