What changed in this filing

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Item 1. Financial Statements

2024-05-29 compared with 2023-11-03 · 108 added, 192 removed, 268 unchanged (53% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except for per share amounts) October 1, 2023 December 25, 2022

(in thousands, except for per share amounts) April 21, 2024 December 31, 2023

Current assets:

2 unchanged sentences

Inventories 27,144 26,839

Income tax receivable 462 562

Prepaid expenses and other current assets 13,623 11,785

12 unchanged sentences

Current portion of operating lease obligations 51,862 43,819

Current portion of long-term debt 875 3,375

Accrued liabilities and other 52,007 46,201

11 unchanged sentences

20,449 shares issued;

15,482 and 15,934 shares outstanding as of October 1, 2023 and December 25, 2022

15,612 and 15,528 shares outstanding as of April 21, 2024 and December 31, 2023

Preferred stock, $ 0.001 par value:

3,000 shares authorized;

no shares issued and outstanding as of October 1, 2023 and December 25, 2022

Treasury stock 4,967 and 4,515 shares, at cost, as of October 1, 2023 and December 25, 2022

no shares issued and outstanding as of April 21, 2024 and December 31, 2023

Treasury stock 4,837 and 4,921 shares, at cost, as of April 21, 2024 and December 31, 2023

( 171,691 ) ( 174,702 )

4 unchanged sentences

Total liabilities and stockholders' equity (deficit) $ 717,086 $ 741,934

$ 777,314 $ 832,145

See Notes to Condensed Consolidated Financial Statements

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

Twelve Weeks Ended Forty Weeks Ended

(in thousands, except for per share amounts) October 1, 2023 October 2, 2022 October 1, 2023 October 2, 2022

Quarter Ended

(in thousands, except for per share amounts) April 21, 2024 April 16, 2023

Restaurant revenue $ 378,568 $ 406,893

Franchise and other revenues 4,427 4,390 20,713 24,302

Franchise revenue 5,341 5,283

Other revenue 4,632 5,636

Total revenues 388,541 417,812

7 unchanged sentences

Selling, general, and administrative expenses 39,389 34,523

Pre-opening and acquisition costs — 217 586 514

Pre-opening costs — 582

Other charges (gains), net ( 3,976 ) 9,759

2 unchanged sentences

Other expense:

Interest expense, net and other 5,945 4,590 19,541 16,151

Interest expense 7,480 7,770

Interest (income) and other, net ( 312 ) ( 353 )

Loss before income taxes ( 9,279 ) ( 3,236 )

Income tax provision (benefit) 278 ( 43 ) 453 453

Income tax provision 181 20

Net loss $ ( 9,460 ) $ ( 3,256 )

23 unchanged sentences

Balance, April 21, 2024 20,449 $ 20 4,837 $ ( 171,691 ) $ 227,488 $ ( 40 ) $ ( 84,878 ) $ ( 29,101 )

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 — — — — — — 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

Exercise of options, issuance of restricted stock, shares exchanged for exercise and tax, and stock issued through employee stock purchase plan — — ( 31 ) 694 ( 809 ) — — ( 115 )

Acquisition of treasury stock — — 480 ( 4,961 ) — — — ( 4,961 )

Non-cash stock compensation — — — 1,480 — — 1,480

Net loss — — — — — — ( 8,161 ) ( 8,161 )

Other comprehensive income (loss), net of tax — — — — — ( 12 ) — ( 12 )

Balance, October 1, 2023 20,449 $ 20 4,967 $ ( 176,813 ) $ 229,769 $ ( 34 ) $ ( 61,685 ) $ ( 8,743 )

Common Stock Treasury Stock Accumulated

1 unchanged sentence

Income/(Loss),

Capital Retained

Capital Accumulated Deficit

(in thousands) Shares Amount Shares Amount Total

5 unchanged sentences

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

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 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

Exercise of options, issuance of restricted stock, shares exchanged for exercise and tax, and stock issued through employee stock purchase plan — — ( 1 ) 36 ( 40 ) — — ( 4 )

Non-cash stock compensation — — — — 2,668 — — 2,668

Net loss — — — — — — ( 12,650 ) ( 12,650 )

Other comprehensive income (loss), net of tax — — — — — ( 45 ) — ( 45 )

Balance, October 2, 2022 20,449 $ 20 4,549 $ ( 184,169 ) $ 242,235 $ ( 51 ) $ ( 9,504 ) $ 48,531

