July 29, 2013

Texas Roadhouse, Inc. Announces Second Quarter 2013 Results

LOUISVILLE, Ky.--(BUSINESS WIRE)-- Texas Roadhouse, Inc. (NasdaqGS: TXRH), today announced financial results for the 13 and 26 week periods ended June 25, 2013.

      Second Quarter       Year to Date
($000's) 2013     2012     % Change 2013     2012     % Change
 
Total revenue 352,119 320,275 10 711,795 645,144 10
Income from operations (a) 29,797 31,247 (5) 67,965 60,649 12
Net income (a) 19,963 20,310 (2) 46,134 39,179 18
Diluted EPS (a) $0.28 $0.28 (1) $0.65 $0.55 18
 
(a) 2012 YTD includes a charge related to a legal settlement discussed below.
 

Results for the second quarter included:

  • Diluted earnings per share remained relatively flat at $0.28 compared to the prior year period;
  • Comparable restaurant sales increased 4.5% at company restaurants and 5.3% at franchise restaurants;
  • Seven company restaurants and one franchise restaurant were opened;
  • Restaurant margin, as a percentage of restaurant sales, decreased 47 basis points to 18.6% primarily due to higher commodity costs; and
  • Higher than average spending on the Company's annual managing partner conference, which marked its 20th anniversary, impacted year-over-year operating results for the quarter as costs were $2.3 million higher compared to the prior year period.

Results for the year-to-date included:

  • Excluding the impact of a prior year charge, diluted earnings per share increased 9.7% to $0.65 from $0.59 in the prior year. The year-to-date 2012 results included a pre-tax charge of $5.0 million ($3.1 million after-tax) which had a negative $0.04 impact on diluted earnings per share;
  • Comparable restaurant sales increased 4.1% at company restaurants and 4.5 % at franchise restaurants;
  • 10 company and three franchise restaurants were opened;
  • Restaurant margin, as a percentage of restaurant sales, decreased 32 basis points to 18.8%; and
  • Costs associated with the Company's annual managing partner conference were $2.4 million higher compared to the prior year period.

Kent Taylor, Chief Executive Officer of Texas Roadhouse, Inc., commented, "We are pleased with our top-line momentum, which resulted in another quarter of solid revenue growth led by positive comparable restaurant sales. Our new restaurants continue to generate solid returns, and we are still generating sufficient cash flows to not only fund our restaurant growth, but also enhance our existing assets and return capital to shareholders. We are confident that our relentless focus on legendary food and service is the best way to continue driving market share gains in this economic environment."

2013 Outlook

The Company reported that comparable restaurant sales at company restaurants for the first four weeks of its third quarter of fiscal 2013 increased 1.9% compared to the prior year period.

Management provided the following expectations for 2013:

  • Positive comparable restaurant sales growth;
  • Approximately 28 company restaurant openings;
  • Food cost inflation of 6.5% to 7.0%, which is updated from the previous expectation of 6.0% to 7.0%;
  • An income tax rate of 30.0% to 30.5% which is lower than the previous expectation of approximately 31.0%; and
  • Total capital expenditures of $100.0 to $105.0 million.

Conference Call

The Company is hosting a conference call today, July 29, 2013, at 5:00 p.m. Eastern Time to discuss these results. The dial-in number is (888) 277-7114 or (913) 312-6667 for international calls. A replay of the call will be available for one week following the conference call. To access the replay, please dial (877) 870 -5176 or (858) 384-5517 for international calls, and use 6656022 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 400 restaurants system-wide in 48 states and two 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 the Company. 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, our ability to continue our share repurchase program and pay a quarterly cash dividend; strength of consumer spending; pending or future legal claims; conditions beyond our control such as weather, natural disasters, disease outbreaks, epidemics or pandemics impacting our customers or food supplies; 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 26 Weeks Ended
June 25, 2013 June 26, 2012 June 25, 2013 June 26, 2012
 
Revenue:
Restaurant sales $ 348,929 $ 317,546 $ 705,493 $ 639,558
Franchise royalties and fees   3,190   2,729   6,302   5,586
 
Total revenue   352,119   320,275   711,795   645,144
 
Costs and expenses:
Restaurant operating costs (excluding depreciation and amortization shown separately below):
 
Cost of sales 120,212 106,860 244,764 216,515
Labor 101,723 93,235 203,384 186,582
Rent 7,152 6,379 14,209 12,631
Other operating 54,989 50,555 110,767 101,784
Pre-opening 4,240 2,780 7,064 6,365
Depreciation and amortization 12,190 11,546 24,402 22,893
Impairment and closure 27 20 84 39
General and administrative (1)   21,789   17,653   39,156   37,686
 
