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RBC Capital Markets, LLC
David Palmer (Analyst)
(212) 905-5998
david.palmer@rbccm.com
Eric Gonzalez (Associate)
(212) 905-5970
eric.gonzalez@rbccm.com
Jack Kindregan, CFA
(Associate)
(212) 618-7716
jack.kindregan@rbccm.com
Outperform
NASDAQ: TXRH; USD 25.17
Price Target USD 32.00
WHAT'S INSIDE
Rating/Risk Change Price Target Change
In-Depth Report Est. Change
Preview News Analysis
Scenario Analysis*
Downside
Scenario
22.00
11%
Current
Price
25.17
Price
Target
32.00
29%
Upside
Scenario
40.00
61%
*Implied Total Returns
Key Statistics
Shares O/S (MM): 71.1
Dividend: 0.48
Float (MM): 57.9
Debt to Cap: 40%
Market Cap (MM): 1,790
Yield: 1.9%
Tr. 12 ROE: 12.00%
3-Yr. Est. EPS Growth: NA
RBC Estimates
FY Dec 2012A 2013A 2014E 2015E
Revenue 1,263.3 1,422.6 1,569.7 1,719.8
Prev. 1,567.5 1,718.5
EPS, Ops Diluted 1.03 1.13 1.27 1.52
Prev. 1.29 1.55
P/E 24.4x 22.3x 19.8x 16.6x
Revenue Q1 Q2 Q3 Q4
2013 359.7A 352.1A 334.8A 376.0A
2014 397.1A 397.9E 379.9E 394.7E
Prev. 397.3E 379.4E 393.6E
2015 440.7E 434.6E 413.3E 431.1E
Prev. 429.8E
EPS, Ops Diluted
2013 0.37A 0.28A 0.24A 0.24A
2014 0.37A 0.35E 0.03E 0.26E
Prev. 0.37E 0.29E 0.25E
2015 0.47E 0.41E 0.33E 0.32E
Prev. 0.43E 0.34E 0.30E
All values in USD unless otherwise noted.
July 31, 2014
Texas Roadhouse, Inc.
Trimming EPS due to beef costs; Outperform
Our view: Ahead of earnings, we are trimming our 2014 and 2015 EPS
estimates to account for continued inflation in steak prices in 2Q14 and
into 2H14. However, we still believe Texas Roadhouse will maintain its SSS
growth gap to the industry with the possibility for additional traffic if it can
maintain its entry-point prices.
Key points:
Trimming 2014 and 2015 EPS estimates: We are trimming our 2014
and 2015 EPS estimates from $1.29 and 1.55 to 1.27 (+13% YOY, $1.26
consensus) and 1.52 (+20% YOY, $1.48 consensus), respectively. Our 2Q
same-store-sales (SSS) growth estimate remains 3.2% (consensus 2.7%),
however our 2Q EPS estimate is now $0.35 to account for higher than
expected steak prices impacting restaurant profitability. While our new
estimates reflect increased headwinds from steak prices in 2H14, we
continue to believe Texas Roadhouse will maintain its 350bp+ SSS growth
gap to the industry and realize outsize EPS growth in 2014 and, especially,
2015.
Steak forecasts revising higher: Texas Roadhouse is currently forecasting
low-single-digit food inflation. However, the ~5%-10% rise in steak price
inflation expectations (45% of food basket) in the last 3 months may push
that guidance higher. During our recent Let's Talk Food Costs conference
call, Kevin Good of Cattle Fax was calling for 10%-20% YOY inflation on
ribeye and sirloin prices in 2H14 (vs 5%-10% previously) due to ongoing
strong global demand.Texas Roadhouse has some cushion given the prices
it paid in 2013 were ~10pp higher than market prices, however inflation in
line with current expectations will likely limit the ability to leverage food
costs in 2014, depending on recent contracting from the company.
Modest labor inflation expected: We are forecasting 20 bp higher labor
costs as a percent of sales in 2014, with labor costs easing in 2015. In
1Q, labor costs increased 60bps as a percent of sales as a result of: 1)
reclassification of expenses from the other income expense line (~30
35bps negative impact); 2) ~1.5% wage inflation; 3) higher healthcare
costs; and 4) higher staffing associated with new unit openings. Excluding
expense reclassification, we assume modest labor deleverage as wage
inflation and healthcare costs are partially offset by sales leverage and
1.5pp of price.
