Table of Contents
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 September 24, 2024
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
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 Regulation 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 66,714,069 on October 23, 2024.
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1 — Financial Statements (Unaudited) — Texas Roadhouse, Inc. and Subsidiaries
3
Condensed Consolidated Balance Sheets — September 24, 2024 and December 26, 2023
Condensed Consolidated Statements of Income — For the 13 and 39 Weeks Ended September 24, 2024 and September 26, 2023
4
Condensed Consolidated Statements of Stockholders’ Equity — For the 13 and 39 Weeks Ended September 24, 2024 and September 26, 2023
5
Condensed Consolidated Statements of Cash Flows — For the 39 Weeks Ended September 24, 2024 and September 26, 2023
7
Notes to Condensed Consolidated Financial Statements
8
Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations
16
Item 3 — Quantitative and Qualitative Disclosures About Market Risk
28
Item 4 — Controls and Procedures
PART II. OTHER INFORMATION
Item 1 — Legal Proceedings
29
Item 1A — Risk Factors
Item 2 — Unregistered Sales of Equity Securities and Use of Proceeds
Item 3 — Defaults Upon Senior Securities
Item 4 — Mine Safety Disclosures
Item 5 — Other Information
30
Item 6 — Exhibits
Signatures
31
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)
September 24, 2024
December 26, 2023
Assets
Current assets:
Cash and cash equivalents
$
189,205
104,246
Receivables, net of allowance for doubtful accounts of $13 at September 24, 2024 and $35 at December 26, 2023
52,341
175,474
Inventories, net
39,842
38,320
Prepaid income taxes
—
3,262
Prepaid expenses and other current assets
26,013
35,172
Total current assets
307,401
356,474
Property and equipment, net of accumulated depreciation of $1,182,014 at September 24, 2024 and $1,078,855 at December 26, 2023
1,574,465
1,474,722
Operating lease right-of-use assets, net
747,799
694,014
Goodwill
169,684
Intangible assets, net of accumulated amortization of $22,733 at September 24, 2024 and $20,929 at December 26, 2023
1,679
3,483
Other assets
112,787
94,999
Total assets
2,913,815
2,793,376
Liabilities and Stockholders’ Equity
Current liabilities:
Current portion of operating lease liabilities
28,476
27,411
Accounts payable
130,850
131,638
Deferred revenue-gift cards
226,626
373,913
Accrued wages
88,698
68,062
Income taxes payable
2,775
112
Accrued taxes and licenses
49,158
42,758
Other accrued liabilities
100,981
101,540
Total current liabilities
627,564
745,434
Operating lease liabilities, net of current portion
802,576
743,476
Restricted stock and other deposits
9,468
8,893
Deferred tax liabilities, net
12,395
23,104
Other liabilities
138,568
114,958
Total liabilities
1,590,571
1,635,865
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, 66,713,823 and 66,789,464 shares issued and outstanding at September 24, 2024 and December 26, 2023, respectively)
67
Retained earnings
1,308,223
1,141,595
Total Texas Roadhouse, Inc. and subsidiaries stockholders’ equity
1,308,290
1,141,662
Noncontrolling interests
14,954
15,849
Total equity
1,323,244
1,157,511
Total liabilities and equity
See accompanying notes to condensed consolidated financial statements.
Condensed Consolidated Statements of Income
(in thousands, except per share data)
13 Weeks Ended
39 Weeks Ended
September 26, 2023
Revenue:
Restaurant and other sales
1,265,279
1,115,224
3,913,073
3,447,192
Franchise royalties and fees
7,720
6,528
22,345
20,119
Total revenue
1,272,999
1,121,752
3,935,418
3,467,311
Costs and expenses:
Restaurant operating costs (excluding depreciation and amortization shown separately below):
Food and beverage
424,566
386,184
1,305,658
1,198,099
Labor
427,470
378,814
1,293,229
1,155,970
Rent
20,162
18,177
59,543
54,001
Other operating
191,011
169,225
581,515
507,846
Pre-opening
7,282
8,663
21,579
19,711
Depreciation and amortization
44,510
39,124
128,918
112,764
Impairment and closure, net
844
(2)
1,135
131
General and administrative
55,131
47,708
165,874
148,573
Total costs and expenses
1,170,976
1,047,893
3,557,451
3,197,095
Income from operations
102,023
73,859
377,967
270,216
Interest income, net
1,916
496
5,007
2,730
Equity income from investments in unconsolidated affiliates
235
139
778
1,181
Income before taxes
104,174
74,494
383,752
274,127
Income tax expense
17,400
8,870
57,913
35,474
Net income including noncontrolling interests
86,774
65,624
325,839
238,653
Less: Net income attributable to noncontrolling interests
2,362
1,836
8,080
6,207
Net income attributable to Texas Roadhouse, Inc. and subsidiaries
84,412
63,788
317,759
232,446
Net income per common share attributable to Texas Roadhouse, Inc. and subsidiaries:
Basic
1.27
0.96
4.76
3.47
Diluted
1.26
0.95
4.74
3.46
Weighted average shares outstanding:
66,704
66,779
66,777
66,923
66,943
67,014
67,023
67,179
Cash dividends declared per share
0.61
0.55
1.83
1.65
Condensed Consolidated Statements of Stockholders' Equity
For the 13 Weeks Ended September 24, 2024
Total Texas
Additional
Roadhouse, Inc.
