Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): May 30, 2019
RED ROBIN GOURMET BURGERS, INC.
(Exact name of registrant as specified in its charter)
Delaware
001-34851
84-1573084
(State or other jurisdiction
of incorporation)
(Commission
File Number)
(IRS Employer
Identification No.)
6312 S. Fiddler’s Green Circle, Suite 200N
Greenwood Village, Colorado
80111
(Address of principal executive offices)
(Zip Code)

Registrant’s telephone number, including area code: (303) 846-6000

Not Applicable
(Former name or former address, if changed since last report.)
 ___________________________________________________________________________

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Exchange Act:
Title of each class
 
Trading symbol(s)
 
Name of each exchange on which registered
Common Stock, $0.001 par value
 
RRGB
 
NASDAQ (Global Select Market)

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

1




ITEM 2.02
Results of Operations and Financial Condition
On May 30, 2019, Red Robin Gourmet Burgers, Inc. issued a press release describing selected financial results for the first fiscal quarter ended April 21, 2019. A copy of this press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference. A copy of the supplemental financial information for the first fiscal quarter ended April 21, 2019, that will be referred to during today’s investor conference call and webcast is being furnished as Exhibit 99.2 to this Form 8-K.
The information in this Item 2.02, including the information set forth in Exhibits 99.1 and 99.2, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, regardless of any general incorporation language in such filing, except as shall be expressly set forth by specific reference in such filing.

ITEM 9.01 Financial Statements and Exhibits

(d)    Exhibits
Exhibit No.
          Description

2




SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

RED ROBIN GOURMET BURGERS, INC.

Date: May 30, 2019             
By:     /s/ Lynn S. Schweinfurth        
Name:    Lynn S. Schweinfurth
Title:    Executive Vice President and Chief Financial Officer




3





EXHIBIT INDEX

Exhibit No.
          Description



4

Exhibit


Exhibit 99.1

Red Robin Gourmet Burgers Reports Results for the Fiscal First Quarter Ended April 21, 2019

Company Announces Closure of 10 Underperforming Restaurants

Greenwood Village, CO – May 30, 2019 – Red Robin Gourmet Burgers, Inc., (NASDAQ: RRGB), a full-service restaurant chain serving an innovative selection of high-quality gourmet burgers in a family-friendly atmosphere, today reported financial results for the quarter ended April 21, 2019.
First Quarter 2019 Financial Highlights Compared to First Quarter 2018
GAAP earnings per diluted share were $0.05 compared to $0.34;
Adjusted earnings per diluted share were $0.19 compared to $0.69 (see Schedule I);
Total revenues were $409.9 million, a decrease of 2.8%;
Off-premise sales increased 20.6%, now comprising 11.6% of total food and beverage sales, including catering;
Comparable restaurant revenue decreased 3.3% (using constant currency rates); and
Comparable restaurant guest counts decreased 5.5%.
Pattye Moore, board chair and interim chief executive officer of Red Robin Gourmet Burgers, Inc., said, “As our financial results demonstrate, there is still much work to be done on the turnaround, and we are moving with urgency. We continue to focus on our five strategic priorities and are starting to see progress on multiple fronts and in the underlying key operational metrics we are tracking. The Board has engaged The Elliot Group, which has deep experience in our industry, to assist in the CEO search and the Search Committee has already begun the interview process. At the same time, in the nine weeks since I became Interim CEO, I have worked closely with the management team to narrow the list of critical initiatives and simplify our focus. We are actively working with The Cypress Group on selectively refranchising and reassessing our real estate portfolio, and today we announced the closure of 10 underperforming restaurants. We have hired an experienced industry leader as our new vice president of Consumer Insights and we are continuing to identify ways to improve all aspects of our business. All of these efforts are designed to enhance the customer experience, significantly improve cash flow, increase profitability and drive shareholder value. We are confident our initiatives will steadily improve our financial and operational performance and that our search process will identify a leader who can accelerate our turnaround.”

First Quarter 2019 Operating Results
Total revenues, which primarily include Company-owned restaurant revenue and franchise royalties, decreased 2.8% to $409.9 million in the first quarter of 2019 from $421.5 million in the first quarter of 2018. Restaurant revenue decreased $14.2 million due to a $13.5 million, or 3.3%, decrease in comparable restaurant revenue, a $2.2 million decrease from closed restaurants, and a $0.6 million unfavorable foreign currency exchange impact, offset by a $2.1 million increase in revenue from new restaurant openings.
System-wide restaurant revenue (which includes franchised units) for the first quarter of 2019 totaled $483.7 million, compared to $498.0 million for the first quarter of 2018.
Comparable restaurant revenue(1) decreased 3.3% in the first quarter of 2019 compared to the same period a year ago, driven by a 5.5% decrease in guest counts offset by a 2.2% increase in average guest check. The increase in average guest check was comprised of a 0.3% increase in menu mix and a 1.9% increase in pricing.
Net income was $0.6 million for the first quarter of 2019 compared to $4.4 million for the same period a year ago. Adjusted net income was $2.4 million for the first quarter of 2019 compared to $9.1 million for the same period a year ago (see Schedule I).
Restaurant-level operating profit margin (a non-GAAP financial measure) was 18.3% in the first quarter of 2019 compared to 20.0% in the same period a year ago. Cost of sales as a percentage of restaurant revenue decreased 40 basis points primarily due to a reduction in waste and lower Tavern mix. Restaurant labor costs as a percentage of restaurant revenue increased 120 basis points due to higher average wage rates, increased management headcount to fully staff our restaurants, and sales deleverage. Other restaurant operating costs increased 60 basis points primarily due to increases in third-party delivery fees and equipment repairs and maintenance costs. Occupancy costs increased 30 basis points primarily due to sales deleverage. 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, in each case under GAAP.
________________________________________
(1)
Comparable restaurants are those Company-owned restaurants that have operated five full quarters during the period presented, and such restaurants are only included in the comparable metrics if they are comparable for the entirety of both periods presented.





