Bloomin' Brands Inc (BLMN) 2014 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Bloomin' Brands first-quarter 2014 results conference call on the 9th of May. (Operator Instructions). I will now turn over the call to Chris Meyer, Vice President of Investor Relations. Please go ahead.

Thanks, Rodney. Good morning, everyone, and thank you for joining us. With me on today's call are Liz Smith, our CEO, and Dave Deno, Executive Vice President and Chief Financial and Administrative Officer. By now you should have access to our fiscal first-quarter 2014 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 operative margin, adjusted income from operations, adjusted net income, and adjusted diluted earnings per share. This information is not calculated in accordance with US GAAP and may be calculated differently than other companies' similar non-GAAP information. Quantitative reconciliations of our non-GAAP financial measures 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 would 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 uncertainties that could cause actual results to differ 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 3, 2014, and subsequent filings which are available at www.sec.gov.

During today's call, we will provide a recap of our financial performance for the fiscal first quarter 2014, an overview of Company highlights, and a discussion regarding progress on key strategic objectives. Once we have completed these remarks, we will open up a 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 first-quarter 2014 as well as related Company highlights.

As noted in this morning's earning release, our adjusted first-quarter diluted earnings per share was $0.46 and our recorded first-quarter core domestic comp sales were flat. We estimate that weather combined with holiday timing lowered Q1 comp sales by 170 basis points. If you exclude this impact, our core comps would have been approximately 1.7%. These results were in line with our expectations and our -- overall our brand held up well in another challenging quarter for the casual dining industry.

Despite the segment headwinds, the first quarter marks the 18th and 19th consecutive quarters that we meaningfully outpaced the industry in sales and traffic respectively. We are encouraged by the fact that we continue to take share and remain confident in the health of the portfolio. And we are able to deliver earnings that kept us on track to meet our stated EPS goals for the year.

Now our review of Q1 by concept is as follows: at Outback, store sales were up 0.8% representing a 270 basis point [beat] versus Knapp. And traffic was minus 0.5% or 350 basis points better than Knapp. Outback continues to benefit from the implementation of key growth strategies including further expansion of the lunch daypart; ongoing menu and marketing innovation efforts; and remodels.

Outback has completed the interior remodel program and is now shifting efforts to a promising exterior remodel program. We currently have 15 of these locations in test and hope to report on our progress in the second half of the year. Look for more innovation and investment in Outback as we continue to grow and take share in casual dining.

At Carrabba's, comp sales were down 1.8% for the quarter. Carrabba's launched its new menu in the last week of February. The goal of the menu, featuring 15 items under $15, was to offer enhanced variety and value. This message is resonating with our customers and it is mixing at 20% of our entrees.

In addition, even with the higher mix and more accessible price points, we are seeing little impact to our average guest check.

During the launch of the new menu, bad weather and an increasingly competitive Italian segment dampened sales. Carrabba's lost 114 total operating days in February and many other days were affected by early closures or slow sales. As a result, while the new menu is being well received by our guests, it has not yet driven the incremental traffic we had hoped during its initial launch.

The other elements of our brand refresh are performing well. We remodeled five locations in the first quarter. When combined with the new menu, we continue to see a 3% to 4% traffic lift at these remodeled locations.

This brand refresh effort touches all elements of the customer experience and we are pleased with our progress thus far. Carrabba's clearly has widespread appeal as it recently finished as the number three overall casual dining concept in the 2014 nation's Restaurant News Annual Consumer Pick Survey despite having locations in only 50% of the country.

Although the brand health is strong, we are not satisfied with our overall sales performance. Until Carrabba's delivers more consistent, sustainable traffic growth, we will be measured in our approach to growing the footprint of the brand. The competition for A quality sites is intense and we have significant opportunity with Bonefish Grill and Outback relocations. Carrabba's will be prioritized behind them in the pipeline.

Going forward, we will be even more focused on occasion expansion and menu innovation that acknowledge the competitive dynamics of the Italian segment. We are confident in the Carrabba's revitalization, but it will still be several quarters before these efforts can be fully reflected in our numbers.

