Texas Roadhouse, Inc. (NasdaqGS: TXRH), today announced financial results for the 13 and 26 week periods ended July 1, 2014.

                       
Second Quarter Year to Date
($000's) 2014 2013 % Change 2014 2013 % Change
 
Total revenue $ 395,363 $ 352,119 12 $ 792,505 $ 711,795 11
Income from operations 34,401 29,797 15 74,585 67,965 10
Net income 23,081 19,963 16 49,546 46,134 7
Diluted EPS $ 0.33 $ 0.28 17 $ 0.70 $ 0.65 8
 

Results for the second quarter included:

  • Diluted earnings per share increased 16.7% to $0.33 from $0.28 in the prior year;
  • Lower costs associated with the Company's annual managing partner conference positively impacted year-over-year operating results for the quarter as costs were $2.4 million lower compared to the prior year period;
  • Comparable restaurant sales increased 2.9% at company restaurants and 3.5% at franchise restaurants;
  • Six company restaurants were opened;
  • Restaurant margin, as a percentage of restaurant sales, decreased 45 basis points to 18.1%; and
  • The Company repurchased 300,000 shares of its common stock for $7.6 million.

Results for the year-to-date included:

  • Diluted earnings per share increased 7.6% to $0.70 from $0.65 in the prior year;
  • As previously stated, costs associated with the Company’s annual managing partner conference were $2.4 million lower compared to the prior year period;
  • Comparable restaurant sales increased 2.9% at company restaurants and 3.6% at franchise restaurants;
  • 12 company restaurants and one franchise restaurant were opened;
  • Restaurant margin, as a percentage of restaurant sales, decreased 10 basis points to 18.7%;
  • Income tax rate increased 185 basis points to 30.3%, primarily due to the expiration of certain federal tax credits at the end of 2013; and
  • The Company repurchased 1,260,000 shares of its common stock for $31.8 million.

Kent Taylor, Chief Executive Officer of Texas Roadhouse, Inc., commented, "We are pleased to report another quarter of double-digit revenue growth led by strong operating week growth and positive comparable restaurant sales, including solid traffic growth. Our restaurant development included six new restaurants during the quarter, including our first restaurant in Alaska and we now operate in 49 states and three foreign countries. Looking forward, we will continue to focus on opening restaurants in new and existing markets and driving traffic growth and market share gains through our ongoing commitment to legendary food and service. This philosophy, along with our ongoing dividend and share repurchase programs, will continue to drive shareholder value."

2014 Outlook

The Company reported that comparable restaurant sales at company restaurants for the first four weeks of its third quarter of fiscal 2014 increased approximately 4.0% compared to the prior year period.

Management reiterated the following expectations for 2014:

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

Management updated the following expectation for 2014:

  • Approximately 25 company restaurant openings.

Conference Call

The Company is hosting a conference call today, August 4, 2014 at 5:00 p.m. Eastern Time to discuss these results. The dial-in number is (877) 627-6582 or (719) 325-4820 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 9936831 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 430 restaurants system-wide in 49 states and three 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; 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
July 1, 2014   June 25, 2013   July 1, 2014   June 25, 2013
 
Revenue:
Restaurant sales $ 391,819 $ 348,929 $ 785,775 $ 705,493
Franchise royalties and fees   3,544   3,190   6,730   6,302
 
Total revenue   395,363   352,119   792,505   711,795
 
Costs and expenses:
Restaurant operating costs (excluding depreciation and amortization shown separately below):
 
Cost of sales 137,082 120,212 271,894 244,764
Labor 115,182 101,723 229,854 203,384
Rent 8,128 7,152 16,170 14,209
Other operating 60,362 54,989 121,215 110,767
Pre-opening 4,455 4,240 8,732 7,064
Depreciation and amortization 14,433 12,190 28,518 24,402
Impairment and closure 9 27 26 84
General and administrative   21,311   21,789   41,511   39,156
 
Total costs and expenses   360,962   322,322   717,920   643,830
 
Income from operations 34,401 29,797 74,585 67,965
 
Interest expense, net 514 567 1,072 1,162

Equity income from investments in unconsolidated affiliates

  353   218   565   398
 
Income before taxes 34,240 29,448 74,078 67,201
Provision for income taxes   10,215   8,583   22,445   19,117
 
Net income including noncontrolling interests $ 24,025 $ 20,865 $ 51,633 $ 48,084
Less: Net income attributable to noncontrolling interests   944   902   2,087   1,950
Net income attributable to Texas Roadhouse, Inc. and subsidiaries $ 23,081 $ 19,963 $ 49,546 $ 46,134
 

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

Basic $ 0.33 $ 0.29 $ 0.71 $ 0.66
Diluted $ 0.33 $ 0.28 $ 0.70 $ 0.65
 
Weighted average shares outstanding:
Basic   69,705   70,030   69,918   69,693
Diluted   70,577   71,267   70,822   70,924
 
     
Texas Roadhouse, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
 
 
(As Adjusted) (1)
July 1, 2014   December 31, 2013
 
 
Cash and cash equivalents $ 77,461 $ 94,874
Other current assets 41,222 50,869
Property and equipment, net 612,528 586,212
Goodwill 117,197 117,197
Intangible assets, net 6,989 7,876
Other assets 21,157 20,616
   
Total assets $ 876,554 $ 877,644
 
 
Current maturities of long-term debt 113 243
Other current liabilities 170,370 174,937

Long-term debt, excluding current maturities

50,760 50,990
Other liabilities 57,269 57,614
Texas Roadhouse, Inc. and subsidiaries stockholders' equity 591,210 587,659
Noncontrolling interests 6,832 6,201
   
Total liabilities and equity $ 876,554 $ 877,644
 

(1)

December 31, 2013 revised to reflect the impact of adjustments to purchase price accounting related to 2013 acquisitions in accordance with generally accepted accounting principles ("GAAP").