Restaurant Revenue Performance
 
Q1 2019
 
Q1 2018
Average weekly sales per unit(1):

 
 
Company-owned – Total
$
51,802

 
$
53,618

Company-owned – Comparable
$
51,962

 
$
53,766

Franchised units – Comparable
$
58,957

 
$
60,523

Total operating weeks:
 
 
 
Company-owned units
7,731

 
7,772

Franchised units
1,408

 
1,386

________________________________________
(1)
Calculated using constant currency rates. Using historical currency rates, the average weekly sales per unit in the first quarter of 2018 for Company-owned – Total and Company-owned – Comparable was $53,704 and $53,853. The Company calculates non-GAAP constant currency average weekly sales per unit by translating prior year local currency average weekly sales per unit to U.S. dollars based on current quarter average exchange rates. The Company considers non-GAAP constant currency average weekly sales per unit to be a useful metric to investors and management as they facilitate a more useful comparison of current performance to historical performance.
Other Results
Depreciation and amortization costs decreased to $28.4 million in the first quarter of 2019 from $29.2 million in the first quarter of 2018.
General and administrative costs were $30.1 million, or 7.3% of total revenues, in the first quarter of 2019, compared to $28.6 million, or 6.8% of total revenues in the same period a year ago. The increase was primarily driven by increases in professional services, travel expenses related to manager training, and salaries, offset by lower incentive and equity compensation.
Selling expenses were $18.0 million, or 4.4% of total revenues, in the first quarter of 2019, compared to $17.7 million, or 4.2% of total revenues, during the same period in the prior year.
Other charges in the first quarter of 2019 included $2.0 million in executive transition and severance, $0.3 million in costs related to restaurants that were previously closed, and $0.1 million in executive retention.
The Company had an effective tax rate of a 291.4% benefit in the first quarter of fiscal year 2019, compared to an effective tax rate of a 21.2% benefit during the same period a year ago. The change in the effective tax rate is primarily due to the decrease in income in the first quarter of 2019 compared to the same period a year ago.
Earnings per diluted share for the first quarter of 2019 were $0.05 compared to $0.34 in the first quarter of 2018. Excluding charges of $0.11 per diluted share for executive transition and severance, $0.02 per diluted share for restaurant closure costs, and $0.01 per diluted share for executive retention, adjusted earnings per diluted share for the first quarter ended April 21, 2019 were $0.19. Excluding charges of $0.22 per diluted share for litigation contingencies and $0.13 per diluted share for reorganization costs, adjusted earnings per diluted share for the first quarter ended April 22, 2018 were $0.69. See Schedule I for a reconciliation of adjusted net income and adjusted earnings per share (each, a non-GAAP financial measure) to net income and earnings per share.
Restaurant Portfolio
There were no Red Robin restaurant openings and one closure during the first quarter of 2019.



Effective May 31, 2019, the Company will close 10 restaurants in connection with its previously announced real estate portfolio reassessment. Seven of these restaurants are in enclosed mall locations. This action is expected to drive improved profitability. Where possible, employees will be offered positions at nearby Red Robin locations. The 10 restaurants contributed $4.5 million in restaurant sales and $0.9 million in restaurant-level pre-tax operating losses, including an immaterial amount of depreciation expense for the four months ended April 21, 2019. As a result of these closures, the Company currently expects to recognize non-cash impairment charges of approximately $0.7 million to $2.6 million during the second quarter of 2019.
The following table details restaurant unit data for Company-owned and franchised locations for the periods indicated:
 
 
Sixteen Weeks Ended
 
Sixteen Weeks Ended
 
 
April 21, 2019
 
April 22, 2018
Company-owned:
 
 
 
 
Beginning of period
 
484

 
480

Opened during the period
 

 
4

Closed during the period
 
(1
)
 

End of period
 
483

 
484

Franchised:
 
 
 
