What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2022-03-10 compared with 2021-03-03 · 301 added, 340 removed, 663 unchanged (49% of the section changed)

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RED ROBIN GOURMET BURGERS, INC.

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm , Deloitte & Touche LLP (PCAOB ID:

Report of Independent Registered Public Accounting Firm, KPMG LLP (PCAOB ID:

Consolidated Balance Sheets

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Notes to Consolidated Financial Statements

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors of Red Robin Gourmet Burgers, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of Red Robin Gourmet Burgers, Inc.

and subsidiaries (the "Company") as of December 26, 2021, the related consolidated statements of operations and comprehensive loss, stockholders' equity, and cash flows for the period ended December 26, 2021, and the related notes (collectively, referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 26, 2021, and the results of its operations and its cash flows for the period ended December 26, 2021, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 26, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 10, 2022, expressed an unqualified opinion on the Company's internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company's financial statements based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Impairment of Long-Lived Assets – Refer to Notes 1, 4 and 9 in the Financial Statements

Critical Audit Matter Description

As of December 26, 2021, the Company had $386.3 million in property and equipment, net, $400.8 million in operating lease assets, net, and $9.7 million in finance lease assets, net.

The Company assesses long-lived assets for impairment at the individual restaurant level whenever events and circumstances indicate the carrying amount of an asset group may not be recoverable.

During the fiscal year ended December 26, 2021, the Company recorded an impairment of $6.4 million related to long-lived assets associated with excess properties.

Long-lived assets are reviewed whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable.

Expected undiscounted cash flows associated with an asset are the key factor in determining the recoverability of the asset.

Identifiable cash flows are measured at the restaurant level.

The estimate of cash flows is based upon, among other things, certain assumptions about expected future operating performance, including assumptions of future revenue trends.

If the sum of the discounted cash flows is less than the carrying value of the asset, an impairment loss is recognized and measured as the amount by which the carrying value exceeds the fair value of the asset.

We identified the evaluation of long-lived asset impairment for restaurant sites, leasehold improvements, other fixed assets, right of use assets, and amortizable intangible assets, as a critical audit matter because of the significant judgments made by management to estimate the undiscounted cash flows, including assumptions about expected future operating performance, and the fair value of the right of use assets.

This required a high degree of auditor judgment and an increased extent of effort, when performing audit procedures to evaluate whether management appropriately identified and evaluated potential impairment

indicators, and when evaluating the reasonableness of management’s estimates and assumptions, particularly related to undiscounted cash flows and market rent.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the impairment of long-lived assets included the following, among others:

• We tested the operating effectiveness of internal controls over the Company’s assessment and evaluation of potential impairment indicators for long-lived assets and over forecasted undiscounted cash flows and market rent used in their recoverability and impairment analyses.

• We evaluated the reasonableness of the Company’s evaluation of impairment indicators by:

◦ Evaluating the Company’s process for identifying qualitative and quantitative impairment indicators by location and whether the Company appropriately considered such indicators

◦ Conducting a completeness assessment to determine whether additional impairment indicators were present during the period that were not identified by the Company.

• We tested the mathematical accuracy of management’s calculations and for a selection of restaurant sites, we tested the underlying source information.

• We evaluated the reasonableness of the information in the Company’s forecasted undiscounted cash flows used in their recoverability and impairment analyses, by comparing the forecasts to

◦ Historical actual information

◦ Internal communications between management and the Board of Directors

◦ Forecasted information included in analyst and industry reports for the Company and certain of its peer companies.

• We evaluated the Company’s forecasted undiscounted cash flows for consistency with evidence obtained in other areas of the audit.

• With the assistance of our fair value specialists, we evaluated the market rent by developing a range of independent estimates and comparing those to the market rent used by management.

/s/ Deloitte & Touche LLP

Denver, Colorado

March 10, 2022

We have served as the Company's auditor since 2021.

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

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Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Red Robin Gourmet Burgers, Inc.

and subsidiaries (the Company) as of December 27, 2020 and December 29, 2019, the related consolidated statements of operations and comprehensive loss, stockholders’ equity, and cash flows for each of the years in the three‑year period ended December 27, 2020, and the related notes (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 27, 2020 and December 29, 2019, and the results of its operations and its cash flows for each of the years in the three‑year period ended December 27, 2020, in conformity with U.S.

We have audited the accompanying consolidated balance sheet of Red Robin Gourmet Burgers, Inc.

and subsidiaries (the Company) as of December 27, 2020, the related consolidated statements of operations and comprehensive loss, stockholders’ equity, and cash flows for each of the years in the two‑year period ended December 27, 2020, and the related notes (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 27, 2020, and the results of its operations and its cash flows for each of the years in the two‑year period ended December 27, 2020, in conformity with U.S.

generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 27, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated March 3, 2021 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Change in Accounting Principle

As discussed in Note 11 to the consolidated financial statements, the Company has changed its method of accounting for leases as of December 31, 2018 due to the adoption of Accounting Standards Update No.

2016-02, Leases .

Basis for Opinion

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We believe that our audits provide a reasonable basis for our opinion

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgment.

The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Impairment of Long-lived Assets

As discussed in Note 1 to the consolidated financial statements, the Company reviews its long-lived assets, including restaurant locations for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to the future undiscounted cash flows expected to be generated by the assets.

If the assets are determined to be impaired, the amount of impairment recognized is the amount by which the carrying amount of the assets exceeds their fair value.

Fair value is generally determined using forecasted cash flows discounted using an estimated weighted average cost of capital.

As of December 27, 2020, long-lived assets consisted of property and equipment, net of $427,033 thousand, intangible assets subject to amortization, net of $17,254 thousand, and right of use assets, net of $425,573 thousand, which primarily related to restaurant locations.

During the year ended December 27, 2020 the Company recorded an impairment of long-lived assets of $21,700 thousand.

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We identified the evaluation of the impairment analysis of long-lived assets as a critical audit matter.

There was a high degree of subjective auditor judgment in evaluating the estimated undiscounted future cash flows used to test restaurant locations for recoverability and the determination of fair value of restaurant locations when required.

Specifically, a high degree of subjective auditor judgment was required to evaluate future revenues and restaurant level expenses before occupancy as a percentage of future revenues of restaurant locations, including consideration of the impact of COVID-19.

The following are the primary procedures we performed to address this critical audit matter.

We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s long-lived asset impairment process, including controls over the identification of restaurant locations at risk of impairment, the determination of estimated undiscounted future cash flows and the fair value of individual restaurant locations, as necessary, and controls over the key assumptions as noted above.

For certain restaurant locations, we (1) compared the Company’s historical revenue and restaurant level expenses before occupancy forecasts to actual revenue and restaurant level expenses before occupancy at the restaurant location level to assess management’s ability to accurately estimate, (2) compared the Company’s estimated future revenue growth rates to external sources and its peer companies, (3) compared the Company’s estimated restaurant level expenses before occupancy as a percentage of revenue to historical actual percentages, and (4) we evaluated the future revenues in consideration of planned business initiatives.

We have served as the Company’s auditor since 2015 .

We served as the Company’s auditor from 2015 to 2021 .

Denver, Colorado

March 3, 2021

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March 3, 2021, except as to paragraph (d) of Note 1, which is as of March 10, 2022

RED ROBIN GOURMET BURGERS, INC.

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Property and equipment, net 386,336 427,033

Right of use assets, net 425,573 426,248

Goodwill — 96,397

Operating lease assets, net 400,825 415,929

Intangible assets, net 21,292 24,714

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Unearned revenue 54,214 50,138

Current portion of lease obligations 55,275 42,699

Current portion of operating lease liabilities 48,842 54,197

Current portion of long-term debt 9,692 9,692

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Long-term debt 167,263 160,952

Long-term portion of lease obligations 465,233 465,435

Long-term portion of operating lease liabilities 435,136 454,296

Other non-current liabilities 26,325 36,224

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45,000 shares authorized;

20,449 and 17,851 shares issued;

20,449 shares issued;

15,722 and 15,548 shares outstanding as of December 26, 2021 and December 27, 2020

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Paid-in capital 242,560 243,407

Accumulated other comprehensive loss, net of tax ( 4 ) ( 4,373 )

Accumulated other comprehensive income (loss), net of tax 1 ( 4 )

Retained earnings 27,196 77,198

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See Notes to Consolidated Financial Statements.

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RED ROBIN GOURMET BURGERS, INC.

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Interest (income) and other, net ( 719 ) ( 1,757 ) ( 1,068 )

Total other expenses 8,406 9,110 10,925

Total other expenses, net 13,457 8,406 9,110

Loss before income taxes ( 50,154 ) ( 283,552 ) ( 22,237 )

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Diluted 15,660 14,314 12,959

Other comprehensive (loss) income:

Other comprehensive income (loss):

Foreign currency translation adjustment $ 5 $ ( 1,115 ) $ 428

Other comprehensive (loss) income, net of tax ( 1,115 ) 428 ( 1,235 )

Other comprehensive income (loss), net of tax 5 ( 1,115 ) 428

Total comprehensive loss $ ( 49,997 ) $ ( 277,183 ) $ ( 7,475 )

See Notes to Consolidated Financial Statements.

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RED ROBIN GOURMET BURGERS, INC.

