Texas Roadhouse, Inc. Announces Second Quarter 2019 Results

LOUISVILLE, Ky., July 29, 2019 (GLOBE NEWSWIRE) -- Texas Roadhouse, Inc. (NasdaqGS: TXRH), today announced financial results for the 13 and 26 week periods ended June 25, 2019. 

	Second Quarter									Year to Date
($000's)		2019			2018		% Change				2019		2018	% Change
Total revenue	$	689,828		$	629,237		9.6	%		$	1,380,436	$	1,256,942	9.8	%
Income from operations		53,283			54,267		(1.8	%)			113,728		119,138	(4.5	%)
Net income		44,845			44,227		1.4	%			95,235		98,768	(3.6	%)
Diluted EPS	$	0.63		$	0.62		1.6	%		$	1.32	$	1.37	(3.7	%)

 

Results for the second quarter included the following highlights:  

• Comparable restaurant sales increased 4.7% at company restaurants and 4.3% at domestic franchise restaurants;
• Restaurant margin, as a percentage of restaurant and other sales, decreased 53 basis points to 17.6%, primarily due to higher labor costs driven by wage rate and other inflation, partially offset by lower cost of sales as the benefit of a higher average check more than offset inflation.  Restaurant margin dollars increased 6.5% to $120.8 million from $113.4 million in the prior year;
• Diluted earnings per share increased to $0.63 from $0.62 in the prior year primarily due to higher restaurant margin dollars along with lower income taxes partially offset by higher general and administrative expenses and higher depreciation and amortization expense;
• Three Texas Roadhouse company restaurants were opened and two franchise restaurants were opened; and
• The Board of Directors approved a stock repurchase program which authorized the repurchase of up to $250 million of common stock.  The Company repurchased 2,096,677 shares of common stock for $112.1 million. 

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

• Comparable restaurant sales increased 5.0% at company restaurants and 4.3% at domestic franchise restaurants;
• Restaurant margin, as a percentage of restaurant and other sales, decreased 90 basis points to 17.8% primarily due to higher labor costs driven by wage rate and other inflation.  Restaurant margin dollars increased 4.6% to $243.4 million from $232.8 million in the prior year;
• Diluted earnings per share decreased to $1.32 from $1.37 primarily due to higher general and administrative expenses and higher depreciation and amortization expense, partially offset by higher restaurant margin dollars; and
• Seven Texas Roadhouse company restaurants were opened and four franchise restaurants were opened.

Kent Taylor, Chief Executive Officer of Texas Roadhouse, Inc., commented, “We are pleased with our continued top-line momentum highlighted by positive comparable restaurant sales of 4.7%.  While restaurant margins continue to be pressured by higher labor costs driven by increasing wage rates and other inflation, the additional pricing we put in place at the beginning of the quarter provided a significant benefit.”

Taylor continued, “On the development front, we have opened 10 company restaurants so far this year.  We have experienced some construction delays that we expect will push some sites into early next year but remain focused on opening approximately 15 additional locations in 2019.  Finally, our healthy cash flows enabled us to repurchase over 2 million shares of our common stock this quarter.  We believe these share buy backs and our dividend program reflect our commitment to further driving shareholder value.”

2019 Outlook

Comparable restaurant sales at company restaurants for the first four weeks of our third quarter of fiscal 2019 increased approximately 4.3% compared to the prior year period.

Management updated the following expectations for 2019:

• Approximately 25 company restaurant openings, including as many as four Bubba’s 33 restaurants;
• An income tax rate of 14.0% to 15.0%; and
• Total capital expenditures of approximately $210 million.

Management reiterated the following expectations for 2019:

• Positive comparable restaurant sales growth;
• Commodity cost inflation of approximately 1.0% to 2.0%; and
• Approximately 7.0% to 8.0% growth in total labor dollars per store week.

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, July 29, 2019 at 5:00 p.m. Eastern Time to discuss these results.  The dial-in number is [phone] or [phone] for international calls.  A replay of the call will be available for one week following the conference call.  To access the replay, please dial [phone] or [phone] for international calls, and use 5154796 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 590 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.

