What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-02-28 compared with 2023-02-28 · 217 added, 188 removed, 775 unchanged (34% of the section changed)

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Report of Independent Registered Public Accounting Firm, Deloitte & Touche LLP (PCAOB ID:

Report of Independent Registered Public Accounting Firm, KPMG LLP (PCAOB ID:

Consolidated Balance Sheets

Consolidated Statements of Operations and Comprehensive Loss

Consolidated Statements of Stockholders' Equity

Consolidated Statements of Stockholders' (Deficit) Equity

Consolidated Statements of Cash Flows

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We have audited the accompanying consolidated balance sheets of Red Robin Gourmet Burgers, Inc.

and subsidiaries (the "Company") as of December 25, 2022 and December 26, 2021, the related consolidated statements of operations and comprehensive loss, stockholders’ equity, and cash flows for the periods ended December 25, 2022 and December 26, 2021, and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 25, 2022 and December 26, 2021, and the results of its operations and its cash flows for the periods ended December 25, 2022 and December 26, 2021, in conformity with accounting principles generally accepted in the United States of America.

and subsidiaries (the "Company") as of December 31, 2023 and December 25, 2022, the related consolidated statements of operations and comprehensive loss, stockholders’ (deficit) equity, and cash flows, for the periods ended December 31, 2023, December 25, 2022, and December 26, 2021, and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and December 25, 2022, and the results of its operations and its cash flows for the periods ended December 31, 2023, December 25, 2022, and December 26, 2021, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 28, 2024, expressed an unqualified opinion on the Company's internal control over financial reporting.

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Critical Audit Matter Description

As of December 25, 2022, the Company had $318.5 million in property and equipment, net, $361.4 million in operating lease assets, net, and $7.6 million in finance lease assets, net.

The Company assesses long-lived assets for impairment at the individual restaurant-level whenever events and circumstances indicate the carrying amount of an asset group may not be recoverable.

During 2022, the Company determined long-lived assets at 46 locations were impaired as a result of their cash flow analysis and recognized non-cash impairment charges of $38.0 million.

Long-lived assets are reviewed whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable.

Expected cash flows associated with an asset are the key factor in determining the recoverability of the asset.

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We identified the evaluation of long-lived asset impairment as a critical audit matter because of the significant judgments made by management to estimate the undiscounted cash flows, including assumptions about expected future operating performance, and the fair value of the lease assets.

indicators, and when evaluating the reasonableness of management’s estimates and assumptions, particularly related to undiscounted cash flows and market rent.

This required a high degree of auditor judgment and an increased extent of effort, when performing audit procedures to evaluate whether management appropriately identified and evaluated potential impairment indicators, and when evaluating the reasonableness of management’s estimates and assumptions, particularly related to undiscounted cash flows and market rent.

How the Critical Audit Matter Was Addressed in the Audit

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We have served as the Company's auditor since 2021.

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

RED ROBIN GOURMET BURGERS, INC.

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated statements of operations, comprehensive loss, stockholders’ equity, and cash flows of Red Robin Gourmet Burgers, Inc.

and subsidiaries (the Company) for the year ended December 31, 2020, and the related notes (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the results of operations of the Company and its cash flows for the year ended December 31, 2020, in conformity with U.S.

generally accepted accounting principles.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audit provides a reasonable basis for our opinion.

We served as the Company’s auditor from 2015 to 2021 .

Denver, Colorado

March 3, 2021, except as to paragraph (c) of Note 1, which is as of March 10, 2022

RED ROBIN GOURMET BURGERS, INC.

CONSOLIDATED BALANCE SHEETS

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Inventories 26,839 26,447

Income tax receivable 562 15,824

Prepaid expenses and other current assets 11,785 12,938

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Total liabilities 762,376 830,356

Stockholders' equity:

Stockholders' (deficit) equity:

Common stock;

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Paid-in capital 229,680 238,803

Accumulated other comprehensive income (loss), net of tax ( 34 ) 1

Retained (deficit) earnings ( 50,604 ) 27,196

Total stockholders' equity 5,375 76,974

Total liabilities and stockholders' equity $ 832,145 $ 928,998

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

Accumulated deficit ( 75,418 ) ( 54,190 )

Total stockholders' (deficit) equity ( 20,442 ) 1,789

Total liabilities and stockholders' (deficit) equity $ 741,934 $ 832,145

See Notes to Consolidated Financial Statements.

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Pre-opening costs 587 568 1,410

Other charges (includes $( 3,299 ), $ 0 , and $ 0 of stock-based compensation)

Other charges (gains), net (includes $ 128 , $( 3,299 ), and $ 0 of stock-based compensation)

( 2,663 ) 38,961 16,074

Total costs and expenses 1,298,504 1,323,031 1,198,775

Loss from operations ( 56,414 ) ( 36,697 ) ( 275,146 )

Income (loss) from operations 4,542 ( 57,497 ) ( 37,138 )

Other expense (income):

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RED ROBIN GOURMET BURGERS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT) EQUITY

(In thousands)

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Exercise of options, issuance of restricted stock, shares exchanged for exercise and tax, and stock issued through employee stock purchase plan — — ( 174 ) 7,105 ( 7,484 ) — ( 379 )

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

Non-cash stock compensation — — — — 6,637 — 6,637

Issuance of common stock.

