What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-08-10 compared with 2022-05-26 · 140 added, 101 removed, 228 unchanged (51% of the section changed)

1 unchanged sentence

Management's Discussion and Analysis of Financial Condition and Results of Operations provides a narrative of our financial performance and condition that should be read in conjunction with the accompanying Condensed Consolidated Financial Statements.

All comparisons under this heading between 2022 and 2021 refer to the sixteen weeks ended April 17, 2022 and April 18, 2021, unless otherwise indicated.

All comparisons under this heading between 2022 and 2021 refer to the twelve and twenty-eight weeks ended July 10, 2022 and July 11, 2021, unless otherwise indicated.

Description of Business

Red Robin Gourmet Burgers, Inc., a Delaware corporation, together with its subsidiaries ("Red Robin," "we," "us," "our," or the "Company"), primarily operates, franchises, and develops full-service restaurants with 528 locations in North America.

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

As of July 10, 2022, the Company owned 426 restaurants located in 38 states.

The Company also had 102 franchised full-service restaurants in 16 states and one Canadian province.

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Financial and Operational Highlights

The following summarizes the operational and financial highlights during the sixteen weeks ended April 17, 2022:

The following summarizes the operational and financial highlights during the twelve weeks ended July 10, 2022:

Restaurant Revenue, compared to the same period in the prior year, is presented in the table below:

Restaurant Revenue for the sixteen weeks ended April 18, 2021

Restaurant Revenue for the twelve weeks ended July 11, 2021

Increase/(decrease) in comparable restaurant revenue (1)

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Total increase/(decrease) 16.5

Restaurant Revenue for the sixteen weeks ended April 17, 2022

Restaurant Revenue for the twelve weeks ended July 10, 2022

The following summarizes the operational and financial highlights during the twenty-eight weeks ended July 10, 2022:

Restaurant Revenue for the twenty-eight weeks ended July 11, 2021

Increase/(decrease) in comparable restaurant revenue (1)

Increase/(decrease) from non-comparable restaurants (1.0)

Total increase/(decrease) 78.5

Restaurant Revenue for the twenty-eight weeks ended July 10, 2022

(1) Comparable restaurant revenue represents revenue from Company-owned restaurants that have operated five full quarters as of the end of the period presented.

Restaurant revenues and operating costs as a percentage of restaurant revenue for the period are detailed in the table below:

Sixteen Weeks

April 17, 2022 April 18, 2021 Increase/(Decrease)

Twelve Weeks Ended

July 10, 2022 July 11, 2021 Increase/(Decrease)

Restaurant revenue (millions) $ 288.7 $ 272.2 6.1 %

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Total 86.4 % 84.3 % 210

Twenty-eight Weeks Ended

July 10, 2022 July 11, 2021 Increase/(Decrease)

Restaurant revenue (millions) $ 669.3 $ 590.8 13.3 %

Restaurant operating costs:

(Percentage of Restaurant Revenue) (Basis Points)

Cost of sales 24.5 % 22.2 % 230

Labor 35.8 35.6 20

Other operating 17.9 17.7 20

Occupancy 8.0 8.8 (80)

Total 86.2 % 84.3 % 190

Certain percentage and basis point amounts in the table above do not total due to rounding as well as restaurant operating costs being expressed as a percentage of restaurant revenue and not total revenues.

The following table summarizes Net Loss, loss per diluted share, and adjusted loss per diluted share for the sixteen weeks ended April 17, 2022 and April 18, 2021;

Sixteen Weeks Ended

April 17, 2022 April 18, 2021

The following table summarizes Net Loss, loss per diluted share, and adjusted loss per diluted share for the twelve and twenty-eight weeks ended and July 10, 2022 and July 11, 2021;

Twelve Weeks Ended Twenty-eight Weeks Ended

July 10, 2022 July 11, 2021 July 10, 2022 July 11, 2021

Net loss as reported $ (17,932) $ (4,996) $ (21,037) $ (13,709)

Loss per share - diluted:

Net (loss) income as reported $ (0.20) $ (0.56)

Net loss as reported $ (1.13) $ (0.32) $ (1.33) $ (0.88)

Asset impairment 0.55 0.01 0.69 0.09

Change in accounting estimate, gift card breakage revenue, net of commissions (1)

Restaurant asset impairment 0.13 0.08

Litigation contingencies 0.11 0.07

Write-off of unamortized debt issuance costs (2)

Restaurant closure costs 0.06 0.11 0.12 0.27

Other financing costs (3)

Board and stockholder matter costs — 0.01

COVID-19 related charges 0.01 0.02 0.02 0.05

Write-off of unamortized debt issuance costs (2)

Executive transition 0.01 — 0.01 —

Litigation contingencies (0.11) — (0.01) 0.07

Board and stockholder matter costs — — — 0.01

Income tax expense (0.14) (0.04) (0.17) (0.13)

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Diluted 15,830 15,665 15,783 15,617

(1) During the sixteen weeks ended April 17, 2022, the Company re-evaluated the estimated redemption pattern related to gift cards.

