Texas Roadhouse, Inc. Announces Third Quarter 2018 Results

Texas Roadhouse, Inc. Announces Third Quarter 2018 Results

LOUISVILLE, Ky. - Oct. 29, 2018 // GLOBE NEWSWIRE // - Texas Roadhouse, Inc. (NasdaqGS: TXRH) today announced financial results for the 13 and 39 week periods ended September 25, 2018.

    Third Quarter   Year to Date
($000's)   2018 2017 % Change   2018 2017 % Change
                 
Total revenue   $ 594,595 $ 540,507 10.0 %   $ 1,851,537 $ 1,674,455 10.6 %
Income from operations   35,444   45,511 (22.1 %)     154,582   148,747 3.9 %
Net income     29,125   31,014 (6.1 %)     127,893   102,908 24.3 %
Diluted EPS   $ 0.40 $ 0.43 (6.7 %)   $ 1.78 $ 1.44 23.5 %
     

Results for the third quarter included the following highlights:

  • Comparable restaurant sales increased 5.5% at company restaurants and 4.2% at domestic franchise restaurants;
  • Restaurant margin, as a percentage of restaurant and other sales, decreased 157 basis points to 16.2%, primarily due to higher labor costs, including the impact of insurance reserve adjustments. Restaurant margin dollars increased 0.3% to $95.8 million from $95.6 million in the prior year;
  • Diluted earnings per share decreased 6.7% to $0.40 from $0.43 in the prior year primarily due to higher labor costs and higher general and administrative expenses partially offset by higher revenues and lower income tax expense; and
  • Three company restaurants and one international franchise restaurant were opened.

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

  • Comparable restaurant sales increased 5.4% at company restaurants and 4.1% at domestic franchise restaurants;
  • Restaurant margin, as a percentage of restaurant and other sales, decreased 102 basis points to 17.9%, primarily due to higher labor costs. Restaurant margin dollars increased 4.6% to $328.6 million from $314.3 million in the prior year;
  • Diluted earnings per share increased 23.5% to $1.78 from $1.44 in the prior year primarily due to higher revenues and lower income tax expense partially offset by higher labor costs. In addition, we recorded a pre-tax charge of $14.9 million ($9.2 million after-tax), or $0.13 per diluted share, in the first quarter of 2017, related to the settlement of a legal matter; and
  • 17 company restaurants, including four Bubba’s 33 restaurants, and four international franchise restaurants were opened.

Kent Taylor, Chief Executive Officer of Texas Roadhouse, Inc., commented, "Our top-line momentum continued this quarter highlighted by positive comparable restaurant sales, driven by positive traffic growth. However, restaurant-level performance continues to be pressured by higher labor costs. Despite the earnings decline this quarter, 2018 is still shaping up to be a good year for Texas Roadhouse."

Taylor continued, "Our new restaurant pipeline is solid and we feel good about our development plans for 2019. We are confident that our business is well positioned for long-term sales and profit growth. In addition, our healthy cash flow generation allows us to fund our new restaurant growth through internal cash flow, while also returning excess capital to our shareholders through our dividend program, further driving shareholder value."

2018 Outlook

Comparable restaurant sales at company restaurants for the first four weeks of our fourth quarter of fiscal 2018 increased approximately 4.0% compared to the prior year period.

Management updated the following expectation for 2018:

  • Total capital expenditures of approximately $160.0 million to $165.0 million.

Management reiterated the following expectations for 2018:

  • Positive comparable restaurant sales growth;
  • 27 or 28 company restaurant openings, including five Bubba’s 33 restaurants;
  • Commodity cost inflation of approximately 1.0%;
  • Mid-single digit growth in labor dollars per store week, excluding the impact of higher guest counts; and
  • An income tax rate of 14.0% to 15.0%.