Par
Paid-in-
Retained
and
Noncontrolling
Shares
Value
Capital
Earnings
Subsidiaries
Interests
Total
Balance, June 25, 2024
66,727,898
1,262,569
1,262,636
15,054
1,277,690
Net income
Distributions to noncontrolling interest holders
(2,485)
Acquisition of noncontrolling interest, net of deferred taxes
(23)
23
Dividends declared ($0.61 per share)
(40,696)
Shares issued under share-based compensation plans including tax effects
60,735
Indirect repurchase of shares for minimum tax withholdings
(18,562)
(3,198)
Repurchase of shares of common stock, including excise tax as applicable
(56,248)
(11,555)
1,938
(9,617)
Share-based compensation
14,776
Balance, September 24, 2024
66,713,823
For the 13 Weeks Ended September 26, 2023
Balance, June 27, 2023
66,843,456
1,082,915
1,082,982
15,268
1,098,250
(1,894)
Dividends declared ($0.55 per share)
(36,731)
68,248
(21,101)
(2,360)
(107,593)
(6,162)
(6,083)
(12,245)
8,522
Balance, September 26, 2023
66,783,010
1,103,889
1,103,956
15,210
1,119,166
For the 39 Weeks Ended September 24, 2024
Balance, December 26, 2023
66,789,464
(8,110)
(3,297)
(865)
(4,162)
Dividends declared ($1.83 per share)
(122,205)
295,519
(92,246)
(14,027)
(278,914)
(15,830)
(28,926)
(44,756)
33,154
For the 39 Weeks Ended September 26, 2023
Balance, December 27, 2022
66,973,311
13,139
999,432
1,012,638
15,024
1,027,662
(6,021)
Dividends declared ($1.65 per share)
(110,429)
324,415
(100,397)
(10,599)
(414,319)
(27,806)
(17,560)
(45,366)
25,266
6
Condensed Consolidated Statements of Cash Flows
(in thousands)
Cash flows from operating activities:
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred income taxes
(9,592)
2,707
Loss on disposition of assets
2,842
4,315
Impairment and closure costs
826
41
(778)
(1,181)
Distributions of income received from investments in unconsolidated affiliates
799
493
Provision for doubtful accounts
(22)
Share-based compensation expense
Changes in operating working capital, net of acquisitions:
Receivables
123,155
102,068
Inventories
(1,522)
1,835
10,394
5,821
(15,566)
(12,680)
3,166
14,188
Deferred revenue—gift cards
(147,287)
(135,251)
20,636
13,469
Prepaid income taxes and income taxes payable
5,923
2,443
6,849
7,041
(98)
(10,117)
Operating lease right-of-use assets and lease liabilities
4,845
4,702
23,608
14,158
Net cash provided by operating activities
516,089
390,739
Cash flows from investing activities:
Capital expenditures—property and equipment
(246,539)
(243,895)
Acquisitions of franchise restaurants, net of cash acquired
(39,153)
Proceeds from sale of investments in unconsolidated affiliates
632
Proceeds from sale of property and equipment
197
1,800
Proceeds from sale leaseback transactions
9,126
7,097
Net cash used in investing activities
(237,216)
(273,519)
Cash flows from financing activities:
Payments on revolving credit facility
(50,000)
Acquisition of noncontrolling interest
(5,279)
Proceeds from restricted stock and other deposits, net
396
485
Repurchase of shares of common stock
(44,689)
(45,193)
Dividends paid to shareholders
Net cash used in financing activities
(193,914)
(221,757)
Net increase (decrease) in cash and cash equivalents
84,959
(104,537)
Cash and cash equivalents—beginning of period
173,861
Cash and cash equivalents—end of period
69,324
Supplemental disclosures of cash flow information:
Interest paid, net of amounts capitalized
669
877
Income taxes paid
61,804
30,323
Capital expenditures included in current liabilities
42,641
51,556
(tabular amounts in thousands, except per share data)
(1) Basis of Presentation
The accompanying unaudited condensed consolidated financial statements include the accounts of Texas Roadhouse, Inc., our wholly owned subsidiaries and subsidiaries in which we have a controlling interest (collectively, the "Company," "we," "our" and/or "us") as of September 24, 2024 and December 26, 2023 and for the 13 and 39 weeks ended September 24, 2024 and September 26, 2023.
The Company maintains three restaurant concepts operating as Texas Roadhouse, Bubba’s 33, and Jaggers. As of September 24, 2024, we owned and operated 657 restaurants and franchised an additional 115 restaurants in 49 states, one U.S. territory, and ten foreign countries. Of the 115 franchise restaurants, there were 59 domestic restaurants and 56 international restaurants, including one in a U.S. territory. As of September 26, 2023, we owned and operated 623 restaurants and franchised an additional 99 restaurants in 49 states and ten foreign countries. Of the 99 franchise restaurants, there were 55 domestic restaurants and 44 international restaurants.
As of September 24, 2024 and September 26, 2023, we owned a majority interest in 19 and 20 company restaurants, respectively. The operating results of these majority-owned restaurants are consolidated and the portion of income attributable to noncontrolling interests is reflected in the line item net income attributable to noncontrolling interests in our unaudited condensed consolidated statements of income.
As of September 24, 2024 and September 26, 2023, we owned a 5.0% to 10.0% equity interest in 20 domestic franchise restaurants. These 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 under equity income from investments in unconsolidated affiliates in our unaudited condensed consolidated statements of income. 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, 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 valuation of property and equipment, goodwill, lease liabilities and right-of-use assets, obligations related to insurance reserves, legal reserves, income taxes, and gift card breakage. 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 unaudited condensed consolidated financial statements 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 and 39 weeks ended September 24, 2024 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2024. 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 fiscal year ended December 26, 2023.
Our significant interim accounting policies include the recognition of income taxes using an estimated annual effective tax rate.