 
Beginning of period
 
89

 
86

Opened during the period
 

 
1

End of period
 
89

 
87

Total number of restaurants
 
572

 
571

Balance Sheet and Liquidity
As of April 21, 2019, the Company had cash and cash equivalents of $23.0 million and total debt of $183.4 million. The Company funded capital expenditures with cash flow from operations and made net repayments of $10.0 million on its credit facility during the first quarter of 2019. As of April 21, 2019, the Company had outstanding borrowings under its credit facility of $182.5 million, in addition to amounts issued under letters of credit of $7.4 million, which reduce the amount available under its credit facility but are not recorded as debt.
The Company’s lease adjusted leverage ratio was 4.23x as of April 21, 2019. The lease adjusted leverage ratio is defined in Section 1.1 of the Company’s credit facility, which is filed as Exhibit 10.32 to the Annual Report on Form 10-K filed on February 21, 2017.
Outlook for 2019
Red Robin's updated 2019 annual outlook reflects lower dine-in sales partially offset by higher off-premise sales, a deliberate decision to delay the rollout of some restaurant-level technology solutions, higher than expected wage rates, incremental commission costs associated with an increase in third-party delivery sales, and lower selling, general and administrative costs. The updated 2019 guidance is as follows:
Comparable restaurant revenue of down 1.0% to up 1.0% (using constant currency rates);
Selling, general and administrative costs of $156 million to $159 million;
Net income of $8.0 million to $16.0 million;
Adjusted EBITDA, a Non-GAAP measure, of $107 million to $117 million;
Adjusted diluted earnings per share, a Non-GAAP measure, of $1.14 to $1.77, which includes the impact of an estimated tax benefit of $0.73 to $0.96; and
Capital expenditures of $45 million to $55 million
Guidance Policy
The Company provides guidance as it relates to selected information related to the Company’s financial and operating performance, and such measures may differ from year to year.
Investor Conference Call and Webcast
Red Robin will host an investor conference call to discuss its first quarter 2019 results today at 5:00 p.m. ET. The conference call number is (323) 794-2423. The financial information that the Company intends to discuss during the conference call is included in this press release and will be available in the “Company” section of the Company’s website at www.redrobin.com by selecting the “Investor Relations” link, then the “Calendar of Events” link. 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 “Company” section, then the “Investor Relations” link, then the “Presentations” link. A replay of the live conference call will be available from two hours after the call until midnight on Thursday, June 6, 2019. The replay can be accessed by dialing (412) 317-6671. The conference ID is 6330529.



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., and under the trade name Red Robin Gourmet Burgers and Brews, 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. Whether a family dining with kids, adults grabbing a drink at the bar, or teens enjoying a meal, Red Robin offers an unparalleled experience for its Guests. In addition to its many burger offerings, Red Robin serves a wide variety of salads, soups, appetizers, entrees, desserts, and signature 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, earning the restaurant a VIBE Vista Award for Best Beer Program in a Multi-Unit Chain Restaurant. There are more than 570 Red Robin restaurants across the United States and Canada, including locations operating under franchise agreements. Red Robin… YUMMM®! Connect with Red Robin on Facebook, Instagram, and Twitter.
Forward-Looking Statements
Forward-looking statements in this press release regarding the Company’s future performance, comparable restaurant revenue, selling, general and administrative costs, net income, EBITDA, earnings per share, restaurant closures, impairment charges, capital expenditures, taxes, and statements under the heading “Outlook for 2019”, 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 “expect,” “believe,” “anticipate,” “intend,” “plan,” “project,” “will” or “estimate,” or the negative or other variations thereof or comparable terminology are intended to identify forward-looking statements. Except as required by law, the Company undertakes no obligation to update such statements to reflect events or circumstances arising after such date and cautions 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 strategic initiatives, including management's focus on a narrower range of key initiatives, the effectiveness of the Company’s affordability, service and operational improvement, technology, and off-premise initiatives to drive traffic and sales; the ability to increase labor productivity through alternative labor models, and to staff and train the Company’s workforce for service execution, including the complexities related to growth of multiple revenue streams within a single restaurant location; the success of the Company’s re-franchising efforts; the effectiveness of the Company’s marketing strategies and promotions to sustain and grow comparable restaurant sales; the cost and availability of key food products, labor, and energy; the ability to achieve anticipated revenue and cost savings from anticipated new technology systems and tools in the restaurants; the ability to develop, test, implement and increase online ordering, to-go services, catering, and other off-premise sales; the ability to achieve savings to the Company’s general and administrative expenses, which, by their nature, tend to be fixed costs; the Company’s ability to repurchase shares at all or at the times or in the amounts we currently anticipate or to achieve anticipated benefits of a share repurchase program; availability of capital or credit facility borrowings to fund the Company’s remodeling and other capital expenditures; the adequacy of cash flows or available debt resources to fund operations and growth opportunities; the impact of federal, state, and local regulation of the Company’s 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.
For media relations questions contact:
Katelyn Kwiatkowski, Coyne PR
(973) 588-2000
For investor relations questions contact:
Raphael Gross, ICR
(203) 682-8253




RED ROBIN GOURMET BURGERS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
 
 
Sixteen Weeks Ended
 
 
April 21, 2019
 
April 22, 2018
Revenues:
 
 
 
 
Restaurant revenue
 
$
400,484

 
$
414,702

Franchise and other revenue
 
9,382

 
6,817

Total revenues
 
409,866

 
421,519

 
 
 
 
 
Costs and expenses:
 
 
 
 
Restaurant operating costs (exclusive of depreciation
and amortization shown separately below):
 
 
 
 
Cost of sales
 
93,715

 
98,515

Labor
 
142,894

 
143,015

Other operating
 
55,565

 
55,025

Occupancy
 
35,020

 
35,010

Depreciation and amortization
 
28,438

 
29,193

General and administrative
 
30,090

 
28,588

Selling
 
18,026

 
17,730

Pre-opening costs
 
319

 
1,137

Other charges
 
2,398

 
6,287

Total costs and expenses
 
406,465

 
414,500

 
 