Bonefish Grill comps were down 1.5% for the quarter. And it is important to point out that although the total impact from weather and holiday was 170 basis points for the quarter, each brand was affected differently. Bonefish was hurt by 250 basis points, driven by their geographic footprint, Easter timing, and higher percentage of special occasion business. It has always been our expectation that the strongest quarters for Bonefish will come in the second half of 2014. We are on track to deliver our new core menu in Q3 and it continues to perform well in tests.

In addition, we are in the process of rolling out Saturday lunch across the system. The renewed focus on innovation and stronger marketing will also continue throughout the year. With these growth levers ahead of us, we expect Bonefish to contribute positive comps in 2014.

In the Nation's Restaurant News Consumer Survey, Bonefish finished as the number two-ranked brand in casual dining and was the top overall brand in service. It ranked highly in every category measured. This recognition comes from the consumer and reinforces our belief that Bonefish will continue to be one of the top performing and most appealing brands in the industry.

Fleming's finished the quarter with comp sales growth of 1.7%, once again outpacing the Knapp-Track high-end steak chain restaurant index. This represents Fleming's 17th consecutive quarter of positive comps. Menu innovation at Fleming's is best in class and their enhanced marketing efforts have allowed this brand to continue to distinguish themselves in the competitive high-end steak segment.

Turning to our international business, Brazil comp sales remain strong and cash flow continues to grow at existing locations. Even though there are concerns about a volatile economy in Brazil, our restaurants continued to perform above our high expectations. Demand for Outback in Brazil is strong and it remains our top international development priority.

We will continue to grow Outback as fast as we can and expect to double our number of restaurants from 51 today to over 100 in the next three to four years. We have a very strong management team in Brazil and they have built a terrific Outback business.

Given our market position and people capabilities, we are making plans to bring a second concept to Brazil. We do not have any details to share yet, but our work so far suggests that all of our core concepts are potential options for expansion.

In Korea we continued to see soft sales as we mentioned in our February call. This weakness is the result of two key factors. First, consumers in Korea have pulled back their discretionary spending. Housing costs are rising and there has been an associated increase in the level of household debt. This is leading to decreased levels of household savings and lower consumer spending. As a result, retail sales are soft across all segments including casual dining.

In addition to the consumer challenges we are seeing in Korea, it is clear our Outback business needs a major brand refresh. Our overall value stores have fallen and our restaurants are dated. This is very similar to where our domestic Outback brand was back in 2009. We are confident that we know how to address these issues in Korea since we have already successfully re-energized the domestic Outback brand under similar circumstances.

A menu refresh, additional investments in this restaurant and activities already underway to address our value issue are all part of our brand update in Korea. We expect a good deal of progress and improvements in our Korea business in the back half of the year.

Now let's turn our attention to occasion expansion. We continue to roll out weekday lunch. As of the end of the quarter, approximately 45% of Outback locations and 44% of Carrabba's locations were offering weekday lunch. This is up from 35% for Outback and 40% for Carrabba's in Q4. This initiative is performing above our expectations and lunch sales continue to grow in restaurants that have had lunch for more than one year.

This success increases our enthusiasm about the potential for weekday lunch and analytics now suggest we can expand this opportunity beyond the original 50% to 60% estimate. It is still too early to discuss what the ultimate opportunity is, but we are pleased with our results to date.

On the development front, we opened 15 systemwide locations in the first quarter consisting of six Bonefish Grill restaurants; five Company-owned international Outback restaurants, three in Brazil with one each in South Korea and China; two Carrabba's Italian Grill restaurants; one domestic Outback restaurant; and one new Fleming's Prime Steakhouse restaurant. To help fund our investments, we are driving strong productivity and building a world-class supply chain team.

We are pleased to announce that Juan Guererro has joined Bloomin' Brands as Senior Vice President and Chief Global Supply Chain Officer. Juan has held leadership positions at Yum! Brands and Starbucks and most recently at Office Depot. He also has deep international experience that will benefit our global procurement strategy. We are thrilled to add his talent to an already best-in-class team.

