rrgb-20200419

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒						QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April 19, 2020


☐						TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-34851

RED ROBIN GOURMET BURGERS, INC.

(Exact name of registrant as specified in its charter)


Delaware						84-1573084
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

6312 S. Fiddlers Green Circle, Suite 200N Greenwood Village, Colorado 80111

(Address of principal executive offices) (Zip Code)

(303) 846-6000

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

☐

Accelerated Filer

☒

Non-accelerated Filer

☐

Smaller Reporting Company

☐

Emerging Growth Company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of each class

Trading symbol(s)

Name of each exchange on which registered

Common Stock, $0.001 par value

RRGB

NASDAQ

(Global Select Market)

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

As of June 8, 2020, there were 12,913,659 shares of the registrant's common stock, par value of $0.001 per share outstanding.

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RED ROBIN GOURMET BURGERS, INC.

TABLE OF CONTENTS

Page

PART I - FINANCIAL INFORMATION

Item 1.

Financial Statements (unaudited)

Condensed Consolidated Balance Sheets

Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income

Condensed Consolidated Statements of Stockholders' Equity

Condensed Consolidated Statements of Cash Flows

Notes to Condensed Consolidated Financial Statements

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Item 4.

Controls and Procedures

PART II - OTHER INFORMATION

Unregistered Sales of Equity Securities and Use of Proceeds

Item 6.

Exhibits

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PART I — FINANCIAL INFORMATION

ITEM 1. Financial Statements (unaudited)

RED ROBIN GOURMET BURGERS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share amounts)


	(Unaudited)
	April 19, 2020		December 29, 2019
Assets:
Current assets:
Cash and cash equivalents	$	88,920	$	30,045
Accounts receivable, net	10,263		22,372
Inventories	24,863		26,424
Prepaid expenses and other current assets	30,790		26,646

Total current assets	154,836		105,487
Property and equipment, net	486,273		518,013
Right of use assets, net	413,287		426,248
Goodwill	—		96,397
Intangible assets, net	27,369		29,975
Other assets, net	40,286		61,460
Total assets	$	1,122,051	$	1,237,580
Liabilities and stockholders’ equity:
Current liabilities:
Accounts payable	$	26,304	$	33,040
Accrued payroll and payroll-related liabilities	24,694		35,221
Unearned revenue	43,349		54,223
Short-term portion of lease obligations	49,654		42,699
Short-term debt	9,692		—
Accrued liabilities and other	39,110		29,403
Total current liabilities	192,803		194,586
Long-term debt	281,221		206,875
Long-term portion of lease obligations	453,775		465,435
Other non-current liabilities	9,883		10,164
Total liabilities	937,682		877,060
Stockholders’ equity:
Common stock; $0.001 par value: 45,000 shares authorized; 17,851 and 17,851 shares issued; 12,890 and 12,923 shares outstanding as of April 19, 2020 and December 29, 2019	18		18
Preferred stock, $0.001 par value: 3,000 shares authorized; no shares issued and outstanding as of April 19, 2020 and December 29, 2019	—		—
Treasury stock 4,961 and 4,928 shares, at cost, as of April 19, 2020 and December 29, 2019	(202,343)		(202,313)
Paid-in capital	213,246		213,922
Accumulated other comprehensive loss, net of tax	(5,520)		(4,373)
Retained earnings	178,968		353,266
Total stockholders’ equity	184,369		360,520
Total liabilities and stockholders’ equity	$	1,122,051	$	1,237,580

See Notes to Condensed Consolidated Financial Statements.

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RED ROBIN GOURMET BURGERS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME

(In thousands, except per share amounts)

(Unaudited)


	Sixteen Weeks Ended
	April 19, 2020		April 21, 2019
Revenues:
Restaurant revenue	$	301,434	$	400,484
Franchise and other revenues	4,631		9,382

Total revenues	306,065		409,866
Costs and expenses:
Restaurant operating costs (excluding depreciation and amortization shown separately below):
Cost of sales	70,426		93,715
Labor	118,566		142,894
Other operating	52,291		55,565
Occupancy	33,657		35,020
Depreciation and amortization	28,320		28,438
Selling, general, and administrative expenses	41,502		48,116
Pre-opening costs	153		319
Other charges	119,379		2,398
Total costs and expenses	464,294		406,465