Industry outperformance is sustainable, in our view: We believe Texas
Roadhouse can continue its track record of outperformance in an
otherwise struggling industry thanks to its: 1) unparalleled core steak
value; 2) strong manager compensation/incentives; 3) low employee
turnover; 3) strong corporate culture. These factors lead to high consumer
preference, strong average unit sales (2nd-best among major 200+ unit
chains at $4.2 million); and an ongoing unit growth opportunity (8%
annual growth for 20122014E).
Priced as of prior trading day's market close, EST (unless otherwise noted).
For Required Conflicts Disclosures, see Page 5.
Target/Upside/Downside Scenarios
Exhibit 1: Texas Roadhouse, Inc.
15m
10m
5m
M A M J J A S O N
2012
D J F M A M J J A S O N
2013
D J F M A M J
2014
J
UPSIDE
40.00
TARGET
32.00
CURRENT
25.17
DOWNSIDE
22.00
Jul 2015
34
29
24
19
14
125 Weeks 08MAR12 - 30JUL14
TXRH Rel. S&P 500 COMPOSITE MA 40 weeks
Source: Bloomberg and RBC Capital Markets estimates for Upside/Downside/Target
Target price/ base case
Our $32 price target is based on two methods: 1) DCF analysis,
which yields a $32 value based upon an 8.2% WACC and a
2.5% terminal growth rate; and 2) comparable peer analysis
versus a group of sustaining double-digit earnings growers.
Our target equates to 21x our 2015E EPS estimate of $1.52.
Our estimates are modestly above consensus and imply 13%
and 20% EPS growth in 2014E and 2015E, respectively. Our
mid-teens long-term EPS growth estimate is driven by 68%
annual unit growth and 33.5% SSS growth long-term.
Upside scenario
We believe Texas Roadhouse share price could be $40 by the
end of 2014 in an upside scenario. Our scenario implies that
the casual dining industry accelerates to 01% from recent
levels and that Texas can maintain a SSS growth gap at the high
end of the recent range. This would drive an additional 70bp of
restaurant margin improvement and 27% EPS growth in FY15.
Our $40 upside case equates to 23x our upside case 2015 EPS
estimate of $1.69. Our estimate assumes 3.6% SSS growth in
2014 translates into impressive 9% EPS growth.
Downside scenario
Texas Roadhouse could fall to $22 in our downside case
scenario. The casual dining industry growth could continue to
stall and Texass SSS growth and gap to peers could compress.
In our view, Texas Roadhouse will still maintain a valuation
premium to its casual dining peers due to its SSS growth,
healthy balance sheet, and strong free cash flow yield (9%),
although the multiple and premium will compress along with
the SSS growth in the industry.
Our $22 downside case equates to 17x our downside 2015 EPS
estimate of $1.30. Our estimate assumes 2.8% SSS growth in
2014 translates into just 5% EPS growth.
Investment summary
We believe Texas Roadhouse delivers a combination of
employee incentives, high food value, and corporate culture
that should lead to consistent and sustainable same-store-
sales (SSS) growth. This growth, together with ongoing high-
single-digit unit growth, can fuel sustainable double-digit EPS
growth. We believe the company will maintain its SSS growth
gap to peers, accelerate relative EPS growth due to less
onerous beef inflation, and maintain its premium valuation.
A casual dining concept built for the next generation: We are
forecasting 3%-3.5% SSS growth long term and 3.2% growth
in 2014 (versus roughly flat SSS growth for the casual dining
chain industry). This forecast implies that the gap between
Texas Roadhouse and industry SSS growth in 2012/2013 is
sustainable and is a result of the chains superior value to
the consumer. Our analysis of menu prices versus competitors
shows significant price differences on key menu items. We
believe consumers recognize the value at Texas Roadhouse
while TV advertising and limited-time offers are becoming less
effective at other brands.
A recipe for sustainability: We believe the chains success
is fueled by: 1) unparalleled core steak value; 2) top-tier
manager pay; 3) low employee turnover; 4) superior customer
satisfaction in service; 5) average unit sales that are second-
best among major 200+ unit chains ($4.2 million); and 6)
ongoing unit growth opportunity (8% annual growth for 2012
2014E). Of course, the factors are interrelated. For example,
restaurant managers that are focused on driving sustainable
restaurant profit growth while offering core menu value are
going to minimize inefficiency elsewhere, which helps fuel unit
economics and new development opportunities. In addition
to the opportunity for unit growth, manager incentive helps
fuel the retention of top-tier market partners.
