RED ROBIN GOURMET BURGERS, INC. Management's Discussion and Analysis of Financial Condition and Results of Operations provides a narrative of our financial performance and condition that should be read in conjunction with the accompanying Condensed Consolidated Financial Statements. All comparisons under this heading between 2021 and 2020 refer to the twelve and twenty-eight weeks endedJuly 11, 2021 andJuly 12, 2020 , unless otherwise indicated. Overview Description of BusinessRed Robin Gourmet Burgers, Inc. , aDelaware corporation, together with its subsidiaries ("Red Robin ," "we," "us," "our," or the "Company"), primarily operates, franchises, and develops full-service restaurants with 531 locations inNorth America . As ofJuly 11, 2021 , the Company owned 430 restaurants located in 38 states. The Company also had 101 franchised full-service restaurants in 16 states and one Canadian province. The Company operates its business as one operating and one reportable segment. COVID-19 Impact Due to the coronavirus ("COVID-19") pandemic, we continue to navigate an unprecedented time for our business and industry. During the second quarter of 2021, the Company continued to expand dine-in seating capacity at Company-owned restaurants. Reopening dining rooms and expanding seating capacity was executed with the health, safety, and well-being ofRed Robin's Team Members, Guests, and communities in mind with strict adherence toUS Centers for Disease Control and Prevention , state, and local guidelines. The Company continues to maintain a disciplined focus on execution to provide our Guests a consistent quality experience each and every time they visit through our Total Guest Experience hospitality model ("TGX"), off-premises enhancements, and our new management labor model. Notably, as of the end of our fiscal eighth period, the Company has sustained off-premises sales that are more than double pre-pandemic levels, even as its restaurants were operating without indoor capacity restrictions. Restaurant operating level expenses incurred for these restaurants during the temporary closures have been recorded in Restaurant closure and refranchising costs in Other charges; see Note 6, Other Charges, in the Notes to the Condensed Consolidated Financial Statements in Part 1, Item 1 of this Quarterly Report on Form 10-Q. In addition, as our dining rooms have re-opened, our ability to attract and retain restaurant-level employees has become more challenging, as the job market for restaurant managers and hourly Team Members has become more competitive. Staffing is our number one priority; during the second fiscal quarter, we have supported our staffing efforts through technology enhancements to the application and hiring process, holding two national hiring days, and deploying internal and external resources to augment recruiting, hiring, and training efforts. We plan to achieve staffing levels above those in 2019 to support elevated demand compared to 2019. The challenges in hiring and retention have also affected certain of our suppliers, resulting in some intermittent product and distribution shortages. 13
-------------------------------------------------------------------------------- Table of Contents Financial and Operational Highlights The following summarizes the operational and financial highlights during the twelve weeks endedJuly 11, 2021 : Restaurant Revenue, compared to the same period in the prior year, is presented in the table below:
(millions)
Restaurant Revenue for the twelve weeks ended
105.4
Increase from non-comparable restaurants
6.7
Total increase
112.1
Restaurant Revenue for the twelve weeks ended
The following summarizes the operational and financial highlights during the twenty-eight weeks endedJuly 11, 2021 : Restaurant Revenue, compared to the same period in the prior year, is presented in the table below:
(millions)
Restaurant Revenue for the twenty-eight weeks ended
461.6
Increase in comparable restaurant revenue
133.7
Decrease from non-comparable restaurants
(4.4)
Total increase/(decrease)
129.3
Restaurant Revenue for the twenty-eight weeks ended
590.8
Restaurant revenues and operating costs as a percentage of restaurant revenue for the period are detailed in the table below:
Twelve weeks ended 2021 compared to 2020 Twelve Weeks Ended 2021 compared to 2019(1)
July 11, 2021 July 12, 2020 Increase/(Decrease) July 14, 2019(1) Increase/(Decrease)
Restaurant revenue (millions) $ 272.2 $ 160.1 69.9 % $ 302.4 (10.0) %
(Percentage of
Restaurant operating costs: (Percentage of Restaurant Revenue) (Basis Points) Restaurant Revenue) (Basis Points)
Cost of sales 22.8 % 24.2 % (140) 23.9 % (110)
Labor 36.4 % 39.2 % (280) 35.2 % 120
Other operating 17.2 % 21.6 % (440) 14.3 % 290
Occupancy 7.9 % 13.0 % (510) 8.4 % (50)
Total 84.3 % 98.0 % (1,370) 81.8 % 250
(1) Presented for improved comparability to pre-COVID-19 operations.
