February 21, 2017

Texas Roadhouse, Inc. Announces Fourth Quarter 2016 Results Increases Quarterly Dividend 10.5% to $0.21 per Share

LOUISVILLE, Ky.--(BUSINESS WIRE)-- Texas Roadhouse, Inc. (NasdaqGS: TXRH), today announced financial results for the 13 and 52 week periods ended December 27, 2016.

     

Fourth Quarter

    Year to Date
($000's)

2016

   

2015

   

% Change

2016

   

2015

   

% Change

 
Total revenue $ 484,710 $ 454,351 7 % $ 1,990,714 $ 1,807,368 10 %
Income from operations 30,839 33,713 (9 %) 171,900 144,565 19 %
Net income 20,725 22,982 (10 %) 115,598 96,894 19 %
Diluted EPS $ 0.29 $ 0.32 (10 %) $ 1.63 $ 1.37 19 %
 

Results for the fourth quarter included the following highlights:

  • Comparable restaurant sales growth of 1.2% at company restaurants, including a negative impact of approximately 0.5% related to the calendar shift of the Christmas holiday, and 2.0% at domestic franchise restaurants;
  • Restaurant margin, as a percentage of restaurant sales, decreased 44 basis points to 17.1%. Wage rate inflation and higher costs associated with payroll taxes, insurance reserve adjustments and gift card fees more than offset the benefit of lower food costs;
  • Restaurant margin dollars increased 4.0% to $82.4 million from $79.2 million in the prior year;
  • Diluted earnings per share decreased 10.3% to $0.29 from $0.32 in the prior year primarily due to restaurant margin performance, higher general and administrative expenses and higher depreciation costs; and
  • Nine company-owned restaurants were opened, including four Bubba's 33 restaurants.

Results for the full year included the following highlights:

  • Comparable restaurant sales growth of 3.5% at company restaurants and 3.3% at domestic franchise restaurants;
  • Restaurant margin, as a percentage of restaurant sales, increased 134 basis points to 18.7%. The benefit of lower food costs more than offset the impact of higher wage rate inflation;
  • Restaurant margin dollars increased 18.7% to $368.9 million from $310.8 million in the prior year;
  • Diluted earnings per share increased 18.8% to $1.63 from $1.37 in the prior year. During fiscal 2016, we recorded a pre-tax charge of $7.3 million ($4.5 million after-tax) related to a legal settlement which had a $0.06 impact on diluted earnings per share and a 4.6% impact on diluted earnings per share growth;
  • 30 company-owned restaurants were opened, including nine Bubba's 33 restaurants; and
  • We repurchased 114,700 shares of our common stock for $4.1 million.

Kent Taylor, Chief Executive Officer of Texas Roadhouse, Inc., commented, "We are pleased to deliver another strong year of results including a 19% increase in diluted earnings per share driven by double-digit revenue growth and restaurant margin expansion. We also delivered impressive comparable restaurant sales growth during 2016 with an increase of 3.5%, and we extended our streak of consecutive quarters of comparable restaurant sales growth to 28 with our fourth quarter increase. Lastly, our strong balance sheet and healthy cash flows allowed us to return $56.2 million of excess capital to shareholders through quarterly dividend payments and share repurchases during 2016."

Taylor continued, "In 2017, we expect to open approximately 30 company restaurants and seven franchise restaurants this year, which is over 7% growth system-wide. Going forward, the strength of our brand continues to be our people and our operational focus on delivering legendary food and legendary service."

Franchise Acquisition

Effective December 28, 2016, we acquired four franchise restaurants in Florida and Georgia for an aggregate purchase price of $16.8 million. The purchase price was paid in cash. Going forward, two of the restaurants will be wholly-owned, while two will be majority-owned. The acquisition did not have a net revenue or accretive impact in 2016 as it occurred on the first day of our 2017 fiscal year.

2017 Outlook

Comparable restaurant sales at company restaurants for the first 55 days of our first quarter of fiscal 2017 increased approximately 1.5% compared to the prior year period.

Management updated the following expectations for 2017:

  • Approximately 30 company restaurant openings, including approximately six Bubba's 33 restaurants;
  • Food cost deflation of approximately 1.0% to 2.0% compared to previous guidance of low-single digit food cost deflation; and
  • An income tax rate of 29.0% to 30.0% compared to previous guidance of 30.0% to 31.0%.

Management reiterated the following expectations for 2017:

  • Positive comparable restaurant sales growth;
  • Mid-single digit labor inflation; and
  • Total capital expenditures of approximately $170.0 million, excluding any cash used for franchise acquisitions.

Cash Dividend Payment

On February 16, 2017, our Board of Directors authorized the payment of a quarterly cash dividend of $0.21 per share of common stock. This payment, which will be distributed on March 31, 2017 to shareholders of record at the close of business on March 15, 2017, represents a 10.5% increase from the cash dividend of $0.19 per share of common stock declared during each quarter of 2016. Since the inception of our dividend program in 2011, our cash dividend per share of common stock has increased an average of 17.5% per year.