Beef costs remain a potential concern long-term: Current
forecasts from management and the USDA call for milder
steak inflation in 2014 compared to recent years. However,
conditions in the US cattle industry could continue to constrain
supply, leading to a sustained period of elevated pricing. Beef
costs are 45% of company food costs and contributed to a
220bp increase in food margins from 2010 through 2013.
Potential risks to our thesis: While we take these factors
into account when developing our thesis, there could be
unforeseen changes to any of the following, including 1)
slowing economic activity, 2) food safety and quality; 3) food
and labor inflation; and 4) competitor menu and marketing
moves.
Texas Roadhouse, Inc.
July 31, 2014 David Palmer (212) 905-5998; david.palmer@rbccm.com 2
Valuation
Our $32 price target is based on two methods: 1) DCF analysis, which yields a $32 value based
upon an 8.2% WACC and a 2.5% terminal growth rate; and 2) comparable peer analysis versus
a group of sustaining double-digit earnings growers. Our target equates to 21x our 2015E EPS
estimate of $1.52. Our estimates are modestly above consensus and imply 13% and 20% EPS
growth in 2014E and 2015E, respectively. Our mid-teens long-term EPS growth estimate is
driven by 68% annual unit growth, and 33.5% SSS growth long term.
Price target impediments
Slowing economic activity: Restaurant meal occasions are highly discretionary in nature. Thus,
Texas Roadhouses customers may be influenced by various macroeconomic factors (domestic
and international), including employment, gas prices, personal savings, discretionary income,
housing, consumer confidence, etc.
Food safety and quality: Texas Roadhouse spends a significant portion of its limited marketing
budget promoting the companys made-from-scratch food and hand-cut steaks. As such, any
challenge to the perception of quality might cause immeasurable harm to the companys
reputation and value.
Food and labor inflation: While Texas Roadhouse has the majority of its food costs locked in for
the current fiscal year, a rapid increase in the price of key commodities would affect the future
earnings growth. The company is exposed to beef pricing, in particular, as it represent 45% of
food costs. Wage increaseswhether from statutory minimum wage increases or voluntary
would affect store-level profitability.
Competitor menu and marketing moves: Texas Roadhouses leading price point on key menu
items is a sustainable driver of traffic. Significant promotional pricing by competitors could
erode this price gap and lead to Texas Roadhouse losing customers to its competition.
Company description
Texas Roadhouse, Inc. operates a chain of casual-dining restaurants under the Texas
Roadhouse and Aspen Creek names. The Texas Roadhouse chain offers a variety of hand-cut
steaks, fall-off-the-bone ribs, made-from-scratch sides, and fresh-baked bread. The company
was founded in 1993 by current Chairman and Chief Executive Officer W. Kent Taylor and is
headquartered in Louisville, KY. There are currently over 400 locations in 48 states and two
foreign territories. Franchise partners operate 72 of the locations, with the balance being
company owned.
Texas Roadhouse, Inc.
July 31, 2014 David Palmer (212) 905-5998; david.palmer@rbccm.com 3
Texas Roadhouse, Inc. Target $1.03 $0.37 $0.28 $0.24 $0.24 $1.13 $0.37 $0.35 $0.28 $0.26 $1.27 $1.52
Income Statement Actual $1.03 $0.37 $0.28 $0.24 $0.24 $1.13 $0.37 $0.35 $0.28 $0.26 $1.27 $1.52
David Palmer Rounded $1.03 $0.37 $0.28 $0.24 $0.24 $1.13 $0.37 $0.35 $0.28 $0.26 $1.27 $1.52
RBC Capital Markets
Currently Running: Base Case
(Figures in $MM, except per-share data. Fiscal year ends Dec.)
