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Item 1. Financial Statements

2022-05-26 compared with 2021-11-10 · 146 added, 146 removed, 235 unchanged (55% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

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

(in thousands, except for per share amounts) April 17, 2022 December 26, 2021

Current assets:

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Prepaid expenses and other current assets 15,080 16,963

Restricted cash 8,151 —

Total current assets 108,031 102,156

Property and equipment, net 371,840 386,336

Right of use assets, net 419,788 425,573

Operating lease assets, net 389,983 400,825

Intangible assets, net 20,472 21,292

6 unchanged sentences

Unearned revenue 37,986 54,214

Current portion of lease obligations 49,894 55,275

Current portion of operating lease obligations 48,297 48,842

Current portion of long-term debt 2,000 9,692

2 unchanged sentences

Long-term debt 192,426 167,263

Long-term portion of lease obligations 450,673 465,233

Long-term portion of operating lease obligations 420,648 435,136

Other non-current liabilities 14,509 26,325

6 unchanged sentences

20,449 shares issued;

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

15,786 and 15,722 shares outstanding as of April 17, 2022 and December 26, 2021

Preferred stock, $ 0.001 par value:

3,000 shares authorized;

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

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

no shares issued and outstanding as of April 17, 2022 and December 26, 2021

Treasury stock 4,663 and 4,727 shares, at cost, as of April 17, 2022 and December 26, 2021

( 190,022 ) ( 192,803 )

Paid-in capital 242,756 242,560

Accumulated other comprehensive income (loss), net of tax 10 ( 4 )

Accumulated other comprehensive income, net of tax 12 1

Retained earnings 24,091 27,196

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

Twelve Weeks Ended Forty Weeks Ended

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

Sixteen Weeks Ended

(in thousands, except for per share amounts) April 17, 2022 April 18, 2021

Restaurant revenue $ 380,612 $ 318,677

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Depreciation and amortization 23,919 25,888

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

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

Selling, general and administrative expenses 34,380 30,610

Pre-opening costs 62 —

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

Other charges, net 5,307 5,471

Total costs and expenses 391,180 330,606

Loss from operations ( 12,136 ) ( 24,595 ) ( 19,031 ) ( 233,406 )

Income (loss) from operations 4,370 ( 4,331 )

Other expense:

1 unchanged sentence

Loss before income taxes ( 3,043 ) ( 8,661 )

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

Income tax provision 62 52

Net loss $ ( 3,105 ) $ ( 8,713 )

5 unchanged sentences

Diluted 15,748 15,579

Other comprehensive (loss) income:

Other comprehensive loss:

Foreign currency translation adjustment $ 11 $ 21

Other comprehensive (loss) income, net of tax ( 6 ) 9 14 ( 1,121 )

Other comprehensive income, net of tax 11 21

Total comprehensive loss $ ( 3,094 ) $ ( 8,692 )

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Balance, April 17, 2022 20,449 $ 20 4,663 $ ( 190,022 ) $ 242,756 $ 12 $ 24,091 $ 76,857

Exercise of options, issuance of restricted stock, shares exchanged for exercise and tax, and stock issued through employee stock purchase plan — — ( 95 ) 3,844 ( 3,547 ) — — 297

Non-cash stock compensation — — — — 1,577 — — 1,577

Net loss — — — — — — ( 4,996 ) ( 4,996 )

Other comprehensive (loss) — — — — — ( 1 ) — ( 1 )

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

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

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

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

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

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

See Notes to Condensed Consolidated Financial Statements.

