ITEM 8. Financial Statements and Supplementary Data
RED ROBIN GOURMET BURGERS, INC.
INDEX
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Page
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Report of Independent Registered Public Accounting Firm
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47
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Consolidated Balance Sheets
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48
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Consolidated Statements of Income
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49
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Consolidated Statements of Comprehensive Income
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50
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Consolidated Statements of Stockholders' Equity
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51
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Consolidated Statements of Cash Flows
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52
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Notes to Consolidated Financial Statements
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53
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46
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Board of Directors and Stockholders of
Red Robin Gourmet Burgers, Inc.
Greenwood Village, Colorado
We
have audited the accompanying consolidated balance sheets of Red Robin Gourmet Burgers, Inc. and subsidiaries (the "Company") as of December 30, 2012 and
December 25, 2011, and the related consolidated statements of income, stockholders' equity, comprehensive income, and cash flows for each of the three years in the period ended
December 30, 2012. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We
conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.
In
our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Red Robin Gourmet Burgers, Inc. and subsidiaries as of
December 30, 2012 and December 25, 2011, and the results of their operations and their cash flows for each of the three years in the period ended December 30, 2012, in conformity
with accounting principles generally accepted in the United States of America.
We
have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's internal control over financial reporting as of
December 30, 2012, based on the criteria established in
Internal ControlIntegrated Framework
issued by the Committee of Sponsoring
Organizations of the Treadway Commission and our report dated February 28, 2013 expressed an unqualified opinion on the Company's internal control over financial reporting.
/s/
DELOITTE & TOUCHE LLP
Denver,
Colorado
February 28, 2013
47
RED ROBIN GOURMET BURGERS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
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|
|
|
|
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December 30,
2012
|
|
December 25,
2011
|
|
Assets:
|
|
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
22,440
|
|
$
|
35,036
|
|
Accounts receivable, net
|
|
|
16,386
|
|
|
14,785
|
|
Inventories
|
|
|
18,371
|
|
|
18,040
|
|
Prepaid expenses and other current assets
|
|
|
13,439
|
|
|
9,970
|
|
Income tax receivable
|
|
|
858
|
|
|
1,387
|
|
Deferred tax asset
|
|
|
3,010
|
|
|
1,429
|
|
|
|
|
|
|
|
Total current assets
|
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74,504
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|
|
80,647
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|
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Property and equipment, net
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413,258
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|
|
402,360
|
|
Goodwill
|
|
|
62,525
|
|
|
61,769
|
|
Intangible assets, net
|
|
|
37,203
|
|
|
38,969
|
|
Other assets, net
|
|
|
9,642
|
|
|
9,231
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
597,132
|
|
$
|
592,976
|
|
|
|
|
|
|
|
Liabilities and Stockholders' Equity:
|
|
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|
|
|
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|
Current Liabilities:
|
|
|
|
|
|
|
|
Trade accounts payable
|
|
$
|
14,241
|
|
$
|
14,798
|
|
Construction related payables
|
|
|
4,694
|
|
|
3,328
|
|
Accrued payroll and payroll related liabilities
|
|
|
31,476
|
|
|
35,044
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|
Unearned revenue, net
|
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28,187
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|
24,139
|
|
Accrued liabilities
|
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22,901
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19,045
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Current portion of credit facility
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9,375
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Current portion of long-term debt and capital lease obligations
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784
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|
|
757
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Total current liabilities
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102,283
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106,486
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Deferred rent
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44,801
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40,025
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Long-term portion of credit facility
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125,000
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136,875
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Other long-term debt and capital lease obligations
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9,211
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9,924
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Other non-current liabilities
|
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8,918
|
|
|
4,968
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|
|
|
|
|
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Total liabilities
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290,213
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|
|
298,278
|
|
|
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Stockholders' Equity:
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Common stock; $0.001 par value: 30,000,000 shares authorized; 17,499,147 and 17,276,404 shares issued; 13,999,278 and 14,579,257 shares
outstanding
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17
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17
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|
Preferred stock, $0.001 par value: 3,000,000 shares authorized; no shares issued and outstanding
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Treasury stock 3,499,869 and 2,697,147 shares, at cost
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|
(107,589
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)
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|
(83,285
|
)
|
Paid-in capital
|
|
|
185,974
|
|
|
178,111
|
|
Accumulated other comprehensive gain (loss), net of tax
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5
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(326
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)
|
Retained earnings
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228,512
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200,181
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Total stockholders' equity
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306,919
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294,698
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Total liabilities and stockholders' equity
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$
|
597,132
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$
|
592,976
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See Notes to Consolidated Financial Statements.
48
RED ROBIN GOURMET BURGERS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
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Year Ended
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December 30,
2012
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December 25,
2011
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December 26,
2010
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Revenues:
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Restaurant revenue
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$
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960,994
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|
$
|
898,842
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$
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846,389
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|
Franchise royalties and fees
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14,501
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|
14,151
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|
13,409
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|
Other revenue
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|
|
1,637
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|
|
1,857
|
|
|
4,471
|
|
|
|
|
|
|
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Total revenues
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|
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977,132
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|
914,850
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864,269
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|
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Costs and expenses:
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|
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|
|
|
|
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Restaurant operating costs:
|
|
|
|
|
|
|
|
|
|
|
Cost of sales (exclusive of depreciation and amortization shown separately below)
|
|
|
242,641
|
|
|
227,063
|
|
|
206,639
|
|
Labor (includes $349, $626 and $839 of stock-based compensation, respectively)
|
|
|
323,100
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|
|
303,503
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|
300,878
|
|
Other operating
|
|
|
125,471
|
|
|
124,238
|
|
|
125,137
|
|
Occupancy
|
|
|
70,971
|
|
|
65,785
|
|
|
63,055
|
|
Depreciation and amortization
|
|
|
55,468
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|
|
55,272
|
|
|
56,738
|
|
Selling, general and administrative expenses (includes $3,459, $2,693 and $3,273 of stock-based compensation, respectively)
|
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|
110,798
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103,124
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92,958
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|
Pre-opening costs
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|
3,474
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|
3,527
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|
|
3,015
|
|
Asset impairment charges
|
|
|
|
|
|
4,337
|
|
|
6,116
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
931,923
|
|
|
886,849
|
|
|
854,536
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
45,209
|
|
|
28,001
|
|
|
9,733
|
|
Other (income) expense:
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
5,662
|
|
|
5,885
|
|
|
5,112
|
|
Loss on debt refinancing
|
|
|
2,919
|
|
|
|
|
|
|
|
Interest income and other, net
|
|
|
(229
|
)
|
|
28
|
|
|
(109
|
)
|
|
|
|
|
|
|
|
|
Total other expenses
|
|
|
8,352
|
|
|
5,913
|
|
|
5,003
|
|
Income before income taxes
|
|
|
36,857
|
|
|
22,088
|
|
|
4,730
|
|
Provision (benefit) for income taxes
|
|
|
8,526
|
|
|
1,511
|
|
|
(2,569
|
)
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
28,331
|
|
$
|
20,577
|
|
$
|
7,299
|
|
|
|
|
|
|
|
|
|
Earnings per share:
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
1.97
|
|
$
|
1.36
|
|
$
|
0.47
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
1.93
|
|
$
|
1.34
|
|
$
|
0.46
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
14,411
|
|
|
15,122
|
|
|
15,536
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
14,669
|
|
|
15,357
|
|
|
15,709
|
|
|
|
|
|
|
|
|
|
See Notes to Consolidated Financial Statements.
49
RED ROBIN GOURMET BURGERS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
December 30,
2012
|
|
December 25,
2011
|
|
December 26,
2010
|
|
Net income
|
|
$
|
28,331
|
|
$
|
20,577
|
|
$
|
7,299
|
|
Cash Flow Hedges:
|
|
|
|
|
|
|
|
|
|
|
Net change in fair value of interest rate swap
|
|
|
(1,127
|
)
|
|
(742
|
)
|
|
(357
|
)
|
Net loss reclassified into interest expense
|
|
|
449
|
|
|
650
|
|
|
2,022
|
|
Loss on de-designation reclassified into loss on debt refinancing
|
|
|
1,220
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total change in unrealized gain (loss) related to cash flow hedges
|
|
|
542
|
|
|
(92
|
)
|
|
1,665
|
|
Income tax expense related to items of other comprehensive income
|
|
|
(211
|
)
|
|
(37
|
)
|
|
(650
|
)
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss), net of tax
|
|
|
331
|
|
|
(129
|
)
|
|
1,015
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
$
|
28,662
|
|
$
|
20,448
|
|
$
|
8,314
|
|
|
|
|
|
|
|
|
|
See Notes to Consolidated Financial Statements.
50
RED ROBIN GOURMET BURGERS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
Other
Comprehensive
Income
(Loss)
net of tax
|
|
|
|
|
|
|
|
Common Stock
|
|
Treasury Stock
|
|
|
|
|
|
|
|
|
|
Paid-in
Capital
|
|
Retained
Earnings
|
|
|
|
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Total
|
|
Balance, December 27, 2009
|
|
|
17,079
|
|
$
|
17
|
|
|
1,492
|
|
$
|
(50,125
|
)
|
$
|
167,637
|
|
$
|
(1,212
|
)
|
$
|
172,305
|
|
$
|
288,622
|
|
Exercise of options, issuance of restricted stock, shares exchanged for exercise and tax
|
|
|
(9
|
)
|
|
|
|
|
9
|
|
|
(196
|
)
|
|
(263
|
)
|
|
|
|
|
|
|
|
(459
|
)
|
Tax expense on exercise of stock options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(502
|
)
|
|
|
|
|
|
|
|
(502
|
)
|
Non-cash stock compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,212
|
|
|
|
|
|
|
|
|
4,212
|
|
Common stock issued through employee stock purchase plan
|
|
|
32
|
|
|
|
|
|
|
|
|
|
|
|
474
|
|
|
|
|
|
|
|
|
474
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,299
|
|
|
7,299
|
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,015
|
|
|
|
|
|
1,015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 26, 2010
|
|
|
17,102
|
|
|
17
|
|
|
1,501
|
|
|
(50,321
|
)
|
|
171,558
|
|
|
(197
|
)
|
|
179,604
|
|
|
300,661
|
|
Exercise of options, issuance of restricted stock, shares exchanged for exercise and tax
|
|
|
145
|
|
|
|
|
|
|
|
|
|
|
|
2,200
|
|
|
|
|
|
|
|
|
2,200
|
|
Tax benefit on exercise of stock options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
389
|
|
|
|
|
|
|
|
|
389
|
|
Acquisition of treasury stock
|
|
|
|
|
|
|
|
|
1,196
|
|
|
(32,964
|
)
|
|
|
|
|
|
|
|
|
|
|
(32,964
|
)
|
Non-cash stock compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,480
|
|
|
|
|
|
|
|
|
3,480
|
|
Common stock issued through employee stock purchase plan
|
|
|
29
|
|
|
|
|
|
|
|
|
|
|
|
484
|
|
|
|
|
|
|
|
|
484
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,577
|
|
|
20,577
|
|
Other comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(129
|
)
|
|
|
|
|
(129
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 25, 2011
|
|
|
17,276
|
|
|
17
|
|
|
2,697
|
|
|
(83,285
|
)
|
|
178,111
|
|
|
(326
|
)
|
|
200,181
|
|
|
294,698
|
|
Exercise of options, issuance of restricted stock, shares exchanged for exercise and tax
|
|
|
198
|
|
|
|
|
|
|
|
|
|
|
|
2,561
|
|
|
|
|
|
|
|
|
2,561
|
|
Tax benefit on exercise of stock options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
683
|
|
|
|
|
|
|
|
|
683
|
|
Acquisition of treasury stock
|
|
|
|
|
|
|
|
|
803
|
|
|
(24,304
|
)
|
|
|
|
|
|
|
|
|
|
|
(24,304
|
)
|
Non-cash stock compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,034
|
|
|
|
|
|
|
|
|
4,034
|
|
Common stock issued through employee stock purchase plan
|
|
|
25
|
|
|
|
|
|
|
|
|
|
|
|
585
|
|
|
|
|
|
|
|
|
585
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28,331
|
|
|
28,331
|
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
331
|
|
|
|
|
|
331
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 30, 2012
|
|
|
17,499
|
|
$
|
17
|
|
|
3,500
|
|
$
|
(107,589
|
)
|
$
|
185,974
|
|
$
|
5
|
|
$
|
228,512
|
|
$
|
306,919
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Consolidated Financial Statements.
