What changed in this filing

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Item 1. Financial Statements

2021-11-10 compared with 2021-08-18 · 75 added, 68 removed, 306 unchanged (32% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except for per share amounts) July 11, 2021 December 27, 2020

(in thousands, except for per share amounts) October 3, 2021 December 27, 2020

Current assets:

29 unchanged sentences

20,449 shares issued;

15,717 and 15,548 shares outstanding as of July 11, 2021 and December 27, 2020

15,722 and 15,548 shares outstanding as of October 3, 2021 and December 27, 2020

Preferred stock, $ 0.001 par value:

3,000 shares authorized;

no shares issued and outstanding as of July 11, 2021 and December 27, 2020

Treasury stock 4,732 and 4,901 shares, at cost, as of July 11, 2021 and December 27, 2020

no shares issued and outstanding as of October 3, 2021 and December 27, 2020

Treasury stock 4,727 and 4,901 shares, at cost, as of October 3, 2021 and December 27, 2020

( 192,819 ) ( 199,908 )

8 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

Twelve Weeks Ended Twenty-Eight Weeks Ended

(in thousands, except for per share amounts) July 11, 2021 July 12, 2020 July 11, 2021 July 12, 2020

Twelve Weeks Ended Forty Weeks Ended

(in thousands, except for per share amounts) October 3, 2021 October 4, 2020 October 3, 2021 October 4, 2020

Restaurant revenue $ 270,202 $ 197,009 $ 861,036 $ 658,587

8 unchanged sentences

Depreciation and amortization 18,881 19,173 63,984 68,053

Selling, general, and administrative expenses

28,346 19,697 58,956 61,199

General and administrative expenses 17,691 15,190 57,664 56,054

Selling expenses 12,652 6,094 31,635 26,429

Pre-opening costs 418 89 792 245

Other charges 1,561 4,416 9,228 138,296

2,196 14,501 7,667 133,880

Total costs and expenses 287,580 225,073 897,725 901,071

3 unchanged sentences

Loss before income taxes ( 15,006 ) ( 26,875 ) ( 29,017 ) ( 241,035 )

Income tax (benefit) provision ( 354 ) 3,700 ( 302 ) 16,399

Income tax benefit ( 26 ) ( 20,696 ) ( 328 ) ( 4,297 )

Net loss $ ( 14,980 ) $ ( 6,179 ) $ ( 28,689 ) $ ( 236,738 )

28 unchanged sentences

Balance, July 11, 2021 20,449 $ 20 4,732 $ ( 193,039 ) $ 238,677 $ 16 $ 63,489 $ 109,163

Exercise of options, issuance of restricted stock, shares exchanged for exercise and tax, and stock issued through employee stock purchase plan — — ( 5 ) 220 ( 280 ) — — ( 60 )

Non-cash stock compensation — — — — 2,048 — — 2,048

Net loss — — — — — — ( 14,980 ) ( 14,980 )

Other comprehensive loss — — — — — ( 6 ) — ( 6 )

Balance, October 3, 2021 20,449 $ 20 4,727 $ ( 192,819 ) $ 240,445 $ 10 $ 48,509 $ 96,165

See Notes to Condensed Consolidated Financial Statements.

19 unchanged sentences

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

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.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Twenty-Eight Weeks Ended

(in thousands) July 11, 2021 July 12, 2020

Forty Weeks Ended

(in thousands) October 3, 2021 October 4, 2020

Cash flows from operating activities:

11 unchanged sentences

Income tax receivable 520 ( 57,756 )

Inventories ( 594 ) 1,363

Prepaid expenses and other current assets 1,014 11,229

5 unchanged sentences

Cash flows from investing activities:

Purchases of property, equipment, and intangible assets ( 10,854 ) ( 11,456 )

Purchases of property and equipment ( 19,987 ) ( 14,870 )

Proceeds from sales of real estate and property, plant, and equipment and other investing activities 20 739

20 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 July 11, 2021, the Company owned and operated 430 restaurants located in 38 states.

As of October 3, 2021, the Company owned and operated 430 restaurants located in 38 states.

The Company also had 101 franchised full-service restaurants in 16 states and one Canadian province.

18 unchanged sentences

Second Quarter 2020 July 12, 2020 12

Third Quarter 2021 October 3, 2021 12

Third Quarter 2020 October 4, 2020 12

Current and Prior Fiscal Years:

2 unchanged sentences

Reclassifications

Certain amounts presented have been reclassified within the July 12, 2020 Condensed Consolidated Statement of Cash Flows to conform with the current period presentation, including prior year reclassifications from Prepaid expenses and other current assets to Inventory and Income tax receivable within Changes in operating assets and liabilities.