Conference Call

We will host a conference call today, February 21, 2017 at 5:00 p.m. Eastern Time to discuss these results. The dial-in number is (800)949-2163 or (719)785-1748 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 6581484 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 operates over 520 restaurants system-wide in 49 states and six foreign countries. For more information, please visit our 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 our management. 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 restaurant openings; 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 other concepts we develop or the franchise restaurants we acquire; 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.

 
 
 
 
 
Texas Roadhouse, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(in thousands, except per share data)
(unaudited)
                     
13 Weeks Ended 52 Weeks Ended

December 27,

2016

December 29,

2015

December 27,

2016

December 29,

2015

 
Revenue:
Restaurant sales $ 480,730 $ 450,529 $ 1,974,261 $ 1,791,446
Franchise royalties and fees   3,980   3,822   16,453   15,922
 
Total revenue   484,710   454,351   1,990,714   1,807,368
 
Costs and expenses:
Restaurant operating costs (excluding depreciation and amortization shown separately below):
 
Cost of sales 162,638 159,301 669,203 644,001
Labor 147,395 131,517 590,256 524,203
Rent 10,103 9,741 40,580 37,183
Other operating 78,208 70,773 305,290 275,296
Pre-opening 5,294 4,640 19,547 19,116
Depreciation and amortization 22,246 18,700 82,964 69,694
Impairment and closure 125 974 179 974
General and administrative   27,862   24,992   110,795   92,336
 
Total costs and expenses   453,871   420,638   1,818,814   1,662,803
 
Income from operations 30,839 33,713 171,900 144,565
 
Interest expense, net 353 479 1,255 1,959

Equity income from investments in unconsolidated affiliates

  280   353   1,111   1,641
 
Income before taxes 30,766 33,587 171,756 144,247
Provision for income taxes   8,858   9,567   51,183   42,986
 
Net income including noncontrolling interests $ 21,908 $ 24,020 $ 120,573 $ 101,261
Less: Net income attributable to noncontrolling interests   1,183   1,038   4,975   4,367
Net income attributable to Texas Roadhouse, Inc. and subsidiaries $ 20,725 $ 22,982 $ 115,598 $ 96,894
 

Net income per common share attributable to Texas Roadhouse, Inc. and subsidiaries:

Basic $ 0.29 $ 0.33 $ 1.64 $ 1.38
Diluted $ 0.29 $ 0.32 $ 1.63 $ 1.37
 
Weighted average shares outstanding:
Basic   70,569   70,143   70,396   70,032
Diluted   71,215   70,865   71,052   70,747
 
Cash dividends declared per share $ 0.19 $ 0.17 $ 0.76 $ 0.68
 
 
 
 
 
 
 
Texas Roadhouse, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
         

December 27,

2016

December 29,

2015

 
 
Cash and cash equivalents $ 112,944 $ 59,334
Other current assets 87,315 74,479
Property and equipment, net 830,054 751,288
Goodwill 116,571 116,571
Intangible assets, net 3,622 4,827
Other assets 29,465 26,207
   
Total assets $ 1,179,971 $ 1,032,706
 
 
Current maturities of long-term debt and obligation under capital lease 167 144
Other current liabilities 279,360 256,498
Long-term debt and obligation under capital lease, excluding current maturities 52,381 25,550
Other liabilities 89,821 73,332
Texas Roadhouse, Inc. and subsidiaries stockholders' equity 750,226 669,662
Noncontrolling interests 8,016 7,520
   
Total liabilities and equity $ 1,179,971 $ 1,032,706
 
 
 
 
 
 
 
Texas Roadhouse, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
         
52 Weeks Ended

December 27,

2016

 

December 29,

2015

 
 
Cash flows from operating activities:
Net income including noncontrolling interests $ 120,573 $ 101,261
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization 82,964 69,694
Share-based compensation expense 26,067 22,825
Other noncash adjustments 12,075 5,697
Change in working capital   15,386     28,464  
Net cash provided by operating activities   257,065     227,941  
 
Cash flows from investing activities:
Capital expenditures - property and equipment (164,738 ) (173,475 )
Proceeds from sale of property and equipment, including insurance proceeds   -     272  
Net cash used in investing activities   (164,738 )   (173,203 )
 
Cash flows from financing activities:
Proceeds from (payments on) revolving credit facility, net 25,000 (25,000 )
Repurchase shares of common stock (4,110 ) (11,397 )
Dividends paid (52,054 ) (46,176 )
Other financing activities   (7,553 )   1,047  
Net cash used in financing activities   (38,717 )   (81,526 )
 