Contacts:

Investor Relations                                                                                          
Tonya Robinson
[phone]

Media
Travis Doster
[phone]

Texas Roadhouse, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(in thousands, except per share data)
(unaudited)
			13 Weeks Ended								26 Weeks Ended
			June 25, 2019				June 26, 2018				June 25, 2019				June 26, 2018
Revenue:
	Restaurant and other sales		$	684,373			$	624,073			$	1,369,490			$	1,246,475
	Franchise royalties and fees			5,455				5,164				10,946				10,467
Total revenue				689,828				629,237				1,380,436				1,256,942
Costs and expenses:
	Restaurant operating costs (excluding depreciation and amortization shown separately below):
		Cost of sales		221,266				204,048				444,978				406,834
		Labor		225,490				199,647				449,370				395,677
		Rent		13,051				12,119				26,179				23,970
		Other operating		103,811				94,858				205,613				187,236
	Pre-opening			4,197				4,107				8,065				9,151
	Depreciation and amortization			28,454				25,165				56,227				49,649
	Impairment and closure			316				22				333				108
	General and administrative			39,960				35,004				75,943				65,179
Total costs and expenses				636,545				574,970				1,266,708				1,137,804
Income from operations				53,283				54,267				113,728				119,138
Interest income (expense), net				691				(283	)			1,445				(642	)
Equity income from investments in
	unconsolidated affiliates			141				445				254				769
Income before taxes				54,115				54,429				115,427				119,265
Provision for income taxes				7,427				8,466				16,546				16,923
Net income including noncontrolling interests				46,688				45,963				98,881				102,342
Less: Net income attributable to noncontrolling interests				1,843				1,736				3,646				3,574
Net income attributable to Texas Roadhouse, Inc. and subsidiaries			$	44,845			$	44,227			$	95,235			$	98,768
Net income per common share attributable to Texas Roadhouse, Inc.
and subsidiaries:
	Basic		$	0.63			$	0.62			$	1.33			$	1.38
	Diluted		$	0.63			$	0.62			$	1.32			$	1.37
Weighted average shares outstanding:
	Basic			71,362				71,445				71,558				71,389
	Diluted			71,733				71,897				71,961				71,853
Cash dividends declared per share			$	0.30			$	0.25			$	0.60			$	0.50

Texas Roadhouse, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
		June 25, 2019				December 25, 2018
	Cash and cash equivalents	$	144,839			$	210,125
	Other current assets, net		72,589				134,894
	Property and equipment, net		991,339				956,676
	Operating lease right-of-use asset, net		485,818				-
	Goodwill		123,220				123,220
	Intangible assets, net		1,513				1,959
	Other assets		49,533				42,402
	Total assets	$	1,868,851			$	1,469,276
	Other current liabilities		359,065				385,142
	Operating lease liabilities, net of current portion		521,820				-
	Other liabilities, net		82,348				123,426
	Texas Roadhouse, Inc. and subsidiaries stockholders' equity		890,852				945,569
	Noncontrolling interests		14,766				15,139
	Total liabilities and equity	$	1,868,851			$	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)
			26 Weeks Ended
			June 25, 2019					June 26, 2018
Cash flows from operating activities:
Net income including noncontrolling interests			$	98,881				$	102,342
Adjustments to reconcile net income to net cash provided by operating activities
	Depreciation and amortization			56,227					49,649
	Share-based compensation expense			16,873					15,856
	Other noncash adjustments, net			(27	)				7,076
Change in working capital				15,062					(9,816	)
		Net cash provided by operating activities		187,016					165,107
Cash flows from investing activities:
Capital expenditures - property and equipment				(87,782	)				(66,718	)
		Net cash used in investing activities		(87,782	)				(66,718	)
Cash flows from financing activities:
Principal payments on long-term debt and capital lease obligation				-					(50,004	)
Repurchase shares of common stock				(112,050	)				-
Dividends paid				(39,452	)				(32,798	)
Other financing activities, net				(13,018	)				(12,152	)
		Net cash used in financing activities		(164,520	)				(94,954	)
		Net (decrease) increase in cash and cash equivalents		(65,286	)				3,435
Cash and cash equivalents - beginning of period				210,125					150,918
Cash and cash equivalents - end of period			$	144,839				$	154,353

Texas Roadhouse, Inc. and Subsidiaries
Reconciliation of Income from Operations to Restaurant Margin
(in thousands)
(unaudited)
	13 Weeks Ended								26 Weeks Ended
	June 25, 2019				June 26, 2018				June 25, 2019				June 26, 2018
Income from operations	$	53,283			$	54,267			$	113,728			$	119,138
Less:
Franchise royalties and fees		5,455				5,164				10,946				10,467
Add:
Pre-opening		4,197				4,107				8,065				9,151
Depreciation and amortization		28,454				25,165				56,227				49,649
Impairment and closure		316				22				333				108
General and administrative		39,960				35,004				75,943				65,179
Restaurant margin	$	120,755			$	113,401			$	243,350			$	232,758
Restaurant margin (as a percentage of restaurant and other sales)		17.6	%			18.2	%			17.8	%			18.7	%

