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):

	13 weeks Ended				26 weeks Ended
	June 28, 2022		June 29, 2021		June 28, 2022		June 29, 2021
Restaurant and other sales	$	1,018,057	$	892,444	$	1,999,029	$	1,687,367
Franchise royalties		5,771		5,555		11,470		10,528
Franchise fees		778