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Texas Roadhouse, Inc. Announces Third Quarter 2010 Results

2010-11-02

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Texas Roadhouse Comparable restaurant sales increased 2.1% at company restaurants and 2.4% at franchise restaurants

Texas Roadhouse, Inc. (NasdaqGS: TXRH), today announced financial results for the 13 and 39 week periods ended September 28, 2010.

“Looking ahead, we are excited to increase our development plans for 2011. Along with continued execution at the store level, we believe this reacceleration of our expansion efforts will position Texas Roadhouse to continue driving long-term value for shareholders.”


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

Total revenue	245,613	226,467	8	760,399	714,963	6
Income from operations	21,448	17,281	24	74,883	61,058	23
Net income	13,952	10,695	30	48,229	38,770	24
Diluted EPS	$0.19	$0.15	28	$0.66	$0.54	22

Results for the quarter included:

Comparable restaurant sales increased 4.3% at company restaurants and 4.4% at franchise restaurants;
Three company restaurants opened;
Restaurant margins increased 79 basis points to 17.9%;
Diluted earnings per share increased 28% to $0.19 from $0.15 in the prior year period.

Results year-to-date included:

Comparable restaurant sales increased 2.1% at company restaurants and 2.4% at franchise restaurants;
Seven company restaurants and one franchise restaurant opened, while one company restaurant closed;
Restaurant margins increased 114 basis points to 19.0%;
Diluted earnings per share increased 22% to $0.66 from $0.54 in the prior year-to-date period.

G.J. Hart, President and Chief Executive Officer of Texas Roadhouse, commented, “We are very encouraged by our third quarter results, which have helped position Texas Roadhouse to end 2010 at the high end of our previously expected diluted EPS range. Comparable restaurant sales growth was over 4% for the quarter, driven by traffic gains, which in turn led to continued margin expansion and net income growth. Importantly, our strong performance was achieved without compromising our commitment to legendary food and service, as our adherence to these core values continues to benefit our business in a tough economy.” Hart continued, “Looking ahead, we are excited to increase our development plans for 2011. Along with continued execution at the store level, we believe this reacceleration of our expansion efforts will position Texas Roadhouse to continue driving long-term value for shareholders.”

Outlook for 2010

The Company reported that comparable restaurant sales for the first four weeks of the fourth quarter of fiscal 2010 increased 3.5% compared to the prior year period.

The Company now estimates 2010 diluted earnings per share growth will be approximately 20% compared to 2009, which is at the high-end of the previous 16% to 20% range. This revised estimate is based, in part, on the following assumptions:

Comparable restaurant sales growth of approximately 2.0%;
14 company restaurant openings;
Food cost deflation of approximately 2.5%; and
Total capital expenditures of approximately $50 million.

Outlook for 2011

While the Company is still finalizing its plans relating to 2011, the Company announced that if comparable restaurant sales growth is 2% to 3% for the year, 2011 diluted earnings per share growth would likely be 5% to 15% compared to 2010. This is based, in part, on the following assumptions:

Approximately 20 company restaurant openings;
Food cost inflation of 2.0% to 3.0%; and
Total capital expenditures of approximately $60 to $65 million.


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

			13 Weeks Ended					39 Weeks Ended
			September 28, 2010		September 29, 2009			September 28, 2010		September 29, 2009

Revenue:
	Restaurant sales		$	243,405	$	224,417		$	753,582	$	708,808
	Franchise royalties and fees			2,208		2,050			6,817		6,155

Total revenue				245,613		226,467			760,399		714,963

Costs and expenses:
	Restaurant operating costs:
		Cost of sales		79,101		74,489			244,560		237,844
		Labor		71,835		67,630			221,241		210,203
		Rent		5,329		5,029			15,886		14,870
		Other operating		43,476		38,778			128,841		119,450
	Pre-opening			2,150		1,194			4,562		4,411
	Depreciation and amortization			10,262		10,395			30,861		31,482
	Impairment and closure			44		(201	)		302		(273	)
	General and administrative			11,968		11,872			39,263		35,918

Total costs and expenses				224,165		209,186			685,516		653,905

Income from operations				21,448		17,281			74,883		61,058

Interest expense, net				644		784			2,078		2,517
Equity income from investments in unconsolidated affiliates				155		36			355		185

Income before taxes				20,959		16,533			73,160		58,726
Provision for income taxes				6,478		5,431			23,133		18,582

Net income including noncontrolling interests			$	14,481	$	11,102		$	50,027	$	40,144
Less: Net income attributable to noncontrolling interests				529		407			1,798		1,374
Net income attributable to Texas Roadhouse, Inc. and subsidiaries			$	13,952	$	10,695		$	48,229	$	38,770

Net income per common share attributable to Texas Roadhouse, Inc.
and subsidiaries:
	Basic		$	0.19	$	0.15		$	0.68	$	0.56
	Diluted		$	0.19	$	0.15		$	0.66	$	0.54

Weighted average shares outstanding:
	Basic			71,660		70,204			71,273		69,847
	Diluted			73,002		71,550			72,727		71,151

