10-Q 1 txrh-20220329x10q.htm 10-Q
0001289460--12-272022Q10069382418684597690false00012894602022-03-1700012894602019-05-310001289460us-gaap:RetainedEarningsMember2022-03-290001289460us-gaap:ParentMember2022-03-290001289460us-gaap:NoncontrollingInterestMember2022-03-290001289460us-gaap:AdditionalPaidInCapitalMember2022-03-290001289460us-gaap:RetainedEarningsMember2021-12-280001289460us-gaap:ParentMember2021-12-280001289460us-gaap:NoncontrollingInterestMember2021-12-280001289460us-gaap:AdditionalPaidInCapitalMember2021-12-280001289460us-gaap:RetainedEarningsMember2021-03-300001289460us-gaap:ParentMember2021-03-300001289460us-gaap:NoncontrollingInterestMember2021-03-300001289460us-gaap:AdditionalPaidInCapitalMember2021-03-300001289460us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-03-300001289460us-gaap:RetainedEarningsMember2020-12-290001289460us-gaap:ParentMember2020-12-290001289460us-gaap:NoncontrollingInterestMember2020-12-290001289460us-gaap:AdditionalPaidInCapitalMember2020-12-290001289460us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-12-290001289460us-gaap:CommonStockMember2021-12-292022-03-290001289460us-gaap:CommonStockMember2020-12-302021-03-300001289460us-gaap:FranchisedUnitsMembertxrh:OfficersDirectorsAndShareholdersMember2021-12-292022-03-290001289460us-gaap:FranchisedUnitsMembertxrh:OfficersDirectorsAndShareholdersMember2020-12-302021-03-300001289460us-gaap:FoodAndBeverageMembertxrh:TexasRoadhouseSegmentMember2021-12-292022-03-290001289460us-gaap:FoodAndBeverageMembertxrh:OtherSegmentMember2021-12-292022-03-290001289460us-gaap:FoodAndBeverageMembertxrh:BubbaS33SegmentMember2021-12-292022-03-290001289460us-gaap:FranchiseMember2021-12-292022-03-290001289460us-gaap:FoodAndBeverageMember2021-12-292022-03-290001289460txrh:FranchiseRoyaltyMember2021-12-292022-03-290001289460txrh:FranchiseFeesMember2021-12-292022-03-290001289460us-gaap:FoodAndBeverageMembertxrh:TexasRoadhouseSegmentMember2020-12-302021-03-300001289460us-gaap:FoodAndBeverageMembertxrh:OtherSegmentMember2020-12-302021-03-300001289460us-gaap:FoodAndBeverageMembertxrh:BubbaS33SegmentMember2020-12-302021-03-300001289460us-gaap:FranchiseMember2020-12-302021-03-300001289460us-gaap:FoodAndBeverageMember2020-12-302021-03-300001289460txrh:FranchiseRoyaltyMember2020-12-302021-03-300001289460txrh:FranchiseFeesMember2020-12-302021-03-300001289460us-gaap:RetainedEarningsMember2020-12-302021-03-300001289460txrh:StockRepurchaseProgramMember2021-12-292022-03-290001289460txrh:PreviousStockRepurchaseProgramMember2021-12-292022-03-290001289460us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-12-302021-03-300001289460txrh:DomesticFranchiseRestaurantsUnitsMemberus-gaap:FranchisedUnitsMemberus-gaap:GeographicDistributionDomesticMemberus-gaap:UnconsolidatedPropertiesMember2022-03-290001289460us-gaap:FranchisedUnitsMemberus-gaap:GeographicDistributionForeignMember2022-03-290001289460us-gaap:FranchisedUnitsMemberus-gaap:GeographicDistributionDomesticMember2022-03-290001289460us-gaap:FranchisedUnitsMembertxrh:OfficersDirectorsAndShareholdersMember2022-03-290001289460us-gaap:EntityOperatedUnitsMemberus-gaap:WhollyOwnedPropertiesMember2022-03-290001289460us-gaap:EntityOperatedUnitsMemberus-gaap:ConsolidatedPropertiesMember2022-03-290001289460us-gaap:ConsolidatedPropertiesMembertxrh:OfficersDirectorsAndShareholdersMember2022-03-290001289460us-gaap:FranchisedUnitsMember2022-03-290001289460us-gaap:EntityOperatedUnitsMember2022-03-290001289460txrh:DomesticFranchiseRestaurantsUnitsMemberus-gaap:FranchisedUnitsMemberus-gaap:GeographicDistributionDomesticMemberus-gaap:UnconsolidatedPropertiesMember2021-03-300001289460us-gaap:FranchisedUnitsMemberus-gaap:GeographicDistributionForeignMember2021-03-300001289460us-gaap:FranchisedUnitsMemberus-gaap:GeographicDistributionDomesticMember2021-03-300001289460us-gaap:FranchisedUnitsMembertxrh:OfficersDirectorsAndShareholdersMember2021-03-300001289460us-gaap:EntityOperatedUnitsMemberus-gaap:WhollyOwnedPropertiesMember2021-03-300001289460us-gaap:EntityOperatedUnitsMemberus-gaap:ConsolidatedPropertiesMember2021-03-300001289460us-gaap:ConsolidatedPropertiesMembertxrh:OfficersDirectorsAndShareholdersMember2021-03-300001289460txrh:NonTexasRoadhouseRestaurantsMemberus-gaap:UnconsolidatedPropertiesMember2021-03-300001289460us-gaap:FranchisedUnitsMember2021-03-300001289460us-gaap:EntityOperatedUnitsMember2021-03-300001289460us-gaap:NoncontrollingInterestMember2021-12-292022-03-290001289460us-gaap:NoncontrollingInterestMember2020-12-302021-03-300001289460srt:MaximumMemberus-gaap:LeaseAgreementsMember2022-03-290001289460srt:MaximumMemberus-gaap:LeaseAgreementsMember2021-12-280001289460srt:MinimumMemberus-gaap:RevolvingCreditFacilityMember2021-12-292022-03-290001289460srt:MaximumMemberus-gaap:RevolvingCreditFacilityMember2021-12-292022-03-290001289460us-gaap:RevolvingCreditFacilityMember2021-12-280001289460txrh:ChinaJointVentureMemberus-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsNonrecurringMember2020-12-302021-03-300001289460us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsNonrecurringMember2021-12-292022-03-290001289460us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsNonrecurringMember2020-12-302021-03-300001289460srt:MinimumMembertxrh:DomesticFranchiseRestaurantsUnitsMemberus-gaap:FranchisedUnitsMemberus-gaap:UnconsolidatedPropertiesMember2022-03-290001289460srt:MaximumMembertxrh:DomesticFranchiseRestaurantsUnitsMemberus-gaap:FranchisedUnitsMemberus-gaap:UnconsolidatedPropertiesMember2022-03-290001289460txrh:ChinaJointVentureMemberus-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsNonrecurringMember2021-12-280001289460srt:MinimumMembertxrh:DomesticFranchiseRestaurantsUnitsMemberus-gaap:FranchisedUnitsMemberus-gaap:UnconsolidatedPropertiesMember2021-03-300001289460srt:MaximumMembertxrh:DomesticFranchiseRestaurantsUnitsMemberus-gaap:FranchisedUnitsMemberus-gaap:UnconsolidatedPropertiesMember2021-03-300001289460txrh:NonTexasRoadhouseRestaurantsUnitsMembertxrh:NonTexasRoadhouseRestaurantsMemberus-gaap:UnconsolidatedPropertiesMember2021-03-300001289460us-gaap:RetainedEarningsMember2021-12-292022-03-290001289460us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2022-03-290001289460us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2021-12-280001289460srt:MinimumMemberus-gaap:RevolvingCreditFacilityMemberus-gaap:LondonInterbankOfferedRateLIBORMember2022-03-290001289460srt:MaximumMemberus-gaap:RevolvingCreditFacilityMemberus-gaap:LondonInterbankOfferedRateLIBORMember2022-03-290001289460us-gaap:CreditCardMember2021-12-292022-03-290001289460us-gaap:CreditCardMember2020-12-302021-03-300001289460us-gaap:CreditCardMember2022-03-290001289460us-gaap:CreditCardMember2021-12-280001289460us-gaap:CommonStockMember2022-03-290001289460us-gaap:CommonStockMember2021-12-280001289460us-gaap:CommonStockMember2021-03-300001289460us-gaap:CommonStockMember2020-12-2900012894602021-03-3000012894602020-12-290001289460txrh:SevenFranchiseRestaurantsMember2022-03-290001289460txrh:SevenFranchiseRestaurantsMember2021-12-292021-12-290001289460us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsNonrecurringMember2021-12-280001289460us-gaap:CarryingReportedAmountFairValueDisclosureMembertxrh:LandAndBuildingRelocatedMember2021-12-280001289460us-gaap:RestrictedStockMember2021-12-292022-03-290001289460us-gaap:RestrictedStockMember2020-12-302021-03-300001289460us-gaap:ParentMember2021-12-292022-03-290001289460us-gaap:AdditionalPaidInCapitalMember2021-12-292022-03-290001289460us-gaap:ParentMember2020-12-302021-03-300001289460us-gaap:AdditionalPaidInCapitalMember2020-12-302021-03-300001289460us-gaap:FranchiseRightsMember2021-12-292022-03-290001289460us-gaap:LeaseAgreementsMember2022-03-290001289460us-gaap:LeaseAgreementsMember2021-12-280001289460us-gaap:RevolvingCreditFacilityMember2022-03-290001289460us-gaap:RevolvingCreditFacilityMember2021-03-300001289460txrh:TexasRoadhouseSegmentMember2021-12-292022-03-290001289460txrh:OtherSegmentMember2021-12-292022-03-290001289460txrh:BubbaS33SegmentMember2021-12-292022-03-290001289460txrh:TexasRoadhouseSegmentMember2020-12-302021-03-300001289460txrh:OtherSegmentMember2020-12-302021-03-300001289460txrh:BubbaS33SegmentMember2020-12-302021-03-3000012894602020-12-302021-03-3000012894602022-03-2900012894602021-12-2800012894602022-04-2700012894602021-12-292022-03-29xbrli:sharesiso4217:USDtxrh:itemiso4217:USDxbrli:sharesxbrli:puretxrh:restaurant