See Footnote 1.

Basis of Presentation and Recent Accounting Pronouncements included in Part I.

(1) During the twenty-eight weeks ended July 10, 2022, the Company re-evaluated the estimated redemption pattern related to gift cards.

See Footnote 1, Basis of Presentation and Recent Accounting Pronouncements included in Part I.

Financial Information in this quarterly report on form 10-Q.

(2) Write-off of unamortized debt issuance costs related to the remaining unamortized debt issuance costs related to our legacy credit agreement with the completion of the refinancing of our Credit Agreement in the first quarter of fiscal year 2022.

(3) Other financing costs includes legal and other charges related to the refinancing of our Credit Facility in the first quarter of 2022.

(2) Write-off of unamortized debt issuance costs related to the remaining unamortized debt issuance costs related to our Prior Credit Agreement (as defined below) with the completion of the refinancing of our Prior Credit Agreement in the first quarter of fiscal year 2022.

(3) Other financing costs includes legal and other charges related to the refinancing of our Prior Credit Agreement in the first quarter of 2022.

We believe the non-GAAP measure of adjusted loss per diluted share gives the reader additional insight into the ongoing operational results of the Company, and it is intended to supplement the presentation of the Company's financial results in accordance with GAAP.

Adjusted loss per diluted share excludes the effects of changes in accounting estimates, asset impairment, litigation contingencies, the write-off of unamortized debt issuance costs, restaurant closure costs, other financing costs, COVID-19 related costs, and related income tax effects.

Other companies may define adjusted net loss per diluted share differently, and as a result our measure of adjusted loss per share may not be directly comparable to those of other companies.

Adjusted loss per share should be considered in addition to, and not as a substitute for, net loss as reported in accordance with U.S.

Other companies may define adjusted net loss per diluted share differently, and as a result our measure of adjusted loss per diluted share may not be directly comparable to those of other companies.

Adjusted loss per diluted share should be considered in addition to, and not as a substitute for, net loss as reported in accordance with U.S.

GAAP as a measure of performance.

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The following table details restaurant unit data for our Company-owned and franchised locations for the periods indicated:

Sixteen Weeks Ended

April 17, 2022 April 18, 2021

Twelve Weeks Ended Twenty-Eight Weeks Ended

July 10, 2022 July 11, 2021 July 10, 2022 July 11, 2021

Company-owned:

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Beginning of period 101 103 101 103

Opened during the period 1 — 1 —

Sold or closed during the period — (2) — (2)

End of period 102 101 102 101

Total number of restaurants 528 531 528 531

The following table presents total Company-owned and franchised restaurants by state or province as of April 17, 2022:

The following table presents total Company-owned and franchised restaurants by state or province as of July 10, 2022:

Company-Owned Restaurants Franchised Restaurants

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Our operating results may fluctuate significantly as a result of a variety of factors, and operating results for any period presented are not necessarily indicative of results for a full fiscal year.

Sixteen Weeks Ended

April 17, 2022 April 18, 2021

Twelve Weeks Ended Twenty-Eight Weeks Ended

July 10, 2022 July 11, 2021 July 10, 2022 July 11, 2021

Restaurant revenue 98.2 % 98.3 % 97.0 % 97.9 %

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Selling, general and administrative 10.9 10.2 9.7 9.8

Pre-opening and acquisition costs 0.1 0.1 — 0.1

Other charges, net 2.8 0.8 2.0 1.3

Income (Loss) from operations 1.1 (1.3)

Loss from operations (4.5) (0.9) (1.3) (1.1)

Interest expense, net and other 1.4 1.0 1.7 1.2

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Net loss (6.1) % (1.8) % (3.1) % (2.3) %

Sixteen Weeks Ended

(Revenues in thousands) April 17, 2022 April 18, 2021 Percent Change

Twelve Weeks Ended Twenty-Eight Weeks Ended

(Revenues in thousands) July 10, 2022 July 11, 2021 Percent Change July 10, 2022 July 11, 2021 Percent Change

Restaurant revenue $ 288,657 $ 272,157 6.1 % $ 669,269 $ 590,834 13.3 %

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Net sales per square foot $ 109 $ 102 6.7 % $ 251 $ 221 13.7 %

Restaurant revenue for the sixteen weeks ended April 17, 2022, which comprises primarily food and beverage sales, increased $61.9 million, or 19.4%, as compared to the first quarter of 2021.

