Bloomin' Brands, Inc. (BLMN) Q2 2013 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by, and welcome to the Bloomin' Brands Inc. Second Quarter 2013 Results Conference Call. [Operator Instructions] I would now like to turn the call over to Mr. Mark Seymour, Vice President, Investor Relations. Go ahead, sir.

Thanks, Jill. Good morning, everyone, and thank you for joining us. With me on today's call are Liz Smith, our Chairman and CEO; and Dave Deno, Executive Vice President and CFO. By now, you should have access to our second quarter 2013 earnings release. It can also be found on our website at www.bloominbrands.com in the Investors section. Throughout this conference call, we will be presenting non-GAAP financial measures, including adjusted income from operations, adjusted net income, adjusted diluted earnings per share and adjusted diluted earnings per pro forma share. This information is not calculated in accordance with U.S. GAAP and may be calculated differently than other companies' similarly titled non-GAAP information. Quantitative reconciliations of our non-GAAP financial measures to their most directly comparable GAAP measures appear in yesterday's earnings release and on our website as previously described. Before we begin our formal remarks, I'd like to remind everyone that part of our discussion today will include forward-looking statements, including our discussion of growth strategies and financial guidance. Such forward-looking statements are not guarantees of future performance, and therefore, you should not put undue reliance on them. These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from our forward-looking statements. Some of these risks are mentioned in yesterday's earnings release, others are discussed in our Form 10-K filed with the SEC on March 4, 2013, which is available at www.sec.gov. During today's call, we'll provide a brief assessment of the current casual dining segment and our financial performance for the second quarter of 2013, as well as an overview of highlights for the quarter and discussion regarding daypart expansion and other key strategic objectives. Once we've completed these remarks, we'll open up the call for questions. With that, I'd now like to turn the call over to Liz Smith.

