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Company Report

August 14, 2014


Red Robin Gourmet Burgers Inc.
EPS Miss on Weaker-Than-Expected Traffic; Management
"Cautious" on Near Term; Reducing Estimates; Maintaining
Neutral
Our Call
This morning, RRGB reported adjusted EPS ~24% below Street estimates as
revenues/SSS fell short. Management attributed most of the miss to an ineffective
marketing message that failed to drive traffic during the quarter. While valuation is
becoming more attractive, we are concerned that the average check could continue
to contract as the Company laps successful burger promotions in 2H14. We are
maintaining Neutral as we believe the risk/reward is balanced at current levels.
Revenues/EPS Fall Short as Advertising Fails to Resonate: RRGB reported
adjusted diluted EPS of $0.68 vs. consensus of $0.90 and our estimate of $0.91.
Management attributed part of the miss to an ineffective marketing message
surrounding a free movie ticket promotion during the worst summer box office
in eight years. While marketing failed to drive positive traffic, average check
also fell sequentially as the Company lapped the successful rollout of price-tiered
appetizers in 2Q13. Revenues of $256.1mm came up shy of our projection of
$264.9mm as same-store sales grew at a slower-than-expected pace. Company-
owned same-store sales increased 1.2% (vs. our estimate/consensus of 3.0%),
composed of a traffic decline of -2.5% and a check increase of 3.7%. RRGB's
restaurant-level margin of 22.1% declined ~110 bps y/y as COGS, labor, and
operating expenses all came in above our expectations. Adjusted earnings
include a $0.03 benefit from the exclusion of executive transition costs. Overall,
results were disappointing on the back of a very strong 1Q. Expectations going
into the announcement were quite high, but we now believe the bar has not been
reset to a more reasonable level.
Guidance Tweaked Given Cautious Outlook on 3Q: Management's tone
was cautious on 3Q and implied that flattish SSS/EPS were likely. However,
management was more optimistic on 4Q and maintained its full-year SSS
guidance (low single digits). CapEx guidance was increased to $100 million
from $85-$90 million previously to reflect a greater number of remodels. Also,
management tweaked guidance to include higher depreciation, G&A and a 10
bps lower restaurant-level margin (21.3%). See guidance details on Page 4.
Reducing Estimates: We are reducing our 3Q EPS estimate from $0.36 to $0.32
based primarily on a lower SSS estimate for company stores of 0.5% vs. our
previous estimate of 2.0%. For FY14, we are reducing our estimate from $2.80 to
$2.53, to mostly reflect the 2Q miss and lowered 3Q projections. For FY15, we
are reducing our estimate from $3.42 to $2.91. Additionally, we are initiating an
FY16 EPS estimate of $3.28, reflecting ~13% growth over our FY15 estimate.
Neutral
RRGB
Price: Close $52.63
Price Target NA
Restaurants
Lynne Collier
(214) 702-4045
lcollier@sterneagee.com
Wesley Carmichael
(214) 702-4004
wcarmichael@sterneagee.com
Company Data
Rating Neutral
Price: Close $52.63
Price Target NA
52-Week Range $50.50 - $86.83
Market Capitalization (M) $922.5
Shares Outstanding (M) 14.3
Avg. Daily Vol. (000) 182.0
Dividend $0.00
Dividend Yield 0.0%
Assets (M) $634.6
Total EV 823
EBITDA (M) 2014E 2015E 2016E
FY 116.9 132.9 145.2
(Prev) 122.1 144.4
EV/EBITDA 7.0x 6.2x 5.7x
Revenue ($M) 2014E 2015E 2016E
FY 1,154.5 1,310.6 1,421.8
(Prev) 1,153.7 1,297.6

