TEXAS ROADHOUSE, INC. CAUTIONARY STATEMENT
This report contains forward-looking statements based on our current expectations, estimates and projections about our industry and certain assumptions made by us. These statements include, but are not limited to, statements related to the potential impact of the COVID-19/Coronavirus outbreak and other non-historical statements. Words such as "anticipates," "expects," "intends," "plans," "believes," "seeks," "estimates," "may," "will" and variations of these words or similar expressions are intended to identify forward-looking statements. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. Such statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Therefore, our actual results could differ materially and adversely from those expressed in any forward-looking statements as a result of various factors. The section entitled "Risk Factors" in our Annual Report on Form 10-K for the year endedDecember 29, 2020 , and in Part II, Item 1A in this Form 10-Q, along with disclosures in our otherSecurities and Exchange Commission ("SEC") filings discuss some of the important risk factors that may affect our business, results of operations, or financial condition. You should carefully consider those risks, in addition to the other information in this report, and in our other filings with theSEC , before deciding to invest in our Company or to maintain or increase your investment. We undertake no obligation to revise or update publicly any forward-looking statements, except as may be required by applicable law. The information contained in this Form 10-Q is not a complete description of our business or the risks associated with an investment in our common stock. We urge you to carefully review and consider the various disclosures made by us in this report and in our other reports filed with theSEC that discuss our business in greater detail and advise interested parties of certain risks, uncertainties and other factors that may affect our business, results of operations or financial condition. COVID-19 Impact
The Company continues to be subject to risks and uncertainties as a result of the COVID-19 pandemic (the "pandemic"). These include state and local restrictions on restaurants, some of which have limited capacity in the dining rooms while others have allowed To-Go or curbside service only. As ofMarch 30, 2021 , all of our domestic company and franchise locations had re-opened their dining rooms under various limited capacity restrictions. As ofMarch 31, 2020 , all of our domestic company and franchise locations were under state or local order which only allowed for To-Go or curbside service. As a result of these capacity restrictions, we continue to utilize our hybrid operating model that accommodates our limited capacity dining rooms together with enhanced To-Go. We continue to see increased sales in our To-Go program, even with dining rooms re-opened, which has offset the decrease in dining room traffic due to the limited capacity restrictions. We cannot predict how long the pandemic will last, how long it will take until all state and local restrictions will be lifted, the extent to which our dining rooms will have to close again, or if the increased sales in our To-Go program will continue. As a result of the pandemic, legislation referred to as the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") was passed in 2020 to benefit companies that were significantly impacted by the pandemic. This legislation allowed for the deferral of the social security portion of the employer portion of FICA payroll taxes from the date of enactment through the end of 2020. Amounts are required to be repaid in equal installments at the end of 2021 and 2022. As ofDecember 29, 2020 , the Company had deferred$47.3 million in payroll taxes with the amount due in 2021 included in accrued wages and payroll taxes and the amount due in 2022 included in other liabilities in our unaudited condensed consolidated balance sheets.
The CARES Act also allowed for an Employee Retention Credit for companies severely impacted by the pandemic to encourage the retention of full-time employees. This refundable payroll tax credit was available for any company that had fully or partially suspended operations due to government order or experienced a significant decline in gross receipts
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and had employees who were paid but did not actually work. The Company provided various forms of relief pay for hourly restaurant employees that qualified for this tax credit. In our Q1 2021 fiscal quarter, we recorded$1.0 million related to this credit which is included in labor expense in our unaudited condensed consolidated statements of income and comprehensive income. OVERVIEWTexas Roadhouse, Inc. is a growing restaurant company operating predominately in the casual dining segment. Our late founder,W. Kent Taylor , started the business in 1993 with the opening of the firstTexas Roadhouse restaurant inClarksville, Indiana . Since then, we have grown to 637 restaurants in 49 states and ten foreign countries. As ofMarch 30, 2021 , our 637 restaurants included:
540 "company restaurants," of which 520 were wholly-owned and 20 were
majority-owned. The results of operations of company restaurants are included
in our unaudited condensed consolidated statements of income and comprehensive
income. The portion of income attributable to noncontrolling interests in ? company restaurants that are not wholly-owned is reflected in the line item
entitled "Net income attributable to noncontrolling interests" in our unaudited
condensed consolidated statements of income and comprehensive income. Of the
540 restaurants we owned as ofMarch 30, 2021 , we operated 505 asTexas Roadhouse restaurants, 32 as Bubba's 33 restaurants and three as Jaggers restaurants. 97 "franchise restaurants," 24 of which we have a 5.0% to 10.0% ownership
interest. The income derived from our minority interests in these franchise
restaurants is reported in the line item entitled "Equity loss from investments
in unconsolidated affiliates" in our unaudited condensed consolidated
statements of income and comprehensive income. Additionally, we provide various ? management services to these 24 franchise restaurants, as well as five
additional franchise restaurants in which we have no ownership interest. All of
the franchise restaurants are operated as
97 franchise restaurants, 69 were domestic restaurants and 28 were
international restaurants. As of
were temporarily closed due to the pandemic but continue to be included in the
above total.