$ 0.001 par value, net of stock issuance costs

2,598 2 — — 28,716 — — 28,718

Release of currency translation adjustment — — — — — 5,484 — 5,484

Net loss — — — — — — ( 50,443 ) ( 50,443 )

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Non-cash stock compensation — — — — 6,323 — — 6,323

Net income — — — — — — ( 50,002 ) ( 50,002 )

Net loss — — — — — — ( 78,883 ) ( 78,883 )

Other comprehensive income — — — — — ( 35 ) — ( 35 )

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Exercise of options, issuance of restricted stock, shares exchanged for exercise and tax, and stock issued through employee stock purchase plan — — ( 456 ) 18,068 ( 16,063 ) — — 2,005

Acquisition of treasury stock — — 862 ( 9,960 ) — — — ( 9,960 )

Non-cash stock compensation — — — — 6,940 — 6,940

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Gift card breakage ( 9,874 ) ( 13,807 ) ( 5,022 )

Goodwill and asset impairments 38,534 7,052 122,354

Asset impairment 9,130 38,534 7,052

Non-cash other charges (gains) ( 1,404 ) ( 3,440 ) 346

Deferred income tax provision — — 51,502

Stock-based compensation expense 6,933 6,294 6,622

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Other operating assets and liabilities, net ( 899 ) ( 8,460 ) ( 8,348 )

Net cash provided by operating activities 35,532 47,292 20,233

Net cash provided by (used in) operating activities ( 1,157 ) 35,532 47,292

Cash Flows From Investing Activities:

Purchases of property, equipment and intangible assets ( 49,440 ) ( 38,159 ) ( 42,261 )

Proceeds from sale-leaseback 58,801 — —

Proceeds from sales of property and equipment, and other 2,394 8,591 20

Net cash used in investing activities ( 29,568 ) ( 42,241 ) ( 21,393 )

Acquisition of franchised restaurants ( 3,529 ) — —

Net cash provided by (used in) investing activities 8,226 ( 29,568 ) ( 42,241 )

Cash Flows From Financing Activities:

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Proceeds related to real estate sale — 3,856 —

Proceeds from issuance of common stock, net of stock issuance costs — — 28,718

(Uses) proceeds from other financing activities, net 2,003 ( 86 ) ( 378 )

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Net change in cash and cash equivalents, and restricted cash ( 26,641 ) 35,456 6,634

Cash and cash equivalents, beginning of period 22,750 16,116 30,045

Cash and cash equivalents, and restricted cash, beginning of period 58,206 22,750 16,116

Cash and cash equivalents, and restricted cash, end of period $ 31,565 $ 58,206 $ 22,750

Supplemental disclosure of cash flow information

Income taxes refund received, net $ ( 14,642 ) $ ( 962 ) $ ( 50,629 )

Income taxes paid (refunds received), net $ 454 $ ( 14,642 ) $ ( 962 )

Interest paid, net of amounts capitalized 24,084 16,054 10,455

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2025 December 28, 2025 52

Certain amounts presented have been reclassified within the December 26, 2021 and December 27, 2020 Consolidated Statements of Cash Flows to conform with the current period presentation, including prior year reclassifications from Other, net to Amortization of debt issuance costs.

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

(d) Use of Estimates

Subsequent to the issuance of the Company’s financial statements as of and for the year ended December 25, 2022, and as previously disclosed in our Form 10-Q, 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 $ 1.1 million for the year ended December 25, 2022 and $ 0.4 million for the year ended December 26, 2021.

The period (rollover) impact of the error correction on net income (loss) for the year ended December 25, 2022 and December 26, 2021 increased net loss by $ 1.1 million and $ 0.4 million, respectively, 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 fifty-three weeks ended December 31, 2023 would have had a significant effect on the results of operations for such periods.

Therefore, the Company has corrected the Consolidated Financial Statements for the prior periods presented in the Form 10-K filing for the year ended December 31, 2023.

Additionally, comparative prior period amounts in the applicable Notes to the 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 Consolidated Financial Statements presented in this Form 10-K:

CORRECTED CONSOLIDATED BALANCE SHEETS

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 (deficit) 5,375 ( 3,586 ) 1,789

CORRECTED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

Fifty-Two Weeks Ended December 25, 2022

(in thousands) As Previously Reported Adjustment As Corrected

Restaurant revenue $ 1,230,318 $ ( 129 ) $ 1,230,189

Franchise and other revenues 16,993 ( 954 ) 16,039

Total revenues 1,266,617 ( 1,083 ) 1,265,534

Loss before income taxes ( 77,053 ) ( 1,083 ) ( 78,136 )

Net loss ( 77,800 ) ( 1,083 ) ( 78,883 )

Net loss per share ( 4.91 ) ( 0.07 ) ( 4.98 )

Total comprehensive loss ( 77,835 ) ( 1,083 ) ( 78,918 )

OTHER NON-GAAP INFORMATION:

Adjusted EBITDA 52,789 ( 679 ) 52,110

CORRECTED CONSOLIDATED STATEMENTS OF STOCKHOLDERS ' EQUITY

Fifty-Two Weeks Ended December 25, 2022

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

As Previously Reported

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

Net loss ( 77,800 ) ( 77,800 )

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

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

Net loss ( 1,083 ) ( 1,083 )

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

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

Net loss ( 78,883 ) ( 78,883 )

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

CORRECTED CONSOLIDATED STATEMENTS OF CASH FLOWS

Fifty-Two Weeks Ended December 25, 2022

(in thousands) As Previously Reported Adjustment As Corrected

Net loss $ ( 77,800 ) $ ( 1,083 ) $ ( 78,883 )

Gift card breakage ( 14,761 ) 954 ( 13,807 )

Unearned revenue 3,906 129 4,035

CORRECTED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

Fifty-Two Weeks Ended December 26, 2021

(in thousands) As Previously Reported Adjustment As Corrected

Restaurant revenue $ 1,137,733 $ ( 90 ) $ 1,137,643

Franchise and other revenues 7,109 ( 351 ) 6,758

Total revenues 1,162,078 ( 441 ) 1,161,637

Loss before income taxes ( 50,154 ) ( 441 ) ( 50,595 )

Net loss ( 50,002 ) ( 441 ) ( 50,443 )

Net loss per share ( 3.19 ) ( 0.03 ) ( 3.22 )

Total comprehensive loss ( 49,997 ) ( 441 ) ( 50,438 )

OTHER NON-GAAP INFORMATION:

Adjusted EBITDA 63,526 ( 441 ) 63,085

CORRECTED CONSOLIDATED STATEMENTS OF STOCKHOLDERS ' EQUITY

Fifty-Two Weeks Ended December 26, 2021

(in thousands) Retained Earnings Total Shareholders' Equity

As Previously Reported

Balance, December 27, 2020 $ 77,198 $ 120,713

Net loss ( 50,002 ) ( 50,002 )

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

Balance, December 27, 2020 ( 2,063 ) ( 2,063 )

Net loss ( 441 ) ( 441 )

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

Balance, December 27, 2020 75,135 118,650

Net loss ( 50,443 ) ( 50,443 )

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

CORRECTED CONSOLIDATED STATEMENTS OF CASH FLOWS

Fifty-Two Weeks Ended December 26, 2021

(in thousands) As Previously Reported Adjustment As Corrected

Net loss $ ( 50,002 ) $ ( 441 ) $ ( 50,443 )

Gift card breakage ( 5,373 ) 351 ( 5,022 )

Unearned revenue 9,449 90 9,539

(d) Reclassifications

Certain amounts presented have been reclassified within the December 25, 2022 Consolidated Balance Sheet, Note 7.

Accrued Payroll and Payroll-Related Liabilities, and Accrued Liabilities and Other Current Liabilities, and Note 11.

Income Taxes to conform with the current period presentation.

The reclassifications had no effect on the Company’s total balances.

Additionally, certain amounts have been reclassified in Note 4.

Other Charges (Gains), net for December 25, 2022 and December 26, 2021 to conform with the current period presentation, with no aggregate effect.

(e) Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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 periods.

The areas that require management's most significant estimates are impairment of long-lived assets, lease accounting, estimating fair value, and unearned revenue.

Actual results could differ from those estimates.

Change in Accounting Estimate - Gift Card Breakage

As part of its annual assessment of gift card breakage and during the fifty-two weeks ended December 25, 2022, the Company re-evaluated the estimated redemption pattern related to gift cards and aligned the recognition of gift card breakage to the updated estimated redemption pattern.

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

This change in accounting estimate decreased net loss by $ 5.2 million, or $ 0.33 per basic and diluted share for the fifty-two weeks ended December 25, 2022.

The Company may record adjustments related to changes in estimated redemption patterns in the future which could be material.

Change in Accounting Estimate - Red Robin Loyalty Breakage

In the fourth quarter of 2022, the Company re-evaluated the estimated redemption pattern related to Red Robin Royalty benefits and aligned the recognition of loyalty breakage to the updated estimated redemption pattern.

As a result, the Company recognized an additional $ 2.9 million of loyalty breakage in Restaurant revenue.

The Company re-evaluates the estimated redemption pattern related to Red Robin Royalty each year and may record adjustments related to changes in estimated redemption patterns in the future which could be material.

(e) Summary of Significant Accounting Policies

(f) Summary of Significant Accounting Policies

Revenue Recognition - Revenues consist of sales from restaurant operations (including third party delivery), franchise revenue, and other revenue including gift card breakage and miscellaneous revenue.

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The Company is required to carry restricted cash balances that are reserved as collateral for existing letters of credit.

The amounts issued under letters of credit, which are undrawn and expire in June 2023, totaled $ 9.1 million.

The amounts issued under letters of credit, which are undrawn totaled $ 7.7 million.

Accounts Receivable, Net - Accounts receivable, net consists primarily of third party gift card receivables, third party delivery partner receivables, trade receivables due from franchisees for royalties and advertising fund contributions, and tenant improvement allowances.

At the end of 2023, there was approximately $ 9.7 million of gift card receivables in accounts receivable related to gift cards that were sold by third party retailers compared to $ 11.6 million at the end of 2022.

At the end of

2022, there was also approximately $ 2.3 million related to third party delivery partners in accounts receivable compared to approximately $ 3.0 million at the end of 2021.

At the end of 2023, there was also approximately $ 2.6 million related to third party delivery partners in accounts receivable compared to approximately $ 2.3 million at the end of 2022.

Inventories - Inventories consist of food, beverages, and supplies valued at the lower of cost (first-in, first-out method) or net realizable value.

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The costs of purchasing transferable liquor licenses through open markets in jurisdictions with a limited number of authorized liquor licenses are capitalized as indefinite-lived intangible assets.

Liquor licenses with indefinite lives are reviewed for impairment annually or whenever events or changes in circumstances indicate the carrying amount may not be recoverable.

If the carrying amount is not recoverable, we record an impairment charge for the excess of the carrying amount over the fair value.

We determine fair value based on prices in the open market for license in same or similar jurisdictions.

Impairment charges of $ 0.5 million were recorded related to indefinite-lived intangibles in 2022 and $ 0.5 million were recorded in 2021.

No impairment charges were recorded in 2020.

Impairment of Long-Lived Assets - The Company reviews its long-lived assets, including restaurant sites, leasehold improvements, other fixed assets, information technology systems, right of use assets, and amortizable intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to the future undiscounted net cash flows expected to be generated by the assets.

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Advertising - Under the Company's franchise agreements, both the Company and the franchisees must contribute up to 3.0 % of revenues to two national media advertising funds (the "Advertising Funds").

These Advertising Funds are used to build the Company's brand equity and awareness primarily through a national marketing strategy, including national television advertising, digital media, social media programs, email, loyalty, and public relations initiatives.

These Advertising Funds are used to drive initial Guest trial and repeat visits, and build the Company's brand equity and awareness.

Primary advertising channels include television advertising, digital media, social media programs, email, loyalty, and public relations initiatives.

Total advertising costs of $ 21.6 million, $ 35.7 million, and $ 34.3 million in 2023, 2022, and 2021 and were included in Selling, general, and administrative expenses.

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Pre-opening costs include rental expenses through the date of opening for each restaurant, travel expenses, wages, and benefits for the training and opening teams, as well as food, beverage, and other restaurant opening costs incurred prior to a restaurant opening for business.