FYE Dec 2014E 2014E 2015E 2015E 2016E
(Prev) (Curr) (Prev) (Curr) (Curr)
EPS ($)
Q1 (Mar) 0.82A 1.05 0.94 1.03
Q2 (Jun) 0.91 0.68A 1.07 0.91 0.99
Q3 (Sept) 0.36 0.32 0.51 0.34 0.45
Q4 (Dec) 0.72 0.71 0.79 0.71 0.81
FY EPS 2.80 2.53 3.42 2.91 3.28
P/E 20.8x 18.1x 16.0x
Source: Sterne Agee and FactSet
Price Performance
Aug-13 Nov-13 Feb-14 May-14 Aug-14
90
85
80
75
70
65
60
55
Red Robin Gourmet Burgers Inc. ($)
BATS 1000 Consumer Services (BATS1000) ($)
Source: FactSet
Any Important Disclosures regarding Price Target Risks, Valuation Methodology, Regulation Analyst Certification,
Investment Banking, Ratings Definitions, and any potential conflicts of interest begin on Page I of the Appendix
Section. Past performance is no guarantee of future results.
800 Shades Creek ParkwaySuite 700Birmingham, AL 35209205-949-3500
Sterne, Agee & Leach Inc. is Member NYSE, FINRA, SIPC
Traffic Underperforms Industry in 2Q; Same-Store Sales "Gap to Knapp" Shrinks: The
Company's 2.5% traffic decline represented the first time in two years that the Company
underperformed casual dining peers using Black Box Intelligence data. As shown below, the
Company's "gap to Knapp" also decreased significantly sequentially. In 2Q, company stores
outperformed Knapp-Track by 210 bps vs. outperformance of 680 bps in 1Q14.
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
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RRGB Same-Store Sales vs. Knapp-Track
RRGB
Knapp-Track
Outperformance
Source: Company reports and Knapp-Track
Valuation Becoming More Attractive but Staying on Sidelines as Sales Momentum Slows: On
an EV/EBITDA basis, we estimate that RRGB is presently trading at approximately 6.6x our NTM
EBITDA estimate (vs. 3-year NTM average of 6.8x). On a P/E basis, shares are presently trading
at 18.3x NTM earnings vs. a 3-year average of 20.0x. However, given industry trends and the fact
that the Company will continue to lap successful menu introductions that drove the average check
last year, we are remaining on the sidelines as we view risk/reward as balanced at current levels.
Glossary:
bps: Basis points
CapEx: Capital expenditures
COGS: Cost of goods sold
EBITDA: Earnings before interest, taxes, depreciation, and amortization
EPS: Earnings per share
EV: Enterprise value
G&A: General & administrative expense
NTM: Next twelve months
P/E: Price to earnings ratio
SSS: Same-store sales
y/y: year over year
Page 2
August 14, 2014
Figure 1: 2Q14 Earnings Variance




Source: Company reports, Sterne Agee estimates, and FactSet; Dollars in millions, except per share







Red Robin Gourmet Burgers (RRGB) Actual 2Q14 SALI 2Q14 Variance Consensus
REVENUE $256.1 $264.9 (3.3%) $263.5
Same-Store Sales (Company) +1.2% +3.0% (180) bps +3.0%
EBITDA $28.1 $32.7 (14.0%) $33.0
EPS $0.68 $0.91 $0.90
MARGINS
Restaurant-Level Margin 22.2% 23.1% (92) bps
EBITDA Margin 11.0% 12.4% (137) bps
Net Income Margin 3.9% 5.1% (121) bps
COMMON-SIZE P&L
Cost of Sales 25.3% 24.9% 35 bps
Labor 32.8% 32.5% 30 bps
Operating 12.3% 12.1% 23 bps
Occupancy 7.4% 7.4% 4 bps
SG&A 11.6% 11.0% 60 bps
Depreciation 5.5% 5.2% 31 bps
Interest, Net 0.2% 0.2% (2) bps
Taxes 1.5% 1.9% (47) bps
OTHER FACTORS
Effective Tax Rate 27.4% 27.5% (13) bps
Share Count 14.5 14.7 -0.1 shares
($0.23)
Page 3
August 14, 2014
Figure 2: FY14 Guidance Details



