TXRH Texas Roadhouse Inc

Texas Roadhouse, Inc. (NasdaqGS: TXRH), today announced financial results for the 13 and 39 week periods ended September 24, 2019. 

		Third Quarter								Year to Date
($000's)		2019			2018			% Change		2019		2018			% Change
Total revenue		$	650,489		$	594,595		9.4%		$	2,030,925		$	1,851,537	9.7%
Income from operations		44,884			35,444			26.6%		158,612		154,582			2.6%
Net income		36,531			29,125			25.4%		131,766		127,893			3.0%
Diluted EPS		$	0.52		$	0.40		29.1%		$	1.85		$	1.78	3.9%

 

Results for the third quarter included the following highlights:  

• Comparable restaurant sales increased 4.4% at company restaurants and 3.2% at domestic franchise restaurants;
• Restaurant margin, as a percentage of restaurant and other sales, increased 49 basis points to 16.7%, as lower cost of sales due to the benefit of a higher average check was partially offset by higher labor costs driven by wage rate and other inflation.  Restaurant margin dollars increased 12.7% to $108.0 million from $95.8 million in the prior year;
• Diluted earnings per share increased 29.1% to $0.52 from $0.40 in the prior year as higher restaurant margin dollars and a decrease in certain general and administrative expenses were partially offset by higher depreciation and amortization expense;
• Four company restaurants, including one Bubba’s 33 restaurant, and two international franchise restaurants were opened; and
• The Company repurchased 358,381 shares of common stock for $18.9 million. 

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

• Comparable restaurant sales increased 4.8% at company restaurants and 4.0% at domestic franchise restaurants;
• Restaurant margin, as a percentage of restaurant and other sales, decreased 46 basis points to 17.4%, as higher labor costs driven by wage rate and other inflation was partially offset by lower cost of sales due to the benefit of a higher average check.  Restaurant margin dollars increased 6.9% to $351.3 million from $328.6 million in the prior year;
• Diluted earnings per share increased 3.9% to $1.85 from $1.78 in the prior year;
• 11 company restaurants, including one Bubba’s 33 restaurant, and six, primarily international, franchise restaurants were opened; and
• The Company repurchased 2,455,058 shares of common stock for $131.0 million. 

Kent Taylor, Chief Executive Officer of Texas Roadhouse, Inc., commented, “We are pleased to deliver a solid quarter of results driven by improved restaurant margins and comparable restaurant sales growth of 4.4%.  Our operators continue to execute on our core strategy of getting guests in the door and providing a legendary experience.”

Taylor continued, “On the development front, our restaurant pipeline is as strong as it has ever been.  In 2020 we are targeting at least 30 company restaurant openings and our franchise partners are targeting an additional eight restaurant openings.  As we head into 2020, we are excited about the growth opportunities and the strength of our business.”

2019 Outlook

Comparable restaurant sales at company restaurants for the first four weeks of our fourth quarter of fiscal 2019 increased 5.3% compared to the prior year period.

Management updated the following expectations for 2019:

• Approximately 22 company restaurant openings, including as many as three Bubba’s 33 restaurants;
• Commodity cost inflation of 1.5% to 2.0%;
• Growth in total labor dollars per store week of 6.0% to 7.0%; and
• Total capital expenditures of approximately $200 million.

Management reiterated the following expectations for 2019:

• Positive comparable restaurant sales growth; and
• An income tax rate of 14.0% to 15.0%.

2020 Outlook

Management provided the following initial expectations for 2020:

• Positive comparable restaurant sales growth;
• At least 30 company restaurant openings, including as many as eight Bubba’s 33 restaurants;
• Store week growth of 3.5% to 4.5%, including the negative impact of lapping the 53rd week from 2019;
• Commodity cost inflation of 1.0% to 2.0%;
• Mid-single digit growth in labor dollars per store week;
• An income tax rate of 14.0% to 15.0%; and
• Total capital expenditures of $190 million to $200 million.

Non-GAAP Measures

We prepare our consolidated financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”).  Within our press release, we make reference to restaurant margin (in dollars and as a percentage of sales).  Restaurant margin represents restaurant and other sales less restaurant-level operating costs, including cost of sales, labor, rent and other operating costs.  Restaurant margin should not be considered in isolation, or as an alternative, to income from operations.  This non-GAAP measure is not indicative of overall company performance and profitability in that this measure does not accrue directly to the benefit of shareholders due to the nature of the costs excluded.  Restaurant margin is widely regarded as a useful metric by which to evaluate restaurant-level operating efficiency and performance.  In calculating restaurant margin, we exclude certain non-restaurant-level costs that support operations, including pre-opening and general and administrative expenses, but do not have a direct impact on restaurant-level operational efficiency and performance.  We also exclude depreciation and amortization expense, substantially all of which relates to restaurant-level assets, as it represents a non-cash charge for the investment in our restaurants.  We also exclude impairment and closure expense as we believe this provides a clearer perspective of ongoing operating performance and a more useful comparison to prior period results.  Restaurant margin as presented may not be comparable to other similarly titled measures of other companies in our industry.  A reconciliation of income from operations to restaurant margin is included in the accompanying financial tables.