51
RED ROBIN GOURMET BURGERS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
December 30,
2012
|
|
December 25,
2011
|
|
December 26,
2010
|
|
Cash Flows From Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
28,331
|
|
$
|
20,577
|
|
$
|
7,299
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
55,468
|
|
|
55,272
|
|
|
56,738
|
|
Gift card breakage
|
|
|
(1,486
|
)
|
|
(1,687
|
)
|
|
(4,286
|
)
|
Provision (benefit) for deferred income taxes
|
|
|
1,846
|
|
|
2,221
|
|
|
(2,199
|
)
|
Loss on debt refinance
|
|
|
2,919
|
|
|
|
|
|
|
|
Asset impairment charges
|
|
|
|
|
|
4,337
|
|
|
6,116
|
|
Amortization of debt issuance costs
|
|
|
1,395
|
|
|
954
|
|
|
342
|
|
Stock-based compensation
|
|
|
3,808
|
|
|
3,319
|
|
|
4,112
|
|
Loss on the sale of property and equipment
|
|
|
|
|
|
120
|
|
|
|
|
Restaurant closure costs
|
|
|
257
|
|
|
|
|
|
856
|
|
Changes in operating assets and liabilities, net of effects of acquired business:
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(642
|
)
|
|
(7,802
|
)
|
|
(1,108
|
)
|
Inventories
|
|
|
(285
|
)
|
|
(2,003
|
)
|
|
(1,510
|
)
|
Prepaid expenses and other current assets
|
|
|
(3,948
|
)
|
|
(1,978
|
)
|
|
(1,305
|
)
|
Income tax receivable
|
|
|
528
|
|
|
2,435
|
|
|
891
|
|
Other assets
|
|
|
(3,408
|
)
|
|
(276
|
)
|
|
(3,183
|
)
|
Unearned revenue
|
|
|
5,516
|
|
|
11,436
|
|
|
3,240
|
|
Trade accounts payable and accrued liabilities
|
|
|
(696
|
)
|
|
2,961
|
|
|
1,395
|
|
Deferred rent
|
|
|
4,776
|
|
|
5,811
|
|
|
3,215
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
94,379
|
|
|
95,697
|
|
|
70,613
|
|
|
|
|
|
|
|
|
|
Cash Flows From Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment
|
|
|
(59,960
|
)
|
|
(44,085
|
)
|
|
(34,962
|
)
|
Proceeds from sales of property
|
|
|
382
|
|
|
1,122
|
|
|
|
|
Acquisition of franchise restaurants, net of cash acquired
|
|
|
(3,247
|
)
|
|
|
|
|
|
|
Changes in marketing fund restricted cash
|
|
|
(480
|
)
|
|
(392
|
)
|
|
(98
|
)
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(63,305
|
)
|
|
(43,355
|
)
|
|
(35,060
|
)
|
|
|
|
|
|
|
|
|
Cash Flows From Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
Borrowings of long-term debt
|
|
|
125,000
|
|
|
188,500
|
|
|
193,200
|
|
Payments of long-term debt and capital leases
|
|
|
(147,049
|
)
|
|
(190,025
|
)
|
|
(231,943
|
)
|
Purchase of treasury stock
|
|
|
(24,304
|
)
|
|
(32,964
|
)
|
|
|
|
Debt issuance costs
|
|
|
(949
|
)
|
|
(3,662
|
)
|
|
|
|
Proceeds from exercise of stock options and employee stock purchase plan
|
|
|
3,632
|
|
|
2,956
|
|
|
811
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities
|
|
|
(43,670
|
)
|
|
(35,195
|
)
|
|
(37,932
|
)
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
$
|
(12,596
|
)
|
$
|
17,147
|
|
$
|
(2,379
|
)
|
Cash and cash equivalents, beginning of year
|
|
|
35,036
|
|
|
17,889
|
|
|
20,268
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of year
|
|
$
|
22,440
|
|
$
|
35,036
|
|
$
|
17,889
|
|
|
|
|
|
|
|
|
|
See Notes to Consolidated Financial Statements.
52
RED ROBIN GOURMET BURGERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Description of Business and Summary of Significant Accounting Policies
Red Robin Gourmet Burgers, Inc., together with its subsidiaries ("Red Robin" or the "Company"), a Delaware corporation, develops and operates casual-dining restaurants. At
December 30, 2012, the Company owned and operated 339 restaurants located in 33 states. The Company also sells franchises, of which there were 133 restaurants, in 21 states and two Canadian
provinces as of December 30, 2012. The Company operates its business as one operating and one reportable segment.
Principles of Consolidation and Fiscal Year
The consolidated financial statements of the Company include the accounts of Red Robin and its wholly
owned subsidiaries after elimination of all intercompany accounts and transactions. The Company's fiscal year is 52 or 53 weeks ending the last Sunday of the calendar year. Fiscal year 2012
included 53 weeks ending December 30, 2012, and fiscal years 2011 and 2010 included 52 weeks. Fiscal year 2013 will include 52 weeks and will end on December 29,
2013.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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 periods. The areas that require management's most significant estimates are impairment of long lived assets, goodwill, lease
accounting, insurance/self-insurance reserves, estimating fair value, income taxes, unearned revenue and stock-based compensation expense. Actual results could differ from those estimates.
Cash Equivalents
The Company considers all highly liquid instruments with an original
maturity of three months or less to be cash equivalents. Amounts receivable from credit card issuers are typically converted to cash within two to four days of the original sales transaction and are
considered to be cash equivalents.
Cash
and cash equivalents are maintained with multiple financial institutions. Generally, these deposits may be redeemed upon demand and are maintained with financial institutions with
reputable credit and therefore bear minimal credit risk. The Company holds cash and cash equivalents at financial institutions in excess of amounts covered by the Federal Depository Insurance
Corporation (the "FDIC") and sometimes invests excess cash in money market funds not insured by the FDIC.
Accounts Receivable
Accounts receivable consists primarily of trade receivables due from franchisees for royalties, as well as third-party gift card
receivables. In 2012, there was approximately $8.8 million of gift cards in transit in accounts receivable related to gift cards that were sold by third-party retailers, but for which cash
settlement occurs anywhere from 15 to 45 days from sale, compared to $7.5 million in 2011. In 2012, there was approximately $2.9 million related to tenant improvement allowances
in accounts receivable compared to $2.7 million in 2011.
Inventories
Inventories consist of food, beverages, and supplies valued at the lower of cost (first-in, first-out method) or
market. At the end of fiscal 2012 and 2011, food and beverage inventories were $6.1 million and $6.6 million, respectively, and supplies inventories were $12.2 million and
$11.4 million, respectively.
Property and Equipment
Property and equipment are recorded at cost. Expenditures for major additions and improvements are capitalized and minor
replacements, maintenance, and repairs are expensed as incurred. Depreciation is computed on the straight-line method, based on the shorter of
53
RED ROBIN GOURMET BURGERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1. Description of Business and Summary of Significant Accounting Policies (Continued)
the
estimated useful lives or the terms of the underlying leases of the related assets. Interest incurred on funds used to construct Company-owned restaurants is capitalized and amortized over the
estimated useful life of the related assets. Capitalized interest totaled $0.3 million in 2012, $0.2 million in 2011, and $0.1 million in 2010.
The
estimated useful lives for property and equipment are:
|
|
|
Buildings
|
|
5 to 20 years
|
Leasehold improvements
|
|
Shorter of lease term or estimated useful life, not to exceed 20 years
|
Furniture, ffixtures and equipment
|
|
3 to 7 years
|
Restaurant property leased to others
|
|
3 to 20 years
|
The
Company capitalizes certain overhead related to the development and construction of its new restaurants, as well as certain information technology infrastructure upgrades.
Capitalized overhead for the years ended December 30, 2012, December 25, 2011, and December 26, 2010, was $2.7 million, $2.4 million, and $2.4 million,
respectively. Costs incurred for the potential development of restaurants that are subsequently terminated are expensed. No material expense has been incurred in any of the fiscal years presented.
Goodwill and Intangible Assets, net
Goodwill represents the excess of purchase price over the fair value of identifiable net assets acquired.
Intangible assets are comprised primarily of leasehold interests, acquired franchise rights and the costs of purchased liquor licenses. Leasehold interests primarily represent the fair values of
acquired lease contracts having contractual rents lower than fair market rents and are amortized on a straight-line basis over the remaining initial lease term. Acquired franchise rights,
which represented the acquired value of franchise contracts, are amortized over the term of the franchise agreements. Liquor licenses are generally amortized over one to five years.
Goodwill,
which is not subject to amortization, is evaluated for impairment annually or more frequently at the level of the Company's single operating segment, which also represents the
Company's only reporting unit, if indicators of impairment are present. The Company performed step one of the impairment test on the last day of the fiscal year, December 30, 2012. Step one of
the impairment test is based upon a comparison of the carrying value of net assets, including goodwill balances, to the fair value of net assets. Fair value is measured using a combination of the
market capitalization method, the income approach, and the market approach. The market capitalization method uses the Company's stock price to derive fair value. The income approach consists of
utilizing the discounted cash flow method that incorporates the Company's estimates of future revenues and costs, discounted using a risk-adjusted discount rate. The Company's estimates
used in the income approach are consistent with the plans and estimates used to manage operations. The market approach utilizes multiples of profit measures in order to estimate the fair value of the
assets. The Company evaluates all methods to ensure reasonably consistent results. Additionally, the Company evaluates the key input factors in the models used to determine whether a moderate change
in any input factor or combination of factors would significantly change the results of the tests. Based on the completion of the step one test, it was determined that goodwill was not impaired as of
December 30, 2012, as the percentage by which the fair value exceeded the carrying value was approximately 50%.