Twenty-Eight Weeks
Twenty-Eight weeks ended 2021 compared to 2020 Ended 2021 compared to 2019(1)
July 11, 2021 July 12, 2020 Increase/(Decrease) July 14, 2019(1) Increase/(Decrease)
Restaurant revenue (millions)
28.0 % $ 702.9 (15.9) %
(Percentage of
Restaurant operating costs: (Percentage of Restaurant Revenue) (Basis Points) Restaurant Revenue) (Basis Points)
Cost of sales 22.2 % 23.7 % (150) 23.6 % (140)
Labor 35.6 % 39.3 % (370) 35.5 % 10
Other operating 17.7 % 18.8 % (110) 14.0 % 370
Occupancy 8.8 % 11.8 % (300) 8.6 % 20
Total 84.3 % 93.6 % (930) 81.7 % 260
(1) Presented for improved comparability to pre-COVID-19 operations.
14--------------------------------------------------------------------------------
Table of Contents
The following table summarizes Net Loss, loss per diluted share, and adjusted loss per diluted share for the twelve and twenty-eight weeks endedJuly 11, 2021 andJuly 12, 2020 ; Twelve Weeks Ended Twenty-Eight Weeks Ended July 11, 2021 July 12, 2020 July 11, 2021 July 12, 2020 Net loss as reported$ (4,996) $ (56,261) $ (13,709) $ (230,559) Loss per share - diluted: Net loss as reported$ (0.32) $ (4.09) $ (0.88) $ (17.38) Restaurant closure and refranchising costs 0.11 0.55 0.27 0.68 Asset impairment 0.01 0.38 0.09 1.57 Litigation contingencies - - 0.07 0.34 COVID-19 related costs 0.02 0.05 0.05 0.06 Board and stockholder matter costs - 0.07 0.01 0.18 Severance and executive transition - - - 0.07 Goodwill impairment - - - 7.19 Income tax effect (0.04) (0.27) (0.13) (2.62) Adjusted loss per share - diluted$ (0.22) $ (3.31) $ (0.52) $ (9.91) Weighted average shares outstanding Basic 15,665 13,741 15,617 13,262 Diluted 15,665 13,741 15,617 13,262 We believe the non-GAAP measure of adjusted loss per diluted share gives the reader additional insight into the ongoing operational results of the Company, and it is intended to supplement the presentation of the Company's financial results in accordance with GAAP. Restaurant Data The following table details restaurant unit data for our Company-owned and franchised locations for the periods indicated: Twelve Weeks Ended Twenty-Eight Weeks Ended July 11, 2021 July 12, 2020 July 11, 2021 July 12, 2020 Company-owned: Beginning of period 440 452 443 454 Closed during the period (10) (2) (13) (4) End of period 430 450 430 450 Franchised: Beginning of period 103 102 103 102 Closed during the period (2) - (2) - End of period 101 102 101 102 Total number of restaurants 531 552 531 552
________________________________________________________
15
--------------------------------------------------------------------------------
Table of Contents
The following table presents total Company-owned and franchised restaurants by
state or province as of July 11, 2021 :
Company-Owned Restaurants Franchised Restaurants
State:
Arkansas 2 2
Alaska - 3
Alabama 4 -
Arizona 18 1
California 59 -
Colorado 22 -
Connecticut - 3
Delaware - 5
Florida 19 -
Georgia 6 -
Iowa 5 -
Idaho 8 -
Illinois 22 -
Indiana 13 -
Kansas - 4
Kentucky 4 -
Louisiana 2 -
Massachusetts 4 2
Maryland 13 -
Maine 2 -
Michigan - 20
Minnesota 4 -
Missouri 8 3
Montana - 2
North Carolina 17 -
Nebraska 4 -
New Hampshire 3 -
New Jersey 12 1
New Mexico 3 -
Nevada 6 -
New York 14 -
Ohio 18 2
Oklahoma 5 -
Oregon 15 5
Pennsylvania 11 21
Rhode Island 1 -
South Carolina 4 -
South Dakota 1 -
Tennessee 11 -
Texas 20 9
Utah 1 6
Virginia 20 -
Washington 38 -
Wisconsin 11 -
Province:
British Columbia - 12
Total 430 101
-------------------
16
--------------------------------------------------------------------------------
Table of Contents
Results of Operations
Operating results for each fiscal period presented below are expressed as a
percentage of total revenues, except for the components of restaurant operating
costs, which are expressed as a percentage of restaurant revenue.