Thanks, Mark, and welcome to everyone listening today. We're pleased to share with you the results for the second quarter of 2013 and related company highlights. As you can see from yesterday's earnings release, our reported second quarter core domestic comp sales growth was 2%, which included a traffic increase of 1.2%. If you exclude the trading day impact, our core comps were 2.2%. Adjusted diluted earnings per pro forma share were $0.25, a 56% increase over the prior year. These results represent continued outperformance of our portfolio, with an estimated 260 basis points gap to KNAPP Casual Dining Index for both sales and traffic. Our growth strategies are delivering share gains across the brands in a challenging and choppy CDR segment. As widely reported, recent CDR sales trends have softened, and consumer metrics are giving mixed signals. We've also noticed an acceleration in promotional activity for casual dining in 2013. So affordability is certainly a key component of the value equation in this environment but other factors such as menu and food quality, marketing innovation, ambience and exceptional service are just as important, and our results bear this out. Our success in this environment is driven by elevating all elements of the 360-degree experience. This means relentless innovation around the menu, offering compelling new dishes at a variety of price points to engage a broad spectrum of guests; ongoing attention to the ambience and appeal of our restaurants; enhancing our marketing efforts with creative promotions and media mix; and continuing to improve all facets of customer service, which is already highly ranked across all of our concepts. Our attention to these details led to the following results by concepts for Q2. At Outback, comp store sales continued to significantly outperform the segment, with 2.8% growth in the second quarter. Excluding the trading day impact, the comps were 3.1%, driven by traffic growth of 1.6%. This marked the 13th consecutive quarter of positive comps for the Outback brand. The strength in sales this quarter was driven by further expansion of the lunch daypart at our restaurants and ongoing menu and marketing innovation efforts. Fleming's finished the quarter with comps up 3.8%, surpassing the KNAPP-TRACK High-End Steakhouse Dining Index, which came in at 3.6%. Excluding the impact of trading days, second quarter comp sales were even further ahead of the segment at 4.2%. On a traffic basis, Fleming's also outperformed the high-end segment, coming in at 2.6% versus 0.8% as measured by KNAPP. The strength of Fleming's was driven by a successful fillet and lobster offer and a great turnout for Mother's and Father's Day. This represents Fleming's 14th consecutive quarter of positive comps. Bonefish Grill comps were up 0.2% for the quarter, which marks their 15th consecutive quarter of comp growth. After adjusting for trading days, Bonefish was up 0.3%. Bonefish Grill continues to be among the top ranked brands in various consumer and industry polls and is our main vehicle for domestic restaurant unit growth. As we discussed on the last call, we are moving ahead with the core menu refresh. We will go into test in Q3 and expect to roll the new menu out in 2014. Finally, Carrabba's comps were 0.3% for the quarter, and excluding the trading day impact, were up 0.5%. Our Pasta Seconds promotion resonated with value-conscious consumers. We're making good progress on the overall brand refresh that was detailed on our last call. 17 remodels were completed this quarter, with another 15 underway. In addition, our new menu is in test in select locations. Overall, Carrabba's implementation of the Bloomin' Brands' playbook is progressing well. Increasing our participation in the $25 billion lunch segment is a key comp sales growth strategy for Bloomin' Brands. Since we get so many questions around this platform, I thought it might be helpful to do a deeper dive on it this quarter. We began to focus on the lunch opportunity in 2010. After rigorous testing, we confirmed the viability of this daypart and began a very thoughtful and measured rollout. There were several aspects we had to consider for successful daypart expansion. First, we spent a good deal of time reviewing our portfolio to identify those locations that could support this occasion from a traffic perspective. Then we performed the necessary work around the menu to ensure that we were providing our guests with items they wanted at price points that work. Finally, we built a training regimen to ensure that our team could deliver an experience that exhibits the same level of quality and freshness that we're known for within the appropriate lunch time constraints. We completed the rollout of weekend lunch across Outback and Carrabba's in 2012. At the end of this quarter, approximately 25% of Outback locations and 21% of Carrabba's locations offer weekday lunch. According to NPD CREST, year-over-year, CDR lunch traffic trends outperformed dinner traffic trends by approximately 100 basis points for the 12 months ending March 31. Bloomin' Brands will continue to increase our participation in weekday lunch and leverage assets that for the most part previously provided no sales contribution from 11 to 4. In addition, we are seeing lunch sales growth in restaurants where lunch has been in place for more than 1 year. Customers are becoming more aware their local Outback and Carrabba's is open for lunch and are adding us to their consideration set. Another significant driver for comp sales growth is the remodeling of our restaurants, and we continue to make progress in this area. Outback completed 14 remodels during the second quarter. This puts us at 30 for the year-to-date and keeps us on track to reach the target of 80 remodels for 2013. In addition, the Carrabba's effort is underway with 17 renovations completed in Q2. Now that we are further into the project, our completion pace suggests that we will finish closer to 40 Carrabba's renovations this year. Based on CDR segment trends, we recognize our growth will continue to come from share gains driven by excellent execution of what we can control, a superior customer experience in our restaurants and ongoing occasion expansion. We have many levers at our disposal that we will use in an appropriate and measured manner to drive sustainable growth. We are confident in our long-term growth potential. An environment like this also highlights the value of a strong portfolio. The ability to leverage scale in a portfolio is the most obvious benefit. But as various commodity prices move and consumer preferences shift, the category diversification of our brands provide us with the ability to take advantage of trends as they arise. The steak category has been strong over the last several quarters, while we've seen a bit of a pullback in Italian. Having a portfolio that spans steak, Italian, seafood and high-end puts us in a strong position to weather any variability and category demand. In addition, we have an expanding opportunity internationally where casual dining is growing. For the trailing 12 months ended June 30, approximately 8% of our total revenues and approximately 20% of our adjusted profits came from 210 international locations. Given our size and operational capability, we believe we are uniquely positioned to capture this global opportunity. To further illustrate this point, I would draw your attention to our business in Brazil. With 2 openings this quarter, our total number of Brazilian units now stands at 43. This 50-50 joint venture is a thriving business by any measure. Average unit volumes are nearly twice that of their domestic counterparts, and they excel at delivering across every daypart. Lunch, happy hour, dinner and late-night are all strongly represented in their operations. We are on track to open 9 restaurants this year and believe this can be at least a 100-unit chain in the next 5 years. This company-owned or joint venture approach to international operations continues to be a point of differentiation for Bloomin' Brands and one that we intend to capitalize on and expand. The second key pillar of our growth strategy is new unit development. In Q2, we opened 7 new restaurants: 1 domestic Bonefish Grill location, 1 Outback South Korea, 3 new international Outback Steakhouse franchise locations and 2 new joint venture Outback Steakhouse restaurants in Brazil, as previously mentioned. This was in line with expectations for the second quarter, and we continue to target a total of 45 to 55 new restaurants for the year. The final element of our growth strategy is to improve productivity and expand margins. We've reached approximately $28 million in total productivity and savings through June 30 and are still targeting at least $50 million for the year. We completed the company-wide implementation of the labor scheduling software in April and continue to refine its use. We've already realized savings from this tool in relation to front-of-the-house labor and expect added benefits as our operators become more comfortable with it. The next step lies in applying this tool to back-of-the-house labor. Separately, we continue to roll out new energy management systems in our restaurants to reduce energy costs. In summary, we were pleased with our performance in Q2. We made good progress against our 3 growth strategies: to grow comp sales at existing restaurants; to develop new restaurant units; and to expand our operating income margins. While the segment continues to face headwinds, we remain confident in the Bloomin' Brands' playbook and our ability to meaningfully outperform the industry. With that, I'll turn the call over to Dave Deno to provide more detail on our second quarter operating results. Dave?

