Please standby, we are about to begin. Good day. And welcome to the Texas Roadhouse Incorporated Third Quarter 2014 Earnings Conference Call. Today’s call is being recorded. All participants are now in a listen-only mode. After the speakers’ remarks, there will be a question-and-answer session. (Operator Instructions) I would now like to introduce Tonya Robinson, Director of Financial Reporting and Investor Relations. You may begin your conference.

Thank you, Robert, and good evening, everyone. By now, you should have access to our earnings release for the third quarter ended September 30, 2014. 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 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. Kent is traveling to an international opening and will not be part of the call today. Following Scott’s and Price’s comments, we will open the call for questions. Now, I’d like to turn the call over to Scott.

Thanks, Tonya, and good evening, everybody. We are very pleased to report another quarter of solid results, highlighted by a combination of double-digit revenue and earnings per share growth. Our performance is directly attributable to our operators who are simply doing a great job of driving traffic and our profitability. After seeing our comp sales increase 5.9% during the third quarter, our sales momentum has continued in the fourth quarter with our comparable restaurant sales increasing approximately 7% for October. While sales trends are very strong, commodity inflation continues to be a headwind for us, particularly with beef cost. It’s too early to give you specifics, but we do expect inflationary pressures to remain throughout 2015. Given this outlook, we expect to take approximately 1.8% of pricing in late November, which is a little earlier than usual. Switching over to development, we are on track to open a total of 25 company restaurants during 2014. That equates to 10 new restaurants in the fourth quarter and I’m pleased to note that six of these have opened -- have already opened to-date. Our new restaurants are performing well and although our average development costs have increased to-date, we continue to see very good returns. Our franchise partners have opened four restaurants so far this year, including our first restaurant in Taiwan, which opened just a few weeks ago. I would also like to note that our 2015 development pipeline is in great shape, with 25 to 30 company-owned restaurant openings plan for the year. We already have 24 of these locations either under construction or in permitting, which is the last step before construction begins. So we feel very good about hitting our development targets for next year. So, now I’d like to turn the call over to Price to provide the financial update.

Thanks, Scott, and thank you all for being on the call today. The third quarter of 2014 we earned $18.8 million or $0.27 per diluted share, which is an 11.9% increase over the prior year. Overall, strong revenue growth of 15.1% was partially offset by the impact of higher food inflation and the lapping of $1.3 million benefit from favorable general liability insurance claims experienced in the prior year quarter. Despite these headwinds, we were able to grow both restaurant margin dollars and income from operations over 12% versus the third quarter of 2013. Higher income tax rate took away a couple points of growth, but that was mostly offset by lower share count compared to the prior year as a result of our share repurchase activity over the last 12 months. 15.1% revenue growth during the quarter was driven by 9% increase in-store weeks and a 5.7% increase in average unit volumes. In addition, we are seeing strong sales performance at our newest stores. Comp sales increased 5.9% during the quarter and were comprised of a 4.4% increase in traffic and 1.5% increase in average check. By month, comparable sales increased 4%, 6.3% and 7.2% for our July, August and September periods, respectively. As Scott mentioned, October trends remained positive with comps increasing approximately 7%. Restaurant operating profit increased $7.1 million or 12.5% for the quarter, compared to the prior year and on a per store week basis, restaurant margin dollars increased over 3% as a result of strong traffic growth. Restaurant margin dollars grew both in total and on a per store week basis, restaurant margin percentages decreased 40 basis points for the quarter, compared to the prior year driven by food cost inflation. Food inflation actually came in higher than we anticipated for the quarter, mostly driven…

Hey. Thanks, Price. Well, I’d like to end our prepared remarks today with a shout out to our operators. And there is no question that inflation will be a challenge for us in 2015. Fortunately, we’ve been having a lot of success in driving topline sales, which is the best way to tackle inflation head on. As many of you know, we don’t add many new products and we are not on TV. Our business is all about how well we execute the legendary food and service within the four walls of each restaurant. Our comp sales have been in positive territory for many consecutive quarters and these results are a direct reflection of the high-level of execution that our operators bring to Texas Roadhouse each and everyday. So, I want to thank all of our operators for the legendary passion, leadership and results. So with that, Robert, would you please open the line for questions?