Costs related to preparing restaurants to introduce Donatos® will be expensed as incurred and included in pre-opening costs.

Costs related to preparing restaurants to introduce Donatos ® are expensed as incurred and included in pre-opening costs.

Income Taxes - Deferred tax liabilities are recognized for the estimated effects of all taxable temporary differences, and deferred tax assets are recognized for the estimated effects of all deductible temporary differences, net operating losses, and tax credit carryforwards.

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However, the amount of the deferred tax assets considered realizable could be adjusted if estimates of future taxable income during the carry forward period are increased or reduced or if there are differences in the timing or amount of future reversals of existing taxable temporary differences.

Pursuant to the guidance for uncertain tax positions, a taxpayer must be able to more likely than not sustain a position to recognize a tax benefit, and the measurement of the benefit is calculated as the largest amount that is more than 50 percent

likely to be realized upon resolution of the benefit.

The Company has analyzed filing positions in all of the federal, state, and foreign jurisdictions where it is required to file income tax returns, as well as all open tax years in these jurisdictions.

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Penalties are recorded in Selling, general, and administrative expenses, interest received is recorded in Interest income and other, net, and interest paid is recorded in Interest expense on the consolidated statements of operations and comprehensive loss.

The Company recorded immaterial interest expense on the identified tax liabilities in 2022, 2021, and 2020.

Approximately $ 1.1 million of interest income was recorded related to a federal cash tax refund received during the fourth quarter of 2020.

The Company recorded immaterial penalty and interest expense on the identified tax liabilities in 2023, 2022, and 2021.

Loss Per Share - Basic loss per share amounts are calculated by dividing net loss by the weighted average number of common shares outstanding during the year.

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

As the Company was in a net loss position for the fifty-two week period ended December 25, 2022, December 26, 2021, and December 27, 2020, all potentially dilutive common shares are considered anti-dilutive.

As the Company was in a net loss position for each of the fiscal years ended December 31, 2023, December 25, 2022, and December 26, 2021, all potentially dilutive common shares are considered anti-dilutive.

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

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The resulting translation adjustment is recorded as a separate component of Other comprehensive (loss) income.

During the fourth quarter of 2020, the Company substantially completed the exit of Company-owned restaurants in Canada resulting in the removal of the accumulated currency translation adjustment as a component of stockholders' equity and the recognition in Other charges on the Consolidated Statements of Operations and Comprehensive Loss totaling a loss of $ 5.5 million.

Recent Accounting Pronouncements

Reference Rate Reform

In March 2020, FASB issued Update 2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting.

This update provides temporary optional expedients to applying the reference rate reform guidance to contracts that reference the London Interbank Offer Rate ("LIBOR") or another reference rate expected to be discontinued.

Under this update, contract modifications resulting in a new reference rate may be accounted for as a continuation of the existing contract.

This guidance is effective upon issuance of the update and applies to contract modifications made through December 31, 2022.

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

In December 2023, FASB issued Update 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures.

This update amends disclosure requirements to 1) improve the effectiveness and comparability of disclosures by aligning with U.S.

Securities and Exchange Commission (SEC) Regulation S-X 210.4-08(h), Rules of General Application—General Notes to Financial Statements:

Income Tax Expense, and removing disclosures that no longer are considered cost beneficial or relevant;

and 2) improve the transparency of income tax disclosures related to the rate reconciliation and income taxes paid disclosures by requiring (a) consistent categories and greater disaggregation of information in the rate reconciliation and (b) income taxes paid disaggregated by jurisdiction.

These amendments apply to all entities that are subject to Topic 740, Income Taxes, and will become effective for public business entities for annual periods beginning after December 15, 2024.

expect these amended disclosures will have a material impact to the Company's Consolidated Financial Statements or Notes to the Consolidated Financial Statements upon adoption.

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

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Gift card breakage 9,874 13,808 5,022

14,762 5,373 4,516

Other revenue 3,011 2,231 1,736

Total revenues $ 1,303,046 $ 1,265,534 $ 1,161,637

(1) The Company re-evaluated the estimated redemption pattern related to gift cards and aligned the recognition of gift card breakage revenue to the updated estimated redemption pattern.

Description of Business and Summary of Significant Accounting Policies.

Contract Liabilities

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Deferred loyalty revenue 7,509 11,107

Unearned revenue $ 36,067 $ 46,944

Revenue recognized in the consolidated statements of operations and comprehensive loss for the redemption of gift cards that were included in the liability balance at the beginning of the fiscal year was as follows (in thousands):

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Asset impairment $ 9,130 $ 38,534 $ 7,052

Gain on sale of restaurant property ( 9,204 ) — —

Gain on sale of restaurant property, net of expenses ( 29,543 ) ( 9,204 ) —

Severance and executive transition, net of $ 128 and $( 3,299 ) in stock-based compensation

3,419 2,280 —

Other financing costs — 1,462 —

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Closed corporate office costs, net of sublease income 416 475 —

COVID-19 related charges 438 1,288 1,858

Litigation contingencies 9,140 4,148 1,330

Board and stockholder matter costs — 128 2,504

Goodwill Impairment — — 95,414

Asset disposal and other 1,713 438 1,416

Other charges (gains), net $ ( 2,663 ) $ 38,961 $ 16,074

Asset Impairment

During 2022, the Company determined long-lived assets at 46 locations were impaired and recognized non-cash impairment charges of $ 38.0 million related to the impairment of the long-lived assets associated with our properties, primarily due to restaurants that did not perform as expected as a result of cost pressures that reduced restaurant-level profitability.

Additionally, the Company recognized $ 0.5 million of non-cash impairment charges related to the impairment of long lived intangible assets related to quota state liquor licenses at six locations.

During 2021, the Company impaired long-lived assets of ten Company-owned restaurants and recognized non-cash impairment charges of $ 6.4 million.

Additionally, the Company recognized $ 0.5 million of non-cash impairment charges related to the impairment of long lived intangible assets related to quota state liquor licenses at seven locations.