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


		(unaudited)
		September 28, 2010		December 29, 2009


Cash and cash equivalents		$	55,425	$	46,858
Other current assets			27,167		27,458
Property and equipment, net			456,473		456,281
Goodwill			113,465		113,465
Intangible asset, net			10,387		11,194
Other assets			7,630		6,817

Total assets		$	670,547	$	662,073


Current maturities of long-term debt
	and obligations under capital leases		267		247
Other current liabilities			88,399		107,956
Long-term debt and obligations under
	capital leases, excluding current maturities		61,977		101,179
Other liabilities			39,079		29,741
Texas Roadhouse, Inc. and subsidiaries stockholders' equity			478,123		420,372
Noncontrolling interests			2,702		2,578

Total liabilities and equity		$	670,547	$	662,073

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


			39 Weeks Ended
			September 28, 2010			September 29, 2009


Cash flows from operating activities:
Net income including noncontrolling interests			$	50,027		$	40,144
Adjustments to reconcile net income to net cash provided by operating activities
	Depreciation and amortization			30,861			31,482
	Share-based compensation expense			5,705			5,642
	Other noncash adjustments			(752	)		2,830
Change in working capital				(11,539	)		(11,802	)
		Net cash provided by operating activities		74,302			68,296

Cash flows from investing activities:
Capital expenditures - property and equipment				(31,598	)		(34,814	)
Acquisition of franchise restaurants, net of cash acquired				-			25
Proceeds from sale of property and equipment, including insurance proceeds				175			2,329
		Net cash used in investing activities		(31,423	)		(32,460	)

Cash flows from financing activities:
Repayments of revolving credit facility, net				(39,000	)		(6,000	)
Other financing activities				4,688			739
		Net cash used in financing activities		(34,312	)		(5,261	)

		Net increase in cash and cash equivalents		8,567			30,575
Cash and cash equivalents - beginning of year				46,858			5,258
Cash and cash equivalents - end of year			$	55,425		$	35,833

Texas Roadhouse, Inc. and Subsidiaries
Supplemental Financial and Operating Information
($ amounts in thousands)
(unaudited)


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

Restaurant openings
	Company		3			1			2				7				12			(5	)
	Franchise		0			2			(2	)			1				3			(2	)
	Total		3			3			0				8				15			(7	)

Restaurant closures
	Company		0			(2	)		2				(1	)			(2	)		1
	Franchise		0			0			0				0				(1	)		1
	Total		0			(2	)		2				(1	)			(3	)		2

Restaurants open at the end of the quarter
	Company		267			255			12
	Franchise		71			71			0
	Total		338			326			12

Company-owned restaurants
	Restaurant sales	$	243,405		$	224,417			8.5		%	$	753,582			$	708,808			6.3		%
	Store weeks		3,450			3,331			3.6		%		10,294				9,893			4.1		%
	Comparable restaurant sales growth (1)		4.3	%		(4.6	)	%					2.1		%		(3.0	)	%
	Average unit volume (2)	$	914		$	874			4.6		%	$	2,836			$	2,792			1.6		%

	Restaurant operating costs (as a % of restaurant sales)
	Cost of sales		32.5	%		33.2		%	(69	)	bps		32.5		%		33.6		%	(110	)	bps
	Labor		29.5	%		30.1		%	(62	)	bps		29.4		%		29.7		%	(30	)	bps
	Rent		2.2	%		2.2		%	(5	)	bps		2.1		%		2.1		%	1		bps
	Other operating		17.9	%		17.3		%	58		bps		17.1		%		16.9		%	24		bps
	Total		82.1	%		82.8		%	(79	)	bps		81.0		%		82.2		%	(114	)	bps

	Restaurant margins (3)		17.9	%		17.2		%	79		bps		19.0		%		17.8		%	114		bps

Franchise-owned restaurants
	Franchise royalties and fees	$	2,208		$	2,050			7.7		%	$	6,817			$	6,155			10.8		%
	Store weeks		912			900			1.3		%		2,707				2,694			0.5		%
	Comparable restaurant sales growth (1)		4.4	%		(3.6	)	%					2.4		%		(3.0	)	%
	Average unit volume (2)	$	905		$	856			5.7		%	$	2,829			$	2,721			4.0		%

Pre-opening expense		$	2,150		$	1,194			80.1		%	$	4,562			$	4,411			3.4		%

Depreciation and amortization		$	10,262		$	10,395			(1.3	)	%	$	30,861			$	31,482			(2.0	)	%
	As a % of revenue		4.2	%		4.6		%	(41	)	bps		4.1		%		4.4		%	(34	)	bps

Impairment and closure		$	44		$	(201	)		NM			$	302			$	(273	)		NM
	As a % of revenue		0.0	%		(0.1	)	%	11		bps		0.0		%		(0.0	)	%	8		bps

General and administrative expenses		$	11,968		$	11,872			0.8		%	$	39,263			$	35,918			9.3		%
	As a % of revenue		4.9	%		5.2		%	(37	)	bps		5.2		%		5.0		%	14		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 Q3 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.

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