RRGB Red Robin Gourmet Burgers Inc

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.

Forward-Looking Statements:

Forward-looking statements in this press release regarding our expected earnings per share and restaurant sales, new restaurant growth, future economic performance and certain statements under the heading “Outlook” and all other statements that are not historical facts, are made under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on assumptions believed by the Company to be reasonable and speak only as of the date on which such statements are made. Without limiting the generality of the foregoing, words such as “will,” “expect,” “believe,” “anticipate,” “intend,” “estimate,” or “continue” or the negative or other variations thereof or comparable terminology are intended to identify forward-looking statements. We undertake no obligation to update such statements to reflect events or circumstances arising after such date, and we caution investors not to place undue reliance on any such forward-looking statements. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those described in the statements based on a number of factors, including but not limited to the following: the effectiveness of the Company’s marketing strategies, loyalty program and guest count initiatives; the ability to continue the strategies and achieve anticipated revenue and cost savings from our anticipated new technology systems and other initiatives; the uncertain general economic conditions; competition in the casual dining market and discounting by competitors; changes in commodity prices; the cost and availability of key food products, labor and energy; availability of capital or credit facility borrowings; the adequacy of cash flows or available debt resources to fund operations and growth opportunities; the ability to fulfill planned expansion, including in both new and existing markets; federal, state and local regulation of our business; and other risk factors described from time to time in the Company’s Form 10-K, Form 10-Q and Form 8-K reports (including all amendments to those reports) filed with the U.S. Securities and Exchange Commission.

RED ROBIN GOURMET BURGERS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited)             Sixteen Weeks Ended

April 15,

2012

April 17,

2011

  Revenues: Restaurant revenue $ 294,642 $ 281,548 Franchise royalties and fees and other revenues   4,817     5,282   Total revenues   299,459     286,830     Costs and expenses: Restaurant operating costs (exclusive of depreciation

and amortization shown separately below):

Cost of sales 75,075 70,361 Labor (includes $143 and $245 of stock- based compensation, respectively) 98,606 96,871 Operating 37,405 38,761 Occupancy 21,114 19,828 Depreciation, amortization and other 16,652 17,111 Selling, general, and administrative (includes $1,059 and $613 of stock-based compensation, respectively) 33,877 32,042 Pre-opening costs   983     661   Total costs and expenses   283,712     275,635     Income from operations 15,747 11,195   Other expense: Interest expense, net and other   1,833     1,355     Income before income taxes 13,914 9,840 Income tax expense   3,356     1,132   Net income $ 10,558   $ 8,708   Earnings per share: Basic $ 0.72   $ 0.56   Diluted $ 0.71   $ 0.56   Weighted average shares outstanding: Basic   14,611     15,466   Diluted   14,984     15,641     RED ROBIN GOURMET BURGERS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share amounts) (Unaudited)          

April 15,

2012

December 25,

2011

Assets: Current Assets: Cash and cash equivalents $ 37,977 $ 35,036 Accounts receivable, net 9,621 14,785 Inventories 17,318 18,040 Prepaid expenses and other current assets 9,180 9,970 Income tax receivable 155 1,387 Deferred tax asset   2,096     1,429   Total current assets   76,347     80,647     Property and equipment, net 398,911 402,360 Goodwill 61,769 61,769 Intangible assets, net 37,874 38,969 Other assets, net   10,576     9,231   Total assets $ 585,477   $ 592,976     Liabilities and Stockholders’ Equity: Current Liabilities: Trade accounts payable $ 13,221 $ 14,798 Construction related payables 5,003 3,328 Accrued payroll and payroll related liabilities 30,620 35,044 Unearned revenue 16,545 24,139 Accrued liabilities 25,537 19,045 Current portion of term loan notes payable and capital lease obligations   12,031     10,132   Total current liabilities   102,957     106,486     Deferred rent 42,020 40,025 Notes payable, long-term portion 116,250 136,875 Other long-term debt and capital lease obligations 9,666 9,924 Other non-current liabilities   6,082     4,968   Total liabilities   276,975     298,278     Stockholders’ Equity: Common stock; $0.001 par value: 30,000,000 shares authorized; 17,388,036 and 17,276,404 shares issued; 14,690,889 and 14,579,257 shares outstanding 17 17 Preferred stock, $0.001 par value: 3,000,000 shares authorized; no shares issued and outstanding - - Treasury stock, 2,697,147 shares, at cost (83,285 ) (83,285 ) Paid-in capital 181,577 178,111 Accumulated other comprehensive income (loss), net of tax (545 ) (326 ) Retained earnings   210,738     200,181   Total stockholders’ equity   308,502     294,698   Total liabilities and stockholders’ equity $

  585,477

  $ 592,976    

Schedule I

Reconciliation of Non-GAAP Results to GAAP Results(In thousands, except per share data)

