Red Robin Gourmet Burgers reports Q1 net earnings of US$10.6M, up 21.8% from year-ago period as total revenues rose 4.4% to US$299.5M

Nevin Barich

GREENWOOD VILLAGE, Colorado , May 16, 2012 (press release) – Red Robin Gourmet Burgers, Inc., (NASDAQ: RRGB), a casual dining restaurant chain focused on serving an innovative selection of high-quality gourmet burgers in a family-friendly atmosphere, today reported financial results for the 16 weeks ended April 15, 2012.

Financial and Operational Results

During the Company’s fiscal first quarter 2012:

* Earnings per diluted share were $0.71, an increase of 22.4% compared to 2011 adjusted earnings per diluted share of $0.58. On a GAAP basis, fiscal first quarter earnings per diluted share were $0.71 in 2012 compared to $0.56 in 2011. (See Schedule I)
* Total revenues increased 4.4% to $299.5 million; Company-owned comparable restaurant net sales increased 0.5%
* Restaurant-level operating profit margin increased to 21.2% from 19.8% a year ago (See Schedule II)
* The Company opened three new company-owned Red Robin® restaurants and one Red Robin’s Burger Works™.

Net income for the 16 weeks ended April 15, 2012, was $10.6 million compared to $8.7 million for the comparable period in 2011. Fiscal first quarter 2011 net income excluding severance costs and initial cumulative gift card income was $9.0 million. See Schedule I below for a reconciliation of adjustments to net income in the fiscal first quarter of 2011.

“Our first quarter 2012 results were mixed in that we continued gains in earnings per share, average guest check, operating profit margin and expense management, while our guest counts declined during the quarter,” said Steve Carley, Red Robin Gourmet Burgers, Inc. Chief Executive Officer. “Although we began the year with strong sales, we were disappointed by the extent of guest traffic softening in the second half of the quarter. Nevertheless, we are confident in our plans for strengthening our business, advancing our brand and positioning Red Robin for long-term growth and profitability.”

Operating Results

Total Company revenues, which include company-owned restaurant sales and franchise royalties, increased 4.4% to $299.5 million in the fiscal first quarter of 2012 versus $286.8 million in the same period last year.

Comparable restaurant net sales increased 0.5% for company-owned restaurants in the fiscal first quarter of 2012 compared to the fiscal first quarter of 2011, and were driven by a 4.1% increase in average guest check that was primarily offset by a 3.6% decrease in guest counts. The year-over-year decrease in guest counts during the fiscal first quarter of 2012 was largely attributable to heavy competitive discounting during the quarter, coupled with Company promotional activity that did not perform as well as promotional efforts in the same period a year ago.

Average weekly net sales in company-owned restaurants increased to $56,303 per unit in the fiscal first quarter of 2012 (5,225 operating weeks) compared to $55,885 a year ago (5,038 operating weeks). In the Company’s franchised restaurants, average weekly net sales per unit were $54,933 in the fiscal first quarter of 2012 (2,186 operating weeks) compared to $53,317 last year. System-wide net sales in the fiscal first quarter of 2012 totaled $414.7 million, compared to $397.7 million in the prior year.

Restaurant-level operating profit margins at company-owned restaurants were 21.2% in the fiscal first quarter of 2012 compared to 19.8% in the fiscal first quarter of 2011, an improvement of 140 basis points as a result of lower labor and other operating costs partially offset by higher food and beverage costs and occupancy expenses. Schedule II of this earnings release defines restaurant-level operating profit, discusses why it is a useful metric for investors and reconciles this metric to income from operations and net income.

Selling, general and administrative (“SG&A”) expenses were $33.9 million in the 16 weeks ended April 15, 2012, compared to $32.0 million in the same period of fiscal 2011. SG&A in the fiscal first quarter of 2012 increased due mainly to higher costs related to gift card sales; higher equity-based compensation costs; and costs related to development of the Company’s new information systems. These increases were partially offset by a decrease in severance costs compared to the fiscal first quarter of 2011.

