rrgb-20231001

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 October 1, 2023


☐						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.)

10000 E. Geddes Avenue, Suite 500
Englewood, Colorado 80112

(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)

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 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, a 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 ☒

As of October 30, 2023, there were 15,480,000 shares of the registrant's common stock, par value of $0.001 per share outstanding.

Table of Contents

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 (Deficit)	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	15
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	30
Item 4.	Controls and Procedures	30
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	31
Item 1A.	Risk Factors	31
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31
Item 5.	Other Information	35
Item 6.	Exhibits	33
	Signature	34

Table of Contents

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)	October 1, 2023		December 25, 2022
Assets:
Current assets:
Cash and cash equivalents	$	48,550	$	48,826
Accounts receivable, net	11,819		21,427
Inventories	27,013		26,447
Income tax receivable	462		562
Prepaid expenses and other current assets	12,945		12,938
Restricted cash	12,268		9,380
Total current assets	113,057		119,580
Property and equipment, net	264,278		318,517
Operating lease assets, net	372,057		361,432

Intangible assets, net	17,114		17,727
Other assets, net	10,808		14,889
Total assets	$	777,314	$	832,145
Liabilities and stockholders' equity (deficit):
Current liabilities:
Accounts payable	$	30,020	$	39,336
Accrued payroll and payroll-related liabilities	37,828		33,666
Unearned revenue	31,980		46,944
Current portion of operating lease obligations	50,250		47,394
Current portion of long-term debt	875		3,375
Accrued liabilities and other	53,495		49,498
Total current liabilities	204,448		220,213
Long-term debt	182,142		203,155
Long-term portion of operating lease obligations	389,416		393,157
Other non-current liabilities	10,051		13,831
Total liabilities	786,057		830,356
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; 15,482 and 15,934 shares outstanding as of October 1, 2023 and December 25, 2022	20		20
Preferred stock, $0.001 par value: 3,000 shares authorized; no shares issued and outstanding as of October 1, 2023 and December 25, 2022	—		—
Treasury stock 4,967 and 4,515 shares, at cost, as of October 1, 2023 and December 25, 2022	(176,813)		(182,810)
Paid-in capital	229,769		238,803
Accumulated other comprehensive loss, net of tax	(34)		(34)
Accumulated deficit	(61,685)		(54,190)
Total stockholders' equity (deficit)	(8,743)		1,789
Total liabilities and stockholders' equity (deficit)	$	777,314	$	832,145

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				Forty Weeks Ended
(in thousands, except for per share amounts)	October 1, 2023		October 2, 2022		October 1, 2023		October 2, 2022
Revenues:
Restaurant revenue	$	273,133	$	282,415	$	973,307	$	951,633
Franchise and other revenues	4,427		4,390		20,713		24,302

Total revenues	277,560		286,805		994,020		975,935
Costs and expenses:
Restaurant operating costs (excluding depreciation and amortization shown separately below):
Cost of sales	65,128		70,640		236,171		234,283
Labor	103,741		100,522		358,841		340,273
Other operating	50,351		52,858		174,243		172,725
Occupancy	23,523		22,828		76,806		76,406
Depreciation and amortization	14,672		17,368		52,253		58,924
Selling, general, and administrative expenses	27,961		35,692		89,348		102,168
Pre-opening and acquisition costs	—		217		586		514
Other charges (gains), net	(5,878)		(5,217)		(6,726)		8,236
Total costs and expenses	279,498		294,908		981,522		993,529

Income (loss) from operations	(1,938)		(8,103)		12,498		(17,594)
Other expense:
Interest expense, net and other	5,945		4,590		19,541		16,151



Loss before income taxes	(7,883)		(12,693)		(7,043)		(33,745)
Income tax provision (benefit)	278		(43)		453		453
Net loss	$	(8,161)	$	(12,650)	$	(7,496)	$	(34,198)
Loss per share:
Basic	$	(0.52)	$	(0.80)	$	(0.47)	$	(2.16)
Diluted	$	(0.52)	$	(0.80)	$	(0.47)	$	(2.16)
Weighted average shares outstanding:
Basic	15,799		15,892		15,949		15,816
Diluted	15,799		15,892		15,949		15,816

Other comprehensive income (loss):
Foreign currency translation adjustment	$	(12)	$	(45)	$	1	$	(51)
Other comprehensive income (loss), net of tax	(12)		(45)		1		(51)
Total comprehensive loss	$	(8,173)	$	(12,695)	$	(7,495)	$	(34,249)

See Notes to Condensed Consolidated Financial Statements.

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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 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

Exercise of options, issuance of restricted stock, shares exchanged for exercise and tax, and stock issued through employee stock purchase plan	—	—		(250)	9,933		(8,297)		—		—		1,636

Acquisition of treasury stock	—	—		382	(4,999)		—		—		—		(4,999)
Non-cash stock compensation	—	—		—	—		1,519		—		—		1,519
Net income	—	—		—	—		—		—		3,922		3,922
Other comprehensive income (loss), net of tax	—	—		—	—		—		4		—		4
Balance, July 9, 2023	20,449	$	20	4,518	$	(172,546)	$	229,098	$	(22)	$	(53,524)	$	3,026

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

Acquisition of treasury stock	—	—		480	(4,961)		—		—		—		(4,961)
Non-cash stock compensation	—	—			—		1,480		—		—		1,480
Net loss	—	—		—	—		—		—		(8,161)		(8,161)
Other comprehensive income (loss), net of tax	—	—		—	—		—		(12)		—		(12)
Balance, October 1, 2023	20,449	$	20	4,967	$	(176,813)	$	229,769	$	(34)	$	(61,685)	$	(8,743)

