Texas Roadhouse, Inc. Announces Third Quarter 2018 Results

LOUISVILLE, Ky., Oct. 29, 2018 (GLOBE NEWSWIRE) -- Texas Roadhouse, Inc. (NasdaqGS: TXRH) today announced financial results for the 13 and 39 week periods ended September 25, 2018.

Results for the third quarter included the following highlights:  

• Comparable restaurant sales increased 5.5% at company restaurants and 4.2% at domestic franchise restaurants;
• Restaurant margin, as a percentage of restaurant and other sales, decreased 157 basis points to 16.2%, primarily due to higher labor costs, including the impact of insurance reserve adjustments.  Restaurant margin dollars increased 0.3% to $95.8 million from $95.6 million in the prior year;
• Diluted earnings per share decreased 6.7% to $0.40 from $0.43 in the prior year primarily due to higher labor costs and higher general and administrative expenses partially offset by higher revenues and lower income tax expense; and 
• Three company restaurants and one international franchise restaurant were opened.

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

• Comparable restaurant sales increased 5.4% at company restaurants and 4.1% at domestic franchise restaurants;
• Restaurant margin, as a percentage of restaurant and other sales, decreased 102 basis points to 17.9%, primarily due to higher labor costs.  Restaurant margin dollars increased 4.6% to $328.6 million from $314.3 million in the prior year;
• Diluted earnings per share increased 23.5% to $1.78 from $1.44 in the prior year primarily due to higher revenues and lower income tax expense partially offset by higher labor costs.  In addition, we recorded a pre-tax charge of $14.9 million ($9.2 million after-tax), or $0.13 per diluted share, in the first quarter of 2017, related to the settlement of a legal matter; and 
• 17 company restaurants, including four Bubba’s 33 restaurants, and four international franchise restaurants were opened.

Kent Taylor, Chief Executive Officer of Texas Roadhouse, Inc., commented, "Our top-line momentum continued this quarter highlighted by positive comparable restaurant sales, driven by positive traffic growth.  However, restaurant-level performance continues to be pressured by higher labor costs.  Despite the earnings decline this quarter, 2018 is still shaping up to be a good year for Texas Roadhouse."

Taylor continued, "Our new restaurant pipeline is solid and we feel good about our development plans for 2019.  We are confident that our business is well positioned for long-term sales and profit growth.  In addition, our healthy cash flow generation allows us to fund our new restaurant growth through internal cash flow, while also returning excess capital to our shareholders through our dividend program, further driving shareholder value."

2018 Outlook

Comparable restaurant sales at company restaurants for the first four weeks of our fourth quarter of fiscal 2018 increased approximately 4.0% compared to the prior year period.

Management updated the following expectation for 2018:

• Total capital expenditures of approximately $160.0 million to $165.0 million.

Management reiterated the following expectations for 2018:

• Positive comparable restaurant sales growth;
• 27 or 28 company restaurant openings, including five Bubba’s 33 restaurants;
• Commodity cost inflation of approximately 1.0%;
• Mid-single digit growth in labor dollars per store week, excluding the impact of higher guest counts; and
• An income tax rate of 14.0% to 15.0%.

2019 Outlook

Management provided the following initial expectations for 2019 which includes a 53^rd week:

• Positive comparable restaurant sales growth;
• 25 to 30 company restaurant openings, including four Bubba’s 33 restaurants;
• Commodity cost inflation of approximately 1.0% to 2.0%;
• Mid-single digit growth in labor dollars per store week, excluding the impact of higher guest counts;
• An income tax rate of 14.0% to 15.0%; and
• Total capital expenditures of approximately $165.0 million to $175.0 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 29, 2018 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 5569057 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 575 restaurants system-wide in 49 states and nine 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
(502) 515-7269

Media
Travis Doster
(502) 638-5457