Texas Roadhouse, Inc. (NasdaqGS: TXRH), today announced financial results for the 13 and 39 week periods ended September 27, 2011.

 
  Third Quarter   Year to Date
($000's)

2011

  

2010

  

% Change

2011

  

2010

  

% Change

 

Total revenue 269,253 245,613 10 832,610 760,399 9
Income from operations 23,072 21,448 8 77,029 74,883 3
Net income 15,798 13,952 13 51,667 48,229 7
Diluted EPS $0.22 $0.19 15 $0.71 $0.66 7
 

Results for the third quarter included:

  • Comparable restaurant sales increased 4.0% at company restaurants and 3.7% at franchise restaurants;
  • Five company restaurants and one franchise restaurant opened;
  • Restaurant margins, as a percentage of restaurant sales, increased nine basis points to 18.0% due, in large part, to approximately $1.0 million in benefits recorded relating to workers compensation and property tax expenses;
  • Diluted earnings per share increased 15% to $0.22 from $0.19 in the prior year period;
  • The Company repurchased 1,503,400 shares of its common stock for a total purchase price of $21.2 million.

Results year-to-date included:

  • Comparable restaurant sales increased 4.4% at company restaurants and 3.9% at franchise restaurants;
  • Ten company restaurants and one franchise restaurant opened;
  • Restaurant margins, as a percentage of restaurant sales, decreased 51 basis points to 18.5%;
  • Diluted earnings per share increased 7% to $0.71 from $0.66 in the prior period;
  • The Company repurchased 3,003,400 shares of its common stock for a total purchase price of $46.4 million.

Kent Taylor, Chief Executive Officer of Texas Roadhouse, commented, "Despite ongoing commodity inflation, we were pleased with our third quarter. Comparable restaurant sales remained strong at 4%, driven by traffic gains and pricing flow through, while our newest units continued to generate very strong volumes. In terms of profitability, although one-time benefits and a lower tax rate bolstered our reported results, our underlying business performance was in-line with our expectations. Finally, we remain on track with our 2011 and 2012 development plans, and are particularly pleased that our cash flow generation remains healthy. This allows us to self-fund our new unit expansion and allocate excess capital for the benefit of shareholders."

Outlook for 2011

The Company reported that comparable restaurant sales at company restaurants for the first four weeks of the fourth quarter of fiscal 2011 increased approximately 4.2% compared to the prior year period.

With better than expected third quarter results, driven by lower than anticipated workers compensation expense, property tax expense and income tax rate, the Company is increasing its diluted earnings per share expectation for 2011. Diluted earnings per share growth is now expected to be up 7.0% to 8.0%. This full year 2011 estimate is based, in part, on the following assumptions, which have not changed from previously reported guidance:

  • Comparable company restaurant sales growth of 4.0% to 4.5%;
  • 20 company restaurant openings;
  • Food cost inflation of approximately 4.0%; and
  • Total capital expenditures of approximately $70.0 million.

Outlook for 2012

With regard to 2012, management provides the following expectations:

  • Positive comparable restaurant sales growth;
  • 25 restaurant openings;
  • Food cost inflation of 7.0% to 9.0%, up from approximately 4.0% in 2011;
  • Higher labor costs due to an increase in minimum and tip wages in 6 states, which impacts approximately 50 company-owned restaurants or approximately 20% of our total company-owned restaurants;
  • Income tax rate of approximately 32.5%, an increase of 270 basis points over the expected 2011 rate based on the scheduled expiration of certain federal tax credits at the end of 2011; and
  • Total capital expenditures of approximately $80.0 million.

Taylor commented on 2012, "We certainly feel very good about our sales momentum and increased restaurant growth heading into 2012. And, while we do anticipate taking some pricing actions, we do not expect those to offset the unusually high inflation we foresee next year. Our job is to balance our long-term positioning with shorter term pressures and that is what we plan to do."