 
 
 
Income from operations
 
3,401

 
7,019

 
 
 
 
 
Other expense:
 
 
 
 
Interest expense, net and other
 
3,238

 
3,407

 
 
 
 
 
Income before income taxes
 
163

 
3,612

Income tax benefit
 
(476
)
 
(768
)
Net income
 
$
639

 
$
4,380

Earnings per share:
 
 
 
 
Basic
 
$
0.05

 
$
0.34

Diluted
 
$
0.05

 
$
0.34

Weighted average shares outstanding:
 
 
 
 
Basic
 
12,967
 
12,960
Diluted
 
13,041
 
13,065



RED ROBIN GOURMET BURGERS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
 
 
(Unaudited)
April 21, 2019

 
December 30, 2018
Assets:
 
 
 
 
Current Assets:
 
 
 
 
Cash and cash equivalents
 
$
22,959

 
$
18,569

Accounts receivable, net
 
12,626

 
25,034

Inventories
 
28,115

 
27,370

Prepaid expenses and other current assets
 
22,224

 
27,576

Total current assets
 
85,924

 
98,549

Property and equipment, net
 
541,161

 
565,142

Right of use assets, net
 
460,815

 

Goodwill
 
96,080

 
95,838

Intangible assets, net
 
33,287

 
34,609

Other assets, net
 
53,128

 
49,803

Total assets
 
$
1,270,395

 
$
843,941

 
 
 
 
 
Liabilities and Stockholders’ Equity:
 
 
 
 
Current Liabilities:
 
 
 
 
Accounts payable
 
$
33,783

 
$
39,024

Accrued payroll and payroll related liabilities
 
40,051

 
37,922

Unearned revenue
 
41,239

 
55,360

Short-term portion of lease obligations
 
42,081

 
786

Accrued liabilities and other
 
38,423

 
38,057

Total current liabilities
 
195,577

 
171,149

Deferred rent
 

 
75,675

Long-term debt
 
183,375

 
193,375

Long-term portion of lease obligations
 
513,520

 
9,414

Other non-current liabilities
 
10,337

 
11,523

Total liabilities
 
902,809

 
461,136

 
 
 
 
 
Stockholders’ Equity:
 
 
 
 
Common stock; $0.001 par value: 45,000 shares authorized; 17,851 and 17,851 shares issued; 12,972 and 12,971 shares outstanding
 
18

 
18

Preferred stock, $0.001 par value: 3,000 shares authorized; no shares issued and outstanding
 

 

Treasury stock 4,879 and 4,880 shares, at cost
 
(201,135
)
 
(201,505
)
Paid-in capital
 
212,025

 
212,752

Accumulated other loss, net of tax
 
(5,130
)
 
(4,801
)
Retained earnings
 
361,808

 
376,341

Total stockholders’ equity
 
367,586

 
382,805

Total liabilities and stockholders’ equity
 
$
1,270,395

 
$
843,941




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

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 16 weeks ended April 21, 2019 and April 22, 2018, net income and basic and diluted earnings per share, excluding the effects of executive transition and severance, restaurant closure costs, litigation contingencies, reorganization costs, and the related income tax effects. The Company believes the presentation of net income and earnings per share exclusive of the identified item 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. Income tax effect of reconciling items was calculated based on the change in the total tax provision calculation after adjusting for the identified item. The non-GAAP measurements are intended to supplement the presentation of the Company’s financial results in accordance with GAAP.
 
 
Sixteen Weeks Ended
 
 
April 21, 2019
 
April 22, 2018
Net income as reported
 
$
639

 
$
4,380

Executive transition and severance
 
1,994

 

Litigation contingencies
 

 
4,000

Restaurant closure costs
 
304

 

Reorganization costs
 

 
2,287

Executive retention
1

100

 

Income tax effect of reconciling items
 
(623
)
 
(1,617
)
Adjusted net income
 
$
2,414

 
$
9,050

 
 
 
 
 
Basic net income per share:
 
 
 
 
Net income as reported
 
$
0.05

 
$
0.34

Executive transition and severance
 
0.15

 

Litigation contingencies
 

 
0.31

Restaurant closure costs
 
0.03

 

Reorganization costs
 

 
0.17

Executive retention
 
0.01

 

Income tax effect of reconciling items
 
(0.05
)
 
(0.12
)
Adjusted earnings per share - basic
 
$
0.19

 
$
0.70

 
 
 
 
 
Diluted net income per share (1):
 
 
 
 
Net income as reported
 
$
0.05

 
$
0.34

Executive transition and severance
 
0.15

 

Litigation contingencies
 

 
0.30

Restaurant closure costs
 
0.03

 

Reorganization costs
 

 
0.17

Executive retention
 
0.01

 

Income tax effect of reconciling items
 
(0.05
)
 
(0.12
)
Adjusted earnings per share - diluted
 
$
0.19

 
$
0.69

 
 
 
 
 
Weighted average shares outstanding
 
 
 
 
Basic
 
12,967

 
12,960

Diluted
 
13,041

 
13,065




Schedule II
Reconciliation of Non-GAAP Restaurant-Level Operating Profit to Income
from Operations and Net Income
(In thousands, unaudited)
The Company believes 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 revenue minus restaurant-level operating costs, excluding restaurant impairment and closure 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 equipment, 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 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 in our industry. The table below sets forth certain unaudited information for the 16 weeks ended April 21, 2019 and April 22, 2018, expressed as a percentage of total revenues, except for the components of restaurant-level operating profit, which are expressed as a percentage of restaurant revenue.
 
