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Texas Roadhouse, Inc. Announces Second Quarter 2010 Results

2010-08-03

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Texas Roadhouse Comparable restaurant sales increased 1.4% at company restaurants and 2.0% at franchise restaurants;

Texas Roadhouse, Inc. (NasdaqGS: TXRH), announced financial results for the 13 and 26 week periods ended June 29, 2010.

	Second Quarter			Year to Date
($000's)	2010	2009	% Change	2010	2009	% Change

Total revenue	255,162	242,423	5	514,786	488,496	5
Income from operations	23,329	21,494	9	53,435	43,777	22
Net income	15,036	13,741	9	34,277	28,075	22
Diluted EPS	$0.21	$0.19	7	$0.47	$0.40	19

Results for the quarter included:

Comparable restaurant sales increased 1.4% at company restaurants and 2.0% at franchise restaurants; One company restaurant and one franchise restaurant opened while one company restaurant closed; Restaurant margins increased 45 basis points to 18.8%; Diluted earnings per share increased 7% to $0.21 from $0.19 in the prior year period.

Results year-to-date included:

Comparable restaurant sales increased 0.9% at company restaurants and 1.4% at franchise restaurants; Four company restaurants and one franchise restaurant opened while one company restaurant closed; Restaurant margins increased 132 basis points to 19.5%; Diluted earnings per share increased 19% to $0.47 from $0.40 in the prior period.

G.J. Hart, President and Chief Executive Officer of Texas Roadhouse, commented, “We are pleased to report another quarter of diluted earnings per share growth led by both positive comparable restaurant sales and continued restaurant-level margin expansion. Positive guest counts drove the increase in comparable restaurant sales, while lower commodity costs continued to pave the way for margin expansion. In addition, sales at our newer restaurants continue to perform at or above our expectations and we are experiencing lower new unit investment costs. Our goal is to continue driving positive traffic growth through our continued commitment to legendary food and service.”

Outlook for 2010

The Company reported that comparable restaurant sales for the first four weeks of the third quarter of fiscal 2010 increased 3.0% compared to the same period a year ago.

The Company estimates 2010 diluted earnings per share growth will be approximately 16% to 20% compared to 2009. This estimate is based, in part, on the following assumptions:

Comparable restaurant sales growth of approximately 1.0%; 14 to 15 company restaurant openings; Food cost deflation of approximately 2.5% to 3.0%; and Total capital expenditures of approximately $50 million.

Texas Roadhouse, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(in thousands, except per share data)
(unaudited)

	13 Weeks Ended				26 Weeks Ended
	June 29, 2010		June 30, 2009		June 29, 2010		June 30, 2009

Revenue:
Restaurant sales	$	252,835	$	240,301	$	510,177	$	484,391
Franchise royalties and fees		2,327		2,122		4,609		4,105

Total revenue		255,162		242,423		514,786		488,496

Costs and expenses:
Restaurant operating costs:
Cost of sales		82,660		80,314		165,459		163,355
Labor		74,497		71,074		149,406		142,573
Rent		5,287		4,929		10,557		9,841
Other operating		42,767		39,812		85,365		80,672
Pre-opening		1,307		933		2,412		3,217
Depreciation and amortization		10,262		10,616		20,599		21,087
Impairment and closure		100		14		258		(72	)
General and administrative		14,953		13,237		27,295		24,046

Total costs and expenses		231,833		220,929		461,351		444,719

Income from operations		23,329		21,494		53,435		43,777

Interest expense, net		704		876		1,434		1,733
Equity income from investments in unconsolidated affiliates		92		64		200		149

Income before taxes		22,717		20,682		52,201		42,193
Provision for income taxes		7,049		6,436		16,655		13,151

Net income including noncontrolling interests	$	15,668	$	14,246	$	35,546	$	29,042
Less: Net income attributable to noncontrolling interests		632		505		1,269		967
Net income attributable to Texas Roadhouse, Inc. and subsidiaries	$	15,036	$	13,741	$	34,277	$	28,075

Net income per common share attributable to Texas Roadhouse, Inc. and subsidiaries:
Basic	$	0.21	$	0.20	$	0.48	$	0.40
Diluted	$	0.21	$	0.19	$	0.47	$	0.40

Weighted average shares outstanding:
Basic		71,471		69,909		71,076		69,666
Diluted		72,961		71,361		72,587		70,948


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

	June 29, 2010		December 29, 2009


Cash and cash equivalents	$	60,235	$	46,858
Other current assets		27,763		27,458
Property and equipment, net		453,365		456,281
Goodwill		113,465		113,465
Intangible asset, net		10,656		11,194
Other assets		7,103		6,817