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

Great. Thanks. Great sales results for third quarter, guys. Just a quick clarification. What was beef inflation during the quarter?

For the quarter, it was very high single-digit inflation.

Okay. And you’ve talked previously about food cost efficiencies. You’ve been able to implement through strategies in procurement buying power as well as cloud-based technology to help monitor food cost. So can you talk about how much is expected to offset the COGS inflation next year? Are there any other supplements also you’ve been able to find to mitigating food cost that do not impact the guest experience?

Most of what we are seeing there, Andrew, this is Price. Most of what we are experiencing there is on the supply chain, and doing a better job at gaining purchasing power and particularly perfectly in areas such as produce and getting more consolidated purchasing power basically in that area. In addition, operators are keenly focused on managing the wayside of the business and doing little things to increase operational efficiencies. On operational efficiencies, it has probably been somewhere on the order of 10 to 20 basis points worth of savings. So, I think we’ll continue to see some of that there. Part of that’s just a function of the high inflationary environment that we are operating in.

Got it. I’ll leave it there. Thank you.

And we will go next to Brian Bittner with Oppenheimer & Company. Mike Tamas - Oppenheimer & Company: Thanks. This is Mike Tamas on for Brian. Just a quick clarification. You said D&A is going to be increasing $500,000 sequentially going forward.

Yes. That’s been a good run rate for us really for the last several years, is about $500,000 sequentially each quarter. Mike Tamas - Oppenheimer & Company: Okay. Great. Thanks. And the question is really on the pricing. I mean, you talked about 1.8% in November. So sort of how does that look as we go through 2015? And then maybe, if you don't see much pushback from consumers on that 1.8% pricing you are taking in November, what’s your ability or willingness to take more pricing given if inflation kinds of hits your low to mid single-digit target? Thanks

I’d say there would be a couple of things we will look at. Well, the first part of your answer is the last time we took pricing we took a little over 1.5% at the beginning of December of 2013. So as it stands right now, when we overlap that then we’d have effectively total 1.8% in pricing on our menu. And so our plan is to continue to get a better handle on exactly what we think commodity inflation will be for next year. Of course, we will -- just as you mentioned, we’ll evaluate the guest reaction to this pricing in the overall environment and helping us determine whether we take any additional pricing next year before the end of next year. Mike Tamas - Oppenheimer & Company: Thank you.

And we will take our next question from Will Slabaugh of Stephens Inc.

Yeah. Thanks, guys. Just curious on the sales pick up that you’ve seen in the past few months. If that’s been across the board, have you seen some geographies behave better than others and also did you see any changes in your mix for just recent quarters as well?

Well, it’s Price. Really the sales pick up has been pretty consistent if you look at it in terms of days of the week and/or regionally. It’s been fairly consistent among both, I would say. And in terms of mix, we are just seeing -- mix is neutral to down slightly right now, which is very similar trend to really what we’ve experienced for the last 12 months.

Got it. And just one more quick follow-up on the price question. As far as where pricing is going to for 4Q, do you know what that weighted average is going to look like and then if I heard you right, you said you had 1.5% that’s going to roll off in December, is that correct and you are just going to be running 1.8% for the rest of ’15, assuming you don't take any additional pricing?

Yeah. And really it’s about 1.6%, $1.7% rolling off.

Okay.

So for Q4, our weighted average as far as what we got, menu pricing wise, will be in that 1.7% to 1.8% range, whereas as we mentioned earlier, our checks been running up about 1.5%.

Got it. Thank you.

Yeah.

And we will take our next question from David Palmer with RBC Capital Markets.

Guys, congrats on those sales trends. Wanted to ask you about the food cost line? Right now you’re going to be -- it feels like you’re going to be perhaps blowing through the past peaks on food cost as a percent of sales. Do you think about that at all? Is that something that you think about a 35% or 36% food cost line? And wow, we’re giving a lot of food value to the consumer and perhaps that's even too much. And you think about toggling a price to that and perhaps keeping that down. Even if that may mean more than 2% pricing, does that come into your thinking at all?