Conference Call

Texas Roadhouse is hosting a conference call today, October 28, 2019 at 5:00 p.m. Eastern Time to discuss these results.  The dial-in number is (877) 699-0953 or (647) 689-5456 for international calls.  A replay of the call will be available for one week following the conference call.  To access the replay, please dial (800) 585-8367 or (416) 621-4642 for international calls, and use 5096392 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 600 restaurants system-wide in 49 states and ten 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 Texas Roadhouse.  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, except as required by applicable law.

Contacts:

Investor Relations                                                                                           Tonya Robinson(502) 515-7269

MediaTravis 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 24, 2019					September 25, 2018				September 24, 2019				September 25, 2018
Revenue:
	Restaurant and other sales		$	645,230				$	589,704			$	2,014,720			$	1,836,179
	Franchise royalties and fees		5,259					4,891				16,205				15,358
Total revenue			650,489					594,595				2,030,925				1,851,537
Costs and expenses:
	Restaurant operating costs (excluding depreciation and amortization shown separately below):
		Cost of sales	205,158					191,990				650,136				598,824
		Labor	218,342					197,621				667,712				593,298
		Rent	12,994					12,330				39,173				36,300
		Other operating	100,742					91,946				306,355				279,182
	Pre-opening		4,736					4,378				12,801				13,529
	Depreciation and amortization		28,347					25,843				84,574				75,492
	Impairment and closure		61					20				394				128
	General and administrative		35,225					35,023				111,168				100,202
Total costs and expenses			605,605					559,151				1,872,313				1,696,955
Income from operations			44,884					35,444				158,612				154,582
Interest income (expense), net			81					(168		)		1,526				(810		)
Equity income from investments in
	unconsolidated affiliates		(154		)			381				100				1,150
Income before taxes			44,811					35,657				160,238				154,922
Provision for income taxes			6,785					5,398				23,331				22,321
Net income including noncontrolling interests			38,026					30,259				136,907				132,601
Less: Net income attributable to noncontrolling interests			1,495					1,134				5,141				4,708
Net income attributable to Texas Roadhouse, Inc. and subsidiaries			$	36,531				$	29,125			$	131,766			$	127,893
Net income per common share attributable to Texas Roadhouse, Inc.
and subsidiaries:
	Basic		$	0.53				$	0.41			$	1.86			$	1.79
	Diluted		$	0.52				$	0.40			$	1.85			$	1.78
Weighted average shares outstanding:
	Basic		69,573					71,508				70,896				71,429
	Diluted		69,939					72,006				71,287				71,906
Cash dividends declared per share			$	0.30				$	0.25			$	0.90			$	0.75

 

Texas Roadhouse, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
			September 24, 2019				December 25, 2018
Cash and cash equivalents			$	99,540			$	210,125
Other current assets, net			65,122				134,894
Property and equipment, net			1,020,167				956,676
Operating lease right-of-use asset, net			495,419				-
Goodwill			123,220				123,220
Intangible assets, net			1,375				1,959
Other assets			50,718				42,402
Total assets			$	1,855,561			$	1,469,276
Other current liabilities			332,272				385,142
Operating lease liabilities, net of current portion			532,480				-
Other liabilities			82,112				123,426
Texas Roadhouse, Inc. and subsidiaries stockholders' equity			893,975				945,569
Noncontrolling interests			14,722				15,139
Total liabilities and equity			$	1,855,561			$	1,469,276
Note: Beginning in 2019, we adopted Accounting Standards Codification 842, Leases, which requires the recognition of an operating lease right-of-use asset and operating lease liability for virtually all leases.

Texas Roadhouse, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
				39 Weeks Ended
				September 24, 2019					September 25, 2018
Cash flows from operating activities:
Net income including noncontrolling interests				$	136,907				$	132,601
Adjustments to reconcile net income to net cash provided by operating activities
	Depreciation and amortization			84,574					75,492
	Share-based compensation expense			25,016					24,820
	Other noncash adjustments, net			881					6,872
Change in working capital				(5,381		)			(14,206		)
		Net cash provided by operating activities		241,997					225,579
Cash flows from investing activities:
Capital expenditures - property and equipment				(144,917		)			(110,906		)
Proceeds from sale of property and equipment				351					-
		Net cash used in investing activities		(144,566		)			(110,906		)
Cash flows from financing activities:
Principal payments on long-term debt and capital lease obligation				-					(50,007		)
Repurchase shares of common stock				(130,963		)			-
Dividends paid				(60,675		)			(50,666		)
Other financing activities, net				(16,378		)			(13,728		)
		Net cash used in financing activities		(208,016		)			(114,401		)
		Net (decrease) increase in cash and cash equivalents		(110,585		)			272
Cash and cash equivalents - beginning of period				210,125					150,918
Cash and cash equivalents - end of period				$	99,540				$	151,190

