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Item 1. Financial Statements

2023-08-17 compared with 2023-05-24 · 200 added, 72 removed, 271 unchanged (50% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except for per share amounts) April 16, 2023 December 25, 2022

(in thousands, except for per share amounts) July 9, 2023 December 25, 2022

Current assets:

31 unchanged sentences

20,449 shares issued;

16,063 and 15,934 shares outstanding as of April 16, 2023 and December 25, 2022

15,931 and 15,934 shares outstanding as of July 9, 2023 and December 25, 2022

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

no shares issued and outstanding as of July 9, 2023 and December 25, 2022

Treasury stock 4,518 and 4,515 shares, at cost, as of July 9, 2023 and December 25, 2022

( 172,546 ) ( 182,810 )

1 unchanged sentence

Accumulated other comprehensive loss, net of tax ( 22 ) ( 34 )

Retained deficit ( 53,704 ) ( 50,604 )

Accumulated deficit ( 53,524 ) ( 54,190 )

Total stockholders' equity 3,026 1,789

4 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

Sixteen Weeks Ended

(in thousands, except for per share amounts) April 16, 2023 April 17, 2022

Twelve Weeks Ended Twenty-Eight Weeks Ended

(in thousands, except for per share amounts) July 9, 2023 July 10, 2022 July 9, 2023 July 10, 2022

Restaurant revenue $ 293,281 $ 288,621 $ 700,174 $ 669,218

9 unchanged sentences

Selling, general, and administrative expenses 26,864 32,095 61,387 66,475

Pre-opening costs 582 62

Pre-opening and acquisition costs 4 235 586 297

Other charges (gains), net ( 10,607 ) 8,146 ( 848 ) 13,453

Total costs and expenses 288,391 307,441 702,023 698,621

Income from operations 4,337 4,370

Income (loss) from operations 10,257 ( 13,385 ) 14,437 ( 9,491 )

Other expense:

Interest expense, net and other 6,179 4,147 13,597 11,560

Loss before income taxes ( 3,080 ) ( 3,043 )

Income (loss) before income taxes 4,078 ( 17,532 ) 840 ( 21,051 )

Income tax provision (benefit) 156 434 176 496

Net loss $ ( 3,100 ) $ ( 3,105 )

Loss per share:

Net income (loss) $ 3,922 $ ( 17,966 ) $ 664 $ ( 21,547 )

Earnings (loss) per share:

Basic $ 0.24 $ ( 1.13 ) $ 0.04 $ ( 1.37 )

6 unchanged sentences

Other comprehensive income (loss), net of tax 4 ( 18 ) 11 ( 7 )

Total comprehensive loss $ ( 3,092 ) $ ( 3,094 )

Total comprehensive income (loss) $ 3,926 $ ( 17,984 ) $ 675 $ ( 21,554 )

See Notes to Condensed Consolidated Financial Statements.

4 unchanged sentences

Income/(Loss),

Capital Retained

Capital Accumulated Deficit

(in thousands) Shares Amount Shares Amount Total

2 unchanged sentences

Non-cash stock compensation — — — — 2,179 — — 2,179

Net loss — — — — — — ( 3,105 ) ( 3,105 )

Net income (loss) — — — — — — ( 3,256 ) ( 3,256 )

Other comprehensive income (loss), net of tax — — — — — 8 — 8

Balance, April 16, 2023 20,449 $ 20 4,386 $ ( 177,480 ) $ 235,876 $ ( 26 ) $ ( 57,445 ) $ 945

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

— — — — — — — —

Exercise of options, issuance of restricted stock, shares exchanged for exercise and tax, and stock issued through employee stock purchase plan — — ( 250 ) 9,933 ( 8,297 ) — — 1,636

Acquisition of treasury stock — — 382 ( 4,999 ) — — — ( 4,999 )