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Comprehensive

(Loss) Income,

Capital Retained

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Non-cash stock compensation — — — — 3,350 — — 3,350

Net loss — — — — — — ( 6,419 ) ( 6,419 )

Other comprehensive loss — — — — — ( 1,235 ) — ( 1,235 )

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 — — ( 64 ) 2,642 ( 2,180 ) — — 462

Acquisition of treasury stock — — 112 ( 3,450 ) — — — ( 3,450 )

Non-cash stock compensation — — — — 3,350 — — 3,350

Topic 842 transition impairment, net of tax — — — — — — ( 15,172 ) ( 15,172 )

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Issuance of common stock, $0.001 par value, net of stock issuance costs 2,598 2 — — 28,716 — — 28,718

Release of foreign currency translation adjustment — — — — — 5,484 — 5,484

Release of currency translation adjustment — — — — — 5,484 — 5,484

Net loss — — — — — — ( 276,068 ) ( 276,068 )

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Balance, December 27, 2020 20,449 20 4,901 ( 199,908 ) 243,407 ( 4 ) 77,198 120,713

Exercise of options, issuance of restricted stock, shares exchanged for exercise and tax, and stock issued through employee stock purchase plan — — ( 174 ) 7,105 ( 7,484 ) — — ( 379 )

Non-cash stock compensation — — — — 6,637 6,637

Net loss — — — — — — ( 50,002 ) ( 50,002 )

Other comprehensive income — — — — — 5 5

Balance, December 26, 2021 20,449 $ 20 4,727 $ ( 192,803 ) $ 242,560 $ 1 $ 27,196 $ 76,974

See Notes to Consolidated Financial Statements.

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RED ROBIN GOURMET BURGERS, INC.

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Goodwill and asset impairments 7,052 122,354 15,094

Non-cash other charges (gains) 2,837 ( 13,621 ) 7,588

Non-cash other charges 346 2,837 ( 13,621 )

Deferred income tax provision (benefit) — 51,502 ( 9,640 )

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Prepaid expenses and other current assets ( 3,066 ) 7,443 ( 3,163 )

Lease assets, net of liabilities 18,324 696 636

Operating lease assets, net of liabilities ( 9,293 ) 18,324 696

Trade accounts payable and accrued liabilities 19,449 ( 9,566 ) ( 15,490 )

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Borrowings of long-term debt 192,500 211,000 273,500

Payments of long-term debt and finance leases ( 247,501 ) ( 261,063 ) ( 289,238 )

Payments of long-term debt and capital leases ( 188,845 ) ( 247,501 ) ( 261,063 )

Purchase of treasury stock — ( 1,635 ) ( 3,450 )

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Proceeds from issuance of common stock, net of stock issuance costs — 28,718 —

Proceeds from exercise of stock options and employee stock purchase plan 666 724 914

Net cash (used in) provided by financing activities ( 11,704 ) 9,678 ( 74,298 )

(Uses) proceeds from other financing activities, net ( 378 ) 666 724

Net cash provided by (used in) financing activities 1,563 ( 11,704 ) 9,678

Effect of exchange rate changes on cash 20 ( 1,065 ) 913

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Supplemental disclosure of cash flow information

Income taxes (refund received) paid $ ( 50,629 ) $ 3,237 $ 2,486

Income taxes (refund received) paid, net $ ( 962 ) $ ( 50,629 ) $ 3,237

Interest paid, net of amounts capitalized 10,455 9,869 9,750

Change in construction related payables $ ( 949 ) $ ( 3,910 ) $ ( 507 )

Accrued purchases of property, equipment and intangible assets $ 4,655 $ 2,358 $ 3,307

See Notes to Consolidated Financial Statements.

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RED ROBIN GOURMET BURGERS, INC.

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Description of Business and Summary of Significant Accounting Policies

(a) 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 casual dining restaurants in North America.

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

Basis of Presentation and Principles of Consolidation - The consolidated financial statements of the Company are prepared in accordance with accounting principles generally accepted in the United States and include the accounts of Red Robin and its wholly owned subsidiaries after elimination of all intercompany accounts and transactions.

(b) Basis of Presentation and Principles of Consolidation

The consolidated financial statements of the Company are prepared in accordance with accounting principles generally accepted in the United States and include the accounts of Red Robin and its wholly owned subsidiaries after elimination of all intercompany accounts and transactions.

The Company's fiscal year is 52 or 53 weeks ending the last Sunday of the calendar year.

Year-end dates and the number of weeks in each fiscal year are shown in the table below for periods presented in this Form 10-K and for the upcoming fiscal year.

Year-end dates and the number of weeks in each fiscal year are shown in the table below for periods presented in the consolidated financial statements and for the upcoming fiscal year.

Fiscal Year Year End Date Number of Weeks in Fiscal Year

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2019 December 29, 2019 52

Upcoming Fiscal Year

Upcoming Fiscal Years:

2022 December 25, 2022 52

Use of Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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 periods.

2023 December 31, 2023 53

The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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 periods.

The areas that require management's most significant estimates are impairment of long-lived assets, lease accounting, estimating fair value, and unearned revenue.

Actual results could differ from those estimates.

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 consolidated balance sheets.

For the year ended December 29, 2019, the Company reclassified the following within net cash provided by operating activities on the consolidated statements of cash flows:

$ 15.1 million from Non-cash other charges to Goodwill and restaurant asset impairment, $ 5.2 million from Prepaid expenses and other current assets to Income tax receivable, $ 0.7 million from Other operating assets and liabilities, net to Lease assets, net of liabilities, and $ 0.2 million from Prepaid expenses and other current assets to Inventories.

For the year ended December 30, 2018, the Company reclassified the following within net cash provided by operating activities on the consolidated statements of cash flows:

$ 28.1 million from Non-cash other charges to Goodwill and restaurant asset impairment, $ 1.4 million from Prepaid expenses and other current assets to Income tax receivable, $ 0.8 million from Prepaid expenses and other current assets to Inventories, and $ 0.6 million from Other operating assets and liabilities, net to Lease assets, net of liabilities.

Revenue Recognition - Revenues consist of sales from restaurant operations, franchise revenue, and other revenue including gift card breakage and miscellaneous revenue.

(d) Immaterial Restatements

Subsequent to the issuance of the December 27, 2020 Consolidated Financial Statements, management concluded that Financing lease right of use assets, Current portion of financing lease obligations and Long-term portion of financing lease liabilities were incorrectly presented within the same financial statement line items as Operating lease right of use assets, Current portion of operating lease obligations, and Long-term portion of operating lease obligations, respectively, on the December 27, 2020 Consolidated Balance Sheet.

To correct the classification of these assets and liabilities, $ 9.7 million of Financing lease right of use assets net was reclassified to Other assets, net, $ 1.1 million of the Current portion of financing lease obligations was reclassified to Accrued liabilities and other current liabilities, and $ 10.9 million of the Long-term portion of financing lease obligations was reclassified to Other non-current liabilities.

Remaining balances in the captions pertain to Operating leases, and the financial statement line item descriptions were changed in the current year presentation to reflect this.

Additionally, subsequent to the issuance of the December 27, 2020 Consolidated Financial Statements, management concluded that the Company had incorrectly disclosed the Change in construction related payables, whereas the required disclosure presents the accrued capital expenditure amounts included in accounts payable and accrued expenses and other current liabilities as of year-end.

The Company corrected the disclosure in the current year and corrected the financial statement line item description to Accrued purchases of property, equipment and intangible assets, and corrected the 2020 and 2019 amounts from $( 0.9 ) million and $( 3.9 ) million, respectively to $ 2.4 million and $ 3.3 million, respectively, within the Consolidated Statement of Cash Flows.

These restatements were related to presentation, and did not have any impact to retained earnings in the current or prior year presentations.

Management has evaluated these errors and has determined, based on quantitative and qualitative factors that they were not material to the December 27, 2020 balance sheet or the cash flow statements for the year ended December 27, 2020 and December 29, 2019.

(e) Summary of Significant Accounting Policies

Revenue Recognition - Revenues consist of sales from restaurant operations (including third party delivery), franchise revenue, and other revenue including gift card breakage and miscellaneous revenue.

The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a restaurant Guest, franchisee, or other customer.

The Company recognizes revenues from restaurant sales when payment is tendered at the point of sale, as the Company's performance obligation to provide food and beverage to the customer has been satisfied.

The Company recognizes revenues from restaurant operations when payment is tendered at the point of sale, as the Company's performance obligation to provide food and beverage to the customer has been satisfied.

The Company sells gift cards which do not have an expiration date, and it does not deduct dormancy fees from outstanding gift card balances.

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(i) Restaurant revenue, when the Company's performance obligation to provide food and beverage to the customer is satisfied upon redemption of the gift card, or (ii) gift card breakage, as discussed below.

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Red Robin Royalty™ deferred revenue primarily relates to a program in which registered members earn an award for a free entrée for every nine entrées purchased.

We recognize the current sale of an entrée and defer a portion of the revenue to reflect partial pre-payment for the future entrée the member is entitled to receive.

Registered members can also earn an award if they visit a Red Robin restaurant 5 separate times within 5 weeks of joining our Royalty™ program.

We recognize the current sale of an entrée and defer a portion of the revenue to reflect partial prepayment for the future entrée the member is entitled to receive.

We estimate the future value of the award based on the historical average value of redemptions.

We also estimate what portion of registered members are not likely to reach the ninth purchase based on historical activity and recognize the deferred revenue related to those purchases.