This information has been prepared on a basis consistent with our audited 2020
annual financial statements, and, in the opinion of management, includes all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the information for the periods presented. Our operating
results may fluctuate significantly as a result of a variety of factors, and
operating results for any period presented are not necessarily indicative of
results for a full fiscal year.
Twelve Weeks Ended Twenty-Eight Weeks Ended
July 14, July 14,
July 11, 2021 July 12, 2020 2019(1) July 11, 2021 July 12, 2020 2019(1)
Revenues:
Restaurant revenue 98.3 % 99.4 % 98.2 % 97.9 % 98.8 % 97.9 %
Franchise and other revenues 1.7 % 0.6 % 1.8 % 2.1 % 1.2 % 2.1
Total revenues 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
Costs and expenses:
Restaurant operating costs
(exclusive of depreciation and
amortization shown separately
below):
Cost of sales 22.8 % 24.2 % 23.9 % 22.2 % 23.7 % 23.6 %
Labor 36.4 % 39.2 % 35.2 % 35.6 % 39.3 % 35.5 %
Other operating 17.2 % 21.6 % 14.3 % 17.7 % 18.8 % 14.0 %
Occupancy 7.9 % 13.0 % 8.4 % 8.8 % 11.8 % 8.6 %
Total restaurant operating costs 84.3 % 98.0 % 81.8 % 84.3 % 93.6 % 81.7 %
Depreciation and amortization 6.9 % 12.8 % 6.9 % 7.5 % 10.5 % 6.9 %
Selling, general and
administrative 10.2 % 12.2 % 11.4 % 9.8 % 13.1 % 11.6 %
Pre-opening and acquisition costs 0.1 % - % - % 0.1 % - % - %
Other charges 0.8 % 9.0 % 5.5 % 1.3 % 28.7 % 2.7 %
Loss from operations (0.9) % (31.4) % (4.2) % (1.1) % (44.7) % (1.3) %
Interest expense, net and other 1.0 % 1.2 % 0.7 % 1.2 % 1.1 % 0.8 %
Loss before income taxes (1.9) % (32.6) % (4.9) % (2.3) % (45.8) % (2.1) %
Income tax (benefit) provision (0.1) % 2.3 % (5.2) % (0.1) % 3.5 % (2.3) %
Net (loss) income (1.8) % (34.9) % 0.3 % (2.3) % (49.4) % 0.2 %
___________________________________
(1) Presented for improved comparability to pre-COVID-19 operations.
Certain percentage amounts in the table above do not total due to rounding as
well as restaurant operating costs being expressed as a percentage of restaurant
revenue and not total revenues.
17
--------------------------------------------------------------------------------
Table of Contents
Revenues
Twelve Weeks Ended Twenty-Eight Weeks Ended
Percent Percent
(Revenues in thousands) July 11, 2021 July 12, 2020 Change July 11, 2021 July 12, 2020 Change
Restaurant revenue $ 272,157 $ 160,144 69.9 % $ 590,834 $ 461,578 28.0 %
Franchise royalties, fees and
other revenue 4,818 978 392.6 % 12,416 5,609 121.4 %
Total revenues $ 276,975 $ 161,122 71.9 % $ 603,250 $ 467,187 29.1 %
Average weekly net sales volumes
in Company-owned restaurants $ 53,135 $ 32,287 71.7 % $ 49,347 $ 37,915 30.2 %
Total operating weeks 5,122 4,960 (1.0) % 11,973 12,174 (1.7) %
Net sales per square foot $ 102 $ 62 64.1 % $ 221 $ 171 29.1 %
Restaurant revenue for the twelve weeks ended July 11, 2021 , which comprises
primarily food and beverage sales, increased $112.1 million , or 69.9%, as
compared to the twelve weeks ended July 12, 2020 . The increase was due to a
$105.4 million , or 66.3%, increase in comparable restaurant revenue, and a $6.7
million increase primarily from reopened restaurants that were temporarily
closed during second quarter 2020. The comparable restaurant revenue increase
was driven by a 47.7% increase in Guest count and a 18.6% increase in average
Guest check. The increase in average Guest check resulted from a 3.0% increase
in pricing, a 14.9% increase in menu mix and a 0.7% increase from lower
discounting. The increase in menu mix was primarily driven by higher sales of
beverages and appetizers, partially offset by lower gourmet burger mix.
