George Price Cooper - Chief Financial Officer and Principal Accounting Officer Wayne Kent Taylor - Founder, Chairman and Chief Executive Officer Scott M. Colosi - President

John S. Glass - Morgan Stanley, Research Division Jonathan R.

Komp - Robert W. Baird & Co.

Incorporated, Research Division Ashwin Shandilya - Barclays Capital, Research Division John W. Ivankoe - JP Morgan Chase & Co, Research Division Christopher T.

O'Cull - KeyBanc Capital Markets Inc., Research Division Andrew M. Barish - Jefferies & Company, Inc., Research Division Bryan C.

Elliott - Raymond James & Associates, Inc., Research Division

Thank you, Jessica, and good evening, everyone. By now, everyone should have access to our earnings announcement for the first quarter ended March 26, 2013.

It may also be found on our website at texasroadhouse.com in the Investors section. Before we begin our formal remarks, I need to remind everyone that part of our discussion today will include forward-looking statements.

These statements are not guarantees of future performance and therefore, undue reliance should not be placed upon them. We refer all of you to our earnings release and our recent filings with the SEC for a more detailed discussion of the relevant factors that could cause actual results to differ materially from those forward-looking statements.

In addition, we may refer to non-GAAP measures. Reconciliations of the non-GAAP measures to the GAAP information can be found under the Investors section of our website.

On the call with me today is Kent Taylor, our founder and CEO; and Scott Colosi, our President. Kent is going to start the call off, after which I'll provide a financial update and then Scott will provide some insight on our performance and business direction.

Afterwards, we'll all be available to answer any questions. Now I'd like to turn the call over to our CEO, Kent Taylor.

Thanks, Price, and good evening, everyone. We are pleased to report another quarter of solid growth for Texas Roadhouse.

Revenue increased 11%. And in spite of significant commodity inflation, we reported diluted EPS growth of 16% on an apples-to-apples basis.

Thanks to our operators, who are by far the best in the industry, we continue to generate positive traffic. This is our 12th consecutive quarter of positive traffic growth, and our second quarter has started off strong as well.

There's no secret to our positive traffic growth. In addition, in Legendary Food and Legendary Service, our operators have embraced our speed initiatives and overall, are flat out just kicking butt.

While sales remained strong, higher commodity costs remain a headwind. And at this point, we expect this pressure to continue throughout 2013 and 2014.

Because of the timing of our pricing actions, our average check increase was a little higher this quarter, which help partially offset commodity inflation. However, we expect our average check increase will be lower for the balance of 2013.

This no doubt presents a challenge, but we feel confident our operators will rise to the occasion and continue driving traffic. This summer, we will begin testing a menu price increase.

And as we get better -- a better handle on inflation for 2014, we'll make our determination on the amount of pricing to be implemented. As always, our primary focus is on driving traffic because we believe it is the best way to generate sales and build long-term success.

That's been our story and we're sticking to it. On the development side of things, we opened 3 company and 2 franchise restaurants during the quarter and on our way to approximately 28 new company restaurants and 5 franchise restaurants this year.

This will represent our third straight year of increased development. Additionally, our 2014 development pipeline is coming together, and we will have it much more front-end loaded than we did this year.

Lastly, to all operators out there, thanks for your awesome results. I look forward to seeing you in Hawaii.

It's been a great 20 years, and we're just getting started forever strong. Now Price will walk you through our financial update.

Thanks, Kent. During the review of the quarter, many of the numbers I'll mention are included in the schedules, supplemental financial and operating information included in the press release.

On a reported basis, net income was $26.2 million or $0.37 per diluted share compared to $18.9 million or $0.27 per diluted share in the prior year. There are a few things to point out for both this year and last year that are impacting results.

First, last year's third quarter results were negatively impacted by a $5 million pretax legal settlement charge, which weighed on last year's diluted EPS, about $0.04. Additionally, this year's net income was positively impacted by approximately $800,000 or just over $0.01 per diluted share by the reinstatement of the Work Opportunity Tax Credit program.