Separately, a quick update on our capital structure. We completed a successful secondary stock offering in March that lowers the private equity ownership in our Company below 40%. In addition, as we announced on April 16, we are working on a potential refinancing of our credit facility that will lower interest rates and position us for a more optimal capital structure.

Overall, the first quarter was challenging, but our businesses performed well. Despite significant headwinds, our Q1 results were in line with our expectations and our key drivers for success remain in place. Given our Q1 results in our growth strategies, we are reaffirming our sales and profit guidance for the year.

And with that, I will turn the call over to Dave Deno to provide more detail on our first-quarter operating results. Dave?

Thank you, Liz, and good morning, everyone. I will kick off with a 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 metric and their most directly comparable US GAAP measure. We also provide a discussion of the nature of each adjustment.

As an additional reminder, our conversion to a new 52-53 week fiscal year resulted in the loss of one operating day in the first quarter. The loss of this day had the following impact on our Q1 results: total revenues were reduced by approximately $7.5 million; net income was reduced by approximately $1.5 million; and diluted earnings per share was reduced by approximately $0.01.

With that in mind, our first-quarter financial highlights versus the prior year are as follows: adjusted diluted earnings per share were $0.46 versus $0.50 in 2013. GAAP diluted earnings per share for the quarter decreased to $0.42 versus $0.50 last year. When considering our results versus a year ago, please note that we did have an unusually low tax rate in 2013.

The change in tax rate year over year was worth approximately $0.06 of EPS. Applying our 2014 tax rate to 2013, our adjusted EPS would have been $0.46 in 2014 versus $0.44 in 2013. Excuse me -- $0.46 in 2014 versus $0.44 in 2013.

Adjusted net income decreased to $58.5 million versus $63.2 million for the first quarter a year ago. GAAP net income was $53.7 million versus $63.2 million in 2013. Comparable domestic restaurant sales at our core domestic concepts were flat while traffic decreased 1.6%. Without the impact of weather and holidays, our comp sales would have been approximately 1.7% and our traffic would have been positive for the quarter.

We also maintained a positive GAAP to the Knapp-Track with an estimated 190 basis point feet for comp sales and 240 basis point feet in traffic. We have outpaced the segment in sales and traffic for 18 and 19 consecutive quarters, respectively.

Total revenues increased 6% to $1.2 billion. The majority of this increase is due to additional revenues from our consolidation of Brazil. Adjusted restaurant level operating margins were 18% this year versus 18.4% a year ago. On a GAAP basis, restaurant level operating margins for Q1 were 18.2% this year versus 18.4% a year ago.

As you will see below, our US restaurant margins were negatively impacted by menu launch and advertising costs. We are pleased with our overall management of food and labor costs this quarter.

Now on to the details. First, cost of sales increased to 32.5% from 32.3% in 2013. This change was primarily driven by increases in seafood and beef costs, costs associated with the rollout of lunch, and our new menu at Carrabba's and the change in product sales mix. The increase was partially offset by productivity initiatives and menu price increases.

There has been a lot of news and concerns about rising commodity costs, particularly in beef. I am pleased to report that our commodity inflation outlook remains at 2% to 4% for the year. We have made several opportunistic buys this year and continue to lock in even more of our commodity needs when possible.

To this point, we are 75% locked in our commodity needs for 2014 including 84% in beef. This is a direct result of the work of our talented supply chain team. We have made significant investment in building this capability and it is paying off.

Labor and other related expenses decreased to 27.1% from 27.7% in 2013. The changes in labor cost include a productivity savings from the new labor model, stronger unit economics in our newly consolidated Brazil restaurants, reduced field compensation expenses and lower workers comp expense. This was partially offset by higher kitchen and service labor associated with the weekday lunch rollout and, to a lesser degree, new restaurants.

Finally, restaurant operating expenses increased to 22.3% from 21.6% in 2013. The change was mainly driven by lower average unit volumes in our Korean restaurants, higher advertising expense, higher costs from our Carrabba's menu rollout as well as increases in rents and utilities. So it was partially offset by our stronger unit economics in our newly consolidated Brazil restaurants and a deferred rent liability write-off associated with our store closures that we discussed in our call in February.

