Red Robin Gourmet Burgers(RRGB) - 2022 Q4 - Annual Report

Part I Item 1. Business Red Robin Gourmet Burgers, Inc. operates and franchises 511 casual dining restaurants, implementing a "North Star" strategy to enhance operations, guest experience, and profitability Restaurant Count as of December 25, 2022 | Category | Count | | :--- | :--- | | Total Restaurants | 511 | | Company-owned | 414 | | Franchised | 97 | - The company has launched a "North Star five-point plan" to improve its competitive position, focusing on operations, guest experience, cost/complexity reduction, guest engagement, and driving revenue and profitability[16][25] - In 2022, burgers accounted for 61% of food sales, with the average check per guest at $15.99, a 10.5% increase from 2021[21][23] - The company is transitioning its restaurant management structure in 2023, introducing "Managing Partners" and "Market Partners" with a compensation plan heavily tied to restaurant-level operating profit to drive local ownership and community engagement[28][31][32] - The partnership with Donatos® pizza has expanded to 245 restaurants, outperforming non-Donatos® locations by 470 basis points in comparable restaurant revenue growth in fiscal 2022[43] Item 1A. Risk Factors The company faces substantial risks from its business strategy, economic conditions, public health crises, operational challenges, financial constraints, and regulatory and litigation exposures - The success of the new "North Star" business strategy is not guaranteed; changes to operations, compensation, and guest experience may not achieve expected growth and could negatively affect guest satisfaction and sales[76][77] - The COVID-19 pandemic has had and may continue to have a material adverse effect on operations, sales, staffing, and costs, with future public health emergencies posing similar risks[79] - The company has experienced labor shortages and significant labor cost inflation, which may disrupt staffing levels, increase expenses, and negatively impact the guest experience and financial results[86] - A privacy or security breach of IT systems could interrupt business, damage the company's reputation, and lead to fines, litigation, and significant unplanned expenses, requiring PCI Data Security Standard compliance[92][93][95] - As of December 25, 2022, 40% of company-owned restaurants were concentrated in the Western United States, making the business susceptible to regional economic trends, regulatory changes, and natural disasters[121] Item 1B. Unresolved Staff Comments The company reports no unresolved staff comments - There are no unresolved staff comments[148] Item 2. Properties The company primarily leases its 414 company-owned restaurants, owning 36 locations, with its corporate center lease expiring in May 2025 - The company leases the majority of its restaurant locations, with operating leases having remaining terms from less than one year to over 15 years[149] - The company owns the real estate for 36 of its company-owned restaurants across 16 states[150] - The Restaurant Support Center is located in Englewood, Colorado, under a lease that expires on May 31, 2025[151] Item 3. Legal Proceedings Legal proceedings information is incorporated by reference from Note 12, "Commitments and Contingencies," within Item 8 of the financial statements - Details on legal proceedings are available in Note 12 of the Financial Statements and Supplementary Data[153] Item 4. Mine Safety Disclosures This item is not applicable to the company - Not applicable[154] Part II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock trades on Nasdaq (RRGB); no dividends or share repurchases occurred in 2022, with future cash flow prioritized for debt and strategic initiatives - The company's common stock is listed on The Nasdaq Global Select Market under the symbol RRGB[157] - No cash dividends were declared or paid in 2022, 2021, or 2020, with future cash flow anticipated for debt service, restaurant maintenance, and long-term business strategy[158] - No share repurchases were made in 2022, as the company's ability to repurchase shares is limited by conditions in its Credit Facility[160] Item 6. Reserved This item is reserved and contains no information Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations In fiscal 2022, total revenues grew 9.0% to $1.27 billion, but the company reported a net loss of $77.8 million, impacted by commodity inflation and decreased Adjusted EBITDA Fiscal Year 2022 Financial Highlights vs. 2021 | Metric | 2022 | 2021 | Change | | :--- | :--- | :--- | :--- | | Total Revenues | $1.27 billion | $1.16 billion | +9.0% | | Comparable Restaurant Revenue | N/A | N/A | +9.2% | | Net Loss | ($77.8 million) | ($50.0 million) | Increased Loss | | Loss per Diluted Share | ($4.91) | ($3.19) | Increased Loss | | Adjusted Loss per Diluted Share | ($3.26) | ($2.43) | Increased Loss | | Adjusted EBITDA | $52.8 million | $63.5 million | -16.9% | Restaurant Operating Costs as a % of Restaurant Revenue | Cost Category | 2022 | 2021 | Basis Point Change | | :--- | :--- | :--- | :--- | | Cost of sales | 24.9% | 22.9% | +200 bps | | Labor | 35.8% | 36.0% | -20 bps | | Other operating | 18.3% | 18.3% | 0 bps | | Occupancy | 8.0% | 8.5% | -50 bps | | Total | 87.0% | 85.7% | +130 bps | - The 9.2% increase in comparable restaurant revenue was driven by a 10.1% increase in average guest check, offsetting a 0.9% decrease in guest count, due to a 6.4% increase in pricing and a 3.8% increase in menu mix[186] - Cost of sales increased by 200 basis points, primarily due to approximately 