Good day and welcome to the Texas Roadhouse Incorporated Fourth Quarter 2013 Earnings Conference Call. (Operator Instructions). I would now like to introduce Tonya Robinson, Director of Financial Reporting. You may begin your conference.

Thank you, Cameron, and good evening, everyone. By now, everyone should have access to our earnings release for the fourth quarter ended December 31, 2013. It may also be found at our website at texasroadhouse.com in the investor 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 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 of 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 Scott Colosi, our President and Price Cooper, our Chief Financial Officer. Scott will provide some insights on our performance and business direction and price will provide a financial update following that we will open the call for questions. Now I would like to turn the call over to Scott.

Thank you Tonya and good afternoon everybody. We’re pleased to have wrapped up another year of solid sales and profit growth and while we’re challenged during 2013 with 7% food cost inflation our operators continued to stay focused on and committed to delivering legendary food and legendary service to our guest each and every day and for the year we generated a 3.4% increase in same store sales which included a 1% increase in guest counts. Additionally for the fourth quarter we increased comp sales by 2.1% and we have now delivered 16 consecutive quarters of positive comp sales growth. And for the full year our sales growth combined with various expense saving initiatives that you’ve heard Price talk about over the past year or so enabled our average restaurant to hold their total margin dollars flat to last year. Pretty remarkable given the 7% food cost inflation I mentioned earlier. On the development side in 2013 we opened 26 company restaurants and our franchise partners opened 4 restaurants including two outside of the United States. Our new company restaurants continue to open strong and are delivering very good financial returns for us. For 2014 we plan to grow our company store base at 25 to 30 openings, our development pipeline is in very good shape and we plan to enter our 49th state Alaska during the first half of this year. In addition we expect our franchise partners to open 4 to 5 restaurants in 2014, 1 to 2 in the United States and the balance outside of the U.S. We recently signed our second international area development agreement which provides for the development of multiple restaurants in Taiwan over five years. We’re excited about the International opportunities for Texas Roadhouse, yet we will continue to be disciplined in…

Thanks Scott. Good afternoon everyone. For the fourth quarter of 2013 we reported revenue growth of 21% and diluted earnings per share growth of 22%. Both of these measures were positively impacted by an extra week in December or 14 weeks in the fourth quarter of 2013 compared to 13 weeks during the fourth quarter of 2012. We estimate the extra week positively impacted diluted earnings per share by $0.03 to $0.04 for the fourth quarter and by approximately $0.04 for the year. Additionally during the quarter while we benefited from a $1.8 million gain recorded in conjunction with the sale of the Aspen Creek concept; the majority of this was offset by two things. First we incurred $700,000 of employment separation cost which was included in our G&A expense. Second, we incurred an incremental $700,000 of amortization expense relating to certain leasehold life adjustments. This amount was recorded in depreciation and amortization expense. From a top-line perspective comp sales increased 2.1% during the quarter and average unit volumes increased 1.4%. Comp sales growth was comprised of flat traffic and a 2.1% increase in average check. By month, comparable sales increased 3.4%, 3.5% and 0.3% for our October, November, and December periods, respectively. Furthermore comp sales for the first seven weeks of 2014 increased approximately 1%. December and year-to-date sales results have certainly been negatively impacted by inclement weather but it is really difficult to quantify. At the end of the day temporary things like weather disruptions do not impact how we run our business for the long term. In terms of restaurant margins dollars per store week grew slightly in the fourth quarter primarily as a result of the flow through on the extra week. Restaurant margin percent continued to be down year-over-year as commodity inflation outpaced our pricing…

(Operator Instructions). And we will take our first question from Andrew Charles with Bank of America Merrill Lynch. Please go ahead.

I just wanted to dig into the commodity guidance a little bit. You mentioned that you took a lot of the pain last year, in terms of beef inflation. But we have recently seen beef costs spike, as well as dairy, and presumably produce given the California drought, so can you just talk about your assumption for beef inflation within your guidance, and as well as how much of your needs are contracted for 2014?