Net increase (decrease) in cash and cash equivalents 53,610 (26,788 )
Cash and cash equivalents - beginning of period   59,334     86,122  
Cash and cash equivalents - end of period $ 112,944   $ 59,334  
 
 
 
 
 
 
 
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

2016

2015

vs LY

2016

2015

vs LY

 
Restaurant openings
Company - Texas Roadhouse 5 7 (2 ) 21 24 (3 )
Company - Bubba's 33 4 0 4 9 4 5
Company - Other 0 0 0 0 1 (1 )
Franchise - Texas Roadhouse - U.S. 0 0 0 1 2 (1 )
Franchise - Texas Roadhouse - International 1 1 0 3 1 2
Total 10 8 2 34 32 2
 
Restaurants open at the end of the quarter
Company - Texas Roadhouse 413 392 21
Company - Bubba's 33 16 7 9
Company - Other 2 2 0
Franchise - Texas Roadhouse - U.S. 73 72 1
Franchise - Texas Roadhouse - International 13 10 3
Total 517 483 34
 
Company-owned restaurants
Restaurant sales $ 480,730 $ 450,529 6.7 % $ 1,974,261 $ 1,791,446 10.2 %
Store weeks 5,544 5,186 6.9 % 21,583 20,020 7.8 %
Comparable restaurant sales growth (1) 1.2 % 4.5 % 3.5 % 7.2 %
Texas Roadhouse restaurants only:
Comparable restaurant sales growth (1) 1.3 % 4.5 % 3.6 % 7.2 %
Average unit volume (2) $ 1,133 $ 1,130 0.3 % $ 4,802 $ 4,664 3.0 %
Weekly sales by group:
Comparable restaurants (370 units) $ 88,003
Average unit volume restaurants (27 units) (3) $ 75,330
Restaurants less than 6 months old (16 units) $ 88,912
 

Restaurant operating costs (as a % of restaurant sales)

Cost of sales 33.8 % 35.4 %

(153) bps

33.9 % 35.9 %

(205) bps

Labor 30.7 % 29.2 %

147 bps

29.9 % 29.3 %

64 bps

Rent 2.1 % 2.2 %

(6) bps

2.1 % 2.1 %

(2) bps

Other operating 16.3 % 15.7 %

56 bps

15.5 % 15.4 %

10 bps

Total 82.9 % 82.4 %

44 bps

81.3 % 82.7 %

(134) bps

 
Restaurant margin (4) 17.1 % 17.6 %

(44) bps

18.7 % 17.3 %

134 bps

 
Restaurant margin $ ($ in thousands) (4) $ 82,387 $ 79,196 4.0 % $ 368,933 $ 310,762 18.7 %
Restaurant margin $ (4)/Store week $ 14,862 $ 15,272 (2.7 )% $ 17,094 $ 15,523 10.1 %
 
Franchise-owned restaurants
Franchise royalties and fees $ 3,980 $ 3,822 4.1 % $ 16,453 $ 15,922 3.3 %
Store weeks 1,108 1,062 4.3 % 4,360 4,174 4.5 %
Comparable restaurant sales growth (1) 0.8 % 4.0 % 2.0 % 6.5 %
U.S. franchise restaurants only:
Comparable restaurant sales growth (1) 2.0 % 4.4 % 3.3 % 7.1 %
Average unit volume (2) $ 1,181 $ 1,164 1.4 % $ 4,929 $ 4,799 2.7 %
 
Pre-opening expense $ 5,294 $ 4,640 14.1 % $ 19,547 $ 19,116 2.3 %
 
Depreciation and amortization $ 22,246 $ 18,700 19.0 % $ 82,964 $ 69,694 19.0 %
As a % of revenue 4.6 % 4.1 %

47 bps

4.2 % 3.9 %

31 bps

 
General and administrative expenses $ 27,862 $ 24,992 11.5 % $ 110,795 $ 92,336 20.0 %
As a % of revenue 5.7 % 5.5 %

25 bps

5.6 % 5.1 %

46 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 to 18 months before the beginning of the period measured.
(4) Restaurant margin (in dollars and as a percentage of restaurant sales) represents restaurant sales less restaurant operating costs, including cost of sales, labor, rent and other operating costs. Depreciation and amortization expense, substantially all of which relates to restaurant-level assets, is excluded from restaurant operating costs. Restaurant margin is widely regarded in the restaurant industry as a useful metric by which to evaluate restaurant-level operating efficiency and performance. Restaurant margin is not a measurement determined in accordance with GAAP and should not be considered in isolation, or as an alternative, to income from operations or other similarly titled measures of other companies.
 
Amounts may not foot due to rounding.
 
 
 

Texas Roadhouse, Inc.
Investor Relations:
Tonya Robinson, 502-515-7269
or
Media:
Travis Doster, 502-638-5457

Source: Texas Roadhouse, Inc.

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