November 1, 2016

Texas Roadhouse, Inc. Announces Third Quarter 2016 Results

LOUISVILLE, Ky.--(BUSINESS WIRE)--

Texas Roadhouse, Inc. (NasdaqGS: TXRH), today announced financial results for the 13 and 39 week periods ended September 27, 2016.

           
Third Quarter Year to Date
($000's)

2016

   

2015

   

% Change

2016

   

2015

   

% Change

 
Total revenue $ 481,637 $ 438,089 10% $ 1,506,004 $ 1,353,017 11%
Income from operations 38,468 30,556 26% 141,061 110,852 27%
Net income 25,675 20,482 25% 94,873 73,912 28%
Diluted EPS $ 0.36 $ 0.29 25% $ 1.34 $ 1.05 28%
 

Results for the third quarter included the following highlights:

  • Comparable restaurant sales growth of 3.4% at company restaurants and 3.3% at domestic franchise restaurants;
  • Restaurant margin, as a percentage of restaurant sales, increased 155 basis points to 18.1%, primarily driven by lower food costs, partially offset by higher labor costs;
  • Diluted earnings per share increased 24.9% to $0.36 from $0.29 in the prior year;
  • The Company recorded a pre-tax charge of $1.2 million ($0.8 million after-tax) related to a legal settlement; and
  • Seven company-owned restaurants were opened, including two Bubba's 33 restaurants.

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

  • Comparable restaurant sales growth of 4.2% at company restaurants and 3.9% at domestic franchise restaurants;
  • Restaurant margin, as a percentage of restaurant sales, increased 192 basis points to 19.2%;
  • Diluted earnings per share increased 27.9% to $1.34 from $1.05 in the prior year;
  • The Company recorded a pre-tax charge of $6.7 million ($4.1 million after-tax) related to a legal settlement which had a $0.06 impact on diluted earnings per share and a 5.6% impact on diluted earnings per share growth;
  • 21 company-owned restaurants were opened, including five Bubba's 33 restaurants; and
  • The Company repurchased 114,700 shares of its common stock for $4.1 million.

Kent Taylor, Chief Executive Officer of Texas Roadhouse, Inc., commented, "We are pleased to report another quarter of restaurant margin expansion and double-digit diluted earnings per share growth. Our results were driven by the opening of new restaurants, positive comparable restaurant sales and continued commodity deflation. As we move into the fourth quarter, our sales momentum continues with October comparable restaurant sales up 3.8%, including positive traffic growth."

Taylor continued, "Looking ahead to 2017, we will stay focused on protecting our long-term brand position by enhancing our ongoing commitment to our value proposition with consumers and to legendary food and legendary service. This commitment has served us well with 26 consecutive quarters of positive traffic growth. In addition, our strong balance sheet and healthy cash flow allow us to continue to internally fund our growth, while returning excess capital to our shareholders through dividend payments and ongoing share repurchases."

2016 Outlook

The Company reported that comparable restaurant sales at company restaurants for the first four weeks of its fourth quarter of fiscal 2016 increased approximately 3.8% compared to the prior year period.

Management updated the following expectations for 2016:

  • Approximately 30 company restaurant openings, including as many as nine Bubba's 33 restaurants; and,
  • Food cost deflation of approximately 3.5% compared to previous guidance of 2.5% to 3.0%.

Management reiterated the following expectations for 2016:

  • Positive comparable restaurant sales growth;
  • An income tax rate of approximately 30.0%; and
  • Total capital expenditures of $165.0 million to $175.0 million.

2017 Outlook

Management provided the following initial expectations for 2017:

  • Positive comparable restaurant sales growth;
  • Approximately 30 company restaurant openings, including at approximately seven to eight Bubba's restaurants;
  • Low-single digit food cost deflation;
  • Mid-single digit labor inflation, including increases from wage rates, as well as regulatory changes;
  • An income tax rate of 30.0% to 31.0%; and
  • Total capital expenditures of $170.0 million.

Conference Call

The Company is hosting a conference call today, November 1, 2016 at 5:00 p.m. Eastern Time to discuss these results. The dial-in number is (877) 419-6590 or (719) 325-4798 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 6678390 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 510 restaurants system-wide in 49 states and five 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 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 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.