(Loss) income from operations	(158,229)		3,401
Other expense:
Interest expense, net and other	3,370		3,238



(Loss) income before income taxes	(161,599)		163
Income tax provision (benefit)	12,699		(476)
Net (loss) income	$	(174,298)	$	639
(Loss) earnings per share:
Basic	$	(13.51)	$	0.05
Diluted	$	(13.51)	$	0.05
Weighted average shares outstanding:
Basic	12,903		12,967
Diluted	12,903		13,041

Other comprehensive (loss) income:
Foreign currency translation adjustment	$	(1,147)	$	(329)
Other comprehensive loss, net of tax	(1,147)		(329)
Total comprehensive (loss) income	$	(175,445)	$	310

See Notes to Condensed Consolidated Financial Statements.

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RED ROBIN GOURMET BURGERS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

(Unaudited)


	Common Stock				Treasury Stock								Accumulated Other Comprehensive Loss, net of tax
																Paid-in Capital	Retained Earnings
	Shares	Amount		Shares	Amount										Total
Balance, December 29, 2019	17,851	$	18	4,928	$	(202,313)	$	213,922	$	(4,373)	$	353,266	$	360,520
Exercise of options, issuance of restricted stock, shares exchanged for exercise and tax, and stock issued through employee stock purchase plan	—	—		(39)	1,605		(1,388)		—		—		217

Acquisition of treasury stock	—	—		72	(1,635)		—		—		—		(1,635)
Non-cash stock compensation	—	—		—	—		712		—		—		712
Net loss	—	—		—	—		—		—		(174,298)		(174,298)
Other comprehensive loss	—	—		—	—		—		(1,147)		—		(1,147)

Balance, April 19, 2020	17,851	$	18	4,961	$	(202,343)	$	213,246	$	(5,520)	$	178,968	$	184,369


	Common Stock				Treasury Stock								Accumulated Other Comprehensive Loss, net of tax
																Paid-in Capital	Retained Earnings
	Shares	Amount		Shares	Amount										Total
Balance, December 30, 2018	17,851	$	18	4,880	$	(201,505)	$	212,752	$	(4,801)	$	376,341	$	382,805
Exercise of options, issuance of restricted stock, shares exchanged for exercise and tax, and stock issued through employee stock purchase plan	—	—		(32)	1,344		(1,204)		—		—		140

Acquisition of treasury stock	—	—		31	(974)		—		—		—		(974)
Non-cash stock compensation	—	—		—	—		477		—		—		477
Net income	—	—		—	—		—		—		639		639
Other comprehensive loss	—	—		—	—		—		(329)		—		(329)
Topic 842 transition impairment, net of tax	—	—		—	—		—		—		(15,172)		(15,172)
Balance, April 21, 2019	17,851	$	18	4,879	$	(201,135)	$	212,025	$	(5,130)	$	361,808	$	367,586

See Notes to Condensed Consolidated Financial Statements.

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RED ROBIN GOURMET BURGERS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Sixteen Weeks Ended
	April 19, 2020		April 21, 2019
Cash flows from operating activities:
Net (loss) income	$	(174,298)	$	639
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Depreciation and amortization	28,320		28,438

Goodwill and restaurant asset impairment	110,912		—
Non-cash other charges	808		1,859
Deferred income tax provision (benefit)	21,152		(760)
Stock-based compensation expense	706		475
Other, net	(630)		(3,509)
Changes in operating assets and liabilities:
Accounts receivable	11,711		12,444
Inventories	1,484		(728)
Prepaid expenses and other current assets	(4,144)		(1,224)
Lease assets, net of liabilities	6,795		3,721
Trade accounts payable and accrued liabilities	(8,022)		(5,576)
Unearned revenue	(9,460)		(10,453)
Other operating assets and liabilities, net	1,346		(35)
Net cash (used in) provided by operating activities	(13,320)		25,291
Cash flows from investing activities:
Purchases of property, equipment, and intangible assets	(8,746)		(10,195)
Proceeds from sales of real estate and property, plant, and equipment and other investing activities	43		118
Net cash used in investing activities	(8,703)		(10,077)
Cash flows from financing activities:
Borrowings of long-term debt	116,000		111,000
Payments of long-term debt and finance leases	(32,006)		(121,239)
Purchase of treasury stock	(1,635)		(974)
Debt issuance costs	(1,040)		—
Proceeds from exercise of stock options and employee stock purchase plan	419		368
Net cash provided by (used in) financing activities	81,738		(10,845)
Effect of exchange rate changes on cash	(840)		21
Net change in cash and cash equivalents	58,875		4,390
Cash and cash equivalents, beginning of period	30,045		18,569
Cash and cash equivalents, end of period	$	88,920	$	22,959