Certain amounts presented have been reclassified within the October 4, 2020 Condensed Consolidated Statement of Cash Flows to conform with the current period presentation, including prior year reclassifications within Changes in operating assets and liabilities.

The reclassifications had no effect on the Company’s cash flows from operations.

Certain amounts presented have been reclassified within the October 4, 2020 Condensed Consolidated Statements Of Operations And Comprehensive Loss to present General and administrative expenses and Selling expenses separately for improved comparability and alignment with industry presentation.

The reclassifications had no effect on the Company’s Total costs and expenses, Loss from operations, or Net loss.

Recent Accounting Pronouncements

7 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.

COVID-19 Pandemic

Due to the coronavirus ("COVID-19") pandemic, we continue to navigate unprecedented challenges and uncertainties for our business and industry.

These include jurisdictional restrictions on restaurants limiting indoor dining room capacity.

The COVID-19 pandemic has had a material adverse effect on our business, including a significant decrease in Guest traffic and sales since March 2020.

As of July 11, 2021, nearly all of our Company-owned and franchised locations were operating without restriction.

While we continue to take appropriate actions to mitigate the impact of COVID-19, the future impact on business operations and financial performance remains unknown at this point.

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 .

As of July 11, 2021, the Company has substantially completed negotiating rent concessions with its landlords, and are making full lease payments to substantially all of our landlords.

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

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").

The 2019 federal NOL's were carried back to previous tax periods and resulted in refunds received and recorded during 2020.

The Company has filed the 2020 federal and state NOL cash tax refund claims totaling approximately $ 16 million during 2021.

While we expect to receive a portion of the refunds in 2021, due to government delays in processing these claims we do not expect to receive the majority until 2022.

As of July 11, 2021, the Company had approximately $ 5.2 million of federal net operating loss carryforwards from the 2020 and 2021 tax years.

The Company has approximately $ 12.2 million of net operating loss carryforwards for state income tax purposes that arose from the 2019, 2020, and 2021 tax years.

The federal net operating loss carryforwards will be retained for an indefinite period.

Of the state net operating loss carryforwards, approximately $ 0.2 million may expire, if unused, in 2024.

The remaining state net operating losses approximating $ 12.0 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.

The total $ 79.1 million valuation allowance includes the $ 5.2 million federal NOL and the $ 12.2 million state NOL's recorded as of July 11, 2021.

Disaggregation of revenue

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

Twelve Weeks Ended Twenty-Eight Weeks Ended

July 11, 2021 July 12, 2020 July 11, 2021 July 12, 2020

Twelve Weeks Ended Forty Weeks Ended

October 3, 2021 October 4, 2020 October 3, 2021 October 4, 2020

Restaurant revenue $ 270,202 $ 197,009 $ 861,036 $ 658,587

6 unchanged sentences

Components of Unearned revenue in the accompanying Condensed Consolidated Balance Sheets are as follows (in thousands):

July 11, 2021 December 27, 2020

October 3, 2021 December 27, 2020

Unearned gift card revenue $ 29,599 $ 38,309

1 unchanged sentence

Revenue recognized in the Condensed Consolidated Statements of Operations and Comprehensive Loss for the redemption and breakage of gift cards that were included in the liability balance at the beginning of the fiscal year was as follows (in thousands):

Twenty-Eight Weeks Ended

July 11, 2021 July 12, 2020

Forty Weeks Ended

October 3, 2021 October 4, 2020

Gift card revenue $ 14,448 $ 16,191

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 11, 2021 and December 27, 2020 as follows (in thousands):

July 11, 2021 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 October 3, 2021 and December 27, 2020 as follows (in thousands):

October 3, 2021 Finance Operating Total

Right of use assets, net $ 9,774 $ 410,014 $ 419,788

8 unchanged sentences

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 and Comprehensive Loss as follows (in thousands):

Twelve Weeks Ended Twenty-Eight Weeks Ended

July 11, 2021 July 12, 2020 July 11, 2021 July 12, 2020

Twelve Weeks Ended Forty Weeks Ended

October 3, 2021 October 4, 2020 October 3, 2021 October 4, 2020

Operating lease cost $ 16,061 $ 14,992 $ 53,765 $ 51,931

5 unchanged sentences

Total $ 20,885 $ 21,271 $ 70,100 $ 72,165

Maturities of our lease liabilities as of July 11, 2021 were as follows (in thousands):

Maturities of our lease liabilities as of October 3, 2021 were as follows (in thousands):

Finance Leases Operating Leases Total

9 unchanged sentences

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

Twenty-Eight Weeks Ended

July 11, 2021 July 12, 2020

Forty Weeks Ended

October 3, 2021 October 4, 2020

Cash flows from operating activities

20 unchanged sentences

Diluted loss per share reflects the potential dilution that could occur if holders of options exercised their options into common stock.

