Item 1. Financial Statements
ITEM 1. Financial Statements (unaudited)
RED ROBIN GOURMET BURGERS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands, except for per share amounts) April 17, 2022 December 26, 2021
Assets:
Current assets:
Cash and cash equivalents $ 33,772 $ 22,750
Accounts receivable, net 12,551 21,400
Inventories 25,232 25,219
Income tax receivable 13,245 15,824
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
Operating lease assets, net 389,983 400,825
Intangible assets, net 20,472 21,292
Other assets, net 16,210 18,389
Total assets $ 906,536 $ 928,998
Liabilities and stockholders ' equity:
Current liabilities:
Accounts payable $ 31,572 $ 32,510
Accrued payroll and payroll-related liabilities 34,727 32,584
Unearned revenue 37,986 54,214
Current portion of operating lease obligations 48,297 48,842
Current portion of long-term debt 2,000 9,692
Accrued liabilities and other 47,514 45,458
Total current liabilities 202,096 223,300
Long-term debt 192,426 167,263
Long-term portion of operating lease obligations 420,648 435,136
Other non-current liabilities 14,509 26,325
Total liabilities 829,679 852,024
Commitments and contingencies (see note 8)
Stockholders ' equity:
Common stock; $ 0.001 par value: 45,000 shares authorized; 20,449 shares issued; 15,786 and 15,722 shares outstanding as of April 17, 2022 and December 26, 2021
20 20
Preferred stock, $ 0.001 par value: 3,000 shares authorized; 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, net of tax 12 1
Retained earnings 24,091 27,196
Total stockholders' equity 76,857 76,974
Total liabilities and stockholders ' equity
$ 906,536 $ 928,998
See Notes to Condensed Consolidated Financial Statements.
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RED ROBIN GOURMET BURGERS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
Sixteen Weeks Ended
(in thousands, except for per share amounts) April 17, 2022 April 18, 2021
Revenues:
Restaurant revenue $ 380,612 $ 318,677
Franchise and other revenues 14,938 7,598
Total revenues 395,550 326,275
Costs and expenses:
Restaurant operating costs (excluding depreciation and amortization shown separately below):
Cost of sales 90,941 69,166
Labor 138,108 111,659
Other operating 67,864 57,712
Occupancy 30,599 30,100
Depreciation and amortization 23,919 25,888
Selling, general and administrative expenses 34,380 30,610
Pre-opening costs 62 —
Other charges, net 5,307 5,471
Total costs and expenses 391,180 330,606
Income (loss) from operations 4,370 ( 4,331 )
Other expense:
Interest expense, net and other 7,413 4,330
Loss before income taxes ( 3,043 ) ( 8,661 )
Income tax provision 62 52
Net loss $ ( 3,105 ) $ ( 8,713 )
Loss per share:
Basic $ ( 0.20 ) $ ( 0.56 )
Diluted $ ( 0.20 ) $ ( 0.56 )
Weighted average shares outstanding:
Basic 15,748 15,579
Diluted 15,748 15,579
Other comprehensive loss:
Foreign currency translation adjustment $ 11 $ 21
Other comprehensive income, net of tax 11 21
Total comprehensive loss $ ( 3,094 ) $ ( 8,692 )
See Notes to Condensed Consolidated Financial Statements.
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RED ROBIN GOURMET BURGERS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS ' EQUITY
(Unaudited)
Common Stock Treasury Stock Accumulated
Other
Comprehensive
(Loss) Income,
net of tax
Paid-in
Capital Retained
Earnings
(in thousands) Shares Amount Shares Amount Total
Balance, December 26, 2021 20,449 $ 20 4,727 $ ( 192,803 ) $ 242,560 $ 1 $ 27,196 $ 76,974
Exercise of options, issuance of restricted stock, shares exchanged for exercise and tax, and stock issued through employee stock purchase plan — — ( 64 ) 2,781 ( 2,846 ) — — ( 65 )
Non-cash stock compensation — — — — 3,042 — — 3,042
Net loss — — — — — — ( 3,105 ) ( 3,105 )
Other comprehensive income — — — — — 11 — 11
Balance, April 17, 2022 20,449 $ 20 4,663 $ ( 190,022 ) $ 242,756 $ 12 $ 24,091 $ 76,857
Common Stock Treasury Stock Accumulated
Other
Comprehensive
Loss,
net of tax
Paid-in
Capital Retained
Earnings
(in thousands) Shares Amount Shares Amount Total
Balance, December 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 — — ( 74 ) 3,025 ( 3,640 ) — — ( 615 )
Non-cash stock compensation — — — — 880 — — 880
Net loss — — — — — — ( 8,713 ) ( 8,713 )
Other comprehensive income — — — — — 21 — 21
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.
