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Texas Roadhouse, Inc. Announces Second Quarter 2016 Results

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August 1, 2016 4:02 PM EDT

LOUISVILLE, Ky.--(BUSINESS WIRE)--

Texas Roadhouse, Inc. (NasdaqGS: TXRH), today announced financial results for the 13 and 26 week periods ended June 28, 2016.

               
Second Quarter Year to Date
($000's)

2016

   

2015

% Change

2016

2015

% Change

 
Total revenue $ 508,808 $ 454,698 12 % $ 1,024,367 $ 914,928 12 %
Income from operations 49,782 31,696 57 % 102,593 80,296 28 %
Net income 33,605 21,138 59 % 69,198 53,430 30 %
Diluted EPS $ 0.47 $ 0.30 58 % $ 0.98 $ 0.76 29 %
 

Results for the second quarter included the following highlights:

  • Comparable restaurant sales growth of 4.5% at company restaurants and 2.6% at franchise restaurants;
  • Restaurant margin, as a percentage of restaurant sales, increased 302 basis points to 19.2%, primarily driven by lower food costs;
  • Diluted earnings per share increased 58.5% to $0.47 from $0.30 in the prior year; and,
  • Seven company-owned restaurants were opened, including one Bubba’s 33 restaurant.

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

  • Comparable restaurant sales increased 4.5% at company restaurants and 2.8% at franchise restaurants;
  • Restaurant margin, as a percentage of restaurant sales, increased 208 basis points to 19.7% primarily driven by lower food costs;
  • Diluted earnings per share increased 29.1% to $0.98 from $0.76 in the prior year;
  • The Company recorded a pre-tax charge of $5.5 million ($3.4 million after-tax) related to a legal settlement which had a $0.05 impact on diluted earnings per share and a 6.3% impact on diluted earnings per share growth;
  • 14 company-owned restaurants were opened, including three Bubba’s 33 restaurants; and,
  • The Company repurchased 114,700 shares of its common stock for $4.1 million.

Kent Taylor, Chief Executive Officer of Texas Roadhouse, Inc., commented, "Our operators continued to deliver strong operational and financial results with solid comparable restaurant sales growth and an increase in restaurant margin. Positive guest counts primarily drove the increase in comparable restaurant sales, marking our 26th consecutive quarter of growth, while lower commodity costs continued to pave the way for margin expansion. On the development front, we are on track to open approximately 30 company restaurants this year and we continue to fill our new restaurant pipeline for next year and beyond."

2016 Outlook

The Company reported that comparable restaurant sales at company restaurants for the first four weeks of its third quarter of fiscal 2016 increased approximately 3.7% compared to the prior year period.

Management updated the following expectation for 2016:

  • 2.5% to 3.0% food cost deflation compared to previous guidance of 1.0% to 2.0% food cost deflation.

Management reiterated the following expectations for 2016:

  • Positive comparable restaurant sales growth;
  • Approximately 30 company restaurant openings, including approximately seven Bubba’s 33 restaurants;
  • An income tax rate of approximately 30.0%; and,
  • Total capital expenditures of $165.0 million to $175.0 million.

Conference Call

The Company is hosting a conference call today, August 1, 2016 at 5:00 p.m. Eastern Time to discuss these results. The dial-in number is (888) 334-3004 or (719) 325-2410 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 8691041 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 500 restaurants system-wide in 49 states and five foreign countries. For more information, please visit the Company’s Web site at www.texasroadhouse.com.

Forward-looking Statements

Certain statements in this release that are not historical facts, including, without limitation, those relating to our anticipated financial performance, are forward-looking statements that involve risks and uncertainties. Such statements are based upon the current beliefs and expectations of the management of the Company. Actual results may vary materially from those contained in forward-looking statements based on a number of factors including, without limitation, the actual number of restaurants opening; the sales at these and our other company and franchise restaurants; changes in restaurant development or operating costs, such as food and labor; our ability to acquire franchise restaurants; our ability to integrate the franchise restaurants we acquire or other concepts we develop; our ability to continue to generate the necessary cash flows to fund our new restaurant growth, continue our share repurchase program and pay a quarterly cash dividend; strength of consumer spending; pending or future legal claims; 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.

