TEXAS ROADHOUSE, INC. DISCUSSION AND ANALYSIS OF MANAGEMENT’S FINANCIAL POSITION AND RESULTS (Form 10-Q)

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CAUTION

This report contains forward-looking statements based on our current
expectations, estimates and projections about our industry and certain
assumptions made by us. These statements include, but are not limited to,
statements related to the potential impact of the COVID-19/Coronavirus outbreak
and other non-historical statements. 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 year ended December 28, 2021, 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 restaurant concepts with
678 restaurants in 49 states and ten foreign countries. As of June 28, 2022, our
678 restaurants included:

582 “company restaurants”, 562 of which were owned alone and 20 were

in majority ownership. The earnings situation of the company restaurants is included

in our unaudited condensed consolidated income statement

Income. The portion of the result of ? Company restaurants that are not 100% owned are reflected in the position

entitled “Net Income Attributable to Non-Controlling Interests” in our unaudited

condensed consolidated income statement. Of

  582 restaurants 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.


  96 "franchise restaurants," 23 of which we have a 5.0% to 10.0% ownership

Interest. The income from our minority interests in these franchises

Restaurants is shown in the item “Participation income from

Investments in Unconsolidated Affiliates” in our Unaudited Condensed Consolidated Statement of Operations. In addition we have

also provide various management services to these 23 franchised restaurants

and five other franchise restaurants not owned by us

Interest. All franchise restaurants are operated as Texas Roadhouse

restaurants. Of the 96 franchised restaurants, 62 were domestic restaurants and

34 were international restaurants.

We have contractual arrangements that give us the right to acquire the remaining equity interests in 18 of the 20 majority-owned corporate restaurants and 58 of the 62 domestic franchise restaurants at pre-determined formulas.

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In this report, we use the term “restaurants” to include all Texas Roadhouse
and Bubba’s 33 unless otherwise noted.

Presentation of financial and operational data

Throughout this report, the 13 weeks ended June 28, 2022, and June 29, 2021, are
referred to as Q2 2022 and Q2 2021, respectively. The 26 weeks ended June 28,
2022 and June 29, 2021 are referred to as 2022 YTD and 2021 YTD, respectively.
Fiscal years 2022 and 2021 will be 52 weeks in length, while the quarters for
the year will be 13 weeks in length.

COVID-19 and other economic impacts

The Company has been subject to risks and uncertainties as a result of the
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 a result of a significant increase in sales, the lingering impact of the
pandemic and other supply constraints, we have experienced and expect to
continue to experience commodity inflation and certain food and supply
shortages. The commodity inflation, with higher costs across the basket, is
mostly due to increased demand and increased costs incurred by our vendors
related to higher labor, transportation, packaging and raw material costs. To
date, we have been able to properly manage any food or supply shortages but have
experienced increased costs. If our vendors are unable to fulfill their
obligations under their contracts, we may encounter further shortages and/or
higher costs to secure adequate supply and a possible loss of sales, any of
which would harm our business.

In addition, as our dining rooms have returned to operating without restriction,
our ability to attract and retain restaurant-level employees has become more
challenging due to an increasingly competitive job market throughout the
country. To the extent these challenges persist, we could continue to experience
increased labor costs and/or decreased sales.

As a result of the pandemic, legislation referred to as the Coronavirus Aid,
Relief, and Economic Security Act was passed in 2020 to benefit companies that
were significantly impacted by the pandemic. This legislation allowed for the
deferral of the social security portion of the employer portion of FICA payroll
taxes from the date of enactment through the end of 2020. In total, we deferred
$47.3 million in payroll taxes, of which $24.3 million was repaid in 2021 and
$23.0 million is required to be repaid at the end of 2022. The amount due in
2022 is included in accrued wages and payroll taxes in our unaudited condensed
consolidated balance sheets.

Long-term strategies to increase earnings per share and create shareholder value

Our long-term strategies to grow net income and earnings per share and create shareholder value include:

Expanding Our Restaurant Base.  We continue to evaluate opportunities to develop
restaurants in existing markets and in new domestic and international markets.
Domestically, we remain focused primarily on markets where we believe a
significant demand for our restaurants exists because of population size, income
levels, and the presence of shopping and entertainment centers and a significant
employment base. In recent years, we have relocated several existing Texas
Roadhouse locations at or near the end of the associated lease or as a result of
eminent domain which allows us to move to a better site, update to a current
prototypical design, construct a larger building with more seats and greater
number of available parking spaces, accommodate increased to-go sales and/or
obtain more favorable lease terms. We continue to evaluate these opportunities
particularly as it relates to older locations with strong sales. At our high
volume restaurants, we continue to look for opportunities to increase our dining
room capacity by adding on to our existing building and/or to increase our
parking capacity by leasing or purchasing property that adjoins our site. In

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Additionally, we continue to lead and pursue opportunities to acquire domestic franchised locations to expand our corporate restaurant base.

In 2022 YTD, eight company restaurants, including one Bubba's 33, were opened
and our franchise partners opened three international restaurants. We currently
plan to open approximately 25 Texas Roadhouse and Bubba's 33 company restaurants
in 2022. We currently expect our franchise partners will open as many as seven
Texas Roadhouse restaurants, primarily international, in 2022.