David, this is Scott. Certainly when you are seeing it everyday, you are aware of the food cost percentages and how high they are getting relative to history. At the same time you know that one day it will eventually turn and that your food cost as a percent of sales will eventually come down, like it has historically, the most recent time would be 2009-2010 I believe. We’re probably in the 33 range, something like that in food cost when cattle prices had fallen off a bit. So we expect that'll happen. It still may take couple years for that to happen, but it will happen. So we don’t want to be overly protective of food cost percentages in the short-term that potentially hurt our value in the long-term and we do look at guests counts, that’s the number one how we figure we look at and those increasing guests counts pay for a lot. Also at the same time, we have been making up some ground in other parts of the P&L, all the things that Price has mentioned in the last few calls about the purchasing opportunities that we’ve had on things besides to cost. I believe sort of helped us make up some of the ground we’ve lost on margins because good has had so much inflation over the last few years.

Thank you.

And we will take our next question from David Tarantino with Robert W. Baird.

Good afternoon. I guess Scott or Price, I just wanted to ask the question on the pricing that you’re putting in Q4, the 1.8%. How do you arrive at that level, especially when you consider that it looks like the inflation is running above that? So first, how do you arrive at the level of 1.8% versus something higher than that at this stage?

David, this is Scott. We just look at a lot of different data points everything from where is the competition at to what have we been successful with was executing in the past. What do we think our guest can bear? At the end of the day we are always going to be on the more conservative side relative to increases in our cost structure. We are going to be very protective of the value Texas Roadhouse that's been part of the recipe for getting us where we're at today and we just aren’t getting where we came from which was taking very conservative stance on many pricing. So you always like to believe, you are not using all of your pricing power. And if you keep believing that the guests keep coming back and you keep driving traffic. So when we look at the traffic numbers that we have had particularly over the last few years, it does give us confidence that we’re working on a lot of the right things, including the pricing strategy. And again, we are in this for the long haul, sometimes in the short-term you got to eat a little bit of inflation, but typically you get that back and much more when that inflation turns a bit more in your favor.

That makes sense. And then is there I guess when you look at the inflation outlook for next year for food cost, low to mid-single digits. I don’t believe price to give us an estimate for the labor inflation or other inflation in the P&L, but what type of traffic growth might you need to see to hold onto the restaurant profit dollars given the inflation you know of right now?

Dave, this is Price. Part of that will depend on obviously where that lands, food cost in particular lands in that low to mid-single digits because they sound like a big range, but difference between say 2% and 5% in that case. It’s a big difference from a P&L perspective. And so that’s as kind of both mentioned we will continue to evaluate and dial-in on where that is. If you are talking specifically on labor, we are probably looking at somewhere in the 2.5% to 3% inflation on labor by the time you roll up the state minimum wage. And if rate changes for next year as well as another call it $2 million or $3 million costs associated with healthcare coverage and the general wage rate inflation that we’re experiencing right now somewhere on the order 1.5% or 2% of general wage rate inflation.

Great. That’s helpful.

You definitely need positive traffic if you are only going to make 1.8% pricing for you.

Great. Makes senses. And just as I -- just for my understanding I would assume if you are going to take, if you have 3% or so percent inflation through the P&L and only slightly less than 2% pricing than you would need something on the order of sort of 2% to 3% traffic increased to hold the percentages and then maybe little less than that?

That’s probably fair to hold the percentages. Normally it’s going to be at least twice the level of pricing.

Got it. Okay. Makes sense. Thank you very much.

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

Thank you very much. Couple of maybe just follow-up questions. One is Price, how much do you know about food cost next year, what’s contracted and it’s a wide range I know but maybe do you think it’s from your gut, is it higher or lower than 2014’s inflation?

Don’t know, tough question if it’s higher or lower sitting here in the early part of November. I will tell you what we do know is that we have started contracting some items for next year without getting specific. Yes, we have started contracting some proteins. And I think our belief is today that on the protein side of the business a lot of that is where we expect the pressure to come from on the protein side. But in addition to that, we’ve begun locking in things such as coordinating mixes, dairy products, some other commodities as well that we feel like we could see some relief on into next year including sea food I might mentioned as well, it’s a small usage items, but sea food cost would be down next year as well.