Source: Company reports


Current As of 1Q14* As of 4Q13*
Comparable Sales Unchanged Low Single Digits Low Single Digits
CapEx Exceed $100mm (ex-acquisitions) $85-$90mm $85-$90mm
Restaurant Openings 20 Red Robins; 4-5 Burger Works 20 Red Robins; 5 Burger Works 20 Red Robins; 5 Burger Works
Remodel Remodel At Least 65 Restaurants Remodel 50 Restaurants Remodel 50 Restaurants
Restaurant-Level Margin Approx. 21.3% Approx. 21.4% Slightly Higher Than 21%
SG&A Approx. $94mm; Selling Expenses of 3.2% of
sales
Approx. $93mm; Selling Expenses of
3.2% of sales
Approx. $93mm; Selling Expenses of
3.1% of sales
Pre-Opening Approx. $9mm ($2.5mm related to acqusition) N/A N/A
Depreciation Approx. $64mm Approx. $62mm $59-$60mm
Interest Expense Approx. $3mm N/A N/A
Tax Rate Approx. 26% Approx. 27.5% Approx. 26.5%
EPS Sensitivity 1% traffic = $0.30 in EPS; 10 bps in
Restaurant Margin = $0.07 in EPS
1% traffic = $0.30 in EPS; 10 bps in
Restaurant Margin = $0.07 in EPS
1% traffic = $0.30 in EPS; 10 bps in
Restaurant Margin = $0.07 in EPS
Page 4
August 14, 2014
Projected Income Statement for Red Robin Gourmet Burgers (RRGB)



Source: Company reports and Sterne Agee estimates; Dollars in millions, except per share

2013A
1Q:13A 2Q:13A 3Q:13A 4Q:13A 2013A 1Q:14A 2Q:14A 3Q:14E 4Q:14E 2014E 1Q:15E 2Q:15E 3Q:15E 4Q:15E 2015E 2016E
(16 weeks) (12 weeks) (12 weeks) (12 weeks) (52 weeks) (16 weeks) (12 weeks) (12 weeks) (12 weeks) (52 weeks) (16 weeks) (12 weeks) (12 weeks) (12 weeks) (52 weeks) (52 weeks)
Restaurant Sales $301.313 $234.490 $226.844 $237.551 $1,000.198 $334.995 $251.818 $269.272 $282.023 $1,138.108 $397.574 $300.948 $292.789 $305.066 $1,296.377 $1,406.647
Franchise Fees & Other 5.036 3.809 3.829 4.375 17.049 5.489 4.315 3.354 3.281 16.438 4.239 3.436 3.062 3.481 14.218 15.121
Total Revenues $306.349 $238.299 $230.673 $241.926 $1,017.247 $340.484 $256.133 $272.626 $285.304 $1,154.547 $401.813 $304.384 $295.851 $308.547 $1,310.595 $1,421.768

Cost of Sales 74.982 58.024 57.253 59.978 250.237 84.220 63.689 69.577 72.335 289.821 100.549 76.566 75.946 78.550 331.612 359.603
Gross Profit 226.331 176.466 169.591 177.573 749.961 250.775 188.129 199.695 209.689 848.288 297.025 224.381 216.843 226.516 964.765 1,047.044
Labor 101.882 76.648 76.624 79.959 335.113 110.921 82.572 91.763 95.774 381.031 132.835 99.434 100.070 103.905 436.244 474.756
Operating 37.090 28.463 29.463 28.463 123.479 40.597 31.022 35.243 34.074 140.936 48.777 37.074 38.321 36.858 161.030 173.319
Occupancy 22.573 16.779 17.132 17.595 74.079 24.282 18.618 20.740 21.171 84.811 29.812 22.250 22.552 22.901 97.515 105.105
Restaurant Operating Income 64.786 54.576 46.372 51.556 217.290 74.975 55.917 51.949 58.670 241.510 85.601 65.623 55.900 62.853 269.977 293.864

Selling, General & Administrative 37.608 28.386 27.481 30.803 124.278 42.423 29.776 29.724 30.130 132.053 46.755 32.679 32.398 32.817 144.648 156.309
Pre-Opening Expenses, Net of Closures 0.834 1.291 2.482 1.923 6.530 2.113 2.326 2.650 1.950 9.039 1.200 1.200 2.400 1.800 6.600 7.500
EBITDA 31.380 28.708 20.238 23.205 103.531 35.928 28.130 22.928 29.871 116.857 41.885 35.180 24.165 31.718 132.947 145.177