In 2022 YTD, we completed the acquisition of eight domestic franchises Texas Roadhouse restaurants for a total purchase price of $33.1 million. The acquisitions are consistent with our strategy to expand our corporate restaurant base to grow net income and earnings per share.

Our average capital investment for the 23 Texas Roadhouse restaurants opened
during 2021, including pre-opening expenses and a capitalized rent factor, was
$5.7 million. We expect our average capital investment for Texas Roadhouse
restaurants opening in 2022 to be approximately $6.6 million with the increase
over 2021 due to a larger building prototype and higher supply costs. Our
average capital investment for the five Bubba's 33 restaurants opened during
2021, including pre-opening expenses and a capitalized rent factor, was $7.4
million. We expect our average capital investment for Bubba's 33 restaurants
opening in 2022 to be approximately $7.7 million with the increase over 2021 due
to higher supply costs. In addition, we continue to experience delays in
acquiring restaurant equipment and supplies that could result in delayed store
openings.

We remain focused on driving sales and managing restaurant investment costs to
maintain our restaurant development in the future. Our capital investment
(including cash and non-cash costs) for new restaurants varies significantly
depending on a number of factors including, but not limited to: the square
footage, layout, scope of required site work, geographical location, cost of
materials, type of construction labor, local permitting requirements, hook-up
fees, our ability to negotiate with landlords and cost of liquor and other
licenses.

We have entered into area development and franchise agreements for the
development and operation of Texas Roadhouse restaurants in numerous foreign
countries and one U.S. territory. We currently have signed franchise and/or
development agreements in nine countries in the Middle East as well as Taiwan,
the Philippines, Mexico, China, South Korea, Brazil and Puerto Rico. As of June
28, 2022, we had 15 restaurants in five countries in the Middle East, five in
the Philippines, five in Taiwan, five in South Korea, three in Mexico and one in
China for a total of 34 restaurants in ten foreign countries. For the existing
international agreements, the franchisee is required to pay us a franchise fee
for each restaurant to be opened, royalties on the sales of each restaurant and
a development fee for our grant of development rights in the named countries. We
anticipate that the specific business terms of any future franchise agreement
for international restaurants might vary significantly from the standard terms
of our domestic agreements and from the terms of existing international
agreements, depending on the territory to be franchised and the extent of
franchisor-provided services to each franchisee.

In 2021, we entered into our first area development agreements for Jaggers, our
fast-casual concept. These agreements allow for the development and operation of
restaurants in specific territories in Texas, Oklahoma and North Carolina. As
part of these agreements, the franchisees are required to pay us a franchise fee
for each restaurant to be opened, royalties on the sales of each restaurant and
a development fee for our grant of development rights in the named territories.
We currently expect our first Jaggers franchise restaurant to open as early as
Q4 2022.

Maintaining and/or Improving Restaurant-Level Profitability. We continue to
balance the impacts of inflationary pressures with our value positioning as we
remain focused on our long-term success. This may create a challenge in terms of
maintaining and/or increasing restaurant-level profitability (restaurant
margin), in any given year, depending on the level of inflation we experience.
Restaurant margin is not a U.S. generally accepted accounting principle ("GAAP")
measure and should not be considered in isolation, or as an alternative to
income from operations. See further discussion of restaurant margin below. In
addition to restaurant margin, as a percentage of restaurant and other sales, we
also focus on the growth of restaurant margin dollars per store week as a
measure of restaurant-level profitability. In terms of driving comparable
restaurant sales, we remain focused on encouraging repeat visits by our guests
and attracting new guests through our continued commitment to operational
standards relating to food and service quality. To attract new

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guests and increase the frequency of visits of our existing guests, we continue
to drive various localized marketing programs, focus on speed of service,
increase throughput by adding seats and parking at certain restaurants and
continue to enhance the guest digital experience. In addition, with the increase
in sales, we have made changes to our building layout and size to better
accommodate higher volumes at our restaurants.

We also continue to look for ways through various strategic initiatives to drive
awareness of our brands and increase sales and profitability. At the onset of
the pandemic, we began selling ready-to-grill steaks for customers to prepare at
home. Based on the success of this program we developed Texas Roadhouse Butcher
Shop. This on-line retail store allows for the purchase and delivery of quality
steaks that are similar to those available in our restaurants. This
non-royalty-based product launched in late 2020.

We also further expanded our retail business in 2021 with the introduction of
our non-alcoholic Margarita Mixer, and our canned cocktail Margarita Seltzer,
which rolled out in test markets. These Texas Roadhouse-branded products are
subject to royalty-based license agreements.

Leveraging Our Scalable Infrastructure.  To support our growth, we have made
investments in our infrastructure across all critical functions, including the
development of new strategic initiatives. Whether we are able to leverage our
infrastructure in future years by growing our general and administrative costs
at a slower rate than our revenue will depend, in part, on our new restaurant
openings, our comparable restaurant sales growth rate going forward and the
level of investment we continue to make in our infrastructure.

Returning Capital to Shareholders. We continue to evaluate opportunities to
return capital to our shareholders including the payment of dividends and
repurchase of common stock. In 2011, our Board of Directors (the "Board")
declared our first quarterly dividend of $0.08 per share of common stock which
has consistently grown over time. The payment of a quarterly dividend was
suspended in 2020 to preserve cash flow due to the pandemic. On April 28, 2021,
the Board reinstated the payment of a quarterly cash dividend of $0.40 per share
of common stock. On May 12, 2022, the Board declared a quarterly cash dividend
of $0.46 per share of common stock representing a 15% increase compared to the
quarterly dividend declared in the prior year period.

