Texas Roadhouse, Inc. Announces Fourth Quarter 2013 Results and Increases Quarterly Dividend by 25% to $0.15 Per Share

 

 

Comparable restaurant sales increased 2.1% at company restaurants and increased 4.5% at franchise restaurants

Texas Roadhouse

Texas Roadhouse, Inc. (NasdaqGS: TXRH), yesterday announced financial results for the 14 and 53 week periods ended December 31, 2013.

               
Fourth Quarter Year to Date
($000's)

2013

2012

% Change

2013

2012

% Change

 
Total revenue 376,020 309,531 21 1,422,585 1,263,331 13
Income from operations (a) 26,054 22,075 18 119,715 110,458 8
Net income (a) 17,119 13,924 23 80,423 71,170 13
Diluted EPS (a) $0.24 $0.19 22 $1.13 $1.00 13
 
(a) 2012 YTD includes a charge related to a legal settlement discussed below.
 

NOTE: Fourth quarter and full year 2013 results include 14 and 53 weeks, respectively, compared to 13 and 52 weeks in the fourth quarter and full year of 2012.

Results for the fourth quarter included:

  • Diluted earnings per share increased to $0.24 from $0.19 in the prior year period. Diluted earnings per share were positively impacted by an estimated $0.03 to $0.04 as a result of the 53rd week;
  • Comparable restaurant sales increased 2.1% at company restaurants and increased 4.5% at franchise restaurants;
  • 12 company restaurants and one franchise restaurant were opened;
  • Restaurant margin, as a percentage of restaurant sales, decreased 64 basis points to 16.9% primarily due to approximately 7% food cost inflation;
  • The Company recorded a pre-tax gain of $1.8 million related to the sale of its Aspen Creek concept;
  • The Company incurred expenses of $1.4 million, which includes $0.7 million of general and administrative expense related to employment separation costs and $0.7 million of depreciation and amortization expense related to leasehold asset life adjustments; and
  • The Company repurchased 461,600 shares of common stock for a total purchase price of $12.8 million.

Results for the full year included:

  • Diluted earnings per share increased 13.2% to $1.13 from $1.00 in the prior year. Year-to-date 2013 results were positively impacted by approximately $0.04 per diluted share as a result of the 53rd week. Year-to-date 2012 results were negatively impacted by $0.04 per diluted share due to a pre-tax charge of $5.0 million ($3.1 million after-tax);
  • Comparable restaurant sales increased 3.4% at company restaurants and increased 4.3% at franchise restaurants; and
  • 26 company and four franchise restaurants were opened.

Kent Taylor, Chief Executive Officer of Texas Roadhouse, Inc., commented, “The continued focus by our operators on legendary food and legendary service resulted in our fourth consecutive year of positive comparable restaurant sales growth and a strong finish to 2013. As we head into 2014, we look forward to low single-digit commodity cost inflation and another year of 25 to 30 company restaurant openings. In addition, we expect to generate a significant amount of free cash flow, which we will continue to allocate to new store development, along with returning excess capital to our shareholders through quarterly dividend payments and share repurchases.”

Sale of Aspen Creek Restaurants and Related Franchise Acquisition

Effective December 31, 2013, the Company sold its Aspen Creek concept and two restaurants in a transaction valued at $6.0 million. In exchange, the Company received two Texas Roadhouse franchise restaurants in Ohio and $1.5 million in cash. The Company recorded a $1.8 million gain in Q4 2013 in conjunction with the sale. The acquisition of the two franchise restaurants did not have a net revenue or an accretive impact in 2013 as it occurred on the last day of the Company's 2013 fiscal year.

2014 Outlook

The Company reported that comparable restaurant sales at company restaurants for the first seven weeks of fiscal 2014 increased approximately 1.0% compared to the prior year period.

Management reiterated the following expectations for full year 2014:

  • Positive comparable restaurant sales growth;
  • 25 to 30 company restaurant openings;
  • Low single digit food cost inflation;
  • An income tax rate of 30.0% to 31.0%, which is higher than the 2013 income tax rate primarily as a result of the expiration of certain federal tax credits at the end of 2013; and
  • Total capital expenditures of $100.0 to $110.0 million.

Cash Dividend Payment

On February 20, 2014, the Company’s Board of Directors authorized the payment of a quarterly cash dividend of $0.15 per share of common stock. This payment, which will be distributed on April 4, 2014 to shareholders of record at the close of business on March 19, 2014, represents a 25% increase from the cash dividend of $0.12 per share of common stock declared during each quarter of 2013.

About the Company

Texas Roadhouse is a casual dining concept that first opened in 1993 and today operates over 420 restaurants system-wide in 48 states and three foreign countries. 

