Exhibit 99.1
Texas Roadhouse, Inc. Announces Fourth Quarter 2005 Results
Louisville, KY, February 21, 2006 – Texas Roadhouse, Inc. (Nasdaq: TXRH), today announced financial results for the thirteen and fifty-two week periods ended December 27, 2005.
| | Fourth Quarter | | Year to Date | |
($000’s) | | 2005 | | 2004 | | % Change | | 2005 | | 2004 | | % Change | |
| | | | | | | | | | | | | |
Total revenue | | 117,633 | | 96,947 | | 21 | | 458,784 | | 363,011 | | 26 | |
Income from operations | | 9,711 | | 8,147 | | 19 | | 47,296 | | 38,682 | | 22 | |
Net income (loss) (1) | | 6,313 | | (331 | ) | NM | | 30,322 | | 13,832 | | 119 | |
Diluted EPS (1) | | $ | 0.09 | | $ | (0.01 | ) | NM | | $ | 0.42 | | $ | 0.24 | | 75 | |
| | | | | | | | | | | | | | | | | |
(1) 2004 net income (loss) and diluted EPS include pro forma provisions for income taxes as reflected on the Condensed Consolidated Statements of Income as, prior to our IPO, the Company operated as a limited liability company and, as such, was not subject to income taxes. In addition, in connection with the closing of our reorganization and IPO on October, 8, 2004, we recorded a cumulative net deferred tax liability of $5.0 million on that date.
Other highlights for the quarter include:
• Seven company restaurants opened;
• Comparable restaurant sales increased 3.6% at company restaurants and 1.6% at franchise restaurants. Excluding restaurant closures related to hurricanes Katrina and Rita, comparable restaurant sales increased approximately 4.0% at company restaurants;
• Restaurant operating costs, as a percentage of sales, were 10 basis points lower than the fourth quarter of 2004. Lower rent expense, due primarily to lapping the prior year’s straight line cumulative rent adjustment, and insurance costs were partially offset by higher utilities, credit card fees, food costs, and hurricane-related closure costs;
• Pre-opening expenses increased $0.5 million or 27.2% quarter-over-quarter reflecting slightly higher costs for openings in 2005 versus 2004; and
• Income from operations grew 19% versus the fourth quarter of 2004 driven principally by the addition of new restaurants.
G.J. Hart, President and Chief Executive Officer of Texas Roadhouse commented, “During the fourth quarter, we were pleased to regain the sales momentum that was temporarily lost after the hurricanes last September. Driving our comparable store gains throughout the quarter was a consistent increase in traffic complimented by a slight increase in pricing. Our pricing benefit was 2% in October but zero in November and December.” Hart continued, “Positive trends have continued during the first seven weeks of 2006, as comparable restaurant sales have increased approximately 6% which includes only 1% of pricing. On the expense side, inflation in utilities is having the most notable impact on costs although we are confident in our profitability outlook. Adding to that confidence is our 2006 development plan, which we believe is on track, positioning Texas Roadhouse and our shareholders for continued, long term gains.”
Outlook for 2006
The Company currently estimates that it will generate diluted earnings per share of at least $0.52 for 2006 excluding the impact of franchise acquisitions and stock option expense, which are discussed below. This forecast is unchanged from the Company’s third quarter 2005 release and is based on the following assumptions:
• New restaurant openings of 23 to 24 company-owned and three to four franchised;
• Comparable restaurant sales growth of approximately +3%;
• Restaurant operating costs as a percent of sales decrease of approximately 50 basis points;
• Effective tax rate of 35.3%; and
• Weighted average diluted shares of approximately 75.5 million.
Franchise Acquisitions
Texas Roadhouse acquired 11 franchise restaurants early in the first quarter of 2006. The Company estimates that these acquisitions will be accretive to 2006 diluted earnings per share by approximately $0.02 prior to any acquisition-related one-time charges. As previously noted in the Company’s third quarter earnings release, such charges relate to the application of EITF 04-1, Accounting for Preexisting Relationships between the Parties to a Business Combination. In the first quarter of 2006, the Company will record a one-time, non-cash pre-tax charge of approximately $0.8 million relating to the acquisition of these 11 restaurants. The Company estimates the acquisitions will have the following full year impact to its financial statements, excluding the one-time charge:
• Increase in restaurant sales of approximately $42.0 million;
• Reduction in franchise royalties of approximately $1.4 million;
• No change in restaurant operating costs as a percentage of sales;
• Increase in general and administrative expenses of $0.1 million;
• Increase in depreciation and amortization of approximately $2.0 million;
• Increase in interest expense of approximately $1.0 million; and,
• Increase in weighted average diluted shares of 2.5 million.
Texas Roadhouse continues to evaluate opportunities for acquiring additional franchise restaurants.