The declaration and payment of cash dividends on our common stock is at the discretion of the Board of Directors, and any decision to declare a dividend will be based on many factors including, but not limited to, earnings, financial condition, applicable arrangements under our amendment, revolving credit facility, other contractual Restrictions and Other Factors Deemed Relevant.

In 2008, the Board approved our first stock repurchase program. From inception
through June 28, 2022, we have paid $633.5 million through our authorized stock
repurchase programs to repurchase 21,041,442 shares of our common stock at an
average price per share of $30.11. On March 17, 2022, 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 and replaced
a previous stock repurchase program which was approved on May 31, 2019 that
authorized the Company to repurchase up to $250.0 million of our common stock.
All repurchases to date have been made through open market transactions. The
Company suspended all share repurchase activity in 2020 in order to preserve
cash flow due to the pandemic. On August 2, 2021, the Company resumed the
repurchase of shares and in 2022 YTD paid $212.9 million to repurchase 2,734,005
shares of common stock. This includes $133.1 million repurchased under our
current authorized stock repurchase program and $79.7 million repurchased under
our prior authorization. As of June 28, 2022, $166.9 million remained authorized
for stock repurchases.

Important key figures for the evaluation of our company

Some of the key metrics we use to evaluate and evaluate our business include the following:

Number of Restaurant Openings.  Number of restaurant openings reflects the
number of restaurants opened during a particular fiscal period. For company
restaurant openings, we incur pre-opening costs, which are defined below, before
the restaurant opens. Typically, new restaurants open with an initial start-up
period of higher than normalized sales volumes, which decrease to a steady level
approximately three to six months after opening. However, although sales

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Volumes are generally higher, as are initial costs, resulting in restaurant margins that are generally lower during the ramp-up phase of operations and rise to stable levels around three to six months after opening.

Comparable Restaurant Sales.  Comparable restaurant sales reflects the change in
restaurant sales for all company restaurants over the same period of the prior
year for the comparable restaurant base. We define the comparable restaurant
base to include those restaurants open for a full 18 months before the beginning
of the period measured excluding restaurants permanently closed during the
period. Comparable restaurant sales can be impacted by changes in guest traffic
counts or by changes in the per person average check amount. Menu price changes,
the mix of menu items sold, and the mix of dine-in versus to-go sales can affect
the per person average check amount.

Average Unit Volume.  Average unit volume represents the average quarterly or
annual restaurant sales for Texas Roadhouse and Bubba's 33 restaurants open for
a full six months before the beginning of the period measured excluding sales of
restaurants permanently closed during the period. Historically, average unit
volume growth is less than comparable restaurant sales growth which indicates
that newer restaurants are operating with sales levels lower than the company
average. At times, average unit volume growth may be more than comparable
restaurant sales growth which indicates that newer restaurants are operating
with sales levels higher than the company average.

shop weeks. Business weeks represent the number of weeks that all company restaurants were open during the reporting period, unless otherwise stated. Store weeks include weeks when a restaurant is temporarily closed.

Restaurant Margin. 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 is not a measurement determined in
accordance with GAAP and should not be considered in isolation, or as an
alternative, to income from operations. This non-GAAP measure is not indicative
of overall company performance and profitability in that this measure does not
accrue directly to the benefit of shareholders due to the nature of the costs
excluded. Restaurant margin is widely regarded as a useful metric by which to
evaluate restaurant-level operating efficiency and performance. In calculating
restaurant margin, we exclude certain non-restaurant-level costs that support
operations, including pre-opening and general and administrative expenses, but
do not have a direct impact on restaurant-level operational efficiency and
performance. We also exclude depreciation and amortization expense,
substantially all of which relates to restaurant-level assets, as it represents
a non-cash charge for the investment in our restaurants. We also exclude
impairment and closure expense 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.

Other key definitions

Restaurant and Other Sales.  Restaurant sales include gross food and beverage
sales, net of promotions and discounts, for all company restaurants. Sales taxes
collected from customers and remitted to governmental authorities are accounted
for on a net basis and therefore are excluded from restaurant sales in the
unaudited condensed consolidated statements of income and comprehensive income.
Other sales include the amortization of fees associated with our third party
gift card sales net of the amortization of gift card breakage income. These
amounts are amortized consistent with the historic redemption pattern of the
associated gift card or on actual redemptions in periods where redemptions do
not align with historic redemption patterns. Other sales also include sales
related to our non-royalty-based retail products.

Franchise Royalties and Fees.  Franchise royalties consist of royalties, as
defined in our franchise agreement, paid to us by our domestic and international
franchisees. Franchise royalties also include sales related to our royalty-based
retail products. Domestic and/or international franchisees also typically pay an
initial franchise fee and/or development fee for each new restaurant or
territory. The terms of the international agreements may vary significantly from
our domestic agreements. These include advertising fees paid by domestic
franchisees to our system-wide marketing and advertising fund and management
fees paid by certain domestic franchisees for supervisory and administrative
services that we perform.

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Food and Beverage Costs.  Food and beverage costs consists of the costs of raw
materials and ingredients used in the preparation of food and beverage products
sold in our company restaurants. Approximately half of our food and beverage
costs relates to beef costs.