Anything about the fourth quarter cost of goods year end this quarter. And I think it’s almost easier to look at it sequentially than year over year, would you start 36% as the starting point than you get a little more pricing, maybe a little back down from there. How do you think about the fourth quarter COGS ratios?

Hopefully, if we are right in the fact that third quarter was our highest quarter, 4.5% food inflation, not sure that you would reach 36% in the fourth quarter of this year.

Okay. But I mean it inflates sequentially, right, I mean, the prices -- you expect the prices to go down sequentially from the third to the fourth. I’m not talking about year-over-year now but beef prices should decline relative to third quarter and the fourth quarter?

Don’t know if we’re going to be -- I want to get that specific on the call but we do expect our year-over-year inflation to be less in the fourth quarter.

Okay. Just the last question as you mentioned labor inflation was the couple of points to enough three or whatever it was. But we look at the labor dollars per store grew more like 5% this quarter. So what was that, was that just like extra bonus accrual because the COGS were stronger. What’s -- and may be my number is not right looking at it externally but what do you think labor dollars per store grew this quarter versus labor inflation, let’s say?

Let’s see. I don’t have that right here John but it does look like it’s growing a little more like first-store week basis and the overall weight -- I'm sorry -- the inflation of 2.5 to 3, the part of that is because we’re running 4.5% traffic.

Got it. Right. So you’re getting your -- it's higher because you got to pay more people or you got to pay them bigger bonuses or a combination of those?

A combo of both. Because, yeah, certainly you are paying more bonuses plus some on the staffing side because you’re doing a lot more traffic.

Got it. Okay. Thank you.

And then keep in mind that we’ve also got that, what is it, I think it’s a 20 basis point re-class of certain cost between that other operating cost line and labor line this year. So that’s also factored into a little higher, if you look at it on a per-store week or per store basis.

Okay. And that goes away one quarter and then next year is left. Is that right?

That’s right. Fourth quarter, that’s right.

Thank you. Okay.

And we will take our next question from Jeffrey Bernstein of Barclays.

Great. Thank you very much. Just two follow-up question, the first is on the pricing topic. And it seems like this year ‘14, you'll end up mid-to-high 1% menu pricing. And I think at this point, that’s where we’re talking about for next year. But it seems safe to assume that risk to COGS will be more and we know the labor and the Affordable Care Act is not going to be less likely more. So I was wondering whether something like that kind of sets an unusual precedent where you might be -- might justify more than two points of price, maybe said it a different way. I know you guys test the range of pricing outcomes in your different market. Can you talk about the range that you’ve tested. And how high you consider going before you reach a point where you are saying no, we would never increase it more than three or whatever the percentage might be?

Yeah, Jeff, we don’t have any hard number that we’re either targeting and or a cap on that. I think that we’re looking at same stuff you are as far as the low-to-mid single digit right now, food inflation is a wide range and we’ll continue to dial in on that. The comment I would mention on the labor side is labor inflation for next year shouldn’t be that dissimilar to this year because if you’ll recall it at beginning of this year, we rolled out some expanded healthcare coverage already to a large number of our hourly employees and that’s about $2.5 million costs that we’re loading into our P&L if you will for this year. So it’s about the range of what we’re talking about, if you’re talking to $2 million to $3 million for next year. So I think you’re just talking labor, inflation should be very similar between the two years. Food cost inflation could turn out being similar between two years. We’ll continue to dial that in and then we didn’t test any specific menu price increases this year. So that’s where we talked about we’ll evaluate what we see after the rollout of our menu price increase. We’ll see the guest reaction. We’ll evaluate that. See if we can determine anything one way or the other from that. And also just see what’s going on in the overall environment and see if it makes sense at that point to make it more pricing, may be sometime throughout 2015.

I got it. So you have the opportunity to raise prices somewhere in the first half of ‘15 if the feedback necessitates it?

Sure. I think it would be more than just fee. I think it would be more than -- I think it would be more than -- more than just what happens with this rollout. I think those other factors would be a large part of the equation. You know that being what inflation looks like for ‘15, how long you expected to be there in the overall economic backdrop. I think but also play a big part.

