Texas Roadhouse, Inc. (TXRH) Q1 2014 Earnings Report, Transcript and Summary

Good day and welcome to the Texas Roadhouse Incorporated First Quarter 2014 Earnings Conference Call. (Operator Instructions). I would now like to introduce Tonya Robinson, Director of Financial Reporting. You may begin your conference.

Thank you, Vicki, and good evening, everyone. By now, you should have access to our earnings release for the first quarter ended April 1, 2014. It may also be found at 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 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 may be found under the Investors section of our website. On the call with me today is Kent Taylor, our Founder and Chief Executive Officer, Scott Colosi, our President and Price Cooper, our Chief Financial Officer. Following their comments, we will open the call for questions. Now I would like to turn the call over to Kent.

Thanks, Tonya. We’re pleased to report another quarter of opening new restaurants and growing sales. During the quarter, we opened 6 company restaurants and 1 franchise restaurants. Our same store sales increased 2.8% with about half of the increase coming from guest counts. This resulted in our 16th consecutive quarter of positive guest count growth. Thank you to all of our operators for that; that was awesome. And in spite of a little calendar shift with the Easter holiday, our comps were positive in the month of April, increasing 1.6% for the first four weeks of our second quarter. Same store sales growth and less than 1% food inflation, we were able to grow both restaurant margin dollars and percents [ph]. From an overall profitability perspective, we gave back some money as we continued to make long term investments for the success of our future. Price will give more details on this in his financial update. We are still targeting 25 to 30 new company openings this year. On top of the new company owned restaurants, it looks like we could see as many as 5 franchise locations open this year with 3 of these being international. Lastly, I want to congratulate Scott Schraeger of Toledo, Ohio for being named our 2013 Managing Partner of The Year at our conference last week in Florida. This honor is very well deserved and thanks to everyone who attended our conference this year, including our great vendor partners. Now I will turn the call over to Price to walk you through our financial update.