Well, thanks, Liz, and good morning, everyone. I'll kick off our discussion around sales and profit performance for the quarter. As a reminder, when I speak to net income and EPS, I'll be referring to adjusted numbers that exclude certain costs and benefits. Please see yesterday's press release for reconciliations between our adjusted metrics and their most directly comparable U.S. GAAP measures. Also provided is a discussion of the nature of each adjustment. With that said, our second quarter financial highlights included the following. Adjusted diluted earnings per pro forma share were $0.25 per share versus $0.16 for Q2 of 2012. That's an increase of 56%. GAAP diluted earnings per share for the quarter increased to $0.58 versus $0.16 for the second quarter of 2012. The significant increase in GAAP diluted EPS is related to the release of the tax valuation allowance which we will discuss later. Adjusted net income increased to $31.8 million versus $19.3 million for the second quarter a year ago. GAAP net income for the quarter was $74.9 million versus $17.4 million for Q2 2012. Comparable domestic restaurant sales growth at our core domestic concepts was 2%. This included a traffic increase of 1.2% for the quarter, driven by daypart expansion and promotions across the portfolio. All 4 of our core domestic concepts had a positive in sales traffic in Q2. Please note x trading day, our comps were 2.2% for the quarter. As mentioned earlier, we maintained a positive gap to KNAPP-TRACK with an estimated 260 basis point beat for both comp sales and traffic in the second quarter. This represents the 14th consecutive quarter in which our blended core domestic comp had outpaced this index. And finally, total revenues increased 3.9% for the quarter of 2013 to just over $1 billion. Restaurant-level operating margins for Q2 were 16% this year versus 15.7% a year ago. Let's break that down by line item. First, cost of sales decreased to 32.3% of restaurant sales for the quarter from 32.5% of restaurant sales for the same quarter in 2012. The decrease was primarily driven by productivity initiatives, menu price increases and reduced seafood costs. The decrease was partially offset by increases in beef costs and a change in our alcoholic beverage mix. Labor as a percentage of restaurant sales was 28.2% in Q2 versus 28% a year ago. The increase in labor costs was primarily driven by higher kitchen, service and management labor. This was a result of planned additional training expenses associated with daypart expansion and new restaurant openings. The increase in labor expense was partially offset by AUV leveraging and further implementation of productivity initiatives at the restaurant level. As Liz mentioned earlier, our new labor scheduling tool is fully rolled out in April, and we've already begun to realize the benefits from its use. We expect that the same tool will continue to grow as our associates in the field become more comfortable with this new tool and as it expands, it'll include back-of-house labor scheduling as well. Finally, restaurant operating expenses for the quarter were 20 basis points favorable versus the prior year, decreasing from 23.8% of restaurant sales in Q2 to 23.6% of restaurant sales in Q2 of this year. The variability was mainly driven by AUV leveraging and productivity improvement, partially offset by higher supplies expenses and repair and maintenance costs. After incorporating the related non-GAAP adjustments outlined in the press release, G&A was $64.4 million in Q2 versus $69.9 million a year ago. This was a decrease of nearly 8%. The decline was driven primarily by the shift of approximately $4 million of expense associated with our annual managing partner conference that moved from Q2 last year to Q1 this year, as well as reductions in insurance costs. GAAP general administrative costs were $65.1 million in Q2 versus $72.2 million last year. This decrease was primarily related to the items I just mentioned and management fees that were being incurred in 2012 and ceased at the IPO last August. In total, adjusted operating income margin increased by a very healthy 150 basis points to 6.7% compared to 5.2% in 2012. The increase mainly from a -- this increase resulted mainly from improved restaurant level operating margins, reduction in G&A and a $4 million decline in impairment and restaurant closing. On a GAAP basis, operating income margin improved 170 basis points from 5% in Q2 2012 to 6.7% in the second quarter of this year. For the second quarter, our adjusted effective income tax rate was approximately 33.8% compared to 18.6% for Q2 last year. The rate of 33.8% does not include the tax benefit for the release of the valuation allowance. We perform ongoing assessments regarding the recoverability of our deferred net income tax assets which have valuation allowances. As part of this process, we determined this quarter that their realizations are more likely than not. As a result, we recorded a $67.7 million reduction of the valuation allowance associated with our U.S. net deferred income tax assets. Of this amount, $52 million was recorded as tax -- income tax benefit and $15.7 million was recorded as an increase to additional trading capital. As it relates to the $52 million of income tax benefit, $44.8 million was released as a discrete event, and the balance is being realized over the course of the year through estimated annual effective income tax rate. The benefit of the deferred tax valuation allowance release is set aside as a deduct and not included in our adjusted operating income earnings. Also in yesterday's release, you'll find in the footnote to our non-GAAP reconciliation table regarding the application of a normalized tax rate. The normalized rate removed the effect of the valuation allowance release. We did this to bring the rate more in line with the expected future effective income tax rate. We anticipate our full year adjusted tax rate will be approximately 22%. Turning to our guidance for the full year. Our guidance for the full year remains unchanged. We believe what we previously communicated as part of our first quarter earnings release still applies. Included in that release were our expectations for blended core domestic comp sales to be up at least 2% and adjusted diluted earnings per pro forma share to be at least $1.10. In addition, while we don't provide quarterly guidance, we do like to provide color that we think may be helpful when modeling our projected earnings. To that end, I would like to point out that based on our estimates, the fourth quarter will be among the strongest of the year, while the third quarter will likely be our most challenging quarter of the year. In closing, we are pleased with the results of the second quarter. While there continues to be pressure on this segment, our brands are well positioned to gain share. Ongoing innovation around the 360-degree experience and a focus on flawless execution in our restaurants will be the keys to maintaining our gap to the industry and achieving the goals we've set for ourselves. And with that, we'll now take your questions.

[Operator Instructions] And our first question comes from the line of Joe Buckley with Bank of America Merrill Lynch.