2011 2012 1Q13 2Q13 3Q13 4Q13 2013 1Q14 2Q14E 3Q14E 4Q14E 2014E 2015E
2011 2012 Mar-13 Jun-13 Sep-13 Dec-13 2013 Mar-14 Jun-14 Sep-14 Dec-14 2014 2015
Revenues
Restaurant Sales $1,099.5 $1,252.4 $356.6 $348.9 $331.7 $372.9 $1,410.1 $394.0 $394.7 $376.5 $391.0 $1,556.1 $1,704.7
YOY Change 10.4% 13.9% 10.7% 9.9% 8.4% 21.5% 12.6% 10.5% 13.1% 13.5% 4.9% 10.4% 9.5%
Franchise Royalties & Fees $9.8 $11.0 3.1 3.2 3.0 3.1 $12.5 3.2 3.2 3.4 3.7 $13.6 $15.1
YOY Change 8.3% 12.5% 8.9% 16.9% 14.9% 14.0% 13.6% 2.4% 1.6% 13.0% 18.5% 8.8% 11.2%
Total revenues $1,109.2 $1,263.3 $359.7 $352.1 $334.8 $376.0 $1,422.6 $397.1 $397.9 $379.9 $394.7 $1,569.7 $1,719.8
YOY Change 10.4% 13.9% 10.7% 9.9% 8.5% 21.5% 12.6% 10.4% 13.0% 13.5% 5.0% 10.3% 9.6%
Cost and expenses
Costs of Sales (Food) $367.4 $423.6 124.6 120.2 116.6 131.0 $492.3 134.8 137.8 133.5 138.6 $544.7 $599.4
YOY Change 13.3% 15.3% 13.6% 12.5% 13.3% 25.7% 16.2% 8.2% 14.6% 14.5% 5.9% 10.6% 10.0%
% of Company Restaurant Sales 33.4% 33.8% 34.9% 34.5% 35.1% 35.1% 34.9% 34.2% 34.9% 35.4% 35.5% 35.0% 35.2%
Margin Change 86bp 41bp 88bp 80bp 150bp 117bp 109bp -71bp 46bp 31bp 33bp 9bp 16bp
Gross Profit $732.1 $828.7 232.0 228.7 215.2 241.9 $917.8 259.1 256.9 243.0 252.3 $1,011.4 $1,105.3
YOY Change 9.0% 13.2% 9.3% 8.6% 5.9% 19.4% 10.7% 11.7% 12.3% 12.9% 4.3% 10.2% 9.3%
% of Company Restaurant Sales 66.6% 66.2% 65.1% 65.5% 64.9% 64.9% 65.1% 65.8% 65.1% 64.6% 64.5% 65.0% 64.8%
Margin Change -86bp -41bp -88bp -80bp -150bp -117bp -109bp 71bp -46bp -31bp -33bp -9bp -16bp
Labor $326.2 $367.8 101.7 101.7 99.0 109.0 $411.4 114.7 115.1 112.7 114.5 $456.9 $495.6
YOY Change 11.3% 12.7% 8.9% 9.1% 8.2% 21.6% 11.9% 12.8% 13.2% 13.8% 5.0% 11.1% 8.5%
% of Company Restaurant Sales 29.7% 29.4% 28.5% 29.2% 29.8% 29.2% 29.2% 29.1% 29.2% 29.9% 29.3% 29.4% 29.1%
Margin Change 25bp -31bp -48bp -21bp -6bp 0bp -19bp 60bp 2bp 8bp 4bp 19bp -29bp
Rent $23.2 $25.8 7.1 7.2 7.2 7.6 $29.0 8.0 8.1 8.2 8.5 $32.9 $35.0
YOY Change 8.4% 11.4% 12.9% 12.1% 10.7% 13.6% 12.3% 14.0% 13.7% 14.3% 12.5% 13.6% 6.3%
% of Company Restaurant Sales 2.1% 2.1% 2.0% 2.0% 2.2% 2.0% 2.1% 2.0% 2.1% 2.2% 2.2% 2.1% 2.1%
Margin Change -4bp -5bp 4bp 4bp 4bp -14bp 0bp 6bp 1bp 2bp 15bp 6bp -6bp
Other Operating $184.1 $204.3 55.8 55.0 51.9 62.2 $224.9 60.9 59.5 57.7 62.4 $240.5 $259.6
YOY Change 6.5% 11.0% 8.9% 8.8% 3.5% 18.7% 10.1% 9.1% 8.2% 11.0% 0.4% 6.9% 7.9%
% of Company Restaurant Sales 16.7% 16.3% 15.6% 15.8% 15.7% 16.7% 15.9% 15.4% 15.1% 15.3% 16.0% 15.5% 15.2%
Margin Change -62bp -43bp -27bp -16bp -74bp -39bp -37bp -20bp -68bp -34bp -70bp -49bp -23bp
