Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains "forward-looking statements" that reflect, when made, the Company's expectations or beliefs concerning future events that involve risks and uncertainties. Forward-looking statements frequently are identified by the words "anticipate," "assume," "believe," "continue," "could," "estimate," "expect," "forecast," "future," "intend," "likely result," "may," "might," "plan," "potential," "predict," "project," "seek", "should," "target," "will be," "will continue," "will likely result," "would" and other similar words and phrases. Similarly, statements herein that describe the Company's objectives, plans or goals, including with respect to restaurant openings/re-openings and acquisitions or closures, capital expenditures, strategy, financial outlook, cash flows, our effective tax rate, and the impact of recent accounting pronouncements, also are forward-looking statements. Actual results could differ materially from those projected, implied or anticipated by the Company's forward-looking statements. Some of the factors that could cause actual results to differ include: the negative impact the COVID-19 pandemic has had and will continue to have on our business, financial condition, results of operations and cash flows; reductions in the availability of, or increases in the cost of, USDA Prime grade beef, fish and other food items; changes in economic conditions and general trends; the loss of key management personnel; the effect of market volatility on the Company's stock price; health concerns about beef or other food products; the effect of competition in the restaurant industry; changes in consumer preferences or discretionary spending; labor shortages or increases in labor costs; the impact of federal, state or local government regulations relating to income taxes, unclaimed property, Company employees, the sale or preparation of food, the sale of alcoholic beverages and the opening of new restaurants; political conditions, civil unrest or other developments and risks in the markets where the Company's restaurants are located; harmful actions taken by the Company's franchisees; the inability to successfully integrate franchisee acquisitions into the Company's business operations; economic, regulatory and other limitations on the Company's ability to pursue new restaurant openings and other organic growth opportunities; a material failure, interruption or security breach of the Company's information technology network; the Company's indemnification obligations in connection with its sale of theMitchell's Restaurants ; the Company's ability to protect its name and logo and other proprietary information; an impairment in the financial statement carrying value of our goodwill, other intangible assets or property; gains or losses on lease modifications; the impact of litigation; the restrictions imposed by the Company's credit agreement; changes in, or the suspension or discontinuation of the Company's quarterly cash dividend payments or share repurchase program; and the inability to secure additional financing on terms acceptable to the Company. For a discussion of these and other risks and uncertainties that could cause actual results to differ from those contained in the forward-looking statements, see "Risk Factors" in Part II Item 1A of this Form 10-Q and the Company's Annual Report on Form 10-K for the fiscal year endedDecember 7, 2020 , which is available on theSEC's website at www.sec.gov. All forward-looking statements are qualified in their entirety by this cautionary statement, and the Company undertakes no obligation to revise or update this Quarterly Report on Form 10-Q to reflect events or circumstances after the date hereof. You should not assume that material events subsequent to the date of this Quarterly Report on Form 10-Q have not occurred. OverviewRuth's Hospitality Group, Inc. is a restaurant company focused on the upscale dining segment.Ruth's Hospitality Group, Inc. operates Company-owned Ruth'sChris Steak House restaurants and sells franchise rights to Ruth'sChris Steak House franchisees giving the franchisees the exclusive right to operate similar restaurants in a particular area designated in the franchise agreement. As ofSeptember 26, 2021 , there were 149 Ruth'sChris Steak House restaurants, including 73 Company-owned restaurants, three restaurants operating under contractual agreements and 73 franchisee-owned restaurants. A new franchisee-owned