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Texas Roadhouse, Inc. Announces Third Quarter 2011 Results

By: Texas Roadhouse |  0 Shares     69 Reads

LOUISVILLE, Ky., Nov 01, 2011 (BUSINESS WIRE) -- Texas Roadhouse, Inc. (NasdaqGS: TXRH), today announced financial results for the 13 and 39 week periods ended September 27, 2011.

		Third Quarter						Year to Date
($000's)		2011		2010		% Change		2011		2010		% Change
Total revenue		269,253		245,613		10		832,610		760,399		9
Income from operations		23,072		21,448		8		77,029		74,883		3
Net income		15,798		13,952		13		51,667		48,229		7
Diluted EPS		$0.22		$0.19		15		$0.71		$0.66		7

Results for the third quarter included:

• Comparable restaurant sales increased 4.0% at company restaurants and 3.7% at franchise restaurants;
• Five company restaurants and one franchise restaurant opened;
• Restaurant margins, as a percentage of restaurant sales, increased nine basis points to 18.0% due, in large part, to approximately $1.0 million in benefits recorded relating to workers compensation and property tax expenses;
• Diluted earnings per share increased 15% to $0.22 from $0.19 in the prior year period;
• The Company repurchased 1,503,400 shares of its common stock for a total purchase price of $21.2 million.

Results year-to-date included:

• Comparable restaurant sales increased 4.4% at company restaurants and 3.9% at franchise restaurants;
• Ten company restaurants and one franchise restaurant opened;
• Restaurant margins, as a percentage of restaurant sales, decreased 51 basis points to 18.5%;
• Diluted earnings per share increased 7% to $0.71 from $0.66 in the prior period;
• The Company repurchased 3,003,400 shares of its common stock for a total purchase price of $46.4 million.

Kent Taylor, Chief Executive Officer of Texas Roadhouse, commented, "Despite ongoing commodity inflation, we were pleased with our third quarter. Comparable restaurant sales remained strong at 4%, driven by traffic gains and pricing flow through, while our newest units continued to generate very strong volumes. In terms of profitability, although one-time benefits and a lower tax rate bolstered our reported results, our underlying business performance was in-line with our expectations. Finally, we remain on track with our 2011 and 2012 development plans, and are particularly pleased that our cash flow generation remains healthy. This allows us to self-fund our new unit expansion and allocate excess capital for the benefit of shareholders."

Outlook for 2011

The Company reported that comparable restaurant sales at company restaurants for the first four weeks of the fourth quarter of fiscal 2011 increased approximately 4.2% compared to the prior year period.

With better than expected third quarter results, driven by lower than anticipated workers compensation expense, property tax expense and income tax rate, the Company is increasing its diluted earnings per share expectation for 2011. Diluted earnings per share growth is now expected to be up 7.0% to 8.0%. This full year 2011 estimate is based, in part, on the following assumptions, which have not changed from previously reported guidance:

• Comparable company restaurant sales growth of 4.0% to 4.5%;
• 20 company restaurant openings;
• Food cost inflation of approximately 4.0%; and
• Total capital expenditures of approximately $70.0 million.

Outlook for 2012

With regard to 2012, management provides the following expectations:

• Positive comparable restaurant sales growth;
• 25 restaurant openings;
• Food cost inflation of 7.0% to 9.0%, up from approximately 4.0% in 2011;
• Higher labor costs due to an increase in minimum and tip wages in 6 states, which impacts approximately 50 company-owned restaurants or approximately 20% of our total company-owned restaurants;
• Income tax rate of approximately 32.5%, an increase of 270 basis points over the expected 2011 rate based on the scheduled expiration of certain federal tax credits at the end of 2011; and
• Total capital expenditures of approximately $80.0 million.

Taylor commented on 2012, "We certainly feel very good about our sales momentum and increased restaurant growth heading into 2012. And, while we do anticipate taking some pricing actions, we do not expect those to offset the unusually high inflation we foresee next year. Our job is to balance our long-term positioning with shorter term pressures and that is what we plan to do."