Supplemental disclosure of cash flow information
Income taxes (refund received) paid	$	(11)	$	2,492
Interest paid, net of amounts capitalized	2,708		3,481
Change in construction related payables	$	(1,745)	$	635

See Notes to Condensed Consolidated Financial Statements.

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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 19, 2020, the Company owned and operated 452 restaurants located in 38 states. The Company also had 102 franchised full-service restaurants in 16 states and one Canadian province as of April 19, 2020. The Company operates its business as one operating and one reportable segment.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include the accounts of Red Robin and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. The Company’s financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The results of operations for any interim period are not necessarily indicative of results for the full year.

The accompanying condensed consolidated financial statements of Red Robin have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”), including the instructions to Form 10-Q and Article 10 of Regulation S-X. Certain information and footnote disclosures normally included in the Company’s annual consolidated financial statements on Form 10-K have been condensed or omitted. The condensed consolidated balance sheet as of December 29, 2019 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 29, 2019, filed with the SEC on February 25, 2020.

Our current and prior 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 2020

April 19, 2020

First Quarter 2019

April 21, 2019

Current and Prior Fiscal Years:

Fiscal Year 2020

December 27, 2020

Fiscal Year 2019

December 29, 2019

Reclassifications

Certain amounts presented in prior periods have been reclassified to conform with the current period presentation. For the sixteen weeks ended April 21, 2019, the Company reclassified the following within net cash (used in) provided by operating activities on the condensed consolidated statements of cash flows: $3.7 million from Other, net to Lease assets, net of liabilities presented in the changes to operating assets and liabilities, $0.8 million from Other, net to Deferred income tax provision (benefit) presented in the adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities, and $0.7 million from Prepaid expense and other current assets to Inventories presented in the changes to operating assets and liabilities.

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Going Concern

Under ASC 205-40, Presentation of Financials Statements – Going Concern, the Company is required to assess whether substantial doubt is raised in that conditions or events indicate that it is probable the Company will be unable to meet its obligations when they come due within one year from the financial statement issuance date. The assessment also includes the Company's consideration of any management plans to alleviate such substantial doubt. The conditions related to the COVID-19 pandemic have had a material adverse impact on the Company's revenues, profitability, and cash flows.

Pursuant to the terms of the First Amendment to the Credit Agreement and Waiver (the "Amendment") to the Company's Amended and Restated Credit Agreement (the "Credit Facility"), further described in Note 2, COVID-19 Pandemic, the lenders thereto agreed, among other things, to waive the existing events of default under the Credit Facility related to the Company's failure to comply with the financial covenants as of the end of the fiscal quarter ended April 19, 2020. In addition, the lenders agreed to (a) suspend the application of the lease adjusted leverage ratio financial covenant (the "Leverage Ratio Covenant") and the fixed charge coverage ratio financial covenant (the "FCCR Covenant"), in each case, for the fiscal quarters ending on July 12, 2020, October 4, 2020 and December 27, 2020 and (b) increase the maximum leverage permitted for purposes of the Leverage Ratio Covenant for each of the first three fiscal quarters ending in 2021; provided that the Company issues new equity (or convertible debt) generating net cash proceeds of at least $25 million.

