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Texas Roadhouse, Inc. Announces Second Quarter 2018 Results

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LOUISVILLE, Ky., July 30, 2018 (GLOBE NEWSWIRE) -- Texas Roadhouse, Inc. (NASDAQ:TXRH), today announced financial results for the 13 and 26 week periods ended June 26, 2018.

    Second Quarter   Year to Date
($000's)   2018 2017 % Change   2018 2017 % Change
                 
Total revenue   $ 629,237   $ 566,262   11.1%   $ 1,256,942   $ 1,133,948   10.8%
Income from operations     54,267     54,214   0.1%     119,138     103,236   15.4%
Net income     44,227     37,581   17.7%     98,768     71,894   37.4%
Diluted EPS   $ 0.62   $ 0.53   16.9%   $ 1.37   $ 1.01   36.5%
                 

Results for the second quarter included the following highlights:  

  • Comparable restaurant sales increased 5.7% at company restaurants and 3.9% at domestic franchise restaurants;
  • Diluted earnings per share increased 16.9% to $0.62 from $0.53 in the prior year;                                                                                                                                                                                
  • Restaurant margin dollars increased 6.5% to $113.4 million from $106.5 million in the prior year, and restaurant margin, as a percentage of restaurant and other sales, decreased 77 basis points to 18.2% primarily due to higher labor costs;
  • General and administrative expenses increased primarily due to higher costs of $2.5 million associated with our annual managing partner conference, which marked our 25th anniversary;
  • Our income tax rate decreased to 15.6% from 27.9% in the prior year period primarily due to the impact of new tax legislation; and
  • Seven company restaurants, including three Bubba's 33 restaurants, and one international franchise restaurant were opened.

Results for the year-to-date period included the following highlights:

  • Comparable restaurant sales increased 5.3% at company restaurants and 4.0% at domestic franchise restaurants;
  • Diluted earnings per share increased 36.5% to $1.37 from $1.01 in the prior year;
  • Restaurant margin dollars increased 6.4% to $232.8 million from $218.7 million in the prior year, and restaurant margin, as a percentage of restaurant and other sales, decreased 76 basis points to 18.7% primarily due to higher labor costs;
  • General and administrative expenses decreased primarily due to a pre-tax charge of $14.9 million ($9.2 million after-tax), or $0.13 per diluted share, recorded in the first quarter of 2017, related to the settlement of a legal matter, which was partially offset by higher costs associated with our annual managing partner conference in 2018;
  • Our income tax rate decreased to 14.2% from 27.2% in the prior year period primarily due to the impact of new tax legislation; and
  • 14 company restaurants, including four Bubba's 33 restaurants, and three international franchise restaurants were opened.

Kent Taylor, Chief Executive Officer of Texas Roadhouse, Inc., commented, "Our top-line results for the second quarter were strong with double-digit revenue growth, including 5.7% comparable restaurant sales growth.  We are pleased with the consistency of our traffic gains this year and the continued strength headed into the third quarter."

Taylor continued, "On the development front, with 14 company restaurants opened in the first half of 2018, we are on track to open 27 or 28 restaurants for the year.  We continue to fund our new restaurant growth through internal cash flow, while also returning excess capital to our shareholders through dividends, further driving shareholder value."

2018 Outlook

Comparable restaurant sales at company restaurants for the first four weeks of our third quarter of fiscal 2018 increased approximately 4.7% compared to the prior year period.

Management updated the following expectations for 2018:

  • 27 or 28 company restaurant openings, including up to five Bubba's 33 restaurants; and
  • An income tax rate of 14.0% to 15.0%.

Management reiterated the following expectations for 2018:

  • Positive comparable restaurant sales growth;
  • Commodity cost inflation of approximately 1.0%;
  • Mid-single digit growth in labor dollars per store week, excluding the impact of higher guest counts; and
  • Total capital expenditures of approximately $165.0 million to $175.0 million.

