Earnings Release
Texas Roadhouse, Inc. Announces Second Quarter 2017 Results
Texas Roadhouse, Inc. (TXRH) today announced financial results for the 13 and 26 week periods ended June 27, 2017.
Second Quarter
Year to Date
($000’s)
2017
2016
% Change
2017
2016
% Change
Total revenue
$
566,262 $
508,808 11
%
$
1,133,948 $
1,024,367 11
%
Income from operations
54,214
49,782
9
%
103,236
102,593
1
%
Net income
37,581
33,605
12
%
71,894
69,198
4
%
Diluted EPS
$
0.53
$
0.47
11
%
$
1.01
$
0.98
3
%
Results for the second quarter included the following highlights:
• Comparable restaurant sales increased 4.0% at company restaurants and 3.6% at domestic franchise restaurants;
• Restaurant margin, as a percentage of restaurant sales, decreased 28 basis points to 18.9%, primarily driven by wage rate inflation, partially offset by the benefit of lower food costs;
-- Diluted earnings per share increased 11.0% to $0.53 from $0.47 in the prior year; and
-- Seven company-owned restaurants were opened, including two Bubba’s 33 restaurants.
Results for the year-to-date period included the following highlights:
• Comparable restaurant sales increased 3.6% at company restaurants and 3.8% at domestic franchise restaurants;
• Restaurant margin, as a percentage of restaurant sales, decreased 25 basis points to 19.4%, primarily driven by wage rate inflation, partially offset by the benefit of lower food costs;
• A pre-tax charge of $14.9 million ($9.2 million after-tax), or $0.13 per diluted share, was recorded in the first quarter of 2017, related to the settlement of a previously disclosed legal matter. The impact of the legal charge was partially offset by a pre-tax charge recorded in the first quarter of 2016 of $5.5 million ($3.4 million after-tax) related to a separate legal matter which had an impact of $0.05 on diluted earnings per share;
-- Diluted earnings per share increased 3.1% to $1.01 from $0.98 in the prior year; and
-- 13 company-owned restaurants were opened, including two Bubba’s 33 restaurants.
Kent Taylor, Chief Executive Officer of Texas Roadhouse, Inc., commented, "We are pleased with our results for the second quarter highlighted by double-digit growth in both revenue and diluted earnings per share. In addition, our comparable restaurant sales growth, driven by traffic gains, continues to be solid with an increase of 4.6% for the first four weeks of the third quarter. We are on track to open 27 to 29 company restaurants this year. Looking ahead, we remain focused on our long-term growth potential as we continue to fill our new restaurant pipeline for next year and beyond. Finally, the strength of our balance sheet and cash flow allow us to internally fund our new restaurant growth and return excess capital to shareholders through dividends and share repurchases."
2017 Outlook
Comparable restaurant sales at company restaurants for the first four weeks of our third quarter of fiscal 2017 increased approximately 4.6% compared to the prior year period.
Management updated the following expectations for 2017:
• 27 to 29 company restaurant openings, including approximately four Bubba’s 33 restaurants compared to previous guidance of approximately 30 company restaurants, including approximately six Bubba’s 33 restaurants; and,
• An income tax rate of approximately 28.0% compared to previous guidance of 29.0% to 30.0%.
Management reiterated the following expectations for 2017:
-- Positive comparable restaurant sales growth;
-- Food cost deflation of approximately 1.0% to 2.0%;
-- Mid-single digit labor inflation; and,
• Total capital expenditures of approximately $170.0 million, excluding any cash used for franchise acquisitions.