 
Texas Roadhouse, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(in thousands, except per share data)
(unaudited)
                   
 
14 and 13 Weeks Ended 53 and 52 Weeks Ended

December 31,

2013

December 25,

2012

December 31,

2013

December 25,

2012

 
Revenue:
Restaurant sales $ 372,879 $ 306,775 $ 1,410,118 $ 1,252,358
Franchise royalties and fees   3,141     2,756   12,467     10,973
 
Total revenue   376,020     309,531   1,422,585     1,263,331
 
Costs and expenses:
Restaurant operating costs (excluding depreciation and amortization shown separately below):
 
Cost of sales 130,972 104,170 492,306 423,615
Labor 109,007 89,674 411,394 367,763
Rent 7,588 6,677 28,978 25,797
Other operating 62,166 52,351 224,882 204,318
Pre-opening 6,081 3,576 17,891 12,399
Depreciation and amortization 14,698 11,996 51,562 46,717
Impairment and closure 212 1,561 399 1,624
Gain on sale of other concept (1,800 ) - (1,800 ) -
General and administrative (1)   21,042     17,451   77,258     70,640
 
Total costs and expenses (1)   349,966     287,456   1,302,870     1,152,873
 
Income from operations (1) 26,054 22,075 119,715 110,458
 
Interest expense, net 514 571 2,201 2,347

Equity income from investments in unconsolidated affiliates

  142     125   713     428
 
Income before taxes (1) 25,682 21,629 118,227 108,539
Provision for income taxes   7,523     6,923   34,140     34,738
 
Net income including noncontrolling interests (1) $ 18,159 $ 14,706 $ 84,087 $ 73,801
Less: Net income attributable to noncontrolling interests   1,040     782   3,664     2,631
Net income attributable to Texas Roadhouse, Inc. and subsidiaries (1) $ 17,119   $ 13,924 $ 80,423   $ 71,170
 

Net income per common share attributable to Texas Roadhouse, Inc. and subsidiaries:

Basic $ 0.24   $ 0.20 $ 1.15   $ 1.02
Diluted $ 0.24   $ 0.19 $ 1.13   $ 1.00
 
Weighted average shares outstanding:
Basic   70,581     70,097   70,089     70,026
Diluted   71,813     71,509   71,362     71,485
 
 

(1) Results for the 52 weeks ended December 25, 2012 include a $5.0 million charge, ($3.1 million after-tax), relating to the settlement of a legal matter. The settlement charge is included in general and administrative costs.

 
 
Texas Roadhouse, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
         
 
December 31, 2013 December 25, 2012
 
 
Cash and cash equivalents $ 94,874 $ 81,746
Other current assets 50,869 40,726
Property and equipment, net 586,192 531,654
Goodwill 116,468 113,435
Intangible assets, net 8,625 9,264
Other assets 20,616 14,429
   
Total assets $ 877,644 $ 791,254
 
 

Current maturities of long-term debt and obligations under capital leases

243 338
Other current liabilities 174,937 158,324

Long-term debt and obligations under capital leases, excluding current maturities

50,990 51,264
Other liabilities 57,614 50,591
Texas Roadhouse, Inc. and subsidiaries stockholders' equity 587,659 525,084
Noncontrolling interests 6,201 5,653
   
Total liabilities and equity $ 877,644 $ 791,254
 
 
Texas Roadhouse, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
           
 
53 and 52 Weeks Ended

December 31,

2013

December 25,

2012

 
 
Cash flows from operating activities:
Net income including noncontrolling interests $ 84,087 $ 73,801
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization 51,562 46,717
Share-based compensation expense 14,740 13,193
Gain on sale of other concept (1,800 ) -
Other noncash adjustments 2,942 2,116
Change in working capital   21,125     12,219  
Net cash provided by operating activities   172,656     148,046  
 
Cash flows from investing activities:
Capital expenditures - property and equipment (111,478 ) (86,985 )
Acquisitions of franchise restaurants, net of cash acquired - (4,297 )
Proceeds from sale of property and equipment, including insurance proceeds 23 1,128
Proceeds from sale of other concept   1,387     -  
Net cash used in investing activities   (110,068 )   (90,154 )
 
Cash flows from financing activities:
Repayments of revolving credit facility, net - (10,000 )
Repurchase shares of common stock (12,761 ) (29,421 )
Dividends paid (46,877 ) (24,486 )
Other financing activities   10,178     8,984  
Net cash used in financing activities   (49,460 )   (54,923 )
 
Net increase in cash and cash equivalents 13,128 2,969
Cash and cash equivalents - beginning of year   81,746     78,777  
Cash and cash equivalents - end of year $ 94,874   $ 81,746  
 
 
Texas Roadhouse, Inc. and Subsidiaries
Supplemental Financial and Operating Information
($ amounts in thousands, except weekly sales by group and RM $ per store week)
(unaudited)
                             
Fourth Quarter Change Year to Date Change

2013

2012

vs LY

2013

2012

vs LY

Restaurant openings
Company - Texas Roadhouse 12 7 5 25 25 0
Company - Other 0 0 0 1 0 1
Franchise - Texas Roadhouse 1 2 (1) 4 2 2
Total 13 9 4 30 27 3