2019 Outlook

Management provided the following initial expectations for 2019 which includes a 53rd week:

  • Positive comparable restaurant sales growth;
  • 25 to 30 company restaurant openings, including four Bubba’s 33 restaurants;
  • Commodity cost inflation of approximately 1.0% to 2.0%;
  • Mid-single digit growth in labor dollars per store week, excluding the impact of higher guest counts;
  • An income tax rate of 14.0% to 15.0%; and
  • Total capital expenditures of approximately $165.0 million to $175.0 million.

Non-GAAP Measures

We prepare our consolidated financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”). Within our press release, we make reference to restaurant margin (in dollars and as a percentage of sales). Restaurant margin represents restaurant and other sales less restaurant-level operating costs, including cost of sales, labor, rent and other operating costs. Restaurant margin should not be considered in isolation, or as an alternative, to income from operations. This non-GAAP measure is not indicative of overall company performance and profitability in that this measure does not accrue directly to the benefit of shareholders due to the nature of the costs excluded. Restaurant margin is widely regarded as a useful metric by which to evaluate restaurant-level operating efficiency and performance. In calculating restaurant margin, we exclude certain non-restaurant-level costs that support operations, including pre-opening and general and administrative expenses, but do not have a direct impact on restaurant-level operational efficiency and performance. We also exclude depreciation and amortization expense, substantially all of which relates to restaurant-level assets, as it represents a non-cash charge for the investment in our restaurants. We also exclude impairment and closure expense as we believe this provides a clearer perspective of ongoing operating performance and a more useful comparison to prior period results. Restaurant margin as presented may not be comparable to other similarly titled measures of other companies in our industry. A reconciliation of income from operations to restaurant margin is included in the accompanying financial tables.

Conference Call

Texas Roadhouse is hosting a conference call today, October 29, 2018 at 5:00 p.m. Eastern Time to discuss these results. The dial-in number is (877) 699-0953 or (647) 689-5456 for international calls. A replay of the call will be available for one week following the conference call. To access the replay, please dial (800) 585-8367 or (416) 621-4642 for international calls, and use 5569057 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 575 restaurants system-wide in 49 states and nine 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 Texas Roadhouse. 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:

Tonya Robinson
Investor Relations
(502) 515-7269

Travis Doster
Media Relations
(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 25, 2018     September 26, 2017   September 25, 2018     September 26, 2017
                       
Revenue:                  
  Restaurant and other sales $ 589,704       $ 536,341     $ 1,836,179       $ 1,661,821  
  Franchise royalties and fees   4,891         4,166       15,358         12,634  
                       
Total revenue   594,595         540,507       1,851,537         1,674,455  
                       
Costs and expenses:                  
  Restaurant operating costs (excluding depreciation and amortization shown separately below):                  
                       
    Cost of sales   191,990         176,498       598,824         545,862  
    Labor   197,621         169,355       593,298         514,287  
    Rent   12,330         11,257       36,300         33,238  
    Other operating   91,946         83,679       279,182         254,176  
  Pre-opening   4,378         4,548       13,529         14,302  
  Depreciation and amortization   25,843         23,534       75,492         69,236  
  Impairment and closure   20         2       128         13  
  General and administrative   35,023         26,123       100,202         94,594  
                       
Total costs and expenses   559,151         494,996       1,696,955         1,525,708  
                       
Income from operations   35,444         45,511       154,582         148,747  
                       
Interest expense, net   168         500       810         1,211  
Equity income from investments in                  
  unconsolidated affiliates   (381 )       (359 )     (1,150 )       (1,149 )
                       
Income before taxes   35,657         45,370       154,922         148,685  
Provision for income taxes   5,398         13,046       22,321         41,159  
                       
Net income including noncontrolling interests   30,259         32,324       132,601         107,526  
Less: Net income attributable to noncontrolling interests   1,134         1,310       4,708         4,618  
Net income attributable to Texas Roadhouse, Inc. and subsidiaries $ 29,125       $ 31,014     $ 127,893       $ 102,908  
                       
Net income per common share attributable to Texas Roadhouse, Inc.                  
and subsidiaries:                  
  Basic $ 0.41       $ 0.44     $ 1.79       $ 1.45  
  Diluted $ 0.40       $ 0.43     $ 1.78       $ 1.44  
                       
