Texas Roadhouse, Inc. Announces Second Quarter 2016 Results
Comparable restaurant sales growth of 4.5% at company restaurants and 2.6% at franchise restaurants
Texas Roadhouse, Inc. (NasdaqGS: TXRH), yesterday announced financial results for the 13 and 26 week periods ended June 28, 2016.
| Second Quarter | Year to Date | ||||||||||||||||||||||
| ($000's) |
2016 |
2015 |
% Change |
2016 |
2015 |
% Change |
|||||||||||||||||
| Total revenue | $ | 508,808 | $ | 454,698 | 12 | % | $ | 1,024,367 | $ | 914,928 | 12 | % | |||||||||||
| Income from operations | 49,782 | 31,696 | 57 | % | 102,593 | 80,296 | 28 | % | |||||||||||||||
| Net income | 33,605 | 21,138 | 59 | % | 69,198 | 53,430 | 30 | % | |||||||||||||||
| Diluted EPS | $ | 0.47 | $ | 0.30 | 58 | % | $ | 0.98 | $ | 0.76 | 29 | % | |||||||||||
Results for the second quarter included the following highlights:
- Comparable restaurant sales growth of 4.5% at company restaurants and 2.6% at franchise restaurants;
- Restaurant margin, as a percentage of restaurant sales, increased 302 basis points to 19.2%, primarily driven by lower food costs;
- Diluted earnings per share increased 58.5% to $0.47 from $0.30 in the prior year; and,
- Seven company-owned restaurants were opened, including one Bubba’s 33 restaurant.
Results for year-to-date included the following highlights:
- Comparable restaurant sales increased 4.5% at company restaurants and 2.8% at franchise restaurants;
- Restaurant margin, as a percentage of restaurant sales, increased 208 basis points to 19.7% primarily driven by lower food costs;
- Diluted earnings per share increased 29.1% to $0.98 from $0.76 in the prior year;
- The Company recorded a pre-tax charge of $5.5 million ($3.4 million after-tax) related to a legal settlement which had a $0.05 impact on diluted earnings per share and a 6.3% impact on diluted earnings per share growth;
- 14 company-owned restaurants were opened, including three Bubba’s 33 restaurants; and,
- The Company repurchased 114,700 shares of its common stock for $4.1 million.
Kent Taylor, Chief Executive Officer of Texas Roadhouse, Inc., commented, "Our operators continued to deliver strong operational and financial results with solid comparable restaurant sales growth and an increase in restaurant margin. Positive guest counts primarily drove the increase in comparable restaurant sales, marking our 26th consecutive quarter of growth, while lower commodity costs continued to pave the way for margin expansion. On the development front, we are on track to open approximately 30 company restaurants this year and we continue to fill our new restaurant pipeline for next year and beyond."
2016 Outlook
The Company reported that comparable restaurant sales at company restaurants for the first four weeks of its third quarter of fiscal 2016 increased approximately 3.7% compared to the prior year period.
Management updated the following expectation for 2016:
- 2.5% to 3.0% food cost deflation compared to previous guidance of 1.0% to 2.0% food cost deflation.
Management reiterated the following expectations for 2016:
- Positive comparable restaurant sales growth;
- Approximately 30 company restaurant openings, including approximately seven Bubba’s 33 restaurants;
- An income tax rate of approximately 30.0%; and,
- Total capital expenditures of $165.0 million to $175.0 million.
About the Company
Texas Roadhouse is a casual dining concept that first opened in 1993 and today operates over 500 restaurants system-wide in 49 states and five foreign countries.
