Texas Roadhouse, Inc. (NasdaqGS: TXRH), today announced financial results for the 13 and 39 week periods ended September 29, 2020 and provided a business update in response to the continued COVID-19 pandemic.

Financial Results

Financial results for the 13 and 39 week periods ended September 29, 2020 were as follows:

    Third Quarter   Year to Date
($000's)   2020   2019   % Change   2020   2019   % Change
                         
Total revenue   $ 631,185   $ 650,489   (3.0 %)   $ 1,760,134   $ 2,030,925   (13.3 %)
Income from operations     34,976     44,884   (22.1 %)     3,448     158,612   (97.8 %)
Net income     29,230     36,531   (20.0 %)     11,706     131,766   (91.1 %)
Diluted earnings per share   $ 0.42   $ 0.52   (19.9 %)   $ 0.17   $ 1.85   (90.9 %)

Results for the third quarter included the following:

  • For the July, August, and September periods, comparable restaurant sales at company restaurants decreased 13.0%, 6.6%, and 0.5%, respectively. Sales during the period were positively impacted by the continued easing of dining room capacity restrictions throughout the country. For the quarter, comparable restaurant sales decreased 6.3% at domestic company restaurants and 9.6% at domestic franchise restaurants;
  • Five company restaurants, including one Bubba’s 33 restaurant, and one international franchise restaurant were opened.   Three international franchise locations remain temporarily closed as of the end of the quarter;
  • Restaurant margin, as a percentage of restaurant and other sales, was 14.5% and restaurant margin dollars were $91.1 million. Restaurant margin was impacted by a decrease in comparable restaurant sales and higher costs related to the pandemic.   These costs included $1.8 million of costs incurred for enhanced benefits for hourly restaurant employees which were more than offset by employee retention payroll tax credits of $4.5 million related to relief pay for hourly restaurant employees provided in the first half of the year;
  • General and administrative expenses included a $3.0 million benefit related to the sale of a legal claim; and,
  • The Company ended the quarter with debt of $240.0 million and $328.6 million of cash on hand.

Results for the year-to-date period included the following highlights:

  • Comparable restaurant sales decreased 16.0% at domestic company restaurants and 16.8% at domestic franchise restaurants;
  • 13 company restaurants, including three Bubba’s 33 restaurants, one domestic franchise restaurant and one international franchise restaurant were opened. One company restaurant and two international franchise restaurants were permanently closed;
  • Restaurant margin, as a percentage of restaurant and other sales, was 10.4% and restaurant margin dollars were $181.6 million. Restaurant margin was impacted by a decrease in comparable restaurant sales and higher costs related to the pandemic. These costs included $12.7 million of costs incurred for relief pay and enhanced benefits for hourly restaurant employees, net of employee retention payroll tax credits; and,
  • The Company repurchased 252,409 shares of common stock for $12.6 million, the last of which occurred on March 17th. No proceeds from the revolving credit facility were utilized to repurchase shares.

Kent Taylor, Chief Executive Officer of Texas Roadhouse, Inc., commented, “As our dining rooms continue to operate under decreasing capacity limitations, we are pleased to see our average weekly sales getting closer to historical levels. In addition, our operators continue to drive traffic through strong To-Go sales and outdoor dining. On the development front, we expect to open at least 20 company restaurants in 2020 despite pausing construction on a number of sites earlier in the year. Thanks to the strength of our operators, we remain confident in the positioning of our brands as we close out the year and head into 2021.”

Business Update

Comparable restaurant sales during the third quarter were positively impacted by the continued easing of dining room capacity restrictions throughout the country. For the quarter, the Company operated under various capacity restrictions in the dining rooms along with enhanced To-Go, which included a curbside and/or drive-up operating model, as permitted by local guidelines. By period, the comparable restaurant sales, average weekly sales, and To-Go sales for all company restaurants were as follows:

                 
    July   August   September   Q3 2020
All restaurants                
Comparable restaurant sales     (13.0 %)     (6.6 %)     (0.5 %)     (6.3 %)
Average weekly sales   $ 86,065     $ 93,849     $ 95,803     $ 92,213  
To-Go sales as a % of average weekly sales     26.2 %     23.6 %     21.1 %     23.3 %
                 

For the October period, comparable restaurant sales at company restaurants increased 0.8%, average weekly sales at all company restaurants were $98,797, and To-Go sales as a percentage of average weekly sales were 20.0%.

