RED ROBIN GOURMET BURGERS INC 10-Q

ITEM 1. Financial Statements (unaudited) RED ROBIN GOURMET BURGERS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (in thousands, except for per share amounts) April 21, 2024 December 31, 2023 Assets: Current assets: Cash and cash equivalents $ 30,594 $ 23,634 Accounts receivable, net 13,949 21,592 Inventories 27,144 26,839 Prepaid expenses and other current assets 13,623 11,785 Restricted cash 7,958 7,931 Total current assets 93,268 91,781 Property and equipment, net 233,525 261,258 Operating lease assets, net 361,934 361,609 Intangible assets, net 15,584 15,491 Other assets, net 12,775 11,795 Total assets $ 717,086 $ 741,934 Liabilities and stockholders ' equity (deficit): Current liabilities: Accounts payable $ 31,347 $ 27,726 Accrued payroll and payroll-related liabilities 37,754 32,524 Unearned revenue 24,673 36,067 Current portion of operating lease obligations 51,862 43,819 Accrued liabilities and other 52,007 46,201 Total current liabilities 197,643 186,337 Long-term debt 161,961 182,594 Long-term portion of operating lease obligations 376,660 383,439 Other non-current liabilities 9,923 10,006 Total liabilities 746,187 762,376 Commitments and contingencies (see Note 8. Commitments and Contingencies) Stockholders' equity (deficit): Common stock; $ 0.001 par value: 45,000 shares authorized; 20,449 shares issued; 15,612 and 15,528 shares outstanding as of April 21, 2024 and December 31, 2023 20 20 Preferred stock, $ 0.001 par value: 3,000 shares authorized; 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 ) Paid-in capital 227,488 229,680 Accumulated other comprehensive loss, net of tax ( 40 ) ( 22 ) Accumulated deficit ( 84,878 ) ( 75,418 ) Total stockholders' equity (deficit) ( 29,101 ) ( 20,442 ) Total liabilities and stockholders' equity (deficit) $ 717,086 $ 741,934 See Notes to Condensed Consolidated Financial Statements 1 Table of Contents RED ROBIN GOURMET BURGERS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited) Quarter Ended (in thousands, except for per share amounts) April 21, 2024 April 16, 2023 Revenues: Restaurant revenue $ 378,568 $ 406,893 Franchise revenue 5,341 5,283 Other revenue 4,632 5,636 Total revenues 388,541 417,812 Costs and expenses: Restaurant operating costs (excluding depreciation and amortization shown separately below): Cost of sales 90,209 99,670 Labor 148,958 145,421 Other operating 66,490 72,050 Occupancy 31,428 29,801 Depreciation and amortization 18,154 21,825 Selling, general, and administrative expenses 39,389 34,523 Pre-opening costs — 582 Other charges (gains), net ( 3,976 ) 9,759 Total costs and expenses 390,652 413,631 Income (loss) from operations ( 2,111 ) 4,181 Other expense: Interest expense 7,480 7,770 Interest (income) and other, net ( 312 ) ( 353 ) Loss before income taxes ( 9,279 ) ( 3,236 ) Income tax provision 181 20 Net loss $ ( 9,460 ) $ ( 3,256 ) Loss per share: Basic $ ( 0.61 ) $ ( 0.20 ) Diluted $ ( 0.61 ) $ ( 0.20 ) Weighted average shares outstanding: Basic 15,554 15,996 Diluted 15,554 15,996 Other comprehensive income (loss): Foreign currency translation adjustment $ ( 18 ) $ 8 Other comprehensive income (loss), net of tax ( 18 ) 8 Total comprehensive loss $ ( 9,478 ) $ ( 3,248 ) See Notes to Condensed Consolidated Financial Statements. 2 Table of Contents RED ROBIN GOURMET BURGERS, INC. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS ' EQUITY (DEFICIT) (Unaudited) Common Stock Treasury Stock Accumulated Other Comprehensive Income/(Loss), net of tax Paid-in Capital Accumulated Deficit (in thousands) Shares Amount Shares Amount Total Balance, December 31, 2023 20,449 $ 20 4,921 $ ( 174,702 ) $ 229,680 $ ( 22 ) $ ( 75,418 ) $ ( 20,442 ) Exercise of options, issuance of restricted stock, shares exchanged for exercise and tax, and stock issued through employee stock purchase plan — — ( 84 ) 3,011 ( 3,382 ) — — ( 371 ) Non-cash stock compensation — — — — 1,190 — — 1,190 Net loss — — — — — — ( 9,460 ) ( 9,460 ) Other comprehensive income (loss), net of tax — — — — — ( 18 ) — ( 18 ) Balance, April 21, 2024 20,449 $ 20 4,837 $ ( 171,691 ) $ 227,488 $ ( 40 ) $ ( 84,878 ) $ ( 29,101 ) Common Stock Treasury Stock Accumulated Other Comprehensive Income/(Loss), net of tax Paid-in Capital Accumulated Deficit (in thousands) Shares Amount Shares Amount Total Balance, December 25, 2022 20,449 $ 20 4,515 $ ( 182,810 ) $ 238,803 $ ( 34 ) $ ( 54,190 ) $ 1,789 Exercise of options, issuance of restricted stock, shares exchanged for exercise and tax, and stock issued through employee stock purchase plan — — ( 129 ) 5,330 ( 5,106 ) — — 224 Non-cash stock compensation — — — — 2,179 — — 2,179 Net loss — — — — — — ( 3,256 ) ( 3,256 ) Other comprehensive income (loss), net of tax — — — — — 8 — 8 Balance, April 16, 2023 20,449 $ 20 4,386 $ ( 177,480 ) $ 235,876 $ ( 26 ) $ ( 57,445 ) $ 945 See Notes to Condensed Consolidated Financial Statements. 