Factoring out both of these items, diluted EPS growth in the first quarter was 16%, as Kent mentioned earlier. This quarter's earnings per share did come in higher than we anticipated as a result of better top line sales and the resulting impact on margins, mainly labor.

Our first quarter 2013 revenue increased 10.7% as a result of an 8.4% increase in store weeks, and a 2.8% increase in average unit volumes. After starting the quarter with comparable sales up 2.2% for the first 55 days, sales momentum improved, putting us up 3.5% in comparable sales for the full quarter.

This will comprise of an average check increase of 3% and traffic growth of 0.5 point. Bottom line comparable sales increased 7.2%, decreased 2.3% and increased 5.6% for our January, February and March periods, respectively.

And as we reported on our release, April trends have remained positive with comps increasing 5.7%. We feel good about the comp sales momentum.

With regard to our newer restaurants, they continue to perform a little below the system average in terms of sales, but we are very pleased with the overall returns we are generating. In terms of company profitability, on a dollar basis, restaurant operating profit increased 9.7% or $6 million year-over-year for the first quarter.

This exceeded our store regrowth of 8.4%, meaning our stores on average continue to make more money. However, we did get back to margin percent as our check increase of 3% was not enough to offset all the inflation we experienced.

Food cost inflation came in at 7.2% for the quarter, so we lost leverage on that line. And while we were able to leverage both labor and other operating costs, it was not enough to offset the impact of commodity inflation on cost of sales.

As we progress throughout the balance of the year, we expect the story to be much the same. However, we do expect margin percent to be under more pressure, driven by the fact we anticipate our check increase will be more like 2% for the rest of the year as compared to 3% in the first quarter.

We continue to expect 6% to 7% food inflation for the year, driven by beef. While we may be able to continue to generate some leverage on the labor and other operating cost lines, it will not be enough to offset food inflation, especially with lower check.

As we've done in the past, we will continue to focus on driving margin dollar growth through traffic gains. Comps below the restaurant level were in line with our expectations.

With regard to G&A for 2013, we expect to leverage our reported 2012 G&A of $70.6 million. However, excluding the impact of the $5 million legal charge last year, it may be difficult to get leverage on this line with our annual Managing Partner Conference cost being up $2.5 million to $3 million versus 2012, primarily due to higher transportation and lodging costs.

Additionally, having our 2013 development a little more back-end loaded this year does not help. As expected, our income tax rate came in lower as a result of the retroactive reinstatement for the Work Opportunity Tax Credit program.

While the rate for the quarter was 28.7%, we continue to expect our full year rate will be approximately 31%. Shifting over to the cash flow and capital side of things.

We ended the quarter with over $95 million in cash. Cash was higher compared to year end due to the timing of openings along with the fact we did not repurchase any stock during the quarter.

As we move forward, we will continue to be opportunistic as it relates to repurchasing stock, and we anticipate our board will continue to declare regular quarterly dividends. Our capital expenditures were only $15.6 million for the quarter.

We continue to expect capital expenditures for the year in the range of $100 million to $105 million. The low amount for the first quarter was driven by the 2013 development being so back-end loaded this year, with as many as 14 restaurants scheduled to open in the fourth quarter alone.

And with that said, I'd like to turn the call over to our President, Scott Colosi.

Thank you, Price, and good evening, everybody. We're very encouraged by our current sales momentum and the corresponding diluted earnings per share growth that was generated this quarter.

On the sales front, comparable sales growth of 3.5% for the first quarter was on top of positive comps of 6% last year. This is great performance from our operators, and we're definitely pleased to see continued positive traffic growth.

New restaurant development continues to be a great opportunity from both the company and franchise perspective. Both Kent and Price mentioned store weeks and new store performance, but I want to reiterate that we feel very positive about our growth in 2013 and going forward.

Development costs were a little higher in 2012, and we expect them to be flat to up slightly in 2013. And while sales at our new restaurants are slightly lower than our system average, their volumes are such that we are very comfortable with the returns that they are generating.

From a franchise perspective, our development pipeline is taking shape as we continue to open new international franchise restaurants. We currently have 3 Middle East locations and expect to have 5 by the end of the year.