See Notes to Condensed Consolidated Financial Statements.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Forty Weeks Ended

(in thousands) October 1, 2023 October 2, 2022

Quarter Ended

(in thousands) April 21, 2024 April 16, 2023

Cash flows from operating activities:

6 unchanged sentences

Stock-based compensation expense 1,190 2,172

Gain on sale of property, plant, and equipment ( 29,865 ) ( 9,204 )

Gain on sale leaseback, net ( 7,425 ) —

Other, net 672 606

11 unchanged sentences

Purchases of property, equipment, and intangible assets ( 8,248 ) ( 16,084 )

Proceeds from sale-leaseback 58,801 —

Proceeds from sales of property and equipment and other investing activities 794 8,739

Acquisition of franchised restaurants ( 3,529 ) —

Net proceeds from sale-leaseback 23,393 —

Net cash provided by (used in) investing activities 15,145 ( 16,084 )

Cash flows from financing activities:

Borrowings of long-term debt — 282,151

Payments of long-term debt and finance leases ( 25,525 ) ( 266,275 )

Purchase of treasury stock ( 9,960 ) —

Debt issuance costs — ( 4,869 )

Proceeds related to real estate sale — 3,856

Proceeds from other financing activities, net 1,744 58

Net cash provided by (used in) financing activities ( 33,741 ) 14,921

Proceeds from borrowings on revolving credit facilities 10,000 —

Repayments of borrowings on revolving credit facilities ( 10,000 ) —

Repayments of borrowings on term loan ( 21,232 ) ( 1,000 )

Repayments of finance lease obligations ( 291 ) ( 241 )

(Uses) Proceeds from other financing activities, net ( 371 ) 224

Net cash used in financing activities ( 21,894 ) ( 1,017 )

Effect of exchange rate changes on cash 2 ( 1 )

3 unchanged sentences

Supplemental disclosure of cash flow information

Income tax paid (refund received), net $ 210 $ ( 14,729 )

Income tax paid, net $ 146 $ 88

Interest paid, net of amounts capitalized $ 5,708 $ 5,475

Right of use assets obtained in exchange for operating lease obligations $ 15,951 $ 7,465

Right of use assets obtained in exchange for finance lease obligations $ 81 $ 541

See Notes to Condensed Consolidated Financial Statements.

3 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 October 1, 2023, the Company owned and operated 417 restaurants located in 39 states.

As of April 21, 2024, the Company owned and operated 413 restaurants located in 39 states.

The Company also had 92 franchised full-service restaurants in 14 states and one Canadian province.

8 unchanged sentences

The accompanying Condensed Consolidated Financial Statements of Red Robin have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC"), including the instructions to Form 10-Q and Article 10 of Regulation S-X.

Certain information and footnote disclosures normally included in the Company's annual consolidated financial statements on Form 10-K have been condensed or omitted.

The Condensed Consolidated Balance Sheet as of December 25, 2022 has been derived from the audited consolidated financial statements as of that date but does not include all disclosures required for audited annual financial statements.

For further information, please refer to and read these interim Condensed Consolidated Financial Statements in conjunction with the Company's audited consolidated financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended December 25, 2022 filed with the SEC on February 28, 2023.

Certain information and footnote disclosures normally included in the Company's annual Condensed Consolidated Financial Statements on Form 10-K have been or omitted.

The Condensed Consolidated Balance Sheet as of December 31, 2023 has been derived from the audited Condensed Consolidated Financial Statements as of that date but does not include all disclosures required for audited annual financial statements.

For further information, please refer to and read these interim Condensed Consolidated Financial Statements in conjunction with the Company's audited Condensed Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2023 filed with the SEC on February 28, 2024.

Our current, prior, and upcoming year periods, period end dates, and number of weeks included in the period are summarized in the table below:

18 unchanged sentences

December 31, 2023 53

Upcoming fiscal year:

Fiscal Year 2024

December 29, 2024 52

Immaterial Restatement of Prior Period Financial Statements

As previously disclosed in our Form 10-Q for the period ended July 9, 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 $ 0.1 million and $ 0.6 million for the twelve and forty weeks ended October 2, 2022.

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 forty weeks ended October 2, 2022 would have had a significant effect on the results of operations for such periods.