As the Company was in a net loss position for both the twelve week and twenty-eight week periods ended July 11, 2021 and July 12, 2020, all potentially dilutive common shares are considered anti-dilutive.

As the Company was in a net loss position for both the twelve week and forty week periods ended October 3, 2021 and October 4, 2020, all potentially dilutive common shares are considered anti-dilutive.

The Company uses the treasury stock method to calculate the effect of outstanding stock options and awards.

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

Twelve Weeks Ended Twenty-Eight Weeks Ended

July 11, 2021 July 12, 2020 July 11, 2021 July 12, 2020

Twelve Weeks Ended Forty Weeks Ended

October 3, 2021 October 4, 2020 October 3, 2021 October 4, 2020

Basic weighted average shares outstanding 15,709 15,540 15,647 13,945

4 unchanged sentences

Other charges consist of the following (in thousands):

Twelve Weeks Ended Twenty-Eight Weeks Ended

July 11, 2021 July 12, 2020 July 11, 2021 July 12, 2020

Restaurant closure and refranchising costs $ 1,752 $ 7,602 $ 4,199 $ 9,008

Twelve Weeks Ended Forty Weeks Ended

October 3, 2021 October 4, 2020 October 3, 2021 October 4, 2020

Restaurant closure costs $ 1,102 $ 3,982 $ 5,301 $ 12,990

Asset impairment — — 1,357 20,779

5 unchanged sentences

Other charges $ 1,561 $ 4,416 $ 9,228 $ 138,296

Restaurant closure and refranchising costs include the ongoing restaurant operating costs of Company-owned restaurants that remained temporarily closed due to the COVID-19 pandemic, as well as any costs incurred for permanently closed restaurants including lease termination costs.

During the twenty-eight weeks ended weeks ended July 11, 2021, we impaired long-lived assets at one Company-owned restaurant with a carrying value of $ 3.8 million (including right of use assets), recognizing an impairment expense of $ 1.2 million related to the net book value of long-lived restaurant assets for this restaurant.

The impairment was recorded as a result of the decision during the fiscal first quarter to close this restaurant and nine additional restaurants which had also remained closed since the beginning of the COVID-19 pandemic, whose long-lived restaurant assets had no remaining net book value.

During the twelve and twenty-eight weeks ended July 12, 2020 the Company recognized non-cash impairment charges related to restaurant assets at 10 and 34 Company-owned restaurants, respectively, resulting from quantitative impairment analyses.

Restaurant closure costs represent costs incurred for permanently closed restaurants, including lease termination costs, as well as the ongoing restaurant operating costs of Company-owned restaurants that remained temporarily closed due to the COVID-19 pandemic.

During the forty weeks ended October 3, 2021, Asset impairment primarily related to the impairment of long-lived assets at one Company-owned restaurant with a carrying value of $ 3.8 million (including right of use assets), recognizing an impairment expense of $ 1.2 million related to the net book value of long-lived restaurant assets for this restaurant.

During the twelve and forty weeks ended October 4, 2020 the Company recognized non-cash impairment charges related to restaurant assets at two and thirty-six Company-owned restaurants, respectively, resulting from quantitative impairment analyses.

Litigation contingencies include legal settlement costs accrued within the period presented related to class action employment cases and other employment matters.

4 unchanged sentences

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

Borrowings as of July 11, 2021 and December 27, 2020 are summarized below (in thousands):

July 11, 2021 December 27, 2020

Borrowings as of October 3, 2021 and December 27, 2020 are summarized below (in thousands):

October 3, 2021 December 27, 2020

Borrowings Weighted

6 unchanged sentences

Amounts issued under letters of credit $ 8,600 $ 8,700

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 $ 2.1 million and $ 3.3 million as of July 11, 2021 and December 27, 2020.

Loan origination costs associated with the Company's Amended and Restated Credit Agreement (the "Credit Facility") are included as deferred costs in Other assets, net in the accompanying Condensed Consolidated Balance Sheets.

Unamortized debt issuance costs were $ 2.0 million and $ 3.3 million as of October 3, 2021 and December 27, 2020.

Third Amendment to Credit Agreement

In response to the continued uncertainty around the impact of industry labor and supply chain challenges as well as the COVID-19 Delta variant, the Company amended its current credit facility on November 9, 2021 (the "Third Amendment") to obtain additional flexibility to continue to implement our business strategy.