15.3% commodity basket inflation, partially offset by menu price increases[190] Summary of Cash Flows (in thousands) | Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $35,532 | $47,292 | | Net cash used in investing activities | ($29,568) | ($42,241) | | Net cash provided by financing activities | $29,533 | $1,563 | Item 7A. Quantitative and Qualitative Disclosures About Market Risk The company faces market risks from interest rate fluctuations on $214.0 million variable-rate debt and commodity price volatility, mitigating the latter with 49% fixed-price contracts - The company has $214.0 million of variable-rate debt, where a 1.0% change in the effective interest rate would result in an annualized pre-tax interest expense fluctuation of $2.1 million[231] - The company is exposed to commodity price volatility for key items, where a 1.0% increase in food and beverage costs would negatively impact cost of sales by approximately $3.1 million annually[233] - As of December 25, 2022, approximately 49% of the company's estimated annual food and beverage purchases were covered by fixed-price contracts, mostly expiring through the end of 2023[234] Item 8. Financial Statements and Supplementary Data This section provides audited consolidated financial statements for fiscal 2022, including balance sheets, income statements, cash flows, and notes, with total assets at $832.1 million and liabilities at $826.8 million Consolidated Balance Sheet Summary (in thousands) | | Dec 25, 2022 | Dec 26, 2021 | | :--- | :--- | :--- | | Total Current Assets | $119,580 | $102,156 | | Total Assets | $832,145 | $928,998 | | Total Current Liabilities | $216,627 | $223,300 | | Total Liabilities | $826,770 | $852,024 | | Total Stockholders' Equity | $5,375 | $76,974 | Consolidated Statement of Operations Summary (in thousands) | | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Total Revenues | $1,266,617 | $1,162,078 | $868,715 | | Loss from Operations | ($56,414) | ($36,697) | ($275,146) | | Net Loss | ($77,800) | ($50,002) | ($276,068) | | Loss per Share (Diluted) | ($4.91) | ($3.19) | ($19.29) | - The company recognized a change in accounting estimate for gift card breakage, resulting in an additional $5.9 million in Other revenues and a net decrease to net loss of $5.2 million in fiscal 2022[271] - In 2022, the company recorded asset impairment charges of $38.5 million, primarily related to 46 underperforming restaurant locations and certain liquor licenses[318][319] - On March 4, 2022, the company replaced its prior credit agreement with a new five-year, $225.0 million facility, consisting of a $25.0 million revolving line of credit and a $200.0 million term loan[341] Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None[401] Item 9A. Controls and Procedures Management concluded that disclosure controls and internal control over financial reporting were effective as of December 25, 2022, with no material changes during the quarter - Based on an evaluation as of December 25, 2022, the CEO and CFO concluded that the company's disclosure controls and procedures are effective[402] - Management assessed the company's internal control over financial reporting using the COSO framework and concluded that it was effective as of December 25, 2022[405] - There were no changes in internal control over financial reporting during the most recent fiscal quarter that materially affected, or are reasonably likely to materially affect, the company's internal controls[403] Item 9B. Other Information The company reports no other information for this item - None[419] Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections The company reports no information for this item, indicating it is not applicable - None[420] Part III Item 10. Directors, Executive Officers and Corporate Governance Information on directors, executive officers, and corporate governance is incorporated by reference from the 2023 Proxy Statement - Required information for this item is incorporated by reference from the 2023 Proxy Statement[423] Item 11. Executive Compensation Information regarding executive compensation is incorporated by reference from the 2023 Proxy Statement - Required information for this item is incorporated by reference from the 2023 Proxy Statement[424] Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information on security ownership and related stockholder matters is incorporated by reference from the 2023 Proxy Statement - Required information for this item is incorporated by reference from the 2023 Proxy Statement[425] Item 13. Certain Relationships and Related Transactions, and Director Independence Information on certain relationships, related transactions, and director independence is incorporated by reference from the 2023 Proxy Statement - Required information for this item is incorporated by reference from the 2023 Proxy Statement[426] Item 14. Principal Accounting Fees and Services Information regarding principal accounting fees and services is incorporated by reference from the 2023 Proxy Statement - Required information for this item is incorporated by reference from the 2023 Proxy Statement[427] Part IV Item 15. Exhibits, Financial Statement Schedules This section lists exhibits and financial statement schedules filed with the Form 10-K, including governance documents, material contracts, and certifications - This item contains an index of all exhibits filed with the Form 10-K, including governance documents, material contracts, and certifications[430] Item 16. Form 10-K Summary The company reports no information for this item - None[434]