Non-cash stock compensation — — — — 1,519 — — 1,519

Net income (loss) — — — — — — 3,922 3,922

Other comprehensive income (loss), net of tax — — — — — 4 — 4

Balance, July 9, 2023 20,449 $ 20 4,518 $ ( 172,546 ) $ 229,098 $ ( 22 ) $ ( 53,524 ) $ 3,026

Common Stock Treasury Stock Accumulated

2 unchanged sentences

Capital Retained

Earnings (Deficit)

(in thousands) Shares Amount Shares Amount Total

2 unchanged sentences

Non-cash stock compensation — — — — 3,042 — — 3,042

Net loss — — — — — — ( 3,100 ) ( 3,100 )

Net income (loss) — — — — — — ( 3,581 ) ( 3,581 )

Other comprehensive income (loss), net of tax — — — — — 11 — 11

Balance, April 17, 2022 20,449 $ 20 4,663 $ ( 190,022 ) $ 242,756 $ 12 $ 21,112 $ 73,878

Exercise of options, issuance of restricted stock, shares exchanged for exercise and tax, and stock issued through employee stock purchase plan — — ( 113 ) 5,817 ( 5,691 ) — — 126

Non-cash stock compensation — — — — 2,542 — — 2,542

Net income (loss) — — — — — — ( 17,966 ) ( 17,966 )

Other comprehensive income (loss), net of tax — — — — — ( 18 ) — ( 18 )

Balance, July 10, 2022 20,449 $ 20 4,550 $ ( 184,205 ) $ 239,607 $ ( 6 ) $ 3,146 $ 58,562

See Notes to Condensed Consolidated Financial Statements.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Sixteen Weeks Ended

(in thousands) April 16, 2023 April 17, 2022

Twenty-Eight Weeks Ended

(in thousands) July 9, 2023 July 10, 2022

Cash flows from operating activities:

Net loss $ ( 3,100 ) $ ( 3,105 )

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

Net income (loss) $ 664 $ ( 21,547 )

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

Depreciation and amortization 37,581 41,556

1 unchanged sentence

Asset impairment 2,387 10,861

Non-cash other charges, net 770 ( 191 )

Non-cash other charges (gains), net ( 619 ) ( 190 )

Stock-based compensation expense 3,691 5,571

(Gain) loss on sale of property, plant, and equipment ( 14,803 ) —

Other, net 251 2,783

Changes in operating assets and liabilities:

Changes in operating assets and liabilities, net of business acquisition:

Accounts receivable 8,703 8,825

9 unchanged sentences

Purchases of property, equipment, and intangible assets ( 25,814 ) ( 15,893 )

Proceeds from sale-leaseback 28,451 —

Proceeds from sales of property and equipment and other investing activities 794 269

Acquisition of franchised restaurants ( 3,529 ) —

Net cash used in investing activities ( 98 ) ( 15,624 )

2 unchanged sentences

Payments of long-term debt and finance leases ( 16,948 ) ( 265,744 )

Purchase of treasury stock ( 4,999 ) —

Debt issuance costs — ( 4,869 )

Proceeds related to real estate sale — 3,856

Proceeds from other financing activities, net 1,861 61

2 unchanged sentences

Net change in cash and cash equivalents, and restricted cash ( 1,959 ) 36,264

Cash and cash equivalents, beginning of period 58,206 22,750

Cash and cash equivalents, and restricted cash, beginning of period 58,206 22,750

Cash and cash equivalents, and restricted cash, end of period $ 56,247 $ 59,014

9 unchanged sentences

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.

As of July 9, 2023, the Company owned and operated 418 restaurants located in 39 states.

The Company also had 91 franchised full-service restaurants in 14 states and one Canadian province.