RED ROBIN GOURMET BURGERS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS ' EQUITY

Common Stock Treasury Stock Accumulated

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Exercise of options, issuance of restricted stock, shares exchanged for exercise and tax, and stock issued through employee stock purchase plan — — ( 74 ) 3,025 ( 3,640 ) — — ( 615 )

Acquisition of treasury stock — — 72 ( 1,635 ) — — — ( 1,635 )

Non-cash stock compensation — — — — 880 — — 880

Net loss — — — — — — ( 8,713 ) ( 8,713 )

Other comprehensive loss — — — — — ( 1,147 ) — ( 1,147 )

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

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

2,598 2 — — 28,723 — — 28,725

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

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

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

Other comprehensive income — — — — — 21 — 21

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

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

Exercise of options, issuance of restricted stock, shares exchanged for exercise and tax, and stock issued through employee stock purchase plan — — ( 1 ) 37 ( 73 ) — — ( 36 )

Non-cash stock compensation — — — — 1,316 — — 1,316

Net loss — — — — — — ( 6,179 ) ( 6,179 )

Other comprehensive income — — — — — 9 — 9

Balance, October 4, 2020 20,449 $ 20 4,901 $ ( 199,908 ) $ 242,048 $ ( 5,494 ) $ 116,528 153,194

Balance, April 18, 2021 20,449 $ 20 4,827 $ ( 196,883 ) $ 240,647 $ 17 $ 68,485 $ 112,286

See Notes to Condensed Consolidated Financial Statements.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Forty Weeks Ended

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

Sixteen Weeks Ended

(in thousands) April 17, 2022 April 18, 2021

Cash flows from operating activities:

Net loss $ ( 3,105 ) $ ( 8,713 )

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation and amortization 23,919 25,888

Gift card breakage ( 7,819 ) ( 2,293 )

Goodwill and asset impairment 1,357 116,193

Non-cash other charges 319 ( 2,438 )

Deferred income tax provision — 52,439

Restaurant asset impairment 2,122 1,242

Non-cash other charges, net ( 191 ) 516

Stock-based compensation expense 3,042 880

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Income tax receivable 2,581 510

Inventories ( 162 ) ( 41 )

Prepaid expenses and other current assets 1,883 975

Lease assets, net of liabilities ( 12,628 ) 19,194

Operating lease assets, net of liabilities ( 4,623 ) ( 6,678 )

Trade accounts payable and accrued liabilities 3,288 12,413

1 unchanged sentence

Other operating assets and liabilities, net ( 10,349 ) ( 8,013 )

Net cash provided by (used in) operating activities 37,617 ( 22,401 )

Net cash provided by operating activities 13,296 18,932

Cash flows from investing activities:

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

Purchases of property, equipment, and intangible assets ( 9,716 ) ( 5,400 )

Proceeds from sales of real estate and property, plant, and equipment and other investing activities 168 —

3 unchanged sentences

Payments of long-term debt and finance leases ( 261,800 ) ( 42,322 )

Purchase of treasury stock — ( 1,635 )

Debt issuance costs ( 4,869 ) ( 616 )

Proceeds from issuance of common stock, net of stock issuance costs — 28,945

Proceeds from exercise of stock options and employee stock purchase plan 549 666

Net cash (used in) provided by financing activities ( 16,037 ) 34,020

(Uses) proceeds from other financing activities, net ( 65 ) 245

Net cash provided by (used in) financing activities 15,417 ( 7,393 )

Effect of exchange rate changes on cash 8 29

Net change in cash and cash equivalents 1,641 ( 2,678 )

Net change in cash and cash equivalents, and restricted cash 19,173 6,168

Cash and cash equivalents, beginning of period 22,750 16,116

Cash and cash equivalents, end of period $ 17,757 $ 27,367

Cash and cash equivalents, and restricted cash, end of period $ 41,923 $ 22,284

Supplemental disclosure of cash flow information

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

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

As of April 17, 2022, the Company owned and operated 426 restaurants located in 38 states.

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

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For further information, please refer to and read these interim Condensed Consolidated Financial Statements in conjunction with the Company's audited consolidated financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended December 26, 2021 filed with the SEC on March 10, 2022.