The Company had an effective tax rate of 24.1% in the fiscal first quarter of 2012, compared to an effective tax rate of 11.5% in the fiscal first quarter of 2011. Income tax expense in the first 16 weeks of 2012 was $3.4 million compared to $1.1 million for the same period of 2011.

Balance Sheet and Liquidity

On April 15, 2012, the Company had cash and cash equivalents of $38.0 million and total debt of $137.9 million, including $10.4 million of capital lease liabilities. During the fiscal first quarter of 2012, the Company paid down principal of $18.8 million on its term loan, of which $15.0 million represented pre-payments.

For the 16 weeks ended April 15, 2012, cash from operations totaled $29.6 million compared to $29.9 million for the same period in 2011. During the fiscal first quarter of 2012, Red Robin’s capital investments amounted to $10.4 million compared to $7.6 million during the fiscal first quarter of 2011.

Restaurant Openings

As of the end of the fiscal first quarter of 2012, there were 330 Company-owned restaurants and 136 franchised Red Robin® locations. In the fiscal first quarter of 2012, the Company opened three full-size prototype Red Robin® restaurants and its second prototype Red Robin’s Burger Works™. One company-owned restaurant closed during the fiscal first quarter of 2012.

Updated Outlook for 2012

Red Robin’s 2012 fiscal year consists of 53 weeks ending on December 30, 2012.

In fiscal 2012, the Company expects up to 1% growth of comparable restaurant net sales compared to the prior year.

Cost of sales is expected to be below 26.0% of restaurant sales. Restaurant-level operating profit margins are expected to be nearly 20% of restaurant sales in fiscal 2012.

The income tax rate in fiscal 2012 is expected to range from 22% to 24%.

During fiscal 2012, the Company expects approximately $60 million in capital expenditures, which will be used to open 13 new company-owned restaurants, including four additional Red Robin’s Burger Works™, as well as fund restaurant and infrastructure improvements and remodeling investments.

The sensitivity of the Company’s earnings per diluted share to a 1% change in guest counts for fiscal 2012 is estimated to be $0.25. Additionally, a 10 basis point change in restaurant-level operating margin is expected to impact earnings per diluted share by approximately $0.05, and a change of $191,000 in pre-tax income or expense is equivalent to approximately $0.01 per diluted share.

Investor Conference Call and Webcast

Red Robin will host an investor conference call to discuss its fiscal first quarter 2012 results today at 5:00 p.m. ET. The conference call number is (888) 267-6301, or for international callers (719) 325-2413. The financial information that the Company intends to discuss during the conference call is included in this press release and will be available on the “Investors” link of the Company's website at www.redrobin.com. Prior to the conference call, the Company will post supplemental financial information that will be discussed during the call and live webcast. To access the supplemental financial information and webcast, please visit www.redrobin.com and select the “Investors” link from the menu. A replay of the live conference call will be available from one hour after the call until midnight on Wednesday, May 23, 2012. The replay can be accessed by dialing (877) 870-5176 or (858) 384-5517 for international callers. The conference ID is 4762636. The webcast replay will also be available on the Company’s website until midnight on Sunday, July 8, 2012.

About Red Robin Gourmet Burgers, Inc. (NASDAQ: RRGB)

Red Robin Gourmet Burgers, Inc. (www.redrobin.com), a casual dining restaurant chain founded in 1969 that operates through its wholly-owned subsidiary, Red Robin International, Inc., is the gourmet burger expert, famous for serving more than two dozen craveable, high-quality burgers with Bottomless Steak Fries® in a fun environment welcoming to guests of all ages. In addition to its many burger offerings, Red Robin serves a wide variety of salads, soups, appetizers, entrees, desserts and signature Mad Mixology® Beverages. There currently are 467 Red Robin® restaurants located across the United States and Canada, including 328 company-owned full-size restaurants and two Red Robin’s Burger Works™ locations, and 136 restaurants operating under franchise agreements.

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