rrgb-20210711

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 July 11, 2021


☐						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 August 16, 2021, there were 15,710,386 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)	1
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations and Comprehensive Loss	2
	Condensed Consolidated Statements of Stockholders' Equity	3
	Condensed Consolidated Statements of Cash Flows	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	13
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26
Item 4.	Controls and Procedures	26
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	27
Item 1A.	Risk Factors	27
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27
Item 6.	Exhibits	28
	Signature	29

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PART I — FINANCIAL INFORMATION

ITEM 1. Financial Statements (unaudited)

RED ROBIN GOURMET BURGERS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


(in thousands, except for per share amounts)	July 11, 2021		December 27, 2020
Assets:
Current assets:
Cash and cash equivalents	$	25,569	$	16,116
Accounts receivable, net	11,323		16,510
Inventories	23,926		23,802
Income tax receivable	16,352		16,662
Prepaid expenses and other current assets	12,342		13,818
Total current assets	89,512		86,908
Property and equipment, net	396,746		427,033
Right of use assets, net	424,647		425,573

Intangible assets, net	23,069		24,714
Other assets, net	8,129		10,511
Total assets	$	942,103	$	974,739
Liabilities and stockholders' equity:
Current liabilities:
Accounts payable	$	31,396	$	20,179
Accrued payroll and payroll-related liabilities	34,106		27,653
Unearned revenue	43,531		50,138
Current portion of lease obligations	51,022		55,275
Current portion of long-term debt	9,692		9,692
Accrued liabilities and other	44,258		39,617
Total current liabilities	214,005		202,554
Long-term debt	145,106		160,952
Long-term portion of lease obligations	457,896		465,233
Other non-current liabilities	15,933		25,287
Total liabilities	$	832,940	$	854,026
Commitments and contingencies (see note 9)
Stockholders' equity:
Common stock; $0.001 par value: 45,000 shares authorized; 20,449 shares issued; 15,717 and 15,548 shares outstanding as of July 11, 2021 and December 27, 2020	$	20	$	20
Preferred stock, $0.001 par value: 3,000 shares authorized; no shares issued and outstanding as of July 11, 2021 and December 27, 2020	—		—
Treasury stock 4,732 and 4,901 shares, at cost, as of July 11, 2021 and December 27, 2020	(193,039)		(199,908)
Paid-in capital	238,677		243,407
Accumulated other comprehensive income (loss), net of tax	16		(4)
Retained earnings	63,489		77,198
Total stockholders' equity	109,163		120,713
Total liabilities and stockholders' equity	$	942,103	$	974,739

See Notes to Condensed Consolidated Financial Statements.

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RED ROBIN GOURMET BURGERS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)


	Twelve Weeks Ended				Twenty-Eight Weeks Ended
(in thousands, except for per share amounts)	July 11, 2021		July 12, 2020		July 11, 2021		July 12, 2020
Revenues:
Restaurant revenue	$	272,157	$	160,144	$	590,834	$	461,578
Franchise and other revenues	4,818		978		12,416		5,609

Total revenues	276,975		161,122		603,250		467,187
Costs and expenses:
Restaurant operating costs (excluding depreciation and amortization shown separately below):
Cost of sales	61,917		38,780		131,083		109,206
Labor	98,949		62,742		210,608		181,308
Other operating	46,928		34,663		104,640		86,954
Occupancy	21,614		20,758		51,714		54,415
Depreciation and amortization	19,215		20,560		45,103		48,880
Selling, general, and administrative expenses	28,346		19,697		58,956		61,199
Pre-opening costs	374		3		374		156
Other charges	2,196		14,501		7,667		133,880
Total costs and expenses	279,539		211,704		610,145		675,998

Loss from operations	(2,564)		(50,582)		(6,895)		(208,811)
Other expense:
Interest expense, net and other	2,786		1,979		7,116		5,349



Loss before income taxes	(5,350)		(52,561)		(14,011)		(214,160)
Income tax (benefit) provision	(354)		3,700		(302)		16,399
Net loss	$	(4,996)	$	(56,261)	$	(13,709)	$	(230,559)
Loss per share:
Basic	$	(0.32)	$	(4.09)	$	(0.88)	$	(17.38)
Diluted	$	(0.32)	$	(4.09)	$	(0.88)	$	(17.38)
Weighted average shares outstanding:
Basic	15,665		13,741		15,617		13,262
Diluted	15,665		13,741		15,617		13,262

Other comprehensive (loss) income:
Foreign currency translation adjustment	$	(1)	$	17	$	20	$	(1,130)
Other comprehensive (loss) income, net of tax	(1)		17		20		(1,130)
Total comprehensive loss	$	(4,997)	$	(56,244)	$	(13,689)	$	(231,689)

See Notes to Condensed Consolidated Financial Statements.