Could you talk about daypart sales experience, particularly at Outback, away from lunch, what else you saw during the quarter? And curious if you have a point of view on the softness in casual dining the last month or so, what the potential drivers of that might be?

Yes. So Joe, it's Liz. Let me take those in 2 parts. In terms of the daypart experience across the portfolio and specifically at Outback, as you know, we have many levers which drives our comps, and daypart expansion and lunch expansion is one of them. And we don't pool those 2 comps, the lunch contribution, apart. We're very pleased with how lunch is performing and how the businesses are performing in general on a comp sales basis in a challenged category. So for Outback, we completed the rollout of weekend lunch in 2012, we're doing a very measured roll of weekday. We like how it's going in. And so in general, the 2 are interacting well together. Now what we did talk about was we look at all the same information pieces you do to make sense of what's happening in the casual dining industry. And as you look out over the last 12 months ended March 31, the lunch segment in general for the industry has held up better than the dinner segment. So you have all these pieces of information that feed into. Okay, so what's going on with the consumer, which is the second part of your question, and there's a lot of obviously mixed signals out there about what is going on with the consumer and the reported softness that's been observed in casual dining. I think it's an accumulation of many different inputs. That's how we're thinking about it. It's not 1 particular thing. On the one hand, consumer confidence is rebounding. July took a bit of a step back, but in general, it's higher than it's been, not back to prerecession levels. But then you have the issue that there's no question that discretionary income for our target group is down. I saw a statistic where wages were up 0.6% but inflation's up about 1.5%, and so you have this pressure on discretionary income. People talk about the spike in gas prices. So I think it's many different things that are coming together. And what's been interesting about the consumer behavior this year is that it's been choppy. This has been a choppy environment for us and for everybody. And so it's not prudent to draw conclusions on a monthly basis, but it's certainly informative about what's happening. And so we use all of those inputs to really come to a point of view on the impact of consumer in the headwinds.

And our next question, Michael Kelter with Goldman Sachs.

Maybe you can elaborate a little more on the slowdown in industry trends, and why you guys do obviously continue to outperform. It would be helpful to maybe hear how the recent change in the dynamics of the industry has manifested itself with your particular customers. So any change in weekday versus weekend or dayparts or changes in ordering patterns like drink or dessert add-on, differences by region? Anything to help us understand what's going on would be great.

Sure, Michael. And you always want the silver bullet and we do too, right, because it's always great when you can say it's X and therefore we can design a program around X. And so I'm going to go back to my prior comment, which I think it's an accumulation of things that are building up. And then you have a reaction on a monthly basis that we haven't maybe seen typically. The one thing I can tell you and I alluded to that in my script that we have seen, and we do use NPD CREST to get a beat on what's happening within the industry, is that the lunch occasion over the last 12 months, and again, we like to look at a longer period because we know monthly is quite variable, the lunch occasion over the last 12 months has held up better than the dinner occasion. I think you can play that out into the ongoing and accelerated demand for value, and the choice full selection of where people are going to put their discretionary income. Now every measure that we have and that we've seen continues to indicate that value, but that broader definition of value, is not becoming less important, it's just becoming more important. And so you've got to be firing on all cylinders to win in this environment. So I think the headline is that it's been a choppy consumer environment because there's been various signals coming in and out in the customer, but the thing that remains is the customer's insistence on the best experience for the most affordable price, and that's how they're looking at value. So as we think about that, that's the lens that we look at the environment through.

And maybe more company-specific, you kept your guidance of 2%-plus same-store sales for the year-over-year, even though you're a little bit below that year-to-date just a bit. But it still assumes an acceleration for you in the back half. And that means the 2-year same-store sales run rate would have to get better from this point forward. Is there any reason why you have such confidence against the choppy backdrop? Are your recent trends maybe a little better? Do you have major initiatives coming? Or is there something else we should be thinking about on same-store sales for the rest of the year?

Michael, I think that we continue to be very optimistic about the levers we have. When you look at the remodels, when you look at product innovation, when you look at daypart expansion, we look at all those things that are going on. We believe that we've got a very good story, and we believe that the at least 2% same-store sales growth, the plans are in place to achieve that for this year. So I think what makes us a bit unique, Michael, is the number of levers that we have. And if you look back -- going back to Joe Buckley's question just for a second as well, I mean, Outback traffic was up 1.2% in the quarter so that's a nice move. And it all goes into the various levers that our brands like Outback, remodels, daypart expansion, all those kind of things are just really, really, really strong. So I think that we have a good look going out -- going forward. And I do want to correct one thing, I did make a mistake. Outback traffic was up 1.6% so I apologize for that. So we're very pleased with the levers that we have, Michael, and the balance of the year that we have planned.

And if could one last one. I mean, did I hear you right earlier that all 4 of the concepts had positive traffic? And the reason I ask is if that's true, it presumably means that check is right now negative at both Bonefish and Carrabba's, and I wanted to understand that dynamic a bit better.