We also estimate what portion of registered members are not likely to reach the ninth purchase or fifth visit based on historical activity and recognize the revenue related to those purchases from deferred revenue.

We recognize the deferred revenue in restaurant revenue on earned rewards when the Company satisfies its performance obligation at redemption, or upon expiration.

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Other revenue consists of miscellaneous revenues considered insignificant to the Company's business.

Cash Equivalents - The Company considers all highly liquid instruments with an original maturity of three months or less to be cash equivalents.

Cash and Cash Equivalents - The Company considers all highly liquid instruments with an original maturity of three months or less to be cash equivalents.

Amounts receivable from credit card issuers are typically converted to cash within two days to four days of the original sales transaction and are considered to be cash equivalents.

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The Company holds cash and cash equivalents at financial institutions in excess of amounts covered by the Federal Depository Insurance Corporation (the "FDIC") and sometimes invests excess cash in money market funds not insured by the FDIC.

Accounts Receivable - Accounts receivable consists primarily of third party gift card receivables, third party delivery partner receivables, trade receivables due from franchisees for royalties, and tenant improvement allowances.

At the end of 2020, there was approximately $ 7.6 million of gift cards in transit in accounts receivable related to gift cards that were sold by third party retailers compared to $ 13.3 million at the end of 2019.

At the end of 2020, there was also approximately $ 4 million related to third party delivery partners in accounts receivable compared to $ 1.2 million at the end of 2019.

The Company periodically assesses the credit risk associated with these financial institutions and believes that the risk of loss is minimal.

Accounts Receivable, Net - Accounts receivable, net consists primarily of third party gift card receivables, third party delivery partner receivables, trade receivables due from franchisees for royalties and advertising fund contributions, and tenant improvement allowances.

At the end of 2021, there was approximately $ 10.9 million of gift card receivables in accounts receivable related to gift cards that were sold by third party retailers compared to $ 7.6 million at the end of 2020.

At the end of

2021, there was also approximately $ 3.0 million related to third party delivery partners in accounts receivable compared to approximately $ 4.0 million at the end of 2020.

Inventories - Inventories consist of food, beverages, and supplies valued at the lower of cost (first-in, first-out method) or net realizable value.

At the end of 2020 and 2019, food and beverage inventories were $ 6.8 million and $ 8.1 million, and supplies inventories were $ 17.0 million and $ 18.3 million.

Property and Equipment - Property and equipment are recorded at cost.

At the end of 2021 and 2020, food and beverage inventories were $ 8.7 million and $ 6.8 million, respectively, and supplies inventories were $ 16.4 million and $ 17.0 million, respectively.

Property and Equipment, Net - Property and equipment are recorded at cost.

Expenditures for major additions and improvements are capitalized and minor replacements, maintenance, and repairs are expensed as incurred.

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Costs incurred for the potential development of restaurants that are subsequently terminated are expensed.

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Leases - The Company leases land, buildings, and equipment used in its operations under operating and finance leases.

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We have elected the short-term lease recognition exemption for all applicable classes of underlying assets.

Short-term disclosures include only those leases with a term greater than one month and 12 months or less, and expense is recognized on a straight-line basis over the lease term.

Short-term disclosures include only those leases with a term of 12 months or less, and expense is recognized on a straight-line basis over the lease term.

Leases with an initial term of 12 months or less, that do not include an option to purchase the underlying asset that we are reasonably certain to exercise, are not recorded on the balance sheet.

We elected the practical expedient that does not require us to separate lease and non-lease components for our population of real estate assets.

Goodwill and Intangible Assets, net - Goodwill represents the excess of purchase price over the fair value of identifiable net assets acquired.

Intangible assets comprise primarily leasehold interests, acquired franchise rights, and the costs of purchased liquor licenses.

Intangible Assets, net - Intangible assets comprise primarily leasehold interests, acquired franchise rights, and the costs of purchased liquor licenses.

Leasehold interests primarily represent the fair values of acquired lease contracts having contractual rents lower than fair market rents and are amortized on a straight-line basis over the remaining initial lease term.

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The costs of purchasing transferable liquor licenses through open markets in jurisdictions with a limited number of authorized liquor licenses are capitalized as indefinite-lived intangible assets.

Goodwill, which is not subject to amortization, is evaluated for impairment annually as of the end of the Company's third fiscal quarter, or more frequently if an event occurs or circumstances change, such as material deterioration in performance or a significant number of restaurant closures, that would indicate an impairment may exist.

Goodwill is evaluated at the level of the Company's single operating segment, which also represents the Company's only reporting unit.

When evaluating goodwill for impairment, the Company may first perform a qualitative assessment to determine whether it is more likely than not that a reporting unit is impaired.

If we do not perform a qualitative assessment, or if we determine that it is not more likely than not that the fair value of the reporting unit exceeds its carrying amount, we perform a quantitative assessment and calculate the estimated fair value of the reporting unit.

If the carrying amount of the reporting unit exceeds the estimated fair value, an impairment charge is recorded to reduce the carrying value to the estimated fair value.

Our decision to perform a qualitative impairment assessment in a given year is influenced by a number of factors, including the significance of the excess of the reporting unit's estimated fair value over carrying value at the last quantitative assessment date, the amount of time in between quantitative fair value assessments, and the price of our common stock.

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

stock market represented a goodwill impairment triggering event due to the COVID-19 pandemic.

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

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

This analysis resulted in full impairment of our goodwill balance totaling $ 95.4 million included in Other charges on the consolidated statements of operations and comprehensive loss.

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

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The Company performed a qualitative assessment for the 2019 annual impairment evaluation at the end of the third fiscal quarter and determined goodwill was not impaired.

No indicators of impairment were identified from the date of our impairment test through the end of 2019.

By review of macroeconomic conditions, industry and market conditions, cost factors, overall financial performance compared with prior projections and prior actual financial results, other relevant entity-specific events, and changes in share price, we determined it was not more likely than not that the fair value of the reporting unit was less than its carrying amount.

Liquor licenses with indefinite lives are reviewed for impairment annually or whenever events or changes in circumstances indicate the carrying amount may not be recoverable.

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We determine fair value based on prices in the open market for license in same or similar jurisdictions.

Impairment charges of $ 0.5 million were recorded related to indefinite-lived intangibles in 2021.

No impairment charges were recorded in 2020, or 2019.

Impairment of Long-Lived Assets - The Company reviews its long-lived assets, including restaurant sites, leasehold improvements, information technology systems, and other fixed assets, and amortizable intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Impairment of Long-Lived Assets - The Company reviews its long-lived assets, including restaurant sites, leasehold improvements, information technology systems, right of use assets, other fixed assets, and amortizable intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to the future undiscounted net cash flows expected to be generated by the assets.

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Fair value is generally determined using forecasted cash flows discounted using an estimated weighted average cost of capital.

Management may also utilize other market information to determine fair value when relevant information is available.

Management may also utilize other market information to determine fair value when relevant information is available, such as market rent, when available, to estimate the fair value of a restaurant.

Restaurant sites and other assets to be disposed of are reported at the lower of their carrying amount or fair value, less estimated costs to sell.

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Contributions to these Advertising Funds from franchisees are recorded as revenue under Franchise revenue in the consolidated statements of operations and comprehensive loss in accordance with ASC Topic 606, Revenue from Contracts with Customers .

Total advertising costs were $ 24.9 million, $ 44.3 million, and $ 44.3 million in 2020, 2019, and 2018 and were included in Selling, general, and administrative expenses.

Total advertising costs of $ 34.3 million, $ 24.9 million, and $ 44.3 million in 2021, 2020, and 2019 and were included in Selling, general, and administrative expenses.

Advertising production costs are expensed in the period when the advertising first takes place.

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Costs related to preparing restaurants to introduce Donatos® will be expensed as incurred and included in pre-opening costs.

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Income Taxes - Deferred tax liabilities are recognized for the estimated effects of all taxable temporary differences, and deferred tax assets are recognized for the estimated effects of all deductible temporary differences, net operating losses, and tax credit carryforwards.

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Potentially dilutive shares are excluded from the computation in periods in which they have an anti-dilutive effect.

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

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

As the Company was in a net loss position for the fifty-two week period ended December 26, 2021, December 27, 2020, and December 29, 2019, all potentially dilutive common shares are considered anti-dilutive.

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

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GAAP, are excluded from net income.

Other comprehensive (loss) income as presented in the consolidated statements of operations and comprehensive loss for 2020, 2019, and 2018 consisted of the foreign currency translation adjustment resulting from the Company's Canadian restaurant operations.

Other comprehensive (loss) income as presented in the consolidated statements of operations and comprehensive loss for 2021, 2020, and 2019 consisted of the foreign currency translation adjustment resulting from the Company's Canadian franchise operations.

Stock-Based Compensation - The Company maintains several equity incentive plans under which it may grant stock options, stock appreciation rights, restricted stock, stock variable compensation, or other forms of awards granted or denominated in the Company's common stock or units of the Company's common stock, as well as cash variable compensation awards to employees, non-employees, directors, and consultants.

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The Company issues shares relating to stock-based compensation plans and the employee stock purchase plan from treasury shares.

Deferred Compensation (Income) Expense - The Company has assets and liabilities related to a deferred compensation plan.

We recognize compensation expenses for only the portion of share-based awards that are expected to vest.

Therefore, we apply estimated forfeiture rates that are derived from our historical forfeitures of similar awards when a Team Member leaves the Company.