And while our international development is still a small piece of the pie, we're very excited about where we are heading and the opportunities it provides to our employees. We do not take our recent sales momentum for granted, and we know we are as only as good as our last shift.

We believe our disciplined focus on sales and staying consistent on food quality and the guest experience will continue to drive our success. We look forward to seeing our operators and many of our vendor partners next week in Maui to celebrate their accomplishments in 20 years of success at Texas Roadhouse.

That covers our prepared remarks so, Jessica, you may now open the line for questions.

A couple of questions, please. Just remind us, Price, what was the pricing running in April?

Have you fully rolled off the price increase? So is it 2% now going forward?

Yes, it's a little over 2%. We rolled over the pricing in middle of February.

Okay. And the testing you're doing this summer, is that for later this year or is that for next year?

It would be for the very latter part of this year, kind of like what we did last year when we took some pricing in December. It would all relate to 2014.

We don't have any schedule now when that would be implemented.

Okay. And then you said food cost is running at 7.2%, so a little higher than your range of 6% to 7%.

Is that just a normal variance within the range or is it -- does food cost sort of decelerate -- inflation, I should say from here in over what, sort of? Is it in the next quarter or is it sort of more back-half loaded you'd see that relief?

We expect it to come down a little bit throughout the year. One thing for us, John, is we were in the market in the fourth quarter last year for a decent amount of our beef needs.

So they were up quite a bit versus say, 2012 or -- I'm sorry, 2011. So we don't expect quite as much beef inflation on a year-over-year basis in fourth quarter.

So you're probably looking at something in the range of say 6% to 7% -- 6.5% to 7% for the second and third quarter and then 6%-ish for the fourth quarter.

Got it. Then just sort of my last question is, did your lower store development this year year-over-year, other than pre-opening, did that possibly impact the margins?

Was that a benefit, for example, on labor and stuff as you have fewer inventory, storage was not really measurable?

I don't think it was that meaningful for the first quarter. It wasn't that meaningful.

This is JR Visalan [ph] for Will. Yes, just thinking of that April trend, that's a very impressive number.

Is there anything you can point out that you were seeing different? Maybe a mix up or a trade up on many or is it -- just kind of give us an idea around that, please.

Yes, JR [ph], this is Price. We haven't really seen anything different as far as from a mix perspective.

Our mix is still flat to down a little bit on the entrée side of things and haven't seen any real differences in days of the week or regionality for that matter. So it's been all -- all I can tell you there, it's just better performance overall.

I'd refer back to the kicking ass comment.

I'd like that. Okay.

And shifting gears mainly, back to the pipeline, the product pipeline, is there an area where you're all going to attack this year, maybe the premium side? I know you rolled out the porterhouse all across the country.

Are you still seeing that trending well, and is that something you're going to continue attacking in '13?

Yes, we -- you are right. We did roll out the porterhouse to all of our restaurants.

But that's all -- the only change that we had with regard to that for this year. So we don't have any more plans for that going forward.

First question just in case I missed it. Price, I think last time you gave a range for potential earnings outcomes for the year.

I think you said low-single digit to low-double digit growth, traffic was up 0% to 2%. Did I miss an update on that or is that range still relevant?

No, we didn't update that. No, Jonathan, last time, we provided a little more detail with regard to guidance giving some unusual circumstances, I'd say.

But our plan going forward is not to give specific EPS guidance or for that matter, a range of potential outcomes.

Okay, got it. And maybe just related to the earnings growth, I know there's few moving parts.

I look at the year-over-year growth, obviously, the fourth quarter could be higher year-over-year because you have the extra week. In this quarter, have some costs in the Managing Partners Conference.

So I'm just wondering, can you at least maybe give some direction in terms of cadence of potential growth? Or more specifically, the second quarter, the current quarter seems like it could be pretty flattish year-over-year.

Is it that the right ballpark for how you're thinking about things?

I'm not going to get into specific things on quarter by -- or by the year. The 2 things we would remind folks of is, one, as you mentioned, we do have an extra week this year, which is in the fourth quarter.