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RED ROBIN GOURMET BURGERS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Unaudited)


	Common Stock			Treasury Stock					Accumulated Other Comprehensive (Loss) Income, net of tax
							Paid-in Capital				Retained Earnings
(in thousands)	Shares	Amount		Shares	Amount								Total
Balance, December 27, 2020	20,449	$	20	4,901	$	(199,908)	$	243,407	$	(4)	$	77,198	$	120,713
Exercise of options, issuance of restricted stock, shares exchanged for exercise and tax, and stock issued through employee stock purchase plan	—	—		(74)	3,025		(3,640)		—		—		(615)


Non-cash stock compensation	—	—		—	—		880		—		—		880
Net loss	—	—		—	—		—		—		(8,713)		(8,713)
Other comprehensive income	—	—		—	—		—		21		—		21

Balance, April 18, 2021	20,449	$	20	4,827	$	(196,883)	$	240,647	$	17	$	68,485	$	112,286

Exercise of options, issuance of restricted stock, shares exchanged for exercise and tax, and stock issued through employee stock purchase plan	—	—		(95)	3,844		(3,547)		—		—		297


Non-cash stock compensation	—	—		—	—		1,577		—		—		1,577
Net loss	—	—		—	—		—		—		(4,996)		(4,996)
Other comprehensive (loss)	—	—		—	—		—		(1)		—		(1)
Balance, July 11, 2021	20,449	$	20	4,732	$	(193,039)	$	238,677	$	16	$	63,489	$	109,163

See Notes to Condensed Consolidated Financial Statements.

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RED ROBIN GOURMET BURGERS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Unaudited)


	Common Stock			Treasury Stock					Accumulated Other Comprehensive Loss, net of tax
							Paid-in Capital				Retained Earnings
(in thousands)	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
Issuance of common stock, $0.001 par value, net of stock issuance costs	2,598	2		—	—		28,723		—		—		28,725
Exercise of options, issuance of restricted stock, shares exchanged for exercise and tax, and stock issued through employee stock purchase plan	—	—		(59)	2,398		(2,228)		—		—		170


Non-cash stock compensation	—	—		—	—		1,071		—		—		1,071
Net loss	—	—		—	—		—		—		(56,261)		(56,261)
Other comprehensive income	—	—		—	—		—		17		—		17

Balance July 12, 2020	20,449	$	20	4,902	$	(199,945)	$	240,812	$	(5,503)	$	122,707	$	158,091

See Notes to Condensed Consolidated Financial Statements.

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RED ROBIN GOURMET BURGERS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Twenty-Eight Weeks Ended
(in thousands)	July 11, 2021		July 12, 2020
Cash flows from operating activities:
Net loss	$	(13,709)	$	(230,559)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	45,103		48,880
Gift card breakage	(2,793)		(1,806)
Goodwill and asset impairment	1,357		116,193
Non-cash other charges	509		2,764
Deferred income tax provision	—		42,686
Stock-based compensation expense	2,457		1,771
Other, net	1,913		393
Changes in operating assets and liabilities:
Accounts receivable	5,159		13,211
Income tax receivable	334		(17,453)
Inventories	(594)		1,363
Prepaid expenses and other current assets	1,454		(2,717)
Lease assets, net of liabilities	(9,375)		17,666
Trade accounts payable and accrued liabilities	17,358		(9,374)
Unearned revenue	(3,814)		(8,479)
Other operating assets and liabilities, net	(8,175)		6,854
Net cash provided by (used in) operating activities	37,184		(18,607)
Cash flows from investing activities:
Purchases of property, equipment, and intangible assets	(10,854)		(11,456)
Proceeds from sales of real estate and property, plant, and equipment and other investing activities	20		43
Net cash used in investing activities	(10,834)		(11,413)
Cash flows from financing activities:
Borrowings of long-term debt	68,300		135,000
Payments of long-term debt and finance leases	(85,164)		(134,385)
Purchase of treasury stock	—		(1,635)
Debt issuance costs	(616)		(2,952)
Proceeds from issuance of common stock, net of stock issuance costs	—		29,675
Proceeds from exercise of stock options and employee stock purchase plan	549		666
Net cash (used in) provided by financing activities	(16,931)		26,369
Effect of exchange rate changes on cash	34		(256)
Net change in cash and cash equivalents	9,453		(3,907)
Cash and cash equivalents, beginning of period	16,116		30,045
Cash and cash equivalents, end of period	$	25,569	$	26,138

