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Investor Alert

press release

Oct. 28, 2019, 4:04 p.m. EDT

Texas Roadhouse, Inc. Announces Third Quarter 2019 Results

LOUISVILLE, Ky., Oct 28, 2019 (GLOBE NEWSWIRE via COMTEX) -- LOUISVILLE, Ky., Oct. 28, 2019 (GLOBE NEWSWIRE) -- 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 53 [rd] 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

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 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 Subsidiaries
Supplemental 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.

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