Deferred Compensation - The Company has assets and liabilities related to a deferred compensation plan.

The assets of the deferred compensation plan are held in a rabbi trust, where they are invested in certain mutual funds that cover an investment spectrum range from equities to money market instruments.

Increases in the market value of the investments held in the trust result in the recognition of deferred compensation expense reported in Selling, general, and administrative expenses and recognition of investment gain reported in Interest income and other, net, in the consolidated statements of operations and comprehensive loss.

Decreases in the market value of the investments held in the trust result in the recognition of a reduction to deferred compensation expense and recognition of investment loss reported in Interest income and other, net, in the consolidated statements of operations and comprehensive loss.

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Foreign Currency Translation - The Canadian Dollar is the functional currency for our Canadian restaurant operations.

Fluctuations in the market value of the investments held in the trust result in the recognition of deferred compensation expense or income reported in Selling, general, and administrative expenses and recognition of investment gain or loss reported in Interest income and other, net, in the consolidated statements of operations and comprehensive loss.

Foreign Currency Translation - The Canadian Dollar is the functional currency for our Canadian franchise operations.

Assets and liabilities denominated in Canadian Dollars are translated into U.S.

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The resulting translation adjustment is recorded as a separate component of Other comprehensive (loss) income.

Gain or loss from foreign currency transactions is recognized in our consolidated statements of operations and comprehensive loss.

Gain or loss from foreign currency transactions is recognized in our consolidated statements of operations and comprehensive loss at the exchange rate in effect as of the date of the transaction.

During the fourth quarter of 2020, the Company substantially completed the exit of Company-owned restaurants in Canada resulting in the removal of the accumulated currency translation adjustment as a component of stockholders' equity and the recognition in Other charges on the consolidated statements of operations and comprehensive loss totaling a loss of $ 5.5 million.

COVID-19 Pandemic

Due to the COVID-19 pandemic, we continue to navigate unprecedented times for our business and industry.

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 franchisee's operations throughout 2020, we temporarily abated franchise royalty payments and advertising contributions at various times during the year.

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.

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 and Leases

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.

The Company has concluded negotiations with many of its landlords representing more than 75 % of its leases as of December 27, 2020.

Rent concessions agreed upon 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 $ 8.6 million remeasurement to increase the lease liability and right-of-use asset resulting from contractual rent concessions under the FASB relief during 2020 and recorded an additional $ 1.1 million of broker's fees to the right-of-use asset.

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 2020, one lease changed classification from operating to finance, and one lease changed classification from finance to operating.

Based on updated discount rates, a $ 49.0 million remeasurement was recorded to increase the lease liability and a $ 49.2 million adjustment, inclusive of broker's fees, was recorded to increase the right-of-use asset during 2020.

Contractual rent concessions granted to the Company during 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.

As discussed in Note 1, Description of Business and Summary of Significant Accounting Policies , the Company recognized full goodwill impairment during the first quarter of 2020 totaling $ 95.4 million resulting from the negative effects of COVID-19 on our business.

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Restaurant Assets

During 2020, the Company recognized $ 21.7 million of impairment related to restaurant assets included in Other charges on the consolidated statements of operations and comprehensive loss resulting from the continuing and projected future results of 40 Company-owned restaurants.

Restaurant asset impairment of $ 5.7 million was related to six permanently closed Company-owned restaurants and included in Restaurant closure and refranchising costs in Note 5, Other Charges .

Additional restaurant asset impairment was recognized during the fourth quarter of 2020 due to planned permanent closures of certain temporarily closed restaurants.

Although current fiscal year to date results continue to align with management's forecast, the increase in reported COVID-19 cases during the fourth quarter of 2020 across the United States and factors associated with the pandemic have changed management's expectation on the timing of the Company's recovery and projected results in future fiscal periods at certain restaurants.

Our restaurant asset impairment assessment is based on inputs subject to various risks and uncertainties caused by the COVID-19 pandemic, including forecasted revenues, expenses, and cash flows, current discount rates, growth rates, observable market data, and changes to the regulatory environment.

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

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

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

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

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

The fair value of restaurant assets is generally determined using a discounted cash flow projection model, which is based on significant inputs not observed in the market and represents a level 3 fair value measurement.

In certain cases, management uses other market information, when available, to estimate the fair value of a restaurant's assets.

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

Under provisions of the CARES Act, we are deferring approximately $ 18 million in payroll taxes to be paid in fiscal years 2022 and 2023.

On February 25, 2021, the Company entered into the Second Amendment to our credit facility.

The Second Amendment further amends the credit facility to, among other things:

• suspend the application of (a) the lease adjusted leverage ratio financial covenant (the "LALR ratio") and (b) the fixed charge coverage ratio (the "FCC ratio") for the first and second fiscal quarters of 2021;

• increase the maximum leverage permitted for purposes of the LALR ratio for the fourth fiscal quarter of 2021 and the first and second fiscal quarters of 2022;

• for the third and fourth fiscal quarters of 2021 and the first fiscal quarter of 2022, provide that (a) the LALR ratio will be calculated using a seasonally adjusted annualized consolidated EBITDA for the applicable period since the beginning of the third fiscal quarter and (b) the FCC ratio will be calculated only for the applicable periods since the beginning of the third fiscal quarter of 2021;

• revise the FCC ratio to account for cash tax refunds received in fiscal year 2021;

• amend the minimum liquidity covenant such that is it measured as of the last day of each applicable fiscal quarter and (a) for the first and second quarters of 2021, requires minimum liquidity of $ 55 million and (b) for the third and fourth fiscal quarters of 2021, requires minimum liquidity of $ 42 million;

• remove provisions requiring mandatory prepayments from net cash proceeds of certain equity issuances and convertible debt issuances;

• shorten the maturity date applicable to the revolver and term loan to January 10, 2023;

• reduce the aggregate revolving commitment to $ 130 million on the Second Amendment effective date and to $ 100 million at the end of the third fiscal quarter of 2021;

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• increase the pricing under the credit facility for (a) the period from the Second Amendment effective date through the first interest determination date occurring after the fourth fiscal quarter of 2021 to LIBOR (subject to a 1 % floor) plus 4.50 % and (b) periods thereafter to LIBOR (subject to a 1 % floor) plus 4 %;

• require the payment of a utilization fee (paid on the revolver maturity date) equal to 0.75 % per annum of the daily outstanding principal balance of term loans, revolving loans, swingline loans, and letter of credit obligations from the Second Amendment effective date to the first interest determination date occurring after the fourth fiscal quarter of 2021;

• subject to limited exceptions and other limitations, prohibit certain capital expenditures, restricted payments, acquisitions, and other investments until the Company delivers a compliance certificate for a fiscal quarter (beginning with third fiscal quarter of 2021 and the fourth fiscal quarter of 2021 specifically for restricted payments) demonstrating a LALR ratio less than or equal to 5.00 :1.00;

• amend the maximum allowable cash on hand provision to require revolver payments (but with no associated permanent reduction in the revolving commitment) to the extent that the Company's consolidated cash on hand exceeds $ 35 million at any time.

In conjunction with the Second Amendment, the Company paid certain customary amendment fees to the lenders under the credit facility totaling approximately $ 0.6 million which will be capitalized as deferred loan fees and amortized over the remaining term of the credit facility.

Impact of COVID-19 Pandemic - The COVID-19 pandemic continues to create unprecedented challenges for our industry including government mandated restrictions, changing consumer behavior, labor and supply chain challenges, and wide spread inflationary costs.

Even as government restrictions were lifted, and dining rooms returned to full capacity, the surge in the Delta and Omicron variants continued to highlight the critical importance of providing a safe environment for our Team Members and Guests.

In response to these COVID-19 challenges, the Company limited dining hours and seating capacity in order to preserve the consistent quality experience our Guests expect from us.

Our ability to attract and retain Team Members has become more challenging in the current competitive job market.

The challenges in hiring and retention and global supply chain disruptions have affected many of our vendor partners, resulting in intermittent product and distribution shortages.

We remain focused on proactively addressing these industry challenges, while delivering a memorable Guest experience and continuing to prioritize the satisfaction and retention of our Team Members.

Recent Accounting Pronouncements

Reference Rate Reform

In March 2020, FASB issued Update 2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting.

This update provides temporary optional expedients to applying the reference rate reform guidance to contracts that reference LIBOR or another reference rate expected to be discontinued.

Under this update, contract modifications resulting in a new reference rate may be accounted for as a continuation of the existing contract.

This guidance is effective upon issuance of the update and applies to contract modifications made through December 31, 2022.

We are currently evaluating the 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 consolidated financial statements.

Disaggregation of Revenue

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(1) The decrease in Franchise revenue during 2020 was driven by the temporary abatement and non-collection of franchise payments.

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

(1) The decrease in Franchise revenue during 2020 was driven by the Company temporary abating franchise payments during the onset of the COVID-19 pandemic.

Contract Liabilities

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Gift card revenue $ 14,249 $ 16,385 $ 19,941

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Recent Accounting Pronouncements

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 plan to adopt during the first quarter of 2021, and we expect an immaterial impact to the consolidated financial statements.

Reference Rate Reform

In March 2020, FASB issued Update 2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting.

This update provides temporary optional expedients to applying the reference rate reform guidance to contracts that reference LIBOR or another reference rate expected to be discontinued.

Under this update, contract modifications resulting in a new reference rate may be accounted for as a continuation of the existing contract.

