October 28, 2013

Texas Roadhouse, Inc. Announces Third Quarter 2013 Results

 

LOUISVILLE, Ky.--(BUSINESS WIRE)-- Texas Roadhouse, Inc. (NasdaqGS: TXRH), today announced financial results for the 13 and 39 week periods ended September 24, 2013.

                             
    Third Quarter       Year to Date
($000's)   2013   2012   % Change       2013   2012   % Change
                             
Total revenue   334,770   308,656   8       1,046,565   953,800   10
Income from operations (a)   25,696   27,734   (7)       93,661   88,383   6
Net income (a)   17,170   18,067   (5)       63,304   57,246   11
Diluted EPS (a)   $0.24   $0.25   (5)       $0.89   $0.80   11
                             
(a) 2012 YTD includes a charge related to a legal settlement discussed below.
 

Results for the third quarter included:

  • Diluted earnings per share decreased 4.6% to $0.24 from $0.25 in the prior year period;
  • Comparable restaurant sales increased 2.6% at company restaurants and increased 4.0% at franchise restaurants;
  • Four company restaurants were opened;
  • Cost of sales, as a percentage of restaurant sales, increased 150 basis points to 35.1% primarily due to food cost inflation of just over 8% in the quarter;
  • Restaurant margin, as a percentage of restaurant sales, decreased 75 basis points to 17.2% primarily due to higher commodity costs, partially offset by approximately $1.3 million in benefits recorded relating to general liability insurance; and
  • Pre-opening costs were $2.3 million higher compared to the prior year period primarily due to seven more restaurant openings planned in the fourth quarter of 2013 compared to the fourth quarter of 2012.

Results for the year-to-date included:

  • Excluding the impact of a prior year charge, diluted earnings per share increased 5.4% to $0.89 from $0.84 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 impact of $0.04 on diluted earnings per share;
  • Comparable restaurant sales increased 3.7% at company restaurants and increased 4.2% at franchise restaurants;
  • 14 company and three franchise restaurants were opened;
  • Restaurant margin, as a percentage of restaurant sales, decreased 45 basis points to 18.3%; and
  • Costs associated with the Company's annual managing partner conference were $2.1 million higher compared to the prior year period.

Kent Taylor, Chief Executive Officer of Texas Roadhouse, Inc., commented, "Our top-line momentum continued this quarter highlighted by positive comparable restaurant sales, including positive traffic growth, and strong performance from our newest restaurants. However, we continue to be challenged by high single-digit commodity cost inflation and higher pre-opening costs this quarter. Looking ahead, we are encouraged by expectations of much lower commodity cost inflation in 2014, and we are excited to be on pace for another year of 25 to 30 restaurant openings. Long-term, we believe that our growth potential and continued restaurant-operations focus, along with our strong balance sheet and healthy cash flow, position us well for future success."

2013 Outlook

The Company reported that comparable restaurant sales at company restaurants for the first four weeks of its fourth quarter of fiscal 2013 increased 3.4% compared to the prior year period.

Management provided the following expectations for full year 2013:

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

2014 Outlook

Management provided the following expectations for full year 2014:

  • Positive comparable restaurant sales growth;
  • 25 to 30 company restaurant openings;
  • Low single digit food cost inflation;
  • An income tax rate of 30.0% to 31.0% which is higher than the 2013 income tax rate as a result of the potential expiration of certain federal tax credits at the end of 2013; and
  • Total capital expenditures of $100.0 to $110.0 million.

Conference Call

The Company is hosting a conference call today, October 28, 2013, at 5:00 p.m. Eastern Time to discuss these results. The dial-in number is (877) 879-6209 or (719) 325-4817 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 2899563 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 410 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   39 Weeks Ended
         

September 24,
2013

 

September 25,
2012

 

September 24,
2013

 

September 25,
2012

                       
Revenue:                  
  Restaurant sales     $ 331,746   $ 306,025   $ 1,037,239   $ 945,583
  Franchise royalties and fees       3,024     2,631     9,326     8,217
                       
Total revenue       334,770     308,656     1,046,565     953,800
                       
Costs and expenses:                  
  Restaurant operating costs (excluding depreciation and amortization shown separately below):                
                       