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RED ROBIN GOURMET BURGERS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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 operating activities:
Depreciation and amortization 23,919 25,888
Gift card breakage ( 7,819 ) ( 2,293 )
Restaurant asset impairment 2,122 1,242
Non-cash other charges, net ( 191 ) 516
Stock-based compensation expense 3,042 880
Other, net 2,266 1,528
Changes in operating assets and liabilities:
Accounts receivable 8,852 5,567
Income tax receivable 2,581 510
Inventories ( 162 ) ( 41 )
Prepaid expenses and other current assets 1,883 975
Operating lease assets, net of liabilities ( 4,623 ) ( 6,678 )
Trade accounts payable and accrued liabilities 3,288 12,413
Unearned revenue ( 8,408 ) ( 4,849 )
Other operating assets and liabilities, net ( 10,349 ) ( 8,013 )
Net cash provided by operating activities 13,296 18,932
Cash flows from investing activities:
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 —
Net cash used in investing activities ( 9,548 ) ( 5,400 )
Cash flows from financing activities:
Borrowings of long-term debt 282,151 35,300
Payments of long-term debt and finance leases ( 261,800 ) ( 42,322 )
Debt issuance costs ( 4,869 ) ( 616 )
(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, and restricted cash 19,173 6,168
Cash and cash equivalents, beginning of period 22,750 16,116
Cash and cash equivalents, and restricted cash, end of period $ 41,923 $ 22,284
Supplemental disclosure of cash flow information
Income tax refunds received, net $ ( 2,519 ) $ ( 473 )
Interest paid, net of amounts capitalized $ 3,374 $ 3,182
See Notes to Condensed Consolidated Financial Statements.
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RED ROBIN GOURMET BURGERS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation and Recent Accounting Pronouncements
Red Robin Gourmet Burgers, Inc., a Delaware corporation, together with its subsidiaries ("Red Robin" or the "Company"), primarily operates, franchises, and develops full-service restaurants in North America. As of 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. The Company operates its business as one operating and one reportable segment.
Basis of Presentation
The accompanying unaudited Condensed Consolidated Financial Statements include the accounts of Red Robin and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. The Company's financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The results of operations for any interim period are not necessarily indicative of results for the full year.
The accompanying Condensed Consolidated Financial Statements of Red Robin have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC"), including the instructions to Form 10-Q and Article 10 of Regulation S-X. Certain information and footnote disclosures normally included in the Company's annual consolidated financial statements on Form 10-K have been condensed or omitted. The condensed Consolidated Balance Sheet as of December 26, 2021 has been derived from the audited consolidated financial statements as of that date, but does not include all disclosures required for audited annual financial statements. For further information, please refer to and read these interim Condensed Consolidated Financial Statements in conjunction with the Company's audited consolidated financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended December 26, 2021 filed with the SEC on March 10, 2022.
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
Current and Prior Fiscal Quarters:
First Quarter 2022 April 17, 2022 16
First Quarter 2021 April 18, 2021 16
Current and Prior Fiscal Years:
Fiscal Year 2022 December 25, 2022 52
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 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.
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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
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 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 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.