 
Texas Roadhouse, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(in thousands, except per share data)
(unaudited)
                 
13 Weeks Ended 26 Weeks Ended
June 28, 2016 June 30, 2015 June 28, 2016 June 30, 2015
 
Revenue:
Restaurant sales $ 504,630 $ 450,692 $ 1,015,914 $ 906,985
Franchise royalties and fees   4,178   4,006   8,453   7,943
 
Total revenue   508,808   454,698   1,024,367   914,928
 
Costs and expenses:
Restaurant operating costs (excluding depreciation and amortization shown separately below):
Cost of sales 171,551 168,077 344,679 328,057
Labor 150,014 132,084 297,560 263,488
Rent 10,184 9,138 20,211 18,117
Other operating 75,887 68,358 153,499 137,675
Pre-opening 4,411 4,909 9,236 8,727
Depreciation and amortization 20,238 16,816 39,777 33,151
Impairment and closure 30 - 41 -
General and administrative   26,711   23,620   56,771   45,417
 
Total costs and expenses   459,026   423,002   921,774   834,632
 
Income from operations 49,782 31,696 102,593 80,296
 
Interest expense, net 309 495 614 1,010

Equity income from investments in unconsolidated affiliates

  475   467   827   839
 
Income before taxes 49,948 31,668 102,806 80,125
Provision for income taxes   15,087   9,402   30,944   24,278
 
Net income including noncontrolling interests $ 34,861 $ 22,266 $ 71,862 $ 55,847
Less: Net income attributable to noncontrolling interests   1,256   1,128   2,664   2,417
Net income attributable to Texas Roadhouse, Inc. and subsidiaries $ 33,605 $ 21,138 $ 69,198 $ 53,430
 

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

Basic $ 0.48 $ 0.30 $ 0.98 $ 0.76
Diluted $ 0.47 $ 0.30 $ 0.98 $ 0.76
 
Weighted average shares outstanding:
Basic   70,368   70,026   70,269   69,933
Diluted   70,876   70,648   70,840   70,588
 
Cash dividends declared per share $ 0.19 $ 0.17 $ 0.38 $ 0.34
 
 
Texas Roadhouse, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
       
June 28, 2016   December 29, 2015
 
 
Cash and cash equivalents $ 95,305 $ 59,334
Other current assets 50,655 74,479
Property and equipment, net 778,634 751,288
Goodwill 116,571 116,571
Intangible assets, net 4,150 4,827
Other assets 27,886 26,207
   
Total assets $ 1,073,201 $ 1,032,706
 
 
Current maturities of long-term debt 151 144
Other current liabilities 218,725 256,498
Long-term debt, excluding current maturities 50,472 25,550
Other liabilities 78,731 73,332
Texas Roadhouse, Inc. and subsidiaries stockholders' equity 717,425 669,662
Noncontrolling interests 7,697 7,520
   
Total liabilities and equity $ 1,073,201 $ 1,032,706
 
 
Texas Roadhouse, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
           
26 Weeks Ended
June 28, 2016 June 30, 2015
 
 
Cash flows from operating activities:
Net income including noncontrolling interests $ 71,862 $ 55,847
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization 39,777 33,151
Share-based compensation expense 11,703 10,215
Other noncash adjustments (493 ) (2,992 )
Change in working capital   (8,781 )   (1,398 )
Net cash provided by operating activities   114,068     94,823  
 
Cash flows from investing activities:
Capital expenditures - property and equipment (69,159 ) (70,933 )
Proceeds from sale of property and equipment, including insurance proceeds   -     9  
Net cash used in investing activities   (69,159 )   (70,924 )
 
Cash flows from financing activities:
Proceeds from revolving credit facility 25,000 -
Repurchase shares of common stock (4,110 ) (3,138 )
Dividends paid (25,277 ) (34,247 )
Other financing activities   (4,551 )   (1,671 )
Net cash used in financing activities   (8,938 )   (39,056 )
 
Net increase (decrease) in cash and cash equivalents 35,971 (15,157 )
Cash and cash equivalents - beginning of period   59,334     86,122  
Cash and cash equivalents - end of period $ 95,305   $ 70,965  
 
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

2016

2015

vs LY

2016

2015

vs LY

 
Restaurant openings
Company - Texas Roadhouse 6 6 0 11 8 3
Company - Bubba's 33 1 2 (1 ) 3 3 0
Company - Other 0 1 (1 ) 0 1 (1 )
Franchise - Texas Roadhouse 1 1 0 2 1 1
Total 8 10 (2 ) 16 13 3
 
