Texas Roadhouse, Inc. Announces Fourth Quarter 2008 Results

LOUISVILLE, Ky.--(BUSINESS WIRE)--Texas Roadhouse, Inc. (NasdaqGS: TXRH), today announced financial results for the 14 and 53 week periods ended December 30, 2008.


Fourth Quarter Year to Date
($000's) 2008 2007 %Change 2008 2007 %Change
Total revenue 234,202 186,312 26 880,461 735,089 20
Income from operations 10,866 11,418 (5) 62,027 63,213 (2)
Net income 6,139 7,220 (15) 38,168 39,325 (3)
Diluted EPS $0.09 $0.09 (8) $0.52 $0.51 1


NOTE> Q4 2008 and 2008 YTD include 14 and 53 weeks, respectively, compared to 13 and 52 weeks in Q4 2007 and 2007 YTD.



Results for the quarter:

  • Comparable restaurant sales decreased 4.7% at company restaurants and 5.5% at franchise restaurants;
  • Six company restaurants opened;
  • One restaurant was acquired from a franchisee;
  • Restaurant operating costs, as a percentage of restaurant sales, increased 201 basis points;
  • The Company recorded an impairment charge of $0.8 million, net of tax, on one under-performing restaurant in Q4 2008. The fourth quarter of 2007 included an impairment charge of $1.1 million, net of tax, on one under-performing restaurant;
  • The Company repurchased 807,900 shares of its Class A common stock for a total purchase price of $4.4 million; and
  • Diluted earnings per share decreased 8.0% compared to the prior year period. Diluted earnings per share were positively impacted by an estimated $0.02 to $0.03 as a result of the extra week in Q4 2008.


Results for the full year:

  • Comparable restaurant sales decreased 2.3% at company restaurants and 3.6% at franchise restaurants;
  • Twenty-nine company restaurants and one franchise restaurant opened while one company restaurant closed;
  • Thirteen restaurants were acquired from franchisees;
  • Restaurant operating costs, as a percentage of restaurant sales, increased 168 basis points;
  • The Company repurchased 6,512,807 shares of its Class A common stock for a total purchase price of $56.8 million. As of the end of 2008, $18.2 million worth of Class A common stock remains authorized for repurchase; and
  • Diluted earnings per share increased 1.0% to $0.52 from $0.51 in the prior year period. Diluted earnings per share were positively impacted by an estimated $0.02 to $0.03 as a result of the extra week discussed above.



G.J. Hart, President and Chief Executive Officer of Texas Roadhouse, commented, "The unprecedented economic environment affected our fourth quarter performance and has continued into early 2009. Although we believe these headwinds will continue, we remain committed to doing what we believe are the right things for the long-term success of the Texas Roadhouse brand. On the operational front, we are focused on providing legendary food and legendary service to each and every guest and remain committed to the overall guest experience by providing quality, fun and value. From a financial perspective, we are managing the business to the current environment and are committed to maintaining a conservative balance sheet and generating adequate returns on the capital we deploy. In addition, we look forward to 2009 as a turning point for us as we anticipate generating a significant amount of free cash flow for the first time in our history as a public company."

Franchise Acquisitions

Effective September 24, 2008, the first day of the Company's fourth fiscal quarter of 2008, the Company acquired one franchise restaurant in Florida for a purchase price of $1.5 million. The purchase price was paid in cash, funded through borrowings under the Company's credit facility.

Outlook for 2009

The Company reported that comparable restaurant sales for the first seven weeks of fiscal 2009 decreased approximately 1.0% compared to the same period of the prior year although management estimates that these results include a benefit of an estimated 2.0-2.5% due to the timing of the New Year's holiday.

While the Company acknowledges the uncertain state of the economy, it also notes that it is targeting 2009 diluted earnings per share to be approximately flat with that of 2008 despite the fact that fiscal 2008 contained an extra week that positively impacted diluted earnings per share by approximately $0.02 to $0.03.