Our current and prior year periods, period end dates, and number of weeks included in the period are summarized in the table below:

Our current, prior, and upcoming year periods, period end dates, and number of weeks included in the period are summarized in the table below:

Periods Period End Date Number of Weeks in Period

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First Quarter 2021 April 18, 2021 16

Second Quarter 2021 July 11, 2021 12

Second Quarter 2020 July 12, 2020 12

Third Quarter 2021 October 3, 2021 12

Third Quarter 2020 October 4, 2020 12

Current and Prior Fiscal Years:

1 unchanged sentence

Fiscal Year 2021 December 26, 2021 52

Upcoming fiscal year:

Fiscal Year 2023 December 31, 2023 53

Reclassifications

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

Certain amounts presented have been reclassified within the April 18, 2021 Condensed Consolidated Statement of Cash Flows to conform with the current period presentation, including prior year reclassifications from Lease assets, net of liabilities to Other operating assets and liabilities.

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

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

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

Change in Accounting Estimate - Gift Card Breakage

As part of its annual assessment of gift card breakage and during the sixteen weeks ended April 17, 2022, the Company re-evaluated the estimated redemption pattern related to gift cards and aligned the recognition of gift card breakage to the updated estimated redemption pattern.

As a result, the Company recognized $ 5.9 million of additional gift card breakage in Franchise and other revenues, partially offset by $ 0.6 million of associated commissions costs recognized in Selling, general and administrative expenses, in the first quarter of 2022.

This change in accounting estimate decreased net loss by $ 5.2 million, or $ 0.33 per basic and diluted share.

The Company does not expect the impact of this change in estimate to be material to its future financial statements.

Recent Accounting Pronouncements

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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.

This update provides temporary optional expedients to applying the reference rate reform guidance to contracts that reference the London Interbank Offer Rate ("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.

We adopted Topic 848 during the first quarter of fiscal year 2022 in conjunction with the refinancing of our credit facility and its associated transition from LIBOR to the Secured Overnight Financing Rate ("SOFR"), noting it did not have a material impact to the Company's Condensed Consolidated Statements of Operations and Comprehensive Loss upon adoption.

We reviewed all other recently issued accounting pronouncements and concluded they were either not applicable or not expected to have a significant impact on the Company's Condensed Consolidated Financial Statements.

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

Twelve Weeks Ended Forty Weeks Ended

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

Sixteen Weeks Ended

April 17, 2022 April 18, 2021

Restaurant revenue $ 380,612 $ 318,677

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Total revenues $ 395,550 $ 326,275

———————————————————

(1) During the sixteen weeks ended April 17, 2022, the Company re-evaluated the estimated redemption pattern related to gift cards and aligned the recognition of gift card breakage revenue to the updated estimated redemption pattern.

See Footnote 1.

Basis of Presentation and Recent Accounting Pronouncements.

Contract liabilities

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

October 3, 2021 December 27, 2020

April 17, 2022 December 26, 2021

Unearned gift card revenue $ 26,150 $ 41,128

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

Forty Weeks Ended

October 3, 2021 October 4, 2020

Sixteen Weeks Ended

April 17, 2022 April 18, 2021

Gift card revenue $ 16,859 $ 9,020

Leases are included in right-of-use assets, net, current portion of lease obligations, and long-term portion of lease liabilities on our Condensed Consolidated Balance Sheet as of October 3, 2021 and December 27, 2020 as follows (in thousands):

October 3, 2021 Finance Operating Total

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

The Company's finance and operating lease assets and liabilities as of April 17, 2022 and December 26, 2021 were as follows (in thousands):

April 17, 2022 Finance (1)

Operating (2)

Lease assets, net (3)

$ 7,936 $ 389,983

Current portion of lease obligations 1,102 48,297

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Total $ 10,416 $ 468,945

December 27, 2020 Finance Operating Total

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

December 26, 2021 Finance (1)

Operating (2)

Lease assets, net (3)

$ 9,664 $ 400,825

Current portion of lease obligations 1,194 48,842

1 unchanged sentence

Total $ 11,959 $ 483,978

(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 April 17, 2022 and December 26, 2021 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 April 17, 2022 and December 26, 2021 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.

