10-Q 1 txrh-20220628x10q.htm 10-Q
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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 June 28, 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 66,853,372 on July 27, 2022.

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION

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

3

Condensed Consolidated Balance Sheets —June 28, 2022 and December 28, 2021

3

Condensed Consolidated Statements of Income and Comprehensive Income — For the 13 and 26 Weeks Ended June 28, 2022 and June 29, 2021

4

Condensed Consolidated Statements of Stockholders’ Equity — For the 13 and 26 Weeks Ended June 28, 2022 and June 29, 2021

5

Condensed Consolidated Statements of Cash Flows — For the 26 Weeks Ended June 28, 2022 and June 29, 2021

7

Notes to Condensed Consolidated Financial Statements

8

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

17

Item 3 — Quantitative and Qualitative Disclosures About Market Risk

32

Item 4 — Controls and Procedures

32

PART II. OTHER INFORMATION

Item 1 — Legal Proceedings

33

Item 1A — Risk Factors

33

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

33

Item 3 — Defaults Upon Senior Securities

33

Item 4 — Mine Safety Disclosures

33

Item 5 — Other Information

34

Item 6 — Exhibits

34

Signatures

35

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)

    

June 28, 2022

    

December 28, 2021

 

Assets

Current assets:

Cash and cash equivalents

$

180,411

$

335,645

Receivables, net of allowance for doubtful accounts of $44 at June 28, 2022 and $17 at December 28, 2021

 

45,465

 

161,358

Inventories, net

 

31,831

 

31,595

Prepaid income taxes

 

4,467

 

10,701

Prepaid expenses and other current assets

 

18,770

 

24,226

Total current assets

 

280,944

 

563,525

Property and equipment, net of accumulated depreciation of $923,684 at June 28, 2022 and $869,375 at December 28, 2021

 

1,207,996

 

1,162,441

Operating lease right-of-use assets, net

611,934

578,413

Goodwill

 

148,732

 

127,001

Intangible assets, net of accumulated amortization of $16,511 at June 28, 2022 and $15,092 at December 28, 2021

 

7,001

 

1,520

Other assets

 

65,111

 

79,052

Total assets

$

2,321,718

$

2,511,952

Liabilities and Stockholders’ Equity

Current liabilities:

Current portion of operating lease liabilities

$

24,453

$

21,952

Accounts payable

 

101,619

 

95,234

Deferred revenue-gift cards

 

208,429

 

300,657

Accrued wages and payroll taxes

 

81,111

 

64,716

Income taxes payable

462

85

Accrued taxes and licenses

 

34,659

 

33,375

Other accrued liabilities

 

77,726

 

86,125

Total current liabilities

 

528,459

 

602,144

Operating lease liabilities, net of current portion

657,476

622,892

Long-term debt

 

75,000

 

100,000

Restricted stock and other deposits

 

8,218

 

8,027

Deferred tax liabilities, net

 

15,430

 

11,734

Other liabilities

 

83,116

 

93,671

Total liabilities

 

1,367,699

 

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, 66,853,296 and 69,382,418 shares issued and outstanding at June 28, 2022 and December 28, 2021, respectively)

 

67

 

69

Additional paid-in-capital

 

 

114,504

Retained earnings

 

938,825

 

943,551

Total Texas Roadhouse, Inc. and subsidiaries stockholders’ equity

 

938,892

 

1,058,124

Noncontrolling interests

 

15,127

 

15,360

Total equity

 

954,019

 

1,073,484

Total liabilities and equity

$

2,321,718

$

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

26 Weeks Ended

    

June 28, 2022

    

June 29, 2021

    

June 28, 2022

    

June 29, 2021

 

Revenue:

Restaurant and other sales

$

1,018,057

$

892,444

$

1,999,029

$

1,687,367

Franchise royalties and fees

6,549

6,344

13,063

12,050

Total revenue

 

1,024,606

 

898,788

 

2,012,092

 

1,699,417

Costs and expenses:

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

Food and beverage

 

347,041

295,504

684,437

546,986

Labor

 

333,042

288,147

654,913

546,183

Rent

 