We have contractual arrangements that grant us the right to acquire at pre-determined formulas the remaining equity interests in 18 of the 20 majority-owned company restaurants and 65 of the 69 domestic franchise restaurants.
Throughout this report, we use the term "restaurants" to include
Presentation of Financial and Operating Data
Throughout this report, the 13 weeks ended
Long-Term Strategies to Grow Earnings Per Share and Create Shareholder Value
While our short-term strategies have changed due to the temporary change in our business model due to the pandemic, our long-term strategies remain unchanged. Our long-term strategies with respect to increasing net income and earnings per share, along with creating shareholder value, include the following: Expanding Our Restaurant Base. We continue to evaluate opportunities to develop restaurants in existing markets and in new domestic and international markets. Domestically, we remain focused primarily on markets where we believe a significant demand for our restaurants exists because of population size, income levels, and the presence of shopping and entertainment centers and a significant employment base. In recent years, we have relocated several existingTexas Roadhouse locations at or near the end of the associated lease or as a result of eminent domain which allows us to move to a better site, update them to a current prototypical design, and/or obtain more favorable lease terms. We continue to evaluate these opportunities particularly as it relates to older locations with strong sales. In addition, at our high volume restaurants, we continue to look for opportunities to increase our dining room capacity by
adding on to our existing
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building and/or to increase our parking capacity by leasing or purchasing
property that adjoins our site. Our ability to expand our restaurant base is
influenced by many factors beyond our control and, therefore, we may not be able
to achieve our anticipated growth.
In Q1 2021, three company restaurants, including one Bubba's 33, were opened. We
currently plan to open 25 to 30 company restaurants across all concepts in 2021.
To the extent that state and local guidelines begin to significantly reduce
capacity and/or re-close dining rooms, we could pull back on development and
reduce capital expenditures accordingly. We currently expect our franchise
partners will open as many as six Texas Roadhouse restaurants, primarily
international, in 2021.
Our average capital investment for the 18 Texas Roadhouse restaurants opened
during 2020, including pre-opening expenses and a capitalized rent factor, was
$6.2 million . We expect our average capital investment for Texas Roadhouse
restaurants opening in 2021 to be approximately $5.5 million . Our average
capital investment for the three Bubba's 33 restaurants opened during 2020,
including pre-opening expenses and a capitalized rent factor, was $7.3 million .
We expect our average capital investment for Bubba's 33 restaurants opening in
2021 to be approximately $6.9 million . The decrease in investment costs for both
concepts is primarily due to higher building and site work costs in 2020 related
to construction delays from the pandemic.
We remain focused on driving sales and managing restaurant investment costs to
maintain our restaurant development in the future. Our capital investment
(including cash and non-cash costs) for new restaurants varies significantly
depending on a number of factors including, but not limited to: the square
footage, layout, scope of required site work, geographical location, type of
construction labor, local permitting requirements, hook-up fees, our ability to
negotiate with landlords, and cost of liquor and other licenses.
We have entered into area development and franchise agreements for the
development and operation of Texas Roadhouse restaurants in numerous foreign
countries and one U.S. territory. We currently have signed franchise and/or
development agreements in nine countries in the Middle East as well as Taiwan ,
the Philippines , Mexico , China , South Korea , Brazil and Puerto Rico . As of March
30, 2021 , we had 15 restaurants in five countries in the Middle East , four
restaurants open in Taiwan , five in the Philippines , two in South Korea and one
each in Mexico and China for a total of 28 restaurants in ten foreign countries.
Due to the pandemic, four of our international restaurants were temporarily
closed as of March 30, 2021 . For the existing international agreements, the
franchisee is required to pay us a franchise fee for each restaurant to be
opened, royalties on the gross sales of each restaurant and a development fee
for our grant of development rights in the named countries. We anticipate that
the specific business terms of any future franchise agreement for international
restaurants might vary significantly from the standard terms of our domestic
agreements and from the terms of existing international agreements, depending on
the territory to be franchised and the extent of franchisor-provided services to
each franchisee.
Maintaining and/or Improving Restaurant Level Profitability. We continue to balance the impacts of inflationary pressures with our value positioning as we remain focused on our long-term success. This may create a challenge in terms of maintaining and/or increasing restaurant-level profitability (restaurant margin), in any given year, depending on the level of inflation we experience. Restaurant margin is not aU.S. generally accepted accounting principle ("GAAP") measure and should not be considered in isolation, or as an alternative to income from operations. See further discussion of restaurant margin below. In addition to restaurant margin, as a percentage of restaurant and other sales, we also focus on the growth of restaurant margin dollars per store week as a measure of restaurant-level profitability. In terms of driving comparable restaurant sales, we remain focused on encouraging repeat visits by our guests and attracting new guests through our continued commitment to operational standards relating to food and service quality. To attract new guests and increase the frequency of visits of our existing guests, we also continue to drive various localized marketing programs, focus on speed of service and increase throughput by adding seats and parking at certain restaurants. In addition, with the increase in To-Go sales in prior years and the significant increase during the pandemic, we are currently testing changes to our building layout to help better accommodate higher To-Go volumes at our restaurants. In addition, we continue to look for ways through various strategic initiatives to drive awareness of our brands and increase sales and profitability. At the onset of the pandemic, we began selling ready-to-grill steaks for customers to prepare at home. While we reduced our store-level offerings around ready-to-grill once our dining rooms began to re- 17
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open in mid-2020, based on the success of this program we have developed Texas Roadhouse Butcher Shop. This on-line platform allows for the purchase and delivery of the same hand-trimmed quality steaks that are available in our restaurants. This platform launched in Q4 2020.
