Texas Roadhouse, Inc. (TXRH) Q4 2011 Earnings Report, Transcript and Summary

Good day, and welcome, ladies and gentlemen. Thank you for standing by, and welcome to the Texas Roadhouse Fourth Quarter 2011 Earnings Conference Call. Just a quick reminder, today's call is being recorded. [Operator Instructions] And now I'll turn things over to our host for today, Mr. Price Cooper, Chief Financial Officer of Texas Roadhouse, Incorporated. Please go ahead, Mr. Cooper.

Good evening, and thank you Bo. By now, everyone should have access to our earnings announcement for the fourth quarter ended December 27, 2011. It may also be found on our website at texasroadhouse.com in the Investors section. Before we begin our formal remarks, I need to remind everyone that part of our discussion today will include forward-looking statements. These statements are not guarantees of future performance, and therefore, undue reliance should not be placed upon them. We refer all of you to our earnings release and our recent filings with the SEC for a more detailed discussion of the relevant factors that could cause actual results to differ materially from those forward-looking statements. In addition, we may refer to non-GAAP measures. Reconciliations to the non-GAAP measures to the GAAP information can be found under the Investors section of our website. On the call with me today is Kent Taylor, our founder and CEO; and Scott Colosi, our President. Kent is going to start the call off. After which, I'll provide a financial update. Scott will then provide some insights on our performance and business direction. Afterwards, we'll all be available to answer any questions. Now I'd like to turn the call over to our Chief Executive Officer, Kent Taylor.

Thanks, Price, and good evening, everyone. I'm very proud of our team's accomplishments this past year and I'm even more excited about what lies ahead for Texas Roadhouse. We finished 2011 with great momentum and 2012 has gotten off to a great start. In addition, we are very excited to be increasing our number of restaurant openings for the second straight year. We believe that our disciplined approach of staying focused on providing Legendary Food and Legendary Service at a great price continues to drive our business forward. We had a great sales year in 2011 with comp restaurant sales up 4.7%. This includes a very healthy 3% increase in guest counts, and while we are certainly encouraged by these results, rest assured we are not taking our foot off the pedal when it comes to operations and challenging our operators to raise the bar another notch. In fact, they continue to focus on key areas such as fee of food and service, which is critical to building traffic and continuing our momentum. As I mentioned earlier, 2012 has gotten off to a very strong start, with comparable sales up 6.7% for the first 7 weeks. We feel particularly good about our sales growth outlook for the year, however, we do expect the cost side of our business to be challenging. In response to some of the inflationary pressures, primarily in food, we recently completed the rollout of an average menu price increase of 2.2%. In conjunction with our latest menu, we also added a 23-ounce porterhouse steak to about 1/3 of our restaurants. This provides additional variety for our guests willing to spend more money, much like the Bone-in Ribeye we added to the menu last year. In spite of these recent pricing actions, we do not expect to completely offset the effect of 8% food cost inflation. In other words, we are going to balance short-term profit growth pressures with protecting the long-term positioning of our concept. We believe that discipline has served us well in the past and will continue to do so in the future. Now Price will walk you through our financial update, and then Scott will provide some additional comments.