Yes, we don't comment on traffic. Did we call out the traffic by concept? I don't think we did. And so we can talk about these pieces across the portfolio of total comp. We had -- comp was adjusted for trading days of 2.2% for the quarter and 1.2% traffic. So we had some pricing realization coming through. So you had -- for the quarter, you had some growth in dinner check, which was planned, and you have that, to some degree, offset by the growing lunch mix but very healthy traffic. So we're actually pleased with the health of the comp store sales because we saw some pricing realizations, prudent on the dinner check, we mixed through the lunch occasion, and we drove traffic in an environment that there was not a lot of traffic being driven. So that's how I think you can think about the mix of our comp.

Did you guys say -- I thought David, you said all 4 have positive traffic for the quarter. Did I get that wrong?

They did.

They do have -- all 4 brands have positive traffic in the quarter, and Liz talked to the pieces of the mix, when you look at lunch, when you look at dinner...

On a portfolio basis.

On a portfolio basis. And the one thing I want to stress too, is that our dinner check grew in the quarter. So lunch is playing a piece in here during the quarter.

Andy Barish with Jefferies.

One other sales question and then an expense question. Just on the sales side, are there -- I think we all understand the template that's been put in place at the Outback business and now kind of moving to other brands. Are there, particularly in regard to Outback, are there some short-term things that we don't necessarily see kind of behind the scenes that you're able to implement on digital or other things that maybe quick hits in response to the environment? And then secondly, on the labor side of things, did you still have some of the change in compensation on the labor line that I think it helps labor and hurts G&A, but just wondering if you can quantify that?

Sure. So I'm going to take the first part, and then I'm going to turn to Dave to talk about the expense part. On the Outback side, we talked a lot about the fact that this is a really nimble, agile team who had many levers at their disposal. So you're absolutely right that digital and what I'd call kind of cutting-edge promotions have been really the forte of this team. We pretty significantly increased our digital spending over the last, call it, several years, and that continues to be an area of growth for us and innovation for us. For competitive reasons, I don't want to talk about some of the things that we've done going forward. But that increasingly created use of media mix and growing focus on digital is absolutely something that the Outback team has been pushing, and that you're going to continue to see more of us. And then I think in this environment, what they have done and continue to do so well is to be nimble and to be agile and to take advantage of trends as they arrive. So you'll continue to see that from us. I don't want to tip our hand, but that is something you'll continue to see from Outback.

And then, Andy, on labor, a couple of things. First of all, before I talk about labor, we were very pleased about the improvement in our cost of sales this quarter, very good. And the productivity initiatives there are really kicking in. On labor, they are kicking in as well. A couple of things. There is no, to your question, there's no shift in the competition piece that's driving the change in labor. It's a couple of things. One, productivity is ahead of our pace. We talked about at least $20 million -- $28 million this quarter, so we're very happy in that achievement. Secondly, in the labor line, we have the training for lunch, and we have the training for new restaurants that we anticipate to pick up new restaurant development in this back half of the year. And then lastly, I just want to remind everybody, as we have more lunch restaurants, the labor component lunch is a bit higher than our dinner business. So you will see a little bit of a tick up in labor as we work through the lunch business. Now that may hurt the lunch -- excuse me, the labor margin in aggregate, but overall for our company, it's a significant sales and profit driver, speaking specifically to lunch here. So in your models, take it into account. So productivity is helping us manage the labor number, and we've got some additional expenses for training, and then we've got, as lunch comes in, we may have a little bit more in labor costs there as you manage the lunch business but significant boost to our bottom line sales.

John Glass with Morgan Stanley.

It's Courtney, on for John Glass. I just wanted to get a quick update on the relocations. I know you had said you're planning to do 10 to 20 this year and just wanted to get an update there. Is that still the goal and if you're still seeing roughly 40% lift? And then maybe if you can just also talk about margin progress and the $50 million in savings? I thought you had said that it was going to be more back half-loaded, so I was wondering if you're expecting to get more in the second half maturity at $28 million?

Sure. On relocations, the 10 to 20 for the year are still our expectations. We may not complete all those this year because -- just because of the time it takes, but we will sign the leases, make the arrangements for at least 10 to 20. And that's consistent with prior discussions and our spend flow is consistent with our prior expectations. And yes, we are seeing the same sales lift, and we are very pleased to see that the combination of the dinner business is growing, because of the new locations, and our lunch business is growing because of the new locations. So the relocation program primarily at Outback is underway and we're very pleased with it. On productivity, we also had a very good quarter, as Liz mentioned. So far this year, we achieved at least $28 million of productivity savings. We achieved, excuse me, we achieved $28 million of productivity savings through the first half of the year. We expect at least $50 million of savings, we feel that most of that will come in the second -- expect it will come in the second and third quarter. And we certainly achieved that in the second quarter. And we will continue to push very hard to achieve our productivity savings while improving customer service and never degrading food quality. So it's a very good quarter of productivity for us. We're very pleased.

And then if you could just follow up on the labor scheduling. I think you said you're starting to see some of the benefits of that now, but can you quantify that?

We don't get to that kind of detail. It's certainly part of the $50 million of savings, it's a big part. We talked about the labor savings before. And I think what investors can see is as our people get used to it and we can expand it to other dayparts and we continue to manage it going forward, we should see a bigger and bigger pickup in the quarters ahead. But we really don't want to get into that kind of granularity, but it is part of certainly our $50 million, at least $50 million productivity save.