 
Sixteen Weeks Ended
 
 
April 21, 2019
 
April 22, 2018
Restaurant revenue
 
$
400,484

 
97.7
 %
 
$
414,702

 
98.4
 %
Restaurant operating costs (1):
 
 
 
 
 
 
 
 
Cost of sales
 
93,715

 
23.4
 %
 
98,515

 
23.8
 %
Labor
 
142,894

 
35.7
 %
 
143,015

 
34.5
 %
Other operating
 
55,565

 
13.9
 %
 
55,025

 
13.3
 %
Occupancy
 
35,020

 
8.7
 %
 
35,010

 
8.4
 %
Restaurant-level operating profit
 
73,290

 
18.3
 %
 
83,137

 
20.0
 %
 
 
 
 
 
 
 
 
 
Add – Franchise and other revenue
 
9,382

 
2.3
 %
 
6,817

 
1.6
 %
Deduct – other operating:
 
 
 
 
 
 
 
 
Depreciation and amortization
 
28,438

 
6.9
 %
 
29,193

 
6.9
 %
General and administrative expenses
 
30,090

 
7.3
 %
 
28,588

 
6.8
 %
Selling
 
18,026

 
4.4
 %
 
17,730

 
4.2
 %
Pre-opening costs
 
319

 
0.1
 %
 
1,137

 
0.3
 %
Other charges
 
2,398

 
0.6
 %
 
6,287

 
1.5
 %
Total other operating
 
79,271

 
19.3
 %
 
82,935

 
19.7
 %
 
 
 
 
 
 
 
 
 
Income from operations
 
3,401

 
0.8
 %
 
7,019

 
1.7
 %
 
 
 
 
 
 
 
 
 
Interest expense, net and other
 
3,238

 
0.8
 %
 
3,407

 
0.8
 %
Income tax benefit
 
(476
)
 
(0.1
)%
 
(768
)
 
(0.2
)%
Total other
 
2,762

 
0.7
 %
 
2,639

 
0.6
 %
 
 
 
 
 
 
 
 
 
Net income
 
$
639

 
0.2
 %
 
$
4,380

 
1.0
 %
________________________________________
(1)
Excluding depreciation and amortization, which is shown separately.
Certain percentage amounts in the table above do not total due to rounding as well as the fact that components of restaurant-level operating profit are expressed as a percentage of restaurant revenue and not total revenues.



Schedule III
Reconciliation of Net Income to EBITDA and Adjusted EBITDA
(In thousands, unaudited)

The Company defines EBITDA as net income before interest expense, (benefit) for income taxes, and depreciation and amortization. EBITDA and adjusted EBITDA are presented because the Company believes investors’ understanding of our performance is enhanced by including these non-GAAP financial measures as a reasonable basis for evaluating our ongoing results of operations without the effect of non-cash charges such as depreciation and amortization expenses, asset disposals, and asset impairment and restaurant closure charges. EBITDA and adjusted EBITDA are supplemental measures of operating performance that do not represent and should not be considered as alternatives to net income or cash flow from operations, as determined by GAAP, and our calculation thereof may not be comparable to that reported by other companies in our industry or otherwise. Adjusted EBITDA further adjusts EBITDA to reflect the additions and eliminations shown in the table below. The use of adjusted EBITDA as a performance measure permits a comparative assessment of our operating performance relative to our performance based on our GAAP results, while isolating the effects of some items that vary from period to period without any correlation to core operating performance. Adjusted EBITDA as presented may not be comparable to other similarly-titled measures of other companies, and our presentation of adjusted EBITDA should not be construed as an inference that our future results will be unaffected by excluded or unusual items. We have not provided a reconciliation of our adjusted EBITDA outlook to the most comparable GAAP measure of net income. Providing net income guidance is potentially misleading and not practical given the difficulty of projecting event-driven transactional and other non-core operating items that are included in net income, including asset impairments and income tax valuation adjustments. The reconciliations of adjusted EBITDA to net income for the historical periods presented below are indicative of the reconciliations that will be prepared upon completion of the periods covered by the non-GAAP guidance.
 