Depreciation 17.834 13.319 13.436 13.611 58.200 18.886 14.120 15.471 15.624 64.100 22.087 16.171 16.493 16.588 71.339 76.679
EBIT 13.546 15.389 6.802 9.594 45.331 17.042 14.010 7.458 14.247 52.757 19.798 19.009 7.672 15.130 61.609 68.498

Interest Expense (Income), Net 1.089 0.674 0.624 0.178 2.565 0.674 0.475 1.000 1.000 3.149 1.221 0.916 0.916 0.916 3.968 3.968
Other Expense (Income) 0.000 0.000 0.000 (1.626) (1.626) 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
Pretax Income 12.457 14.715 6.178 11.042 44.392 16.368 13.535 6.458 13.247 49.608 18.577 18.093 6.756 14.214 57.641 64.530
Income Taxes 2.977 3.576 1.517 1.914 9.984 4.424 3.704 1.769 2.941 12.838 4.830 4.704 1.757 3.696 14.987 16.778
Proforma Net Income $9.480 $11.139 $4.661 $9.128 $34.408 $11.944 $9.831 $4.688 $10.306 $36.770 $13.747 $13.389 $4.999 $10.518 $42.654 $47.752
Add: Gains/(Losses) on Special Items 0.000 0.000 0.000 (2.169) (2.169) 0.000 (0.361) 0.000 0.000 (0.361) 0.000 0.000 0.000 0.000 0.000 0.000
Reported Net Income $9.480 $11.139 $4.661 $6.959 $32.239 $11.944 $9.470 $4.688 $10.306 $36.409 $13.747 $13.389 $4.999 $10.518 $42.654 $47.752
Diluted Weighted Average Shares in Millions 14.341 14.475 14.600 14.607 14.506 14.592 14.528 14.538 14.578 14.559 14.618 14.658 14.698 14.738 14.678 14.538
Proforma Earnings Per Diluted Share $0.66 $0.77 $0.32 $0.62 $2.37 $0.82 $0.68 $0.32 $0.71 $2.53 $0.94 $0.91 $0.34 $0.71 $2.91 $3.28

Margins
Cost of Sales 24.9% 24.7% 25.2% 25.2% 25.0% 25.1% 25.3% 25.8% 25.6% 25.5% 25.3% 25.4% 25.9% 25.7% 25.6% 25.6%
Labor 33.8% 32.7% 33.8% 33.7% 33.5% 33.1% 32.8% 34.1% 34.0% 33.5% 33.4% 33.0% 34.2% 34.1% 33.7% 33.8%
Operating 12.3% 12.1% 13.0% 12.0% 12.3% 12.1% 12.3% 13.1% 12.1% 12.4% 12.3% 12.3% 13.1% 12.1% 12.4% 12.3%
Occupancy 7.5% 7.2% 7.6% 7.4% 7.4% 7.2% 7.4% 7.7% 7.5% 7.5% 7.5% 7.4% 7.7% 7.5% 7.5% 7.5%
Restaurant Operating Margin 21.5% 23.3% 20.4% 21.7% 21.7% 22.4% 22.2% 19.3% 20.8% 21.2% 21.5% 21.8% 19.1% 20.6% 20.8% 20.9%
Selling, General & Administrative 12.3% 11.9% 11.9% 12.7% 12.2% 12.5% 11.6% 10.9% 10.6% 11.4% 11.6% 10.7% 11.0% 10.6% 11.0% 11.0%
Pre-Opening Expenses, Net of Closures 0.3% 0.5% 1.1% 0.8% 0.6% 0.6% 0.9% 1.0% 0.7% 0.8% 0.3% 0.4% 0.8% 0.6% 0.5% 0.5%
EBITDA Margin 10.2% 12.0% 8.8% 9.6% 10.2% 10.6% 11.0% 8.4% 10.5% 10.1% 10.4% 11.6% 8.2% 10.3% 10.1% 10.2%
Depreciation 5.8% 5.6% 5.8% 5.6% 5.7% 5.5% 5.5% 5.7% 5.5% 5.6% 5.5% 5.3% 5.6% 5.4% 5.4% 5.4%
EBIT Margin 4.4% 6.5% 2.9% 4.0% 4.5% 5.0% 5.5% 2.7% 5.0% 4.6% 4.9% 6.2% 2.6% 4.9% 4.7% 4.8%
Proforma Net Income Margin 3.1% 4.7% 2.0% 3.8% 3.4% 3.5% 3.8% 1.7% 3.6% 3.2% 3.4% 4.4% 1.7% 3.4% 3.3% 3.4%
2016E 2014E 2015E
Page 5
August 14, 2014
Projected Unit Statistics for Red Robin Gourmet Burgers (RRGB)