3 Table of Contents RED ROBIN GOURMET BURGERS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Quarter Ended (in thousands) April 21, 2024 April 16, 2023 Cash flows from operating activities: Net loss $ ( 9,460 ) $ ( 3,256 ) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 18,154 21,825 Gift card breakage ( 4,162 ) ( 4,809 ) Asset impairment — 694 Non-cash other charges (gains), net ( 193 ) 770 Stock-based compensation expense 1,190 2,172 Gain on sale leaseback, net ( 7,425 ) — Other, net 672 606 Changes in operating assets and liabilities, net of business acquisition: Accounts receivable 7,610 8,907 Income tax receivable 31 89 Inventories ( 383 ) 1,068 Prepaid expenses and other current assets ( 195 ) ( 399 ) Operating lease assets, net of liabilities 3,024 ( 3,654 ) Trade accounts payable and accrued liabilities 13,179 1,086 Unearned revenue ( 7,232 ) ( 7,949 ) Other operating assets and liabilities, net ( 1,076 ) 192 Net cash provided by operating activities 13,734 17,342 Cash flows from investing activities: Purchases of property, equipment, and intangible assets ( 8,248 ) ( 16,084 ) Net proceeds from sale-leaseback 23,393 — Net cash provided by (used in) investing activities 15,145 ( 16,084 ) Cash flows from financing activities: 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 ) Net change in cash and cash equivalents, and restricted cash 6,987 240 Cash and cash equivalents, and restricted cash, beginning of period 31,565 58,206 Cash and cash equivalents, and restricted cash, end of period $ 38,552 $ 58,446 Supplemental disclosure of cash flow information 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 See Notes to Condensed Consolidated Financial Statements. 4 Table of Contents RED ROBIN GOURMET BURGERS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Basis of Presentation and Recent Accounting Pronouncements Red Robin Gourmet Burgers, Inc., a Delaware corporation, together with its subsidiaries ("Red Robin" or the "Company"), primarily operates, franchises, and develops full-service restaurants in North America. As of April 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. The Company operates its business as one operating and one reportable segment. Basis of Presentation The accompanying unaudited Condensed Consolidated Financial Statements include the accounts of Red Robin and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. The Company's financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The results of operations for any interim period are not necessarily indicative of results for the full year. The accompanying Condensed Consolidated Financial Statements of Red Robin have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC"), including the instructions to Form 10-Q and Article 10 of Regulation S-X. Certain information and footnote disclosures normally included in the Company's annual 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: Periods Period End Date Number of Weeks in Period Current and Prior Fiscal Quarters: First Quarter 2024 April 21, 2024 16 First Quarter 2023 April 16, 2023 16 Second Quarter 2024 July 14, 2024 12 Second Quarter 2023 July 9, 2023 12 Third Quarter 2024 October 6, 2024 12 Third Quarter 2023 October 1, 2023 12 Current and Prior Fiscal Years: Fiscal Year 2024 December 29, 2024 52 Fiscal Year 2023 December 31, 2023 53 5 Table of Contents 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 $ 0.2 million first quarter ended April 16, 2023. Management has evaluated this misstatement and concluded it was not material to prior periods, individually or in the aggregate. 