Thanks, Kent. Good evening everyone. From a big picture perspective for the first quarter of 2014 as compared to the first quarter of 2013, topline sales grew slightly over 10% and with expanding restaurant margins, restaurant level profitability increased closer to 12%. However diluted earnings per share were flat with the prior year due to a few things. First, our tax rate was considerably higher this year due to the expiration of the work opportunity tax credit at the end of 2013 and the fact that last year included some catch-up from when this tax credit was retroactively reinstated. Overall the increased tax rate negatively impacted diluted earnings-per-share growth by 4% to 5%. Secondly, preopening G&A and depreciation all grew at greater than 12% rate of growth we experienced in terms of restaurant margin dollars. Some of this was due to timing while some was the result of continuing to invest in the business. I will get into more detail on these after I discuss our store level performance. For the first quarter of 2014, restaurant sales increased 10.5% as a result of an 8.4% increase in store weeks and a 2.2% increase in average unit volumes. As has been the case for several quarters, comp sales growth outpaced average unit volume growth with comp sales increasing 2.8% during the quarter. Comp sales growth was comprised of a 1.3% increase in traffic and a 1.5% increase in average check. By month, comparable sales increased 1.1%, 2.6% and 4% for the January, February and March periods respectively. And as Ken mentioned, comps were up 1.6% in April. It is worth noting the Easter weekend calendar shift from March to April positively impacted March results by approximately 1% and negatively impacted April costs by closer to 1.5% due to the fact March is a five-week period and April is a four week period. So netting this out, our comp sales trends for the last few months has been a positive 2.5% to 3% with roughly half being check and half being traffic driven. Restaurant operating profit increased 11.9% or $8.1 million for the quarter compared to the prior year. This outpaced our sales growth as restaurant level margin increased 25 basis points for quarter. We did lose some leverage on the labor line due to three things: higher health care costs, reclassifying some costs between the other operating in the labor line and experiencing more labor inefficiencies associated with new store openings given the increase in these year-over-year. However we were able to more than offset the de-leverage on the labor line with leverage on the cost of sales line. The approximately 1.5% menu price increase taken in late December more than offset food inflation of approximately 0.5 point for the quarter. As it relates to food inflation, it is worth noting that our beef costs were actually slightly lower for the quarter than during the first quarter last year. In terms of the other operating topline, much higher natural gas prices prevented us from gaining additional leverage here as we continued to make good headway on reducing some of our non-gas interfacing costs. As we look at the full year in terms of restaurant margins, I want to give you a little more color to help everyone understand how we're looking at our business. While our beef costs were lower year-over-year for the first quarter, we do not expect this to be the case for all of 2014. However to be clear, we do not expect our 2014 beef costs to be up as much as the overall beef market. This is driven by the fact that in 2013 we experienced beef inflation of 14% to 15% versus the market being up low to mid-single digits. Overall we could see leverage on the food line with roughly 1.5% in check, low single digit food inflation and operator efficiencies. Labor will be very difficult to leverage this year with an additional $2.5 million to $3 million of healthcare costs driven by expanded healthcare coverage. Also, our wage rate inflation continued running 1.5% or so and we're reclassifying some of our contract labor out of the other operating line into the labor line which will create 15 to 20 basis points of headwind all year. On the other operating topline, we would expect to be able to leverage this for the year even with higher natural gas prices as we anticipate getting a few million dollars in savings from non-guest interfacing costs. I would remind everyone that the third quarter can be much tougher to leverage as we're overlapping a $1.3 million credit related to our general liability self-insurance last year. Preopening costs were up $1.5 million this quarter as compared to the prior year. The higher costs were primarily due to the opening of six restaurants this quarter compared to only three in the prior year. Preopening costs are running 550,000 to 600,000 per store right now and do vary depending on the timing of openings. Depreciation costs were up $1.9 million this quarter compared to the prior year primarily due to depreciation on new restaurant. In addition, the way depreciation was recorded in 2013 with 52 weeks of depreciation spread over 53 weeks drove approximately 250,000 of this increase. And we did make some changes at the end of 2013 to shorten some lives on various leasehold assets. G&A cots were up $2.8 million versus last year. The majority of this increase was due to increased investment and store level support in a few areas such as training and facility support. In addition, we continue to invest in international expansion. For the second quarter, we do not expect G&A to be it up as much year-over-year as we expect the spending associated with our annual managing partner conference to be down about $1 million versus the prior year. However we do anticipate it will be difficult to leverage G&A for the year. Tax rate for the quarter came in at 30.7% which is considerably higher than the 27.9% rate last year primarily due to the expiration of the work opportunity tax credit at the end of 2013. We continue to expect our full year rate to be 30% to 31% which is up a decent from the 2013 rate of 28.9%. Moving to the balance sheet and cash flow. We ended the quarter with $91 million in cash which was in line with our year-end balance. While we generate approximately $45 million in cash flow from operations, we spent $49 million in cash primarily on capital expenditures and share repurchases. During the quarter, we spent $24 million to repurchase 960,000 shares of our common stock. We are committed to repurchasing the dilutive impact of our share-based compensation programs and actually we’ve been a little more aggressive here in the first part of 2014 as we're working on buying in the dilutive impact for both 2013 and 2014. We will do this as long as the price is less than what we calculate as the value on a discounted cash flow basis. Finally, on the development front, we still expect your capital spending to be $100 million to $110 million for 2014. With that said, I’d like to turn the call over to President Scott Colosi.

Thank you, Price and good evening everybody. While we’re very encouraged by our current sales momentum, especially the continued traffic growth, the 16 straight quarters of attractive growth, we believe we’re focused on many of the right things for the long-term success of our business. On the development side, we continue to believe 25 to 30 new company restaurant is a good growth rate for us for the next several years. While all-in development costs are back up to a bit over $4 million, we feel very good about the returns we’re generating based on the continued solid sales performance of new restaurants. And by keeping a good pace of new restaurant, we not only create shareholder value, but we also create opportunities for our people and this certainly helps us consistently recruit and retain high-quality team members who are so important to our ongoing success. We don't take any future success for granted, we’re always challenging ourselves to get better, or as we say internally to each other bigger, stronger and faster. To support this effort, we will continue to make the necessary investments in our people and our infrastructure particularly as it relates to food and service to further ensure our future success. On top of growth, we continue to generate solid operating cash flows and we put them to good use in the first quarter. As Price mentioned, along with our ongoing dividend program, we repurchased some of our common stock this quarter. Our focus on returning excess capital to shareholders is undeniable. Since the inception of these programs, we spent over $182 million to our authorized stock repurchase programs and we paid over $98 million in dividends to our shareholders. Overall we feel very good about the momentum of the business. We believe strong comp sales performance and new unit growth along with a strong balance sheet and disciplined capital allocation are the ingredients that set us up for continued success. I will end by echoing Kent’s comments about our conference. Our culture of partnership and passion for Texas Roadhouse is very apparent at our conference and I look forward each year to spend time with all of our operators and vendor partners. Thanks to all of you for your continued commitment to Texas Roadhouse and I'd like to make one last shout out to our 2013 Managing Partner of The Year Scott Schraeger, congratulations Scott. Vicki, you may now open the line up for questions.