The increase was due to a $61.5 million, or 19.7%, increase in comparable restaurant revenue, and a $0.4 million increase at non-comparable restaurants, including the impact of restaurant closures.

Restaurant revenue for the twelve weeks ended July 10, 2022, which comprises primarily food and beverage sales, increased $16.5 million, or 6.1%, as compared to the second quarter of 2021.

The increase was due to a $18.1 million, or 6.7%, increase in comparable restaurant revenue, and a $1.6 million decrease at non-comparable restaurants, including the impact of restaurant closures.

The comparable restaurant revenue increase was driven by a 9.6% increase in average Guest check, and a 2.9% decrease in Guest count.

The increase in average Guest check resulted from a 3.7% increase in menu mix, a 6.0% increase in pricing, and was partially offset by a 0.1% decrease from higher discounts.

The increase in menu mix was primarily driven by our limited time menu offerings and higher dine-in sales volumes.

Off-premises sales decreased 6.3% and comprised 28.6% of total food and beverage sales during the second quarter of 2022, as compared to the same period in 2021.

Restaurant revenue for the twenty-eight weeks ended July 10, 2022, increased $78.4 million, or 13.3%, as compared to the twenty-eight weeks ended July 11, 2021.

The increase was due to a $79.5 million, or 13.8%, increase in comparable restaurant revenue, and a $1.0 million decrease at non-comparable restaurants, including the impact of restaurant closures.

The comparable restaurant revenue increase was driven by a 11.3% increase in average Guest check, and a 2.5% increase in Guest count.

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The increase in menu mix was primarily driven by our limited time menu offerings and higher dine-in sales volumes.

Off-premises sales decreased 12.9% and comprised 30.5% of total food and beverage sales during the first quarter of 2022, as compared to the same period in 2021.

Off-premises sales decreased 10.3% and comprised 29.7% of total food and beverage sales during the twenty-eight weeks ended July 10, 2022, as compared to the same period in 2021.

Average weekly net sales volumes represent the total restaurant revenue for all Company-owned Red Robin restaurants for each time period presented, divided by the number of operating weeks in the period.

Comparable restaurant revenues are comprised of Company-owned restaurants that have operated five full quarters as of the end of the period presented.

The Company-owned restaurants that were temporarily closed due to the COVID-19 pandemic were not included in the comparable base for the sixteen weeks ended April 17, 2022 or April 18, 2021.

Fluctuations in average weekly net sales volumes for Company-owned restaurants reflect the effect of comparable restaurant revenue changes as well as the performance of new and acquired restaurants during the period, the average square footage of our restaurants, as well as the impact of changing capacity limitations in response to COVID-19 levels in a given locality.

The Company-owned restaurants that were temporarily closed due to the COVID-19 pandemic were not included in the comparable base for the twenty-eight weeks ended July 10, 2022 or July 11, 2021.

Fluctuations in average weekly net sales volumes for Company-owned restaurants reflect the effect of comparable restaurant revenue changes as well as the performance of reopened, new and acquired restaurants during the period, the average square footage of our restaurants, as well as the impact of changing capacity limitations in response to COVID-19 levels in a given locality.

Net sales per square foot represents the total restaurant revenue for Company-owned restaurants included in the comparable base divided by the total square feet of Company-owned restaurants included in the comparable base.

Franchise and other revenue increased $7.3 million for the sixteen weeks ended April 17, 2022 compared to the sixteen weeks ended April 18, 2021, primarily due to the re-evaluation of the estimated redemption pattern related to gift cards resulting in a $5.2 million adjustment to gift card breakage from aligning our estimate to the updated estimated redemption pattern.

Our franchisees reported a comparable restaurant revenue increase of 18.7% for the sixteen weeks ended April 17, 2022 compared to the same period in 2021.

Franchise and other revenue increased $0.6 million for the twelve weeks ended July 10, 2022 compared to the twelve weeks ended July 11, 2021.

Our franchisees reported a comparable restaurant revenue increase of 3.8% for the twelve weeks ended July 10, 2022 compared to the same period in 2021.

Franchise and other revenue increased $8.0 million for the twenty-eight weeks ended July 10, 2022 compared to the twenty-eight weeks ended July 11, 2021, primarily due to the re-evaluation of the estimated redemption pattern related to gift cards resulting in a $5.8 million adjustment to gift card breakage from aligning our estimate to the updated estimated redemption pattern.

Our franchisees reported a comparable restaurant revenue increase of 11.7% for the twenty-eight weeks ended July 10, 2022 compared to the same period in 2021.