restaurant opened inSeptember 2021 inManila, Philippines . Subsequent to the third quarter a Company-owned Ruth'sChris Steak House restaurant was opened inShort Hills, NJ . The Ruth's Chris menu features a broad selection of USDA Prime and other high quality steaks and other premium offerings served in Ruth's Chris' signature fashion - "sizzling" and topped with butter - complemented by other traditional menu items inspired by ourNew Orleans heritage. The Ruth's Chris restaurants reflect over 50 years committed to the core values instilled by our founder,Ruth Fertel , of caring for our guests by delivering the highest quality food, beverages and service in a warm and inviting atmosphere. 17 -------------------------------------------------------------------------------- All Company-owned Ruth'sChris Steak House restaurants are located inthe United States . The franchisee-owned Ruth'sChris Steak House restaurants include 22 international franchisee-owned restaurants inAruba ,Canada ,China ,Hong Kong ,Indonesia ,Japan ,Mexico ,Singapore ,Taiwan andthe Philippines . InMarch 2020 theWorld Health Organization declared the novel coronavirus 2019 (COVID-19) a pandemic andthe United States declared it aNational Public Health Emergency, which has resulted in a significant reduction in revenue at the Company's restaurants due to mandatory restaurant closures, capacity limitations, social distancing guidelines or other restrictions mandated by governments across the world, including federal, state and local governments inthe United States . As a result of these developments, the Company has experienced a significant negative impact on its revenues, results of operations and cash flows compared to periods prior to the onset of the pandemic. As ofSeptember 26, 2021 , 75 of the 76 Company-owned and -managed restaurants were open and one was closed, and 73 franchisee-owned restaurants were offering dining service. This is an unprecedented event in the Company's history, and as the COVID-19 pandemic continues to evolve, it remains uncertain how the conditions surrounding COVID-19 will continue to change. The Company could experience macroeconomic impacts arising from the long duration of the COVID-19 pandemic, including labor shortages and supply chain disruptions. The extent to which COVID-19 will continue to impact the Company will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the unknown duration and severity of the COVID-19 pandemic, which may be impacted by variants of the COVID-19 virus and the adoption rate of the COVID-19 vaccines in the jurisdictions in which the Company operates, the actions taken to contain the impact of COVID-19, and further actions that may be taken to limit the resulting economic impact. Following increases in the number of cases of COVID-19 throughoutthe United States and a spike in COVID-19 cases as a result of the Delta variant, some of our restaurants are subject to COVID-19-related restrictions such as mask and/ or vaccine requirements for team members, guests or both. We continue to monitor state, local, and federal government regulatory and public health responses to the COVID-19 pandemic, including the anticipated federalOccupational Health and Safety Administration's Emergency Temporary Standard implementing a nationwide vaccine requirement for employees of businesses with 100 or more employees. Our business is subject to seasonal fluctuations. Historically, our first and fourth quarters have tended to be the strongest revenue quarters due largely to the year-end holiday season and the popularity of dining out during the fall and winter months. Due to the impacts of COVID-19, it is uncertain whether future quarters will be stronger or weaker than the third fiscal quarter of 2021. Consequently, results for any one quarter are not necessarily indicative of results to be expected for any other quarter or for any year and comparable restaurant sales for any particular period may decrease.
Our Annual Report on Form 10-K for the fiscal year ended
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Results of Operations