Overall we have got about a third of our beef needs for this year contracted and we’re expecting to see some inflation in our overall beef basket and we’re expecting the market for beef to be up but certainly we’re expecting the market prices to be up more than our price because of the fact that early last year we were at 13% to 14%, our beef was up 13% to 14% in 2013 which was considerably higher than the market. On the dairy side of things we do have a portion of our dairy needs locked up. Overall our commodities we’re sitting here to date roughly 35% to 40% of our commodity needs locked up. So sitting here today we feel pretty good that overall commodity inflation will be in that low single digit range.

Okay, and would you say it's feasible to see lower year-over-year cost of goods than in 2014?

It could be; it’ll depend on where that low single digit shakes out to be exactly. But yeah they could be flat to down slightly depending on exactly where that low single digit is.

We will take our next question from Alton Stump with Longbow Research. Please go ahead.

Just a quick question. I certainly understand that it is very difficult to try to break out how much the weather impacted. But I think you mentioned at the month of - December was only up very slightly versus your 2.1% comp for the full quarter. So it is pretty clear, at least based on that read, that it did indeed have a meaningful impact on comps in the fourth quarter.

I think if you’re asking a question if there was a meaningful impact of weather in December, certainly I guess there could have been - probably was. We just historically haven't spent much time trying to calculate what we think that impact is. Some of the weather, remember there is always bad weather a year ago as well so when you’re looking at it's not just about what’s happening this year and sort of what was the weather last year and none of that changes what we do in our business day in and day out short term, long term so we just don’t spend a lot of time trying to get to a number on it.

And then just one quick follow-up we had heard from some of our checks that there was a portion of restaurants that there was increased focus on the bar effort, is that widespread and is that an area of the restaurant that you would like to see grow as a percentage of sale?

We would love to at least hold where we’re on that, that’s been an area where us and others in the industry have seemingly lost a little bit over time and the fact that our alcohol as a percentage of our total sales has continued to come down a little bit year-over-year, currently we’re at about 11% in terms of alcohol mix so yeah certainly we would love to at least hold on to what we got or grow it slightly but you know our business is still about the food, and the made from scratch food.

We will take our next question from John Glass with Morgan Stanley.

First, Price, can you just talk about the cadence of the food inflation for ’14, does it drop right down to that low single-digit the first quarter or do you kind of feather in over the year as the contracts come and do it all over?

It's tough to know exactly John but right now today we would expect our second quarter inflation to be modestly higher than the rest of the year. It does not come in exactly in the first quarter because of the aging process on our beef. So for instance typically our January commodity inflation will be the highest and then by quarter it looks like sitting here today that our second quarter will be a little bit higher than the other quarters more so due to the timing on the beef side of things.

And the health insurance that you’re offering, do you know yet or are you getting people to take you up or this is just an estimate? There have been other companies that have offered it and they have not seen the response that they expected therefore their cost were lower, is this already commitments from employees that are taking it up?

We offered it to the folks working 35 hours and up for us, so we don’t go all the way to 30, and a smaller percentage, I’m going to go too specific, of folks accepted the coverage. However some of those folks accepted more expensive coverage than we would have forecasted. So at the end of day we ended up fairly close to where we thought we might be but there are still long ways to go on it, I mean this is still a new thing for a lot of people and we’re just kind of scratching the surface I think from an experience standpoint just being really a 1.5 month into the New Year.

And the last question is on your dividend policy and your philosophy there, it seems like you’re - if I’m doing this right, your payout ratio is well over 50%, which is large I think in the context of other casual diners. How do you think about what the right payout ratio for your business is? Is this a signal that much more of your capital return is therefore dividends and less share repurchase? It would seem that it would have to be that way at least in the short term.

I will start on the first part of that but our payout ratio we look at it more so in terms of cash flow and right now our payout ratio is somewhere in the neighborhood of 20% to 25% of cash flow in the form of a dividend and I think that’s something that you’ve seen grow a little disproportionally early on to our growth in cash flow and I think sitting here we think we can continue to grow that at a little bit of a disproportionate rate earlier on. We don’t have a set target per se as far as what percentage of cash flow we necessarily get that to but we look at it much more in terms of cash flow versus EPS.

We will take our next question from Will Slabaugh with Stephens.

[Jay R.] [ph] here on for Will. Digging deeper into the comp here I wonder if there were some regions you could point out that maybe were stronger or weaker than expected and I guess in even more detail did you’ve more door closures year-over-year in December than you did the year before?