During 2020, the Company impaired long-lived assets of 40 Company-owned restaurants and recognized non-cash impairment charges of $ 21.7 million.

Additionally, the Company impaired information technology assets totaling $ 5.2 million due to the COVID-19 pandemic redirecting our implementation of certain digital platforms in order to accelerate our speed to market.

During 2023, the Company recognized non-cash impairment charges of $ 9.1 million, primarily related to the impairment of the long-lived assets at 19 underperforming locations and quota state liquor licenses at three locations.

During 2022, the Company recognized non-cash impairment charges of $ 38.5 million, primarily related to impairments of long-lived assets at 46 underperforming locations and quota state liquor licenses at six locations.

During 2021, the Company recognized non-cash impairment charges of $ 7.1 million, primarily related to impairments of long-lived assets at 10 underperforming locations and quota state liquor licenses at seven locations.

Gain on Sale of Restaurant Property

During the second quarter of 2022 the Company closed on an agreement to sell a restaurant property that the Company owned and leased back on a short-term basis.

The Company collected initial net proceeds from the purchaser-lessor of $ 3.9 million, which represented a portion of the total consideration received from the sale.

The Company did not recognize a sale in the second quarter of 2022 as certain criteria to recognize a sale in accordance with ASC Topic 842, Leases , and ASC Topic 606, Revenue from Contracts with Customers , were not met.

During 2023, the Company sold 18 restaurant properties for aggregate net proceeds of $ 58.8 million in sale-leaseback transactions that resulted in a gain, net of expenses of $ 29.4 million.

In addition, during 2023, the Company sold one restaurant property for total proceeds of $ 1.6 million which resulted in a gain, net of expenses of $ 0.1 million.

The net proceeds are included within cash flows from investing activities on the Consolidated Statements of Cash Flows for the year ended December 31, 2023.

During 2022 the Company closed on an agreement to sell a restaurant property that the Company owned and leased back on a short-term basis.

The Company collected initial net proceeds from the purchaser-lessor of $ 3.9 million in the second quarter of 2022, which represented a portion of the total consideration received from the sale.

During the third quarter of 2022, the Company received the remaining proceeds, upon which the lease terminated and the sale transaction was completed, and recognized a $ 9.2 million gain on the sale of the restaurant property.

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Severance and Executive Transition

During 2022, the Company recorded $ 2.3 million of severance and executive transition costs primarily related to transitioning to a new Chief Executive Officer, and changes in other leadership positions as a result of our strategic pivot under the North Star plan and severance related to a reduction in force of restaurant support Team Members in the fourth quarter of 2022.

These costs are net of a $ 3.3 million stock-based compensation benefit primarily related to a change in estimated stock-based compensation forfeitures as a result of changes in executive leadership.

During 2020, the Company recorded $ 0.9 million of severance and executive transition costs primarily related to severance costs associated with the reduction in force of Restaurant Support Center Team Members in the first quarter of 2020.

During 2023 and 2022, the Company incurred severance and executive transition costs primarily related to a reduction in force of Team Members and costs associated with changes in leadership positions.

Accrued Payroll and Payroll-Related Liabilities, and Accrued Liabilities and Other Current Liabilities.

Other Financing Costs

Other financing costs of $ 1.5 million 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.

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.

Restaurant Closure Costs, net

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

In 2022, 2021 and 2020, the Company recorded $ 0.8 million, $ 6.3 million, and $ 19.8 million of costs, respectively.

Restaurant closure costs (gains) include the ongoing restaurant operating costs for closed Company-owned restaurants and closed restaurant lease termination gains or losses.

Closed Corporate Office Costs, Net of Sublease Income

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

COVID-19 Related Costs

In 2022, 2021 and 2020, the Company recorded $ 0.4 million, $ 1.3 million, and $ 1.9 million of costs, respectively, related to purchasing personal protective equipment for restaurant Team Members and Guests and providing emergency sick pay to restaurant Team Members during the pandemic.

Closed corporate office, net of sublease income relates to a corporate office facility that was vacated in 2022, and subleased in 2023.

Litigation Contingencies

In 2022, 2021 and 2020, the Company recorded $ 4.1 million, $ 1.3 million, and $ 6.4 million respectively, of contingencies related to litigation matters.

Litigation contingencies during 2022 include the impact of cash proceeds received by the Company related to certain legal claims.

In 2023, 2022 and 2021, the Company recorded reserves associated with litigation contingencies.

Commitments and Contingencies, for further discussion.

Board and Stockholder Matters Costs

During 2021, the Company recorded $ 0.1 million of board and stockholder matters costs.

During 2020, the Company recorded $ 2.5 million of board and stockholder matters costs primarily related to the shareholder rights plan and the recruitment and appointment of a new board member in the first quarter of 2020.

Goodwill Impairment

The Company recognized full goodwill impairment during the first quarter of 2020 totaling $ 95.4 million resulting from the negative effects of COVID-19 on our business.

Asset Disposal and Other

Asset disposals and other relate primarily to lease terminations and closures at Company-owned restaurants in 2023.

The costs in 2022 and 2021 primarily relate to COVID-19 costs, including the cost of personal protective equipment for restaurant Team Members and Guests and providing emergency sick pay to restaurant Team Members during the pandemic.

Property and Equipment, Net

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Intangible assets, net $ 75,163 $ ( 59,673 ) $ 15,491 $ 75,664 $ ( 57,937 ) $ 17,727

Immaterial impairment charges were recorded related to finite-lived intangibles resulting from the continuing and projected future results at Company-owned restaurants in 2022, 2021, and 2020.

Impairment charges of $ 0.5 million were recorded related to indefinite-lived intangibles in 2022 and $ 0.5 million were recorded in 2021.

No impairment charges were recorded related to indefinite-lived intangibles in 2020.

The aggregate amortization expense related to intangible assets subject to amortization for 2023, 2022, and 2021 was $ 2.4 million, $ 2.5 million, and $ 2.9 million.