In addition to the results provided in accordance with Generally Accepted Accounting Principles (“GAAP”) throughout this press release, the Company has provided non-GAAP measurements which present the sixteen weeks ended April 15, 2012, and April 17, 2011, net income and basic and diluted earnings per share, excluding the effects of the severance expense, executive transition costs, and initial gift card breakage revenue recorded in first quarter 2011. The Company believes that the presentation of net income and earnings per share exclusive of the identified items gives the reader additional insight into the ongoing operational results of the Company. This supplemental information will assist with comparisons of past and future financial results against the present financial results presented herein. The non-GAAP results were calculated using an assumed 11.5% normalized tax rate in 2011 income and expense items before taxes excluding the identified items. The non-GAAP measurements are intended to supplement the presentation of the Company’s financial results in accordance with GAAP.

    Sixteen Weeks Ended April 15, 2012     April 17, 2011     Net income as reported $ 10,558 $ 8,708 Severance expense - 785 Initial cumulative gift card breakage income - (438 ) Income tax (benefit) expense   -     (34 )   Adjusted net income $ 10,558 $ 9,021     Basic net income per share: Net income as reported $ 0.72 $ 0.56 Severance expense - 0.05 Initial cumulative gift card breakage income - (0.03 ) Income tax (benefit) expense   -     -     Adjusted earnings per basic share $ 0.72 $ 0.58       Diluted net income per share: Severance expense $ 0.71 $ 0.56 Initial cumulative gift card breakage income - 0.05 Income tax (benefit) expense - (0.03 ) Income tax expense   -     -     Adjusted earnings per diluted share $ 0.71 $ 0.58   Weighted average shares outstanding: Basic 14,611 15,466 Diluted 14,984 15,641  

Schedule II

Reconciliation of Non-GAAP Restaurant-Level Operating Profit to Incomefrom Operations and Net Income(In thousands, except percentage data)

The Company believes that restaurant-level operating profit is an important measure for management and investors because it is widely regarded in the restaurant industry as a useful metric by which to evaluate restaurant-level operating efficiency and performance. The Company defines restaurant-level operating profit to be restaurant revenues minus restaurant-level operating costs, excluding restaurant closures and impairment costs. The measure includes restaurant level occupancy costs, which include fixed rents, percentage rents, common area maintenance charges, real estate and personal property taxes, general liability insurance and other property costs, but excludes depreciation related to restaurant buildings and leasehold improvements. The measure excludes depreciation and amortization expense, substantially all of which is related to restaurant level assets, because such expenses represent historical sunk costs which do not reflect current cash outlay for the restaurants. The measure also excludes selling, general and administrative costs, and therefore excludes occupancy costs associated with selling, general and administrative functions, and pre-opening costs. The Company excludes restaurant closure costs as they do not represent a component of the efficiency of continuing operations. Restaurant impairment costs are excluded, because, similar to depreciation and amortization, they represent a non-cash charge for the Company’s investment in its restaurants and not a component of the efficiency of restaurant operations. Restaurant-level operating profit is not a measurement determined in accordance with generally accepted accounting principles (“GAAP”) and should not be considered in isolation, or as an alternative, to income from operations or net income as indicators of financial performance. Restaurant-level operating profit as presented may not be comparable to other similarly titled measures of other companies. The table below sets forth certain unaudited information for the 16 weeks ended April 15, 2012, and April 17, 2011, expressed as a percentage of total revenues, except for the components of restaurant operating costs, which are expressed as a percentage of restaurant revenues.

                          Sixteen Weeks Ended April 15, 2012 April 17, 2011 Restaurant revenues $ 294,642 98.4 % $ 281,548 98.2 % Restaurant operating costs (exclusive of depreciation and amortization shown separately below): Cost of sales 75,075 25.5 70,361 25.0 Labor 98,606 33.5 96,871 34.4 Operating 37,405 12.7 38,761 13.8 Occupancy   21,114     7.2     19,828     7.0   Restaurant-level operating profit   62,442     21.2     55,727     19.8     Add – other revenues 4,817 1.6 5,282 1.8 Deduct – other operating: Depreciation and amortization 16,652 5.6 17,111 6.0 Selling, general, and administrative 33,792 11.3 31,987 11.2 Pre-opening costs 983 0.3 661 0.2 Restaurant closure costs   85     -     55     -   Total other operating   51,512     17.2     49,814     17.4     Income from operations 15,747 5.3 11,195 3.9   Total other expenses, net 1,833 0.6 1,355 0.5 Income tax expense   3,356     1.1     1,132     0.4   Total other 5,189 1.7 2,487 0.9   Net income $ 10,558     3.5   % $ 8,708     3.0   %  

Certain percentage amounts in the table above do not total due to rounding as well as the fact that restaurant operating costs are expressed as a percentage of restaurant revenues, as opposed to total revenues.