Non-GAAP Measures

We prepare our consolidated financial statements in accordance with U.S. generally accepted accounting principles ("GAAP").  Within our press release, we make reference to restaurant margin (in dollars and as a percentage of sales).  Restaurant margin represents restaurant and other sales less restaurant-level operating costs, including cost of sales, labor, rent and other operating costs.  Restaurant margin should not be considered in isolation, or as an alternative, to income from operations.  This non-GAAP measure is not indicative of overall company performance and profitability in that this measure does not accrue directly to the benefit of shareholders due to the nature of the costs excluded.  Restaurant margin is widely regarded as a useful metric by which to evaluate restaurant-level operating efficiency and performance.  In calculating restaurant margin, we exclude certain non-restaurant-level costs that support operations, including pre-opening and general and administrative expenses, but do not have a direct impact on restaurant-level operational efficiency and performance.  We also exclude depreciation and amortization expense, substantially all of which relates to restaurant-level assets, as it represents a non-cash charge for the investment in our restaurants.  We also exclude impairment and closure expense, as we believe this provides a clearer perspective of ongoing operating performance and a more useful comparison to prior period results.  Restaurant margin as presented may not be comparable to other similarly titled measures of other companies in our industry.  A reconciliation of income from operations to restaurant margin is included in the accompanying financial tables.

Conference Call

Texas Roadhouse is hosting a conference call today, July 30, 2018 at 5:00 p.m. Eastern Time to discuss these results.  The dial-in number is (866) 548-4713 or (323) 794-2093 for international calls.  A replay of the call will be available for one week following the conference call.  To access the replay, please dial (844) 512-2921 or (412) 317-6671 for international calls, and use 2736628 as the pass code.  There will be a simultaneous Web cast conducted at www.texasroadhouse.com.

About the Company

Texas Roadhouse is a casual dining concept that first opened in 1993 and today has grown to over 565 restaurants system-wide in 49 states and eight foreign countries.  For more information, please visit the Company's Web site at www.texasroadhouse.com.

Forward-looking Statements

Certain statements in this release that are not historical facts, including, without limitation, those relating to our anticipated financial performance, are forward-looking statements that involve risks and uncertainties.  Such statements are based upon the current beliefs and expectations of the management of Texas Roadhouse.  Actual results may vary materially from those contained in forward-looking statements based on a number of factors including, without limitation, the actual number of restaurants opening; the sales at these and our other company and franchise restaurants; changes in restaurant development or operating costs, such as food and labor; our ability to acquire franchise restaurants; our ability to integrate the franchise restaurants we acquire or other concepts we develop; our ability to continue to generate the necessary cash flows to fund our new restaurant growth, continue our share repurchase program and pay a quarterly cash dividend; strength of consumer spending; pending or future legal claims; breaches of security; conditions beyond our control such as weather, natural disasters, disease outbreaks, epidemics or pandemics impacting our customers or food supplies; food safety and food-borne illness concerns; acts of war or terrorism and other factors disclosed from time to time in our filings with the U.S. Securities and Exchange Commission.  Investors should take such risks into account when making investment decisions.  Shareholders and other readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made.  We undertake no obligation to update any forward-looking statements.

Contacts:

Investor Relations                                                                                          
Tonya Robinson
(502) 515-7269

Media
Travis Doster
(502) 638-5457

 
Texas Roadhouse, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(in thousands, except per share data)
(unaudited)
                       
           
      13 Weeks Ended   26 Weeks Ended
      June 26, 2018   June 27, 2017   June 26, 2018   June 27, 2017
                       
Revenue:                  
  Restaurant and other sales $ 624,073       $ 562,160     $ 1,246,475       $ 1,125,480  
  Franchise royalties and fees   5,164         4,102       10,467         8,468  
                       
Total revenue   629,237         566,262       1,256,942         1,133,948  
                       
Costs and expenses:                  
  Restaurant operating costs (excluding depreciation and amortization shown separately below):                  
                   
    Cost of sales   204,048         185,171       406,834         369,364  
    Labor   199,647         174,585       395,677         344,932  
    Rent   12,119         11,112       23,970         21,981  
    Other operating   94,858         84,837       187,236         170,497  
  Pre-opening   4,107         5,014       9,151         9,754  
  Depreciation and amortization   25,165         23,106       49,649         45,702  
  Impairment and closure   22         -       108         11  
  General and administrative   35,004         28,223       65,179         68,471  
                       
Total costs and expenses   574,970         512,048       1,137,804         1,030,712  
                       
Income from operations   54,267         54,214       119,138         103,236  
                       
Interest expense, net   283         379       642         711  
Equity income from investments in                  
  unconsolidated affiliates   (445 )       (470 )     (769 )       (790 )
                       
Income before taxes   54,429         54,305       119,265         103,315  
Provision for income taxes   8,466         15,126       16,923         28,113  
                       