And we've talked about we expect our annual conference expense to be up $2.5 million or $3 million above last year, and that is a second quarter event.

And this is Scott. The other thing that's out there is just our average check growth.

We've lapped the pricing back in February, as Price mentioned. So we have less pricing in the menu right now than we had earlier this year.

Okay, that's helpful. And then maybe just one more question.

I know you mentioned the pricing tests for potentially -- potentially for 2014. As you sit here today and think about contemplating needing some -- to test some pricing, are you thinking more about further food inflation in 2014?

Is it labor inflation you're worried about or what are you specifically looking at?

Right now, we're just planning for the potential for general inflation from the food side of things, sitting here today, specifically on the beef side of things. I think -- we think it's logical to assume we're going to have some inflation continuing into 2014.

Don't know exactly how much that will be. We'll continue to get a better handle on that as we move throughout the year.

But in general, we'd continue to expect there'll be some inflation there. And every year, we expect to have some inflation in wage rates and other labor items.

So we plan to have inflation every year.

This is Ashwin Shandilya for Jeff. So my first question was basically on the first quarter comp, looking at the fluctuations from month-to-month, was it mostly macro-driven, or were there any competitive or promotional dynamics at play?

I don't really know. It wasn't anything that we did internally.

As we talked about last time, we certainly did see it soften for us in our February period, which is late January into the late February time frame. Don't know if some of that was driven by the Social Security -- or increases on Social Security taxes for people with less take-home pay or higher gas prices or delay in tax return filings, certainly had some weather hit, a bunch of stuff all coming together, and we don't exactly know what it was or is.

We are very, very pleased with the fact that we saw it bounce back pretty positive for both March and April.

Great. And then just kind of shifting years, can you give us an update on many maybe unit growth opportunities outside the Texas Roadhouse brand, maybe either through further development of Aspen Creek or acquisition of smaller brands?

We're always looking for other brands. That might be our second avenue.

It will not be Aspen Creek. We're looking at quite a few at the moment, but nothing solid yet.

Maybe the results speak for themselves, but it does seem like the competitive environment is a lot more focused on price or -- I mean, I don't know. I mean, just modestly more like focused on price on television, at lunch, at dinner, and dinner especially may be than it has been in the past.

And I guess some referencing directly like Outback and Longhorn, like now you see on television very regularly with what they're running. When you see those brands kind of running television or not running television, do you see any impact at all in your weekly sales trends?

Or most conversely, is their advertising somehow pulling customers into you? Are you -- is that something that you're -- you put your focus on or like you think about?

Not, not really. They've been on TV a lot lately and our sales have been pretty good.

So maybe we like to thank them for helping us to bring attention to steak.

Yes, I mean, I guess -- I mean, again, I mean, sometimes just things are what they are. And then secondly, if I may, and I think both Price and Scott mentioned it in their prepared remarks, I mean the new unit volume being a little bit less than average unit volume is, there's something that you're doing maybe as you think about the 2014 development plan that would allow that to revert to the new unit volumes being equal or in excess of average unit volumes?

John, this is Scott. We don't -- we always want to perform at least at the average for sure.

But we're pretty close to the average right now with our sales. The sales volumes of the new stores are still very, very strong.

So we don't really look at it as, "Oh, my God, there's some big issue here." But we're going to keep a close eye on it, like we always do.

Every class year is a little bit different. It seems like there's a little bit of an ebb and flow in each class year's volumes.

And so right now, we're very comfortable. And we're doing our pro formas by the way, we don't -- or I should say we take a pretty conservative approach to what we think the sales can be in our newer restaurants, because we do believe the second 400 stores are probably harder than the first 400 in our concept, so we do plan very cautiously.

And as a result, we're really getting dynamite returns from the new stores because they're still doing very, very strong volumes.

There's probably no regionality either. Of all the sites I've already approved for next year, I'm already in 19 states.

So that's across the board.

And Kent, have you thought about going a little bit more inner-ring in cities? Or have you gotten a little bit more inner-ring in cities that would come with higher volumes would probably come with higher costs as well?

