Table of Contents

** **

 

** **

**UNITEDSTATES**

**SECURITIESAND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

 

**FORM 10-Q**

 
| **x**                                                  | **QUARTERLY  REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE  ACT OF 1934**  |
|--------------------------------------------------------|----------------------------------------------------------------------------------------------------------|
|                                                   |                                                                                                     |
| **For  the quarterly period ended June 24, 2008** |
|                                                   |                                                                                                     |
| **OR**                                                 |
|                                                   |                                                                                                     |
| **o**                                                  | **TRANSITION  REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE  ACT OF 1934** |

 

**Forthe transition periodfrom                            to**

 

**CommissionFile Number 000-50972**

 

**TexasRoadhouse, Inc.**

(Exact name ofregistrant specified in its charter)

 

| **Delaware**                     | ** ** | **20-1083890**          |
|----------------------------------|------------|-------------------------|
| (State or other  jurisdiction of |       | (IRS Employer           |
| incorporation or  organization)  |       | Identification  Number) |

 

**6040Dutchmans Lane, Suite 200**

**Louisville,Kentucky 40205**

(Address ofprincipal executive offices) (Zip Code)

 

**(502)426-9984**

(Registrant’stelephone number, including area code)

 

Indicate by check markwhether registrant (1) has filed all reports required to be filed by Section 13or 15(d) of the Securities Exchange Act of 1934 during the preceding 12months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements forthe past 90 days.    Yes   x No  o.

 

Indicate by check markwhether the registrant is a large accelerated filer, an accelerated filer or anon-accelerated filer.  See definition of“accelerated filer and large accelerated filer” in Rule 12b-2 of theExchange Act.  (Check one):

 
| Large accelerated filer    x | Accelerated filer    o | Non-accelerated filer    o | Smaller reporting  company    o |
|---------------------------------------------|---------------------------------------|-------------------------------------------|------------------------------------------------|

 

Indicate by check markwhether the registrant is a shell company (as defined in Rule 12b-2 of theExchange Act).   Yes   o  No  x.

 

The number of shares of Class Aand Class B common stock outstanding were 66,761,757 and 5,265,376,respectively, on July 25, 2008.

 

 

 

----

Table of Contents

 

**TABLEOF CONTENTS**

 
| PART I. FINANCIAL INFORMATION                                                                                           | ** ** |
|------------------------------------------------------------------------------------------------------------------------------|------------|
|                                                                                                                         |       |
| Item 1 — Financial Statements — Texas  Roadhouse, Inc. and Subsidiaries                                       | 3          |
| Condensed Consolidated  Balance Sheets — June 24, 2008 and December 25, 2007                                  | 3          |
| Condensed Consolidated  Statements of Income — For the 13 and 26 Weeks Ended June 24, 2008 and  June 26, 2007 | 4          |
| Condensed Consolidated  Statements of Cash Flows — For the 26 Weeks Ended June 24, 2008 and  June 26, 2007    | 5          |
| Notes  to Condensed Consolidated Financial Statements                                                                        | 6          |
| Item 2 — Management’s Discussion and Analysis of  Financial Condition and Results of Operations                    | 14         |
| Item 3 — Quantitative and Qualitative Disclosures  About Market Risk                                                    | 22         |
| Item 4 — Controls and Procedures                                                                                        | 22         |
|                                                                                                                         |       |
| PART II.  OTHER INFORMATION                                                                                             |       |
|                                                                                                                         |       |
| Item  1 — Legal Proceedings                                                                                             | 23         |
| Item  1A — Risk Factors                                                                                                 | 23         |
| Item 2 — Unregistered Sales of Equity Securities and  Use of Proceeds                                                   | 23         |
| Item 3 — Defaults Upon Senior Securities                                                                                | 23         |
| Item 4 — Submission of Matters to a Vote of Security  Holders                                                           | 24         |
| Item  5 — Other Information                                                                                             | 24         |
| Item 6 —  Exhibits                                                                                                      | 24         |
|                                                                                                                         |       |
| Signatures                                                                                                                   | 25         |

 

2

----

Table of Contents

 

**PART I — FINANCIAL INFORMATION**

 

**ITEM1 — FINANCIAL STATEMENTS**

 

**TexasRoadhouse, Inc. and Subsidiaries**

**Condensed Consolidated Balance Sheets**

**(inthousands, except share and per share data)**

 
| ** **                                                                                                                                                                                               | ** ** | **(unaudited)**        | ** ** | ** **                 | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------|------------|----------------------------|------------|
| ** **                                                                                                                                                                                               | ** ** | **June 24, 2008** | ** ** | **December 25, 2007** | ** ** |
| **Assets**                                                                                                                                                                                               | ** ** | ** **             | ** ** | ** **                 | ** ** |
| Current assets:                                                                                                                                                                                          |       |                   |       |                       |       |
| Cash and cash  equivalents                                                                                                                                                                               |       | $                      | 7,071      |                       | $          | 11,564 |   |
| Receivables, net  of allowance for doubtful accounts of $5 at June 24, 2008 and $8 at  December 25, 2007                                                                                       |       | 10,432                 |       | 18,303                     |       |
| Inventories, net                                                                                                                                                                                         |       | 7,303                  |       | 7,277                      |       |
| Prepaid expenses                                                                                                                                                                                         |       | 2,548                  |       | 3,646                      |       |
| Deferred tax  assets                                                                                                                                                                                     |       | 1,669                  |       | 841                        |       |
| Total current  assets                                                                                                                                                                                    |       | 29,023                 |       | 41,631                     |       |
| Property and  equipment, net                                                                                                                                                                             |       | 425,997                |       | 390,378                    |       |
| Goodwill                                                                                                                                                                                                 |       | 108,153                |       | 101,856                    |       |
| Intangible  asset, net                                                                                                                                                                                   |       | 9,610                  |       | 8,414                      |       |
| Other assets                                                                                                                                                                                             |       | 4,012                  |       | 3,750                      |       |
| Total assets                                                                                                                                                                                             |       | $                      | 576,795    |                       | $          | 546,029 |   |
|                                                                                                                                                                                                     |       |                   |       |                       |       |
| **Liabilities  and Stockholders’ Equity**                                                                                                                                                           | ** ** | ** **             | ** ** | ** **                 | ** ** |
| Current  liabilities:                                                                                                                                                                                    |       |                   |       |                       |       |
| Current  maturities of long-term debt and obligations under capital leases                                                                                                                               |       | $                      | 236        |                       | $          | 302 |   |
| Accounts payable                                                                                                                                                                                         |       | 22,484                 |       | 23,716                     |       |
| Deferred revenue  — gift cards/certificates                                                                                                                                                         |       | 15,915                 |       | 32,088                     |       |
| Accrued wages                                                                                                                                                                                            |       | 16,734                 |       | 14,561                     |       |
| Income tax  payable                                                                                                                                                                                      |       | 3,125                  |       | 721                        |       |
| Accrued taxes  and licenses                                                                                                                                                                              |       | 8,705                  |       | 6,439                      |       |
| Other accrued  liabilities                                                                                                                                                                               |       | 10,304                 |       | 10,432                     |       |
| Total current  liabilities                                                                                                                                                                               |       | 77,503                 |       | 88,259                     |       |
| Long-term debt  and obligations under capital leases, excluding current maturities                                                                                                                       |       | 93,592                 |       | 66,482                     |       |
| Stock option and  other deposits                                                                                                                                                                         |       | 5,201                  |       | 4,916                      |       |
| Deferred rent                                                                                                                                                                                            |       | 8,531                  |       | 7,472                      |       |
| Deferred tax  liabilities                                                                                                                                                                                |       | 2,983                  |       | 4,900                      |       |
| Other  liabilities                                                                                                                                                                                       |       | 5,718                  |       | 4,235                      |       |
| Total  liabilities                                                                                                                                                                                       |       | 193,528                |       | 176,264                    |       |
| Minority  interest in consolidated subsidiaries                                                                                                                                                          |       | 3,144                  |       | 2,384                      |       |
| Stockholders’  equity:                                                                                                                                                                              |       |                   |       |                       |       |
| Preferred stock  ($0.001 par value, 1,000,000 shares authorized; no shares issued or  outstanding)                                                                                                       |       | —                 |       | —                     |       |
| Common stock,  Class A, ($0.001 par value, 100,000,000 shares authorized, 68,107,957  and 69,582,602 shares issued and outstanding at June 24, 2008 and  December 25, 2007, respectively) |       | 68                     |       | 70                         |       |
| Common stock,  Class B, ($0.001 par value, 8,000,000 shares authorized, 5,265,376 shares  issued and outstanding)                                                                                   |       | 5                      |       | 5                          |       |
| Additional paid  in capital                                                                                                                                                                              |       | 253,593                |       | 264,234                    |       |
| Retained  earnings                                                                                                                                                                                       |       | 126,457                |       | 103,072                    |       |
| Total  stockholders’ equity                                                                                                                                                                         |       | 380,123                |       | 367,381                    |       |
| Total  liabilities and stockholders’ equity                                                                                                                                                         |       | $                      | 576,795    |                       | $          | 546,029 |   |

 

See accompanyingnotes to condensed consolidated financial statements.

 

3

----

Table of Contents

 

**TexasRoadhouse, Inc. and Subsidiaries**

**Condensed Consolidated Statements ofIncome**

**(inthousands, except per share data)**

**(unaudited)**

** **
| ** **                                                   | ** ** | **13 Weeks Ended**     | ** ** | **26 Weeks Ended**     | ** ** |
|--------------------------------------------------------------|------------|------------------------|------------|------------------------|------------|
| ** **                                                   | ** ** | **June 24, 2008** | ** ** | **June 26, 2007** | ** ** | **June 24, 2008** | ** ** | **June 26, 2007** | ** ** |
| Revenue:                                                     |       |                   |       |                   |       |   |   |   |   |
| Restaurant sales                                             |       | $                      | 214,787    |                   | $          | 178,129 |   | $ | 423,388 |   | $ | 353,573 |   |
| Franchise  royalties and fees                                |       | 2,524                  |       | 2,857                  |       | 5,136 |   | 5,750 |   |
|                                                         |       |                   |       |                   |       |   |   |   |   |
| Total revenue                                                |       | 217,311                |       | 180,986                |       | 428,524 |   | 359,323 |   |
|                                                         |       |                   |       |                   |       |   |   |   |   |
| Costs and  expenses:                                         |       |                   |       |                   |       |   |   |   |   |
| Restaurant  operating costs:                                 |       |                   |       |                   |       |   |   |   |   |
| Cost of sales                                                |       | 74,774                 |       | 62,250                 |       | 148,360 |   | 123,347 |   |
| Labor                                                        |       | 61,804                 |       | 50,282                 |       | 120,246 |   | 98,579 |   |
| Rent                                                         |       | 3,601                  |       | 2,846                  |       | 6,890 |   | 5,631 |   |
| Other operating                                              |       | 35,346                 |       | 28,774                 |       | 68,596 |   | 56,667 |   |
| Pre-opening                                                  |       | 3,212                  |       | 3,102                  |       | 6,038 |   | 6,685 |   |
| Depreciation and  amortization                               |       | 9,066                  |       | 7,230                  |       | 17,612 |   | 13,875 |   |
| Impairment and  closure                                      |       | 31                     |       | —                 |       | 734 |   | — |   |
| General and  administrative                                  |       | 12,437                 |       | 11,600                 |       | 22,308 |   | 19,937 |   |
|                                                         |       |                   |       |                   |       |   |   |   |   |
| Total costs and  expenses                                    |       | 200,271                |       | 166,084                |       | 390,784 |   | 324,721 |   |
|                                                         |       |                   |       |                   |       |   |   |   |   |
| Income from  operations                                      |       | 17,040                 |       | 14,902                 |       | 37,740 |   | 34,602 |   |
|                                                         |       |                   |       |                   |       |   |   |   |   |
| Interest  expense, net                                       |       | 720                    |       | 361                    |       | 1,362 |   | 597 |   |
| Minority  interest                                           |       | 279                    |       | 230                    |       | 540 |   | 519 |   |
| Equity income  from investments in unconsolidated affiliates |       | 70                     |       | 93                     |       | 139 |   | 190 |   |
|                                                         |       |                   |       |                   |       |   |   |   |   |
| Income before  taxes                                         |       | 16,111                 |       | 14,404                 |       | 35,977 |   | 33,676 |   |
| Provision for  income taxes                                  |       | 5,639                  |       | 5,147                  |       | 12,592 |   | 12,123 |   |
| Net income                                                   |       | $                      | 10,472     |                   | $          | 9,257 |   | $ | 23,385 |   | $ | 21,553 |   |
|                                                         |       |                   |       |                   |       |   |   |   |   |
| Net income per  common share:                                |       |                   |       |                   |       |   |   |   |   |
| Basic                                                        |       | $                      | 0.14       |                   | $          | 0.12 |   | $ | 0.31 |   | $ | 0.29 |   |
|                                                         |       |                   |       |                   |       |   |   |   |   |
| Diluted                                                      |       | $                      | 0.14       |                   | $          | 0.12 |   | $ | 0.31 |   | $ | 0.28 |   |
|                                                         |       |                   |       |                   |       |   |   |   |   |
| Weighted-average  shares outstanding:                        |       |                   |       |                   |       |   |   |   |   |
| Basic                                                        |       | 74,252                 |       | 74,613                 |       | 74,498 |   | 74,500 |   |
|                                                         |       |                   |       |                   |       |   |   |   |   |
| Diluted                                                      |       | 75,996                 |       | 76,912                 |       | 76,220 |   | 76,879 |   |

 

See accompanyingnotes to condensed consolidated financial statements.