Turning to G&A, after removing the $2.1 million of adjustments highlighted in our earnings release, general and administrative costs were $72 million in Q1 versus $72.5 million a year ago, a decrease of nearly 1%. This decrease was primarily driven by the timing of our annual managing partners' conference and a number of other reductions. This favorability was largely offset by the inclusion of our Brazil G&A in our consolidated results. GAAP, general and administrative costs were $74.1 million versus $72.5 million last year.

GAAP G&A included two items that were excluded from our adjusted results. First was $1.1 million of transaction-related expenses most of which were related to our secondary stock offering in March. Second was $1 million of G&A related to the restaurant closures that we discussed in our last call.

First-quarter adjusted operating income margin decreased to 8.4% from 8.9% in 2013. This was in line with our expectations, given the increase in lunch rollout for the printing, training, and advertising of our new Carrabba's menu, flat comp sales, and some of the challenges Liz mentioned in Korea.

It is our expectation that we will make progress in operating margins as the year progresses, given anticipated sales increases and our work on the productivity front.

On the topic of productivity, we continued to make great progress. And I wanted to spend a couple of minutes updating you on these efforts. Over the past six years, we have achieved cumulative cost savings of $330 million in areas ranging from supply chain efficiency to spec standardizations, to basic labor upsides. Even with all the success there remain several opportunities ahead of us that reinforces our belief that we can continue to remove at least $50 million of costs from our business annually over the next several years. Many of these opportunities are not new in our industry and are fairly standard in other restaurant concepts.

For example, in 2013, we implemented our automated labor scheduling in our front of the house. Prior to this we had been using handwritten schedules to schedule labor on a weekly basis. Although our managing partners are very good at what they do, we realize that this was an efficiency opportunity by using handheld tech -- by using technology-based solutions that could use volume-based metrics to determine opportune shift start and end times.

Again, this is pretty basic stuff, but we didn't have any of it. The rollout was completed by the middle of last year and it is clear that we have made a good deal of progress on labor costs the past few quarters. We are implementing the same technology in the back of the house in 2014. We had various spreadsheet-based labor tools in the back of the house over the past couple of years, but given the higher wage rates in the back of the house, there is still opportunity to use our technology-based platform to drive additional labor savings.

As we implement these two initiatives, we expect labor will be a greater part of our overall productivity savings in 2014.

Towards the end of the year, we will be rolling out an actual versus theoretical tool to help us better manage food costs. Most restaurant companies have had this technology for some time and it is very effective at targeting problematic menu items on certain commodities that have a large amount of waste.

I personally have had great success with this tool in other companies and am confident that we can make great progress on food cost as we roll it out here at Bloomin' Brands. Although we should get some benefit from this tool in 2014, this is going to represent a large percent of our savings as we roll into 2015.

We are also working on a kitchen redesign and kitchen display technology that also offers potential labor savings. Bonefish Grill is leading this effort in a handful of locations and initial results are extremely promising. This could be a big idea for the future in helping us manage our labor costs.

We are also equally focused on reducing operating expenses in our restaurants. We are looking at lowering our utilities expense in energy and management systems.

In addition, since we are largely self-insured, we are exploring ways to reduce our workers comp and general liability exposure.

All these opportunities remain ahead of us as we seek to improve our overall operating margins. We are confident we have significant runway to achieve our annual $50 million a year target for the foreseeable future.

Importantly, the capital required for these initiatives is already built into the CapEx guidance for the year. Productivity is now part of our culture and we will continue to explore opportunities. We can assure you that our productivity opportunity will not diminish the quality of our food or the experience enjoyed by our customers.

Turning back to the first quarter, we had three primary adjustments that have been removed from our adjusted net income and adjusted EPS. The first item relates to our decision to close 22 underperforming restaurants that we announced on the last call. In connection with this initiative, the Company incurred approximately $4.9 million for noncancelable operating lease liabilities and other restaurant closing costs in Q1.