18 unchanged sentences

April 17, 2022 16

Second Quarter 2023

July 9, 2023 12

Second Quarter 2022

July 10, 2022 12

Current and Prior Fiscal Years:

6 unchanged sentences

December 29, 2024 52

Immaterial Restatement of Prior Period Financial Statements

Subsequent to the issuance of the Company's financial statements as of and for the sixteen weeks ended April 16, 2023, the Company discovered a multi-year error in its calculation and recognition of revenue related to gift cards, primarily related to breakage revenue that had been recognized for bonus and discounted gift cards for which no or discounted monetary consideration was received, which resulted in the Company overstating total revenues by $ 0.2 million for the sixteen weeks ended April 16, 2023, $ 1.1 million for the year ended December 25, 2022, and $ 0.5 million for the twenty-eight weeks ended July 10, 2022.

The period (rollover) impact of the error correction on net income (loss) for the year ended December 25, 2022 increased net loss by $ 1.1 million, and the cumulative impact of the error correction on unearned revenue was an increase of $ 3.6 million.

Management has evaluated this misstatement and concluded it was not material to prior periods, individually or in the aggregate.

However, correcting the cumulative effect of the error in the twelve and twenty-eight weeks ended July 9, 2023 would have had a significant effect on the results of operations for such periods.

Therefore, the Company is correcting the relevant prior period Condensed Consolidated Financial Statements and related footnotes for this error for comparative purposes.

The Company will also correct previously reported financial information for such immaterial errors in future filings, as applicable (see "Part II, Item 5.

Other Information" below for additional information).

Additionally, comparative prior period amounts in the applicable Notes to the Condensed Consolidated Financial Statements have been restated.

The following tables reflect the effects of the correction on all affected line items of the Company's previously reported Condensed Consolidated Financial Statements presented in this Form 10-Q:

CORRECTED CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

December 25, 2022

(in thousands) As Previously Reported Adjustment As Corrected

Unearned revenue $ 43,358 $ 3,586 $ 46,944

Total current liabilities 216,627 3,586 220,213

Total liabilities 826,770 3,586 830,356

Accumulated deficit ( 50,604 ) ( 3,586 ) ( 54,190 )

Total stockholders' equity 5,375 ( 3,586 ) 1,789

CORRECTED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (unaudited)

Twelve Weeks Ended July 10, 2022

Twenty-Eight Weeks Ended July 10, 2022

(in thousands, except per share amounts) As Previously Reported Adjustment As Corrected As Previously Reported Adjustment As Corrected

Restaurant revenue $ 288,657 $ ( 36 ) $ 288,621 $ 669,269 $ ( 51 ) $ 669,218

Franchise and other revenues 5,433 2 5,435 20,371 ( 459 ) 19,912

Total revenues 294,090 ( 34 ) 294,056 689,640 ( 510 ) 689,130

Loss before income taxes ( 17,498 ) ( 34 ) ( 17,532 ) ( 20,541 ) ( 510 ) ( 21,051 )

Net loss ( 17,932 ) ( 34 ) ( 17,966 ) ( 21,037 ) ( 510 ) ( 21,547 )

Net loss per share ( 1.13 ) — ( 1.13 ) ( 1.33 ) ( 0.04 ) ( 1.37 )

Total comprehensive loss ( 17,950 ) ( 34 ) ( 17,984 ) ( 21,044 ) ( 510 ) ( 21,554 )

CORRECTED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS ' EQUITY (unaudited)

Sixteen Weeks Ended April 16, 2023

(in thousands) Accumulated Deficit Total Shareholders' Equity

As Previously Reported

Balance, December 25, 2022 $ ( 50,604 ) $ 5,375

Net loss ( 3,100 ) ( 3,100 )

Balance, April 16, 2023 ( 53,704 ) 4,686

Balance, December 25, 2022 ( 3,586 ) ( 3,586 )

Net loss ( 156 ) ( 156 )

Balance, April 16, 2023 ( 3,741 ) ( 3,741 )

Balance, December 25, 2022 ( 54,190 ) 1,789

Net loss ( 3,256 ) ( 3,256 )

Balance, April 16, 2023 $ ( 57,445 ) $ 945

CORRECTED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS ' EQUITY (unaudited)

Twenty-Eight Weeks Ended July 10, 2022

(in thousands) Retained Earnings/ (Accumulated Deficit) Total Shareholders' Equity