Stock Option Expense
The Company will begin expensing stock options beginning in 2006 per the adoption of Statement of Financial Accounting Standards No. 123R, Share-Based Payment. The Company expects the impact on diluted EPS to be approximately $0.08 to $0.09 in 2006, $0.03 higher than the Company’s previous guidance. The change in guidance is driven by an increase of approximately 280 basis points to the Company’s effective tax rate resulting from the potential non-deductibility of certain incentive stock options. Texas Roadhouse grants both incentive stock
options (ISO’s) and nonqualified stock options. All compensation expense resulting from the exercise of nonqualified stock options results in a tax benefit; however, the tax benefit of compensation expense relating to ISO’s ultimately depends on the timing of when the option is exercised and the acquired shares are subsequently sold.
Conference Call
The Company is hosting a conference call today, February 21, 2006, at 5:30 p.m. Eastern Time to discuss these results. The dial-in number is (866) 383-8108 and the pass code is 73511834. A replay of the call will be available until February 28, 2006. To access the replay, please dial (888) 286-8010, and use 92474166 as the pass code.
There will be a simultaneous web cast conducted at the Company’s web site at www.texasroadhouse.com.
About the Company
Texas Roadhouse is a casual dining concept that first opened in 1993 and today operates over 220 restaurants system-wide in 41 states. For more information, please visit the Company’s website 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 for the full year 2006, 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 during full year 2006, the sales at these and our other company-owned and franchised restaurants, our ability to control other restaurant operating costs, our ability to complete the acquisition of franchise restaurants, our ability to integrate the franchise restaurants which we acquire 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. 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.
# # #
Contacts:
Investor Relations
Scott Colosi
502-515-7300
Media
Juli Hart
502-515-7235
Texas Roadhouse, Inc.
Supplemental Financial and Operating Information
(in thousands)
| | Fourth Quarter | | Change | | Year to Date | | Change | |
| | 2005 | | 2004 | | vs LY | | 2005 | | 2004 | | vs LY | |
| | | | | | | | | | | | | |
Restaurant openings | | | | | | | | | | | | | |
Company | | 7 | | 7 | | — | | 20 | | 19 | | 1 | |
Franchise | | 0 | | 4 | | (4 | ) | 8 | | 12 | | (4 | ) |
Total | | 7 | | 11 | | (4 | ) | 28 | | 31 | | (3 | ) |
| | | | | | | | | | | | | |
Restaurant acquisitions (1) | | | | | | | | | | | | | |
Company | | 0 | | 1 | | (1 | ) | 0 | | 1 | | (1 | ) |
Franchise | | 0 | | (1 | ) | 1 | | 0 | | (1 | ) | 1 | |
Total | | 0 | | 0 | | — | | 0 | | 0 | | — | |
| | | | | | | | | | | | | |
Restaurants open at the end of the quarter | | | | | | | | | | | | | |
Company | | 127 | | 107 | | 20 | | | | | | | |
Franchise | | 94 | | 86 | | 8 | | | | | | | |
Total | | 221 | | 193 | | 28 | | | | | | | |
| | | | | | | | | | | | | |
Company-owned restaurants | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Restaurant sales | | $ | 114,984 | | $ | 94,538 | | 21.6 | % | $ | 448,341 | | $ | 354,190 | | 26.6 | % |
Store weeks | | 1,594 | | 1,338 | | 19.1 | % | 5,984 | | 4,920 | | 21.6 | % |
Comparable restaurant sales growth (2) | | 3.6 | % | 6.5 | % | | | 5.6 | % | 7.6 | % | | |
Average unit volume (3) | | $ | 933 | | $ | 908 | | 2.8 | % | $ | 3,891 | | $ | 3,679 | | 5.8 | % |
| | | | | | | | | | | | | |
Restaurant costs (as a % of restaurant sales) | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Cost of sales | | 35.4 | % | 35.2 | % | 20 | bps | 35.2 | % | 34.9 | % | 30 | bps |
Labor | | 27.5 | % | 27.3 | % | 20 | bps | 27.2 | % | 27.4 | % | (20 | )bps |
Rent | | 1.9 | % | 3.3 | % | (140 | )bps | 1.9 | % | 2.3 | % | (40 | )bps |
Other operating | | 17.7 | % | 16.8 | % | 90 | bps | 16.7 | % | 16.4 | % | 30 | bps |
Total | | 82.5 | % | 82.6 | % | (10 | )bps | 81.0 | % | 81.0 | % | — | bps |
| | | | | | | | | | | | | |
Franchise restaurants | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Franchise royalties and fees | | $ | 2,649 | | $ | 2,409 | | 10.0 | % | $ | 10,443 | | $ | 8,821 | | 18.4 | % |
Store weeks | | 1,222 | | 1,081 | | 13.0 | % | 4,698 | | 4,076 | | 15.3 | % |
Comparable restaurant sales growth (2) | | 1.6 | % | 6.5 | % | | | 4.4 | % | 7.0 | % | | |
Average unit volume (3) | | $ | 879 | | $ | 864 | | 1.7 | % | $ | 3,669 | | $ | 3,519 | | 4.3 | % |
| | | | | | | | | | | | | |
Pre-opening expense | | 2,133 | | 1,677 | | 27.2 | % | 6,178 | | 5,237 | | 18.0 | % |
| | | | | | | | | | | | | |
General and administrative expenses | | 6,801 | | 5,728 | | 18.7 | % | 27,154 | | 21,055 | | 29.0 | % |
As a % of revenue | | 5.8 | % | 5.9 | % | (13 | )bps | 5.9 | % | 5.8 | % | 12 | bps |
| | | | | | | | | | | | | |
Depreciation and amortization expense | | 4,041 | | 3,313 | | 22.0 | % | 14,582 | | 11,005 | | 32.5 | % |
As a % of revenue | | 3.4 | % | 3.4 | % | 2 | bps | 3.2 | % | 3.0 | % | 15 | bps |
| | | | | | | | | | | | | |
Interest expense | | 102 | | 1,495 | | -93.2 | % | 263 | | 4,654 | | -94.3 | % |
Minority interest | | 145 | | (305 | ) | -147.5 | % | 549 | | 5,278 | | -89.6 | % |
(1) Represents the acquisition of the Longview, Texas restaurant on October 8, 2004, which was a franchise restaurant that was acquired as part of our initial public offering and associated corporate reorganization.