Source: Company reports and Sterne Agee estimates
2013A
1Q:13A 2Q:13A 3Q:13A 4Q:13A 2013A 1Q:14A 2Q:14A 3Q:14E 4Q:14E 2014E 1Q:15E 2Q:15E 3Q:15E 4Q:15E 2015E 2016E
(16 weeks) (12 weeks) (12 weeks) (12 weeks) (52 weeks) (16 weeks) (12 weeks) (12 weeks) (12 weeks) (52 weeks) (16 weeks) (12 weeks) (12 weeks) (12 weeks) (52 weeks) (52 weeks)
Growth Rate Analysis
Restaurant Sales Growth Rate 2.3% 6.6% 8.1% 0.4% 4.1% 11.2% 7.4% 18.7% 18.7% 13.8% 18.7% 19.5% 8.7% 8.2% 13.9% 8.5%
Franchise Fees & Other 4.5% 1.7% 7.5% 9.0% 5.6% 9.0% 13.3% (12.4%) (25.0%) (3.6%) (22.8%) (20.4%) (8.7%) 6.1% (13.5%) 6.4%
Total Revenues Growth Rate 2.3% 6.5% 8.1% 0.5% 4.1% 11.1% 7.5% 18.2% 17.9% 13.5% 18.0% 18.8% 8.5% 8.1% 13.5% 8.5%
Restaurant Operating Income Growth Rate 3.8% 17.7% 12.3% 5.8% 9.3% 15.7% 2.5% 12.0% 13.8% 11.1% 14.2% 17.4% 7.6% 7.1% 11.8% 8.8%
EBITDA Growth Rate (3.1%) 19.8% 5.8% (7.9%) 2.8% 14.5% (2.0%) 13.3% 28.7% 12.9% 16.6% 25.1% 5.4% 6.2% 13.8% 9.2%
EBIT Growth Rate (14.0%) 34.7% 16.6% (21.4%) 0.3% 25.8% (9.0%) 9.6% 48.5% 16.4% 16.2% 35.7% 2.9% 6.2% 16.8% 11.2%
Proforma Net Income Growth Rate (10.2%) 43.8% 31.9% 8.8% 13.8% 26.0% (11.7%) 0.6% 12.9% 6.9% 15.1% 36.2% 6.6% 2.1% 16.0% 12.0%
Proforma Earnings Per Diluted Share Growth Rate (6.9%) 47.6% 31.4% 6.7% 15.2% 23.8% (12.1%) 1.0% 13.1% 6.5% 14.9% 35.0% 5.5% 0.9% 15.1% 13.0%