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	Common Stock			Treasury Stock					Accumulated Other Comprehensive Income/(Loss), net of tax
							Paid-in Capital				Retained Earnings
(in thousands)	Shares	Amount		Shares	Amount								Total
Balance, December 26, 2021	20,449	$	20	4,727	$	(192,803)	$	242,560	$	1	$	24,693	$	74,471
Exercise of options, issuance of restricted stock, shares exchanged for exercise and tax, and stock issued through employee stock purchase plan	—	—		(64)	2,781		(2,846)		—		—		(65)


Non-cash stock compensation	—	—		—	—		3,042		—		—		3,042
Net loss	—	—		—	—		—		—		(3,581)		(3,581)
Other comprehensive income (loss), net of tax	—	—		—	—		—		11		—		11

Balance, April 17, 2022	20,449	$	20	4,663	$	(190,022)	$	242,756	$	12	$	21,112	$	73,878
Exercise of options, issuance of restricted stock, shares exchanged for exercise and tax, and stock issued through employee stock purchase plan	—	—		(113)	5,817		(5,691)		—		—		126


Non-cash stock compensation	—	—		—	—		2,542		—		—		2,542
Net loss	—	—		—	—		—		—		(17,966)		(17,966)
Other comprehensive income (loss), net of tax	—	—		—	—		—		(18)		—		(18)

Balance, July 10, 2022	20,449	$	20	4,550	$	(184,205)	$	239,607	$	(6)	$	3,146	$	58,562
Exercise of options, issuance of restricted stock, shares exchanged for exercise and tax, and stock issued through employee stock purchase plan	—	—		(1)	36		(40)		—		—		(4)


Non-cash stock compensation	—	—		—	—		2,668		—		—		2,668
Net loss	—	—		—	—		—		—		(12,650)		(12,650)
Other comprehensive income (loss), net of tax	—	—		—	—		—		(45)		—		(45)
Balance, October 2, 2022	20,449	$	20	4,549	$	(184,169)	$	242,235	$	(51)	$	(9,504)	$	48,531

See Notes to Condensed Consolidated Financial Statements.

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RED ROBIN GOURMET BURGERS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Forty Weeks Ended
(in thousands)	October 1, 2023		October 2, 2022
Cash flows from operating activities:
Net loss	$	(7,496)	$	(34,198)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	52,253		58,924
Gift card breakage	(5,930)		(7,781)
Asset impairment	7,187		13,048
Non-cash other charges (gains), net	(1,819)		(2,287)

Stock-based compensation expense	5,171		8,229
Gain on sale of property, plant, and equipment	(29,865)		(9,204)
Other, net	733		3,240
Changes in operating assets and liabilities, net of business acquisition:
Accounts receivable	9,607		9,487
Income tax receivable	100		15,163
Inventories	(377)		(217)
Prepaid expenses and other current assets	1,354		2,183
Operating lease assets, net of liabilities	(9,975)		(10,562)
Trade accounts payable and accrued liabilities	5,416		9,621
Unearned revenue	(9,127)		(8,301)
Other operating assets and liabilities, net	129		(8,545)
Net cash provided by operating activities	17,361		38,800
Cash flows from investing activities:
Purchases of property, equipment, and intangible assets	(37,074)		(27,036)
Proceeds from sale-leaseback	58,801		—
Proceeds from sales of property and equipment and other investing activities	794		8,739
Acquisition of franchised restaurants	(3,529)		—
Net cash provided by (used in) investing activities	18,992		(18,297)
Cash flows from financing activities:
Borrowings of long-term debt	—		282,151
Payments of long-term debt and finance leases	(25,525)		(266,275)
Purchase of treasury stock	(9,960)		—
Debt issuance costs	—		(4,869)
Proceeds related to real estate sale	—		3,856
Proceeds from other financing activities, net	1,744		58
Net cash provided by (used in) financing activities	(33,741)		14,921
Effect of exchange rate changes on cash	—		(44)
Net change in cash and cash equivalents, and restricted cash	2,612		35,380
Cash and cash equivalents, and restricted cash, beginning of period	58,206		22,750
Cash and cash equivalents, and restricted cash, end of period	$	60,818	$	58,130

Supplemental disclosure of cash flow information
Income tax paid (refund received), net	$	210	$	(14,729)
Interest paid, net of amounts capitalized	$	18,261	$	11,387
Right of use assets obtained in exchange for operating lease obligations	$	50,769	$	11,604
Right of use assets obtained in exchange for finance lease obligations	$	81	$	541

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 October 1, 2023, the Company owned and operated 417 restaurants located in 39 states. The Company also had 91 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 consolidated financial statements on Form 10-K have been condensed or omitted. The Condensed Consolidated Balance Sheet as of December 25, 2022 has been derived from the audited consolidated financial statements as of that date but does not include all disclosures required for audited annual financial statements. For further information, please refer to and read these interim Condensed Consolidated Financial Statements in conjunction with the Company's audited consolidated financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended December 25, 2022 filed with the SEC on February 28, 2023.