Total Restaurant Costs $900.8 $1,021.5 $289.0 $284.1 $274.7 $309.7 $1,157.6 $318.4 $320.5 $312.0 $324.1 $1,275.0 $1,389.5
YOY Change 11.0% 13.4% 11.0% 10.5% 9.4% 22.5% 13.3% 10.1% 12.8% 13.6% 4.6% 10.1% 9.0%
Company Restaurant Margin $198.6 $230.9 $67.5 $64.9 $57.0 $63.1 $252.6 $75.6 $74.1 $64.5 $66.9 $281.1 $315.1
YOY Change 7.7% 16.2% 9.7% 7.2% 3.9% 17.1% 9.4% 11.9% 14.3% 13.0% 5.9% 11.3% 12.1%
% of Company Restaurant Sales 18.1% 18.4% 18.9% 18.6% 17.2% 16.9% 17.9% 19.2% 18.8% 17.1% 17.1% 18.1% 18.5%
Margin Change -45bp 37bp -17bp -47bp -75bp -64bp -52bp 25bp 19bp -7bp 17bp 15bp 42bp
Pre-Opening Expense $11.5 $12.4 2.8 4.2 4.7 6.1 $17.9 4.3 4.6 5.2 6.0 $20.1 $22.7
YOY Change 63.6% 7.5% (21.2%) 52.5% 93.1% 70.1% 44.3% 51.5% 9.3% 9.9% (1.7%) 12.4% 12.7%
% of Total Revenues 1.0% 1.0% 0.8% 1.2% 1.4% 1.6% 1.3% 1.1% 1.2% 1.4% 1.5% 1.3% 1.3%
Margin Change 34bp -6bp -32bp 34bp 62bp 46bp 28bp 29bp -4bp -4bp -10bp 2bp 4bp
Depreciation & Amortization $42.7 $46.7 12.2 12.2 12.5 14.7 $51.6 14.1 13.3 13.5 14.5 $55.3 $58.6
YOY Change 3.5% 9.4% 7.6% 5.6% 5.4% 22.5% 10.4% 15.3% 8.8% 8.6% (1.7%) 7.3% 5.9%
% of Total Revenues 3.9% 3.7% 3.4% 3.5% 3.7% 3.9% 3.6% 3.5% 3.3% 3.6% 3.7% 3.5% 3.4%
Margin Change -26bp -15bp -10bp -14bp -11bp 3bp -7bp 15bp -13bp -16bp -25bp -10bp -12bp
Impairment & Closure $1.2 $1.6 0.1 0.0 0.1 0.2 $0.4 0.0 0.0 0.1 0.2 $0.4 $0.5
YOY Change (40.1%) 35.2% 200.0% 35.0% 329.2% (86.4%) (75.4%) (70.2%) 14.8% 15.4% 14.7% 2.8% 12.5%
% of Total Revenues 0.1% 0.1% 0.0% 0.0% 0.0% 0.1% 0.0% 0.0% 0.0% 0.0% 0.1% 0.0% 0.0%
Margin Change -9bp 2bp 1bp 0bp 2bp -45bp -10bp -1bp 0bp 0bp 1bp 0bp 0bp
General & Administrative $57.7 $65.6 17.4 21.8 17.1 19.2 $75.5 20.2 22.6 19.2 21.4 $83.5 $89.2
YOY Change 9.9% 13.8% 15.5% 23.4% 10.0% 10.3% 15.0% 16.3% 3.9% 12.7% 11.5% 10.7% 6.9%
% of Total Revenues 5.2% 5.2% 4.8% 6.2% 5.1% 5.1% 5.3% 5.1% 5.7% 5.1% 5.4% 5.3% 5.2%
Margin Change -2bp -1bp 20bp 68bp 7bp -52bp 11bp 26bp -50bp -4bp 32bp 2bp -13bp
Total Costs & Expenses $1,014.0 $1,147.9 $321.5 $322.3 $309.1 $350.0 $1,302.9 $357.0 $361.1 $350.1 $366.2 $1,434.4 $1,560.5
YOY Change 10.9% 13.2% 10.7% 11.5% 10.0% 21.7% 13.5% 11.0% 12.0% 13.3% 4.6% 10.1% 8.8%
Operating Profit (EBIT) $95.2 $115.5 $38.168 $29.8 $25.7 $26.1 $119.7 $40.184 $36.8 $29.8 $28.5 $135.3 $159.3
YOY Change 5.1% 21.2% 10.9% (4.6%) (7.3%) 18.0% 3.7% 5.3% 23.5% 16.0% 9.4% 13.0% 17.7%
% of Total Revenues 8.6% 9.1% 10.6% 8.5% 7.7% 6.9% 8.4% 10.1% 9.2% 7.8% 7.2% 8.6% 9.3%
Margin Change -43bp 55bp 2bp -129bp -131bp -20bp -72bp -49bp 78bp 17bp 29bp 20bp 64bp
Interest (income) expense $2.4 $2.3 0.60 0.57 0.53 0.51 $2.2 0.56 0.6 0.6 0.6 $2.2 $2.3