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 29, 2022

OR

  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from           to

Commission File Number 000-50972

Texas Roadhouse, Inc.

(Exact name of registrant specified in its charter)

Delaware

20-1083890

(State or other jurisdiction of

(IRS Employer

incorporation or organization)

Identification Number)

6040 Dutchmans Lane, Suite 200

Louisville, Kentucky 40205

(Address of principal executive offices) (Zip Code)

(502) 426-9984

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.001 per share

TXRH

NASDAQ Global Select Market

Indicate by check mark whether registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes     No  .

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulations S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes     No  .

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer  

Accelerated Filer  

Non-accelerated Filer  

Smaller Reporting Company  

Emerging Growth Company  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes    No  .

The number of shares of common stock outstanding were 68,167,949 on April 27, 2022.

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION

Item 1 — Financial Statements (Unaudited) — Texas Roadhouse, Inc. and Subsidiaries

3

Condensed Consolidated Balance Sheets — March 29, 2022 and December 28, 2021

3

Condensed Consolidated Statements of Income and Comprehensive Income — For the 13 Weeks Ended March 29, 2022 and March 30, 2021

4

Condensed Consolidated Statement of Stockholders’ Equity — For the 13 Weeks Ended March 29, 2022 and March 30, 2021

5

Condensed Consolidated Statements of Cash Flows — For the 13 Weeks Ended March 29, 2022 and March 30, 2021

6

Notes to Condensed Consolidated Financial Statements

7

Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations

15

Item 3 — Quantitative and Qualitative Disclosures About Market Risk

28

Item 4 — Controls and Procedures

29

PART II. OTHER INFORMATION

Item 1 — Legal Proceedings

30

Item 1A — Risk Factors

30

Item 2 — Unregistered Sales of Equity Securities and Use of Proceeds

30

Item 3 — Defaults Upon Senior Securities

30

Item 4 — Mine Safety Disclosures

30

Item 5 — Other Information

31

Item 6 — Exhibits

31

Signatures

32

2

PART I — FINANCIAL INFORMATION

ITEM 1 — FINANCIAL STATEMENTS

Texas Roadhouse, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands, except share and per share data)

(unaudited)

    

March 29, 2022

    

December 28, 2021

 

Assets

Current assets:

Cash and cash equivalents

$

325,723

$

335,645

Receivables, net of allowance for doubtful accounts of $29 at March 29, 2022 and $17 at December 28, 2021

 

45,152

 

161,358

Inventories, net

 

30,043

 

31,595

Prepaid income taxes

 

2,668

 

10,701

Prepaid expenses and other current assets

 

22,401

 

24,226

Total current assets

 

425,987

 

563,525

Property and equipment, net of accumulated depreciation of $896,035 at March 29, 2022 and $869,375 at December 28, 2021

 

1,181,707

 

1,162,441

Operating lease right-of-use assets, net

605,146

578,413

Goodwill

 

144,334

 

127,001

Intangible assets, net of accumulated amortization of $15,764 at March 29, 2022 and $15,092 at December 28, 2021

 

6,848

 

1,520

Other assets

 

73,298

 

79,052

Total assets

$

2,437,320

$

2,511,952

Liabilities and Stockholders’ Equity

Current liabilities:

Current portion of operating lease liabilities

$

23,845

$

21,952

Accounts payable

 

100,093

 

95,234

Deferred revenue-gift cards

 

221,479

 

300,657

Accrued wages and payroll taxes

 

79,834

 

64,716

Income taxes payable

3,500

85

Accrued taxes and licenses

 

33,690

 

33,375

Other accrued liabilities

 

79,333

 

86,125

Total current liabilities

 

541,774

 

602,144

Operating lease liabilities, net of current portion

649,069

622,892

Long-term debt

 

100,000

 

100,000

Restricted stock and other deposits

 

8,167

 

8,027

Deferred tax liabilities, net

 

14,154

 

11,734

Other liabilities

 

88,897

 

93,671

Total liabilities

 

1,402,061

 

1,438,468

Texas Roadhouse, Inc. and subsidiaries stockholders’ equity:

Preferred stock ($0.001 par value, 1,000,000 shares authorized; no shares issued or outstanding)

 

 

Common stock ($0.001 par value, 100,000,000 shares authorized, 68,459,769 and 69,382,418 shares issued and outstanding at March 29, 2022 and December 28, 2021, respectively)

 

68

 

69

Additional paid-in-capital

 

32,754

 

114,504

Retained earnings

 

986,958

 

943,551

Total Texas Roadhouse, Inc. and subsidiaries stockholders’ equity

 

1,019,780

 

1,058,124

Noncontrolling interests

 

15,479

 

15,360

Total equity

 

1,035,259

 

1,073,484

Total liabilities and equity

$

2,437,320

$

2,511,952

See accompanying notes to condensed consolidated financial statements.

