RED ROBIN GOURMET BURGERS INC 10-Q

ITEM 1. Financial Statements (unaudited) RED ROBIN GOURMET BURGERS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (in thousands, except for per share amounts) April 16, 2023 December 25, 2022 Assets: Current assets: Cash and cash equivalents $ 49,024 $ 48,826 Accounts receivable, net 12,520 21,427 Inventories 25,380 26,447 Income tax receivable 473 562 Prepaid expenses and other current assets 13,337 12,938 Restricted cash 9,422 9,380 Total current assets 110,156 119,580 Property and equipment, net 307,954 318,517 Operating lease assets, net 355,917 361,432 Intangible assets, net 17,082 17,727 Other assets, net 12,785 14,889 Total assets $ 803,894 $ 832,145 Liabilities and stockholders ' equity: Current liabilities: Accounts payable $ 32,290 $ 39,336 Accrued payroll and payroll-related liabilities 37,975 33,666 Unearned revenue 30,444 43,358 Current portion of operating lease obligations 48,121 47,394 Current portion of long-term debt 2,875 3,375 Accrued liabilities and other 48,537 49,498 Total current liabilities 200,242 216,627 Long-term debt 203,188 203,155 Long-term portion of operating lease obligations 383,621 393,157 Other non-current liabilities 12,157 13,831 Total liabilities 799,208 826,770 Commitments and contingencies (see Note 8. Commitments and Contingencies) Stockholders ' equity: Common stock; $ 0.001 par value: 45,000 shares authorized; 20,449 shares issued; 16,063 and 15,934 shares outstanding as of April 16, 2023 and December 25, 2022 20 20 Preferred stock, $ 0.001 par value: 3,000 shares authorized; no shares issued and outstanding as of April 16, 2023 and December 25, 2022 — — Treasury stock 4,386 and 4,515 shares, at cost, as of April 16, 2023 and December 25, 2022 ( 177,480 ) ( 182,810 ) Paid-in capital 235,876 238,803 Accumulated other comprehensive loss, net of tax ( 26 ) ( 34 ) Retained deficit ( 53,704 ) ( 50,604 ) Total stockholders' equity 4,686 5,375 Total liabilities and stockholders ' equity $ 803,894 $ 832,145 See Notes to Condensed Consolidated Financial Statements 1 Table of Contents 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 16, 2023 April 17, 2022 Revenues: Restaurant revenue $ 406,893 $ 380,612 Franchise and other revenues 11,075 14,938 Total revenues 417,968 395,550 Costs and expenses: Restaurant operating costs (excluding depreciation and amortization shown separately below): Cost of sales 99,670 90,941 Labor 145,421 138,108 Other operating 72,050 67,864 Occupancy 29,801 30,599 Depreciation and amortization 21,825 23,919 Selling, general, and administrative expenses 34,523 34,380 Pre-opening costs 582 62 Other charges (gains), net 9,759 5,307 Total costs and expenses 413,631 391,180 Income from operations 4,337 4,370 Other expense: Interest expense, net and other 7,417 7,413 Loss before income taxes ( 3,080 ) ( 3,043 ) Income tax provision (benefit) 20 62 Net loss $ ( 3,100 ) $ ( 3,105 ) Loss per share: Basic $ ( 0.19 ) $ ( 0.20 ) Diluted $ ( 0.19 ) $ ( 0.20 ) Weighted average shares outstanding: Basic 15,996 15,748 Diluted 15,996 15,748 Other comprehensive income (loss): Foreign currency translation adjustment $ 8 $ 11 Other comprehensive income (loss), net of tax 8 11 Total comprehensive loss $ ( 3,092 ) $ ( 3,094 ) See Notes to Condensed Consolidated Financial Statements. 2 Table of Contents RED ROBIN GOURMET BURGERS, INC. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS ' EQUITY (Unaudited) Common Stock Treasury Stock Accumulated Other Comprehensive Income/(Loss), 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 (loss), net of tax — — — — — 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 Income/(Loss), net of tax Paid-in Capital Retained Earnings (Deficit) (in thousands) Shares Amount Shares Amount Total Balance, December 25, 2022 20,449 $ 20 4,515 $ ( 182,810 ) $ 238,803 $ ( 34 ) $ ( 50,604 ) $ 5,375 Exercise of options, issuance of restricted stock, shares exchanged for exercise and tax, and stock issued through employee stock purchase plan — — ( 129 ) 5,330 ( 5,106 ) — — 224 Non-cash stock compensation — — — — 2,179 — — 2,179 Net loss — — — — — — ( 3,100 ) ( 3,100 ) Other comprehensive income (loss), net of tax — — — — — 8 — 8 Balance, April 16, 2023 20,449 $ 20 4,386 $ ( 177,480 ) $ 235,876 $ ( 26 ) $ ( 53,704 ) $ 4,686 See Notes to Condensed Consolidated Financial Statements. 