Conference Call

The Company is hosting a conference call today, November 1, 2011, at 5:00 p.m. Eastern Time to discuss these results. The dial-in number is (877) 419-6594 or (719) 325-4888 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 6062456 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 350 restaurants system-wide in 46 states. 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, strength of consumer spending, conditions beyond the Company's control such as weather, natural disasters, disease outbreaks, epidemics or pandemics impacting the Company's customers or food supplies, acts of war or terrorism and other factors disclosed from time to time in the Company's filings with the U.S. Securities and Exchange Commission. Investors should take such risks into account when making investment decisions. Stockholders 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. The Company undertakes 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,
2011

 

September 28,
2010

 

September 27,
2011

 

September 28,
2010

 
Revenue:
Restaurant sales $ 266,874 $ 243,405 $ 825,283 $ 753,582
Franchise royalties and fees   2,379   2,208   7,327   6,817
 
Total revenue   269,253   245,613   832,610   760,399
 
Costs and expenses:
Restaurant operating costs:
Cost of sales 88,944 79,101 274,751 244,560
Labor 78,919 71,835 244,551 221,241
Rent 5,796 5,329 17,153 15,886
Other operating 45,112 43,476 136,331 128,841
Pre-opening 3,327 2,150 7,413 4,562
Depreciation and amortization 10,571 10,262 31,724 30,861
Impairment and closure 13 44 59 302
General and administrative   13,499   11,968   43,599   39,263
 
Total costs and expenses   246,181   224,165   755,581   685,516
 
Income from operations 23,072 21,448 77,029 74,883
 
Interest expense, net 669 644 1,776 2,078

Equity income from investments in unconsolidated affiliates

  71   155   271   355
 
Income before taxes 22,474 20,959 75,524 73,160
Provision for income taxes   6,058   6,478   21,934   23,133
 
Net income including noncontrolling interests $ 16,416 $ 14,481 $ 53,590 $ 50,027
Less: Net income attributable to noncontrolling interests   618   529   1,923   1,798
Net income attributable to Texas Roadhouse, Inc. and subsidiaries $ 15,798 $ 13,952 $ 51,667 $ 48,229
 

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

Basic $ 0.22 $ 0.19 $ 0.72 $ 0.68
Diluted $ 0.22 $ 0.19 $ 0.71 $ 0.66
 
Weighted average shares outstanding:
Basic   70,800   71,660   71,370   71,273
Diluted   72,186   73,002   72,903   72,727
 
     
Texas Roadhouse, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in thousands, except per share data)
(unaudited)
 
 
39 Weeks Ended

September 27,
2011

   

September 28,
2010

 
 
Cash flows from operating activities:
Net income including noncontrolling interests $ 53,590 $ 50,027
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization 31,724 30,861
Share-based compensation expense 8,151 5,705
Other noncash adjustments 1,145 1,574
Change in working capital   (13,601 )   (13,865 )
Net cash provided by operating activities   81,009     74,302  
 
Cash flows from investing activities:
Capital expenditures - property and equipment (51,839 ) (31,598 )
Proceeds from sale of property and equipment, including insurance proceeds   171     175  
Net cash used in investing activities   (51,668 )   (31,423 )
 
Cash flows from financing activities:
Repayments of revolving credit facility, net - (39,000 )
Repurchase shares of common stock (46,445 ) -
Dividends paid (11,399 ) -
Other financing activities   1,961     4,688  
Net cash used in financing activities   (55,883 )   (34,312 )
 
Net (decrease) increase in cash and cash equivalents (26,542 ) 8,567
Cash and cash equivalents - beginning of year   82,215     46,858  
Cash and cash equivalents - end of year $ 55,673   $ 55,425  
 
 
Texas Roadhouse, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands)
   
 
 
(unaudited)
September 27, 2011 December 28, 2010
 
 
Cash and cash equivalents $ 55,673 $ 82,215
Other current assets 28,616 31,707
Property and equipment, net 479,167 458,983
Goodwill 111,785 111,785
Intangible assets, net 9,311 10,118
Other assets 11,431 7,993
   
Total assets $ 695,983 $ 702,801
 
 