Thanks, Kent. During my review of the fourth quarter, please note that many of the numbers I will mention are listed in a schedule of supplemental financial and operating data that was included in the press release. Also please note that in the supplemental schedule, we have begun breaking out Texas Roadhouse restaurant-only information this quarter, mainly from an average weekly sales perspective. This information excludes the result of our 3 Aspen Creek restaurants. Some details on the quarter. Our fourth quarter and overall 2011 results came in better than we had anticipated due to better-than-expected sales, driven by traffic and slightly lower food inflation. Starting at the top of the income statement, total revenues increased 13.1% over the year-ago period, driven by operating week growth of 7% and average unit volume growth of 5.6%. For Texas Roadhouse restaurants, average unit volume growth of 5.6% was in line with our same-store sales growth of 5.6%. With regard to same-store sales, traffic increased over 3%, while average check was up approximately 2.3%. By month, comparable sales increased 4.2%, 5.3% and 6.9% for October, November and December, respectively. On the cost side of the P&L, restaurant margins as a percentage of sales decreased 25 basis points over the prior year. As has been the case in recent quarters, we experienced margin pressure in cost of sales and labor, partially offset by leverage and other operating costs as a result of our strong comparable restaurant sales growth. Despite lower restaurant margins as a percentage of sales, restaurant margin dollars per store week grew 4.1% for the quarter and 2% compared to the prior year. So while we gave some margin percent back, we were able to achieve solid restaurant margin dollar growth for the year. Now a little color on some of the specific lines for the fourth quarter of 2011 as compared to the same period last year. Cost of sales increased 90 basis points versus the prior year, driven by food inflation of approximately 4.6% for the quarter. For 2011, food inflation increased just over 3.5%. Labor was up 18 basis points versus the prior year as the benefit of comparable restaurant sales growth was more than offset by the impact of increased payroll tax expense. This increased payroll tax expense was driven by the reclassification of the higher tax credit program incentives. This negatively impacted labor cost by 40 basis points as the credits were recorded as an offset to income tax expense in 2011 versus an offset to labor cost in 2010. It's worth noting that for the full year, labor as a percent of sales would have been close to flat excluding the impact of this reclassification. Other operating costs were down 76 basis points during the quarter, thanks in large part to comparable restaurant sales growth of 5.6%. This enabled us to leverage several expense categories, including utilities, supplies and property taxes. Additionally, we experienced lower credit card fees because of regulatory changes that took effect in October relating to debit card interchange fees. Looking at cost below the restaurant margins, preopening expenses continued to be higher year-over-year in conjunction with increased development. And during the quarter, we recorded $1.1 million in impairment charges. $800,000 of this amount related to writing off some goodwill on a particular restaurant in conjunction with our annual goodwill impairment testing which occurs during the fourth quarter. With regard to G&A, we experienced a 30-basis point improvement during the quarter driven by leverage from a 13%-plus increase in revenues. Our tax rate for the year came in at 29.5%, leading to a 28.2% tax rate for the quarter. Both of these were a little lower than expected due to lower nondeductible officer compensation. Our balance sheet remains strong as we ended the year with $74 million in cash and $62 million in debt. Once again, we generated positive free cash flow during the fourth quarter, bringing our total free cash flow for the year to $56 million. During 2011, we utilized our free cash flow along with $8 million in cash from the prior year and $10 million in additional debt borrowings to pay $17 million in dividends and repurchased $59 million worth of stock. And as we announced, our board authorized an increase in our quarterly dividend payment, taking it to $0.09 per share from $0.08 per share last year. This represents a 12.5% increase. Additionally, our board approved a new $100 million share repurchase program. The new authorization replaces the previous repurchase program that had $40.9 million remaining at the end of 2011 fiscal year. We believe the increase in dividend payment, along with our new share repurchase program, reflects our ongoing commitment to returning capital to shareholders. Now onto our outlook for 2012. On the sales front, 2012 is off to a solid start with comparable sales up 6.7% for the first 7 weeks compared to the prior year. While we do not specifically calculate the impact of inclement weather, it is worth mentioning that we have had milder weather this year than in the prior year. Regarding our outlook for 2012 diluted earnings per share, we expect to generate solid double-digit revenue growth. However, we anticipate we will get back some margin percent and that a much higher tax rate resulting from the expiration of certain tax credits will negatively impact our diluted earnings per share growth by about 5%. Thus, we are expecting diluted earnings per share growth to be approximately 5% for the year. Our 2012 expectations include the following assumptions: first, comparable restaurant sales growth of 4% to 5% with approximately 3% from pricing and 1% to 2% from traffic growth. While we're up more than that now, we believe 4% to 5% is a reasonable assumption for the year; second, we expect 25 openings for 2012 which leads to high single-digit operating week growth; third, we expect approximately 8% food inflation in 2012, primarily due to higher beef costs. We currently have 6 price arrangements in place for 65% to 70% of our overall cost of sales for 2012. And keep in mind that 20% to 30% of our overall commodity cost typically float; and finally, we expect our income tax rate to be 32.5% to 33% versus 29.5% in 2011 because of expiring credits. As I mentioned, this significantly impacts our earnings per share growth potential in 2012. A couple of additional comments relating to 2012. On the G&A front, we expect continued leverage driven by double-digit revenue growth and we also expect to continue returning capital to shareholders through dividends and ongoing share repurchases. With that said, let me turn the call over to our President, Scott Colosi.