 

4

----

Table of Contents

 

**TexasRoadhouse, Inc. and Subsidiaries**

**Condensed Consolidated Statements ofCash Flows**

**(inthousands)**

**(unaudited)**

 
| ** **                                                                         | ** ** | **26 Weeks Ended** | ** ** |
|------------------------------------------------------------------------------------|------------|------------------------------|------------|
| ** **                                                                         | ** ** | **June 24, 2008**  | ** ** | **June 26, 2007** | ** ** |
| **Cash  flows from operating activities:**                                         |       |                         |       |   |   |
| Net income                                                                         |       | $                            | 23,385     |   | $ | 21,553 |   |
| Adjustments to  reconcile net income to net cash provided by operating activities: |       |                         |       |   |   |
| Depreciation and  amortization                                                     |       | 17,612                       |       | 13,875 |   |
| Deferred income  taxes                                                             |       | (2,745                       | )          | (1,745 | ) |
| Loss on  disposition of assets                                                     |       | 394                          |       | 112 |   |
| Impairment and  closure                                                            |       | 611                          |       | — |   |
| Minority  interest                                                                 |       | 540                          |       | 519 |   |
| Equity income  from investments in unconsolidated affiliates                       |       | (139                         | )          | (190 | ) |
| Distributions  received from investments in unconsolidated affiliates              |       | 212                          |       | 208 |   |
| Provision for  doubtful accounts                                                   |       | (3                           | )          | (16 | ) |
| Share-based  compensation expense                                                  |       | 3,582                        |       | 2,436 |   |
| Changes in  operating working capital:                                             |       |                         |       |   |   |
| Receivables                                                                        |       | 7,874                        |       | (257 | ) |
| Inventories                                                                        |       | 58                           |       | (35 | ) |
| Prepaid expenses                                                                   |       | 1,134                        |       | 1,054 |   |
| Other assets                                                                       |       | (335                         | )          | 146 |   |
| Accounts payable                                                                   |       | (1,452                       | )          | (517 | ) |
| Deferred revenue  — gift cards/certificates                                   |       | (16,549                      | )          | (13,140 | ) |
| Accrued wages                                                                      |       | 2,173                        |       | 1,212 |   |
| Excess tax  benefits from share-based compensation                                 |       | (260                         | )          | (1,479 | ) |
| Prepaid income  taxes and income taxes payable                                     |       | 2,664                        |       | (797 | ) |
| Accrued taxes  and licenses                                                        |       | 2,266                        |       | 861 |   |
| Other accrued  liabilities                                                         |       | (221                         | )          | (447 | ) |
| Deferred rent                                                                      |       | 1,059                        |       | 782 |   |
| Other  liabilities                                                                 |       | 872                          |       | 1,582 |   |
|                                                                               |       |                         |       |   |   |
| Net cash  provided by operating activities                                         |       | $                            | 42,732     |   | $ | 25,717 |   |
|                                                                               |       |                         |       |   |   |
| **Cash  flows from investing activities:**                                         |       |                         |       |   |   |
| Capital  expenditures — property and equipment                                |       | (52,573                      | )          | (48,732 | ) |
| Acquisitions of  franchise restaurants, net of cash acquired                       |       | (8,173                       | )          | — |   |
| Proceeds from  sale of property and equipment, including insurance proceeds        |       | 197                          |       | 301 |   |
|                                                                               |       |                         |       |   |   |
| Net cash used in  investing activities                                             |       | $                            | (60,549    | ) | $ | (48,431 | ) |
|                                                                               |       |                         |       |   |   |
| **Cash  flows from financing activities:**                                         |       |                         |       |   |   |
| Net proceeds  from revolving credit facility                                       |       | 28,000                       |       | 46,000 |   |
| Proceeds from  minority interest contributions and other                           |       | 877                          |       | 347 |   |
| Distributions to  minority interest holders                                        |       | (613                         | )          | (591 | ) |
| Excess tax  benefits from share-based compensation                                 |       | 260                          |       | 1,479 |   |
| Repurchase  shares of common stock                                                 |       | (15,095                      | )          | — |   |
| Proceeds from  stock option and other deposits                                     |       | 389                          |       | 478 |   |
| Principal  payments on long-term debt and capital lease obligations                |       | (956                         | )          | (2,090 | ) |
| Payments for  debt issuance costs                                                  |       | —                       |       | (459 | ) |
| Proceeds from  exercise of stock options                                           |       | 462                          |       | 1,557 |   |
|                                                                               |       |                         |       |   |   |
| Net cash  provided by financing activities                                         |       | $                            | 13,324     |   | $ | 46,721 |   |
|                                                                               |       |                         |       |   |   |
| Net  (decrease)/increase in cash                                                   |       | (4,493                       | )          | 24,007 |   |
| Cash and cash  equivalents — beginning of period                              |       | 11,564                       |       | 33,784 |   |
| Cash and cash  equivalents — end of period                                    |       | $                            | 7,071      |   | $ | 57,791 |   |
|                                                                               |       |                         |       |   |   |
| Supplemental  disclosures of cash flow information:                                |       |                         |       |   |   |
| Interest, net of  amounts capitalized                                              |       | $                            | 1,672      |   | $ | 695 |   |
| Income taxes                                                                       |       | $                            | 12,673     |   | $ | 14,666 |   |

 

See accompanyingnotes to condensed consolidated financial statements.

 

5

----

Table of Contents

 

**TexasRoadhouse, Inc. and Subsidiaries**

**Notes to Condensed ConsolidatedFinancial Statements**

**(Tabulardollar amounts in thousands, except per share data)**

**(unaudited)**

 

**(1)   Basisof Presentation**

 

The accompanyingunaudited condensed consolidated financial statements include the accounts ofTexas Roadhouse, Inc. (the “Company”) and its wholly-owned subsidiaries,Texas Roadhouse Holdings LLC (“Holdings”), Texas Roadhouse DevelopmentCorporation (“TRDC”) and Texas Roadhouse Management Corp. (“ManagementCorp.”), as of and for the 13 and 26 weeks ended June 24, 2008 and June 26,2007.  The Company and its wholly-owned subsidiaries operate TexasRoadhouse restaurants. Holdings also provides supervisory and administrativeservices for certain other franchise and license restaurants. TRDC sellsfranchise rights and collects the franchise royalties and fees. Management Corp. provides management services to the Company, Holdings andcertain other license and franchise restaurants.

 

Management of the Companyhas made a number of estimates and assumptions relating to the reporting ofassets and liabilities, the disclosure of contingent assets and liabilities atthe date of the condensed consolidated financial statements and the reportingof revenue and expenses during the period to prepare these condensedconsolidated financial statements in conformity with U.S. generally acceptedaccounting principles (“GAAP”). Significant items subject to such estimates andassumptions include the carrying amount of property and equipment, goodwill,obligations related to insurance reserves, income taxes and share-basedcompensation expense. Actual results could differ from those estimates.

 

In the opinion ofmanagement, the accompanying unaudited financial statements reflect alladjustments, consisting only of normal recurring adjustments, necessary topresent fairly the financial position, results of operations and cash flows ofthe Company for the periods presented.  The financial statements have beenprepared in accordance with GAAP, except that certain information and footnoteshave been condensed or omitted pursuant to rules and regulations of theSecurities and Exchange Commission (“SEC”).  Operating results for the 13and 26 weeks ended June 24, 2008 are not necessarily indicative of theresults that may be expected for the year ending December 30, 2008. The financial statements should be read in conjunction with the consolidatedfinancial statements and notes thereto included in the Company’s Annual Reporton Form 10-K for the year ended December 25, 2007.

 

Our significant interimaccounting policies include the recognition of income taxes using an estimatedannual effective tax rate.

 

**(2)   Share-basedCompensation**

 

The Company may grantincentive and non-qualified stock options to purchase shares of Class Acommon stock, stock bonus awards (restricted stock unit awards (“RSUs”)) andrestricted stock awards under the Texas Roadhouse, Inc. 2004 EquityIncentive Plan (the “Plan”).  Beginningin 2008, the Company changed the method by which it provides share-basedcompensation to its employees by eliminating stock option grants and, instead,granting RSUs as a form of share-based compensation.   An RSU is the conditional right to receiveone share of Class A common stock upon satisfaction of the vestingrequirement.

 

The following tablesummarizes the share-based compensation recorded in the accompanying condensedconsolidated statements of income:

 
| ** **                              | ** ** | **13 Weeks Ended** | ** ** | **26 Weeks Ended** | ** ** |
|-----------------------------------------|------------|------------------------------|------------|------------------------------|------------|
| ** **                              | ** ** | **June 24, 2008**  | ** ** | **June 26, 2007**  | ** ** | **June 24, 2008** | ** ** | **June 26, 2007** | ** ** |
| ** **                              | ** ** | ** **                   | ** ** | ** **                   | ** ** | ** ** | ** ** | ** ** | ** ** |
| Labor expense                           |       | $                            | 618        |                         | $          | 532 |   | $ | 1,168 |   | $ | 1,025 |   |
| General and  administrative expense     |       | 1,264                        |       | 781                          |       | 2,414 |   | 1,411 |   |
| Total  share-based compensation expense |       | $                            | 1,882      |                         | $          | 1,313 |   | $ | 3,582 |   | $ | 2,436 |   |

 

6

----

Table of Contents

 

A summary ofshare-based compensation activity by type of grant as of June 24, 2008 andchanges during the period then ended is presented below.

 

*Summary Details for Plan ShareOptions*

 
| ** **                             | ** ** | **Shares** | ** ** | **Weighted-Average  Exercise Price** | ** ** | **Weighted-Average  Remaining Contractual  Term (years)** | ** ** | **Aggregate  Intrinsic  Value** | ** ** |
|----------------------------------------|------------|------------|------------|-------------------------------------------|------------|---------------------------------------------------------------------|------------|---------------------------------|------------|
|                                   |       |       |       |                                      |       |                                                                |       |                            |       |
| Outstanding at  December 25, 2007 |       | 7,356,978  |       | $                                         | 9.11       |                                                                |       |                            |       |   |
| Granted                                |       | —     |       | —                                    |       |                                                                |       |                            |       |
| Forfeited                              |       | (71,511    | )          | 11.87                                     |       |                                                                |       |                            |       |
| Exercised                              |       | (149,555   | )          | 3.95                                      |       |                                                                |       |                            |       |
| Outstanding at  June 24, 2008     |       | 7,135,912  |       | $                                         | 9.19       |                                                                | 5.95       |                            | $          | 16,893 |   |
|                                   |       |       |       |                                      |       |                                                                |       |                            |       |
| Exercisable at  June 24, 2008     |       | 5,737,711  |       | $                                         | 8.33       |                                                                | 5.43       |                            | $          | 16,329 |   |

 

No stock options weregranted during the 26 weeks ended June 24, 2008.  The weighted-average grant date fair value ofoptions granted during the 13 and 26 weeks ended June 26, 2007 were $5.34and $5.31, respectively, using the Black-Scholes option-pricing model with thefollowing weighted-average assumptions:

 
| ** **               | ** ** | **13 Weeks  Ended**    | ** ** | **26 Weeks  Ended**    | ** ** |
|--------------------------|------------|-----------------------------|------------|-----------------------------|------------|
| ** **               | ** ** | **June 26, 2007** | ** ** | **June 26, 2007** | ** ** |
|                     |       |                        |       |                        |       |
| Risk-free  interest rate |       | 4.55                        | %          | 4.58                        | %          |
| Expected term  (years)   |       | 3.0 – 5.0              |       | 3.0 – 5.0              |       |
| Expected  volatility     |       | 35.2                        | %          | 35.5                        | %          |
| Expected dividend  yield |       | 0.0                         | %          | 0.0                         | %          |

 

The total intrinsic valueof options exercised during the 13 weeks ended June 24, 2008 and June 26,2007 was $0.5 million and $1.8 million, respectively.  The total intrinsic value of optionsexercised during the 26 weeks ended June 24, 2008 and June 26, 2007was $1.1 million and $5.0 million, respectively.   As of June 24, 2008, with respect tounvested stock options, there was $2.8 million of unrecognized compensationcost that is expected to be recognized over a weighted-average period of 1.0year.  The total grant date fair value ofstock options vested for both 13 week periods ended June 24, 2008 and June 26,2007 was $1.1 million and $1.2 million, respectively, and for the 26 weekperiods ended June 24, 2008 and June 26, 2007 was $3.3 million and$2.4 million, respectively.

