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Texas Roadhouse, Inc. Announces Second Quarter 2019 Results

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LOUISVILLE, Ky., July 29, 2019 (GLOBE NEWSWIRE) -- Texas Roadhouse, Inc. (NASDAQ:TXRH), today announced financial results for the 13 and 26 week periods ended June 25, 2019. 

       
  Second Quarter   Year to Date
($000's)   2019     2018   % Change     2019   2018 % Change
                   
Total revenue $   689,828   $   629,237   9.6 %   $   1,380,436 $   1,256,942 9.8 %
Income from operations   53,283     54,267   (1.8 %)     113,728   119,138 (4.5 %)
Net income   44,845     44,227   1.4 %     95,235   98,768 (3.6 %)
Diluted EPS $   0.63   $   0.62   1.6 %   $   1.32 $   1.37 (3.7 %)
                   

 

Results for the second quarter included the following highlights:  

  • Comparable restaurant sales increased 4.7% at company restaurants and 4.3% at domestic franchise restaurants;
  • Restaurant margin, as a percentage of restaurant and other sales, decreased 53 basis points to 17.6%, primarily due to higher labor costs driven by wage rate and other inflation, partially offset by lower cost of sales as the benefit of a higher average check more than offset inflation.  Restaurant margin dollars increased 6.5% to $120.8 million from $113.4 million in the prior year;
  • Diluted earnings per share increased to $0.63 from $0.62 in the prior year primarily due to higher restaurant margin dollars along with lower income taxes partially offset by higher general and administrative expenses and higher depreciation and amortization expense;
  • Three Texas Roadhouse company restaurants were opened and two franchise restaurants were opened; and
  • The Board of Directors approved a stock repurchase program which authorized the repurchase of up to $250 million of common stock.  The Company repurchased 2,096,677 shares of common stock for $112.1 million. 

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

  • Comparable restaurant sales increased 5.0% at company restaurants and 4.3% at domestic franchise restaurants;
  • Restaurant margin, as a percentage of restaurant and other sales, decreased 90 basis points to 17.8% primarily due to higher labor costs driven by wage rate and other inflation.  Restaurant margin dollars increased 4.6% to $243.4 million from $232.8 million in the prior year;
  • Diluted earnings per share decreased to $1.32 from $1.37 primarily due to higher general and administrative expenses and higher depreciation and amortization expense, partially offset by higher restaurant margin dollars; and
  • Seven Texas Roadhouse company restaurants were opened and four franchise restaurants were opened.

Kent Taylor, Chief Executive Officer of Texas Roadhouse, Inc., commented, "We are pleased with our continued top-line momentum highlighted by positive comparable restaurant sales of 4.7%.  While restaurant margins continue to be pressured by higher labor costs driven by increasing wage rates and other inflation, the additional pricing we put in place at the beginning of the quarter provided a significant benefit."

Taylor continued, "On the development front, we have opened 10 company restaurants so far this year.  We have experienced some construction delays that we expect will push some sites into early next year but remain focused on opening approximately 15 additional locations in 2019.  Finally, our healthy cash flows enabled us to repurchase over 2 million shares of our common stock this quarter.  We believe these share buy backs and our dividend program reflect our commitment to further driving shareholder value."

2019 Outlook

Comparable restaurant sales at company restaurants for the first four weeks of our third quarter of fiscal 2019 increased approximately 4.3% compared to the prior year period.

Management updated the following expectations for 2019:

  • Approximately 25 company restaurant openings, including as many as four Bubba's 33 restaurants;
  • An income tax rate of 14.0% to 15.0%; and
  • Total capital expenditures of approximately $210 million.

Management reiterated the following expectations for 2019:

  • Positive comparable restaurant sales growth;
  • Commodity cost inflation of approximately 1.0% to 2.0%; and
  • Approximately 7.0% to 8.0% growth in total labor dollars per store week.

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 29, 2019 at 5:00 p.m. Eastern Time to discuss these results.  The dial-in number is (877) 699-0953 or (647) 689-5456 for international calls.  A replay of the call will be available for one week following the conference call.  To access the replay, please dial (800) 585-8367 or (416) 621-4642 for international calls, and use 5154796 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 590 restaurants system-wide in 49 states and ten 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 25, 2019   June 26, 2018   June 25, 2019   June 26, 2018
                       
Revenue:                  
  Restaurant and other sales $   684,373     $   624,073     $   1,369,490     $   1,246,475  
  Franchise royalties and fees     5,455         5,164         10,946         10,467  
                       