Restaurant Labor Expenses.  Restaurant labor expenses include all direct and
indirect labor costs incurred in operations except for profit sharing incentive
compensation expenses earned by our restaurant managing partners and market
partners. These profit sharing expenses are reflected in restaurant other
operating expenses. Restaurant labor expenses also include share-based
compensation expense related to restaurant-level employees.

Restaurant rental costs. Restaurant rental costs include all rentals, except pre-opening rent, associated with the leasing of real estate and include base, percentage and linear rental costs.

Restaurant Other Operating Expenses.  Restaurant other operating expenses
consist of all other restaurant-level operating costs, the major components of
which are utilities, dining room and to-go supplies, local store advertising,
repairs and maintenance, equipment rent, property taxes, credit card fees and
general liability insurance. Profit sharing incentive compensation expenses
earned by our restaurant managing partners and market partners are also included
in restaurant other operating expenses.

Pre-opening Expenses.  Pre-opening expenses, which are charged to operations as
incurred, consist of expenses incurred before the opening of a new or relocated
restaurant and are comprised principally of opening team and training team
compensation and benefits, travel expenses, rent, food, beverage and other
initial supplies and expenses. On average, over 70% of total pre-opening costs
incurred per restaurant opening relate to the hiring and training of employees.
Pre-opening costs vary by location depending on many factors, including the size
and physical layout of each location; the number of management and hourly
employees required to operate each restaurant; the availability of qualified
restaurant staff members; the cost of travel and lodging for different
geographic areas; the timing of the restaurant opening; and the extent of
unexpected delays, if any, in obtaining final licenses and permits to open the
restaurants.

Depreciation and Amortization Expenses.  Depreciation and amortization expenses
("D&A") include the depreciation of fixed assets and amortization of intangibles
with definite lives, substantially all of which relates to restaurant-level
assets.

Impairment and Closure Costs, Net. Impairment and closure costs, net include any
impairment of long-lived assets, including property and equipment, operating
lease right-of-use assets and goodwill, and expenses associated with the closure
of a restaurant. Closure costs also include any gains or losses associated with
a relocated restaurant or the sale of a closed restaurant and/or assets held for
sale as well as lease costs associated with closed or relocated restaurants.

General and Administrative Expenses.  General and administrative expenses
("G&A") are comprised of expenses associated with corporate and administrative
functions that support development and restaurant operations and provide an
infrastructure to support future growth including certain advertising costs
incurred. G&A also includes legal fees, settlement charges and share-based
compensation expense related to executive officers, Support Center employees and
market partners and the realized and unrealized holding gains and losses related
to the investments in our deferred compensation plan.

Interest Expense, Net.  Interest expense, net includes interest expense on our
debt or financing obligations including the amortization of loan fees reduced by
earnings on cash and cash equivalents.

Equity Income from Unconsolidated Affiliates.  Equity income includes our
percentage share of net income earned by unconsolidated affiliates and our share
of any gain on the acquisition of these affiliates. 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. We
fully impaired our equity investment related to this joint venture in late
2021
as these restaurants closed.

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Net Income Attributable to Noncontrolling Interests.  Net income attributable to
noncontrolling interests represents the portion of income attributable to the
other owners of the majority-owned restaurants. Our consolidated subsidiaries
include 20 majority-owned restaurants for all periods presented.

Financial Highlights of Q2 2022

Total revenue increased $125.8 million or 14.0% to $1,024.6 million in Q2 2022
compared to $898.8 million in Q2 2021 primarily due to an increase in average
unit volume driven by comparable restaurant sales growth, along with an increase
in store weeks. Store weeks and comparable restaurant sales increased 6.4% and
7.6%, respectively, at company restaurants in Q2 2022 compared to Q2 2021. The
increase in store weeks was due to new store openings and the acquisition of
franchise restaurants. The increase in comparable restaurant sales was due to
increases in our per person average check.

Restaurant margin dollars increased $10.5 million or 6.6% to $168.7 million in
Q2 2022 compared to $158.2 million in Q2 2021. Restaurant margin, as a
percentage of restaurant and other sales, decreased to 16.6% in Q2 2022 compared
to 17.7% in Q2 2021.  The decrease in restaurant margin, as a percentage of
restaurant and other sales, was due to commodity and labor inflation partially
offset by higher sales.

Net income decreased $3.1 million or 4.1% to $72.4 million in Q2 2022 compared
to $75.5 million in Q2 2021 primarily due to higher general and administrative
expenses driven by the timing of our annual managing partner conference
partially offset by higher restaurant margin dollars. Diluted earnings per share
decreased 0.8% to $1.07 in Q2 2022 from $1.08 in Q2 2021 due to the decrease in
net income partially offset by the benefit of share repurchases.