Cost of Sales

Sixteen Weeks Ended

(In thousands, except percentages) April 17, 2022 April 18, 2021 Percent Change

Twelve Weeks Ended Twenty-Eight Weeks Ended

(In thousands, except percentages) July 10, 2022 July 11, 2021 Percent Change July 10, 2022 July 11, 2021 Percent Change

Cost of sales $ 72,702 $ 61,917 17.4 % $ 163,643 $ 131,083 24.8 %

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Cost of sales, which comprises of food and beverage costs, is variable and generally fluctuates with sales volume.

Cost of sales as a percentage of restaurant revenue increased 220 basis points for the sixteen weeks ended April 17, 2022 as compared to the same period in 2021.

The increase was primarily driven by commodity inflation, partially offset by favorable mix shifts and pricing.

Sixteen Weeks Ended

(In thousands, except percentages) April 17, 2022 April 18, 2021 Percent Change

Cost of sales as a percentage of restaurant revenue increased 240 basis points for the twelve weeks ended July 10, 2022 as compared to the same period in 2021.

The increase was primarily driven by commodity inflation, partially offset by pricing and rebates.

Cost of sales as a percentage of restaurant revenue increased 230 basis points for the twenty-eight weeks ended July 10, 2022 as compared to the same period in 2021.

The increase was primarily driven by commodity inflation, partially offset by favorable mix shifts, pricing, and rebates.

Twelve Weeks Ended Twenty-Eight Weeks Ended

(In thousands, except percentages) July 10, 2022 July 11, 2021 Percent Change July 10, 2022 July 11, 2021 Percent Change

Labor $ 101,643 $ 98,949 2.7 % $ 239,751 $ 210,608 13.8 %

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Labor costs include restaurant-level hourly wages and management salaries as well as related taxes and benefits.

For the sixteen weeks ended April 17, 2022, labor as a percentage of restaurant revenue increased 130 basis points compared to the same period in 2021.

The increase was primarily driven by higher labor inflation and staffing costs, partially offset by sales leverage.

For the twelve weeks ended July 10, 2022, labor as a percentage of restaurant revenue decreased 120 basis points compared to the same period in 2021.

The decrease was primarily driven by sales leverage and lower group insurance and management incentive compensation costs, partially offset by wage rate inflation.

For the twenty-eight weeks ended July 10, 2022, labor as a percentage of restaurant revenue increased 20 basis points compared to the same period in 2021.

The increase was primarily driven by higher wage rate inflation and staffing costs, partially offset by sales leverage and lower group insurance and management incentive compensation costs.

Other Operating

Sixteen Weeks Ended

(In thousands, except percentages) April 17, 2022 April 18, 2021 Percent Change

Twelve Weeks Ended Twenty-Eight Weeks Ended

(In thousands, except percentages) July 10, 2022 July 11, 2021 Percent Change July 10, 2022 July 11, 2021 Percent Change

Other operating $ 52,003 $ 46,928 10.8 % $ 119,867 $ 104,640 14.6 %

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Other operating costs include costs such as equipment repairs and maintenance costs, restaurant supplies, utilities, restaurant technology, and other miscellaneous costs.

For the sixteen weeks ended April 17, 2022, other operating costs as a percentage of restaurant revenue decreased 30 basis points as compared to the same period in 2021.

The decrease was primarily driven by lower supply costs driven by lower off-premises sales, and sales leverage, partially offset by increased maintenance costs due to outsourcing.

Sixteen Weeks Ended

(In thousands, except percentages) April 17, 2022 April 18, 2021 Percent Change

For the twelve weeks ended July 10, 2022, other operating costs as a percentage of restaurant revenue increased 80 basis points as compared to the same period in 2021.

The increase was primarily driven by increases in maintenance costs, utilities and third party commissions, partially offset by lower hiring costs and sales leverage.

For the twenty-eight weeks ended July 10, 2022, other operating costs as a percentage of restaurant revenue increased 20 basis points as compared to the same period in 2021.

The increase was primarily driven by increases in maintenance costs, utilities, and third party commissions, partially offset by lower supply costs driven by lower off-premises sales, lower hiring costs, and sales leverage.

Twelve Weeks Ended Twenty-Eight Weeks Ended

(In thousands, except percentages) July 10, 2022 July 11, 2021 Percent Change July 10, 2022 July 11, 2021 Percent Change

Occupancy $ 22,980 $ 21,614 6.3 % $ 53,579 $ 51,714 3.6 %

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Occupancy costs include fixed rents, property taxes, common area maintenance charges, general liability insurance, contingent rents, and other property costs.