Conference Call

The Company is hosting a conference call today, November 1, 2011, at 5:00 p.m. Eastern Time to discuss these results. The dial-in number is (877) 419-6594 or (719) 325-4888 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 6062456 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 350 restaurants system-wide in 46 states. 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, strength of consumer spending, conditions beyond the Company's control such as weather, natural disasters, disease outbreaks, epidemics or pandemics impacting the Company's customers or food supplies, acts of war or terrorism 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)
		13 Weeks Ended						39 Weeks Ended
		September 27, 2011			September 28, 2010			September 27, 2011			September 28, 2010
Revenue:
Restaurant sales		$	266,874		$	243,405		$	825,283		$	753,582
Franchise royalties and fees			2,379			2,208			7,327			6,817
Total revenue			269,253			245,613			832,610			760,399
Costs and expenses:
Restaurant operating costs:
Cost of sales			88,944			79,101			274,751			244,560
Labor			78,919			71,835			244,551			221,241
Rent			5,796			5,329			17,153			15,886
Other operating			45,112			43,476			136,331			128,841
Pre-opening			3,327			2,150			7,413			4,562
Depreciation and amortization			10,571			10,262			31,724			30,861
Impairment and closure			13			44			59			302
General and administrative			13,499			11,968			43,599			39,263
Total costs and expenses			246,181			224,165			755,581			685,516
Income from operations			23,072			21,448			77,029			74,883
Interest expense, net			669			644			1,776			2,078
Equity income from investments in unconsolidated affiliates			71			155			271			355
Income before taxes			22,474			20,959			75,524			73,160
Provision for income taxes			6,058			6,478			21,934			23,133
Net income including noncontrolling interests		$	16,416		$	14,481		$	53,590		$	50,027
Less: Net income attributable to noncontrolling interests			618			529			1,923			1,798
Net income attributable to Texas Roadhouse, Inc. and subsidiaries		$	15,798		$	13,952		$	51,667		$	48,229
Net income per common share attributable to Texas Roadhouse, Inc. and subsidiaries:
Basic		$	0.22		$	0.19		$	0.72		$	0.68
Diluted		$	0.22		$	0.19		$	0.71		$	0.66
Weighted average shares outstanding:
Basic			70,800			71,660			71,370			71,273
Diluted			72,186			73,002			72,903			72,727

Texas Roadhouse, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in thousands, except per share data)
(unaudited)
		39 Weeks Ended
		September 27, 2011					September 28, 2010
Cash flows from operating activities:
Net income including noncontrolling interests		$	53,590				$	50,027
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization			31,724					30,861
Share-based compensation expense			8,151					5,705
Other noncash adjustments			1,145					1,574
Change in working capital			(13,601	)				(13,865	)
Net cash provided by operating activities			81,009					74,302
Cash flows from investing activities:
Capital expenditures - property and equipment			(51,839	)				(31,598	)
Proceeds from sale of property and equipment, including insurance proceeds			171					175
Net cash used in investing activities			(51,668	)				(31,423	)
Cash flows from financing activities:
Repayments of revolving credit facility, net			-					(39,000	)
Repurchase shares of common stock			(46,445	)				-
Dividends paid			(11,399	)				-
Other financing activities			1,961					4,688
Net cash used in financing activities			(55,883	)				(34,312	)
Net (decrease) increase in cash and cash equivalents			(26,542	)				8,567
Cash and cash equivalents - beginning of year			82,215					46,858
Cash and cash equivalents - end of year		$	55,673				$	55,425