Total costs and expenses   322,322   289,028   643,830   584,495
 
Income from operations (1) 29,797 31,247 67,965 60,649
 
Interest expense, net 567 568 1,162 1,173
Equity income from investments in
unconsolidated affiliates   218   121   398   162
 
Income before taxes (1) 29,448 30,800 67,201 59,638
Provision for income taxes   8,583   9,952   19,117   19,037
 
Net income including noncontrolling interests (1) $ 20,865 $ 20,848 $ 48,084 $ 40,601
Less: Net income attributable to noncontrolling interests   902   538   1,950   1,422
Net income attributable to Texas Roadhouse, Inc. and subsidiaries (1) $ 19,963 $ 20,310 $ 46,134 $ 39,179
 
Net income per common share attributable to Texas Roadhouse, Inc.
and subsidiaries:
Basic $ 0.29 $ 0.29 $ 0.66 $ 0.56
Diluted $ 0.28 $ 0.28 $ 0.65 $ 0.55
 
Weighted average shares outstanding:
Basic   70,030   70,129   69,693   69,763
Diluted   71,267   71,587   70,924   71,247
 

(1) Results for the 26 weeks ended June 26, 2012 include a $5.0 million charge ($3.1 million after-tax) relating to the settlement of a legal matter. The settlement charge is included in general and administrative costs.

       
Texas Roadhouse, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
 
June 25, 2013 December 25, 2012
 
 
Cash and cash equivalents $ 100,117 $ 81,746
Other current assets 33,353 40,726
Property and equipment, net 542,211 531,654
Goodwill 113,454 113,435
Intangible assets, net 8,283 9,264
Other assets 15,983 14,429
   
Total assets $ 813,401 $ 791,254
 
 
Current maturities of long-term debt
and obligations under capital leases 317 338
Other current liabilities 132,987 158,324
Long-term debt and obligations under
capital leases, excluding current maturities 51,120 51,264
Other liabilities 52,800 50,591
Texas Roadhouse, Inc. and subsidiaries stockholders' equity 570,380 525,084
Noncontrolling interests 5,797 5,653
   
Total liabilities and equity $ 813,401 $ 791,254
 
 
Texas Roadhouse, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
       
26 Weeks Ended
June 25, 2013 June 26, 2012
 
 
Cash flows from operating activities:
Net income including noncontrolling interests $ 48,084 $ 40,601
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization 24,402 22,893
Share-based compensation expense 6,971 6,324
Other noncash adjustments 552 (2,991 )
Change in working capital   (10,656 )   (7,289 )
Net cash provided by operating activities   69,353     59,538  
 
Cash flows from investing activities:
Capital expenditures - property and equipment (35,915 ) (42,547 )
Proceeds from sale of property and equipment, including insurance proceeds   4     106  
Net cash used in investing activities   (35,911 )   (42,441 )
 
Cash flows from financing activities:
Repayments of revolving credit facility, net - (10,000 )
Dividends paid (21,512 ) (11,806 )
Other financing activities   6,441     7,490  
Net cash used in financing activities   (15,071 )   (14,316 )
 
Net increase in cash and cash equivalents 18,371 2,781
Cash and cash equivalents - beginning of year   81,746     78,777  
Cash and cash equivalents - end of period $ 100,117   $ 81,558  
 
                       
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
2013 2012 vs LY 2013 2012 vs LY
 
Restaurant openings
Company - Texas Roadhouse 6 7 (1 ) 9 15 (6 )
Company - Other 1 0 1 1 0 1
Franchise - Texas Roadhouse 1 0 1 3 0 3
Total 8 7 1 13 15 (2 )
 
 
Restaurants open at the end of the quarter
Company - Texas Roadhouse 327 306 21
Company - Other 3 3 0
Franchise - Texas Roadhouse 75 72 3
Total 405 381 24
 
Company-owned restaurants
Restaurant sales $ 348,929 $ 317,546 9.9 % $ 705,493 $ 639,558 10.3 %
Store weeks 4,214 3,962 6.4 % 8,388 7,813 7.4 %
Comparable restaurant sales growth (1) 4.5 % 4.5 % 4.1 % 5.3 %
Texas Roadhouse restaurants only:
Comparable restaurant sales growth (1) 4.5 % 4.5 % 4.1 % 5.3 %
Average unit volume (2) $ 1,077 $ 1,038 3.7 % $ 2,188 $ 2,118 3.3 %
Weekly sales by group:
Comparable restaurants (283 units) $ 83,433
Average unit volume restaurants (28 units) $ 76,603
Restaurants less than 6 months old (16 units) $ 85,810
 
