Bloomin' Brands Inc (BLMN) 2013 Q4 法說會逐字稿

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Bloomin' Brands fourth-quarter and full-year 2013 results conference call.

(Operator Instructions)

I would now like to turn the conference over to Mr. Chris Meyer, Vice President of Investor Relations. Please go ahead.

Thanks, Angel. Good morning, everyone, and thank you for joining us. With me on today's call are Liz Smith, our Chairman and CEO, and Dave Deno, Executive Vice President and Chief Financial and Administrative Officer. By now, you should have access to our fourth-quarter 2013 earnings release. It can also be found on our website at www.bloominbrands.com in the Investor section.

Throughout this conference call, we will be presenting non-GAAP financial measures, including adjusted restaurant-level operating margin, adjusted income from operations, adjusted net income, adjusted diluted earnings per share, adjusted diluted earnings per pro forma share, and adjusted EBITDA. This information is not calculated in accordance with US GAAP and may be calculated differently than other companies' non-GAAP information. Quantitative reconciliations of our non-GAAP financial measure to their most directly comparable GAAP measures appear in our earnings release and on our website as previously described.

Before we begin our formal remarks, I'd like to remind everyone that part of our discussion today will include forward-looking statements, including our discussion of growth strategies and financial guidance. Such forward-looking statements are not guarantees of future performance, and therefore, you should not put undue reliance on them. These statements are subject to numerous risks and uncertainty that could cause actual results to differ materially from our forward-looking statements. Some of these risks are mentioned in our earnings release. Others are discussed in our form 10-K filed with the SEC on March 4, 2013, and subsequent filings, which are available at www.SEC.gov.

During today's call, we'll provide a recap of our financial performance for the fourth quarter and full year 2013, an overview of Company highlights, a discussion regarding progress on key strategic objectives, and finally, guidance for full-year 2014. Once we have completed these remarks, we'll open up the call for questions. With that, I would now like to turn the call over to Liz Smith.

Thanks, Chris, and welcome to everyone listening today. We are pleased to share with you our results for the fourth quarter and full year 2013, as well as related Company highlights and our thoughts on 2014.

As noted in this morning's early earnings release, our adjusted fourth-quarter diluted earnings per pro forma share was $0.27, up 35% over the prior year. Our reported fourth-quarter core domestic comp sales increased 1.4%, which included a traffic increase of 0.3%. This marks the 16th consecutive quarter of positive traffic for our core domestic concepts.

Consistent with the past three years, our brands once again meaningfully outperformed the segment in the fourth quarter. The core business significantly outpaced the Knapp casual dining index for sales and traffic by approximately 320 and 400 basis points respectively. We have now outpaced the segment in sales for 17 consecutive quarters.

Also in Q4, all four core domestic brands posted positive comps and continued to take share in a volatile industry environment. This resulted from elevating every element of the 360-degree customer experience.

A review by concept as follows. Out Outback, comp store sales were up 1.1%, representing a 290-basis-point beat verses Knapp, and traffic was positive at 0.5%, or 420 basis points better than Knapp. We had two primary LTOs in the quarter, including back by popular demand, the successful combination of steak and lobster, and butcher cuts, which was a new platform that showcased our steak authority and performed well.

It is another example of the continuous innovation that has allowed this concept to maintain its relevance with the customer. Q4 was Outback's 16th consecutive quarter of positive traffic, and they widened their GAAP to Knapp from the third quarter.

At Carrabba's, comp sales were up 0.9% for the quarter. This was 270 basis points better than Knapp. This is a solid end to 2013 for Carrabba's behind revitalized marketing. The ongoing brand refresh will culminate in a new menu launch next week.

On another note, I know everyone saw the news regarding the recent departure of Steve Shlemon. Steve was the President of Carrabba's for 13 years, and we're going to miss him. But as I have said many times, we have a deep, talented Team that is capable of executing the brand revitalization efforts underway at Carrabba's, and as we search for successor, they will report directly to me.

Bonefish Grill comp sales and traffic were up 0.9% for the quarter. This was a 360-basis-point sequential improvement in comp sales from the third quarter, and 270 basis points better than Knapp. Bonefish Grill has begun to close the innovation gap in food and marketing platforms that impacted its performance in Q3.

The Tuesday Tales of Lobster menu has been a great success, and the brand enters 2014 with this platform to build upon. We remain on track to roll out the new core menu in the second half of 2014.

Finally, Fleming's finished quarter with comp sales growth of 4.9%, significantly outpacing the Knapp-Track high-end steak chain restaurant index, which came in at 3.1%. Ongoing innovation continues to help this brand distinguish itself in the high-end category. This represents Fleming's 16th consecutive quarter of positive comps.

In addition, we continue to roll out weekday lunch. As of the end of this quarter, approximately 35% of Outback locations and 40% of Carrabba's locations were offering weekday lunch. This is up from 26% for Outback and 28% for Carrabba's in Q3. A significant number of these new lunch restaurants opened in December.

Turning to development, we opened 15 system-wide locations in the fourth quarter, consisting of six Bonefish Grill restaurants, including our first location in California; two Carrabba's Italian Grill restaurants; six Company-owned international Outback Steakhouse restaurants, four in Brazil, with one each in South Korea and China; and one new international franchise restaurant. These openings brought our 2013 total to 46 locations.