 
Sixteen Weeks Ended
 
 
April 21, 2019
 
April 22, 2018
Net income as reported
 
$
639

 
$
4,380

Interest expense, net
 
3,345

 
3,277

Income tax benefit
 
(476
)
 
(768
)
Depreciation and amortization
 
28,438

 
29,193

EBITDA
 
31,946

 
36,082

 
 
 
 
 
Executive transition and severance
 
1,994

 

Litigation contingencies
 

 
4,000

Restaurant closure costs
 
304

 

Reorganization costs
 

 
2,287

Executive retention
 
100

 

Adjusted EBITDA
 
$
34,344

 
$
42,369



rrgbq119supplementalfina
First Quarter 2019 Results May 30, 2019 CLASSIFIED – INTERNAL USE ONLY


 
Forward-Looking Statements Forward-looking statements in this presentation regarding the Company’s future performance, sales and guest traffic, comparable revenue and growth, costs including selling, general and administrative, net income, EBITDA, earnings per share, tax benefit, restaurant closures, capital expenditures, and statements under the heading “Outlook for 2019”, 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 “expect,” “believe,” “anticipate,” “intend,” “plan,” “project,” “will” or “estimate,” or the negative or other variations thereof or comparable terminology are intended to identify forward-looking statements. Except as required by law, the Company undertakes no obligation to update such statements to reflect events or circumstances arising after such date and cautions 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 strategic initiatives, including the effectiveness of the Company’s affordability, service and operational improvement, technology, and off-premise initiatives to drive traffic and sales; the ability to increase labor productivity through alternative labor models, and to staff and train the Company’s workforce for service execution, including the complexities related to growth of multiple revenue streams in the restaurant; the success of the Company’s re-franchising efforts; the effectiveness of the Company’s marketing strategies and promotions to sustain and grow comparable restaurant sales; the cost and availability of key food products, labor, and energy; the ability to achieve anticipated revenue and cost savings from anticipated new technology systems and tools in the restaurants; the ability to develop, test, implement and increase online ordering, to-go services, catering, and other off-premise sales; the ability to achieve savings to the Company’s general and administrative expenses, which, by their nature, tend to be fixed costs; the Company’s ability to repurchase shares at all or at the times or in the amounts we currently anticipate or to achieve anticipated benefits of a share repurchase program; anticipated tax benefits; availability of capital or credit facility borrowings to fund the Company’s remodeling and other capital expenditures; the adequacy of cash flows or available debt resources to fund operations and growth opportunities; the impact of federal, state, and local regulation of the Company’s 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. This presentation may also contain non-GAAP financial information. Management uses this information in its internal analysis of results and believes that this information may be informative to investors in gauging the quality of the Company’s financial performance, identifying trends in results, and providing meaningful period-to-period comparisons. For a reconciliation of non-GAAP measures presented in this document, see the Appendix of this presentation or the Schedules to the Q1 press release posted on redrobin.com. PAGE 2


 
Red Robin Q1-2019 Financial Results • Total revenues decreased 2.8% • Off-premise sales increased 220 basis points to 11.6% of total food and beverage sales • Comparable restaurant revenue decreased 3.3% (using constant currency rates) • 2.2% increase in average check • Comparable restaurant guest counts decreased 5.5% • Restaurant-level operating profit(1) was 18.3% compared to 20.0% in the prior year • Adjusted EBITDA(1) was $34.3 million • Earnings per diluted share was $0.05 compared to $0.34 in Q1 2018. Adjusted diluted EPS(1) were $0.19 compared to $0.69 in Q1 2018 (1) See reconciliations of non-GAAP financial measures to the most comparable GAAP financial measures in Appendix. PAGE 3


 
Making Progress Improving Performance • Focusing on fewer operational and financial initiatives • Enhancing dine-in starting to pay off: key metrics showing positive trends • Boosting PPA by encouraging trade out from Tavern to Gourmet and Finest • Growing catering and third-party delivery • Initiated real estate portfolio reassessment and refranchising program Red Robin team committed to, and intensely focused on, turning our business around PAGE 4


 
Enhancing the Dine-in Experience • Hire, Train and Retain • Manager Front Of House Engagement • Managing the Shoulders to Peak the Peaks • Delivering on the Promise of Maestro PAGE 5


 
Key Strategies to Deliver Value to Shareholders Our Five 2019 Strategic Priorities: • Stabilizing dine-in revenue by reinforcing Red Robin’s compelling Value proposition • Continue building To-Go and Catering business • Improving Guest experience and recapturing Red Robin’s known-for “Gift of Time” convenience • Implementing digital platforms and restaurant technology solutions • Selectively refranchising and reassessing real estate portfolio PAGE 6


 
Financial Update PAGE 7


 
Q1-19 Sales Highlights Q1-19 Q1-18 Change (16 Weeks) (16 Weeks) Restaurant revenue $400.5 million $414.7 million -3.4% Total company revenues $409.9 million $421.5 million -2.8% Company-owned comp revenue(1)(2) -3.3% -0.9% Price/Mix 2.2% -1.0% Guest counts -5.5% 0.1% Franchised comp revenue(2) -2.6% -0.5% Company avg. weekly revenue/unit(1) – total $51,802 $53,618 -3.5% Company avg. weekly revenue/unit(1) – comp $51,962 $53,766 -3.8% Avg. weekly restaurant level operating profit/unit(1) – comp $9,546 $10,656 -5.8% Operating weeks 7,731 7,722 0.1% Net Sales/ sq. ft (TTM) $431 $449 -4.0% (1) Calculated at constant currency rates (2) Comparable revenue growth is calculated by comparing the same calendar weeks. Comparable restaurants are those Company-owned restaurants that have operated five full quarters during the period presented, and such restaurants are only included in the comparable metrics if they are comparable for the entirety of both periods presented. PAGE 8