3

Texas Roadhouse, Inc. and Subsidiaries

Condensed Consolidated Statements of Income and Comprehensive Income

(in thousands, except per share data)

(unaudited)

13 Weeks Ended

    

March 29, 2022

    

March 30, 2021

    

 

Revenue:

Restaurant and other sales

$

980,972

$

794,923

Franchise royalties and fees

6,514

5,706

Total revenue

 

987,486

 

800,629

Costs and expenses:

Restaurant operating costs (excluding depreciation and amortization shown separately below):

Food and beverage

 

337,396

251,482

Labor

 

321,871

258,036

Rent

 

16,368

14,452

Other operating

 

144,154

123,379

Pre-opening

 

4,291

4,268

Depreciation and amortization

 

33,620

30,869

Impairment and closure, net

 

(646)

504

General and administrative

 

40,294

36,712

Total costs and expenses

 

897,348

 

719,702

Income from operations

 

90,138

 

80,927

Interest expense, net

 

397

1,460

Equity income (loss) from investments in unconsolidated affiliates

 

334

(217)

Income before taxes

$

90,075

$

79,250

Income tax expense

 

12,747

12,820

Net income including noncontrolling interests

77,328

66,430

Less: Net income attributable to noncontrolling interests

 

2,126

2,280

Net income attributable to Texas Roadhouse, Inc. and subsidiaries

$

75,202

$

64,150

Other comprehensive loss, net of tax:

Foreign currency translation adjustment, net of tax of $- and $4, respectively

(12)

Total comprehensive income

$

75,202

$

64,138

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

Basic

$

1.09

$

0.92

Diluted

$

1.08

$

0.91

Weighted average shares outstanding:

Basic

 

69,086

69,637

Diluted

 

69,373

70,137

Cash dividends declared per share

$

0.46

$

See accompanying notes to condensed consolidated financial statements.

4

Texas Roadhouse, Inc. and Subsidiaries

Condensed Consolidated Statement of Stockholders' Equity

(in thousands, except share and per share data)

(unaudited)

For the 13 Weeks Ended March 29, 2022

    

    

    

    

    

Accumulated

    

Total Texas

    

    

 

Additional

Other

Roadhouse, Inc.

 

Par

Paid-in-

Retained

Comprehensive

and

Noncontrolling

 

Shares

Value

Capital

Earnings

Loss

Subsidiaries

Interests

Total

 

Balance, December 28, 2021

 

69,382,418

$

69

$

114,504

$

943,551

$

$

1,058,124

$

15,360

$

1,073,484

Net income

 

 

 

 

75,202

 

 

75,202

 

2,126

 

77,328

Distributions to noncontrolling interest holders

 

 

 

 

 

 

 

(2,007)

 

(2,007)

Dividends declared ($0.46 per share)

 

 

 

 

(31,795)

 

 

(31,795)

 

 

(31,795)

Shares issued under share-based compensation plans including tax effects

 

204,968

 

 

 

 

 

 

 

Indirect repurchase of shares for minimum tax withholdings

 

(66,999)

 

 

(6,166)

 

 

 

(6,166)

 

 

(6,166)

Repurchase of shares of common stock

(1,060,618)

(1)

(84,704)

(84,705)

(84,705)

Share-based compensation

 

 

 

9,120

 

 

 

9,120

 

 

9,120

Balance, March 29, 2022

 

68,459,769

$

68

$

32,754

$

986,958

$

$

1,019,780

$

15,479

$

1,035,259

For the 13 Weeks Ended March 30, 2021

    

    

    

    

    

Accumulated

    

Total Texas

    

    

Additional

Other

Roadhouse, Inc.

Par

Paid-in-

Retained

Comprehensive

and

Noncontrolling

Shares

Value

Capital

Earnings

Loss

Subsidiaries

Interests

Total

Balance, December 29, 2020

 

69,561,861

$

70

$

145,626

$

781,915

$

(106)

$

927,505

$

15,546

$

943,051

Net income

 

 

 

 

64,150

 

 

64,150

 

2,280

 

66,430

Other comprehensive loss, net of tax

(12)

(12)

(12)

Distributions to noncontrolling interest holders

 

 

 

 

 

 

 

(1,429)

 

(1,429)

Shares issued under share-based compensation plans including tax effects

 

269,918

 

 

 

 

 

 

 

Indirect repurchase of shares for minimum tax withholdings

 

(89,259)

 

 

(7,930)

 

 

 

(7,930)

 

 

(7,930)

Share-based compensation

 

 

 

9,908

 

 

 

9,908

 

 

9,908

Balance, March 30, 2021

 

69,742,520

$

70

$

147,604

$

846,065

$

(118)

$

993,621

$

16,397

$

1,010,018

See accompanying notes to condensed consolidated financial statements

5

Texas Roadhouse, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

13 Weeks Ended

    

March 29, 2022

    

March 30, 2021

Cash flows from operating activities:

Net income including noncontrolling interests

$

77,328

$

66,430

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

 

33,620

 

30,869

Deferred income taxes

 

2,630

 

1,025

Loss on disposition of assets

 

1,151

 

324

Impairment and closure costs

 

26

 

494

Equity (income) loss from investments in unconsolidated affiliates

 

(334)

 

217

Distributions of income received from investments in unconsolidated affiliates

 

332

 

122

Provision for doubtful accounts

 

12

 

9

Share-based compensation expense

 

9,120

 

9,908

Changes in operating working capital:

Receivables

 

116,419

 

60,791

Inventories

 

1,820

 

(998)

Prepaid expenses and other current assets

 

651

 

874

Other assets

 

5,756

 

(2,786)

Accounts payable

 

6,275

 

19,937

Deferred revenue—gift cards

 

(80,009)

 

(50,454)

Accrued wages and payroll taxes

 

15,118

 

17,896

Prepaid income taxes and income taxes payable

 

11,447

 

11,055

Accrued taxes and licenses

 

315

 

7,559

Other accrued liabilities

 

(10,676)

 

(643)

Operating lease right-of-use assets and lease liabilities

 

1,542

 

1,520

Other liabilities

 

(4,774)

 

3,864

Net cash provided by operating activities

 

187,769

 

178,013

Cash flows from investing activities:

Capital expenditures—property and equipment

 

(49,029)

(38,666)

Acquisition of franchise restaurants, net of cash acquired

(26,437)

Proceeds from sale of property and equipment

2,188

Proceeds from sale leaseback transactions

 

 

2,192

Net cash used in investing activities

 

(73,278)

 

(36,474)

Cash flows from financing activities:

Distributions to noncontrolling interest holders

 

(2,007)

(1,429)

Proceeds from restricted stock and other deposits, net

 

260

311

Indirect repurchase of shares for minimum tax withholdings

 

(6,166)

(7,930)

Repurchase of shares of common stock

 

(84,705)

Dividends paid to shareholders

 

(31,795)

Net cash used in financing activities

 

(124,413)

 

(9,048)

Net (decrease) increase in cash and cash equivalents

 

(9,922)

 

132,491

Cash and cash equivalents—beginning of period

 

335,645

363,155

Cash and cash equivalents—end of period

$

325,723

$

495,646

Supplemental disclosures of cash flow information:

Interest paid, net of amounts capitalized

$

381

$

1,195

Income taxes (refunded) paid

$

(1,317)

$

740

Capital expenditures included in current liabilities

$

25,006

$

14,519

See accompanying notes to condensed consolidated financial statements.

6

Texas Roadhouse, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(tabular amounts in thousands, except share and per share data)

(unaudited)

(1)  Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include the accounts of Texas Roadhouse, Inc. ("TRI"), our wholly-owned subsidiaries and subsidiaries in which we have a controlling interest (collectively the "Company," "we," "our" and/or "us") as of March 29, 2022 and December 28, 2021 and for the 13 weeks ended March 29, 2022 and March 30, 2021.

As of March 29, 2022, we owned and operated 576 restaurants and franchised an additional 96 restaurants in 49 states and ten foreign countries. Of the 576 company restaurants that were operating at March 29, 2022, there were 556 wholly-owned restaurants and 20 majority-owned restaurants. Of the 96 franchise restaurants, there were 63 domestic restaurants and 33 international restaurants.

As of March 30, 2021, we owned and operated 540 restaurants and franchised an additional 97 restaurants in 49 states and ten foreign countries. Of the 540 company restaurants that were operating at March 30, 2021, there were 520 wholly-owned restaurants and 20 majority-owned restaurants. Of the 97 franchise restaurants, there were 69 domestic restaurants and 28 international restaurants.