We had 36 remodels in the fourth quarter, for a total of 143 remodels for the year. Both were consistent with our expectations. Outback finished 29 remodels in Q4 and has now completed its interior remodel program, having touched 490 restaurants over the past four years.

At Carrabba's, we remodeled four locations in the fourth quarter, giving us a total of 41 for the year. We are pleased with the sales and traffic lift we are seeing as a result of these efforts.

In addition, we remain very excited about new unit expansion in our portfolio. We recently announced that Suk Singh has joined Bloomin' Brands to lead this effort as Senior Vice President of Development. Suk is a highly-respected leader in the restaurant development space, and I'm confident he will have a significant impact on our global development efforts.

Overall, we were very pleased with our 2013 performance given the overall CDR environment. We exited Q4 with our strongest quarterly outperformance verses Knapp in 2013. We expect the casual dining segment will remain challenged with negative traffic until there is a meaningful increase in our target consumers' disposable income.

Despite this backdrop, our portfolio of differentiated brands and unique occasion expansion potential provides us with an ongoing opportunity to gain share. In 2014, we will be entering the fifth year of our sustainable growth plan. Our confidence in the vitality of our portfolio and its long-term growth prospects is strong.

Before I turn it over to Dave to provide more color on Q4, I would like to share with you my thoughts on 2014. When we re-emerged as a public Company in 2012, we shared with you our platforms for sustainable growth. This plan focused on three key areas for success.

First, to grow comp sales by leveraging innovation, occasion expansion, remodels, and relocation. Second, to capture our domestic new unit expansion opportunity, with Bonefish Grill being the lead development vehicle. And third, to accelerate growth in our category-leading international business.

We are pleased with our progress on all three fronts. Our growth strategy is coupled with a continuous productivity mindset to fund investment while we build scale, infrastructure, and systems.

Now, I'd like to update you on our 2014 plan against these three platforms. First, to drive comp store sales performance, we will focus on ongoing innovation. A new menu rolled out at Carrabba's in Q1. Bonefish new menu is coming in the second half of 2014. We expect these menus to drive dinner traffic for both brands.

Strong LTO news and marketing that communicates our value proposition will run across the portfolio. In addition, we are expanding our investment in our digital and mobile marketing platforms, including website upgrades, online ordering, and payment. We have additional tests in markets to determine where technology can further enhance the customer experience.

Occasion expansion. We will further expand weekday lunch at Outback and Carrabba's. In addition, the roll out of Saturday lunch at Bonefish is underway for 2014.

Remodel. 2014 will mark the second year of Carrabba's remodel program. In addition, we will expand Outback's promising exterior remodel test and upgrade new and existing Bonefish sites.

Finally, we will continue to pursue Outback relocations where we are seeing 40% sales increases at restaurants that we have relocated. We will execute the strategy as quickly as A sites become available. Our 2014 sales growth strategy has many levers and extends from lunch through the evening dining experience and is, as always, centered around the customer.

Our second platform is domestic new unit growth. Bonefish Grill remains our primary domestic growth vehicle, and we continue to grow this brand as fast as we are able to find quality real estate. Carrabba's is our second priority, and we will also invest opportunistically in new Outback locations. Fleming's will continue to expand as well, and we believe we can scale this brand to 100 locations over time.

Our third platform is the acceleration of our international business. In our last call, we discussed very important development as we completed the acquisition of a 90% ownership in our Brazil restaurant. Brazil is one of the most vibrant emerging consumer markets in the world.

Outback is uniquely positioned to take advantage of this growth, having spent the past 16 years building the infrastructure, Management Team, and most importantly, a brand identity that resonates with the Brazilian consumer. Average unit volumes in Brazil are nearly double those of a domestic Outback.

In terms of profitability, we recently filed an 8-K that details historical pro forma financials that offered an indication of the health of this business. Like sales, average unit profitability is well above those of a domestic Outback. Clearly, our Team in Brazil executes at a very high level, and expansion in this country in 2014 and beyond is a key priority. We expect to double the size in the next three to five years, and we are building the infrastructure to add a second concept at the appropriate time.

In addition to Brazil, we are also focused on international growth opportunities in China and Mexico, as well as revitalizing our business in Korea. You can expect investments in all of these markets 2014, but our primary focus will be on the expansion of our Brazil business. In total, we expect to open 55 to 60 new system-wide restaurants globally in 2014.

Productivity efforts have been a core part of our strategy for several years, and we'll continue to fund our investments in 2014. We have already made measurable strides in margin improvement. Adjusted operating income margins have improved from 5.1% in 2011 to 6.4% in 2013. We are very pleased with this progress, and we will continue to pursue our productivity opportunities as we seek to close the gap on margins relative to our peer group.

In summary, we are confident in our plan and optimistic that we will continue to meaningfully outperform the industry in 2014. More importantly, we are making the necessary investments this year to support our significant long-term growth potential.

With that, I'll turn the call over to Dave Deno to provide more detail on our fourth-quarter operating results and what you can expect for 2014. Dave?

Well thanks, Liz, and good morning, everyone. If you have reviewed our earnings release that we filed this morning, you will have noted that there are several important details embedded in our Q4 results and our 2014 guidance. I'll spend a good deal of time on today's call working through those items one by one to provide transparency into results. With that in mind, I'll kick off discussion around sales and profit performance for the quarter.

