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Feb 20, 2018
Texas Roadhouse, Inc. Announces Fourth Quarter 2017 Results
Increases Quarterly Dividend 19.0% to $0.25 per Share

LOUISVILLE, Ky., Feb. 20, 2018 (GLOBE NEWSWIRE) -- Texas Roadhouse, Inc. (Nasdaq:TXRH), today announced financial results for the 13 and 52 week periods ended December 26, 2017. 

       
  Fourth Quarter   Year to Date
($000's) 2017 2016 % Change   2017 2016 % Change
               
Total revenue $   545,076 $   484,710 12.5%   $   2,219,531 $   1,990,714 11.5%
Income from operations 37,459 30,839 21.5%   186,206 171,900 8.3%
Net income 28,618 20,725 38.1%   131,526 115,598 13.8%
Diluted EPS $   0.40 $   0.29 37.0%   $   1.84 $   1.63 13.0%
                       

Results for the fourth quarter included the following highlights:  

  • Comparable restaurant sales increased 5.8% at company restaurants, including a positive impact of approximately 0.4% related to the calendar shift of the Christmas holiday, and 4.7% at domestic franchise restaurants;
  • Diluted earnings per share increased 37.0% to $0.40 from $0.29 in the prior year primarily due to restaurant margin performance and a lower income tax rate;
  • Restaurant margin dollars increased 11.9% to $92.2 million from $82.4 million in the prior year and restaurant margin, as a percentage of restaurant sales, decreased 11 basis points to 17.0%.  The decrease was primarily driven by labor inflation, partially offset by the benefit of lower food costs;
  • Our income tax rate decreased to 19.8% from 28.8% in the prior year primarily due to the impact of new tax legislation enacted in the current quarter, which resulted in a $3.1 million reduction in income tax expense, or $0.04 per diluted share; and
  • Seven company restaurants and two international franchise restaurants were opened.

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

  • Comparable restaurant sales increased 4.5% at company restaurants and 4.2% at domestic franchise restaurants;
  • Diluted earnings per share increased 13.0% to $1.84 from $1.63 in the prior year;
  • Restaurant margin dollars increased 10.2% to $406.4 million from $368.9 million in the prior year and restaurant margin, as a percentage of restaurant sales, decreased 24 basis points to 18.4%, primarily driven by labor inflation, partially offset by the benefit of lower food costs;
  • A pre-tax charge of $14.9 million ($9.2 million after-tax), or $0.13 per diluted share, was recorded in the first quarter of 2017, related to the settlement of a legal matter.  The impact of the legal charge was partially offset by a pre-tax charge recorded in 2016 of $7.3 million ($4.5 million after-tax), or $0.06 per diluted share, related to a separate legal matter;
  • Our income tax rate decreased to 26.1% from 29.8% in the prior year primarily due to the impact of new accounting rules adopted in 2017 related to share-based compensation and the impact of new tax legislation, which combined resulted in a $6.5 million reduction in income tax expense, or $0.09 per diluted share; and
  • 27 company restaurants, including four Bubba’s 33, and five franchise restaurants, including four international, were opened.             

Kent Taylor, Chief Executive Officer of Texas Roadhouse, Inc., commented, "We delivered another strong year of results, with double digit revenue and diluted earnings per share growth for both the fourth quarter and full year.  We achieved our 32nd consecutive quarter of positive comparable restaurant sales growth with comparable restaurant sales growth of 5.8% for the quarter, driven by strong traffic gains.  In addition, our solid balance sheet and healthy cash flow allowed us to open 27 restaurants this year while returning $58.2 million of excess capital to shareholders through our dividend program."

Taylor continued, “For 2018, our top-line momentum has continued with comparable restaurant sales growth of 4.7% during the first 55 days of the year.  In addition, our development pipeline is in great shape and we are on track to open approximately 30 company restaurants."

2018 Outlook

Comparable restaurant sales at company restaurants for the first 55 days of our first quarter of fiscal 2018 increased approximately 4.7% compared to the prior year period, including a positive impact of approximately 0.2% related to the calendar shift of the New Year’s holiday.

Management updated the following expectations for 2018:

  • An income tax rate of 15.0% to 16.0%; and
  • Total capital expenditures of approximately $165.0 million to $175.0 million.

Management reiterated the following expectations for 2018:

  • Positive comparable restaurant sales growth;
  • Approximately 30 company restaurant openings, including up to seven Bubba’s 33 restaurants;
  • Relatively flat food costs; and
  • Mid-single digit labor inflation.

Cash Dividend Payment

On February 16, 2018, our Board of Directors authorized the payment of a quarterly cash dividend of $0.25 per share of common stock.  This payment, which will be distributed on March 29, 2018 to shareholders of record at the close of business on March 14, 2018, represents a 19.0% increase from the cash dividend of $0.21 per share of common stock declared during each quarter of 2017.  Since the inception of our dividend program in 2011, our cash dividend per share of common stock has increased an average of 17.6% per year.

