Basis of Presentation and Recent Accounting Pronouncements
|9 Months Ended|
Oct. 01, 2017
|Organization, Consolidation and Presentation of Financial Statements [Abstract]|
|Basis of Presentation and Recent Accounting Pronouncements||
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 develops, operates, and franchises full-service restaurants in North America. As of October 1, 2017, the Company owned and operated 479 restaurants located in 39 states and two Canadian provinces. The Company also had 86 franchised full-service restaurants in 15 states as of October 1, 2017. 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, 2016 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, 2016, filed with the SEC on February 21, 2017.
The Company’s quarter that ended October 1, 2017 is referred to as third quarter 2017, or the twelve weeks ended October 1, 2017; the second quarter ended July 9, 2017 is referred to as second quarter 2017, or the twelve weeks ended July 9, 2017; the first quarter ended April 16, 2017 is referred to as first quarter 2017, or the sixteen weeks ended April 16, 2017; and together, the first, second, and third quarters of 2017 are referred to as the forty weeks ended October 1, 2017. The quarter ended October 2, 2016 is referred to as third quarter 2016, or the twelve weeks ended October 2, 2016; the second quarter ended July 10, 2016 is referred to as second quarter 2016, or the twelve weeks ended July 10, 2016; the first quarter ended April 17, 2016 is referred to as first quarter 2016, or the sixteen weeks ended April 17, 2016; and together, the first, second, and third quarters of 2016 are referred to as the forty weeks ended October 2, 2016. The Company’s fiscal year 2017 comprises fifty-three weeks and will end on December 31, 2017.
Certain amounts presented in prior periods have been reclassified to conform with the current period presentation. For the twelve weeks ended October 2, 2016, the Company reclassified impairment charges and restaurant closure costs of $9.3 million from Asset impairment and restaurant closure costs to Other charges on the condensed consolidated statement of operations. For the forty weeks ended October 2, 2016, the Company reclassified impairment charges and restaurant closure costs of $14.0 million from Asset impairment and restaurant closure costs and litigation contingencies of $3.9 million from Selling, general, and administrative expenses to Other charges on the condensed consolidated statement of operations. Management believes separating these items on the condensed consolidated statement of operations provides more clarity for readers of these financial statements. See Note 4, Other Charges.
Recently Issued Accounting Standards
In February 2016, the Financial Accounting Standards Board (“FASB”) issued Update 2016-02, Leases (“Topic 842”). This guidance requires the recognition of liabilities for lease obligations and corresponding right-of-use assets on the balance sheet and disclosure of key information about leasing arrangements. This guidance is effective for annual and interim reporting periods beginning after December 15, 2018 using a modified retrospective adoption method. Early adoption is permitted. We are evaluating the full impact Topic 842 will have on our consolidated financial statements but expect this adoption will result in a significant increase in the assets and liabilities on our consolidated balance sheet.
In May 2014, the FASB issued Update 2014-09, Revenue from Contracts with Customers (“Topic 606”), subsequently amended by various standard updates. This guidance requires an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Additionally, this guidance expands related disclosure requirements. We have determined Topic 606 will not have an impact on our recognition of food and beverage sales from Company-owned restaurants or our recognition of royalty fees from franchisees. The Company will recognize franchise advertising fund contributions as Franchise royalties, fees, and other revenues, with the related advertising fund expenses recognized as Selling, general, and administrative expenses. The Company will adopt Topic 606 beginning with its fiscal first quarter 2018 and will apply the guidance retrospectively to each prior period presented. Upon adoption of the standard, the Company does not expect the impact of recognizing initial franchise fees over the franchise agreement period or franchise advertising fund contributions as revenues and expenses to have a material effect on our consolidated financial statements.
The entire disclosure for the general note to the financial statements for the reporting entity which may include, descriptions of the basis of presentation, business description, significant accounting policies, consolidations, reclassifications, new pronouncements not yet adopted and changes in accounting principles.
Reference 1: http://www.xbrl.org/2003/role/presentationRef