The table below sets forth certain operating data expressed as a percentage of total revenues for the periods indicated, except as otherwise noted. Our historical results are not necessarily indicative of the operating results that may be expected in the future. 13 Weeks Ended 39 Weeks Ended September 26, September 27, September 26, September 27, 2021 2020 2021 2020 Revenues: Restaurant sales 93.6 % 92.4 % 93.7 % 94.1 % Franchise income 4.6 % 5.5 % 4.3 % 4.0 % Other operating income 1.8 % 2.1 % 2.0 % 1.9 % Total revenues 100.0 % 100.0 % 100.0 % 100.0 % Costs and expenses: Food and beverage costs (percentage of restaurant sales) 34.2 % 27.1 % 31.0 % 28.9 % Restaurant operating expenses (percentage of restaurant sales) 47.2 % 59.5 % 45.5 % 62.2 % Marketing and advertising 2.3 % 1.4 % 2.5 % 2.6 % General and administrative costs 7.4 % 11.9 % 7.8 % 11.3 % Depreciation and amortization expenses 4.8 % 8.4 % 5.0 % 8.3 % Pre-opening costs 0.6 % 0.6 % 0.4 % 0.6 % Loss/(Gain) on lease modifications - 0.5 % - (0.1 %) Loss on impairment - 5.2 % 0.1 % 8.1 % Total costs and expenses 91.3 % 108.1 % 87.6 % 116.6 % Operating income (loss) 8.7 % (8.1 %) 12.4 % (16.6 %) Other income (expense): Interest expense, net (0.7 %) (2.2 %) (1.0 %) (1.7 %) Other (0.0 %) (0.1 %) 0.0 % (0.0 %) Income (loss) before income taxes 8.0 % (10.4 %) 11.4 % (18.3 %) Income tax expense (benefit) 1.3 % (2.0 %) 1.9 % (5.0 %) Net income (loss) 6.7 % (8.4 %) 9.5 % (13.3 %)
Third Quarter Ended
Overview. Operating income (loss) increased by$14.1 million to$9.0 million for the third quarter of fiscal year 2021 from the loss reported for the third quarter of fiscal year 2020. Operating income for the third quarter of fiscal year 2021 was favorably impacted by a$38.9 million increase in restaurant sales, a$3.3 million decrease in loss on impairment, a$1.2 million increase in franchise income and a$590 thousand increase in other operating income, offset by a$17.5 million increase in food and beverage costs, a$11.2 million increase in restaurant operating expenses, and a$1.5 million increase in marketing and advertising costs. Net income (loss) increased from the third quarter of fiscal year 2020 by$12.2 million to$6.9 million . Segment Profits. Segment profitability information is presented in Note 7 in the notes to the condensed consolidated financial statements included in Item 1. "Financial Statements". Segment profit for the third quarter of fiscal year 2021 for the Company-owned steakhouse restaurant segment increased by$10.6 million to a$19.3 million profit compared to the third quarter of fiscal year 2020. The increase was driven primarily by a$39.3 million increase in restaurant sales offset by an increase of$17.5 million in food and beverage costs and a$11.2 million increase in restaurant operating expenses. Franchise income increased$1.2 million in the third quarter of fiscal year 2021 compared to the third quarter of fiscal year 2020. Restaurant Sales. Restaurant sales increased by$38.9 million , or 66.5%, to$97.5 million in the third quarter of fiscal year 2021 from the third quarter of fiscal year 2020. Company-owned comparable restaurant sales in the third quarter of fiscal year 2021 were$91.9 million , which represented an increase of$36.8 million compared to the third quarter of fiscal year 2020. Company-owned comparable restaurant sales increased by 66.8%, which consisted of a 37.4% increase in traffic and a 21.5% increase in average check. 19 -------------------------------------------------------------------------------- Franchise Income. Franchise income in the third quarter of fiscal year 2021 increased by$1.2 million , or 35.1%, to$4.7 million compared to the third quarter of fiscal year 2020. The increase in franchise income compared to the third quarter of fiscal year 2020 was due to an increase in franchisee-owned restaurant sales. Other Operating Income. Other operating income increased by$590 thousand in the third quarter of fiscal year 2021 compared to the third quarter of fiscal year 2020. The increase was primarily due to an increase in breakage income of$267 thousand resulting from an increase in gift card redemptions and a$166 thousand increase in income from restaurants operating under contractual agreements. The increase in these items were primarily due to increases in restaurant sales. Food and Beverage Costs. Food and beverage costs increased by$17.5 million , or 110.0%, to$33.4 million in the third quarter of fiscal year 2021 compared to the third quarter of fiscal year 2020 primarily due to increased restaurant sales. As a percentage of restaurant sales, food and beverage costs increased to 34.2% in the third quarter of fiscal year 2021 from 27.1% in the third quarter of fiscal year 2020, primarily driven by a 65% increase in beef costs. Restaurant Operating Expenses. Restaurant operating expenses increased by$11.2 million , or 32.0%, to$46.0 million in the third quarter of fiscal year 2021 from the third quarter of fiscal year 2020. Restaurant operating expenses, as a percentage of restaurant sales, decreased to 47.2% in the third quarter of fiscal year 2021 from 59.5% in the third quarter of fiscal year 2020. The decrease in restaurant operating expenses as a percentage of restaurant sales compared to the third quarter of fiscal year 2020 were primarily due to the impact of higher sales and leveraging of fixed costs. Marketing and Advertising. Marketing and advertising expenses increased by$1.5 million , or 174.0%, to$2.4 million in the third quarter of fiscal year 2021 from the third quarter of fiscal year 2020. The increase in marketing and advertising expenses in the third quarter of fiscal year 2021 was attributable to a partial return in spending following our earlier response to the COVID-19 pandemic in line with our anticipated level of operations. General and Administrative Costs. General and administrative costs increased by$149 thousand , or 2.0%, to$7.7 million in the third quarter of fiscal year 2021 from the third quarter of fiscal year 2020. As a percentage of revenue, general and administrative costs decreased from 11.9% in the third quarter of fiscal year 2020 to 7.4% in the third quarter of fiscal year 2021 primarily due to sales increasing. Depreciation and Amortization Expenses. Depreciation and amortization expense decreased by$331 thousand to$5.0 million in the third quarter of fiscal year 2021 from the third quarter of fiscal year 2020. Pre-opening Costs. Pre-opening costs were$581 thousand in the third quarter of fiscal year 2021. These expenses are primarily due to the planned opening of the Ruth'sChris Steak House restaurant inShort Hills, NJ and recognition of rent expense at unopened Ruth'sChris Steak House restaurants where the Company has taken possession of the property. Pre-opening costs were$403 thousand in the third quarter of the fiscal year 2020 primarily due to the recognition of rent expense at unopened Ruth'sChris Steak House restaurants where the Company took possession of the property. Loss on Lease Modifications. During the third quarter of fiscal year 2020, the Company recorded a$310 thousand loss on lease modifications primarily due to the write off of capitalized expenses incurred related to the termination of a lease related to a planned Ruth'sChris Steak House restaurant. No loss on lease modification was recorded during the third quarter of fiscal year 2021. Loss on Impairment. During the third quarter of fiscal year 2020, the Company recorded a$3.3 million loss on impairment of which$3.2 million related to long-lived assets as described further in Note 2 in the notes to the condensed consolidated financial statements included in Item 1. "Financial Statements". No loss on impairment was recorded during the third quarter of fiscal year 2021. Interest Expense. Interest expense decreased$744 thousand to$678 thousand in the third quarter of fiscal year 2021 compared to$1.4 million in the third quarter of fiscal year 2020. The decrease primarily relates to a lower average debt balance during the third quarter of fiscal year 2021 compared to the third quarter of fiscal year 2020.
Other Income and Expense. During the third quarter of fiscal year 2021, we
recognized other expense of
Income Tax Expense (Benefit). During the third quarter of fiscal year 2021, we recognized income tax expense of$1.4 million . During the third quarter of fiscal year 2020, we recognized an income tax benefit of$1.3 million . The effective tax rate, including the impact of discrete items, decreased to a 16.8% expense for the third quarter of fiscal year 2021 compared to a 19.5% benefit for the third quarter of fiscal year 2020, primarily due to the generation of pretax income for the third quarter of fiscal year 2021 compared to a pretax loss in the third quarter of fiscal year 2020. Fiscal year 2021 discrete items and other unexpected changes impacting the annual 20
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tax expense may cause the effective tax rate for fiscal year 2021 to differ from the effective tax rate for the third quarter of fiscal year 2021.
Net Income (Loss). Net income was$6.9 million in the third quarter of fiscal year 2021, which reflected an increase of$12.2 million compared to a net loss of$5.3 million in the third quarter of fiscal year 2020. The increase was attributable to the factors noted above.