    Cost of sales       116,570     102,930     361,334     319,445
    Labor       99,003     91,507     302,387     278,089
    Rent       7,181     6,489     21,390     19,120
    Other operating       51,949     50,183     162,716     151,967
  Pre-opening       4,746     2,458     11,810     8,823
  Depreciation and amortization       12,462     11,828     36,864     34,721
  Impairment and closure       103     24     187     63
  General and administrative (1)       17,060     15,503     56,216     53,189
                       
Total costs and expenses       309,074     280,922     952,904     865,417
                       
Income from operations (1)       25,696     27,734     93,661     88,383
                       
Interest expense, net       525     603     1,687     1,776

 

                 

Equity income from investments in unconsolidated affiliates

      173     141     571     303
                       
Income before taxes (1)       25,344     27,272     92,545     86,910
Provision for income taxes       7,500     8,778     26,617     27,815
                       
Net income including noncontrolling interests (1)     $ 17,844   $ 18,494   $ 65,928   $ 59,095
Less: Net income attributable to noncontrolling interests       674     427     2,624     1,849
Net income attributable to Texas Roadhouse, Inc. and subsidiaries (1)     $ 17,170   $ 18,067   $ 63,304   $ 57,246
                       

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

                 
  Basic     $ 0.24   $ 0.26   $ 0.91   $ 0.82
  Diluted     $ 0.24   $ 0.25   $ 0.89   $ 0.80
                       
Weighted average shares outstanding:                  
  Basic       70,361     70,482     69,914     70,004
  Diluted       71,620     71,928     71,175     71,480
                       
                       

(1) Results for the 39 weeks ended September 25, 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)
             
             
             
      September 24, 2013     December 25, 2012
             
             
Cash and cash equivalents     $ 87,344     $ 81,746
Other current assets       35,022       40,726
Property and equipment, net       565,433       531,654
Goodwill       113,454       113,435
Intangible assets, net       7,877       9,264
Other assets       17,938       14,429
             
Total assets     $ 827,068     $ 791,254
             
             

Current maturities of long-term debt and obligations under capital leases

      248       338
Other current liabilities       131,077       158,324

Long-term debt and obligations under capital leases, excluding current maturities

      51,056       51,264
Other liabilities       53,953       50,591
Texas Roadhouse, Inc. and subsidiaries stockholders' equity       584,916       525,084
Noncontrolling interests       5,818       5,653
             
Total liabilities and equity     $ 827,068     $ 791,254
             
Texas Roadhouse, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
             
             
      39 Weeks Ended
     

September 24,
2013

   

September 25,
2012

             
             
Cash flows from operating activities:            
Net income including noncontrolling interests     $ 65,928       $ 59,095  
Adjustments to reconcile net income to net cash provided by operating activities            
Depreciation and amortization       36,864         34,721  
Share-based compensation expense       10,583         9,754  
Other noncash adjustments       843         (3,630 )
Change in working capital       (14,557 )       (8,946 )
Net cash provided by operating activities       99,661         90,994  
             
Cash flows from investing activities:            
Capital expenditures - property and equipment       (71,888 )       (63,146 )
Proceeds from sale of property and equipment, including insurance proceeds       (39 )       255  
Net cash used in investing activities       (71,927 )       (62,891 )
             
Cash flows from financing activities:            
Repayments of revolving credit facility, net       -         (10,000 )
Dividends paid       (29,939 )       (18,134 )
Other financing activities       7,803         9,349  
Net cash used in financing activities       (22,136 )       (18,785 )
             
Net increase in cash and cash equivalents       5,598         9,318  
Cash and cash equivalents - beginning of year       81,746         78,777  
Cash and cash equivalents - end of period     $ 87,344       $ 88,095  
 
Texas Roadhouse, Inc. and Subsidiaries
Supplemental Financial and Operating Information
($ amounts in thousands, except weekly sales by group and RM $ per store week)
(unaudited)
                                       
                                       
    Third Quarter   Change   Year to Date   Change
    2013   2012   vs LY   2013   2012   vs LY
                                       
Restaurant openings                                      
Company - Texas Roadhouse     4       3     1     13       18     (5)
Company - Other     0       0     0     1       0     1
Franchise - Texas Roadhouse     0       0     0     3       0     3
Total     4       3     1     17       18     (1)
                                       