 

*Summary Details for RSUs*

 
| ** **                             | ** ** | **Shares** | ** ** | **Weighted-  Average  Grant Date Fair  Value** | ** ** |
|----------------------------------------|------------|------------|------------|-----------------------------------------------------|------------|
|                                   |       |       |       |                                                |       |
| Outstanding at  December 25, 2007 |       | —     |       | $                                                   |       |   |
| Granted                                |       | 939,482    |       | 10.58                                               |       |
| Forfeited                              |       | (3,999     | )          | 9.92                                                |       |
| Vested                                 |       | —     |       | —                                              |       |
| Outstanding at  June 24, 2008     |       | 935,483    |       | $                                                   | 10.58      |   |

 

During the second quarterof 2008, the Company recorded pre-tax compensation expense in connection withthese RSUs of $0.2 million in labor expense and $0.6 million in general andadministrative expense.  For the 26 weeksended June 24, 2008, the Company recorded pre-tax compensation expense inconnection with these RSUs of $0.2 million in labor expense and $1.0 million ingeneral and administrative expense.  Asof June 24, 2008, with respect to unvested RSUs, there was $8.2 million ofunrecognized compensation cost that is expected to be recognized over aweighted-average period of 2.0 years. The vesting terms of the RSUs range from approximately 1.0 to 5.0 years.

 

In the fourth quarter of2006, the Company awarded 36,000 restricted shares, at a weighted-average priceof $14.55 per share, to two corporate office employees under the terms of thePlan.  The restricted shares vest afterthree years.  At June 24, 2008, theunrecognized compensation expense related to the restricted stock grantstotaled approximately $0.2 million and will be recognized over the remainingvesting period.

 

7

----

Table of Contents

 

**(3)   Long-termDebt and Obligations Under Capital Leases**

 

Long-term debt andobligations under capital leases consisted of the following:

 
| ** **                               | ** ** | **June 24, 2008** | ** ** | **December 25, 2007** | ** ** |
|------------------------------------------|------------|-----------------------------|------------|---------------------------------|------------|
| Installment  loans, due 2008 – 2020 |       | $                           | 2,282      |                            | $          | 3,210 |   |
| Obligations  under capital leases        |       | 546                         |       | 574                             |       |
| Revolver                                 |       | 91,000                      |       | 63,000                          |       |
|                                     |       | 93,828                      |       | 66,784                          |       |
| Less current  maturities                 |       | 236                         |       | 302                             |       |
|                                     |       | $                           | 93,592     |                            | $          | 66,482 |   |

 

The weighted-averageinterest rate for installment loans outstanding at June 24, 2008 and December 25,2007 was 10.50% and 9.95%, respectively. The debt is secured by certain land, buildings and equipment.

 

On May 31, 2007, theCompany amended and restated its existing five-year revolving credit facilitydated October 8, 2004 with a syndicate of commercial lenders led by Bankof America, N.A., Banc of America Securities LLC and National City Bank.  The facility was increased from $150.0million to $250.0 million and the term was extended to May 31, 2012.  The terms of the facility require the Companyto pay interest on outstanding borrowings at LIBOR plus a margin of 0.50% to0.875% and to pay a commitment fee of 0.10% to 0.175% per year on any unusedportion of the facility, in both cases depending on the Company’s leverageratio.   The weighted-average interestrate for the revolver at June 24, 2008 and December 25, 2007 was3.06% and 5.73%, respectively.  At June 24,2008, the Company had $91.0 million outstanding under the credit facility and$155.8 million of availability, net of $3.2 million of outstanding letters ofcredit.

 

The lenders’ obligationto extend credit under the facility depends on the Company maintaining certainfinancial covenants, including a minimum consolidated fixed charge coverageratio of 2.00 to 1.00 and a maximum consolidated leverage ratio of 3.00 to1.00.  The new credit facility permitsthe Company to incur additional secured or unsecured indebtedness outside thefacility, except for the incurrence of secured indebtedness that in theaggregate exceeds 20% of the Company’s consolidated tangible net worth orcircumstances where the incurrence of secured or unsecured indebtedness wouldprevent the Company from complying with its financial covenants.  The Company is currently in compliance withsuch covenants.

 

**(4)   RecentAccounting Pronouncements**

 

In September 2006,the Financial Accounting Standards Board (“FASB”) issued Statement of FinancialAccounting Standards (“SFAS”) No. 157, *Fair Value Measurements*(“SFAS157”), which defines fair value, establishes a framework for measuring fairvalue and expands disclosures about fair value measurements.  The provisions of SFAS 157 for financialassets and liabilities, as well as any other assets and liabilities that arecarried at fair value on a recurring basis in financial statements are effectivefor financial statements issued for fiscal years beginning after November 15,2007 (fiscal year 2008 for the Company). FASB Staff Position FAS 157-2, *Effective Date of FASBStatement No. *157, delayed the effective date of SFAS 157 formost nonfinancial assets and nonfinancial liabilities until fiscal yearsbeginning after November 15, 2008 (fiscal year 2009 for the Company).  The implementation of SFAS 157 for financialassets and financial liabilities, effective December 26, 2007, did nothave a material impact on the Company’s consolidated financial position,results of operations or cash flows.  TheCompany is currently assessing the impact of SFAS 157 for nonfinancial assetsand liabilities on its consolidated financial position, results of operationsor cash flows.  See note 10 foradditional fair value discussions.

 

In February 2007,the FASB issued SFAS No. 159, *The Fair Value Option forFinancial Assets and Financial Liabilities* (“SFAS 159”). SFAS 159permits entities to choose to measure selected financial assets and financialliabilities at fair value. Unrealized gains and losses on items for which thefair value option has been elected are reported in earnings at each subsequentreporting date. The provisions of SFAS 159 are effective as of the beginning ofthe Company’s 2008 fiscal year. The adoption of SFAS 159 did not have amaterial impact on the Company’s consolidated financial position, results ofoperations or cash flows.

 

In December 2007,the FASB issued SFAS No. 141 (revised 2007), *BusinessCombinations* (“SFAS 141R”). SFAS 141R establishes the principles and requirements for how anacquirer: 1) recognizes and measures in its financial statements theidentifiable assets acquired, the liabilities assumed, and any noncontrollinginterest in the acquiree; 2) recognizes and measures the goodwill acquired inthe business combination or gain from a bargain purchase;  and 3) determines what information todisclose to enable users of the financial statements to evaluate the nature andfinancial effects of the business combination. SFAS 141R is to be applied prospectively to business combinationsconsummated on or after the beginning of the first annual reporting period onor after December 15, 2008 (fiscal year 2009 for the Company).  The Company is currently evaluating theimpact SFAS 141R will have on any potential future business combinations.

 

8

----

Tableof Contents

 

In December 2007,the FASB issued SFAS No. 160, *Noncontrolling Interestsin Consolidated Financial Statements – an amendment of ARB No. 51*(“SFAS 160”).  SFAS 160 establishesaccounting and reporting standards that require noncontrolling interests to bereported as a component of equity, changes in a parent’s ownership interestwhile the parent retains its controlling interest be accounted for as equitytransactions, and any retained noncontrolling equity investment upon thedeconsolidation of a subsidiary be initially measured at fair value.  SFAS 160 is to be applied prospectively tobusiness combinations consummated on or after the beginning of the first annualreporting period on or after December 15, 2008 (fiscal year 2009 for theCompany).  The Company is currentlyevaluating the impact of adopting SFAS 160 on its consolidated financialposition, results of operations or cash flows.

 

In May 2008, theFASB issued SFAS No. 162, *The Hierarchy of GenerallyAccepted Accounting Principles* (“SFAS 162”).  SFAS 162 identifies the sources of accountingprinciples and the framework for selecting the principles used in thepreparation of financial statements of nongovernmental entities that arepresented in conformity with GAAP in the United States.  This statement will be effective 60 daysfollowing the SEC’s approval of the Public Company Accounting Oversight Boardamendments to AU Section 411, *The Meaning of PresentFairly in Conformity with Generally Accepted Accounting Principles*.  The Company does not expect the adoption ofSFAS 162 to have a significant impact on its consolidated financial position,results of operations or cash flows.

 

**(5)****           Commitments andContingencies**

** **

The estimated cost ofcompleting capital project commitments at June 24, 2008 and December 25,2007 was approximately $86.7 million and $90.0 million, respectively.

 

The Company entered intoreal estate lease agreements for franchise restaurants located in Everett, MA,Longmont, CO, Montgomeryville, PA and Fargo, ND before granting franchiserights for those restaurants. The Company has subsequently assigned the leasesto the franchisees, but remains contingently liable if a franchisee defaultsunder the terms of a lease.  The Longmont lease was assigned in October 2003and expires in May 2014, the Everett lease was assigned in September 2002and expires in February 2018, the Montgomeryville lease was assigned in October 2004and expires in June 2021 and the Fargo lease was assigned in February 2006and expires in July 2016.  As thefair value of the guarantees is not considered significant, no liability hasbeen recorded.  As discussed in note 6,the Everett, MA, Longmont, CO, and Fargo, ND restaurants are owned, in whole orpart, by certain officers, directors or 5% shareholders of the Company.

 

The Company is involvedin various claims and legal actions arising in the normal course of business.In the opinion of management, the ultimate disposition of these matters willnot have a material effect on the Company’s consolidated financial position,results of operations, or cash flows.

 

On March 26, 2007, acivil case styled as a class action complaint titled *Nicole M. Ehrheart v. Texas Roadhouse, Inc. and Does 1 through 10(“Ehrheart”)*, Case Number CA 07-54, was filed against the Company inthe United States District Court for the Western District of Pennsylvania ErieDivision.  On July 20, 2007, a civil case styled as a class actioncomplaint titled *Mario Aliano v. TexasRoadhouse Holdings LLC and Does 1-10 (“Aliano”)*, Case Number07cv4108, was filed against the Company in the United States District Court forthe Northern District of Illinois Eastern Division.  Both suits allegethat the Company willfully violated the Fair and Accurate Credit TransactionsAct (“FACTA”) based on the alleged practice of unlawfully including moreinformation than is permitted on the electronically printed credit or debitcard receipts provided to customers.  Plaintiffs seek monetary damages,including statutory damages, punitive damages, costs and attorneys’ fees, and apermanent injunction against the alleged unlawful practice.  On April 7, 2008, *Ehrheart*and*Aliano*were consolidated by the UnitedStates Judicial Panel on Multidistrict Litigation in the United States DistrictCourt for the Northern District of Illinois as Case Number 1:08-cv-2362, styled*In re: Texas Roadhouse FACTA Litigation, MDL No. 1927*(the “*MDL Action*”).  While the Company has denied plaintiffs’material allegations, discovery has not yet begun.  Statutory damages range from $100 to $1,000for each willful violation of FACTA, and actual damages are available toplaintiffs for each negligent violation of FACTA.

 

On June 3, 2008, theCredit and Debit Card Receipt Clarification Act (the “FACTA Clarification Act”)became effective, providing that any merchant who printed a credit card’sexpiration date on a receipt issued to a consumer between FACTA’s effectivedate and the FACTA Clarification Act’s effective date cannot be found to havewillfully violated FACTA as long as the merchant otherwise complied with FACTAand the Fair Credit Reporting Act.

 

The Company believes thatit has meritorious defenses to the claims raised in the MDL Action, and itintends to vigorously defend against the claims, including plaintiffs’ effortsto certify a nationwide class action.  The Company believes that neithercase will have a material adverse effect on its business and its consolidatedfinancial position, results of operations or cash flows.