As a reminder, when I speak to net income and EPS, I will be referring to adjusted numbers that exclude certain costs and benefits. Please see our earnings release for reconciliations between our adjusted non-GAAP metrics and their most directly comparable US GAAP measures. We also provide a discussion of the nature of each adjustment.

Our fourth-quarter financial highlights verses the prior year are as follows. Adjusted diluted earnings per pro forma share were $0.27, verses $0.20 in 2012, an increase of nearly 35%. GAAP diluted earnings per share for the quarter increased to $0.46, verses $0.15 last year.

(Technical difficulty) in dollars, versus $25.8 million for the fourth quarter a year ago. (Technical difficulty), verses $18.4 million in 2012. Comparable domestic restaurant sales at our core domestic concepts increased 1.4%, while traffic increased 0.3%. Our Q4 comp sales (technical difficulty) results include favorable trading-day impact of 0.4%.

We maintained a positive GAAP to the Knapp-Track with estimated 320-basis-point beat for comp sales, and a 400-basis-point beat on traffic. We have outpassed the segment in sales for 17 consecutive quarters.

Total revenues increased 5.2% to $1.1 billion. Adjusted restaurant level operating margins were 15.9% this year, verses 15.4% a year ago. On GAAP basis, restaurant-level operating margins for Q4 were 14.8% this year, verses 15.4% a year ago.

Let's break that down by line item. First, cost of sales increased 32.7% from 32.4% in 2012. The increase was primarily driven by increases in beef and shrimp costs and change in product sales mix. The increase was partially offset by productivity initiatives and menu price increases.

On an adjusted basis, labor and other related expenses decreased to 27.6% from 28.6% in 2012. The changes in labor cost included favorability in health insurance due to lower claims activity, productivity savings from the newly remodeled, and reduced expense associated with our Managing Partner Deferred Compensation programs.

We also got the margin benefit of higher sales. This was partially offset by higher kitchen and service labor associated with the weekday lunch rollout.

On a GAAP, basis labor and other related expenses increased to 28.8% from 28.6% in 2012. This increase was primarily driven by an additional $12 million of expense related to the IRS payroll tax audit. I will explain this expense in more detail in just a minute.

Finally, restaurant operating expenses increased to 23.7% from 23.5% in 2012. The change was mainly driven by higher advertising expense, as well as increases in operating supplies and utilities. This was partially offset by lower general liability insurance claim activity, [AUV] leveraging, and productivity improvements.

Now, let's turn to G&A. After taking into account the related non-GAAP adjustments outlined in earnings release, G&A was $67.3 million in Q4, verses $69.1 million a year ago. The nearly 3% decline was primarily driven by lower corporate and fuel-related intensive compensation.

General GAAP administrative costs were $69.5 million, verses $66.6 million last year. This increase was primarily due to a lapping of a $3.5-million gain recorded in Q4 2002 (sic - see press release "2012"), associated with the 2009 sale of our Cheeseburger in Paradise concept. Unfavorability also came from costs incurred in 2013 as a result of our acquisitions of Brazil business. We adjusted for both of these items in our non-GAAP metrics.

Fourth-quarter adjusted operating income margin increased to 6.1%, from 5.1% in 2012. For the full year, our adjusted operating income increased to 6.4%, from 5.9% in 2012, in line with our guidance. As Liz indicated earlier, this is a 130-basis-point improvement from where we ended 2011, and is a 50-basis-point improvement verses 2012. We continue to make meaningful progress to our long-term operating margin improvement goals.

In the quarter, we had three primary (technical difficulty) items that were removed from our adjusted net income and adjusted EPS. The first is a one-time non-cash gain of $37 million from our Brazil acquisition. This adjustment is recorded on our statement of income as gain on remeasurement of equity method investment. This P&L line falls below operating income.

The second item was our decision to close 22 underperforming restaurants. As we re-evaluate our portfolio for relocation opportunities, we identify underperforming locations that are not good candidates for relocation. Their closure optimizes our portfolio and allows us to focus our efforts up to 100 relocation opportunities previously identified for Outback. The closings also set us up for further new Outback development.

(Technical difficulty) decision resulted in an $18.7 million non-cash asset impairment charge booked on provision for impaired assets and restaurant closings on the statement of income. The write-down does include five restaurants and sale lease-back for mortgage packages. This increases the average write-off per restaurant.

The impairment charge lowered GAAP operating income margin by approximately 180 basis points in Q4 and the is primary reason why on a GAAP basis, Q4 operating margin decreased from 5.4% in Q4 2012 to 3% in the fourth quarter of this year. Again, the $37-million gain from Brazil falls below operating income on our P&L and was not included in operating margins.

The third adjustment is a $12-million expense related to our ongoing IRS payroll tax audit. If you recall, in the third quarter, we recorded a $5-million contingency from a payroll tax audit. This audit will determine our share of FICA taxes on unreported cash tips received by employees in 2010.

The IRS recently informed us that they were expanding this audit to include 2011 and 2012. It was necessary to book an additional payroll tax contingency. We are working with the IRS to resolve this matter and are confident that the processes that we put in place at the end of 2012 address this matter.