16,714

14,956

33,082

29,408

Other operating

 

152,524

135,606

296,678

258,985

Pre-opening

 

5,323

6,319

9,614

10,587

Depreciation and amortization

 

34,420

31,650

68,040

62,519

Impairment and closure, net

 

411

17

(235)

521

General and administrative

 

49,213

36,861

89,507

73,573

Total costs and expenses

 

938,688

 

809,060

 

1,836,036

 

1,528,762

Income from operations

 

85,918

 

89,728

 

176,056

 

170,655

Interest expense, net

 

395

975

792

2,435

Equity income from investments in unconsolidated affiliates

 

545

239

879

22

Income before taxes

$

86,068

$

88,992

$

176,143

$

168,242

Income tax expense

 

11,531

11,067

24,278

23,887

Net income including noncontrolling interests

74,537

77,925

$

151,865

$

144,355

Less: Net income attributable to noncontrolling interests

 

2,118

2,445

4,244

4,725

Net income attributable to Texas Roadhouse, Inc. and subsidiaries

$

72,419

$

75,480

$

147,621

$

139,630

Other comprehensive income, net of tax:

Foreign currency translation adjustment, net of tax of $-, ($7), $- and ($3), respectively

22

10

Total comprehensive income

$

72,419

$

75,502

$

147,621

$

139,640

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

Basic

$

1.07

$

1.08

$

2.16

$

2.00

Diluted

$

1.07

$

1.08

$

2.15

$

1.99

Weighted average shares outstanding:

Basic

 

67,654

69,790

68,370

69,713

Diluted

 

67,890

70,161

68,631

70,150

Cash dividends declared per share

$

0.46

$

0.40

$

0.92

$

0.40

See accompanying notes to condensed consolidated financial statements.

4

Texas Roadhouse, Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders' Equity

(in thousands, except share and per share data)

(unaudited)

For the 13 Weeks Ended June 28, 2022

    

    

    

    

    

Accumulated

    

Total Texas

    

    

 

Additional

Other

Roadhouse, Inc.

 

Par

Paid-in-

Retained

Comprehensive

and

Noncontrolling

 

Shares

Value

Capital

Earnings

Loss

Subsidiaries

Interests

Total

 

Balance, March 29, 2022

 

68,459,769

$

68

$

32,754

$

986,958

$

$

1,019,780

$

15,479

$

1,035,259

Net income

 

 

 

 

72,419

 

 

72,419

 

2,118

 

74,537

Distributions to noncontrolling interest holders

 

 

 

 

 

 

 

(2,130)

 

(2,130)

Acquisition of noncontrolling interest

(1,395)

(1,395)

(340)

(1,735)

Dividends declared ($0.46 per share)

 

 

 

 

(30,752)

 

 

(30,752)

 

 

(30,752)

Shares issued under share-based compensation plans including tax effects

 

97,387

 

 

 

 

 

 

 

Indirect repurchase of shares for minimum tax withholdings

 

(30,473)

 

 

(2,499)

 

 

 

(2,499)

 

 

(2,499)

Repurchase of shares of common stock

(1,673,387)

(1)

(38,352)

(89,800)

(128,153)

(128,153)

Share-based compensation

 

 

 

9,492

 

 

 

9,492

 

 

9,492

Balance, June 28, 2022

 

66,853,296

$

67

$

$

938,825

$

$

938,892

$

15,127

$

954,019

For the 13 Weeks Ended June 29, 2021

    

    

    

    

    

Accumulated

    

Total Texas

    

    

Additional

Other

Roadhouse, Inc.