(Operator Instructions) We will take our first question from Andrew Charles with Bank of America.

Thank you. Can you talk about the dynamics of beef inflation during the quarter and why you think 1Q represents the low point of the year for beef inflation? And then separately, you were previously one-third contracted on beef. Is that still the case?

Andrew, this is Price. Thanks for your question. As far as how much we’re contracted on specific commodities, we’re not going to get specific into that for competitive reasons. I will tell you we utilize different methodologies for contracting. We utilize -- we do do some fixed price contracting, some of it’s formula base and some is based on spot buying. So we’re not a hundred percent – I will tell you we’re not a hundred percent contracted on beef and seasonally beef is typically a little higher in the second quarter of the year. And so that's why sitting here today we think that beef will be up a little bit. That’s one of the reasons we think beef will be up a little bit for the rest of the year as compared to the first quarter.

And also you mentioned also about the share repurchases, that they'd be loaded in the first half of this year. Are we correct to assume then, I thought that you'd be more of a steady repurchaser of shares just given that you repurchased some last quarter as well. If the share price remains below your calculations, do you think that you will be a more consistent repurchaser going forward or is it more first-half repurchase impact?

We plan to be consistent to some degree throughout the year. We talked about we would like to buy in at least the dilutive impact which – that’s somewhere between 1 million and 1.2 million shares a year. So between what we did in the fourth quarter as well as what we did in the first quarter we bought in roughly 50% of that, I call it at the end of the first quarter.

We’ll go next to Brian Bittner with Oppenheimer & Co. Mike Tamas – Oppenheimer: Great, thanks. This is Mike Tamas on for Brian. You talked about some of the reasons for the labor deleverage. But can you talk a little bit more about the new unit inefficiency and maybe how you think that's going to go going forward?

Mike, thanks for the question. A large part of that new unit inefficiency was driven by the fact that we had a pretty heavy new store opening schedule in the back part of last year specifically November and December, as well as we opened up six in the first quarter of this year as compared to three last year. So that drove our labor inefficiencies up a little more this quarter. So as far as what it will be going forward will depend somewhat on the timing of our openings as compared to last year, because in general, let me back up a step, what typically happens at our newer locations is they run much higher sales volumes but they also run a little higher the cost side of the equation in terms of cost percentages as well. So we expect to have some going forward depending on the pace of our new store openings. Mike Tamas – Oppenheimer: And then just follow-up on the inflation question as it relates to pricing. It seems to be a little bit better inflation-wise than where it has been. What are your thoughts on pricing for the rest of the year?

We don’t have any plans to take any more pricing right now, we're currently not testing any pricing. So as we move throughout the year and give a little bit better handle on what we think 2015 will look like, then we will be evaluating, okay what kind of testing should we be doing, what kind of pricing might we take, as you look forward into 2015, and when would we take that price?

We’ll go next to John Glass with Morgan Stanley.

First just, Price, on back on the beef inflation and the contract that you used to break that out, is that a new -- why the change and you’re not going to talk about how much you’ve contracted now?

Appreciate the question and we did use to be very specific on that but most of it is really driven from competitive and market reasons from our own internal purchasing perspective, that we don't want to get specific with suppliers out there as far as where we stand relative to our beef pricing and needs for the year.

No, no, I can understand that. And then are you willing to talk about what you think what beef inflation you expect this year, the percentage inflation?

I am sorry.

Did you say – or are you willing to say what you think beef inflation specifically will be this year for you?

I am willing to pinpoint a number. We do expect to have – I will tell you we do expect to have some beef inflation.