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 2023

April 16, 2023

First Quarter 2022

April 17, 2022

Second Quarter 2023

July 9, 2023

Second Quarter 2022

July 10, 2022

Third Quarter 2023

October 1, 2023

Third Quarter 2022

October 2, 2022

Current and Prior Fiscal Years:

Fiscal Year 2023

December 31, 2023

Fiscal Year 2022

December 25, 2022

Upcoming fiscal year:

Fiscal Year 2024

December 29, 2024

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Immaterial Restatement of Prior Period Financial Statements

As previously disclosed in our Form 10-Q for the period ended July 9, 2023, the Company discovered a multi-year error in its calculation and recognition of revenue related to gift cards, primarily related to breakage revenue that had been recognized for bonus and discounted gift cards for which no or discounted monetary consideration was received, which resulted in the Company overstating total revenues by $0.1 million and $0.6 million for the twelve and forty weeks ended October 2, 2022. Management has evaluated this misstatement and concluded it was not material to prior periods, individually or in the aggregate. However, correcting the cumulative effect of the error in the twelve and forty weeks ended October 2, 2022 would have had a significant effect on the results of operations for such periods. Therefore, the Company is correcting the relevant prior period Condensed Consolidated Financial Statements and related footnotes for this error for comparative purposes.

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


CORRECTED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (unaudited)
	Twelve Weeks Ended October 2, 2022						Forty Weeks Ended October 2, 2022
(in thousands)	As Previously Reported		Adjustment		As Corrected		As Previously Reported		Adjustment		As Corrected
Restaurant revenue	$	282,449	$	(34)	$	282,415	$	951,718	$	(85)	$	951,633
Franchise and other revenues	4,439		(49)		4,390		24,810		(508)		24,302
Total revenues	286,888		(83)		286,805		976,528		(593)		975,935







Loss before income taxes	(12,610)		(83)		(12,693)		(33,152)		(593)		(33,744)
Net loss	(12,567)		(83)		(12,650)		(33,605)		(593)		(34,197)
Net loss per share	(0.79)		(0.01)		(0.80)		(2.12)		(0.04)		(2.16)
Total comprehensive loss	(12,612)		(83)		(12,695)		(33,656)		(593)		(34,249)

OTHER NON-GAAP INFORMATION:
Adjusted EBITDA	3,960		(83)		3,877		43,900		(189)		43,711


CORRECTED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) (unaudited)
	Forty Weeks Ended October 2, 2022
(in thousands)	Retained Earnings/(Accumulated Deficit)		Total Shareholders' Equity


























As Previously Reported
Balance, July 10, 2022	6,159		61,575
Net loss	(12,567)		(12,567)
Balance, October 2, 2022	(6,408)		51,627
Adjustments
Balance, July 10, 2022	(3,013)		(3,013)
Net loss	(83)		(83)
Balance, October 2, 2022	(3,096)		(3,096)
As Corrected
Balance, July 10, 2022	3,146		58,562
Net loss	(12,650)		(12,650)
Balance, October 2, 2022	$	(9,504)	$	48,531


CORRECTED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
	Forty Weeks Ended October 2, 2022
(in thousands)	As Previously Reported		Adjustment		As Corrected
Net loss	$	(33,605)	$	(593)	$	(34,198)

Gift card breakage	(8,289)		508		(7,781)



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

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2. Revenue

Disaggregation of revenue

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


	Twelve Weeks Ended				Forty Weeks Ended
	October 1, 2023		October 2, 2022		October 1, 2023		October 2, 2022
Restaurant revenue	$	273,133	$	282,415	$	973,307	$	951,633
Franchise revenue	3,418		4,249		12,245		14,891
Gift card breakage	589		141		5,930		7,782
Other revenue	420		—		2,538		1,629
Total revenues	$	277,560	$	286,805	$	994,020	$	975,935

Contract Liabilities

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


	October 1, 2023		December 25, 2022
Unearned gift card revenue	$	20,583	$	35,837
Deferred loyalty revenue	$	11,398	$	11,107

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


	Forty Weeks Ended
	October 1, 2023		October 2, 2022
Gift card revenue	$	16,865	$	21,222

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):


	Twelve Weeks Ended				Forty Weeks Ended
	October 1, 2023		October 2, 2022		October 1, 2023		October 2, 2022
Operating lease cost	$	16,691	$	15,793	$	53,865	$	53,904
Finance lease cost:
Amortization of right of use assets	216		261		764		841
Interest on lease liabilities	116		111		400		408
Total finance lease cost	$	332	$	372	1,164		1,249
Variable lease cost	4,994		4,130		15,263		15,136
Total	$	22,017	$	20,295	$	70,292	$	70,289

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

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

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


	Twelve Weeks Ended		Forty Weeks Ended
	October 1, 2023	October 2, 2022	October 1, 2023	October 2, 2022
Basic weighted average shares outstanding	15,799	15,892	15,949	15,816
Dilutive effect of stock options and awards	—	—	—	—
Diluted weighted average shares outstanding	15,799	15,892	15,949	15,816

Awards excluded due to anti-dilutive effect on diluted income (loss) per share	1,420	869	1,421	1,010

5. Other Charges (Gains), net

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


	Twelve Weeks Ended				Forty Weeks Ended
	October 1, 2023		October 2, 2022		October 1, 2023		October 2, 2022
Gain on sale leaseback, net of expenses	$	(14,883)	$	—	$	(29,413)	$	—
Gain on sale of restaurant property	—		(9,204)		—		(9,204)
Litigation contingencies	3,600		133		9,140		47
Restaurant closure costs, net	(91)		(1,570)		1,546		309
Severance and executive transition	341		1,825		3,195		1,954
Asset impairment	4,800		2,187		7,187		13,048
Other	277		—		1,366		—
Closed corporate office costs, net of sublease income	78		267		253		267
Other financing costs	—		1,022		—		1,392
COVID-19 related charges	—		123		—		423




Other charges (gains), net	$	(5,878)	$	(5,217)	$	(6,726)	$	8,236

During the third quarter of 2023, the Company sold nine restaurant properties for total proceeds of $30.4 million in a sale-leaseback transaction that resulted in a gain, net of expenses of $14.9 million. This was the second sale-leaseback transaction of the year with the first transaction occurring in the second quarter of 2023 for another nine restaurant properties. The year-to-date net proceeds of $58.8 million from the sale of 18 restaurant properties are included within cash flows from investing activities on the Condensed Consolidated Statements of Cash Flows for the forty weeks ended October 1, 2023.

