Red Robin Gourmet Burgers(RRGB) - 2021 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION This section details the company's unaudited financial performance and condition for the period ended July 11, 2021, highlighting recovery and operational insights Financial Statements (unaudited) Unaudited financial statements for Q2 2021 reflect significant revenue recovery, reduced net loss, and positive operating cash flow Condensed Consolidated Balance Sheets Total assets and stockholders' equity decreased as of July 11, 2021, primarily due to reduced property and equipment and long-term debt Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | July 11, 2021 | December 27, 2020 | | :--- | :--- | :--- | | Total Assets | $942,103 | $974,739 | | Cash and cash equivalents | $25,569 | $16,116 | | Property and equipment, net | $396,746 | $427,033 | | Total Liabilities | $832,940 | $854,026 | | Long-term debt | $145,106 | $160,952 | | Total Stockholders' Equity | $109,163 | $120,713 | Condensed Consolidated Statements of Operations and Comprehensive Loss Q2 2021 saw substantial revenue growth and a significant reduction in net loss compared to the prior year Statement of Operations Highlights (in thousands, except per share data) | Metric | Twelve Weeks Ended July 11, 2021 | Twelve Weeks Ended July 12, 2020 | Twenty-Eight Weeks Ended July 11, 2021 | Twenty-Eight Weeks Ended July 12, 2020 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $276,975 | $161,122 | $603,250 | $467,187 | | Loss from operations | $(2,564) | $(50,582) | $(6,895) | $(208,811) | | Net Loss | $(4,996) | $(56,261) | $(13,709) | $(230,559) | | Diluted Loss Per Share | $(0.32) | $(4.09) | $(0.88) | $(17.38) | Condensed Consolidated Statements of Stockholders' Equity Stockholders' equity declined by $11.5 million in the first twenty-eight weeks of 2021, mainly due to the period's net loss of $13.7 million[18] Condensed Consolidated Statements of Cash Flows The company generated positive operating cash flow of $37.2 million, leading to a $9.5 million increase in cash and cash equivalents Cash Flow Summary (in thousands) | Cash Flow Activity | Twenty-Eight Weeks Ended July 11, 2021 | Twenty-Eight Weeks Ended July 12, 2020 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $37,184 | $(18,607) | | Net cash used in investing activities | $(10,834) | $(11,413) | | Net cash (used in) provided by financing activities | $(16,931) | $26,369 | | Net change in cash and cash equivalents | $9,453 | $(3,907) | Notes to Condensed Consolidated Financial Statements Notes detail COVID-19 impacts, revenue sources, and significant changes in other charges and debt structure - As of July 11, 2021, the company operated 430 company-owned and 101 franchised restaurants[26] - The company has filed for approximately $16 million in federal and state NOL cash tax refunds under the CARES Act, with the majority expected in 2022[37] Other Charges Breakdown (in thousands) | Charge Type | Twenty-Eight Weeks Ended July 11, 2021 | Twenty-Eight Weeks Ended July 12, 2020 | | :--- | :--- | :--- | | Restaurant closure and refranchising costs | $4,199 | $9,008 | | Asset impairment | $1,357 | $20,779 | | Goodwill impairment | $0 | $95,414 | | Total Other Charges | $7,667 | $133,880 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the Q2 2021 operational and financial recovery, driven by dining room reopenings and sustained off-premise sales Overview and COVID-19 Impact The company expanded dine-in capacity in Q2 2021, facing labor challenges while off-premise sales remained robust - As of July 11, 2021, the company owned 430 restaurants and had 101 franchised locations[62] - Staffing is the number one priority, with technology enhancements and national hiring days addressing competitive job market challenges[65] - Off-premise sales have remained more than double pre-pandemic levels, even as restaurants operate without indoor capacity restrictions[64] Financial and Operational Highlights Q2 2021 restaurant revenue increased 69.9% year-over-year, with improved operating costs and a reduced adjusted diluted loss per share Q2 Restaurant Revenue Comparison (in millions) | Period | 2021 | 2020 | % Change vs 2020 | 2019 | % Change vs 2019 | | :--- | :--- | :--- | :--- | :--- | :--- | | Restaurant Revenue | $272.2 | $160.1 | 69.9% | $302.4 | (10.0)% | Q2 Restaurant Operating Costs as a % of Revenue | Cost Category | 2021 | 2020 | Basis Point Change | | :--- | :--- | :--- | :--- | | Cost of sales | 22.8% | 24.2% | (140) | | Labor | 36.4% | 39.2% | (280) | | Other operating | 17.2% | 21.6% | (440) | | Occupancy | 7.9% | 13.0% | (510) | | Total | 84.3% | 98.0% | (1,370) | - Adjusted diluted loss per share improved to $(0.22) for the twelve weeks ended July 11, 2021, compared to $(3.31) for the same period in 2020[68] Results of Operations Q2 2021 revenue growth was driven by increased guest count and average check, improving cost leverage despite higher wage rates - Q2 2021 comparable restaurant revenue increase was driven by a 47.7% increase in Guest count and an 18.6% increase in average Guest check[76] - Off-premise sales constituted 32.8% of total food and beverage sales in Q2 2021, down from 63.8% in Q2 2020 as dine-in traffic returned[76] - Labor as a percentage of revenue decreased by 280 basis points in Q2 2021, primarily due to staffing shortages and sales leverage, offsetting higher wage rates and increased compensation costs[83] - Selling, general, and administrative costs increased by $8.6 million in Q2 2021, mainly due to lapping significant reductions in marketing spend and temporary salary cuts made in 2020[93] Liquidity and Capital Resources Liquidity improved with $117 million available, positive operating cash flow, and a focus on debt reduction - As of July 11, 2021, the company had approximately $117 million in liquidity, including cash on hand and available borrowing capacity[103] - Net cash provided by operating activities was $37.2 million for the first twenty-eight weeks of 2021, a $55.8 million improvement from the same period in 2020[104][105] - Total debt outstanding decreased by $15.8 million to $154.8 million at July 11, 2021, from year-end 2020[112] - The company's share repurchase program remains temporarily suspended, with $68.4 million of availability under the current authorization[114][115] Quantitative and Qualitative Disclosures About Market Risk Primary market risks include interest rate fluctuations on variable debt and commodity price volatility for key food items - A 1.0% change in the effective interest rate on variable-rate borrowings would result in an annualized pre-tax interest expense fluctuation of $1.6 million[128] - A 1.0% increase in food and beverage costs would negatively impact cost of sales by approximately $2.0 million on an annualized basis[129] Controls and Procedures Management concluded disclosure controls and procedures were effective, with no material changes to internal control over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of July 11, 2021[130] - No changes occurred during the quarter that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[131] PART II - OTHER INFORMATION This section covers legal proceedings, risk factors, equity security sales, and required exhibits Legal Proceedings The company is involved in routine litigation, with management believing adequate provisions have been made for potential losses - The company regularly evaluates litigation contingencies and believes adequate accruals and disclosures have been made[134][135] Risk Factors No material changes to the previously disclosed risk factors were reported for the current quarter - No material changes to risk factors were reported for the quarter[136] Unregistered Sales of Equity Securities and Use of Proceeds No unregistered equity sales or share repurchases occurred, with the repurchase program remaining suspended - No share repurchases were made during the second fiscal quarter of 2021[137] - The ability to repurchase shares is restricted by lenders until at least the first fiscal quarter of 2022, contingent on meeting a specific leverage ratio[137] Exhibits This section lists required filings, including CEO/CFO certifications and XBRL financial data - Exhibits filed include CEO and CFO certifications (Rule 13a-14(a) and Section 1350) and XBRL data[139]