Red Robin Gourmet Burgers Reports Earnings for the Fiscal First Quarter 2009

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 19, 2009.

Financial and Operational Highlights

Highlights for the 16 weeks ended April 19, 2009, compared to the 16 weeks ended April 20, 2008, are as follows:

• Total revenues increased 6.0% to $270.8 million.

• Restaurant revenue increased 6.3% to $266.6 million.

• Company-owned comparable restaurant sales decreased 8.1%.

• Restaurant-level operating profit decreased 1.7% to $47.1 million.

• GAAP diluted earnings per share were $0.25, which included $0.19 per diluted share in compensation expense related to the Company's tender offer for certain stock options, and $0.03 per diluted share in costs related to the closing of four company-owned restaurants, vs. $0.43 in the fiscal first quarter a year ago.

• A total of nine new Red Robin(R) restaurants, seven company-owned and two franchised locations, were opened during the fiscal first quarter 2009.

As of the end of the fiscal first quarter of 2009, there were 298 company-owned and 130 franchised Red Robin(R) restaurants.

'While the macroeconomic environment remains challenging, our restaurant teams are focused on driving traffic and strengthening our business by offering our Guests the service, quality and value they expect from Red Robin, while we invest in our people, streamline our operations and manage our controllable costs,' said Dennis Mullen, chairman and chief executive officer. 'We are confident that our strategy will not only enable us to weather the current downturn but will also position us well as the economy improves. We will continue to strengthen our balance sheet with reduced new restaurant development in 2009, and thus we expect to generate significant free cash flow, the majority of which will be used to further reduce our debt levels.'

Fiscal First Quarter 2009 Results

Comparable restaurant sales comparisons were difficult in the fiscal first quarter of 2009, as the Company overlapped its most successful quarter of 2008, in which it began its 2008 national cable advertising on February 4th of last year, while there was no national cable advertising in the fiscal first quarter of 2009.

Comparable restaurant sales decreased 8.1% for company-owned restaurants in the fiscal first quarter of 2009 compared to the fiscal first quarter of 2008, driven by a 10.2% decline in guest counts partially offset by a 2.1% increase in the average guest check. Average weekly comparable sales for company-owned restaurants were $58,079 from the 244 comparable restaurants in the fiscal first quarter of 2009, compared to $64,543 for the 200 comparable restaurants in the fiscal first quarter of 2008. Average weekly sales for the 41 non-comparable company-owned restaurants were $55,245 in the fiscal first quarter of 2009, compared to $55,165 for the 42 non-comparable restaurants in the fiscal first quarter a year ago. For all Company-owned restaurants, average weekly sales were $57,352 from 4,768 operating weeks in the first quarter of 2009 compared to $62,945 from 4,075 operating weeks, in the fiscal first quarter of 2008.

Early in the second quarter of 2008, the Company acquired 15 existing Red Robin franchised restaurants from three franchisees (the '2008 Acquired Restaurants'). Average weekly sales for these 15 restaurants were $52,555 in the fiscal first quarter of 2009.

Total Company revenues, which include company-owned restaurant sales and franchise royalties and fees, increased 6.0% to $270.8 million in the fiscal first quarter of 2009, versus $255.6 million last year. Franchise royalties and fees decreased 10.4% to $4.2 million in the fiscal first quarter of 2009 compared to $4.6 million in the same period a year ago. Franchise royalties and fees in the fiscal first quarter of 2008 included $517,000 of royalties attributed to the 2008 Acquired Restaurants.

For the fiscal first quarter of 2009, the Company's franchise system reported a decrease in total U.S. franchise restaurant sales of 10.2% to $95.0 million, compared to $105.9 million in the prior year period, due primarily to $13.3 million of fiscal first quarter 2008 revenue from the 2008 Acquired Restaurants. Comparable sales in the fiscal first quarter of 2009 for franchise restaurants in the U.S. decreased 7.2% and for franchise restaurants in Canada increased 0.8% compared to the fiscal first quarter of 2008. Average weekly comparable sales for the U.S. franchised restaurants were $52,919 from the 98 comparable restaurants in the fiscal first quarter of 2009, compared to $56,809 for the 94 comparable restaurants in the fiscal first quarter of 2008. Average weekly sales in the fiscal first quarter of 2009 for the Company's 18 comparable franchise restaurants in Canada were C$51,058 versus C$50,662 in the same period last year. Canadian results are in Canadian dollars.

Restaurant-level operating profit margins at company-owned restaurants were 17.7% in the fiscal first quarter of 2009 compared to 19.1% in the fiscal first quarter of 2008. Fiscal first quarter 2009 restaurant-level operating profit margins were negatively impacted by approximately 0.8% of higher food and beverage costs, a 0.7% increase in labor costs, including 0.3% related to the tender offer for stock options, and a 0.7% increase in occupancy costs, partially offset by 0.8% lower operating costs, largely driven by lower year-over-year contributions to the Company's national advertising fund, which were 0.25% of restaurant revenue in the fiscal first quarter of 2009 versus 1.5% of revenue in 2008.