The components of lease expense, including variable lease costs primarily consisting of common area maintenance charges and real estate taxes, are included in Occupancy on our Condensed Consolidated Statement of Operations and Comprehensive Loss as follows (in thousands):

Twelve Weeks Ended Forty Weeks Ended

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

Sixteen Weeks Ended

April 17, 2022 April 18, 2021

Operating lease cost $ 21,689 $ 21,461

5 unchanged sentences

Total $ 28,501 $ 28,299

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

Finance Leases Operating Leases Total

Maturities of our lease liabilities as of April 17, 2022 were as follows (in thousands):

Finance Leases Operating Leases

Remainder of 2022 $ 1,133 $ 53,494

6 unchanged sentences

Less imputed interest 2,545 189,309

Carrying value of lease liability $ 11,953 $ 488,614 $ 500,567

Fair value of lease liability $ 10,416 $ 468,945

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

Forty Weeks Ended

October 3, 2021 October 4, 2020

Sixteen Weeks Ended

April 17, 2022 April 18, 2021

Cash flows from operating activities

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Other information related to operating leases as follows:

Weighted average remaining lease term 9.9 years 10.3 years

Weighted average remaining lease term (years) 9.48 10.10

Weighted average discount rate 7.12 % 6.96 %

Other information related to finance leases as follows:

Weighted average remaining lease term 11.0 years 11.9 years

Weighted average remaining lease term (years) 10.91 11.47

Weighted average discount rate 4.89 % 4.56 %

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

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

As the Company was in a net loss position for both the sixteen weeks ended April 17, 2022 and April 18, 2021, all potentially dilutive common shares are considered anti-dilutive.

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

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

Twelve Weeks Ended Forty Weeks Ended

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

Sixteen Weeks Ended

April 17, 2022 April 18, 2021

Basic weighted average shares outstanding 15,748 15,579

2 unchanged sentences

Awards excluded due to anti-dilutive effect on diluted loss per share 885 241

Other Charges

Other charges consist of the following (in thousands):

Twelve Weeks Ended Forty Weeks Ended

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

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

Asset impairment — — 1,357 20,779

Other Charges, net

Other charges, net consisted of the following (in thousands):

Sixteen Weeks Ended

April 17, 2022 April 18, 2021

Restaurant asset impairment 2,122 1,242

Litigation contingencies 1,720 1,085

COVID-19 related costs 299 430 1,112 1,279

Restaurant closure costs 949 2,447

Other financing costs 309 —

COVID-19 related charges 207 569

Board and stockholder matter costs — 128

Goodwill impairment — — — 95,414

Severance and executive transition — — — 881

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

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

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

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

Other charges, net $ 5,307 $ 5,471

The Company recognized non-cash impairment charges related to restaurant assets at three and one Company-owned restaurants during the sixteen weeks ended April 17, 2022 and April 18, 2021, respectively.

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

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

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

Board and stockholder matters costs were primarily related to the recruitment and appointment of new board members, and other board and stockholder matters.

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

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

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

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

October 3, 2021 December 27, 2020

Borrowings Weighted

Interest Rate Borrowings Weighted

Other financing costs include fees related to the entry by the Company into the New Credit Agreement (as defined below) on March 4, 2022 that were not capitalized with the closing of the New Credit Facility.

See Footnote 6.

Board and stockholder matters costs were primarily related to the recruitment and appointment of a new board member in the first quarter of 2021.

Borrowings as of April 17, 2022 and December 26, 2021 are summarized below (in thousands):

April 17, 2022 Weighted

Interest Rate December 26, 2021 Weighted

Interest Rate

Revolving credit facility, term loan, and other long-term debt $ 157,163 6.80 % $ 170,644 4.50 %

Total debt 157,163 170,644

Less current portion 9,692 9,692

Revolving line of credit $ 3,000 $ 57,000

Term loan 200,000 8.20 % 119,080 7.10 %

Notes payable, non-current 875 875

Total borrowings 203,875 176,955

unamortized debt issuance costs and discounts (1)

current portion of long-term debt 2,000 9,692

Long-term debt $ 192,426 $ 167,263

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

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

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

Third Amendment to Credit Agreement

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

The Company anticipates refinancing its Credit Facility in 2022.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Revolving line of credit unamortized deferred financing charges (1) :

(1) Loan origination costs associated with the Company's credit facility are included as deferred costs in Other assets, net for financing charges allocated to the Revolving line of credit, and Long-term debt for financing charges associated with the term loan in the accompanying Condensed Consolidated Balance Sheets.