Thanks, Price, and good evening, everybody. We're very pleased with our 2011 results as we grew diluted earnings per share double digits, while investing in 20 new restaurants and returning over $75 million in capital to our shareholders in the form of share repurchases and dividends. We've also entered 2012 with very strong top line momentum. And although we expect to give back some margin this year and an increased tax rate will certainly impact our earnings growth, we remain focused on doing the right things for the long-term success of Texas Roadhouse and its employees, guests and shareholders. To that extent, we feel very confident about our positioning, and in particular, our growth prospects. In addition to the positive sales results we're experiencing at existing restaurants that Kent mentioned earlier, we continue to experience solid performance from our newer restaurants, giving us confidence they will continue to generate positive incremental returns. 70% of the restaurants we opened in 2011 did over $100,000 in sales during their first week. Furthermore, our development costs continue to be a few hundred thousand dollars lower than they were several years ago. Taken together, these results are very encouraging for the future growth of Texas Roadhouse. Our development plans for the remainder of the year, of this year, are complete, and we are already well on our way to building the pipeline for 2013. At this point, our goal is to put ourselves in a position to target at least the same number of openings in 2013 as the 25 we are doing this year and possibly a few more. We believe the demand certainly exists for many more Texas Roadhouse restaurants and are seeing great new store performance from both the sales and cost side to make us feel encouraged about continuing to increase our unit growth on an annual basis. While our primary focus for growth will continue to be on the domestic side of Texas Roadhouse, we're certainly excited about what we perceive as long-term prospects for international growth. Our franchise restaurant in Dubai, which opened during the third quarter of 2011, continues to perform very well and we are optimistic we could have additional opening in the Middle East this year. We're also focusing on introducing the Texas Roadhouse brand in other parts of the world, including Mexico, Canada, Russia and China. As always, our goal is to create value for our employees, our guests, our local community and our shareholders. We will continue to challenge ourselves to be the best we can be in terms of providing a great place to work and a great place to dine. I want to take a moment to thank all of our team members, particularly our managing partners, for a great 2011 and a very solid start to 2012. You all have done a fantastic job exhibiting our core values of passion, partnership, integrity and fun to drive our business forward in a very tough economic environment. Kent, Price and I congratulate all of you for your outstanding results, and we look forward to seeing all of you at our upcoming annual conference. With that, we conclude our prepared remarks. So operator, you can please open the lines for questions.

[Operator Instructions] And our first question this afternoon from Jason West at Deutsche Bank.

Just want to follow up on the pricing. Just -- can you talk a little bit about how you came to the decision to take the 2.2 -- I mean, I guess, that's what you are testing, but just if you could talk about how that performed in tests and why 2 was the right number?

Jason, this is Scott. We had to invest -- 2% is a number that we are comfortable with competitively. Certainly, we've got to think about what inflation we have. We've also got to think in terms of really what's going on competitively, what we think that our concept can bear and be fair to our guests and fair to our employees and everybody in our system. And we felt that was a good number for us, good, reasonable number for us.

Okay. And then...

Jeff, this is Kent. I personally spoke to all 40 of our market partners and got feedback from them and their managers on making our pricing decisions as we do every year.

Okay. That's helpful, guys. And then just a follow-up on that, the guidance that you said around 3 points of price is assumed in the comp guidance. Does that require you to take any more? Or can you -- is it kind of 3 with what you have now in the menu for the rest of the year?