 

 The Companycurrently buys most of its beef from three suppliers. Although there are alimited number of beef suppliers, management believes that other supplierscould provide a similar product on comparable terms. A change in suppliers,however, could cause supply shortages and a possible loss of sales, which wouldaffect operating results adversely. The Company has no material minimumpurchase commitments with its vendors that extend beyond a year.

 

9

----

Table of Contents

** **

**(6)   RelatedParty Transactions**

** **

The Longview, Texasrestaurant, which was acquired by the Company in connection with the completionof the initial public offering, leases the land and restaurant building from anentity controlled by Steven L. Ortiz, the Company’s Chief Operating Officer.The lease term is 15 years and will terminate in November 2014. Thelease can be renewed for two additional terms of five years each. Rent isapproximately $16,000 per month and will increase by 5% on the11th anniversary date of the lease. The lease can be terminated if thetenant fails to pay the rent on a timely basis, fails to maintain the insurancespecified in the lease, fails to maintain the building or property or becomesinsolvent. Total rent payments were approximately $50,000 for each of the 13week periods ended June 24, 2008 and June 26, 2007.  For the 26 weeks ended June 24, 2008 andJune 26, 2007, rent payments were $0.1 million.

 

The Bossier City,Louisiana restaurant, of which Steven L. Ortiz, the Company’s Chief OperatingOfficer, beneficially owns 66.0% and the Company owns 5.0%, leases the land andbuilding from an entity owned by Mr. Ortiz.  The lease term is 15 years and will terminateon March 31, 2020.  The lease can berenewed for three additional terms of five years each.  Rent is approximately $15,000 per month forthe first five years of the lease and escalates 10% each five year period duringthe term.  The lease can be terminated ifthe tenant fails to pay rent on a timely basis, fails to maintain insurance,abandons the property or becomes insolvent. Total rent payments were approximately $45,000 for each of the 13 weekperiods ended June 24, 2008 and June 26, 2007.   For the 26 weeks ended June 24, 2008and June 26, 2007, rent payments were $0.1 million.

 

 The Company had 14franchise and license restaurants owned, in whole or part, by certain officers,directors or 5% shareholders of the Company at June 24, 2008 and June 26,2007. These entities paid the Company fees of approximately $0.5 million duringeach of the 13 week periods ended June 24, 2008 and June 26, 2007,respectively.  For the 26 weeks ended June 24,2008 and June 26, 2007, these entities paid the Company fees ofapproximately $1.1 million.  As disclosedin note 5, the Company is contingently liable on leases which are related tothree of these restaurants.

 

From 2000 to December 2007,the Company employed Juli Miller Hart, who, during 2007, was the wife of G.J.Hart, the Company’s President and Chief Executive Officer. Ms. Hart didnot report to Mr. Hart.  In December 2007,Ms. Hart’s status changed from employee to consultant.

 

**(7)   EarningsPer Share**

** **

The share and net incomeper share data for all periods presented are based on the historicalweighted-average shares outstanding.  The diluted earnings per sharecalculations show the effect of the weighted-average stock options, RSUs andrestricted stock awards outstanding from the Plan.  For the 13 and 26 weeks ended June 24,2008, options to purchase 3,228,176 and 3,194,376 shares of common stock,respectively, were outstanding, but not included in the computation of dilutedearnings per share because their inclusion would have had an anti-dilutiveeffect.  For the 13 and 26 weeks ended June 26,2007, options to purchase 2,005,858 and 2,045,858 shares of common stock,respectively, were outstanding, but not included in the computation of dilutedearnings per share because their inclusion would have had an anti-dilutiveeffect

 

The following table setsforth the calculation of weighted-average shares outstanding as presented inthe accompanying condensed consolidated statements of income:

 
| ** **                                             | ** ** | **13 Weeks Ended** | ** ** | **26 Weeks Ended** | ** ** |
|--------------------------------------------------------|------------|------------------------------|------------|------------------------------|------------|
| ** **                                             | ** ** | **June 24, 2008**  | ** ** | **June 26, 2007**  | ** ** | **June 24, 2008** | ** ** | **June 26, 2007** | ** ** |
| Net income                                             |       | $                            | 10,472     |                         | $          | 9,257 |   | $ | 23,385 |   | $ | 21,553 |   |
|                                                   |       |                         |       |                         |       |   |   |   |   |
| Basic EPS:                                             |       |                         |       |                         |       |   |   |   |   |
| Weighted-average  common shares outstanding            |       | 74,252                       |       | 74,613                       |       | 74,498 |   | 74,500 |   |
|                                                   |       |                         |       |                         |       |   |   |   |   |
| Basic EPS                                              |       | $                            | 0.14       |                         | $          | 0.12 |   | $ | 0.31 |   | $ | 0.29 |   |
|                                                   |       |                         |       |                         |       |   |   |   |   |
| Diluted EPS:                                           |       |                         |       |                         |       |   |   |   |   |
| Weighted-average  common shares outstanding            |       | 74,252                       |       | 74,613                       |       | 74,498 |   | 74,500 |   |
| Dilutive effect  of stock options and restricted stock |       | 1,744                        |       | 2,299                        |       | 1,722 |   | 2,379 |   |
| Shares – diluted                                  |       | 75,996                       |       | 76,912                       |       | 76,220 |   | 76,879 |   |
|                                                   |       |                         |       |                         |       |   |   |   |   |
| Diluted EPS                                            |       | $                            | 0.14       |                         | $          | 0.12 |   | $ | 0.31 |   | $ | 0.28 |   |

 

10

----

Table of Contents

** **

**(8)           Acquisitions**

** **

On March 26, 2008,the first day of the Company’s second fiscal quarter, the Company completed theacquisitions of three restaurants located in Kentucky and Missouri.  Pursuant to the terms of the acquisitionagreements, the Company paid an aggregate purchase price of approximately $8.7million.  These acquisitions areconsistent with the Company’s long-term strategy to increase net income andearnings per share.

 

These transactions wereaccounted for using the purchase method as defined in SFAS No. 141, *Business Combinations*. Based on a purchase price of $8.4 million, including approximately $0.1million of direct acquisition costs and net of the $0.3 million of cashacquired and the $35,000 charge related to Emerging Issues Task Force (“EITF”)Issue No. 04-1, *Accounting for PreexistingRelationships between the Parties to a Business Combination* (“EITF04-1”), and the Company’s estimates of the fair value of net assets acquired,$6.5 million of goodwill was generated by the acquisitions, which is notamortizable for book purposes, but is deductible for tax purposes.

 

The purchase price hasbeen preliminarily allocated as follows:

 
| Current assets               |   | $      | 84     |   |
|------------------------------|--------|--------|--------|--------|
| Property and  equipment, net |   | 867    |   |
| Goodwill                     |   | 6,502  |   |
| Intangible asset             |   | 1,579  |   |
| Current  liabilities         |   | (675   | )      |
|                         |   |   |   |
|                         |   | $      | 8,357  |   |

 

If the acquisitions hadbeen completed as of the beginning of the year ended December 25, 2007,pro forma revenue, net income and earnings per share would have been asfollows:

 
| ** **  | ** ** | **13 Weeks Ended** | ** ** | **26 Weeks Ended** | ** ** |
|-------------|------------|------------------------------|------------|------------------------------|------------|
| ** **  | ** ** | **June 24, 2008**  | ** ** | **June 26, 2007**  | ** ** | **June 24, 2008** | ** ** | **June 26, 2007** | ** ** |
|        |       |                         |       |                         |       |   |   |   |   |
| Revenue     |       | $                            | 217,311    |                         | $          | 184,165 |   | $ | 431,838 |   | $ | 365,782 |   |
| Net income  |       | $                            | 10,472     |                         | $          | 9,391 |   | $ | 23,506 |   | $ | 21,820 |   |
| Basic EPS   |       | $                            | 0.14       |                         | $          | 0.13 |   | $ | 0.31 |   | $ | 0.29 |   |
| Diluted EPS |       | $                            | 0.14       |                         | $          | 0.12 |   | $ | 0.31 |   | $ | 0.28 |   |

 

As a result of theseacquisitions, the Company incurred a charge of $35,000 and recorded anintangible asset relating to certain reacquired franchise rights of $1.6million in accordance with EITF 04-1.  EITF04-1 requires that a business combination between two parties that have apreexisting relationship be evaluated to determine if a settlement of apreexisting relationship exists. EITF 04-1 also requires that certainreacquired rights (including the rights to the acquirer’s trade name under afranchise agreement) be recognized as intangible assets apart from goodwill.However, if a contract giving rise to the reacquired rights includes terms thatare favorable or unfavorable when compared to pricing for current markettransactions for the same or similar items, EITF 04-1 requires that asettlement gain or loss should be measured as the lesser of (i) the amountby which the contract is favorable or unfavorable under market terms from theperspective of the acquirer or (ii) the stated settlement provisions ofthe contract available to the counterparty to which the contract isunfavorable.

 

The intangible asset of$1.6 million has a weighted-average life of approximately 13 years.  When calculating this intangible asset, theCompany considered the remaining term of the existing franchise agreementsincluding renewals.  The remaining termsranged from ten to 16 years.  The Companyrecorded amortization expense relating to the intangible asset of approximately$31,000 for the 13 weeks ended June 24, 2008.  The Company expects the annual expense foreach of the next five years to be $0.1 million.

 

On June 27, 2007,the first day of the Company’s third fiscal quarter, the Company completed theacquisitions of nine restaurants located in Indiana, Kentucky andMissouri.  Pursuant to the terms of theacquisition agreements, the Company paid an aggregate purchase price ofapproximately $22.9 million.  Inconjunction with these acquisitions, the Company acquired land and buildingsleased by seven of the nine franchisees from parties related to thosefranchisees for an aggregate purchase price of approximately $12.1million.  These acquisitions areconsistent with the Company’s long-term strategy to increase net income andearnings per share.

 

These transactions wereaccounted for using the purchase method as defined in SFAS No. 141, *Business Combinations*. Based on a purchase price of $33.1 million, including $0.2 million ofdirect acquisition costs and net of the $1.6 million of cash acquired and the$0.5 million charge related to EITF 04-1 and the Company’s estimates of thefair value of net assets acquired, $15.0 million of goodwill was generated bythe acquisitions, which is not amortizable for book purposes, but is deductiblefor tax purposes.

 

11

----

Table of Contents

 

The purchase price hasbeen allocated as follows:

 
| Current assets               |   | $      | 427    |   |
|------------------------------|--------|--------|--------|--------|
| Property and  equipment, net |   | 15,629 |   |
| Goodwill                     |   | 15,026 |   |
| Intangible asset             |   | 4,064  |   |
| Other assets                 |   | 12     |   |
| Current  liabilities         |   | (2,078 | )      |
| Other  liabilities           |   | (18    | )      |
|                         |   |   |   |
|                         |   | $      | 33,062 |   |

 

If the acquisitions hadbeen completed as of the beginning of the year ended December 25, 2007,pro forma revenue, net income and earnings per share would have been asfollows:

 
| ** **  | ** ** | **13 Weeks Ended** | ** ** | **26 Weeks Ended** | ** ** |
|-------------|------------|------------------------------|------------|------------------------------|------------|
| ** **  | ** ** | **June 26, 2007**  | ** ** | **June 26, 2007**  | ** ** |
|        |       |                         |       |                         |       |
| Revenue     |       | $                            | 189,283    |                         | $          | 376,312 |   |
| Net income  |       | $                            | 9,506      |                         | $          | 22,118 |   |
| Basic EPS   |       | $                            | 0.13       |                         | $          | 0.30 |   |
| Diluted EPS |       | $                            | 0.12       |                         | $          | 0.29 |   |

 

As a result of theseacquisitions, the Company incurred a charge of $0.5 million and recorded anintangible asset relating to certain reacquired franchise rights of $4.1million in accordance with EITF 04-1.

 

The intangible asset of$4.1 million has a weighted-average life of approximately 13 years.  When calculating this intangible asset, theCompany considered the remaining term of the existing franchise agreements includingrenewals.  The remaining terms rangedfrom nine to 18 years.  The Companyrecorded amortization expense relating to the intangible asset of approximately$0.1 million and $0.2 million for the 13 and 26 weeks ended June 24, 2008,respectively.  The Company expects theannual expense for each of the next five years to be $0.3 million.

 

**(9)  Income Taxes**

** **

In June 2006, FASBInterpretation No. 48, *Accounting for Uncertaintyin Income Taxes – an Interpretation of FAS 109* (“FIN 48”), wasissued.  FIN 48 clarifies the accountingfor uncertainty in income taxes recognized in an entity’s financial statementsin accordance with FASB Statement No. 109, *Accountingfor Income Taxes.*  FIN 48prescribes a recognition threshold and measurement attribute for the financialstatement recognition and measurement of a tax position taken or expected to betaken in a tax return.  The Companyadopted the provisions of FIN 48 on December 27, 2006, the first day ofthe Company’s 2007 fiscal year.