We also further expanded our retail business in 2021 with the introduction of ourMargarita Mixer , which was available in Q1 2021, and our cannedMargarita Seltzer , available in several flavors, which will be available beginning in Q2 2021. TheseTexas Roadhouse -branded products are subject to license agreements for which we will receive royalties. Leveraging Our Scalable Infrastructure. To support our growth, we have made investments in our infrastructure over the past several years, including information and accounting systems, real estate, human resources, legal, marketing, international and restaurant operations, including the development of new concepts. Whether we are able to leverage our infrastructure in future years by growing our general and administrative costs at a slower rate than our revenue will depend, in part, on our new restaurant openings, our comparable restaurant sales growth rate going forward and the level of investment we continue to make in our infrastructure. Returning Capital to Shareholders. We continue to evaluate opportunities to return capital to our shareholders including the payment of dividends and repurchase of common stock. In 2011, our Board of Directors declared our first quarterly dividend of$0.08 per share of common stock which we consistently grew over time. OnMarch 24, 2020 , the Board of Directors voted to suspend the payment of quarterly cash dividends on the Company's common stock, effective with respect to dividends occurring after the quarterly cash dividend of$0.36 paid onMarch 27, 2020 . This was done to preserve cash flow due to the pandemic. OnApril 28, 2021 , our Board of Directors reinstated the payment of a quarterly cash dividend of$0.40 per share of common stock. This payment will be distributed onJune 4, 2021 to shareholders of record at the close of business onMay 19, 2021 . The declaration and payment of cash dividends on our common stock is at the discretion of our Board of Directors, and any decision to declare a dividend will be based on many factors, including, but not limited to, earnings, financial condition, applicable covenants under our revolving credit facility, other contractual restrictions and other factors deemed relevant. To the extent that state and local guidelines begin to significantly reduce capacity and/or re-close dining rooms, we could suspend the payment of cash dividends. In 2008, our Board of Directors approved our first stock repurchase program. From inception throughMarch 30, 2021 , we have paid$369.0 million through our authorized stock repurchase programs to repurchase 17,722,505 shares of our common stock at an average price per share of$20.82 . OnMay 31, 2019 , our Board of Directors approved a stock repurchase program under which we may repurchase up to$250.0 million of our common stock. This stock repurchase program has no expiration date and replaced a previous stock repurchase program which was approved onMay 22, 2014 . All repurchases to date have been made through open market transactions. The Company suspended all share repurchase activity onMarch 17, 2020 in order to preserve cash flow due to the pandemic. As ofMarch 30, 2021 ,$147.8 million remains authorized for stock repurchases. We are currently evaluating when we will resume the repurchase of shares.
Key Measures We Use to Evaluate Our Company
Key measures we use to evaluate and assess our business include the following:
Number of Restaurant Openings. Number of restaurant openings reflects the
number of restaurants opened during a particular fiscal period. For company
restaurant openings, we incur pre-opening costs, which are defined below, before
the restaurant opens. Typically, new restaurants open with an initial start-up
period of higher than normalized sales volumes, which decrease to a steady level
approximately three to six months after opening. However, although sales volumes
are generally higher, so are initial costs, resulting in restaurant margins that
are generally lower during the start-up period of operation and increase to a
steady level approximately three to six months after opening.
Comparable Restaurant Sales. Comparable restaurant sales reflects the change in
restaurant sales for company restaurants over the same period in prior years for
the comparable restaurant base. We define the comparable restaurant base to
include those restaurants open for a full 18 months before the beginning of the
period measured excluding restaurants permanently closed during the period.
Comparable restaurant sales can be impacted by changes in guest
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traffic counts or by changes in the per person average check amount. Menu price changes, the mix of menu items sold, and the mix of dine-in versus To-Go sales can affect the per person average check amount. Average Unit Volume. Average unit volume represents the average quarterly or annual restaurant sales forTexas Roadhouse restaurants open for a full six months before the beginning of the period measured excluding restaurants permanently closed during the period. Historically, average unit volume growth is less than comparable restaurant sales growth which indicates that newer restaurants are operating with sales levels lower than the company average. At times, average unit volume growth may be more than comparable restaurant sales growth which indicates that newer restaurants are operating with sales levels higher than the company average.
Store Weeks. Store weeks represent the number of weeks that our company restaurants were open during the reporting period. Store weeks include weeks in which a restaurant is temporarily closed.
Restaurant Margin. Restaurant margin (in dollars and as a percentage of
restaurant and other sales) represents restaurant and other sales less
restaurant-level operating costs, including food and beverage costs, labor, rent
and other operating costs. 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. 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 the Company's 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
Results of Operations section below.