The Company has been subject to risks and uncertainties as a result of the global COVID-19 pandemic (the "pandemic"). These include federal, state and local restrictions on restaurants, some of which limited capacity or seating in the dining rooms while others allowed to-go or curbside service only. As of March 29, 2022, all of our domestic company and franchise locations were operating without restriction. As of March 30, 2021, all of our domestic company and franchise locations had re-opened their dining rooms, many of which were operating under various limited capacity restrictions.

As of March 29, 2022 and March 30, 2021, we owned a 5.0% to 10.0% equity interest in 24 domestic franchise restaurants. Additionally, as of March 30, 2021, we owned a 40% equity interest in four non-Texas Roadhouse restaurants as part of a joint venture agreement with a casual dining restaurant operator in China.

The unconsolidated restaurants are accounted for using the equity method. Our investments in these unconsolidated affiliates are included in other assets in our unaudited condensed consolidated balance sheets, and we record our percentage share of net income earned by these unconsolidated affiliates in our unaudited condensed consolidated statements of income and comprehensive income under equity income (loss) from investments in unconsolidated affiliates. The investment balance related to our joint venture agreement in China was fully impaired in late 2021 as the related restaurants closed. All significant intercompany balances and transactions for these unconsolidated restaurants as well as the entities whose accounts have been consolidated have been eliminated.

We have made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reporting of revenue and expenses during the periods to prepare these unaudited condensed consolidated financial statements in conformity with U.S. generally accepted accounting principles ("GAAP"). Significant items subject to such estimates and assumptions include the carrying amount of property and equipment, goodwill, obligations related to insurance reserves, leases and leasehold improvements, legal reserves, gift card breakage and third party fees and income taxes. Actual results could differ from those estimates.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, necessary to present fairly our consolidated financial position, results of operations and cash flows for the periods presented. The unaudited condensed consolidated financial statements have been prepared in accordance with GAAP, except that certain information and footnotes have been condensed or omitted pursuant to rules and regulations of the Securities and Exchange Commission. Operating results for the 13 weeks ended March 29, 2022 are not necessarily indicative of the results that may be expected for the year

7

ending December 27, 2022. The unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 28, 2021.

Our significant interim accounting policies include the recognition of income taxes using an estimated annual effective tax rate.

(2) Recent Accounting Pronouncements

Reference Rate Reform

(Accounting Standards Update 2020-04, "ASU 2020-04")

In March 2020, the Financial Accounting Standards Board issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides temporary optional expedients and exceptions to the current guidance on contract modifications and hedge accounting. These changes are intended to simplify the market transition from the London Interbank Offered Rate ("LIBOR") and other interbank offered rates to alternative reference rates. This guidance is effective upon issuance to modifications made as early as the beginning of the interim period through December 31, 2022. We are currently assessing the impact of this new standard on our condensed consolidated financial statements.

(3)   Long-term Debt

On May 4, 2021, we entered into an agreement to amend our revolving credit facility with a syndicate of commercial lenders led by JPMorgan Chase Bank, N.A. and PNC Bank, N.A. The amended revolving credit facility remains an unsecured, revolving credit agreement and has a borrowing capacity of up to $300.0 million with the option to increase by an additional $200.0 million subject to certain limitations, including approval by the syndicate of lenders. The amendment also extended the maturity date to May 1, 2026.

The terms of the amendment require us to pay interest on outstanding borrowings at LIBOR plus a margin of 0.875% to 1.875% and pay a commitment fee of 0.125% to 0.30% per year on any unused portion of the revolving credit facility, in each case depending on our leverage ratio. The amendment also provides an Alternate Base Rate that may be substituted for LIBOR.

As of March 29, 2022 and December 28, 2021, we had $100.0 million outstanding on the amended revolving credit facility and $189.1 million of availability, net of $10.9 million of outstanding letters of credit. As of March 30, 2021, we had $240.0 million outstanding on the revolving credit facility prior to the May 4, 2021 amendment. These outstanding amounts are included as long-term debt on our unaudited condensed consolidated balance sheets.

The weighted-average interest rate for the $100.0 million outstanding as of March 29, 2022 was 1.20%. ​The weighted-average interest rate for the $240.0 million outstanding as of March 30, 2021 was 1.95%.

The lenders’ obligation to extend credit pursuant to the amended revolving credit facility depends on us maintaining certain financial covenants. We were in compliance with all financial covenants as of March 29, 2022.

8

(4) Revenue

The following table disaggregates our revenue by major source (in thousands):

13 weeks ended

March 29, 2022

March 30, 2021

Restaurant and other sales

$

980,972

$

794,923

Franchise royalties

5,699

4,973

Franchise fees

815

733

Total revenue

$

987,486

$

800,629

We record deferred revenue for gift cards which includes cards that have been sold but not yet redeemed, a breakage adjustment for a percentage of gift cards that are not expected to be redeemed, and fees paid on gift cards sold through third party retailers. When gift cards are redeemed, we recognize restaurant sales and reduce deferred revenue. We amortize breakage and third party fees consistent with the historic redemption pattern of the associated gift card or on actual redemptions in periods where redemptions do not align with historic redemption patterns. We recognize these amounts as a component of other sales. As of March 29, 2022 and December 28, 2021, our deferred revenue balance related to gift cards was $221.5 million and $300.7 million, respectively. We recognized sales of $102.1 million for the 13 weeks ended March 29, 2022 related to the amount in deferred revenue as of December 28, 2021. We recognized sales of $71.4 million for the 13 weeks ended March 30, 2021 related to the amount in deferred revenue as of December 29, 2020.

(5) Income Taxes

For the 13 weeks ended March 29, 2022 and March 30, 2021, we recognized income tax expense using an estimated effective annual tax rate. This resulted in an effective tax rate of 14.2% and 16.2% for the 13 weeks ended March 29, 2022 and March 30, 2021, respectively. The reduction in our tax rate was primarily driven by an increase in FICA Tip and Work Opportunity tax credits partially offset by a decrease in the tax benefit for stock compensation.

(6)

Commitments and Contingencies

The estimated cost of completing capital project commitments at March 29, 2022 and December 28, 2021 was $160.3 million and $135.0 million, respectively.

As of March 29, 2022 and December 28, 2021, we were contingently liable for $12.0 million and $12.2 million, respectively, for seven lease guarantees. These amounts represent the maximum potential liability of future payments under the guarantees. In the event of default, the indemnity and default clauses in our assignment agreements govern our ability to pursue and recover damages incurred. No material liabilities have been recorded as of March 29, 2022 and December 28, 2021 as the likelihood of default was deemed to be less than probable and the fair value of the guarantees is not considered significant.

During the 13 weeks ended March 29, 2022, we bought most of our beef from four suppliers. We have no material minimum purchase commitments with our vendors that extend beyond a year.

Occasionally, we are a defendant in litigation arising in the ordinary course of our business, including "slip and fall" accidents, employment related claims, claims related to our service of alcohol, and claims from guests or employees alleging illness, injury or food quality, health or operational concerns.  None of these types of litigation, most of which are covered by insurance, has had a material adverse effect on us during the periods covered by this report and, as of the date of this report, we are not party to any litigation that we believe could have a material adverse effect on our business.

9

(7)   Acquisitions

On December 29, 2021, we completed the acquisition of seven franchised Texas Roadhouse restaurants located in South Carolina and Georgia. Pursuant to the terms of the acquisition agreements, we paid a total purchase price of $26.4 million, net of cash acquired. These acquisitions are consistent with our long-term strategy to increase net income and earnings per share. The transactions were accounted for using the acquisition method as defined in Accounting Standards Codification ("ASC") 805, Business Combinations.

The following table summarizes the consideration paid (in thousands) for the acquisitions, and the estimated fair value of the assets acquired, and the liabilities assumed at the acquisition date, which are adjusted for measurement-period adjustments through March 29, 2022.