54
RED ROBIN GOURMET BURGERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1. Description of Business and Summary of Significant Accounting Policies (Continued)
However,
an impairment charge may be triggered in the future, if the value of the Company's stock declines, sales in the Company's restaurants decline beyond current forecast, or if
there are significant adverse changes in the operating environment of the restaurant industry. The Company has followed a consistent approach to evaluating whether there are impairments of goodwill.
The Company makes adjustments to assumptions to reflect management's view of current market and economic conditions. There was no impairment recorded during fiscal years 2012, 2011, and 2010.
Impairment of Long-Lived Assets
The Company reviews its long-lived assets, including land, property and equipment, and
amortizable intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and
used is measured by a comparison of the carrying amount of the assets to the future undiscounted net cash flows expected to be generated by the assets. Identifiable cash flows are measured at the
lowest level for which they are largely independent of the cash flows of other groups of assets and liabilities, generally at the restaurant level. If the assets are determined to be impaired, the
amount of impairment recognized is the amount by which the carrying amount of the assets exceeds their fair value. Fair value is generally determined using forecasted cash flows discounted using an
estimated weighted average cost of capital. Restaurant sites and other assets to be disposed of are reported at the lower of their carrying amount or fair value, less estimated costs to sell. There
was no impairment recorded during 2012. During 2011 and 2010, the Company recorded impairments of certain long-lived assets. See Note 3,
Restaurant
Impairment and Restaurant Closures
.
Fair Value Measurements
The Company measures certain financial assets and liabilities at fair value in accordance with the accounting guidance for
measuring fair value. These assets and liabilities are measured at each reporting period, and certain of these are revalued as required. Refer to Note 9,
Fair Value
Measurements
.
Other Assets, net
Other assets, net consist primarily of assets related to the employee deferred compensation plan, unamortized debt issuance costs
and various deposits. Debt issuance costs are capitalized and amortized to interest expense on a straight-line basis which approximates the effective interest rate method over the term of
the Company's long term debt. Due to the Company's refinancing of debt in December 2012, the Company wrote off $1.7 million of certain unamortized loan origination costs associated with the
previous credit facility. Refer to Note 7
Borrowings
. Debt issuance costs at the end of fiscal years 2012 and 2011 were $1.8 million and
$3.2 million, respectively.
Revenue Recognition
Revenues consist of sales from restaurant operations, gift card breakage, franchise royalties and fees, and rental income.
Revenues from restaurant sales are recognized when payment is tendered at the point of sale.
The
Company sells gift cards which do not have an expiration date, and it does not deduct dormancy fees from outstanding gift card balances. The Company recognizes revenue from gift
cards when: (i) the gift card is redeemed by the customer; or (ii) the likelihood of the gift card being redeemed by the customer is remote (gift card breakage), and the Company
determines that there is not a legal obligation to remit the unredeemed gift card balance to the relevant jurisdiction. The determination of the gift card breakage rate is based upon the Company's
specific historical redemption patterns. The Company recognizes gift card breakage by applying its estimate of the rate of gift card breakage over the period of estimated performance (currently
24 months). The Company completed initial analysis of unredeemed gift card liabilities for gift cards sold in third party locations during the
55
RED ROBIN GOURMET BURGERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1. Description of Business and Summary of Significant Accounting Policies (Continued)
first
quarter of 2011 and recognized $0.4 million into revenue as an initial adjustment. The Company completed its initial analysis of unredeemed gift card liabilities for gift cards that it
sold in its restaurants during the first quarter 2010, and recognized $3.5 million into revenue as an initial adjustment. For the fiscal years ended 2012, 2011 and 2010, the Company recognized
$1.5 million, $1.7 million and $4.3 million (inclusive of the initial adjustments), respectively, into revenue related to
unredeemed gift card breakage. Gift card breakage is included in other revenue in the consolidated statements of operations. Unearned gift card revenue at the end of fiscal years 2012 and 2011 was
$23.6 million and $20.3 million, respectively.
The
Company typically grants franchise rights to franchisees for a term of 20 years, with the right to extend the term for an additional ten years if they satisfy various
conditions. The Company provides management expertise, training, pre-opening assistance and restaurant operating assistance in exchange for area development fees, franchise fees, license
fees and royalties of 3% to 4% of the franchised adjusted gross restaurant sales. The Company recognizes area development fees and franchise fees as income when the Company has performed all material
obligations and initial services, which generally occurs upon the opening of the new restaurant. Until earned, these fees are accounted for as an accrued liability. Area development fees are
recognized proportionately with the opening of each new restaurant. Royalties are accrued as earned and are calculated each period based on the franchisee's reported adjusted sales.
The
Company accounts for its Red Robin Royalty loyalty program using a deferred revenue approach in accordance with United States Generally Accepted Accounting Principles
("U.S. GAAP") related to loyalty programs. Red Robin Royalty deferred revenue primarily relates to a program in which registered members earn an award for a free
entrée for every nine entrées purchased. We recognize the current sale of an entrée and defer a portion of the revenue to reflect partial
pre-payment for the future entrée the member is entitled to receive. We estimate the future value of the award based on the historical average value of redemptions. We also
estimate what portion of registered members are not likely to reach the ninth purchase based on historical activity and recognize the deferred revenue related to those purchases. We recognize the
deferred revenue in Restaurant Revenue on earned rewards when redeemed or upon expiration, which is 60 days after the award is earned. We compare the estimate of the value of future awards to
historical redemptions to evaluate the reasonableness of the deferred amount. Deferred loyalty revenue at December 30 2012 and December 25, 2011, was $4.6 million and
$3.8 million, respectively.
Advertising
Advertising production costs are expensed in the period when the advertising first takes place. Other advertising and marketing costs are
expensed as incurred. Advertising and marketing costs were $33.5 million, $29.0 million, and $28.9 million in 2012, 2011, and 2010, respectively, and are included in selling,
general, and administrative expenses in the consolidated statements of income.
Under
the Company's franchise agreements, both the Company and the franchisees must contribute a minimum percentage of revenues to two marketing and national media advertising funds (the
Marketing Funds). These Marketing Funds are used to develop and distribute Red Robin® branded marketing materials, for media purchases and for administrative costs. The Company's portion
of costs incurred by the Marketing Funds is recorded as selling, general and administrative expenses in the Company's consolidated statements of income. Restricted cash includes amounts contributed to
the Marketing Funds held for future use.
56
RED ROBIN GOURMET BURGERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1. Description of Business and Summary of Significant Accounting Policies (Continued)
Rent
The Company's leases generally contain escalating rent payments over the lease term as well as optional renewal periods. The Company accounts for
its leases by recognizing rent expense on a straight-line basis over the lease term, which includes reasonably assured renewal periods. The lease term begins when the Company has the right
to control the use of the property, which is typically before rent payments are due under the lease agreement. The difference between the rent expense and rent paid is recorded as deferred rent in the
consolidated balance sheet. Rent expense for the period prior to the restaurant opening is expensed in pre-opening costs. Tenant incentives used to fund leasehold improvements are recorded
in deferred rent and amortized as reductions of lease rent expense ratably over the lease term.
Additionally,
certain of the Company's operating lease agreements contain clauses that provide for additional contingent rent based on a percentage of sales greater than certain
specified target amounts. The Company recognizes contingent rent expense prior to the achievement of the specified target that triggers contingent rent, provided the achievement of that target is
considered probable. Refer to Note 12
, Commitments and Contingencies.
Self-Insurance Programs
The Company utilizes a self-insurance plan for health, general liability, and workers' compensation
coverage. Predetermined loss limits have been arranged with insurance companies to limit the Company's per occurrence cash outlay. Accrued liabilities and accrued payroll and payroll-related
liabilities include the estimated cost to settle reported claims and incurred but unreported claims.
Pre-opening Costs
Pre-opening costs are expensed as incurred. Pre-opening costs include rental expenses through
the date of opening for each restaurant, travel expenses, wages and benefits for the training and opening teams, and food, beverage and other restaurant opening costs incurred prior to a restaurant
opening for business.
Income Taxes
Deferred tax liabilities are recognized for the estimated effects of all taxable temporary differences, and deferred tax assets are
recognized for the estimated effects of all deductible temporary differences and net operating losses, if any, and tax credit carryforwards.
Measurement of the Company's current and deferred tax liabilities and assets is based on provisions of enacted tax laws.
Earnings Per Share
Basic earnings per share amounts are calculated by dividing net income by the weighted average number of common shares outstanding
during the year. Diluted earnings per share amounts are calculated based upon the weighted average number of common and potentially dilutive common shares outstanding during the year. Potentially
dilutive shares are excluded from the computation in periods in which they have an anti-dilutive effect. Diluted earnings per share reflect the potential dilution that could occur if
holders of options exercised their holdings into common stock. During 2012, 2011, and 2010, a total of 305,000, 226,000, and 511,000 weighted average stock options outstanding were not included in the
computation of diluted earnings per share because to do so would have been anti-dilutive for the periods presented. The Company uses the treasury stock method to calculate the impact of
outstanding stock options.
57
RED ROBIN GOURMET BURGERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1. Description of Business and Summary of Significant Accounting Policies (Continued)
The
computations for basic and diluted earnings per share are as follows (in thousands, except per share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
2011
|
|
2010
|
|
Net income
|
|
$
|
28,331
|
|
$
|
20,577
|
|
$
|
7,299
|
|
|
|
|
|
|
|
|
|
Basic weighted average shares outstanding
|
|
|
14,411
|
|
|
15,122
|
|
|
15,536
|
|
Dilutive effect of stock options and awards
|
|
|
258
|
|
|
235
|
|
|
173
|
|
|
|
|
|
|
|
|
|
Diluted weighted average shares outstanding
|
|
|
14,669
|
|
|
15,357
|
|
|
15,709
|
|
|
|
|
|
|
|
|
|
Earnings per share:
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
1.97
|
|
$
|
1.36
|
|
$
|
0.47
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
1.93
|
|
$
|
1.34
|
|
$
|
0.46
|
|
|
|
|
|
|
|
|
|
Comprehensive Income
Comprehensive income consists of the net income and other gains and losses affecting stockholders' equity that, under
U.S. GAAP, are excluded from net income. Other comprehensive income as presented in the consolidated statements of stockholders' equity for 2012 consisted of the unrealized gain, net of tax, on
the Company's current cash flow hedge which will expire in June 2015. Other comprehensive loss as presented in the consolidated statements of stockholders' equity for 2011 consisted of the unrealized
loss, net of tax, on the Company's current cash flow hedge. Other comprehensive income for 2010 consisted of the unrealized gain, net of tax, on the Company's former cash flow hedge that expired March
2011. See Note 8,
Derivative and Other Comprehensive Income.
Stock-Based Compensation
The Company maintains several equity incentive plans under which it may grant stock options, stock appreciation rights,
restricted stock, stock variable compensation or other forms of awards granted or denominated in the Company's common stock or units of the Company's common stock, as well as cash variable
compensation awards to employees, non-employees, directors and consultants. In 2010, the Company granted performance-based restricted stock units ("PSUs") to executives and other key
employees. These PSUs are subject to company performance metrics based on Total Shareholder Return and measure the overall stock price performance of the Company to the stock price performance of a
selected industry peer group, thus resulting in a market condition. The Company also maintains an employee stock purchase plan. See Note 15,
Stock Incentive
Plans
, for additional details.