The $12-million expense has a corresponding adjustment in the income tax provision that completely offsets the additional labor and other related expense in 2013. As a result of the associated income tax benefit, recording of the liability has no impact to net income. However, given prior period nature of this expense and its impact to operating margin, we are adjusting it out of our results.

For the fourth quarter, our adjusted effective tax rate was 22%, compared to 10.8% for Q4 last year. The normalized rate of 22% used in 2013 does not include the tax benefit for the release of the valuation allowance in Q2 and the impact of other items not considered indicative of ongoing operations.

And one last note on Q4 results. We have previously discussed our intent to improve our debt metrics and build a strong balance sheet. I am please to announce that in the fourth quarter, we paid down an additional $40 million on our outstanding term loan obligation.

Now, let's turn to 2014. Our overall guidance of at least 15% adjusted net income growth on a comparable basis is lower than our 20% long-term target. There are two reasons for this.

The first is a reflection of the difficulty facing the casual dining industry, and we expect another challenging year for the segment. Having said, that we firmly believe that we will continue to significantly outperform the casual dining segment in sales by 200 to 300 basis points in 2014.

The second reason is our decision to increased funding in key growth areas. This includes more funding for our business in China and other important initiatives, such as digital marketing.

Before I begin with the guidance, it is important to discuss two very important changes to our financial reporting in 2014. First, we released an 8-K on January 21 that detailed the consolidation of Brazil and impact on Bloomin' Brands' financial statement.

After reviewing that document, you will see significant profits generated by Brazilian restaurants. However, because of the non-cash amortization of new intangibles, we will not get the benefit of this profit in our Bloomin' Brands GAAP net income. As a result, we have decided to exclude this amortization impact from our 2014 adjusted net income to give investors a better sense of the earnings power of Brazil.

On the November, call we discussed other potential options to address this amortization, but after further consideration, we have determined that this non-GAAP presentation provides a better representation of the ongoing profitability of our business. The annual impact of this adjustment is approximately $6.5 million pre tax and will be added back to adjusted net income in 2014. This adjustment is expected to add approximately $0.03 to adjusted EPS guidance for 2014.

The second large change in our financial reporting is moving from a calendar-based year to a 52-53 (technical difficulty). As noted in our 8-K filed on January 6, the conversion to this new calendar results in the loss of three high-volume days at the end of 2014. The loss of these high-volume days is expected to have the following impact on our 2014 results.

Total revenues will be reduced by approximately $43 million. Net income will be reduced by approximately $8 million, and diluted earnings per share will be reduced by approximately $0.06. The guidance we are providing reflects the Brazil acquisition and the new accounting calendar.

We've also included a table in our press release that will assist you as we walk through the items. In this table, we provide what 2014 calendar-year guidance would have been for these financial measures, as well as our outlook for the 52-53 week fiscal year.

Because we have historically reported our results on a calendar basis, we have chosen to provide calendar-year guidance that excludes the impact of our conversion to the 52-53 week fiscal year guidance discussed. The calendar-year guidance will provide you the most comparable way to understand the expected growth in 2014 for our businesses. However, it is provided for grounding purposes only. It will not be reported in any future earnings releases. Importantly, we will use the 52-53-week year fiscal year for recording in 2014 and beyond.

Let me start with revenue guidance. Total Company revenue is expected to increase [approximately 8%] to $4.45 billion on calendar basis. [It will be driven by] the consolidation of our Brazil entity, (technical difficulty) comp sales, and planned new restaurant development. It also accounts for the impact of the restaurant closures. On 52-53 week fiscal-year basis, our total revenue will be up approximately $43 billion (sic - see press release "$43 million") lower.

On the international front, the Brazil business continues to perform very well, and we expect a very strong 2014. However, we did see softness in Korea during Q4 that is continuing into 2014. This is a result of deteriorating macroeconomic conditions and the need for 360-degree brand refresh. This work is currently underway.

Adjusted EBITDA for the year is expected to be at least $508 million on a calendar basis. This represents an impressive 15% growth from 2013. On a 52-53 week fiscal basis, our adjusted EBITDA will be at least $493 million.

Adjusted net income for the year is expected to be at least $164 million on calendar basis. This represents growth of 15% from 2013. This will include and estimated $4.3 million post-tax amortization add back for Brazil.

On a 52-53 week fiscal basis, our adjusted net income will be $8 million lower, or at least $156 million. (Technical difficulty) $156 million on a calendar basis. On a 52-53 week fiscal basis, our GAAP net income will be [$8 million] lower, or at least $148 million.

Adjusted diluted EPS for the year is expected to be at least $1.27 on calendar basis. This is an increase of 14% from 2013. The difference between adjusted net income growth and adjusted EPS is driven by an anticipated increase in our share count. This also includes an approximate $0.3 amortization add back for Brazil.

On a 52-53 week fiscal basis, our adjusted diluted EPS will be $0.06 lower, or at least $1.21. GAAP diluted EPS will be at least $1.21 on a calendar basis. On a 52-53 week fiscal-year basis, our GAAP diluted EPS will be $0.06 lower, or at least $1.15.

Finally, we will be adjusting for anticipated lease liability and store closure expense of approximately $3.1 million after tax in our adjusted metrics. Most of this expense will be in Q1. This is the remaining expense from our decision to close 22 restaurants.