Go it. And then just the other question on the unit growth side. I know you mentioned last quarter that our few units rolled into early ‘15 which is why this year, kind of, came in at 25 number. Just wondering for ‘15, anything, any thoughts around openings by quarter or what we should assume from the franchisees on top of your 25 and whether or not, you still think you can achieve that one to one. I think you mentioned that the cost to open will continue to arise but do you still expect to exceed the one-to-one sales to investment ratio?

Hey Jeff, this is Scott. Regarding the timing of the 2015 openings, as I mentioned earlier we do have lot of stores under construction permitting. So we could get close to half our openings in the first half of the year. That is very possible, achievable for us, sitting hear today at that point. Of course only time will tell, but we’re in really good shape to get close to the top end of our 25 to 30 range, given where we’re at today on that. As far as the economics, the one-to-one ratio, we’re a little bit below that right now. Our average cost of construction all-in is closer to 4, 5, 4.5 million to 4.6 million. But our sales continue to go higher as well. Our average unit volumes continue to still gets us to mid teens IRRs even being slightly below the one-to-one ratio and our sales are doing so well. They may end up being one-to-one. Once these stores get pass our honeymoon curves and support, we’ve opened with such strong sales and we’ll just see. We are building the stores little bit bigger with more seats. That’s part of the reason why the costs are up, that’s part of the reason why the sales are higher. So we’re very encouraged by the strength of our openings. I will say that and bullish on 2015 openings as well.

And the franchises, how many they might give you on top of the 25 to 30?

Franchisees in the U.S. typically will be one to two a year. It could be one this year, it could be two next year. And on the international side, we are going to up to about a handful a year. That’s about what we’ll do this year and it looks like we’ll do that next year. International is definitely starting to build some momentum, did mention we opened in Taiwan, a couple of weeks ago. Kent is over there right now. And yes very active internationally as well as in the U.S. of course but there is a lot of things that are in the works to international for us.

Understood. Thank you.

And we’ll take our next question from Andy Barish of Jefferies.

Hey guys. Just wondering on the traffic acceleration, is there anything you would kind of point to externally. I know you don’t look at lot of this, the macro stuff, is it simply gas prices coming down or you think gave your consumer a little bit more disposable income?

You know Andy. I would say never we don’t know. We don’t have any specific data on macrotype things in the correlation to traffic. But I’m sure gas prices coming down didn’t hurt. Another thing, you never really know we’re talking a lot about beef inflation, it’s is floating for us as well as with the growth fiscal level. So that’s have some benefit for us to the fact that they cost a lot more to buy beef at the grocery store versus -- or those prices have increased a lot more on the percentage basis and probably at us and other restaurants, maybe that didn’t hurt.

Right. Thanks and congrats to Kent and the whole Texas Roadhouse team on the operator of the year, very impressive, well deserved.

Thanks, Andy.

Thanks Andy.

Thank you. (Operator Instructions) we will take our next question from Chris O'Cull with KeyBanc.

Hey, thanks. Good afternoon guys.

Hey, Chris.

Prices -- the amount of pricing you’re taking expected to offset the dollar impact of the food cost inflation?

I don’t know. We have to drive some traffic. With the other inflation, we’re expecting through the P&L, we have to drive some traffic. It’s definitely been our MRO if you will for the last several years. If you go back and look that over the last four years or so, we've averaged somewhere on the order of 8% beef cost inflation and probably 5% or so overall food cost inflation. But yet to your point, we’ve been able to drive those margin dollars 2.5% to 3%. And at the end of the day, our model works really, really well. If we can grovels margin dollars on store week basis in that 2% to 3% range.

Okay. Okay and Scott, I think if I remember right in 2012, you guys are pretty aggressive with pricing. What would cause you to be more aggressive with pricing again?

You know Chris, the only thing that I would really make us be more aggressive them 1.5% to 12% change would be really big changes in minimum wage. That affects everybody across the board at the same time. That would probably be -- and usually it’s permanent, minimum rates go up, doesn’t comeback down, like deep prices go up, chances are they come back down. The minimum wage does it. And back in 2007, I believe we had a number of states where there were significant increases at the state level minimum wage. And we raised prices in some of those states 3%. But again it was every restaurant in the state impacted the same way with the same minimum wage deal. Unlike this where its principally beef related, which obviously doesn't impact every -- everybody in the restaurant business in a same way. And I do want to point out to everybody, we are growing traffic. We believe one of the reason we continue to go traffic because we have stayed on our fence, meaning we kept our prices very aggressive. We’ve kept our restaurants well staffed. We haven't messed with our food or staffing standards. We stayed very aggressive and we’re going continue to do that as we think longer term. That’s what makes the most sense for us. And we were very confident and will continue to grow traffic next year and in future year.