During the second quarter of 2022 the Company closed on an agreement to sell a restaurant property that the Company owned and leased back on a short-term basis. The Company collected initial net proceeds from the purchaser-lessor of $3.9 million, which represented a portion of the total consideration received from the sale. During the third quarter of 2022, the Company received the remaining proceeds, upon which the lease terminated and the sale transaction was completed, and recognized a $9.2 million gain on the sale of the restaurant property. The initial net proceeds of $3.9 million are included within cash flows from financing activities and the final proceeds received of $8.5 million are included within cash flows from investing activities on the Condensed Consolidated Statements of Cash Flows for the forty weeks ended October 2, 2022.

Litigation contingencies during the twelve and forty weeks ended October 1, 2023 and October 2, 2022 represent reserves for various in progress legal matters. Litigation contingencies during the forty weeks ended October 2, 2022 include the impact of cash proceeds received by the Company related to certain legal claims.

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

Severance and executive transition costs include one-time termination benefits related to a reduction in force of Team Members and costs associated with changes in leadership positions as a result of our strategic pivot and are accounted for in accordance with ASC Topic 420, Exit or Disposal Cost Obligations. The Company expects to make the remaining payments related to these benefits in 2023.

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The Company incurred a cumulative total of $5.0 million related to these one-time termination benefits. Approximately $2.1 million in one-time termination benefits was incurred and recorded in Other charges in the Consolidated Statements of Operations and Comprehensive Income (Loss) during the forty weeks ended October 1, 2023. A reconciliation of our termination benefits liability, which is included in Accrued liabilities and other current liabilities in our Condensed Consolidated Balance Sheets is as follows:


	Termination Benefits
Balance as of December 25, 2022	$	2,505
Charges	2,077
Cash Payments	(4,164)
Balance as of October 1, 2023	$	418

The Company recognized non-cash impairment charges primarily related to restaurant assets at eight and twelve Company-owned restaurants during the twelve and forty weeks ended October 1, 2023. Additionally, the Company recognized non-cash impairment charges related to subleasing additional space at the Company's closed corporate office during the forty weeks ended October 1, 2023. The Company recognized non-cash impairment charges related to restaurant assets at one and ten Company-owned restaurants for the twelve and forty weeks ended October 2, 2022, respectively.

Other primarily includes non-cash charges related to terminated capital projects and disposals, and certain insurance claim proceeds.

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

Other financing costs include fees related to the entry by the Company into the new Credit Agreement (as defined below) on March 4, 2022 that were not capitalized with the closing of the Credit Facility. See Note 6. Borrowings.

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

6. Borrowings

Borrowings as of October 1, 2023 and December 25, 2022 are summarized below (in thousands):


	October 1, 2023		Variable Interest Rate		December 25, 2022		Variable Interest Rate
Revolving line of credit	$	—			$	15,000	10.44	%
Term loan	189,142		12.16	%	199,000		9.81	%
Notes payable	875				875
Total borrowings	190,017				214,875
Less: unamortized debt issuance costs and discounts(1)	7,000				8,345
Less: current portion of long-term debt	875				3,375
Long-term debt	$	182,142			$	203,155

Revolving line of credit unamortized deferred financing charges(1):	$	807			$	988

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

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Credit Agreement

On March 4, 2022, the Company replaced its prior amended and restated credit agreement (the "Prior Credit Agreement") with a new Credit Agreement (the "Credit Agreement") by and among the Company, Red Robin International, Inc., as the borrower, the lenders from time to time party thereto, the issuing banks from time to time party thereto, Fortress Credit Corp., as Administrative Agent and as Collateral Agent and JPMorgan Chase Bank, N.A., as Sole Lead Arranger and Sole Bookrunner. The five-year $225.0 million Credit Agreement provides for a $25.0 million revolving line of credit and a $200.0 million term loan (collectively, the "Credit Facility"). The borrower maintains the option to increase the amount of borrowings available under the Credit Agreement in the future, subject to lenders’ participation, by up to an additional $40.0 million in the aggregate on the terms and conditions set forth in the Credit Agreement.

The 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 Facility's interest rate references the Secured Overnight Financing Rate ("SOFR"), a new index calculated by short-term repurchase agreements and backed by U.S. Treasury securities, or the Alternate Base Rate ("ABR"), which represents the highest of (a) the Prime Rate, (b) the Federal Funds Rate plus 0.5% per annum, or (c) one-month term SOFR plus 1.0% per annum.

Red Robin International, Inc. is the borrower under the Credit Agreement, and certain of its subsidiaries and the Company are guarantors of borrower’s obligations under the Credit Agreement. 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. This new Security Agreement replaced the existing security agreement, dated January 10, 2020, which was entered into in connection with the Prior Credit Agreement.