For the third quarter, the Company’s cash on hand position increased approximately $46.1 million due to increased sales performance and working capital inflows, partially offset by cash used for capital expenditures. As of the end of the quarter, the Company had opened 13 company restaurants and an additional 18 company restaurants had either resumed construction or were approved to resume construction soon. As many as eight of these restaurants are expected to open in 2020 and the remaining 10 are expected to open in the first half of 2021. The Company’s development pipeline also includes an additional 15 restaurants that are fully approved or in permitting.

In addition, the Company continues to look for ways through various strategic initiatives to drive awareness of its brands and increase profitability.  This includes Texas Roadhouse Butcher Shop, an on-line platform for the purchase and delivery of hand-cut quality steaks.

Kent Taylor commented, “During any crisis, if you look close enough, an opportunity like the Texas Roadhouse Butcher Shop arises.  Back in March and April, our guests looked to us to stock up on steaks at home. As a result, we saw an opportunity to provide the same Texas Roadhouse quality and value with our on-line Butcher Shop, which will launch in early November.” 

2020 Outlook

As previously announced, due to the uncertainty surrounding the pandemic, the Company withdrew the financial outlook for the fiscal year ending December 29, 2020. However, based on the improved cashflow at company restaurants, the Company is providing the following expectations for 2020:

  • At least 20 company restaurant openings; and,
  • Total capital expenditures of approximately $160 million.

Non-GAAP Measures

The Company prepares the consolidated financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”). Within the press release, the Company makes reference to restaurant margin (in dollars and as a percentage of restaurant and other sales). Restaurant margin represents restaurant and other sales less restaurant-level operating costs, including food and beverage costs, labor, rent and other operating costs. Restaurant margin should not be considered in isolation, or as an alternative, to income from operations. This non-GAAP measure is not indicative of overall company performance and profitability in that this measure does not accrue directly to the benefit of shareholders due to the nature of the costs excluded. Restaurant margin is widely regarded as a useful metric by which to evaluate restaurant-level operating efficiency and performance. In calculating restaurant margin, the Company excludes certain non-restaurant-level costs that support operations, including pre-opening and general and administrative expenses, but do not have a direct impact on restaurant-level operational efficiency and performance. The Company also excludes depreciation and amortization expense, substantially all of which relates to restaurant-level assets, as it represents a non-cash charge for the investment in restaurants. The Company also excludes impairment and closure expense as it believes this provides a clearer perspective of ongoing operating performance and a more useful comparison to prior period results. Restaurant margin as presented may not be comparable to other similarly titled measures of other companies in the industry. A reconciliation of income from operations to restaurant margin is included in the accompanying financial tables.

Conference Call

Texas Roadhouse is hosting a conference call today, October 28, 2020 at 5:00 p.m. Eastern Time to discuss these results. The dial-in number is (877) 699-0953 or (647) 689-5456 for international calls.   A replay of the call will be available for one week following the conference call. To access the replay, please dial (800) 585-8367 or (416) 621-4642 for international calls and use 7594428 as the pass code. There will be a simultaneous Web cast conducted at www.texasroadhouse.com.

About the Company

Texas Roadhouse is a casual dining concept that first opened in 1993 and today has grown to over 620 restaurants system-wide in 49 states and ten foreign countries. For more information, please visit the Web site at www.texasroadhouse.com.