% of Avg. total debt 4.4% 4.5% 4.6% 4.4% 4.1% 4.0% 4.3% 4.4% 4.4% 4.4% 4.4% 4.4% 4.4%
Equity Income from uncons affiliates $0.4 $0.4 0.18 0.22 0.17 0.14 $0.7 0.21 0.1 0.1 0.1 $0.5 $0.4
Pre-tax income $92.5 $112.7 37.8 29.4 25.3 25.7 $118.2 39.8 36.3 29.3 28.0 $133.5 $157.4
Income taxes $26.8 $36.6 10.5 8.6 7.5 7.5 $34.1 12.2 10.9 8.8 8.4 $40.3 $48.0
Tax Rate 28.9% 32.5% 27.9% 29.1% 29.6% 29.3% 28.9% 30.7% 30.0% 30.0% 30.0% 30.2% 30.5%
Net Income Incl Noncontrolling Interests $65.7 $76.0 $27.2 $20.9 $17.8 $18.2 $84.1 $27.6 $25.4 $20.5 $19.6 $93.2 $109.4
Minority interest $2.5 $2.6 1.0 0.9 0.7 1.0 $3.7 1.1 0.9 0.7 1.0 $3.8 $2.4
Net Income from Operations $63.2 $73.4 $26.2 $20.0 $17.2 $17.1 $80.42 $26.5 $24.5 $19.9 $18.6 $89.4 $107.0
YOY Change 10.1% 16.1% 19.6% (0.5%) (3.5%) 25.2% 9.5% 1.1% 22.9% 15.7% 8.5% 11.2% 19.6%
Nonrecurring (gain) loss 0.0 3.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
GAAP Net Income $63.2 $70.3 $26.2 $20.0 $17.2 $17.1 $80.4 $26.5 $24.5 $19.9 $18.6 $89.4 $107.0
5.2%
Earnings Per Share
Reported $0.87 $0.98 $0.37 $0.28 $0.24 $0.24 $1.13 $0.37 $0.35 $0.28 $0.26 $1.27 $1.52
Nonrecurring (gain) loss $0.00 $0.04 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Continuing operations $0.87 $1.03 $0.37 $0.28 $0.24 $0.24 $1.13 $0.37 $0.35 $0.28 $0.26 $1.27 $1.52
YOY Change 11.1% 17.4% 20.0% (0.1%) (3.0%) 24.7% 9.8% 0.4% 24.6% 17.9% 10.9% 12.5% 19.6%
Wt'd. avg. diluted shrs. (Mil.) 72.3 71.5 70.6 71.3 71.6 71.8 71.3 71.1 70.28 70.28 70.28 70.5 70.5
Source: Company Data and RBC Capital Markets estimates
Texas Roadhouse, Inc.
July 31, 2014 David Palmer (212) 905-5998; david.palmer@rbccm.com 4
Required disclosures
Conflicts disclosures
The analyst(s) responsible for preparing this research report received compensation that is based upon various factors, including
total revenues of the member companies of RBC Capital Markets and its affiliates, a portion of which are or have been generated
by investment banking activities of the member companies of RBC Capital Markets and its affiliates.
Please note that current conflicts disclosures may differ from those as of the publication date on, and as set forth in,
this report. To access current conflicts disclosures, clients should refer to https://www.rbccm.com/GLDisclosure/PublicWeb/
DisclosureLookup.aspx?entityId=1 or send a request to RBC CM Research Publishing, P.O. Box 50, 200 Bay Street, Royal Bank Plaza,
29th Floor, South Tower, Toronto, Ontario M5J 2W7.
RBC Capital Markets, LLC makes a market in the securities of Texas Roadhouse, Inc..