Other Key Definitions
Restaurant and Other Sales. Restaurant sales include gross food and beverage
sales, net of promotions and discounts, for all company restaurants. Sales taxes
collected from customers and remitted to governmental authorities are accounted
for on a net basis and therefore are excluded from restaurant sales in the
unaudited condensed consolidated statements of income and comprehensive income.
Other sales include the amortization of fees associated with our third-party
gift card sales net of the amortization of gift card breakage income. These
amounts are amortized consistent with the historic redemption pattern of the
associated gift card or on actual redemptions in periods where redemptions do
not align with historic redemption patterns. Other sales also include sales
related to our non-royalty-based retail products.
Franchise Royalties and Fees. Franchise royalties consist of royalties, as
defined in our franchise agreement, paid to us by our domestic and international
franchisees. Franchise royalties also include sales related to our royalty-based
retail products. Domestic and/or international franchisees also typically pay an
initial franchise fee and/or development fee for each new restaurant or
territory. The terms of the international agreements may vary significantly from
our domestic agreements. Franchise fees also include advertising fees paid by
domestic franchisees to our system-wide marketing and advertising fund and
management fees paid by certain domestic franchisees for supervisory and
administrative services that we perform.
Food and Beverage Costs. Food and beverage costs consists of the costs of raw
materials and ingredients used in the preparation of food and beverage products
sold in our company restaurants. Approximately half of our food and beverage
costs relates to beef costs.
Restaurant Labor Expenses. Restaurant labor expenses include all direct and
indirect labor costs incurred in operations except for profit-sharing incentive
compensation expenses earned by our restaurant managing partners and
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market partners. These profit-sharing expenses are reflected in restaurant other operating expenses. Restaurant labor expenses also include share-based compensation expense related to restaurant-level employees.
Restaurant Rent Expense. Restaurant rent expense includes all rent, except pre-opening rent, associated with the leasing of real estate and includes base, percentage and straight-line rent expense.
Restaurant Other Operating Expenses. Restaurant other operating expenses consist of all other restaurant-level operating costs, the major components of which are utilities, dining room and To-Go supplies, local store advertising, repairs and maintenance, equipment rent, property taxes, credit card fees and general liability insurance. Profit sharing incentive compensation expenses earned by our restaurant managing partners and market partners are also included in restaurant other operating expenses. Pre-opening Expenses. Pre-opening expenses, which are charged to operations as incurred, consist of expenses incurred before the opening of a new or relocated restaurant and are comprised principally of opening team and training team compensation and benefits, travel expenses, rent, food, beverage and other initial supplies and expenses. On average, over 70% of total pre-opening costs incurred per restaurant opening relate to the hiring and training of employees. Pre-opening costs vary by location depending on many factors, including the size and physical layout of each location; the number of management and hourly employees required to operate each restaurant; the availability of qualified restaurant staff members; the cost of travel and lodging for different geographic areas; the timing of the restaurant opening; and the extent of unexpected delays, if any, in obtaining final licenses and permits to open
the
restaurants.
Depreciation and Amortization Expenses. Depreciation and amortization expenses
("D&A") include the depreciation of fixed assets and amortization of intangibles
with definite lives, substantially all of which relates to restaurant-level
assets.
Impairment and Closure Costs, Net. Impairment and closure costs, net include any
impairment of long-lived assets, including property and equipment, operating
lease right-of-use assets and goodwill, and expenses associated with the closure
of a restaurant. Closure costs also include any gains or losses associated with
a relocated restaurant or the sale of a closed restaurant and/or assets held for
sale as well as lease costs associated with closed or relocated restaurants.
General and Administrative Expenses. General and administrative expenses
("G&A") are comprised of expenses associated with corporate and administrative
functions that support development and restaurant operations and provide an
infrastructure to support future growth including certain advertising costs
incurred. G&A also includes legal fees, settlement charges and share-based
compensation expense related to executive officers, Support Center employees,
and market partners, and the realized and unrealized holding gains and losses
related to the investments in our deferred compensation plan.
Interest Expense, Net. Interest expense, net includes interest expense on our
debt or financing obligations including the amortization of loan fees reduced by
earnings on cash and cash equivalents.
Equity Loss from Unconsolidated Affiliates. Equity loss includes our percentage
share of net income earned by unconsolidated affiliates. As of March 30, 2021
and March 31, 2020 , we owned a 5.0% to 10.0% equity interest in 24 domestic
franchise restaurants. Additionally, as of March 30, 2021 and March 31, 2020 , we
owned a 40% equity interest in four non-Texas Roadhouse restaurants as part of a
joint venture agreement with a casual dining restaurant operator in China .
Net Income Attributable to Noncontrolling Interests. Net income attributable to
noncontrolling interests represents the portion of income attributable to the
other owners of the majority-owned restaurants. Our consolidated subsidiaries
include 20 majority-owned restaurants for all periods presented.
Q1 2021 Financial Highlights
Total revenue increased $148.1 million to $800.6 million in Q1 2021 compared to
$652.5 million in Q1 2020 primarily due to an increase in average unit volumes
driven by an increase in comparable restaurant sales combined with the opening
of new restaurants. Store weeks and comparable restaurant sales increased 4.1%
and 18.5%, respectively, at
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company restaurants in Q1 2021. The increase in average unit volume was
primarily due to the re-opening of dining rooms, all of which had re-opened by
the end of Q1 2021, the continued easing of dining room capacity restrictions,
and strong To-Go sales.