I don’t know exactly how many store closures we had because as Scott mentioned we don’t track it. Now on the regional side I can tell you that in December and certainly the first part of this year as well both the Midwest markets as well as the stores in the Northeast, their same store sales growth was much lower than it was prior to December. So in other words both areas were running positive up until that December time frame and then come December and since then both of those areas are now negative as compared to the rest of the markets.

And switching gears this new cloud based back in the house system that you all talked to and some other that front of the house management system I’m wondering given you’ve had a few more months with that in place, do you see an quantifiably data there around speed of service, throughput, comp lifts around those line items?

On the back house system it's not out yet it's only in a couple of market, so we have got a long way to go on that piece. On the front of house systems, our guest management systems, we certainly believe that it makes a little bit easier for some of our folks to manage so many of the parties that we have coming into our restaurant because they are managing a walk in party, a lot of walk in, they are also managing a lot of parties that call ahead so you’re balancing these two lists all times and we just went through a very, very busy Valentine’s Day weekend where those systems get tested to the hilt. So a lot of our folks are very, very happy that we have that system. We haven't quantified at this point what the sales lift if any is specifically from that particular system. There is a lot of things going on in the restaurant besides just that in any restaurant whether it's what our competition is doing, what the weather is doing so forth and so it is hard to factor at one specific thing. We kind of really look at, we look at these types of systems, do our people like them or not? Do they believe that they add value to them? So it's the kind of the way we look at it and it's only in about half our stores, the guest system. So we don’t mandate it in our restaurants and as it proves to be a big of a hit and you will see more of our operators asking for it.

And we will take our next question from David Palmer with RBC. David Palmer – RBC: It looks like your new store productivity metrics improved somewhat, could you perhaps talk about what you’re seeing with new store and perhaps the honeymoon effect?

Yeah I mean our stores actually, it's been fairly consistent the gap between the stores in the AUV calcs [ph] in comparison to the stores in our same store sales calcs [ph]. I think we laid it out in the last report I believe they are about $7000 a week or $8000 a week difference and I thought two follow-up for where they have been most of the year. I can’t tell you that the last couple of years, the 2011 year and the 2012 year for which we now have 12 full a months of data of those years, they are doing quite better than our pro forma sales estimates and we’re generating very good financial returns, really in the high-teens IRRs level for those store years. 2013 in the stores it started off pretty strong but it's way too early to tell how those stores are going to shake out once they get back to our honeymoon, our honeymoon really hasn’t changed a lot in the last couple of years. It's been fairly consistent. I mean it does bounce around within a few percentage points relative to the first month that we’re open but I think what you’re seeing is it's just sort of just a little bouncing around effect. David Palmer – RBC: And one just follow-up, a lot of company’s out there that may not have done a lot of conventional marketing advertising on TV, have been exploring ways to do things in a more local and perhaps digital basis. Are you testing things differently that way or is there any changes in the way that you’re thinking about marketing?

There is no change in the way we’re thinking about marketing, our approach has been forever to be very locally based. We do have a very big presence within Facebook and Twitter and other forms of social media and we’re quite aggressive at leveraging that but our approach has always been a very grassroots marketing approach and we think that works really well for us. We’re going to continue down that road.

And we will take our next question from Jeff Farmer with Wells Fargo Securities.

Just following up on that your productivity question, I’m curious what’s your development is going to look like this year in terms of new markets versus exciting markets and I guess more specifically does that make a difference at all in terms of your unit volumes?

Historically really hasn’t made a significant difference in our average volumes for a particular last year. Really the only new market that we have is Alaska otherwise we’re kind of somewhere not too far away from where we’re building restaurants and as it's typical for us they are spread out all over the country but we have the same discipline process including Kent visiting every location before a deal becomes a deal. So the pipeline this year is in great shape, folks are well on their way to next year’s pipeline, wrapping that up so we do feel very good about the momentum we have in our new stores and admittedly part of that some opening 25 to 30 stores a year, not 50 stores a year and we think by limiting the number of stores that we do open we end up on average with better quality in light of quantity.

And just one more curious if you guys have sort of drill down on what you expect the total investment cost per unit to be sort of the unit level economics cost of the box in ’14 and can you just sort of compare that to what 2013 came in for us?