2. Recent Accounting Pronouncements
Recently Adopted Accounting Standards
In May 2011, the Financial Accounting Standards Board ("FASB") issued
Amendments to Achieve Common Fair Value
Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards
. This pronouncement was issued to provide a consistent definition of
fair value and ensure that the fair value measurement and disclosure requirements are similar between U.S. GAAP and International Financial Reporting Standards. The new guidance changes certain
fair value measurement principles and enhances the disclosure requirements particularly for Level 3 fair value
58
RED ROBIN GOURMET BURGERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. Recent Accounting Pronouncements (Continued)
measurements.
The Company adopted this pronouncement in the first quarter of 2012. The adoption of this guidance did not have a significant impact on the Company's consolidated financial statements.
In
June 2011 and as updated in December 2011, the FASB updated its guidance regarding comprehensive income to require companies to present the total of comprehensive income, the
components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The updated
guidance eliminates the option to present the components of other comprehensive income as part of the statement of changes in equity. This guidance was adopted retrospectively in the first quarter of
2012 and did not have a significant impact on the Company's consolidated financial statements.
In
September 2011, the FASB issued
Testing Goodwill for Impairment
. The new guidance simplifies how entities test goodwill for impairment
and permits an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for
determining whether it is necessary to perform the two-step goodwill impairment test. This guidance was adopted in the first quarter of 2012 and did not have a significant impact on the
Company's consolidated financial statements.
Newly Issued Accounting Standards
In July 2012, the FASB issued
IntangiblesTesting Indefinite Lived Intangibles for
Impairment
. This pronouncement allows an entity the option to first assess qualitative factors to determine whether it is necessary to perform a quantitative impairment test.
An entity electing to perform a qualitative assessment is no longer required to calculate the fair value of an indefinite-lived intangible asset unless the entity determines, based on the qualitative
assessment, that it is more likely than not that the asset is impaired. The guidance is effective for impairment tests for fiscal years beginning after September 15, 2012, however, earlier
adoption is allowed. As the guidance does not change the underlying principle that the carrying amount of an indefinite-lived intangible asset should not exceed its fair value, the adoption of this
guidance is not expected to have a material impact on the Company's consolidated financial statements.
In
January 2013, the FASB issued
Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities
, which clarifies the scope of
transactions that are subject to the disclosures about offsetting and will require disclosure of information about the effect or potential effect of financial instrument netting arrangements on
financial position. Entities will be required to present both net (offset amounts) and gross information in the notes to the financial statements for relevant assets and liabilities that are offset.
This guidance is effective for fiscal years beginning on or after January 1, 2013, and interim periods within those annual periods. The adoption of this guidance is not expected to have a
material impact on the Company's consolidated financial statements.
In
February 2013, the FASB issued
Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income,
which requires an
entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, an entity is required to present, either on the face of the
statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the
amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under
59
RED ROBIN GOURMET BURGERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. Recent Accounting Pronouncements (Continued)
U.S. GAAP
to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures required under U.S. GAAP that provide additional detail about
those amounts. The guidance is effective for reporting periods beginning after December 15, 2012, however, earlier adoption is allowed. The adoption of this guidance is not expected to have a
material impact on the Company's consolidated financial statements.
3. Restaurant Impairment and Restaurant Closures
Restaurant Impairment
There were no restaurant impairments during 2012. During 2011, the Company determined that three Company-owned restaurants were
impaired. The Company recognized a non-cash pre-tax impairment charge of $4.3 million resulting from the continuing and projected future results of these restaurants,
primarily through projected cash flows. Each restaurant's past and present operating performance were reviewed combined with projected future results, primarily through projected undiscounted cash
flows, which indicated possible impairment. The Company compared the carrying amount of each restaurant's assets to its fair value as estimated by management. The fair value of the
long-lived assets was determined using a discounted cash flows projection model that uses several scenarios that estimate expected future cash flows. The discount factor was determined
using external information regarding the risk-free rate of return, industry beta factors, and premium adjustments. These factors were combined with internal information such as the
Company's average cost of debt and effective tax rate to determine a weighted average cost of capital which was applied to the undiscounted cash flows. The impairment charges represent the excess of
each restaurant's carrying amount over its estimated fair value. During 2010, the Company determined that the long lived assets of four Company-owned restaurants were impaired, and recognized a
non-cash pre-tax impairment charge of $6.1 million resulting from the continuing and projected losses of these restaurants.
Restaurant Closures
The Company closed three restaurants in the fiscal year 2012, no restaurants in fiscal year 2011, and three restaurants in 2010. In
2012 and 2010, one restaurant operating below acceptable profitability levels was closed in each fiscal year. In both 2012 and 2010, two restaurants were closed at the end of their respective lease
terms.
The
Company evaluates restaurants that are sold or closed and allocates goodwill based on the relative fair value of the disposal restaurants to the Company's reporting unit. Since
restaurant operations are typically valued based on cash flow from operations, the Company compares the historical cash flow from the closed restaurants to the cash flow from the reporting unit to
determine the relative value. The Company allocates goodwill to disposed restaurants, if necessary. No goodwill was allocated to the restaurants closed in fiscal years 2012 or 2010 because those
restaurants had projected negative cash flow and consequently did not have positive fair value.
60
RED ROBIN GOURMET BURGERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
4. Property and Equipment
Property and equipment consist of the following at December 30, 2012, and December 25, 2011, (in thousands):
|
|
|
|
|
|
|
|
|
|
2012
|
|
2011
|
|
Land
|
|
$
|
33,896
|
|
$
|
34,111
|
|
Buildings
|
|
|
79,918
|
|
|
78,048
|
|
Leasehold improvements
|
|
|
453,761
|
|
|
426,191
|
|
Furniture, fixtures and equipment
|
|
|
226,509
|
|
|
211,248
|
|
Restaurant property leased to others
|
|
|
4,554
|
|
|
4,561
|
|
Construction in progress
|
|
|
18,044
|
|
|
9,517
|
|
|
|
|
|
|
|
|
|
|
816,682
|
|
|
763,676
|
|
Accumulated depreciation and amortization
|
|
|
(403,424
|
)
|
|
(361,316
|
)
|
|
|
|
|
|
|
Property and equipment, net
|
|
$
|
413,258
|
|
$
|
402,360
|
|
|
|
|
|
|
|
Depreciation
and amortization expense on property and equipment, including assets under capital lease, was $50.9 million in 2012, $50.7 million in 2011 and
$52.1 million in 2010.
5. Goodwill and Intangible Assets
The following table presents goodwill as of December 30, 2012, and December 25, 2011, (in thousands).
|
|
|
|
|
|
|
|
|
|
2012
|
|
2011
|
|
Balance at beginning of year
|
|
$
|
61,769
|
|
$
|
61,769
|
|
Acquisitions
|
|
|
756
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
$
|
62,525
|
|
$
|
61,769
|
|
|
|
|
|
|
|
The
Company has no historical goodwill impairment losses in periods prior to those presented in the above table.
The
following table presents intangible assets subject to amortization as of December 30, 2012, and December 25, 2011, (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
2011
|
|
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
Carrying
Amount
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
Carrying
Amount
|
|
Intangible assets subject to amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Franchise rights
|
|
$
|
43,519
|
|
$
|
(15,342
|
)
|
$
|
28,177
|
|
$
|
43,494
|
|
$
|
(14,515
|
)
|
$
|
28,979
|
|
Leasehold interests
|
|
|
12,744
|
|
|
(4,313
|
)
|
|
8,431
|
|
|
12,955
|
|
|
(3,747
|
)
|
|
9,208
|
|
Liquor licenses
|
|
|
9,095
|
|
|
(8,500
|
)
|
|
595
|
|
|
8,210
|
|
|
(7,428
|
)
|
|
782
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
65,358
|
|
$
|
(28,155
|
)
|
$
|
37,203
|
|
$
|
64,659
|
|
$
|
(25,690
|
)
|
$
|
38,969
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
61
RED ROBIN GOURMET BURGERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
5. Goodwill and Intangible Assets (Continued)
There
were insignificant impairments of liquor licenses related to restaurants impaired in 2011 and 2010, which are discussed in Note 3,
Restaurant
Impairment and Restaurant Closures.
There were no other impairments of intangible assets subject to amortization in 2011 or 2010. There were no impairments to intangible assets
in 2012. The aggregate amortization expense related to intangible assets subject to amortization for 2012, 2011, and 2010 was $4.6 million, $4.6 million and $4.6 million,
respectively.
The
estimated aggregate future amortization expense as of December 30, 2012 is as follows, (in thousands):
|
|
|
|
|
2013
|
|
$
|
2,942
|
|
2014
|
|
|
3,143
|
|
2015
|
|
|
2,983
|
|
2016
|
|
|
2,837
|
|
2017
|
|
|
2,712
|
|
Thereafer
|
|
|
22,586
|
|
|
|
|
|
|
|
$
|
37,203
|
|
|
|
|
|
6. Accrued Payroll and Payroll-related Liabilities and Accrued Liabilities
Accrued payroll and payroll-related liabilities consist of the following at December 30, 2012, and December 25, 2011, (in thousands):
|
|
|
|
|
|
|
|
|
|
2012
|
|
2011
|
|
Payroll
|
|
$
|
3,713
|
|
$
|
7,550
|
|
Corporate and restaurant variable compensation
|
|
|
10,503
|
|
|
9,004
|
|
Workers compensation insurance
|
|
|
6,831
|
|
|
6,878
|
|
Accrued vacation
|
|
|
5,032
|
|
|
5,336
|
|
Other
|
|
|
5,397
|
|
|
6,276
|
|
|
|
|
|
|
|
|
|
$
|
31,476
|
|
$
|
35,044
|
|
|
|
|
|
|
|
Accrued
liabilities consist of the following at December 30, 2012, and December 25, 2011, (in thousands):
|
|
|
|
|
|
|
|
|
|
2012
|
|
2011
|
|
State and city sales taxes
|
|
$
|
6,919
|
|
$
|
4,886
|
|
Real estate, personal property, state income and other taxes payable
|
|
|
2,767
|
|
|
3,054
|
|
General liability insurance
|
|
|
2,815
|
|
|
2,387
|
|
Utilities
|
|
|
1,874
|
|
|
1,726
|
|
Other
|
|
|
8,526
|
|
|
6,992
|
|
|
|
|
|
|
|
|
|
$
|
22,901
|
|
$
|
19,045
|
|
|
|
|
|
|
|
62
RED ROBIN GOURMET BURGERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
7. Borrowings
Borrowings as of December 30, 2012, and December 25, 2011, are summarized below (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 30, 2012
|
|
December 25, 2011
|
|
|
|
Borrowings
|
|
Weighted
Average
Interest Rate
|
|
Borrowings
|
|
Weighted
Average
Interest Rate
|
|
Term loan facility
|
|
$
|
|
|
|
n/a
|
|
$
|
146,250
|
|
|
3.14
|
%
|
Revolving credit facility, variable interest rate based on an applicable margin plus LIBOR
|
|
|
125,000
|
|
|
2.38
|
%
|
|
|
|
|
|
%
|
Capital lease obligations
|
|
|
9,995
|
|
|
5.59
|
%
|
|
10,681
|
|
|
5.69
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt
|
|
|
134,995
|
|
|
|
|
|
156,931
|
|
|
|
|
Less: Current portion
|
|
|
(784
|
)
|
|
|
|
|
(10,132
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
$
|
134,211
|
|
|
|
|
$
|
146,799
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maturities
of long-term debt and capital lease obligations as of December 30, 2012 are as follows (in thousands):
|
|
|
|
|
2013
|
|
$
|
784
|
|
2014
|
|
|
791
|
|
2015
|
|
|
531
|
|
2016
|
|
|
494
|
|
2017
|
|
|
125,564
|
|
Thereafter
|
|
|
6,831
|
|
|
|
|
|
|
|
$
|
134,995
|
|
|
|
|
|
On
May 6, 2011, the Company amended and restated its credit facility to provide a more flexible capital structure and facilitate our growth plans ("Previous Facility"). Borrowings
under the Previous Facility could be used by the Company for general corporate purposes including, among other uses, to repurchase shares of our capital stock, to continue to finance restaurant
construction, and for working capital and general corporate requirements. The Previous Facility was comprised of (i) a $100 million revolving credit facility maturing on May 6,
2016 and (ii) a $150 million term loan maturing on May 6, 2016, both with rates based on the London Interbank Offered Rate ("LIBOR") plus a spread based on leverage or a base rate
plus a spread based on leverage (base rate is the highest of (a) the Prime Rate, (b) the Federal Funds Rate plus 0.50% and (c) LIBOR for an interest period of one month plus 1%).