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 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, February 20, 2018 at 5:00 p.m. Eastern Time to discuss these results.  The dial-in number is (800) 239-9838 or (323) 794-2551 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 9967049 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 550 restaurants system-wide in 49 states and seven 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     52 Weeks Ended  
  December 26,
2017
      December 27,
2016
    December 26,
2017
      December 27,
2016
 
                           
Revenue:                          
Restaurant sales $   541,196       $   480,730     $   2,203,017       $   1,974,261  
Franchise royalties and fees   3,880         3,980       16,514         16,453  
                           
Total revenue   545,076         484,710       2,219,531         1,990,714  
                           
Costs and expenses:                          
Restaurant operating costs (excluding depreciation and amortization shown separately below):                          
Cost of sales   175,688         162,638       721,550         669,203  
Labor   173,258         147,395       687,545         590,256  
Rent   11,569         10,103       44,807         40,580  
Other operating   88,526         78,208       342,702         305,290  
Pre-opening   4,972         5,294       19,274         19,547  
Depreciation and amortization    24,263         22,246       93,499         82,964  
Impairment and closure   641         125       654         179  
General and administrative   28,700         27,862       123,294         110,795  
                           
Total costs and expenses   507,617         453,871       2,033,325         1,818,814  
                           
Income from operations   37,459         30,839       186,206         171,900  
                           
Interest expense, net   366         353       1,577         1,255  
Equity income from investments in unconsolidated affiliates   (339 )       (280 )     (1,488 )       (1,111 )
                           
Income before taxes   37,432         30,766       186,117         171,756  
Provision for income taxes   7,422         8,858       48,581         51,183  
                           
Net income including noncontrolling interests   30,010         21,908       137,536         120,573  
Less: Net income attributable to noncontrolling interests   1,392         1,183       6,010         4,975  
Net income attributable to Texas Roadhouse, Inc. and subsidiaries $   28,618       $   20,725     $   131,526       $   115,598  
                           
Net income per common share attributable to Texas Roadhouse, Inc. and subsidiaries:                          
Basic $   0.40       $   0.29     $   1.85       $   1.64  
Diluted $   0.40       $   0.29     $   1.84       $   1.63  
                           
Weighted average shares outstanding:                          
Basic   71,138         70,569       70,989         70,396  
Diluted   71,753         71,215       71,527         71,052  
                           
Cash dividends declared per share $   0.21       $   0.19     $   0.84       $   0.76  

 

 
Texas Roadhouse, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
         
         
         
    December 26, 2017   December 27, 2016
         
         
Cash and cash equivalents   $   150,918   $   112,944
Other current assets, net     106,163     87,315
Property and equipment, net     912,147     830,054
Goodwill     121,040     116,571
Intangible assets, net     2,700     3,622
Other assets     37,655     29,465
         
Total assets   $   1,330,623   $   1,179,971
         
         
Current maturities of long-term debt and obligation under capital lease     9     167
Other current liabilities     329,989     279,360
Long-term debt and obligation under capital lease, excluding current maturities      51,981     52,381
Other liabilities, net     97,253     89,821
Texas Roadhouse, Inc. and subsidiaries stockholders' equity     839,079     750,226
Noncontrolling interests      12,312     8,016
         
Total liabilities and equity   $   1,330,623   $   1,179,971
         

 

 
Texas Roadhouse, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
             
             
    52 Weeks Ended  
             
    December 26, 2017     December 27, 2016  
             
             
Cash flows from operating activities:            
Net income including noncontrolling interests   $   137,536     $   120,573  
Adjustments to reconcile net income to net cash provided by operating activities            
Depreciation and amortization     93,499       82,964  
Share-based compensation expense     26,934       26,067  
Other noncash adjustments, net     438       12,075  
Change in working capital     27,966       15,386  
Net cash provided by operating activities     286,373       257,065  
             
Cash flows from investing activities:            
Capital expenditures - property and equipment     (161,628 )     (164,738 )
Acquisition of franchise restaurants, net of cash acquired     (16,528 )     -   
Net cash used in investing activities     (178,156 )     (164,738 )
             
Cash flows from financing activities:            
Proceeds from revolving credit facility, net     -        25,000  
Repurchase shares of common stock     -        (4,110 )
Dividends paid     (58,154 )     (52,054 )
Other financing activities, net     (12,089 )     (7,553 )
Net cash used in financing activities     (70,243 )     (38,717 )
             
Net increase in cash and cash equivalents     37,974       53,610  
Cash and cash equivalents - beginning of period     112,944       59,334  
Cash and cash equivalents - end of period   $   150,918     $   112,944  
             

 

 
Texas Roadhouse, Inc. and Subsidiaries
Reconciliation of Income from Operations to Restaurant Margin
(in thousands)
(unaudited)
 
 
    13 Weeks Ended     52 Weeks Ended  
    December 26, 2017     December 27, 2016     December 26, 2017     December 27, 2016  
                         
Income from operations   $   37,459     $   30,839     $   186,206     $   171,900  
                         
Less:                        
Franchise royalties and fees     3,880       3,980       16,514       16,453  
                         
