TXRH
$48.58
Texas Roadhouse
($.24)
(.49%)
Earnings Details
3rd Quarter September 2017
Monday, October 30, 2017 4:07:25 PM
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Summary

Texas Roadhouse Misses

Texas Roadhouse (TXRH) reported 3rd Quarter September 2017 earnings of $0.43 per share on revenue of $540.5 million. The consensus earnings estimate was $0.43 per share on revenue of $538.7 million. The Earnings Whisper number was $0.44 per share. Revenue grew 12.2% on a year-over-year basis.

Texas Roadhouse Inc is a full-service, casual dining restaurant company. It offers steaks, ribs, fish, seafood, chicken, pork chops, pulled pork and vegetable plates, and an assortment of hamburgers, salads and sandwiches.

Results
Reported Earnings
$0.43
Earnings Whisper
$0.44
Consensus Estimate
$0.43
Reported Revenue
$540.5 Mil
Revenue Estimate
$538.7 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Texas Roadhouse, Inc. Announces Third Quarter 2017 Results

Texas Roadhouse, Inc. (TXRH), today announced financial results for the 13 and 39 week periods ended September 26, 2017.

Third Quarter
Year to Date
($000’s)
2017
2016
% Change
2017
2016
% Change
Total revenue
$
540,507 $
481,637 12.2 %
$
1,674,455 $
1,506,004 11.2 %
Income from operations
45,511
38,468
18.3 %
148,747
141,061
5.4
%
Net income
31,014
25,675
20.8 %
102,908
94,873
8.5
%
Diluted EPS
$
0.43
$
0.36
19.9 %
$
1.44
$
1.34
7.6
%

Results for the third quarter included the following highlights:

Comparable restaurant sales increased 4.5% at company restaurants and 4.7% at domestic franchise restaurants;

Restaurant margin, as a percentage of restaurant sales, decreased 31 basis points to 17.8%, primarily driven by wage rate inflation, partially offset by the benefit of lower food costs;

Diluted earnings per share increased 19.9% to $0.43 from $0.36 in the prior year. This includes overlapping a pre-tax charge recorded in the prior year quarter of $1.2 million ($0.8 million after-tax) related to the settlement of a legal matter; and

Seven company-owned restaurants, including two Bubba’s 33 restaurants, and one franchise restaurant were opened.

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

Comparable restaurant sales increased 4.0% at both company restaurants and 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;

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 legal matter. The impact of the legal charge was partially offset by a pre-tax charge recorded in 2016 of $6.7 million ($4.1 million after-tax) related to a separate legal matter which had an impact of $0.06 on diluted earnings per share;

-- Diluted earnings per share increased 7.6% to $1.44 from $1.34 in the prior year; and

20 company-owned restaurants, including four Bubba’s 33 restaurants, and three franchise restaurants were opened.

Kent Taylor, Chief Executive Officer of Texas Roadhouse, Inc., commented, "We are pleased to deliver another solid quarter of results including a 19.9% increase in diluted earnings per share driven by double-digit revenue growth. Comparable restaurant sales grew 4.5%, driven primarily by traffic gains of 3.5%. In addition, our positive sales momentum has continued into the fourth quarter. None of this growth would be possible without the commitment from our operators and everyone associated with our legendary brand."

Taylor continued, "As we look to 2018, our balance sheet and strong cashflow have us well positioned for continued growth including approximately 30 planned restaurant openings. In addition, our allocation strategy will continue to be focused on returning capital to shareholders, primarily through our dividend program."

2017 Outlook

Comparable restaurant sales at company restaurants for the first four weeks of our fourth quarter of fiscal 2017 increased approximately 5.3% compared to the prior year period.

Management updated the following expectations for 2017:

26 or 27 company restaurant openings (compared to previous guidance of 27 to 29 company restaurant openings), including four Bubba’s 33 restaurants;

Food cost deflation of approximately 2.0%, compared to previous guidance of approximately 1.0% to 2.0%; and

Labor inflation of approximately 7.0% to 8.0%, compared to previous guidance of mid-single digit inflation.

Management reiterated the following expectations for 2017:

-- Positive comparable restaurant sales growth;

-- An income tax rate of approximately 28.0%; and

Total capital expenditures of approximately $170.0 million, excluding any cash used for franchise acquisitions.