For the sixteen weeks ended April 17, 2022, occupancy costs as a percentage of restaurant revenue decreased 140 basis points compared to the same period in 2021 primarily driven by sales leverage.

Our fixed rents for the sixteen weeks ended April 17, 2022 and April 18, 2021 were $21.3 million and $21.1 million, an increase of $0.2 million.

For the twelve weeks ended July 10, 2022, occupancy costs as a percentage of restaurant revenue increased 10 basis points compared to the same period in 2021 primarily driven by higher insurance costs, partially offset by sales leverage.

For the twenty-eight weeks ended July 10, 2022, occupancy costs as a percentage of restaurant revenue decreased 80 basis points compared to the same period in 2021 primarily driven by sales leverage, partially offset by higher insurance costs.

Our fixed rents for the twelve weeks ended July 10, 2022 and July 11, 2021 were $16.1 million and $16.0 million, an increase of $0.1 million.

Our fixed rents for the twenty-eight weeks ended July 10, 2022 and July 11, 2021 were $37.4 million and $37.0 million.

Depreciation and Amortization

Sixteen Weeks Ended

(In thousands, except percentages) April 17, 2022 April 18, 2021 Percent Change

Twelve Weeks Ended Twenty-Eight Weeks Ended

(In thousands, except percentages) July 10, 2022 July 11, 2021 Percent Change July 10, 2022 July 11, 2021 Percent Change

Depreciation and amortization $ 17,637 $ 19,215 (8.2) % $ 41,556 $ 45,103 (7.9) %

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Depreciation and amortization includes depreciation on capital expenditures for restaurants and corporate assets as well as amortization of acquired franchise rights, leasehold interests, and certain liquor licenses.

For the sixteen weeks ended April 17, 2022, depreciation and amortization expense as a percentage of revenue decreased 190 basis points over the same period in 2021 primarily due to net closed Company-owned restaurants, and sales leverage.

For the twelve weeks ended July 10, 2022, depreciation and amortization expense as a percentage of revenue decreased 90 basis points over the same period in 2021 primarily due to net closed Company-owned restaurants, and sales leverage.

For the twenty-eight weeks ended July 10, 2022, depreciation and amortization expense as a percentage of revenue decreased 150 basis points over the same period in 2021 primarily due to net closed Company-owned restaurants, and sales leverage.

Selling, General, and Administrative

Sixteen Weeks Ended

(In thousands, except percentages) April 17, 2022 April 18, 2021 Percent Change

Twelve Weeks Ended Twenty-Eight Weeks Ended

(In thousands, except percentages) July 10, 2022 July 11, 2021 Percent Change July 10, 2022 July 11, 2021 Percent Change

Selling, general, and administrative $ 32,095 $ 28,346 13.2 % $ 66,475 $ 58,956 12.8 %

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and board of directors expenses.

General, and administrative costs in the sixteen weeks ended April 17, 2022 increased $2.8 million, or 12.3%, as compared to the same period in 2021.

General, and administrative costs in the twelve weeks ended July 10, 2022 increased $1.0 million, or 5.7%, as compared to the same period in 2021.

The increase was primarily driven by increased stock based compensation expense, merit increases, and increased manager-in-training costs, partially offset by a decrease in incentive compensation costs.

General, and administrative costs in the twenty-eight weeks ended July 10, 2022 increased $3.2 million, or 8.0%, as compared to the same period in 2021.

The increase was primarily driven by increased stock based compensation expense, merit increases, and increased manager-in-training costs.

Selling costs in the sixteen weeks ended April 17, 2022 increased $1.0 million, or 11.8%, as compared to the same period in 2021.

Selling costs in the twelve weeks ended July 10, 2022 increased $2.7 million, or 25.8%, as compared to the same period in 2021.

The increase was primarily driven by increased marketing spend.

Selling costs in the twenty-eight weeks ended July 10, 2022 increased $4.3 million, or 22.8%, as compared to the same period in 2021.

The increase was primarily driven by increased marketing spend.

Pre-opening Costs

Sixteen Weeks Ended

(In thousands, except percentages) April 17, 2022 April 18, 2021 Percent Change

Twelve Weeks Ended Twenty-Eight Weeks Ended

(In thousands, except percentages) July 10, 2022 July 11, 2021 Percent Change July 10, 2022 July 11, 2021 Percent Change

Pre-opening costs $ 235 $ 374 (37.2) % $ 297 $ 374 (20.6) %

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Pre-opening costs for any given quarter will typically include expenses associated with restaurants opened during the quarter as well as expenses related to restaurants opening in subsequent quarters.

We incurred pre-opening costs during the sixteen weeks ended April 17, 2022 related to the rollout of Donatos®.