3 Table of Contents RED ROBIN GOURMET BURGERS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Sixteen Weeks Ended (in thousands) April 16, 2023 April 17, 2022 Cash flows from operating activities: Net loss $ ( 3,100 ) $ ( 3,105 ) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 21,825 23,919 Gift card breakage ( 4,965 ) ( 7,819 ) Asset impairment 694 2,122 Non-cash other charges, net 770 ( 191 ) Stock-based compensation expense 2,172 3,042 Other, net 606 2,266 Changes in operating assets and liabilities: Accounts receivable 8,907 8,852 Income tax receivable 89 2,581 Inventories 1,068 ( 162 ) Prepaid expenses and other current assets ( 399 ) 1,883 Operating lease assets, net of liabilities ( 3,654 ) ( 4,623 ) Trade accounts payable and accrued liabilities 1,086 3,288 Unearned revenue ( 7,949 ) ( 8,408 ) Other operating assets and liabilities, net 192 ( 10,349 ) Net cash provided by operating activities 17,342 13,296 Cash flows from investing activities: Purchases of property, equipment, and intangible assets ( 16,084 ) ( 9,716 ) Proceeds from sales of property and equipment and other investing activities — 168 Net cash used in investing activities ( 16,084 ) ( 9,548 ) Cash flows from financing activities: Borrowings of long-term debt — 282,151 Payments of long-term debt and finance leases ( 1,241 ) ( 261,800 ) Debt issuance costs — ( 4,869 ) Proceeds from other financing activities, net 224 ( 65 ) Net cash provided by (used in) financing activities ( 1,017 ) 15,417 Effect of exchange rate changes on cash ( 1 ) 8 Net change in cash and cash equivalents, and restricted cash 240 19,173 Cash and cash equivalents, beginning of period 58,206 22,750 Cash and cash equivalents, and restricted cash, end of period $ 58,446 $ 41,923 Supplemental disclosure of cash flow information Income tax paid (refund received), net $ 88 $ ( 2,519 ) Interest paid, net of amounts capitalized $ 5,475 $ 3,374 Right of use assets obtained in exchange for operating lease obligations $ 7,465 $ 3,382 Right of use assets obtained in exchange for finance lease obligations $ — $ 746 See Notes to Condensed Consolidated Financial Statements. 4 Table of Contents 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 16, 2023, the Company owned and operated 415 restaurants located in 38 states. The Company also had 96 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 25, 2022 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 25, 2022 filed with the SEC on February 28, 2023. 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 2023 April 16, 2023 16 First Quarter 2022 April 17, 2022 16 Current and Prior Fiscal Years: Fiscal Year 2023 December 31, 2023 53 Fiscal Year 2022 December 25, 2022 52 Upcoming fiscal year: Fiscal Year 2024 December 29, 2024 52 5 Table of Contents 2. Revenue Disaggregation of revenue In the following table, revenue is disaggregated by type of good or service (in thousands): Sixteen Weeks Ended April 16, 2023 April 17, 2022 Restaurant revenue $ 406,893 $ 380,612 Franchise revenue 5,283 6,280 Gift card breakage 4,965 7,819 Other revenue 827 839 Total revenues $ 417,968 $ 395,550 Contract Liabilities Components of Unearned revenue in the accompanying Condensed Consolidated Balance Sheets are as follows (in thousands): April 16, 2023 December 25, 2022 Unearned gift card revenue $ 19,088 $ 32,251 Deferred loyalty revenue $ 11,356 $ 11,107 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 16, 2023 April 17, 2022 Gift card revenue $ 14,574 $ 16,859 3. Leases 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 16, 2023 April 17, 2022 Operating lease cost $ 20,895 $ 21,689 Finance lease cost: Amortization of right of use assets 327 342 Interest on lease liabilities 173 145 Total finance lease cost 500 487 Variable lease cost 5,792 6,325 Total $ 27,187 $ 28,501 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 16, 2023 and April 17, 2022, all potentially dilutive common shares are considered anti-dilutive. 