Total assets	$	672,587	$	662,073


Current maturities of long-term debt and obligations under capital leases		260		247
Other current liabilities		91,416		107,956
Long-term debt and obligations under capital leases, excluding current maturities		79,046		101,179
Other liabilities		36,342		29,741
Texas Roadhouse, Inc. and subsidiaries stockholders' equity		462,835		420,372
Noncontrolling interests		2,688		2,578

Total liabilities and equity	$	672,587	$	662,073


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

	26 Weeks Ended
	June 29, 2010			June 30, 2009


Cash flows from operating activities:
Net income including noncontrolling interests	$	35,546		$	29,042
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization		20,599			21,087
Share-based compensation expense		3,736			3,814
Other noncash adjustments		300			1,497
Change in working capital		(11,853	)		(8,914	)
Net cash provided by operating activities		48,328			46,526

Cash flows from investing activities:
Capital expenditures - property and equipment		(17,967	)		(22,526	)
Acquisition of franchise restaurants, net of cash acquired		-			50
Proceeds from sale of property and equipment, including insurance proceeds		51			120
Net cash used in investing activities		(17,916	)		(22,356	)

Cash flows from financing activities:
Repayments of revolving credit facility, net		(22,000	)		(6,000	)
Other financing activities		4,965			1,551
Net cash used in financing activities		(17,035	)		(4,449	)

Net increase in cash and cash equivalents		13,377			19,721
Cash and cash equivalents - beginning of year		46,858			5,258
Cash and cash equivalents - end of year	$	60,235		$	24,979


Supplemental Financial and Operating Information
($ amounts in thousands)
(unaudited)

	Second Quarter								Change			Year to Date								Change
	2010				2009				vs LY			2010				2009				vs LY

Restaurant openings
Company		1				2			(1	)			4				11			(7	)
Franchise		1				1			0				1				1			0
Total		2				3			(1	)			5				12			(7	)

Restaurant closures
Company		(1	)			0			(1	)			(1	)			0			(1	)
Franchise		0				(1	)		1				0				(1	)		1
Total		(1	)			(1	)		0				(1	)			(1	)		0

Restaurants open at the end of the quarter
Company		264				256			8
Franchise		71				69			2
Total		335				325			10

Company-owned restaurants
Restaurant sales	$	252,835			$	240,301			5.2		%	$	510,177			$	484,391			5.3		%
Store weeks		3,432				3,313			3.6		%		6,844				6,562			4.3		%
Comparable restaurant sales growth (1)		1.4		%		(3.7	)	%					0.9		%		(2.4	)	%
Average unit volume (2)	$	952			$	939			1.4		%	$	1,925			$	1,914			0.6		%

Restaurant operating costs (as a % of restaurant sales)
Cost of sales		32.7		%		33.4		%	(73	)	bps		32.4		%		33.7		%	(129	)	bps
Labor		29.5		%		29.6		%	(11	)	bps		29.3		%		29.4		%	(15	)	bps
Rent		2.1		%		2.1		%	4		bps		2.1		%		2.0		%	4		bps
Other operating		16.9		%		16.6		%	35		bps		16.7		%		16.7		%	8		bps
Total		81.2		%		81.6		%	(45	)	bps		80.5		%		81.8		%	(132	)	bps

Restaurant margins (3)		18.8		%		18.4		%	45		bps		19.5		%		18.2		%	132		bps

Franchise-owned restaurants
Franchise royalties and fees	$	2,327			$	2,122			9.7		%	$	4,609			$	4,105			12.3		%
Store weeks		911				897			1.6		%		1,821				1,794			1.5		%
Comparable restaurant sales growth (1)		2.0		%		(3.5	)	%					1.4		%		(2.7	)	%
Average unit volume (2)	$	951			$	927			2.6		%	$	1,900			$	1,873			1.4		%

Pre-opening expense	$	1,307			$	933			40.1		%	$	2,412			$	3,217			(25.0	)	%

Depreciation and amortization	$	10,262			$	10,616			(3.3	)	%	$	20,599			$	21,087			(2.3	)	%
As a % of revenue		4.0		%		4.4		%	(36	)	bps		4.0		%		4.3		%	(32	)	bps

Impairment and closure	$	100			$	14			NM			$	258			$	(72	)		NM
As a % of revenue		0.0		%		0.0		%	3		bps		0.1		%		(0.0	)	%	6		bps

General and administrative expenses	$	14,953			$	13,237			13.0		%	$	27,295			$	24,046			13.5		%
As a % of revenue		5.9		%		5.5		%	40		bps		5.3		%		4.9		%	38		bps

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

(2)		Average unit volume includes sales from restaurants open six months as of the beginning of the measurement period. For comparative purposes, average unit volumes for Q2 2009 and 2009 YTD were adjusted to reflect restaurant sales of any acquired franchise restaurants as part of Company-owned restaurants average unit volume and were excluded from franchise-owned restaurants average unit volume.

(3)		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.