Restaurant margin dollars increased $69.0 million to $147.6 million in Q1 2021
compared to $78.6 million in Q1 2020. Restaurant margin, as a percentage of
restaurant and other sales, increased to 18.6% in Q1 2021 compared to 12.1% in
Q1 2020. The increase in restaurant margin was due to higher sales and the
prior year impact of the pandemic, which began to significantly impact our
operations in March 2020 .
Net income increased $48.1 million to $64.2 million in Q1 2021 compared to $16.0
million in Q1 2020 primarily due to higher restaurant margin dollars partially
offset by higher income tax expense. Diluted earnings per share increased to
$0.91 in Q1 2021 from $0.23 in Q1 2020.
Results of Operations
13 Weeks Ended
March 30, 2021 March 31, 2020
$ % $ %
(In thousands)
Consolidated Statements of Income:
Revenue:
Restaurant and other sales 794,923 99.3 647,626 99.2
Franchise royalties and fees 5,706 0.7 4,898 0.8
Total revenue 800,629 100.0 652,524 100.0
Costs and expenses:
(As a percentage of restaurant and
other sales)
Restaurant operating costs
(excluding depreciation
and amortization shown separately
below):
Food and beverage 251,482 31.6 210,180 32.5
Labor 258,036 32.5 241,079 37.2
Rent 14,452 1.8 13,471 2.1
Other operating 123,379 15.5 104,289 16.1
(As a percentage of total revenue)
Pre-opening 4,268 0.5 5,112 0.8
Depreciation and amortization 30,869 3.9 29,054 4.5
Impairment and closure, net 504 NM 595 NM
General and administrative 36,712 4.6 32,954 5.1
Total costs and expenses 719,702 89.9 636,734 97.6
Income from operations 80,927 10.1 15,790 2.4
Interest expense, net 1,460 0.2 69 0.0
Equity loss from investments in
unconsolidated affiliates (217) NM (508) NM
Income before taxes 79,250 9.9 15,213 2.3
Income tax expense (benefit) 12,820 1.6 (1,939) (0.3)
Net income including noncontrolling
interests 66,430 8.3 17,152 2.6
Net income attributable to
noncontrolling interests 2,280 0.3 1,123 0.2
Net income attributable to Texas
Roadhouse, Inc. and subsidiaries 64,150 8.0 16,029 2.5
NM - Not meaningful
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Reconciliation of Incomefrom Operations to Restaurant Margin
(in thousands)
13 Weeks Ended
March 30, 2021 March 31, 2020
Income from operations $ 80,927 $ 15,790
Less:
Franchise royalties and fees 5,706 4,898
Add:
Pre-opening 4,268 5,112
Depreciation and amortization 30,869 29,054
Impairment and closure, net 504 595
General and administrative 36,712 32,954
Restaurant margin $ 147,574 $ 78,607
Restaurant margin $/store week $ 21,097 $ 11,695
Restaurant margin (as a percentage of
restaurant and other sales) 18.6% 12.1%
See above for the definition of restaurant margin.
Restaurant Unit Activity
Total Texas Roadhouse Bubba's 33 Jaggers
Balance at December 29, 2020 634 600 31 3
Company openings 3 2 1 -
Company closings - - - -
Franchise openings - Domestic - - - -Franchise openings - International - - -
-
Franchise closings - International - - -
-
Balance at March 30, 2021 637 602 32 3
March 30, 2021 March 31, 2020
Company - Texas Roadhouse 505 488
Company - Bubba's 33 32 29
Company - Jaggers 3 2Franchise - Texas Roadhouse - U.S. 69 70 Franchise - Texas Roadhouse - International(1) 28 28 Total 637 617
(1) Includes four international franchise locations that were temporarily closed.
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Q1 2021 (13 weeks) compared to Q1 2020 (13 weeks)
Restaurant and Other Sales. Restaurant and other sales increased by 22.7% in Q1
2021 as compared to Q1 2020. The following table summarizes certain key drivers
and/or attributes of restaurant and other sales at company restaurants for the
periods presented. Company restaurant count activity is shown in the restaurant
unit activity table above.
Q1 2021 Q1 2020
Company Restaurants :
Increase in store weeks 4.1 % 5.3 %Increase (decrease) in average unit volume 17.5 % (8.5) % Other(1) 1.0 % (2.1) % Total increase (decrease) in restaurant sales 22.6 % (5.3) % Other sales(2) 0.1 % (0.2) % Total increase (decrease) in restaurant and other sales
22.7 % (5.5) % Store weeks 6,995 6,721 Comparable restaurant sales 18.5 % (8.4) %Texas Roadhouse restaurants only: Comparable restaurant sales 18.3 % (8.2) % Average unit volume (in thousands) $
1,509
Weekly sales by group: Comparable restaurants (473 and 452 units, respectively)$ 116,816 $ 98,979 Average unit volume restaurants (18 and 20 units, respectively)(3)$ 96,780 $ 91,373 Restaurants less than six months old (14 and 16 units, respectively)$ 117,833 $ 97,353
Includes the impact of the year-over-year change in sales volume of all
non-
applicable, the impact of restaurants permanently closed or acquired during
the period.