Effective Tax Rate 23.9% 24.3% 24.6% 17.3% 22.5% 27.0% 27.4% 27.4% 22.2% 26.0% 26.0% 26.0% 26.0% 26.0% 26.0% 26.0%
Store Count
Red Robin
Company Stores at Beginning of Period 335 338 340 346 335 356 362 365 405 356 412 416 420 428 412 434
Openings 3 2 6 10 21 2 3 8 7 20 4 4 8 6 22 25
Acquired from Franchisees 0 0 0 0 0 4 0 32 0 36 0 0 0 0 0 0
(Closings) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Company Stores at End of Period 338 340 346 356 356 362 365 405 412 412 416 420 428 434 434 459
Average Number of Company Red Robins 336.5 339.0 343.0 351.0 345.5 359.0 363.5 401.0 408.5 384.0 414.0 418.0 424.0 431.0 423.0 446.5
Burger Works
Company Stores at Beginning of Period 5 5 5 5 5 6 5 7 9 6 9 10 11 13 9 14
Openings 0 0 0 1 1 0 2 2 0 4 1 1 2 1 5 5
Acquired from Franchisees 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
(Closings) 0 0 0 0 0 (1) 0 0 0 (1) 0 0 0 0 0 0
Company Stores at End of Period 5 5 5 6 6 5 7 9 9 9 10 11 13 14 14 19
Average Number of Company Burger Works 5.0 5.0 5.0 5.5 5.5 5.5 6.0 8.0 9.0 7.5 9.5 10.5 12.0 13.5 11.5 16.5
Franchise Stores at Beginning of Period 133 133 133 135 133 134 129 130 99 134 100 101 102 103 100 104
Openings 0 0 2 0 2 0 1 1 1 3 1 1 1 1 4 5
(Sold to Company) 0 0 0 0 0 (4) 0 (32) 0 (36) 0 0 0 0 0 0
(Closings) 0 0 0 (1) (1) (1) 0 0 0 (1) 0 0 0 0 0 0
Franchise Stores at End of Period 133 133 135 134 134 129 130 99 100 100 101 102 103 104 104 109
Average Number of Franchise Stores in Period 133.0 133.0 134.0 134.5 133.5 131.5 129.5 114.5 99.5 117.0 100.5 101.5 102.5 103.5 102.0 106.5
Sales Analysis (AWS in actual $)
Weeks in Quarter 16 12 12 12 52 16 12 12 12 52 16 12 12 12 52 52
Operating Weeks (Company) 5,444 4,111 4,108 4,227 17,890 5,718 4,360 4,908 5,010 19,996 6,776 5,142 5,232 5,334 22,484 23,918
Operating Weeks Growth (Company) 3.8% 4.6% 3.8% (3.8%) 2.1% 5.0% 6.1% 19.5% 18.5% 11.8% 18.5% 17.9% 6.6% 6.5% 12.4% 6.4%
Average Weekly Sales (Company) $55,978 $57,699 $55,029 $56,012 $56,180 $58,382 $57,549 $54,864 $56,292 $56,772 $58,674 $58,527 $55,961 $57,193 $57,589 $58,741
Average Weekly Sales Growth (Company) (0.6%) 3.5% 4.3% 2.9% 2.5% 4.3% (0.3%) (0.3%) 0.5% 1.1% 0.5% 1.7% 2.0% 1.6% 1.4% 2.0%
Same-Store Sales (Company) 2.2% 4.3% 5.7% 3.7% 4.0% 5.4% 1.2% 0.5% 1.3% 2.1% 1.0% 2.2% 2.5% 2.1% 2.0% 2.0%
Operating Weeks (Franchise) 2,128 1,596 1,608 1,632 6,964 2,124 1,560 1,374 1,194 6,252 1,608 1,218 1,230 1,242 5,298 5,524
Operating Weeks Growth (Franchise) (2.7%) 0.1% 1.0% (5.4%) (1.9%) (0.2%) (2.3%) (14.6%) (26.8%) (10.2%) (24.3%) (21.9%) (10.5%) 4.0% (15.3%) 4.3%
Average Weekly Franchise Revenue $2,367 $2,387 $2,381 $2,681 $2,454 $2,584 $2,766 $2,441 $2,748 $2,635 $2,636 $2,821 $2,490 $2,803 $2,687 $2,741
Average Weekly Franchise Revenue Growth 7.4% 1.6% 6.4% 15.3% 7.7% 9.2% 15.9% 2.5% 2.5% 7.5% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%
2016E 2014E 2015E
Page 6
August 14, 2014
APPENDIX SECTION
Company Description:
Red Robin Gourmet Burgers develops, operates, and franchises a casual dining restaurant chain in the United States and Canada. The
company's approximate 502 restaurants feature gourmet burgers and fries, as well as a variety of other menu items. The Company was
founded in 1969 and is headquartered in Greenwood Village, Colorado.
IMPORTANT DISCLOSURES:
Regulation Analyst Certification:
I, Lynne Collier and Wesley Carmichael, hereby certify the views expressed in this research report accurately reflect my personal views
about the subject security(ies) or issuer(s). I further certify that no part of my compensation was, is, or will be, directly or indirectly,
related to the specific recommendations or views expressed by me in this report.
Price Target Risks & Related Risk Factors:
Investment risks associated with the achievement of the price target include, but are not limited to, a company's failure to achieve Sterne,