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
				2019			2018		vs LY				2019			2018		vs LY
Restaurant openings
	Company - Texas Roadhouse			3			4		(1	)			7			10		(3	)
	Company - Bubba's 33			0			3		(3	)			0			4		(4	)
	Company - Other			0			0		0				0			0		0
	Franchise - Texas Roadhouse - U.S.			1			0		1				1			0		1
	Franchise - Texas Roadhouse - International			1			1		0				3			3		0
	Total			5			8		(3	)			11			17		(6	)
Restaurant closures
	Franchise - Texas Roadhouse - International			(2	)		0		(2	)			(2	)		0		(2	)
	Total			(2	)		0		(2	)			(2	)		0		(2	)
Restaurants open at the end of the quarter
	Company - Texas Roadhouse			471			450		21
	Company - Bubba's 33			25			24		1
	Company - Other			2			2		0
	Franchise - Texas Roadhouse - U.S.			70			70		0
	Franchise - Texas Roadhouse - International			23			20		3
	Total			591			566		25
Company restaurants
	Restaurant and other sales		$	684,373		$	624,073		9.7	%		$	1,369,490		$	1,246,475		9.9	%
	Store weeks			6,460			6,142		5.2	%			12,846			12,190		5.4	%
	Comparable restaurant sales growth (1)			4.7	%		5.7	%					5.0	%		5.3	%
	Texas Roadhouse restaurants only:
		Comparable restaurant sales growth (1)		4.6	%		5.6	%					4.9	%		5.2	%
		Average unit volume (2)	$	1,393		$	1,337		4.2	%		$	2,812		$	2,695		4.4	%
		Weekly sales by group:
		Comparable restaurants (434 units)	$	107,590
		Average unit volume restaurants (20 units) (3)	$	98,426
		Restaurants less than 6 months old (17 units)	$	115,233
Restaurant operating costs (as a % of restaurant and other sales)
Cost of sales				32.3	%		32.7	%	(37	)	bps		32.5	%		32.6	%	(15	)	bps
Labor				32.9	%		32.0	%	96		bps		32.8	%		31.7	%	107		bps
Rent				1.9	%		1.9	%	(4	)	bps		1.9	%		1.9	%	(1	)	bps
Other operating				15.2	%		15.2	%	(3	)	bps		15.0	%		15.0	%	(1	)	bps
Total				82.4	%		81.8	%	53		bps		82.2	%		81.3	%	90		bps
	Restaurant margin			17.6	%		18.2	%	(53	)	bps		17.8	%		18.7	%	(90	)	bps
	Restaurant margin ($ in thousands)		$	120,755		$	113,401		6.5	%		$	243,350		$	232,758		4.6	%
	Restaurant margin $/Store week		$	18,692		$	18,463		1.2	%		$	18,943		$	19,094		(0.8	)%
Franchise restaurants
	Franchise royalties and fees		$	5,455		$	5,164		5.6	%		$	10,946		$	10,467		4.6	%
	Store weeks			1,208			1,164		3.8	%			2,403			2,303		4.3	%
	Comparable restaurant sales growth (1)			3.7	%		1.9	%					3.3	%		1.9	%
	U.S. franchise restaurants only:
		Comparable restaurant sales growth (1)		4.3	%		3.9	%					4.3	%		4.0	%
		Average unit volume (2)	$	1,436		$	1,376		4.3	%		$	2,897		$	2,777		4.3	%
Pre-opening expense			$	4,197		$	4,107		2.2	%		$	8,065		$	9,151		(11.9	)%
Depreciation and amortization			$	28,454		$	25,165		13.1	%		$	56,227		$	49,649		13.2	%
	As a % of revenue			4.1	%		4.0	%	13		bps		4.1	%		3.9	%	12		bps
General and administrative expenses			$	39,960		$	35,004		14.2	%		$	75,943		$	65,179		16.5	%
	As a % of revenue			5.8	%		5.6	%	23		bps		5.5	%		5.2	%	32		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.