Other sales, for Q1 2021, primarily represented
amortization of third-party gift card fees net of
represented
fees net of
income.
Average unit volume restaurants include restaurants open a full six and up to (3) 18 months before the beginning of the period measured, excluding sales from
restaurants permanently closed during the period.
The increase in restaurant sales for Q1 2021 is primarily attributable to an
increase in average unit volumes, driven by an increase in comparable restaurant
sales, along with an increase in store weeks. The increase in comparable
restaurant sales was primarily driven by the re-opening of our dining rooms, the
continued easing of dining room capacity restrictions, and strong To-Go sales.
Comparable restaurant sales increased 18.5%, which included guest traffic count
growth of 13.0% and per person average check growth of 5.5%.
As of March 30, 2021 , all of our company restaurants had re-opened their dining
rooms. While all of our dining rooms have re-opened, they continue to operate
under limited capacity restrictions. For our January, February and March
periods, comparable restaurant sales decreased 0.3%, decreased 3.5% and
increased 64.1%, respectively. In addition, To-Go sales as a percentage of
restaurant sales were 22.3% and 12.8% for Q1 2021 and Q1 2020, respectively.
In addition, in late October 2020 , we implemented a menu price increase of
approximately 1.0% which was the only increase taken for 2020. In late April
2021 , we implemented a menu price increase of approximately 1.75%. We may take
additional pricing in 2021 if needed.
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In Q1 2021, we opened three company restaurants, including one Bubba's 33
restaurant. As of March 30, 2021 , an additional 15 restaurants were under
construction. We currently plan to open 25 to 30 company restaurants across all
concepts in 2021. To the extent that state and local guidelines begin to
significantly reduce capacity and/or re-close dining rooms, we could pull back
on development and reduce capital expenditures accordingly.
Franchise Royalties and Fees. Franchise royalties and fees increased by $0.8
million , or by 16.5%, in Q1 2021 from Q1 2020. The increase was due to higher
average unit volume, driven by comparable restaurant increases at domestic
stores. Comparable restaurant sales at domestic franchise stores increased15.2% for Q1 2021.
We anticipate that our existing franchise partners will open as many as six
Food and Beverage Costs. Food and beverage costs, as a percentage of restaurant and other sales, decreased to 31.6% in Q1 2021 from 32.5% in Q1 2020. The decrease was primarily due to the benefit of a higher guest check amount partially offset by commodity inflation of 1.8%.
For 2021, we currently expect commodity cost inflation to be approximately 4.0% with fixed price contracts for approximately 50% of our overall food costs and the remainder subject to floating market prices. Restaurant Labor Expenses. Restaurant labor expenses, as a percentage of restaurant and other sales, decreased to 32.5% in Q1 2021 compared to 37.2% in Q1 2020. The decrease was primarily due to an increase in average unit volume as well as lapping several items related to Q1 2020 including labor inefficiencies as we converted to our hybrid operating model, relief payments and increased benefits provided to our hourly employees, and higher health insurance costs. In Q1 2021, the benefit of a higher guest check amount and employee retention payroll tax credits of$1.0 million also contributed to the decrease. These decreases were partially offset by higher wage rates primarily due to labor market pressures along with increases in state-mandated minimum and tipped
wage rates.
In Q1 2021, we incurred costs of
Health insurance costs were lower in Q1 2021 compared to Q1 2020 primarily due to a$2.3 million increase in claim costs in Q1 2020. The increase in claims costs was primarily driven by unfavorable claims experience. Restaurant Rent Expense. Restaurant rent expense, as a percentage of restaurant and other sales, decreased to 1.8% in Q1 2021 compared to 2.1% in Q1 2020. The decrease was due to the increase in average unit volume partially offset by higher rent expense, as a percentage of restaurant and other sales, at our
newer restaurants. Restaurant Other Operating Expenses. Restaurant other operating expenses, as a percentage of restaurant and other sales, decreased to 15.5% in Q1 2021 compared to 16.1% in Q1 2020. This decrease was due to an increase in average unit volume partially offset by an increase in supplies and incentive compensation expense. Higher supplies expense was due to an increase in To-Go supplies, increased cost and usage of personal protective equipment and other costs to support our hybrid operating model. Higher incentive compensation expense was primarily due to higher restaurant profitability. In addition, due to the significant increase in our average unit volumes, expenses that are largely fixed, including utilities, property taxes, and other outside services decreased as a percentage of restaurant and other sales. Restaurant Pre-opening Expenses. Pre-opening expenses decreased to$4.3 million in Q1 2021 from$5.1 million in Q1 2020. This decrease was primarily due to the timing of restaurant openings as average pre-opening expenses incurred for each restaurant remained relatively unchanged. Pre-opening costs will fluctuate from quarter to quarter based on the specific pre-opening costs incurred for each restaurant, the number and timing of restaurant openings and the number and timing of restaurant managers hired. Depreciation and Amortization Expense. D&A, as a percentage of total revenue, decreased to 3.9% in Q1 2021 compared to 4.5% in Q1 2020. The decrease was primarily due to an increase in average unit volume partially offset by higher depreciation at new restaurants. 24 Table of Contents Impairment and Closure Costs, Net. Impairment and closure costs, net was$0.5 million in Q1 2021 compared to$0.6 million in Q1 2020. For Q1 2021, impairment and closure costs, net included the impairment of land and building at a site that was relocated and are currently classified as assets held for sale. For Q1 2020, impairment and closure costs, net included the impairment of the operating lease right-of-use assets for an underperforming restaurant and a restaurant that was relocated.