So buying some sort of permanent step-up in your cost structure is going to 1.5% to 2% pricing. And in the latter part of the year, November ad December, its kind of what we should expect from you guys going forward.

My guess is that would that would probably be all we would do for the year, unless there was really something abnormal occurred like a minimum wage change. If that was too occur, we would probably go back and repeat think our pricing. Beyond that I don't know -- I don't see actually change in our menu price.

Okay. Great. Thanks guys.

And we will take our next question from John Ivankoe with JP Morgan.

Great. Thanks. I also would like to just one more try in pricing, if I may. You mentioned that you would take market pricing at minimum-wage or some cost increase in that specific market. But my question is you whether you fully explored market-by-market. But give me the reason four corner pricing in your restaurant or it is silicates you take your maybe little bit more our national approach to pricing versus pricing each individual restaurant relative to each individual trade area?

John, we have many tiers. So we look at it nearly market-by-market and we have essentially 50 markets now in the country. And Kent personally has phone calls with every one of those 50 markets and walks through the pricing strategy for each one of those markets. And those in turn market partners are talking to their managing partners about what they like to do and we gave them various options. Typically maybe a low option and medium and high option and the guys will have a lot of input with Kent on where they would like to be. And a lot of our operators are also very conservative in pricing. They have been another concepts where maybe they felt those concept raised their prices too much too fast, especially to try to hit some target in the short-term and maybe it ends up turn into guest off in that concept. So they are by nature a pretty conservative and many, many, many of our operators have had a lot of success over the years driving traffic in their store. So if you go back 10 years ago, our average volumes were about $3.3 million, something like that and today they are about $4.3 million. So $1 million difference, I don’t think there are many concepts, so that’s been the case, certainly ones of our size. So a lot of that we attribute to even our prices at a very aggressive level, that’s worked for us. And hopefully years down the road we will be talking about $5 million, $5.3 million average unit volumes.

That’s great color. So it’s true then even within the safety market stat, each individual stores operating partner can come and choose different pricing at an individual store level not just at a market level?

No, they will try to keep it consistent by market and certainly Kent is very close to the pricing and he will -- he is the final say. And certainly what our folks in the field give him as far as feedback, he takes that very much to heart, but he is also the ultimate protector of our menu pricing and he will tweak individual items here and there. He has tons of data that he is looking at ultimately in making the final decisions. When you have the guy doing it, who has been doing it since day one and has the philosophy that’s worked for us, we are going to continue on that same philosophy.

And is there any lesson to be learned about your new unit volumes being as high as they are. I think it’s been the fourth quarter -- the third quarter excuse me was a really good quarter in terms of what you’ve been achieving. And is that beginning to maybe change your impression of how many units, how many Texas Roadhouse units there could be or maybe have the site profile changed a little bit in ‘14 relative to previous years because the more penetrated you get, better the comps, the better the need and volumes are. So just to get a little bit, may be a little bit more sense on the real state side.

I think we feel we are at a good rate of growth at 25 to 30 restaurant level. It does mean that we have to develop higher, what have you 25 to 30 new management teams and then that’s just a new stores and the existing business you do have turnover. So you have to have management teams with your turnover. And there's only so many people that we’re going to allow to run this high-traffic volume Texas Roadhouse because remember most of our stores aren’t open for lunch, except on Saturday and Sunday. So we do an enormous amount of traffic in a very short period time 4 to 10 are really 5 to 9:30. And so it takes a special person to be able to manage that restaurant where all the food is made from scratch and you got a 100 employees. So we are going to keep our growth under control not only for the real estate piece to make sure we are picking great sites but also from the people piece to make sure that will disallowing great of management teams to take over Texas Roadhouse.

Thank you.

And we will take our next question from Steve Anderson of Miller Tabak.