I will now turn our attention to the items included in our guidance that will not be impacted by the conversion to the 52-53 week fiscal calendar. We expect our blended restaurant sales comps for our four domestic brands to grow by 1% to 2% with positive traffic. This increase is based on ongoing menu and promotional innovation, continued lunch expansion, and additional restaurant remodels. We are not relying on meaningful improvement in segment trends to lift our 2014 results.

Turning to commodities, we expect inflation will (technical difficulty) 2% and 4%. This includes beef inflation in the range of 3% to 5% and seafood inflation of 10% to 12%, which is largely driven by higher shrimp costs. We expect to see improvement in other protein costs which will help offset these pressures. We are currently contracted for approximately 68% of our total buy for 2014, which is consistent with where we typically stand at this time of year.

Our productivity goal in 2014 will once again be at least $50 million. You can expect 40% to 45% of our total savings from labor, 40% to 45% of the savings in food cost, and the remainder from other operating expenses and G&A. General and administrative expenses are expected to come between in $295 million and $305 million in 2014. This represents a large change from 2013, and I want to provide some details on this increase.

First, the consolidation of our Brazil entity accounts for the largest portion of the change. In addition, 2013 was an abnormally favorable year in health insurance, especially in catastrophic claims for our employees at the corporate office. We do not believe it is prudent to assume a continuation of this level of favorability, and a return to previously observed levels of expense as reflected in our guidance.

Another driver of increase in G&A is higher merit-based compensation expenses in 2014. Since we did not meet our sales goals in 2013, we had favorability in incentive compensation expense. We have to reset these expenses in 2014, and this will result in higher overhead.

Finally, aside from the items noted above, we remain committed to zero overhead growth in our support function. We will, however, continue to invest in infrastructure and overhead to support our key growth initiatives, so there will be some increases in G&A spending as a result of this investment. Examples include investments in technology and investments to support our growth plans outside the United States.

We anticipate an adjusted effective income tax rate in the range of 27% to 29%. This increase over 2013 is primarily due to a higher effective income tax rate in Brazil, as well as reduced leverage on our domestic FICA tip credit. We estimate that 2014 full-year capital expenditures will be between $250 million and $280 million. This includes the consolidation of Brazil capital expenditures.

System-wide (technical difficulty) in 2014 is expected to be in the range of 55 to 60 restaurants, with approximately 50% in the US and 50% international. Bonefish Grill will continue to be our lead development vehicle in the US, and Brazil will represent majority of our international development.

Now, we'd like to comment briefly on Q1. Our stated of policy is to only provide annual guidance; however, there are three items expected to have material impacts in our Q1 financials that are appropriate to mention.

First, we believe Q1 will be our most difficult sales quarter for the year. For January, the Knapp-Track casual dining index was down 2.6 for sales comps and negative 4.4% for traffic.

Bad weather has put significant pressure on industry sales. Weather has impacted Bloomin' Brands' comps by approximately 200 basis points through February. Having said that, we expect to continue to markedly outperform Knapp with our core domestic Q1 comp sales ranging from approximately negative 1% to positive 1%.

Second, our annual Managing Partners Conference is in the second quarter of 2014. Last year, the conference was held in the first quarter. The cost of the conference is approximately $3 million.

Finally, as you may recall, in the first quarter of 2013, our tax rate was much lower than normal at 14.1%. As of Q1, 2013, we had not yet released the valuation allowance on our deferred tax assets. The release happened in the second quarter of 2013, and the favorability seen in Q1 of 2013 reversed in Q2.

As you look at Q4, Q1, 2014 please remember that this will have a significant impact on quarterly comparisons, as we expect our Q1 tax rate in 2014 to be roughly in line with our full-year guidance of 27% to 29% for our tax rate.

In summary, we were very pleased with the way we finished 2013. Our brands held up very well in a difficult environment, and we reached our profit goals for the year. We have a strong plan to continue to grow our business and are looking forward to another successful year in 2014.

With that, we'll open up the phone lines for questions.

Thank you. We will now begin the question and answer session. (Operator Instructions)

Your first question will come from the line of Mr. John Glass from Morgan Stanley. Please go ahead.

Thanks. Dave, if I could just sort through the pieces of the 2014 guidance for a moment. First, your decision to back out amortization in Brazil. Are you effectively saying that is $0.03 to $0.4 accretive in 2014? Is that the right way to think about that?

Yes. As we looked at the earnings power of the business, we looked at EBITDA, we looked at restaurant margins, we looked at cash flow, we decided (technical difficulty) fraction of the business. And so that's about $0.03 a share as part of our $1.21 fiscal calendar guidance.

Okay. You think about the G&A, can you parse out a couple pieces, and some had to do easier G&A comparisons. How much of the increase in G&A is just the investment spending?

We probably, John, won't get into that too much for competitive reasons, but both Liz and I talked about the need to invest in our international business and really power up that business, and invest in technology, especially mobile marketing. These are sizeable investments. We have zero overhead growth planned for our core departments, and we have sizeable investments to grow business in China and in technology and mobile marketing.

Last one for you. The 22 stores you are closing, were those cash flow positive? Were they negative? Is there any material impact either on EBITDA number or the margin associated with the Outback brand?