The Company's restaurant-level operating profit metric does not represent income from operations or net income calculated in accordance with generally accepted accounting principles ("GAAP"). Schedule I of this earnings release reconciles restaurant-level operating profit to income from operations and net income for all periods presented.

General and administrative expense was $20.2 million, or 7.4% of revenue in the fiscal first quarter of 2009, compared to $22.5 million, or 8.8% of revenue, in the fiscal first quarter of 2008.

During the fiscal first quarter of 2009, the Company completed the previously announced cash tender offer for certain stock options. As a result of the tender offer, the Company incurred a one-time non-cash pretax charge of approximately $4.0 million, or $0.19 per diluted share. Approximately $3.1 million of this charge in the fiscal first quarter of 2009 was attributed to the Company's non-restaurant employees' tendered options and approximately $886,000 was attributed to restaurant employees' tendered options. The gross cash proceeds paid for the tendered options were $3.5 million.

As previously announced, the Company closed four restaurants during the first quarter of 2009. This decision was the result of an initiative to identify those restaurants that were in declining trade areas, performing below acceptable profitability levels and/or required significant capital expenditures. The locations selected for closure represented older restaurants whose leases were not extended, or were in need of significant capital improvements that were not projected to provide acceptable returns in the foreseeable future. The Company recognized a charge of approximately $586,000, or $0.03 per diluted share, during the fiscal first quarter of 2009 related to lease termination costs based on estimated remaining lease obligations, net of estimated sublease income, and other closing related costs.

Interest expense was $2.1 million in the fiscal first quarter of 2009, compared to $2.3 million in the fiscal first quarter of 2008.

Net income for the fiscal first quarter of 2009 was $3.8 million or $0.25 per diluted share. The fiscal first quarter 2009 net income includes $0.19 per diluted share related to the one time charge associated with the acceleration of vesting for options tendered, and $0.03 related to the previously announced closure of four restaurants in the quarter. Excluding these one time charges, diluted earnings per share were $0.47, an increase of 9.3% compared to $0.43 per diluted share in the fiscal first quarter of 2008.

Schedule II of this earnings release reconciles the impact on the net income and diluted earnings per share as reported on a GAAP basis in the fiscal first quarters of 2009 and 2008 to adjusted amounts excluding the impact from the tender offer and restaurant closures.

Balance Sheet and Liquidity

On April 19, 2009, the Company held $8.6 million in cash and equivalents and had total outstanding debt of $218.9 million, including $130.2 million in borrowings under the $150 million term loan and $82.0 million of borrowing, as well as $4.4 million of letters of credit outstanding under the $150 million revolving credit facility. As of May 17, 2009, the Company's total outstanding debt balance was $212.8.

The Company is subject to a number of customary covenants under the various credit agreements, including limitations on additional borrowings, acquisitions, dividend payments, and requirements to maintain certain financial ratios. As of April 19, 2009, the Company was in compliance with all debt covenants and expects to remain in compliance throughout fiscal year 2009.

Based on the Company's development plans and other infrastructure and maintenance capital expenditures, the Company expects fiscal year 2009 capital expenditures to be approximately $45 million, which the Company will fund out of operating cash flow. The Company will make scheduled payments of $15 million required by the term loan portion of its existing credit facility from free cash flow after capital expenditures in fiscal year 2009 and expects to use the remaining free cash flow to make payments on the Company's revolving credit facility and may make opportunistic purchases of its common stock.

Outlook

For the fiscal second quarter of 2009, which is a twelve week quarter, the Company expects to open six new company-owned restaurants with the franchisees opening one new franchised restaurants. Three company-owned restaurants and one new franchised restaurant have already opened during the fiscal second quarter of 2009 and three company-owned restaurants and one franchised restaurant are currently under construction. In fiscal 2009, the Company plans to open 14 to 15 new company-owned restaurants, while franchisees are expected to open five to six new restaurants.

The Company continues to expect that traffic will remain negative in fiscal year 2009. In addition to the general macroeconomic pressures, the extent of the traffic declines may also be influenced by prior-year marketing activities, which create more difficult comparisons during certain periods. The Company also expects certain costs, such as minimum wage increases and select commodity cost increases, to continue to put pressure on restaurant-level profitability. Based on these factors, the Company anticipates that without any menu price increases, restaurant-level operating margins could decline by 50 to 80 basis points during fiscal year 2009, even after considering the benefit from reduced national advertising contributions and other cost reduction activities. For every 10 basis point change in restaurant level operating profit during fiscal year 2009, diluted earnings per share are estimated to be impacted by approximately $0.04.

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