A member company of RBC Capital Markets or one of its affiliates received compensation for products or services other than
investment banking services from Texas Roadhouse, Inc. during the past 12 months. During this time, a member company of RBC
Capital Markets or one of its affiliates provided non-investment banking securities-related services to Texas Roadhouse, Inc..
A member company of RBC Capital Markets or one of its affiliates received compensation for products or services other than
investment banking services from Texas Roadhouse, Inc. during the past 12 months. During this time, a member company of RBC
Capital Markets or one of its affiliates provided non-securities services to Texas Roadhouse, Inc..
RBC Capital Markets is currently providing Texas Roadhouse, Inc. with non-securities services.
RBC Capital Markets has provided Texas Roadhouse, Inc. with non-investment banking securities-related services in the past 12
months.
RBC Capital Markets has provided Texas Roadhouse, Inc. with non-securities services in the past 12 months.
The author is employed by RBC Capital Markets, LLC, a securities broker-dealer with principal offices located in New York, USA.
Explanation of RBC Capital Markets Equity rating system
An analyst's 'sector' is the universe of companies for which the analyst provides research coverage. Accordingly, the rating assigned
to a particular stock represents solely the analyst's view of how that stock will perform over the next 12 months relative to
the analyst's sector average. Although RBC Capital Markets' ratings of Top Pick (TP)/Outperform (O), Sector Perform (SP), and
Underperform (U) most closely correspond to Buy, Hold/Neutral and Sell, respectively, the meanings are not the same because
our ratings are determined on a relative basis.
Ratings
Top Pick (TP): Represents analyst's best idea in the sector; expected to provide significant absolute total return over 12 months
with a favorable risk-reward ratio.
Outperform (O): Expected to materially outperform sector average over 12 months.
Sector Perform (SP): Returns expected to be in line with sector average over 12 months.
Underperform (U): Returns expected to be materially below sector average over 12 months.
Risk Rating
As of March 31, 2013, RBC Capital Markets suspends its Average and Above Average risk ratings. The Speculative risk rating reflects
a security's lower level of financial or operating predictability, illiquid share trading volumes, high balance sheet leverage, or limited
operating history that result in a higher expectation of financial and/or stock price volatility.
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July 31, 2014 David Palmer (212) 905-5998; david.palmer@rbccm.com 5
Distribution of ratings
For the purpose of ratings distributions, regulatory rules require member firms to assign ratings to one of three rating categories
- Buy, Hold/Neutral, or Sell - regardless of a firm's own rating categories. Although RBC Capital Markets' ratings of Top Pick(TP)/
Outperform (O), Sector Perform (SP), and Underperform (U) most closely correspond to Buy, Hold/Neutral and Sell, respectively,
the meanings are not the same because our ratings are determined on a relative basis (as described below).
Distribution of ratings
RBC Capital Markets, Equity Research
As of 30-Jun-2014
Investment Banking
Serv./Past 12 Mos.
Rating Count Percent Count Percent
BUY [Top Pick & Outperform] 845 53.24 299 35.38
HOLD [Sector Perform] 658 41.46 159 24.16
SELL [Underperform] 84 5.29 10 11.90

References to a Recommended List in the recommendation history chart may include one or more recommended lists or model
portfolios maintained by RBC Wealth Management or one of its affiliates. RBC Wealth Management recommended lists include
a former list called the Prime Opportunity List (RL 3), the Guided Portfolio: Prime Income (RL 6), the Guided Portfolio: Large Cap
(RL 7), the Guided Portfolio: Dividend Growth (RL 8), the Guided Portfolio: Midcap 111 (RL 9), the Guided Portfolio: ADR (RL 10),
and the Guided Portfolio: Global Equity (U.S.) (RL 11). RBC Capital Markets recommended lists include the Strategy Focus List
and the Fundamental Equity Weightings (FEW) portfolios. The abbreviation 'RL On' means the date a security was placed on a
Recommended List. The abbreviation 'RL Off' means the date a security was removed from a Recommended List.
Equity valuation and risks
For valuation methods used to determine, and risks that may impede achievement of, price targets for covered companies, please
see the most recent company-specific research report at https://www.rbcinsight.com or send a request to RBC Capital Markets
Research Publishing, P.O. Box 50, 200 Bay Street, Royal Bank Plaza, 29th Floor, South Tower, Toronto, Ontario M5J 2W7.
Conflicts policy
RBC Capital Markets Policy for Managing Conflicts of Interest in Relation to Investment Research is available from us on request.
