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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