Good afternoon. Just wanted to go on to the labor, just general restaurant level expenses and you talk about some fluctuations regard to your liability insurance. Is this something I know serves a credit last year, do you know of any other fluctuations in the next couple of quarters?

Hey, Steve, it’s Price. Nothing material jumps out to me. The third quarter, our insurance here runs on October to September year-end, so a lot of times we’ll have a true-up if you will for that current calendar year of insurance that hits us in the third quarter. Below the restaurant level line, of course we had -- on the fourth quarter last year we had a $1.8 million gain in the fourth quarter of last year that will be overlapping this year.

Okay. Thank you.

And we will take our next question from Andrew Strelzik of BMO Capital Markets.

Hey. Good afternoon, everyone.

Hey.

I'm just wondering with traffic growing the way it is, do you see any capacity constraints or the bump outs that you have been doing enough and if we kind of roll the story forward you continue to see this type of traffic growth? Do you see yourselves getting there and is there anything else you can do?

Andrew. This is Price. I will start up and tell you that in addition to continue to see traffic gains across the regions and across days of the week, we continued to see it pretty consistent among different volumes of restaurants. And that our higher volume restaurants continue really quarter-after-quarter, year-over-year to drop more and more traffic and more and more throughput. The difference you see is it kind of expands throughout more days of the week, if you will. As you mentioned, we have done some bump outs, we’ve done that about 130, 140 locations and that’s been a great addition and a great way to continue to drive traffic through existing restaurants so. And then I have mentioned also, we've got existing restaurants that do $7 plus million in sales and they continue to grow sales year in and year out. So we think that we’ve still got plenty of capacity in the overall system.

Okay. Great. And then with wholesale beef prices or spot beef prices, the inflation being greater in the third quarter and potentially also in the fourth quarter than it was in the first half. I’m wondering if you’ve seen any change in competitive promotional activity in terms of either depth or frequency or anything like that.

We have and that’s not to say that there isn't. We’re probably not tuned into that and watching that as closely as we are to Scott mentioned, are focused on running our business and legendary food, legendary service at Texas Roadhouse.

Great. Thank you.

And we will take our next question from Paul Westra of Stifel.

Great. Thanks. Good afternoon. Just one more follow-up questions on the cost of goods sold line. I guess, I’m trying to deduce some of the comments you’ve already made, Price was, it sounds to me that you expect fourth quarter cost of goods sold inflation to be a little bit less in the third quarter. As you're looking for certain number, you may be slightly below 36. And if you did for 2015, looks like that’s a number we should be staring at which, because cost of goods sold in ‘15 at 35.8 to 36 would kind of deduce two points of price or maybe four points of inflation. I just want to make sure that mentally, sounds like from a sequential standpoint you are not looking for any increase sequential inflation once you get through the end of this year?

I think the range numbers you're talking about are within the range of numbers that we’ve talked about. So from a low to mid single-digits, 1.8% percent in pricing, you could get into that range that you are talking about for food cost. Now, we don’t know what it will end up being but you can certainly get there with what you are talking about.

Great. And then so you obviously are seeing offsetting inflation on some of the protein sides and some puts and takes on that number to offset some of the beef inflation?

Yes. On other commodity items, yes.

Okay. And then last question maybe, just on the G&A outlook for next year. Just you had a pretty, I guess, the goal is to grow that slower than overall revenues?

We’re right now in the middle of our G&A budgeting process for next year. So we’ve got a lot of things going on and we continue to invest in our business. But we continue to challenge ourselves to be more efficient in how we use our resources just like we do in restaurant to get more efficient. So we don’t have any specific guidance to give you, but it will be up for sure because we’re growing. But we’ll probably give you more thoughts on that on our next call.

Great. Okay. Thanks and congrats.

Thanks, Paul.

And we will go next to Bryan Elliott with Raymond James.

Thanks. Good afternoon. Just a couple of questions. One, as I look at prices, I look at the COGS through this year and thinking about next year. First quarter of ’14, was kind of an outlier to the downside. You reported just a half a point of inflation overall and beef was actually down year-on-year, probably more speaking to what happened in ’13 than in ’14. But as we think about the flow through, the cadence of food cost for ’14, should we look for the biggest pressure to be in Q1 from a COGS ratio standpoint?