 

The adoption of FIN 48 onDecember 27, 2006 did not result in any change to the Company’sunrecognized tax benefits.  The Company’sgross unrecognized tax benefits were $0.7 million at June 24, 2008 and December 25,2007.  In addition, activity related tothe Company’s unrecognized tax benefits was not material during the 26 weeksended June 24, 2008.  The Company,consistent with its existing policy, recognizes both interest and penalties onrecognized tax benefits as part of income tax expense.  As of June 24, 2008 and December 25,2007, the total amount of accrued penalties and interest was $0.2 million.  Included in the balance of total unrecognizedtax benefits at June 24, 2008 are potential benefits of $0.1 million,which, if recognized, would affect the effective tax rate on income beforetaxes.

 

All entities for whichunrecognized tax benefits exist as of June 24, 2008 possess a December taxyear-end.  As a result, as of June 24,2008, the tax years ended December 28, 2004, December 27, 2005, December 26,2006 and December 25, 2007 remain subject to examination by taxjurisdictions.  As of June 24, 2008,no audits were in process by a tax jurisdiction that, if completed during thenext 12 months, would be expected to result in a material change to the Company’sunrecognized tax benefits.  Additionally,as of June 24, 2008, no event occurred that is likely to result in asignificant increase or decrease in the unrecognized tax benefits through December 30,2008.

 

12

----

Table of Contents

 

**(10) Fair Value Measurement**

 

On December 26,2007, the Company adopted SFAS No. 157, which defines fair value,establishes a framework for using fair value to measure assets and liabilities,and expands disclosures about fair value measurements.  SFAS 157 applies whenever other statementsrequire or permit assets or liabilities to be measured at fair value.

 

As of June 24, 2008,the Company’s financial assets and financial liabilities that are measured atfair value on a recurring basis are comprised of the Second Amended andRestated Deferred Compensation Plan of Texas Roadhouse Management Corp., asamended, (the “Deferred Compensation Plan”). The Deferred Compensation Plan is a nonqualified deferred compensationplan which allows highly compensated employees to defer receipt of a portion oftheir compensation and contribute such amounts to one or more investment fundsheld in a rabbi trust. The Company reports the accounts of the rabbi trust inits condensed consolidated financial statements. At June 24, 2008,investments totaling $2.0 million are included within other assets andoffsetting obligations of $1.9 million are included within other liabilities onthe condensed consolidated balance sheet. These investments are consideredtrading securities and are reported at fair value based on third-party brokerstatements which represents level 2 in the SFAS 157 fair value hierarchy. Therealized and unrealized holding gains and losses related to these investments,as well as the offsetting compensation expense, is recorded in general andadministrative expense on the condensed consolidated statements of income.

 

**(11)  Stock Repurchase Program**

 

On February 14,2008, the Company’s Board of Directors approved a stock repurchase programunder which it authorized the Company to repurchase up to $25.0 million of its Class Acommon stock.  Under this program, theCompany may repurchase outstanding shares of its Class A common stock fromtime to time in open market transactions during the two-year period ending February 14,2010.  The timing and the amount of anyrepurchases will be determined by management of the Company under parametersestablished by its Board of Directors, based on its evaluation of the Company’sstock price, market conditions and other corporate considerations.  See note 12.

 

For the 13 weeks ended June 24,2008, the Company paid approximately $10.2 million to repurchase 1,094,300shares at an average price of $9.29 per share.  For the 26 weeks ended June 24, 2008, the Company paidapproximately $15.1 million to repurchase 1,624,200 shares at an average priceof $9.27 per share.

 

**(12)  Subsequent Events**

** **

On July 8, 2008, theCompany’s Board of Directors approved a $50.0 million increase in the Company’sstock repurchase program.  The Company’stotal stock repurchase authorization increased to $75.0 million.

 

Effective July 23,2008, the Company completed the acquisitions of nine franchise restaurantslocated in Tennessee.  Pursuant to theterms of the acquisition agreements, the Company paid an aggregate purchaseprice of approximately $10.6 million. The Company expects to complete its purchase price allocation related tothis transaction in the third quarter of 2009.

 

13

----

Tableof Contents

 

**ITEM2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS**

** **

**OVERVIEW**

** **

Texas Roadhouse is agrowing, moderately priced, full-service restaurant chain. Our founder andchairman, W. Kent Taylor, started the business in 1993. Our mission statementis “Legendary Food, Legendary Service®.” Our operating strategy is designed to position each of ourrestaurants as the local hometown destination for a broad segment of consumersseeking high quality, affordable meals served with friendly, attentive service.As of June 24, 2008, there were 300 Texas Roadhouse restaurants operatingin 44 states, including:

 

·  222“company restaurants,” of which 213 were wholly-owned and nine weremajority-owned.  The results of operations of company restaurants areincluded in our condensed consolidated statements of income. The portion ofincome attributable to minority interests in company restaurants that are notwholly-owned is reflected in the line item entitled “Minority interest” in ourcondensed consolidated statements of income.

 

· 78“franchise restaurants,” of which 75 were franchise restaurants and three werelicense restaurants. We have a 5.0% to 10.0% ownership interest in 18 franchiserestaurants.  The income derived from ourminority interests in these franchise restaurants is reported in the line itementitled “Equity income from investments in unconsolidated affiliates” inour condensed consolidated statements of income. Additionally, we providevarious management services to these franchise restaurants, as well as fouradditional franchise restaurants in which we have no ownership interest.

 

We have contractualarrangements which grant us the right to acquire at pre-determined valuationformulas (i) the remaining equity interests in seven of the ninemajority-owned company restaurants, and (ii) 65 of the franchiserestaurants.

 

**Presentationof Financial and Operating Data**

** **

Throughout this report,the 13 weeks ended June 24, 2008 and June 26, 2007 are referred to asQ2 2008 and Q2 2007, respectively, and the 26 weeks ended June 24, 2008and June 26, 2007 are referred to as 2008 YTD and 2007 YTD, respectively.

 

**Long-termStrategies to Grow Earnings Per Share**

** **

Our long-term strategieswith respect to increasing net income and earnings per share include thefollowing:

 

*ExpandingOur Restaurant Base.*   We will continue toevaluate opportunities to develop Texas Roadhouse restaurants in existing andnew domestic and international markets. We will remain focused primarily onmid-sized markets where we believe a significant demand for our restaurantsexists because of population size, income levels and the presence of shoppingand entertainment centers and a significant employment base.

 

We may, at ourdiscretion, add franchise restaurants, domestically and/or internationally,primarily with franchisees who have demonstrated prior success with the TexasRoadhouse or other restaurant concepts and in markets in which the franchiseedemonstrates superior knowledge of the demographics and restaurant operatingconditions.  We may also look to acquirefranchise restaurants under terms favorable to us and our stockholders.  Additionally, from time to time, we mayevaluate potential mergers, acquisitions, joint ventures or other strategicinitiatives to acquire or develop additional concepts.

 

*Maintainingand/or Improving Restaurant Level Profitability.*   Weplan to maintain, or possibly increase, restaurant level profitability througha combination of increased comparable restaurant sales and operating costmanagement.

 

*LeveragingOur Scalable Infrastructure.*   Over the pastseveral years, we have made significant investments in our infrastructure,including information systems, real estate, human resources, legal, marketingand operations. As a result, we believe that our general and administrativecosts will increase at a slower growth rate than our revenue.

 

*StockRepurchase Program. *Wecontinue to look at opportunities to repurchase our Class A common stockat favorable market prices under our stock repurchase program.  Currently, our Board of Directors hasauthorized us to repurchase up to $75.0 million of our Class A commonstock.

 

**KeyMeasures We Use to Evaluate Our Company**

** **

Key measures we use toevaluate and assess our business include the following:

 

*Numberof Restaurant Openings.*   Number of restaurantopenings reflects the number of restaurants opened during a particular fiscalperiod. For company restaurant openings we incur pre-opening costs, which aredefined below, before the restaurant opens. 

 

14

----

Table of Contents

 

Typically new restaurantsopen with an initial start-up period of higher than normalized sales volumes,which decrease to a steady level approximately three to six months afteropening. However, although sales volumes are generally higher, so are initialcosts, resulting in restaurant operating margins that are generally lowerduring the start-up period of operation and increase to a steady levelapproximately three to six months after opening.

 

*ComparableRestaurant Sales Growth. *  Comparablerestaurant sales growth reflects the change in year-over-year sales for allcompany restaurants for the comparable restaurant base. We define thecomparable restaurant base to include those restaurants open for a full 18months before the beginning of the later fiscal period excluding restaurantsclosed during the period. Comparable restaurant sales growth can be generatedby an increase in guest traffic counts or by increases in the per personaverage check amount. Menu price changes and the mix of menu items sold canaffect the per person average check amount.

 

*AverageUnit Volume.*   Average unit volume representsthe average annual restaurant sales for all company restaurants open for a fullsix months before the beginning of the period measured. Average unitvolume excludes sales on restaurants closed during the period.  Growth in average unit volumes in excess ofcomparable restaurant sales growth is generally an indication that newerrestaurants are operating with sales levels in excess of the company average.Conversely, growth in average unit volumes less than growth in comparablerestaurant sales growth is generally an indication that newer restaurants areoperating with sales levels lower than the system average.

 

*StoreWeeks.*   Store weeks represent the number ofweeks that our company restaurants were open during the reporting period.

 

**OtherKey Definitions**

** **

*RestaurantSales.*   Restaurant sales include gross foodand beverage sales, net of promotions and discounts.

 

*FranchiseRoyalties and Fees.*   Franchisees typically paya $40,000 initial franchise fee for each new restaurant and a franchise renewalfee equal to the greater of 30% of the then-current initial franchise fee or$10,000 to $15,000. Franchise royalties consist of royalties in the amount of2.0% to 4.0% of gross sales paid to us by our franchisees.

 

*RestaurantCost of Sales.*   Restaurant cost of salesconsists of food and beverage costs.

 

*RestaurantLabor Expenses.*   Restaurant labor expensesinclude all direct and indirect labor costs incurred in operations except forprofit sharing incentive compensation expenses earned by our managing partnersand market partners. These profit sharing expenses are reflected in restaurantother operating expenses.  Restaurantlabor expenses also include share-based compensation expense related torestaurant-level employees.

 

*RestaurantRent Expense.*   Restaurant rent expenseincludes all rent associated with the leasing of real estate and includes base,percentage and straight-line rent expense.

 

*RestaurantOther Operating Expenses.*   Restaurant otheroperating expenses consist of all other restaurant-level operating costs, themajor components of which are utilities, supplies, advertising, repair andmaintenance, property taxes, credit card fees and general liability insurance.Profit sharing allocations to managing partners and market partners are alsoincluded in restaurant other operating expenses.

 

*Pre-openingExpenses.*   Pre-opening expenses, which arecharged to operations as incurred, consist of expenses incurred before theopening of a new restaurant and are comprised principally of opening team andtraining salaries, travel expenses, rent, and food, beverage and other initialsupplies and expenses.

 

*Depreciationand Amortization Expenses.*   Depreciation andamortization expenses (“D&A”) includes the depreciation of fixed assets andamortization of intangibles with definite lives.

 

* Impairment and closure costs. *Impairment and closure costs include any impairment of long-livedassets associated with restaurants where the carrying amount of the asset isnot recoverable and exceeds the fair value of the asset and expenses associatedwith the closure of a restaurant.

 

*Generaland Administrative Expenses.*   General andadministrative expenses (“G&A”) are comprised of expenses associated withcorporate and administrative functions that support development and restaurantoperations and provide an infrastructure to support future growth.   Supervision and accounting fees receivedfrom certain franchise restaurants and license restaurants are offset againstG&A.  G&A also includesshare-based compensation expense related to executive officers, support centeremployees and market partners.

 

*InterestExpense, Net.*   Interest expense includes thecost of our debt obligations including the amortization of loan fees, reducedby interest income and capitalized interest. Interest income includes earnings on cash and cash equivalents.

 

15

----

Table of Contents

* *

*MinorityInterest.*   Minority interest represents theportion of income attributable to the other owners of the majority-owned orcontrolled restaurants.  Our consolidatedsubsidiaries at June 24, 2008 included ten majority-owned restaurants,nine of which were open and one of which was under construction.  Ourconsolidated subsidiaries at June 26, 2007 included ten majority-ownedrestaurants, five of which were open.

