Red Robin Gourmet Burgers, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Leases

Leases

6 Months Ended

Jul. 10, 2022

The Company's finance and operating lease assets and liabilities as of July 10, 2022 and December 26, 2021 were as follows (in thousands):


July 10, 2022	Finance(1)		Operating(2)
Lease assets, net(3)	$	7,494	$	383,500

Current portion of lease obligations	1,029		48,080
Long-term portion of lease obligations	8,873		413,278
Total	$	9,902	$	461,358

December 26, 2021	Finance(1)		Operating(2)
Lease assets, net(3)	$	9,664	$	400,825

Current portion of lease obligations	1,194		48,842
Long-term portion of lease obligations	10,765		435,136
Total	$	11,959	$	483,978

(1) Finance lease assets and obligations are included in Other assets, net, Accrued liabilities and other current liabilities, and Other non-current liabilities on our July 10, 2022 and December 26, 2021 Consolidated Balance Sheets.

(2) Operating lease assets and obligations are included in Operating lease assets, net, Current portion of operating lease liabilities, and Long-term portion of operating lease liabilities on our July 10, 2022 and December 26, 2021 Consolidated Balance Sheets.

(3) The Lease assets, net caption includes the right of use assets associated with the Company's Finance and Operating leases, net of the associated amortization of these right of use assets.

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 10, 2022		July 11, 2021		July 10, 2022		July 11, 2021
Operating lease cost	$	16,422	$	16,243	$	38,111	$	37,704
Finance lease cost:
Amortization of right of use assets	238		197		580		460
Interest on lease liabilities	153		117		298		276
Total finance lease cost	$	391	$	314	$	878	$	736
Variable lease cost	4,682		4,359		11,007		10,775
Total	$	21,495	$	20,916	$	49,996	$	49,215

Maturities of our lease liabilities as of July 10, 2022 were as follows (in thousands):


	Finance Leases		Operating Leases
Remainder of 2022	$	621	$	33,689
2023	1,387		77,092
2024	1,480		75,483
2025	1,190		71,411
2026	1,246		65,683
Thereafter	6,440		325,096
Total future lease payments	$	12,364	$	648,454
Less imputed interest	2,462		187,096
Total lease liability	$	9,902	$	461,358

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


	Twenty-Eight Weeks Ended
	July 10, 2022			July 11, 2021
Cash flows from operating activities
Cash paid related to lease liabilities
Operating leases	$	46,194		$	47,727
Finance leases	298			276
Cash flows from financing activities
Cash paid related to lease liabilities
Finance leases	1,017			1,018
Cash paid for amounts included in the measurement of lease liabilities:	$	47,509		$	49,021

Right of use assets obtained in exchange for operating lease obligations	$	7,773		$	7,784
Right of use assets obtained in exchange for finance lease obligations	$	541		$	751

Other information related to operating leases as follows:
Weighted average remaining lease term (years)	9.39			10.01
Weighted average discount rate	7.20		%	7.01		%

Other information related to finance leases as follows:
Weighted average remaining lease term (years)	10.70			11.25
Weighted average discount rate	4.89		%	4.56		%

On June 8, 2022 the Company closed on an agreement to sell a real estate property that the Company owned and lease it back on a short-term basis. The Company collected initial net proceeds from the purchaser-lessor of $3.9 million, which represents a portion of the total consideration to be received from the sale. The Company did not recognize a sale in the second quarter of 2022 as certain criteria to recognize a sale in accordance with ASC Topic 842, Leases, and ASC Topic 606, Revenue from Contracts with Customers, were not met. The Company did not derecognize the property, and the proceeds have been recorded on the Condensed Consolidated Balance Sheet in Accrued liabilities and other, and are included within cash flows from financing activities on the Condensed Consolidated Statements of Cash Flows for the twenty-eight weeks ended July 10, 2022. The Company expects to recognize a gain on this transaction when sale recognition criteria have been met.