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                             Results of Operations

                                     13 Weeks Ended                         26 Weeks Ended
                             June 28, 2022      June 29, 2021      June 28, 2022       June 29, 2021
                               $         %        $        %         $         %         $         %

                                     (In thousands)                         (In thousands)
Consolidated Statements
of Income:
Revenue:
Restaurant and other
sales                      1,018,057    99.4   892,444    99.3   1,999,029    99.4   1,687,367    99.3
Franchise royalties and
fees                           6,549     0.6     6,344     0.7      13,063     0.6      12,050     0.7
Total revenue              1,024,606   100.0   898,788   100.0   2,012,092 
 100.0   1,699,417   100.0
Costs and expenses:
(As a percentage of
restaurant and other
sales)
Restaurant operating
costs (excluding
depreciation
and amortization shown
separately below):
Food and beverage            347,041    34.1   295,504    33.1     684,437    34.2     546,986    32.4
Labor                        333,042    32.7   288,147    32.3     654,913    32.8     546,183    32.4
Rent                          16,714     1.6    14,956     1.7      33,082     1.7      29,408     1.7
Other operating              152,524    15.0   135,606    15.2     296,678    14.8     258,985    15.3
(As a percentage of
total revenue)
Pre-opening                    5,323     0.5     6,319     0.7       9,614     0.5      10,587     0.6
Depreciation and
amortization                  34,420     3.4    31,650     3.5      68,040     3.4      62,519     3.7
Impairment and closure,
net                              411      NM        17      NM       (235)      NM         521      NM
General and
administrative                49,213     4.8    36,861     4.1      89,507     4.4      73,573     4.3
Total costs and expenses     938,688    91.6   809,060    90.0   1,836,036    91.3   1,528,762    90.0
Income from operations        85,918     8.4    89,728    10.0     176,056     8.7     170,655    10.0
Interest expense, net            395      NM       975     0.1         792     0.0       2,435     0.1
Equity income from
investments in
unconsolidated
affiliates                       545      NM       239      NM         879      NM          22      NM
Income before taxes           86,068     8.4    88,992     9.9     176,143     8.8     168,242     9.9
Income tax expense            11,531     1.1    11,067     1.2      24,278     1.2      23,887     1.4
Net income including
noncontrolling interests      74,537     7.3    77,925     8.7     151,865     7.5     144,355     8.5
Net income attributable
to noncontrolling
interests                      2,118     0.2     2,445     0.3       4,244     0.2       4,725     0.3
Net income attributable
to Texas Roadhouse, Inc.
and subsidiaries              72,419     7.1    75,480     8.4     147,621     7.3     139,630     8.2


NM - Not meaningful

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Matching operating revenue with restaurant margin

                                                                                          (in thousands)
                                                                    13 Weeks Ended                                            26 Weeks Ended
                                            June 28, 2022                                    June 29, 2021         June 28, 2022         June 29, 2021
Income from operations                    $           85,918                               $           89,728    $          176,056    $          

170,655

Fewer:

Franchise royalties and fees                           6,549               
                            6,344                13,063                12,050

Add:
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
Restaurant margin                         $          168,736                               $          158,231    $          329,919    $          305,805
Restaurant margin $/store week            $           22,390                               $           22,333    $           22,006    $           

21,719

Restaurant margin (as a percentage of
restaurant and other sales)                            16.6%                                            17.7%                 16.5%                 

18.1%

See above for definition of Restaurant Margin.

                            Restaurant Unit Activity

                                      Total  Texas Roadhouse  Bubba's 33    Jaggers
Balance at December 28, 2021            667              627          36          4
Company openings                          8                7           1          -
Company closings                          -                -           -          -
Franchise openings - Domestic             -                -           -          -
Franchise openings - International        3                3           -   
      -
Franchise closings                        -                -           -          -
Balance at June 28, 2022                678              637          37          4


                                              June 28, 2022   June 29, 2021
Company - Texas Roadhouse                          541             511
Company - Bubba's 33                               37              34
Company - Jaggers                                   4               3
Franchise - Texas Roadhouse - U.S.                 62              69
Franchise - Texas Roadhouse - International        34              30
Total                                              678             647


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Q2 2022 vs. Q2 2021 and 2022 YTD vs. 2021 YTD

Restaurant and Other Sales. Restaurant and other sales increased by 14.1% in Q2
2022 compared to Q2 2021 and 18.5% in 2022 YTD compared to 2021 YTD. The
following table summarizes certain key drivers and/or attributes of restaurant
and other sales at company restaurants for the periods presented. Company
restaurant count activity is shown in the restaurant unit activity table above.

                                                                   Q2 2022      Q2 2021     2022 YTD     2021 YTD
Company Restaurants:
Increase in store weeks                                                 6.4 %        5.1 %        6.5 %        4.6 %
Increase in average unit volume(1)                                      7.4 %       78.7 %       11.3 %       43.3 %
Other(2)                                                                0.2 %        5.3 %        0.7 %        2.7 %
Total increase in restaurant sales                                     14.0 %       89.1 %       18.5 %       50.6 %
Other sales                                                             0.1 %      (0.5) %          - %        0.0 %
Total increase in restaurant and other sales                           14.1
%       88.6 %       18.5 %       50.6 %

Store weeks                                                           7,536        7,085       14,992       14,080
Comparable restaurant sales                                             7.6 %       80.2 %       11.7 %       44.5 %

Texas Roadhouse restaurants:
Store weeks                                                           7,006        6,617       13,942       13,167
Comparable restaurant sales                                             7.6 %       79.0 %       11.5 %       43.9 %
Average unit volume (in thousands)                                $   1,786

$1,662 $3,530 $3,169

Weekly sales by group:
Comparable restaurants (503, 476, 499 and 473 units)              $ 137,599    $ 128,716    $ 136,096    $ 122,814
Average unit volume restaurants (22, 19, 20 and 18 units)         $ 132,222    $ 110,459    $ 130,576    $ 103,471
Restaurants less than six months old (16, 16, 22 and 20 units)    $ 145,756
   $ 134,822    $ 139,534    $ 125,049