(2) Comparable restaurant sales growth includes sales from restaurants open 18 months as of the beginning of the measurement period.
(3) Average unit volume includes sales from restaurants open six months as of the beginning of the measurement period.
Texas Roadhouse, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(in thousands, except per share data)
| | 13 Weeks Ended | | 52 Weeks Ended | |
| | December 27,
2005 | | December 28,
2004 | | December 27,
2005 | | December 28,
2004 | |
Revenue: | | | | | | | | | |
Restaurant sales | | $ | 114,984 | | $ | 94,538 | | $ | 448,341 | | $ | 354,190 | |
Franchise royalties and fees | | 2,649 | | 2,409 | | 10,443 | | 8,821 | |
| | | | | | | | | |
Total revenue | | 117,633 | | 96,947 | | 458,784 | | 363,011 | |
| | | | | | | | | |
Costs and expenses: | | | | | | | | | |
Restaurant operating costs: | | | | | | | | | |
Cost of sales | | 40,729 | | 33,258 | | 158,004 | | 123,531 | |
Labor | | 31,659 | | 25,818 | | 122,090 | | 97,196 | |
Rent | | 2,173 | | 3,142 | | 8,397 | | 8,261 | |
Other operating | | 20,386 | | 15,864 | | 75,083 | | 58,044 | |
Pre-opening | | 2,133 | | 1,677 | | 6,178 | | 5,237 | |
Depreciation and amortization | | 4,041 | | 3,313 | | 14,582 | | 11,005 | |
General and administrative | | 6,801 | | 5,728 | | 27,154 | | 21,055 | |
| | | | | | | | | |
Total costs and expenses | | 107,922 | | 88,800 | | 411,488 | | 324,329 | |
| | | | | | | | | |
Income from operations | | 9,711 | | 8,147 | | 47,296 | | 38,682 | |
| | | | | | | | | |
Interest expense, net | | 102 | | 1,495 | | 263 | | 4,654 | |
Minority interest | | 145 | | (305 | ) | 549 | | 5,278 | |
Equity income from investments in unconsolidated affiliates | | (43 | ) | (18 | ) | (130 | ) | (110 | ) |
| | | | | | | | | |
Income before taxes | | 9,507 | | 6,975 | | 46,614 | | 28,860 | |
Provision for income taxes (1) | | 3,194 | | 7,159 | | 16,292 | | 7,159 | |
Net income (loss) | | $ | 6,313 | | $ | (184 | ) | $ | 30,322 | | $ | 21,701 | |
| | | | Pro forma | | | | Pro forma | |
Historical net income (loss) | | | | $ | (184 | ) | | | $ | 21,701 | |
Pro forma provision for income taxes | | | | 147 | | | | 7,869 | |
| | | | | | | | | |
Net income (loss) adjusted for pro forma provision for income taxes | | | | $ | (331 | ) | | | $ | 13,832 | |
| | | | | | | | | |
Net income (loss) per common share: | | | | | | | | | |
Basic | | $ | 0.09 | | $ | (0.01 | ) | $ | 0.44 | | $ | 0.27 | |
| | | | | | | | | |
Diluted | | $ | 0.09 | | $ | (0.01 | ) | $ | 0.42 | | $ | 0.24 | |
| | | | | | | | | |
Weighted average shares outstanding (2): | | | | | | | | | |
Basic | | 70,214 | | 64,890 | | 68,677 | | 51,890 | |
| | | | | | | | | |
Diluted | | 73,556 | | 70,216 | | 72,565 | | 56,514 | |
(1) Provision for income taxes for the quarter and year ended December 28, 2004 includes a cumulative net deferred income tax provision of $5.0 million.
(2) The Company completed a two-for-one stock split on September 23, 2005 in the form of a 100% stock dividend. All share and per share information included in this release for all periods presented have been adjusted to retroactively reflect the stock split.