Texas Roadhouse, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands)
		(unaudited)
		September 27, 2011			December 28, 2010
Cash and cash equivalents		$	55,673		$	82,215
Other current assets			28,616			31,707
Property and equipment, net			479,167			458,983
Goodwill			111,785			111,785
Intangible assets, net			9,311			10,118
Other assets			11,431			7,993
Total assets		$	695,983		$	702,801
Current maturities of long-term debt and obligations under capital leases			296			274
Other current liabilities			100,592			111,784
Long-term debt and obligations under capital leases, excluding current maturities			51,681			51,906
Other liabilities			44,446			39,455
Texas Roadhouse, Inc. and subsidiaries stockholders' equity			495,072			496,616
Noncontrolling interests			3,896			2,766
Total liabilities and equity		$	695,983		$	702,801

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
		2011					2010					vs LY						2011					2010						vs LY
Restaurant openings
Company			5					3				2							10					7					3
Franchise			1					0				1							1					1					0
Total			6					3				3							11					8					3
Restaurant closures
Company			0					0				0							0					(1)					1
Franchise			0					0				0							0					0					0
Total			0					0				0							0					(1)					1
Restaurants open at the end of the quarter
Company			284					267				17
Franchise			72					71				1
Total			356					338				18
Company-owned restaurants
Restaurant sales		$	266,874				$	243,405				9.6			%			$	825,283				$	753,582					9.5			%
Store weeks			3,643					3,450				5.6			%				10,818					10,294					5.1			%
Comparable restaurant sales growth (1)			4.0		%			4.3		%									4.4		%			2.1			%
Average unit volume (2)		$	949				$	913				3.9			%			$	2,970				$	2,836					4.7			%
Weekly sales by group (3):
Comparable restaurants (260 units)		$	73,098
Average unit volume restaurants (14 units)		$	71,165
Restaurants less than 6 months old (10 units)		$	84,524
Restaurant operating costs (as a % of restaurant sales)
Cost of sales			33.3		%			32.5		%		83			bps				33.3		%			32.5			%		84			bps
Labor			29.6		%			29.5		%		6			bps				29.6		%			29.4			%		27			bps
Rent			2.2		%			2.2		%		(2	)		bps				2.1		%			2.1			%		(3	)		bps
Other operating			16.9		%			17.9		%		(96	)		bps				16.5		%			17.1			%		(58	)		bps
Total			82.0		%			82.1		%		(9	)		bps				81.5		%			81.0			%		51			bps
Restaurant margins (4)			18.0		%			17.9		%		9			bps				18.5		%			19.0			%		(51	)		bps
Franchise-owned restaurants
Franchise royalties and fees		$	2,379				$	2,208				7.7			%			$	7,327				$	6,817					7.5			%
Store weeks			927					912				1.6			%				2,773					2,707					2.4			%
Comparable restaurant sales growth (1)			3.7		%			4.4		%									3.9		%			2.4			%
Average unit volume (2)		$	935				$	905				3.3			%			$	2,906				$	2,829					2.7			%
Pre-opening expense		$	3,327				$	2,150				54.7			%			$	7,413				$	4,562					62.5			%
Depreciation and amortization		$	10,571				$	10,262				3.0			%			$	31,724				$	30,861					2.8			%
As a % of revenue			3.9		%			4.2		%		(25	)		bps				3.8		%			4.1			%		(25	)		bps
Impairment and closure		$	13				$	44				NM						$	59				$	302					NM
General and administrative expenses		$	13,499				$	11,968				12.8			%			$	43,599				$	39,263					11.0			%
As a % of revenue			5.0		%			4.9		%		14			bps				5.2		%			5.2			%		7			bps

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

(2) Average unit volume includes sales from restaurants open six months as of the beginning of the measurement period, excluding sales from restaurants closed during the period.

(3) Weekly sales by group includes sales from comparable restaurants, sales from average unit restaurants and sales from restaurants which were open less than six months as of the beginning of the measurement period. Average unit volume restaurants includes sales from restaurants open less than 18 months, but more than six months, as of the beginning of the measurement period, excluding sales from restaurants closed during the period.

(4) Restaurant margins represent restaurant sales less restaurant operating costs (as a percentage of restaurant sales).

NM - Not meaningful

Amounts may not foot due to rounding.

SOURCE: Texas Roadhouse, Inc.

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