The Previous Facility required the payment of an annual commitment fee based upon the unused portion of the credit facility. The Previous Facility's interest rates and the annual commitment rate were
based on a financial leverage ratio, as defined in the credit agreement. The Company's obligations under the Previous Facility were secured by first priority liens and security interests in
substantially all of the Company's assets, which included the capital stock of certain subsidiaries. Additionally, the Previous Facility included a negative pledge on all tangible and intangible
assets (including all real and personal property) with customary exceptions.
63
RED ROBIN GOURMET BURGERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
7. Borrowings (Continued)
On December 14, 2012, the Company terminated the Previous Facility and entered into a new credit facility ("New Credit Facility") with a consortium of banks. The New Credit
Facility provides for a $225 million revolving line of credit with a sublimit for the issuance of up to $25 million in letters of credits and swingline loans up to $15 million,
and maintains the option to increase this credit facility in the future, subject to lenders' participation, by up to an additional $100 million in the aggregate. Borrowings under the New Credit
Facility are subject to rates based on LIBOR plus a spread based on leverage or a base rate plus a spread based on leverage (base rate is the highest of (a) the Prime Rate, (b) the
Federal Funds Rate plus 0.50% and (c) LIBOR for an Interest Period of one month plus 1%). This $225 million revolving line of credit matures on December 14, 2017. Borrowings under
the New Credit Facility are secured by first priority liens and security interests in substantially all of the Company's assets, which include the capital stock of certain Company subsidiaries, and
are available for financing activities including restaurant construction costs, working capital and general corporate purposes, including, among other uses, to refinance certain indebtedness,
permitted acquisitions and redemption of capital stock. As of December 30, 2012, we had outstanding borrowings under the New Credit Facility revolver of $125.0 million.
Proceeds
from the New Credit Facility were used to pay off the $121.9 million outstanding balance of the term loan of the Previous Facility and to pay related transaction fees and
expenses associated with the refinancing of debt. Loan origination costs associated with the New Credit Facility were $0.9 million and are included as deferred costs in other assets, net in the
accompanying consolidated balance sheet as of December 30, 2012. The Company also recorded a non-cash, pre-tax charge of approximately $2.9 million, comprised of
a write-off of unamortized fees from the prior credit arrangement of $1.7 million and a charge related to the de-designation of an interest rate swap of
$1.2 million.
During
August 2011, the Company entered into a variable-to-fixed interest rate swap agreement with Rabobank International, Utrecht ("Rabobank") to hedge the
Company's floating interest rate on an aggregate of up to $74.1 million of debt that is currently or expected to be outstanding under the Previous Facility. On December 14, 2012, the
Company re-designated the swap to the New Credit Facility's $225 million revolver. Refer to Note 8,
Derivative and Other Comprehensive
Income.
The
Company is subject to a number of customary covenants under its New Credit Facility, including limitations on additional borrowings, acquisitions, capital expenditures, share
repurchases, lease commitments and dividend payments, and requirements to maintain certain financial ratios. The Company was in compliance with such covenants as of December 30, 2012.
8. Derivative and Other Comprehensive Income
The Company enters into derivative instruments for risk management purposes only, including derivatives designated as a cash flow hedge under guidance for derivative instruments and
hedging activities. The Company uses interest rate-related derivative instruments to manage its exposure to fluctuations in interest rates. By using these instruments, the Company exposes
itself, from time to time, to credit risk and market risk. Credit risk is the failure of either party to the contract to perform under the terms of the derivative contract. When the fair value of a
derivative contract is positive, the counterparty owes the Company, which creates credit risk for the Company. The Company minimizes the credit risk by entering into transactions with
high-quality counterparties whose credit rating is evaluated on a quarterly basis. The Company has one interest rate swap at December 30, 2012 and its
64
RED ROBIN GOURMET BURGERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
8. Derivative and Other Comprehensive Income (Continued)
counterparty
is Rabobank. Market risk, as it relates to the Company's interest-rate derivative, is the adverse effect on the value of a financial instrument that results from changes in
interest rates. The Company minimizes market risk by establishing and monitoring parameters that limit the types and degree of market risk that the Company takes.
In
August 2011, the Company entered into a variable-to-fixed interest rate swap agreement with Rabobank to hedge the floating interest rate on a portion of the
term loan under the Previous Facility. The interest rate swap was effective August 5, 2011 with an initial notional amount of $74.1 million. In accordance with its original terms
$4.7 million and $0.9 million of the initial $74.1 million expired in 2012 and 2011 respectively. The remaining notional amount of $68.4 million decreases quarterly, and is
set to expire on June 30, 2015 with a notional hedge amount of $50.6 million. Under the swap, the Company is required to make quarterly payments based on a fixed interest rate of 1.135%,
calculated based on the remaining notional amount. In exchange, the Company receives interest on the notional amount at a variable rate that is based on the 3-month spot LIBOR rate
quarterly. The Company entered into this interest rate swap to offset the variability of its interest expense arising out of changes in the variable interest rate for the designated interest payments
and designated the swap as a cash flow hedge. Concurrent with the December 14, 2012 refinancing of the loan agreement that was designated as being hedged by this swap, the Company
de-designated the original hedging relationship for this swap and consequently reclassified all deferred gains and losses that had been deferred in accumulated other comprehensive loss
("AOCL"), a non-cash pre-tax charge of $1.2 million, recognized through loss on debt refinancing in the consolidated statements of income. On
December 14, 2012, the Company re-designated the swap on the New Credit Facility's $225 million revolver. Accordingly, changes in fair value of the interest rate swap
contract are recorded, net of taxes, as a component of AOCL in the accompanying condensed consolidated balance sheets. The Company reclassifies the effective gain or loss from AOCL, net of tax, on the
Company's consolidated balance sheet to interest expense on the Company's consolidated statements of income as the interest expense is recognized on the related debt.
The
following table summarizes the fair value and presentation in the consolidated balance sheets of the interest rate swap as hedging instruments as of December 30, 2012 and
December 25, 2011 (in thousands):
|
|
|
|
|
|
|
|
|
|
Derivative Liability
|
|
Balance Sheet Location
|
|
Fair Value at
December 30, 2012
|
|
Fair Value at
December 25, 2011
|
|
Accrued liabilities
|
|
$
|
539
|
|
$
|
449
|
|
Other non-current liabilities
|
|
|
677
|
|
|
85
|
|
|
|
|
|
|
|
Total derivatives
|
|
$
|
1,216
|
|
$
|
534
|
|
|
|
|
|
|
|
During
2012, the interest rate swap was highly effective. Amounts reclassified from AOCL into interest expense represent payments made to the counterparty for the effective portion of
the interest rate swap. The Company expects the swap to continue to be highly effective during the next twelve months. Additionally, the Company had no obligations at December 30, 2012 to post
collateral under the terms of the Interest Rate Swap Agreement.
65
RED ROBIN GOURMET BURGERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
8. Derivative and Other Comprehensive Income (Continued)
The
components of accumulated other comprehensive income at the end of each period was as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
December 30,
2012
|
|
December 25,
2011
|
|
Unrealized gain (loss) related to cash flow hedges, pretax
|
|
$
|
9
|
|
$
|
(533
|
)
|
Tax effect
|
|
|
(4
|
)
|
|
207
|
|
|
|
|
|
|
|
Accumulated other comprehensive income (loss), net
|
|
$
|
5
|
|
$
|
(326
|
)
|
|
|
|
|
|
|
9. Fair Value Measurements
Fair value measurements are made under a three-tier fair value hierarchy, which prioritizes the inputs used in the measuring of fair value:
Level 1: Observable
inputs that reflect unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
Level 2: Inputs
other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3: Inputs
that are generally unobservable. These inputs may be used with internally developed methodologies that result in management's best estimate of fair value.
Assets and Liabilities Measured at Fair Value
The derivative liability associated with the interest rate swap is considered to be a Level 2 instrument. The interest rate swap
is a standard cash flow hedge whose fair value is estimated using industry-standard valuation models. Such models project future cash flows and discount the future amounts to a present value using
market-based observable inputs, including interest rate curves. See Note 8,
Derivative and Other Comprehensive Income
, for the discussion of the
derivative liability.
The
Company's deferred compensation plan is a nonqualified deferred compensation plan which allows highly compensated employees to defer a portion of their base salary, variable
compensation, and commissions each plan year. The carrying value of both the liability for the deferred compensation plan and associated life insurance policy are equal to their fair value. These
agreements are required to be measured at fair value on a recurring basis and are valued using Level 2 inputs. See Note 16,
Employee Benefit
Programs.
At December 30, 2012, and December 25, 2011, a liability for participant contributions and investment income thereon of $3.0 million and
$2.6 million, respectively, is included in other non-current liabilities. To offset its obligation, the Company's plan administrator purchases Company-owned whole-life
insurance contracts on certain team members. The cash surrender value of these policies at the end of fiscal 2012 and 2011 was $2.9 and $2.5 million, respectively, and is included in other
assets, net.
As
of December 30, 2012, the Company had no financial assets or liabilities that were measured using Level 1 or Level 3 inputs. The Company also had no
non-financial assets or liabilities that were required to be measured on a recurring basis.