2018 Outlook

Management provided the following initial expectations for 2018:

-- Positive comparable restaurant sales growth;

Approximately 30 company restaurant openings, including up to seven Bubba’s 33 restaurants;

-- Relatively flat food costs;

-- Mid-single digit labor inflation;

-- An income tax rate of between 28.0% and 29.0%; and

Total capital expenditures of approximately $175.0 million, excluding any cash used for franchise acquisitions.

Conference Call

The Company is hosting a conference call today, October 30, 2017 at 5:00 p.m. Eastern Time to discuss these results. The dial-in number is (888) 297-0358 or (719) 325-2396 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 1901754 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 540 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.

Contacts:

Investor Relations

Tonya Robinson

(502) 515-7269

Media

Travis Doster

(502) 638-5457

Texas Roadhouse, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(in thousands, except per share data)
(unaudited)
13 Weeks Ended
39 Weeks Ended
September 26,
September 27,
September 26,
September 27,
2017
2016
2017
2016
Revenue:
Restaurant sales
$
536,341
$
477,617
$
1,661,821
$
1,493,531
Franchise royalties and fees
4,166
4,020
12,634
12,473
Total revenue
540,507
481,637
1,674,455
1,506,004
Costs and expenses:
Restaurant operating costs (excluding depreciation and
amortization shown separately below):
Cost of sales
176,498
161,886
545,862
506,565
Labor
169,355
145,301
514,287
442,861
Rent
11,257
10,266
33,238
30,477
Other operating
83,679
73,583
254,176
227,082
Pre-opening
4,548
5,017
14,302
14,253
Depreciation and amortization
23,534
20,941
69,236
60,718
Impairment and closure
2
13
13
54
General and administrative
26,123
26,162
94,594
82,933
Total costs and expenses
494,996
443,169
1,525,708
1,364,943
Income from operations
45,511
38,468
148,747
141,061
Interest expense, net
500
288
1,211
902
Equity income from investments in
unconsolidated affiliates
(359
)
(4
)
(1,149
)
(831
)
Income before taxes
45,370
38,184
148,685
140,990
Provision for income taxes
13,046
11,381
41,159
42,325
Net income including noncontrolling interests
32,324
26,803
107,526
98,665
Less: Net income attributable to noncontrolling interests
1,310
1,128
4,618
3,792
Net income attributable to Texas Roadhouse, Inc. and subsidiaries
$
31,014
$
25,675
$
102,908
$
94,873
Net income per common share attributable to Texas Roadhouse, Inc.
and subsidiaries:
Basic
$
0.44
$
0.36
$
1.45
$
1.35
Diluted
$
0.43
$
0.36
$
1.44
$
1.34
Weighted average shares outstanding:
Basic
71,067
70,477
70,939
70,338
Diluted
71,532
70,981
71,449
70,898
Cash dividends declared per share
$
0.21
$
0.19
$
0.63
$
0.57
Texas Roadhouse, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
September 26, 2017 December 27, 2016
Cash and cash equivalents
$
114,436
$
112,944
Other current assets
50,893
87,315
Property and equipment, net
886,972
830,054
Goodwill
121,040
116,571
Intangible assets, net
2,930
3,622
Other assets
36,448
29,465
Total assets
$
1,212,719
$
1,179,971
Current maturities of long-term debt and obligation under capital lease
9
167
Other current liabilities
238,260
279,360
Long-term debt and obligation under capital lease, excluding current maturities
51,984
52,381
Other liabilities
91,674
89,821
Texas Roadhouse, Inc. and subsidiaries stockholders’ equity
818,743
750,226
Noncontrolling interests
12,049
8,016
Total liabilities and equity
$
1,212,719
$
1,179,971
Texas Roadhouse, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
39 Weeks Ended
September 26, 2017
September 27, 2016
Cash flows from operating activities:
Net income including noncontrolling interests
$
107,526
$
98,665
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization
69,236
60,718