(2) Recent Accounting Pronouncements
In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosure. This ASU primarily requires enhanced disclosures about significant segment expenses including requiring segment disclosures to include a description of other segment items by reportable segment and any additional measures of a segment’s profit or loss used by the chief operating decision maker ("CODM") when deciding how to allocate resources. The ASU also requires all annual disclosures currently required by Topic 280 to be included in interim periods as well as the title of the CODM and an explanation of how the CODM uses the reported measure of segment profit or loss in assessing performance and allocating resources. The amendments in this update are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. We are currently assessing the impact of this new standard on our segment reporting disclosures and expect to provide additional detail and disclosures under this new guidance.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This ASU primarily requires enhanced disclosures about an entity’s income tax including requiring consistent categories and greater disaggregation of the information included in the rate reconciliation and income taxes paid disaggregated by jurisdiction. The amendments in this update are effective for fiscal years beginning after December 15, 2024, and interim periods within fiscal years beginning after December 15, 2025. We are currently assessing the impact of this new standard on our income tax disclosures and expect to provide additional detail and disclosures under this new guidance.
(3) Long-term Debt
We maintain a revolving credit facility (the "credit facility") with a syndicate of commercial lenders led by JPMorgan Chase Bank, N.A. and PNC Bank, N.A. The credit facility is 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 commercial lenders. The credit facility has a maturity date of May 1, 2026.
We are required to pay interest on outstanding borrowings at the Term Secured Overnight Financing Rate ("SOFR"), plus a fixed adjustment of 0.10% and a variable adjustment of 0.875% to 1.875% depending on our consolidated leverage ratio.
As of September 24, 2024 and December 26, 2023, we had no outstanding borrowings under the credit facility and had $295.3 million of availability, net of $4.7 million of outstanding letters of credit.
The interest rate for the credit facility as of September 24, 2024 and September 26, 2023 was 5.72% and 6.19%, respectively.
The lenders’ obligation to extend credit pursuant to the credit facility depends on us maintaining certain financial covenants, including a minimum consolidated fixed charge coverage ratio and a maximum consolidated leverage ratio. The credit facility permits us to incur additional secured or unsecured indebtedness, except for the incurrence of secured indebtedness that in the aggregate is equal to or greater than $125.0 million and 20% of our consolidated tangible net worth. We were in compliance with all financial covenants as of September 24, 2024.
9
(4) Revenue
The following table disaggregates our revenue by major source:
Franchise royalties
6,808
5,832
20,601
17,896
Franchise fees
912
696
1,744
2,223
The following table presents a rollforward of deferred revenue-gift cards:
Beginning balance
250,485
226,130
335,403
Gift card activations, net of third-party fees
56,527
48,824
191,409
167,378
Gift card redemptions and breakage
(80,386)
(73,638)
(338,696)
(301,465)
Ending balance
201,316
We recognized restaurant sales of $26.1 million and $210.1 million for the 13 and 39 weeks ended September 24, 2024, respectively, related to amounts in deferred revenue as of December 26, 2023. We recognized restaurant sales of $26.5 million and $191.7 million for the 13 and 39 weeks ended September 26, 2023, respectively, related to amounts in deferred revenue as of December 27, 2022.
(5) Income Taxes
The effective tax rate was 16.7% and 11.9% for the 13 weeks ended September 24, 2024 and September 26, 2023, respectively. The effective tax rate was 15.1% and 12.9% for the 39 weeks ended September 24, 2024 and September 26, 2023, respectively. The increase in our tax rate for the 13 and 39 weeks ended September 24, 2024 as compared to the prior year periods was primarily due to a decrease in the impact of the FICA tip tax credit, which was driven by increased profitability.
(6)
Commitments and Contingencies
The estimated cost of completing capital project commitments at September 24, 2024 and December 26, 2023 was $256.3 million and $237.4 million, respectively.
As of September 24, 2024 and December 26, 2023, we were contingently liable for $9.7 million and $10.4 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 September 24, 2024 and December 26, 2023, 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 and 39 weeks ended September 24, 2024 and September 26, 2023, we bought our beef primarily from four suppliers. Although there are a limited number of beef suppliers, we believe that other suppliers could provide a similar product on comparable terms. We have no material minimum purchase commitments with our vendors that extend beyond a year.
10
Occasionally, we are a defendant in litigation arising in the ordinary course of 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 at varying retention levels, has had a material adverse effect on us 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.
(7) Acquisitions
On December 28, 2022, the first day of the 2023 fiscal year, we completed the acquisition of eight franchise Texas Roadhouse restaurants located in Maryland and Delaware, including four in which we previously held a 5.0% equity interest. Pursuant to the terms of the acquisition agreements, we paid a total purchase price of $39.1 million, net of cash acquired, for 100% of the entities. The transactions in which we held an equity interest were accounted for as step acquisitions, and we recorded a gain of $0.6 million on our previous investments in equity income from investments in unconsolidated affiliates in the unaudited condensed consolidated statements of income.
These transactions were accounted for using the acquisition method as defined in Accounting Standards Codification 805, Business Combinations. These acquisitions are consistent with our long-term strategy to increase net income and earnings per share.
The following table summarizes the consideration paid for these acquisitions and the estimated fair value of the assets acquired and the liabilities assumed at the acquisition date, which are adjusted for final measurement-period adjustments.
Inventory
410
293
Property and equipment
17,763
Operating lease right-of-use assets
4,775
20,067
Intangible assets
1,700
(1,164)
(110)
(4,665)
39,069
Intangible assets represent reacquired franchise rights which are being amortized over a weighted-average useful life of 2.2 years. We expect all of the goodwill 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.
