Texas Roadhouse, Inc. Announces Fourth Quarter 2012 Results and Increases Quarterly Dividend to $0.12 Per Share

2013-02-21
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  • Texas Roadhouse Comparable restaurant sales increased 4.4% at company restaurants and 4.5% at franchise restaurants

    Texas Roadhouse, Inc. (NasdaqGS: TXRH), announced financial results for the 13 and 52 week periods ended December 25, 2012.

          Fourth Quarter       Year to Date
    ($000's) 2012     2011   % Change 2012     2011   % Change
     
    Total revenue 309,531 276,616 12 1,263,331 1,109,226 14
    Income from operations (1) 22,075 18,210 21 110,458 95,239 16
    Net income (1) 13,924 12,297 13 71,170 63,964 11
    Diluted EPS (1) $0.19 $0.17 12 $1.00 $0.88 13
     
    (1) 2012 YTD includes a charge related to a legal settlement discussed below.
     

    Results for the fourth quarter included:

    • Comparable restaurant sales increased 4.4% at company restaurants and 4.5% at franchise restaurants;
    • Seven company and two franchise restaurants were opened;
    • Restaurant margins, as a percentage of restaurant sales, increased 74 basis points to 17.6%;
    • Diluted earnings per share increased 12% to $0.19 from $0.17 in the prior year; and
    • The Company repurchased 1,786,855 shares of its common stock for a total purchase price of $29.4 million.

    Results year-to-date included:

    • Comparable restaurant sales increased 4.7% at company restaurants and 5.3% at franchise restaurants;
    • 25 company and two franchise restaurants were opened;
    • Restaurant margins, as a percentage of restaurant sales, increased 37 basis points to 18.4%;
    • As previously disclosed, the Company recorded a one-time, pre-tax charge of $5.0 million ($3.1 million after-tax) in the first quarter of 2012 for a legal settlement, which had a $0.04 impact on diluted earnings per share;
    • Before the previously disclosed first quarter charge, diluted earnings per share increased 17% to $1.04 from $0.88 in the prior year; and
    • In the fourth quarter, the Company repurchased 1,786,855 shares of its common stock for a total purchase price of $29.4 million.

    Kent Taylor, Chief Executive Officer of Texas Roadhouse, commented, “We were very pleased to have finished 2012 on a strong note, with double-digit revenue and earnings per share growth. Despite the consumer and inflationary challenges, we achieved our third consecutive year of positive same-store sales growth and another year of increased store level profitability. In addition, our strong balance sheet and healthy cash flows enabled us to return $54 million of excess capital to shareholders through share repurchases and quarterly dividend payments. While we anticipate further commodity inflation in 2013, we believe our brand is well-positioned for future growth and feel confident about increasing our new restaurant growth for the third consecutive year.”

    Franchise Acquisition

    Effective December 25, 2012, the Company acquired two franchise restaurants in Illinois for an aggregate purchase price of $4.3 million. The purchase price was paid in cash. The acquisition did not have a net revenue or accretive impact in 2012 as it occurred on the last day of the Company’s 2012 fiscal year.

    2013 Outlook

    The Company reported that comparable restaurant sales at company restaurants for the first 55 days of its fiscal 2013 increased approximately 2.2% compared to the prior year period. Additionally, the Company announced that it implemented a menu price increase of approximately 2.0% across its restaurants in December 2012.

    Management is providing the following expectations for 2013:

    • Positive comparable restaurant sales growth;
    • Approximately 28 company restaurant openings;
    • Food cost inflation of 6.0% to 7.0%;
    • An income tax rate of approximately 31.0%, which is lower than the prior year rate of 32.8% primarily as a result of the reinstatement of certain federal tax credits at the beginning of 2013; and
    • Total capital expenditures of $100.0 to $105.0 million.