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

In connection with entry into the new Credit Agreement, the Company’s Prior Credit Agreement was terminated. In connection with such termination and new borrowings under the new Credit Agreement, the Company paid off all outstanding borrowings, accrued interest, and fees under the Prior Credit Agreement.

On July 17, 2023, the Company amended the Credit Agreement (the “Credit Agreement Amendment”) to remove the previously included $50.0 million aggregate cap (the “Prior Cap”) on sale-leasebacks of Company-owned real property. Pursuant to the Credit Agreement Amendment, it also was agreed that (i) the Company may reinvest in the business within 360 days of receipt the net proceeds of sale-leasebacks to the extent that such proceeds are equal to or less than the amount of the Prior Cap and (ii) the Company shall make a mandatory prepayment with the net proceeds of sale-leasebacks to the extent that such proceeds exceed the amount of the Prior Cap. Additionally, the prepayment premium associated with any mandatory prepayments derived from the net proceeds of sale-leasebacks that exceed the Prior Cap is reduced by the Credit Agreement Amendment to a premium equal to 50% of the prepayment premium otherwise applicable. The Amendment also made certain other conforming changes to the Existing Credit Agreement to effect the foregoing.

The summary descriptions of the Credit Agreement, the Credit Agreement Amendment, and the Security Agreement do not purport to be complete and are qualified in their entirety by reference to the full text of the Credit Agreement, the Credit Agreement Amendment, and the Security Agreement, respectively, which have been filed as exhibits to the Company’s Current Reports on Form 8-K filed with the Securities and Exchange Commission on March 10, 2022, with respect to the Credit Agreement and the Security Agreement, and July 19, 2023, with respect to the Credit Agreement Amendment.

During the first quarter of 2022, the Company expensed approximately $1.7 million of deferred financing charges related to the extinguishment of the Prior Credit Agreement on March 4, 2022. These charges were recorded to interest expense, net and other on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the forty weeks ended October 2, 2022. In association with the execution of the new Credit Agreement, the Company recognized $4.8 million of deferred financing charges, and $6.1 million of original issuance discount.

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

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


	October 1, 2023		Level 1		Level 2		Level 3
Assets:
Investments in rabbi trust	$	2,137	$	2,137	$	—	$	—
Total assets measured at fair value	$	2,137	$	2,137	$	—	$	—

	December 25, 2022		Level 1		Level 2		Level 3
Assets:
Investments in rabbi trust	$	4,250	$	4,250	$	—	$	—
Total assets measured at fair value	$	4,250	$	4,250	$	—	$	—

Other than as disclosed in Note 9. Acquisition of Franchised Restaurants, as of October 1, 2023, the Company had no financial assets or liabilities that were measured using level 2 or 3 inputs. The Company also had no non-financial assets or liabilities that were required to be measured on a recurring basis.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

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

The Company has measured non-financial assets for impairment using continuing and projected future cash flows, which were based on significant inputs not observable in the market and thus represented a level 3 fair value measurement. See Note 5. Other Charges (Gains), net.

We impaired long-lived restaurant assets with a carrying value (including right of use lease assets) of $15.3 million and $26.7 million during the twelve and forty weeks ended October 1, 2023, recognizing impairment expense of $4.8 million and $6.5 million, respectively, related to the net book value of these long-lived restaurant assets. We determined the fair value of these long-lived assets to be $10.5 million and $20.2 million in the twelve and forty weeks ended October 1, 2023. Additionally, we impaired long-lived assets at the Company's closed corporate office with a carrying value (including right of use lease assets) of $1.0 million, recognizing an impairment expense of $0.7 million during the forty weeks ended October 1, 2023, related to the net book value of these long-lived restaurant assets. We determined the fair value of these long-lived assets to be $0.3 million in the forty weeks ended October 1, 2023. The impairments were recorded as a result of quantitative impairment analyses.

Disclosures of Fair Value of Other Assets and Liabilities

The Company's liability under its credit facility is carried at historical cost in the accompanying Condensed Consolidated Balance Sheets. As of October 1, 2023, the fair value of the credit facility was approximately $188.0 million and the principal amount carrying value was $189.1 million. The credit facility term loan is reported net of $7.0 million in unamortized discount and debt issuance costs in the Condensed Consolidated Balance Sheet as of October 1, 2023. The carrying value of the credit facility was $214.0 million and the fair value of the credit facility was $205.1 million as of December 25, 2022. The interest rate on the credit facility represents a level 2 fair value input.

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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, and other contingencies, certain of which are covered by insurance policies. While it is not possible to predict the outcome of these suits, legal proceedings, and claims with certainty, management is of the opinion that adequate provision for potential losses associated with these matters has been made in the financial statements and that the ultimate resolution of any one of these matters will not have a material adverse effect on our financial position and results of operations. A significant increase in the number of these claims, or one or more successful claims resulting in greater liabilities than we currently anticipate, could materially and adversely affect our business, financial condition, results of operations, and cash flows.

As of October 1, 2023, we had a balance of $13.7 million for loss contingencies included within Accrued liabilities and other on our Condensed Consolidated Balance Sheet. In the normal course of business, there are various claims in process, matters in litigation, administrative proceedings, and other contingencies. These include employment related claims and class action lawsuits, claims from Guests or Team Members alleging illness, injury, food quality, health, or operational concerns, and lease and other commercial disputes. We increased our estimate of loss contingency liabilities by approximately $3.6 million for the twelve weeks ended October 1, 2023 and $9.1 million for the forty weeks ended October 1, 2023 related to changes during the third quarter in the status of ongoing litigation matters. We ultimately may be subject to greater or less than the accrued amount for this and other matters.