As Previously Reported

Balance, December 26, 2021 $ 27,196 $ 76,974

Net loss ( 3,105 ) ( 3,105 )

Balance, April 17, 2022 24,091 76,857

Balance, December 26, 2021 ( 2,503 ) ( 2,503 )

Net loss ( 476 ) ( 476 )

Balance, April 17, 2022 ( 2,979 ) ( 2,979 )

Balance, December 26, 2021 24,693 74,471

Net loss ( 3,581 ) ( 3,581 )

Balance, April 17, 2022 21,112 73,878

As Previously Reported

Balance, April 17, 2022 24,091 76,857

Net loss ( 17,932 ) ( 17,932 )

Balance, July 10, 2022 6,159 61,575

Balance, April 17, 2022 ( 2,979 ) ( 2,979 )

Net loss ( 34 ) ( 34 )

Balance, July 10, 2022 ( 3,013 ) ( 3,013 )

Balance, April 17, 2022 21,112 73,878

Net loss ( 17,966 ) ( 17,966 )

Balance, July 10, 2022 $ 3,146 $ 58,562

CORRECTED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

Twenty-Eight Weeks Ended July 10, 2022

(in thousands) As Previously Reported Adjustment As Corrected

Net income (loss) $ ( 21,037 ) $ ( 510 ) $ ( 21,547 )

Gift card breakage ( 8,099 ) 459 ( 7,640 )

Unearned revenue ( 8,283 ) 51 ( 8,232 )

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

Twelve Weeks Ended Twenty-Eight Weeks Ended

July 9, 2023 July 10, 2022 July 9, 2023 July 10, 2022

Restaurant revenue $ 293,281 $ 288,621 $ 700,174 $ 669,218

5 unchanged sentences

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

April 16, 2023 December 25, 2022

July 9, 2023 December 25, 2022

Unearned gift card revenue $ 22,185 $ 35,837

Deferred loyalty revenue $ 11,623 $ 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

Revenue recognized in the Condensed Consolidated Statements of Operations and Comprehensive Income (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):

Twenty-Eight Weeks Ended

July 9, 2023 July 10, 2022

Gift card revenue $ 16,038 $ 18,023

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

Twelve Weeks Ended Twenty-Eight Weeks Ended

July 9, 2023 July 10, 2022 July 9, 2023 July 10, 2022

Operating lease cost $ 16,279 $ 16,422 $ 37,174 $ 38,111

5 unchanged sentences

Total $ 21,088 $ 21,495 $ 48,276 $ 49,996

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.

Refer to Footnote 5, Other Charges (gains), net , for information regarding the sale-leaseback transaction during the twelve and twenty-eight weeks ended July 9, 2023.

Earnings (Loss) Per Share

Basic earnings (loss) per share amounts are calculated by dividing net income (loss) by the weighted-average number of shares of common stock outstanding during the period.

Diluted earnings 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.

Diluted earnings 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 income (loss) position for the twelve and twenty-eight weeks ended July 10, 2022, all potentially dilutive common shares are considered anti-dilutive.

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

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

Sixteen Weeks Ended

April 16, 2023 April 17, 2022

Twelve Weeks Ended Twenty-Eight Weeks Ended

July 9, 2023 July 10, 2022 July 9, 2023 July 10, 2022

Basic weighted average shares outstanding 16,037 15,830 16,014 15,783

1 unchanged sentence

Diluted weighted average shares outstanding 16,291 15,830 16,367 15,783

Awards excluded due to anti-dilutive effect on diluted loss per share 1,368 885

Awards excluded due to anti-dilutive effect on diluted income (loss) per share 560 983 577 806

Other Charges (Gains), net

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

Sixteen Weeks Ended

April 16, 2023 April 17, 2022

Twelve Weeks Ended Twenty-Eight Weeks Ended

July 9, 2023 July 10, 2022 July 9, 2023 July 10, 2022

Gain on sale leaseback, net of expenses

$ ( 14,586 ) $ — $ ( 14,586 ) $ —

Litigation contingencies

1,240 ( 1,806 ) 5,540 ( 86 )