(8) Related Party Transactions
As of September 24, 2024 and September 26, 2023, we had four franchise restaurants and one majority-owned company restaurant owned in part by a current officer of the Company. We recognized revenue of $0.5 million for each of the 13 weeks ended September 24, 2024 and September 26, 2023 related to the four franchise restaurants. We recognized revenue of $1.5 million for each of the 39 weeks ended September 24, 2024 and September 26, 2023 related to the four franchise restaurants.
(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. Performance stock units are not included in the diluted earnings per share calculation until the performance-based criteria have been met.
11
For all periods presented, the weighted-average shares of nonvested stock units that were outstanding but not included in the computation of diluted earnings per share because they would have had an anti-dilutive effect were not significant.
The following table sets forth the calculation of earnings per share and weighted-average shares outstanding as presented in the accompanying unaudited condensed consolidated statements of income:
Basic EPS:
Weighted-average common shares outstanding
Basic EPS
Diluted EPS:
Dilutive effect of nonvested stock units
239
246
256
Shares-diluted
Diluted EPS
(10) Fair Value Measurements
At September 24, 2024 and December 26, 2023, 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. There were no transfers among levels within the fair value hierarchy during the 13 and 39 weeks ended September 24, 2024.
The following table presents the fair values for our financial assets and liabilities measured on a recurring basis:
Fair Value Measurements
Level
Deferred compensation plan—assets
1
96,994
81,316
Deferred compensation plan—liabilities
(96,994)
(81,222)
We report the accounts of the deferred compensation plan in other assets and the corresponding liability in other liabilities in our unaudited condensed consolidated balance sheets. 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.
12
(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. 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, including complying with Rule 10b5-1 trading arrangements under the Securities Exchange Act of 1934, as amended (the "Exchange Act").
For the 13 and 39 weeks ended September 24, 2024, we paid $9.6 million and $44.7 million to repurchase 56,248 shares and 278,914 shares of our common stock, respectively. For the 13 and 39 weeks ended September 26, 2023, we paid $12.1 million and $45.2 million to repurchase 107,593 shares and 414,319 shares of our common stock, respectively. As of September 24, 2024, $72.2 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 and franchise Jaggers restaurants and the results of our retail initiatives, are included in Other. In addition, corporate-related assets, depreciation and amortization, and capital expenditures are also included in Other.
Management uses restaurant margin as the primary measure for assessing performance of our segments. Restaurant margin represents restaurant and other sales less restaurant-level operating costs, including food and beverage costs, labor, rent, and other operating costs. Restaurant margin also includes sales and operating costs related to our non-royalty based retail initiatives. Restaurant margin is used by our CODM to evaluate restaurant-level operating efficiency and performance.
In calculating restaurant margin, we exclude certain non-restaurant-level costs that support operations, but do not have a direct impact on restaurant-level operational efficiency and performance, including general and administrative expenses. We exclude pre-opening expenses as it occurs at irregular intervals and would impact comparability to prior period results. We exclude depreciation and amortization expenses, substantially all of which relates to restaurant-level assets, as it represents a non-cash charge for the investment in our restaurants. We exclude impairment and closure expenses 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.
13
The following tables reconcile our segment results to our consolidated results reported in accordance with GAAP:
Texas Roadhouse
Bubba's 33
Other
1,184,125
73,416
7,738
Restaurant operating costs (excluding depreciation and amortization)
993,576
62,926
6,707
1,063,209
Restaurant margin
190,549
10,490
1,031
202,070
37,372
4,150
2,988
Capital expenditures
81,882
6,735
2,444
91,061
1,047,795
61,083
6,346
893,330
53,584
5,486
952,400
154,465
7,499
860
162,824
32,416
3,518
3,190
76,811
7,027
5,477
89,315
3,672,510
217,501
23,062
3,038,186
182,282
19,477
3,239,945
634,324
35,219
3,585
673,128
108,327
11,961
8,630
214,815
25,268
6,456
246,539
3,244,973
184,012
18,207
2,741,313
158,428
16,175
2,915,916
503,660
25,584
2,032
531,276
93,072
10,399
9,293
210,403
23,032
10,460
243,895
14
A reconciliation of restaurant margin to income from operations is presented below. We do not allocate interest income, net and equity income from investments in unconsolidated affiliates to reportable segments.
Add:
Less:
15
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. 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 fiscal year ended December 26, 2023, 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 772 restaurants in 49 states, one U.S. territory, and ten foreign countries. As of September 24, 2024, our 772 restaurants included:
We have contractual arrangements that grant us the right to acquire at pre-determined formulas the remaining equity interests in 17 of the 19 majority-owned company restaurants and 54 of the 59 systemwide domestic franchise restaurants.
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 September 24, 2024 and September 26, 2023, are referred to as Q3 2024 and Q3 2023, respectively. The 39 weeks ended September 24, 2024, and September 26, 2023, are referred to as 2024 YTD and 2023 YTD, respectively. Fiscal year 2024 will be 53 weeks in length, with the fourth quarter 14 weeks in length. Fiscal year 2023 was 52 weeks in length, with the quarters 13 weeks in length.
Key Measures We Use to Evaluate Our Company
Key measures we use to evaluate and assess our business include the following:
In calculating restaurant margin, we exclude certain non-restaurant-level costs that support operations, but do not have a direct impact on restaurant-level operational efficiency and performance, including general and administrative expenses. We exclude pre-opening expenses as it occurs at irregular intervals and would impact comparability to prior period results. We exclude depreciation and amortization expenses, substantially all of which relates to restaurant-level assets, as it represents a non-cash charge for the investment in our restaurants. We exclude impairment and closure expenses 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.
