Red Robin Gourmet Burgers(RRGB) - 2022 Q3 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Financial Statements (unaudited) This section presents the unaudited Condensed Consolidated Financial Statements for the quarterly period ended October 2, 2022, including balance sheets, operations, cash flows, and notes Condensed Consolidated Balance Sheets | (in thousands) | October 2, 2022 | December 26, 2021 | | :--- | :--- | :--- | | Total current assets | $109,055 | $102,156 | | Total assets | $860,942 | $928,998 | | Total current liabilities | $205,601 | $223,300 | | Total liabilities | $809,315 | $852,024 | | Total stockholders' equity | $51,627 | $76,974 | Condensed Consolidated Statements of Operations and Comprehensive Loss | (in thousands) | Twelve Weeks Ended Oct 2, 2022 | Twelve Weeks Ended Oct 3, 2021 | Forty Weeks Ended Oct 2, 2022 | Forty Weeks Ended Oct 3, 2021 | | :--- | :--- | :--- | :--- | :--- | | Total revenues | $286,888 | $275,444 | $976,528 | $878,694 | | Loss from operations | $(8,020) | $(12,136) | $(17,001) | $(19,031) | | Net loss | $(12,567) | $(14,980) | $(33,605) | $(28,689) | | Loss per share (Basic & Diluted) | $(0.79) | $(0.95) | $(2.12) | $(1.83) | Condensed Consolidated Statements of Cash Flows | (in thousands) | Forty Weeks Ended Oct 2, 2022 | Forty Weeks Ended Oct 3, 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $38,800 | $37,617 | | Net cash used in investing activities | $(18,297) | $(19,967) | | Net cash provided by (used in) financing activities | $14,921 | $(16,037) | | Net change in cash, cash equivalents, and restricted cash | $35,380 | $1,641 | Notes to Condensed Consolidated Financial Statements - As of October 2, 2022, the Company owned and operated 424 restaurants and had 101 franchised restaurants[23] - A change in the accounting estimate for gift card redemption patterns resulted in the recognition of an additional $5.9 million in gift card breakage revenue in the first quarter of 2022, decreasing net loss by $5.2 million for the forty-week period[28] - During the third quarter of 2022, the company completed the sale of a restaurant property, recognizing a $9.2 million gain[38] - On March 4, 2022, the Company entered into a new five-year, $225.0 million Credit Agreement, consisting of a $25.0 million revolving line of credit and a $200.0 million term loan, replacing its prior credit facility[45] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial performance, covering revenue, profitability, liquidity, and capital resources, with inflation impacts Results of Operations | Metric | Twelve Weeks Ended Oct 2, 2022 | Twelve Weeks Ended Oct 3, 2021 | | :--- | :--- | :--- | | Restaurant Revenue | $282.4 million | $270.2 million | | Comparable Restaurant Revenue Change | +5.3% | N/A | | Average Guest Check Change | +9.0% | N/A | | Guest Count Change | -3.7% | N/A | - For the forty weeks ended October 2, 2022, restaurant revenue increased 10.5% to $951.7 million, driven by an 11.2% increase in comparable restaurant revenue, composed of a 10.6% increase in average guest check and a 0.6% increase in guest count[79] | Cost Category (% of Restaurant Revenue) | Twelve Weeks Ended Oct 2, 2022 | Twelve Weeks Ended Oct 3, 2021 | Change (Basis Points) | | :--- | :--- | :--- | :--- | | Cost of Sales | 25.0% | 23.2% | +180 bps | | Labor | 35.6% | 36.9% | -130 bps | | Other Operating | 18.7% | 19.0% | -30 bps | | Occupancy | 8.1% | 8.3% | -20 bps | - Cost of sales increased by 180 basis points in Q3 2022 primarily due to commodity inflation, partially offset by pricing actions and favorable menu mix shifts[83] - Labor costs as a percentage of revenue decreased by 130 basis points in Q3 2022 due to sales leverage, lower hiring costs, and reduced management incentive compensation, offsetting wage rate inflation[85] - Selling, general, and administrative (SG&A) expenses increased by $5.3 million in Q3 2022 compared to Q3 2021, primarily due to a timing shift of the annual leadership conference and increased marketing spend[94][95][97] Liquidity and Capital Resources - As of October 2, 2022, the Company had approximately $75.0 million in liquidity, including cash on hand and available borrowing capacity under its new credit facility[104] - Net cash provided by operating activities was $38.8 million for the forty weeks ended October 2, 2022, a slight increase from $37.6 million in the prior year period, primarily due to changes in working capital including tax refunds[105][106] | Capital Expenditures (in thousands) | Forty Weeks Ended Oct 2, 2022 | Forty Weeks Ended Oct 3, 2021 | | :--- | :--- | :--- | | Restaurant improvement capital and other | $12,376 | $6,467 | | Investment in technology, infrastructure, and other | $8,274 | $5,355 | | Donatos® expansion | $4,396 | $7,687 | | New restaurants and restaurant refreshes | $1,989 | $478 | | Total capital expenditures | $27,036 | $19,987 | - The Company operates with a working capital deficit, typical for the industry, as cash from sales is received before payables are due, with future cash flows and credit facility capacity expected to be sufficient to manage this deficit and fund capital expenditures[115] Inflation - The company's operations are significantly affected by inflation in food, labor, and energy costs, negatively impacting financial results during the forty weeks ended October 2, 2022, and expected to continue for the remainder of the year[118] Quantitative and Qualitative Disclosures About Market Risk This section outlines the company's market risk exposure from interest rates and commodity prices, detailing financial impacts - The company is exposed to interest rate risk with $199.0 million of variable-rate debt outstanding, where a 1.0% change in the effective interest rate would result in an annualized pre-tax interest expense fluctuation of $2.0 million[129] - The company faces commodity price risk, particularly for ground beef, poultry, and potatoes, where a 1.0% increase in food and beverage costs would negatively impact cost of sales by approximately $3.0 million on an annualized basis[130] Controls and Procedures Management concluded disclosure controls were effective, with no material changes to internal financial reporting controls - The Company's CEO and CFO concluded that the disclosure controls and procedures were effective as of the end of the period covered by the report[131] - There were no changes in the Company's internal control over financial reporting during the most recent fiscal quarter that have materially affected, or are likely to materially affect, these controls[132] PART II - OTHER INFORMATION Legal Proceedings The company is involved in various legal claims, with adequate provisions made and no material financial impact - The company is involved in various claims and litigation in the normal course of business, but management believes adequate financial provisions have been made and the outcomes will not have a material adverse effect[62][135] Risk Factors This section confirms that there have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the fiscal year ended December 26, 2021 - There have been no material changes from the risk factors disclosed in the company's Annual Report on Form 10-K for the fiscal year 2021[137] Unregistered Sales of Equity Securities and Use of Proceeds The company reports no unregistered equity sales or share repurchases in Q3 2022, limited by Credit Agreement - No share repurchases were made by the Company during the twelve weeks ended October 2, 2022, with the ability to repurchase shares limited by conditions in the Credit Agreement[138] Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO/CFO certifications and XBRL data - The exhibits filed with this report include CEO and CFO certifications (Exhibits 31.1, 31.2, 32.1) and financial information formatted in XBRL (Exhibit 101)[140]