Texas Roadhouse, Inc. Announces Third Quarter 2014 Results

By: Texas Roadhouse | 1,014 Shares 59 Reads

LOUISVILLE, Ky. - (BUSINESS WIRE) - Nov. 3, 2014 - Texas Roadhouse, Inc. (NasdaqGS: TXRH), today announced financial results for the 13 and 39 week periods ended September 30, 2014.


	Third Quarter			Year to Date
($000's)	2014	2013	% Change	2014	2013	% Change

Total revenue	$ 385,218	$ 334,770	15	$ 1,177,723	$ 1,046,565	13
Income from operations	28,821	25,696	12	103,406	93,661	10
Net income	18,881	17,170	10	68,427	63,304	8
Diluted EPS	$0.27	$0.24	12	$0.97	$0.89	9

Results for the third quarter included:

Diluted earnings per share increased 11.9% to $0.27 from $0.24 in the prior year;
Comparable restaurant sales increased 5.9% at company restaurants and 5.2% at franchise restaurants;
Three company restaurants were opened;
Restaurant margin, as a percentage of restaurant sales, decreased 40 basis points to 16.8%, primarily due to approximately 4.5% food cost inflation and higher costs associated with general liability insurance due to the impact of overlapping a $1.3 million credit recorded in the prior year period;
Income tax rate increased 178 basis points to 31.4%, primarily due to reduced activity related to the exercise of incentive stock options and the expiration of certain federal tax credits at the end of 2013; and
The Company repurchased 315,000 shares of its common stock for $8.2 million.

Results for the year-to-date included:

Diluted earnings per share increased 8.9% to $0.97 from $0.89 in the prior year;
Comparable restaurant sales increased 3.9% at company restaurants and 4.4% at franchise restaurants;
15 company restaurants and one franchise restaurant were opened;
Restaurant margin, as a percentage of restaurant sales, decreased 21 basis points to 18.1%;
Costs associated with the Company's annual managing partner conference were $2.0 million lower compared to the prior year period;
Income tax rate increased 182 basis points to 30.6%, primarily due to the expiration of certain federal tax credits at the end of 2013; and
The Company repurchased 1,575,000 shares of its common stock for $40.0 million.

Kent Taylor, Chief Executive Officer of Texas Roadhouse, Inc., commented, "We are pleased to report another quarter of strong top-line growth highlighted by solid traffic growth of 4.4%. While we were challenged by higher commodity cost inflation, we delivered solid diluted earnings per share growth this quarter. As we move into the fourth quarter, we are pleased with our sales momentum, and our development is on track. Looking ahead to 2015, we are well positioned for continued success with 25 to 30 planned restaurant openings, a strong balance sheet and healthy cash flow with a focus on returning excess capital to our shareholders, and an ongoing commitment to legendary food and legendary service."

2014 Outlook

The Company reported that comparable restaurant sales at company restaurants for the first four weeks of its fourth quarter of fiscal 2014 increased approximately 7.0% compared to the prior year period.

Management reiterated the following expectations for 2014:

Positive comparable restaurant sales growth;
Approximately 25 company restaurant openings; and
An income tax rate of approximately 30.0% to 31.0% which is higher than the 2013 income tax rate primarily as a result of the expiration of certain federal tax credits at the end of 2013.

Management updated the following expectations for 2014:

Approximately 3.0% food cost inflation for the full year; and
Total capital expenditures of approximately $110 million.

2015 Outlook

Management provided the following expectations for 2015:

Positive comparable restaurant sales growth;
25 to 30 company restaurant openings;
Low to mid-single digit food cost inflation;
An income tax rate of approximately 29.0% to 31.0% depending on the reinstatement of certain federal tax credits and timing of such; and
Total capital expenditures of $110 million to $120 million.

Conference Call

The Company is hosting a conference call today, November 3, 2014 at 5:00 p.m. Eastern Time to discuss these results. The dial-in number is (877) 857-6151 or (719) 325-4879 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 2758536 as the pass code. There will be a simultaneous Web cast conducted at www.texasroadhouse.com.