To access our current policy, clients should refer to
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July 31, 2014 David Palmer (212) 905-5998; david.palmer@rbccm.com 6
https://www.rbccm.com/global/file-414164.pdf
or send a request to RBC Capital Markets Research Publishing, P.O. Box 50, 200 Bay Street, Royal Bank Plaza, 29th Floor, South
Tower, Toronto, Ontario M5J 2W7. We reserve the right to amend or supplement this policy at any time.
Dissemination of research and short-term trade ideas
RBC Capital Markets endeavours to make all reasonable efforts to provide research simultaneously to all eligible clients, having
regard to local time zones in overseas jurisdictions. Subject to any applicable regulatory considerations, "eligible clients" may
include RBC Capital Markets institutional clients globally, the retail divisions of RBC Dominion Securities Inc. and RBC Capital
Markets LLC, and affiliates. RBC Capital Markets' equity research is posted to our proprietary websites to ensure eligible clients
receive coverage initiations and changes in rating, targets and opinions in a timely manner. Additional distribution may be done
by the sales personnel via email, fax or regular mail. Clients may also receive our research via third party vendors. Please contact
your investment advisor or institutional salesperson for more information regarding RBC Capital Markets research. RBC Capital
Markets also provides eligible clients with access to SPARC on its proprietary INSIGHT website. SPARC contains market color and
commentary, and may also contain Short-Term Trade Ideas regarding the securities of subject companies discussed in this or
other research reports. SPARC may be accessed via the following hyperlink: https://www.rbcinsight.com. A Short-Term Trade Idea
reflects the research analyst's directional view regarding the price of the security of a subject company in the coming days or weeks,
based on market and trading events. A Short-Term Trade Idea may differ from the price targets and/or recommendations in our
published research reports reflecting the research analyst's views of the longer-term (one year) prospects of the subject company,
as a result of the differing time horizons, methodologies and/or other factors. Thus, it is possible that the security of a subject
company that is considered a long-term 'Sector Perform' or even an 'Underperform' might be a short-term buying opportunity
as a result of temporary selling pressure in the market; conversely, the security of a subject company that is rated a long-term
'Outperform' could be considered susceptible to a short-term downward price correction. Short-Term Trade Ideas are not ratings,
nor are they part of any ratings system, and RBC Capital Markets generally does not intend, nor undertakes any obligation, to
maintain or update Short-Term Trade Ideas. Short-Term Trade Ideas discussed in SPARC may not be suitable for all investors and
have not been tailored to individual investor circumstances and objectives, and investors should make their own independent
decisions regarding any Short-Term Trade Ideas discussed therein.
Analyst certification
All of the views expressed in this report accurately reflect the personal views of the responsible analyst(s) about any and all of
the subject securities or issuers. No part of the compensation of the responsible analyst(s) named herein is, or will be, directly or
indirectly, related to the specific recommendations or views expressed by the responsible analyst(s) in this report.
The Global Industry Classification Standard (GICS) was developed by and is the exclusive property and a service mark of MSCI Inc. (MSCI) and Standard & Poors Financial Services
LLC (S&P) and is licensed for use by RBC. Neither MSCI, S&P, nor any other party involved in making or compiling the GICS or any GICS classifications makes any express or implied
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of originality, accuracy, completeness, merchantability and fitness for a particular purpose with respect to any of such standard or classification. Without limiting any of the foregoing,
in no event shall MSCI, S&P, any of their affiliates or any third party involved in making or compiling the GICS or any GICS classifications have any liability for any direct, indirect, special,
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RBC Capital Markets is the business name used by certain branches and subsidiaries of the Royal Bank of Canada, including RBC Dominion Securities Inc., RBC
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opinions and estimates contained in this report constitute RBC Capital Markets' judgement as of the date of this report, are subject to change without notice and
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July 31, 2014 David Palmer (212) 905-5998; david.palmer@rbccm.com 7
any of its affiliates, nor any other person, accepts any liability whatsoever for any direct or consequential loss arising from any use of this report or the information
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Additional information is available on request.
To U.S. Residents:
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To Canadian Residents:
This publication has been approved by RBC Dominion Securities Inc.(member IIROC). Any Canadian recipient of this report that is not a Designated Institution in
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Copyright RBC Capital Markets, LLC 2014 - Member SIPC
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All rights reserved
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July 31, 2014 David Palmer (212) 905-5998; david.palmer@rbccm.com 8