Supplemental disclosure of cash flow information
Income tax refunds received, net	$	(628)	$	(3)
Interest paid, net of amounts capitalized	$	5,423	$	4,915

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 July 11, 2021, the Company owned and operated 430 restaurants located in 38 states. The Company also had 101 franchised full-service restaurants in 16 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 consolidated financial statements on Form 10-K have been condensed or omitted. The Condensed Consolidated Balance Sheet as of December 27, 2020 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 27, 2020 filed with the SEC on March 3, 2021.

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 2021

April 18, 2021

First Quarter 2020

April 19, 2020

Second Quarter 2021

July 11, 2021

Second Quarter 2020

July 12, 2020

Current and Prior Fiscal Years:

Fiscal Year 2021

December 26, 2021

Fiscal Year 2020

December 27, 2020

Reclassifications

Certain amounts presented have been reclassified within the July 12, 2020 Condensed Consolidated Statement of Cash Flows to conform with the current period presentation, including prior year reclassifications from Prepaid expenses and other current assets to Inventory and Income tax receivable within Changes in operating assets and liabilities. The reclassifications had no effect on the Company’s cash flows from operations.

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Recent Accounting Pronouncements

Reference Rate Reform

In March 2020, FASB issued Update 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This update provides temporary optional expedients to applying the reference rate reform guidance to contracts that reference LIBOR or another reference rate expected to be discontinued. Under this update, contract modifications resulting in a new reference rate may be accounted for as a continuation of the existing contract. This guidance is effective upon issuance of the update and applies to contract modifications made through December 31, 2022. We 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.

2. COVID-19 Pandemic

Overview

Due to the coronavirus ("COVID-19") pandemic, we continue to navigate unprecedented challenges and uncertainties for our business and industry. These include jurisdictional restrictions on restaurants limiting indoor dining room capacity. The COVID-19 pandemic has had a material adverse effect on our business, including a significant decrease in Guest traffic and sales since March 2020. As of July 11, 2021, nearly all of our Company-owned and franchised locations were operating without restriction. While we continue to take appropriate actions to mitigate the impact of COVID-19, the future impact on business operations and financial performance remains unknown at this point.

Rent

In response to the impact of COVID-19 on our operations, beginning April 1, 2020 the Company stopped making 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.

As of July 11, 2021, the Company has substantially completed negotiating rent concessions with its landlords, and are making full lease payments to substantially all of our landlords. The types of rent concessions the Company negotiated include early termination, early renewal, rent deferral, and rent abatement.

Income Tax

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 net operating losses ("NOL's"). The 2019 federal NOL's were carried back to previous tax periods and resulted in refunds received and recorded during 2020. The Company has filed the 2020 federal and state NOL cash tax refund claims totaling approximately $16 million during 2021. While we expect to receive a portion of the refunds in 2021, due to government delays in processing these claims we do not expect to receive the majority until 2022.

As of July 11, 2021, the Company had approximately $5.2 million of federal net operating loss carryforwards from the 2020 and 2021 tax years. The Company has approximately $12.2 million of net operating loss carryforwards for state income tax purposes that arose from the 2019, 2020, and 2021 tax years. The federal net operating loss carryforwards will be retained for an indefinite period. Of the state net operating loss carryforwards, approximately $0.2 million may expire, if unused, in 2024. The remaining state net operating losses approximating $12.0 million may expire, if unused, through 2039 or in some cases will be retained for an indefinite period. The utilization of net operating loss carryforwards may be limited to 80% of taxable income in any given year. The total $79.1 million valuation allowance includes the $5.2 million federal NOL and the $12.2 million state NOL's recorded as of July 11, 2021.