Bubba's 33 restaurants:
Store weeks                                                             478          429          946          835
Comparable restaurant sales                                             8.1 %      115.4 %       14.3 %       60.9 %
Average unit volume (in thousands)                                $   1,475

$1,332 $2,864 $2,500

Weekly sales by group:
Comparable restaurants (31, 26, 30 and 25 units)                  $ 110,740    $ 106,675    $ 109,896    $  99,459
Average unit volume restaurants (4, 5, 4 and 5 units)             $ 134,386    $  80,685    $ 111,997    $  79,603
Restaurants less than six months old (2, 3, 3 and 4 units)        $ 128,134

$143,672 $135,393 $105,458

Average piece volume includes restaurants open a full six and up to 18 months(1) before the start of the measured period, excluding restaurant sales

possibly permanently closed during the period.

Includes the impact of the annual change in sales volume of all (2) Jaggers restaurants, along with Texas Roadhouse and Bubba’s 33 restaurants

opened less than six months before the start of the measurement period and

applicable, the impact of restaurants being permanently closed during the period.

The increase in restaurant sales for Q2 2022 and 2022 YTD is primarily due to an
increase in average unit volume, driven by an increase in comparable restaurant
sales, along with an increase in store weeks driven by the opening of new
restaurants and the acquisition of franchise restaurants. Comparable restaurant
sales growth for both periods presented was driven primarily by increases in our
per person average check as shown in the table below.

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                                       Q2 2022     Q2 2021      2022 YTD      2021 YTD
Guest traffic counts                     (0.8) %      58.6 %         3.0 %        32.0 %
Per person average check                   8.4 %      21.6 %         8.7 %        12.5 %
Comparable restaurant sales growth         7.6 %      80.2 %        11.7 % 

44.5%

The decrease in Q2 2022 guest traffic counts was due to a decrease in to-go
sales partially offset by an increase in dining room sales. The increase in 2022
YTD guest traffic counts was primarily driven by all of our company locations
operating without capacity restrictions for the entire 2022 YTD period. As of
June 29, 2021, nearly all of our company locations were operating without
restriction. To-go sales as a percentage of restaurant sales were 13.1% for Q2
2022 and 13.9% for 2022 YTD compared to 16.9% for Q2 2021 and 19.5% for 2021
YTD.

The average check per person includes the benefit of approximately 3.2% menu price increases implemented in April 2022 and increases of 4.2% and 1.75% implemented October 2021 and April 2021, respectively. We remain focused on balancing the value we offer our guests with the importance of further menu pricing action we take in 2022.

In 2022 YTD, we opened eight company restaurants and acquired eight franchise restaurants. away June 28, 2022, another 15 restaurants were under construction. In 2022 we plan to open about 25 Texas Roadhouse and Bubba’s 33 company restaurants. Overall, we expect weekly store growth of approximately 6.0% in 2022, including the impact of the eight acquired franchise restaurants.

Other sales primarily represent the net impact of the amortization of third
party gift card fees and gift card breakage income. The unfavorable impact was
$3.5 million and $3.4 million in Q2 2022 and Q2 2021, respectively, and was $8.6
million and $7.3 million in 2022 YTD and 2021 YTD, respectively. The change in
both periods is due to higher amortization of third party fees due to the
increase in sales through our third party gift card program, partially offset by
higher breakage income.

Franchise Royalties and Fees. Franchise royalties and fees increased by $0.2
million, or by 3.2%, in Q2 2022 compared to Q2 2021 and increased by $1.0
million, or by 8.4%, in 2022 YTD compared to 2021 YTD. The increase in both
periods was due to higher average unit volume, driven by comparable restaurant
sales growth. Franchise comparable restaurant sales increased 8.7% and 13.8% in
Q2 2022 and 2022 YTD, respectively. These increases were partially offset by
decreased royalties related to the eight franchise restaurants that were
acquired.

In 2022 YTD our existing franchise partners opened three Texas Roadhouse
restaurants, and we expect them to open up to seven restaurants in 2022, mostly international.

Food and Beverage Costs. Food and beverage costs, as a percentage of restaurant
and other sales, increased to 34.1% in Q2 2022 compared to 33.1% in Q2 2021 and
increased to 34.2% in 2022 YTD compared to 32.4% in 2021 YTD. The increase in
both periods was primarily due to commodity inflation partially offset by the
benefit of a higher guest check. Commodity inflation was 11.8% and 14.4% in Q2
2022 and 2022 YTD, respectively, with higher costs across the basket.

For 2022, we currently expect commodity inflation of approximately 12% for the
year with prices locked for approximately 45% of our remaining forecasted costs
and the remainder subject to floating market prices.

Restaurant Labor Expenses. Restaurant labor expenses, as a percentage of
restaurant and other sales, increased to 32.7% in Q2 2022 compared to 32.3% in
Q2 2021 and increased to 32.8% in 2022 YTD compared to 32.4% in 2021 YTD. The
increase in both periods was primarily due to higher wage and benefit expense
driven by labor market pressures along with increases in state-mandated minimum
and tipped wage rates and increased investment in our people. In addition, a
higher mix of dining room sales versus to-go sales also contributed to the
increase. The increases in both periods were partially offset by the benefit of
a higher guest check. We also benefited from a decrease in group insurance and
workers' compensation expense due to favorable claims experience of $1.6 million
and $3.4 million in Q2 2022 and 2022 YTD, respectively.