$6 million of this expense is related to accelerated lease liabilities and is recorded in the provision for impaired assets and restaurant closings on the statement of operations. Another $1 million of restaurant closure costs were booked to G&A. These were offset by a $2.1 million benefit to restaurant operating expense for the write-off of deferred rent.

The second item is the non-cash amortization of new intangibles resulting from our Brazil acquisition. As discussed on the February call, we will be adding these costs back to attain our adjusted EPS. This $1.5 million expense primarily falls in the depreciation and amortization line of our P&L. As a reminder, we will continue to have this adjustment to our income on an ongoing basis.

The third adjustment is $1.1 million of transaction expenses. These costs are related largely to the secondary offering we completed in March. For the first quarter, our effective tax rate was 24.8% compared to 14.1% for Q1 last year.

The change in tax rate is due to three primary factors. First we acquired certain minority partner interest during 2013 and January 2014 and the increased income from the buyouts led to increased taxes.

Secondly, we had a lower estimated tax rate in Q1 2013 due to the reduction of valuation allowances resulting from the utilization of certain deferred tax assets in 2013.

And finally, there was a change in the blend of taxable income and tax rates across our domestic and international portfolio that made up the balance of the increase. As a reminder, the increase in the tax rate had a $0.06 impact on adjusted EPS versus a year ago.

I would like to mention a couple of other items that took place in the first quarter. First, as Liz mentioned earlier, we completed a secondary public offering of 20.7 million shares of the Company's common stock in early March. After the completion of this transaction, the Company no longer qualifies as a controlled company within the meaning of the corporate governance rules by NASDAQ. We are very appreciative of the support provided by our private equity partners and this transaction is another milestone in our evolution as a public company.

We also continue to make progress in our capital structure. In addition to making a $10 million voluntary premium prepayment on our term loan in the first quarter, we are also working on the refinancing of our debt that we expect to complete in the near future. This refinancing will allow us to convert a large portion of our Term Loan B into a new facility consisting of a Term Loan A in a larger revolver.

The primary benefit of this transaction is lower interest expense. It is important to note that this refinancing will not add any additional debt to our capital structure, it simply exchanges higher rate interest debt for lower rate interest debt. We will update everyone if and when we have a completed transaction.

We also recognize that we still have work to do before we reach our stated goal of attaining a lease-adjusted ratio of nearing three times. We will still use excess cash to pay down debt and we continue to make good progress in building a fortressed balance sheet.

We are also very pleased that we have the potential to reduce our financing costs in 2014. Importantly, should this opportunity arise, we will be investing the benefit of lower interest costs back into our business. For example, we will use some of this benefit to accelerate the introduction of a second concept in Brazil.

In conclusion, our first-quarter sales and profit results were right in line with our expectations. As the result, we are reaffirming our guidance for the year. This includes the comp sales range of 1% to 2% for the year and 2014 adjusted EPS of at least $1.21.

With that, we will now open up the call for questions.

(Operator Instructions). Joe Buckley, Bank of America.

Good morning. Kind of a -- maybe an unusual question, but there seem to be a lot of mention of the Korean business in the release. So could you talk about what impact that softness is having on the overall results? And maybe discuss your confidence that it -- about it turning in the second half.

Sure, Joe, so I will talk about the macroeconomic conditions and then Dave will give some perspective on the impact and how it flows through. As we talked about, there has been a real contraction in consumer spending in Korea that has affected all consumer categories. And so the casual dining industry has seen that double-digit dip over the last six months slot.

And because our portfolio there was dated and we needed to do the whole brand playbook and the refresh, we have been impacted, consistent with the industry impact over there. So we are, right now, we have the right team in place. We have a very senior Outback leader from the US who is now running sales. We have a great team on the ground. We are starting the entire renovation. We like the design, we like the menu work and so that kind of refresh, remodel relocation work is all under way and you are going to see really good progress on that.

But that is going to start to build itself out in the second half of the year.

In terms of where the impact goes, I will let Dave add some perspective on that.

Yes, Joe, internationally it is really a tale of two different situations. Korea you will see it in the sales, but also it impacted our margins a bit and I talked about like in restaurant other expenses through some of the sales deleverage in some of our cost there.