Off-premise sales comprised 32.8% of total food and beverage sales during second
quarter 2021, compared to 63.8% in the same period in 2020.
Restaurant revenue for the twenty-eight weeks ended July 11, 2021 , increased
$129.3 million or 28.0%, as compared to the twenty-eight weeks ended July 12,
2020 . The increase was due to a $133.7 million , or 30.3%, increase in comparable
restaurant revenue, partially offset by a $4.4 million decrease primarily from
closed restaurants. The comparable restaurant revenue decrease was driven by a
20.4% increase in Guest counts and a 9.9% increase in average Guest check. The
increase in average Guest check resulted from a 3.5% increase in pricing and a
5.8% increase in menu mix, and a 0.6% increase from lower discounting. The
increase in menu mix was primarily driven by higher sales of appetizers and
beverages.
Average weekly net sales volumes represent the total restaurant revenue for all
Company-owned Red Robin restaurants for each time period presented, divided by
the number of operating weeks in the period. Comparable restaurant revenues are
comprised of Company-owned restaurants that have operated five full quarters as
of the end of the period presented. Company-owned restaurants that were
temporarily closed due to the COVID-19 pandemic were not included in the
comparable base for the twelve and twenty-eight weeks ended July 11, 2021 or
July 12, 2020 . Fluctuations in average weekly net sales volumes for
Company-owned restaurants reflect the effect of comparable restaurant revenue
changes as well as the performance of new and acquired restaurants during the
period, the average square footage of our restaurants, as well as the impact of
changing capacity limitations in response to COVID-19 levels in a given
locality. Net sales per square foot represents the total restaurant revenue for
Company-owned restaurants included in the comparable base divided by the total
square feet of Company-owned restaurants included in the comparable base.
Franchise and other revenue increased $3.8 million for the twelve weeks ended
July 11, 2021 compared to the twelve weeks ended July 12, 2020 , due to charging
and collecting royalty payments and advertising contributions from our
franchisees during the second fiscal quarter of 2021; during the same period in
2020, the Company had temporarily abated franchisee royalty and advertising
contribution payments, resuming collection during the latter half of the second
fiscal quarter of 2020. Our franchisees reported a comparable restaurant revenue
increase of 69.7% for the twelve weeks ended July 11, 2021 compared to the same
period in 2020.
Franchise and other revenue increased $6.8 million for the twenty-eight weeks
ended July 11, 2021 compared to the twenty-eight weeks ended July 12, 2020 , due
to charging and collecting royalty payments and advertising contributions from
our franchisees during the second fiscal quarter of 2021; during the same period
in 2020, the Company had temporarily abated franchisee royalty and advertising
contribution payments in mid-March, resuming collection during the latter half
of the second fiscal quarter of 2020, as well as an increase in gift card
breakage. Our franchisees reported a comparable restaurant revenue increase of
35.7% for the twenty-eight weeks ended July 11, 2021 compared to the same period
in 2020.
18
--------------------------------------------------------------------------------
Table of Contents
Cost of Sales
Twelve Weeks Ended Twenty-Eight Weeks Ended
(In thousands, except
percentages) July 11, 2021 July 12, 2020 Percent Change July 11, 2021 July 12, 2020 Percent Change
Cost of sales $ 61,917 $ 38,780 59.7 % $ 131,083 $ 109,206 20.0 %
As a percent of restaurant
revenue 22.8 % 24.2 % (1.4) % 22.2 % 23.7 % (1.5) %
Cost of sales, which comprises of food and beverage costs, is variable and
generally fluctuates with sales volume. Cost of sales as a percentage of
restaurant revenue decreased 140 basis points for the twelve weeks ended
July 11, 2021 as compared to the same period in 2020. The decrease was primarily
driven by pricing, favorable mix shifts, and discounts, partially offset by
commodity inflation.