Conference Call
The Company is hosting a conference call today, July 31, 2017 at 5:00 p.m. Eastern Time to discuss these results. The dial-in number is (888) 334-3032 or (719) 457-2619 for international calls. A replay of the call will be available for one week following the conference call. To access the replay, please dial (844) 512-2921 or (412) 317-6671 for international calls, and use 3626432 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 535 restaurants system-wide in 49 states and six 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)
13 Weeks Ended
26 Weeks Ended
June 27, 2017
June 28, 2016
June 27, 2017
June 28, 2016
Restaurant sales
$
562,160
$
504,630
$
1,125,480
$
1,015,914
Franchise royalties and fees
4,102
4,178
8,468
8,453
Total revenue
566,262
508,808
1,133,948
1,024,367
Restaurant operating costs (excluding depreciation and amortization shown separately below):
Cost of sales
185,171
171,551
369,364
344,679
Labor
174,585
150,014
344,932
297,560
Rent
11,112
10,184
21,981
20,211
Other operating
84,837
75,887
170,497
153,499
Pre-opening
5,014
4,411
9,754
9,236
Depreciation and amortization
23,106
20,238
45,702
39,777
Impairment and closure
-
30
11
41
General and administrative
28,223
26,711
68,471
56,771
Total costs and expenses
512,048
459,026
1,030,712
921,774
Income from operations
54,214
49,782
103,236
102,593
Interest expense, net
379
309
711
614
Equity income from investments in
unconsolidated affiliates
(470
)
(475
)
(790
)
(827
)
Income before taxes
54,305
49,948
103,315
102,806
Provision for income taxes
15,126
15,087
28,113
30,944
Net income including noncontrolling interests
$
39,179
$
34,861
$
75,202
$
71,862
Less: Net income attributable to noncontrolling interests
1,598
1,256
3,308
2,664
Net income attributable to Texas Roadhouse, Inc. and subsidiaries
$
37,581
$
33,605
$
71,894
$
69,198
Net income per common share attributable to Texas Roadhouse, Inc.
Basic
$
0.53
$
0.48
$
1.01
$
0.98
Diluted
$
0.53
$
0.47
$
1.01
$
0.98
Weighted average shares outstanding:
Basic
70,973
70,368
70,876
70,269
Diluted
71,437
70,876
71,398
70,840
Cash dividends declared per share
$
0.21
$
0.19
$
0.42
$
0.38
Texas Roadhouse, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
June 27, 2017
December 27, 2016
Cash and cash equivalents
$
116,508
$
112,944
Other current assets
55,904
87,315
Property and equipment, net
868,668
830,054
Intangible assets, net
3,161
3,622
Total assets
$
1,199,281
$
1,179,971
Current maturities of long-term debt and obligation under capital lease
176
167
Other current liabilities
246,032
279,360
Long-term debt and obligation under capital lease, excluding current maturities
52,291
52,381
Other liabilities
91,361
89,821
Texas Roadhouse, Inc. and subsidiaries stockholders’ equity
797,388
750,226
Noncontrolling interests
12,033
8,016
Total liabilities and equity
$
1,199,281
$
1,179,971
Texas Roadhouse, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
June 27, 2017
June 28, 2016
Cash flows from operating activities:
Net income including noncontrolling interests
$
75,202
$
71,862
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization
45,702
39,777
Share-based compensation expense
12,365
11,703
Other noncash adjustments
(1,842
)
(493
)
Change in working capital
(3,119
)
(8,781
)
Net cash provided by operating activities
128,308
114,068
Cash flows from investing activities:
Capital expenditures - property and equipment
(73,637 )
(69,159 )
Acquisition of franchise restaurants, net of cash acquired
(16,528 )
-
Net cash used in investing activities
(90,165 )
(69,159 )
Cash flows from financing activities:
Proceeds from revolving credit facility, net
-
25,000
Repurchase shares of common stock
-
(4,110
)
Dividends paid
(28,308 )
(25,277 )
Other financing activities
(6,271
)
(4,551
)
Net cash used in financing activities
(34,579 )
(8,938
)
Net increase (decrease) in cash and cash equivalents
3,564
35,971
Cash and cash equivalents - beginning of period
112,944
59,334
Cash and cash equivalents - end of period
$
116,508
$
95,305
Texas Roadhouse, Inc. and Subsidiaries
Supplemental Financial and Operating Information
($ amounts in thousands, except weekly sales by group)
Second Quarter
Change
Year to Date
Change
2017
2016
vs LY
2017
2016
vs LY
Company - Texas Roadhouse
5
6
(1
)
11
11
0
Company - Bubba’s 33
2
1
1
2
3
(1
)
Franchise - Texas Roadhouse - U.S.