| Texas Roadhouse, Inc. and Subsidiaries | |||||||||||||||||
| Condensed Consolidated Statements of Income | |||||||||||||||||
| (in thousands, except per share data) | |||||||||||||||||
| (unaudited) | |||||||||||||||||
| 13 Weeks Ended | 26 Weeks Ended | ||||||||||||||||
| June 28, 2016 | June 30, 2015 | June 28, 2016 | June 30, 2015 | ||||||||||||||
| Revenue: | |||||||||||||||||
| Restaurant sales | $ | 504,630 | $ | 450,692 | $ | 1,015,914 | $ | 906,985 | |||||||||
| Franchise royalties and fees | 4,178 | 4,006 | 8,453 | 7,943 | |||||||||||||
| Total revenue | 508,808 | 454,698 | 1,024,367 | 914,928 | |||||||||||||
| Costs and expenses: | |||||||||||||||||
| Restaurant operating costs (excluding depreciation and amortization shown separately below): | |||||||||||||||||
| Cost of sales | 171,551 | 168,077 | 344,679 | 328,057 | |||||||||||||
| Labor | 150,014 | 132,084 | 297,560 | 263,488 | |||||||||||||
| Rent | 10,184 | 9,138 | 20,211 | 18,117 | |||||||||||||
| Other operating | 75,887 | 68,358 | 153,499 | 137,675 | |||||||||||||
| Pre-opening | 4,411 | 4,909 | 9,236 | 8,727 | |||||||||||||
| Depreciation and amortization | 20,238 | 16,816 | 39,777 | 33,151 | |||||||||||||
| Impairment and closure | 30 | - | 41 | - | |||||||||||||
| General and administrative | 26,711 | 23,620 | 56,771 | 45,417 | |||||||||||||
| Total costs and expenses | 459,026 | 423,002 | 921,774 | 834,632 | |||||||||||||
| Income from operations | 49,782 | 31,696 | 102,593 | 80,296 | |||||||||||||
| Interest expense, net | 309 | 495 | 614 | 1,010 | |||||||||||||
|
Equity income from investments in unconsolidated affiliates |
475 | 467 | 827 | 839 | |||||||||||||
| Income before taxes | 49,948 | 31,668 | 102,806 | 80,125 | |||||||||||||
| Provision for income taxes | 15,087 | 9,402 | 30,944 | 24,278 | |||||||||||||
| Net income including noncontrolling interests | $ | 34,861 | $ | 22,266 | $ | 71,862 | $ | 55,847 | |||||||||
| Less: Net income attributable to noncontrolling interests | 1,256 | 1,128 | 2,664 | 2,417 | |||||||||||||
| Net income attributable to Texas Roadhouse, Inc. and subsidiaries | $ | 33,605 | $ | 21,138 | $ | 69,198 | $ | 53,430 | |||||||||
|
Net income per common share attributable to Texas Roadhouse, Inc. and subsidiaries: |
|||||||||||||||||
| Basic | $ | 0.48 | $ | 0.30 | $ | 0.98 | $ | 0.76 | |||||||||
| Diluted | $ | 0.47 | $ | 0.30 | $ | 0.98 | $ | 0.76 | |||||||||
| Weighted average shares outstanding: | |||||||||||||||||
| Basic | 70,368 | 70,026 | 70,269 | 69,933 | |||||||||||||
| Diluted | 70,876 | 70,648 | 70,840 | 70,588 | |||||||||||||
| Cash dividends declared per share | $ | 0.19 | $ | 0.17 | $ | 0.38 | $ | 0.34 | |||||||||
| Texas Roadhouse, Inc. and Subsidiaries | ||||||||
| Condensed Consolidated Balance Sheets | ||||||||
| (in thousands) | ||||||||
| (unaudited) | ||||||||
| June 28, 2016 | December 29, 2015 | |||||||
| Cash and cash equivalents | $ | 95,305 | $ | 59,334 | ||||
| Other current assets | 50,655 | 74,479 | ||||||
| Property and equipment, net | 778,634 | 751,288 | ||||||
| Goodwill | 116,571 | 116,571 | ||||||
| Intangible assets, net | 4,150 | 4,827 | ||||||
| Other assets | 27,886 | 26,207 | ||||||
| Total assets | $ | 1,073,201 | $ | 1,032,706 | ||||
| Current maturities of long-term debt | 151 | 144 | ||||||
| Other current liabilities | 218,725 | 256,498 | ||||||
| Long-term debt, excluding current maturities | 50,472 | 25,550 | ||||||
| Other liabilities | 78,731 | 73,332 | ||||||
| Texas Roadhouse, Inc. and subsidiaries stockholders' equity | 717,425 | 669,662 | ||||||
| Noncontrolling interests | 7,697 | 7,520 | ||||||
| Total liabilities and equity | $ | 1,073,201 | $ | 1,032,706 | ||||
| Texas Roadhouse, Inc. and Subsidiaries | ||||||||||||
| Condensed Consolidated Statements of Cash Flows | ||||||||||||
| (in thousands) | ||||||||||||