Forward-looking Statements

Certain statements in this release are forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended. These statements include, but are not limited to, statements related to the potential impact of the COVID-19/Coronavirus outbreak and other non-historical statements. Such statements are based upon the current beliefs and expectations of the management of Texas Roadhouse. Actual results may vary materially from those contained in forward-looking statements based on a number of factors including, without limitation, conditions beyond its control such as weather, natural disasters, disease outbreaks, epidemics or pandemics impacting customers or food supplies; food safety and food-borne illness concerns; and other factors disclosed from time to time in its filings with the U.S. Securities and Exchange Commission. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. These factors include but are not limited to those described under “Part I—Item 1A. Risk Factors” of the Annual Report on Form 10-K for the fiscal year ended December 31, 2019 and in the Current Report on Form 8-K filed on October 28, 2020. These factors should not be construed as exhaustive and should be read in conjunction with other filings with the Securities and Exchange Commission. Investors should take such risks into account when making investment decisions. Shareholders and other readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. The Company undertakes no obligation to update any forward-looking statements, except as required by applicable law.

Contacts:

Investor Relations                                                                Michael Bailen(502) 515-7298

MediaTravis Doster(502) 638-5457

 
Texas Roadhouse, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(in thousands, except per share data)
(unaudited)
           
      13 Weeks Ended   39 Weeks Ended
      September 29, 2020   September 24, 2019   September 29, 2020   September 24, 2019
                   
Revenue:              
  Restaurant and other sales $ 626,429   $ 645,230   $ 1,747,145   $ 2,014,720
  Franchise royalties and fees 4,756   5,259   12,989   16,205
                   
Total revenue 631,185   650,489   1,760,134   2,030,925
                   
Costs and expenses:              
  Restaurant operating costs (excluding depreciation and amortization shown separately below):              
    Food and beverage 201,308   205,158   575,529   650,136
    Labor 217,275   218,342   652,976   667,712
    Rent 13,723   12,994   40,445   39,173
    Other operating 102,978   100,742   296,615   306,355
  Pre-opening 4,894   4,736   14,296   12,801
  Depreciation and amortization 29,364   28,347   87,434   84,574
  Impairment and closure, net 716   61   871   394
  General and administrative 25,951   35,225   88,520   111,168
                   
Total costs and expenses 596,209   605,605   1,756,686   1,872,313
                   
Income from operations 34,976   44,884   3,448   158,612
                   
Interest expense (income), net 1,502   (81)   2,601   (1,526)
Equity income (loss) from investments in              
  unconsolidated affiliates 1   (154)   (597)   100
                   
Income before taxes 33,475   44,811   250   160,238
Income tax expense (benefit) 3,072   6,785   (13,999)   23,331
                   
Net income including noncontrolling interests 30,403   38,026   14,249   136,907
Less: Net income attributable to noncontrolling interests 1,173   1,495   2,543   5,141
Net income attributable to Texas Roadhouse, Inc. and subsidiaries $ 29,230   $ 36,531   $ 11,706   $ 131,766
                   
Net income per common share attributable to Texas Roadhouse, Inc. and subsidiaries:              
  Basic $ 0.42   $ 0.53   $ 0.17   $ 1.86
  Diluted $ 0.42   $ 0.52   $ 0.17   $ 1.85
                   
Weighted average shares outstanding:              
  Basic 69,446   69,573   69,410   70,896
  Diluted 69,898   69,939   69,830   71,287
                   
Cash dividends declared per share $  -   $ 0.30   $ 0.36   $ 0.90
               
 
Texas Roadhouse, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
         
    September 29, 2020   December 31, 2019
         
Cash and cash equivalents   $ 328,636   $ 107,879
Other current assets, net   70,905   140,020
Property and equipment, net   1,076,924   1,056,563
Operating lease right-of-use assets, net   526,501   499,801
Goodwill   124,748   124,748
Intangible assets, net   890   1,234
Other assets   59,407   53,320
         