Total revenue     689,828         629,237         1,380,436         1,256,942  
                       
Costs and expenses:                  
  Restaurant operating costs (excluding depreciation and amortization shown separately below):                  
    Cost of sales     221,266         204,048         444,978         406,834  
    Labor     225,490         199,647         449,370         395,677  
    Rent     13,051         12,119         26,179         23,970  
    Other operating     103,811         94,858         205,613         187,236  
  Pre-opening     4,197         4,107         8,065         9,151  
  Depreciation and amortization     28,454         25,165         56,227         49,649  
  Impairment and closure     316         22         333         108  
  General and administrative     39,960         35,004         75,943         65,179  
                       
Total costs and expenses     636,545         574,970         1,266,708         1,137,804  
                       
Income from operations     53,283         54,267         113,728         119,138  
                       
Interest income (expense), net     691         (283 )       1,445         (642 )
Equity income from investments in                  
  unconsolidated affiliates     141         445         254         769  
                       
Income before taxes     54,115         54,429         115,427         119,265  
Provision for income taxes     7,427         8,466         16,546         16,923  
                       
Net income including noncontrolling interests     46,688         45,963         98,881         102,342  
Less: Net income attributable to noncontrolling interests     1,843         1,736         3,646         3,574  
Net income attributable to Texas Roadhouse, Inc. and subsidiaries $   44,845     $   44,227     $   95,235     $   98,768  
                       
Net income per common share attributable to Texas Roadhouse, Inc.                  
  and subsidiaries:                  
  Basic $   0.63     $   0.62     $   1.33     $   1.38  
  Diluted $   0.63     $   0.62     $   1.32     $   1.37  
                       
Weighted average shares outstanding:                  
  Basic     71,362         71,445         71,558         71,389  
  Diluted     71,733         71,897         71,961         71,853  
                       
Cash dividends declared per share $   0.30     $   0.25     $   0.60     $   0.50  
                             


 
Texas Roadhouse, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
           
    June 25, 2019   December 25, 2018
           
           
  Cash and cash equivalents $   144,839     $   210,125  
  Other current assets, net     72,589         134,894  
  Property and equipment, net     991,339         956,676  
  Operating lease right-of-use asset, net     485,818         -   
  Goodwill     123,220         123,220  
  Intangible assets, net     1,513         1,959  
  Other assets     49,533         42,402  
           
  Total assets $   1,868,851     $   1,469,276  
           
           
  Other current liabilities     359,065         385,142  
  Operating lease liabilities, net of current portion     521,820         -   
  Other liabilities, net     82,348         123,426  
  Texas Roadhouse, Inc. and subsidiaries stockholders' equity     890,852         945,569  
  Noncontrolling interests     14,766         15,139  
           
  Total liabilities and equity $   1,868,851     $   1,469,276  
           
           
  Note:  Beginning in 2019, we adopted Accounting Standards Codification 842, Leases, which requires the recognition of an operating lease right-of-use asset and operating lease liability for virtually all leases.
                 


 
Texas Roadhouse, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
             
             
      26 Weeks Ended
           
      June 25, 2019   June 26, 2018
             
             
Cash flows from operating activities:        
Net income including noncontrolling interests $   98,881       $   102,342  
Adjustments to reconcile net income to net cash provided by operating activities        
  Depreciation and amortization     56,227           49,649  
  Share-based compensation expense     16,873           15,856  
  Other noncash adjustments, net     (27 )         7,076  
Change in working capital     15,062           (9,816 )
    Net cash provided by operating activities     187,016           165,107  
             
Cash flows from investing activities:        
Capital expenditures - property and equipment     (87,782 )         (66,718 )
    Net cash used in investing activities     (87,782 )         (66,718 )
             
Cash flows from financing activities:        
Principal payments on long-term debt and capital lease obligation     -            (50,004 )
Repurchase shares of common stock     (112,050 )         -   
Dividends paid     (39,452 )         (32,798 )
Other financing activities, net     (13,018 )         (12,152 )
    Net cash used in financing activities     (164,520 )         (94,954 )
             
    Net (decrease) increase in cash and cash equivalents     (65,286 )         3,435  
Cash and cash equivalents - beginning of period     210,125           150,918  
Cash and cash equivalents - end of period $   144,839       $   154,353  
             


 
Texas Roadhouse, Inc. and Subsidiaries
Reconciliation of Income from Operations to Restaurant Margin
(in thousands)
(unaudited)
               
  13 Weeks Ended   26 Weeks Ended
  June 25, 2019   June 26, 2018   June 25, 2019   June 26, 2018
               
Income from operations $   53,283     $   54,267     $   113,728     $   119,138  
               
Less:              
Franchise royalties and fees     5,455         5,164         10,946         10,467  
               
