Texas Roadhouse, Inc. Announces Third Quarter 2011 Results

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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