6 Table of Contents 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 16, 2023 April 17, 2022 Basic weighted average shares outstanding 15,996 15,748 Dilutive effect of stock options and awards — — Diluted weighted average shares outstanding 15,996 15,748 Awards excluded due to anti-dilutive effect on diluted loss per share 1,368 885 5. Other Charges (Gains), net Other charges (gains), net consisted of the following (in thousands): Sixteen Weeks Ended April 16, 2023 April 17, 2022 Litigation contingencies $ 4,300 $ 1,720 Severance and executive transition 1,891 — Restaurant closure costs, net 1,750 949 Other 1,062 — Asset impairment 694 2,122 Closed corporate office costs, net of sublease income 62 — Other financing costs — 309 COVID-19 related charges — 207 Other charges (gains), net $ 9,759 $ 5,307 Litigation contingencies during the sixteen weeks ended April 16, 2023 and April 17, 2022 represent reserves for various in progress legal matters. Severance and executive transition costs include one-time termination benefits related to a reduction in force of Team Members and costs associated with changes in leadership positions as a result of our strategic pivot and are accounted for in accordance with ASC Topic 420, Exit or Disposal Cost Obligations . The Company expects to make the remaining payments related to these benefits in 2023. The Company expects to incur a total of approximately $ 5.0 million in termination benefits, of which it has incurred a cumulative total of $ 4.4 million through April 16, 2023. Approximately $ 1.5 million in one-time termination benefits was incurred and recorded in Other charges in the Consolidated Statements of Operations and Comprehensive Loss during the sixteen weeks ended April 16, 2023. A reconciliation of our termination benefits liability, which is included in Accrued liabilities and other current liabilities in our Condensed Consolidated Balance Sheets is as follows: Termination Benefits Balance as of December 25, 2022 $ 2,505 Charges 1,476 Cash Payments ( 2,788 ) Balance as of April 16, 2023 $ 1,193 Restaurant closure costs (gains) include the ongoing restaurant operating costs of the Company-owned restaurants incurred for closed restaurants and closed restaurant lease termination gains or losses. Other includes non-cash charges primarily related to terminated capital projects, disposals, and lease terminations. The Company recognized non-cash impairment charges related to subleasing additional space at the Company's closed corporate office during the sixteen weeks ended April 16, 2023. The Company recognized non-cash impairment charges related to restaurant assets at three Company-owned restaurants for the sixteen weeks ended April 17, 2022. Closed corporate office, net of sublease income includes expense and sublease income related to a corporate office facility that was vacated and subleased. 7 Table of Contents 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 Credit Facility. See Note 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. 6. Borrowings Borrowings as of April 16, 2023 and December 25, 2022 are summarized below (in thousands): April 16, 2023 Variable Interest Rate December 25, 2022 Variable Interest Rate Revolving line of credit $ 15,000 11.37 % $ 15,000 10.44 % Term loan 198,000 12.12 % 199,000 9.81 % Notes payable 875 875 Total borrowings 213,875 214,875 Less: unamortized debt issuance costs and discounts (1) 7,812 8,345 Less: current portion of long-term debt 2,875 3,375 Long-term debt $ 203,188 $ 203,155 Revolving line of credit unamortized deferred financing charges (1) : $ 915 $ 988 (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. 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 (collectively, the "Credit Facility"). The borrower maintains the option to increase the amount of borrowings available under 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 Facility. The term loans require quarterly principal payments in an aggregate annual amount equal to 1.0 % of the original principal amount of the term loan. The Credit Facility's interest rate references the Secured Overnight Financing Rate ("SOFR"), a new index calculated by short-term repurchase agreements and backed by U.S. Treasury securities, or the Alternate Base Rate ("ABR"), which represents the highest of (a) the Prime Rate, (b) the Federal Funds Rate plus 0.5 % per annum, or (c) one-month term SOFR plus 1.0 % 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 replaced 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. 