0
0
0
1
0
1
Franchise - Texas Roadhouse - International
0
1
(1
)
1
2
(1
)
Restaurant acquisitions/dispositions
Company - Texas Roadhouse
0
0
0
4
0
4
Company - Bubba’s 33
0
0
0
0
0
0
Franchise - Texas Roadhouse
0
0
0
(4
)
0
(4
)
Restaurants open at the end of the quarter
Company - Texas Roadhouse
428
403
25
Company - Bubba’s 33
18
10
8
Franchise - Texas Roadhouse - U.S.
70
72
(2
)
Franchise - Texas Roadhouse - International
14
12
2
Company-owned restaurants
Restaurant sales
$
562,160
$ 504,630
11.4
%
$
1,125,480
$ 1,015,914
10.8
%
Store weeks
5,775
5,350
7.9
%
11,456
10,612
8.0
%
Comparable restaurant sales growth (1)
4.0
%
4.5
%
3.6
%
4.5
%
Texas Roadhouse restaurants only:
Comparable restaurant sales growth (1)
4.1
%
4.5
%
3.7
%
4.5
%
Average unit volume (2)
$
1,274
$ 1,233
3.3
%
$
2,575
$ 2,506
2.7
%
Comparable restaurants (389 units)
$
98,689
Average unit volume restaurants (23 units) (3) $
85,958
Restaurants less than 6 months old (16 units)
$
105,972
Restaurant operating costs (as a % of restaurant sales)
Cost of sales
32.9
%
34.0
% (106
) bps
32.8
%
33.9
% (111
)
bps
Labor
31.1
%
29.7
% 133
bps
30.6
%
29.3
% 136
bps
Rent
2.0
%
2.0
% (4
) bps
2.0
%
2.0
% (4
)
bps
Other operating
15.1
%
15.0
% 5
bps
15.1
%
15.1
% 4
bps
Total
81.1
%
80.8
% 28
bps
80.6
%
80.3
% 25
bps
Restaurant margin (4)
18.9
%
19.2
% (28
) bps
19.4
%
19.7
% (25
)
bps
Restaurant margin ($ in thousands) (4)
$
106,455
$ 96,994
9.8
%
$
218,706
$ 199,965
9.4
%
Restaurant margin $ (4)/Store week
$
18,434
$ 18,130
1.7
%
$
19,091
$ 18,843
1.3
%
Franchise-owned restaurants
Franchise royalties and fees
$
4,102
$ 4,178
(1.8
) %
$
8,468
$ 8,453
0.2
%
Store weeks
1,092
1,088
0.4
%
2,172
2,157
0.7
%
Comparable restaurant sales growth (1)
2.9
%
2.6
%
3.0
%
2.8
%
U.S. franchise restaurants only:
Comparable restaurant sales growth (1)
3.6
%
4.3
%
3.8
%
4.2
%
Average unit volume (2)
$
1,321
$ 1,265
4.4
%
$
2,644
$ 2,552
3.6
%
Pre-opening expense
$
5,014
$ 4,411
13.7
%
$
9,754
$ 9,236
5.6
%
Depreciation and amortization
$
23,106
$ 20,238
14.2
%
$
45,702
$ 39,777
14.9
%
As a % of revenue
4.1
%
4.0
% 10
bps
4.0
%
3.9
% 15
bps
General and administrative expenses
$
28,223
$ 26,711
5.7
%
$
68,471
$ 56,771
20.6
%
As a % of revenue
5.0
%
5.2
% (27
) bps
6.0
%
5.5
% 50
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 (in dollars and as a percentage of restaurant sales) represents restaurant sales less restaurant operating costs, including cost of sales, labor, rent and other operating costs.
Depreciation and amortization expense, substantially all of which relates to restaurant-level assets, 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.
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