However, as previously disclosed, correcting the cumulative effect of the error in the first quarter ended April 16, 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 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:

The following tables reflect the effects of the correction on all affected line items of the Company's previously reported Condensed Consolidated Financial Statements for the quarter ended April 16, 2023 presented in this Form 10-Q:

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

Twelve Weeks Ended October 2, 2022

Forty Weeks Ended October 2, 2022

(in thousands) As Previously Reported Adjustment As Corrected As Previously Reported Adjustment As Corrected

Restaurant revenue $ 282,449 $ ( 34 ) $ 282,415 $ 951,718 $ ( 85 ) $ 951,633

Franchise and other revenues 4,439 ( 49 ) 4,390 24,810 ( 508 ) 24,302

Quarter Ended April 16, 2023

(in thousands) As Previously Reported Adjustment As Corrected

Other revenues $ 5,792 $ ( 156 ) $ 5,636

Total revenues 417,968 ( 156 ) 417,812

6 unchanged sentences

CORRECTED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS ' EQUITY (DEFICIT) (unaudited)

Forty Weeks Ended October 2, 2022

Quarter Ended April 16, 2023

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

As Previously Reported

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

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

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

Balance, October 2, 2022 ( 6,408 ) 51,627

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

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

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

Net loss ( 156 ) ( 156 )

Balance, October 2, 2022 ( 3,096 ) ( 3,096 )

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

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

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

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

Balance, October 2, 2022 $ ( 9,504 ) $ 48,531

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

CORRECTED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

Forty Weeks Ended October 2, 2022

Quarter Ended April 16, 2023

(in thousands) As Previously Reported Adjustment As Corrected

1 unchanged sentence

Gift card breakage ( 4,965 ) 156 ( 4,809 )

Unearned revenue ( 8,386 ) 85 ( 8,301 )

Reclassifications

Certain amounts presented have been reclassified to conform with the current period presentation.

The reclassifications had no effect on the Company’s consolidated results.

An adjustment has been made to the Condensed Consolidated Statement of Operations and Comprehensive Loss to disaggregate franchise and other revenue.

Also, a reclassification was made within the Condensed Consolidated Balance Sheet between Current portion of long-term debt and Accrued liabilities and other.

Recently Issued and Recently Adopted Accounting Standards

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

Improvements to Income Tax Disclosures which updates income tax disclosures related to the rate reconciliation and requires disclosure of income taxes paid by jurisdiction.

The amendment also provides further disclosure comparability.

The amendment is effective for fiscal years beginning after December 15, 2024.

Early adoption is permitted.

The amendments should be applied prospectively.

However, retrospective application is permitted.

We do not 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.

In November 2023, FASB issued Update 2023-07—Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures, which updates reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses.

The amendments are effective for fiscal years beginning after December 15, 2023 and for interim periods within fiscal years beginning after December 15, 2024.

Early adoption is permitted.

The amendments should be applied retrospectively to all prior periods presented in the financial statements.

Management is currently evaluating this ASU to determine its impact on the Company’s disclosures.

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

Disaggregation of revenue

In the following table, revenue is disaggregated by type of good or service (in thousands):

Twelve Weeks Ended Forty Weeks Ended

October 1, 2023 October 2, 2022 October 1, 2023 October 2, 2022

Quarter Ended

April 21, 2024 April 16, 2023

Restaurant revenue $ 378,568 $ 406,893

4 unchanged sentences

Contract Liabilities

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

October 1, 2023 December 25, 2022

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

April 21, 2024 December 31, 2023

Unearned gift card revenue $ 16,641 $ 28,558

Deferred loyalty revenue 8,032 7,509

Unearned Revenue $ 24,673 $ 36,067

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):

Forty Weeks Ended

October 1, 2023 October 2, 2022

Quarter Ended

April 21, 2024 April 16, 2023

Gift card revenue $ 12,629 $ 14,343

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 Income (Loss) as follows (in thousands):

Twelve Weeks Ended Forty Weeks Ended

October 1, 2023 October 2, 2022 October 1, 2023 October 2, 2022

Quarter Ended

April 21, 2024 April 16, 2023

Operating lease cost $ 23,007 $ 20,895

5 unchanged sentences

Total $ 29,335 $ 27,187

Refer to Footnote 5, Other Charges (gains), net , for information regarding the sale-leaseback transaction during the twelve and forty weeks ended October 1, 2023.

Refer to Footnote 5, Other Charges (Gains), net , for information regarding the sale-leaseback transaction during the first quarter ended April 21, 2024.

Earnings (Loss) Per Share

3 unchanged sentences

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 loss position for both the twelve and forty weeks ended October 1, 2023 and October 2, 2022, all potentially dilutive common shares are considered anti-dilutive.

