Texas Roadhouse, Inc. Announces Second Quarter 2012 Results

2012 Outlook

The Company reported that comparable restaurant sales at company restaurants for the first four weeks of its third quarter of fiscal 2012 increased approximately 5.5% compared to the prior year period which includes a benefit from the timing of the fourth of July holiday.

The Company currently anticipates that GAAP diluted earnings per share for 2012, which includes the legal settlement charge discussed below, will be $0.94 to $0.96. This compares to diluted earnings per share of $0.88 in 2011. The updated guidance is based, in part, on the following assumptions and other information:

• Comparable restaurant sales growth of 4.0% to 4.5%, the low end of our previously expected range;
• Approximately 25 company restaurant openings;
• Food cost inflation of approximately 7.0%, the low end of our previously expected range;
• A pre-tax charge of $5.0 million ($3.1 million after-tax) relating to a legal settlement. This charge was recorded in the first quarter of 2012 and is expected to negatively impact full year 2012 diluted earnings per share by approximately $0.04;
• An income tax rate of 32.5% to 33.0%, which is higher than the prior year rate of 29.5% as a result of the expiration of certain federal tax credits at the end of 2011. The increased tax rate is expected to negatively impact full year 2012 diluted earnings per share by approximately $0.04; and
• Total capital expenditures of approximately $90.0 million, higher than our previous range of $80.0 to $85.0 million.

Conference Call

The Company is hosting a conference call today, July 30, 2012, at 5:00 p.m. Eastern Time to discuss these results. The dial-in number is [phone] or [phone] for international calls. A replay of the call will be available for one week following the conference call. To access the replay, please dial [phone] or [phone] for international calls, and use 6138467 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 operates over 380 restaurants system-wide in 47 states and one foreign country. For more information, please visit the Company’s Web site at www.texasroadhouse.com.

Forward-looking Statements

Certain statements in this release that are not historical facts, including, without limitation, those relating to our anticipated financial performance, are forward-looking statements that involve risks and uncertainties. Such statements are based upon the current beliefs and expectations of the management of the Company. Actual results may vary materially from those contained in forward-looking statements based on a number of factors including, without limitation, the actual number of restaurants opening, the sales at these and our other company and franchise restaurants, changes in restaurant development or operating costs, such as food and labor, our ability to acquire franchise restaurants, our ability to integrate the franchise restaurants we acquire or other concepts we develop, strength of consumer spending, pending or future legal claims, conditions beyond the Company's control such as weather, natural disasters, disease outbreaks, epidemics or pandemics impacting the Company's customers or food supplies, acts of war or terrorism and other factors disclosed from time to time in the Company's filings with the U.S. Securities and Exchange Commission. Investors should take such risks into account when making investment decisions. Stockholders 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.

Texas Roadhouse, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(in thousands, except per share data)
(unaudited)
					13 Weeks Ended								26 Weeks Ended
					June 26, 2012				June 28, 2011				June 26, 2012				June 28, 2011
Revenue:
Restaurant sales					$	317,546			$	277,089			$	639,558			$	558,409
Franchise royalties and fees						2,729				2,483				5,586				4,948
Total revenue						320,275				279,572				645,144				563,357
Costs and expenses:
Restaurant operating costs:
Cost of sales						106,860				92,266				216,515				185,807
Labor						93,235				82,912				186,582				165,632
Rent						6,379				5,700				12,631				11,357
Other operating						50,555				45,938				101,784				91,219
Pre-opening						2,780				2,196				6,365				4,086
Depreciation and amortization						11,546				10,553				22,893				21,153
Impairment and closure						20				20				39				46
General and administrative						17,653				16,239				37,686				30,100
Total costs and expenses						289,028				255,824				584,495				509,400
Income from operations						31,247				23,748				60,649				53,957
Interest expense, net						568				542				1,173				1,107
Equity income from investments in
unconsolidated affiliates						121				97				162				200
Income before taxes						30,800				23,303				59,638				53,050
Provision for income taxes						9,952				6,604				19,037				15,876
Net income including noncontrolling interests (1)					$	20,848			$	16,699			$	40,601			$	37,174
Less: Net income attributable to noncontrolling interests						538				623				1,422				1,305
Net income attributable to Texas Roadhouse, Inc. and subsidiaries					$	20,310			$	16,076			$	39,179			$	35,869
Net income per common share attributable to Texas Roadhouse, Inc. and subsidiaries:
Basic					$	0.29			$	0.23			$	0.56			$	0.50
Diluted					$	0.28			$	0.22			$	0.55			$	0.49
Weighted average shares outstanding:
Basic						70,129				71,261				69,763				71,654
Diluted						71,587				72,791				71,247				73,256

(1)

Results for the 26 weeks ended June 26, 2012 include a $5.0 million charge ($3.1 million, net of tax), before the statutory income tax rate, relating to the settlement of a legal matter. The settlement is included in general and administrative costs.