Texas Roadhouse, Inc. and Subsidiaries
Reconciliation of Income from Operations to Restaurant Margin
(in thousands)
(unaudited)
		13 Weeks Ended						39 Weeks Ended
		September 24, 2019			September 25, 2018			September 24, 2019			September 25, 2018
Income from operations		$	44,884		$	35,444		$	158,612		$	154,582
Less:
Franchise royalties and fees		5,259			4,891			16,205			15,358
Add:
Pre-opening		4,736			4,378			12,801			13,529
Depreciation and amortization		28,347			25,843			84,574			75,492
Impairment and closure		61			20			394			128
General and administrative		35,225			35,023			111,168			100,202
Restaurant margin		$	107,994		$	95,817		$	351,344		$	328,575
Restaurant margin (as a percentage of restaurant and other sales)		16.7%			16.2%			17.4%			17.9%

Texas Roadhouse, Inc. and SubsidiariesSupplemental Financial and Operating Information($ amounts in thousands, except weekly sales by group)(unaudited)
			Third Quarter						Change				Year to Date						Change
			2019			2018			vs LY				2019			2018			vs LY
Restaurant openings
	Company - Texas Roadhouse		3			3			0				10			13			(3)
	Company - Bubba's 33		1			0			1				1			4			(3)
	Company - Other		0			0			0				0			0			0
	Franchise - Texas Roadhouse - U.S.		0			0			0				1			0			1
	Franchise - Texas Roadhouse - International		2			1			1				5			4			1
	Total		6			4			2				17			21			(4)
Restaurant closures
	Franchise - Texas Roadhouse - International		0			0			0				(2)			0			(2)
	Total		0			0			0				(2)			0			(2)
Restaurants open at the end of the quarter
	Company - Texas Roadhouse		474			453			21
	Company - Bubba's 33		26			24			2
	Company - Other		2			2			0
	Franchise - Texas Roadhouse - U.S.		70			70			0
	Franchise - Texas Roadhouse - International		25			21			4
	Total		597			570			27
Company restaurants
	Restaurant and other sales		$	645,230		$	589,704		9.4		%		$	2,014,720		$	1,836,179		9.7		%
	Store weeks		6,509			6,196			5.0		%		19,355			18,386			5.3		%
	Comparable restaurant sales growth (1)		4.4		%	5.5		%					4.8		%	5.4		%
	Texas Roadhouse restaurants only:
		Comparable restaurant sales growth (1)	4.2		%	5.5		%					4.7		%	5.3		%
		Average unit volume (2)	$	1,304		$	1,254		4.0		%		$	4,118		$	3,953		4.2		%
		Weekly sales by group:
		Comparable restaurants (441 units)	$	100,578
		Average unit volume restaurants (23 units) (3)	$	95,324
		Restaurants less than 6 months old (10 units)	$	107,347
Restaurant operating costs (as a % of restaurant and other sales)
Cost of sales			31.8		%	32.6		%	(76	)	bps		32.3		%	32.6		%	(34	)	bps
Labor			33.8		%	33.5		%	33		bps		33.1		%	32.3		%	83		bps
Rent			2.0		%	2.1		%	(8	)	bps		1.9		%	2.0		%	(3	)	bps
Other operating			15.6		%	15.6		%	2		bps		15.2		%	15.2		%	0		bps
Total			83.3		%	83.8		%	(49	)	bps		82.6		%	82.1		%	46		bps
	Restaurant margin		16.7		%	16.2		%	49		bps		17.4		%	17.9		%	(46	)	bps
	Restaurant margin ($ in thousands)		$	107,994		$	95,817		12.7		%		$	351,344		$	328,575		6.9		%
	Restaurant margin $/Store week		$	16,591		$	15,464		7.3		%		$	18,153		$	17,871		1.6		%
Franchise restaurants
	Franchise royalties and fees		$	5,259		$	4,891		7.5		%		$	16,205		$	15,358		5.5		%
	Store weeks		1,220			1,175			3.8		%		3,623			3,478			4.2		%
	Comparable restaurant sales growth (1)		2.4		%	1.8		%					3.0		%	2.0		%
	U.S. franchise restaurants only:
		Comparable restaurant sales growth (1)	3.2		%	4.2		%					4.0		%	4.1		%
		Average unit volume (2)	$	1,346		$	1,304		3.2		%		$	4,243		$	4,081		4.0		%
Pre-opening expense			$	4,736		$	4,378		8.2		%		$	12,801		$	13,529		(5.4	)	%
Depreciation and amortization			$	28,347		$	25,843		9.7		%		$	84,574		$	75,492		12.0		%
	As a % of revenue		4.4		%	4.3		%	1		bps		4.2		%	4.1		%	9		bps
General and administrative expenses			$	35,225		$	35,023		0.6		%		$	111,168		$	100,202		10.9		%
	As a % of revenue		5.4		%	5.9		%	(48)		bps		5.5		%	5.4		%	6		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.
Amounts may not foot due to rounding.