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3. Revenue

Disaggregation of revenue

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


	Twelve Weeks Ended				Twenty-Eight Weeks Ended
	July 11, 2021		July 12, 2020		July 11, 2021		July 12, 2020
Restaurant revenue	$	272,157	$	160,144	$	590,834	$	461,578
Franchise revenue	3,944		380		8,820		3,277
Gift card breakage	500		392		2,793		1,806
Other revenue	374		206		803		526
Total revenues	$	276,975	$	161,122	$	603,250	$	467,187

———————————————————

Contract liabilities

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


	July 11, 2021		December 27, 2020
Unearned gift card revenue	$	30,765	$	38,309
Deferred loyalty revenue	$	12,766	$	11,829

Revenue recognized in the Condensed Consolidated Statements of Operations and Comprehensive Loss for the redemption and breakage of gift cards that were included in the liability balance at the beginning of the fiscal year was as follows (in thousands):


	Twenty-Eight Weeks Ended
	July 11, 2021		July 12, 2020
Gift card revenue	$	10,945	$	12,990

4. Leases

Leases are included in right-of-use assets, net, current portion of lease obligations, and long-term portion of lease liabilities on our Condensed Consolidated Balance Sheet as of July 11, 2021 and December 27, 2020 as follows (in thousands):


July 11, 2021	Finance		Operating		Total
Right of use assets, net	$	9,909	$	414,738	$	424,647

Current portion of lease obligations	1,108		49,914		51,022
Long-term portion of lease obligations	10,925		446,971		457,896
Total	$	12,033	$	496,885	$	508,918

December 27, 2020	Finance		Operating		Total
Right of use assets, net	$	9,644	$	415,929	$	425,573

Current portion of lease obligations	1,078		54,197		55,275
Long-term portion of lease obligations	10,937		454,296		465,233
Total	$	12,015	$	508,493	$	520,508

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The components of lease expense, including variable lease costs primarily consisting of common area maintenance charges and real estate taxes, are included in Occupancy on our Condensed Consolidated Statement of Operations and Comprehensive Loss as follows (in thousands):


	Twelve Weeks Ended				Twenty-Eight Weeks Ended
	July 11, 2021		July 12, 2020		July 11, 2021		July 12, 2020
Operating lease cost	$	16,243	$	14,949	$	37,704	$	36,939
Finance lease cost:
Amortization of right of use assets	197		185		460		388
Interest on lease liabilities	117		124		276		262
Total finance lease cost	$	314	$	309	$	736	$	650
Variable lease cost	4,359		4,988		10,775		13,305
Total	$	20,916	$	20,246	$	49,215	$	50,894

Maturities of our lease liabilities as of July 11, 2021 were as follows (in thousands):


	Finance Leases		Operating Leases		Total
Remainder of 2021	$	820	$	35,857	$	36,677
2022	1,327		78,816		80,143
2023	1,244		75,746		76,990
2024	1,264		73,579		74,843
2025	1,283		68,874		70,157
Thereafter	9,349		373,835		383,184
Total future lease liability	$	15,287	$	706,707	$	721,994
Less imputed interest	3,254		209,822		213,076
Carrying value of lease liability	$	12,033	$	496,885	$	508,918

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


	Twenty-Eight Weeks Ended
	July 11, 2021			July 12, 2020
Cash flows from operating activities
Cash paid related to lease liabilities
Operating leases	$	47,727		$	17,188
Finance leases	276			262
Cash flows from financing activities
Cash paid related to lease liabilities
Finance leases	1,018			—
Cash paid for amounts included in the measurement of lease liabilities:	$	49,021		$	17,450

Right of use assets obtained in exchange for operating lease obligations	$	7,784		$	19,781
Right of use assets obtained in exchange for finance lease obligations	$	751		$	4,224

Other information related to operating leases as follows:
Weighted average remaining lease term	10.0 years			10.4 years
Weighted average discount rate	7.01		%	7.25		%

Other information related to finance leases as follows:
Weighted average remaining lease term	11.3 years			12.2 years
Weighted average discount rate	4.56		%	4.96		%