 
Comparable Restaurant Revenue Trend(1) 5.0% 4.0% 3.0% 2.7% 2.0% 1.0% 0.5% 0.0% -0.1% -1.0% -0.9% -1.2% -2.0% -3.0% -2.6% -3.4% -3.3% -4.0% -5.0% -4.5% Q1-17 Q2-17 Q3-17 Q4-17 Q1-18 Q2-18 Q3-18 Q4-18 Q1-19 (1) Calculated at constant currency rates PAGE 9


 
Continued Off-Premise Sales Growth US Comp Locations Off-Premise Sales as a % of Gross F&B Sales 14.0% +220 bps Y-O-Y in 12.0% 11.6% Q1 2019 10.6% 10.1% 10.0% 9.4% 9.6% 8.3% 8.0% 7.6% 7.0% 6.3% 6.0% 4.0% 2.0% 0.0% Q1-17 Q2-17 Q3-17 Q4-17 Q1-18 Q2-18 Q3-18 Q4-18 Q1-19 PAGE 10


 
(1)(2) Restaurant Level Operating Profit Margins 25.0% 24.0% 23.0% 22.0% 21.3% 21.0% 20.8% 20.5% 20.0% 20.0% 19.4% 19.3% 19.0% 18.6% 18.3% 18.0% 17.0% 16.8% 16.0% Q1 Q2 Q3 Q4 2017 2018 2019 (1) See Appendix for reconciliation of non-GAAP restaurant-level operating profit to net income (loss) (2) Prior period local marketing costs have been reclassified from Other operating to Selling to conform with the current period presentation PAGE 11


 
Q1-19 Restaurant Results % of Restaurant % of Restaurant Revenue Revenue Favorable Q1-19 Q1-18 (Unfavorable) Cost of sales 23.4% 23.8% 40 bps Labor 35.7% 34.5% (120 bps) Other operating 13.9% 13.3% (60 bps) Occupancy 8.7% 8.4% (30 bps) Restaurant Level Operating Profit(1) 18.3% 20.0% (170 bps) (1) See Appendix for reconciliation of non-GAAP restaurant-level operating profit to net income (loss) PAGE 12


 
Adjusted EBITDA(1) $50.0 $45.8 $45.0 $42.4 $40.0 $35.8 $35.0 $34.3 $32.3 $30.0 $28.8 $28.4 $25.5 $25.0 $24.2 $20.0 $15.0 $10.0 Q1 Q2 Q3 Q4 2017 2018 2019 (1) See Appendix for reconciliation of non-GAAP Adjusted EBITDA to Net Income (Loss) PAGE 13


 
Adjusted Earnings Per Diluted Share $1.00 $0.90 $0.89 $0.80 $0.78 $0.70 $0.69 $0.61 $0.60 $0.50 $0.46 $0.43 $0.40 $0.30 $0.19 $0.21 $0.20 $0.16 $0.10 $0.00 Q1 Q2 Q3 Q4 2017 2018 2019 See Appendix for reconciliation of non-GAAP Adjusted Earnings Per Diluted Share to Earnings (Loss) Per Diluted Share PAGE 14


 
Outlook for 2019 • Comparable restaurant revenue down 1.0% to up 1.0% • Selling, general and administrative costs of $156 million to $159 million • Net income of $8.0 million to $16.0 million • Adjusted EBITDA of $107 million to $117 million; • Adjusted diluted earnings per share of $1.14 to $1.77, includes the impact of an estimated tax benefit of $0.73 to $0.96 • Capital expenditures of $45 million to $55 million PAGE 15


 
In Closing PAGE 16


 
Appendix PAGE 17


 
Adjusted Net Income(1) ($ in Millions) $14.0 $12.0 $11.6 $10.2 $10.0 $9.1 $7.9 $8.0 $6.0 $6.0 $5.4 $4.0 $2.7 $2.4 $2.1 $2.0 $0.0 Q1 Q2 Q3 Q4 2017 2018 2019 (1) See Appendix for reconciliation of non-GAAP Adjusted Net Income to Net Income (Loss) PAGE 18


 
Cash Flow from Operations ($ in Millions) $80.0 $70.0 $70.0 $60.0 $57.0 $50.0 $40.0 $37.5 $34.7 $35.0 $30.0 $25.3 $20.0 $20.0 $16.9 $11.8 $10.0 $0.0 Q1 Q2 Q3 Q4 2017 2018 2019 PAGE 19