Severance and executive transition

Restaurant closure costs, net

( 112 ) 930 1,638 1,879

Severance and executive transition

962 129 2,854 129

Asset impairment

1,693 8,739 2,387 10,861

Closed corporate office costs, net of sublease income 113 — 175 —

2 unchanged sentences

Other charges (gains), net $ ( 10,607 ) $ 8,146 $ ( 848 ) $ 13,453

Litigation contingencies during the sixteen weeks ended April 16, 2023 and April 17, 2022 represent reserves for various in progress legal matters.

During the second quarter of 2023, the Company sold nine restaurant properties for total proceeds of $ 28.5 million in a sale-leaseback transaction that resulted in a gain, net of expenses of $ 14.6 million.

The net proceeds of $ 28.5 million are included within cash flows from investing activities on the Condensed Consolidated Statements of Cash Flows for the twenty-eight weeks ended July 9, 2023.

Litigation contingencies during the twelve and twenty-eight weeks ended July 9, 2023 and July 10, 2022 represent reserves for various in progress legal matters.

Litigation contingencies during the twelve and twenty-eight weeks ended July 10, 2022 include the impact of cash proceeds received by the Company related to certain legal claims.

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.

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.

The Company incurred a cumulative total of $ 5.0 million related to these one-time termination benefits.

Approximately $ 2.1 million in one-time termination benefits was incurred and recorded in Other charges in the Consolidated Statements of Operations and Comprehensive Income (Loss) during the twenty-eight weeks ended July 9, 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:

3 unchanged sentences

Cash Payments ( 3,947 )

Balance as of April 16, 2023

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.

Balance as of July 9, 2023

The Company recognized non-cash impairment charges primarily related to restaurant assets at four Company-owned restaurants during the twelve and twenty-eight weeks ended July 9, 2023.

Additionally, the Company recognized non-cash impairment charges related to subleasing additional space at the Company's closed corporate office during the twenty-eight weeks ended July 9, 2023.

The Company recognized non-cash impairment charges related to restaurant assets at six and nine Company-owned restaurants for the twelve and twenty-eight weeks ended July 10, 2022, respectively.

Other primarily includes non-cash charges related to terminated capital projects and disposals, and certain insurance claim proceeds.

Closed corporate office, net of sublease income includes expense and sublease income related to a corporate office facility that was vacated and subleased.

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.

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.

Borrowings as of April 16, 2023 and December 25, 2022 are summarized below (in thousands):

April 16, 2023 Variable

COVID-19 related charges 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.

Borrowings as of July 9, 2023 and December 25, 2022 are summarized below (in thousands):

July 9, 2023 Variable

Interest Rate December 25, 2022 Variable

28 unchanged sentences

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.

On July 17, 2023, the Company amended the Credit Agreement (the “Credit Agreement Amendment”) to remove the previously included $ 50.0 million aggregate cap (the “Prior Cap”) on sale-leasebacks of Company-owned real property.

Pursuant to the Credit Agreement Amendment, it also was agreed that (i) the Company may reinvest in the business within 360 days of receipt the net proceeds of sale-leasebacks to the extent that such proceeds are equal to or less than the amount of the Prior Cap and (ii) the Company shall make a mandatory prepayment with the net proceeds of sale-leasebacks to the extent that such proceeds exceed the amount of the Prior Cap.

Additionally, the prepayment premium associated with any mandatory prepayments derived from the net proceeds of sale-leasebacks that exceed the Prior Cap is reduced by the Credit Agreement Amendment to a premium equal to 50 % of the prepayment premium otherwise applicable.

The Amendment also made certain other conforming changes to the Existing Credit Agreement to effect the foregoing.