Share-based compensation expense
18,826
18,347
Other noncash adjustments
(2,702
)
1,321
Change in working capital
(4,816
)
(19,269
)
Net cash provided by operating activities
188,070
159,782
Cash flows from investing activities:
Capital expenditures - property and equipment
(117,037 )
(113,219 )
Acquisition of franchise restaurants, net of cash acquired
(16,528
)
-
Net cash used in investing activities
(133,565 )
(113,219 )
Cash flows from financing activities:
Proceeds from revolving credit facility, net
-
25,000
Repurchase shares of common stock
-
(4,110
)
Dividends paid
(43,223
)
(38,656
)
Other financing activities
(9,790
)
(6,418
)
Net cash used in financing activities
(53,013
)
(24,184
)
Net increase in cash and cash equivalents
1,492
22,379
Cash and cash equivalents - beginning of period
112,944
59,334
Cash and cash equivalents - end of period
$
114,436
$
81,713
Texas Roadhouse, Inc. and Subsidiaries
Supplemental Financial and Operating Information
($ amounts in thousands, except weekly sales by group)
(unaudited)
Third Quarter
Change
Year to Date
Change
2017
2016
vs LY
2017
2016
vs LY
Restaurant openings
Company - Texas Roadhouse
5
5
0
16
16
0
Company - Bubba’s 33
2
2
0
4
5
(1
)
Company - Other
0
0
0
0
0
0
Franchise - Texas Roadhouse - U.S.
0
1
(1
)
1
1
0
Franchise - Texas Roadhouse - International
1
0
1
2
2
0
Total
8
8
0
23
24
(1
)
Restaurant acquisitions/dispositions
Company - Texas Roadhouse
0
0
0
4
0
4
Company - Bubba’s 33
0
0
0
0
0
0
Company - Other
0
0
0
0
0
0
Franchise - Texas Roadhouse
0
0
0
(4
)
0
(4
)
Total
0
0
0
0
0
0
Restaurants open at the end of the quarter
Company - Texas Roadhouse
433
408
25
Company - Bubba’s 33
20
12
8
Company - Other
2
2
0
Franchise - Texas Roadhouse - U.S.
70
73
(3
)
Franchise - Texas Roadhouse - International
15
12
3
Total
540
507
33
Company-owned restaurants
Restaurant sales
$
536,341
$ 477,617
12.3
%
$
1,661,821
$ 1,493,531
11.3
%
Store weeks
5,868
5,427
8.1
%
17,324
16,039
8.0
%
Comparable restaurant sales growth (1)
4.5
%
3.4
%
4.0
%
4.2
%
Texas Roadhouse restaurants only:
Comparable restaurant sales growth (1)
4.6
%
3.5
%
4.0
%
4.2
%
Average unit volume (2)
$
1,197
$ 1,152
3.9
%
$
3,776
$ 3,663
3.1
%
Weekly sales by group:
Comparable restaurants (396 units)
$
92,712
Average unit volume restaurants (21 units) (3) $
79,891
Restaurants less than 6 months old (16 units)
$
93,419
Restaurant operating costs (as a % of restaurant sales)
Cost of sales
32.9
%
33.9
% (99
) bps
32.8
%
33.9
% (107
)
bps
Labor
31.6
%
30.4
% 115
bps
30.9
%
29.7
% 130
bps
Rent
2.1
%
2.1
% (5
) bps
2.0
%
2.0
% (4
)
bps
Other operating
15.6
%
15.4
% 20
bps
15.3
%
15.2
% 9
bps
Total
82.2
%
81.9
% 31
bps
81.1
%
80.8
% 28
bps
Restaurant margin (4)
17.8
%
18.1
% (31
) bps
18.9
%
19.2
% (28
)
bps
Restaurant margin ($ in thousands) (4)
$
95,552
$ 86,581
10.4
%
$
314,258
$ 286,546
9.7
%
Restaurant margin $ (4)/Store week
$
16,284
$ 15,953
2.1
%
$
18,140
$ 17,866
1.5
%
Franchise-owned restaurants
Franchise royalties and fees
$
4,166
$ 4,020
3.6
%
$
12,634
$ 12,473
1.3
%
Store weeks
1,092
1,095
(0.3
) %
3,264
3,253
0.3
%
Comparable restaurant sales growth (1)
2.8
%
1.9
%
2.9
%
2.5
%
U.S. franchise restaurants only:
Comparable restaurant sales growth (1)
4.7
%
3.3
%
4.0
%
3.9
%
Average unit volume (2)
$
1,227
$ 1,163
5.5
%
$
3,862
$ 3,717
3.9
%
Pre-opening expense
$
4,548
$ 5,017
(9.3
) %
$
14,302
$ 14,253
0.3
%
Depreciation and amortization
$
23,534
$ 20,941
12.4
%
$
69,236
$ 60,718
14.0
%
As a % of revenue
4.4
%
4.3
% 1
bp
4.1
%
4.0
% 10
bps
General and administrative expenses
$
26,123
$ 26,162
(0.1
) %
$
94,594
$ 82,933
14.1
%
As a % of revenue
4.8
%
5.4
% (60
) bps
5.6
%
5.5
% 14
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.
(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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