And you mentioned there was a couple of reasons why D&A didn’t lever and one of them was you changed the way you – the fixed asset register, some sort of depreciation schedule for leasehold improvements, how much of -- how impactful is that in 2014, how much of that?

That was probably a couple hundred thousand for this quarter. So maybe that's 0.5 million to 800,000 for the year.

And then just the other piece of it, the G&A not levering and you talked about some investments, is it – can you just breakdown the pieces for which you’re spending G&A on? It doesn't seem like it's levering and that’s for the reasons why even though you got restaurant level margin expansion you're seeing compression in your overall operating margin. Is that investments that are going to be made throughout the year specific to the quarter, is it stock comp, is it – what are the big pockets that drive that?

Yeah, I will tell you, the majority of it, about 70% of our G&A is people driven. And so we’ve talked in about that we’re investing in, a lot of it is around our service training support, so similar we talked about our product structure on the food side of things. We started over the last six months with a more intense focus on investing on the service side of the business and in training folks on that as well. Also we've added some folks on the facility side of the business, as our stores, as our restaurants continue getting older, we want to make sure we’re staying relevant that we’re keeping up and taking care of our assets. One thing that we are doing this year that we’re about halfway through is we’re rolling out a new back office package in all of our restaurants. And so we have hired a handful more people to help get that done. So a lot of this is – one last thing I will mention is the international piece. We continue investing on the international front. So a lot of this is for continuing one either to drive sales at existing restaurants and/or two, to drive overall profitability for the company as a whole.

John, this is Kent. We’ve also hired some big dogs from some of our competitors that we brought over the future that will be future market partners. So we’ve added a bit of that as well.

I am sorry, that’s at the field level?

Yes.

We’ll go next to David Tarantino with Robert W. Baird.

Price, just a question back on like cost outlook, I think everyone might be struggling with the degree of confidence you have in the low single digit inflation outlook. So could you just maybe talk about that given that you're not locked in on all your commodities, how confident are you that you’re going to end up in that level given the markets today and are you sort of assuming that the markets today continue, are you assuming something gets better as you look out into back half of the year?

Based on what we know today we feel good about it. We had significant beef – well the beef market anyway, there was significant inflation in the beef market during the first quarter. As we mentioned, our beef was actually down year-over-year and it was down 1% or 2% for the quarter versus the market being up considerably more than that. A big part of that is the fact that we did – we paid 14 or 15 – we had 14% or 15% beef inflation last year as compared to the beef market being up in the low to mid-single digits. So we do expect beef to begin to be up year-over-year for us. We are expecting produce costs to be up for this year, and then the other -- the other side of the proteins on chicken and pork and seafood, we’re expecting some of those to be up and some of those to be down and we’re locked on a good part of that side of our protein basket. So we feel pretty good at where we’re at and think we’re being realistic about our expectation as it relates to the commodity outlook.

And then maybe a bigger picture question as you look out over the next year or two, I think it's always tough to predict that far in advance. But what's your overall thought on where the beef market is heading and do you think there's a chance we see a reversal here in the next 12 months or is that unlikely in your mind?

Yes, there is a chance of anything. We don’t have a crystal ball, we think a lot of it will depend on what plays out on the demand side of the equation because certainly anything, any of the data would point to as far as on the supply side of the equation that it would be a tight market likely into sometime into 2015 at this point. So any future pressure if you will or relief would likely come from a shift on the demand side of the equation. And right now you are seeing – when we talk about beef being up considerably you're seeing increases on different cuts as well -- different cuts are different as well. And actually the cuts we use in general aren’t up as much as some of the outer cuts.

And then one more quick one on the cost side. So G&A dollars around $20 million in the first quarter, is that a good number to think about excluding the manager conference for the rest of the year on a quarterly run rate basis, is there any sort of seasonality that we need to take account for?

The biggest thing on the seasonality part is as you mentioned the second quarter tends to run higher with our managing partner conference.

We’ll go next to David Palmer with RBC. David Palmer – RBC: Just a follow up question on the labor line and it seems that labor costs were up for two reasons that you called out, one was the shift from the other line and sort of an accounting change there, and the other was healthcare. Beyond that, and correct me if I am wrong, it could be maybe 30 basis points between the two of those, and then that de-leverage would hold if your wages were up something like your comps on the underlying labor. How -- could you walk us through that, how that will play out the rest of the year? And what I am thinking is that perhaps you would leverage better than the 30 basis points from here on now given the fact you have pricing in place?