As the Company was in a net loss position for both the first quarter ended April 21, 2024 and April 16, 2023, 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):

Twelve Weeks Ended Forty Weeks Ended

October 1, 2023 October 2, 2022 October 1, 2023 October 2, 2022

Quarter Ended

April 21, 2024 April 16, 2023

Basic weighted average shares outstanding 15,554 15,996

4 unchanged sentences

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

Twelve Weeks Ended Forty Weeks Ended

October 1, 2023 October 2, 2022 October 1, 2023 October 2, 2022

Gain on sale leaseback, net of expenses

$ ( 14,883 ) $ — $ ( 29,413 ) $ —

Gain on sale of restaurant property

Quarter Ended

April 21, 2024 April 16, 2023

Gain on sale leaseback, net

$ ( 7,425 ) $ —

Litigation contingencies

3,600 133 9,140 47

Restaurant closure costs, net

( 91 ) ( 1,570 ) 1,546 309

Severance and executive transition

341 1,825 3,195 1,954

Asset impairment

4,800 2,187 7,187 13,048

277 — 1,366 —

Asset disposal and other, net

Closed corporate office costs, net of sublease income 115 62

Other financing costs

— 1,022 — 1,392

COVID-19 related charges

Other charges (gains), net $ ( 3,976 ) $ 9,759

During the third quarter of 2023, the Company sold nine restaurant properties for total proceeds of $ 30.4 million in a sale-leaseback transaction that resulted in a gain, net of expenses of $ 14.9 million.

This was the second sale-leaseback transaction of the year with the first transaction occurring in the second quarter of 2023 for another nine restaurant properties.

The year-to-date net proceeds of $ 58.8 million from the sale of 18 restaurant properties are included within cash flows from investing activities on the Condensed Consolidated Statements of Cash Flows for the forty weeks ended October 1, 2023.

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.

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.

The initial net proceeds of $ 3.9 million are included within cash flows from financing activities and the final proceeds received of $ 8.5 million are included within cash flows from investing activities on the Condensed Consolidated Statements of Cash Flows for the forty weeks ended October 2, 2022.

Litigation contingencies during the twelve and forty weeks ended October 1, 2023 and October 2, 2022 represent reserves for various in progress legal matters.

Litigation contingencies during the forty weeks ended October 2, 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 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 forty weeks ended October 1, 2023.

A reconciliation of our termination benefits liability, which is included in Accrued liabilities and other current liabilities in our Condensed Consolidated Balance Sheets is as follows:

Termination Benefits

Balance as of December 25, 2022

Charges 2,077

Cash Payments ( 4,164 )

Balance as of October 1, 2023

The Company recognized non-cash impairment charges primarily related to restaurant assets at eight and twelve Company-owned restaurants during the twelve and forty weeks ended October 1, 2023.

Additionally, the Company recognized non-cash impairment charges related to subleasing additional space at the Company's closed corporate office during the forty weeks ended October 1, 2023.

The Company recognized non-cash impairment charges related to restaurant assets at one and ten Company-owned restaurants for the twelve and forty weeks ended October 2, 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 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 October 1, 2023 and December 25, 2022 are summarized below (in thousands):

October 1, 2023 Variable

During the first quarter of 2024, the Company sold ten restaurant properties for total proceeds of $ 23.9 million in a sale-leaseback transaction that resulted in a gain, net of expenses of $ 7.4 million.

The net proceeds of $ 23.4 million from the sale of 10 restaurant properties are included within cash flows from investing activities in the Condensed Consolidated Statements of Cash Flows for the first quarter ended April 21, 2024.

Borrowings as of April 21, 2024 and December 31, 2023 are summarized below (in thousands):

April 21, 2024 Variable

Interest Rate December 31, 2023 Variable

2 unchanged sentences

Term loan 167,911 11.59 % 189,143 11.62 %

Notes payable 875 875

Total borrowings 167,911 189,143

unamortized debt issuance costs and discounts 5,950 6,549

current portion of long-term debt 875 3,375

Long-term debt $ 161,961 $ 182,594

Revolving line of credit unamortized deferred financing charges:

(1) Loan origination costs associated with the Company's credit facility are included as deferred costs in Other assets, net for financing charges allocated to the Revolving line of credit, and Long-term debt for financing charges associated with the term loan in the accompanying Condensed Consolidated Balance Sheets.