 

*EquityIncome from Unconsolidated Affiliates.*   Weown a 5.0% to 10.0% equity interest in 18 franchise restaurants. Equity incomefrom unconsolidated affiliates represents our percentage share of net incomeearned by these unconsolidated affiliates.

 

**Resultsof Operations**

 
| ** **                                                   | ** ** | **13 Weeks Ended** | ** ** | **26 Weeks Ended** | ** ** |
|--------------------------------------------------------------|------------|------------------------------|------------|------------------------------|------------|
| ** **                                                   | ** ** | **June 24, 2008**  | ** ** | **June 26, 2007**  | ** ** | **June 24, 2008** | ** ** | **June 26, 2007** | ** ** |
| **($ in thousands)**                               | ** ** | **$**                        | ** ** | **%**                        | ** ** | **$** | ** ** | **%** | ** ** | **$** | ** ** | **%** | ** ** | **$** | ** ** | **%** | ** ** |
|                                                         |       |                         |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Revenue:                                                     |       |                         |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Restaurant sales                                             |       | 214,787                      |       | 98.8                         |       | 178,129 |   | 98.4 |   | 423,388 |   | 98.8 |   | 353,573 |   | 98.4 |   |
| Franchise  royalties and fees                                |       | 2,524                        |       | 1.2                          |       | 2,857 |   | 1.6 |   | 5,136 |   | 1.2 |   | 5,750 |   | 1.6 |   |
|                                                         |       |                         |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Total revenue                                                |       | 217,311                      |       | 100.0                        |       | 180,986 |   | 100.0 |   | 428,524 |   | 100.0 |   | 359,323 |   | 100.0 |   |
|                                                         |       |                         |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Costs and  expenses:                                         |       |                         |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |
| *(As a  percentage of restaurant sales)*                     |       |                         |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Restaurant  operating costs:                                 |       |                         |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Cost of sales                                                |       | 74,774                       |       | 34.8                         |       | 62,250 |   | 34.9 |   | 148,360 |   | 35.0 |   | 123,347 |   | 34.9 |   |
| Labor                                                        |       | 61,804                       |       | 28.8                         |       | 50,282 |   | 28.2 |   | 120,246 |   | 28.4 |   | 98,579 |   | 27.9 |   |
| Rent                                                         |       | 3,601                        |       | 1.7                          |       | 2,846 |   | 1.6 |   | 6,890 |   | 1.6 |   | 5,631 |   | 1.6 |   |
| Other operating                                              |       | 35,346                       |       | 16.5                         |       | 28,774 |   | 16.2 |   | 68,596 |   | 16.2 |   | 56,667 |   | 16.0 |   |
| *(As a  percentage of total revenue)*                        |       |                         |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Pre-opening                                                  |       | 3,212                        |       | 1.5                          |       | 3,102 |   | 1.7 |   | 6,038 |   | 1.4 |   | 6,685 |   | 1.9 |   |
| Depreciation and  amortization                               |       | 9,066                        |       | 4.2                          |       | 7,230 |   | 4.0 |   | 17,612 |   | 4.1 |   | 13,875 |   | 3.9 |   |
| Impairment and  closure                                      |       | 31                           |       | NM                           |       | — |   | — |   | 734 |   | 0.2 |   | — |   | — |   |
| General and  administrative                                  |       | 12,437                       |       | 5.7                          |       | 11,600 |   | 6.4 |   | 22,308 |   | 5.2 |   | 19,937 |   | 5.5 |   |
|                                                         |       |                         |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Total costs and  expenses                                    |       | 200,271                      |       | 92.2                         |       | 166,084 |   | 91.8 |   | 390,784 |   | 91.2 |   | 324,721 |   | 90.4 |   |
| Income from  operations                                      |       | 17,040                       |       | 7.8                          |       | 14,902 |   | 8.2 |   | 37,740 |   | 8.8 |   | 34,602 |   | 9.6 |   |
| Interest  expense, net                                       |       | 720                          |       | 0.3                          |       | 361 |   | 0.2 |   | 1,362 |   | 0.3 |   | 597 |   | 0.2 |   |
| Minority  interest                                           |       | 279                          |       | 0.1                          |       | 230 |   | 0.1 |   | 540 |   | 0.1 |   | 519 |   | 0.1 |   |
| Equity income  from investments in unconsolidated affiliates |       | 70                           |       | NM                           |       | 93 |   | 0.1 |   | 139 |   | NM |   | 190 |   | 0.1 |   |
|                                                         |       |                         |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Income before  taxes                                         |       | 16,111                       |       | 7.4                          |       | 14,404 |   | 8.0 |   | 35,977 |   | 8.4 |   | 33,676 |   | 9.4 |   |
| Provision for  income taxes                                  |       | 5,639                        |       | 2.6                          |       | 5,147 |   | 2.8 |   | 12,592 |   | 2.9 |   | 12,123 |   | 3.4 |   |
| Net income                                                   |       | 10,472                       |       | 4.8                          |       | 9,257 |   | 5.2 |   | 23,385 |   | 5.5 |   | 21,553 |   | 6.0 |   |

 

NM – Not meaningful

 

**RestaurantUnit Activity**

 
| ** **                         | ** ** | **Company** | ** ** | **Franchise** | ** ** | **Total** | ** ** |
|------------------------------------|------------|-------------|------------|---------------|------------|-----------|------------|
| Balance at  December 25, 2007 |       | 204         |       | 81            |       | 285       |       |
| Openings                           |       | 16          |       | —        |       | 16        |       |
| Acquisitions  (Dispositions)       |       | 3           |       | (3            | )          | —    |       |
| Closures                           |       | (1          | )          | —        |       | (1        | )          |
|                               |       |        |       |          |       |      |       |
| Balance at  June 24, 2008     |       | 222         |       | 78            |       | 300       |       |

 

16

----

Table of Contents

 

**Q2 2008 (13 weeks) Comparedto Q2 2007 (13 weeks) and 2008 YTD (26 weeks) Compared to 2007 YTD (26 weeks)**

 

*RestaurantSales.*   Restaurantsales increased by 20.6% in Q2 2008 as compared to Q2 2007 and by 19.7% in 2008YTD as compared to 2007 YTD.  Theseincreases were primarily attributable to the opening of new restaurants and theacquisitions of franchise restaurants, partially offset by a decrease incomparable restaurant sales and average unit volumes.

 

The following tablesummarizes certain key drivers and/or attributes of restaurant sales at companyrestaurants for the periods.

 
| ** **                          | ** ** | **Q2 2008** | ** ** | **Q2 2007** | ** ** | **2008 YTD** | ** ** | **2007 YTD** | ** ** |
|-------------------------------------|------------|------------------|------------|------------------|------------|-------------------|------------|-------------------|------------|
|                                |       |             |       |             |       |              |       |              |       |
| Store weeks                         |       | 2,805            |       | 2,278            |       | 5,472             |       | 4,439             |       |
| Comparable  restaurant sales growth |       | (0.3             | )%         | 1.9              | %          | (0.7              | )%         | 1.5               | %          |
| Average unit  volume (in thousands) |       | $                | 995        |             | $          | 1,012             |       | $                 | 2,017      |   | $ | 2,063 |   |
|                                     |            |                  |            |                  |            |                   |            |                   |            |  |  |  |  |

 

Theamounts in the table above include the impact of increased menu pricing ofapproximately 1.5% implemented in May and June 2008 and 1.1%implemented during January and February 2008 in response to continuedinflationary pressures.  We will continueto evaluate the need for and test further menu price increases as we assess thecurrent inflationary environment.

 

Onthe first day of Q2 2008, we acquired three franchise restaurants.  On an on-going annual basis, we estimatethese acquisitions will be accretive to diluted earnings per share byapproximately $0.005.  In both Q2 2008and 2008 YTD, restaurant sales included $3.3 million from the three acquiredfranchise restaurants.  On June 27,2007, we acquired nine franchise restaurants. On an on-going annual basis, we estimate these acquisitions will beaccretive to diluted earnings per share by approximately $0.015.  In Q2 2008 and 2008 YTD, restaurant salesincluded $8.6 million and $17.6 million, respectively, from the nine acquiredfranchise restaurants.  For comparativepurposes, average unit volume for Q2 2007 and 2007 YTD was adjusted to reflectrestaurant sales of these acquired franchise restaurants as part ofcompany-owned restaurants average unit volume.

 

Subsequentto Q2 2008, we acquired nine franchise restaurants.  On a 12-month basis, the acquisitions areexpected to add approximately $31.0 million of net revenue and approximately$0.003 per diluted share to earnings.

 

*FranchiseRoyalties and Fees.*   Franchiseroyalties and fees decreased by $0.3 million, or by 11.7%, in Q2 2008 from Q22007 and by $0.6 million, or by 10.7%, in 2008 YTD from 2007 YTD.  These decreases were primarily attributableto the loss of royalties associated with the nine franchise restaurantsacquired at the beginning of the third quarter of fiscal 2007 and the threefranchise restaurants acquired at the beginning of the second quarter of fiscal2008 and a decrease in comparable restaurant sales, partially offset byincreasing royalty rates in conjunction with the renewal of certain franchiseagreements.  The acquired franchiserestaurants generated approximately $0.4 million and $0.8 million in franchiseroyalties in Q2 2007 and 2007 YTD, respectively.  Franchise comparable restaurant salesdecreased 2.3% in Q2 2008.  Franchiserestaurant count activity is shown in the restaurant unit activity table above.

 

*RestaurantCost of Sales.*   Restaurantcost of sales, as a percentage of restaurant sales, decreased to 34.8% in Q22008 from       34.9% in Q2 2007 andincreased to 35.0% in 2008 YTD from 34.9% in 2007 YTD.  The decrease in Q2 2008 was primarilyattributable to the benefit of floating contracts on various beef products andmenu price increases discussed above, offset by higher commodity costs on fooditems, such as wheat and oil-based ingredients, and dairy costs.  For 2008 YTD, the benefit of floatingcontracts on various beef products and menu price increases were more thanoffset by higher commodity costs on food items, such as bread mix, shortening,oil-based ingredients and dairy costs. Through 2008 YTD, we held fixed price contracts for approximately 75% ofour beef product volume with the remainder subject to fluctuating marketprices.  Subsequent to the end of Q22008, we entered into fixed contracts for the portion of our beef productvolume that had been subject to fluctuating market prices.  Currently, we have fixed price contracts for100% of our beef product volume for 2008. For 2008, we remain subject to fluctuating market pricing forcommodities representing approximately 20% of our overall restaurant cost of sales.

 

*RestaurantLabor Expenses.*   Restaurantlabor expenses, as a percentage of restaurant sales, increased to 28.8% in Q22008 from 28.2% in Q2 2007 and to 28.4% in 2008 YTD from 27.9% in 2007YTD.  These increases were primarilyattributable to higher labor costs associated with restaurants opened in 2008YTD and the latter part of fiscal 2007 and higher average wage rates combinedwith negative average unit volume growth, partially offset by menu priceincreases discussed above.  We generallyincur higher labor costs, as a percentage of restaurant sales, during the firstfew months after the opening of a new restaurant.   Higher average hourly wage rates resultedfrom several state-mandated increases in minimum and tip wage rates throughout2007.  We anticipate our labor costs willcontinue to be pressured by inflation, which is primarily caused by federal-and state-mandated increases in minimum and tip wages rates.  These increases may or may not be offset byadditional menu price adjustments.

 

*RestaurantRent Expense.*   Restaurantrent expense, as a percentage of restaurant sales, increased to 1.7% in Q2 2008from 1.6% in Q2 2007 and was flat at 1.6% from 2008 YTD to 2007 YTD.

 

17

----

Table of Contents

 

*RestaurantOther Operating Expenses**. ****** ***Restaurant other operating expenses, as a percentageof restaurant sales, increased to 16.5% in Q2 2008 from 16.2% in Q2 2007 and to16.2% in 2008 YTD from 16.0% in 2007 YTD. These increases were primarily attributable to higher utility costscombined with negative average unit volume growth, offset by lower credit cardcharges.  In addition, lower managingpartner and market partner bonuses, as a percentage of restaurant sales, furtheroffset the increase in 2008 YTD.