We incurred pre-opening costs during the twelve and twenty-eight weeks ended July 10, 2022 related to the rollout of Donatos®.

The Company expects to continue its roll out of Donatos® in 2022 to approximately 50 restaurants.

Interest Expense, Net and Other

Interest expense, net and other was $7.4 million for the sixteen weeks ended April 17, 2022, an increase of $3.1 million, or 71.2%, compared to the same period in 2021.

The increase was primarily related to a higher weighted average interest rate for the quarter as well as the write off of approximately $1.7 million of deferred financing charges related to the Company's prior credit facility upon the execution of the Credit Agreement on March 4, 2022.

Our weighted average interest rate was 8.2% for the sixteen weeks ended April 17, 2022 as compared to 6.3% for the same period in 2021.

Interest expense, net and other was $4.1 million for the twelve weeks ended July 10, 2022, an increase of $1.4 million, or 48.9%, compared to the same period in 2021.

The increase was primarily related to higher outstanding debt and a higher weighted average interest rate for the quarter.

Our weighted average interest rate on our credit facility debt was 8.7% for the twelve weeks ended July 10, 2022 as compared to 7.4% for the same period in 2021.

Interest expense, net and other was $11.6 million for the twenty-eight weeks ended July 10, 2022, an increase of $4.4 million, or 62.5%, compared to the same period in 2021.

The increase was primarily related to higher outstanding debt and a higher weighted average interest rate as well as the write off of approximately $1.7 million of deferred financing charges related to the Company's Prior Credit Facility upon the execution of the Credit Agreement on March 4, 2022.

Our weighted average interest rate on our credit facility debt was 8.4% for the twenty-eight weeks ended July 10, 2022 as compared to 6.7% for the same period in 2021.

Income Tax Provision

The effective tax rate for the sixteen weeks ended April 17, 2022 was a 2.0% expense, compared to a 0.6% expense for the sixteen weeks ended April 18, 2021.

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

During the sixteen weeks ended April 17, 2022, the Company received $2.5 million of those refund claims.

On May 24, 2022, the Company received an additional $12.7 million, and expects to receive the remaining $0.6 million during 2022, due to ongoing processing delays at the IRS and state authorities.

The effective tax rate for the twelve weeks ended July 10, 2022 was a 2.5% expense, compared to a 6.6% benefit for the twelve weeks ended July 11, 2021.

The effective tax rate for the twenty-eight weeks ended July 10, 2022 was a 2.4% expense, compared to a 2.2% benefit for the twenty-eight weeks ended July 11, 2021.

During the twelve and twenty-eight weeks ended July 10, 2022, the Company received $12.3 million and $14.8 million of federal and state refund claims, respectively, and expects to receive an additional $0.6 million during the second half of 2022.

Liquidity and Capital Resources

Cash and cash equivalents, and restricted cash increased $19.2 million to $41.9 million as of April 17, 2022, from $22.8 million at the beginning of the fiscal year.

As the Company continues to recover from the COVID-19 pandemic and generates operating cash flow, the Company is using available cash flow from operations to pay down debt, maintain existing restaurants and infrastructure, and execute on its long-term strategic initiatives.

As of April 17, 2022, the Company had approximately $55.8 million in liquidity, including cash on hand and available borrowing capacity under its credit facility.

Cash and cash equivalents, and restricted cash increased $36.3 million to $59.0 million as of July 10, 2022, from $22.8 million at the beginning of the fiscal year.

As the Company continues to recover from the COVID-19 pandemic and generates operating cash flow, the Company is using available cash flow from operations to maintain existing restaurants and infrastructure, execute on its long-term strategic initiatives, and pay down debt.

As of July 10, 2022, the Company had approximately $75.3 million in liquidity, including cash on hand and available borrowing capacity under its credit facility.

The table below summarizes our cash flows from operating, investing, and financing activities for each period presented (in thousands):

Sixteen Weeks Ended

April 17, 2022 April 18, 2021

Twenty-Eight Weeks Ended

July 10, 2022 July 11, 2021

Net cash provided by operating activities $ 36,439 $ 37,184

4 unchanged sentences

Operating Cash Flows

Net cash flows provided by operating activities decreased $5.6 million to $13.3 million for the sixteen weeks ended April 17, 2022.

The changes in net cash provided by operating activities are primarily attributable to lower accounts payable balances due to the timing of operational receipts and payments, as well as other changes in working capital as presented in the Condensed Consolidated Statements of Cash Flows, partially offset increased income from operations, driven primarily by an increase in comparable restaurant revenue.

Net cash flows provided by operating activities decreased $0.7 million to $36.4 million for the twenty-eight weeks ended July 10, 2022.