 
Reconciliation of Adjusted Net Income to Net Income (Loss) and Adjusted Earnings Per Diluted Share to Earnings (Loss) Per Diluted Share ($ in thousands, except per share data) 2017 2018 2019 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Net income (loss) as reported $ 11,567 $ 6,931 $ 2,714 $ 8,807 $ 4,380 $ (1,874) $ 1,709 $ (10,634) $ 639 Adjustments to net income (loss): Executive transition and severance - - - - - - - - 1,994 Asset impairment and restaurant closure costs - 1,584 - 5,330 - 9,643 - 18,483 304 Litigation contingencies - - - - 4,000 - - 795 - Smallwares disposal - - - - - 506 - 2,430 - Reorganization costs - - - - 2,287 466 520 - Executive retention - - - - - - - - 100 Income tax (expense) benefit of adj. - (618) - (1,175) (1,617) (2,777) (135) (5,644) (623) Deferred tax liability remeasurement due to Tax Cuts and Jobs Act - - - (2,808) - - - - - Adjusted net income 11,567 7,897 2,714 10,154 9,050 5,964 2.094 5,430 36,658 Diluted net income (loss) per share(1): Net income (loss) as reported $ 0.89 $ 0.53 $ 0.21 $ 0.68 $ 0.34 $ (0.14) $ 0.13 $ (0.82) $ 0.05 Adjustments to net income (loss): Executive transition and severance - - - - - - - - 0.15 Asset impairment and restaurant closure costs - 0.12 - 0.41 - 0.74 - 1.43 0.03 Litigation contingencies - - - - 0.30 - - 0.06 - Smallwares disposal - - - - - 0.04 - 0.19 - Reorganization costs - - - - 0.17 0.04 0.04 - - Income tax (expense) benefit of adj. - (0.04) - (0.09) (0.12) (0.22) (0.01) (0.43) 0.01 Deferred tax liability remeasurement due to Tax Cuts and Jobs Act - - - (0.22) - - - - - Adjusted EPS - diluted $ 0.89 $ 0.61 $ 0.21 $ 0.78 $ 0.69 $ 0.46 $ 0.16 $ 0.43 $ 0.19 (1) For the second and fourth quarters of 2018, the impact of dilutive shares is included in the calculations as the adjustments for the quarter resulted in adjusted net income PAGE 20


 
Restaurant Level Operating Profit Reconciliation to Income from Operations and Net Income (Loss) ($ in thousands) 2017 2018 2019 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Restaurant revenue $ 413,451 $ 312,351 $ 301,100 $ 338,154 $ 414,702 $ 310,392 $290,218 $300,897 $400,484 Restaurant operating costs(1): Cost of sales 94,607 73,903 71,642 80,203 98,515 74,874 69,003 71,112 93,715 Labor 145,519 108,422 106,205 115,286 143,015 106,476 102,322 104,449 142,894 (2) Other operating 52,064 40,057 41,454 44,734 55,025 42,668 43,612 40,779 55,565 Occupancy 33,119 25,140 25,868 28,626 35,010 26,460 26,629 26,047 35,020 Restaurant-level operating profit 88,142 64,828 55,932 69,309 83,137 59,914 48,652 58,510 73,290 Add – Franchise and other 7,178 4,959 4,599 5,770 6,817 4,996 4,659 5,882 9,382 revenue(2) Deduct – Other operating: Depreciation and amortization 28,044 21,173 21,258 22,070 29,193 22,323 21,819 22,036 28,438 General and administrative expenses 30,913 21,927 18,562 21,874 28,588 20,408 16,763 18,335 30,090 (2) Selling 17,050 14,361 15,152 16,818 17,730 15,209 12,017 17,408 18,026 Pre-opening and acquisition costs 1,855 1,377 1,503 835 1,137 569 387 - 319 (2) Other charges - 1,584 - 5,330 6,287 10,615 520 21,708 2,398 Total other operating 77,862 60,422 56,475 66,927 82,935 69,124 51,506 79,487 79,271 Income (loss) from operations 17,458 9,366 4,056 8,152 7,019 (4,214) 1,805 (15,095) 3,401 Interest expense, net and other 2,984 2,453 2,032 2,543 3,407 2,385 2,295 2,838 3,238 Income tax expense (benefit) 2,907 (18) (690) (3,198) (768) (4,725) (2,199) (7,299) (476) Net income (loss) 11,567 6,931 2,714 8,807 4,380 (1,874) 1,709 (10,634) 639 (1) Excluding depreciation and amortization, which is shown separately (2) Certain amounts presented in prior periods have been reclassified to conform with the current period presentation PAGE 21


 
EBITDA and Adjusted EBITDA Reconciliation to Net Income (Loss) ($ in thousands) 2017 2018 2019 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Net income (loss) as reported $ 11,567 $ 6,931 $ 2,714 $ 8,807 $ 4,380 $ (1,874) $ 1,709 $ (10,634) $ 639 Adjustments to net income (loss): Income tax expense (benefit) 2,907 (18) (690) (3,198) (768) (4,725) (2,199) (7,299) (476) Interest expense, net 3,249 2,626 2,222 2,821 3,277 2,458 2,390 2,550 3,345 Depreciation and amortization 28,044 21,173 21,258 22,070 29,193 22,323 21,819 22,036 28,438 EBITDA $ 45,767 $ 30,712 $ 25,504 $ 30,500 $ 36,082 $ 18,182 $ 23,719 $6,653 $ 31,946 Executive transition and severance 1,994 Asset impairment and restaurant - 1,584 - 5,330 - 9,643 - 18,483 304 closure costs Litigation contingencies - - - - 4,000 - - 795 - Smallwares disposal - - - - - 506 - 2,430 - Reorganization costs - - - - 2,287 466 520 - - Executive retention - - - - - - - - 100 Adjusted EBITDA $ 45,767 $ 32,296 $ 25,504 $ 35,830 $ 42,369 $ 28,797 $ 24,239 $ 28,361 $ 34,344 PAGE 22