Jason, it's Price, and that does not require us to take any more. It's what we have in the menu and what we've already taken this year and factoring in what's carrying over from 2011.

Okay. And are you testing anything incremental already? Or is that really just kind of on hold, wait-and-see at this moment?

We're not right now. We just completed the rollout of the 2.2% 2 weeks ago, so we haven't begun any further testing.

We'll take our next question now from Jeffrey Bernstein at Barclays Capital.

Great. A couple of questions. Just first on the comp side of things. Obviously, very strong comp for the first 7 weeks. Just wondering, you mentioned weather being favorable -- just wondering, it seemed like the first few days of your 7 weeks would still be the last 2 days of calendar '11. So I'm wondering can you talk about the sequential trends, whether we should assume that those first few days were very strong in terms of the holiday. And if you can also talk broadly, it seems that the broader industry is seeing a nice uptick. Just wondering whether you can make any comment on what you think the underlying trend is for your business, and then I had a follow-up.

Jeff, it's Price here. We did have a good holiday season for sure. Some calendar shifts did help us a little bit during the holiday season. Christmas was on a change-up for a day for almost went from a Saturday to a Sunday. This year, New Year's helped us into 2012 a little bit. I'd say the biggest thing that's helped us is, first and foremost, operationally, I think we've got a lot of momentum. We feel like we've got a lot of momentum in our business. And then on top of that, we've been helped by at least a few percentage points from having less inclement weather year-over-year.

The weather, you think, is a few percentage points?

It's probably a couple percentage points, yes.

Okay. And then any pushback on the pricing? I know it's early on, but I know that was historically the fear was that you'd get some pushback. Are you seeing anything like that thus far?

No, but in truthfulness, it's been out there 2 weeks so it's early on.

Got it. And then just on the food inflation side of things, it looks like -- I think you previously told us you were 40% locked. Now it sounds like it's 65% to 70% and you're still kind of zoning in on that 8%. Just wondering if you can talk about the beef component of that, how much you've got secured, and just more broadly speaking, it seems like commodity is -- of course much of the spectrum are easing, but beef, obviously, have a longer-term cycle. I'm just wondering how you balance -- you often talk about the long-term positioning versus the short-term pressures. Can you just talk about beef inflation in terms of at what point you would expect that to ease or whether we should assume this type of levels the next couple of years?

Yes, I'm trying to tackle that, Jeff. On the beef side, we are -- we do have fixed pricing arrangements in effect for over 90% of our beef cost in 2012. So we feel very good on where we are there. The volatility around that 8% estimate for food cost inflation would really be driven by produce and dairy. Those are the biggest components that we float around the market, and that's about 15% to 20% of our total cost of sales. I think you asked us well on beef. It's a little early to tell about beef going forward at this point. Again, we feel very good and are very pleased with the fact that we've got almost all of our needs locked in pricing-wise for 2012.

Kent, just lastly, you didn't mention labor inflation. I think last quarter, you thought it was going to be like a 2% to 3% basket. Is that still reasonable for '12 at this point?

Yes, that's our underlying estimate for 2012 right now, yes.

We'll go next now to David Tarantino at Robert W. Baird

Just a question on the -- first question is on the 2012 guidance and you mentioned that you're expecting to give up some margin percentage this year. So could you maybe quantify the level of margin compression that's embedded in the guidance, both at the restaurant level and at the operating income level?

David, it's Price. With the range of sales, we don't really get specific on the margin compression. We did give up about 40 basis points of margins in 2011. Right now, embedded in our plan is giving back a little -- is giving back more than that in 2012. The biggest component of that will definitely be on the food cost side of things. We expect to give back margin there and make up a little bit of margin in terms of labor and on the other operating side of things.

Okay, that's helpful. And then, I guess, if you take a look at where you might end the year if you hit that guidance towards maybe the low end of your historical range on restaurant margin percentage, I was just wondering if you can maybe talk philosophically about how you think margins could trend on a long-term basis, whether the idea would be to recoup some of that margin as you look out several years from now and what are the factors that will drive that?