Par

Paid-in-

Retained

Comprehensive

and

Noncontrolling

Shares

Value

Capital

Earnings

Loss

Subsidiaries

Interests

Total

Balance, March 30, 2021

 

69,742,520

$

70

$

147,604

$

846,065

$

(118)

$

993,621

$

16,397

$

1,010,018

Net income

 

 

 

 

75,480

 

 

75,480

 

2,445

 

77,925

Other comprehensive income, net of tax

22

22

22

Distributions to noncontrolling interest holders

 

 

 

 

 

 

 

(2,994)

 

(2,994)

Dividends declared ($0.40 per share)

 

 

 

 

(27,932)

 

 

(27,932)

 

 

(27,932)

Shares issued under share-based compensation plans including tax effects

 

128,590

 

 

 

 

 

 

 

Indirect repurchase of shares for minimum tax withholdings

 

(40,721)

 

 

(4,265)

 

 

 

(4,265)

 

 

(4,265)

Share-based compensation

 

 

 

9,909

 

 

 

9,909

 

 

9,909

Balance, June 29, 2021

 

69,830,389

$

70

$

153,248

$

893,613

$

(96)

$

1,046,835

$

15,848

$

1,062,683

See accompanying notes to condensed consolidated financial statements

5

Texas Roadhouse, Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders' Equity

(in thousands, except share and per share data)

(unaudited)

For the 26 Weeks Ended June 28, 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

 

 

 

 

147,621

 

 

147,621

 

4,244

 

151,865

Distributions to noncontrolling interest holders

 

 

 

 

 

 

 

(4,137)

 

(4,137)

Acquisition of noncontrolling interest

(1,395)

(1,395)

(340)

(1,735)

Dividends declared ($0.92 per share)

 

 

 

 

(62,547)

 

 

(62,547)

 

 

(62,547)

Shares issued under share-based compensation plans including tax effects

 

302,355

 

 

 

 

 

 

 

Indirect repurchase of shares for minimum tax withholdings

 

(97,472)

 

 

(8,664)

 

 

 

(8,664)

 

 

(8,664)

Repurchase of shares of common stock

(2,734,005)

(2)

(123,057)

(89,800)

(212,859)

(212,859)

Share-based compensation

 

 

 

18,612

 

 

 

18,612

 

 

18,612

Balance, June 28, 2022

 

66,853,296

$

67

$

$

938,825

$

$

938,892

$

15,127

$

954,019

For the 26 Weeks Ended June 29, 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

 

 

 

 

139,630

 

 

139,630

 

4,725

 

144,355

Other comprehensive income, net of tax

10

10

10

Distributions to noncontrolling interest holders

 

 

 

 

 

 

 

(4,423)

 

(4,423)

Dividends declared ($0.40 per share)

 

 

 

 

(27,932)

 

 

(27,932)

 

 

(27,932)

Shares issued under share-based compensation plans including tax effects

 

398,508

 

 

 

 

 

 

 

Indirect repurchase of shares for minimum tax withholdings

 

(129,980)

 

 

(12,195)

 

 

 

(12,195)

 

 

(12,195)

Share-based compensation

 

 

 

19,817

 

 

 

19,817

 

 

19,817

Balance, June 29, 2021

 

69,830,389

$

70

$

153,248

$

893,613

$

(96)

$

1,046,835

$

15,848

$

1,062,683

See accompanying notes to condensed consolidated financial statements

6

Texas Roadhouse, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

26 Weeks Ended

    

June 28, 2022

    

June 29, 2021

Cash flows from operating activities:

Net income including noncontrolling interests

$

151,865

$

144,355

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

Depreciation and amortization

 

68,040

 

62,519

Deferred income taxes

 

3,906

 

2,948

Loss on disposition of assets

 

1,991

 

1,072

Impairment and closure costs

 

386

 

505

Equity income from investments in unconsolidated affiliates

 

(879)

 

(22)

Distributions of income received from investments in unconsolidated affiliates

 

619

 

401

Provision for doubtful accounts

 

27

 

(1)

Share-based compensation expense

 

18,612

 

19,817

Changes in operating working capital:

Receivables

 

115,998

 

50,143

Inventories

 

84

 

(3,270)

Prepaid expenses and other current assets

 

4,294

 

2,782

Other assets

 

13,852

 

(7,178)

Accounts payable

 

4,301

 

21,301

Deferred revenue—gift cards

 

(93,175)

 

(54,866)

Accrued wages and payroll taxes

 

16,395

 

19,855

Prepaid income taxes and income taxes payable

 

6,611

 

2,589

Accrued taxes and licenses

 