About Texas Roadhouse

Texas Roadhouse is a casual dining concept that first opened in 1993 and today operates over 440 restaurants system-wide in 49 states and four 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; conditions beyond our control such as weather, natural disasters, disease outbreaks, epidemics or pandemics impacting our customers or food supplies; 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)
(unaudited)

	13 Weeks Ended					39 Weeks Ended
	September 30, 2014			September 24, 2013		September 30, 2014		September 24, 2013

Revenue:
Restaurant sales	$	381,991		$	331,746	$	1,167,766	$	1,037,239
Franchise royalties and fees		3,227			3,024		9,957		9,326

Total revenue		385,218			334,770		1,177,723		1,046,565

Costs and expenses:
Restaurant operating costs (excluding depreciation and amortization shown separately below):
Cost of sales		137,658			116,570		409,552		361,334
Labor		112,521			99,003		342,375		302,387
Rent		8,380			7,181		24,550		21,390
Other operating		59,276			51,949		180,491		162,716
Pre-opening		3,945			4,746		12,677		11,810
Depreciation and amortization		15,164			12,462		43,682		36,864
Impairment and closure		(16	)		103		10		187
General and administrative		19,469			17,060		60,980		56,216

Total costs and expenses		356,397			309,074		1,074,317		952,904

Income from operations		28,821			25,696		103,406		93,661

Interest expense, net		492			525		1,564		1,687
Equity income from investments in unconsolidated affiliates		410			173		975		571

Income before taxes		28,739			25,344		102,817		92,545
Provision for income taxes		9,017			7,500		31,462		26,617

Net income including noncontrolling interests	$	19,722		$	17,844	$	71,355	$	65,928
Less: Net income attributable to noncontrolling interests		841			674		2,928		2,624
Net income attributable to Texas Roadhouse, Inc. and subsidiaries	$	18,881		$	17,170	$	68,427	$	63,304

Net income per common share attributable to Texas Roadhouse, Inc. and subsidiaries:
Basic	$	0.27		$	0.24	$	0.98	$	0.91
Diluted	$	0.27		$	0.24	$	0.97	$	0.89

Weighted average shares outstanding:
Basic		69,544			70,361		69,793		69,914
Diluted		70,395			71,620		70,639		71,175


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

				(As Adjusted) (1)
		September 30, 2014		December 31, 2013


	Cash and cash equivalents	$	59,307	$	94,874
	Other current assets		39,646		50,869
	Property and equipment, net		631,552		586,212
	Goodwill		117,197		117,197
	Intangible assets, net		6,546		7,876
	Other assets		22,059		20,616

	Total assets	$	876,307	$	877,644


	Current maturities of long-term debt		126		243
	Other current liabilities		164,795		174,937
	Long-term debt, excluding current maturities		50,727		50,990
	Other liabilities		57,744		57,614
	Texas Roadhouse, Inc. and subsidiaries stockholders' equity		596,120		587,659
	Noncontrolling interests		6,795		6,201

	Total liabilities and equity	$	876,307	$	877,644

(1)	December 31, 2013 revised to reflect the impact of adjustments to purchase price accounting related to 2013 acquisitions in accordance with generally accepted accounting principles ("GAAP").


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

	39 Weeks Ended
	September 30, 2014			September 24, 2013

Cash flows from operating activities:
Net income including noncontrolling interests	$	71,355		$	65,928
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization		43,682			36,864
Share-based compensation expense		10,937			10,583
Other noncash adjustments		(1,392	)		843
Change in working capital		(8,266	)		(15,534	)
Net cash provided by operating activities		116,316			98,684

Cash flows from investing activities:
Capital expenditures - property and equipment		(89,645	)		(70,911	)
Proceeds from sale of property and equipment, including insurance proceeds		1,197			(39	)
Net cash used in investing activities		(88,448	)		(70,950	)

Cash flows from financing activities:
Repurchase shares of common stock		(39,966	)		-
Dividends paid		(20,923	)		(29,939	)
Other financing activities		(2,546	)		7,803
Net cash used in financing activities		(63,435	)		(22,136	)