The change in net cash provided by operating activities is primarily attributable to increased loss from operations, partially offset by increased non-cash items as well as other changes in working capital, including the tax refunds received in 2022, as presented in the Condensed Consolidated Statements of Cash Flows.

Investing Cash Flows

Net cash flows used in investing activities increased $4.1 million to $9.5 million for the sixteen weeks ended April 17, 2022, as compared to $5.4 million for the same period in 2021.

Net cash flows used in investing activities increased $4.8 million to $15.6 million for the twenty-eight weeks ended July 10, 2022, as compared to $10.8 million for the same period in 2021.

The increase is primarily due to increased spending on restaurant improvements, and investments in technology.

The following table lists the components of our capital expenditures, net of currency translation, for the sixteen weeks ended April 17, 2022 and April 18, 2021 (in thousands):

Sixteen Weeks Ended

April 17, 2022 April 18, 2021

The following table lists the components of our capital expenditures, net of currency translation, for the twenty-eight weeks ended July 10, 2022 and July 11, 2021 (in thousands):

Twenty-Eight Weeks Ended

July 10, 2022 July 11, 2021

Restaurant improvement capital and other $ 7,379 $ 6,184

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Financing Cash Flows

Net cash flows provided by financing activities increased $22.8 million to $15.4 million for the sixteen weeks ended April 17, 2022, as compared to net cash flows used in financing activities of $7.4 million in the same period in 2021.

The increase is primarily due to a $20.4 million increase in net draws made on long-term debt as a result of the Company's refinancing of debt on March 4, 2022, partially offset by an increase in cash used for debt issuance costs, compared to a net paydown of debt in 2021.

Net cash flows provided by financing activities increased $32.4 million to $15.5 million for the twenty-eight weeks ended July 10, 2022, as compared to net cash flows used in financing activities of $16.9 million in the same period in 2021.

The increase is primarily due to $16.4 million in net draws made on long-term debt as a result of the Company's refinancing of debt on March 4, 2022 and $3.9 million in proceeds received related to a real estate sale, partially offset by an increase in cash used for debt issuance costs, compared to a net paydown of debt of $16.9 million in 2021.

New Credit Agreement

On March 4, 2022 the Company entered into a new Credit Agreement.

On March 4, 2022 the Company entered into a new Credit Agreement (the "Credit Agreement"), which replaced its prior amended and restated credit agreement (the "Prior Credit Agreement").

The new Credit Agreement 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.

As of April 17, 2022, the Company had outstanding borrowings under the Credit Agreement of $194.4 million net of unamortized deferred financing charges and discounts, of which $2.0 million was classified as current.

As of April 17, 2022, the Company had $22.0 million of available borrowing capacity under its Credit Agreement.

Net draws during the sixteen weeks ended April 17, 2022 totaled $26.9 million, compared to net payments totaling $6.4 million for the same period in 2021.

As of April 17, 2022, the Company had $7.8 million of letters of credit issued against cash collateral, compared to $8.6 million for the same period in 2021.

The Company's cash collateral is recorded in Restricted cash on our Condensed Consolidated Balance Sheets for the quarter ended April 17, 2022.

As of July 10, 2022, the Company had outstanding borrowings under the Credit Agreement of $190.5 million net of unamortized deferred financing charges and discounts, of which $2.0 million was classified as current.

As of July 10, 2022, the Company had $25.0 million of available borrowing capacity under its Credit Agreement.

As of July 10, 2022, the Company had $8.4 million of letters of credit issued against cash collateral, compared to $8.6 million for the same period in 2021.

The Company's cash collateral is recorded in Restricted cash on our Condensed Consolidated Balance Sheets for the quarter ended July 10, 2022.

We are subject to a number of customary covenants under our new Credit Facility, including limitations on additional borrowings, acquisitions, stock repurchases, sales of assets, and dividend payments, as well as a Total Net Leverage ratio covenant.

Debt Outstanding

Total debt outstanding increased $26.9 million to $203.9 million at April 17, 2022, from $177.0 million at December 26, 2021, primarily driven by net proceeds from the issuance of the New Credit Facility during the sixteen weeks ended April 17, 2022.

Total debt outstanding increased $23.4 million to $200.4 million at July 10, 2022, from $177.0 million at December 26, 2021, primarily driven by net proceeds from the issuance of the New Credit Facility during the twenty-eight weeks ended July 10, 2022.

Working Capital

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Pursuant to the repurchase program, purchases may be made from time to time at the Company's discretion and the Company is not obligated to acquire any particular amount of common stock.