17
Other Key Definitions
18
Q3 2024 Financial Highlights
Total revenue increased $151.2 million or 13.5% to $1,273.0 million in Q3 2024 compared to $1,121.8 million in Q3 2023 primarily due to an increase in comparable restaurant sales and store weeks. Comparable restaurant sales and store weeks increased 8.5% and 5.8%, respectively, at company restaurants in Q3 2024 compared to Q3 2023. The increase in comparable restaurant sales was due to an increase in our per person average check along with an increase in guest traffic counts. The increase in store weeks was due to new store openings.
Net income increased $20.6 million or 32.3% to $84.4 million in Q3 2024 compared to $63.8 million in Q3 2023 primarily due to higher restaurant margin dollars, as described below, partially offset by higher general and administrative expenses and higher depreciation and amortization expenses. Diluted earnings per share increased 32.5% to $1.26 in Q3 2024 from $0.95 in Q3 2023 primarily due to the increase in net income.
Restaurant margin dollars increased $39.2 million or 24.1% to $202.1 million in Q3 2024 compared to $162.8 million in Q3 2023 primarily due to higher sales. Restaurant margin, as a percentage of restaurant and other sales, increased to 16.0% in Q3 2024 compared to 14.6% in Q3 2023. The increase in restaurant margin, as a percentage of restaurant and other sales, was primarily driven by higher sales. The benefit of a higher average guest check and labor productivity more than offset wage and other labor inflation of 4.7% and commodity inflation of 1.3%.
In addition, during the 13 weeks ended September 24, 2024, capital allocation spend included capital expenditures of $91.1 million, dividends of $40.7 million, and repurchases of common stock of $9.6 million.
19
Results of Operations
%
Condensed Consolidated Statements of Income:
99.4
0.6
100.0
(As a percentage of restaurant and other sales)
33.5
34.6
33.4
34.8
33.8
34.0
33.0
1.6
1.5
15.1
15.2
14.9
14.7
(As a percentage of total revenue)
0.8
0.5
3.5
3.3
0.1
NM
4.3
4.2
92.0
93.4
90.4
92.2
8.0
6.6
9.6
7.8
0.2
0.0
8.2
9.8
7.9
1.4
1.0
6.8
5.9
8.3
6.9
Net income attributable to noncontrolling interests
5.7
8.1
6.7
NM — Not meaningful
20
Reconciliation of Income from Operations to Restaurant Margin
($ in thousands, except restaurant margin $ per store week)
Restaurant margin $/store week
23,784
20,272
26,725
22,237
Restaurant margin (as a percentage of restaurant and other sales)
16.0%
14.6%
17.2%
15.4%
See above for the definition of restaurant margin.
Restaurant Unit Activity
Jaggers
Balance at December 26, 2023
741
686
45
Company openings
22
Franchise openings - Domestic
Franchise openings - International (1)
Balance at September 24, 2024
772
713
48
Company - Texas Roadhouse
601
573
Company - Bubba's 33
43
Company - Jaggers
Total company
657
623
Franchise - Texas Roadhouse - Domestic
56
54
Franchise - Jaggers - Domestic
Franchise - Texas Roadhouse - International (1)
44
Total franchise
115
99
722
21
Q3 2024 compared to Q3 2023 and 2024 YTD compared to 2023 YTD
Restaurant and Other Sales
Restaurant and other sales increased 13.5% in both Q3 2024 compared to Q3 2023 and 2024 YTD compared to 2023 YTD. The following table summarizes certain key drivers and/or attributes of restaurant sales at company restaurants for the periods presented. Company restaurant count activity is shown in the restaurant unit activity table above.
Q3 2024
Q3 2023
2024 YTD
2023 YTD
Company Restaurants:
Increase in store weeks
5.8
5.4
Increase in average unit volume
7.5
9.7
Other (1)
(0.1)
Total increase in restaurant sales
13.8
13.4
13.6
15.5
Other sales
(0.3)
(0.4)
Total increase in restaurant and other sales
13.5
13.0
15.4
Store weeks
8,496
8,032
25,187
23,892
Comparable restaurant sales
8.5
8.8
10.1
Texas Roadhouse restaurants:
7,768
7,394
23,070
22,041
8.7
8.4
8.9
10.3
Average unit volume (in thousands) (2)
1,990
1,840
6,260
5,753
Weekly sales by group:
Comparable restaurants (560, 542, 549, and 527 units)
153,870
141,675
160,715
147,832
Average unit volume restaurants (22, 18, 17, and 22 units)
132,430
138,439
153,918
139,989
Restaurants less than six months old (19, 13, 35, and 24 units)
142,628
141,409
142,925
150,747
Bubba's 33 restaurants:
624
547
1,805
1,593
5.3
4.8
5.0
6.0
1,502
1,437
4,641
4,494
Comparable restaurants (40, 36, 37, and 34 units)
116,330
112,447
120,952
115,343
Average unit volume restaurants (5, 4, 4, and 3 units)
109,485
93,012
100,893
113,926
Restaurants less than six months old (3, 3, 7, and 6 units)
140,369
129,941
128,746
116,281
The increases in restaurant sales for Q3 2024 and 2024 YTD were primarily attributable to an increase in store weeks and an increase in comparable restaurant sales. The increases in store weeks were driven by the opening of new restaurants. The increases in comparable restaurant sales were driven by an increase in our per person average check along with an increase in guest traffic counts as shown in the table below.
Guest traffic counts
3.8
4.1
5.5
Per person average check
4.7
4.5
4.6
Comparable restaurant sales growth
To-go sales as a percentage of restaurant sales were 12.7% in Q3 2024 compared to 12.3% in Q3 2023 and were 12.8% in 2024 YTD compared to 12.6% in 2023 YTD.
Per person average check for 2024 includes the benefit of a menu price increase of approximately 2.2% implemented in Q2 2024 and menu price increases of approximately 2.2% and 2.7% implemented in Q2 2023 and Q4 2023, respectively. In addition, we implemented a menu price increase of approximately 0.9% in late September 2024.