    Cash Dividend Payment

    On February 14, 2013, the Company’s Board of Directors authorized the payment of a quarterly cash dividend of $0.12 per share of common stock. This payment, which will be distributed on March 29, 2013 to shareholders of record at the close of business on March 13, 2013, represents a 33% increase from the cash dividend of $0.09 per share of common stock declared during each quarter of 2012.

    About the Company

    Texas Roadhouse is a casual dining concept that first opened in 1993 and today operates over 390 restaurants system-wide in 47 states and two foreign countries. 

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

    (unaudited)

                     
     
    13 Weeks Ended 52 Weeks Ended

    December 25,

    2012

    December 27,

    2011

    December 25,

    2012

    December 27,

    2011

     
    Revenue:
    Restaurant sales $ 306,775 $ 274,192 $ 1,252,358 $ 1,099,475
    Franchise royalties and fees   2,756   2,424   10,973   9,751
     
    Total revenue   309,531   276,616   1,263,331   1,109,226
     
    Costs and expenses:

    Restaurant operating costs (excluding depreciation and

    amortization shown separately below):

     
    Cost of sales 104,170 92,634 423,615 367,385
    Labor 89,674 81,682 367,763 326,233
    Rent 6,677 5,997 25,797 23,150
    Other operating 52,351 47,742 204,318 184,073
    Pre-opening 3,576 4,121 12,399 11,534
    Depreciation and amortization 11,996 10,985 46,717 42,709
    Impairment and closure 1,561 1,142 1,624 1,201
    General and administrative   17,451   14,103   70,640   57,702
     
    Total costs and expenses   287,456   258,406   1,152,873   1,013,987
     
    Income from operations 22,075 18,210 110,458 95,239
     
    Interest expense, net 571 637 2,347 2,413

    Equity income from investments in unconsolidated affiliates

      125   95   428   366
     
    Income before taxes 21,629 17,668 108,539 93,192
    Provision for income taxes   6,923   4,831   34,738   26,765
     
    Net income including noncontrolling interests (1) $ 14,706 $ 12,837 $ 73,801 $ 66,427
    Less: Net income attributable to noncontrolling interests   782   540   2,631   2,463
    Net income attributable to Texas Roadhouse, Inc. and subsidiaries $ 13,924 $ 12,297 $ 71,170 $ 63,964
     
    Net income per common share attributable to Texas Roadhouse, Inc.
    and subsidiaries:
    Basic $ 0.20 $ 0.18 $ 1.02 $ 0.90
    Diluted $ 0.19 $ 0.17 $ 1.00 $ 0.88
     
    Weighted average shares outstanding:
    Basic   70,097   69,214   70,026   70,829
    Diluted   71,509   70,463   71,485   72,278
     
    Texas Roadhouse, Inc. and Subsidiaries
    Condensed Consolidated Balance Sheets
    (in thousands)

    (unaudited)

             

    December 25,

    2012

    December 27,

    2011

     
     
    Cash and cash equivalents $ 81,746 $ 78,777
    Other current assets 40,726 33,197
    Property and equipment, net 531,654 497,217
    Goodwill 113,435 110,946
    Intangible assets, net 9,264 9,042
    Other assets 14,429 11,491
       
    Total assets $ 791,254 $ 740,670
     
     
    Current maturities of long-term debt
    and obligations under capital leases 338 304
    Other current liabilities 158,324 136,068
    Long-term debt and obligations under
    capital leases, excluding current maturities 51,264 61,601
    Other liabilities 50,591 46,875
    Texas Roadhouse, Inc. and subsidiaries stockholders' equity 525,084 491,904
    Noncontrolling interests 5,653 3,918
       
    Total liabilities and equity $ 791,254 $ 740,670
     
    Texas Roadhouse, Inc. and Subsidiaries
    Condensed Consolidated Statements of Cash Flows
    (in thousands)
    (unaudited)
             
     
    52 Weeks Ended

    December 25,

    2012

    December 27,

    2011

     
     