Inventory

$

268

Other assets

211

Property and equipment

3,456

Goodwill

17,333

Intangible assets

6,000

Current liabilities

(831)

$

26,437

The aggregate purchase prices are preliminary as the Company is finalizing working capital adjustments. Intangible assets represent reacquired franchise rights which will be amortized over a weighted-average useful life of 3.5 years. We expect all of the goodwill and intangible asset amortization will be deductible for tax purposes and believe the resulting amount of goodwill reflects the benefit of sales and unit growth opportunities as well as the benefit of the assembled workforce of the acquired restaurants.

Pro forma operating results for the 13 weeks ended March 29, 2022 have not been presented as the results of the acquired restaurants are not material to our unaudited condensed consolidated financial position, results of operations or cash flows.

(8)   Related Party Transactions

As of March 29, 2022 and March 30, 2021, we had four franchise restaurants and one majority-owned company restaurant owned in part by a current officer of the Company. The franchise entities paid us fees of $0.4 million for both of the 13 week periods ended March 29, 2022 and March 30, 2021.

(9)   Earnings Per Share

The share and net income per share data for all periods presented are based on the historical weighted-average shares outstanding.  The diluted earnings per share calculations show the effect of the weighted-average restricted stock units from our equity incentive plans, except during loss periods as the effect would be anti-dilutive. Performance stock units are not included in the diluted earnings per share calculation until the performance-based criteria have been met.

For the 13 weeks ended March 29, 2022, there were 29,887 weighted-average shares of nonvested stock that were outstanding but not included in the computation of diluted earnings per share because they would have had an anti-dilutive effect. For the 13 weeks ended March 30, 2021, there were 4,827 weighted-average shares of nonvested stock that were outstanding but not included in the computation of diluted earnings per share because they would have had an anti-dilutive effect.

10

The following table sets forth the calculation of earnings per share and weighted-average shares outstanding (in thousands) as presented in the accompanying unaudited condensed consolidated statements of income and comprehensive income:

 

13 Weeks Ended

 

    

March 29, 2022

    

March 30, 2021

 

Net income attributable to Texas Roadhouse, Inc. and subsidiaries

$

75,202

$

64,150

Basic EPS:

Weighted-average common shares outstanding

 

69,086

69,637

Basic EPS

$

1.09

$

0.92

Diluted EPS:

Weighted-average common shares outstanding

 

69,086

69,637

Dilutive effect of nonvested stock

 

287

500

Shares-diluted

 

69,373

 

70,137

Diluted EPS

$

1.08

$

0.91

(10) Fair Value Measurements

ASC 820, Fair Value Measurements and Disclosures ("ASC 820"), establishes a framework for measuring fair value and expands disclosures about fair value measurements. ASC 820 establishes a three-level hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs in measuring fair value. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability on the measurement date.

Level 1

Inputs based on quoted prices in active markets for identical assets.

Level 2

Inputs other than quoted prices included within Level 1 that are observable for the assets, either directly or indirectly.

Level 3

Inputs that are unobservable for the asset.

There were no transfers among levels within the fair value hierarchy during the 13 weeks ended March 29, 2022.

The following table presents the fair values for our financial assets and liabilities measured on a recurring basis:

Fair Value Measurements

 

    

Level

    

March 29, 2022

    

December 28, 2021

 

Deferred compensation plan—assets

 

1

$

61,996

$

67,512

Deferred compensation plan—liabilities

 

1

$

(61,839)

$

(67,431)

The Second Amended and Restated Deferred Compensation Plan of Texas Roadhouse Management Corp. (as amended, the "Deferred Compensation Plan") is a nonqualified deferred compensation plan which allows highly compensated employees to defer receipt of a portion of their compensation and contribute such amounts to one or more investment funds held in a rabbi trust. We report the amounts of the rabbi trust in other assets and the corresponding liability in other liabilities in our unaudited condensed consolidated financial statements. These investments are considered trading securities and are reported at fair value based on quoted market prices. The realized and unrealized holding gains and losses related to these investments, as well as the offsetting compensation expense, are recorded in general and administrative expense in the unaudited condensed consolidated statements of income and comprehensive income.

11

The following table presents the fair value of our assets measured on a nonrecurring basis:

Fair Value Measurements

Total gain (loss)

13 Weeks Ended

    

    

March 29,

    

December 28,

    

March 29,

March 30,

Level

2022

2021

2022

2021

Long-lived assets held for sale

3

$

$

1,175

$

690

$

(470)

Investments in unconsolidated affiliates

3

$

$

$

$

(531)

Long-lived assets held for sale include land and building at a site that was relocated and had a carrying amount of $1.2 million as of December 28, 2021. These assets were included in prepaid expenses and other current assets in our consolidated balance sheets and were valued using a Level 3 input. These assets were sold during the 13 weeks ended March 29, 2022 and resulted in a gain of $0.7 million which is included in impairment and closure, net in our unaudited condensed consolidated statement of income and comprehensive income.

Investments in unconsolidated affiliates included a 40% equity interest in a joint venture in China which was fully impaired in late 2021. This asset was valued using a Level 3 input, or the amount we expected to receive upon the sale of this investment. This resulted in a loss of $0.5 million during the 13 weeks ended March 30, 2021 and is included in equity income (loss) from investments in unconsolidated affiliates in our unaudited condensed consolidated statement of income and comprehensive income for the 13 weeks ended March 30, 2021.

At March 29, 2022 and December 28, 2021, the fair values of cash and cash equivalents, accounts receivable and accounts payable approximated their carrying values based on the short-term nature of these instruments. At March 29, 2022 and December 28, 2021, the fair value of our amended revolving credit facility approximated its carrying value since it is a variable rate credit facility (Level 2).

(11) Stock Repurchase Program

On March 17, 2022, our Board of Directors (the "Board") approved a stock repurchase program under which we may repurchase up to $300.0 million of our common stock. This stock repurchase program has no expiration date and replaced a previous stock repurchase program which was approved on May 31, 2019 that authorized the Company to repurchase up to $250.0 million of our common stock. All repurchases to date under our stock repurchase programs have been made through open market transactions. The timing and the amount of any repurchases are determined by management under parameters established by the Board, based on an evaluation of our stock price, market conditions and other corporate considerations.

For the 13 week period ended March 29, 2022, we paid $84.7 million to repurchase 1,060,618 shares of our common stock. This includes $79.7 million repurchased under our prior authorization and $5.0 million under our current authorized stock repurchase program. For the 13 weeks ended March 30, 2021, we did not repurchase any shares of our common stock. As of March 29, 2022, $295.0 million remained under our authorized stock repurchase program.

(12) Segment Information

We manage our restaurant and franchising operations by concept and as a result have identified Texas Roadhouse, Bubba’s 33, Jaggers and our retail initiatives as separate operating segments. Our reportable segments are Texas Roadhouse and Bubba’s 33. The Texas Roadhouse reportable segment includes the results of our domestic company Texas Roadhouse restaurants and domestic and international franchise Texas Roadhouse restaurants. The Bubba's 33 reportable segment includes the results of our domestic company Bubba's 33 restaurants. Our remaining operating segments, which include the results of our domestic company Jaggers restaurants and the results of our retail initiatives, are included in Other. In addition, Corporate-related segment assets, depreciation and amortization, and capital expenditures are also included in Other.

Management uses restaurant margin as the measure for assessing performance of our segments. Restaurant margin (in dollars and as a percentage of restaurant and other sales) represents restaurant and other sales less restaurant-level operating costs, including food and beverage costs, labor, rent and other operating costs. Restaurant margin also

12

includes sales and operating costs related to our non-royalty based retail initiatives. Restaurant margin is used by our chief operating decision maker to evaluate restaurant-level operating efficiency and performance.

In calculating restaurant margin, we exclude 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. We also exclude depreciation and amortization expense, substantially all of which relates to restaurant-level assets, as it represents a non-cash charge for the investment in our restaurants. We also exclude impairment and closure expense as we believe this provides a clearer perspective of the Company’s 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 our industry.

