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Texas Roadhouse, Inc. Announces Third Quarter 2017 Results

LOUISVILLE, Ky., Oct. 30, 2017 (GLOBE NEWSWIRE) -- Texas Roadhouse, Inc. (Nasdaq:TXRH), today announced financial results for the 13 and 39 week periods ended September 26, 2017.

Third Quarter Year to Date
($000's) 2017 2016% Change 2017 2016% Change
Total revenue$ 540,507$ 481,63712.2% $ 1,674,455$ 1,506,00411.2%
Income from operations 45,511 38,46818.3% 148,747 141,0615.4%
Net income 31,014 25,67520.8% 102,908 94,8738.5%
Diluted EPS$ 0.43$ 0.3619.9% $ 1.44$ 1.347.6%

Results for the third quarter included the following highlights:

  • Comparable restaurant sales increased 4.5% at company restaurants and 4.7% at domestic franchise restaurants;
  • Restaurant margin, as a percentage of restaurant sales, decreased 31 basis points to 17.8%, primarily driven by wage rate inflation, partially offset by the benefit of lower food costs;
  • Diluted earnings per share increased 19.9% to $0.43 from $0.36 in the prior year. This includes overlapping a pre-tax charge recorded in the prior year quarter of $1.2 million ($0.8 million after-tax) related to the settlement of a legal matter; and
  • Seven company-owned restaurants, including two Bubba's 33 restaurants, and one franchise restaurant were opened.

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

  • Comparable restaurant sales increased 4.0% at both company restaurants and domestic franchise restaurants;
  • Restaurant margin, as a percentage of restaurant sales, decreased 28 basis points to 18.9%, primarily driven by wage rate 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 $6.7 million ($4.1 million after-tax) related to a separate legal matter which had an impact of $0.06 on diluted earnings per share;
  • Diluted earnings per share increased 7.6% to $1.44 from $1.34 in the prior year; and
  • 20 company-owned restaurants, including four Bubba’s 33 restaurants, and three franchise restaurants were opened.

Kent Taylor, Chief Executive Officer of Texas Roadhouse, Inc., commented, "We are pleased to deliver another solid quarter of results including a 19.9% increase in diluted earnings per share driven by double-digit revenue growth. Comparable restaurant sales grew 4.5%, driven primarily by traffic gains of 3.5%. In addition, our positive sales momentum has continued into the fourth quarter. None of this growth would be possible without the commitment from our operators and everyone associated with our legendary brand."

Taylor continued, “As we look to 2018, our balance sheet and strong cashflow have us well positioned for continued growth including approximately 30 planned restaurant openings. In addition, our allocation strategy will continue to be focused on returning capital to shareholders, primarily through our dividend program.”

2017 Outlook

Comparable restaurant sales at company restaurants for the first four weeks of our fourth quarter of fiscal 2017 increased approximately 5.3% compared to the prior year period.

Management updated the following expectations for 2017:

  • 26 or 27 company restaurant openings (compared to previous guidance of 27 to 29 company restaurant openings), including four Bubba’s 33 restaurants;
  • Food cost deflation of approximately 2.0%, compared to previous guidance of approximately 1.0% to 2.0%; and
  • Labor inflation of approximately 7.0% to 8.0%, compared to previous guidance of mid-single digit inflation.

Management reiterated the following expectations for 2017:

  • Positive comparable restaurant sales growth;
  • An income tax rate of approximately 28.0%; and
  • Total capital expenditures of approximately $170.0 million, excluding any cash used for franchise acquisitions.

2018 Outlook

Management provided the following initial 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;
  • Mid-single digit labor inflation;
  • An income tax rate of between 28.0% and 29.0%; and
  • Total capital expenditures of approximately $175.0 million, excluding any cash used for franchise acquisitions.

Conference Call

The Company is hosting a conference call today, October 30, 2017 at 5:00 p.m. Eastern Time to discuss these results. The dial-in number is (888) 297-0358 or (719) 325-2396 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 1901754 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 540 restaurants system-wide in 49 states and six 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, 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 39 Weeks Ended
September 26,
2017
September 27,
2016
September 26,
2017
September 27,
2016
Revenue:
Restaurant sales$ 536,341 $ 477,617 $ 1,661,821 $ 1,493,531
Franchise royalties and fees 4,166 4,020 12,634 12,473
Total revenue 540,507 481,637 1,674,455 1,506,004
Costs and expenses:
Restaurant operating costs (excluding depreciation and
amortization shown separately below):
Cost of sales 176,498 161,886 545,862 506,565
Labor 169,355 145,301 514,287 442,861
Rent 11,257 10,266 33,238 30,477
Other operating 83,679 73,583 254,176 227,082
Pre-opening 4,548 5,017 14,302 14,253
Depreciation and amortization 23,534 20,941 69,236 60,718
Impairment and closure 2 13 13 54
General and administrative 26,123 26,162 94,594 82,933
Total costs and expenses 494,996 443,169 1,525,708 1,364,943
Income from operations 45,511 38,468 148,747 141,061
Interest expense, net 500 288 1,211 902
Equity income from investments in
unconsolidated affiliates (359) (4) (1,149) (831)
Income before taxes 45,370 38,184 148,685 140,990
Provision for income taxes 13,046 11,381 41,159 42,325
Net income including noncontrolling interests 32,324 26,803 107,526 98,665
Less: Net income attributable to noncontrolling interests 1,310 1,128 4,618 3,792
Net income attributable to Texas Roadhouse, Inc. and subsidiaries$ 31,014 $ 25,675 $ 102,908 $ 94,873
Net income per common share attributable to Texas Roadhouse, Inc.
and subsidiaries:
Basic$ 0.44 $ 0.36 $ 1.45 $ 1.35
Diluted$ 0.43 $ 0.36 $ 1.44 $ 1.34
Weighted average shares outstanding:
Basic 71,067 70,477 70,939 70,338
Diluted 71,532 70,981 71,449 70,898
Cash dividends declared per share$ 0.21 $ 0.19 $ 0.63 $ 0.57