This guidance is effective upon issuance of the update and applies to contract modifications made through December 31, 2022.

We are currently evaluating the full impact this guidance will have on our consolidated financial statements.

Other Charges

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December 26, 2021 December 27, 2020 December 29, 2019

Goodwill impairment $ 95,414 $ — $ —

Restaurant closures and refranchising costs (gains) $ 6,276 $ 19,846 $ ( 1,187 )

Asset impairment 7,052 26,940 15,094

Restaurant closure and refranchising costs (gains) 19,846 ( 1,187 ) —

Litigation contingencies 1,330 6,440 —

Board and stockholder matters costs 2,504 3,261 —

COVID-19 related costs 1,288 1,858 —

Board and shareholder matter costs 128 2,504 3,261

Goodwill impairment — 95,414 —

Severance and executive transition — 881 3,450

Executive retention — — 980

Reorganization costs — — 3,273

Smallwares disposal — — 2,936

Other charges $ 16,074 $ 153,883 $ 21,598

Goodwill Impairment

The Company recognized full goodwill impairment during the first quarter of 2020 totaling $ 95.4 million resulting from the negative effects of COVID-19 on our business.

See Note 1, Description of Business and Summary of Significant Accounting Policies , for further discussion.

Asset Impairment

During 2020, the Company determined long-lived assets at 40 Company-owned restaurants were impaired and recognized non-cash impairment charges of $ 21.7 million.

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

Additionally, the Company impaired information technology assets totaling $ 5.2 million due to the COVID-19 pandemic redirecting our implementation of certain digital platforms in order to accelerate our speed to market.

During 2019 and 2018, the Company impaired long-lived assets of 29 and 41 Company-owned restaurants and recognized non-cash impairment charges of $ 15.1 million and $ 28.1 million.

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Restaurant Closure and Refranchising Costs

During 2020, the Company temporarily closed 35 restaurants due to COVID-19.

Of the temporarily closed restaurants, we permanently closed six restaurants and reopened 17 restaurants as of the end of 2020.

Restaurant Closure and Refranchising Costs (Gains)

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 2020, the Company temporarily closed 35 restaurants due to the onset of the COVID-19 pandemic.

During periods of temporary closure, restaurant operating and occupancy costs were included in Restaurant closures and refranchising costs.

In total, the Company permanently closed 11 restaurants, of which six were initially temporarily closed due to COVID-19.

The table below shows the disposition of these restaurants:

(Restaurants)

Restaurants Temporarily closed in March, 2020 as a result of the COVID-19 Pandemic:

Temporarily closed restaurants re-opened in 2020:

Temporarily closed restaurants permanently closed in 2020:

Restaurants temporarily closed as of December 27, 2020:

Temporarily closed restaurants re-opened in 2021:

Temporarily closed restaurants permanently closed in 2021:

Restaurants temporarily closed as of December 26, 2021 (1) :

(1) The Company intends to re-open the remaining temporarily closed restaurant in the first fiscal quarter of 2022.

During 2021, the Company permanently closed 14 restaurants.

Ten of these restaurants were initially temporarily closed due to COVID-19 in 2020.

During 2020, the Company permanently closed 11 restaurants.

Six of these restaurants were initially temporarily closed due to COVID-19.

Due to permanent closure of certain restaurants during 2020, we impaired long-lived assets at six of the 11 permanently closed restaurants totaling $ 5.7 million.

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The gain is driven by early lease terminations on previously closed restaurants.

During 2018, the Company closed four restaurants resulting in immaterial restaurant closure costs.

Asset Impairment

During 2021, the Company determined long-lived assets at ten locations were impaired and recognized non-cash impairment charges of $ 6.4 million primarily related to the impairment of the long-lived assets associated with our excess properties.

Additionally, the Company recognized $ 0.5 million of non-cash impairment charges related to the impairment of long lived intangible assets related to quota state liquor licenses at seven locations.

During 2020, the Company impaired long-lived assets of 40 Company-owned restaurants and recognized non-cash impairment charges of $ 21.7 million.

During 2019, the Company impaired long-lived assets of 29 Company-owned restaurants and recognized non-cash impairment charges of $ 15.1 million.

Litigation Contingencies

In 2020, the Company recorded $ 6.4 million of legal settlement costs primarily related to class action employment cases.

In 2021 and 2020, the Company recorded $ 1.3 million and $ 6.4 million, respectively, of contingencies related to litigation matters.

See Note 13, Commitments and Contingencies , for further discussion.

In 2018, the Company recorded $ 4.8 million of litigation contingencies for class action employment cases that were settled in January 2021.

COVID-19 Related Costs

In 2021 and 2020, the Company recorded $ 1.3 million and $ 1.9 million of costs, respectively, related to purchasing personal protective equipment for restaurant Team Members and Guests and providing emergency sick pay to restaurant Team Members during the pandemic.

Board and Stockholder Matters Costs

During 2021, the Company recorded an immaterial amount of board and stockholder matters costs.

During 2020, the Company recorded $ 2.5 million of board and stockholder matters costs primarily related to the shareholder rights plan and the recruitment and appointment of a new board member in the first quarter of 2020.

During 2019, the Company recorded $ 3.3 million of board and stockholder matters costs primarily related to the recruitment and appointment of the three new board members and the adoption of a shareholder rights plan.

COVID-19 Related Costs

In 2020, the Company recorded $ 1.9 million of costs related to purchasing personal protective equipment for restaurant Team Members and Guests and providing emergency sick pay to restaurant Team Members during the pandemic.

Goodwill Impairment

The Company recognized full goodwill impairment during the first quarter of 2020 totaling $ 95.4 million resulting from the negative effects of COVID-19 on our business.

Severance and Executive Transition

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During 2019, the Company recorded $ 1.0 million of executive retention costs related to payments made to retain executive leadership believed to be critical to the ongoing operation of the Company during the uncertainty created following the retirement of our CEO in early April 2019 and throughout the subsequent transition period.

Reorganization Costs

During 2018, the Company recorded $ 3.3 million of severance costs related to the reorganization in first quarter 2018.

Smallwares Disposal

During 2018, the Company recorded $ 2.9 million of costs related to the disposal of smallwares.

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Property and Equipment

Property and Equipment, Net

Property and equipment consist of the following at December 26, 2021 and December 27, 2020 (in thousands):

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Depreciation and amortization expense on property and equipment was $ 80.5 million in 2021, $ 83.2 million in 2020, and $ 87.4 million in 2019.

Goodwill and Intangible Assets

The following table presents goodwill as of December 27, 2020 and December 29, 2019 (in thousands):

Balance, beginning $ 96,397 $ 95,838

Foreign currency translation adjustment ( 983 ) 559

Goodwill impairment (1)

Balance, end $ — $ 96,397

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

On January 25, 2022 the Company entered into a purchase and sale agreement to sell a location where the Company owns the real estate, contingent upon the completion of customary due diligence.

If completed, this sale will result in a material gain during 2022.

Intangible Assets

The following table presents intangible assets as of December 26, 2021 and December 27, 2020 (in thousands):

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Intangible assets, net $ 78,999 $ ( 57,707 ) $ 21,292 $ 80,147 $ ( 55,433 ) $ 24,714

Immaterial impairment charges were recorded related to finite-lived intangibles resulting from the continuing and projected future results at Company-owned restaurants in 2020, 2019, and 2018, and no impairment charges were recorded related to indefinite-lived intangibles in 2020, 2019, and 2018.

Immaterial impairment charges were recorded related to finite-lived intangibles resulting from the continuing and projected future results at Company-owned restaurants in 2021, 2020, and 2019.

Impairment charges of $ 0.5 million were recorded related to indefinite-lived intangibles in 2021.

No impairment charges were recorded related to indefinite-lived intangibles in 2020, and 2019.

The aggregate amortization expense related to intangible assets subject to amortization for 2021, 2020, and 2019 was $ 2.9 million, $ 4.4 million, and $ 4.4 million.

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The estimated aggregate future amortization expense as of December 26, 2021 is as follows (in thousands):

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December 26, 2021 December 27, 2020

Legal $ 10,480 $ 4,290

CARES act deferred payroll tax $ 8,780 $ —

State and city sales tax payable 6,960 3,487

Real estate, personal property, state income, and other taxes payable 6,696 6,501

General liability insurance 4,984 6,370

State and city sales tax payable 3,487 6,776

Utilities 2,569 2,747

Legal 2,455 10,480

Accrued marketing 2,108 282

Current portion of finance lease liabilities 1,194 1,078

Other 9,712 9,750

Accrued liabilities and other current liabilities $ 45,458 $ 40,695

Borrowings as of December 27, 2020 and December 29, 2019 are summarized below (in thousands):

Borrowings as of December 26, 2021 and December 27, 2020 are summarized below:

December 26, 2021 December 27, 2020

Borrowings Weighted

(Dollars in thousands) Borrowings Weighted

Interest Rate Borrowings Weighted

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Total debt 176,955 170,644

Current portion 9,692 —

Less current portion 9,692 9,692

Long-term debt $ 167,263 $ 160,952

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Maturities of long-term debt as of December 26, 2021 are as follows (in thousands):

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Credit Facility

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

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

The credit facility also provides for a Canadian Dollar borrowing sub-limit equivalent to $ 20 million and limits sale leasebacks transactions to $ 50 million.

In connection with the termination of the credit facility and new borrowings under the credit facility, the Company repaid all outstanding borrowings, accrued interest, and fees under the previous credit facility.

