Red Robin reports fiscal Q1 net earnings of US$11.9M, up 26% from year-ago period as revenues rise 11.1% to US$340.5M

Nevin Barich

GREENWOOD VILLAGE, Colorado , May 20, 2014 (press release) – Red Robin Gourmet Burgers, Inc., (RRGB), a casual dining restaurant chain serving an innovative selection of high-quality gourmet burgers in a family-friendly atmosphere, today reported financial results for the 16 weeks ended April 20, 2014 compared to the 16 weeks ended April 21, 2013.

First Quarter Financial Highlights

First quarter revenues were $340.5 million, an increase of 11.1%

Comparable restaurant revenue increased 5.4%

Restaurant-level operating profit, as a percent of restaurant revenue, increased to 22.4% from 21.5% (See Schedule I)

Earnings per diluted share increased 24.2% to $0.82 compared to $0.66 for the same period a year ago

Net income increased 26.0% to $11.9 million compared to $9.5 million for the same period a year ago

“We are pleased with Red Robin’s first quarter performance, which included strong comparable restaurant revenue growth and productivity gains that resulted in solid EPS growth,” said Steve Carley, Red Robin Gourmet Burgers, Inc. chief executive officer. “The success of our new FinestTM line of Black Angus burgers as well as increased media contributed to our higher sales. Looking ahead, we will continue to focus on our expansion, efficiency and engagement initiatives which should help to offset headwinds and position us well for the future.”

Operating Results

Total Company revenues, which include Company-owned restaurant revenue and franchise royalties, increased 11.1% to $340.5 million in the first quarter of 2014 from $306.3 million in the first quarter of 2013.

System-wide restaurant revenue (including franchised units) for the first quarter of 2014 totaled $457.3 million, compared to $415.6 million for the first quarter in 2013 at constant currency rates.

Comparable restaurant revenue increased 5.4% in the first quarter of 2014 compared to the prior year. In the first quarter, guest counts increased 0.5%, supported by increased media this year, while average guest check increased 4.9%. Comparable restaurants are those Company-owned restaurants that have achieved five full quarters of operations during the period presented, and such restaurants are only included in our comparable metrics if they are comparable for the entirety of both periods presented.

Restaurant-level operating profit margins (a non-GAAP financial measure) were 22.4% in the first quarter of 2014 compared to 21.5% in the first quarter of fiscal year 2013, an improvement of 90 basis points. The increased margins resulted primarily from the leverage of a higher average check on fixed costs and effective labor management. Schedule I 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.

Other Results

Depreciation and amortization costs increased $1.1 million to $18.9 million in the first quarter of 2014 compared to $17.8 million in the first quarter of 2013. The increased depreciation was primarily related to new restaurants opened and acquired since the first quarter 2013 and restaurants remodeled under our brand transformation initiative.

General and administrative costs were $32.1 million, an increase of $3.1 million from the first quarter of fiscal year 2013, due mainly to an increase in salaries and benefits related to investments in talent to support the Company’s business initiatives.

Selling expenses were $10.3 million, or 3.1% of revenue, in the first quarter of fiscal year 2014, an increase from $8.6 million, or 2.8% of revenue, a year ago due to increased spending on media.

Pre-opening and acquisition costs were $2.1 million in the first quarter of fiscal year 2014 which included approximately $0.6 million of costs related to franchise acquisitions.

The Company had an effective tax rate of 27.0% in the first quarter of fiscal year 2014, compared to a 23.9% rate in the same period a year ago.

Restaurant Development and Acquisitions

As of the end of the first quarter of 2014, there were 362 Company-owned Red Robin® restaurants, five Red Robin's Burger Works® and 129 franchised Red Robin restaurants – a total of 496 restaurants. In the first quarter of fiscal year 2014, the Company opened four new Red Robin restaurants, and closed one full-service and one Red Robin's Burger Works restaurant.

As previously announced, the Company acquired four franchised restaurants in New York State in March for approximately $8.0 million. In addition, Red Robin has an agreement to acquire an additional 32 franchised restaurants in the U.S. and Canada for approximately $40 million, which is expected to close in late summer.

Balance Sheet and Liquidity

As of April 20, 2014, the Company had cash and cash equivalents of $14.6 million and total debt of $87.5 million, including $9.1 million of capital lease liabilities.

During the first quarter of 2014, the Company repurchased approximately 108,000 shares for a total of $7.5 million under its share repurchase authorization.

Outlook for 2014

The Company's outlook does not include the impact of the anticipated acquisition of 32 restaurants which is expected to close in late summer.

Red Robin’s 2014 fiscal year consists of 52 weeks and will end on December 28, 2014.

In fiscal year 2014, the Company expects comparable restaurant revenue growth in the low single digits. Additionally, the Company plans to open 20 new Red Robin restaurants and five Red Robin's Burger Works resulting in total operating week growth of between 6% and 7%.

Capital investments in fiscal year 2014 are expected to total between $85 million and $90 million, excluding acquisitions. In addition to the new restaurant openings, the Company also plans to remodel at least 50 Red Robin restaurants as part of its brand transformation initiative.

Restaurant-level operating profit margins in fiscal year 2014 are expected to be approximately 21.4%.

General and administrative costs are expected to be approximately $93 million, while selling expenses are expected to be approximately 3.2% of sales. Depreciation is projected to be approximately $62 million.

The income tax rate in fiscal year 2014 is expected to be approximately 27.5%.

The sensitivity of the Company’s earnings per diluted share to a 1% change in guest counts for fiscal year 2014 is estimated to be $0.30 on an annualized basis. Additionally, a 10 basis point change in restaurant-level operating margin is expected to impact earnings per diluted share by approximately $0.07, and a change of approximately $200,000 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 first quarter 2014 results today at 10:00 a.m. ET. The conference call number is (888) 569-5033, or for international callers (719) 325-2456. 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 two hours after the call until midnight on Tuesday, May 27, 2014. The replay can be accessed by dialing (877) 870-5176, or (858) 384-5517 for international callers. The conference ID is 2282970.

About Red Robin Gourmet Burgers, Inc. (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 Authority™, 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. Red Robin offers a variety of options behind the bar, including its extensive selection of local and regional beers, and innovative adult beer shakes and cocktails, recently earning the restaurant the 2014 VIBE Vista Award for Best Beer Program in a Multi-Unit Chain Restaurant. There are close to 500 Red Robin restaurants across the United States and Canada, including those operating under franchise agreements. Red Robin… YUMMM®! Connect with Red Robin on Facebook and Twitter.

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