Thirty-nine Weeks Ended
Overview. Operating income (loss) increased by$70.7 million to$37.4 million for the first thirty-nine weeks of fiscal year 2021 from the loss reported for the first thirty-nine weeks of fiscal year 2020. Operating income for the first thirty-nine weeks of fiscal year 2021 was favorably impacted by a$94.7 million increase in restaurant sales,$15.9 million decrease in loss on impairment and a$5.0 million increase in franchise income, which was partially offset by a$33.4 million increase in food and beverage costs and an$11.8 million increase in restaurant operating expenses. Net income (loss) increased from the first thirty-nine weeks of fiscal year 2020 by$55.2 million to$28.5 million . Segment Profits. Segment profitability information is presented in Note 7 in the notes to the condensed consolidated financial statements included in Item 1. "Financial Statements". Segment profit for the first thirty-nine weeks of fiscal year 2021 for the Company-owned steakhouse restaurant segment increased by$51.1 million to a$69.9 million profit compared to the first thirty-nine weeks of fiscal year 2020. The increase was driven primarily by a$96.2 million increase in restaurant sales offset by a$33.4 million increase in food and beverage costs and a$11.8 million increase in restaurant operating expenses. Franchise income increased$5.0 million in the first thirty-nine weeks of fiscal year 2021 compared to the fist thirty-nine weeks of fiscal year 2020. Restaurant Sales. Restaurant sales increased by$94.7 million , or 50.2%, to$283.3 million in the first thirty-nine weeks of fiscal year 2021 from the first thirty-nine weeks of fiscal year 2020. Company-owned comparable restaurant sales during the first thirty-nine weeks of fiscal year 2021 were$266.8 million , which represented an increase of$98.5 million compared to the first thirty-nine weeks of fiscal year 2020. Company-owned comparable restaurant sales increased by 58.6%, which consisted of a 40.6% increase in traffic and a 12.8% increase in average check. Franchise Income. Franchise income in the first thirty-nine weeks of fiscal year 2021 increased by$5.0 million , or 61.4%, to$13.1 million in the first thirty-nine weeks of fiscal year 2021 compared to the first thirty-nine weeks of fiscal year 2020. The increase in franchise income compared to the first thirty-nine weeks of fiscal year 2020 was due to an increase in franchisee-owned restaurant sales primarily due to the lessening of COVID-19 restrictions. Other Operating Income. Other operating income increased by$2.3 million in the first thirty-nine weeks of fiscal year 2021 compared to the first thirty-nine weeks of fiscal year 2020. The increase was primarily due to a$1.5 million increase in income from restaurants operating under contractual agreements and an increase in breakage income of$821 thousand resulting from an increase in gift card redemptions. The increase in these items were primarily due to increases in restaurant sales. Food and Beverage Costs. Food and beverage costs increased by$33.4 million , or 61.2%, to$87.9 million in the first thirty-nine weeks of fiscal year 2021 compared to the first thirty-nine weeks of fiscal year 2020 primarily due to increased restaurant sales. As a percentage of restaurant sales, food and beverage costs increased to 31.0% in the first thirty-nine weeks of fiscal year 2021 from 28.9% in the first thirty-nine weeks of fiscal year 2020, primarily driven by a 34% increase in beef costs. Restaurant Operating Expenses. Restaurant operating expenses increased by$11.8 million , or 10.1%, to$129.0 million in the first thirty-nine weeks of fiscal year 2021 from the first thirty-nine weeks of fiscal year 2020. Restaurant operating expenses, as a percentage of restaurant sales, decreased to 45.5% in the first thirty-nine weeks of fiscal year 2021 from 62.2% in the first thirty-nine weeks of fiscal year 2020. The decrease in restaurant operating expenses as a percentage of restaurant sales was primarily due to the impact of higher sales and leveraging of fixed costs. Marketing and Advertising. Marketing and advertising expenses increased by$2.4 million , or 45.0%, to$7.7 million in the first thirty-nine weeks of fiscal year 2021 from the first thirty-nine weeks of fiscal year 2020. The increase in marketing and advertising expenses in the first thirty-nine weeks of fiscal year 2021 was attributable to a partial return in spending following our response to the COVID-19 pandemic in line with our anticipated level of operations. General and Administrative Costs. General and administrative costs increased$1.0 million , or 4.5%, to$23.7 million in the first thirty-nine weeks of fiscal year 2021 from the first thirty-nine weeks of fiscal year 2020. The increase in general and administrative costs was primarily attributable to an increase in compensation related expenses. As a percentage of revenue, general and administrative costs decreased from 11.3% in the first thirty-nine weeks of fiscal year 2020 to 7.8% in the first thirty-nine weeks of fiscal year 2021 primarily due to sales increasing. 