I think it’s tough to think that we would leverage that line throughout the year with only one and a half percent in pricing. Our average wage rates right now, our average hourly wage rates are running up about 1.5%. And I’d say that’s certainly a good portion of what hits in that labor line, in addition to that you’ve got 2.5 million to 3 million of extra cost from rolling out expanded healthcare to those hourly employees and then the 15 to 20 basis points of headwind as we do -- we are reclassifying some of our – what used to hit in the other operating expense line, that is now hitting in the labor line this year. So it doesn't affect overall restaurant margins but it affects both those two lines. David Palmer – RBC: Yeah, just I wasn’t clear, I just would say, aside from those two line items, which might be 30, 35 basis points of de-leverage. You might be able to leverage labor away from that. In other words, perhaps not do as badly as the first quarter deleverage but correct me if I'm wrong, is that labor line going to be looking like that on a year over year comp similarly to that first quarter?

Well, you do have the shift going on all year. So that 15 or 20 basis points you will have every quarter, you do have the healthcare rolling in every quarter. The difference on the labor line will be what happens on the inefficiency portion as it relates to new store openings. For this quarter that was probably about 30 basis points – 25 to 30 basis points of it was driven by the labor inefficiencies. Well, that will be the x factor [ph].

We’ll go next to Jeff Farmer with Wells Fargo.

I do think we all understand your price value positioning and advantage but is there anything else you guys can point to that’s been a driver of your traffic in recent quarters?

I think staying focused on the basics, number one I think as Kent mentioned, we’re staffing up and hiring some folks. Now we’re doing at the market partner level but we truly do have the best of best operators out there.

Jeff, this is Scott. I would say certainly we continue to get sharper over the years on our local store marketing efforts, our grassroots, guerrilla marketing efforts and our team continues to get stronger and stronger and more experience in that regard. There has been a lot of questions on the labor side of the P&L and I understand that. But in some ways think about our labor, we’re on office [ph], running our stores. I mean we staff to win, we staff to do big volumes and we have lot of people working in our stores because we’re so busy and we’re growing sales. So I think that's a big help to us. While we’re very competitive internally on margins and managing labor and food costs and all that, at the same time our guys really know you win the game by growing sales. And they’re prepared to make those investments in labor whether it’s staffing in the front of the house, whether it’s a local store marketer to get out in the community wherever those things are and the long-term success of the business. And that’s why we’re doing north of 4 million now on our average unit volume, which is a lot higher than most of the people that we compete directly against and we believe in part it’s because of our offensive nature when we staff our restaurants.

That’s helpful, and I realize you don’t want to give away any trade secrets here but are you doing anything even slightly differently on the local store marketing front? Any material change there?

It’s just more of the same, I think prices around the head, it’s just the consistency.

The last one, I don’t think, actually I don't know, you're rolling out this guest management system. I am curious if there has been any throughput benefit from that or anything else that might be working on the throughput side for you?

I can’t tell you anything conclusively on the throughput side of the guest management system. It’s still on less at half of our restaurants today and for most part it's a comfort level of the operators and the technology that they want to use. They do believe this facilitates the folks working the host stand where there is a gazillion people managing multiple list of guests where you’ve got walk-in list and of course the caller heads and merging those lists together and keeping track of everybody, it’s really a preference in the technology for the operator. It is hard to measure the ROI if you will on that stuff, it’s because there are so many other things going on in the world that impact sales, whether it be what the competition is doing, our other efforts inside the four walls or outside the four walls. Of course there is always weather here and there, competitive closings, competitive openings, all sorts of things going on. So it is hard to isolate something like that. But a lot of it's just the faith that our operators have, they think our folks are doing a better job of managing the flow-through of the guests, they’re going to use that technology and just helps the overall execution of the restaurant.

We’ll go next to Jeffrey Bernstein with Barclays.

Couple of questions, one just on the real estate pipeline, I think you mentioned in the next few years comfort doing 25 to 30, if that was US company operated, just wondering one, if you could talk about the availability of the quality of those sites that you see coming now versus year or so ago, and I think you mentioned now it’s a question of pushing up north of 4 million, I was wondering how that pans out in terms of your comfort level with the sales to investment ratio, and then I have one follow up.