8 Table of Contents 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, which were filed as exhibits to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on March 10, 2022. 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 Condensed Consolidated Statements of Operations and Comprehensive Loss for the sixteen weeks ended April 17, 2022. In association with the execution 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 16, 2023 and December 25, 2022 (in thousands): April 16, 2023 Level 1 Level 2 Level 3 Assets: Investments in rabbi trust $ 3,165 $ 3,165 $ — $ — Total assets measured at fair value $ 3,165 $ 3,165 $ — $ — December 25, 2022 Level 1 Level 2 Level 3 Assets: Investments in rabbi trust $ 4,250 $ 4,250 $ — $ — Total assets measured at fair value $ 4,250 $ 4,250 $ — $ — 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 (Gains), net. We impaired long-lived assets with a carrying value (including right of use lease assets) of $ 1.0 million, recognizing an impairment expense of $ 0.7 million during the sixteen weeks ended April 16, 2023, related to the net book value of these long-lived restaurant assets. We determined the fair value of these long-lived assets to be $ 0.3 million in the sixteen weeks ended April 16, 2023. The impairment was recorded as a result of quantitative impairment analyses. 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 April 16, 2023, the fair value of the credit facility was approximately $ 214.4 million and the principal amount carrying value was $ 213.0 million. The credit facility term loan is reported net of $ 7.8 million in unamortized discount and debt issuance costs in the Condensed Consolidated Balance Sheet as of April 16, 2023. The carrying value of the credit facility was $ 214.0 million and the fair value of the credit facility was $ 205.1 million as of December 25, 2022. The interest rate on the credit facility represents a level 2 fair value input. 9 Table of Contents 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 condensed 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, certain of which are covered by insurance policies. 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 any one of these matters will not have a material adverse effect on our financial position and results of operations. 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 16, 2023, we had a balance of $ 8.9 million for loss contingencies included within Accrued liabilities and other on our Condensed Consolidated Balance Sheet. In the normal course of business, there are various claims in process, matters in litigation, administrative proceedings, and other contingencies. These include employment related claims and class action lawsuits, claims from Guests or Team Members alleging illness, injury, food quality, health, or operational concerns, and lease and other commercial disputes. We increased our estimate of loss contingency liabilities by approximately $ 4.3 million in the first quarter of 2023 related to changes during the first quarter in the status of ongoing litigation matters. We ultimately may be subject to greater or less than the accrued amount for this and other matters. As of April 16, 2023, we had non-cancellable purchase commitments to certain vendors who provide food and beverages and other supplies to our restaurants, for an aggregate of $ 133.2 million. We expect to fulfill our commitments under these agreements in the normal course of business, and as such, no liability has been recorded. 9. Subsequent Events On April 17, 2023 and subsequent to first quarter 2023, the Company acquired five Red Robin restaurants in the northeastern United States from a long-term franchisee who retired for approximately $ 3.3 million plus standard closing adjustments. The Company expects the transaction to result in a business combination; however, determination of the purchase price allocation is not considered practical as of the filing date of the first quarter 2023 Form 10-Q. 10 Table of Contents