                                       
Restaurants open at the end of the quarter                                      
Company - Texas Roadhouse     331       309     22                  
Company - Other     3       3     0                  
Franchise - Texas Roadhouse     75       72     3                  
Total     409       384     25                  
                                       
Company-owned restaurants                                      
Restaurant sales   $ 331,746     $ 306,025     8.4 %   $ 1,037,239     $ 945,583     9.7 %
Store weeks     4,294       4,041     6.3 %     12,682       11,854     7.0 %
Comparable restaurant sales growth (1)     2.6 %     3.6 %           3.7 %     4.8 %      
Texas Roadhouse restaurants only:                                      
Comparable restaurant sales growth (1)     2.6 %     3.6 %           3.7 %     4.8 %      
Average unit volume (2)   $ 999     $ 984     1.6 %   $ 3,191     $ 3,102     2.8 %
Weekly sales by group:                                      
Comparable restaurants (293 units)   $ 77,662                                
Average unit volume restaurants (25 units)   $ 67,409                                
Restaurants less than 6 months old (13 units)   $ 93,889                                
                                       
Restaurant operating costs (as a % of restaurant sales) (3)                                      
Cost of sales     35.1 %     33.6 %   150 bps     34.8 %     33.8 %   105 bps
Labor     29.8 %     29.9 %   (6) bps     29.2 %     29.4 %   (26) bps
Rent     2.2 %     2.1 %   4 bps     2.1 %     2.0 %   4 bps
Other operating     15.7 %     16.4 %   (74) bps     15.7 %     16.1 %   (38) bps
Total     82.8 %     82.1 %   75 bps     81.7 %     81.3 %   45 bps
                                       
Restaurant margin (4)     17.2 %     17.9 %   (75) bps     18.3 %     18.7 %   (45) bps
                                       
Restaurant margin $/Store week   $ 13,284     $ 13,590     (2.2) %   $ 14,935     $ 14,928     0.0 %
                                       
Franchise-owned restaurants                                      
Franchise royalties and fees   $ 3,024     $ 2,631     14.9 %   $ 9,326     $ 8,217     13.5 %
Store weeks     975       936     4.2 %     2,886       2,808     2.8 %
Comparable restaurant sales growth (1)     4.0 %     4.9 %           4.2 %     5.5 %      
Average unit volume (2)   $ 1,038     $ 998     4.0 %   $ 3,284     $ 3,134     4.8 %
                                       
Pre-opening expense   $ 4,746     $ 2,458     93.1 %   $ 11,810     $ 8,823     33.9 %
                                       
Depreciation and amortization (3)   $ 12,462     $ 11,828     5.4 %   $ 36,864     $ 34,721     6.2 %
As a % of revenue     3.7 %     3.8 %   (11) bps     3.5 %     3.6 %   (12) bps
                                       
General and administrative expenses (5)   $ 17,060     $ 15,503     10.0 %   $ 56,216     $ 53,189     5.7 %
As a % of revenue     5.1 %     5.0 %   7 bps     5.4 %     5.6 %   (21) bps
                                       
(1) Comparable restaurant sales growth includes sales from 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 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 39 weeks ended September 25, 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 39 weeks ended September 25, 2012.

             
      For the 39 weeks Ended
      September 24, 2013     September 25, 2012
Net income attributable to Texas Roadhouse, Inc. and subsidiaries, excluding settlement charge     $ 63,304     $ 60,308  
Amount reserved for settlement of a legal matter, net of tax (1)     $ -     $ (3,062 )
Net income attributable to Texas Roadhouse, Inc. and subsidiaries     $ 63,304     $ 57,246  
             
Weighted average diluted shares outstanding       71,175       71,480  
             
Diluted earnings per share, excluding settlement charge     $ 0.89     $ 0.84  
Impact of settlement charge on diluted earnings per share     $ -     $ (0.04 )
Diluted earnings per share     $ 0.89     $ 0.80  
             
(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, Inc.
Investor Relations
Tonya Robinson, 502-515-7300
or
Media
Travis Doster, 502-638-5457

Source: Texas Roadhouse, Inc.

 

 

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