Restaurant operating costs (as a % of restaurant sales) (3)
Cost of sales 34.5 % 33.7 % 80 bps 34.7 % 33.9 % 84 bps
Labor 29.2 % 29.4 % (21 ) bps 28.8 % 29.2 % (34 ) bps
Rent 2.0 % 2.0 % 4 bps 2.0 % 2.0 % 4 bps
Other operating 15.8 % 15.9 % (16 ) bps 15.7 % 15.9 % (21 ) bps
Total 81.4 % 80.9 % 47 bps 81.2 % 80.9 % 32 bps
 
Restaurant margin (4) 18.6 % 19.1 % (47 ) bps 18.8 % 19.1 % (32 ) bps
 
Franchise-owned restaurants
Franchise royalties and fees $ 3,190 $ 2,729 16.9 % $ 6,302 $ 5,586 12.8 %
Store weeks 966 936 3.2 % 1,332 1,872 (28.8 ) %
Comparable restaurant sales growth (1) 5.3 % 4.8 % 4.5 % 5.9 %
Average unit volume (2) $ 1,112 $ 1,052 5.7 % $ 1,123 $ 1,068 5.1 %
 
Pre-opening expense $ 4,240 $ 2,780 52.5 % $ 7,064 $ 6,365 11.0 %
 
Depreciation and amortization $ 12,190 $ 11,546 5.6 % $ 24,402 $ 22,893 6.6 %
As a % of revenue 3.5 % 3.6 % (14 ) bps 3.4 % 3.5 % (12 ) bps
 
General and administrative expenses (5) $ 21,789 $ 17,653 23.4 % $ 39,156 $ 37,686 3.9 %
As a % of revenue 6.2 % 5.5 % 68 bps 5.5 % 5.8 % (34 ) bps

 

(1) Comparable restaurant sales growth includes sales from domestic restaurants open 18 months as of the beginning of the measurement period, excluding sales from restaurants closed during the period.

(2) Average unit volume includes sales from domestic Texas Roadhouse restaurants open six months as of the beginning of the measurement period, excluding sales from restaurants closed during the period.

(3) Depreciation and amortization expense, substantially all of which relates to restaurant-level assets, is excluded from restaurant operating costs and is shown separately as it represents a non-cash charge for the investment in our restaurants.

(4) Restaurant margin represents restaurant sales less cost of sales, labor, rent and other operating costs (as a percentage of restaurant sales). 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 generally accepted accounting principles ("GAAP") and should not be considered in isolation, or as an alternative, to income from operations or other similarly titled measures of other companies.

(5) Results for the 26 weeks ended June 26, 2012 included a $5.0 million pre-tax charge for the settlement of a legal matter.

Amounts may not foot due to rounding.

Texas Roadhouse, Inc. and Subsidiaries
Reconciliation of GAAP and Non-GAAP Information
(in thousands, except per share data)
(unaudited)

In addition to the results provided in accordance with U.S. Generally Accepted Accounting Principles ("GAAP") throughout this document, the Company has provided non-GAAP measurements which present operating results on a basis before the impact of a settlement of a legal matter. This item is described in detail throughout this document.

The Company used earnings before the impact of the legal settlement as a key performance measure of results of operations for purposes of evaluating performance internally. This non-GAAP measurement is not intended to replace the presentation of our financial results in accordance with GAAP. Rather, the Company believes that the presentation of results before the legal settlement provides additional information to facilitate the comparison of past and present operations, excluding items that the Company does not believe were indicative of our ongoing operations in the 26 weeks ended June 26, 2012.

   
For the 26 weeks Ended
June 25, 2013     June 26, 2012
Net income attributable to Texas Roadhouse, Inc. and subsidiaries, excluding settlement charge $ 46,134 $ 42,240
Amount reserved for settlement of a legal matter, net of tax (1) $ - $ (3,062 )
Net income attributable to Texas Roadhouse, Inc. and subsidiaries $ 46,134 $ 39,179
 
Weighted average diluted shares outstanding 70,924 71,247
 
Diluted earnings per share, excluding settlement charge $ 0.65 $ 0.59
Impact of settlement charge on diluted earnings per share $ - $ (0.04 )
Diluted earnings per share $ 0.65 $ 0.55  

 

(1) Amount reserved in the first quarter of fiscal 2012 for the settlement of a legal matter was $5.0 million before the statutory income tax rate. The settlement amount was included in general and administrative costs on the Company's Condensed Consolidated Statements of Income.

Texas Roadhouse
Investor Relations
Tonya Robinson, 502-515-7300
or
Media
Travis Doster, 502-638-5457

Source: Texas Roadhouse, Inc.

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