Restaurant and other sales for all operating segments are derived primarily from food and beverage sales. We do not rely on any major customer as a source of sales and the customers and assets of our reportable segments are located predominantly in the United States. There are no material transactions between reportable segments.

The following tables reconcile our segment results to our consolidated results reported in accordance with GAAP:

13 Weeks Ended March 29, 2022

Texas Roadhouse

Bubba's 33

Other

Total

Restaurant and other sales

$

926,729

$

51,225

$

3,018

$

980,972

Restaurant operating costs (excluding depreciation and amortization)

773,261

43,431

3,097

819,789

Restaurant margin

$

153,468

$

7,794

$

(79)

$

161,183

Depreciation and amortization

$

27,541

$

3,190

$

2,889

$

33,620

Capital expenditures

39,677

7,377

1,975

49,029

13 Weeks Ended March 30, 2021

Texas Roadhouse

Bubba's 33

Other

Total

Restaurant and other sales

$

756,597

$

35,685

$

2,641

$

794,923

Restaurant operating costs (excluding depreciation and amortization)

615,485

29,682

2,182

647,349

Restaurant margin

$

141,112

$

6,003

$

459

$

147,574

Depreciation and amortization

$

25,663

$

3,013

$

2,193

$

30,869

Capital expenditures

31,154

5,580

1,932

38,666

13

A reconciliation of restaurant margin to income from operations is presented below. We do not allocate interest expense, net and equity income (loss) from investments in unconsolidated affiliates to reportable segments.

13 Weeks Ended

March 29, 2022

March 30, 2021

Restaurant margin

$

161,183

$

147,574

Add:

Franchise royalties and fees

6,514

5,706

Less:

Pre-opening

4,291

4,268

Depreciation and amortization

33,620

30,869

Impairment and closure, net

(646)

504

General and administrative

40,294

36,712

Income from operations

$

90,138

$

80,927

14

ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

CAUTIONARY STATEMENT

This report contains forward-looking statements based on our current expectations, estimates and projections about our industry and certain assumptions made by us. 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. Words such as "anticipates," "expects," "intends," "plans," "believes," "seeks," "estimates," "may," "will" and variations of these words or similar expressions are intended to identify forward-looking statements. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. Such statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Therefore, our actual results could differ materially and adversely from those expressed in any forward-looking statements as a result of various factors. The section entitled "Risk Factors" in our Annual Report on Form 10-K for the year ended December 28, 2021, and in Part II, Item 1A in this Form 10-Q, along with disclosures in our other Securities and Exchange Commission ("SEC") filings discuss some of the important risk factors that may affect our business, results of operations, or financial condition. You should carefully consider those risks, in addition to the other information in this report, and in our other filings with the SEC, before deciding to invest in our Company or to maintain or increase your investment. We undertake no obligation to revise or update publicly any forward-looking statements, except as may be required by applicable law. The information contained in this Form 10-Q is not a complete description of our business or the risks associated with an investment in our common stock. We urge you to carefully review and consider the various disclosures made by us in this report and in our other reports filed with the SEC that discuss our business in greater detail and advise interested parties of certain risks, uncertainties and other factors that may affect our business, results of operations or financial condition.

Our Company

Texas Roadhouse, Inc. is a growing restaurant company operating predominantly in the casual dining segment. Our late founder, W. Kent Taylor, started the Company in 1993 with the opening of the first Texas Roadhouse restaurant in Clarksville, Indiana. Since then, we have grown to three concepts with 672 restaurants in 49 states and ten foreign countries. As of March 29, 2022, our 672 restaurants included:

576 "company restaurants," of which 556 were wholly-owned and 20 were majority-owned.  The results of operations of company restaurants are included in our unaudited condensed consolidated statements of income and comprehensive income. The portion of income attributable to noncontrolling interests in company restaurants that are not wholly-owned is reflected in the line item entitled "Net income attributable to noncontrolling interests" in our unaudited condensed consolidated statements of income and comprehensive income. Of the 576 restaurants we owned as of March 29, 2022, we operated 536 as Texas Roadhouse restaurants, 36 as Bubba’s 33 restaurants and four as Jaggers restaurants.

96 "franchise restaurants," 24 of which we have a 5.0% to 10.0% ownership interest. The income derived from our minority interests in these franchise restaurants is reported in the line item entitled "Equity income from investments in unconsolidated affiliates" in our unaudited condensed consolidated statements of income and comprehensive income. Additionally, we provide various management services to these 24 franchise restaurants, as well as five additional franchise restaurants in which we have no ownership interest. All of the franchise restaurants are operated as Texas Roadhouse restaurants. Of the 96 franchise restaurants, 63 were domestic restaurants and 33 were international restaurants.

We have contractual arrangements that grant us the right to acquire at pre-determined formulas the remaining equity interests in 18 of the 20 majority-owned company restaurants and 59 of the 63 domestic franchise restaurants.

15

Throughout this report, we use the term "restaurants" to include Texas Roadhouse and Bubba’s 33, unless otherwise noted.

Presentation of Financial and Operating Data

Throughout this report, the 13 weeks ended March 29, 2022, and March 30, 2021, are referred to as Q1 2022 and Q1 2021, respectively.

COVID-19 and Related Impacts

The Company has been subject to risks and uncertainties as a result of the COVID-19 pandemic (the "pandemic"). These include federal, state and local restrictions on restaurants, some of which limited capacity or seating in the dining rooms while others allowed to-go or curbside service only. As of March 29, 2022, all of our domestic company and franchise locations were operating without restriction. As of March 30, 2021, all of our domestic company and franchise locations had re-opened their dining rooms, many of which were operating under various limited capacity restrictions.

As a result of a significant increase in sales, the lingering impact of the pandemic and other supply constraints, we have experienced and expect to continue to experience commodity inflation and certain food and supply shortages. The commodity inflation, which primarily relates to proteins, is mostly due to increased demand and increased costs incurred by our vendors related to higher labor, transportation, packaging and raw material costs. To date, we have been able to properly manage any food or supply shortages but have experienced increased costs. If our vendors are unable to fulfill their obligations under their contracts, we may encounter further shortages and/or higher costs to secure adequate supply and a possible loss of sales, any of which would harm our business.

In addition, as our dining rooms have returned to operating without restriction, our ability to attract and retain restaurant-level employees has become more challenging due to an increasingly competitive job market throughout the country. To the extent these challenges persist, we could continue to experience increased labor costs and/or decreased sales.

As a result of the pandemic, legislation referred to as the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") was passed in 2020 to benefit companies that were significantly impacted by the pandemic. This legislation allowed for the deferral of the social security portion of the employer portion of FICA payroll taxes from the date of enactment through the end of 2020. In total, we deferred $47.3 million in payroll taxes, of which $24.3 million was repaid in 2021 and $23.0 million is required to be repaid at the end of 2022. The amount due in 2022 is included in accrued wages and payroll taxes in our unaudited condensed consolidated balance sheets.

Long-Term Strategies to Grow Earnings Per Share and Create Shareholder Value

Our long-term strategies with respect to increasing net income and earnings per share, along with creating shareholder value, include the following:

Expanding Our Restaurant Base.   We continue to evaluate opportunities to develop restaurants in existing markets and in new domestic and international markets. Domestically, we remain focused primarily on markets where we believe a significant demand for our restaurants exists because of population size, income levels, and the presence of shopping and entertainment centers and a significant employment base. In recent years, we have relocated several existing Texas Roadhouse locations at or near the end of the associated lease or as a result of eminent domain which allows us to move to a better site, update them to a current prototypical design, construct a larger building with more seats and greater number of available parking spaces, accommodate increased to-go sales and/or obtain more favorable lease terms. We continue to evaluate these opportunities particularly as it relates to older locations with strong sales. At our high volume restaurants, we continue to look for opportunities to increase our dining room capacity by adding on to our existing building and/or to increase our parking capacity by leasing or purchasing property that adjoins our site. In addition, we continue to execute and pursue opportunities to acquire domestic franchise locations to expand our company restaurant base.