The Company is actively evaluating options for raising equity capital in order to satisfy the requirements of the Amendment. If the Company is unable to raise sufficient equity capital within the timeframe prescribed by the Amendment, and is unable to obtain a further waiver or amendment to the Credit Facility, then the Company could experience an event of default under the Credit Facility, which could have a material adverse effect on the Company's liquidity, financial condition, and results of operations. We cannot make any assurance regarding the likelihood, certainty, or exact timing of the Company's ability to raise capital or execute further amendments to the Credit Facility. As a result, under applicable accounting standards, the Company concluded, because the equity raise is outside of management's control, substantial doubt exists surrounding the Company's ability to meet its obligations within one year of the financial statement issuance date and to continue as a going concern.

The condensed consolidated financial statements included in this Quarterly Report on Form 10-Q do not include any adjustments that might result from the outcome of this uncertainty.

Recent Accounting Pronouncements

Income Taxes

In December 2019, the Financial Accounting Standards Board ("FASB") issued Update 2019-12, Income Taxes ("Topic 740") as part of its Simplification Initiative. This guidance provides amendments to simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. This guidance is effective for annual and interim reporting periods beginning after December 15, 2020, and early adoption is permitted. We are currently evaluating the full impact this guidance will have on our consolidated financial statements.

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.

Recently Adopted Accounting Standards

Current and Expected Credit Losses

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Update 2016-13, Financial Instruments - Credit Losses (“Topic 326”), subsequently amended by various standard updates. This guidance replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information when determining credit loss estimates and requires financial assets to be measured net of expected credit losses at the time of initial recognition. The Company performed an analysis to determine the impact on our condensed consolidated financial statements and recognized an immaterial adjustment to Accounts Receivable, Net on our condensed consolidated balance sheets upon adoption during the first quarter of 2020. We performed an update to our analysis in the context of the COVID-19 pandemic and recognized an additional immaterial adjustment related to our franchise receivables.

2. COVID-19 Pandemic

Overview

Due to the novel coronavirus ("COVID-19") pandemic, we have navigated and continue to navigate an unprecedented time for our business and industry as we collectively work to combat the global crisis. With the health, safety, and well-being of Red Robin's Team Members, Guests, and communities as our top priority, we immediately shifted our restaurants to an off-premise model and are strictly adhering to US Centers for Disease Control ("CDC"), state, and local guidelines as we have begun to reopen our dining rooms to our Guests and Team Members. The COVID-19 pandemic has had a material effect on our business, and we expect the impact from COVID-19 will continue to negatively affect our business through the remainder of fiscal year 2020.

Franchise Revenue

In response to COVID-19's effect on our franchisee's operations, we temporarily abated franchise royalty payments and advertising contributions effective March 20, 2020. During periods of abated payments, franchise revenue is not recognized under GAAP or collected from our franchise partners. Franchised restaurants operate under contractual arrangements with the Company, and the payments specified in the franchise contracts will be accounted for under ASC Topic 606, Revenue from Contracts with Customers.

Rent

In response to the impact of COVID-19 on our operations, beginning April 1, 2020 the Company has not made full lease payments under its existing lease agreements. During the suspension of payments, the Company continued to recognize expenses and liabilities for lease obligations and corresponding right-of-use assets on the balance sheet in accordance with ASC Topic 842.

We have engaged in ongoing constructive discussions with landlords regarding the potential restructuring of lease payments and rent concessions. We will elect to recognize any contractual rent concessions reached in the future as a variable credit to rent expense as opposed to a lease modification consistent with the relief issued by the Financial Accounting Standards Board titled ASC Topic 842 and ASC Topic 840: Accounting for Lease Concessions Related to the Effects of the COVID-19 Pandemic. Contractual rent concessions expected to be agreed to cannot be reasonably determined at this time based on the status of discussions with our landlords.

Goodwill

The Company determined the sustained decrease in our stock price coupled with the closure of our dining rooms and significant decline to the equity value of our peers and overall U.S. stock market represented a goodwill impairment triggering event. We performed a quantitative analysis as of our first quarter ended April 19, 2020 to determine if impairment to our goodwill existed for our one reporting unit. We used a blended approach in calculating fair value of our one reporting unit including the income approach, market approach, and market capitalization approach. This analysis resulted in full impairment of our goodwill balance totaling $95.4 million recognized during the sixteen weeks ended April 19, 2020 included in Other charges on the condensed consolidated statement of operations and comprehensive (loss) income. The goodwill impairment was measured as the amount by which the carrying amount of the reporting unit, including goodwill, exceeded its fair value.