Borrowings refinanced under the credit facility totaled $ 186.6 million, net of loan origination fees.

The credit facility will mature on January 10, 2023.

As of December 26, 2021, the Company had outstanding borrowings under the credit facility of $ 176.1 million, in addition to amounts issued under letters of credit of $ 7.9 million.

As of December 27, 2020, the Company had outstanding borrowings under the credit facility of $ 169.8 million, in addition to amounts issued under letters of credit of $ 8.7 million.

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

As of December 26, 2021 and December 27, 2020, the current portion of long-term borrowings under the credit facility totaled $ 9.7 million.

As of December 26, 2021, our credit facility primarily consisted of a $ 119.1 million dollar term loan, and a $ 57.0 million revolving line of credit.

The term loan requires quarterly principal payments at a rate of 7.0 % per annum of the original principal balance.

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

Dollars, are subject to rates based on the London Interbank Offered Rate ("LIBOR") plus a spread based on leverage or a base rate plus a spread based on leverage (base rate is the highest of (a) the Prime Rate, (b) the Federal Funds Rate plus 0.5 %, and (c) LIBOR for an Interest Period of one month plus 1 %).

Additional pricing on the credit facility is effective per the Second Amendment.

The publication of LIBOR is expected to discontinue in December 2021;

however, we anticipate an amended credit agreement will be executed at the new applicable reference rate.

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

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

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

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

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

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

The term loan and revolving line of credit bear interest at LIBOR with a floor of 1.0 %, plus a spread of 6.0 %, and both the term loan and the revolving line of credit mature on January 10, 2023.

Borrowings under the credit facility are secured by substantially all of the assets of the Company and are available to:

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Restrictions on how borrowings are used by the Company are in place per requirements set forth by our lenders.

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The Company will continue to be subject to a number of customary covenants under the credit facility, including limitations on additional borrowings, acquisitions, capital expenditures, share repurchases, lease commitments, dividend payments, and requirements to maintain certain financial ratios including the lease adjusted leverage ratio and fixed charge coverage ratio.

However, the First Amendment provides certain covenant relief to the Company through the end of the third quarter of 2021.

The Company was in compliance with such covenants as of December 27, 2020.

The Company was subject to a number of customary covenants under the credit facility, including limitations on additional borrowings, acquisitions, capital expenditures, share repurchases, lease commitments, dividend payments, and requirements to maintain certain financial ratios including the lease adjusted leverage ratio and fixed charge coverage ratio.

However, the Third Amendment provided certain covenant relief to the Company through the end of 2021.

Our debt covenant assessment is based on inputs subject to various risks and uncertainties caused by the COVID-19 pandemic, including forecasted revenues, expenses, and cash flows, current discount rates, growth rates, observable market data, and changes to the regulatory environment.

As of December 27, 2020, the Company had outstanding borrowings under the credit facility of $ 169.8 million, in addition to amounts issued under letters of credit of $ 8.7 million.

As of December 29, 2019, the Company had outstanding borrowings under the prior credit facility of $ 206.0 million, in addition to amounts issued under letters of credit of $ 7.5 million.

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

As of December 27, 2020, the current portion of long-term borrowings under the credit facility totaled $ 9.7 million;

no outstanding borrowings under the prior credit facility were considered current as of December 29, 2019.

On February 25, 2021, the Company entered into the Second Amendment to the credit facility, which is discussed further in Note 2, COVID-19 Pandemic .

Covenant relief and other provisions of the First Amendment discussed above were changed upon execution of the Second Amendment.

Loan origination costs associated with the credit facility are included as deferred costs in Other assets, net in the accompanying consolidated balance sheets, except for the current portion of these costs which is included in Prepaid expenses and other current assets.

Unamortized debt issuance costs were $ 3.3 million and $ 1.0 million as of December 27, 2020 and December 29, 2019.

Third Amendment

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 Third Amendment further amended the Company’s 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 % floor) plus 6.00 % and (b) periods thereafter to LIBOR (to which a 1 % 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 $ 75.0 million 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 $ 30.0 million 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.

In conjunction with the Second Amendment to the Amended and Restated Credit Facility (the "Second Amendment") on February 25, 2021 and Third Amendment, the Company paid certain customary amendment fees to the lenders under the Credit Facility totaling approximately $ 0.6 million and $ 0.8 million respectively, which will be capitalized as deferred loan fees and amortized over the remaining term of the Credit Facility.

During 2021, the Company expensed approximately $ 1.7 million of deferred financing charges related to calculated reductions in total borrowing capacity of the revolver associated with the Second and Third Amendments.

The $ 1.7 million is included in interest expense on the Consolidated Statements of Operations and Comprehensive Loss for the year ended December 26, 2021.

New Credit Facility

On March 4, 2022, the Company replaced its Prior Credit Agreement with a new Credit Agreement (the "Credit Agreement") by and among the Company Red Robin International, Inc., as the borrower, the lenders from time to time party thereto, the issuing banks from time to time party thereto, Fortress Credit Corp., as Administrative Agent and as Collateral Agent and JPMorgan Chase Bank, N.A., as Sole Lead Arranger and Sole Bookrunner.

The five-year $ 225.0 million Credit Agreement provides for a $ 25.0 million revolving line of credit and a $ 200.0 million term loan.

The borrower maintains the option to increase the credit facility in the future, subject to lenders’ participation, by up to an additional $ 40.0 million in the aggregate on the terms and conditions set forth in the Credit Agreement.

The new credit facility will mature on March 4, 2027 .

No amortization is required with respect to the revolving credit facility.

The term loans require quarterly principal payments in an aggregate annual amount equal to 1.0 % of the original principal amount of the term loan.

The new facility's interest rate references the Secured Overnight Financing Rate ("SOFR"), a new index calculated by short-term repurchase agreements and backed by U.S.

Treasury securities, or the Alternate Base Rate ("ABR"), which represents the highest of (a) the Prime Rate, (b) the Federal Funds Rate plus 0.50 % per annum, or (c) one-month term SOFR plus 1.00 % per annum.

Red Robin International, Inc.

is the borrower under the Credit Agreement, and certain of its subsidiaries and the Company are guarantors of borrower’s obligations under the Credit Agreement.

Borrowings under the Credit Agreement are secured by substantially all of the assets of the borrower and the guarantors, including the Company, and are available to:

(i) refinance certain existing indebtedness of the borrower and its subsidiaries, (ii) pay any fees and expenses in connection with the Credit Agreement, and (iii) provide for the working capital and general corporate requirements of the Company, the borrower and its subsidiaries, including permitted acquisitions and capital expenditures, but excluding restricted payments.

On March 4, 2022, Red Robin International, Inc., the Company, and the guarantors also entered into a Pledge and Security Agreement (the “Security Agreement”) granting to the Administrative Agent a first priority security interest in substantially all of the assets of the borrower and the guarantors to secure the obligations under the Credit Agreement.

This new Security Agreement replaces the existing security agreement, dated January 10, 2020, which was entered into in connection with the Prior Credit Agreement.

Red Robin International, Inc.

as the borrower is obligated to pay customary fees to the agents, lenders and issuing banks under the Credit Agreement with respect to providing, maintaining, or administering, as applicable, the credit facilities.

The summary descriptions of the Credit Agreement and the Security Agreement do not purport to be complete and are qualified in their entirety by reference to the full text of the Credit Agreement and the Security Agreement, respectively.

Fair Value Measurements

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

The Company maintains a rabbi trust to fund obligations under a deferred compensation plan.

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Fair market value of mutual funds is measured using level 1 inputs (quoted prices for identical assets in active markets).

The value of the deferred compensation plan liability is dependent upon the fair value of the assets held in the rabbi trust and therefore is not measured at fair value.

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The following tables present the Company's assets measured at fair value on a recurring basis as of December 26, 2021 and December 27, 2020 (in thousands):

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Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Assets and liabilities recognized or disclosed at fair value on the 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.

During 2021, 2020, and 2019, the Company measured non-financial assets for impairment using continuing and projected future cash flows, as discussed in Note 4, Other Charges , which were based on significant inputs not observable in the market and thus represented a level 3 fair value measurement.

Based on our 2020 and 2019 impairment analyses, we impaired long-lived assets at 40 and 29 Company-owned restaurants with carrying values of $ 67.3 million and $ 17.3 million.

We determined the fair value of these long-lived assets in 2020 and 2019 to be $ 34.7 million and $ 2.2 million based on level 3 fair value measurements.

See Note 1, Description of Business and Summary of Significant Accounting Policies , for discussion of the first quarter 2020 nonrecurring fair value measurement of goodwill and related impairment charges.

Based on our 2021, 2020 and 2019 impairment analyses, we impaired long-lived assets at ten , 40 and 29 locations with carrying values of $ 13.7 million, $ 67.3 million, and $ 17.3 million.

We determined the fair value of these long-lived assets in 2021, 2020, and 2019 to be $ 7.2 million, $ 34.7 million and $ 2.2 million based on level 3 fair value measurements.

Liquor licenses with indefinite lives are reviewed for impairment annually or whenever events or changes in circumstances indicate the carrying amount may not be recoverable.

If the carrying amount is not recoverable, we record an impairment charge for the excess of the carrying amount over the fair value.

We determine fair value based on quoted prices in the active market for the license in the same or similar jurisdictions, representing a level 1 fair value measurement.

