Texas Roadhouse(US:TXRH)2023-02-24 15:02Restaurant Operations - As of December 27, 2022, Texas Roadhouse operated 697 restaurants across 49 states and ten foreign countries, including 597 company restaurants and 100 franchise restaurants[228]. - In 2022, the company opened 23 company restaurants and franchise partners opened seven restaurants internationally, with plans to open approximately 25 to 30 company restaurants and up to nine franchise openings in 2023[237]. - The company completed the acquisition of eight domestic franchise Texas Roadhouse restaurants for $33.1 million in 2022 and another eight for approximately $39.0 million at the start of fiscal year 2023[238]. - The company has entered into area development agreements for Texas Roadhouse restaurants in various foreign countries and one U.S. territory, with plans for the first Jaggers franchise restaurant to open in 2023[236]. - The company opened 23 new restaurants in 2022, including 18 Texas Roadhouse, 4 Bubba's 33, and 1 Jaggers, and acquired 8 franchise restaurants[270]. - For 2023, the company plans to open approximately 25 to 30 Texas Roadhouse and Bubba's 33 restaurants and three Jaggers restaurants, expecting at least 6% store week growth[271]. Financial Performance - Total revenue increased by $551.0 million or 15.9% to $4.0 billion in 2022 compared to $3.5 billion in 2021, driven by a 6.1% increase in store weeks and a 9.7% increase in comparable restaurant sales[258]. - Net income rose by $24.5 million or 10.0% to $269.8 million in 2022, with diluted earnings per share increasing by 13.5% to $3.97 from $3.50 in the prior year[259]. - Restaurant margin dollars increased by $45.8 million or 7.9% to $627.5 million in 2022, although the restaurant margin percentage decreased to 15.7% from 16.9% due to commodity and labor inflation[260]. - Restaurant and other sales increased by 16.0% in 2022, with comparable restaurant sales growth of 9.7%[266]. - Franchise royalties and fees increased by $1.4 million or 5.5% in 2022, with franchise comparable restaurant sales growing by 10.3%[273]. - Net cash provided by operating activities was $511.7 million in 2022, up from $468.8 million in 2021, attributed to increased net income and favorable working capital[292]. Cost and Expenses - Food and beverage costs as a percentage of sales increased to 34.6% in 2022 from 33.6% in 2021, with commodity inflation at 10.8%[275]. - Restaurant labor expense as a percentage of sales increased to 33.1% in 2022, driven by wage inflation of 8.3%[276]. - General and administrative expenses decreased to 4.3% of total revenue in 2022 from 4.5% in 2021, driven by increased average unit volume and lower legal settlement expenses[284]. - Interest expense significantly decreased to $0.1 million in 2022 from $3.7 million in 2021, primarily due to increased earnings on cash and cash equivalents[285]. Shareholder Returns - The Board declared a quarterly cash dividend of $0.55 per share in February 2023, a 20% increase compared to the previous year[240]. - The company continues to evaluate opportunities for capital return to shareholders, including dividends and stock repurchases, with $166.9 million remaining authorized for stock repurchases as of December 27, 2022[241]. - The company repurchased 2,734,005 shares for $212.9 million in 2022, compared to $51.6 million for 584,932 shares in 2021[299]. - A quarterly dividend of $0.46 per share was paid in 2022, totaling $124.1 million, with an increase to $0.55 per share declared for 2023[300]. Debt and Financial Instruments - As of December 27, 2022, the company had $50.0 million outstanding on its amended revolving credit facility, with an interest rate of 5.21%[304][305]. - The interest rate for the $50.0 million outstanding on the amended revolving credit facility was 5.21% as of December 27, 2022, with a potential increase in annual interest expense of $0.5 million if rates rise by one percentage point[319]. - The company has $50.0 million outstanding on its amended credit agreement, which is classified as long-term debt on the consolidated balance sheets[318]. - The company does not currently use financial instruments to hedge commodity prices but is evaluating their effectiveness due to potential price volatility in the market[320]. Risks and Challenges - The company is currently facing high inflation, primarily driven by commodity costs and wage inflation, which may impact future restaurant profitability[317]. - The company is subject to business risk as its beef supply is highly dependent on four vendors, which could lead to supply shortages or increased costs if any vendor fails to meet obligations[322]. - The company may experience unpredictable price volatility for commodities due to market conditions, which could adversely affect future results[321]. - The company performed a goodwill impairment analysis at the concept level in 2022, with no indicators of impairment identified[316]. - In 2022, the company recorded impairment and closure costs of $1.6 million, including $1.7 million for impairment of assets at three restaurants and $0.6 million for ongoing closure costs[311]. Future Outlook - The company expects commodity cost inflation of 5% to 6% for 2023, with prices locked for approximately 40% of forecasted costs[275]. - The effective tax rate increased slightly to 13.6% in 2022 from 13.5% in 2021, with an expected rate of approximately 14% for 2023[286]. - Texas Roadhouse segment restaurant margin increased by $48.2 million or 8.7% in 2022, while the margin percentage decreased to 16.0% from 16.9% in 2021[290]. - Bubba's 33 segment restaurant margin dollars decreased by $1.9 million or 6.7% in 2022, with the margin percentage dropping to 12.7% from 16.6% in 2021[291]. - The company has implemented menu price increases to offset some impacts of inflation, but future decisions on pricing will affect profitability[317].