From the date of the current program approval through April 17, 2022, we have repurchased a total of 226,500 shares at an average price of $29.14 per share for an aggregate amount of $6.6 million.

Accordingly, as of April 17, 2022, we had $68.4 million of availability under the current share repurchase program.

From the date of the current program approval through July 10, 2022, we have repurchased a total of 226,500 shares at an average price of $29.14 per share for an aggregate amount of $6.6 million.

Accordingly, as of July 10, 2022, we had $68.4 million of availability under the current share repurchase program.

Effective March 14, 2020, the Company suspended its share repurchase program to provide additional liquidity during the COVID-19 pandemic.

Our ability to repurchase shares is limited to conditions set forth by our lenders in the Credit Agreement;

redemptions shall not exceed (in any fiscal year) the greater of $2,500,000 and 4% of Consolidated EBITDA calculated on a Pro Forma Basis for the then most recently ended period.

repurchases shall not exceed (in any fiscal year) the greater of $2,500,000 and 4% of Consolidated EBITDA calculated on a Pro Forma Basis for the then most recently ended period.

The primary inflationary factors affecting our operations are food, labor costs, energy costs, and materials used in the construction of new restaurants.

A large number of our restaurant personnel are paid at rates based on the applicable minimum wage, and increases in the minimum wage rates have directly affected our labor costs in recent years.

Many of our leases require us to pay taxes, maintenance, repairs, insurance, and utilities, all of which are generally subject to inflationary increases.

Labor cost inflation had a negative impact on our financial condition and results of operations during the sixteen weeks ended April 17, 2022.

Increases in wage rates have directly affected our labor costs in recent years.

Additionally, many of our leases require us to pay taxes, maintenance, repairs, insurance, and utilities, all of which are generally subject to inflationary increases.

Labor cost and commodity cost inflation had a negative impact on our financial condition and results of operations during the twelve and twenty-eight weeks ended July 10, 2022.

Uncertainties related to fluctuations in costs, including energy costs, commodity prices, annual indexed and other wage increases, and construction materials make it difficult to predict what impact, if any, inflation may continue to have on our business, but it is anticipated inflation will have a negative impact on labor and commodity costs for the remainder of 2022.

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Contractual Obligations

There were no other material changes outside the ordinary course of business to our contractual obligations since the filing of the Company's Annual Report on Form 10-K for the fiscal year ended December 26, 2021, except for long-term debt obligations resulting from the changes to our Credit Facility in March 2022 as previously discussed in Note 6, Borrowings , of Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q, Contractual long-term debt payments as of April 17, 2022 are as follows (in thousands):

There were no other material changes outside the ordinary course of business to our contractual obligations since the filing of the Company's Annual Report on Form 10-K for the fiscal year ended December 26, 2021, except for long-term debt obligations resulting from the refinancing of our Credit Agreement in March 2022 as previously discussed above and in Note 6, Borrowings , of Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q, Contractual long-term debt payments as of July 10, 2022 are as follows (in thousands):

Payments Due by Period

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Recently Issued and Recently Adopted Accounting Standards

See Note 1, Basis of Presentation and Recent Accounting Pronouncements , of Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Forward-Looking Statements

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Forward-looking statements may relate to, among other things:

(i) anticipated impacts of litigation, including employment-related claims, on our financial position and results of operations, (ii) anticipated impacts of COVID-19 on our business, our financial position and results of operations, (iii) expectations regarding our ability to attract and retain Team Members, (iv) our business focus and strategy, (v) expectations regarding claims for tax refunds, (vi) our ability to maintain our working capital position, (vii) our ability to use our Credit Facility to satisfy our working capital deficit, short-term liquidity requirements and capital expenditures, (viii) anticipated impacts of inflation, and (ix) availability of food and supplies meeting our specifications from alternate sources.

(i) anticipated impacts of litigation, including employment-related claims, on our financial position and results of operations, (ii) anticipated impacts of COVID-19 on our business, our financial position and results of operations, (iii) expectations regarding our ability to attract and retain Team Members, (iv) our business focus and strategy, (v) our ability to maintain our working capital position, (vi) our ability to use our credit facility to satisfy our working capital deficit, short-term liquidity requirements and capital expenditures, (vii) anticipated impacts of inflation, and (viii) availability of food and supplies meeting our specifications from alternate sources.

Although we believe the expectations reflected in our forward-looking statements are based on reasonable assumptions, such expectations may prove to be materially incorrect due to known and unknown risks and uncertainties.

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• the adequacy of cash flows and the cost and availability of capital or credit facility borrowings, including our ability to refinance our credit facility, on terms we expect or at all

• government delays in processing tax refund claims

• the level and impacts of inflation;

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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 2. Management’s Discussion and Analysis