Dave, don't know exactly. Our margins will bounce around a little bit year-to-year, driven primarily from what food inflation is. When we had a couple of years of deflationary environment, we were able to pick up good margin percents in those years. We've given back a little bit in 2011, expect to again in 2012. Our real focus is consistently being able to grow those restaurant margin dollars on a consistent basis. And overall, we've been able to do that. If you look back over a 5- or 6-year period, we've been successful in being able to consistently average low single-digit restaurant margin dollar growth on a per store week basis. So I would expect during years when we have a little lighter food inflation, it gives us an opportunity to pick up a little bit on the restaurant margin percents. And in years where we've got 3.5% like we did last year, a little over 3.5% food inflation, and certainly this year, with about 8% food inflation, we'll give back some margin.

We'll go next now to Destin Tompkins at Morgan Keegan.

Just a couple additional questions on kind of that margin compression issue. I guess specifically on labor leverage, looking at the fourth quarter, had it not been for the payroll tax item, I think you maybe would have had 10 to 20 basis points of leverage. Is that maybe a good basis point for us to look at as we project 2012 or are there any other moving parts that we should kind of be aware of?

No, Destin, that's probably fair.

Okay. And then on the kind of the 8% food cost inflation numbers, we look at that through the year. Is that 8% kind of quarter-by-quarter? Or can you kind of help us with the cadence of that cost inflation and given that you're going to have a little bit more pricing in the first half of the year, well, maybe in the second quarter at least, how we should be thinking of that kind of cost of sales year-over-year as it goes through the year?

Sure. For the most part, the inflation, we expect it to be pretty even through the year, maybe about a point higher in the first half of the year than the second half of the year is our best guess there. And to your point, the pricing -- on the pricing side, we expect to have a little more price increase in the first half of the year and then not as much in the back half of the year as we start to overlap some of our pricing actions from last year.

Okay. And then lastly, just as a clarification, on the timing of the 2012 development, I thought I remembered it being more front-end loaded this year than last year. And you may have said it, forgive me if you did, but can you just kind of remind us what the timing of development looks like this year?

I would say, half of our stores will be opened by the first half of the year.

We'll take our next question now from Phillip Juhan at BMO Capital Markets.

Scott, it looks like your CapEx came in a little bit higher than planned, about $10 million. You last guided to about $70 million based on [indiscernible] and you guys came in about $81 million. Can you talk to us a little bit about that variance in CapEx, actual versus planned? What's driving that?

Again, it's Price. On the CapEx side, the $80 million is really driven by where we are on our new development, our new restaurant development. We've spent last year -- of that $81 million, we spent just under $20 million on maintenance CapEx. I believe it's $18 million to $19 million on maintenance CapEx, remodel of existing restaurants, and the rest of the CapEx went to new restaurant development. So it's really a function of where we are in the development pipeline on new restaurants. And this year, it's much more evenly weighted through the year than 2011 was.

Okay. And Price, would that mean that CapEx number is in line with your plan at the beginning of the year?

Yes. Generally, we plan -- we expect to spend $15 million to $20 million a year on remodel and maintenance CapEx. So the increase from our initial plan back in the year had to do with the fact that we got in -- we're much more evenly low-weighted as far as new restaurant openings. We're in very good shape in our development pipeline.

And we'll take our next question now from Bart Glenn at D.A. Davidson.

I was just curious, in terms of your earnings guidance, what sort of assumptions do you have in terms of the -- how much share repurchase you might do during the year?

Bart, we're assuming we're going to buy in at least dilution. Dilution for us is 1 million to 1.5 million shares a year. So we're assuming we'll buy in at least that. Obviously, with this recent board authorization, it frees us up to -- certainly, I have the flexibility to buy in more than that.

And then just one follow-up question as well. With a lot of competitors kind of focusing on opening price points and you tend to have lower average ticket than a lot of your competitors, it doesn't seem like it's had any impact in the results, but are you doing anything strategically just to make sure that you don't feel pressure from the efforts of some competitors?