As of October 1, 2023, we had non-cancellable purchase commitments to certain vendors who provide food and beverages and other supplies to our restaurants, for an aggregate of $216.6 million. We expect to fulfill our commitments under these agreements in the normal course of business, and as such, no liability has been recorded.

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9. Acquisition of Franchised Restaurants

On April 17, 2023, the Company acquired certain assets and liabilities of five restaurants from one of its U.S. franchisees for cash consideration of $3.5 million. The pro forma impact of this acquisition and the operating results of the acquired restaurants are not presented as the impact was not material to reported results.

The acquisition was accounted for using the purchase method as defined in ASC 805, Business Combinations. The goodwill arising from the acquisition consists largely of the benefit of the assembled workforce of the acquired restaurants. The goodwill generated by the acquisition is not amortizable for book purposes but is amortizable and deductible for tax purposes. The Company allocated the purchase price to the fair value of the assets acquired and liabilities assumed as follows (in thousands):


	Fair Value at Acquisition Date
Property and equipment, net	$	2,637

Operating lease assets	7,400
Operating lease liabilities	(8,250)
Operating lease assets, net	(850)

Other assets, net of liabilities(1)	299

Intangible assets, net	1,443

Total purchase price	$	3,529

(1) Includes inventory, prepaid assets, till cash, and gift card and loyalty liabilities.

Of the $2.6 million in property and equipment, $1.7 million is related to leasehold improvements and $1.0 million is related to personal property. The $0.9 million in net operating lease assets is related to acquired unfavorable leases, which reduces the acquired operating lease right-of-use assets. Of the $1.4 million of intangible assets, $1.2 million is related to reacquired franchise rights, which will be amortized on a straight-line basis. The fair value measurement of tangible and intangible assets and liabilities as of the acquisition date is based on significant inputs not observed in the market and thus represents a level 3 fair value measurement.

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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 2023 and 2022 refer to the twelve and forty weeks ended October 1, 2023 and October 2, 2022, unless otherwise indicated, and reflect the correction of certain information for the immaterial restatement of prior period financial statements as disclosed in Footnote 1, Basis of Presentation and Recent Accounting Pronouncements.

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 508 locations in North America. As of October 1, 2023, the Company owned 417 restaurants located in 39 states. The Company also had 91 franchised full-service restaurants in 14 states and one Canadian province. The Company operates its business as one operating and one reportable segment.

Highlights for the Third Quarter of Fiscal 2023, Compared to the Third Quarter of Fiscal 2022

•Total revenues are $277.6 million, a decrease of $9.2 million.

•Comparable restaurant revenue(1) decreased 3.4%.

•Comparable restaurant dine-in sales(2) increased 0.5%.

•Net loss is $8.2 million, a decrease of $4.5 million from a net loss of $12.7 million during the same period of 2022.

•Adjusted EBITDA(3) (a non-GAAP metric) is $6.8 million, a $2.9 million increase.

•Completed Sale-Leaseback transaction for nine restaurants, generating net proceeds of approximately $30.4 million and a gain, net of expenses of $14.9 million.

•Repaid $8.4 million of debt and repurchased $5.0 million of stock.

Highlights for the Year-to-Date Period of Fiscal 2023, Compared to the Year-to-Date Period of Fiscal 2022

•Total revenues are $994.0 million, an increase of $18.1 million.

•Comparable restaurant revenue(1) increased 2.9%.

•Comparable restaurant dine-in sales(2) increased 8.4%.

•Net loss is $7.5 million, a decrease of $26.7 million from a net loss of $34.2 million during the same period of 2022.

•Adjusted EBITDA(3) (a non-GAAP metric) is $58.3 million, a $14.5 million increase.

•Completed two Sale-Leaseback transactions for eighteen restaurants, generating net proceeds of $58.8 million and a gain, net of expenses of $29.4 million.

•Repaid $24.9 million of debt and repurchased $10.0 million of stock.

(1) Comparable restaurant revenue represents revenue from Company-owned restaurants that have operated five full quarters as of the end of the period presented. For the twelve and forty weeks ended October 1, 2023 there were 409 and 408 comparable restaurants, respectively, out of the total 417 Company-owned restaurants.

(2) Comparable restaurant dine-in sales are calculated based on the Company’s point-of-sale sales data, which does not include adjustments for loyalty breakage.

(3) See below for a reconciliation of Adjusted EBITDA, a non-GAAP measure, to Net loss.

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 October 2, 2022	$	282.4
Increase/(decrease) in comparable restaurant revenue(1)	(9.6)
Increase/(decrease) in non-comparable restaurant revenue	0.3
Total increase/(decrease)	(9.3)
Restaurant Revenue for the twelve weeks ended October 1, 2023	$	273.1

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Restaurant revenues and operating costs (GAAP measures), and restaurant level operating profit (a non-GAAP measure) for the period are detailed in the table below:


	Twelve Weeks Ended						Forty Weeks Ended
	October 1, 2023		October 2, 2022		Increase/ (Decrease)		October 1, 2023		October 2, 2022		Increase/ (Decrease)
Restaurant revenue (millions)	$	273.1	$	282.4	(3.3)	%	$	973.3	$	951.6	2.3	%
Restaurant operating costs:
Cost of sales	65.1		70.6		(7.8)	%	236.2		234.3		0.8	%
Labor	103.7		100.5		3.2	%	358.8		340.3		5.5	%
Other operating	50.4		52.9		(4.7)	%	174.2		172.7		0.9	%
Occupancy	23.5		22.8		3.0	%	76.8		76.4		0.5	%
Total Restaurant Operating Costs	$	242.7	$	246.8	(6.3)	%	$	846.1	$	823.7	7.7	%

Restaurant Level Operating Profit(1)	$	30.4	$	35.6	(14.6)	%	$	127.2	$	127.9	(0.5)	%

(1) Restaurant Level Operating Profit is a non-GAAP measure. See below for a reconciliation of Restaurant Level Operating Profit to Income from Operations and Income from Operations as a percentage of total revenues.