But importantly, we also had tremendous performance in Brazil this quarter. And Korea did offset some of that, but our expectations in Brazil were high and they continue to exceed those expectations.

So it is really a tale of two things, Joe, in our results and you will see those two situations balance off each other in our overall consolidated results.

So, Dave, if you look at the EPS year-over-year performance, EPS impact year over year for international, how did it shake out and if you are comfortable telling us how it shook out for Korea and Brazil separately, that would be helpful.

Yes, Joe, we don't disclose our results in that kind of segment so I really can't get into that kind of detail. But I think the easiest way to think about it is Brazil had really tremendous performance. Korea had some softness. Basically there was largely an offset. I think Brazil might have contributed a little bit to overall -- the two of them together, Brazil might have outweighed it a little bit, but that is kind of how to think about it. Until we get into more international segment reporting, Joe, I can't get into more detail.

Okay. Thank you.

John Glass, Morgan Stanley.

Good morning. Dave, first, thinking about your outlook hasn't changed for the year, but I think on the margin your restaurant level profits may be a little bit weaker than some had been forecast and there were some puts and takes here that may on the margin seem a little weak in the first quarter. So can you talk about how you think the year progresses to get to the $1.21 given you're down about 8% in the first quarter?

Sure. First of all our results were absolutely spot on with our expectations. We met what we had internally and we are very comfortable with how Q1 feels for the rest of the year. And so that is why our guidance was reaffirmed.

I think, John, stepping back if you look at some of the details, you will see increased advertising costs and menu costs from the Carrabba's menu rollout embedded in some of our costs. And that is why restaurant operating costs were a little bit higher than last year.

If you look at both labor line and if you look at commodities, those were extremely well managed this quarter, especially labor. And that is the stuff that is going to carry forward as we go throughout the year. And that is why we are going to see the opportunities in the P&L that I talked about in my prepared remarks.

All right. That's helpful. Then thinking about some of the Bonefish and Carrabba's underperformance, I know there was a piece of it had to do with weather. What do you think -- how does that progress throughout the rest of this year? It sounds like Carrabba's was not -- didn't get the menu traction you thought it was going to get this quarter.

Once the weather is clear, have you started to see some of that improvement or is that still lagging? And maybe as an overall statement, once we get -- gotten beyond weather have you seen a bounceback in your business that you would have hoped for?

Sure. So, John, I am going to take it in two parts. You talked about Carrabba's and Bonefish. It is a different answer for each.

On Carrabba's, as I indicated in my prepared remarks, it was a tough time to launch a new menu in February in terms of the traffic.

And when you look at Q1 on Carrabba's and if you look at [MPD] CREST, as you know they lagged by a month, but they report December, January, and February. The impact of the weather really took a disproportionate hit on dinner. Dinner was down 5% for the category. Lunch was down 2%. And a lot of that weather hit on the weekend.

So the trial and the increased traffic that we expected to see was impacted dimensionally by the weather for Carrabba's. So we were not pleased with the incremental traffic we saw.

The message, though, of 15 under $15 is absolutely resonating and the right message. And we are going to continue to hit that and to innovate against that. And so once you move past that, you did see a settling out of Carrabba's and you know we don't give monthly comps in front of this. But once you got past that, you did see a settling out of Carrabba's.

But the Italian category is competitive. This brand is very healthy, number three ranked. We have got to continue to deliver value as we define it which is great creativity at affordable prices. And we think we have more runway to break through now that we are past Q1. But more work ahead on Carrabba's. But again, the levers such as occasion expansion, growing lunch, those all remain in front of us and we like what we are seeing on those separate levers.

On Bonefish. Bonefish would have been positive and a positive contributor in the first quarter. It was impacted by weather and I think I indicated that to a large degree. We have always been very open with the timing of the news on Bonefish that is going to come in the second half of the year, right? So the new menu will be launched in the Q3 period and you will see that innovation and that culinary creativity and all of that go.

We are rolling out Saturday lunch. That is going in well. We continue to be pleased with how Sunday is going in. So we are feeling we have the levers in place on that brand and the real innovation that is coming on that in the second half. So that should give you hopefully a flavor.