Well 2013 was around 4.1 million and again for us that includes 10 times the first year’s rent and also includes preopening which we have a very, very fully loaded preopening numbers relative to some other folks and that will probably go up you know 100,000 to 200,000 in 2014. Some of that’s just with the cost of real estate, some of that’s just the cost of equipment and building a couple of stores in Alaska costs a little bit more to get those stores built up there. So, and we have a deal or two on Long Island, it was a little bit more expensive. So we have got a few deals a little bit more expensive and plus general inflation but we’re comfortable with those numbers relative to our AUVs which of course continue to go up overtime and we feel very, very good about what we’re modeling and the chances that we have to continue to get very good returns on these stores.

We will take our next question from Jeffrey Bernstein with Barclays.

Two questions just first on the cost side, I think you mentioned from a labor line perspective healthcare is what you focused on, I think you said 2.5 million to 3 million and then from a cost saving perspective you said roughly 3 million plus, I’m just wondering if you can give me a little bit color on at least on the labor side how many wage might come into play and on the cost saving side what the biggest bucket side that are contributing to that 3 million plus and then I had a follow-up.

On the cost side it's really too early tell if you’re talking the minimum wage that may come into effect at some point. Now we do operate in, we have got 13 to 14 states with a minimum and/or tip wage increases or can increase every year, in a lot of those cases it's tied to the CPI index and so from that I think it's about a $1 million for this year but it would have been roughly that for last year’s increases as well. So that’s just kind of a general headwind that we have every year in terms of labor inflation in those states and then on the cost side, the cost side of things on the savings I guess in interfacing cost, most of our savings in 2013 really came from various supplies or paper products or certain services. I think if you look towards ’14 most of these savings it will see they will be either the other operating expense line or some of that maybe in the food cost line as it relates to our supply chain and getting some better synergies and purchasing power that might relate to produce of dairy. But most of it in that other line would be for supplies again or various contractual services at the restaurant level.

Got it and then just could because you are still generating positive traffic and speed of service is the biggest opportunity. I’m just wondering I know you had said maybe there was you did mention in the past there is a casual model and test and I'm just wondering any kind of early learning’s and something like that, how you might adopt to casual dining or whether there is some incremental technology you’re using whether it's table tablets or the server handhelds to kind of improve the speed of service.

Well Jeff we have got two stores opening in Oregon that have a modified service concept. Three similar to Texas Roadhouse, your order food little bit differently, you wait in the queue and you order food at the counter and then we run it out to you but it's more similar to a regular Texas Roadhouse. Big footprint, lots of tables and so forth and different. We’re still reading results there is only two, who knows where this thing will go with regards to that as far as the table top technology stuff we have tested some things in the past. Our main vendors NCR purchased Radiant, purchased (indiscernible) back in the day and so we’re pretty attuned with what’s available and what’s going on and we’re watching very closely to see what transpires with the number of competitors that have announced are going to go or have gone tablets in some form or ordering devices or payment devices on tables in some form nationally. We’re just watching those folks very closely and seeing how things go. We’re very protective of the server guest face to face interaction and relationship and legendary service is the second part of our mission statement. So we’re a very relationship based concept as we’re going to be watching this technology piece very, very closely to see how well it might be good for us or not.

And our next question comes from David Tarantino from Robert W. Baird.

First question on the pricing that you mentioned, I think you said took 1.5 and only 1 percentage point of that is flowing through. So just wondering maybe what you’re seeing in terms of the flow through there and why you’re not getting the full 1.5%. I’m going to have a follow-up related to that.

Yeah we did take approximately 1.5 but in conjunction with that we kept a price point of some of the entry level, the lower priced items in certain categories. So largely as a result of that we’re expecting to experience either 1% or maybe a shade up more than that on a flow through side of things and that’s exactly what we’re experiencing at least year-to-date on that.

And then as you think about that level of flow through and the inflation guidance you’ve given netted against the cost savings. I think last time on the call you said you might be able to hold restaurant margin percentages flat if you get a little bit of traffic growth. Is that still the case? What type of traffic growth might you need to hold the percentages flat in 2014?