Texas Roadhouse, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands)
				(unaudited)
				June 26, 2012				December 27, 2011
Cash and cash equivalents				$	77,225			$	73,731
Other current assets					34,469				38,243
Property and equipment, net					515,620				497,217
Goodwill					110,946				110,946
Intangible assets, net					8,504				9,042
Other assets					12,612				11,491
Total assets				$	759,376			$	740,670
Current maturities of long-term debt
and obligations under capital leases					321				304
Other current liabilities					122,771				136,068
Long-term debt and obligations under
capital leases, excluding current maturities					51,437				61,601
Other liabilities					46,979				46,875
Texas Roadhouse, Inc. and subsidiaries stockholders' equity					533,007				491,904
Noncontrolling interests					4,861				3,918
Total liabilities and equity				$	759,376			$	740,670

Texas Roadhouse, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
					26 Weeks Ended
					June 26, 2012					June 28, 2011
Cash flows from operating activities:
Net income including noncontrolling interests					$	40,601				$	37,174
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization						22,893					21,153
Share-based compensation expense						6,324					5,733
Other noncash adjustments						(2,991	)				2,075
Change in working capital						(6,576	)				(9,784	)
Net cash provided by operating activities						60,251					56,351
Cash flows from investing activities:
Capital expenditures - property and equipment						(42,547	)				(29,093	)
Proceeds from sale of property and equipment, including insurance proceeds						106					75
Net cash used in investing activities						(42,441	)				(29,018	)
Cash flows from financing activities:
(Repayments) of revolving credit facility, net						(10,000	)				-
Repurchase shares of common stock						-					(25,269	)
Dividends paid						(11,806	)				(5,692	)
Other financing activities						7,490					789
Net cash used in financing activities						(14,316	)				(30,172	)
Net increase (decrease) in cash and cash equivalents						3,494					(2,839	)
Cash and cash equivalents - beginning of year						73,731					82,215
Cash and cash equivalents - end of year					$	77,225				$	79,376

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
					2012				2011				vs LY				2012				2011				vs LY
Restaurant openings
Company - Texas Roadhouse						7				3			4					15				5			10
Company - Aspen Creek						0				0			0					0				0			0
Franchise - Texas Roadhouse						0				0			0					0				0			0
Total						7				3			4					15				5			10
Restaurants open at the end of the quarter
Company - Texas Roadhouse						306				276			30
Company - Aspen Creek						3				3			0
Franchise - Texas Roadhouse						72				71			1
Total						381				350			31
Company-owned restaurants
Restaurant sales					$	317,546			$	277,089			14.6		%		$	639,558			$	558,409			14.5		%
Store weeks						3,962				3,607			9.8		%			7,813				7,175			8.9		%
Comparable restaurant sales growth (1)						4.5		%		4.4		%						5.3	%			4.5	%
Texas Roadhouse restaurants only:
Comparable restaurant sales growth (1)						4.5		%		4.4		%						5.3	%			4.6	%
Average unit volume (2)					$	1,038			$	997			4.1		%		$	2,118			$	2,019			4.9		%
Weekly sales by group:
Comparable restaurants (265 units)					$	80,141
Average unit volume restaurants (16 units)					$	74,531
Restaurants less than 6 months old (25 units)					$	87,954
Restaurant operating costs (as a % of restaurant sales)
Cost of sales						33.7		%		33.3		%	35		bps			33.9	%			33.3	%		58		bps
Labor						29.4		%		29.9		%	(56	)	bps			29.2	%			29.7	%		(49	)	bps
Rent						2.0		%		2.1		%	(5	)	bps			2.0	%			2.0	%		(6	)	bps
Other operating						15.9		%		16.6		%	(66	)	bps			15.9	%			16.3	%		(42	)	bps
Total						80.9		%		81.9		%	(91	)	bps			80.9	%			81.3	%		(39	)	bps
Restaurant margins (3)						19.1		%		18.1		%	91		bps			19.1	%			18.7	%		39		bps
Franchise-owned restaurants
Franchise royalties and fees					$	2,729			$	2,483			9.9		%		$	5,586			$	4,948			12.9		%
Store weeks						936				923			1.4		%			1,872				1,846			1.4		%
Comparable restaurant sales growth (1)						4.8		%		3.6		%						5.9	%			3.8	%
Average unit volume (2)					$	1,030			$	983			4.8		%		$	2,091			$	1,972			6.1		%
Pre-opening expense					$	2,780			$	2,196			26.6		%		$	6,365			$	4,086			55.8		%
Depreciation and amortization					$	11,546			$	10,553			9.4		%		$	22,893			$	21,153			8.2		%
As a % of revenue						3.6		%		3.8		%	(17	)	bps			3.5	%			3.8	%		(21	)	bps
General and administrative expenses (4)					$	17,653			$	16,239			8.7		%		$	37,686			$	30,100			25.2		%
As a % of revenue						5.5		%		5.8		%	(30	)	bps			5.8	%			5.3	%		50		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)		Restaurant margins represent restaurant sales less restaurant operating costs (as a percentage of restaurant sales).
(4)		Results for the 26 weeks ended June 26, 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.

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