5. Loss Per Share

Basic loss per share amounts are calculated by dividing net loss by the weighted-average number of shares of common stock outstanding during the period. Diluted loss per share amounts are calculated based upon the weighted-average number of shares of common stock and potentially dilutive shares of common stock outstanding during the period. Potentially dilutive shares are excluded from the computation in periods in which they have an anti-dilutive effect. Diluted loss per share reflects the potential dilution that could occur if holders of options exercised their options into common stock. As the Company was in a net loss position for both the twelve week and twenty-eight week periods ended July 11, 2021 and July 12, 2020, 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		Twenty-Eight Weeks Ended
	July 11, 2021	July 12, 2020	July 11, 2021	July 12, 2020
Basic weighted average shares outstanding	15,665	13,741	15,617	13,262
Dilutive effect of stock options and awards	—	—	—	—
Diluted weighted average shares outstanding	15,665	13,741	15,617	13,262

Awards excluded due to anti-dilutive effect on diluted loss per share	241	865	308	317

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6. Other Charges

Other charges consist of the following (in thousands):


	Twelve Weeks Ended				Twenty-Eight Weeks Ended
	July 11, 2021		July 12, 2020		July 11, 2021		July 12, 2020
Restaurant closure and refranchising costs	$	1,752	$	7,602	$	4,199	$	9,008
Asset impairment	115		5,281		1,357		20,779
Litigation contingencies	85		—		1,170		4,500
COVID-19 related costs	244		651		813		849
Board and stockholder matter costs	—		967		128		2,449
Goodwill impairment	—		—		—		95,414
Severance and executive transition	—		—		—		881



Other charges	$	2,196	$	14,501	$	7,667	$	133,880

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

During the twenty-eight weeks ended weeks ended July 11, 2021, we impaired long-lived assets at one Company-owned restaurant with a carrying value of $3.8 million (including right of use assets), recognizing an impairment expense of $1.2 million related to the net book value of long-lived restaurant assets for this restaurant. The impairment was recorded as a result of the decision during the fiscal first quarter to close this restaurant and nine additional restaurants which had also remained closed since the beginning of the COVID-19 pandemic, whose long-lived restaurant assets had no remaining net book value. During the twelve and twenty-eight weeks ended July 12, 2020 the Company recognized non-cash impairment charges related to restaurant assets at 10 and 34 Company-owned restaurants, respectively, resulting from quantitative impairment analyses.

Litigation contingencies include legal settlement costs accrued within the period presented related to class action employment cases and other employment matters.

COVID-19 related costs include the costs of purchasing personal protective equipment for restaurant Team Members and Guests and emergency sick pay provided to restaurant Team Members during the pandemic.

Board and stockholder matters costs were primarily related to the recruitment and appointment of new board members, and other board and stockholder matters.

We performed a goodwill impairment analysis during the first quarter of 2020 resulting in full impairment of our goodwill balance. The goodwill impairment was measured as the amount by which the carrying amount of the reporting unit, including goodwill, exceeded its fair value.

Severance and executive transition in 2020 primarily relates to severance costs associated with the reduction in force of restaurant support center Team Members in April 2020.

7. Borrowings

Borrowings as of July 11, 2021 and December 27, 2020 are summarized below (in thousands):


	July 11, 2021				December 27, 2020
	Borrowings		Weighted Average Interest Rate		Borrowings		Weighted Average Interest Rate
Revolving credit facility, term loan, and other long-term debt	$	154,798	7.40	%	$	170,644	4.50	%
Total debt	154,798				170,644
Less current portion	9,692				9,692
Long-term debt	$	145,106			$	160,952

Amounts issued under letters of credit	$	8,600			$	8,700

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Loan origination costs associated with the Company's credit facility are included as deferred costs in Other assets, net in the accompanying Condensed Consolidated Balance Sheets. Unamortized debt issuance costs were $2.1 million and $3.3 million as of July 11, 2021 and December 27, 2020.