21 -------------------------------------------------------------------------------- Depreciation and Amortization Expenses. Depreciation and amortization expense decreased by$1.5 million to$15.1 million in the first thirty-nine weeks of fiscal year 2021 from the first thirty-nine weeks of fiscal year 2020 primarily due to the permanent closure of nine Ruth'sChris Steak House restaurants during fiscal year 2020. Pre-opening Costs. Pre-opening costs were$1.2 million in both the first thirty-nine weeks of fiscal year 2021 and the first thirty-nine weeks of fiscal year 2020. The expenses during the first thirty-nine weeks of fiscal year 2021 are primarily due to the planned opening of the Ruth'sChris Steak House restaurant inShort Hills, NJ and recognition of rent expense at unopened Ruth'sChris Steak House restaurants where the Company has taken possession of the property. During the first thirty-nine weeks of fiscal year 2020 pre-opening expenses were primarily due to recognition of rent expense at unopened Ruth'sChris Steak House restaurants where the Company took possession of the properties. Gain on Lease Modifications. During the first thirty-nine weeks of fiscal year 2020, the Company recorded a$178 thousand gain on lease modifications primarily related to a gain on the modification of a lease of$663 thousand , partially offset by the write off of capitalized expenses incurred related to the termination of a lease on a planned Ruth'sChris Steak House restaurant of$422 thousand . There was no gain on lease modifications recorded during the first thirty-nine weeks of fiscal year 2021. Loss on Impairment. During the first thirty-nine weeks of fiscal year 2021, the Company recorded a$394 thousand impairment loss of which$306 thousand related to long-lived assets. During the first thirty-nine weeks of fiscal year 2020, the Company recorded a$16.3 million loss consisting of a$12.7 million impairment of long-lived assets, a$3.1 million impairment of territory rights and a$416 thousand impairment of inventory as described further in Note 2 in the notes to the condensed consolidated financial statements included in Item 1. "Financial Statements". Interest Expense. Interest expense decreased$232 thousand to$3.1 million in the first thirty-nine weeks of fiscal year 2021 compared to$3.3 million in the first thirty-nine weeks of fiscal year 2020. The decrease primarily relates to a lower average debt balance during the first thirty-nine weeks of fiscal year 2021 compared to the first thirty-nine weeks of fiscal year 2020.
Other Income and Expense. During the first thirty-nine weeks of fiscal year
2021, we recognized other income of
Income Tax Expense (Benefit). During the first thirty-nine weeks of fiscal year 2021, we recognized income tax expense of$5.9 million . During the first thirty-nine weeks of fiscal year 2020, we recognized an income tax benefit of$9.9 million . The effective tax rate, including the impact of discrete items, decreased to a 17.0% expense for the first thirty-nine weeks quarter of fiscal year 2021 compared to an 27.1% benefit for the first thirty-nine weeks of fiscal year 2020, primarily due to the generation of pretax income for the first thirty-nine weeks of fiscal year 2021 compared to a pretax loss in the first thirty-nine weeks of fiscal year 2020. Fiscal year 2021 discrete items and other unexpected changes impacting the annual tax expense may cause the effective tax rate for fiscal year 2021 to differ from the effective tax rate for the first thirty-nine weeks of fiscal year 2021. Net Income (Loss). Net income was$28.5 million in the first thirty-nine weeks of fiscal year 2021, which reflected an increase of$55.2 million compared to a net loss of$26.7 million in the first thirty-nine weeks of fiscal year 2020. The increase was attributable to the factors noted above.