Agee & Leach, Inc., earnings and revenue estimates; unforeseen macroeconomic and/or industry events that adversely affect demand for a
company's products or services; product obsolescence; changes in investor sentiment regarding the specific company or industry; intense
and rapidly changing competitive pressures; the continuing development of industry standards; the company's ability to recruit and retain
competent personnel; and adverse market conditions. For a complete discussion of the risk factors that could affect the market price of
a company's shares, refer to the most recent Form 10-Q or 10-K that a company has filed with the Securities Exchange Commission.
Company Specific Risks:
Investment risks include: slowing domestic economic growth; pressures on consumer spending and sentiment; increased competition,
particularly in the bar & grill segment of casual dining; and commodity and labor inflation.
Valuation Methodology:
Methodology for assigning ratings and target prices includes qualitative and quantitative factors including an assessment of industry
size, structure, business trends and overall attractiveness; management effectiveness; competition; visibility; financial condition; and
expected total return, among other factors. These factors are subject to change depending on overall economic conditions or industry
or company-specific occurrences. Sterne, Agee & Leach, Inc., analysts base valuations on a combination of forward looking earnings
multiples, price-to-revenue multiples, and enterprise-value-to-revenue ratios. Sterne, Agee & Leach, Inc., believes this accurately reflects
the strong absolute value of earnings, the strong earnings growth rate, the inherent profitability, and adjusted balance sheet factors.
Additional company-specific valuation methodology is available through Sterne, Agee & Leach, Inc.
Definition of Investment Ratings:
BUY: We expect this stock to outperform the industry over the next 12 months.
NEUTRAL: We expect this stock to perform in line with the industry over the next 12 months.
UNDERPERFORM: We expect this stock to underperform the industry over the next 12 months.
RESTRICTED: Restricted list requirements preclude comment.
Ratings Distribution:
IB Serv./ Past 12Mos.
Rating Category Count Percent Count Percent
Buy 263 50.19% 36 13.69%
Neutral 247 47.14% 25 10.12%
Underperform 14 2.67% 0 0.00%
ADDITIONAL INFORMATION AVAILABLE UPON REQUEST: Contact Robert Hoehn at 1-212-338-4731.
Other Disclosures:
Opinions expressed are our present opinions only. This material is based upon information that we consider reliable, but we do not
represent that it is accurate or complete, and it should not be relied upon as such. Past performance is no guarantee of future results.
For UK Professional Clients
Appendix Section, Page I
August 14, 2014
This research report is disseminated in the UK by Sterne Agee UK LLP which is authorized and regulated by the Financial Conduct
Authority. This research report is intended for distribution in the UK only to, and should be relied upon only by, persons who or may be
classified as eligible counterparties or professional clients pursuant to the FCA's rules or who are investment professionals as defined in
Article 19 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005.
Copyright 2014 Sterne, Agee & Leach, Inc. All Rights Reserved.
To receive price charts or other disclosures on the companies mentioned in this report that are not the subject of this report
which Sterne Agee continues to cover, please visit our website at https://sterneagee.bluematrix.com/sellside/Disclosures.action
or contact Sterne, Agee & Leach, Inc. toll-free at (800) 240-1438 or (205) 949-3689.
Appendix Section, Page II
August 14, 2014