8. 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 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 July 11, 2021 and December 27, 2020 (in thousands):


	July 11, 2021		Level 1		Level 2		Level 3
Assets:
Investments in rabbi trust	$	6,113	$	6,113	$	—	$	—
Total assets measured at fair value	$	6,113	$	6,113	$	—	$	—

	December 27, 2020		Level 1		Level 2		Level 3
Assets:
Investments in rabbi trust	$	6,740	$	6,740	$	—	$	—
Total assets measured at fair value	$	6,740	$	6,740	$	—	$	—

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, goodwill, and other intangible assets. These assets are measured at fair value if determined to be impaired.

As of July 11, 2021, 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. See footnote 6 Other Charges of this Quarterly Report on Form 10-Q for additional detail.

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. Due to market interest rates decreasing during fiscal year 2021, the Company determined the carrying value of the liability under its credit facility did not approximate fair value. The carrying value and fair value of the credit facility as of July 11, 2021 were $153.9 million and $152.4 million. As of December 27, 2020, the carrying value and fair value of the credit facility were $169.8 million and $172.6 million. The interest rate on the credit facility represents a level 2 fair value input.

9. Commitments and Contingencies

In the normal course of business, there are various claims in process, matters in litigation, and other contingencies. These include employment related claims and claims from Guests or Team Members alleging illness, injury, food quality, health, or operational concerns. 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.

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ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations provides a narrative of our financial performance and condition that should be read in conjunction with the accompanying Condensed Consolidated Financial Statements. All comparisons under this heading between 2021 and 2020 refer to the twelve and twenty-eight weeks ended July 11, 2021 and July 12, 2020, unless otherwise indicated.

Overview

Description of Business

Red Robin Gourmet Burgers, Inc., a Delaware corporation, together with its subsidiaries ("Red Robin," "we," "us," "our," or the "Company"), primarily operates, franchises, and develops full-service restaurants with 531 locations in North America. As of July 11, 2021, the Company owned 430 restaurants located in 38 states. The Company also had 101 franchised full-service restaurants in 16 states and one Canadian province. The Company operates its business as one operating and one reportable segment.

COVID-19 Impact

Due to the coronavirus ("COVID-19") pandemic, we continue to navigate an unprecedented time for our business and industry. During the second quarter of 2021, the Company continued to expand dine-in seating capacity at Company-owned restaurants. Reopening dining rooms and expanding seating capacity was executed with the health, safety, and well-being of Red Robin's Team Members, Guests, and communities in mind with strict adherence to US Centers for Disease Control and Prevention, state, and local guidelines. The Company continues to maintain a disciplined focus on execution to provide our Guests a consistent quality experience each and every time they visit through our Total Guest Experience hospitality model ("TGX"), off-premises enhancements, and our new management labor model.

Notably, as of the end of our fiscal eighth period, the Company has sustained off-premises sales that are more than double pre-pandemic levels, even as its restaurants were operating without indoor capacity restrictions. Restaurant operating level expenses incurred for these restaurants during the temporary closures have been recorded in Restaurant closure and refranchising costs in Other charges; see Note 6, Other Charges, in the Notes to the Condensed Consolidated Financial Statements in Part 1, Item 1 of this Quarterly Report on Form 10-Q.

In addition, as our dining rooms have re-opened, our ability to attract and retain restaurant-level employees has become more challenging, as the job market for restaurant managers and hourly Team Members has become more competitive. Staffing is our number one priority; during the second fiscal quarter, we have supported our staffing efforts through technology enhancements to the application and hiring process, holding two national hiring days, and deploying internal and external resources to augment recruiting, hiring, and training efforts. We plan to achieve staffing levels above those in 2019 to support elevated demand compared to 2019. The challenges in hiring and retention have also affected certain of our suppliers, resulting in some intermittent product and distribution shortages.

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Financial and Operational Highlights

The following summarizes the operational and financial highlights during the twelve weeks ended July 11, 2021:

Restaurant Revenue, compared to the same period in the prior year, is presented in the table below:




	(millions)
Restaurant Revenue for the twelve weeks ended July 12, 2020	$	160.1
Increase in comparable restaurant revenue	105.4
Increase from non-comparable restaurants	6.7
Total increase	112.1
Restaurant Revenue for the twelve weeks ended July 11, 2021	$	272.2

The following summarizes the operational and financial highlights during the twenty-eight weeks ended July 11, 2021:

Restaurant Revenue, compared to the same period in the prior year, is presented in the table below:




	(millions)
Restaurant Revenue for the twenty-eight weeks ended July 12, 2020	$	461.6
Increase in comparable restaurant revenue	133.7
Decrease from non-comparable restaurants	(4.4)
Total increase/(decrease)	129.3
Restaurant Revenue for the twenty-eight weeks ended July 11, 2021	$	590.8

Restaurant revenues and operating costs as a percentage of restaurant revenue for the period are detailed in the table below:


	Twelve weeks ended				2021 compared to 2020		Twelve Weeks Ended			2021 compared to 2019(1)
	July 11, 2021		July 12, 2020		Increase/(Decrease)		July 14, 2019(1)			Increase/(Decrease)
Restaurant revenue (millions)	$	272.2	$	160.1	69.9	%	$	302.4		(10.0)	%
Restaurant operating costs:	(Percentage of Restaurant Revenue)				(Basis Points)		(Percentage of Restaurant Revenue)			(Basis Points)
Cost of sales	22.8 %		24.2 %		(140)		23.9		%	(110)
Labor	36.4 %		39.2 %		(280)		35.2		%	120
Other operating	17.2 %		21.6 %		(440)		14.3		%	290
Occupancy	7.9 %		13.0 %		(510)		8.4		%	(50)
Total	84.3 %		98.0 %		(1,370)		81.8		%	250

(1) Presented for improved comparability to pre-COVID-19 operations.


	Twenty-Eight weeks ended				2021 compared to 2020		Twenty-Eight Weeks Ended			2021 compared to 2019(1)
	July 11, 2021		July 12, 2020		Increase/(Decrease)		July 14, 2019(1)			Increase/(Decrease)
Restaurant revenue (millions)	$	590.8	$	461.6	28.0	%	$	702.9		(15.9)	%
Restaurant operating costs:	(Percentage of Restaurant Revenue)				(Basis Points)		(Percentage of Restaurant Revenue)			(Basis Points)
Cost of sales	22.2 %		23.7 %		(150)		23.6		%	(140)
Labor	35.6 %		39.3 %		(370)		35.5		%	10
Other operating	17.7 %		18.8 %		(110)		14.0		%	370
Occupancy	8.8 %		11.8 %		(300)		8.6		%	20
Total	84.3 %		93.6 %		(930)		81.7		%	260

(1) Presented for improved comparability to pre-COVID-19 operations.

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The following table summarizes Net Loss, loss per diluted share, and adjusted loss per diluted share for the twelve and twenty-eight weeks ended July 11, 2021 and July 12, 2020;


	Twelve Weeks Ended				Twenty-Eight Weeks Ended
	July 11, 2021		July 12, 2020		July 11, 2021		July 12, 2020
Net loss as reported	$	(4,996)	$	(56,261)	$	(13,709)	$	(230,559)


























Loss per share - diluted:
Net loss as reported	$	(0.32)	$	(4.09)	$	(0.88)	$	(17.38)
Restaurant closure and refranchising costs	0.11		0.55		0.27		0.68
Asset impairment	0.01		0.38		0.09		1.57
Litigation contingencies	—		—		0.07		0.34
COVID-19 related costs	0.02		0.05		0.05		0.06
Board and stockholder matter costs	—		0.07		0.01		0.18
Severance and executive transition	—		—		—		0.07
Goodwill impairment	—		—		—		7.19


Income tax effect	(0.04)		(0.27)		(0.13)		(2.62)
Adjusted loss per share - diluted	$	(0.22)	$	(3.31)	$	(0.52)	$	(9.91)

Weighted average shares outstanding
Basic	15,665		13,741		15,617		13,262
Diluted	15,665		13,741		15,617		13,262

We believe the non-GAAP measure of adjusted loss per diluted share gives the reader additional insight into the ongoing operational results of the Company, and it is intended to supplement the presentation of the Company's financial results in accordance with GAAP.

Restaurant Data

The following table details restaurant unit data for our Company-owned and franchised locations for the periods indicated:


	Twelve Weeks Ended		Twenty-Eight Weeks Ended
	July 11, 2021	July 12, 2020	July 11, 2021	July 12, 2020
Company-owned:
Beginning of period	440	452	443	454


Closed during the period	(10)	(2)	(13)	(4)
End of period	430	450	430	450
Franchised:
Beginning of period	103	102	103