General and Administrative Expenses. G&A, as a percentage of total revenue, decreased to 4.6% in Q1 2021 compared to 5.1% in Q1 2020. The decrease was primarily driven by an increase in average unit volume and lower travel and meeting expenses partially offset by higher incentive and performance-based compensation costs and legal settlement expenses. Travel and meeting expenses were lower due to fewer in-person meetings as a result of the pandemic. Higher incentive and performance-based compensation costs were due to the increase
in profitability.
Interest Expense, Net. Interest expense, net was
Equity loss from Unconsolidated Affiliates. Equity loss was$0.2 million in Q1 2021 compared to$0.5 million in Q1 2020 due to increased profitability from our unconsolidated affiliates. This equity income was more than offset by an impairment charge related to our investment in a foreign joint venture that was recorded in both Q1 2021 and Q1 2020. Income Tax Expense (Benefit). Our effective tax rate increased to 16.2% in Q1 2021 compared to an effective tax rate benefit of 12.7% in Q1 2020 primarily due to the significant increase in pre-tax income. In Q1 2020, our FICA tip and Work opportunity tax credits exceeded our federal tax liability which resulted in a tax rate benefit.
Liquidity and Capital Resources
The following table presents a summary of our net cash provided by (used in) operating, investing and financing activities (in thousands):
13 Weeks Ended
March 30, 2021 March 31, 2020 Net cash provided by operating activities$ 178,013 $ 21,716 Net cash used in investing activities (36,474)
(44,505)
Net cash (used in) provided by financing activities (9,048)
145,516
Net increase in cash and cash equivalents$ 132,491
$ 122,727 Net cash provided by operating activities was$178.0 million in Q1 2021 compared to$21.7 million in Q1 2020. This increase was primarily due to favorable changes in working capital and an increase in net income. Working capital changes include increases in accounts payable, accrued wages and payroll taxes, accrued taxes and licenses and income taxes payable. Our operations have not required significant working capital and, like many restaurant companies, we have been able to operate with negative working capital. Sales are primarily for cash, and restaurant operations do not require significant inventories or receivables. In addition, we receive trade credit for the purchase of food, beverages and supplies, thereby reducing the need for incremental working capital to support growth.
Net cash used in investing activities was
We require capital principally for the development of new company restaurants, the refurbishment or relocation of existing restaurants and the acquisition of franchise restaurants, if any. We either lease our restaurant site locations under operating leases for periods of five to 30 years (including renewal periods) or purchase the land when appropriate. In addition, as ofMarch 30, 2021 , we had developed 148 of the 540 company restaurants on land in which
we
own.
25
Table of Contents
The following table presents a summary of capital expenditures (in thousands):
Q1 2021 Q1 2020
New company restaurants $ 22,975 $ 19,124
Refurbishment of existing restaurants 13,742 12,902
Relocation of existing restaurants 705
11,188
Capital expenditures related to Support Center office 1,244 3,458 Total capital expenditures
$ 38,666 $ 46,672
In 2021, we expect our capital expenditures to be$210.0 million to$220.0 million and we currently plan to open 25 to 30 restaurants across all concepts. To the extent that state and local guidelines begin to significantly reduce capacity and/or re-close dining rooms, we could pull back on development and reduce capital spend accordingly. As ofMarch 30, 2021 , the estimated cost of completing capital project commitments over the next 12 months was approximately$120.1 million . See note 6 to the unaudited condensed consolidated financial statements for a discussion of contractual obligations. Net cash used in financing activities was$9.0 million in Q1 2021 compared to net cash provided by financing activities of$145.5 million in Q1 2020. The decrease is primarily due to borrowings under our revolving credit facility in Q1 2020 offset by share repurchases and dividends paid in Q1 2020. InMarch 2020 we increased our borrowings as a precautionary measure in order to bolster our cash position and enhance financial flexibility in response to
the pandemic.