Net income including noncontrolling interests   45,963         39,179       102,342         75,202  
Less: Net income attributable to noncontrolling interests   1,736         1,598       3,574         3,308  
Net income attributable to Texas Roadhouse, Inc. and subsidiaries $ 44,227       $ 37,581     $ 98,768       $ 71,894  
                       
Net income per common share attributable to Texas Roadhouse, Inc.                  
and subsidiaries:                  
  Basic $ 0.62       $ 0.53     $ 1.38       $ 1.01  
  Diluted $ 0.62       $ 0.53     $ 1.37       $ 1.01  
                       
Weighted average shares outstanding:                  
  Basic   71,445         70,973       71,389         70,876  
  Diluted   71,897         71,437       71,853         71,398  
                       
Cash dividends declared per share $ 0.25       $ 0.21     $ 0.50       $ 0.42  
                                   


 
Texas Roadhouse, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
           
           
           
    June 26, 2018   December 26, 2017
           
           
Cash and cash equivalents   $ 154,353     $ 150,918
Other current assets, net     62,446       106,163
Property and equipment, net     928,765       912,147
Goodwill     121,040       121,040
Intangible assets, net     2,329       2,700
Other assets     42,660       37,655
           
Total assets   $ 1,311,593     $ 1,330,623
           
           
Current maturities of long-term debt and obligation under capital lease     10       9
Other current liabilities     280,382       329,989
Long-term debt and obligation under capital lease, excluding current maturities   1,976       51,981
Other liabilities, net     107,627       97,253
Texas Roadhouse, Inc. and subsidiaries stockholders' equity     908,049       839,079
Noncontrolling interests     13,549       12,312
           
Total liabilities and equity   $ 1,311,593     $ 1,330,623
           


 
Texas Roadhouse, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
 
 
    26 Weeks Ended
    June 26, 2018   June 27, 2017
           
           
Cash flows from operating activities:          
Net income including noncontrolling interests   $ 102,342       $ 75,202  
Adjustments to reconcile net income to net cash provided by operating activities          
  Depreciation and amortization     49,649         45,702  
  Share-based compensation expense     15,856         12,365  
  Other noncash adjustments, net     7,076         (1,842 )
Change in working capital     (9,816 )       (3,119 )
    Net cash provided by operating activities     165,107         128,308  
           
Cash flows from investing activities:          
Capital expenditures - property and equipment     (66,718 )       (73,637 )
Acquisition of franchise restaurants, net of cash acquired     -         (16,528 )
    Net cash used in investing activities     (66,718 )       (90,165 )
           
Cash flows from financing activities:          
Principal payments on long-term debt and capital lease obligation     (50,004 )       (81 )
Dividends paid     (32,798 )       (28,308 )
Other financing activities, net     (12,152 )       (6,190 )
    Net cash used in financing activities     (94,954 )       (34,579 )
           
    Net increase in cash and cash equivalents     3,435         3,564  
Cash and cash equivalents - beginning of period     150,918         112,944  
Cash and cash equivalents - end of period   $ 154,353       $ 116,508  
           


 
Texas Roadhouse, Inc. and Subsidiaries
Reconciliation of Income from Operations to Restaurant Margin
(in thousands)
(unaudited)
                 
    13 Weeks Ended   26 Weeks Ended
    June 26, 2018   June 27, 2017   June 26, 2018   June 27, 2017
                 
Income from operations   $ 54,267     $ 54,214     $ 119,138     $ 103,236  
                 
Less:                
Franchise royalties and fees     5,164       4,102       10,467       8,468  
                 
Add:                
Pre-opening     4,107       5,014       9,151       9,754  
Depreciation and amortization     25,165       23,106       49,649       45,702  
Impairment and closure     22       -       108       11  
General and administrative     35,004       28,223       65,179       68,471  
                 
Restaurant margin   $ 113,401     $ 106,455     $ 232,758     $ 218,706  
                 
Restaurant margin (as a percentage of restaurant and other sales)     18.2 %     18.9 %     18.7 %     19.4 %
                 


 
Texas Roadhouse, Inc. and Subsidiaries
Supplemental Financial and Operating Information
($ amounts in thousands, except weekly sales by group)
(unaudited)
                               
      Second Quarter   Change     Year to Date   Change  
      2018   2017   vs LY     2018   2017   vs LY  
                               