No. John, they were modestly negative. I think for us, it's all about focus. We've got a lot of growth leverage at our disposal. Rather than spending time on these restaurants that averaged about $2 million in sales and spending capital on them, we decided to make the difficult decision and close them. It does open us up for relocation opportunities, and it does open us up for new development opportunities in Outback. But we felt that given the opportunities to address these restaurants, John, we decided to take the decision to close them.

Thank you very much.

Your next question comes from Joe Buckley, Bank of America Merrill Lynch.

Thank you. Good morning. A couple of questions. You talked about the EPS growth guidance for this year, obviously, being lower than the 20% long-term target. Do you think the 20% long-term growth target is intact beyond 2014, or some of these factors continue to come into play looking ahead?

Hi, Joe. So we feel as confident in the long-term earnings potential and growth of this business as we always have. But as you know, on an annual basis, you plant some seeds, and they come to fruition, and we feel very confident, but sometimes the timing of the investments don't line up, so it's a linear delivery of, let's say, about 20% year over year. And for us, 2014, we're going to deliver a strong year, but most importantly, we are going to make the investments ahead of growth to drive the long-term health and profitability of the portfolio.

So we won't peg an annual number year by year. I would just reaffirm that our confidence in the long-term growth and profitability of the business remains intact, and 2014 will be a strong year, particularly relative to the industry, but also, a year where we balance that strong annual delivery with investing ahead of growth, which is a philosophy that we've always had.

So I'm not going to peg it to 2014, 2015, 2016. We all know there's a lot moving pieces, but we certainly feel good about the long term.

Okay, and then just a minutia part of that question. Dave, do you have a sense what the tax rate will look like going forward? A lot of moving parts there as well, but we'll be in this higher range, do you think, going forward?

An important part of that is Brazil tax rate is in the high 30%s, low 40%s. So that's consolidated in our results, and as we become more profitable, the FICA tip credit is fixed, and so it loses some of that leverage. (Technical difficulty) pieces from the change in the guidance on that tax (technical difficulty) 27% to 29%.

Okay. Thank you.

We have Andy Barish, Jefferies.

Good morning.

Can you guys give us a quick lunch update as it stands today just in terms of what you're seeing with any cannibalization, how you are differentiating that experience? And then maybe, does the check average or mix issue start to taper as you move through 2014? I am just trying to get a sense of, have we see biggest incremental impact on check average of lunch sales, or does that continue at a relatively similar pace?

A couple things Andy. First of all, our check average in the consolidated basis are holding up quite well. So there's no need to -- any particular concerns about (technical difficulty) as we go forward our check average. (Technical difficulty) which is really important. We talked about that before. (Technical difficulty)

Ladies and gentlemen, please stand by. Your call will resume momentarily. Again, ladies and gentlemen, we are just fixing the audio on the call.

Okay. So, Andy, let me go back and answer your question. Hopefully, I'm not fading out too much. First of all, the guest check in our restaurants (technical difficulty). Secondly, as we look at lunch comp sales, the lunch comp sales are growing in restaurants that had lunch open at least a year. The lunch (technical difficulty).

Ladies and gentlemen, please stand by. Your audio will resume momentarily.

Operator?

I think we're back live. Apologies. I think we are having some AV issues of cutting in and out. I'm going to ask Dave, Andy, to readdress your question, and we'll go from there. Because of the lost time, we are certainly happy to go a little longer if we need. So Dave?

Andy, in response to your question, a couple things. First of all, the lunch restaurants that have been open at least a year are comping positively. Their lunch business is comping positively. The dinner check in our restaurants is growing, and so our guest check situation in our restaurants is in good shape.

And lastly, we do factor in some very modest cannibalization because the lunch business is different than dinner business. We do factor that into our modeling, and everything seems to be going quite well in our lunch restaurants.

Thank you.

We have Michael Kelter, Goldman Sachs.

Good morning. This is Ivan sitting in for Michael. Can you please talk about the progress of remodels? What are some of the key learnings from the process? And can you help us understand how the sales lifts have been curing following the initial action?

Yes, I'll he answer the sales lifts, and then I'll turn it over to Liz to talk about some of the progress that we've been making. We still are seeing between 3% and 5% sales lifts. That's sustaining and working quite well. So we continue to expand our Carrabba's, our remodels, and we'll be working on Outback exteriors next. But our Outback interior remodel program is about done.

The only thing I would add to that is, we talked about strengthening all elements of the 360-degree experience and never getting behind again on ambience, and we've lived that. So we finished the Outback remodel program.

We are taking same playbook to Carrabba's. Did 40 last year; we're going to be rolling that. You heard from Dave, we're very happy with the lift we're seeing.

But now, in the spirit of never getting behind, we are now going to start touching the Bonefish Grill, and we have a new design for Bonefish Grill. Every new restaurant that goes up in 2014 will have this new design, and we will also be touching the original 150.

Those are in tests. We really like what we are seeing. We imagine employing the same strategy, that multi-year roll on Bonefish.

In addition, you'll see Fleming's upgrades and redesigns. So that philosophy of constantly contemporizing is alive throughout the portfolio, and you'll be seeing that over the next several years from us.

Thank you.

Jason West, Deutsche Bank.

Just one on the guidance. It looks like it implies, and we're trying to work through the moving parts here, but it seems to imply a pretty significant increase in restaurant margins, like north of 100 basis points in 2014. Just don't know if we're doing that right or if that is correct, if you could help us out there.