2. Revenue
Disaggregation of revenue
In the following table, revenue is disaggregated by type of good or service (in thousands):
Sixteen Weeks Ended
April 17, 2022 April 18, 2021
Restaurant revenue $ 380,612 $ 318,677
Franchise revenue 6,280 4,877
Gift card breakage (1)
7,819 2,293
Other revenue 839 428
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):
April 17, 2022 December 26, 2021
Unearned gift card revenue $ 26,150 $ 41,128
Deferred loyalty revenue $ 11,836 $ 13,086
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):
Sixteen Weeks Ended
April 17, 2022 April 18, 2021
Gift card revenue $ 16,859 $ 9,020
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3. Leases
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
Long-term portion of lease obligations 9,314 420,648
Total $ 10,416 $ 468,945
December 26, 2021 Finance (1)
Operating (2)
Lease assets, net (3)
$ 9,664 $ 400,825
Current portion of lease obligations 1,194 48,842
Long-term portion of lease obligations 10,765 435,136
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):
Sixteen Weeks Ended
April 17, 2022 April 18, 2021
Operating lease cost $ 21,689 $ 21,461
Finance lease cost:
Amortization of right of use assets 342 263
Interest on lease liabilities 145 159
Total finance lease cost 487 $ 422
Variable lease cost 6,325 6,416
Total $ 28,501 $ 28,299
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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
2023 1,461 76,964
2024 1,473 75,368
2025 1,201 70,764
2026 1,241 64,679
Thereafter 6,452 316,985
Total future lease liability $ 12,961 $ 658,254
Less imputed interest 2,545 189,309
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):
Sixteen Weeks Ended
April 17, 2022 April 18, 2021
Cash flows from operating activities
Cash paid related to lease liabilities
Operating leases $ 26,519 $ 27,998
Finance leases 145 159
Cash flows from financing activities
Cash paid related to lease liabilities
Finance leases 573 599
Cash paid for amounts included in the measurement of lease liabilities: $ 27,237 $ 28,756
Right of use assets obtained in exchange for operating lease obligations $ 3,382 $ 13,448
Right of use assets obtained in exchange for finance lease obligations $ 746 $ —
Other information related to operating leases as follows:
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 (years) 10.91 11.47
Weighted average discount rate 4.89 % 4.56 %
4. Loss Per Share
Basic loss per share amounts are calculated by dividing net loss by the weighted-average number of shares of common stock outstanding during the period. Diluted loss per share amounts are calculated based upon the weighted-average number of shares of common stock and potentially dilutive shares of common stock outstanding during the period. Potentially dilutive shares are excluded from the computation in periods in which they have an anti-dilutive effect. Diluted loss per share reflects the potential dilution that could occur if holders of options exercised their options into common stock. 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.
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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):
Sixteen Weeks Ended
April 17, 2022 April 18, 2021
Basic weighted average shares outstanding 15,748 15,579
Dilutive effect of stock options and awards — —
Diluted weighted average shares outstanding 15,748 15,579
Awards excluded due to anti-dilutive effect on diluted loss per share 885 241
5. 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
Restaurant closure costs 949 2,447
Other financing costs 309 —
COVID-19 related charges 207 569
Board and stockholder matter costs — 128
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.
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. Borrowings .
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 related to the COVID-19 pandemic.
Board and stockholder matters costs were primarily related to the recruitment and appointment of a new board member in the first quarter of 2021.
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6. Borrowings
Borrowings as of April 17, 2022 and December 26, 2021 are summarized below (in thousands):
April 17, 2022 Weighted
Average
Interest Rate December 26, 2021 Weighted
Average
Interest Rate
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
Less: unamortized debt issuance costs and discounts (1)
9,449 —
Less: current portion of long-term debt 2,000 9,692
Long-term debt $ 192,426 $ 167,263
Revolving line of credit unamortized deferred financing charges (1) :
$ 0.9 $ 2.0
(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.
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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.
7. Fair Value Measurements
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The carrying amounts of the Company's cash and cash equivalents, accounts receivable, accounts payable, and current accrued expenses and other liabilities approximate fair value due to the short term nature or maturity of the instruments.
The 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
Assets:
Investments in rabbi trust $ 4,764 $ 4,764 $ — $ —
Total assets measured at fair value $ 4,764 $ 4,764 $ — $ —
December 26, 2021 Level 1 Level 2 Level 3
Assets:
Investments in rabbi trust $ 6,276 $ 6,276 $ — $ —
Total assets measured at fair value $ 6,276 $ 6,276 $ — $ —
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, 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 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 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.
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8. 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.
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