 
       
Texas Roadhouse, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
   
 
26 Weeks Ended
July 1, 2014 June 25, 2013
 
 
Cash flows from operating activities:
Net income including noncontrolling interests $ 51,633 $ 48,084
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization 28,518 24,402
Share-based compensation expense 7,399 6,971
Other noncash adjustments (1,044 ) 552
Change in working capital   (5,813 )   (11,412 )
Net cash provided by operating activities   80,693     68,597  
 
Cash flows from investing activities:
Capital expenditures - property and equipment (53,971 ) (35,159 )
Proceeds from sale of property and equipment, including insurance proceeds   1,193     4  
Net cash used in investing activities   (52,778 )   (35,155 )
 
Cash flows from financing activities:
Repurchase shares of common stock (31,760 ) -
Dividends paid (10,473 ) (21,512 )
Other financing activities   (3,095 )   6,441  
Net cash used in financing activities   (45,328 )   (15,071 )
 
Net (decrease) increase in cash and cash equivalents (17,413 ) 18,371
Cash and cash equivalents - beginning of year   94,874     81,746  
Cash and cash equivalents - end of period $ 77,461   $ 100,117  
 
                       
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
2014 2013 vs LY 2014 2013 vs LY
 
Restaurant openings
Company - Texas Roadhouse 6 6 0 12 9 3
Company - Other 0 1 (1 ) 0 1 (1 )
Franchise - Texas Roadhouse 0 1 (1 ) 1 3 (2 )
Total 6 8 (2 ) 13 13 0
 
 
Restaurants open at the end of the quarter
Company - Texas Roadhouse 357 327 30
Company - Other 1 3 (2 )
Franchise - Texas Roadhouse 75 75 0
Total 433 405 28
 
Company-owned restaurants
Restaurant sales $ 391,819 $ 348,929 12.3 % $ 785,775 $ 705,493 11.4 %
Store weeks 4,593 4,214 9.0 % 9,117 8,388 8.7 %
Comparable restaurant sales growth (1) 2.9 % 4.5 % 2.9 % 4.1 %
Texas Roadhouse restaurants only:
Comparable restaurant sales growth (1) 2.9 % 4.5 % 2.9 % 4.1 %
Average unit volume (2) $ 1,099 $ 1,073 2.4 % $ 2,220 $ 2,170 2.3 %
Weekly sales by group:
Comparable restaurants (313 units) $ 84,964
Average unit volume restaurants (20 units) (3) $ 77,873
Restaurants less than 6 months old (24 units) $ 97,734
 
Restaurant operating costs (as a % of restaurant sales)
Cost of sales 35.0 % 34.5 %

53

bps

34.6 % 34.7 %

(9)

bps

Labor 29.4 % 29.2 %

24

bps

29.3 % 28.8 %

42

bps

Rent 2.1 % 2.0 %

2

bps

2.1 % 2.0 %

4

bps

Other operating 15.4 % 15.8 %

(35)

bps

15.4 % 15.7 %

(27)

bps

Total 81.9 % 81.4 %

45

bps

81.3 % 81.2 %

10

bps

 
Restaurant margin (4) 18.1 % 18.6 %

(45)

bps

18.7 % 18.8 %

(10)

bps

Restaurant margin $/Store week $ 15,472 $ 15,390 $ 16,084 $ 15,781
 
Franchise-owned restaurants
Franchise royalties and fees $ 3,544 $ 3,190 11.1 % $ 6,730 $ 6,302 6.8 %
Store weeks 975 966 0.9 % 1,937 1,332 45.4 %
Comparable restaurant sales growth (1) 3.5 % 5.3 % 3.6 % 4.5 %
Average unit volume (2) $ 1,171 $ 1,112 5.3 % $ 2,361 $ 2,236 5.6 %
 
Pre-opening expense $ 4,455 $ 4,240 5.1 %

$

8,732 $ 7,064 23.6 %
 
Depreciation and amortization $ 14,433 $ 12,190 18.4 % $ 28,518 $ 24,402 16.9 %
As a % of revenue 3.7 % 3.5 %

19

bps

3.6 % 3.4 %

17

bps

 
General and administrative expenses $ 21,311 $ 21,789 (2.2 )% $ 41,511 $ 39,156 6.0 %
As a % of revenue 5.4 % 6.2 %

(80)

bps

5.2 % 5.5 %

(26)

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 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 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.