In addition, the Company provided the following details as they relate to 2009:

  • Plans include approximately 15 company and two franchise restaurant openings;
  • Total capital expenditures are estimated to be $50-60 million;
  • Food cost deflation is estimated to be approximately 2.0% to 3.0% for 2009;
  • Based on the lower number of openings in 2009 as compared to 2008, the Company anticipates much lower pre-opening costs over the prior periods; and
  • As previously announced, the Company will incur an estimated $1.5 million in incremental expense in 2009 for enhancements made to the bonus plans for its Managing Partners.


Conference Call

The Company is hosting a conference call today, February 23, 2009, at 5:00 p.m. Eastern Time to discuss these results. The dial-in number is (888) 765-5554 or (913) 661-9178 for international calls. A replay of the call will be available for one week following the conference call. To access the replay, please dial (888) 203-1112 or (719) 457-0820 for international calls, and use 1447783 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 300 restaurants system-wide in 46 states.

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 operating costs, our ability to acquire franchise restaurants, our ability to integrate the franchise restaurants we acquire or other concepts we develop, strength of consumer spending and other factors disclosed from time to time in the Company's filings with the U.S. Securities and Exchange Commission. Investors should take such risks into account when making investment decisions. Stockholders 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. The Company undertakes 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)

14 Weeks 13 Weeks 53 Weeks 52 Weeks
Ended Ended Ended Ended
December 30, December 25, December 30, December 25,
2008 2007 2008 2007
Revenue:
Restaurant sales $232,429 $183,920 $871,556 $724,372
Franchise royalties and fees 1,773 2,392 8,905 10,717

Total revenue 234,202 186,312 880,461 735,089
Costs and expenses:
Restaurant operating costs:
Cost of sales 82,918 65,863 308,123 255,060
Labor 69,136 53,499 253,132 205,780
Rent 4,741 3,191 15,879 11,735
Other operating 40,651 29,992 146,019 116,258
Pre-opening 2,631 3,440 11,604 12,741
Depreciation and amortization 10,638 8,543 37,694 30,446
Impairment and closure 1,398 1,721 2,175 1,721
General and administrative 11,223 8,645 43,808 38,135

Total costs and expenses 223,336 174,894 818,434 671,876

Income from operations 10,866 11,418 62,027 63,213

Interest expense, net 1,508 868 3,844 2,295
Minority interest 359 94 841 711

Equity income from investments in

unconsolidated affiliates 31 38 215 294

Income before taxes 9,030 10,494 57,557 60,501
Provision for income taxes 2,891 3,274 19,389 21,176

Net income $6,139 $7,220 $38,168 $39,325

Net income per common share:
Basic $0.09 $0.10 $0.53 $0.53
Diluted $0.09 $0.09 $0.52 $0.51

Weighted average shares outstanding:
Basic 69,923 74,778 72,672 74,611
Diluted 70,915 76,731 74,079 76,832

Texas Roadhouse, Inc. and Subsidiaries
Condensed Consolidated Balance Sheet
(in thousands)
(unaudited)




December 30, December 25,
2008 2007

Cash and cash equivalents $5,258 $11,564
Other current assets 28,550 30,067
Property and equipment, net 456,132 390,378
Goodwill 114,807 101,856
Intangible asset, net 12,807 8,414
Other assets 4,109 3,750

Total assets $621,663 $546,029

Current maturities of long-term debt
and obligations under capital leases 228 302
Other current liabilities 99,415 87,957
Long-term debt and obligations under
capital leases, excluding current maturities 132,482 66,482
Other liabilities 27,741 21,523
Minority interest 2,807 2,384
Stockholders' equity 358,990 367,381

Total liabilities and stockholders' equity $621,663 $546,029

Texas Roadhouse, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in thousands, except per share data)
(unaudited)


Fiscal Year Ended


December 30, December 25,
2008 2007
Cash flows from operating activities:
Net income $38,168 $39,325
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation and amortization 37,694 30,446
Share-based compensation expense 7,745 4,742
Other noncash adjustments 5,998 393
Change in working capital 11,609 1,661
Net cash provided by operating activities 101,214 76,567

Cash flows from investing activities:
Capital expenditures - property and equipment (102,536) (101,923)
Acquisition of franchise restaurants,
net of cash acquired (17,835) (33,222)
Proceeds from sale of property and equipment,
including insurance proceeds 250 613
Investment in equity investees (95) -
Net cash used in investing activities (120,216) (134,532)