Restaurants open at the end of the quarter
Company - Texas Roadhouse 403 376 27
Company - Bubba's 33 10 6 4
Company - Other 2 2 0
Franchise - Texas Roadhouse 84 80 4
Total 499 464 35
 
Company-owned restaurants
Restaurant sales $ 504,630 $ 450,692 12.0 % $ 1,015,914 $ 906,985 12.0 %
Store weeks 5,350 4,934 8.4 % 10,612 9,790 8.4 %
Comparable restaurant sales growth (1) 4.5 % 8.2 % 4.5 % 8.5 %
Texas Roadhouse restaurants only:
Comparable restaurant sales growth (1) 4.5 % 8.2 % 4.5 % 8.5 %
Average unit volume (2) $ 1,232 $ 1,188 3.7 % $ 2,505 $ 2,409 4.0 %
Weekly sales by group:
Comparable restaurants (361 units) $ 95,434
Average unit volume restaurants (24 units) (3) $ 84,272
Restaurants less than 6 months old (18 units) $ 98,319
 
Restaurant operating costs (as a % of restaurant sales)
Cost of sales 34.0 % 37.3 % (330 ) bps 33.9 % 36.2 % (224 ) bps
Labor 29.7 % 29.3 % 42 bps 29.3 % 29.1 % 24 bps
Rent 2.0 % 2.0 % (1 ) bps 2.0 % 2.0 % (1 ) bps
Other operating 15.0 % 15.2 % (13 ) bps 15.1 % 15.2 % (7 ) bps
Total 80.8 % 83.8 % (302 ) bps 80.3 % 82.4 % (208 ) bps
 
Restaurant margin (4) 19.2 % 16.2 % 302 bps 19.7 % 17.6 % 208 bps
Restaurant margin ($ in thousands) $ 96,994 $ 73,035 32.8 % $ 199,965 $ 159,648 25.3 %
Restaurant margin $/Store week $ 18,130 $ 14,804 22.5 % $ 18,843 $ 16,307 15.6 %
 
Franchise-owned restaurants
Franchise royalties and fees $ 4,178 $ 4,006 4.3 % $ 8,453 $ 7,943 6.4 %
Store weeks 1,088 1,032 5.4 % 2,157 2,059 4.8 %
Comparable restaurant sales growth (1) 2.6 % 6.9 % 2.8 % 7.5 %
Average unit volume (2) $ 1,273 $ 1,274 (0.1 ) % $ 2,590 $ 2,580 0.4 %
 
Pre-opening expense $ 4,411 $ 4,909 (10.1 ) % $ 9,236 $ 8,727 5.8 %
 
Depreciation and amortization $ 20,238 $ 16,816 20.3 % $ 39,777 $ 33,151 20.0 %
As a % of revenue 4.0 % 3.7 % 28 bps 3.9 % 3.6 % 26 bps
 
General and administrative expenses $ 26,711 $ 23,620 13.1 % $ 56,771 $ 45,417 25.0 %
As a % of revenue 5.2 % 5.2 % 6 bps 5.5 % 5.0 % 58 bps
 
(1) Comparable restaurant sales growth reflects the change in year-over-year sales for restaurants open a full 18 months before the beginning of the period measured, excluding sales from restaurants closed during the period.
(2) Average unit volume includes sales from Texas Roadhouse restaurants open for a full six months before the beginning of the period measured, excluding any sales at restaurants closed during the period.
(3) Average unit volume restaurants include restaurants open a full six to 18 months before the beginning of the period measured.
(4) Restaurant margin represents restaurant sales less restaurant operating costs, including cost of sales, labor, rent and other operating costs (as a percentage of restaurant sales). Depreciation and amortization expense, substantially all of which relates to restaurant-level asset, is excluded from restaurant operating costs. Restaurant margin is widely regarded in the restaurant industry as a useful metric by which to evaluate restaurant-level operating efficiency and performance. Restaurant margin is not a measurement determined in accordance with GAAP and should not be considered in isolation, or as an alternative, to income from operations or other similarly titled measures of other companies.
 
Amounts may not foot due to rounding.

Texas Roadhouse, Inc.
Investor Relations:
Tonya Robinson, 502-515-7269
or
Media:
Travis Doster, 502-638-5457

Source: Texas Roadhouse, Inc.


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