Add:              
Pre-opening     4,197         4,107         8,065         9,151  
Depreciation and amortization     28,454         25,165         56,227         49,649  
Impairment and closure     316         22         333         108  
General and administrative     39,960         35,004         75,943         65,179  
               
Restaurant margin $   120,755     $   113,401     $   243,350     $   232,758  
               
Restaurant margin (as a percentage of restaurant and other sales)   17.6 %     18.2 %     17.8 %     18.7 %
               


 
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  
        2019     2018   vs LY     2019     2018   vs LY  
                         
Restaurant openings                    
  Company - Texas Roadhouse   3     4   (1 )     7     10   (3 )  
  Company - Bubba's 33   0     3   (3 )     0     4   (4 )  
  Company - Other   0     0   0       0     0   0    
  Franchise - Texas Roadhouse - U.S.   1     0   1       1     0   1    
  Franchise - Texas Roadhouse - International   1     1   0       3     3   0    
  Total   5     8   (3 )     11     17   (6 )  
                         
Restaurant closures                    
  Franchise - Texas Roadhouse - International   (2 )   0   (2 )     (2 )   0   (2 )  
  Total   (2 )   0   (2 )     (2 )   0   (2 )  
                         
Restaurants open at the end of the quarter                    
  Company - Texas Roadhouse   471     450   21              
  Company - Bubba's 33   25     24   1              
  Company - Other   2     2   0              
  Franchise - Texas Roadhouse - U.S.   70     70   0              
  Franchise - Texas Roadhouse - International   23     20   3              
  Total   591     566   25              
                         
Company restaurants                    
  Restaurant and other sales $   684,373   $   624,073     9.7 %   $   1,369,490   $   1,246,475     9.9 %  
  Store weeks   6,460     6,142     5.2 %     12,846     12,190     5.4 %  
  Comparable restaurant sales growth (1)   4.7 %   5.7 %         5.0 %   5.3 %      
  Texas Roadhouse restaurants only:                    
    Comparable restaurant sales growth (1)   4.6 %   5.6 %         4.9 %   5.2 %      
    Average unit volume (2) $   1,393   $   1,337     4.2 %   $   2,812   $   2,695     4.4 %  
    Weekly sales by group:            
      Comparable restaurants (434 units) $   107,590                    
      Average unit volume restaurants (20 units) (3) $   98,426                    
      Restaurants less than 6 months old (17 units) $   115,233                    
                         
Restaurant operating costs (as a % of restaurant and other sales)                    
Cost of sales   32.3 %   32.7 %   (37 ) bps   32.5 %   32.6 %   (15 ) bps
Labor   32.9 %   32.0 %   96   bps   32.8 %   31.7 %   107   bps
Rent     1.9 %   1.9 %   (4 ) bps   1.9 %   1.9 %   (1 ) bps
Other operating   15.2 %   15.2 %   (3 ) bps   15.0 %   15.0 %   (1 ) bps
Total   82.4 %   81.8 %   53   bps   82.2 %   81.3 %   90   bps
                         
  Restaurant margin   17.6 %   18.2 %   (53 ) bps   17.8 %   18.7 %   (90 ) bps
                         
  Restaurant margin ($ in thousands) $   120,755   $   113,401     6.5 %   $   243,350   $   232,758     4.6 %  
  Restaurant margin $/Store week $   18,692   $   18,463     1.2 %   $   18,943   $   19,094     (0.8 )%  
                         
Franchise restaurants                    
  Franchise royalties and fees $   5,455   $   5,164     5.6 %   $   10,946   $   10,467     4.6 %  
  Store weeks   1,208     1,164     3.8 %     2,403     2,303     4.3 %  
  Comparable restaurant sales growth (1)   3.7 %   1.9 %         3.3 %   1.9 %      
  U.S. franchise restaurants only:                                
    Comparable restaurant sales growth (1)   4.3 %   3.9 %         4.3 %   4.0 %      
    Average unit volume (2) $   1,436   $   1,376     4.3 %   $   2,897   $   2,777     4.3 %  
                         
Pre-opening expense $   4,197   $   4,107     2.2 %   $   8,065   $   9,151     (11.9 )%  
                         
Depreciation and amortization $   28,454   $   25,165     13.1 %   $   56,227   $   49,649     13.2 %  
  As a % of revenue   4.1 %   4.0 %   13   bps   4.1 %   3.9 %   12   bps
                         
General and administrative expenses $   39,960   $   35,004     14.2 %   $   75,943   $   65,179     16.5 %  
  As a % of revenue   5.8 %   5.6 %   23   bps   5.5 %   5.2 %   32   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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