Exhibit 99.1

 

Texas Roadhouse, Inc. Announces Third Quarter 2018 Results

 

LOUISVILLE, KY. (October 29, 2018) — 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:

 

Investor Relations

Tonya Robinson

(502) 515-7269

 

Media

Travis Doster

(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.