 
Texas Roadhouse, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(in thousands, except per share data)
(unaudited)
                   
 
13 Weeks Ended 39 Weeks Ended

September 27,
2016

September 29,
2015

September 27,
2016

September 29,
2015

 
Revenue:
Restaurant sales $ 477,617 $ 433,932 $ 1,493,531 $ 1,340,917
Franchise royalties and fees   4,020   4,157   12,473   12,100
 
Total revenue   481,637   438,089   1,506,004   1,353,017
 
Costs and expenses:
Restaurant operating costs (excluding depreciation and amortization shown separately below):
Cost of sales 161,886 156,643 506,565 484,700
Labor 145,301 129,198 442,861 392,686
Rent 10,266 9,325 30,477 27,442
Other operating 73,583 66,848 227,082 204,523
Pre-opening 5,017 5,749 14,253 14,476
Depreciation and amortization 20,941 17,843 60,718 50,994
Impairment and closure 13 - 54 -
General and administrative   26,162   21,927   82,933   67,344
 
Total costs and expenses   443,169   407,533   1,364,943   1,242,165
 
Income from operations 38,468 30,556 141,061 110,852
 
Interest expense, net 288 470 902 1,480

Equity income from investments in unconsolidated affiliates

  4   449   831   1,288
 
Income before taxes 38,184 30,535 140,990 110,660
Provision for income taxes   11,381   9,141   42,325   33,419
 
Net income including noncontrolling interests $ 26,803 $ 21,394 $ 98,665 $ 77,241
Less: Net income attributable to noncontrolling interests   1,128   912   3,792   3,329
Net income attributable to Texas Roadhouse, Inc. and subsidiaries $ 25,675 $ 20,482 $ 94,873 $ 73,912
 

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

Basic $ 0.36 $ 0.29 $ 1.35 $ 1.06
Diluted $ 0.36 $ 0.29 $ 1.34 $ 1.05
 
Weighted average shares outstanding:
Basic   70,477   70,117   70,338   69,995
Diluted   70,981   70,735   70,898   70,639
 
Cash dividends declared per share $ 0.19 $ 0.17 $ 0.57 $ 0.51
 
 
Texas Roadhouse, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
           
September 27, 2016   December 29, 2015
 
 
Cash and cash equivalents $ 81,713 $ 59,334
Other current assets 51,552 74,479
Property and equipment, net 802,555 751,288
Goodwill 116,571 116,571
Intangible assets, net 3,873 4,827
Other assets 28,258 26,207
   
Total assets $ 1,084,522 $ 1,032,706
 
 

Current maturities of long-term debt and obligation under capital lease

163 144
Other current liabilities 207,775 256,498

Long-term debt and obligation under capital lease, excluding current maturities

52,424 25,550
Other liabilities 80,796 73,332
Texas Roadhouse, Inc. and subsidiaries stockholders' equity 735,590 669,662
Noncontrolling interests 7,774 7,520
   
Total liabilities and equity $ 1,084,522 $ 1,032,706
 
 
Texas Roadhouse, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
           
39 Weeks Ended
September 27, 2016 September 29, 2015
 
 
Cash flows from operating activities:
Net income including noncontrolling interests $ 98,665 $ 77,241
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization 60,718 50,994
Share-based compensation expense 18,347 15,649
Other noncash adjustments 1,321 (5,066 )
Change in working capital   (19,269 )   (7,310 )
Net cash provided by operating activities   159,782     131,508  
 
Cash flows from investing activities:
Capital expenditures - property and equipment (113,219 ) (125,100 )
Proceeds from sale of property and equipment, including insurance proceeds   -     272  
Net cash used in investing activities   (113,219 )   (124,828 )
 
Cash flows from financing activities:
Proceeds from revolving credit facility 25,000 20,000
Repurchase shares of common stock (4,110 ) (4,741 )
Dividends paid (38,656 ) (34,247 )
Other financing activities   (6,418 )   (1,198 )
Net cash used in financing activities   (24,184 )   (20,186 )
 