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 for the quarter ended April 16, 2023 presented in this Form 10-Q: CORRECTED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (unaudited) 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 Loss before income taxes ( 3,080 ) ( 156 ) ( 3,236 ) Net loss ( 3,100 ) ( 156 ) ( 3,256 ) Net loss per share ( 0.19 ) ( 0.01 ) ( 0.20 ) Total comprehensive loss ( 3,092 ) ( 156 ) ( 3,248 ) OTHER NON-GAAP INFORMATION: Adjusted EBITDA 36,080 ( 156 ) 35,924 CORRECTED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS ' EQUITY (DEFICIT) (unaudited) Quarter Ended April 16, 2023 (in thousands) Retained Earnings/(Accumulated Deficit) Total Shareholders' Equity As Previously Reported Balance, December 25, 2022 $ ( 50,604 ) $ 5,375 Net loss ( 3,100 ) ( 3,100 ) Balance, April 16, 2023 ( 53,704 ) 4,686 Adjustments Balance, December 25, 2022 ( 3,586 ) ( 3,586 ) Net loss ( 156 ) ( 156 ) Balance, April 16, 2023 ( 3,741 ) ( 3,741 ) As Corrected Balance, December 25, 2022 ( 54,190 ) 1,789 Net loss ( 3,256 ) ( 3,256 ) Balance, April 16, 2023 ( 57,445 ) 945 CORRECTED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) Quarter Ended April 16, 2023 (in thousands) As Previously Reported Adjustment As Corrected Net loss $ ( 3,100 ) $ ( 156 ) $ ( 3,256 ) Gift card breakage ( 4,965 ) 156 ( 4,809 ) 6 Table of Contents 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. 2. Revenue Disaggregation of revenue In the following table, revenue is disaggregated by type of good or service (in thousands): Quarter Ended April 21, 2024 April 16, 2023 Restaurant revenue $ 378,568 $ 406,893 Franchise revenue 5,341 5,283 Gift card breakage 4,162 4,809 Other revenue 470 827 Total revenues $ 388,541 $ 417,812 Contract Liabilities 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): Quarter Ended April 21, 2024 April 16, 2023 Gift card revenue $ 12,629 $ 14,343 7 Table of Contents 3. Leases The components of lease expense, including variable lease costs primarily consisting of common area maintenance charges and real estate taxes, are included in Occupancy on our Condensed Consolidated Statement of Operations and Comprehensive Income (Loss) as follows (in thousands): Quarter Ended April 21, 2024 April 16, 2023 Operating lease cost $ 23,007 $ 20,895 Finance lease cost: Amortization of right of use assets 288 327 Interest on lease liabilities 137 173 Total finance lease cost $ 425 $ 500 Variable lease cost 5,903 5,792 Total $ 29,335 $ 27,187 Refer to Footnote 5, Other Charges (Gains), net , for information regarding the sale-leaseback transaction during the first quarter ended April 21, 2024. 4. Earnings (Loss) Per Share Basic earnings (loss) per share amounts are calculated by dividing net income (loss) by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings per share amounts are calculated based upon the weighted-average number of shares of common stock and potentially dilutive shares of common stock outstanding during the period. Potentially dilutive shares are excluded from the computation in periods in which they have an anti-dilutive effect. Diluted 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 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): Quarter Ended April 21, 2024 April 16, 2023 Basic weighted average shares outstanding 15,554 15,996 Dilutive effect of stock options and awards — — Diluted weighted average shares outstanding 15,554 15,996 Awards excluded due to anti-dilutive effect on diluted income (loss) per share 1,422 1,368 8 Table of Contents 5. Other Charges (Gains), net Other charges (Gains), net consisted of the following (in thousands): Quarter Ended April 21, 2024 April 16, 2023 Gain on sale leaseback, net $ ( 7,425 ) $ — Litigation contingencies 420 4,300 Restaurant closure costs, net 175 1,750 Severance and executive transition 945 1,891 Asset impairment — 694 Asset disposal and other, net 1,794 1,062 Closed corporate office costs, net of sublease income 115 62 Other charges (gains), net $ ( 3,976 ) $ 9,759 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. 