The Company anticipates refinancing its Credit Facility in 2022.

The Third Amendment further amends the Company’s Amended and Restated Credit Agreement (as amended, the "Credit Facility") to, among other things:

• waive the application of the lease adjusted leverage ratio financial covenant (the "Leverage Ratio Covenant") for the third fiscal quarter of 2021

• increase the maximum leverage permitted for purposes of the Leverage Ratio Covenant for the fourth fiscal quarter of 2021 and the first, second and third fiscal quarters of 2022, with the definition of the Leverage Ratio Covenant also being amended to provide that it shall not be calculated on a basis that gives effect to a seasonally adjusted annualized consolidated EBITDA in future periods;

• decrease the minimum fixed charge coverage ratio required for purposes of the fixed charge coverage ratio financial covenant (the “FCCR Covenant”) for the first fiscal quarter of 2022, with the definition of the FCCR Covenant also being amended to account for cash tax refunds received in any future period and certain capital expenditures constituting "Expansion Capital Expenditures" being excluded from the calculation thereof;

• decrease the minimum liquidity required for purposes of the minimum liquidity covenant and provide for the testing of such minimum liquidity covenant at all times;

• make certain amendments to the Credit Facility to (i) provide that certain additional capital expenditures shall constitute "Expansion Capital Expenditures" and (ii) provide that "Expansion Capital Expenditures" shall be permitted for all periods on or prior to the last day of the fiscal quarter of the Company ending on or about October 2, 2022, so long as (1) there is no default or event of default, (2) on a pro forma basis, Liquidity shall exceed a certain amount and (3) such "Expansion Capital Expenditures" do not exceed certain agreed amounts in each fiscal quarter (with carryforward of unused amounts to the immediately succeeding fiscal quarter), and, for all periods thereafter, so long as (1) there is no default or event of default, (2) on a pro forma basis, Liquidity shall exceed a certain amount and (3) on a pro forma basis, lease adjusted leverage ratio shall not exceed 5.00x ;

• increase the pricing under the Credit Facility for (a) the period from the Third Amendment Effective Date through the first interest determination date occurring after the last day of the fiscal quarter of the Company ending on or about April 17, 2022 to LIBOR (subject to a 1.00 % floor) plus 6.00 % and (b) periods thereafter to LIBOR (to which a 1.00 % LIBOR floor shall apply) plus 6.50 %;

• provide that the previously agreed utilization fee of 0.75 % per annum of the daily outstanding principal amount of term loans, revolving loans, swingline loans and letter of credit obligations under the Credit Facility shall be owing solely in respect of the period commencing on February 25, 2021 and ending on the Third Amendment Effective Date, with all such amounts payable on the Third Amendment Effective Date;

• reduce the aggregate revolving commitment to $ 75,000,000 on the last day of the fiscal quarter of the Company ending on or about April 17, 2022;

• amend the anti-cash hoarding provision to require revolver repayments (but with no associated permanent reduction in the revolving commitment) to the extent that the Company’s consolidated cash on hand exceeds $ 30,000,000 at any time;

• revise the requirement that the annual audited financial statements be delivered without a "going concern qualification" to permit such a qualification solely relating to (i) any impending debt maturity (whether under the Credit Facility or otherwise) or (ii) any actual or prospective inability to satisfy a financial maintenance covenant;

• make certain amendments to the Credit Facility to address LIBOR transition matters.

The description above is a summary of the Third Amendment and is qualified in its entirety by the complete text of the agreement, which is incorporated herein by reference.

In conjunction with the Third Amendment, the Company paid certain customary amendment fees to the lenders under the Credit Facility totaling approximately $ 0.8 million, which will be capitalized as deferred loan fees and amortized over the remaining term of the Credit Facility.

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 July 11, 2021 and December 27, 2020 (in thousands):

July 11, 2021 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 October 3, 2021 and December 27, 2020 (in thousands):

October 3, 2021 Level 1 Level 2 Level 3

Investments in rabbi trust $ 5,999 $ 5,999 $ — $ —

6 unchanged sentences

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

As of July 11, 2021, 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.

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.

See footnote 5 Other Charges of this Quarterly Report on Form 10-Q for additional detail.

1 unchanged sentence

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 2021, 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 11, 2021 were $ 153.9 million and $ 152.4 million.

As of October 3, 2021, the carrying value of the liability under the Company's Credit Facility approximated fair value.

As of December 27, 2020, the carrying value and fair value of the Credit Facility were $ 169.8 million and $ 172.6 million.

5 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