 

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

296 274
Other current liabilities 100,592 111,784

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

51,681 51,906
Other liabilities 44,446 39,455
Texas Roadhouse, Inc. and subsidiaries stockholders' equity 495,072 496,616
Noncontrolling interests 3,896 2,766
   
Total liabilities and equity $ 695,983 $ 702,801
 
 
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

2011

2010

vs LY

2011

2010

vs LY

 
Restaurant openings

 

Company 5 3 2 10 7 3
Franchise 1 0 1 1 1 0
Total 6 3 3 11 8 3
 
Restaurant closures
Company 0 0 0 0 (1) 1
Franchise 0 0 0 0 0 0
Total 0 0 0 0 (1) 1
 
Restaurants open at the end of the quarter
Company 284 267 17
Franchise 72 71 1
Total 356 338 18
 
Company-owned restaurants
Restaurant sales $ 266,874 $ 243,405 9.6 % $ 825,283 $ 753,582 9.5 %
Store weeks 3,643 3,450 5.6 % 10,818 10,294 5.1 %
Comparable restaurant sales growth (1) 4.0 % 4.3 % 4.4 % 2.1 %
Average unit volume (2) $ 949 $ 913 3.9 % $ 2,970 $ 2,836 4.7 %
Weekly sales by group (3):
Comparable restaurants (260 units) $ 73,098
Average unit volume restaurants (14 units) $ 71,165
Restaurants less than 6 months old (10 units) $ 84,524
 
Restaurant operating costs (as a % of restaurant sales)
Cost of sales 33.3 % 32.5 % 83 bps 33.3 % 32.5 % 84 bps
Labor 29.6 % 29.5 % 6 bps 29.6 % 29.4 % 27 bps
Rent 2.2 % 2.2 % (2 ) bps 2.1 % 2.1 % (3 ) bps
Other operating 16.9 % 17.9 % (96 ) bps 16.5 % 17.1 % (58 ) bps
Total 82.0 % 82.1 % (9 ) bps 81.5 % 81.0 % 51 bps
 
Restaurant margins (4) 18.0 % 17.9 % 9 bps 18.5 % 19.0 % (51 ) bps
 
Franchise-owned restaurants
Franchise royalties and fees $ 2,379 $ 2,208 7.7 % $ 7,327 $ 6,817 7.5 %
Store weeks 927 912 1.6 % 2,773 2,707 2.4 %
Comparable restaurant sales growth (1) 3.7 % 4.4 % 3.9 % 2.4 %
Average unit volume (2) $ 935 $ 905 3.3 % $ 2,906 $ 2,829 2.7 %
 
Pre-opening expense $ 3,327 $ 2,150 54.7 % $ 7,413 $ 4,562 62.5 %
 
Depreciation and amortization $ 10,571 $ 10,262 3.0 % $ 31,724 $ 30,861 2.8 %
As a % of revenue 3.9 % 4.2 % (25 ) bps 3.8 % 4.1 % (25 ) bps
 
Impairment and closure $ 13 $ 44 NM $ 59 $ 302 NM
 
General and administrative expenses $ 13,499 $ 11,968 12.8 % $ 43,599 $ 39,263 11.0 %
As a % of revenue 5.0 % 4.9 % 14 bps 5.2 % 5.2 % 7 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 restaurants open six months as of the beginning of the measurement period, excluding sales from restaurants closed during the period.
(3) Weekly sales by group includes sales from comparable restaurants, sales from average unit restaurants and sales from restaurants which were open less than six months as of the beginning of the measurement period. Average unit volume restaurants includes sales from restaurants open less than 18 months, but more than six months, as of the beginning of the measurement period, excluding sales from restaurants closed during the period.
(4) Restaurant margins represent restaurant sales less restaurant operating costs (as a percentage of restaurant sales).
 
NM - Not meaningful
Amounts may not foot due to rounding.

Texas Roadhouse, Inc.
Investor Relations:
Price Cooper, 502-515-7300
or
Media:
Travis Doster, 502-638-5457