Cost of sales as a percentage of restaurant revenue decreased 150 basis points
for the twenty-eight weeks ended July 11, 2021 as compared to the same period in
2020. The decrease was primarily driven by pricing and favorable mix shifts.
Labor
Twelve Weeks Ended Twenty-Eight Weeks Ended
(In thousands, except
percentages) July 11, 2021 July 12, 2020 Percent Change July 11, 2021 July 12, 2020 Percent Change
Labor $ 98,949 $ 62,742 57.7 % $ 210,608 $ 181,308 16.2 %
As a percent of restaurant
revenue 36.4 % 39.2 % (2.8) % 35.6 % 39.3 % (3.7) %
Labor costs include restaurant-level hourly wages and management salaries as
well as related taxes and benefits. For the twelve weeks ended July 11, 2021 ,
labor as a percentage of restaurant revenue decreased 280 basis points compared
to the same period in 2020. The decrease was primarily driven by staffing
shortages, and sales leverage, partially offset by higher wage rates, staffing
costs and increased restaurant management compensation costs in 2021. $1.6
million of incremental labor costs were incurred due to increased hiring ads,
incremental hiring and training resources, and retention and sign-on bonuses to
support our staffing initiatives.
For the twenty-eight weeks ended July 11, 2021 , labor as a percentage of
restaurant revenue decreased 370 basis points compared to the same period in
2020. The decrease was primarily driven by staffing shortages, and sales
leverage, partially offset by higher wage rates and staffing costs.
Other Operating
Twelve Weeks Ended Twenty-Eight Weeks Ended
(In thousands, except
percentages) July 11, 2021 July 12, 2020 Percent Change July 11, 2021 July 12, 2020 Percent Change
Other operating $ 46,928 $ 34,663 35.4 % $ 104,640 $ 86,954 20.3 %
As a percent of restaurant
revenue 17.2 % 21.6 % (4.4) % 17.7 % 18.8 % (1.1) %
Other operating costs include costs such as equipment repairs and maintenance
costs, restaurant supplies, utilities, restaurant technology, and other
miscellaneous costs. For the twelve weeks ended July 11, 2021 , other operating
costs as a percentage of restaurant revenue decreased 440 basis points as
compared to the same period in 2020. The decrease was primarily driven by lower
third party delivery fees and supplies due to lower off-premises sales volumes,
and sales leverage.
For the twenty-eight weeks ended July 11, 2021 , other operating costs as a
percentage of restaurant revenue decreased 110 basis points as compared to the
same period in 2020. The decrease was primarily driven by sales leverage and
supply costs, partially offset by higher third party delivery commissions.
19
--------------------------------------------------------------------------------
Table of Contents
Occupancy
Twelve Weeks Ended Twenty-Eight Weeks Ended
(In thousands, except
percentages) July 11, 2021 July 12, 2020 Percent Change July 11, 2021 July 12, 2020 Percent Change
Occupancy $ 21,614 $ 20,758 4.1 % $ 51,714 $ 54,415 (5.0) %
As a percent of restaurant
revenue 7.9 % 13.0 % (5.1) % 8.8 % 11.8 % (3.0) %
Occupancy costs include fixed rents, property taxes, common area maintenance
charges, general liability insurance, contingent rents, and other property
costs. Occupancy costs incurred prior to opening our new restaurants are
included in pre-opening costs. For the twelve weeks ended July 11, 2021 ,
occupancy costs as a percentage of restaurant revenue decreased 510 basis points
compared to the same period in 2020 primarily driven by savings from permanently
closed restaurants and restructuring of lease payments, rent concessions, and
sales leverage.
For the twenty-eight weeks ended July 11, 2021 , occupancy costs as a percentage
of restaurant revenue decreased 300 basis points compared to the same period in
2020 primarily driven by savings from permanently closed restaurants and
restructuring of lease payments and rent concessions.
Our fixed rents for the twelve weeks ended July 11, 2021 and July 12, 2020
were $16.0 million and $14.7 million , an increase of $1.3 million due to
recognizing ongoing fixed rents of Company-owned restaurants that were
temporarily closed due to the COVID-19 pandemic in Closed restaurant expense (a
component of Other Charges) in 2020, compared to Occupancy in 2021, partially
offset by a net decrease in store count resulting from 10 locations permanently
closed during the period. Our fixed rents for the twenty-eight weeks ended
July 11, 2021 and July 12, 2020 were $37.0 million and $36.3 million , an
increase of $0.7 million due to recognizing ongoing fixed rents of Company-owned
restaurants that were temporarily closed due to the COVID-19 pandemic in Closed
restaurant expense (a component of Other Charges) in 2020, compared to Occupancy
in 2021, partially offset by a net decrease in store count resulting from 13
locations permanently closed during the period.