The summary descriptions of the Credit Agreement, the Credit Agreement Amendment, 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, the Credit Agreement Amendment, and the Security Agreement, respectively, which have been filed as exhibits to the Company’s Current Reports on Form 8-K filed with the Securities and Exchange Commission on March 10, 2022, with respect to the Credit Agreement and the Security Agreement, and July 19, 2023, with respect to the Credit Agreement Amendment.

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.

These charges were recorded to interest expense, net and other on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the twenty-eight weeks ended July 10, 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.

5 unchanged sentences

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

July 9, 2023 Level 1 Level 2 Level 3

Investments in rabbi trust $ 2,994 $ 2,994 $ — $ —

3 unchanged sentences

Total assets measured at fair value $ 4,250 $ 4,250 $ — $ —

Other than as disclosed in Note 9.

Acquisition of Franchised Restaurants, as of July 9, 2023, the Company had no financial assets or liabilities that were measured using level 3 inputs.

The Company also had no non-financial assets or liabilities that were required to be measured on a recurring basis.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

3 unchanged sentences

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.

We impaired long-lived restaurant assets with a carrying value (including right of use lease assets) of $ 11.4 million, recognizing an impairment expense of $ 1.7 million during the twelve and twenty-eight weeks ended July 9, 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 $ 9.7 million in the twelve and twenty-eight weeks ended July 9, 2023.

Additionally, we impaired long-lived assets at the Company's closed corporate office with a carrying value (including right of use lease assets) of $ 1.0 million, recognizing an impairment expense of $ 0.7 million during the twenty-eight weeks ended July 9, 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 twenty-eight weeks ended July 9, 2023.

The impairments were 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.

As of July 9, 2023, the fair value of the credit facility was approximately $ 196.7 million and the principal amount carrying value was $ 197.5 million.

The credit facility term loan is reported net of $ 7.4 million in unamortized discount and debt issuance costs in the Condensed Consolidated Balance Sheet as of July 9, 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.

9 unchanged sentences

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.

As of July 9, 2023, we had a balance of $ 10.1 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 increased our estimate of loss contingency liabilities by approximately $ 1.2 million for the twelve weeks ended July 9, 2023 and $ 5.5 million for the twenty-eight weeks ended July 9, 2023 related to changes during the second 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.

As of July 9, 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 $ 127.7 million.

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

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.

Acquisition of Franchised Restaurants

On April 17, 2023, the Company acquired certain assets and liabilities of five restaurants from one of its U.S.

franchisees for cash consideration of $ 3.5 million.

The pro forma impact of this acquisition and the operating results of the acquired restaurants are not presented as the impact was not material to reported results.

The acquisition was accounted for using the purchase method as defined in ASC 805, Business Combinations .

The goodwill arising from the acquisition consists largely of the benefit of the assembled workforce of the acquired restaurants.

The goodwill generated by the acquisition is not amortizable for book purposes but is amortizable and deductible for tax purposes.

The Company allocated the purchase price to the fair value of the assets acquired and liabilities assumed as follows (in thousands):

Fair Value at Acquisition Date

Property and equipment, net $ 2,637

Operating lease assets 7,400

Operating lease liabilities ( 8,250 )

Operating lease assets, net ( 850 )

Other assets, net of liabilities (1)

Intangible assets, net 1,443

Total purchase price $ 3,529

(1) Includes inventory, prepaid assets, till cash, and gift card and loyalty liabilities.

Of the $ 2.6 million in property and equipment, $ 1.7 million is related to leasehold improvements and $ 1.0 million is related to personal property.

The $ 0.9 million in net operating lease assets is related to acquired unfavorable leases, which reduces the acquired operating lease right-of-use assets.

Of the $ 1.4 million of intangible assets, $ 1.2 million is related to reacquired franchise rights, which will be amortized on a straight-line basis.

The fair value measurement of tangible and intangible assets and liabilities as of the acquisition date is based on significant inputs not observed in the market and thus represents a level 3 fair value measurement.

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

What changed 10-Q

Item 1. Financial Statements