Restaurant revenues and operating costs (GAAP measures), and restaurant level operating profit(1) (a non-GAAP measure) as a percentage of restaurant revenue for the period are detailed in the table below:


	Twelve Weeks Ended								Forty Weeks Ended
	October 1, 2023			October 2, 2022			Increase/ (Decrease)		October 1, 2023			October 2, 2022			Increase/(Decrease)
Restaurant revenue (millions)	$	273.1		$	282.4		(3.3)	%	$	973.3		$	951.6		2.3	%
Restaurant operating costs:	(Percentage of Restaurant Revenue)						(Basis Points)		(Percentage of Restaurant Revenue)						(Basis Points)
Cost of sales	23.8		%	25.0		%	(120)		24.3		%	24.6		%	(30)
Labor	38.0			35.6			240		36.9			35.8			110
Other operating	18.4			18.7			(30)		17.9			18.2			(30)
Occupancy	8.6			8.1			50		7.9			8.0			(10)
Total Restaurant Operating Costs	88.8		%	87.4		%	140		86.8		%	86.6		%	20

Restaurant Level Operating Profit(1)	11.1		%	12.6		%	(150)		13.1		%	13.4		%	(30)

Certain percentage and basis point amounts in the table above do not total due to rounding as well as restaurant operating costs being expressed as a percentage of restaurant revenue and not total revenues.

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The following table summarizes net loss, loss per diluted share (GAAP measures), and adjusted loss per diluted share (a non-GAAP measure) for the twelve and forty weeks ended October 1, 2023 and October 2, 2022:


	Twelve Weeks Ended				Forty Weeks Ended
	October 1, 2023		October 2, 2022		October 1, 2023		October 2, 2022
Net loss as reported	$	(8,161)	$	(12,650)	$	(7,496)	$	(34,198)


























Loss per share - diluted:
Net loss as reported	$	(0.52)	$	(0.80)	$	(0.47)	$	(2.16)
Gain on sale leaseback, net of expenses	(0.94)		—		(1.84)		—
Gain on sale of restaurant property	—		(0.58)		—		(0.58)
Litigation contingencies	0.23		0.01		0.57		—
Restaurant closure costs, net	(0.01)		(0.10)		0.10		0.02
Severance and executive transition	0.02		0.11		0.20		0.12
Asset impairment	0.30		0.14		0.45		0.82
Other(1)	0.02		—		0.09		—
Closed corporate office costs, net of sublease income	—		0.02		0.02		0.02
Other financing costs(2)	—		0.06		—		0.09
COVID-19 related charges	—		0.01		—		0.03
Change in estimate, gift card breakage(3)	—		—		—		(0.33)
Write-off of unamortized debt issuance costs(4)	—		—		—		0.11
Income tax expense	0.10		0.09		0.11		(0.08)




Adjusted loss per share - diluted	$	(0.79)	$	(1.04)	$	(0.78)	$	(1.94)

Weighted average shares outstanding:
Basic	15,799		15,892		15,949		15,816
Diluted(5)	15,799		15,892		15,949		15,816

(1) Other primarily includes non-cash charges related to terminated capital projects and disposals, and certain insurance claim proceeds.

(2) Other financing costs includes legal and other charges related to the refinancing of our Prior Credit Agreement (as defined below) in the first quarter of 2022.

(3) During the forty weeks ended October 2, 2022, the Company re-evaluated the estimated redemption pattern related to gift cards. The impact comprises $5.9 million included in Franchise royalties, fees, and other revenue partially offset by $0.6 million in gift card commission costs included in Selling on the Condensed Consolidated Statements of Operations.

(4) Write-off of unamortized debt issuance costs related to the remaining unamortized debt issuance costs related to our Prior Credit Agreement with the completion of the refinancing of our Prior Credit Agreement in the first quarter of fiscal year 2022.

(5) For the twelve weeks ended October 1, 2023, the impact of dilutive shares is excluded in the calculations due to the net loss position for the quarter. For diluted shares reported on the Condensed Consolidated Statement of Operations, the impact of dilutive shares is excluded due to the reported net loss for the quarter.

We believe the non-GAAP measure of adjusted loss per share-diluted 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. Adjusted loss per share-diluted excludes the effects of change in estimate, gift card breakage, asset impairment, litigation contingencies, the write-off of unamortized debt issuance costs, restaurant closure costs, other financing costs, gain on sale leaseback, net of expenses, closed corporate office costs, net of sublease income, COVID-19 related charges, severance and executive transition costs, and income tax effects and other. We have revised our definition of adjusted loss per diluted share to exclude gain on sale leaseback, net of expenses and other. We did not revise the prior year’s adjusted loss per share-diluted because there were no other charges similar in nature to these costs. Other companies may define adjusted net loss per share-diluted differently, and as a result our measure of adjusted loss per share-diluted may not be directly comparable to those of other companies. Adjusted loss per share-diluted should be considered in addition to, and not as a substitute for, net loss as reported in accordance with U.S. GAAP as a measure of performance.