John Ivankoe with JPMorgan. John W. Ivankoe - JP Morgan Chase & Co, Research Division: Yes, just clarifications and then a question, if I may. Firstly, could you remind us what the targeted system-wide rollouts are for midweek lunch for Outback and Carrabba's fiscal '13 and fiscal '14?

Certainly, John. For Outback, by year end, we expect to have 29% of the system open for weekday lunch. And for Carrabba's by year end, we expect to have 35% of the country open for lunch. John W. Ivankoe - JP Morgan Chase & Co, Research Division: Okay. So obviously still a lot of work there for the rest of the year. And have you updated the '14 forecast?

No, Dave, not yet. And I would like to add one thing. And Liz mentioned it in her script, but this is -- I want to emphasize it. We're finding that, as we've talked about before, lunch -- restaurants that had lunch that have been open at least a year, that lunch business keeps growing. And so we have an opportunity to roll out more lunch, more restaurants that have lunch and we have an opportunity to grow the lunch business. So I just want to stress both of those levers are available to us as we go forward. John W. Ivankoe - JP Morgan Chase & Co, Research Division: Okay. And Dave, you mentioned right at the tail end of your prepared remarks about, I think, 3Q being the low point of the year. Certainly, that would make sense from an earnings perspective. Did you also mean that from a comp perspective?

I mean, we don't give broad -- we don't give detailed comp guidance, John. But if we look at our overall business performance, third quarter would be the most challenging. John W. Ivankoe - JP Morgan Chase & Co, Research Division: Okay. And then I guess specific to the question, if I may, it's on Bonefish. And I want to ask this both in terms of the rate of development and the same-store sales there. I mean certainly, I think the vast majority of us would see this as your most obvious unit growth, perhaps even comp growth opportunity in the U.S., given what the penetration of that brand has been. So just hoping in this forum where we can get an update on both of those important metrics at the brand.

Sure, John. Let me start first with kind of your question on kind of the comps, and then we'll talk about the new unit development. So Bonefish had a comp of 0.3 adjusted for trading days, which is a deceleration, although still, as you know, outperforming the industry comfortably on both a sales and traffic basis. So I want to start there. But the 0.3 is a deceleration and on top of a deceleration that we saw in Q1. So want to start out by saying first that we -- I don't -- we have no structural concerns on brand health and appeal of this concept. It continues to drive among the highest customer satisfaction scores in the industry, among top in any consumer industry poll. And our new units are traveling well beyond the core geographies. So on balance, our new units are opening above system average. So this is a concept whose appeal is traveling well and continues to resonate. That being said, I've talked a lot about, this notion of continuous innovation, and what we do with ourselves is the most meaningful driver. And candidly, as we talked I think in the last call and the call before that, we have not refreshed this menu since 2008. We have a very innovative menu in test in Q3, and we'll roll it out in 2014. But candidly, we have an innovation gap that's pressuring our comps, and it somewhat self-conflicting. You have to have that relentless, continuous innovation, and we went too long in this area. The good news is I'm very pleased and excited about the menu that is in test. And this is not a long-term brand health issue. However, it just continues to highlight that in this environment, you have got to have that continuous relentless innovation. On the new unit development front, we feel very good about how the new units are opening. We only opened 1 Bonefish unit this quarter. However, we are on track. That means that our pipeline is back half-loaded. We have to do a better job of smoothing the pipeline. However, we are absolutely on track with our communicated 45 to 55. It just means that it's more back half-loaded than we'd like. And that's just a matter of completion and pacing. So just in summary, recognize the deceleration on the innovation gap, feel good about how we're progressing, and as we look long term, the brand is traveling very well, and the levers for long-term growth remain intact, whether it's lunch expansion, late-night bar business, private dining, online ordering, these are all AUV opportunities that are in front of us. John W. Ivankoe - JP Morgan Chase & Co, Research Division: And regarding that menu innovation that you alluded to, do you think it's necessary to introduce many new lower-priced products? I mean, do you think it just became an absolute price point issue for consumers today where maybe the average ticket needs to come down? Or by menu, you're talking about new and different and differentiated things that really that only Bonefish can sell?

Yes. John, I'm really glad you asked that question. It's the latter. We are known for -- so we have a $23 check average, and we have to continue to provide price points all along the spectrum, and certainly, this menu refresh will have. But what we're known for is exciting twists. And that's what you'll see when the new menu comes out, keeping the core things that sell but also really updating that innovation and culinary forwardness that we bring to polish casual. It's more the surprise and delight aspect that we let get too stale versus a value issue, although every one value is important to have that range of price points, so we will have that in the new menu as well.

Jeff Farmer with Wells Fargo.

Just following up on Joe's first question from a long time ago, the beginning of the call, but we're increasingly having conversations with investors that there's been probably too much focus on the demand side of the equation, meaning that the pretty material acceleration in both chain and independent restaurant elements over the last 12, 18, 24 months is at least partially to blame for some decelerating industry traffic and same-store sales. I'd just be interested to get your thoughts on that topic if we're sort of beginning to go down that path again as an industry.