| (unaudited) | ||||||||||||
| 26 Weeks Ended | ||||||||||||
| June 28, 2016 | June 30, 2015 | |||||||||||
| Cash flows from operating activities: | ||||||||||||
| Net income including noncontrolling interests | $ | 71,862 | $ | 55,847 | ||||||||
| Adjustments to reconcile net income to net cash provided by operating activities | ||||||||||||
| Depreciation and amortization | 39,777 | 33,151 | ||||||||||
| Share-based compensation expense | 11,703 | 10,215 | ||||||||||
| Other noncash adjustments | (493 | ) | (2,992 | ) | ||||||||
| Change in working capital | (8,781 | ) | (1,398 | ) | ||||||||
| Net cash provided by operating activities | 114,068 | 94,823 | ||||||||||
| Cash flows from investing activities: | ||||||||||||
| Capital expenditures - property and equipment | (69,159 | ) | (70,933 | ) | ||||||||
| Proceeds from sale of property and equipment, including insurance proceeds | - | 9 | ||||||||||
| Net cash used in investing activities | (69,159 | ) | (70,924 | ) | ||||||||
| Cash flows from financing activities: | ||||||||||||
| Proceeds from revolving credit facility | 25,000 | - | ||||||||||
| Repurchase shares of common stock | (4,110 | ) | (3,138 | ) | ||||||||
| Dividends paid | (25,277 | ) | (34,247 | ) | ||||||||
| Other financing activities | (4,551 | ) | (1,671 | ) | ||||||||
| Net cash used in financing activities | (8,938 | ) | (39,056 | ) | ||||||||
| Net increase (decrease) in cash and cash equivalents | 35,971 | (15,157 | ) | |||||||||
| Cash and cash equivalents - beginning of period | 59,334 | 86,122 | ||||||||||
| Cash and cash equivalents - end of period | $ | 95,305 | $ | 70,965 | ||||||||
| Texas Roadhouse, Inc. and Subsidiaries | ||||||||||||||||||||||||||||||||||||||
| Supplemental Financial and Operating Information | ||||||||||||||||||||||||||||||||||||||
| ($ amounts in thousands, except weekly sales by group) | ||||||||||||||||||||||||||||||||||||||
| (unaudited) | ||||||||||||||||||||||||||||||||||||||
| Second Quarter | Change | Year to Date | Change | |||||||||||||||||||||||||||||||||||
|
2016 |
2015 |
vs LY |
2016 |
2015 |
vs LY |
|||||||||||||||||||||||||||||||||
| Restaurant openings | ||||||||||||||||||||||||||||||||||||||
| Company - Texas Roadhouse | 6 | 6 | 0 | 11 | 8 | 3 | ||||||||||||||||||||||||||||||||
| Company - Bubba's 33 | 1 | 2 | (1 | ) | 3 | 3 | 0 | |||||||||||||||||||||||||||||||
| Company - Other | 0 | 1 | (1 | ) | 0 | 1 | (1 | ) | ||||||||||||||||||||||||||||||
| Franchise - Texas Roadhouse | 1 | 1 | 0 | 2 | 1 | 1 | ||||||||||||||||||||||||||||||||
| Total | 8 | 10 | (2 | ) | 16 | 13 | 3 | |||||||||||||||||||||||||||||||
| Restaurants open at the end of the quarter | ||||||||||||||||||||||||||||||||||||||
| Company - Texas Roadhouse | 403 | 376 | 27 | |||||||||||||||||||||||||||||||||||
| Company - Bubba's 33 | 10 | 6 | 4 | |||||||||||||||||||||||||||||||||||
| Company - Other | 2 | 2 | 0 | |||||||||||||||||||||||||||||||||||
| Franchise - Texas Roadhouse | 84 | 80 | 4 | |||||||||||||||||||||||||||||||||||
| Total | 499 | 464 | 35 | |||||||||||||||||||||||||||||||||||
| Company-owned restaurants | ||||||||||||||||||||||||||||||||||||||
| Restaurant sales | $ | 504,630 | $ | 450,692 | 12.0 | % | $ | 1,015,914 | $ | 906,985 | 12.0 | % | ||||||||||||||||||||||||||
| Store weeks | 5,350 | 4,934 | 8.4 | % | 10,612 | 9,790 | 8.4 | % | ||||||||||||||||||||||||||||||
| Comparable restaurant sales growth (1) | 4.5 | % | 8.2 | % | 4.5 | % | 8.5 | % | ||||||||||||||||||||||||||||||
| Texas Roadhouse restaurants only: | ||||||||||||||||||||||||||||||||||||||
| Comparable restaurant sales growth (1) | 4.5 | % | 8.2 | % | 4.5 | % | 8.5 | % | ||||||||||||||||||||||||||||||
| Average unit volume (2) | $ | 1,232 | $ | 1,188 | 3.7 | % | $ | 2,505 | $ | 2,409 | 4.0 | % | ||||||||||||||||||||||||||
| Weekly sales by group: | ||||||||||||||||||||||||||||||||||||||