Thank you.

Jason West, Deutsche Bank.

One on the guidance. You guys confirmed the earnings and the comps, but didn't really touch on some of the components that we got last quarter. Should we just assume all the other line items and guidance are still the same or has anything changed in terms of your thinking around EBITDA or maybe the tax rate?

No, all other, I think we mentioned in the release, all other aspects -- we highlighted the comps and the EPS. All other aspects of our guidance is in place. The only exception to that would be if there was a refinancing and the refinancing one-time cost associated with that would flow through the GAAP basis of our P&L.

But everything else, Jason, is spot on.

Okay. And one on the balance sheet. As you are still paying down debt, can you remind us when you think you will hit a level on the balance sheet you would be willing to do something else with the free cash flow and what those options might be, whether it's a dividend you are thinking about or perhaps a stock buyback?

Yes. Our first priority is to get our balance sheet squared away and build a fortress balance sheet for our Company as we run this business for the long term. So that's job one. I would say the next 18 to 24 months we will see how conditions change. It is something that we are looking at to continue to pay down some debt.

As far as the tools to returning cash to shareholders, we haven't decided that as a company. But based on my own history, it has been both a share buyback and a dividend mix, but we will come to that point when we are ready. And I think if you look at the cash flow coming out of our Company it is a pretty attractive thing coming down the line.

Thank you.

Michael Gallo, CL King.

Good morning. Couple of questions. Wanted to dig in a little bit on the commodity basket.

Dave, obviously you mentioned you locked in on most of your beef needs. I was wondering if you think that will provide you some opportunity perhaps go after guest traffic more aggressively as some of your peers may need to take more pricing in the back half of the year? And then also where you stand on shrimp which looks like it is starting to roll over whether you are locked in there or whether it could potentially provide some favorability if it comes down later in the year. Thank you.

Yes. Sure. First of all it has been our long-term strategy to price below commodity inflation. And when you have a supply chain group like ours that consistently beats the rest of the industry and you look at the 2% to 4% guidance that we have with our lockup, it is really a nice weapon to have in our Company.

There is, we are locked up about 65% in shrimp. And the reason why we are not locked up more is because of the -- what you mentioned is there probably is some opportunistic buys that we have going forward. So but overall we are extremely pleased with where we stand on the commodity front.

Great. And then to follow up, I was wondering early what you are seeing in Bonefish lunch on Saturday. Whether there is any cannibalization of dinner and what we should think about in terms of the cadence of how you might roll that out, whether it will be in all stores by the end of the year or there will be a couple of years, how long you think that will take?

Sure. So, as always, we always do a lot of testing and so what I would tell you is that the cannibalization is coming in very much where we had expected. Pretty consistent with the rollout that we saw on Carrabba's and Outback, that being a separate daypart.

In terms of timing, because it is going in so well, we are going to be certainly completed with that timing. We are looking at Q2, Q3 completion for Saturday lunch on Bonefish.

Okay. Thank you.

Jeff Farmer, Wells Fargo.

Thank you. Coming back to Brazil. Could you provide some color on the regional management supply chain, real estate, all the other pieces of the infrastructure that you already have on the ground? And then I guess more importantly, how should we think about their relationship between revenue growth coming out of Brazil versus G&A growth over the next several years? Do you have a pretty healthy opportunity there?

Yes. A few things. I will take care of the organization piece and then I will turn it over to Liz on some of the branding stuff and the opportunities there.

First of all, one of the great things about the Brazil business is we have the people on the ground already. With a joint venture for many years, we have the developer team there. We have supply chain team there, the finance team there, it is all there that not only can we use to leverage to grow the Outback business, but we can leverage the second brand as well.

From a financial standpoint, we should be able to get some G&A leverage because sales are growing so rapidly down there. We certainly will invest in capability down there. But given the sales growth we are seeing both from a comp store sales standpoint and new development, list talked about doubling the footprint over the next three to four years in Outback only. That is the kind of leverage that we are looking at.

So we are very, very happy with the team that we have down there and we also have a very talented team here in Tampa that works closely with our Brazil team and the team in Tampa has the international experience.