Founded in 1901, Sterne Agee has been providing investors like you with high-quality investment opportunities for over a century. During the early years, our founders
prominently established themselves in the financial securities industry in the southeastern United States. Today, we have expanded to serve all regions of the country. Sterne,
Agee is headquartered in Birmingham, Alabama. Sterne Agee is one of the largest independent firms in the country. Sterne, Agee & Leach, Inc. is a division of Sterne Agee
Group, Inc., which also includes The Trust Company of Sterne, Agee & Leach, Inc.; Sterne Agee Asset Management, Inc.; Sterne Agee Clearing, Inc.; and Sterne Agee
Financial Services, Inc.www.sterneagee.com

EQUITY CAPITAL MARKETS
Ryan Medo Managing Dir., Eq. Cap. Mkts. (205) 949-3623

INSTITUTIONAL SALES
William J ump Director of Institutional Sales (404) 814-3960
J on Schenk Assoc. Director of Inst. Sales (212) 763-8221

INSTITUTIONAL TRADING
J T Cacciabaudo Head of Trading (212) 763-8288

EQUITY RESEARCH
Robert Hoehn Director of Research (212) 338-4731

CHIEF ECONOMIST
Lindsey M. Piegza (312) 924-0607

TECHNICAL ANALYSIS & RESEARCH
Carter Braxton Worth (212) 338-4765

CONSUMER
Broadlines / Health & Wellness Retailing
Charles Grom, CFA (646) 376-5373
Renato Basanta, CFA (646) 376-5317
J ohn Parke (646) 376-5315

Footwear & Apparel
Sam Poser (212) 763-8226
Ben Shamsian (212) 338-4721

Leisure & Entertainment
David Bain (949) 721-6651

Media & Entertainment
Vasily Karasyov (646) 376-5362

Restaurants
Lynne Collier (214) 702-4045
Wes Carmichael (214) 702-4004

Specialty Retail
Ike Boruchow, J r. (212) 338-4756
Tom Nikic, CFA (212) 338-4784

ENERGY
Exploration & Production
Tim Rezvan, CFA (212) 338-4736
Truman Hobbs (212) 338-4767

Oilfield Services & Equipment
Stephen D. Gengaro (646) 376-5331
Ivan Suleiman (212) 338-4723

FINANCIAL SERVICES
Asset Management
J ason Weyeneth, CFA (212) 763-8293

Banks & Thrifts
Terry McEvoy, CFA (207) 775-4926
Erik Zwick, CFA (610) 260-9551
Austin Nicholas (207) 775-4394
Matthew Kelley (207) 699-5800
Matthew Breese (207) 699-5800
Brett Rabatin, CFA (615) 760-1466
Nathan Race (615) 760-1477
Peyton Green (615) 760-1464
Kenneth J ames (615) 760-1474
Maxwell Neely (615) 760-1468
Life Insurance
J ohn M. Nadel (212) 338-4717

Specialty/Real Estate Finance
Henry J . Coffey, J r., CFA (615) 760-1472
J ason P. Weaver, CFA (615) 760-1479
Calvin Hotrum (615) 760-1476

Property/Casualty Insurance
Dan Farrell (212) 338-4782
Nitin Chhabra, FCAS (212) 338-4779

HEALTHCARE
Health Insurance
Brian Wright (646) 376-5350

Medical Technology
Gregory P. Chodaczek (610) 260-9560

Pharmaceutical Services
Gregory Bolan (615) 760-1469
Michael A. Ward (646) 218-4829

Specialty and Generic Pharmaceuticals
Shibani Malhotra (646) 376-5396
Austin Nelson (646) 218-4839

INDUSTRIALS
Aerospace & Defense
Peter Arment (646) 376-5336
J osh W. Sullivan (646) 376-5337
Asher Carey (646) 218-4825

Auto, Auto Parts and Auto Retailers
Michael P. Ward, CFA (646) 376-5375
Ali Faghri (646) 376-5304

Coal, Metals & Mining, Engineering &
Construction
Michael S. Dudas, CFA (646) 376-5329
Satyadeep J ain, CFA (646) 376-5357
Patrick Uotila, CPA (646) 376-5358

Construction Materials & Di versified
Industrials
Todd Vencil, CFA (804) 282-7385

Homebuilding
J ay McCanless (615) 760-1475
Annie Worthman (615) 760-1478

Water and Flow Control
Kevin Bennett, CFA (804) 282-4506

TECHNOLOGY
Data Networking and Storage
Alex Kurtz (415) 402-6015
Amelia Harris (415) 402-6018

Enterprise Software
Robert Breza (612) 360-7550
J ean-Baptiste J ouve (917) 392-5700

Interactive Entertainment / Internet
Arvind Bhatia, CFA (214) 702-4001
Brett Strauser (214) 702-4009

LED Supply Chain
Andrew Huang (415) 362-6143
J ohn Shen (415) 402-6052

Semiconductors
Vijay Rakesh (312) 525-8431
Troy Cowdrey (312) 525-8430

TRANSPORTATION, SERVICES & EQUIPMENT
Sal Vitale (212) 338-4766