66
RED ROBIN GOURMET BURGERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
9. Fair Value Measurements (Continued)
The
following table presents the Company's assets and liabilities measured at fair value, of which the derivative, deferred compensation plan, and life insurance policy are valued on a
recurring basis for the fiscal years ended December 30, 2012, and December 25, 2011 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 30,
2012
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Life insurance policy
|
|
$
|
2,920
|
|
$
|
|
|
$
|
2,920
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets measured at fair value
|
|
$
|
2,920
|
|
$
|
|
|
$
|
2,920
|
|
$
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivativeinterest rate swap
|
|
$
|
1,216
|
|
$
|
|
|
$
|
1,216
|
|
$
|
|
|
Deferred compensation plan
|
|
|
2,974
|
|
|
|
|
|
2,974
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities measured at fair value
|
|
$
|
4,190
|
|
$
|
|
|
$
|
4,190
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 25,
2011
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Life insurance policy
|
|
$
|
2,534
|
|
$
|
|
|
$
|
2,534
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets measured at fair value
|
|
$
|
2,534
|
|
$
|
|
|
$
|
2,534
|
|
$
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivativeinterest rate swap
|
|
$
|
534
|
|
$
|
|
|
$
|
534
|
|
$
|
|
|
Deferred compensation plan
|
|
|
2,608
|
|
|
|
|
|
2,608
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities measured at fair value
|
|
$
|
3,142
|
|
$
|
|
|
$
|
3,142
|
|
$
|
|
|
Disclosures of Fair Value of Other Assets and Liabilities
The Company's liabilities under its credit facility and capital leases are carried at historical cost in the accompanying consolidated
balance sheet. For disclosure purposes, the Company estimated the fair value of the credit facility and capital lease obligations using discounted cash flow analysis based on market rates obtained
from independent third parties for similar types of debt. Both the credit facility and the Company's capital lease obligations are considered to be Level 2 instruments. The carrying value of
the Company's credit facility as of December 30, 2012, and December 25, 2011, was $125.0 million and $146.3 million, respectively. The fair value of the Company's credit
facility at the end of fiscal years 2012 and 2011, was approximately $124.4 million and $147.6 million, respectively. There are $10.0 million of outstanding borrowings recorded
for the Company's capital leases as of December 30, 2012, which have an estimated fair value of $11.8 million. At December 25, 2011, the carrying amount of the Company's capital
lease obligations was $10.7 million, and the fair value was $11.7 million.
Asset Impairment
The Company recorded impairment charges for three and four of its restaurants in 2011 and 2010, respectively. These are considered to
be assets that are measured at fair value on a nonrecurring basis.
67
RED ROBIN GOURMET BURGERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
9. Fair Value Measurements (Continued)
The
inputs used for the fair value measurement of the restaurants are considered Level 3. For further information refer to Note 3,
Restaurant Impairment and
Restaurant Closures
.
10. Supplemental Disclosures to Consolidated Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
2012
|
|
2011
|
|
2010
|
|
Cash paid during the year for:
|
|
|
|
|
|
|
|
|
|
|
Income taxes paid
|
|
$
|
5,871
|
|
$
|
1,698
|
|
$
|
865
|
|
Interest paid, net of amounts capitalized
|
|
|
5,531
|
|
|
4,953
|
|
|
4,709
|
|
Non-cash investing and financing activities:
|
|
|
|
|
|
|
|
|
|
|
Change in construction related payables
|
|
|
1,366
|
|
|
385
|
|
|
(238
|
)
|
Capital lease obligations incurred for real estate and equipment purchases
|
|
|
113
|
|
|
|
|
|
5,328
|
|
11. Income Taxes
The provision (benefit) for income taxes consists of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
2011
|
|
2010
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
3,977
|
|
$
|
2,135
|
|
$
|
596
|
|
State
|
|
|
2,703
|
|
|
1,832
|
|
|
369
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
2,115
|
|
|
(1,961
|
)
|
|
(3,771
|
)
|
State
|
|
|
(269
|
)
|
|
(495
|
)
|
|
237
|
|
|
|
|
|
|
|
|
|
|
|
$
|
8,526
|
|
$
|
1,511
|
|
$
|
(2,569
|
)
|
|
|
|
|
|
|
|
|
68
RED ROBIN GOURMET BURGERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
11. Income Taxes (Continued)
The reconciliation of income tax provision that would result from applying the federal statutory rate to income tax provision as shown in the accompanying consolidated statements of
income is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
2011
|
|
2010
|
|
Tax provision at U.S. federal statutory rate
|
|
|
35.0
|
%
|
|
35.0
|
%
|
|
35.0
|
%
|
State income taxes
|
|
|
4.1
|
|
|
4.0
|
|
|
7.4
|
|
FICA tip tax credits
|
|
|
(15.9
|
)
|
|
(24.9
|
)
|
|
(99.2
|
)
|
HIRE act tax credit
|
|
|
|
|
|
(7.6
|
)
|
|
|
|
Other
|
|
|
(0.1
|
)
|
|
0.3
|
|
|
2.5
|
|
|
|
|
|
|
|
|
|
Effective tax rate
|
|
|
23.1
|
%
|
|
6.8
|
%
|
|
(54.3
|
)%
|
|
|
|
|
|
|
|
|
The
increase in the Company's effective tax rates in fiscal 2012 and fiscal 2011 is primarily attributable to the increase in earnings before income taxes.
The
Company's total deferred tax assets and liabilities at December 30, 2012, and December 25, 2011, are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
2012
|
|
2011
|
|
Deferred tax assets
|
|
$
|
46,634
|
|
$
|
48,691
|
|
Deferred tax liabilities
|
|
|
(48,362
|
)
|
|
(49,038
|
)
|
|
|
|
|
|
|
Deferred tax liabilities, net
|
|
$
|
(1,728
|
)
|
$
|
(347
|
)
|
|
|
|
|
|
|
69
RED ROBIN GOURMET BURGERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
11. Income Taxes (Continued)
The
Company's federal and state deferred taxes at December 30, 2012, and December 25, 2011, are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
2012
|
|
2011
|
|
Current deferred tax assets and liabilities, net:
|
|
|
|
|
|
|
|
Accrued compensation and related costs
|
|
$
|
8,865
|
|
$
|
9,279
|
|
Advanced payments
|
|
|
1,083
|
|
|
676
|
|
General business and other tax credits
|
|
|
361
|
|
|
361
|
|
Interest rate swap
|
|
|
(2
|
)
|
|
201
|
|
Other current deferred tax assets
|
|
|
1,724
|
|
|
598
|
|
Other current deferred tax liabilities
|
|
|
(1,188
|
)
|
|
(1,587
|
)
|
Prepaid expenses
|
|
|
(2,823
|
)
|
|
(2,844
|
)
|
Supplies inventory
|
|
|
(5,010
|
)
|
|
(5,255
|
)
|
|
|
|
|
|
|
Current deferred tax asset, net
|
|
|
3,010
|
|
|
1,429
|
|
|
|
|
|
|
|
Non-current deferred tax assets and liabilities, net:
|
|
|
|
|
|
|
|
Deferred rent
|
|
|
13,896
|
|
|
14,350
|
|
Stock-based compensation
|
|
|
6,864
|
|
|
7,064
|
|
General business and other tax credits
|
|
|
9,735
|
|
|
12,529
|
|
Alternative minimum tax credits
|
|
|
1,262
|
|
|
1,262
|
|
Accrued compensation and related costs
|
|
|
1,016
|
|
|
916
|
|
Other non-current deferred tax assets
|
|
|
666
|
|
|
550
|
|
Other non-current deferred tax liabilities
|
|
|
(455
|
)
|
|
(416
|
)
|
Goodwill
|
|
|
(7,335
|
)
|
|
(6,458
|
)
|
Property and equipment
|
|
|
(31,547
|
)
|
|
(32,478
|
)
|
Franchise rights
|
|
|
1,163
|
|
|
870
|
|
Interest rate swap
|
|
|
(3
|
)
|
|
35
|
|
|
|
|
|
|
|
Non-current deferred tax liability, net, included in other non-current liabilities
|
|
|
(4,738
|
)
|
|
(1,776
|
)
|
|
|
|
|
|
|
Net deferred tax liability
|
|
$
|
(1,728
|
)
|
$
|
(347
|
)
|
|
|
|
|
|
|
Realization
of net deferred tax assets are dependent upon profitable operations and future reversals of existing taxable temporary differences. Although realization is not assured, the
Company believes it is more likely than not that the net recorded benefits will be realized through the reduction of future taxable income. The amount of the net deferred tax assets is considered
realizable; however, it could be reduced in the near term if actual future taxable income is lower than estimated, or if there are differences in the timing or amount of future reversals of existing
taxable temporary differences.
The
Company has federal alternative minimum tax credits of $1.3 million available with no expiration date. The Company also has general business and other tax credits totaling
$10.1 million available to offset future taxes which expire through 2032.
Pursuant
to the guidance for uncertain tax positions, a taxpayer must be able to more likely than not sustain a position to recognize a tax benefit, and the measurement of the benefit is
calculated as the largest amount that is more than 50 percent likely to be realized upon resolution of the benefit. The Company has analyzed filing positions in all of the federal and state
jurisdictions where it is
70
RED ROBIN GOURMET BURGERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
11. Income Taxes (Continued)
required
to file income tax returns, as well as all open tax years in these jurisdictions. The only periods subject to examination for the Company's federal and state returns are the 2008 through 2012
tax years.
The
following table summarizes the Company's unrecognized tax benefits (in thousands):
|
|
|
|
|
|
|
|
|
|
December 30,
2012
|
|
December 25,
2011
|
|
Beginning of year
|
|
$
|
212
|
|
$
|
273
|
|
Increase due to current year tax positions
|
|
|
168
|
|
|
50
|
|
Decrease due to current year tax positions
|
|
|
(1
|
)
|
|
(8
|
)
|
Settlements
|
|
|
(1
|
)
|
|
(23
|
)
|
Reductions related to lapses
|
|
|
(43
|
)
|
|
(80
|
)
|
|
|
|
|
|
|
End of year
|
|
$
|
335
|
|
$
|
212
|
|
|
|
|
|
|
|
The
total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate is approximately $0.3 million. The Company does not anticipate significant
changes in the aggregate amount of unrecognized tax benefits within the next twelve months, other than nominal tax settlements.
The
Company's policy for recording interest and penalties associated with audits is to record such items as a component of income before taxes. Penalties are recorded in Other (gains)
losses, net, and interest paid or received is recorded in interest expense in the consolidated statements of income. The Company recorded nominal interest expense on the identified tax liabilities in
fiscal years 2012, 2011, and 2010, and no penalties were recorded in those fiscal years.