Credit Agreement

On March 4, 2022, the Company replaced its prior amended and restated credit agreement (the "Prior Credit Agreement") with a new Credit Agreement (the "Credit Agreement") by and among the Company, Red Robin International, Inc., as the borrower, the lenders from time to time party thereto, the issuing banks from time to time party thereto, Fortress Credit Corp., as Administrative Agent and as Collateral Agent and JPMorgan Chase Bank, N.A., as Sole Lead Arranger and Sole Bookrunner.

On March 4, 2022, the Company entered into a credit agreement (the "Credit Agreement") by and among the Company, Red Robin International, Inc., as the borrower, the lenders from time to time party thereto, the issuing banks from time to time party thereto, Fortress Credit Corp., as Administrative Agent and as Collateral Agent and JPMorgan Chase Bank, N.A., as Sole Lead Arranger and Sole Bookrunner.

The five-year $ 225.0 million Credit Agreement provides for a $ 25.0 million revolving line of credit and a $ 200.0 million term loan (collectively, the "Credit Facility").

The borrower maintains the option to increase the amount of borrowings available under the Credit Agreement in the future, subject to lenders’ participation, by up to an additional $ 40.0 million in the aggregate on the terms and conditions set forth in the Credit Agreement.

The borrower maintains the option to increase the Credit Facility in the future, subject to lenders’ participation, by up to an additional $ 40.0 million in the aggregate on the terms and conditions set forth in the Credit Agreement.

The Credit Facility will mature on March 4, 2027.

1 unchanged sentence

The term loans require quarterly principal payments in an aggregate annual amount equal to 1.0 % of the original principal amount of the term loan.

The Credit Facility's interest rate references the Secured Overnight Financing Rate ("SOFR"), a new index calculated by short-term repurchase agreements and backed by U.S.

Treasury securities, or the Alternate Base Rate ("ABR"), which represents the highest of (a) the Prime Rate, (b) the Federal Funds Rate plus 0.5 % per annum, or (c) one-month term SOFR plus 1.0 % per annum.

Red Robin International, Inc.

is the borrower under the Credit Agreement, and certain of its subsidiaries and the Company are guarantors of borrower’s obligations under the Credit Agreement.

The Credit Agreement's interest rate references the Secured Overnight Financing Rate ("SOFR"), a new index calculated by short-term repurchase agreements and backed by U.S.

Treasury securities, or the Alternate Base Rate, 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.

As of April 21, 2024, the Company had outstanding borrowings under the Credit Facility of $ 162.0 million, in addition to amounts issued under letters of credit of $ 7.7 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.

Red Robin International, Inc., is the borrower under the Credit Agreement, and certain of its subsidiaries and the Company are guarantors of borrower’s obligations under the Credit Agreement.

Borrowings under the Credit Agreement are secured by substantially all of the assets of the borrower and the guarantors, including the Company, and are available to:

1 unchanged sentence

On March 4, 2022, Red Robin International, Inc., the Company, and the guarantors also entered into a Pledge and Security Agreement (the “Security Agreement”) granting to the Administrative Agent a first priority security interest in substantially all of the assets of the borrower and the guarantors to secure the obligations under the Credit Agreement.

This new Security Agreement replaced the existing security agreement, dated January 10, 2020, which was entered into in connection with the Prior Credit Agreement.

Red Robin International, Inc.

as the borrower is obligated to pay customary fees to the agents, lenders and issuing banks under the Credit Agreement with respect to providing, maintaining, or administering, as applicable, the credit facilities.

In connection with entry into the new Credit Agreement, the Company’s Prior Credit Agreement was terminated.

In connection with such termination and new borrowings under the new Credit Agreement, the Company paid off all outstanding borrowings, accrued interest, and fees under the Prior Credit Agreement.

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 Income (Loss) for the forty weeks ended October 2, 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.

On July 17, 2023, the Company amended the Credit Agreement (the “Credit Agreement Amendment”) to, among other things, remove the previously included $ 50.0 million aggregate cap on sale-leasebacks of Company-owned real property that are permitted under the Credit Agreement, subject to certain conditions set forth in the Credit Agreement.

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 was filed February 28, 2024, as an exhibit to the Annual Report on Form 10-K.

Fair Value Measurements

2 unchanged sentences

The Company maintains a rabbi trust to fund obligations under a deferred compensation plan.

Amounts in the rabbi trust are invested in mutual funds, which are designated as trading securities and carried at fair value and are included in Other assets, net in the accompanying consolidated balance sheets.