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Legal 8,740 7,736

Accrued interest 1,657 1,195

Accrued marketing 3,650 722

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Accrued liabilities and other current liabilities $ 46,201 $ 49,498

The CARES act deferred payroll tax amount was paid in full subsequent to our fiscal year end, and prior to the December 31, 2022 deadline for repayment.

Accrued severance represents one-time termination benefits primarily related to changes in leadership positions as a result of our strategic pivot under the North Star plan and a related reduction in force of restaurant support Team Members in 2022 and is 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 $ 4.2 million in termination benefits related to the North Star plan.

Approximately $ 3.0 million in one-time termination benefits was incurred and recorded in Other charges in the Consolidated Statements of Operations and Comprehensive Loss during the fifty-two week period ended December 25, 2022.

Restructuring costs were as follows:

Accrued severance represents one-time termination benefits primarily related to changes in leadership positions as a result of our strategic pivot under the North Star plan and a related reduction in force and are accounted for in accordance with ASC Topic 420, Exit or Disposal Cost Obligations .

The Company incurred a cumulative total of $ 5.1 million in one-time termination benefits in Other charges in the Consolidated Statements of Operations and Comprehensive Loss, which is comprised of $ 2.1 million and $ 3.0 million recognized during 2023 and 2022, respectively.

One-time termination benefits activity for the years ended December 25, 2022 and December 31, 2023, respectively is as follows:

Termination Benefits

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Balance as of December 25, 2022

Charges 2,077

Cash Payments ( 4,398 )

Balance as of December 31, 2023

Borrowings as of December 31, 2023 and December 25, 2022 are summarized below:

December 31, 2023 December 25, 2022

(Dollars in thousands) Borrowings Weighted

Interest Rate Borrowings Weighted

Interest Rate

(Dollars in thousands) Borrowings Variable

Interest Rates Borrowings Variable

Interest Rates

Revolving line of credit $ — $ 15,000 10.44 %

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

$ 988 $ 2,015

(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 Consolidated Balance Sheets.

Maturities of long-term debt as of December 31, 2023 are as follows (in thousands):

(1) A typical fiscal year includes four principal payments of $ 0.5 million for a total of $ 2.0 million associated with the term loan;

however, as fiscal year 2023, comprises 53 weeks instead of 52 weeks, there will be one additional principal payment in 2023 compared to fiscal year 2022.

Description of Business and Summary of Significant Accounting Policies for details on our fiscal calendar.

Credit Facility

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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.

The variable interest rates were 9.81 % for the term loan and 10.44 % for the revolving line of credit as of December 25, 2022.

As of December 25, 2022, the Company had outstanding borrowings under the Credit Facility of $ 205.7 million net of $ 8.3 million of unamortized deferred financing charges and discounts, of which $ 3.4 million was classified as current.

As of December 26, 2021, the Company had outstanding borrowings under the credit facility under the Prior Credit Agreement of $ 176.1 million, of which $ 9.7 million was classified as current, in addition to amounts issued under letters of credit of $ 7.9 million.

As of December 31, 2023, the Company had outstanding borrowings under the Credit Facility of $ 182.6 million, in addition to amounts issued under letters of credit of $ 7.7 million.

As of December 25, 2022, the Company had outstanding borrowings under the Credit Facility of $ 205.7 million, in addition to amounts issued under letters of credit of $ 9.1 million.

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.

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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 was 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 Security Agreement, and the Credit Agreement Amendment do not purport to be complete and are qualified in their entirety by reference to the full text of each agreement, each of which is filed as an exhibit to this Annual Report on Form 10-K.

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

These charges were recorded to interest expense, net and other on the Consolidated Statements of Operations and Comprehensive Loss for the fifty-two weeks ended December 25, 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.

These charges were recorded to interest expense, net and other on the Consolidated Statements of Operations and Comprehensive Loss for the year ended December 25, 2022.

Fair Value Measurements

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Other Charges (Gains), net, which were based on significant inputs not observable in the market and thus represented a level 3 fair value measurement.

Based on our 2022, 2021, and 2020 impairment analyses, we impaired long-lived assets at 46 , 10 and 40 locations with carrying values of $ 80.4 million, $ 13.7 million, and $ 67.3 million.

We determined the fair value of these long-lived assets in 2022, 2021, and 2020 to be $ 42.4 million, $ 7.2 million and $ 34.7 million based on level 3 fair value measurements.

Based on our 2023, 2022, and 2021 impairment analyses, we impaired long-lived assets at 19 , 46 and 10 locations with carrying values of $ 36.5 million, $ 80.4 million, and $ 13.7 million, respectively.

We determined the fair value of these long-lived assets in 2023, 2022, and 2021 to be $ 27.4 million, $ 42.4 million and $ 7.2 million, respectively, based on level 3 fair value measurements.

Liquor licenses with indefinite lives are reviewed for impairment annually or whenever events or changes in circumstances indicate the carrying amount may not be recoverable.

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During the fourth quarter of 2023, the Company performed its annual review of its indefinite lived liquor licenses that had a carrying value of $ 6.2 million, and recorded impairment charges of $ 0.2 million to indefinite-lived intangibles in 2023.

Impairment charges of $ 0.5 million were recorded to liquor licenses with indefinite lives in 2021 and no impairment charges were recorded in 2020.

Impairment charges of $ 0.5 million were recorded to liquor licenses with indefinite lives in 2022 and $ 0.5 million impairment charges were recorded in 2021.