9 Table of Contents 6. Borrowings 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 Interest Rate Revolving line of credit $ — $ — — % Term loan 167,911 11.59 % 189,143 11.62 % Total borrowings 167,911 189,143 Less: unamortized debt issuance costs and discounts 5,950 6,549 Long-term debt $ 161,961 $ 182,594 Revolving line of credit unamortized deferred financing charges: $ 680 $ 752 Credit Agreement 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 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. No amortization is required with respect to the revolving Credit Facility. The term loans require quarterly principal payments in an aggregate annual amount equal to 1.0 % of the original principal amount of the term loan. The Credit 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: (i) refinance certain existing indebtedness of the borrower and its subsidiaries, (ii) pay any fees and expenses in connection with the Credit Agreement, and (iii) provide for the working capital and general corporate requirements of the Company, the borrower and its subsidiaries, including permitted acquisitions and capital expenditures, but excluding restricted payments. On March 4, 2022, Red Robin International, Inc., the Company, and the guarantors also entered into a Pledge and Security Agreement (the “Security Agreement”) granting to the Administrative Agent a first priority security interest in substantially all of the assets of the borrower and the guarantors to secure the obligations under the Credit Agreement. 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. 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. 10 Table of Contents 7. Fair Value Measurements Assets and Liabilities Measured at Fair Value on a Recurring Basis The carrying amounts of the Company's cash and cash equivalents, accounts receivable, accounts payable, and current accrued expenses and other liabilities approximate fair value due to the short-term nature or maturity of the instruments. The Company maintains a rabbi trust to fund obligations under a deferred compensation plan. Amounts in the rabbi trust are invested in mutual funds, which are designated as trading securities and carried at fair value and are included in Other assets, net in the accompanying Condensed 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 (in thousands): April 21, 2024 Level 1 Level 2 Level 3 Assets: Investments in rabbi trust $ 2,023 $ 2,023 $ — $ — Total assets measured at fair value $ 2,023 $ 2,023 $ — $ — December 31, 2023 Level 1 Level 2 Level 3 Assets: Investments in rabbi trust $ 2,079 $ 2,079 $ — $ — Total assets measured at fair value $ 2,079 $ 2,079 $ — $ — Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis 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. 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 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. The interest rate on the credit facility represents a level 2 fair value input. 11 Table of Contents 8. Commitments and Contingencies Because litigation is inherently unpredictable, assessing contingencies related to litigation is a complex process involving highly subjective judgment about potential outcomes of future events. When evaluating litigation contingencies, we may be unable to provide a meaningful estimate due to a number of factors, including the procedural status of the matter in question, the availability of appellate remedies, insurance coverage related to the claim or claims in question, the presence of complex or novel legal theories, and the ongoing discovery and development of information important to the matter. In addition, damage amounts claimed in litigation against us may be unsupported, exaggerated, or unrelated to possible outcomes, and as such are not meaningful indicators of our potential liability or financial exposure. Accordingly, we review the adequacy of accruals and disclosures each quarter in consultation with legal counsel, and we assess the probability and range of possible losses associated with contingencies for potential accrual in the Condensed Consolidated Financial Statements. However, the ultimate resolution of litigated claims may differ from our current estimates. In the normal course of business, there are various claims in process, matters in litigation, 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. 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. 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 ultimately may be subject to greater or less than the accrued amount for this and other matters. 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. 12 Table of Contents