Yes. Certainly, we believe, and we've talked about this for a long time, there's winners and losers in this segment. And that what we do in our own business and how we manage our business and the things that was just mentioned, for instance, and driving the business at Bonefish or Outback and everything else, has a much, much, much bigger impact than the supply side, the demand side and everything else. So it's a fragmented industry. We think there's a lot of opportunity to take share. As you've seen in our results, we are taking share and we believe that what we do with our brands for this, the enormous opportunity, they continue to make progress. So we believe that the sales trends, what we do with our brand will be the main thing going forward in this casual dining industry.

Understood. But just anecdotally, if you look left and right at really being in the mall developments, wherever you're opening your restaurants or choosing to compete, do you get the sense that the pace of development has picked up materially or is that perhaps overstated on my part?

One thing -- so let me just say, materially, we have seen and we've talked about the demand for A quality sites being in test, right? So part of our pipeline, and we said this before, it's not the demand for Bonefish, it's been the supply of sites that has also put -- dictated the speed of our rollout. So we are seeing competition for A quality sites. Whether I can tell you that's a material uptick. No, I can't say it's material uptick but there's a real demand for A quality sites. But I think to Dave's point, this is still an industry that has real estate tied up in brands that aren't performing as well, right? So part of the industry, you have to have some of that less productive supply shakeout, while some of the brands that have a national expansion program supported by consumer trends are rolling out. So I think you see both happening.

Right, that's helpful. And then just one more unrelated question, if I may. So just thinking about your promotional strategy, and actually, your second quarter at Outback was a little bit of a good case study here. You had 2 things going on. You had some new food news with the Steak Flights and then you brought back the 4 course for $15. My question for you is in this environment, which of those really proves to be a more effective traffic driver, meaning sort of the new food news or value? What do you think consumers are finding more appealing right now?

Well, Jeff, you've heard us say a lot that it's the entire 360 degrees. We cannot pull it apart, and that's what the consumers told us. They want great food at affordable prices, and that is how we construct our LTOs. So when you say we brought back the Outback 4, there's still new dishes and innovation within that. And then with Steak Flights was a really important celebration of our award-winning steak credentials. So it's that superior brand value as divided by the best benefits divided by price. And what the consumer's telling us is you better deliver both.

Sharon Zackfia with William Blair. Sharon Zackfia - William Blair & Company L.L.C., Research Division: Two questions, I guess one for David first. The third quarter commentary that you made, is that a change from your initial thought process? Did you always thought the third quarter might be the most challenging and because of the pace of initiatives or what have you? And then secondarily for Liz, I think, there seems to be a lot of concern with investors that you're lapping over weekend lunch and how do you sustain these above-average comps. I mean, could you give us kind of some insight into your visibility into the future, the initiatives you have laid out and kind of that timeline where you're really confident in achieving well above-average same-store sales within the space?

The quarterly split, as you know, we don't give quarterly splits during the year. It's really no news for us. We just felt looking at some of the modeling that's out there and everything that warranted a commentary. But as we look at our quarterly splits, we knew that Q3 was going to be the most challenging quarter for us. And so no new news there. I just felt that it's the right occasion given what we saw in some of the modeling out there.

Yes. So Sharon, on this continual outperformance in the industry going forward, the first thing that I would say is we love our brands, we like how we're positioned and we like the portfolio of levers that we have in front of us, okay? And we're going to roll those out in a measured manner. So let me talk specifically about your question about lapping weekend lunch, and then we'll talk about that. The reality is, is that we lapped weekend lunch. It started on Outback Sunday in Q1 of 2011 and finished in Q2 of 2011. So we will lap that, and I think Dave has already indicated that those occasions continue to grow. This is not a matter of "Gee, once you anniversary lunch, boy, you better, what else are you going to do?" Those weekend lunch legacy, they're growing, so we feel very good about that because, think about it, as customers become more and more aware that we're open for weekend lunch, that occasion is growing for us. And so we see that playing out across weekend lunch on Saturday and Sunday for Outback and Carrabba's. And we finished the roll of weekend lunch in Q1 of 2012 on Saturday for Carrabba's and Q3 of 2012 on Saturday for Outback, okay, and they will continue to grow. So I just first wanted to clarify that. In terms of leverage in front of us, we've talked a lot about the measured, staged role of weekday lunch, and I think we've given you guys specific targets on how that's going to flow, and in year end, we're going to be -- I mentioned earlier where we'll be at year end. And long term, we said 50% to 60% of the fleet could support that. Continue to feel very good about that assumption. We've talked about the remodel program, and we're finishing up that on Outback this year. And we've talked about the fact that we've got the Carrabba's remodel. You just heard that we had 17 finished, 15 in progress, we feel very good about what we're seeing there. And then we're going to do this 3-year rollout of that. And we kind of have a good line of sight into what that gets us. On the menu work, you've got to put that in test, but the culinary expertise we have here gives me great confidence that we'll continue to innovate. So these are staged and measured levers that we're going to pace so that we do them right and that they go in right. Now all of that happens against the backdrop of a consumer environment that, as you know, has been very choppy and has had a lot of headwinds. So I feel very good about what we can control. What I don't have is a crystal ball that tells me how the macro and customer sentiment landscape is going to unfold. So that is how we think about our outperformance by the industry, and that's what gives us that confidence that, that's going to be an ongoing story for us. Sharon Zackfia - William Blair & Company L.L.C., Research Division: Can I ask a follow-up? I mean, just given the initiatives that are coming out of both Carrabba's and Bonefish, I mean, obviously, the comps had been led by Outback for the last several years on a very strong way. I mean, is there a point over the next few years where you think that flip-flops and Carrabba's and Bonefish are leading the same-store sales for the company?