Disclosures of Fair Value of Other Assets and Liabilities

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Loss before income taxes $ ( 20,918 ) $ ( 78,136 ) $ ( 50,595 )

The benefit for income taxes for the fiscal years ended December 25, 2022, December 26, 2021, and December 27, 2020 consist of the following (in thousands):

The expense (benefit) for income taxes for the fiscal years ended December 31, 2023, December 25, 2022, and December 26, 2021 consist of the following (in thousands):

2023 2022 2021

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Foreign — — —

Total current income tax (benefit) $ 747 $ ( 152 ) $ ( 58,986 )

Total current income tax expense (benefit) $ 310 $ 747 $ ( 152 )

Federal $ — $ — $ —

State — — 8,086

Foreign — — —

Total deferred income tax expense (benefit) — — —

Income tax benefit $ 747 $ ( 152 ) $ ( 7,484 )

The reconciliation between the income tax benefit and the amount of income tax computed by applying the U.S.

Income tax expense (benefit), net $ 310 $ 747 $ ( 152 )

The reconciliation between the income tax expense (benefit) and the amount of income tax computed by applying the U.S.

federal statutory rate to loss before income taxes as shown in the accompanying Consolidated Statements of Operations and Comprehensive Loss for fiscal years ended December 31, 2023, December 25, 2022, and December 26, 2021 is as follows:

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State income taxes 4.2 4.0 3.8

FICA tip tax credits — — —

Foreign taxes versus U.S statutory rate — — —

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Impact of CARES Act and related method changes — — —

Other tax credits — — —

Meals and entertainment — — —

Excess stock options ( 3.3 ) ( 1.1 ) 1.1

Employee travel — — —

Other ( 1.1 ) ( 0.7 ) ( 0.4 )

Effective tax rate ( 1.5 ) % ( 1.0 ) % 0.3 %

The increase in tax expense for the year ended December 25, 2022, is primarily due to the 2022 impact of state taxes including minimum state income taxes and state franchise taxes as well as an adjustment to federal taxes.

The decrease in the Company's effective tax benefit in 2021 is primarily due to the 2020 favorable rate impact of net operating loss carrybacks allowed as part of the CARES Act.

The Company's federal and state deferred taxes at December 31, 2023 and December 25, 2022 are as follows (in thousands):

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Advanced payments 628 1,371

Interest expense 11,345 5,247

Other non-current deferred tax assets 2,478 3,479

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The Company had outstanding federal and state refund claims of approximately $ 0.6 million as of December 31, 2023.

Recent Tax Legislation

The CHIPS and Science Act of 2022 (CHIPS) and the Inflation Reduction Act (IRA) of 2022 were signed into law by President Biden on August 9, 2022 and August 16, 2022, respectively.

The legislation introduces new options for monetizing certain credits, a corporate alternative minimum tax, and a stock repurchase excise tax.

The Company is currently evaluating the impact of CHIPS and IRA, but at present does not expect that any of the provisions included in these Acts would result in a material impact to our deferred tax assets, liabilities, or income taxes payable.

Commitments and Contingencies

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However, a significant increase in the number of these claims, or one or more successful claims resulting in greater liabilities than we currently anticipate, could materially and adversely affect our business, financial condition, results of operations, and cash flows.

As of December 25, 2022, we had a balance of $ 7.7 million for loss contingencies on our consolidated balance sheets, of which $ 3.0 million relates to a class action settlement that is scheduled to be paid in first quarter 2023.

We increased our estimate of loss contingency liabilities by approximately $ 4.1 million in the fourth quarter of 2022 related to changes during the fourth quarter in the status ongoing litigation matters.

As of December 31, 2023, we had reserves of $ 8.7 million for loss contingencies include within Accrued liabilities and other on our 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 recorded estimated loss contingency reserves of approximately $ 9.1 million for the year ended December 31, 2023 related to ongoing litigation matters.

We ultimately may be subject to greater or less than the accrued amount for this and other matters.

As of December 25, 2022, we had purchase commitments to certain vendors who provide food and beverages and other supplies to our restaurants, for an aggregate of $ 142.1 million.

As of December 31, 2023, we had non-cancellable purchase commitments primarily related to certain vendors who provide food and beverages and other supplies to our restaurants, for an aggregate of $ 230.7 million.

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

Stockholders' Equity

Stockholders' Deficit

On August 9, 2018, the Company's Board of Directors authorized an increase to the Company's share repurchase program of approximately $ 21 million to a total of $ 75 million of the Company's common stock.

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The repurchase program does not obligate the Company to acquire any particular amount of common stock, and the Company may suspend or discontinue the repurchase program at any time.

In 2022, the Company did not repurchase any shares under its share repurchase program.

In 2023, the Company repurchased $ 10.0 million in shares under its share repurchase program.

From the date of the current program approval through December 31, 2023, we have repurchased a total of 1,088,588 shares at an average price of $ 15.18 per share for an aggregate amount of $ 16.5 million.

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The maximum number of shares of the Company's common stock that may be issued or transferred pursuant to awards under the 2017 Stock Plan was 630,182 shares.

The 2017 Stock Plan was amended in May 2019, and again in May 2020 to add an additional 660,000 and 275,000 shares, respectively, bringing the total to 1,565,182 shares as of December 25, 2022.

The 2017 Stock Plan was amended in May 2019, and again in May 2020 to add an additional 660,000 and 275,000 shares, respectively, bringing the total maximum shares that may be issued to 1,565,182 shares as of December 31, 2023.

Vesting of the awards under the 2017 Stock Plan is determined at the date of grant by the plan administrator.

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As of December 31, 2023, there was $ 9.9 million of unrecognized compensation cost, excluding estimated forfeitures.

Unrecognized compensation costs are expected to be recognized over the weighted average remaining vesting period of approximately 0.25 years for stock options, 0.92 years for the restricted stock units ("RSU"), and 1.71 years for the performance stock units ("PSU").

Unrecognized compensation costs are expected to be recognized over the weighted average remaining vesting period of approximately 1.13 years for the restricted stock units ("RSU") and 1.65 years for the performance stock units ("PSU").

There is no unrecognized compensation cost for stock options in the year ended December 31, 2023.

Stock Options

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No options were granted during 2023, 2022, or 2021.