 

*RestaurantPre-opening Expenses.*   Pre-opening expenses increased to $3.2 millionin Q2 2008 from $3.1 million in Q2 2007 and decreased to $6.0 million 2008 YTDfrom $6.7 million 2007 YTD.   Theincrease in Q2 2008 was primarily due to more restaurants being opened in Q22008 compared to Q2 2007.  The decreasein 2008 YTD was primarily due to fewer restaurants being in the developmentpipeline in fiscal 2008 compared to fiscal 2007.  Pre-opening costs will fluctuate from periodto period based on the number and timing of restaurant openings and the numberand timing of restaurant managers hired.

 

*Depreciationand Amortization Expense.*   D&A, as a percentage of total revenue, increasedto 4.2% in Q2 2008 from 4.0% in Q2 2007 and to 4.1% 2008 YTD from 3.9% 2007YTD.  These increases were primarilyrelated to capital spending on new restaurants.

 

*Impairmentand Closure Expenses.*  Impairment and closure expensesincreased to $31,000 in Q2 2008 and $0.7 million in 2008 YTD.  These increases were due to lease reserve andother charges incurred in conjunction with the closure of a restaurant in thefirst quarter of fiscal 2008.  In thefourth quarter of fiscal 2007, an impairment charge was incurred relating tothis restaurant.  No impairment orclosure costs were incurred in Q2 2007.

 

*Generaland Administrative Expenses.*  G&A, as apercentage of total revenue, decreased to 5.7% in Q2 2008 from 6.4% in Q2 2007and 5.2% in 2008 YTD from 5.5% in 2007 YTD. These decreases were primarily due to lower costs associated with ourannual managing partner conference in Q2 2008 versus Q2 2007, offset by highershare-based compensation costs combined with negative average unit volumegrowth.  Annual costs associated with ourmanaging partner conference were approximately $1.0 million less in 2008 YTD ascompared to 2007 YTD as a result of a late change in the location of the 2007annual conference, which resulted in higher costs.  The higher share-based compensation costswere a result of the renewals of certain executive employment contracts at thebeginning of 2008.

 

*InterestExpense, Net.*   Interestexpense increased to $0.7 million in Q2 2008 from $0.4 million in Q2 2007 and$1.4 million in 2008 YTD from $0.6 million in 2007 YTD.  These increases were primarily due toincreased borrowings under our credit facility, partially offset by lowerinterest rates.  The increased borrowingswere primarily related to franchise restaurant acquisitions and stock repurchasesunder our stock repurchase program.

 

*IncomeTax Expense. * Weaccount for income taxes in accordance with Statement of Financial AccountingStandards  (“SFAS”) No. 109, *Accounting for Income Taxes. *Oureffective tax rate decreased to 35.0% in Q2 2008 from 35.7% in Q2 2007 and in2008 YTD to 35.0% from 36.0% in 2007 YTD. These decreases are primarily attributable to higher federal tax creditsearned.

 

**Liquidityand Capital Resources**

 

The following tablepresents a summary of our net cash provided by (used in) operating, investingand financing activities:

 
| ** **                                 | ** ** | **26 Weeks Ended** | ** ** |
|--------------------------------------------|------------|------------------------------|------------|
| ** **                                 | ** ** | **June 24, 2008**  | ** ** | **June 26, 2007** | ** ** |
| ** **                                 | ** ** | ** **                   | ** ** | ** ** | ** ** |
| Net cash  provided by operating activities |       | $                            | 42,732     |   | $ | 25,717 |   |
| Net cash used in  investing activities     |       | (60,549                      | )          | (48,431 | ) |
| Net cash  provided by financing activities |       | 13,324                       |       | 46,721 |   |
|                                       |       |                         |       |   |   |
| Net (decrease)  increase in cash           |       | $                            | (4,493     | ) | $ | 24,007 |   |

 

Net cash provided byoperating activities was $42.7 million in Q2 2008 compared to $25.7 million inQ2 2007.  This increase was primarily dueto an $8.7 million decrease in accounts receivable due to the timing of creditcard settlements as fiscal year 2007 ended on a bank holiday, higher net incomeand depreciation and increases in other working capital.  Our operations have not required significantworking capital and, like many restaurant companies, we have been able tooperate with negative working capital. Sales are primarily for cash, and restaurant operations do not requiresignificant inventories or receivables. In addition, we received trade credit for the purchase of food,beverages and supplies, thereby reducing the need for incremental workingcapital to support growth.

 

Net cash used ininvesting activities was $60.6 million in Q2 2008 compared to the $48.4 millionin Q2 2007.  This increase was primarilydue to the $8.7 million use of cash associated with the acquisitions of threefranchise restaurants in Q2 2008.

 

18

----

Table of Contents

 

We require capitalprincipally for the development of new company restaurants and therefurbishment of existing restaurants.  We either lease our restaurantsite locations under operating leases for periods of five to 30 years(including renewal periods) or purchase the land where it is cost effective. Asof June 24, 2008, there were 112 restaurants developed on land which weowned.

 

Our future capitalrequirements will primarily depend on the number of new restaurants we open andthe timing of those openings within a given fiscal year. These requirementswill include costs directly related to opening new restaurants and may alsoinclude costs necessary to ensure that our infrastructure is able to support alarger restaurant base. In fiscal 2008, we expect our capital expenditures tobe approximately $100.0 million to $110.0 million, excluding any cashused for franchise acquisitions, substantially all of which will relate toplanned restaurant openings. We continue to evaluate opportunities to acquirefranchise restaurants under terms which would create value for us and ourstockholders.  In accordance with thisstrategy, we completed the acquisitions of nine franchise restaurants for anaggregate purchase price of approximately $10.6 million during the thirdquarter of 2008.  See note 12 to thecondensed consolidated financial statements. We intend to satisfy our capital requirements over the next12 months with cash on hand, net cash provided by operating activities andfunds available under our credit facility.

 

Net cash provided byfinancing activities was $13.3 million in Q2 2008 as compared to $46.7 millionin Q2 2007.  This decrease was primarilydue to reduced borrowings under our credit facility and stock repurchases of$15.1 million in fiscal 2008.  The reducedborrowings under our credit facility are due to borrowings of $36.0 million inconjunction with the acquisitions of nine franchise restaurants in the thirdquarter of fiscal 2007 compared to borrowings of approximately $15.0 million inconjunction with stock repurchases in fiscal 2008 and $9.0 million inconjunction with the acquisitions of three franchise restaurants in Q22008.  On February 14, 2008, ourBoard of Directors approved a stock repurchase program to repurchase up to$25.0 million of Class A common stock. Under this program, we may repurchase outstanding shares from time totime in open market transactions during the two-year period ending February 14,2010.  On July 8, 2008, our Board ofDirectors approved a $50.0 million increase in the Company’s stock repurchaseprogram, thereby increasing the Company’s total stock repurchase authorizationto $75.0 million.  The timing and theamount of any repurchases will be determined by management under parametersestablished by our Board of Directors, based on its evaluation of our stockprice, market conditions and other corporate considerations.

 

In Q2 2008, we paiddistributions of $0.6 million to equity holders of nine of our majority-ownedcompany restaurants.  Currently, ourintent is to retain our future earnings, if any, primarily to finance thefuture development and operation of our business.

 

On May 31, 2007, weamended and restated our existing five-year revolving credit facility dated October 8,2004 with a syndicate of commercial lenders led by Bank of America, N.A., Bancof America Securities LLC and National City Bank. The facility was increasedfrom $150.0 million to $250.0 million and the term was extended to May 31,2012.  The terms of the facility requireus to pay interest on outstanding borrowings at LIBOR plus a margin of 0.50% to0.875% and to pay a commitment fee of 0.10% to 0.175% per year on any unusedportion of the facility, in both cases depending on our leverage ratio.   The weighted-average interest rate for therevolver at June 24, 2008 and December 25, 2007 was 3.06% and 5.73%,respectively.  The lenders’ obligation toextend credit under the facility depends on us maintaining certain financialcovenants, including a minimum consolidated fixed charge coverage ratio of 2.00to 1.00 and a maximum consolidated leverage ratio of 3.00 to 1.00.  The new credit facility permits us to incuradditional secured or unsecured indebtedness outside the facility, except forthe incurrence of secured indebtedness that in the aggregate exceeds 20% of ourconsolidated tangible net worth or circumstances where the incurrence ofsecured or unsecured indebtedness would prevent us from complying with ourfinancial covenants.  We were incompliance with all covenants as of June 24, 2008.

 

At June 24, 2008, wehad $91.0 million of outstanding borrowings under our credit facility and$155.8 million of availability net of $3.2 million of outstanding letters ofcredit.  In addition, we had various other notes payable totaling $2.3million with interest rates ranging from 4.35% to 10.80%.  Each of thesenotes related to the financing of specific restaurants. Our totalweighted-average effective interest rate at June 24, 2008 was 3.24%.

 

19

----

Table of Contents

 

**ContractualObligations**

 

The following tablesummarizes the amount of payments due under specified contractual obligationsas of June 24, 2008:

 
| ** **                         | ** ** | **Payments Due by Period** | ** ** |
|------------------------------------|------------|-------------------------------------------|------------|
| ** **                         | ** ** | **Total**                                 | ** ** | **Less than  1 year** | ** ** | **1-3  Years** | ** ** | **3-5  Years** | ** ** | **More than  5 years** | ** ** |
| ** **                         | ** ** | **(in thousands)**                   | ** ** |
| Long-term debt  obligations        |       | $                                         | 93,282     |   | $ | 175 |   | $ | 334 |   | $ | 91,412 |   | $ | 1,361 |   |
| Capital lease  obligations         |       | 546                                       |       | 61 |   | 144 |   | 179 |   | 162 |   |
| Interest (1)                       |       | 1,637                                     |       | 288 |   | 504 |   | 390 |   | 455 |   |
| Operating lease  obligations       |       | 150,249                                   |       | 14,397 |   | 28,693 |   | 28,481 |   | 78,678 |   |
| Capital  obligations               |       | 86,723                                    |       | 86,723 |   | — |   | — |   | — |   |
| Total  contractual obligations (2) |       | $                                         | 332,437    |   | $ | 101,644 |   | $ | 29,675 |   | $ | 120,462 |   | $ | 80,656 |   |

 

----

(1)         Assumes constant rate until maturity forour fixed and variable rate debt and capital lease obligations.

Uses interest rates as ofJune 24, 2008 for our variable rate debt. Interest payments on our variable-rate revolving credit facility havebeen excluded from the amounts shown above, primarily because the balanceoutstanding under our revolving credit facility, described further in note 3 ofthe condensed consolidated financial statements, can fluctuate daily.

(2)           This amount excludes $0.7 million ofunrecognized tax benefits under Financial Accounting Standards Board (“FASB”)Interpretation No. 48, *Accounting for Uncertaintyin Income Taxes – an Interpretation of FASB Statement No. 109* (“FIN48”).

 

The Company has nomaterial minimum purchase commitments with its vendors that extend beyond ayear.  See note 5 to the condensedconsolidated financial statements for details of contractual obligations.

 

**Off-BalanceSheet Arrangements**

 

Except for operatingleases (primarily restaurant leases), we do not have any off-balance sheetarrangements.

 

**Guarantees**

 

We entered into realestate lease agreements for franchise restaurants located in Everett, MA,Longmont, CO, Montgomeryville, PA and Fargo, ND prior to our granting franchiserights for those restaurants. We have subsequently assigned the leases to thefranchisees, but we remain contingently liable if a franchisee defaults underthe terms of a lease. The Longmont lease expires in May 2014, the Everettlease expires in February 2018, the Montgomeryville lease expires in June 2021and the Fargo lease expires in July 2016.

 

**Recently Issued AccountingStandards**

 

In September 2006,the FASB issued SFAS No. 157, *Fair Value Measurements*(“SFAS157”), which defines fair value, establishes a framework for measuring fairvalue and expands disclosures about fair value measurements.  The provisions of SFAS 157 for financialassets and liabilities, as well as any other assets and liabilities that arecarried at fair value on a recurring basis in financial statements areeffective for financial statements issued for fiscal years beginning after November 15,2007 (our fiscal year 2008).  FASB StaffPosition FAS 157-2, *Effective Date of FASBStatement No. 157,* delayed the effective date of SFAS 157 formost nonfinancial assets and nonfinancial liabilities until fiscal yearsbeginning after November 15, 2008 (our fiscal year 2009).  The implementation of SFAS 157 for financialassets and financial liabilities, effective December 26, 2007, did nothave a material impact on our consolidated financial position, results ofoperations or cash flows.  We arecurrently assessing the impact of SFAS 157 for nonfinancial assets andliabilities on our consolidated financial position, results of operations orcash flows.   See note 10 of thecondensed consolidated financial statements for additional fair valuediscussions.