Sure, this is Kent. Now we’re still planning sites, in 2014 we’ve got 16 states we will be opening in, so that we’re still spread out quite a bit. Alaska, the new location that will be – our new state we will be adding and then actually a little bit with the slowdown of some of our competitors openings, some sites that currently were not available to us are now being sent to us. So we feel really good about ‘15 as well and I’ve actually looked at over 30 sites for ‘15 so far.

And that the cost comment you guys made about going up, if there is any [indiscernible] managing that down or whether you’re comfortable running that 4 million plus investment cost relative to the 4 million AUV?

I would say that will stay pretty much the same as we like A sites, we don’t want to go and look at B and C sites.

Yeah, Jeff, I think our AUVs are hitting close to 4.2 million. So we’re pretty close to 1.1 sales to investment ratio which gets us to the mid to high teens IRRs that we’re looking for and we’re still sticking to that model. Having the investment cost now over 4 million, not such a big deal as it was six, seven years ago we were over 4 million. So with normal inflation both in our per person check which of course impacts our AUVs and then overall investment cost, we kind of feel like we’re in a good place right now. As Kent mentioned we’re finding number of sites that we feel comfortable with to hit our 25 to 30, it’s kind of an advantage for us to grow at a rate of 25 to 30 versus 45 to 50 because we can beat you to zero and we can say no to lot of real estate which is what happens, we do say no to a lot of things and lets sort of the best sites shake out. We also tell a lot of you that while we’ve done a few one-off locations let’s say in more urban location if you will and a couple places, by and large we’re still sticking to the same model of midsized cities, mid-sized trade areas, middle incomes, that kind of thing. There will be a few exceptions each year again in a more urban type environment, maybe an cat type of environment, by and large it’s sort of traditional Texas Roadhouse.

And then just a clarification or two clarifications on the comp. One, I think you talked about the Easter shift and exit Easter it was relatively stable. Just to clarify, I mean the Easter weekend, did that not fall into the first month of your second quarter for both periods, am I thinking about that wrong, I thought your quarter last year ended in 20 March and –

So Jeff, this is Price. No, it actually fell into the second quarter of this year whereas it was the first quarter of 2013. So it fell into our March period last year versus April this year.

Okay, I was looking, I know in the press release of last year, quarter ended March 26, I don’t know if you’re using that as a benchmark, I thought the Easter holiday was March 31 for the Easter weekend I guess last year.

Yeah, I apologize, I don’t have the dates in front of me but I know those are in our March period last year whereas April of this year.

And then any comment on the weather, I know obviously it’s had an impact on everybody but I know you don’t often quantify it?

Yeah, we don’t quantify, you definitely seem like you had more this year than last year for sure. But we don't track days close and honestly it's hard to track it. We can tell you that the Northeast and Midwest were definitely softer than their normal trends in the January February timeframe. But we don't track it.

We will go next to Will Slabaugh with Stephens.

Want to ask you about pricing and you mentioned the pricing took in January, it didn’t look like it but just wondering if you saw any pushback at all or guest feedback for that matter on the pricing you did take and if you took that fairly across the menu or if that was focused in one particular area?

We took it for the most part across the menu, we didn’t take all of our lower price items up. So it’s hard to tell, it’s hard to say if you’ve got any pushback or not. In general we took a little bit over 1.5% and kind of what we’re seeing this month and what we sold for a lot of that first time for the first quarter as well is a couple of tenths not flowing through. Part of that some shift in entree preferences and part of it is it seems like we continue losing up a little bit on the alcohol side of the business. So I would say I don’t know how we validate that, that we’re not seeing – of course, we hadn’t seen any material shifts.

I was going to ask you about the mix as a follow up there. You mentioned alcohol as one piece that’s declining just a little bit as an asset [ph], and you mentioned you kicked the overall grew by about 1.5 which was equal to your pricing, just wondering about that flat mix, if there are any other pieces that are moving around and outside of alcohol?

Not materially, the reason why it grew 1.5 was a little bit like the Valentine’s Day shift, believe it or not, we were up a couple tenths because of that, because excluding that, that went from a Thursday to a Friday. Excluding that our check would have been up more like 1.3% something like that, but no we’ve seen a little bit of slippage on the alcohol side, a little bit of trending down on the entrée side and selling a few more appetizers and all that nets to a couple of tenths of the pricing not flowing through.