Restaurant openings                          
  Company - Texas Roadhouse 4   5   (1)     10   11   (1)  
  Company - Bubba's 33 3   2   1     4   2   2  
  Company - Other 0   0   0     0   0   0  
  Franchise - Texas Roadhouse - U.S. 0   0   0     0   1   (1)  
  Franchise - Texas Roadhouse - International 1   0   1     3   1   2  
  Total 8   7   1     17   15   2  
                               
Restaurant acquisitions/dispositions                          
  Company - Texas Roadhouse 0   0   0     0   4   (4)  
  Franchise - Texas Roadhouse 0   0   0     0   (4)   4  
  Total 0   0   0     0   0   0  
                               
Restaurants open at the end of the quarter                          
  Company - Texas Roadhouse 450   428   22                
  Company - Bubba's 33 24   18   6                
  Company - Other 2   2   0                
  Franchise - Texas Roadhouse - U.S. 70   70   0                
  Franchise - Texas Roadhouse - International 20   14   6                
  Total 566   532   34                
                               
Company restaurants                          
  Restaurant and other sales $ 624,073   $ 562,160   11.0     $ 1,246,475   $ 1,125,480     10.8 
  Store weeks   6,142     5,775   6.4       12,190     11,456     6.4 
  Comparable restaurant sales growth (1)   5.7 %   4.0 %       5.3 %   3.6 %    
  Texas Roadhouse restaurants only:                          
    Comparable restaurant sales growth (1)   5.6 %   4.1 %       5.2 %   3.7 %    
    Average unit volume (2) $ 1,338   $ 1,274   5.0     $ 2,696   $ 2,575     4.7 
    Weekly sales by group:                  
    Comparable restaurants (412 units) $ 103,464                        
    Average unit volume restaurants (21 units) (3) $ 91,973                        
    Restaurants less than 6 months old (17 units) $ 105,386                        
                               
Restaurant operating costs (as a % of restaurant and other sales)                          
Cost of sales   32.7 %   32.9 % (24)  bps   32.6 %   32.8 %   (18)  bps
Labor   32.0 %   31.1 % 93  bps   31.7 %   30.6 %   110  bps
Rent     1.9 %   2.0 % (3)  bps   1.9 %   2.0 %   (3)  bps
Other operating   15.2 %   15.1 % 11  bps   15.0 %   15.1 %   (13)  bps
Total   81.8 %   81.1 % 77  bps   81.3 %   80.6 %   76  bps
                               
  Restaurant margin   18.2 %   18.9 % (77)  bps   18.7 %   19.4 %   (76)  bps
                               
  Restaurant margin ($ in thousands) $ 113,401   $ 106,455   6.5    $ 232,758   $ 218,706     6.4 
  Restaurant margin $/Store week $ 18,463   $ 18,434   0.2    $ 19,094   $ 19,091     0.0 
                               
Franchise restaurants                          
  Franchise royalties and fees $ 5,164   $ 4,102   25.9    $ 10,467   $ 8,468     23.6 
  Store weeks   1,164     1,092   6.6      2,303     2,172     6.1  %
  Comparable restaurant sales growth (1)   1.9 %   2.9 %       1.9 %   3.0 %    
  U.S. franchise restaurants only:                          
    Comparable restaurant sales growth (1)   3.9 %   3.6 %       4.0 %   3.8 %    
    Average unit volume (2) $ 1,373   $ 1,321   4.0    $ 2,771   $ 2,644     4.8  %
                               
Pre-opening expense $ 4,107   $ 5,014   (18.1)    $ 9,151   $ 9,754     (6.2)  %
                               
Depreciation and amortization $ 25,165   $ 23,106   8.9    $ 49,649   $ 45,702     8.6 
  As a % of revenue   4.0 %   4.1 % (8)  bps   3.9 %   4.0 %   (8)  bps
                               
General and administrative expenses $ 35,004   $ 28,223   24.0  %   $ 65,179   $ 68,471     (4.8)  %
  As a % of revenue   5.6 %   5.0 % 58  bps   5.2 %   6.0 %   (85)  bps
                               
(1)  Comparable restaurant sales growth reflects the change in year-over-year sales for restaurants open a full 18 months before the beginning of the period measured, excluding sales from restaurants closed during the period.  
 
(2)  Average unit volume includes sales from Texas Roadhouse restaurants open for a full six months before the beginning of the period measured, excluding any sales at restaurants closed during the period.  
(3)  Average unit volume restaurants include restaurants open a full six and up to 18 months before the beginning of the period measured.  
Amounts may not foot due to rounding.  
 

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