Texas Roadhouse, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
September 26, 2017 December 27, 2016
Cash and cash equivalents $ 114,436 $ 112,944
Other current assets 50,893 87,315
Property and equipment, net 886,972 830,054
Goodwill 121,040 116,571
Intangible assets, net 2,930 3,622
Other assets 36,448 29,465
Total assets $ 1,212,719 $ 1,179,971
Current maturities of long-term debt and obligation under capital lease 9 167
Other current liabilities 238,260 279,360
Long-term debt and obligation under capital lease, excluding current maturities 51,984 52,381
Other liabilities 91,674 89,821
Texas Roadhouse, Inc. and subsidiaries stockholders' equity 818,743 750,226
Noncontrolling interests 12,049 8,016
Total liabilities and equity $ 1,212,719 $ 1,179,971

Texas Roadhouse, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
39 Weeks Ended
September 26, 2017 September 27, 2016
Cash flows from operating activities:
Net income including noncontrolling interests $ 107,526 $ 98,665
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization 69,236 60,718
Share-based compensation expense 18,826 18,347
Other noncash adjustments (2,702) 1,321
Change in working capital (4,816) (19,269)
Net cash provided by operating activities 188,070 159,782
Cash flows from investing activities:
Capital expenditures - property and equipment (117,037) (113,219)
Acquisition of franchise restaurants, net of cash acquired (16,528) -
Net cash used in investing activities (133,565) (113,219)
Cash flows from financing activities:
Proceeds from revolving credit facility, net - 25,000
Repurchase shares of common stock - (4,110)
Dividends paid (43,223) (38,656)
Other financing activities (9,790) (6,418)
Net cash used in financing activities (53,013) (24,184)
Net increase in cash and cash equivalents 1,492 22,379
Cash and cash equivalents - beginning of period 112,944 59,334
Cash and cash equivalents - end of period $ 114,436 $ 81,713

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
2017 2016 vs LY 2017 2016 vs LY
Restaurant openings
Company - Texas Roadhouse 5 5 0 16 16 0
Company - Bubba's 33 2 2 0 4 5 (1)
Company - Other 0 0 0 0 0 0
Franchise - Texas Roadhouse - U.S. 0 1 (1) 1 1 0
Franchise - Texas Roadhouse - International 1 0 1 2 2 0
Total 8 8 0 23 24 (1)
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 433 408 25
Company - Bubba's 33 20 12 8
Company - Other 2 2 0
Franchise - Texas Roadhouse - U.S. 70 73 (3)
Franchise - Texas Roadhouse - International 15 12 3
Total 540 507 33
Company-owned restaurants
Restaurant sales$ 536,341 $ 477,617 12.3 % $ 1,661,821 $ 1,493,531 11.3 %
Store weeks 5,868 5,427 8.1 % 17,324 16,039 8.0 %
Comparable restaurant sales growth (1) 4.5 % 3.4 % 4.0 % 4.2 %
Texas Roadhouse restaurants only:
Comparable restaurant sales growth (1) 4.6 % 3.5 % 4.0 % 4.2 %
Average unit volume (2)$ 1,197 $ 1,152 3.9 % $ 3,776 $ 3,663 3.1 %
Weekly sales by group:
Comparable restaurants (396 units)$ 92,712
Average unit volume restaurants (21 units) (3)$ 79,891
Restaurants less than 6 months old (16 units)$ 93,419
Restaurant operating costs (as a % of restaurant sales)
Cost of sales 32.9 % 33.9 % (99)bps 32.8 % 33.9 % (107)bps
Labor 31.6 % 30.4 % 115 bps 30.9 % 29.7 % 130 bps
Rent 2.1 % 2.1 % (5)bps 2.0 % 2.0 % (4)bps
Other operating 15.6 % 15.4 % 20 bps 15.3 % 15.2 % 9 bps
Total 82.2 % 81.9 % 31 bps 81.1 % 80.8 % 28 bps
Restaurant margin (4) 17.8 % 18.1 % (31)bps 18.9 % 19.2 % (28)bps
Restaurant margin ($ in thousands) (4)$ 95,552 $ 86,581 10.4 % $ 314,258 $ 286,546 9.7 %
Restaurant margin $ (4)/Store week$ 16,284 $ 15,953 2.1 % $ 18,140 $ 17,866 1.5 %
Franchise-owned restaurants
Franchise royalties and fees$ 4,166 $ 4,020 3.6 % $ 12,634 $ 12,473 1.3 %
Store weeks 1,092 1,095 (0.3)% 3,264 3,253 0.3 %
Comparable restaurant sales growth (1) 2.8 % 1.9 % 2.9 % 2.5 %
U.S. franchise restaurants only:
Comparable restaurant sales growth (1) 4.7 % 3.3 % 4.0 % 3.9 %
Average unit volume (2)$ 1,227 $ 1,163 5.5 % $ 3,862 $ 3,717 3.9 %
Pre-opening expense$ 4,548 $ 5,017 (9.3)% $ 14,302 $ 14,253 0.3 %
Depreciation and amortization $ 23,534 $ 20,941 12.4 % $ 69,236 $ 60,718 14.0 %
As a % of revenue 4.4 % 4.3 % 1 bp 4.1 % 4.0 % 10 bps
General and administrative expenses $ 26,123 $ 26,162 (0.1)% $ 94,594 $ 82,933 14.1 %
As a % of revenue 4.8 % 5.4 % (60)bps 5.6 % 5.5 % 14 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.
(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.


Source:Texas Roadhouse, Inc