OnMay 31, 2019 , our Board of Directors approved a stock repurchase program under which we may repurchase up to$250.0 million of our common stock. This stock repurchase program has no expiration date and replaced a previous stock repurchase program which was approved onMay 22, 2014 . All repurchases to date under our stock repurchase programs have been made through open market transactions. The timing and the amount of any repurchases will be determined by management under parameters established by the Board of Directors, based on an evaluation of our stock price, market conditions and other corporate considerations. OnMarch 17, 2020 , we suspended all share repurchase activity. As ofMarch 30, 2021 ,$147.8 million remains authorized for stock repurchases. We are currently evaluating when we will resume the repurchase of shares. OnFebruary 20, 2020 , our Board of Directors authorized the payment of a cash dividend of$0.36 per share of common stock. The payment of this dividend totaling$25.0 million was distributed onMarch 27, 2020 to shareholders of record at the close of business onMarch 11, 2020 . OnMarch 24, 2020 , the Board of Directors voted to suspend the payment of quarterly cash dividends of the Company's common stock, effective with respect to dividends occurring afterMarch 27, 2020 . OnApril 28, 2021 , our Board of Directors reinstated the payment of a quarterly cash dividend of$0.40 per share of common stock. This payment will be distributed onJune 4, 2021 to shareholders of record at the close of business onMay 19, 2021 . To the extent that state and local guidelines begin to significantly reduce capacity and/or re-close dining rooms, we could suspend the payment of cash dividends. We paid distributions of$1.4 million to equity holders of 16 of our 20 majority-owned company restaurants in Q1 2021. We paid distributions of$1.8 million to equity holders of all 20 majority-owned company restaurants in Q1 2020. OnAugust 7, 2017 , we entered into an agreement with respect to our revolving credit facility with a syndicate of commercial lenders led byJPMorgan Chase Bank, N.A .,PNC Bank, N.A. , andWells Fargo Bank, N.A. The revolving credit facility is an unsecured, revolving credit agreement under which we may borrow up to$200.0 million with the option to increase the revolving credit facility by an additional$200.0 million subject to certain limitations, including approval by the syndicate of lenders. OnMay 11, 2020 , we amended the revolving credit facility to provide for an incremental revolving credit facility of up to$82.5 million . This amount reduced the additional$200.0 million that was available under the revolving credit facility. The maturity date for the incremental revolving credit facility wasMay 10, 2021 . The maturity date for the original revolving credit facility remainedAugust 5, 2022 . 26 Table of Contents The terms of the amendment require us to pay interest on outstanding borrowings of the original revolving credit facility at LIBOR plus a margin of 1.50% and to pay a commitment fee of 0.25% per year on any unused portion of the revolving credit facility through the end of our Q1 2021 fiscal quarter. The amendment also provides an Alternate Base Rate that may be substituted for LIBOR. As ofMarch 30, 2021 , we had$190.0 million outstanding on the original revolving credit facility and$1.8 million of availability, net of$8.2 million of outstanding letters of credit. This outstanding amount is included as long-term debt on our unaudited condensed consolidated balance sheet. The terms of the amendment also require us to pay interest on outstanding borrowings of the incremental revolving credit facility at LIBOR, which is subject to a floor of 1.0%, plus a margin of 2.25% and to pay a commitment fee of 0.50% per year on any unused portion of the incremental revolving credit facility through the maturity date. As ofMarch 30, 2021 , we had$50.0 million outstanding and$32.5 million of availability on the incremental revolving credit facility. This outstanding amount is included as current maturities of long-term debt on our unaudited condensed consolidated balance sheet.
The weighted-average interest rate for the revolving credit facility as of
The lenders' obligation to extend credit pursuant to the revolving credit facility depends on us maintaining certain financial covenants. The amendment to the revolving credit facility also modified the financial covenants through the end of our Q1 2021 fiscal quarter. We were in compliance with all financial covenants as ofMarch 30, 2021 . OnMay 4, 2021 , we entered into an agreement to further amend our revolving credit facility with the same syndicate of commercial lenders. This amendment increased the amount we may borrow to$300.0 million with the option to increase by an additional$200.0 million and extended the maturity date toMay 1, 2026 . As part of the amendment, the$190.0 million on the original credit facility remained outstanding and the$50.0 million on the incremental credit facility was repaid. The terms of the amendment require us to pay interest on outstanding borrowings at LIBOR plus a margin of 0.875% to 1.875% and pay a commitment fee of 0.125% to 0.30% per year on any unused portion of the revolving credit facility, in each case depending on our leverage ratio. The amendment also provides an Alternate Base Rate that may be substituted for LIBOR. 27 Table of Contents Guarantees
As ofMarch 30, 2021 andDecember 29, 2020 , we are contingently liable for$12.8 million and$13.0 million , respectively, for seven lease guarantees, listed in the table below. These amounts represent the maximum potential liability of future payments under the guarantees. In the event of default, the indemnity and default clauses in our assignment agreements govern our ability to pursue and recover damages incurred. No material liabilities have been recorded as ofMarch 30, 2021 andDecember 29, 2020 as the likelihood of default was deemed to be less than probable and the fair value of the guarantees is not considered significant. Lease Current Lease Assignment Date Term Expiration Everett, Massachusetts (1) September 2002 February 2023 Longmont, Colorado (1) October 2003 May 2029 Montgomeryville, Pennsylvania (1) October 2004 March 2026 Fargo, North Dakota (1) February 2006 July 2026 Logan, Utah (1) January 2009 August 2024 Irving, Texas (2) December 2013 December 2024 Louisville, Kentucky (2)(3) December 2013 November 2023
Real estate lease agreements for restaurant locations which we entered into (1) before granting franchise rights to those restaurants. We have subsequently
assigned the leases to the franchisees, but remain contingently liable under
the terms of the lease if the franchisee defaults.
Leases associated with non-
the terms of the lease if the acquirer defaults.
(3) We may be released from liability after the initial contractual lease term
expiration contingent upon certain conditions being met by the acquirer.
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