New Credit Agreement

On March 4, 2022, the Company replaced its prior amended and restated credit agreement (the "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 Agreement 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 Credit Facility will mature on March 4, 2027.

No amortization is required with respect to the revolving Credit Agreement.

The term loans require quarterly principal payments in an aggregate annual amount equal to 1.00 % of the original principal amount of the term loan.

The Credit Agreement's interest rate references 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.

In connection with entry into the new Credit Agreement, the Company’s Prior Credit Agreement was terminated.

In connection with such termination and new borrowings under the new Credit Agreement, the Company paid off all outstanding borrowings, accrued interest, and fees under the Prior Credit Agreement.

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.

During the first quarter of 2022, the Company expensed approximately $ 1.7 million of deferred financing charges related to the extinguishment of the Prior Credit Agreement on March 4, 2022.

These charges were recorded to interest expense, net and other on the Consolidated Statements of Operations and Comprehensive Loss for the quarter ended April 17, 2022.

In association with the issuance of the new credit agreement, the Company recognized $ 4.8 million of deferred financing charges, and $ 6.1 million of original issuance discount.

Fair Value Measurements

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

The following tables present the Company's assets measured at fair value on a recurring basis included in Other assets, net on the accompanying Condensed Consolidated Balance Sheets as of October 3, 2021 and December 27, 2020 (in thousands):

October 3, 2021 Level 1 Level 2 Level 3

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

Amounts in the rabbi trust are invested in mutual funds, which are designated as trading securities and carried at fair value and are included in Other assets, net in the accompanying consolidated balance sheets.

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

The following tables present the Company's assets measured at fair value on a recurring basis included in Other assets, net on the accompanying Condensed Consolidated Balance Sheets as of April 17, 2022 and December 26, 2021 (in thousands):

April 17, 2022 Level 1 Level 2 Level 3

Investments in rabbi trust $ 4,764 $ 4,764 $ — $ —

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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 Condensed Consolidated Financial Statements on a nonrecurring basis include items such as property, plant and equipment, right of use assets, goodwill, and other intangible assets.

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

The Company has measured non-financial assets for impairment using continuing and projected future cash flows, which were based on significant inputs not observable in the market and thus represented a level 3 fair value measurement.

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

See Note 5, Other Charges, net .

We impaired long-lived restaurant assets at three Company-owned restaurants with a carrying value of $ 3.0 million, recognizing an impairment expense of $ 2.1 million related to the net book value of long-lived restaurant assets for these restaurants.

The impairment was recorded as a result of changes in the lease term of these locations.

Disclosures of Fair Value of Other Assets and Liabilities

The Company's liability under its Credit Facility is carried at historical cost in the accompanying Condensed Consolidated Balance Sheets.

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

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

The Company's liability under its credit facility is carried at historical cost in the accompanying consolidated balance sheets.

The carrying value approximated the fair value of the credit facility as of April 17, 2022 and December 26, 2021, 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.

Commitments and Contingencies

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.

These include employment related claims and claims from Guests or Team Members alleging illness, injury, food quality, health, or operational concerns.

To date, none of these claims, certain of which are covered by insurance policies, have had a material effect on the Company.

While it is not possible to predict the outcome of these suits, legal proceedings, and claims with certainty, management is of the opinion that adequate provision for potential losses associated with these matters has been made in the financial statements and that the ultimate resolution of these matters will not have a material adverse effect on our financial position and results of operations.

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.

As of April 17, 2022, we had a balance of $ 3.9 million for loss contingencies on our consolidated balance sheets.

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

As of April 17, 2022, we had non-cancellable purchase commitments to certain vendors who provide food and beverages and other supplies to our restaurants, for an aggregate of $ 135.1 million.

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

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

What changed 10-Q

Item 1. Financial Statements