16

In Q1 2022, three company Texas Roadhouse restaurants opened and our franchise partners opened two international restaurants. We currently plan to open approximately 25 Texas Roadhouse and Bubba’s 33 company restaurants in 2022. We currently expect our franchise partners will open as many as seven Texas Roadhouse restaurants, primarily international, in 2022.

Our average capital investment for the 23 Texas Roadhouse restaurants opened during 2021, including pre-opening expenses and a capitalized rent factor, was $5.7 million. We expect our average capital investment for Texas Roadhouse restaurants opening in 2022 to be approximately $6.4 million with the increase over 2021 due to higher supply costs. Our average capital investment for the five Bubba’s 33 restaurants opened during 2021, including pre-opening expenses and a capitalized rent factor, was $7.4 million. We expect our average capital investment for Bubba’s 33 restaurants opening in 2022 to be approximately $7.3 million with the decrease over 2021 due to lower pre-opening costs offset by higher supply costs.

We remain focused on driving sales and managing restaurant investment costs to maintain our restaurant development in the future. Our capital investment (including cash and non-cash costs) for new restaurants varies significantly depending on a number of factors including, but not limited to: the square footage, layout, scope of required site work, geographical location, cost of materials, type of construction labor, local permitting requirements, hook-up fees, our ability to negotiate with landlords and cost of liquor and other licenses.

We have entered into area development and franchise agreements for the development and operation of Texas Roadhouse restaurants in numerous foreign countries and one U.S. territory. We currently have signed franchise and/or development agreements in nine countries in the Middle East as well as Taiwan, the Philippines, Mexico, China, South Korea, Brazil and Puerto Rico. As of March 29, 2022, we had 15 restaurants in five countries in the Middle East, five restaurants in the Philippines, five in Taiwan, four in South Korea, three in Mexico and one in China for a total of 33 restaurants in ten foreign countries. For the existing international agreements, the franchisee is required to pay us a franchise fee for each restaurant to be opened, royalties on the sales of each restaurant and a development fee for our grant of development rights in the named countries. We anticipate that the specific business terms of any future franchise agreement for international restaurants might vary significantly from the standard terms of our domestic agreements and from the terms of existing international agreements, depending on the territory to be franchised and the extent of franchisor-provided services to each franchisee.

In 2021, we entered into our first area development agreements for Jaggers, our fast-casual concept. These agreements allow for the development and operation of restaurants in specific territories in Texas, Oklahoma and North Carolina. As part of these agreements, the franchisees are required to pay us a franchise fee for each restaurant to be opened, royalties on the sales of each restaurant and a development fee for our grant of development rights in the named territories. We currently expect our first Jaggers franchise restaurant to open as early as Q4 2022.

Maintaining and/or Improving Restaurant-Level Profitability. We continue to balance the impacts of inflationary pressures with our value positioning as we remain focused on our long-term success. This may create a challenge in terms of maintaining and/or increasing restaurant-level profitability (restaurant margin), in any given year, depending on the level of inflation we experience. Restaurant margin is not a U.S. generally accepted accounting principle ("GAAP") measure and should not be considered in isolation, or as an alternative to income from operations. See further discussion of restaurant margin below. In addition to restaurant margin, as a percentage of restaurant and other sales, we also focus on the growth of restaurant margin dollars per store week as a measure of restaurant-level profitability. In terms of driving comparable restaurant sales, we remain focused on encouraging repeat visits by our guests and attracting new guests through our continued commitment to operational standards relating to food and service quality. To attract new guests and increase the frequency of visits of our existing guests, we continue to drive various localized marketing programs, focus on speed of service, increase throughput by adding seats and parking at certain restaurants and continue to enhance the guest digital experience. In addition, with the increase in sales, we have made changes to our building layout to better accommodate higher volume at our restaurants.

We also continue to look for ways through various strategic initiatives to drive awareness of our brands and increase sales and profitability. At the onset of the pandemic, we began selling ready-to-grill steaks for customers to prepare at

17

home. Based on the success of this program we developed Texas Roadhouse Butcher Shop. This on-line retail store allows for the purchase and delivery of quality steaks that are similar to those available in our restaurants. This non-royalty-based product launched in late 2020.

We also further expanded our retail business in 2021 with the introduction of our non-alcoholic Margarita Mixer, and our canned cocktail Margarita Seltzer, which rolled out in test markets. These Texas Roadhouse-branded products are subject to royalty-based license agreements.

Leveraging Our Scalable Infrastructure.   To support our growth, we have made investments in our infrastructure over the past several years, including information and accounting systems, real estate, human resources, legal, marketing, international and restaurant operations, including the development of new strategic initiatives. Whether we are able to leverage our infrastructure in future years by growing our general and administrative costs at a slower rate than our revenue will depend, in part, on our new restaurant openings, our comparable restaurant sales growth rate going forward and the level of investment we continue to make in our infrastructure.

Returning Capital to Shareholders. We continue to evaluate opportunities to return capital to our shareholders including the payment of dividends and repurchase of common stock. In 2011, our Board of Directors (the "Board") declared our first quarterly dividend of $0.08 per share of common stock which has consistently grown over time. The payment of a quarterly dividend was suspended in 2020 to preserve cash flow due to the pandemic. On April 28, 2021, the Board reinstated the payment of a quarterly cash dividend of $0.40 per share of common stock. On February 17, 2022, the Board declared a quarterly cash dividend of $0.46 per share of common stock.

The declaration and payment of cash dividends on our common stock is at the discretion of the Board, and any decision to declare a dividend will be based on many factors, including, but not limited to, earnings, financial condition, applicable covenants under our amended revolving credit facility, other contractual restrictions and other factors deemed relevant.

In 2008, the Board approved our first stock repurchase program. From inception through March 29, 2022, we have paid $505.4 million through our authorized stock repurchase programs to repurchase 19,368,055 shares of our common stock at an average price per share of $26.09. On March 17, 2022, the Board approved a stock repurchase program under which we may repurchase up to $300.0 million of our common stock. This stock repurchase program has no expiration date and replaced a previous stock repurchase program which was approved on May 31, 2019 that authorized the Company to repurchase up to $250.0 million of our common stock. All repurchases to date have been made through open market transactions. The Company suspended all share repurchase activity in 2020 in order to preserve cash flow due to the pandemic. On August 2, 2021, the Company resumed the repurchase of shares and in Q1 2022 paid $84.7 million to repurchase 1,060,618 shares of common stock. This includes $79.7 million repurchased under our prior authorization and $5.0 million under our current authorized stock repurchase program. As of March 29, 2022, $295.0 million remained authorized for stock repurchases.

Key Measures We Use to Evaluate Our Company

Key measures we use to evaluate and assess our business include the following:

Number of Restaurant Openings.  Number of restaurant openings reflects the number of restaurants opened during a particular fiscal period. For company restaurant openings, we incur pre-opening costs, which are defined below, before the restaurant opens. Typically, new restaurants open with an initial start-up period of higher than normalized sales volumes, which decrease to a steady level approximately three to six months after opening. However, although sales volumes are generally higher, so are initial costs, resulting in restaurant margins that are generally lower during the start-up period of operation and increase to a steady level approximately three to six months after opening.

Comparable Restaurant Sales.   Comparable restaurant sales reflects the change in restaurant sales for all company restaurants over the same period of the prior year for the comparable restaurant base. We define the comparable restaurant base to include those restaurants open for a full 18 months before the beginning of the period measured excluding restaurants permanently closed during the period. Comparable restaurant sales can be impacted by changes in

18

guest traffic counts or by changes in the per person average check amount. Menu price changes, the mix of menu items sold, and the mix of dine-in versus to-go sales can affect the per person average check amount.