As we talked about earlier, and as you saw in our 8-K on Brazil, the consolidation of restaurant margins in Brazil add significantly to our restaurant margins overall, which is one indication I talked earlier about, the power of that business. We'll see large expansions in restaurant margins throughout 2014 because of the very profitable Brazil business.

Is there any way to isolate Brazil impact within that?

No. It's large, but I think it will would prudent to just say it's large at this point.

Okay. And then just big picture on the EBIT margin outlook. In the past, and you mentioned it again today, you have referenced the peer target that you'd like to get to. Can you update us on what that peer target is that you guys are shooting for on EBIT margins and how long you think it will take to catch up?

When we went public, we talked about a 300-basis-point opportunity in our Company versus our peers. And as we talked today, we have made over a 100-basis-point improvement in operating margins. And we'll make some more improvement in 2014. We think it's still a few years out, but we continue to make significant progress each year on operating margins.

Great. Thank you.

John Ivankoe, JPMorgan.

Great. Actually, on that margin conversation, Dave, could you remind us where you are? I think about in 2014, maybe in 2015, as well, talking about back-of-house labor scheduling, potential KDS, more efficient preparation of your food, what you do in restaurant versus out of restaurant. Could you update us on some of those initiatives and what benefit we could expect?

Yes, we have really -- it's our third year of doing this, John. And as we look at the pipeline of opportunities in margins, they continue to be very robust. So we will -- in 2014, we will complete the benefit of the front-of-the-house labor tool.

If you look at our margins, in the Q4 of 2014, you saw the benefit of that. That's very important. So we'll complete that. We'll start -- we are in the process of starting the back-of-the-house labor scheduling tool this year, and that will be another big benefit for us.

Then we move to what's very important for the Company that a lot of restaurant companies have, which is centralized inventory management and management of food cost through standard costing. That benefit is being built during 2014. The benefits will start to come in 2014 and will continue throughout 2015 and beyond. And this is a big opportunity for us.

Lastly, we'll continue to get supply chain opportunities. Our supply chain organization continues to outperform the industry on managing food costs, so we'll continue to get more opportunity on that.

And then lastly is our high performance kitchen and KDS work. That's basically adding computers, automation to our prep tables in our restaurants, and also laying out the kitchens more effectively. We're just starting on that, so that's really not included much in our 2014 guidance. But with 2015 and beyond, we have a lot of opportunity.

So just to recap, near in, front-of-house labor, back-of-house labor. Then we move into centralized inventory management and food cost management through standard costing. And then finally, kitchen design systems and high-performance kitchens are all in our pipeline. This is not ground-breaking work. This exists in the restaurant business, and we want to be able to take advantage of this.

Thank you for the update.

Jeff Farmer, Wells Fargo.

Thanks. Carrabba's new menu was in test, it looks like, for most of 2013. So I'm just curious if you guys can share any color at all on average check, traffic impact, anything relative to the control group, and how you think that new menu might impact same store sales for Carrabba's as we get into 2014.

Sure, Jeff.

So just to be clear, the new menu is rolled out everywhere, and actually, we will start advertising that next week, which we're very excited about. We were clearly very pleased with how the menu behaved in tests, and we're happy to roll it national. When the menu is combined with the design, so taking the two elements together, we are seeing that 3% to 5% lift, which is pretty much consistent with what we saw when we did that ground breaking break through on Outback. So we are very pleased with that.

We are expecting, obviously, the new menu, which has enhanced variety. It has enhanced lightness. It has enhanced affordability. We're expecting that to perform very well. In terms of average check, we're very pleased with how it's affected that.

As you know, we already have a pretty affordable average check, vis a vie the quality at Carrabba's. It's about $21.00, $21.50, so we've seen some movement around that, but frankly, it was exactly what we wanted to see, so very excited on how that's going in. Look for it on TV starting first week of March.

Okay. And just one other quick one on -- going back to Bonefish and what you can do there. It sounded like you're pretty excited about what you were able do on Tuesday nights. And again, you touched on it. But as we get on to 2014 and 2015, how much more opportunity is there? It sounds like you guys are just scratching the edge of the surface here in what you can do in terms of new food news there.

I think that's a really fair characterization. We were pretty honest with you guys about all the things going on. We got a little behind in innovation. We've closed that innovation gap. So Tuesday Tales and Lobster, very successful platform for us. We're building on that. We're very pleased with how the core menu, which is in Texas, is performing. And that will be rolled out closer to the midpoint of this year, so obviously, that's progressing very well, and that will be an entire core menu overhaul with a lot of the culinary forward twists that customers expect and are really excited about.

The other thing that I would say on Bonefish is that we've also added and upgraded advertising in addition to the new menu, in addition to the marketing platforms. We do think we've scratched the surface on several initiatives with Bonefish. As you know, we've talked about what lies in front of us. Online ordering lies in front of us. An enhanced happy hour lies in front of us. Private dining lies in front of us. We really have to chunk these out.

We feel confident enough in how things are going to roll out Saturday lunch this year. Sunday lunch performed extremely well at Bonefish. It has a really strong and loyal following. We have been working on a Saturday menu for lunch. That will be rolling out this year. So just a lot of levers of growth and excitement and refresh coming for Bonefish, and we're really pleased about how we're setting up this brand for continued long-term growth.