 

In February 2007,the FASB issued SFAS No. 159, *The Fair Value Option forFinancial Assets and Financial Liabilities* (“SFAS 159”). SFAS 159permits entities to choose to measure selected financial assets and financialliabilities at fair value. Unrealized gains and losses on items for which thefair value option has been elected are reported in earnings at each subsequentreporting date. The provisions of SFAS 159 are effective as of the beginning ofour 2008 fiscal year.  The adoption ofSFAS 159 did not have a material impact on our consolidated financial position,results of operations or cash flows.

 

In December 2007,the FASB issued SFAS No. 141 (revised 2007), *BusinessCombinations* (“SFAS 141R”). SFAS 141R establishes the principles and requirements for how anacquirer: 1) recognizes and measures in its financial statements theidentifiable assets acquired, the liabilities assumed, and any noncontrolling interestin the acquiree; 2) recognizes and measures the goodwill

 

20

----

Table of Contents

 

acquired in the businesscombination or gain from a bargain purchase; and 3) determines what information to disclose to enable users of thefinancial statements to evaluate the nature and financial effects of thebusiness combination.  SFAS 141R is to beapplied prospectively to business combinations consummated on or after thebeginning of the first annual reporting period on or after December 15,2008 (our fiscal year 2009).  We arecurrently evaluating the impact SFAS 141R will have on any potential futurebusiness combinations.

 

In December 2007,the FASB issued SFAS No. 160, *Noncontrolling Interestsin Consolidated Financial Statements – an amendment of ARB No. 51*(“SFAS 160”).  SFAS 160 establishesaccounting and reporting standards that require noncontrolling interests to bereported as a component of equity, changes in a parent’s ownership interestwhile the parent retains its controlling interest be accounted for as equitytransactions, and any retained noncontrolling equity investment upon thedeconsolidation of a subsidiary be initially measured at fair value.  SFAS 160 is to be applied prospectively tobusiness combinations consummated on or after the beginning of the first annualreporting period on or after December 15, 2008 (our fiscal year2009).  We are currently evaluating theimpact of adopting SFAS 160 on our consolidated financial position, results ofoperations or cash flows.

 

In May 2008, theFASB issued SFAS No. 162, *The Hierarchy of GenerallyAccepted Accounting Principles* (“SFAS 162”).  This Statement identifies the sources ofaccounting principles and the framework for selecting the principles used inthe preparation of financial statements of nongovernmental entities that arepresented in conformity with generally accepted accounting principles (“GAAP”)in the United States.  This statementwill be effective 60 days following the SEC’s approval of the Public CompanyAccounting Oversight Board amendments to AU Section 411, *The Meaning of Present Fairly in Conformity with Generally AcceptedAccounting Principles*.  We donot expect the adoption of SFAS 162 to have a significant impact on ourconsolidated financial position, results of operations or cash flows.

 

21

----

Table of Contents

 

**ITEM3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**

 

We are exposed to marketrisk from changes in interest rates on debt and changes in commodity prices.Our exposure to interest rate fluctuations is limited to our outstanding bankdebt. At June 24, 2008, there was $91.0 million outstanding under ourrevolving line of credit which bears interest at approximately 0.50% to 0.875%(depending on our leverage ratios) over the London Interbank OfferedRate.   Our various other notes payable totaled $2.3 million at June 24,2008 and had fixed rates ranging from 4.35% to 10.80%.  Should interestrates based on these borrowings increase by one percentage point, our estimatedannual interest expense would increase by $0.9 million.

 

Many of the ingredientsused in the products sold in our restaurants are commodities that are subjectto unpredictable price volatility. There are no established fixed price marketsfor certain commodities such as produce and cheese, and we are subject toprevailing market conditions when purchasing those types of commodities. Forother commodities, we employ various purchasing and pricing contract techniquesin an effort to minimize volatility, including fixed price contracts for termsof one year or less and negotiating prices with vendors with reference tofluctuating market prices.  We currentlydo not use financial instruments to hedge commodity prices, but we willcontinue to evaluate their effectiveness. Extreme and/or long term increases incommodity prices could adversely affect our future results, especially if weare unable, primarily due to competitive reasons, to increase menu prices.Additionally, if there is a time lag between the increasing commodity pricesand our ability to increase menu prices or if we believe the commodity priceincrease to be short in duration and we choose not to pass on the costincreases, our short-term financial results could be negatively affected.

 

We are subject tobusiness risk as our beef supply is highly dependent upon three vendors.  If these vendors were unable to fulfill theirobligations under their contracts, we may encounter supply shortages and incurhigher costs to secure adequate supplies, any of which would harm our business.

 

**ITEM4. CONTROLS AND PROCEDURES**

 

**Evaluation of disclosure controlsand procedures**

 

We have evaluated theeffectiveness of the design and operation of our disclosure controls andprocedures pursuant to, and as defined in Exchange Act Rules 13a-15(e) and15d-15(e) as of the end of the period covered by this report. Based on theevaluation, performed under the supervision and with the participation of ourmanagement, including the Chief Executive Officer (the “CEO”) and the ChiefFinancial Officer (the “CFO”), our management, including the CEO and CFO,concluded that our disclosure controls and procedures were effective as of theend of the period covered by this report.

 

**Changes in internal control**

 

During the period coveredby this report, there were no significant changes with respect to our internalcontrol over financial reporting that materially affected, or are reasonablylikely to materially affect, our internal control over financial reporting.

 

22

----

Table of Contents

 

**PART II — OTHER INFORMATION**

 

**ITEM1.  LEGAL PROCEEDINGS**

 

Occasionally, we are adefendant in litigation arising in the ordinary course of our business,including “slip and fall’ accidents, employment related claims and claims fromguests or employees alleging illness, injury or food quality, health oroperational concerns.  None of these types of litigation, most of whichare covered by insurance, has had a material effect on us and, as of the dateof this report, we are not party to any litigation that we believe would have amaterial adverse effect on our business.

 

On March 26, 2007, acivil case styled as a class action complaint titled *Nicole M. Ehrheart v. Texas Roadhouse, Inc. and Does 1 through 10(“Ehrheart”)*, Case Number CA 07-54, was filed against us in theUnited States District Court for the Western District of Pennsylvania ErieDivision.  On July 20, 2007, a civil case styled as a class actioncomplaint titled *Mario Aliano v. TexasRoadhouse Holdings LLC and Does 1-10 (“Aliano”)*, Case Number07cv4108, was filed against us in the United States District Court for theNorthern District of Illinois Eastern Division.  Both suits allege that wewillfully violated the Fair and Accurate Credit Transactions Act (“FACTA”)based on the alleged practice of unlawfully including more information than ispermitted on the electronically printed credit or debit card receipts providedto customers.  Plaintiffs seek monetary damages, including statutorydamages, punitive damages, costs and attorneys’ fees, and a permanentinjunction against the alleged unlawful practice.  On April 7, 2008, *Ehrheart*and*Aliano*were consolidated by the UnitedStates Judicial Panel on Multidistrict Litigation in the United States DistrictCourt for the Northern District of Illinois as Case Number 1:08-cv-2362, styled*In re: Texas Roadhouse FACTA Litigation, MDL No. 1927*(the “*MDL Action*”).  While we have denied plaintiffs’ materialallegations, discovery has not yet begun. Statutory damages range from $100 to $1,000 for each willful violationof FACTA, and actual damages are available to plaintiffs for each negligentviolation of FACTA.

 

On June 3, 2008, theCredit and Debit Card Receipt Clarification Act (the “FACTA Clarification Act”)became effective, providing that any merchant who printed a credit card’sexpiration date on a receipt issued to a consumer between FACTA’s effectivedate and the FACTA Clarification Act’s effective date cannot be found to havewillfully violated FACTA as long as the merchant otherwise complied with FACTAand the Fair Credit Reporting Act.

 

We believe that we havemeritorious defenses to the claims raised in the MDL Action, and we intend tovigorously defend against the claims, including plaintiffs’ efforts to certifya nationwide class action.  We believethat neither case will have a material adverse effect on our business and ourconsolidated financial position, results of operations or cash flows.

 

**ITEM1A.   RISK FACTORS**

 

Informationregarding risk factors appears in our Annual Report on Form 10-K for theyear ended December 25, 2007, under the heading “Special Note RegardingForward-looking Statements” and in the Form 10-K Part I, Item 1A,Risk Factors.  There have been nomaterial changes from the risk factors previously disclosed in our Form 10-K.

 

**ITEM2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS**

 

On February 14,2008, our Board of Directors approved a stock repurchase program under which itauthorized the Company to repurchase up to $25.0 million of its Class Acommon stock during the two-year period ending February 14, 2010.

 

The followingtable includes information regarding purchases of our common stock made by usduring the 13 weeks ended June 24, 2008:

 

| **Period**                      | ** ** | **Total Number  of Shares  Purchased** | ** ** | **Average  Price Paid  per Share** | ** ** | **Total Number of Shares  Purchased as Part of Publicly  Announced Plans or Programs** | ** ** | **Maximum Number (or Approximate  Dollar Value) of Shares that May Yet Be  Purchased Under the Plans or Programs** | ** ** |
|---------------------------------|------------|--------------------------------------------------|------------|----------------------------------------------|------------|------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|
| March 26 to  April 22 | ** ** | **15,000**                                       | ** ** | **$9.50**                                    | ** ** | **15,000**                                                                                                                               | ** ** | **$19,963,529**                                                                                                                                                                               | ** ** |
| April 23 to  May 20   | ** ** | **—**                                       | ** ** | **—**                                   | ** ** | **—**                                                                                                                               | ** ** | **$19,963,529**                                                                                                                                                                               | ** ** |
| May 21 to  June 24    | ** ** | **1,079,300**                                    | ** ** | **$9.29**                                    | ** ** | **1,079,300**                                                                                                                            | ** ** | **$9,937,183**                                                                                                                                                                                | ** ** |
| Total                           | ** ** | **1,094,300**                                    | ** ** | ** **                                   | ** ** | **1,094,300**                                                                                                                            | ** ** | ** **                                                                                                                                                                                    | ** ** |

 

On July 8, 2008, ourBoard of Directors approved a $50.0 million increase in our stock repurchaseprogram.

 

**ITEM3.  DEFAULTS UPON SENIOR SECURITIES**

 

None.

 

23

----

Table of Contents

 

**ITEM4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.**

 

On May 22, 2008, atthe Annual Meeting of Stockholders, the stockholders took the followingactions:

 

1.               Elected all directors designated in theproxy statement dated April 11, 2008, as follows:

 
| ** **      | ** ** | **Number of Votes** | ** ** |
|-----------------|------------|-------------------------------|------------|
| ** **      | ** ** | **For**                       | ** ** | **Withheld** | ** ** |
|            |       |                          |       |   |   |
| James R. Ramsey |       | 115,392,394                   |       | 557,721 |   |
| James R. Zarley |       | 115,390,255                   |       | 559,860 |   |

 

Directors whose termscontinued after the Annual Meeting of Stockholders are as follows: G.J. Hart,Martin T. Hart, Gregory N. Moore, James F. Parker and W. Kent Taylor.

 

2.     Ratified the audit committee’s selection of KPMG LLP as theCompany’s independent auditors for the fiscal year ending December 30,2008:  115,505,505 votes cast for,409,454 votes cast against and 35,154 abstained.

 

**ITEM5.  OTHER INFORMATION.**

 

None.

 

**ITEM6. EXHIBITS.**

 
| **Exhibit No.** | ** ** | **Description**                                                                                                                                                |
|----------------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 31.1                 |       | Certification of Chief  Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of  2002.                                                     |
| 31.2                 |       | Certification of Chief  Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of  2002.                                                     |
| 32.1                 |       | Certification of Chief  Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
| 32.2                 |       | Certification of Chief  Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant  to Section 906 of the Sarbanes-Oxley Act of 2002. |

 

24

----

Table of Contents

 

**SIGNATURES**

 

Pursuant to therequirements of the Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on its behalf by the undersigned thereunto dulyauthorized.

 
|                       | TEXAS ROADHOUSE, INC. |
|----------------------------|-----------------------|
|                       |                  |   |
| Date: August 1,  2008 | By:                   | /s/ G.J. Hart |
|                       |                  | G.J. Hart |
|                       |                  | President, Chief  Executive Officer |
|                       |                  | (principal executive  officer) |
|                       |                  |   |
| Date: August 1,  2008 | By:                   | /s/ Scott M. Colosi |
|                       |                  | Scott M. Colosi |
|                       |                  | Chief Financial Officer |
|                       |                  | (principal financial  officer) |
|                       |                  | (chief accounting  officer) |

 

25

----