Add:                        
Pre-opening     4,972       5,294       19,274       19,547  
Depreciation and amortization     24,263       22,246       93,499       82,964  
Impairment and closure     641       125       654       179  
General and administrative     28,700       27,862       123,294       110,795  
                         
Restaurant margin   $   92,155     $   82,386     $   406,413     $   368,932  
                         
Restaurant margin (as a percentage of restaurant sales)   17.0 %   17.1 %   18.4 %   18.7 %
                         

 

     
Texas Roadhouse, Inc. and Subsidiaries    
Supplemental Financial and Operating Information    
($ amounts in thousands, except weekly sales by group)    
(unaudited)    
                               
                               
  Fourth Quarter   Change       Year to Date    Change    
  2017   2016   vs LY       2017   2016   vs LY    
                               
Restaurant openings                              
Company - Texas Roadhouse 7   5   2       23   21   2    
Company - Bubba's 33 0   4   (4)       4   9   (5)    
Company - Other 0   0   0       0   0   0    
Franchise - Texas Roadhouse - U.S. 0   0   0       1   1   0    
Franchise - Texas Roadhouse - International 2   1   1       4   3   1    
Total 9   10   (1)       32   34   (2)    
                               
Restaurant acquisitions/dispositions                              
Company - Texas Roadhouse 0   0   0       4   0   4    
Company - Bubba's 33 0   0   0       0   0   0    
Company - Other 0   0   0       0   0   0    
Franchise - Texas Roadhouse 0   0   0       (4)   0   (4)    
Total 0   0   0       0   0   0    
                               
Restaurants open at the end of the quarter                              
Company - Texas Roadhouse 440   413   27                    
Company - Bubba's 33 20   16   4                    
Company - Other 2   2   0                    
Franchise - Texas Roadhouse - U.S. 70   73   (3)                    
Franchise - Texas Roadhouse - International 17   13   4                    
Total 549   517   32                    
                               
Company restaurants                              
Restaurant sales $   541,196   $   480,730     12.6   %   $  2,203,017   $   1,974,261     11.6   %
Store weeks 5,950   5,544     7.3   %   23,274   21,583     7.8   %
Comparable restaurant sales growth (1) 5.8 % 1.2 %         4.5 % 3.5 %      
Texas Roadhouse restaurants only:                              
Comparable restaurant sales growth (1) 5.9 % 1.3 %         4.5 % 3.6 %      
Average unit volume (2) $   1,193   $   1,134     5.2   %   $   4,973   $   4,805     3.5   %
Weekly sales by group:                              
  Comparable restaurants (401 units) $   92,330                            
  Average unit volume restaurants (22 units) (3) $   81,165                            
  Restaurants less than 6 months old (17 units) $   90,504                            
                               
Restaurant operating costs (as a % of restaurant sales)                              
Cost of sales 32.5 % 33.8 %   (137 ) bps   32.8 % 33.9 %   (114 ) bps
Labor 32.0 % 30.7 %   135   bps   31.2 % 29.9 %   131   bps
Rent 2.1 % 2.1 %   4   bps   2.0 % 2.1 %   (2 ) bps
Other operating  16.4 % 16.3 %   9   bps   15.6 % 15.5 %   9   bps
Total  83.0 % 82.9 %   11   bps   81.6 % 81.3 %   24   bps
                               
Restaurant margin 17.0 % 17.1 %   (11 ) bps   18.4 % 18.7 %   (24 ) bps
Restaurant margin ($ in thousands) $   92,155   $   82,386     11.9   %   $   406,413   $   368,932     10.2   %
Restaurant margin $/Store week $   15,488   $   14,862     4.2   %   $   17,462   $   17,094     2.2   %
                               
Franchise restaurants                              
Franchise royalties and fees $   3,880   $   3,980     (2.5 ) %   $   16,514   $   16,453     0.4   %
Store weeks 1,117   1,108     0.9   %   4,381   4,360     0.5   %
Comparable restaurant sales growth (1) 2.9 % 0.8 %         2.9 % 2.0 %      
U.S. franchise restaurants only:                              
Comparable restaurant sales growth (1) 4.7 % 2.0 %         4.2 % 3.3 %      
Average unit volume (2) $   1,224   $   1,158     5.7   %   $   5,076   $   4,878     4.0   %
                               
Pre-opening expense $   4,972   $   5,294     (6.1 ) %   $   19,274   $   19,547     (1.4 ) %
                               
Depreciation and amortization  $   24,263   $   22,246     9.1   %   $   93,499   $   82,964     12.7   %
As a % of revenue  4.5 % 4.6 %   (14 ) bp   4.2 % 4.2 %   5   bps
                               
General and administrative expenses  $   28,700   $   27,862     3.0   %   $   123,294   $   110,795     11.3   %
As a % of revenue 5.3 % 5.7 %   (48 ) bps   5.6 % 5.6 %   (1 ) 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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Source: Texas Roadhouse, Inc

INVESTOR RELATIONS

Tonya Robinson
VP, Finance & Investor Relations
Texas Roadhouse, Inc.
Phone: (502) 426-9984