Great. Thank you.

Jeffrey Bernstein, Barclays.

Great. Thank you very much. Two follow ups actually. One on the pricing.

I am just wondering whether you give any color in terms of your outlook for pricing by brand and whether or not your goal here is to protect, or I should say or expand the margin, or whether you're more focused on rebuilding traffic, and therefore, not necessarily looking to fully offset the pressure. That question is ex Brazil, as you think about 2014 by brand and whether goal is to expand the margin or focus more on the traffic and let the margin fall where it may.

Broadly, Jeff, we will not use pricing to expand margins. That's been our philosophy from day one. We're going to be building traffic. Pricing will not be as high as commodity costs, and so we need productivity and traffic to help close the gap. It was successful formula in 2012. It was a successful formula in 2012. It was a successful formula in 2013, and that will continue. We don't break out pricing in any detail by brand, but I can say that it will be pretty consistent across brands at roughly 2% to 2.5%.

Got you. And then you mentioned a couple times the advertising. I am just wondering whether you can give some color in terms of what your spend was in 2013 by brand. It seems like it's getting a lot attention at Bonefish and Carrabba's, and what you think ad expense uptick is going to be in 2014, and which brand has greatest opportunity from that perspective?

Yes. The big thing for us that Liz talked about earlier is advertising around our technology efforts and mobility. We'll be really stressing that. Again, for competitive reasons, we don't stress advertising by brand, but I think our advertising expense is a reflection of the work we're still doing on TV and media, but also the importance of mobility and technology in our advertising.

What I add to that is, we are spending robustly against all three of our CDR brands behind a lot of news, so we're very enthusiastic because we have real transformational food news and innovation across them. As Dave said, a biggest from-to on a year-over-year basis is just some of the exciting things we are doing in digital advertising and a heavy focus on social marketing, ad channels, and partnerships with Facebook, Twitter, YouTube, upgrading our website, enhancing our online ordering capability and payment.

We've got some pretty cool apps that have come out that are doing well, Outback 365. So just taking that constant innovation mentality even further into the digital world, and our brands are respond in a great manner.

Just lastly, I know you gave a couple comments on the first quarter in terms of unusuals. Is there any color as we look through 2014 in terms of sequential trend of EBITDA or EPS growth?

No, not really. I think that we provided an update on Q1 on that, and some of the new news we provide everybody given some of the weather impact we've had. 200 basis points from the weather in through February. But after that, Jeff, nothing really unusual or different.

Great. Thank you.

Your last question, Michael Gallo, CL King.

Good morning. Most of my questions have been answered. Just a question and a follow up. Perhaps I missed it, but how many units are you going to add weekday lunch to this year?

As we talked about, we are taking a staged multi-year roll, so we've never in the past broken out or given a target for the number of weekday lunches that we're rolling out. We've always said it's going to be a multi-year approach. We'll continue do that, and roll them out quarterly throughout the year.

What we have said is that are analytics suggests that 60% of the system for Outback and Carrabba's would support a healthy weekday lunch, and we will build to that number. So we're making progress over time, and as we indicated, we'll give you guys quarterly updates on where we are, but we don't tend to put -- commit beyond that 60% number and continued measured progress.

Great. And then on the new unit openings, how many of those do you expect will be in Brazil?

Well, we expect about half of our new unit openings, between 55 to 60 guidance we gave, to be in international. We won't break out specifically by country, but a couple things. Brazil will be our lead development vehicle, and we believe -- we've got 50 Outback locations there today, and we believe over the next three to five years, we can double that business. So that's how we're thinking about it.

Okay. Great. And then final question, if I could just squeeze one in. Any view at this point on table tops? Is it something you are looking at or testing or -- obviously, you have varying commentary on this from a lot of your peers. I was wondering if you had any thoughts on that. Thank you.

Absolutely. As you said, there's a ton of different tests going on in table top. Consistent with our philosophy, we are doing a lot of research with our consumer and a lot of tests in market to find out what is the exact right use of in-store technology, table top tablets, for our brands that provides true satisfaction to the customer?

And so we have a number of different tablet tests going on in any of our different stores, tablets at the table, tablets with the server. The most important thing for this is to understand how and where it enhances the customer experience process, but also understand the potential unintended consequences of having the technology in there.

So we are testing. We have a go slow to go fast. I would characterize our strategy as completely informed, watching closely. We intend to be a fast follower. But these things are really important to understand their long-term impact on the customer experience.

So as always, what you can expect from us is a lot of research, a lot of analytics, and a very thoughtful decision on how and when we use them. And that's going to vary, by the way, by concept, right, because what might be an acceptable and good answer for Outback is not going to play in a fine dining environment. So we're on this, but as I said, when we do roll it out, it will be with our eyes wide open.

Very helpful commentary, and congratulations again on the continued category outperformance. Thanks.

Thank you.

I will now hand the conference back to Ms. Smith for closing remarks.

We thank you guys all for joining us today. We appreciate the support, and we look forward to updating you on our continued progress in our Q1 call in May. Take care, and thanks again.

Ladies and gentlemen, this now concludes the Bloomin' Brands fourth-quarter 2013 results conference call. Thank you for your participation. You may now disconnect.