1,284

 

7,225

Other accrued liabilities

 

(8,339)

 

14,649

Operating lease right-of-use assets and lease liabilities

 

3,385

 

2,592

Other liabilities

 

(10,554)

 

9,430

Net cash provided by operating activities

 

298,703

 

296,846

Cash flows from investing activities:

Capital expenditures—property and equipment

 

(108,567)

(85,068)

Acquisition of franchise restaurants, net of cash acquired

(33,069)

Proceeds from sale of investment in unconsolidated affiliate

316

Proceeds from the sale of property and equipment

 

2,188

 

Proceeds from sale leaseback transaction

3,285

Net cash used in investing activities

 

(139,132)

 

(81,783)

Cash flows from financing activities:

Payments on revolving credit facility, net

(25,000)

(50,000)

Debt issuance costs

(708)

Distributions to noncontrolling interest holders

 

(4,137)

(4,423)

Acquisition of noncontrolling interest

(1,735)

Proceeds from restricted stock and other deposits, net

 

137

459

Indirect repurchase of shares for minimum tax withholdings

 

(8,664)

(12,195)

Repurchase of shares of common stock

 

(212,859)

Dividends paid to shareholders

 

(62,547)

(27,932)

Net cash used in financing activities

 

(314,805)

 

(94,799)

Net (decrease) increase in cash and cash equivalents

 

(155,234)

 

120,264

Cash and cash equivalents—beginning of period

 

335,645

363,155

Cash and cash equivalents—end of period

$

180,411

$

483,419

Supplemental disclosures of cash flow information:

Interest paid, net of amounts capitalized

$

139

$

2,078

Income taxes paid

$

13,784

$

18,351

Capital expenditures included in current liabilities

$

24,906

$

25,030

See accompanying notes to condensed consolidated financial statements.

7

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 June 28, 2022 and December 28, 2021 and for the 13 and 26 weeks ended June 28, 2022 and June 29, 2021.

As of June 28, 2022, we owned and operated 582 restaurants and franchised an additional 96 restaurants in 49 states and ten foreign countries. Of the 582 company restaurants that were operating at June 28, 2022, there were 562 wholly-owned restaurants and 20 majority-owned restaurants. Of the 582 restaurants that we owned as of June 28, 2022, we operated 541 as Texas Roadhouse restaurants, 37 as Bubba’s 33 restaurants and four as Jaggers restaurants. Of the 96 Texas Roadhouse franchise restaurants, there were 62 domestic restaurants and 34 international restaurants.

As of June 29, 2021, we owned and operated 548 restaurants and franchised an additional 99 restaurants in 49 states and ten foreign countries. Of the 548 company restaurants that were operating at June 29, 2021, there were 528 wholly-owned restaurants and 20 majority-owned restaurants. Of the 548 restaurants that we owned as of June 29, 2021, we operated 511 as Texas Roadhouse restaurants, 34 as Bubba’s 33 restaurants and three as Jaggers restaurants. Of the 99 Texas Roadhouse franchise restaurants, there were 69 domestic restaurants and 30 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 June 28, 2022, all of our domestic company and franchise locations were operating without restriction. As of June 29, 2021, nearly all of our domestic company and franchise locations were operating without restriction.

As of June 28, 2022 and June 29, 2021, we owned a 5.0% to 10.0% equity interest in 23 and 24 domestic franchise restaurants, respectively. Additionally, as of June 29, 2021, we owned a 40% equity interest in three 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 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

8

for the 13 and 26 weeks ended June 28, 2022 are not necessarily indicative of the results that may be expected for the year 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 June 28, 2022, we had $75.0 million outstanding on the amended revolving credit facility and $212.7 million of availability, net of $12.3 million of outstanding letters of credit. As of 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. These outstanding amounts are included as long-term debt on our unaudited condensed consolidated balance sheets.

The weighted-average interest rate for the $75.0 million outstanding as of June 28, 2022 was 2.13%. ​The weighted-average interest rate for the $190.0 million outstanding as of June 29, 2021 was 0.98%.

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 June 28, 2022.

9

(4) Revenue

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