Restaurant Assets

The Company determined the triggering event described above also represented a restaurant asset impairment triggering event. The Company recognized $15.5 million of impairment related to restaurant assets during the sixteen weeks ended April 19, 2020 included in Other charges on the condensed consolidated statement of operations and comprehensive (loss) income resulting from the continuing and projected future results of 24 Company-owned restaurants. Recoverability of restaurant assets, including restaurant sites, leasehold improvements, information technology systems, right-of-use assets, amortizable intangible assets, and other fixed 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. Identifiable cash flows are measured at the lowest level for which they are largely independent of the cash flows of other groups of assets and liabilities, generally at the restaurant level. Each restaurant's past and present operating performance was reviewed in combination with projected future results primarily through projected undiscounted cash flows that included management's expectation of future financial impacts from COVID-19. If the restaurant assets were determined to be impaired through comparison of the assets carrying value to its undiscounted cash flows, the Company compared the carrying amount of each restaurant's assets to its fair value as estimated by management to calculate the impairment amount. The fair value of restaurant assets is generally determined using a discounted cash flow projection model, which is based on significant inputs not observed in the market and represents a level 3 fair value measurement. In certain cases, management uses other market information, when available, to estimate the fair value of a restaurant's assets. The restaurant asset impairment charges represent the excess of the carrying amount over the estimated fair value of the restaurant assets calculated using a discounted cash flow projection model. Additional restaurant asset impairment may be required to be recognized if the COVID-19 pandemic continues to negatively impact our business.

Valuation Allowance on Deferred Tax Assets

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the future reversals of existing deferred tax liabilities and projected taxable income, including whether future originating deductible temporary differences are likely to be realized.

The March 19, 2020 passage of the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") created an opportunity for the Company to carry back 2019 and 2020 projected net operating losses ("NOL's") to generate up to $12 million of projected cash tax refunds within the next 12 months. As a result of these projected NOL carrybacks, approximately $38 million of the previously utilized FICA tip tax credits will be reinstated. As of April 19, 2020 the existing $52 million FICA tip credit carryforwards will be utilized based on projected future taxable income, however they are anticipated to be replaced by originating FICA tip credits that are not projected to be utilized in the carry forward period. Therefore, a $52 million valuation allowance has been established for the FICA tip credit carryforwards. To the extent future actual taxable income exceeds the current projections, the FICA tip credit carryforwards may become realizable.

Borrowings

During the first quarter ended April 19, 2020, the Company made draws of $94 million on its revolving line of credit to provide operating liquidity while our restaurant dining rooms remain closed due to the COVID-19 pandemic. As of April 19, 2020, our credit facility was fully drawn.

Subsequent Event - Credit Agreement Amendment

On May 29, 2020, the Company entered into the Amendment which amends the Company's Credit Facility as follows:

•increased the pricing under the Credit Facility for (a) the period of the Amendment Effective Date through the first interest determination date occurring after the fiscal quarter ending on or about April 18, 2021 to LIBOR (subject to a 1.00% LIBOR floor) plus 3.25% and (b) periods thereafter to the amounts set forth in a grid included in the Amendment (to which a 1.00% LIBOR floor shall apply);

•waived the existing events of default under the Credit Facility related to the Company's failure to comply with the financial covenants as of April 19, 2020

•suspended the application of (a) the Lease Ratio Covenant and (b) the FCCR Covenant, in each case, for the fiscal quarter ending on July 12, 2020;

•if the Company issues new equity (or convertible debt) generating net cash proceeds of at least $25 million (the "Minimum Capital Event"), (a) suspend the application of the Leverage Ratio Covenant and FCCR Covenant, in each case, for the fiscal quarters ending on October 4, 2020 and December 27, 2020 and (b) increase the maximum leverage permitted for purposes of the Leverage Ratio Covenant for each of the first three fiscal quarters ending in 2021;