Is that a potential for you all?

Actually, we're experimenting with that the fourth quarter of this year, so we'll see.

Just as a follow-up to the new store question. Scott, what is the average full investment for a new restaurant?

Well, it's just short of $4 million. It's right about $3.9 million or so.

Now that includes pre-opening, which we average about $450,000. It also includes about $1 million roughly of land, which in our case, is mostly rent.

So we take 10x the first year rent. So from a capital spending perspective, it's closer to $2.5 million.

From an all-in capitalized perspective, including pre-opening, it's just short of $4 million. And we think it will be around $3.9 million this year, which is really good considering we were already at $3.9 million, I think back in 2007 and actually above $4 million in 2008 and 2009.

So we've taken some costs down a little bit. We've been able to kind of keep inflation relatively under control the last few years.

And so it's another thing that's made us really optimistic about the strength of our development the last few years including the last 12 months.

Okay, great. And then I know you guys have focused on or have expanded the dining areas to improve throughput.

But are there other ways to improve capacity or have you used utilization of space?

Well, I'll start. Yes, certainly we think our bumped out program has been very successful.

There are other small, very small type remodeling work that we can do to add a few more seats here and there in our restaurants and that's been very successful. And of course, we're on long wait.

So we did talk about speed and turning tables. It's a big part of our belief, and we just continue to focus on the basics of that.

And we just get after it and talk about it a lot day in and day out. And we've got to be careful because only so many seats our kitchens can handle before things get too slow, which will be a turnoff to the guests, obviously.

So there's a balance there. But our operators are really doing a great job finding ways to grow traffic in their restaurants, whether it's through intensive local store marketing efforts, being very active in their communities or having seats as well, which we obviously leverage when it's peak revenue time on Friday and Saturday night, in particular.

Obviously with the sales volatility and weather and stuff, the labor line in the first quarter look really good. Is that -- are there a couple of initiatives you're focused on there?

Or was that you just got terrific leverage when you had those kind of big sales weeks?

Yes, Andy, this is Price. It's really leverage from having good sales.

And the fact that we mentioned earlier, we had 3% in pricing and a check increase in our menu in the first quarter. And we are seeing relatively benign wage rate inflation, counting that 1% to 2% range.

So with 3% in pricing and a low overall inflation, we were able to get a little more leverage on that labor line.

And then, just on another expense item, some of the sort of new things you're working on nonguest impacting, sort of other expense cuts, did some of that start to show up in the first quarter? Or did that sort of filter in as you move further through the year?

Yes, some of that had definitely started showing up in the first quarter. We expect we'd get a couple million dollars throughout the year.

Some of that definitely showed up in the first quarter. But more of that is in the other occupancy cost line.

But yes, we definitely started seeing that flow into. And then there's things like supplies, chemicals, outside service -- a handful of different things we're working on.

Just a quick clarification and then a question. Price, I missed the monthlies, monthly comps.

Could you give them real quick again? Sorry.

Yes. Hang on a second, Bryan.

Increased 7.2% for January, decrease of 2.3% for February, increase of 5.6% for March and then April was up 5.7%.

Okay. And you said the price fell off about 1 point in mid-Feb, right?

A couple points in mid-February.

Okay. All right.

And the question is just related to the guidance. So just wondering if you can elaborate a bit on your decision to forgo earnings guidance, what your thinking is?

No, we -- Yes, I can tell you that in general, we started down that path fourth quarter's call back in February. At that time, we give you a little more detail than we had in the past, just given the sales environment that we were in.

And so didn't want to necessarily just pull away from communicating, if you will, when sales were softer because it has nothing to do with that. It has more to do with the fact that being an 80% company-owned system, very small changes and inputs towards things like traffic or inflation can have pretty meaningful impact on our earnings, not as much -- a lot less impact on overall cash flow, but more meaningful impacts on EPS.

All right. Thank you, Jessica, and thank you all for joining us this evening.

If you've got any follow-up questions, please give us a shout. Thanks.

Take care.