Net increase (decrease) in cash and cash equivalents 22,379 (13,506 )
Cash and cash equivalents - beginning of period   59,334     86,122  
Cash and cash equivalents - end of period $ 81,713   $ 72,616  
 
 
Texas Roadhouse, Inc. and Subsidiaries
Supplemental Financial and Operating Information
($ amounts in thousands, except weekly sales by group)
(unaudited)
                         
 
Third Quarter Change Year to Date Change

2016

2015

vs LY

2016

2015

vs LY

 
Restaurant openings
Company - Texas Roadhouse 5 9 (4) 16 17 (1)
Company - Bubba's 33 2 1 1 5 4 1
Company - Other 0 0 0 0 1 (1)
Franchise - Texas Roadhouse - U.S. 1 1 0 1 2 (1)
Franchise - Texas Roadhouse - International 0 0 0 2 0 2
Total 8 11 (3) 24 24 0
 
Restaurants open at the end of the quarter
Company - Texas Roadhouse 408 385 23
Company - Bubba's 33 12 7 5
Company - Other 2 2 0
Franchise - Texas Roadhouse - U.S. 73 72 1
Franchise - Texas Roadhouse - International 12 9 3
Total 507 475 32
 
Company-owned restaurants
Restaurant sales $ 477,617 $ 433,932 10.1 % $ 1,493,531 $ 1,340,917 11.4 %
Store weeks 5,427 5,044 7.6 % 16,039 14,834 8.1 %
Comparable restaurant sales growth (1) 3.4 % 6.9 % 4.2 % 8.1 %
Texas Roadhouse restaurants only:
Comparable restaurant sales growth (1) 3.5 % 6.9 % 4.2 % 8.1 %
Average unit volume (2) $ 1,151 $ 1,119 2.8 % $ 3,660 $ 3,531 3.7 %
Weekly sales by group:
Comparable restaurants (368 units) $ 89,079
Average unit volume restaurants (24 units) (3) $ 80,390
Restaurants less than 6 months old (16 units) $ 84,539
 
Restaurant operating costs (as a % of restaurant sales)
Cost of sales 33.9 % 36.1 % (220) bps 33.9 % 36.1 % (223) bps
Labor 30.4 % 29.8 % 65 bps 29.7 % 29.3 % 37 bps
Rent 2.1 % 2.1 % 0 bps 2.0 % 2.0 % (1) bps
Other operating 15.4 % 15.4 % 0 bps 15.2 % 15.3 % (5) bps
Total 81.9 % 83.4 % (155) bps 80.8 % 82.7 % (192) bps
Restaurant margin (4) 18.1 % 16.6 % 155 bps 19.2 % 17.3 % 192 bps
Restaurant margin ($ in thousands) $ 86,581 $ 71,917 20.4 % $ 286,546 $ 231,566 23.7 %
Restaurant margin $/Store week $ 15,953 $ 14,258 11.9 % $ 17,866 $ 15,610 14.5 %
 
Franchise-owned restaurants
Franchise royalties and fees $ 4,020 $ 4,157 (3.3) % $ 12,473 $ 12,100 3.1 %
Store weeks 1,095 1,052 4.1 % 3,253 3,112 4.5 %
Comparable restaurant sales growth (1) 1.9 % 7.7 % 2.5 % 7.4 %
U.S. franchise restaurants only:
Comparable restaurant sales growth (1) 3.3 % 6.9 % 3.9 % 8.0 %
Average unit volume (2) $ 1,191 $ 1,160 2.7 % $ 3,760 $ 3,640 3.3 %
 
Pre-opening expense $ 5,017 $ 5,749 (12.7) % $ 14,253 $ 14,476 (1.5) %
 
Depreciation and amortization $ 20,941 $ 17,843 17.4 % $ 60,718 $ 50,994 19.1 %
As a % of revenue 4.3 % 4.1 % 27 bps 4.0 % 3.8 % 26 bps
 
General and administrative expenses $ 26,162 $ 21,927 19.3 % $ 82,933 $ 67,344 23.1 %
As a % of revenue 5.4 % 5.0 % 43 bps 5.5 % 5.0 % 53 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 represents restaurant sales less restaurant operating costs, including cost of sales, labor, rent and other operating costs (as a percentage of restaurant sales). 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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