Liquidity and Capital Resources
Overview
Our principal sources of cash have been historically provided by our operating activities as well as periodic borrowings from our senior credit facility. During the first thirty-nine weeks of fiscal year 2021 our principal uses of cash flow were debt repayments, capital expenditures and repurchase of common stock. During the fourth quarter of fiscal year 2019, our Board of Directors approved a new share repurchase program authorizing us to repurchase up to$60 million of outstanding common stock from time to time. During the fiscal year 2020, as a result of the impacts to our business arising from the COVID-19 pandemic, the Company suspended its share repurchase program and dividend payments. During the third quarter of fiscal year 2021 the Company resumed its share repurchase program and repurchased 192,102 shares at an aggregate cost of$3.8 million or an average cost of$19.93 per share. All repurchased shares were retired and cancelled. Senior Credit Facility As ofSeptember 26, 2021 , we had$70.0 million of outstanding indebtedness under our senior credit facility and approximately$4.7 million of outstanding letters of credit, pursuant to a credit agreement entered into withWells Fargo Bank, National Association as 22
-------------------------------------------------------------------------------- administrative agent, and certain other lenders (as amended, as of the end of the fiscal year 2020, the "Credit Agreement "). As ofSeptember 26, 2021 , the weighted average interest rate on our outstanding debt was 3.5% and the weighted average interest rate on our outstanding letters of credit was 2.6%. In addition, the fee on the unused portion of our senior credit facility was 0.3%. OnOctober 18, 2021 , subsequent to the third fiscal quarter of 2021, the Company entered into an amended and restated credit agreement, which amends and restates its prior credit agreement withWells Fargo Bank, National Association as administrative agent, and certain other lenders (as amended and restated, the "Credit Agreement"). The Credit Agreement provides for a revolving credit facility of$140.0 million with a$10.0 million sub-facility of letters of credit and a$5.0 million sub-facility for swingline loans. Subject to the satisfaction of certain conditions and lender consent, the revolving credit facility may be increased up to a maximum of$200.0 million . The Credit Agreement has a maturity date ofOctober 18, 2026 . As ofOctober 29, 2021 , the Company had$70.0 million of outstanding indebtedness under its senior credit facility with approximately$65.3 million of borrowings available, net of outstanding letters of credit of approximately$4.7 million . The Credit Agreement contains customary representations and affirmative and negative covenants (including limitations on indebtedness and liens) as well as financial covenants, as described below, requiring a minimum fixed coverage charge ratio as defined in the Credit Agreement ("Fixed Charge Coverage Ratio") limiting the Company's actual leverage ratio as defined in the Credit Agreement ("Maximum Consolidated Leverage Ratio"). TheOctober 2021 amendment and restatement of the Credit Agreement restored the Fixed Charge Coverage Ratio and Maximum Consolidated Leverage Ratio to a Fixed Charge Coverage Ratio equal to or greater than 1.25:1.00 and Maximum Consolidated Leverage Ratio no greater than 3.00:1.00. Effective with theOctober 2021 amendment and restatement of the Credit Agreement, the Company is limited to$40.0 million of restricted junior payments per year, which include cash dividends and repurchases of common stock, if the Maximum Consolidated Leverage Ratio is greater than or equal to 2.50:1.00. The Credit Agreement also contains events of default customary for credit facilities of this type (with customary grace periods, as applicable), including nonpayment of principal or interest when due; material incorrectness of representations and warranties when made; breach of covenants; bankruptcy and insolvency; unsatisfied ERISA obligations; unstayed material judgment beyond specified periods; default under other material indebtedness; and certain changes of control of the Company. If any event of default occurs and is not cured within the applicable grace period or waived, the outstanding loans may be accelerated by lenders holding a majority of the commitments and the lenders' commitments may be terminated. The obligations under the Credit Agreement are guaranteed by certain of the Company's subsidiaries and are secured by a lien on substantially all of the Company's personal property assets other than any equity interest in current and future subsidiaries of the Company. Interest rate margins and the fee for the unused commitment will be calculated based on the Maximum Consolidated Leverage Ratio, and at the Company's option, revolving loans may bear interest at either:
(i) LIBOR, plus an applicable margin, or
(ii) the highest of (a) the rate publicly announced by Wells Fargo as its prime rate, (b) the average published federal funds rate in effect on such day plus 0.50% and (c) one month LIBOR plus 1.00%, plus an applicable margin (the rate described in this clause (ii) prior to adding the applicable margin, the "Base Rate"). The applicable margin is based on the Company's Maximum Consolidated LeverageRatio , ranging (a) from 1.50% to 2.25% above the applicable LIBOR rate or (b) 0.50% to 1.25% above the applicable Base Rate.