•Additionally, (a) the Leverage Ratio Covenant will be calculated using a seasonally adjusted annualized consolidated EBITDA for the applicable period since the beginning of fiscal year 2021 and (b) the FCCR Covenant will be calculated only for the applicable period since the beginning of fiscal year 2021;

•added a minimum liquidity covenant, measured as of the last day of each fiscal month, that applies during the period commencing on the Amendment Effective Date through March 21, 2021;

•subject to limited exceptions, prohibit expansion capital expenditures, restricted payments, acquisitions, and other investments until the later of (a) the Company's delivery of a compliance certificate for the fiscal quarter ending on or about July 11, 2021 demonstrating compliance with the financial covenants then in effect and (b) the Company satisfying an agreed ratio under its Leverage Ratio Covenant for the most recently ended fiscal quarter or fiscal year, as applicable;

•added a maximum cash balance limitation requiring revolver repayments (but with no associated permanent reduction in the revolver) to the extent that the Company's consolidated cash on hand exceeds $30 million as of the end of any fiscal month;

•revised the conditions precedent to the revolver borrowings so that certain effects of COVID-19 are excluded for purposes of certain representations and warranties that must be true and correct as conditions to revolving borrowings;

•required mandatory prepayments from net cash proceeds of equity (or convertible debt) issuances that exceed amounts set forth in the Amendment; and

•provided for certain additional financial reporting requirements under the Credit Facility.

As conditions to the Amendment, the Company (a) repaid the revolving loans, so that the amount of the Company's consolidated cash on hand did not exceed $30 million as of the Amendment Effective Date totaling $59 million and (b) paid certain customary amendment fees to the lenders under the Credit Facility totaling approximately $1.1 million which will be capitalized as deferred loan fees and amortized over the remaining term of the Credit Facility.

3. Revenue

Disaggregation of revenue

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


	Sixteen Weeks Ended
	April 19, 2020		April 21, 2019
Restaurant revenue	$	301,434	$	400,484
Franchise revenue⁽¹⁾	2,897		5,363
Gift card breakage	1,414		3,680
Other revenue	320		339
Total revenues	$	306,065	$	409,866

———————————————————

⁽¹⁾ The decrease in Franchise revenue is driven by the temporary abatement and non-collection of franchise payments. See Note 2, COVID-19 Pandemic, for further discussion.

Contract liabilities

Components of Unearned revenue in the accompanying condensed consolidated balance sheets are as follows (in thousands):


	April 19, 2020		December 29, 2019
Unearned gift card revenue	$	32,650	$	43,544
Deferred loyalty revenue	$	10,699	$	10,679

Revenue recognized in the condensed consolidated statements of operations and comprehensive (loss) income 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):


	Sixteen Weeks Ended
	April 19, 2020		April 21, 2019
Gift card revenue	$	11,911	$	16,097

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4. Leases

Leases are included in right-of-use assets, net, short-term portion of lease obligations, and long-term portion of lease liabilities on our condensed consolidated balance sheet as of April 19, 2020 and December 29, 2019 as follows (in thousands):


April 19, 2020	Finance		Operating		Total
Right of use assets, net	$	7,324	$	405,963	$	413,287

Short-term portion of lease obligations	738		48,916		49,654
Long-term portion of lease obligations	8,624		445,151		453,775
Total	$	9,362	$	494,067	$	503,429

December 29, 2019	Finance		Operating		Total
Right of use assets, net	$	7,552	$	418,696	$	426,248

Short-term portion of lease obligations	725		41,974		42,699
Long-term portion of lease obligations	8,822		456,613		465,435
Total	$	9,547	$	498,587	$	508,134

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 as follows (in thousands):


	Sixteen Weeks Ended
	April 19, 2020		April 21, 2019
Operating lease cost	$	21,990	$	23,672
Finance lease cost:
Amortization of right of use assets	203		248
Interest on lease liabilities	138		169
Total finance lease cost	$	341	$	417
Variable lease cost	8,317		8,885
Total	$	30,648	$	32,974

Maturities of our lease liabilities as of April 19, 2020 were as follows (in thousands):