    Cash flows from operating activities:
    Net income including noncontrolling interests $ 73,801 $ 66,427
    Adjustments to reconcile net income to net cash provided by operating activities
    Depreciation and amortization 46,717 42,709
    Share-based compensation expense 13,193 10,525
    Other noncash adjustments 2,116 3,728
    Change in working capital   10,113     15,125  
    Net cash provided by operating activities   145,940     138,514  
     
    Cash flows from investing activities:
    Capital expenditures - property and equipment (84,879 ) (81,758 )
    Acquisitions of franchise restaurants, net of cash acquired (4,297 ) -
    Proceeds from sale of property and equipment, including insurance proceeds   1,128     188  
    Net cash used in investing activities   (88,048 )   (81,570 )
     
    Cash flows from financing activities:
    (Repayments) of revolving credit facility, net (10,000 ) 10,000
    Repurchase shares of common stock (29,421 ) (59,147 )
    Dividends paid (24,486 ) (17,012 )
    Other financing activities   8,984     1,738  
    Net cash used in financing activities   (54,923 )   (64,421 )
     
    Net increase (decrease) in cash and cash equivalents 2,969 (7,477 )
    Cash and cash equivalents - beginning of year   78,777     86,254  
    Cash and cash equivalents - end of year $ 81,746   $ 78,777  
     
    Texas Roadhouse, Inc. and Subsidiaries
    Supplemental Financial and Operating Information
    ($ amounts in thousands, except weekly sales by group)
    (unaudited)
                               
     
    Fourth Quarter Change Year to Date Change
    2012 2011 vs LY 2012 2011 vs LY
     
    Restaurant openings
    Company - Texas Roadhouse 7 10 (3 ) 25 20 5
    Company - Aspen Creek 0 0 0 0 0 0
    Franchise - Texas Roadhouse 2 0 2 2 1 1
    Total 9 10 (1 ) 27 21 6
     
    Restaurant acquisitions
    Company 2 0 2 2 0 2
    Franchise (2 ) 0 (2 ) (2 ) 0 (2 )
    Total 0 0 0 0 0 0
     
    Restaurant closures
    Company - Texas Roadhouse 0 0 0 0 0 0
    Company - Aspen Creek (1 ) 0 (1 ) (1 ) 0 (1 )
    Franchise - Texas Roadhouse 0 0 0 0 0 0
    Total (1 ) 0 (1 ) (1 ) 0 (1 )
     
    Restaurants open at the end of the quarter
    Company - Texas Roadhouse 318 291 27
    Company - Aspen Creek 2 3 (1 )
    Franchise - Texas Roadhouse 72 72 0
    Total 392 366 26
     
    Company-owned restaurants
    Restaurant sales $ 306,775 $ 274,192 11.9 % $ 1,252,358 $ 1,099,475 13.9 %
    Store weeks 4,082 3,755 8.7 % 15,936 14,573 9.4 %
    Comparable restaurant sales growth (1) 4.4 % 5.6 % 4.7 % 4.7 %
    Texas Roadhouse restaurants only:
    Comparable restaurant sales growth (1) 4.3 % 5.6 % 4.7 % 4.8 %
    Average unit volume (2) $ 978 $ 945 3.5 % $ 4,085 $ 3,917 4.3 %
    Weekly sales by group:
    Comparable restaurants (273 units) $ 75,809
    Average unit volume restaurants (26 units) $ 68,944
    Restaurants less than 6 months old (17 units) $ 77,943
     
    Restaurant operating costs (as a % of restaurant sales) (3)
    Cost of sales 34.0 % 33.8 % 17 bps 33.8 % 33.4 % 41 bps
    Labor 29.2 % 29.8 % (56 ) bps 29.4 % 29.7 % (31 ) bps
    Rent 2.2 % 2.2 % (1 ) bps 2.1 % 2.1 % (5 ) bps
    Other operating 17.1 % 17.4 % (35 ) bps 16.3 % 16.7 % (43 ) bps
    Total 82.4 % 83.2 % (74 ) bps 81.6 % 81.9 % (37 ) bps
     