Well, I guess I would just first take a little bit of exception with that. We're entering our 13th, 14th and 15th quarter of -- well, Carrabba's had a little bit of a decline, but all of these concepts have been outperforming the industry, right? And so Bonefish, we've talked about the deceleration, but it still was positive and had a meaningful outperformance versus the industry. So I would say the journey over the last 4 years, we have felt very, very good about how all of our brands has performed. Fleming's continues to outperform the industry meaningfully quarter after quarter. So the portfolio is in good shape. This is not a story of Outback dragging along 3 laggards. So we feel very good about the brand health across the portfolio. That being said, each brand has to deliver against that 360-degree experience. And so marketing, menu innovation. It's an $88 billion category. We're a very small share. We think there's share opportunity across all of the brands, not just Outback.

And I just wanted to add, and Liz mentioned this in her script, international is close to 10% of our revenue and approximately 20% of our profit. We've talked about the Brazil business, that business is doing extremely well. We're adding restaurants. It's an important part of our portfolio. And international will become an increasingly important part of our portfolio going forward. So as you look at the investors and analysts look at our business, it's a global business and we will continue to capture that opportunity.

Jeff Omohundro with Davenport & Company. Jeffrey F. Omohundro - Davenport & Company, LLC, Research Division: Wonder if we could dig in a little bit more on Carrabba's. Covered Bonefish and Outback pretty extensively, but Carrabba's is facing a sector that appears to be experiencing some more significant promo and value initiatives competitively. When you think about the 360 approach to business, and think about casual Italian, certainly Pasta Seconds has delivered for you. But do you think it's time to look at other levers? And if so, is value or is there other options at this point?

Sure. So let me talk about Carrabba's. I think on the last call, you're absolutely right, there's many levers. And so we said on the last call that we were a couple chapters behind implementing the Bloomin' Brands' playbook on Carrabba's that we did on Outback. So as you know, we have a new menu that is in test and that pending what we, so far looks like a very positive read, we will be rolling out at the end of this year. We have a new design, which has done extremely well. We have new ambience and service, and all of that has gone into a test, and we anticipate starting to roll that at the end of the year. So we're upgrading the entire Carrabba's 360-degree experience, very similar to what we did to Outback. Specifically on the menu, the menu innovation work is going to keep what is unbelievable quality and crave-able, but it's also going to expand the menu into a larger variety, whether it's a variety of price points, whether it's having the wonderful Italian things but also ways to eat lighter, ways to eat more informally. That menu refresh will address all that. And so we feel good about the 360 upgrades we're making on Carrabba's. And as you know, Carrabba's continues to take share in the Italian segment. Before -- the Italian segment has seen a decline over the last year, call it a couple of points, in our data from NPD CREST, a couple of points below the industry. The reality is though that this has just been a year phenomena. And it's a $15 billion industry, and we're a very small share. So we continue to see Carrabba's share growth in front of us, and the levers that we've talked about and detailed are progressing nicely, and we anticipate beginning that roll at the end of this year.

Michael Gallo with CL King. Michael W. Gallo - CL King & Associates, Inc., Research Division: I just had a question, a bigger picture question with regards to Outback. So you've been able to roll out weekend and then starting to roll out weekday lunch without cannibalizing the dinner business. It's still a relatively small percentage of sales, certainly relative to the casual dining category. I guess when I look at your performance in Brazil, your ability to really hit 4 dayparts and the volumes that are obviously significantly above the averages, I was wondering what you think longer-term bigger picture with Outback, whether Brazil can become a template for really becoming a much more significant player across some of those other dayparts, even aspirationally and whether we should think about the potential for the longer-term volumes at domestic Outback to be much higher than they are today?

Yes. So I don't -- we're not going to get ahead of our schemes, but we do think Brazil is a wonderful example of how you utilize all the dayparts. And you've heard me talk a lot about the levers but the need to do it in a measured, paced fashion. I also -- so do we think that there is an opportunity to grow additional occasions and expand in Outback? Yes, we do. We are focused on the lunch piece now and executing that and doing that very well. But that doesn't mean we're not thinking about innovating around the other daypart occasions on Outback that frankly, as you pointed out, we haven't really gone after. So that's all I really want to say for now, for competitive reasons. But I think there's no question that we have a lot of optimism for what opportunities there could be in the future to just fill the box. The other thing I would say is that our relo program obviously enhances that ability because you also have to have the right location to support those other occasions too, right? So that plays into it as well and the 2 converge well.

And that concludes the question-and-answer session. I will now turn the call back to Ms. Smith for any closing remarks.

Yes. Well, we thank all of you for joining us this morning, and we look forward to catching up with you for the next quarter's call. Take care.

Ladies and gentlemen, this concludes the Bloomin' Brands Second Quarter 2013 Results Conference Call. Thank you for your participation. You may now disconnect.