	Finance Leases		Operating Leases		Total
Remainder of 2020	$	877	$	57,349	$	58,226
2021	1,133		76,042		77,175
2022	979		73,629		74,608
2023	916		71,600		72,516
2024	932		68,384		69,316
Thereafter	7,458		379,808		387,266
Total future lease liability	$	12,295	$	726,812	$	739,107
Less imputed interest	2,933		232,745		235,678
Fair value of lease liability	$	9,362	$	494,067	$	503,429

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Supplemental cash flow information related to leases is as follows (in thousands, except other information):


	Sixteen Weeks Ended
	April 19, 2020			April 21, 2019
Cash flows from operating activities
Cash paid related to lease liabilities
Operating leases	$	12,683		$	19,772
Finance leases	138			137
Cash flows from financing activities
Cash paid related to lease liabilities
Finance leases	—			239
Cash paid for amounts included in the measurement of lease liabilities:	$	12,821		$	20,148

Right of use assets obtained in exchange for operating lease obligations	$	2,311		$	4,325
Right of use assets obtained in exchange for finance lease obligations	$	—		$	1,669

Other information related to operating leases as follows:
Weighted average remaining lease term	10.50 years			11.32 years
Weighted average discount rate	7.38		%	7.34		%

Other information related to financing leases as follows:
Weighted average remaining lease term	12.14 years			11.96 years
Weighted average discount rate	4.86		%	4.77		%

5. Goodwill and Intangible Assets

The following table presents goodwill as of April 19, 2020 and December 29, 2019 (in thousands):


Balance, December 29, 2019	$	96,397
Foreign currency translation adjustment	(983)
Goodwill impairment⁽¹⁾	(95,414)
Balance, April 19, 2020	$	—

———————————————————

⁽¹⁾ See Note 2, COVID-19 Pandemic, for further discussion of goodwill impairment recognized during the sixteen weeks ended April 19, 2020.

The following table presents intangible assets as of April 19, 2020 and December 29, 2019 (in thousands):


	April 19, 2020										December 29, 2019
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Intangible assets subject to amortization:
Franchise rights	$	50,584	$	(35,520)	$	15,064	$	53,336	$	(35,896)	$	17,440
Favorable leases	13,001		(8,957)		4,044		13,001		(8,794)		4,207
Liquor licenses and other	10,713		(9,912)		801		10,737		(9,869)		868
	$	74,298	$	(54,389)	$	19,909	$	77,074	$	(54,559)	$	22,515
Indefinite-lived intangible assets:
Liquor licenses and other	$	7,460	$	—	$	7,460	$	7,460	$	—	$	7,460
Intangible assets, net	$	81,758	$	(54,389)	$	27,369	$	84,534	$	(54,559)	$	29,975

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6. (Loss) Earnings Per Share

Basic earnings per share amounts are calculated by dividing net (loss) income by the weighted-average number of shares of common stock outstanding during the period. Diluted (loss) earnings per share amounts are calculated based upon the weighted-average number of shares of common stock and potentially dilutive shares of common stock outstanding during the period. Potentially dilutive shares are excluded from the computation in periods in which they have an anti-dilutive effect. Diluted (loss) earnings per share reflect the potential dilution that could occur if holders of options exercised their options into common stock.

The Company uses the treasury stock method to calculate the effect of outstanding stock options. Basic weighted average shares outstanding is reconciled to diluted weighted average shares outstanding as follows (in thousands):


	Sixteen Weeks Ended
	April 19, 2020	April 21, 2019
Basic weighted average shares outstanding	12,903	12,967
Dilutive effect of stock options and awards	—	74
Diluted weighted average shares outstanding	12,903	13,041

Awards excluded due to anti-dilutive effect on diluted earnings per share	318	487

7. Other Charges

Other charges consist of the following (in thousands):


	Sixteen Weeks Ended
	April 19, 2020		April 21, 2019
Goodwill impairment	$	95,414	$	—
Restaurant asset impairment	15,498		—
Litigation contingencies	4,500		—
Board and stockholder matter costs	1,482		—
Restaurant closure and refranchising costs	1,406		304
Severance and executive transition	881		1,994
COVID-19 related charges	198		—


Executive retention	—		100
Other charges	$	119,379	$	2,398

The Company recognized non-cash impairment charges related to goodwill and restaurant assets at 24 res