We’ll go next to Andy Barish with Jefferies.

Just a couple of quick ones on the cost side, I guess I am trying to follow the logic on beef purchasing and it would seem as if you were better than, or worse than market in ’13, better than the market in ’14, so what does that mean for ’15? And then were there any rebates in the first quarter? I think that this is the time of the year where you guys tend to see some of the rebates coming in?

Andy, this is Price. Nothing on the rebate side, we don't receive any out – we don’t receive any rebates like that. So that has no effect on our business. But what you're talking about on the beef side as far as overpaying and being under the market is exactly what's happening. We paid a decent amount -- what turned out to be a decent amount above the market last year, so you can look at it in a way and we paid up for little bit entrance last year or we paid up for lot of this year’s inflation last year because the market wasn't up near what our pricing was. And consequently that’s why when we talked about it we were actually down in the first quarter which is well below what the market was, because the market was up a good deal in the first quarter.

Okay and then just one other, just trying to kind of drive the thoughts on the non-guest spacing, I know it’s not big dollars, the 2.5 million, 3 million or so, is that – should we now think about that as being reinvested in some of these additional support functions and field or if some of that’s still flowing through to the earnings line?

Sorry Andy, can you repeat that?

Yes, just trying to match up the non-guest spacing saves that you’re realizing versus some of the incremental infrastructure and field support that – at first time I’ve heard you talk about, are they offsetting each other this year, or are you still getting some net savings from the non-guest spacing programs you’ve put in place?

With the non-guest, I think we will get to somewhere in the $3 million range this year on that as well. And that will be a little bit -- a lot of that will be in the other line, some of that will actually be in the food line because we’re doing some more rounds of consolidated buying power on the procurement side, and so it kind of all falls under that category. I think we’ll get a couple million there and conversely you can look at it, I will tell you that enables us to take less pricing or to your point, what you were talking about maybe that’s more investment that we’re able to make like in the G&A side of the business on more service training or facility managers. So to us you can look at it either way but all those in the same bucket.

We’ll go next to Brett Levy with Deutsche Bank.

Just a clarification on pricing, first, you said you had 1% and that’s going to be consistent each quarter rolling off 4Q, is that about right?

That’s about right, I mean it’s more like one and a half percent. We think our check will be up a little less than that but we took 1.5% back in late December.

And last quarter you had discussed roughly million dollars hit that you’re expecting from higher wages – minimum wages that’s about right?

That’s probably about right. And that’s probably not that dissimilar to what it was in 2013, we're in 14 states now where the minimum and/or tip wage is subject to annual changes. And so that’s just the constant headwind which I don't think that million is a whole lot different than what it was in 2013.

And on ACA, the rise in cost, how much of that was coming from more people signing up, how much is coming from higher cost per clean?

I would say it's maybe to 80% from more people signing up and the rest from general increase in the cost of insurance.

And do you have a number, can you quantify what percentage of your hourlys are taking advantage of it?

I don't have that.

We’ll move next to John Ivankoe with JPMorgan.

Hi guys, it’s Dalton [ph] filling in for John. The first question was – the average unit volume for store that’s opened less than six months looked very, very high on a dollar basis, I think maybe the highest since you’ve been breaking that out, so was there anything interesting you could tell us in terms of where those units opened, maybe some of those urban locations you were mentioning or is there something else that might be driving the level of volume that you're getting like the throughput execution is better at those restaurants. Just trying to get a sense or maybe how we should think about the honeymoon period going forward?

I don't remember anything specific about being in different locations per se than we have opened in the past. I will tell you in general our new store openings have been very very strong and I will tell you also what can affect that is just how long they've been a new store. And so that category of restaurants include restaurants that are open six months or less and with us being heavily back end weighted in 2013, some of those stores were little earlier in their honeymoon during the first quarter. And so that will all tend to weigh that number up a little bit and I think that's probably more of the reason why – and then combined with the fact that we are opening up in strong volumes.

And then can you give us an update maybe on where you are on the number of bump-outs you’ve done and how many more could be done and then maybe broadly Scott talked about a little bit about guest management system, but you obviously have maybe an issue in some of your restaurants than lot of other restaurant companies would be – which is rate times and getting guests to the door. So just broadly speaking, are there other initiatives that you're thinking about from the throughput standpoint or something to lower wait time etcetera?