Total assets   $ 2,188,011   $ 1,983,565
         
Current liabilities   396,402   417,220
Operating lease liabilities, net of current portion   567,480   538,710
Long-term debt, excluding current maturities   190,000   -
Other liabilities   115,626   96,466
Texas Roadhouse, Inc. and subsidiaries stockholders' equity   902,916   915,994
Noncontrolling interests   15,587   15,175
         
Total liabilities and equity   $ 2,188,011   $ 1,983,565
         
 
Texas Roadhouse, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
             
        39 Weeks Ended
        September 29, 2020   September 24, 2019
             
Cash flows from operating activities:        
Net income including noncontrolling interests   $ 14,249   $ 136,907
Adjustments to reconcile net income to net cash provided by operating activities        
  Depreciation and amortization   87,434   84,574
  Share-based compensation expense   22,070   25,016
  Deferred income taxes   (15,572)   (3,660)
  Other noncash adjustments, net   3,717   4,541
Change in working capital   34,137   (5,381)
    Net cash provided by operating activities   146,035   241,997
             
Cash flows from investing activities:        
Capital expenditures - property and equipment   (117,521)   (144,917)
Proceeds from sale of property and equipment   32   351
Proceeds from sale leaseback transaction   2,167   -
    Net cash used in investing activities   (115,322)   (144,566)
             
Cash flows from financing activities:        
Proceeds from revolving credit facility   240,000   -
Repurchase of shares of common stock   (12,621)   (130,963)
Dividends paid   (24,989)   (60,675)
Other financing activities, net   (12,346)   (16,378)
    Net cash provided by (used in) financing activities   190,044   (208,016)
             
    Net increase (decrease) in cash and cash equivalents   220,757   (110,585)
Cash and cash equivalents - beginning of period   107,879   210,125
Cash and cash equivalents - end of period   $ 328,636   $ 99,540
         
 
Texas Roadhouse, Inc. and Subsidiaries
Reconciliation of Income from Operations to Restaurant Margin
(in thousands)
(unaudited)
                 
    13 Weeks Ended   39 Weeks Ended
    September 29, 2020   September 24, 2019   September 29, 2020   September 24, 2019
                 
Income from operations   $ 34,976     $ 44,884     $ 3,448     $ 158,612  
                 
Less:                
Franchise royalties and fees     4,756       5,259       12,989       16,205  
                 
Add:                
Pre-opening     4,894       4,736       14,296       12,801  
Depreciation and amortization     29,364       28,347       87,434       84,574  
Impairment and closure, net     716       61       871       394  
General and administrative     25,951       35,225       88,520       111,168  
                 
Restaurant margin   $ 91,145     $ 107,994     $ 181,580     $ 351,344  
                 
Restaurant margin (as a percentage of restaurant and other sales)     14.5 %     16.7 %     10.4 %     17.4 %
                 
 
Texas Roadhouse, Inc. and Subsidiaries
Supplemental Financial and Operating Information
($ amounts in thousands, except weekly sales by group)
(unaudited)
                               
      Third Quarter   Change     Year to Date   Change  
        2020       2019   vs LY       2020       2019     vs LY  
                               
Restaurant openings                          
  Company - Texas Roadhouse   4       3   1         10       10     0    
  Company - Bubba's 33   1       1   0         3       1     2    
  Company - Other   0       0   0         0       0     0    
  Franchise - Texas Roadhouse - U.S.   0       0   0         1       1     0    
  Franchise - Texas Roadhouse - International   1       2   (1)         1       5     (4)    
  Total   6       6   0         15       17     (2)    
                               
Restaurant closures                          
  Company - Texas Roadhouse   0       0   0         (1)       0     (1)    
  Company - Bubba's 33   0       0   0         0       0     0    
  Company - Other   0       0   0         0       0     0    
  Franchise - Texas Roadhouse - International   0       0   0         (2)       (2)     0    
  Total   0       0   0         (3)       (2)     (1)    
                               