12. Commitments and Contingencies
Commitments
Leasing Activities
The Company leases land, buildings, and equipment used in its operations under operating leases. The Company's operating leases
have remaining non-cancelable terms ranging from less than one year to more than 15 years. These leases generally contain renewal options which permit the Company to renew the
leases at defined contractual rates or prevailing market rates. Certain equipment leases also include options to purchase equipment at the end of the lease term. Certain leases provide for contingent
rents, which are determined as a percentage of adjusted restaurant sales in excess of specified levels. The Company records a contingent rent liability and the corresponding rent expense when
specified levels have been
achieved or when management determines that achieving the specified levels during the fiscal year is probable. Certain lease agreements also require the Company to pay maintenance, insurance, and
property tax costs. Rental expense related to land, building, and equipment leases is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
2011
|
|
2010
|
|
Minimum rent
|
|
$
|
47,287
|
|
$
|
43,756
|
|
$
|
41,845
|
|
Contingent rent
|
|
|
1,861
|
|
|
1,821
|
|
|
1,632
|
|
Equipment rent under operating leases
|
|
|
788
|
|
|
748
|
|
|
740
|
|
|
|
|
|
|
|
|
|
|
|
$
|
49,936
|
|
$
|
46,325
|
|
$
|
44,217
|
|
|
|
|
|
|
|
|
|
71
RED ROBIN GOURMET BURGERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
12. Commitments and Contingencies (Continued)
The
Company leases certain of its owned land, buildings, and equipment to outside parties under non-cancelable operating leases. Cost of the leased land, buildings and
equipment at the end of fiscal years 2012 and 2011 was $4.6 million in both periods, and related accumulated depreciation was $2.6 million and $2.4 million, respectively. Rental
income was immaterial for fiscal years 2012, 2011 and 2010.
Future
minimum lease commitments and minimum rental income under all leases as of December 30, 2012 are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
Leases
|
|
Operating
Leases
|
|
Rental
Income
|
|
2013
|
|
$
|
1,310
|
|
$
|
48,696
|
|
$
|
150
|
|
2014
|
|
|
1,246
|
|
|
48,404
|
|
|
150
|
|
2015
|
|
|
930
|
|
|
46,825
|
|
|
150
|
|
2016
|
|
|
862
|
|
|
43,996
|
|
|
38
|
|
2017
|
|
|
900
|
|
|
40,891
|
|
|
|
|
Thereafter
|
|
|
8,350
|
|
|
157,259
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
13,598
|
|
$
|
386,071
|
|
$
|
488
|
|
|
|
|
|
|
|
|
|
|
Less amount representing interest
|
|
|
(3,603
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Present value of future minimum lease payments
|
|
|
9,995
|
|
|
|
|
|
|
|
Less current portion
|
|
|
(784
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term capital lease obligations
|
|
$
|
9,211
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
the end of fiscal 2012 and 2011, property and equipment included $20.3 million and $20.0 million of assets under capital lease, respectively, and $7.3 million and
$6.7 million of related accumulated depreciation, respectively.
Contingencies
In the normal course of business, there are various claims in process, matters in litigation, and other contingencies. These include
claims resulting from "slip and fall" accidents, employment related claims and claims alleging illness, injury or other food quality, health or operational issues. To date, no claims of these types of
litigation, certain of which are covered by insurance policies, have had a material effect on us. While it is not possible to predict the outcome of these other suits, legal proceedings and claims
with certainty, management is of the opinion that adequate provision for potential losses associated with these other matters has been made in the financial statements and that the ultimate resolution
of these other matters will not have a material effect on the Company's financial position and results of operations.
72
RED ROBIN GOURMET BURGERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
13. Franchise Operations
Results of franchise operations included in the consolidated statements of income consist of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
2011
|
|
2010
|
|
Franchise royalties and fees:
|
|
|
|
|
|
|
|
|
|
|
Royalty income
|
|
$
|
14,440
|
|
$
|
13,863
|
|
$
|
13,175
|
|
Franchise fees
|
|
|
61
|
|
|
288
|
|
|
234
|
|
|
|
|
|
|
|
|
|
Total franchise royalties and fees
|
|
|
14,501
|
|
|
14,151
|
|
|
13,409
|
|
|
|
|
|
|
|
|
|
The
Company provides management expertise, training, pre-opening assistance, and restaurant operating assistance in exchange for area development fees, franchise fees,
license fees, and royalties of 3% to 4% of the franchised adjusted gross restaurant sales. Franchise fee revenue is recognized when all material obligations and initial services to be provided by the
Company have been performed, generally upon the opening of the new restaurant. Until earned, these fees are accounted for as deferred revenue. Area development fees are dependent upon the number of
restaurants in the territory as well as the Company's obligations under the area franchise agreement. Consequently, as the Company's obligations are met, area development fees are recognized
proportionately with the opening of each new restaurant. Royalties are accrued as earned and are calculated each period based on the franchisee's reported adjusted sales.
14. Stockholders' Equity
On August 12, 2010, the Company's board of directors authorized a repurchase of up to $50.0 million of the Company's common stock, which was set to expire on
December 31, 2011. On October 26, 2011, the Company's board of directors re-authorized a repurchase of up to $50.0 million of the Company's common stock. This
authorization expired on December 31, 2012. In fiscal 2012, the Company purchased 895,000 shares with an average purchase price of $29.73 per share for a total of $24.3 million. In
fiscal 2011, the Company purchased 1.2 million shares, with an average purchase price of $27.56 per share for a total of $33.0 million. There were no shares repurchased in fiscal 2010.
On
November 15, 2012, the Company's board of directors re-authorized a repurchase of up to $50 million of the Company's common stock. This authorization became
effective on January 1, 2013, and will terminate upon completing the repurchase of $50 million of common stock unless earlier terminated by the Company's board of directors. Purchases
under the repurchase program may be made in open market or privately negotiated transactions. Purchases may be made from time to time at the Company's discretion and the timing and amount of any share
repurchases will be determined based on share price, market conditions, legal requirements and other factors. The repurchase program does not obligate the Company to acquire any particular amount of
common stock, and it may be suspended or discontinued at any time.
15. Stock Incentive Plans
In 2007, stockholders approved the 2007 Performance Incentive Plan which was amended and restated in 2008 and amended and restated again in 2011 (the "2007 Stock Plan"). The 2007 Stock
Plan authorizes the issuance of stock options, stock appreciation rights (SARs), restricted stock, stock variable compensation and other forms of awards granted or denominated in the Company's common
73
RED ROBIN GOURMET BURGERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
15. Stock Incentive Plans (Continued)
stock
or units of the Company's common stock, as well as cash variable compensation awards pursuant to the plan. Persons eligible to receive awards under the 2007 Stock Plan include officers and
employees of the Company and any of the Company's subsidiaries, directors of the Company, and certain consultants and advisors to the Company or any of its subsidiaries. The maximum number of shares
of the Company's common stock that may be issued or transferred pursuant to awards under the 2007 Stock Plan is 2,074,600 shares. Vesting of the awards under the 2007 Stock Plan is determined at the
date of grant by the plan administrator. Each award granted under the 2007 Stock Plan fully vests, becomes exercisable and/or payable, as applicable, upon a change in control event. However, unless
the individual award agreement provides otherwise, with respect to executive and certain other high level officers of the Company, upon the occurrence of a change in control, no award will vest unless
such officers' employment with the Company is terminated by the Company without cause during the two-year period following such change in control event. Each award expires on such date as
shall be determined at the date of grant, however, the maximum term of options, SARs and other rights to acquire common stock under the plan is ten years after the initial date of the award, subject
to provisions for further deferred payment in certain circumstances. The 2007 Stock Plan terminates on April 4, 2021, unless terminated earlier by the Company's board of directors. As of
December 30, 2012, options to acquire a total of 578,430 shares of the Company's common stock remained outstanding under this plan of which 308,279 were vested.
The
Company has four other stock-based compensation plans: the 1996 Stock Option Plan (the 1996 Stock Plan), the 2000 Management Performance Common Stock Option Plan (the 2000 Stock
Plan), the 2002 Incentive Stock Option Plan (2002 Stock Plan) and the 2004 Performance Incentive Plan (the 2004 Stock Plan). No further grants can be made under these plans. In general, options
granted under these plans were issued at the estimated fair market value at the date of grant. Vesting of awards under these plans were generally time based over a period of one to four years;
however, in some cases, options under these plans vested based on the attainment of certain financial results. As of December 30, 2012, options to acquire a total of 126,514 of the Company's
common stock remain outstanding under these plans of which all are fully vested. Options granted under these plans expire within ten years from the date of grant. Canceled options revert back to the
2007 Stock Plan for potential reissuance.
Total
stock-based compensation costs recognized in fiscal 2012, 2011, and 2010 were $3.8 million, $3.3 million, and $4.1 million, respectively, with related income
tax benefits of $1.5 million, $1.3 million, and $1.7 million, respectively. As of December 30, 2012, there was $4.2 million of total unrecognized compensation cost,
excluding estimated forfeitures, which is expected to be recognized over the weighted average remaining vesting period of approximately 1.2 years for stock options, 0.2 year for the
non-vested common shares, 1.2 years for the restricted stock units, and 0.5 years for the performance stock units.
74
RED ROBIN GOURMET BURGERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
15. Stock Incentive Plans (Continued)
Stock Options
The table below summarizes the status of the Company's stock option plans (in thousands, except per share data and exercise price):
|
|
|
|
|
|
|
|
|
|
Stock Options
|
|
|
|
Shares
|
|
Weighted
Average
Exercise
Price
|
|
Outstanding, December 25, 2011
|
|
|
867
|
|
$
|
25.14
|
|
Granted
|
|
|
97
|
|
|
35.45
|
|
Cancelled
|
|
|
(92
|
)
|
|
31.83
|
|
Exercised
|
|
|
(167
|
)
|
|
18.19
|
|
|
|
|
|
|
|
|
Outstanding, December 30, 2012
|
|
|
705
|
|
$
|
27.35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
Weighted
Average
Exercise
Price
|
|
Weighted
Average
Remaining
Years of
Contractual
Life
|
|
Aggregate
Intrinsic Value
|
|
Outstanding as of December 30, 2012
|
|
|
705
|
|
$
|
27.35
|
|
|
6.31
|
|
$
|
5,424
|
|
Vested and expected to vest as of December 30, 2012(1)
|
|
|
660
|
|
$
|
27.05
|
|
|
6.17
|
|
$
|
5,281
|
|
Exercisable as of December 30, 2012
|
|
|
435
|
|
$
|
26.01
|
|
|
5.25
|
|
$
|
4,060
|
|
-
(1)
-
The
expected to vest options are the result of applying the pre-vesting forfeiture rate assumption to total outstanding options.
The
estimated fair value of each option granted is calculated using the Black-Scholes multiple option-pricing model. The average assumptions used in the model were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
2011
|
|
2010
|
|
Risk-free interest rate
|
|
|
0.7
|
%
|
|
1.2
|
%
|
|
1.5
|
%
|
Expected years until exercise
|
|
|
4.1
|
|
|
3.6
|
|
|
3.6
|
|
Expected stock volatility
|
|
|
52.8
|
%
|
|
60.3
|
%
|
|
57.9
|
%
|
Dividend yield
|
|
|
0.0
|
%
|
|
0.0
|
%
|
|
0.0
|
%
|
Weighted average Black-Scholes fair value per share at date of grant
|
|
$
|
14.60
|
|
$
|
14.21
|
|
$
|
9.12
|
|
Total intrinsic value of options exercised (in thousands)
|
|
$
|
1,477
|
|
$
|
657
|
|
$
|
176
|
|
The
risk-free interest rate was based on the rate for zero coupon U.S. Government issues with a remaining term similar to the expected life. The expected life of the options
represents the period of time the options are expected to be outstanding and is based on historical trends and
team member exercise patterns. The expected stock price volatility represents an average of the Company's historical volatility measured over a period approximating the expected life. The dividend
yield assumption is based on the Company's history and expectations of dividend payouts.