Depreciation and Amortization
Twelve Weeks Ended Twenty-Eight Weeks Ended
(In thousands, except
percentages) July 11, 2021 July 12, 2020 Percent Change July 11, 2021 July 12, 2020 Percent Change
Depreciation and
amortization $ 19,215 $ 20,560 (6.5) % $ 45,103 $ 48,880 (7.7) %
As a percent of total
revenues 6.9 % 12.8 % (5.9) % 7.5 % 10.5 % (3.0) %
Depreciation and amortization includes depreciation on capital expenditures for
restaurants and corporate assets as well as amortization of acquired franchise
rights, leasehold interests, and certain liquor licenses. For the twelve weeks
ended July 11, 2021 , depreciation and amortization expense as a percentage of
revenue decreased 590 basis points over the same period in 2020. For the
twenty-eight weeks ended July 11, 2021 , depreciation and amortization expense as
a percentage of revenue decreased 300 basis points over the same period in 2020.
The decreases are primarily due to net closed Company-owned restaurants, and
sales leverage.
Selling, General, and Administrative
Twelve Weeks Ended Twenty-Eight Weeks Ended
(In thousands, except
percentages) July 11, 2021 July 12, 2020 Percent Change July 11, 2021 July 12, 2020 Percent Change
Selling, general, and
administrative $ 28,346 $ 19,697 43.9 % $ 58,956 $ 61,199 (3.7) %
As a percent of total
revenues 10.2 % 12.2 % (2.0) % 9.8 % 13.1 % (3.3) %
Selling, general, and administrative costs include all corporate and
administrative functions. Components of this category include marketing and
advertising costs; restaurant support center, regional, and franchise support
salaries and benefits; travel; professional and consulting fees; corporate
information systems; legal expenses; office rent; training; and board of
directors expenses.
Selling, general, and administrative costs in the twelve weeks ended July 11,
2021 increased $8.6 million , or 43.9%, as compared to the same period in 2020.
The increase in selling, general and administrative costs in 2021 was primarily
driven by lapping the significant reduction in marketing spend in 2020 due to
the COVID-19 pandemic, increased Team Member benefits, and temporary salary
reductions in 2020, partially offset by lower professional services spend.
20
--------------------------------------------------------------------------------
Table of Contents
Selling, general, and administrative costs in the twenty-eight weeks ended
July 11, 2021 decreased $2.2 million , or 3.7%, as compared to the same period in
2020. The decrease was primarily driven by a decrease in travel and
entertainment costs, decreased broadcast and national media marketing spend,
decreased professional services spend and decreased salaries and wage expenses,
partially offset by increased Team Member benefit costs.
Pre-opening Costs
Twelve Weeks Ended Twenty-Eight Weeks Ended
(In thousands, except
percentages) July 11, 2021 July 12, 2020 Percent Change July 11, 2021 July 12, 2020 Percent Change
Pre-opening costs $ 374 $ 3 * $ 374 $ 156 *
As a percent of total
revenues 0.1 % - % 0.1 % 0.1 % - % 0.1 %
* Percentage increases and decreases over 100 percent were not considered
meaningful.
Pre-opening costs, which are expensed as incurred, comprise the costs related to
preparing restaurants to introduce Donatos®, as well as direct costs, including
labor, occupancy, training, and marketing, incurred related to opening new
restaurants and hiring the initial work force. Our pre-opening costs fluctuate
from period to period, depending upon, but not limited to, the number of
restaurants where Donatos® has been introduced, the number of restaurant
openings, the size of the restaurants being opened, and the location of the
restaurants. Pre-opening costs for any given quarter will typically include
expenses associated with restaurants opened during the quarter as well as
expenses related to restaurants opening in subsequent quarters.
We incurred pre-opening costs during the twelve and twenty-eight weeks ended
July 11, 2021 and July 12, 2020 related to the rollout of Donatos®. The Company
completed the rollout of 41 restaurants during the twelve weeks ended July 11,
2021 , and expects to continue its roll out of Donatos® to approximately 80
restaurants in the second half of fiscal year 2021.