During the fourth quarter of 2021, the Company performed its annual review of its indefinite lived liquor licenses that had a carrying value of $ 7.2 million, and recorded impairment charges of $ 0.5 million to indefinite-lived intangibles in 2021.

No impairment charges were recorded to liquor licenses with indefinite lives in 2020, or 2019.

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 consolidated balance sheets.

Due to market interest rates decreasing during 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 December 27, 2020 were $ 169.8 million and $ 172.6 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 carrying value approximated the fair value of the credit facility as of December 26, 2021 and December 27, 2020, 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.

Adoption of FASB Accounting Standards Update ("ASU") 2016-02

On January 1, 2019, we adopted ASU 2016-02, Leases (Topic 842) ("Topic 842") along with related clarifications and improvements using the modified retrospective approach without application to prior periods.

This guidance requires the recognition of liabilities for lease obligations and corresponding right of use assets on the balance sheet and disclosure of key information about leasing arrangements.

We applied the practical expedients that do not require us to reassess existing contracts for embedded leases, to separate leases and non-lease components for our population of real estate assets, or to reassess lease classification or initial direct costs.

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The effects of the changes made to our consolidated balance sheet as of December 30, 2018 as a result of the adoption of Topic 842 was as follows (in thousands):

Balance at December 30, 2018 Adjustments due to Topic 842 Balance at December 30, 2018

Balance Sheet

Non-current assets

Right of use assets, net $ — $ 478,268 $ 478,268

Prepaid expenses and other current assets 27,576 ( 6,592 ) 20,984

Current liabilities

Current portion of lease obligations 786 40,606 41,392

Non-current liabilities

Deferred rent 75,675 ( 75,675 ) —

Long-term portion of lease obligations 9,414 506,745 516,159

Stockholders' equity

Retained earnings $ 376,341 $ ( 15,172 ) $ 361,169

Leases - Topic 842

Leases are included in right of use assets, net, current portion of lease obligations, and long-term portion of lease liabilities on our consolidated balance sheet as of December 27, 2020 and December 29, 2019 as follows (in thousands):

December 27, 2020 Finance Operating Total

Right of use assets, net $ 9,644 $ 415,929 $ 425,573

The Company's finance and operating lease assets and liabilities as of December 26, 2021 and December 27, 2020 as follows (in thousands):

December 26, 2021 Finance (1)

Operating (2)

Lease assets, net (3)

$ 9,664 $ 400,825

Current portion of lease obligations 1,194 48,842

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Total $ 11,959 $ 483,978

December 29, 2019 Finance Operating Total

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

(1) Finance lease assets and obligations are included in Other assets, net, Accrued liabilities and other current liabilities, and Other non-current liabilities on our December 26, 2021 and December 27, 2020 Consolidated Balance Sheets.

(2) Operating lease assets and obligations are included in Operating lease assets, net, Current portion of operating lease liabilities, and Long-term portion of operating lease liabilities on our December 26, 2021 and December 27, 2020 Consolidated Balance Sheets.

(3) The Lease assets, net caption includes the right of use assets associated with the Company's Finance and Operating leases, net of the associated amortization of these right of use assets.

December 27, 2020 Finance (1)

Operating (2)

Lease assets, net (3)

$ 9,644 $ 415,929

Current portion of lease obligations 1,078 54,197

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Total $ 12,015 $ 508,493

(3) The Lease assets, net caption includes the right of use assets associated with the Company's Finance and Operating leases, net of the associated amortization of these right of use assets.

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 consolidated statements of operations and comprehensive loss as follows (in thousands):

December 27, 2020 December 29, 2019

December 26, 2021 December 27, 2020 December 29, 2019

Operating lease cost $ 70,000 $ 67,320 $ 75,496

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Total lease costs $ 91,200 $ 93,181 $ 106,133

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(4) Interest on finance lease liabilities is recorded to interest expense in our consolidated statements of operations and comprehensive loss.

Maturities of our lease liabilities as of December 26, 2021 were as follows (in thousands):

Finance Leases Operating Leases Total

Finance Leases Operating Leases

2022 $ 1,716 $ 80,361

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

December 27, 2020 December 29, 2019

December 26, 2021 December 27, 2020 December 29, 2019

Cash flows from operating activities

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Other information related to operating leases as follows:

Weighted average remaining lease term 10.24 years 10.70 years

Weighted average remaining lease term 9.69 years 10.24 years 10.70 years

Weighted average discount rate 7.05 % 6.90 % 7.38 %

Other information related to financing leases as follows:

Weighted average remaining lease term 11.76 years 12.37 years

Weighted average remaining lease term 10.81 years 11.76 years 12.37 years

Weighted average discount rate 4.56 % 4.56 % 4.90 %

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Loss before income taxes $ ( 50,154 ) $ ( 283,552 ) $ ( 22,237 )

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The benefit for income taxes for the fiscal years ended December 26, 2021, December 27, 2020, and December 29, 2019 consist of the following (in thousands):

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Foreign — — —

Total current income tax (benefit) expense $ ( 58,986 ) $ ( 4,741 ) $ 3,622

Total current income tax (benefit) $ ( 152 ) $ ( 58,986 ) $ ( 4,741 )

Federal $ — $ 44,353 $ ( 10,994 )

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The Company had a tax benefit in all three years presented above, but due to the mathematical computation of tax benefit to book loss the effective tax rate in 2021, 2020, and 2019 are represented as a positive percentage.

The decreases in the Company's effective tax benefit in 2020 is primarily a result of a decrease in tax credits and an increase in the valuation allowance, partially offset by a decrease in income and the favorable rate impact of net operating loss ("NOL") carrybacks allowed as part of the CARES Act.

The decrease in the 2019 effective tax benefit is primarily attributable to a decrease in credits and an increase in the valuation allowance.

Tabl e of Contents

The decrease in the Company's effective tax benefit in 2021 is primarily due to the 2020 favorable rate impact of net operating loss carrybacks allowed as part of the CARES Act.

The decrease in the 2020 effective tax benefit is primarily due to a decrease in credits and an increase in the valuation allowance.

The Company's federal and state deferred taxes at December 26, 2021 and December 27, 2020 are as follows (in thousands):

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Prepaid expenses ( 2,517 ) ( 2,884 )

Goodwill — ( 12,138 )

Other non-current deferred tax liabilities ( 6,306 ) ( 4,932 )

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This is comprised of approximately $ 11.8 million of federal net operating loss carryovers, approximately $ 14.8 million of state net operating loss carryovers, and approximately $ 9.5 million of foreign net operating loss carryovers.

The federal net operating loss has an indefinite carryforward period, the state net operating loss carryovers may expire between 2025 and 2040, and the foreign net operating loss carryovers may expire between 2035 and 2040.

The federal net operating loss has an indefinite carryforward period, the state net operating loss carryovers expire at various dates between 2025 and 2041, and the foreign net operating loss carryovers expire at various dates between 2035 and 2041.

As of December 26 , 2021 , the Company had a deferred tax asset of $ 39.3 million related to federal tax credits, which expire at various dates between 2037 and 2040.

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Projected future taxable income is positive subjective evidence but is not strong enough to overcome the recent cumulative loss objective evidence.

Therefore, management determined that a full valuation allowance was required as of December 27, 2020.

Therefore, management determined that a full valuation allowance was required as of December 26 , 2021 and at December 27, 2020.

Based on the Company's evaluation of its deferred tax assets, a valuation allowance of approximately $ 99.1 million has been recorded against the deferred tax asset for federal and state tax credits, federal and state deferred tax assets, all net operating loss carry forwards and the deferred taxes of our foreign subsidiary.

Tabl e of Contents

The following table summarizes the Company's unrecognized tax benefits at December 27, 2020 and December 29, 2019 (in thousands):

The following table summarizes the Company's unrecognized tax benefits at December 26, 2021, December 27, 2020, and December 29, 2019

(in thousands):

2021 2020 2019

Beginning of year $ 80 $ 104 $ 304

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Settlements — — ( 16 )

Reductions related to lapses — ( 66 )

Reductions related to lapses in the statute of limitations ( 51 ) — ( 66 )

End of year $ 32 $ 80 $ 104

The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate is approximately $ 0.1 million.

The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate is approximately $ 32 thousand.

The Company does not anticipate significant changes in the aggregate amount of unrecognized tax benefits within the next 12 months, other than nominal tax settlements.

The Company had outstanding federal and state refund claims of approximately $ 15.8 million as of December 26, 2021.

In January 2022, the Company received $ 2.4 million of those refund claims, and expects to receive the remaining $ 13.4 million over the next 12-18 months due to processing delays at the IRS.

Commitments and Contingencies

In July 2017, an hourly Team Member filed a class actions lawsuit before the United States District Court in Santa Ana, California ( Vigueras v.

Red Robin International, Inc.

) alleging the Company failed to provide required meal breaks and rest periods and failed to reimburse business expenses, among other claims.

In the first quarter of 2020, the Company reached a tentative settlement resolving all claims for an aggregate $ 8.5 million.

An additional $ 4.5 million was accrued during the Company's first fiscal quarter of 2020 to fully reserve the $ 8.5 million settlement amount, which was paid out in January 2021.

Because litigation is inherently unpredictable, assessing contingencies related to litigation is a complex process involving highly subjective judgment about potential outcomes of future events.