Restaurant acquisitions/dispositions/closures

Company - Texas Roadhouse 2 2 0 2 2 0
Company - Other (2) (1) (1) (2) (1) (1)
Franchise (2) (2) 0 (2) (2) 0
Total (2) (1) (1) (2) (1) (1)
Restaurants open at the end of the quarter
Company - Texas Roadhouse 345 318 27
Company - Other 1 2 (1)
Franchise - Texas Roadhouse 74 72 2
Total 420 392 28
 
Company restaurants
Restaurant sales $ 372,879 $ 306,775 21.5 % $ 1,410,118 $ 1,252,358 12.6 %
Store weeks 4,744 4,082 16.2 % 17,426 15,936 9.3 %
Comparable restaurant sales growth (1) 2.1 % 4.4 % 3.4 % 4.7 %
Texas Roadhouse restaurants only:
Comparable restaurant sales growth (1) 2.1 % 4.3 % 3.4 % 4.7 %
Average unit volume (2) $ 1,091 $ 978 11.6 % $ 4,285 $ 4,085 4.9 %
Average unit volume, 2012 adjusted (3) $ 1,091 $ 1,075 1.4 % $ 4,285 $ 4,183 2.4 %
Weekly sales by group:
Comparable restaurants (301 units) $ 78,407
Average unit volume restaurants (20 units) $ 70,392
Restaurants less than 6 months old (22 units) $ 96,199
 
Restaurant operating costs (as a % of restaurant sales) (4)
Cost of sales 35.1 % 34.0 % 117 bps 34.9 % 33.8 % 109 bps
Labor 29.2 % 29.2 % 0 bps 29.2 % 29.4 % (19) bps
Rent 2.0 % 2.2 % (14) bps 2.1 % 2.1 % (0) bps
Other operating 16.7 % 17.1 % (39) bps 15.9 % 16.3 % (37) bps
Total 83.1 % 82.4 % 64 bps 82.1 % 81.6 % 52 bps
 
Restaurant margin (5) 16.9 % 17.6 % (64) bps 17.9 % 18.4 % (52) bps
Restaurant margin $/Store week $ 13,311 $ 13,205 0.8 % $ 14,493 $ 14,487 0.0 %
 
Franchise restaurants
Franchise royalties and fees $ 3,141 $ 2,756 14.0 % $ 12,467 $ 10,973 13.6 %
Store weeks 1,051 954 10.2 % 3,937 3,762 4.7 %
Comparable restaurant sales growth (1) 4.5 % 4.5 % 4.3 % 5.3 %
Average unit volume (2) $ 1,168 $ 1,000 16.8 % $ 4,429 $ 4,039 9.7 %
Average unit volume, 2013 adjusted (3) $ 1,168 $ 1,096 6.6 % $ 4,429 $ 4,132 7.2 %
 
Pre-opening expense $ 6,081 $ 3,756 61.9 % $ 17,891 $ 12,399 44.3 %
Depreciation and amortization (4) $ 14,698 $ 11,996 22.5 % $ 51,562 $ 46,717 10.4 %
As a % of revenue 3.9 % 3.9 % 3 bps 3.6 % 3.7 % (7) bps
General and administrative expenses (6) $ 21,042 $ 17,451 20.6 % $ 77,258 $ 70,640 9.4 %
As a % of revenue 5.6 % 5.6 % (4) bps 5.4 % 5.6 % (16) bps
 
(1) Comparable restaurant sales growth reflects the change in sales over the same period of the prior year and includes sales from 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 Texas Roadhouse restaurants open six months as of the beginning of the measurement period, excluding sales from restaurants closed during the period. Q4 2013 and YTD 2013 include 14 and 53 weeks, respectively, while Q4 2012 and YTD 2012 include 13 and 52 weeks.
(3) For comparative purposes, Q4 2012 and 2012 YTD were adjusted to include 14 and 53 weeks, respectively.
(4) 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.
(5) Restaurant margin represents 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.
(6) Results for the 52 weeks ended December 25, 2012 included 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 were indicative of our ongoing operations in the 52 weeks ended December 25, 2012.

 
For the 53 & 52 weeks Ended
December 31, 2013 December 25, 2012
Net income attributable to Texas Roadhouse, Inc. and subsidiaries, excluding settlement charge $ 80,423 $ 74,232
Amount reserved for settlement of a legal matter, net of tax (1) $ - $ (3,062 )
Net income attributable to Texas Roadhouse, Inc. and subsidiaries $ 80,423 $ 71,170
 
Weighted average diluted shares outstanding 71,362 71,485
 
Diluted earnings per share, excluding settlement charge $ 1.13 $ 1.04
Impact of settlement charge on diluted earnings per share $ - $ (0.04 )
Diluted earnings per share $ 1.13 $ 1.00  
 
(1) Amount reserved in the first quarter of fiscal 2012 for the settlement of a legal matter was $5.0 million before the statutory income tax rate. The settlement amount was included in general and administrative costs on the Company's Condensed Consolidated Statements of Income.



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