Fair market value of mutual funds is measured using level 1 inputs (quoted prices for identical assets in active markets).

The following tables present the Company's assets measured at fair value on a recurring basis included in Other assets, net on the accompanying Condensed Consolidated Balance Sheets as of October 1, 2023 and December 25, 2022 (in thousands):

October 1, 2023 Level 1 Level 2 Level 3

The following tables present the Company's assets measured at fair value on a recurring basis (in thousands):

April 21, 2024 Level 1 Level 2 Level 3

Investments in rabbi trust $ 2,023 $ 2,023 $ — $ —

3 unchanged sentences

Total assets measured at fair value $ 2,079 $ 2,079 $ — $ —

Other than as disclosed in Note 9.

Acquisition of Franchised Restaurants, as of October 1, 2023, the Company had no financial assets or liabilities that were measured using level 2 or 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

Assets and liabilities recognized or disclosed at fair value on the Condensed Consolidated Financial Statements on a nonrecurring basis include items such as property, plant and equipment, right of use assets, and other intangible assets.

Assets and liabilities recognized or disclosed at fair value in the Condensed Consolidated Financial Statements on a nonrecurring basis include items such as property, plant and equipment, right of use assets, and other intangible assets.

These assets are measured at fair value if determined to be impaired.

The Company has measured non-financial assets for impairment using continuing and projected future cash flows, which were based on significant inputs not observable in the market and thus represented a level 3 fair value measurement.

Other Charges (Gains), net.

We impaired long-lived restaurant assets with a carrying value (including right of use lease assets) of $ 15.3 million and $ 26.7 million during the twelve and forty weeks ended October 1, 2023, recognizing impairment expense of $ 4.8 million and $ 6.5 million, respectively, related to the net book value of these long-lived restaurant assets.

We determined the fair value of these long-lived assets to be $ 10.5 million and $ 20.2 million in the twelve and forty weeks ended October 1, 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 forty weeks ended October 1, 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 forty weeks ended October 1, 2023.

The impairments were recorded as a result of quantitative impairment analyses.

During 2024 and 2023, the Company measured non-financial assets for impairment using continuing and projected future cash flows, which were based on significant inputs not observable in the market and thus represented a level 3 fair value measurement.

The Company did not recognize any impairment charges in the first quarter of fiscal 2024, compared to $ 0.7 million recognized in the first quarter of fiscal 2023.

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 October 1, 2023, the fair value of the credit facility was approximately $ 188.0 million and the principal amount carrying value was $ 189.1 million.

The credit facility term loan is reported net of $ 7.0 million in unamortized discount and debt issuance costs in the Condensed Consolidated Balance Sheet as of October 1, 2023.

As of April 21, 2024, the fair value of the credit facility was approximately $ 165.4 million and the principal amount carrying value was $ 167.9 million.

The credit facility term loan is reported net of $ 6.0 million in unamortized discount and debt issuance costs in the Condensed Consolidated Balance Sheet as of April 21, 2024.

The carrying value of the credit facility was $ 189.1 million and the fair value of the credit facility was $ 186.9 million as of December 31, 2023.

6 unchanged sentences

However, the ultimate resolution of litigated claims may differ from our current estimates.

In the normal course of business, there are various claims in process, matters in litigation, and other contingencies, certain of which are covered by insurance policies.

While it is not possible to predict the outcome of these suits, legal proceedings, and claims with certainty, management is of the opinion that adequate provision for potential losses associated with these matters has been made in the financial statements and that the ultimate resolution of any one of these matters will not have a material adverse effect on our financial position and results of operations.

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

As of October 1, 2023, we had a balance of $ 13.7 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 $ 3.6 million for the twelve weeks ended October 1, 2023 and $ 9.1 million for the forty weeks ended October 1, 2023 related to changes during the third quarter in the status of ongoing litigation matters.

To date, none of these claims, certain of which are covered by insurance policies, have had a material effect on the Company.

While it is not possible to predict the outcome of these suits, legal proceedings, and claims with certainty, management is of the opinion that adequate provision for potential losses associated with these matters has been made in the financial statements and that the ultimate resolution of these matters will not have a material adverse effect on our financial position and results of operations.

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

As of April 21, 2024, we had reserves of $ 9.2 million for loss contingencies include 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.

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

As of October 1, 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 $ 216.6 million.

As of April 21, 2024, 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 $ 215.6 million.

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

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