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The following table summarizes Net loss (a GAAP measure), and EBITDA and Adjusted EBITDA (non-GAAP measures) for the twelve and forty weeks ended October 1, 2023 and October 2, 2022:


	Twelve Weeks Ended				Forty Weeks Ended
	October 1, 2023		October 2, 2022		October 1, 2023		October 2, 2022
Net loss as reported	$	(8,161)	$	(12,650)	$	(7,496)	$	(34,198)
Interest expense, net	5,885		4,419		19,766		15,137
Income tax provision (benefit)	278		(43)		453		453
Depreciation and amortization	14,672		17,368		52,253		58,924
EBITDA	12,674		9,094		64,976		40,316

Change in accounting estimate, gift card breakage	—		—		—		(5,246)
Other charges (gains), net:
Gain on sale leaseback, net of expenses	(14,883)		—		(29,413)		—
Gain on sale of restaurant property	—		(9,204)		—		(9,204)
Litigation contingencies	3,600		133		9,140		47
Restaurant closure costs, net	(91)		(1,570)		1,546		309
Severance and executive transition	341		1,825		3,195		1,954
Asset impairment	4,800		2,187		7,187		13,048
Other	277		—		1,366		—
Closed corporate office costs, net of sublease income	78		267		253		267
Other financing costs	—		1,022		—		1,392
COVID-19 related charges	—		123		—		423
Adjusted EBITDA	$	6,796	$	3,877	$	58,250	$	43,711

We believe the non-GAAP measures of EBITDA and adjusted EBITDA give 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. We define EBITDA as net loss before interest expense, income taxes, and depreciation and amortization. Adjusted EBITDA further excludes the effects of change in accounting estimate - gift card breakage, asset impairment, litigation contingencies, restaurant closure costs, net, other financing costs, COVID-19 related charges, severance and executive transition costs, closed corporate office, net of sublease income, and gain of sale leaseback, net of expenses, and other. We have revised our definition of adjusted EBITDA to exclude gain of sale leaseback, net of expenses and other. We did not revise prior years’ adjusted EBITDA because there were no other charges similar in nature to these costs. Other companies may define EBITDA and adjusted EBITDA differently, and as a result our measure of EBITDA and adjusted EBITDA may not be directly comparable to those of other companies. EBITDA and adjusted EBITDA should be considered in addition to, and not as a substitute for, net loss as reported in accordance with U.S. GAAP as a measure of performance.

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The following table summarizes Income from Operations (a GAAP measure), and Restaurant Level Operating Profit (a non-GAAP measure) for the twelve and forty weeks ended October 1, 2023 and October 2, 2022:


	Twelve Weeks Ended						Forty Weeks Ended
	October 1, 2023			October 2, 2022			October 1, 2023			October 2, 2022
Income (loss) from operations	$	(1,938)	(0.7)%	$	(8,103)	(2.8)%	$	12,498	1.3%	$	(17,594)	(1.8)%

Less:
Franchise royalties, fees and other revenue	4,427		1.6%	4,390		1.5%	20,713		2.1%	24,302		2.5%

Add:
Other charges (gains), net	(5,878)		(2.1)	(5,217)		(1.8)	(6,726)		(0.7)	8,236		0.8
Pre-opening costs	—		—	217		0.1	586		0.1	514		0.1
Selling	8,771		3.2	14,194		4.9	22,692		2.3	37,503		3.8
General and administrative expenses	19,190		6.9	21,498		7.5	66,656		6.7	64,665		6.6
Depreciation and amortization	14,672		5.3	17,368		6.1	52,253		5.3	58,924		6.0
Restaurant level operating profit	$	30,390		$	35,567		$	127,246		$	127,946

Income (loss) from operations as a percentage of total revenues	(0.7)%			(2.8)%			1.3%			(1.8)%
Restaurant level operating profit margin (as a percentage of restaurant revenue)	11.1%			12.6%			13.1%			13.4%

The Company believes restaurant level operating profit is an important measure for management and investors because it is widely regarded in the restaurant industry as a useful metric by which to evaluate restaurant level operating efficiency and performance. The Company defines restaurant level operating profit to be income from operations less franchise royalties, fees and other revenue, plus other charges (gains), net, pre-opening costs, selling costs, general and administrative expenses, and depreciation and amortization. The measure includes restaurant level occupancy costs that include fixed rents, percentage rents, common area maintenance charges, real estate and personal property taxes, general liability insurance, and other property costs, but excludes depreciation and amortization expense, substantially all of which is related to restaurant level assets, because such expenses represent historical sunk costs which do not reflect current cash outlay for the restaurants. The measure also excludes selling costs and general and administrative expenses, and therefore excludes costs associated with selling, general, and administrative functions, and pre-opening costs. The Company excludes Other charges (gains), net because these costs are not related to the ongoing operations of its restaurants. Restaurant level operating profit is not a measurement determined in accordance with GAAP and should not be considered in isolation, or as an alternative, to income from operations or net income (loss) as indicators of financial performance. Restaurant level operating profit as presented may not be comparable to other similarly titled measures of other companies in the Company's industry.

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Restaurant Data

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

Twelve Weeks Ended

Forty Weeks Ended

October 1, 2023

October 2, 2022

October 1, 2023

October 2, 2022

Company-owned:

Beginning of period