Yeah. I don’t necessarily know about that Bryan. A lot of that reason for last year had to do with the timing and when we rolled on -- rolled off rather some of our beef contracts a year before with the aging process, so that’s the biggest reason for that. So we don’t really have a lot of clarity or detail, I guess, if you rolled off or you, kind of on the cadence between the quarters for ’15, because a lot of that will depend on ultimately do end up fixed, under more fixed price contracts, do we lockup the commodity itself would be subject to more market prices on the commodity. So those are all the kind of things we’re working through in the back half of this year.

Yeah. I guess I misspoke using the word cadence, I just sort of was focusing on Q1 and whether it will be an outlier again this year like it was last year, for this year rather. Next year will be an outlier similar to ’14 and it could be, I guess, no visibility yet on year end, which is fine?

Yeah. I would say generally, it so not as much of an outlier, I would say.

Okay. All right. That’s helpful. And then, our subject it hasn’t been gone up yet, pricing. In the past you all have talked a lot about a very detailed and systematic testing of potential price increases -- potential price, I didn’t hear that commentary here with so much focus on this call and on the outlook? Have you changed your procedures there or has the testing given you less confidence than you’ve expressed during past periods? Can you flush that out please?

Hey, Bryan. This is Scott. We’ve actually in a way have testing going on all the time, because we got to such a high number of different menu tiers that we were able to use those menu tiers to look at a good proxy for what different price changes might lead to. So last year, last December when we made our 1.5% price increase, that affected different tiers in different ways, just the average was 1.5%. And so we had a good track record coming into the fall of what those different price increases might lead to whether its mix changes, traffic changes or whatever. So the value added from having a specific test, which many ways was just another tier or another representation, what we were already doing wasn’t adding a tremendous amount of value to us.

Okay. That’s quite helpful. I understood. And would it be fair to characterize the commentary today from you all as maybe to summarize. You’re happy, obviously, thrilled with the traffic and you're willing to trade-off margin for traffic from a strategic standpoint, given that the beef situation is what it is and is going to self correct, is that a fair summary?

I think in the short-term, yes, we’ll be very protective of the traffic and we want to stay on offense and keep going traffic and expect that in the long-term when the beef thing does turn, we’re going to be in a very strong position.

Yeah. Great. Thanks so much. Appreciate it. Congrats.

Thank you, Bryan.

(Operator Instructions) We will go next to David Palmer of RBC Capital Markets.

Great. Thanks for the follow-up. I know Texas Roadhouse is not a company with a lot of top-down initiatives, but I know there is a spirit of continuous improvement and you try to ensure the best practices are shared? Are there areas of improvements, things that you would highlight that you're seeing in your meetings with the market partners and managing partners that are perhaps areas that could be areas of improvement into ‘15 that we should focus on?

Hey, David. This is Price. I would say there is nothing leeringly that’s material. I would say, just like other aspects of our business, we continue to evolve in that and that’s where a lot of our non-guest interfacing cost savings that we’ve talked about come into play, a lot, most of those and not all are suggestions from our operators and that's what you get in a very partnership based model. So we would expect that we would continue to get those types of ideas. And we believe our job is to help facilitate the sharing and implementation of those things versus as you say not be a top-down type of portrait.

I guess, one of my fishing areas is, we’re directed at the labor line, because, clearly, if you are getting too high food costs, that value should generate some traffic and sustaining traffic into next year. That’s an opportunity if you're trying to value engineer your business? You could leverage that labor line, perhaps if and find ways to as you ride out this commodity issue, perhaps you can find ways to leverage that line little bit more, that was where I was fishing?

Yeah. In terms of that, not only is the food side of our business very important, but service part is as well. And so, if we can leverage it through being able to drive more throughput or do you things like add seats in our restaurants, great, certainly, not looking for ways to leverage that through reducing service. That -- what’s Scott being saying, we are definitely trying to continue to stay on offense and to keep the momentum behind this traffic going.

Thank you.

Thanks, David.

And this does conclude today's Q&A session. I will turn the call back to Tonya Robinson for closing remarks.

Just want to thank you all for being with us on the call tonight. And have a great night. Thanks.