| Comparable restaurants (361 units) | $ | 95,434 | ||||||||||||||||||||||||||||||||||||
| Average unit volume restaurants (24 units) (3) | $ | 84,272 | ||||||||||||||||||||||||||||||||||||
| Restaurants less than 6 months old (18 units) | $ | 98,319 | ||||||||||||||||||||||||||||||||||||
| Restaurant operating costs (as a % of restaurant sales) | ||||||||||||||||||||||||||||||||||||||
| Cost of sales | 34.0 | % | 37.3 | % | (330 | ) | bps | 33.9 | % | 36.2 | % | (224 | ) | bps | ||||||||||||||||||||||||
| Labor | 29.7 | % | 29.3 | % | 42 | bps | 29.3 | % | 29.1 | % | 24 | bps | ||||||||||||||||||||||||||
| Rent | 2.0 | % | 2.0 | % | (1 | ) | bps | 2.0 | % | 2.0 | % | (1 | ) | bps | ||||||||||||||||||||||||
| Other operating | 15.0 | % | 15.2 | % | (13 | ) | bps | 15.1 | % | 15.2 | % | (7 | ) | bps | ||||||||||||||||||||||||
| Total | 80.8 | % | 83.8 | % | (302 | ) | bps | 80.3 | % | 82.4 | % | (208 | ) | bps | ||||||||||||||||||||||||
| Restaurant margin (4) | 19.2 | % | 16.2 | % | 302 | bps | 19.7 | % | 17.6 | % | 208 | bps | ||||||||||||||||||||||||||
| Restaurant margin ($ in thousands) | $ | 96,994 | $ | 73,035 | 32.8 | % | $ | 199,965 | $ | 159,648 | 25.3 | % | ||||||||||||||||||||||||||
| Restaurant margin $/Store week | $ | 18,130 | $ | 14,804 | 22.5 | % | $ | 18,843 | $ | 16,307 | 15.6 | % | ||||||||||||||||||||||||||
| Franchise-owned restaurants | ||||||||||||||||||||||||||||||||||||||
| Franchise royalties and fees | $ | 4,178 | $ | 4,006 | 4.3 | % | $ | 8,453 | $ | 7,943 | 6.4 | % | ||||||||||||||||||||||||||
| Store weeks | 1,088 | 1,032 | 5.4 | % | 2,157 | 2,059 | 4.8 | % | ||||||||||||||||||||||||||||||
| Comparable restaurant sales growth (1) | 2.6 | % | 6.9 | % | 2.8 | % | 7.5 | % | ||||||||||||||||||||||||||||||
| Average unit volume (2) | $ | 1,273 | $ | 1,274 | (0.1 | ) | % | $ | 2,590 | $ | 2,580 | 0.4 | % | |||||||||||||||||||||||||
| Pre-opening expense | $ | 4,411 | $ | 4,909 | (10.1 | ) | % | $ | 9,236 | $ | 8,727 | 5.8 | % | |||||||||||||||||||||||||
| Depreciation and amortization | $ | 20,238 | $ | 16,816 | 20.3 | % | $ | 39,777 | $ | 33,151 | 20.0 | % | ||||||||||||||||||||||||||
| As a % of revenue | 4.0 | % | 3.7 | % | 28 | bps | 3.9 | % | 3.6 | % | 26 | bps | ||||||||||||||||||||||||||
| General and administrative expenses | $ | 26,711 | $ | 23,620 | 13.1 | % | $ | 56,771 | $ | 45,417 | 25.0 | % | ||||||||||||||||||||||||||
| As a % of revenue | 5.2 | % | 5.2 | % | 6 | bps | 5.5 | % | 5.0 | % | 58 | bps | ||||||||||||||||||||||||||
| (1) Comparable restaurant sales growth reflects the change in year-over-year sales for restaurants open a full 18 months before the beginning of the period measured, excluding sales from restaurants closed during the period. | ||||||||||||||||||||||||||||||||||||||
| (2) Average unit volume includes sales from Texas Roadhouse restaurants open for a full six months before the beginning of the period measured, excluding any sales at restaurants closed during the period. | ||||||||||||||||||||||||||||||||||||||
| (3) Average unit volume restaurants include restaurants open a full six to 18 months before the beginning of the period measured. | ||||||||||||||||||||||||||||||||||||||
| (4) Restaurant margin represents restaurant sales less restaurant operating costs, including cost of sales, labor, rent and other operating costs (as a percentage of restaurant sales). Depreciation and amortization expense, substantially all of which relates to restaurant-level asset, is excluded from restaurant operating costs. 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 GAAP and should not be considered in isolation, or as an alternative, to income from operations or other similarly titled measures of other companies. | ||||||||||||||||||||||||||||||||||||||
| Amounts may not foot due to rounding. | ||||||||||||||||||||||||||||||||||||||