Flat would be out of the question, it will depend as you’ve mentioned on traffic growth for sure but also it will depend on exactly where does the low single digit food inflation come in at and you know to on extent on exactly where do the labor cost come in at but with all that said flat margin percent would not be out of the question for sure and hopefully we will be able to certainly continue to grow those margin dollars because that’s what our folks are paid off of and that’s what ultimately flows through to the bottom line and the shareholders are paid off of.

We will go next to Jason West with Deutsche Bank.

Just a couple of housekeeping questions first and then a bigger picture question. So on the quarter price can you tell us where the pricing averaged out for the full quarter? I know you have took some pricing in December just want to get the number on the average for the full quarter.

Yes the average was right at 2%.

And then the revenue number was a bit higher than we had modeled even when the comps were a little lower so I don’t know if there was a timing issue with the stores maybe some of the new stores opened early in the quarter or maybe the extra week with a higher revenue number than we had modeled and if you had that number?

Yeah Jason the extra week was a $90,000 plus as compared to more like a $78,000 - $80,000 week. So that would have accounted for a large part of the higher side. I think in the week we’re somewhere in the order of $32 million.

And just back on the pricing question, I know you guys are looking at low single-digit food inflation today but some variability still left in that number. Just wondering how you’re thinking about pricing over the rest of the year. Are you already testing something for later in the year or are you planning to stick with the strategy of the last year which was wait till December on that?

Right now we’re not testing, we’re not currently testing anything. We will begin testing stuff pricing as we move in to this year but we will probably sit where we’re pricing wise for 2014 and then as we get more understanding of what the commodities market in particular and other cost side of the equation looks like for 2015 we will begin dialing those expectations.

And we will go next to Brian Bittner with Oppenheimer & Co. Brian Bittner - Oppenheimer & Co: So if you stick with the plan for 2014 as it is today for pricing what would the full year price impact end up be?

The full year pricing we would have in our menu would be right at about 1.5% but again not expecting all of that to necessarily flow through but we took that 1.5% the middle part of December so it would be right about that 1.5%. Brian Bittner - Oppenheimer & Co: So I guess that would imply food cost inflation would definitely have to be underneath that 1.5% to get any leverage, other cost [ph] line unless you’re expecting some type of mix benefit this year, is that correct?

Correct. The only caveat of that would be some of the cost savings, some of the cost savings side of the equation could fold into the supply chain side of the business which would hit that food cost line and then a lot of our, we do have some variability in the food cost concerns of yields. So our yields change and can hopefully increase overtime since we do our own cutting of our meat in our restaurants you know as we get better and better in that regard that can also help food cost as well. Brian Bittner - Oppenheimer & Co: So net to net, the improved supply chain benefit and the yield how many basis points do you think that is per benefit?

Well we don’t have any idea on that I’m just mentioning it is, those are a couple of things that can go into play there.

(Operator Instructions). We will go next to Keith Siegner with UBS. Keith Siegner – UBS: Just two quick questions from me, the first one in the past in the couple of years the big inflation you got some interesting ways to help deal with the margin impact from select menu item replacements. You had the year where you put the photography on the extra flap to help steer people’s attention towards certain products. If the USDA is right we might not see beef production increases until 2017, so we still have a couple of years of beef inflation to go. Have you thought about other things like this? Any other adjustments to the menu maybe doing some other things like those photography? Have you thought about anything like that? Thanks.

I think we’re always thinking about stuff like that as these markets continue to revolve and the world changes whether it's corn related changes, the prices of corn or whether it's beef supply related or anything else is going on. We’re always looking for an edge, if you will and we will continue to do that but one thing we will be is this protective as we have always been on made from scratch, quality of our food and cutting stakes a very intensive service, high labor service model and we won't let any of that change but things like the pictures and certain focuses on certain items absolutely we will continue to look on that and you may see us add to things to the menu or remove something’s overtime as we have done over the years, we’re always, always looking for that kind of stuff. Keith Siegner – UBS: And one other quicker question, so the Aspen Creek has gone and looks like there is still some commitment to Bubba's 33, could you just remind me what the approach is or what the party line is for how you’re thinking about other concepts in the portfolio? Thank you.