This is Scott. We've been very, very focused on executing our food and our service at a very high level, that's number one. And number two, we still scream a lot of value on our menu, and that continues to bring in our guests as well. So we've got -- we're very, very well positioned right now as we believe that, and if it's showing on our results certainly. Again, we continue to maintain a lot of value on our menu that I think is as competitive, if not more, than the majority of our competitors.

And this is Kent. We have not compromised the quality of our ingredients nor have shortchanged our service levels in the restaurants either.

[Operator Instructions] We go next now to Andy Barish at Jefferies.

Just on the porterhouse rollout, as you continue to push on the higher end as well, is that a supply constraint going into 1/3 of the restaurants? Or is it more kind of a demographic, willing to accept that price point? And just not to get too granular, but in the comp expectations for the year, are you assuming mix is relatively flattish, i.e. some of the higher price point steaks offset some nonalcoholic bev mix or something like that?

Andy, this is Kent. Yes, supply is the issue on the porterhouse as we would love to have done the whole system.

And Andy, on the second part of your question, on the mix, I have assumed a little bit of negative mix because part of the pricing we took late last year was a little bit on our alcoholic beverage tiers. And so typically, when we do that, we see a little bit of negative mix from that. So I have assumed a little bit of negative mix for 2012.

We'll go next now to David Dorfman at Morgan Stanley.

Guys, I just have a couple of questions. One is just to clarify on the pricing. Just in this window that we're in now, for example, between -- when you added the 2.2% and before we sort of anniversary the 1% from March last year, are you now running 4.2%? Is that where we're at now and has sort of come down throughout the year?

Yes, that's correct.

Okay. And then just these last 2 quick things. For the HIRE Act sort of tax credit shift in the labor line, that was still a -- that did not affect the first quarter of '11, right? So you have one more year to -- one more quarter to cycle that and then we'll be sort of a wash in the second quarter?

We've cycled it now, David, so now the ongoing effect from that will be a much higher tax rate. So no labor line, but it will be -- it will result in much higher tax rate.

And Cooper you say you might start seeing some leverage that could happen in the first quarter?

Correct.

Okay, and the last question is just related to some comments you made last year, just sort of anecdotally that you saw some -- a bit of like a trade down, a little bit more white collar crowd in the restaurant. Is that something that's still going on? Are you still seeing sort of maybe sort of a higher-income demographic moving in?

This is Scott. I don't think we know that, really, what that trend is or we've had that specificity on our data. We do know that in rolling out the Bone-in Ribeye product, higher-priced products had been very successful for us. And the porterhouse in the stores we tested in also had a lot of success. So we're optimistic that there are folks out there that have a demand for some of the higher-priced stuff, and will continue to buy it.

Do you have a sense of where you may be taking some of the -- I mean with your comps, where the share might be coming from?

I think it's coming from everywhere, really. I mean smaller folks, bigger folks, I think it's all over the board.

We'll go next now to John Ivankoe at JPMorgan.

It's Amod Gautam on for John. You talked a little bit about mix already. I was just curious, it sounds like with the check growth that you mentioned for the fourth quarter and what I think is about 2 points of pricing that mix has been relatively stable. Is that -- do you think that's been sustained into that 6, 7 comp that you mentioned for the first 7 weeks?

Yes. For the fourth quarter, mix was basically flat. And it's been about flat for this -- for the first period, anyway, first part of 2012. It's been down slightly again due to the fact we took a little pricing on alcoholic beverages and we're not seeing necessarily all that flow through.

Okay. And then you've talked about pulling out costs out of development. Do you think you're pretty much at the bottom end of the investment cost at this point? And somewhat related to that, what is kind of the dollar preopening expenses that you expect or the dollar increase in 2012 relative to 2011?

This is Scott. I'd say we're at the bottom of the development cost cycle, if you will, from the changes that we've made the last few years, so I don't think we're going to go down much more than we already have. And then inflation is going to start to hit us on certain things where there's building construction with the cost of materials or the cost of equipment or whatnot, but we actually -- you may see us continue to build slightly larger restaurants, just have more tables and seats and so forth since we have bumped out quite a bit of stores over the last few years and we continue to do that program. So I see that continuing to happen.