Restaurants open at the end of the quarter (1)                          
  Company - Texas Roadhouse   493       474   19                  
  Company - Bubba's 33   31       26   5                  
  Company - Other   2       2   0                  
  Franchise - Texas Roadhouse - U.S.   70       70   0                  
  Franchise - Texas Roadhouse - International   27       25   2                  
  Total   623       597   26                  
                               
Company restaurants                          
  Restaurant and other sales $ 626,429     $ 645,230   (2.9 ) %   $ 1,747,145     $ 2,014,720     (13.3 ) %
  Store weeks   6,810       6,509   4.6   %     20,274       19,355     4.7   %
  Comparable restaurant sales (2)   (6.3 ) %   4.4 %         (16.0 ) %   4.8   %    
  Texas Roadhouse restaurants only:                          
    Comparable restaurant sales (2)   (6.5 ) %   4.2 %         (15.8 ) %   4.7   %    
    Average unit volume (3) $ 1,211     $ 1,302   (7.0 ) %   $ 3,433     $ 4,088     (16.0 ) %
    Weekly sales by group:                  
        Comparable restaurants (464 units) $ 93,659                          
        Average unit volume restaurants (19 units) (4) $ 80,556                          
        Restaurants less than 6 months old (10 units) $ 93,616                          
                               
Restaurant operating costs (as a % of restaurant and other sales)                        
Food and beverage costs   32.1   %   31.8 % 34   bps   32.9   %   32.3   % 67   bps
Labor   34.7   %   33.8 % 85   bps   37.4   %   33.1   % 423   bps
Rent   2.2   %   2.0 % 18   bps   2.3   %   1.9   % 37   bps
Other operating   16.4   %   15.6 % 83   bps   17.0   %   15.2   % 177   bps
Total   85.5   %   83.3 % 219   bps   89.6   %   82.6   % 705   bps
                               
  Restaurant margin   14.5   %   16.7 % (219 ) bps   10.4   %   17.4   % (705 ) bps
                               
  Restaurant margin ($ in thousands) $ 91,145     $ 107,994   (15.6 ) %   $ 181,580     $ 351,344     (48.3 ) %
  Restaurant margin $/Store week $ 13,384     $ 16,591   (19.3 ) %   $ 8,956     $ 18,153     (50.7 ) %
                               
Franchise restaurants                          
  Franchise royalties and fees $ 4,756     $ 5,259   (9.6 ) %   $ 12,989     $ 16,205     (19.8 ) %
  Store weeks   1,259       1,220   3.2   %     3,788       3,623     4.6   %
  Comparable restaurant sales (2)   (11.2 ) %   2.4 %         (19.5 ) %   3.0   %    
  U.S. franchise restaurants only:                          
    Comparable restaurant sales (2)   (9.6 ) %   3.2 %         (16.8 ) %   4.0   %    
    Average unit volume (3) $ 1,228     $ 1,349   (9.0 ) %   $ 3,543     $ 4,230     (16.2 ) %
                               
Pre-opening expense $ 4,894     $ 4,736   3.3   %   $ 14,296     $ 12,801     11.7   %
                               
Depreciation and amortization $ 29,364     $ 28,347   3.6   %   $ 87,434     $ 84,574     3.4   %
  As a % of revenue   4.7   %   4.4 % 29   bps   5.0   %   4.2   % 80   bps
                               
General and administrative expenses $ 25,951     $ 35,225   (26.3 ) %   $ 88,520     $ 111,168     (20.4 ) %
  As a % of revenue   4.1   %   5.4 % (130 ) bps   5.0   %   5.5   % (44 ) bps
                               
(1) Includes three international franchise locations that are temporarily closed.              
(2) Comparable restaurant sales 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 permanently closed during the period.  
(3) Average unit volume includes sales from Texas Roadhouse restaurants open for a full six months before the beginning of the period measured, excluding sales from restaurants permanently closed during the period.  
(4) Average unit volume restaurants include restaurants open a full six and up to 18 months before the beginning of the period measured.  
   
Amounts may not foot due to rounding.  

 

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