In 2024 YTD, we opened 19 Texas Roadhouse company restaurants and three Bubba’s 33 company restaurants. In 2024, we expect store week growth of approximately 7.5% across all concepts, including a benefit of 2% from the 53rd week. In 2025, we expect store week growth of approximately 5% across all concepts, including a benefit of 2% from the planned acquisition of 13 domestic franchise restaurants at the beginning of our 2025 fiscal year.
Other sales include the net impact of the amortization of third party gift card fees and gift card breakage income, sales related to our non-royalty based retail products, and content revenue related to our tabletop kiosk devices. The net impact of these amounts was $(2.1) million in Q3 2024 and $1.4 million in Q3 2023 and was $(11.3) million in 2024 YTD and $(7.2) million in 2023 YTD. The changes in Q3 2024 and Q3 2023 were driven by favorable adjustments recorded of $0.6 million and $3.7 million, respectively. These adjustments related to changes in our estimate of gift card breakage due to a shift in our historic redemption patterns which indicated that the percentage of gift cards sold that are not expected to be redeemed had increased.
Franchise Royalties and Fees
Franchise royalties and fees increased by $1.2 million or 18.3% in Q3 2024 compared to Q3 2023 and increased by $2.2 million or 11.1% in 2024 YTD compared with 2023 YTD. The increases were due to comparable franchise restaurant sales growth and new store openings partially offset by $0.2 million in Q3 2024 and $1.1 million in 2024 YTD related to the reclassification of certain items that were reported in general and administrative expenses in our unaudited condensed consolidated statements of income in Q3 2023 and 2023 YTD.
In 2024 YTD, our franchise partners opened eight international Texas Roadhouse restaurants, including one in a U.S. territory, and one Jaggers domestic restaurant.
Food and Beverage Costs
Food and beverage costs, as a percentage of restaurant and other sales, decreased to 33.5% in Q3 2024 compared to 34.6% in Q3 2023 and decreased to 33.4% in 2024 YTD compared to 34.8% in 2023 YTD. The decreases were primarily driven by the benefit of a higher average guest check partially offset by commodity inflation of 1.3% in Q3 2024 and 0.8% in 2024 YTD primarily due to higher beef costs.
In 2024, we expect commodity inflation of less than 1% for the year with prices locked for approximately 70% of our remaining forecasted costs and the remainder subject to floating market prices. In 2025, we expect commodity inflation of 2% to 3%.
Restaurant Labor Expenses
Restaurant labor expenses, as a percentage of restaurant and other sales, decreased to 33.8% in Q3 2024 compared to 34.0% in Q3 2023 and decreased to 33.0% in 2024 YTD compared to 33.5% in 2023 YTD. The decreases were primarily driven by the benefit of a higher average guest check and labor productivity partially offset by wage and other labor inflation of 4.7% in Q3 2024 and 4.5% in 2024 YTD. Wage and other labor inflation was driven by higher wage and benefit expense due to labor market pressures along with increases in state-mandated minimum and tipped wage rates and increased investment in our people.
In 2024, we expect wage and other labor inflation of approximately 4.5%. In 2025, we anticipate our labor costs will continue to be pressured by wage and other labor inflation of 4% to 5%.
Restaurant Rent Expense
Restaurant rent expense, as a percentage of restaurant and other sales, was 1.6% in both Q3 2024 and Q3 2023 and decreased to 1.5% in 2024 YTD compared to 1.6% in 2023 YTD. In Q3 2024, higher rent expense at our newer restaurants was offset by the increase in average unit volume. The decrease in 2024 YTD was driven by the increase in average unit volume partially offset by higher rent expense at our newer restaurants.
Restaurant Other Operating Expenses
Restaurant other operating expenses, as a percentage of restaurant and other sales, decreased to 15.1% in Q3 2024 compared to 15.2% in Q3 2023 and increased to 14.9% in 2024 YTD compared to 14.7% in 2023 YTD. The decrease in Q3 2024 was driven by the increase in average unit volume partially offset by higher incentive compensation expense. The increase in 2024 YTD was driven by an increase in general liability insurance expense of $2.4 million and higher incentive compensation expense partially offset by the increase in average unit volume. The increase in general liability insurance expense was due to unfavorable claims experience and an increase in retention levels.
Pre-opening Expenses
Pre-opening expenses were $7.3 million in Q3 2024 compared to $8.7 million in Q3 2023 and $21.6 million in 2024 YTD compared to $19.7 million in 2023 YTD. Pre-opening costs will fluctuate from quarter to quarter based on specific pre-opening costs incurred for each restaurant, the number and timing of restaurant openings, and the number and timing of restaurant managers hired.
Depreciation and Amortization Expenses
Depreciation and amortization expense, as a percentage of total revenue, was 3.5% in both Q3 2024 and Q3 2023 and was 3.3% in both 2024 YTD and 2023 YTD. In both periods, higher depreciation expense at our newer restaurants was offset by the increase in average unit volume.
Impairment and Closure Costs, Net
Impairment and closure costs, net were $0.8 million in Q3 2024 and were not significant in Q3 2023 and were $1.1 million in 2024 YTD compared to $0.1 million in 2023 YTD. In Q3 2024 and 2024 YTD, impairment and closure costs, net included costs related to the impairment of a building at a previously relocated store.