    Restaurant margins (4) 17.6 % 16.8 % 74 bps 18.4 % 18.1 % 37 bps
     
    Franchise-owned restaurants
    Franchise royalties and fees $ 2,756 $ 2,424 13.7 % $ 10,973 $ 9,751 12.5 %
    Store weeks 954 936 1.9 % 3,762 3,709 1.4 %
    Comparable restaurant sales growth (1) 4.5 % 5.7 % 5.3 % 4.3 %
    Average unit volume (2) $ 1,000 $ 927 7.9 % $ 4,042 $ 3,831 5.5 %
     
    Pre-opening expense $ 3,576 $ 4,121 (13.2 ) % $ 12,399 $ 11,534 7.5 %
     
    Depreciation and amortization $ 11,996 $ 10,985 9.2 % $ 46,717 $ 42,709 9.4 %
    As a % of revenue 3.9 % 4.0 % (10 ) bps 3.7 % 3.9 % (15 ) bps
     
    General and administrative expenses (5) $ 17,451 $ 14,103 23.7 % $ 70,640 $ 57,702 22.4 %
    As a % of revenue 5.6 % 5.1 % 54 bps 5.6 % 5.2 % 39 bps
     
    (1) Comparable restaurant sales growth includes sales from domestic restaurants open 18 months as of the beginning of the measurement period, excluding sales from restaurants closed during the period.
    (2) Average unit volume includes sales from domestic Texas Roadhouse restaurants open six months as of the beginning of the measurement period, excluding sales from restaurants closed during the period.
    (3) Depreciation and amortization expense, substantially all of which relates to restaurant-level assets, is excluded from restaurant operating costs and is shown separately as it represents a non-cash charge for the investment in our restaurants.
    (4) Restaurant margins represent 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 generally accepted accounting principles ("GAAP") and should not be considered in isolation, or as an alternative, to income from operations or other similarly titled measures of other companies.
    (5) Results for the 52 weeks ended December 25, 2012 include a $5.0 million pre-tax charge for the settlement of a legal matter.
     
    Amounts may not foot due to rounding.
     
    Texas Roadhouse, Inc. and Subsidiaries
    Reconciliation of GAAP and Non-GAAP Information
    (in thousands, except per share data)
    (unaudited)
       

    In addition to the results provided in accordance with U.S. Generally Accepted Accounting Principles ("GAAP") throughout this document, the Company has provided non-GAAP measurements which present operating results on a basis before the impact of a settlement of a legal matter. This item is described in detail throughout this document.

     

    The Company used earnings before the impact of the legal settlement as a key performance measure of results of operations for purposes of evaluating performance internally. This non-GAAP measurement is not intended to replace the presentation of our financial results in accordance with GAAP. Rather, the Company believes that the presentation of results before the legal settlement provides additional information to facilitate the comparison of past and present operations, excluding items that the Company does not believe are indicative of our ongoing operations in the 52 weeks ended December 25, 2012.

     

     
    For the 52 weeks Ended
    December 25, 2012 December 27, 2011
    Net income attributable to Texas Roadhouse, Inc. and subsidiaries, excluding settlement charge $ 74,232 $ 63,964
    Amount reserved for settlement of a legal matter, net of tax (1) $ (3,062 ) $ -  
    Net income attributable to Texas Roadhouse, Inc. and subsidiaries $ 71,170 $ 63,964
     
    Weighted average diluted shares outstanding 71,485 72,278
     
    Diluted earnings per share, excluding settlement charge $ 1.04 $ 0.88
    Impact of settlement charge on diluted earnings per share $ (0.04 ) $ -  
    Diluted earnings per share $ 1.00   $ 0.88  
     


    Logos, product and company names mentioned are the property of their respective owners.

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