The average assumptions used in the model for the fiscal years ended December 25, 2022, December 26, 2021 and December 27, 2020 were as follows:

Risk-free interest rate 0.5 %

Expected years until exercise 4.7

Expected stock volatility 61.0 %

Dividend yield — %

Weighted average Black-Scholes fair value per share at date of grant $ 6.28

Total intrinsic value of options exercised was $ 213 thousand, $ 4 thousand, and $ 89 thousand in 2023, 2022, and 2021, respectively.

The risk-free interest rate was based on the rate for zero coupon U.S.

Government issues with a remaining term similar to the expected life.

The expected life of the options represents the period of time the options are expected to be outstanding and is based on historical trends and Team Member exercise patterns.

The expected stock price volatility represents an average of the Company's historical volatility measured over a period approximating the expected life.

The dividend yield assumption is based on the Company's history and expectations of dividend payouts.

Time-Based RSUs

During 2023, 2022, and 2021, the Company issued time-based restricted stock units ("RSUs") to certain employees as permitted under the 2017 Stock Plan.

The Company can grant RSUs to its directors, executive officers, and other key employees.

The RSUs granted to employees typically vest in equal installments over three to four years .

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Outstanding, December 31, 2023 (1)

(1) Awards expected to vest are the result of applying the pre-vesting forfeiture rate assumption to total outstanding options.

(1) Awards expected to vest are the result of applying the pre-vesting forfeiture rate assumption to total outstanding awards.

The Company applies estimated forfeiture rates that are derived from our historical forfeitures of similar awards.

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Forfeited ( 175 ) 29.41

Vested ( 3 ) 29.40

Outstanding, December 31, 2023 (1)

(1) Awards expected to vest are the result of applying the pre-vesting forfeiture rate assumption to total outstanding options.

(1) Awards expected to vest are the result of applying the pre-vesting forfeiture rate assumption to total outstanding awards.

The Company applies estimated forfeiture rates that are derived from our historical forfeitures of similar awards.

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Outstanding, December 25, 2022

188 $ 7.57 124 $ 6.13

Awarded — — — —

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125 $ 7.57 124 $ 6.13

(1) Awards expected to vest are the result of applying the pre-vesting forfeiture rate assumption to total outstanding options.

(1) Awards expected to vest are the result of applying the pre-vesting forfeiture rate assumption to total outstanding awards.

The Company applies estimated forfeiture rates that are derived from our historical forfeitures of similar awards.

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Compensation is recognized variably over the 3 -year performance period based on a Monte Carlo valuation model.

Beginning in 2017, the long-term cash incentive plan was based on operational metrics with 3 one-year performance periods.

Beginning in 2017, the long-term cash incentive plan was based on operational metrics with 3 three-year performance periods.

Compensation expense for awards granted before 2020 is recognized variably over the performance period based on the plan-to-date performance achievement.

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The amounts recorded in 2023 include the reversal of the expense related to 2021 grants for which performance targets were not met.

During 2022 and 2021, the long-term cash incentive plan payout totaled $ 0.0 million and $ 0.3 million, respectively.

During 2023 and 2022, there were no long-term cash incentive plan payouts.

At December 31, 2023 and December 25, 2022, a $ 0.4 million and $ 0.6 million long-term cash incentive plan liability was included in Accrued payroll and payroll-related liabilities on the consolidated balance sheets.

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A corresponding change in the liability associated with the deferred compensation plan results in an offsetting deferred compensation expense, or reduction of expense, reported in Selling, general, and administrative expenses in the Consolidated Statements of Operations and Comprehensive Loss.

The Company recognized a $ 0.8 million decrease in deferred compensation expense in 2022, and an increase in deferred compensation expenses of $ 0.7 million in 2021 and $ 0.6 million in 2020.

As of December 25, 2022 and December 26, 2021, $ 4.3 million and $ 6.3 million of deferred compensation assets are included in Other assets, net and $ 4.3 million and $ 6.3 million of deferred compensation plan liabilities are included in Other non-current liabilities in the accompanying Consolidated Balance Sheets.

The Company recognized a $ 0.4 million increase in deferred compensation expense in 2023, and an increase in deferred compensation expenses of $ 0.8 million in 2022 and $ 0.7 million in 2021.

As of December 31, 2023 and December 25, 2022, $ 2.1 million and $ 4.3 million of deferred compensation assets are included in Other assets, net, in the accompanying Consolidated Balance Sheets.

In 2023, $ 0.4 million of this deferred compensation is included in Prepaid expenses and other current assets.

As of December 31, 2023 and December 25, 2022, $ 1.7 million and $ 4.3 million of deferred compensation plan liabilities are included in Other non-current liabilities in the accompanying Consolidated Balance Sheets.

In 2023, $ 0.4 million of this deferred compensation is included in Accrued liabilities and other current liabilities.

Employee Stock Purchase Plan

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In May 2020, our Board of Directors authorized the issuance of an additional 150,000 shares of the Company's common stock under the ESPP Plan.

In December 2022, our board of directors authorized the issuance of an additional 350,000 shares of the Company's common stock under the ESPP Plan, subject to approval by stockholders in 2023, increasing the shares authorized to be granted under the ESPP Plan to a total of 600,000 shares.

In December 2022, our Board of Directors authorized, and at our 2023 Annual Meeting of Stockholders, our stockholders approved, the issuance of an additional 350,000 shares of the Company's common stock under the ESPP Plan increasing the shares authorized to be granted under the ESPP Plan to a total of 600,000 shares.

Under the ESPP Plan, eligible Team Members may voluntarily contribute up to 15 % of their salary, subject to limitations, to purchase common stock at a price equal to 85 % of the fair market value of a share of the Company's common stock on the first day of each offering period or 85 % of the fair market value of a share of the Company's common stock on the last day of each offering period, whichever amount is less.

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The Company recognized matching contribution expense of $ 3.0 million in 2023, $ 2.9 million in 2022, and $ 2.8 million in 2021.

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 .

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.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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-K

Item 8. Financial Statements and Supplementary Data