General and Administrative Expenses
General and administrative expenses, as a percentage of total revenue, were 4.3% in both Q3 2024 and Q3 2023 and decreased to 4.2% in 2024 YTD compared to 4.3% in 2023 YTD. In Q3 2024, higher restricted stock expense and incentive compensation expense were offset by an increase in average unit volume. The decrease in 2024 YTD was driven by the increase in average unit volume and a separation payout of $2.6 million in Q1 2023, related to the retirement of an executive officer, partially offset by higher restricted stock expense and incentive compensation
24
expense. The increases in restricted stock expense were primarily due to shifting our restricted stock grants from quarterly to annually.
Interest Income, Net
Interest income, net was $1.9 million and $0.5 million in Q3 2024 and Q3 2023, respectively, and was $5.0 million and $2.7 million in 2024 YTD and 2023 YTD, respectively. The increases were driven by increased earnings on our cash and cash equivalents in both periods and decreased borrowings on our revolving credit facility in 2024 YTD.
Equity Income from Investments in Unconsolidated Affiliates
Equity income was $0.2 million in Q3 2024 compared to $0.1 million Q3 2023 and was $0.8 million in 2024 YTD compared to $1.2 million in 2023 YTD. The increase in Q3 2024 was driven by increased earnings on these affiliates. The decrease in 2024 YTD was primarily driven by a $0.6 million gain on the acquisition of four of these affiliates in 2023 YTD partially offset by increased earnings on these remaining affiliates.
Income Tax Expense
Our effective tax rate was 16.7% in Q3 2024 compared to 11.9% in Q3 2023 and was 15.1% in 2024 YTD compared to 12.9% in 2023 YTD. The increases were driven by a decrease in the impact of the FICA tip tax credit, which was driven by increased profitability.
In 2024, we expect an effective tax rate of approximately 15% based on forecasted operating results. In 2025, we expect an effective tax rate of 15% to 16% based on forecasted operating results.
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 and franchise Jaggers restaurants and the results of our retail initiatives, are included in Other. In addition, corporate-related assets, depreciation and amortization, and capital expenditures are also included in Other.
Management uses restaurant margin as the primary 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 includes sales and operating costs related to our non-royalty based retail initiatives that are included in Other. Restaurant margin is used by our CODM to evaluate restaurant-level operating efficiency and performance. A reconciliation of income from operations to restaurant margin is included in the Results of Operations section above.
25
The following table presents a summary of restaurant margin by segment (in thousands):
16.1
14.3
12.3
13.3
16.0
14.6
17.3
16.2
13.9
11.2
17.2
In our Texas Roadhouse reportable segment, restaurant margin dollars increased $36.1 million or 23.4% in Q3 2024 and increased $130.7 million or 25.9% in 2024 YTD. The increases were primarily due to higher sales and improved labor productivity partially offset by wage and other labor inflation as well as higher general liability insurance expense in the 2024 YTD period.
In our Bubba’s 33 reportable segment, restaurant margin dollars increased $3.0 million or 39.9% in Q3 2024 and increased $9.6 million or 37.7% in 2024 YTD. The increases were primarily due to higher sales and improved labor productivity partially offset by wage and other labor inflation.
Liquidity and Capital Resources
The following table presents a summary of our net cash provided by (used in) operating, investing, and financing activities (in thousands):
Net cash provided by operating activities was $516.1 million in 2024 YTD compared to $390.7 million in 2023 YTD. This increase was primarily due to an increase in net income and a favorable change in working capital.
Our operations have not required significant working capital and, like many restaurant companies, we have been able to operate with negative working capital, if necessary. Sales are primarily for cash, and restaurant operations do not require significant inventories or receivables. In addition, we receive trade credit for the purchase of food, beverages, and supplies, thereby reducing the need for incremental working capital to support growth.
Net cash used in investing activities was $237.2 million in 2024 YTD compared to $273.5 million in 2023 YTD. The decrease was primarily due to the acquisition of eight domestic franchise restaurants for $39.1 million in Q1 2023.
We require capital principally for the development of new company restaurants, the refurbishment or relocation of existing restaurants and the acquisition of franchise restaurants, as applicable. We either lease our restaurant site locations under operating leases for periods of five to 30 years (including renewal periods) or purchase the land when appropriate. As of September 24, 2024, we had developed 153 of the 657 company restaurants on land that we own.
26
The following table presents a summary of capital expenditures (in thousands):
New company restaurants
144,574
138,124
Refurbishment or expansion of existing restaurants
87,014
88,580
Relocation of existing restaurants
10,540
11,946
Capital expenditures related to Support Center office
4,411
5,245
Total capital expenditures
Our future capital requirements will primarily depend on the number and mix of new restaurants we open, the timing of those openings, and the restaurant prototype developed in a given fiscal year. These requirements will include costs directly related to opening, maintaining, or relocating restaurants and may also include costs necessary to ensure that our infrastructure is able to support a larger restaurant base.
We intend to satisfy our capital requirements over the next 12 months with cash on hand, net cash provided by operating activities and, if needed, funds available under our revolving credit facility. In 2024, we expect capital expenditures of $360 million to $370 million. In 2025, we expect capital expenditures of approximately $400 million.
Net cash used in financing activities was $193.9 million in 2024 YTD compared to $221.8 million in 2023 YTD. The decrease is primarily due to the $50 million repayment of our revolving credit facility in 2023 YTD partially offset by an increase in our quarterly dividend payment.
On February 14, 2024, our Board authorized the payment of a quarterly cash dividend of $0.61 per share of common stock compared to the quarterly dividend of $0.55 per share of common stock declared in 2023. The payment of quarterly dividends totaled $122.2 million and $110.4 million in 2024 YTD and 2023 YTD, respectively.
On March 17, 2022, our 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. All repurchases to date under our stock repurchase programs have been made through open market transactions.