For more information about our long-term debt, see Note 5 in the notes to the condensed consolidated financial statements included in Item 1. "Financial Statements".
Sources and Uses of Cash
The following table presents a summary of our net cash provided by (used in) operating, investing and financing activities (in thousands):
39 Weeks Ended September 26, September 27, 2021 2020 Net cash provided by (used in): Operating activities$ 48,521 $ 5,598 Investing activities (8,418 ) (9,007 ) Financing activities (51,726 ) 100,949
Net (decrease) increase in cash and cash equivalents
23 -------------------------------------------------------------------------------- Operating Activities. Operating activities provided cash during the first thirty-nine weeks of fiscal year 2021 and the first thirty-nine weeks of fiscal year 2020. Operating cash outflows pertain primarily to expenditures for food and beverages, restaurant operating expenses, marketing and advertising, general and administrative costs, and income taxes. Operating activities provided cash flows primarily because operating revenues have exceeded cash-based expenses. Investing Activities. Cash used in investing activities totaled$8.4 million in the first thirty-nine weeks of fiscal year 2021 compared with$9.0 million used in the first thirty-nine weeks of fiscal year 2020. Cash used in investing projects during the first thirty-nine weeks of fiscal year 2021 primarily pertained to$4.3 million for new restaurants,$2.1 million for technology, and$2.0 million for restaurant remodel and capital replacement projects. Cash used in investing activities during the first thirty-nine weeks of fiscal year 2020 primarily pertained to$5.6 million for new restaurants and$2.9 million for restaurant remodel and capital replacement projects. Financing Activities. Financing activities used cash during the first thirty-nine weeks of fiscal year 2021 and provided cash during the first thirty-nine weeks of fiscal year 2020. During the first thirty-nine weeks of fiscal year 2021, we reduced debt by$45.0 million , repurchased$3.8 million in common stock, paid$2.8 million in employee withholding taxes in connection with the vesting of restricted stock and paid$145 thousand in deferred financing costs. We paid the$2.8 million in taxes in connection with the vesting of restricted stock for recipientswho elected to satisfy their individual tax withholding obligations by having us withhold a number of vested shares of restricted stock. During the first thirty-nine weeks of fiscal year 2020, we increased debt by$71.2 million to secure additional liquidity in response to COVID-19; sold common stock for$49.6 million ; used$13.2 million to repurchase common stock; paid dividends of$4.4 million ; paid$1.6 million in taxes in connection with the vesting of restricted stock; and paid$582 thousand in deferred financing costs.
Off-Balance Sheet Arrangements
As of
Critical Accounting Policies and Estimates
The preparation of our financial statements requires management to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses during the periods presented. Our Annual Report on Form 10-K for the fiscal year endedDecember 27, 2020 includes a summary of the critical accounting policies and estimates that we believe are the most important to aid in the understanding our financial results. There have been no material changes to these critical accounting policies and estimates that impacted our reported amounts of assets, liabilities, revenues or expenses during the first thirty-nine weeks of fiscal year 2021.
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