Weighted average shares outstanding:                  
  Basic   71,508         71,067       71,429         70,939  
  Diluted   72,006         71,532       71,906         71,449  
                       
Cash dividends declared per share $ 0.25       $ 0.21     $ 0.75       $ 0.63  
                       

 

   
Texas Roadhouse, Inc. and Subsidiaries  
Condensed Consolidated Balance Sheets  
(in thousands)  
(unaudited)  
                 
                 
                 
        September 25, 2018     December 26, 2017  
                 
 
  Cash and cash equivalents   $ 151,190     $ 150,918  
  Other current assets, net     64,965       106,163  
  Property and equipment, net     940,955       912,147  
  Goodwill     121,040       121,040  
  Intangible assets, net     2,144       2,700  
  Other assets     44,532       37,655  
           
  Total assets   $ 1,324,826     $ 1,330,623  
           
           
  Current maturities of long-term debt and obligation under capital lease   10       9  
  Other current liabilities     272,467       329,989  
  Long-term debt and obligation under capital lease, excluding current maturities   1,973       51,981  
  Other liabilities, net     109,078       97,253  
  Texas Roadhouse, Inc. and subsidiaries stockholders' equity     926,255       839,079  
  Noncontrolling interests     15,043       12,312  
           
  Total liabilities and equity   $ 1,324,826     $ 1,330,623  
           

 

 
Texas Roadhouse, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
               
               
        39 Weeks Ended
        September 25, 2018     September 26, 2017
               
 
Cash flows from operating activities:  
Net income including noncontrolling interests   $ 132,601       $ 107,526  
Adjustments to reconcile net income to net cash provided by operating activities  
  Depreciation and amortization     75,492         69,236  
  Share-based compensation expense     24,820         18,826  
  Other noncash adjustments, net     6,872         (2,702 )
Change in working capital     (14,206 )       (4,816 )
  Net cash provided by operating activities     225,579         188,070  
         
Cash flows from investing activities:          
Capital expenditures - property and equipment     (110,906 )       (117,037 )
Acquisition of franchise restaurants, net of cash acquired     -         (16,528 )
  Net cash used in investing activities     (110,906 )       (133,565 )
         
Cash flows from financing activities:          
Dividends paid     (50,666 )       (43,223 )
Other financing activities, net     (63,735 )       (9,790 )
  Net cash used in financing activities     (114,401 )       (53,013 )
         
  Net increase in cash and cash equivalents     272         1,492  
Cash and cash equivalents - beginning of period     150,918         112,944  
Cash and cash equivalents - end of period   $ 151,190       $ 114,436  
         

 

 
Texas Roadhouse, Inc. and Subsidiaries
Reconciliation of Income from Operations to Restaurant Margin
(in thousands)
(unaudited)
                 
    13 Weeks Ended   39 Weeks Ended
    September 25, 2018   September 26, 2017   September 25, 2018   September 26, 2017
                 
Income from operations   $ 35,444     $ 45,511     $ 154,582     $ 148,747  
                 
Less:                
Franchise royalties and fees     4,891       4,166       15,358       12,634  
                 
Add:                
Pre-opening     4,378       4,548       13,529       14,302  
Depreciation and amortization     25,843       23,534       75,492       69,236  
Impairment and closure     20       2       128       13  
General and administrative     35,023       26,123       100,202       94,594  
                 
Restaurant margin   $ 95,817     $ 95,552     $ 328,575     $ 314,258  
                 
Restaurant margin (as a percentage of restaurant and other sales)     16.2 %     17.8 %     17.9 %     18.9 %
                 

 

   
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
  2018   2017   vs LY   2018   2017   vs LY
                 
Restaurant openings                          
  Company - Texas Roadhouse 3   5   (2)   13   16   (3)
  Company - Bubba's 33 0   2   (2)   4   4   0
  Company - Other 0   0   0   0   0   0
  Franchise - Texas Roadhouse - U.S. 0   0   0   0   1   (1)
  Franchise - Texas Roadhouse - International 1   1   0   4   2   2
  Total 4   8   (4)   21   23   (2)
                           