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For 2022, we anticipate our labor costs will be pressured by wage and other
inflation of approximately 8% driven by labor market pressures, increases in
state-mandated minimum and tipped wage rates, and increased investment in our
people.

Restaurant Rent Expense. Restaurant rent expense, as a percentage of restaurant
and other sales, decreased to 1.6% in Q2 2022 compared to 1.7% in Q2 2021 and
remained flat at 1.7% in 2022 YTD compared to 2021 YTD. The decrease was due to
the increase in average unit volume partially offset by higher rent expense, as
a percentage of restaurant and other sales, at our newer restaurants.

Restaurant Other Operating Expenses. Restaurant other operating expenses, as a
percentage of restaurant and other sales, decreased to 15.0% in Q2 2022 compared
to 15.2% in Q2 2021 and decreased to 14.8% in 2022 YTD compared to 15.3% in 2021
YTD. The decrease in both periods was primarily due to the increase in average
unit volume and lower supplies and bonus expense partially offset by higher
credit card charges and repair and maintenance costs.

Pre-opening Expenses. Pre-opening expenses were $5.3 million in Q2 2022 compared
to $6.3 million in Q2 2021 and $9.6 million in 2022 YTD compared to $10.6
million in 2021 YTD. Pre-opening costs will fluctuate from quarter to quarter
based on the 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 Expense. D&A, as a percentage of total revenue,
decreased to 3.4% in Q2 2022 compared to 3.5% in Q2 2021 and decreased to 3.4%
in 2022 YTD compared to 3.7% in 2021 YTD. The decrease in both periods was
primarily due to the increase in average unit volume partially offset by higher
depreciation at new restaurants and increased amortization of intangible assets.

Impairment and Closure Costs, Net. Impairment and closure costs, net was $0.4
million in Q2 2022 and was not significant in Q2 2021 and was ($0.2) million in
2022 YTD and $0.5 million in 2021 YTD. For Q2 2022, impairment and closure
costs, net included the impairment of an operating lease right-of-use asset at a
restaurant that is currently scheduled to be relocated in Q3 2022. For 2022 YTD,
impairment and closure costs, net included this impairment as well as a gain of
$0.7 million associated with the sale of land and building that was previously
classified as assets held for sale. For 2021 YTD, impairment and closure costs,
net included the impairment of land and building at a site that was relocated
and was classified as assets held for sale.

General and Administrative Expenses. G&A, as a percentage of total revenue,
increased to 4.8% in Q2 2022 compared to 4.1% in Q2 2021 and increased to 4.4%
in 2022 YTD compared to 4.3% in 2021 YTD. Total G&A expense was $49.2 million
and $36.9 million in Q2 2022 and Q1 2022, respectively, and was $89.5 million
and $73.6 million in 2022 YTD and 2021 YTD, respectively. The increase in both
periods was primarily driven by the timing of our annual managing partner
conference partially offset by the increase in average unit volume and lower
legal settlement expense. Managing partner conference expense totaled $8.0
million and was held in Q2 2022 as compared to Q3 2021.

Interest Expense, Net. Interest expense, net was $0.4 million and $1.0 million
in Q2 2022 and Q2 2021, respectively, and was $0.8 million and $2.4 million in
2022 YTD and 2021 YTD, respectively. The decrease in both periods was primarily
driven by decreased borrowings on our amended revolving credit facility.

Equity Income from Unconsolidated Affiliates.  Equity income was $0.5 million in
Q2 2022 compared to $0.2 million in Q2 2021. Equity income was $0.9 million in
2022 YTD and was not significant in 2021 YTD. The increase in both periods is
due to increased profitability from our unconsolidated affiliates and the gain
on the acquisition of one of these affiliates. The YTD fluctuation was partially
offset due to an impairment charge of $0.5 million recorded in Q1 2021 related
to our investment in a joint venture in China.

Income Tax Expense. Our effective tax rate increased to 13.4% in Q2 2022
compared to 12.4% in Q2 2021 primarily due to a reduction in the tax benefit for
stock compensation partially offset by an increase in the FICA Tip and Work
Opportunity tax credits. Our effective tax rate decreased to 13.8% in 2022 YTD
compared to 14.2% in 2021 YTD primarily due to an increase in FICA Tip and Work
Opportunity tax credits partially offset by a reduction in the tax

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Stock Compensation Advantage. For 2022, we expect an effective tax rate of around 14%, excluding the impact of legislative changes.

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
Jaggers restaurants and the results of our retail initiatives, are included in
Other.

Management uses restaurant margin as the 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. Restaurant margin is used
by our chief operating decision maker 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.

The following table shows a summary of restaurant margin by segment (in thousands):

                           13 Weeks Ended
                  June 28, 2022      June 29, 2021
Texas Roadhouse $ 161,051  16.8 %  $ 149,227  17.7 %
Bubba's 33          7,575  13.9        8,542  18.9
Other                 110   3.3          462  16.8
Total           $ 168,736  16.6 %  $ 158,231  17.7 %

                           26 Weeks Ended
                  June 28, 2022      June 29, 2021
Texas Roadhouse $ 314,518  16.7 %  $ 290,339  18.1 %
Bubba's 33         15,368  14.5       14,545  18.0
Other                  33   0.5          921  17.1
Total           $ 329,919  16.5 %  $ 305,805  18.1 %


The increase in Texas Roadhouse restaurant margin dollars is driven by an
increase in restaurant sales partially offset by commodity and labor inflation.
The increase in restaurant sales is primarily attributable to an increase in
average unit volume, driven by an increase in comparable restaurant sales, along
within an increase in store weeks. The decrease in Bubba's 33 restaurant margin
dollars is driven by increased commodity and labor inflation partially offset by
an increase in average unit volume.