Average Unit Volume.   Average unit volume represents the average quarterly or annual restaurant sales for Texas Roadhouse and Bubba’s 33 restaurants open for a full six months before the beginning of the period measured excluding sales of restaurants permanently closed during the period. Historically, average unit volume growth is less than comparable restaurant sales growth which indicates that newer restaurants are operating with sales levels lower than the company average. At times, average unit volume growth may be more than comparable restaurant sales growth which indicates that newer restaurants are operating with sales levels higher than the company average.

Store Weeks.   Store weeks represent the number of weeks that all company restaurants, unless otherwise noted, were open during the reporting period. Store weeks include weeks in which a restaurant is temporarily closed.

Restaurant Margin. Restaurant margin (in dollars and as a percentage of restaurant and other sales) represents restaurant and other sales less restaurant-level operating costs, including food and beverage costs, labor, rent and other operating costs. 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. 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, we exclude 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. We also exclude depreciation and amortization expense, substantially all of which relates to restaurant-level assets, as it represents a non-cash charge for the investment in our restaurants. We also exclude impairment and closure expense as we believe this provides a clearer perspective of the Company’s 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 our industry. A reconciliation of income from operations to restaurant margin is included in the Results of Operations section below.

Other Key Definitions

Restaurant and Other Sales.   Restaurant sales include gross food and beverage sales, net of promotions and discounts, for all company restaurants. Sales taxes collected from customers and remitted to governmental authorities are accounted for on a net basis and therefore are excluded from restaurant sales in the unaudited condensed consolidated statements of income and comprehensive income. Other sales include the amortization of fees associated with our third party gift card sales net of the amortization of gift card breakage income. These amounts are amortized consistent with the historic redemption pattern of the associated gift card or on actual redemptions in periods where redemptions do not align with historic redemption patterns. Other sales also include sales related to our non-royalty-based retail products.

Franchise Royalties and Fees.   Franchise royalties consist of royalties, as defined in our franchise agreement, paid to us by our domestic and international franchisees. Franchise royalties also include sales related to our royalty-based retail products. Domestic and/or international franchisees also typically pay an initial franchise fee and/or development fee for each new restaurant or territory. The terms of the international agreements may vary significantly from our domestic agreements. These include advertising fees paid by domestic franchisees to our system-wide marketing and advertising fund and management fees paid by certain domestic franchisees for supervisory and administrative services that we perform.

Food and Beverage Costs.   Food and beverage costs consists of the costs of raw materials and ingredients used in the preparation of food and beverage products sold in our company restaurants. Approximately half of our food and beverage costs relates to beef costs.

Restaurant Labor Expenses.   Restaurant labor expenses include all direct and indirect labor costs incurred in operations except for profit sharing incentive compensation expenses earned by our restaurant managing partners and

19

market partners. These profit sharing expenses are reflected in restaurant other operating expenses. Restaurant labor expenses also include share-based compensation expense related to restaurant-level employees.

Restaurant Rent Expense.   Restaurant rent expense includes all rent, except pre-opening rent, associated with the leasing of real estate and includes base, percentage and straight-line rent expense.

Restaurant Other Operating Expenses.   Restaurant other operating expenses consist of all other restaurant-level operating costs, the major components of which are utilities, dining room and to-go supplies, local store advertising, repairs and maintenance, equipment rent, property taxes, credit card fees and general liability insurance. Profit sharing incentive compensation expenses earned by our restaurant managing partners and market partners are also included in restaurant other operating expenses.

Pre-opening Expenses.   Pre-opening expenses, which are charged to operations as incurred, consist of expenses incurred before the opening of a new or relocated restaurant and are comprised principally of opening team and training team compensation and benefits, travel expenses, rent, food, beverage and other initial supplies and expenses. On average, over 70% of total pre-opening costs incurred per restaurant opening relate to the hiring and training of employees. Pre-opening costs vary by location depending on many factors, including the size and physical layout of each location; the number of management and hourly employees required to operate each restaurant; the availability of qualified restaurant staff members; the cost of travel and lodging for different geographic areas; the timing of the restaurant opening; and the extent of unexpected delays, if any, in obtaining final licenses and permits to open the restaurants.

Depreciation and Amortization Expenses.   Depreciation and amortization expenses ("D&A") include the depreciation of fixed assets and amortization of intangibles with definite lives, substantially all of which relates to restaurant-level assets.

Impairment and Closure Costs, Net. Impairment and closure costs, net include any impairment of long-lived assets, including property and equipment, operating lease right-of-use assets and goodwill, and expenses associated with the closure of a restaurant. Closure costs also include any gains or losses associated with a relocated restaurant or the sale of a closed restaurant and/or assets held for sale as well as lease costs associated with closed or relocated restaurants.

General and Administrative Expenses.   General and administrative expenses ("G&A") are comprised of expenses associated with corporate and administrative functions that support development and restaurant operations and provide an infrastructure to support future growth including certain advertising costs incurred. G&A also includes legal fees, settlement charges and share-based compensation expense related to executive officers, Support Center employees and market partners and the realized and unrealized holding gains and losses related to the investments in our deferred compensation plan.

Interest Expense, Net.   Interest expense, net includes interest expense on our debt or financing obligations including the amortization of loan fees reduced by earnings on cash and cash equivalents.

Equity Income (Loss) from Unconsolidated Affiliates.   Equity income (loss) includes our percentage share of net income (loss) earned by unconsolidated affiliates. As of March 29, 2022 and March 30, 2021, we owned a 5.0% to 10.0% equity interest in 24 domestic franchise restaurants. Additionally, as of March 30, 2021, we owned a 40% equity interest in four non-Texas Roadhouse restaurants as part of a joint venture agreement with a casual dining restaurant operator in China. We fully impaired our equity investment related to this joint venture in late 2021 as these restaurants closed.

Net Income Attributable to Noncontrolling Interests.   Net income attributable to noncontrolling interests represents the portion of income attributable to the other owners of the majority-owned restaurants. Our consolidated subsidiaries include 20 majority-owned restaurants for all periods presented.

Q1 2022 Financial Highlights

Total revenue increased $186.9 million or 23.3% to $987.5 million in Q1 2022 compared to $800.6 million in Q1 2021 primarily due to an increase in average unit volume driven by comparable restaurant sales growth, along with an

20

increase in store weeks. Store weeks and comparable restaurant sales increased 6.6% and 16.0%, respectively, at company restaurants in Q1 2022. The increase in comparable restaurant sales was primarily due to all company restaurants operating without restriction for the entire Q1 2022 period, continued strong to-go sales and increases in our per person average check.

Restaurant margin dollars increased $13.6 million or 9.2% to $161.2 million in Q1 2022 compared to $147.6 million in Q1 2021. Restaurant margin, as a percentage of restaurant and other sales, decreased to 16.4% in Q1 2022 compared to 18.6% in Q1 2021.  The decrease in restaurant margin, as a percentage of restaurant and other sales, was due to commodity and labor inflation partially offset by higher sales.

Net income increased $11.0 million or 17.2% to $75.2 million in Q1 2022 compared to $64.2 million in Q1 2021 primarily due to higher restaurant margin dollars partially offset by higher general and administrative expense. Diluted earnings per share increased 18.5% to $1.08 in Q1 2022 from $0.91 in Q1 2021.

Results of Operations

13 Weeks Ended

March 29, 2022

March 30, 2021

  

$

  

%

  

$

  

%

  

(In thousands)

Consolidated Statements of Income:

Revenue:

Restaurant and other sales

980,972

99.3

794,923

99.3

Franchise royalties and fees

6,514

0.7

5,706

0.7

Total revenue

987,486

100.0

800,629

100.0

Costs and expenses:

(As a percentage of restaurant and other sales)

Restaurant operating costs (excluding depreciation and amortization shown separately below):

Food and beverage

337,396

34.4

251,482

31.6

Labor

321,871

32.8

258,036

32.5

Rent

16,368

1.7

14,452

1.8

Other operating

144,154

14.7

123,379

15.5

(As a percentage of total revenue)