75
RED ROBIN GOURMET BURGERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
15. Stock Incentive Plans (Continued)
Restricted Stock
During the fiscal years ended December 30, 2012 and December 25, 2011, the Company did not issue restricted stock as
permitted under the 2007 Stock Plan. In the past, the Company has granted restricted stock to its directors, executive officers and other key employees. The restricted shares granted to directors were
generally subject to a three year vesting requirement. The restricted shares granted to executive officers and other key employees were generally subject to a four year graded vesting requirement. The
fair value of the non-vested common shares is based on the grant date market value of the common shares.
The
table below summarizes the status of the Company's non-vested shares under the 2007 Stock Plan (in thousands, except per share data and grant-date fair
value):
|
|
|
|
|
|
|
|
|
|
Restricted Stock
|
|
|
|
Shares
|
|
Weighted
Average
Grant-Date
Fair Value
(per share)
|
|
Non-vested outstanding, December 25, 2011
|
|
|
14
|
|
$
|
20.85
|
|
Granted
|
|
|
|
|
|
|
|
Cancelled
|
|
|
(1
|
)
|
|
14.93
|
|
Vested
|
|
|
(9
|
)
|
|
23.73
|
|
|
|
|
|
|
|
|
Non-vested outstanding, December 30, 2012
|
|
|
4
|
|
$
|
14.93
|
|
|
|
|
|
|
|
|
Time-Based RSUs
During fiscal years 2012 and 2011, the Company issued time-based restricted stock units (RSUs) to certain employees as
permitted under the 2007 Stock Plan. The Company can grant RSUs to its directors, executive officers and other key employees. The RSUs vest in equal installments over four years and upon vesting, one
share of the Company's common stock is issued for each RSU. The fair value of each RSU granted is equal to the market price of the Company's stock at the date of grant.
The
table below summarizes the status of the Company's time-based RSUs under the 2007 Stock Plan (shares in thousands):
|
|
|
|
|
|
|
|
|
|
Restricted
Stock Units
|
|
|
|
Shares
|
|
Weighted
Average
Grant-Date
Fair Value
(per share)
|
|
Outstanding, December 25, 2011
|
|
|
165
|
|
$
|
24.85
|
|
Granted
|
|
|
66
|
|
|
33.67
|
|
Cancelled
|
|
|
(6
|
)
|
|
24.81
|
|
Vested
|
|
|
(45
|
)
|
|
24.83
|
|
|
|
|
|
|
|
|
Outstanding, December 30, 2012
|
|
|
180
|
|
$
|
28.52
|
|
|
|
|
|
|
|
|
76
RED ROBIN GOURMET BURGERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
15. Stock Incentive Plans (Continued)
Performance-Based RSUs
There were no performance-based restricted stock units awarded in fiscal 2012 or 2011. In March and September 2010, the Company granted
performance-based restricted stock units ("PSUs") to executives and other key employees. These PSUs are subject to company performance metrics based on Total Shareholder Return and measure the overall
stock price performance of the Company to the stock price performance of a selected industry peer group, thus resulting in a market condition. The actual number of PSUs subject to the awards will be
determined at the end of the performance period based on these performance metrics. The fair value of the PSUs was calculated using the Monte Carlo valuation method. This method utilizes multiple
input variables to determine the probability of the Company achieving the market condition and the fair value of the awards. These awards have a three-year performance period and are
classified as equity as each unit is convertible into one share of the Company's common stock upon vesting. Compensation expense is recognized on a straight-line basis over the requisite
service period (or to an employee's eligible retirement date, if earlier).
During
fiscal year 2012, the Company granted no PSUs under the 2007 Stock Plan. At the end of fiscal year 2011, the Company had 37,000 PSUs outstanding. During the fiscal year 2012, the
Company cancelled 2,000 PSUs, resulting in an outstanding balance of 35,000 PSUs as of the end of fiscal year 2012.
Long-Term Cash Incentive Plan
In 2011, the Company began a long-term cash incentive program. The long-term cash incentive plan is based on
operational metrics with a three-year performance period. The awards cliff vest at the end of each three-year performance cycle. In 2012 and 2011, the Company recorded
approximately $1.5 million and $0.4 million related to this program, respectively, in Selling, General and Administrative expense.
16. Employee Benefit Programs
Employee Deferred Compensation Plan
In 2003, the Company adopted a deferred compensation plan that permits key employees and other members of
management not eligible to participate in the Employee Defined Contribution Plan to defer portions of their compensation. The Company pays all administrative expenses of the plan. Under this plan,
eligible team members may elect to defer up to 75% of their base salary and up to 100% of variable compensation and commissions each plan year. At the end of fiscal 2012 and 2011, a liability for
participant contributions and investment income thereon of $3.0 million and $2.6 million, respectively, is included in other non-current liabilities. To offset its
obligation, the Company's plan administrator purchases Company-owned whole-life insurance contracts on certain team members. The cash surrender value of these policies at the end of fiscal
years 2012 and 2011, of $2.9 million and $2.5 million, respectively, is included in other assets, net.
Employee Stock Purchase Plan
In 2002, the Company adopted an Employee Stock Purchase Plan under which eligible team members may voluntarily contribute
up to 15% of their salary, subject to limitations, to purchase common stock at a price equal to 85% of the fair market value of a share of the Company's common stock on the first day of each offering
period or 85% of the fair market value of a share of the Company's common stock on the last day of each offering period, whichever amount is less. In general, all of the Company's officers and team
members who have been employed by the
77
RED ROBIN GOURMET BURGERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
16. Employee Benefit Programs (Continued)
Company
for at least one year and who are regularly scheduled to work more than twenty hours per week are eligible to participate in this plan which operates in successive six-month
periods commencing on each January 1 and July 1 of each fiscal year. A total of 300,000 shares of common stock are available for issuance under this plan. The Company has issued a total
of 206,674 shares under this plan, including 24,786 shares that were issued in 2012. A total of 93,326 shares remain available for future issuance. For 2012, in accordance with the guidance for
accounting for stock compensation, the Company estimated the fair value of the stock purchase plan using the Black-Scholes multiple-option pricing model. The average assumptions used in the model
included a 0.17% risk-free interest rate; 0.5 year expected life; expected volatility of 48.45%; and a 0% dividend yield. The weighted average fair value per share at grant date was
$7.77. For the fiscal year 2011, the average assumptions used in the model included a 0.18% risk-free interest rate; 0.5 year expected life; expected volatility of 60.4%; and a 0%
dividend yield. The weighted average fair value per share at grant date was $5.28. In 2012 and 2011, the Company recognized $0.2 million and $0.1 million, respectively, of compensation
expense related to this plan.
Employee Defined Contribution Plan
The Company maintains a 401(k) Savings Plan ("401K Plan") which covers eligible team members who have satisfied the
service requirements and reached 21 years of age. The 401K Plan, which qualifies under Section 401(k) of the Internal Revenue Code, allows team members to defer specified percentages of
their compensation on a pre-tax basis. The Company may make matching contributions in an amount determined by the board of directors. In addition, the Company may contribute each period,
at its discretion, an additional amount from profits. In 2006, the board of directors authorized matching contributions equal to 25% of the first 4% of compensation that is deferred by the
participant. The Company recognized matching contribution expense of $0.3 million in both fiscal years 2012 and 2011.
17. Related Party Transactions
The former president and majority owner of one of the Company's former franchises has served on the Company's board of directors since 2009. He has announced his retirement from the
board effective as of the date of the Company's 2013 annual meeting of stockholders. The Company purchased 13 Red Robin® restaurants in Washington from him in 2006. The board member is a
principal of and holds, directly or indirectly, interests of between 45% and 100% in each of three privately-held entities that hold the leases for three of the Washington restaurants that
the Company acquired in 2006. These leases were assumed by the Company in connection with the acquisition. Under these leases, the Company recognized rent and other related payments in the amounts of
$1.2 million, $1.1 million and $1.1 million for the fiscal years 2012, 2011, 2010, respectively. Future minimum lease commitments under these leases are $4.1 million at the
end of fiscal 2012.
78
RED ROBIN GOURMET BURGERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
18. Quarterly Results of Operations (unaudited)
The following tables summarize the unaudited consolidated quarterly financial information for 2012 and 2011 (in thousands, except per share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q1
(16 weeks)
|
|
Q2
(12 weeks)
|
|
Q3
(12 weeks)
|
|
Q4
(13 weeks)
|
|
2012
(53 weeks)
|
|
Total revenues
|
|
$
|
299,459
|
|
$
|
223,677
|
|
$
|
213,317
|
|
$
|
240,679
|
|
$
|
977,132
|
|
Income from operations
|
|
$
|
15,747
|
|
$
|
11,423
|
|
$
|
5,836
|
|
$
|
12,203
|
|
$
|
45,209
|
|
Net income
|
|
$
|
10,558
|
|
$
|
7,748
|
|
$
|
3,533
|
|
$
|
6,492
|
|
$
|
28,331
|
|
Basic earnings per share
|
|
$
|
0.72
|
|
$
|
0.53
|
|
$
|
0.25
|
|
$
|
0.46
|
|
$
|
1.97
|
|
Diluted earnings per share
|
|
$
|
0.71
|
|
$
|
0.52
|
|
$
|
0.24
|
|
$
|
0.45
|
|
$
|
1.93
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q1
(16 weeks)
|
|
Q2
(12 weeks)
|
|
Q3(1)
(12 weeks)
|
|
Q4(2)
(12 weeks)
|
|
2011
(52 weeks)
|
|
Total revenues
|
|
$
|
286,830
|
|
$
|
215,795
|
|
$
|
206,244
|
|
$
|
205,981
|
|
$
|
914,850
|
|
Income from operations
|
|
$
|
11,195
|
|
$
|
9,070
|
|
$
|
3,256
|
|
$
|
4,479
|
|
$
|
28,001
|
|
Net income
|
|
$
|
8,708
|
|
$
|
6,894
|
|
$
|
2,069
|
|
$
|
2,905
|
|
$
|
20,577
|
|
Basic earnings per share
|
|
$
|
0.56
|
|
$
|
0.45
|
|
$
|
0.14
|
|
$
|
0.20
|
|
$
|
1.36
|
|
Diluted earnings per share
|
|
$
|
0.56
|
|
$
|
0.44
|
|
$
|
0.14
|
|
$
|
0.20
|
|
$
|
1.34
|
|
-
(1)
-
During
the third quarter of fiscal 2011, it was determined that one Company-owned restaurant was impaired. The Company recognized a pre-tax
non-cash impairment charge of $1.9 million for this restaurant.
-
(2)
-
During
the fourth quarter of fiscal 2011, it was determined that two Company-owned restaurant were impaired. The Company recognized a pre-tax
non-cash impairment charge of $2.4 million for these restaurants.
19. Subsequent Events
The Company has evaluated subsequent events and found there to be no events requiring recognition or disclosure through the date of issuance of this report.
79