Interest Expense, Net and Other
Interest expense, net and other was $2.8 million for the twelve weeks ended
July 11, 2021 , an increase of $0.8 million , or 40.0%, compared to the same
period in 2020. The increase was primarily related to a higher weighted average
interest rate for the quarter due to increased rates associated with the Second
Amendment to Credit Agreement (the "Second Amendment"), partially offset by a
lower average outstanding debt balance compared to the same period in 2020. Our
weighted average interest rate was 7.4% for the twelve weeks ended July 11, 2021
as compared to 4.2% for the same period in 2020.
Interest expense, net and other was $7.1 million for the twenty-eight weeks
ended July 11, 2021 , an increase of $1.8 million , or 34.0%, from the same period
in 2020. The increase was primarily related to a higher weighted average
interest rate for the period as well as the partial write off of approximately
$1.2 million of deferred financing charges related to the modification of our
revolver in conjunction with the execution of the Second Amendment on
February 25, 2021 , partially offset by a lower average outstanding debt balance
compared to the same period in 2020. Our weighted average interest rate was 6.7%
for the twenty-eight weeks ended July 11, 2021 as compared to 4.2% for the same
period in 2020.
Provision for Income Taxes
The effective tax rate for the twelve weeks ended July 11, 2021 was a 6.6%
benefit, compared to a 7.0% expense for the twelve weeks ended July 12, 2020 .
The decrease in tax expense for the twelve weeks ended July 11, 2021 is
primarily due to the change in full valuation allowance recognition.
The effective tax benefit for the twenty-eight weeks ended July 11, 2021 and
July 12, 2020 was 2.2%, compared to a 7.7% expense for the twelve weeks ended
July 12 , 2020.The decrease in tax expense for the twenty-eight weeks ended
July 11, 2021 is primarily due to the change in full valuation allowance
recognition.
The Company has filed federal and state cash tax refund claims totaling
approximately $16 million during 2021 from net operating loss carrybacks. While
we expect to receive a portion of the refunds in 2021, due to government delays
in processing these claims we do not expect to receive the majority until 2022.
Liquidity and Capital Resources
Cash and cash equivalents increased $9.5 million to $25.6 million as of July 11,
2021 , from $16.1 million at the beginning of the fiscal year. As the Company
continues to recover from the COVID-19 pandemic and generates operating cash
flow, the Company is using available cash flow from operations to pay down debt,
maintain existing restaurants and infrastructure, and execute on our long-term
strategic initiatives. As of July 11, 2021 , the Company had approximately $117
million in liquidity, including cash on hand and available borrowing capacity,
under its credit facility.
21
--------------------------------------------------------------------------------
Table of Contents
Cash Flows
The table below summarizes our cash flows from operating, investing, and
financing activities for each period presented (in thousands):
Twenty-Eight Weeks Ended
July 11, 2021 July 12, 2020
Net cash provided by (used in) operating activities $ 37,184 $ (18,607)
Net cash used in investing activities (10,834) (11,413)
Net cash (used in) provided by financing activities (16,931) 26,369
Effect of exchange rate changes on cash 34 (256)
Net change in cash and cash equivalents $
9,453
Operating Cash Flows Net cash flows provided by (used in) operating activities increased$55.8 million to$37.2 million for the twenty-eight weeks endedJuly 11, 2021 . The changes in net cash provided by (used in) operating activities are primarily attributable to a$90.5 million increase in profit from operations (defined as the change in operating margins from comparable and non-comparable restaurants), lower accounts receivable and higher accounts payable balances due to the timing of operational receipts and payments, deferral of payroll tax payments under the CARES Act, as well as other changes in working capital as presented in the Condensed Consolidated Statements of Cash Flows. Investing Cash Flows Net cash flows used in investing activities decreased$0.6 million to$10.8 million for the twenty-eight weeks endedJuly 11, 2021 , as compared to$11.4 million for the same period in 2020. The decrease is primarily due to the Company selectively pursuing projects aligned with strategic uses of capital and cost management in restaurant technology and restaurant improvement capital, as well as increased spend on Donatos® associated with adding 41 restaurants in the second fiscal quarter. The following table lists the components of our capital expenditures, net of currency translation, for the twenty-eight weeks endedJuly 11, 2021 andJuly 12, 2020 (in thousands):
© Edgar Online, source