Cash flows from financing activities:
Proceeds from revolving credit facility, net 67,000 33,000
Repurchase of shares of common stock (56,974) -
Other financing activities 2,670 2,745
Net cash provided by financing activities 12,696 35,745

Net (decrease) increase in cash (6,306) (22,220)
Cash and cash equivalents - beginning of year 11,564 33,784
Cash and cash equivalents - end of year 5,258 11,564


Supplemental Financial and Operating Information
($ amounts in thousands)
(unaudited)


Fourth Quarter Change Year to Date Change
2008 2007 vs LY 2008 2007 vs LY
Restaurant openings
Company 6 10 (4) 29 32 (3)
Franchise 0 0 0 1 2 (1)
Total 6 10 (4) 30 34 (4)

Restaurant acquisitions
Company 1 0 1 13 9 4
Franchise (1) 0 (1) (13) (9) (4)
Total 0 0 0 0 0 0

Restaurant closures
Company 0 0 0 (1) 0 (1)
Franchise 0 0 0 0 0 0
Total 0 0 0 (1) 0 (1)

Restaurants open at the end of the quarter
Company 245 204 41
Franchise 69 81 (12)
Total 314 285 29

Company-owned restaurants
Restaurant sales $232,429 $183,920 26.4% $871,556 $24,372 20.3%
Store weeks 3,389 2,573 31.7% 11,861 9,499 24.9%
Comparable restaurant
sales growth(1) (4.7)% (0.8)% (2.3)% 1.4%
Average unit volume (2) $956 $927 3.1% $3,917 $3,973 (1.4)%
Average unit volume,
2007 adjusted (3) $956 $1,021 (6.4)% $3,917 $4,069 (3.7)%

Restaurant operating costs (as a % of restaurant sales)
Cost of sales 35.7% 35.8% (14)bps 35.4% 35.2% 14 bps
Labor 29.7% 29.1% 66 bps 29.0% 28.4% 64 bps
Rent 2.0% 1.7% 30 bps 1.8% 1.6% 20 bps
Other operating 17.5% 16.3% 118 bps 16.8% 16.0% 70 bps
Total 84.9% 82.9% 201 bps 83.0% 81.3% 168 bps

Franchise-owned restaurants
Franchise royalties and fees $1,773 $2,392 (25.9)% $8,905 $10,717 (16.9)%
Store weeks 966 1,053 (8.3)% 4,007 4,401 (9.0)%
Comparable restaurant
sales growth (1) (5.5)% (1.5)% (3.6)% 0.8%
Average unit volume (2) $920 $890 3.4% $3,726 $3,795 (1.8)%
Average unit volume,
2007 adjusted (3) $920 $976 (5.7)% $3,726 $3,880 (4.0)%

Pre-opening expense $2,631 $3,440 (23.5)% $11,604 $12,741 (8.9)%

Depreciation and
amortization $10,638 $8,543 24.5% $37,694 $30,446 23.8%
As a % of revenue 4.5% 4.6% (4) bps 4.3% 4.1% 14 bps

General and administrative
expenses $11,223 $8,645 29.8% $43,808 $38,135 14.9%
As a % of revenue 4.8% 4.6% 15 bps 5.0% 5.2% (21) bps


(1) Comparable restaurant sales growth includes
sales from restaurants open 18 months as of the
beginning of the measurement period.

(2) Average unit volume includes sales from
restaurants open six months as of the
beginning of the measurement period. Q4 2008
and 2008 YTD include 14 and 53 weeks,
respectively, while Q4 2007 and 2007 YTD
include 13 and 52 weeks. For comparative
purposes, average unit volumes for Q4 2007 and 2007
YTD were adjusted to reflect restaurant sales of
any acquired franchise stores as part of Company-owned
restaurants average unit volume and were excluded
from franchise-owned restaurants average unit volume.

(3) For comparative purposes, Q4 2007 and 2007
YTD were adjusted to include 14 and 53 weeks, respectively.

NM - not meaningful
Amounts may not foot due to rounding.

###

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