Restaurant acquisitions/dispositions                          
  Company - Texas Roadhouse 0   0   0   0   4   (4)
  Franchise - Texas Roadhouse 0   0   0   0   (4)   4
  Total 0   0   0   0   0   0
                           
Restaurants open at the end of the quarter                          
  Company - Texas Roadhouse 453   433   20              
  Company - Bubba's 33 24   20   4              
  Company - Other 2   2   0              
  Franchise - Texas Roadhouse - U.S. 70   70   0              
  Franchise - Texas Roadhouse - International 21   15   6              
  Total 570   540   30              
                     
Company restaurants                  
  Restaurant and other sales $ 589,704   $ 536,341   9.9   %   $ 1,836,179   $ 1,661,821     10.5   %
  Store weeks   6,196     5,868   5.6   %     18,386     17,324     6.1   %
  Comparable restaurant sales growth (1)   5.5 %   4.5 %     5.4 %   4.0   %  
  Texas Roadhouse restaurants only:                        
  Comparable restaurant sales growth (1)   5.5 %   4.6 %     5.3 %   4.0   %  
  Average unit volume (2) $ 1,255   $ 1,197   4.8   %   $ 3,954   $ 3,776     4.7   %
  Weekly sales by group:                          
  Comparable restaurants (417 units) $ 97,137                        
  Average unit volume restaurants (23 units) (3) $ 85,217                        
  Restaurants less than 6 months old (13 units) $ 96,347                        
                     
Restaurant operating costs (as a % of restaurant and other sales)                  
Cost of sales   32.6 %   32.9 % (35 ) bps   32.6 %   32.8   % (23 ) bps
Labor   33.5 %   31.6 % 194   bps   32.3 %   30.9   % 136   bps
Rent   2.1 %   2.1 % (1 ) bps   2.0 %   2.0   % (2 ) bps
Other operating   15.6 %   15.6 % (1 ) bps   15.2 %   15.3   % (9 ) bps
Total   83.8 %   82.2 % 157   bps   82.1 %   81.1   % 102   bps
                           
  Restaurant margin   16.2 %   17.8 % (157 ) bps   17.9 %   18.9   % (102 ) bps
                               
  Restaurant margin ($ in thousands) $ 95,817   $ 95,552   0.3   %   $ 328,575   $ 314,258     4.6   %
  Restaurant margin $/Store week $ 15,464   $ 16,284   (5.0 ) %   $ 17,871   $ 18,140     (1.5 ) %
                 
Franchise restaurants                  
  Franchise royalties and fees $ 4,891   $ 4,166   17.4   %   $ 15,358   $ 12,634     21.6   %
  Store weeks   1,175     1,092   7.6   %     3,478     3,264     6.6   %
  Comparable restaurant sales growth (1)   1.8 %   2.8 %     2.0 %   2.9   %  
  U.S. franchise restaurants only:                        
    Comparable restaurant sales growth (1)   4.2 %   4.7 %     4.1 %   4.0   %  
  Average unit volume (2) $ 1,281   $ 1,227   4.4   %   $ 4,053   $ 3,862     5.0   %
                       
Pre-opening expense $ 4,378   $ 4,548   (3.7 ) %   $ 13,529   $ 14,302     (5.4 ) %
                           
Depreciation and amortization  $ 25,843   $ 23,534   9.8   %   $ 75,492   $ 69,236     9.0   %
  As a % of revenue   4.3 %   4.4 % (1 ) bps   4.1 %   4.1   % (6 ) bps
                           
General and administrative expenses $ 35,023   $ 26,123   34.1   %   $ 100,202   $ 94,594     5.9   %
  As a % of revenue   5.9 %   4.8 % 106   bps   5.4 %   5.6   % (24 ) 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.
 
Amounts may not foot due to rounding.
       

SOURCE Texas Roadhouse, Inc

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