The decrease in restaurant margin, as a percentage of restaurant and other
sales, for the Texas Roadhouse and Bubba's 33 segments is primarily driven by
the impact of commodity and labor inflation partially offset by the benefit of
an increase in comparable restaurant sales.

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liquidity and capital resources

The following table summarizes our net cash from operating, investing and financing activities (in thousands):

                                                              26 Weeks 

Completed

                                                    June 28, 2022        June 29, 2021
Net cash provided by operating activities         $         298,703    $   

296,846

Net cash used in investing activities                     (139,132)        

(81,783)

Net cash used in financing activities                     (314,805)        

(94,799)

Net (decrease) increase in cash and cash
equivalents                                       $       (155,234)    $   

120,264


Net cash provided by operating activities was $298.7 million in 2022 YTD
compared to $296.8 million in 2021 YTD. This increase was primarily due to an
increase in net income and non-cash items such as depreciation and amortization.
This was partially offset by decreases 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 $139.1 million in 2022 YTD compared to
$81.8 million in 2021 YTD. The increase was due to the acquisition of eight
franchise restaurants for a net purchase price of $33.1 million as well as an
increase in capital expenditures, driven by an increase in new company
restaurants and refurbishments and relocations of existing restaurants.

We require capital principally for the development of new company restaurants,
the refurbishment or relocation of existing restaurants and the acquisition of
franchise restaurants, if any.  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 June 28, 2022, we had
developed 148 of the 582 company restaurants on land that we own.

The following table presents a summary of capital expenditures (in thousands):

                                                                    26 Weeks Ended
                                                           June 28, 2022      June 29, 2021
New company restaurants                                   $        61,425    $        48,282
Refurbishment or expansion of existing restaurants                 38,067  

29,712

Relocation of existing restaurants                                  7,724              4,694
Capital expenditures related to Support Center office               1,351  
           2,380
Total capital expenditures                                $       108,567    $        85,068

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 new restaurants or relocating existing
restaurants and may also include costs necessary to ensure that our
infrastructure is able to support a larger restaurant base. In 2022, we expect
our capital expenditures to be approximately $230.0 million and we currently
plan to open approximately 25 Texas Roadhouse and Bubba's 33 restaurants. 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 amended revolving credit facility. For 2022, net cash provided by
operating activities should exceed capital expenditures, which we plan to use,
along with cash on hand, to pay dividends, repurchase common stock, pay down our
amended revolving credit facility and acquire franchise restaurants, if
applicable.

As of June 28, 2022, the estimated cost of completing capital project
commitments over the next 12 months was approximately $169.2 million. See note 6
to the unaudited condensed consolidated financial statements for a discussion of
contractual obligations.

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Net cash used in financing activities was $314.8 million in 2022 YTD compared to
$94.8 million in 2021 YTD. The increase is primarily due to the resumption of
share repurchases and the reinstatement of our quarterly dividend payment
partially offset by a decrease in repayments made on our amended revolving
credit facility.

On August 2, 2021, the Company resumed the share repurchase program that had
been suspended at the onset of the pandemic. On March 17, 2022, 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 and replaced a previous stock repurchase program which was approved on May
31, 2019. All repurchases to date under our stock repurchase programs have been
made through open market transactions. The timing and the amount of any
repurchases 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.

During 2022 YTD, we paid $212.9 million to repurchase 2,734,005 shares of our
common stock. This includes $133.1 million repurchased under our current
authorized stock repurchase program and $79.7 million repurchased under our
prior authorization. As of June 28, 2022, $166.9 million remained authorized for
stock repurchases.

On April 28, 2021, the Board reinstated the payment of a quarterly cash
dividend. This was the first dividend since the Board voted to suspend the
payment of quarterly cash dividends at the onset of the pandemic. On February
17, 2022, our Board authorized the payment of a quarterly cash dividend of $0.46
per share of common stock. The payment of these quarterly dividends totaled
$62.5 million and $27.9 million in 2022 YTD and 2021 YTD, respectively.

We paid distributions of $4.1 million to equity holders of 19 of our 20
majority-owned company restaurants in 2022 YTD. We paid distributions of $4.4
million to equity holders of 18 of our 20 majority-owned company restaurants in
2021 YTD.

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 amended 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 $75.0 million pending from June 28, 2022 was 2.13%. The weighted average interest rate for $190.0 million of the loans June 29, 2021 was 0.98%.

Lenders’ obligation to make loans under the amended revolving credit facility is contingent on our compliance with certain financial metrics. We have complied with all financial covenants June 28, 2022.

guarantees

As of June 28, 2022 and December 28, 2021, we are contingently liable for $11.7
million and $12.2 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 June 28, 2022 and December 28,
2021 as the likelihood of default was deemed to be less than probable and the
fair value of the guarantees is not considered significant.

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