During 2024 YTD and 2023 YTD, we paid $44.7 million and $45.2 million, respectively, to repurchase 278,914 shares and 414,319 shares, respectively, of our common stock. As of September 24, 2024, $72.2 million remained under our authorized stock repurchase program.
We maintain a credit facility with a syndicate of commercial lenders led by JPMorgan Chase Bank, N.A. and PNC Bank, N.A. The credit facility is 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 commercial lenders. The credit facility has a maturity date of May 1, 2026.
As of September 24, 2024 and December 26, 2023, we had no outstanding borrowings under the credit facility and had $295.3 million of availability, net of $4.7 million of outstanding letters of credit, respectively.
The interest rate for the credit facility as of September 24, 2024 and September 26, 2023 was 5.72% and 6.19%, respectively.
27
Guarantees
As of September 24, 2024 and December 26, 2023, we were contingently liable for $9.7 million and $10.4 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 September 24, 2024 and December 26, 2023 as the likelihood of default was deemed to be less than probable and the fair value of the guarantees is not considered significant.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risk from changes in interest rates on variable rate debt and changes in commodity prices. Our exposure to interest rate fluctuations is limited to our outstanding bank debt. The terms of the credit facility require us to pay interest on outstanding borrowings at SOFR, plus a fixed adjustment of 0.10%, plus a variable adjustment of 0.875% to 1.875% depending on our consolidated leverage ratio. As of September 24, 2024, we had no outstanding borrowings under our credit facility.
In an effort to secure high quality, low-cost ingredients used in the products sold in our restaurants, we employ various purchasing and pricing contract techniques. When purchasing certain types of commodities, we may be subject to prevailing market conditions resulting in unpredictable price volatility. For certain commodities, we may also enter into contracts for terms of one year or less that are either fixed price agreements or fixed volume agreements where the price is negotiated with reference to fluctuating market prices. We currently do not use financial instruments to hedge commodity prices, but we will continue to evaluate their effectiveness. Extreme and/or long-term increases in commodity prices could adversely affect our future results, especially if we are unable, primarily due to competitive reasons, to increase menu prices. Additionally, if there is a time lag between the increasing commodity prices and our ability to increase menu prices or if we believe the commodity price increase to be short in duration and we choose not to pass on the cost increases, our short-term financial results could be negatively affected.
We are subject to business risk as our beef supply is highly dependent upon four vendors. If these vendors are unable to fulfill their obligations under their contracts, we may encounter supply shortages and/or higher costs to secure adequate supply and a possible loss of sales, any of which would harm our business.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We have evaluated the effectiveness of the design and operation of our disclosure controls and procedures pursuant to, and as defined in, Rules 13a-15(e) and 15d-15(e) under the Exchange Act as of the end of the period covered by this report. Based on the evaluation, performed under the supervision and with the participation of our management, including the Chief Executive Officer (the "CEO") and the Chief Financial Officer (the "CFO"), our management, including the CEO and CFO, concluded that our disclosure controls and procedures were effective as of September 24, 2024.
Changes in Internal Control
There were no changes in the Company’s internal control over financial reporting that occurred during the 13 weeks ended September 24, 2024 that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II — OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
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 at varying retention levels, 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.
ITEM 1A. RISK FACTORS
Information regarding risk factors appears in our Annual Report on Form 10-K for the year ended December 26, 2023, under the heading "Special Note Regarding Forward-looking Statements" and in the Form 10-K Part I, Item 1A, Risk Factors. There have been no material changes from the risk factors previously disclosed in our Form 10-K for the fiscal year ended December 26, 2023.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
In 2008, our Board approved our first stock repurchase program. From inception through September 24, 2024, we have paid $728.2 million through our authorized stock repurchase programs to repurchase 21,775,382 shares of our common stock at an average price per share of $33.44. On March 17, 2022, our Board approved a stock repurchase program which authorized us to repurchase up to $300.0 million of our common stock. This stock repurchase program has no expiration date. All repurchases to date under our stock repurchase programs have been made through open market transactions. The timing and the amount of any repurchases through this program will be determined by management under parameters established by the Board, based on an evaluation of our stock price, market conditions and other corporate considerations, including complying with Rule 10b5-1 trading arrangements under the Exchange Act.
For the 13 weeks ended September 24, 2024, we paid $9.6 million to repurchase 56,248 shares of our common stock. As of September 24, 2024, $72.2 million remained authorized for stock repurchases.
Maximum Number
(or Approximate
Total Number of
Dollar Value)
Shares Purchased
of Shares that
Total Number
Average
as Part of Publicly
May Yet Be
of Shares
Price Paid
Announced Plans
Purchased Under the
Period
Purchased
per Share
or Programs
Plans or Programs
June 26 to July 23
48,748
169.95
73,460,525
July 24 to August 20
7,500
168.75
72,194,875
August 21 to September 24
56,248
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
Rule 10b5-1 Trading Plans
During the 13 weeks ended September 24, 2024, no executive officer or director adopted, modified, or terminated a Rule 10b5-1 or a non-Rule 10b5-1 trading arrangement, as such terms are defined in Item 408(a) of Regulation S-K.
ITEM 6. EXHIBITS
Exhibit No.
Description
31.1
Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2
31.3
32.1
Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH
Inline XBRL Taxonomy Extension Schema Document
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document
104
Cover page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
TEXAS ROADHOUSE, INC.
Date: November 1, 2024
By:
/s/ GERALD L. MORGAN
Gerald L. Morgan
Chief Executive Officer
(Principal Executive Officer)
/s/ D. CHRISTOPHER MONROE
D. Christopher Monroe
Chief Financial Officer
(Principal Financial Officer)
/s/ KEITH V. HUMPICH
Keith V. Humpich
Vice President of Finance
(Principal Accounting Officer)