When evaluating litigation contingencies, we may be unable to provide a meaningful estimate due to a number of factors, including the procedural status of the matter in question, the availability of appellate remedies, insurance coverage related to the claim or claims in question, the presence of complex or novel legal theories, and the ongoing discovery and development of information important to the matter.

In addition, damage amounts claimed in litigation against us may be unsupported, exaggerated, or unrelated to possible outcomes, and as such are not meaningful indicators of our potential liability or financial exposure.

Accordingly, we review the adequacy of accruals and disclosures 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.

However, the ultimate resolution of litigated claims may differ from our current estimates

In the normal course of business, there are various claims in process, matters in litigation, and other contingencies.

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However, a significant increase in the number of these claims, or one or more successful claims resulting in greater liabilities than we currently anticipate, could materially and adversely affect our business, financial condition, results of operations, and cash flows.

Including the accrued liabilities related to the Vigueras settlement, as of December 27, 2020, we had a balance of $ 10.5 million for loss contingencies on our consolidated balance sheets.

As of December 26, 2021, we had a balance of $ 2.5 million for loss contingencies on our consolidated balance sheets.

We ultimately may be subject to greater or less than the accrued amount.

As of December 26, 2021, we had purchase commitments to certain vendors who provide food and beverages and other supplies to our restaurants, for an aggregate of $ 155.9 million.

We expect to fulfill our commitments under these agreements in the normal course of business, and as such, no liability has been recorded.

Stockholders' Equity

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The repurchase program does not obligate the Company to acquire any particular amount of common stock, and the Company may suspend or discontinue the repurchase program at any time.

In 2020, the Company purchased 72,100 shares with an average purchase price of $ 22.68 per share for a total of approximately $ 1.6 million.

In 2021, the Company did not repurchase any shares under its share repurchase program.

From the date of the current program approval through December 26, 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.

2 unchanged sentences

Our ability to repurchase shares is limited to conditions set forth by our lenders in the Second Amendment 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.

Tabl e of Contents

Stock Incentive Plans

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The maximum number of shares of the Company's common stock that may be issued or transferred pursuant to awards under the 2017 Stock Plan was 630,182 shares.

The 2017 stock plan was amended in May 2019, and again in May 2020 to add an additional 660,000 and 275,000 shares, respectively, bringing the total to 1,565,182 as of December 27, 2020.

The 2017 Stock Plan was amended in May 2019, and again in May 2020 to add an additional 660,000 and 275,000 shares, respectively, bringing the total to 1,565,182 shares as of December 26, 2021.

Vesting of the awards under the 2017 Stock Plan is determined at the date of grant by the plan administrator.

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Outstanding, December 27, 2020

Granted 241 12.61

Forfeited/expired ( 13 ) 34.67

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The Company applies estimated forfeiture rates that are derived from our historical forfeitures of similar awards.

Tabl e of Contents

The estimated fair value of each option granted is calculated using the Black-Scholes multiple option-pricing model, and expense is recognized straight line over the vesting period.

No options were granted during 2019.

The average assumptions used in the model for the fiscal years ended December 27, 2020 and December 30, 2018 were as follows:

No options were granted during 2021 or 2019.

The average assumptions used in the model for the fiscal years ended December 26, 2021, December 27, 2020 and December 29, 2019 were as follows:

2021 2020 2019

Risk-free interest rate — % 0.5 % — %

Expected years until exercise 4.7 0 3.2

Expected years until exercise 0 years 4.7 years 0 years

Expected stock volatility — % 61.0 % — %

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Outstanding, December 26, 2021 (1)

(1) Awards expected to vest are the result of applying the pre-vesting forfeiture rate assumption to total outstanding options.

The Company applies estimated forfeiture rates that are derived from our historical forfeitures of similar awards.

Performance Stock Units

2 unchanged sentences

Prior to 2020, each PSU was divided into three equal tranches with applicable performance periods, typically consisting of a fiscal year, subject to the achievement of the applicable performance goals at target and applicable vesting conditions.

Fair value of each PSU granted was equal to the market price of the Company's stock at the grant date, and expense is recognized variably across the total performance period based on probability of achieving applicable performance goals.

Fair value of each PSU granted was equal to the market price of the Company's stock at the grant date, and expense is recognized ratably across the total performance period based on probability of achieving applicable performance goals.

PSUs remain unvested until the end of the third performance period and are forfeited in the event of termination of employment of a grantee prior to the last day of the third performance period.

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PSUs remain unvested until the last day of the three year performance period and are forfeited in the event of termination of employment of a grantee prior to the last day of the three year performance period.

Tabl e of Contents

The table below summarizes the status of the Company's performance stock units under the 2017 Stock Plan (shares in thousands):

6 unchanged sentences

Outstanding, December 26, 2021 (1)

(1) Awards expected to vest are the result of applying the pre-vesting forfeiture rate assumption to total outstanding options.

The Company applies estimated forfeiture rates that are derived from our historical forfeitures of similar awards.

Long-Term Cash Incentive Plan

2 unchanged sentences

Beginning in 2017, the long-term cash incentive plan was based on operational metrics with three one year performance periods.

Prior to 2017, the long-term cash incentive plan was based on operational metrics with one performance period totaling three years .

Compensation expense for awards granted before 2020 is recognized variably over the performance period based on the plan-to-date performance achievement.

All long-term cash incentive awards cliff vest after three years at the end of each performance cycle.

In 2020, 2019, and 2018, the Company recorded $ 0.2 million, $ 0.2 million, and $ 0.7 million in compensation expense related to the 2017 long-term cash incentive plan.

During 2020, the long-term cash incentive plan payout totaled $ 0.5 million;

no long-term cash incentive plan payouts occurred during 2019.

In 2021, 2020, and 2019, the Company recorded $ 0.5 million, $ 0.2 million, and $ 0.2 million, respectively in compensation expense to Selling, general, and administrative expenses in the consolidated statements of operations and comprehensive loss related to the 2017 long-term cash incentive plan.

During 2021 and 2020, the long-term cash incentive plan payout totaled $ 0.3 million and $ 0.5 million, respectively.

At December 26, 2021 and December 27, 2020, a $ 1.0 million and $ 0.8 million long-term cash incentive plan liability was included in Accrued payroll and payroll-related liabilities on the consolidated balance sheets.

3 unchanged sentences

Under this plan, eligible Team Members may elect to defer up to 75 % of their base salary and up to 100 % of variable compensation and commissions each plan year.

Beginning in 2019, the Company did not make matching contributions under the deferred compensation plan because the Company amended its 401(k) plan to allow a broader group, including highly compensated employees, to participate and receive matching contributions under the 401(k) plan.

Prior to 2019, the board of directors authorized matching contributions equal to 50 % of the first 4 % of compensation that was deferred by the participant.

The Company recognized immaterial matching contribution expenses in 2018 related to the deferred compensation plan.

The assets of the deferred compensation plan are held in a rabbi trust, where they are invested in certain mutual funds that cover an investment spectrum ranging from equities to money market instruments and are available to satisfy the claims of the Company's creditors in the event of bankruptcy or insolvency.

3 unchanged sentences

A corresponding change in the liability associated with the deferred compensation plan results in an offsetting deferred compensation expense, or reduction of expense, reported in Selling, general, and administrative expenses in the consolidated statements of operations and comprehensive loss.

The Company recognized $ 0.6 million of deferred compensation expense in 2020, $ 1.1 million in 2019, and an immaterial amount in 2018.

As of December 27, 2020 and December 29, 2019, $ 6.7 million and $ 7.3 million of deferred compensation asset is included in Other assets, net and $ 6.7 million and $ 7.3 million of deferred compensation plan liability is included in Other non-current liabilities in the accompanying consolidated balance sheets.

Tabl e of Contents

The Company recognized $ 0.7 million of deferred compensation expense in 2021, $ 0.6 million in 2020, and $ 1.1 million in 2019.

As of December 26, 2021 and December 27, 2020, $ 6.3 million and $ 6.7 million of deferred compensation assets are included in Other assets, net and $ 6.3 million and $ 6.7 million of deferred compensation plan liabilities are included in Other non-current liabilities in the accompanying consolidated balance sheets.

Employee Stock Purchase Plan

10 unchanged sentences

The weighted average fair value per share at grant date was $ 2.16 .

For 2019, the assumptions used in the model included 1.5 % risk-free interest rate, 0.50 year expected life, expected volatility of 41.82 %, and 0 % dividend yield.

The weighted average fair value per share at grant date was $ 7.56 .

The Company recognized $ 0.2 million of compensation expense related to this plan in 2021, $ 0.1 million in 2020, and $ 0.2 million in 2019.

4 unchanged sentences

In addition, the Company may contribute each period, at its discretion, an additional amount from profits.

In 2019, the board of directors authorized an increase to employer matching contributions equal to 100 % of the first 3 % of compensation and 50 % on the next 2 % of compensation.

Employer matching contributions equal to 100 % of the first 3 % of compensation and 50 % on the next 2 % of compensation.

The Company matches contributions when the employee contribution is made, and the employer matching contributions are not subject to a vesting schedule.

Prior to 2019, the Company matched employee contributions equal to 50 % of the first 4 % of compensation that was deferred by the participant consistent with the Company's vesting schedule.

The Company recognized matching contribution expense of $ 2.8 million in 2021, $ 2.5 million in 2020, and $ 3.0 million in 2019.

Tabl e of Contents

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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-K

Item 8. Financial Statements and Supplementary Data