Yeah, I will start out on the bump out and then – on the initiatives, but from a bump out perspective, we've done right at 125 stores in the system so far and we are doing them in the right -- looks like we do get about 30 of them done this year. And we're looking internally just on how far that can go throughout the system, that we feel pretty comfortable that we can get at least halfway through the system with that, maybe at plus [ph] to three-quarters of the system and then as our restaurants continue to grow their volumes and ultimately we’re able to filter that more and more throughout the system, and that’s also a big thing we’re doing on the throughput side of things. One is you mentioned, we’re adding seats, we also continue to remain focused on just the speed of service and whether that be what we call the butt to butt times and between table turns, whether that be in the kitchen on the back of the house, trying to figure out a way to take 30 seconds or minute all for ticket time by just the logistical method in way the food goes down our line. Those are couple things that we’re going to improve our throughout.

This is Scott, I would just say in addition to everything Price just mentioned, I mentioned this earlier, it really comes down to staffing. And first, hiring the right people, people who can work in an environment where we’re so busy and we’re so running and gunning whether you’re in the front of the house or the back of the house. We're so busy and you’ve got to staff with right number of people who can handle that kind of volume. If you try to under staff and cut corners you just get run over and that definitely hurts your guest loyalty. So that’s how we err on the side of maybe even staffing too much sometimes because we’re just so busy. The training piece is so important across training piece and it always comes down to people in our business and the people make it go and that's always been our number one focus to get the results.

We’ll move next to David Carlson with KeyBanc.

Just a real quick question, if I'm the last question on the call, that means it's probably going to be the last beef question you guys get. Just trying to get a sense of how it looked during the quarter. If I remember correctly, I think your contract ended in January. Is it safe to assume that the deflation you saw in February and March was greater than the overall 1% to 2% beef deflation that you saw in the first quarter?

Yeah, year-over-year we definitely saw inflation in period one because you’re exactly right, our contracts ran January through December that was aging, and kind of takes you through that January period. In that period we were definitely higher on beef year over year.

Then we will take a follow up question from Steve Anderson with Miller Tabak.

Regarding your comments on throughput and in light of some of the decisions by some of the peers of casual dining to implement more technology, is this something that you will be looking at, at this time to maybe further improve some of the throughput and guest pacing?

This is Scott. We are looking at everything. We don't have any one particular item and test right now on that kind of scale but we’re looking at everything, we are watching closely what our competition is doing. We don't mind if they go first sometimes on some of these things and we’re just going to keep our eyes open and the technology is changing so fast. That is one of the biggest challenges that we have. I can tell you that we’re very close to all the credit card related stuff, especially post Target and chip technology and all the changes to the credit card standards which are coming down the road, we’re very close to that, we will be all over that. And the other technological piece, where it’s ordering at the table or paying at the table, we have been testing a little bit online to go, we don’t do a whole lot to go but in some of the stores it was a bigger deal. We’ve got a couple handheld ordering portable devices but it's really a small test for us. We’re really more watching to see what other folks do and how it goes for them.

A real quick, I want to go back to the question on the timing of Easter, make sure we fully explain that to everybody. With having a 53 week year last year, from a same store sales basis, you're comparing weeks 1 through 13 of this year to weeks 2 through 14 of last year, so that Easter was in the first week of our second quarter last year but that's the weekly compare to the last week of our first quarter this year. So hopefully that clears it up versus confuse it but call us if there is any question.

Thank you all very much for being on the call, we definitely appreciate your interest and look forward to – oh, wait, we’ve got one more call.

We have one last question from Brett Levy with Deutsche Bank.

Since you brought up Easter again, what was the quarterly impact into 1Q and out of 2Q?

I am sorry, as it related to what –

With Easter. You talked about 100 basis points into 1Q and 150 out of Q2 for the month. What was it for the quarter?

It's probably in the neighborhood of 30 basis points roughly, I’d add into the math on the weight on that but just dividing that by bride is close.

At this time we have no further questions. So I will turn the conference back over to Tonya Robinson for any additional or closing remarks.

We want to thank you guys for joining us tonight and we will talk to you soon. Have a great night.