Net (decrease) increase in cash and cash equivalents		(35,567	)		5,598
Cash and cash equivalents - beginning of year		94,874			81,746
Cash and cash equivalents - end of period	$	59,307		$	87,344


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
	2014			2013			vs LY				2014		2013			vs LY

Restaurant openings
Company - Texas Roadhouse		3			4		(1	)			15			13		2
Company - Other		0			0		0				0			1		(1	)
Franchise - Texas Roadhouse		0			0		0				1			3		(2	)
Total		3			4		(1	)			16			17		(1	)


Restaurants open at the end of the quarter
Company - Texas Roadhouse		360			331		29
Company - Other		1			3		(2	)
Franchise - Texas Roadhouse		75			75		0
Total		436			409		27

Company-owned restaurants
Restaurant sales	$	381,991		$	331,746		15.1		%	$	1,167,766		$	1,037,239		12.6		%
Store weeks		4,682			4,294		9.0		%		13,799			12,682		8.8		%
Comparable restaurant sales growth (1)		5.9	%		2.6	%					3.9	%		3.7	%
Texas Roadhouse restaurants only:
Comparable restaurant sales growth (1)		5.9	%		2.6	%					3.9	%		3.7	%
Average unit volume (2)	$	1,051		$	994		5.7		%	$	3,270		$	3,167		3.2		%
Weekly sales by group:
Comparable restaurants (320 units)	$	80,995
Average unit volume restaurants (25 units) (3)	$	78,542
Restaurants less than 6 months old (15 units)	$	99,636

Restaurant operating costs (as a % of restaurant sales)
Cost of sales		36.0	%		35.1	%	90		bps		35.1	%		34.8	%	24		bps
Labor		29.5	%		29.8	%	(39	)	bps		29.3	%		29.2	%	17		bps
Rent		2.2	%		2.2	%	3		bps		2.1	%		2.1	%	4		bps
Other operating		15.5	%		15.7	%	(14	)	bps		15.5	%		15.7	%	(23	)	bps
Total		83.2	%		82.8	%	40		bps		81.9	%		81.7	%	21		bps
Restaurant margin (4)		16.8	%		17.2	%	(40	)	bps		18.1	%		18.3	%	(21	)	bps
Restaurant margin ($ in thousands)	$	64,156		$	57,043		12.5		%	$	210,798		$	189,410		11.3		%
Restaurant margin $/Store week	$	13,703		$	13,284		3.2		%	$	15,276		$	14,935		2.3		%

Franchise-owned restaurants
Franchise royalties and fees	$	3,227		$	3,024		6.7		%	$	9,957		$	9,326		6.8		%
Store weeks		975			975		-		%		2,912			2,886		0.9		%
Comparable restaurant sales growth (1)		5.2	%		4.0	%					4.4	%		4.2	%
Average unit volume (2)	$	1,128		$	1,058		6.6		%	$	3,473		$	3,273		6.1		%

Pre-opening expense	$	3,945		$	4,746		(16.9	)	%	$	12,677		$	11,810		7.3		%

Depreciation and amortization	$	15,164		$	12,462		21.7		%	$	43,682		$	36,864		18.5		%
As a % of revenue		3.9	%		3.7	%	21		bps		3.7	%		3.5	%	19		bps

General and administrative expenses	$	19,469		$	17,060		14.1		%	$	60,980		$	56,216		8.5		%
As a % of revenue		5.1	%		5.1	%	(4	)	bps		5.2	%		5.4	%	(19	)	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 represents restaurant sales less cost of sales, labor, rent and other operating costs (as a percentage of restaurant sales). 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.

SOURCE Texas Roadhouse

Contacts:

Tonya Robinson
Texas Roadhouse, Inc.
Investor Relations:
502-515-7269

Travis Doster
Texas Roadhouse, Inc.
Media Relations
502-638-5457

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Texas Roadhouse, Inc. Announces Third Quarter 2014 Results

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Texas Roadhouse, Inc. Announces Third Quarter 2014 Results

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