You know we would love to have something else or something’s that we can grow in addition to Texas Roadhouse, we’re passing 400 stores. We talk about the potential for Roadhouse being 700 – 800, could have been more maybe, could be 700 – 800 maybe. We don’t know until you get there but you don’t want to wait till you get there to start thinking about other concepts and it's so important for our people. We could certainly raise the dividend or buyback more stock but this is really about our people and having opportunities of growth for people. We recognize there is always a risk when you go to multiple concepts, gets talked about a lot. We think that risk is well worth, the well worth looking at whether we start one, buy one, buy two whatever it is concepts. We would always be looking to have them be consistent with the Texas Roadhouse partnership model, scratch based food, high level of service, high level of energy and fun those types of things and all will be thinking we will think about if we were going to do something else.

And our next question comes from Bryan Elliot with Raymond James.

Just a couple of questions, first the healthcare plan that you put in that you referenced earlier. Just curious is that fully ACA compliant with respect to the benefits?

Yes absolutely fully ACA compliant offers four different plans in our case that our folks can sign up for. So starting with the minimum they have to have to the minimally affordable that we have to offer.

And just to be clear you said that you’ve a little, you didn’t necessarily have more higher percentage of takers but those that did accept the offer actually bought up at a higher rate than you would have expected. Is that correct summary of their earlier remarks?

Yes.

And then just briefly why price, why is the depreciation for the week going up? Is it just a little bit of bounce in cost to build or is there something else going on that we shouldn’t think about?

If it's only specific to this fourth quarter we had a $700,000 kind of catch up in there included in Q4.

Sorry I was referring maybe I misheard it, I thought when you were talking about items puts and takes were 14 one of them was that depreciation per week will be rising.

It will be rising from the same point given the fact we had a 53 week in 2013, in essence what happened is you had 52 weeks of depreciation spread out over 53 weeks of results and so on average alone when you shift back to a 52 week year your weekly run-rate on depreciation increases.

It should only effect fourth quarter though right? Because first three quarters will be 13 weeks against 13 weeks and you said 13 weeks of depreciation and a 14 week order in Q4 correct?

No because when we have a 53 week year we take 52 weeks of depreciation and spread that evenly over 53 weeks, that’s having a free week if you will in the fourth quarter. So I want to make sure that you all are aware that from a weekly run-rate perspective when you’re modeling that that’s going to increase in 2014.

Okay well that’s pretty complicated. Just ignore the extra week and not worry about it. But okay thank you for that clarity that’s helpful.

And we will take our next question from John Ivankoe with JPMorgan. John Ivankoe – JPMorgan: We haven't talked in a while about development opportunity that you may have, I guess I’m going to say within the city ring [ph] especially from your better markets where you’re very successful but maybe a lot of customers that maybe living more expensive real estate areas haven't had access to your brand. So what’s the thinking, are you testing that? Is it still on the table?

We have been going a little more in that direction for example we just opened a new Roadhouse in New York at a bottom of a Trump Building and that was quite the adventure to get the restaurant opened but we did get it open and almost as urban as it gets for us. We had opened another store on Long Island and so we’re looking into a number of different places that are more urban Chicago would be one that we’re starting to go maybe inside some of the loop highways to go around the bigger cities and where it's a lot more expensive real estate, more expensive wage rates and obviously requires maybe a little bit higher pricing for us to just to make it all work. John Ivankoe – JPMorgan: And that’s interesting, so you would have different pricing I guess you just alluded to that but I would also think that maybe things like preopening per store could actually be lower especially if you could be training from a store in existing market maybe get a manager from an existing market. So it may seem like there would be some positives maybe some negatives but probably more positives and negatives in pursing that. So can you give us sense of what percent of that type of development is for ’14 or you don’t want to be that specific?

I would tell you it's very low percentage I mean just a couple of deals I would say and it also depends what’s your definition of urban even. The nice thing about some of these (indiscernible) there are so many people within just a couple of miles of a location. We’re opening in Miami later this year kind of in a very highly populated part of Miami just west of the city and we’re very excited about a lot of people within just a few miles of the restaurant. So but again expensive real estate.

And that concludes today’s question and answer session. Ms. Robinson at this time I will turn the conference back to you for any additional or closing remarks.

I would like to thank everyone for joining us tonight and please give us a call if you’ve any additional questions. Have a great night.