As we have reduced our costs on opening these stores, we have added seats. So that's an additional benefit.

Now on the preopening side, we're looking at probably in the range of $450,000 per store, somewhere thereabouts. It moves around quite a bit depending upon the store and who's going to run that store, if it's an internal or external hire for that restaurant. But $450,000 is probably a good number, somewhere in that range.

And just to tag onto that, depending on where we are in our development pipeline, if we end up continuing down this path for 2013 and potentially open up more restaurants for 2012, we could have more than, say, $450,000 times 25 restaurants in preopening costs for this year.

We'll take the next question now from Keith Siegner at Credit Suisse.

Just kind of a bigger picture question. These are really strong traffic numbers you're putting up on a 1-year and 2-year and you've waived your path kind of the traffic pressures of '08, '09, so you're kind of like all-time peaks now. Where is the traffic coming from? I mean, you've got long lines, on a lot of the weekend nights, like where is the capacity for such big traffic growth? Is it weekdays, is it shoulder periods? Kind of where is that coming in and how much capacity do you have kind of, say, at the peak hours? Like how much more room for traffic is there in the current system?

I'll start it off. As far as where the traffic is coming from, we continue to see all days of the week doing well. It's pretty much across-the-board in regards to that. We continue to operate, continue to challenge themselves on the speed initiatives on how to increase the opportunity for more throughput in the restaurants. On top of that, we continue adding seats at restaurants. We're up to just shy of 70 restaurants where we've added additional seating capacity to and we've got another 25 to 30 on top to complete this year. And in those locations, we're adding anywhere from 22 to 35 additional seats.

Keith, another thing we're working on, as Kent is -- just eliminating tables sitting there idle and trying to turn the tables much quicker during the peak times that we have, which has definitely been successful for us.

[Operator Instructions] We go next now to Peter Saleh at Telsey Advisory Group.

Just a quick question on -- just if you guys can give us an update on your initiatives to reduce wait times, call ahead seating and maybe some of the -- an update on pay-at-the-table?

Well, call ahead seating, we've got a few different host-related systems that we've been testing and that have various ways to how we collect the data for call ahead and also walk-ins and mesh that data together and so forth. And we tried different things as far as using pagers or reader boards, stuff like that. As far as pay-at-the-table, we had a test last year. We decided to end that test and we're looking at some other things. So we may test something in the future. We continue to get pitched a lot of different programs from people, but we haven't settled in on anything quite yet.

We’ll go next now to Brian Bittner at Oppenheimer.

Just to elaborate a little bit more on this incremental traffic you're seeing. I mean, is there anything incremental versus 2011 that you're doing on a marketing basis, maybe enhancing a local marketing program? Or in other words, is there anything that you could say -- these top 2 initiatives are what’s really -- these top 2 internal initiatives is really what's helping drive this traffic.

This is Scott. Not really. I mean, we continued to strengthen our local store marketing team, meaning that we've got more experienced people. We've got more training classes and those kind of things based on a very fundamental blocking and tackling kind of stuff, but it continues to evolve and strengthen over time. As Kent mentioned, we continue to focus on speed because we do have very long waits in our restaurants. And so we want to make it tougher to lose people, if you will, because the waits are so long. So just really getting stronger and maintaining a disciplined focus on the business is really what's driving results for us.

And then our new openings were allowing our trainers, a few trainers, to stay on longer which definitely helps us with our, I guess, curve when we lose some sales after the honeymoon period.

And gentlemen, it appears we have no further questions at this afternoon. I'd like to turn the conference back to you for any closing remarks.

All right. Well, thank you all for joining us this afternoon and feel free to call us with any questions.

Thank you. Have a good evening.

Thank you. That concludes today's Texas Roadhouse Fourth Quarter Earnings Conference Call. Thank you so much for joining us. I wish you all a great afternoon. Goodbye.