Yes so the only thing I would add to that is that the good news is we have obviously been doing a lot of work down in Brazil from a consumer standpoint on the other core concepts. And all three of the other core concepts have performed really well in that consumer research and so really lend themselves.

For competitive reasons I am not going to talk about which one we are going to go down there first with. But the Brazilian team was up here this week and we are managing through, as Dave said, the combination of the talented center of excellence that we have here that can help them and really first world-class boots on the ground.

We will have an opportunity to leverage the infrastructure in both places to expand a second concept and someday a third concept. But you are also going to have dedicated brand teams against those to make sure that you really drive optimal growth.

So we are going to double Outback and we are not going to ask the exact same group of people to grow another huge brand off the side of their desk. There is going to be some G&A leverage from scale, but the good news is these brands have such growth runway that they will be managed fairly similarly to the kind of scale focused balance we have here in the US.

That's helpful. And one more question because again the conversation with investors is really all about trying to understand what the marginal EBITDA contribution from Brazil could be moving forward. Realize that is a tough question, it's early on, but, Dave, is there any type of high-level framework? Any help you can give us in thinking about how Brazil can ultimately impact the P&L over the next several years?

Yes. We did provide a Q -- or a K, excuse me, in January, gave some of the details on that. Like I mentioned to Joe Buckley we don't break out our international business, but let's just maybe step back for a second. Our goals for the next three to four years is to double the footprint of that business so you can begin to see some of the revenue. And that is just Outback alone.

Then, when you look at some of the other concepts that we could bring down there and leverage, that would also be very sizable. So I think we can see very rapid growth in that business, both from a sales and a profitability perspective as we go forward.

We have not provided any kind of five-year plan to the market on Brazil or anything, but if you think about what the opportunities to look at.

Then, the other piece I just want to mention about Brazil, which is important, is it gives us a strong geographic footprint in a very important market. And we can easily take some of that knowledge and move to the Andean Cluster or other parts of South America to grow that business. So it is not just a Brazil store, it is a marketwide story.

We are doing the same thing in China. We have got a really good but small Hong Kong business that we are using to help grow the China business. So you have got to think about these things, not only country-specific, but what it means for the region of the world that we are in.

All right. Thank you very much.

Jeffrey Bernstein, Barclays.

Two questions from a comp perspective. One, Liz, I think in your prepared remarks and the press release you talk about the challenging environment here in the States. Obviously we know about the weather and the holiday shifts which you detail, but have you seen anything change either for better or for worse in terms of how you define that challenging environment, whether you are seeing competitors getting more or less aggressive or the consumer perhaps getting more or less cautious? Wondering what you are seeing because obviously you are talking about something broader than the short-term detail on the weather and the holiday.

Sure, no. So, absolutely. So, fortunately we are all, knock wood, glad to no longer are we discussing weather as we move into the spring and summer. And I think -- look, you have, I think, Knapp April has been published so there continues to be some kind of challenging transfer the industry. But as I said on our last call there's positive indications, but then there's also challenging indications.

So there's no question that our consumer for CBR in that 55,000 to 65,000 continues to see pressure on their consumer disposable income. There hasn't been a meaningful change for this group. It has been more of a high-end recovery to date and you see that reflected in the high-end indexes and steakhouse numbers and all of that. That being said, a lot of the numbers that are coming out, a lot of the confidence things are showing some decent momentum.

So I think we have always said that the casual dining industry is going to be flat to plus or minus and that we are not going to rely on a rising tide to lift the boat, but within an $80 billion industry, there's tremendous share advantage for executing with excellence. And so our outlook on that really is -- we see nothing to change that perspective that we have had pretty consistently for the last couple of years.

You mentioned the weather, so just to clarify because I think you said 170 basis points essentially for the quarter. You appear to have talked about the first half, second half of the quarter. I am wondering if it was 170 for the full quarter is it safe to assume that trends were -- that disparity between the beginning and the end were 300 plus basis points that you are now sitting at a -- any color on the sequential trends through the quarter to know how we are thinking about entering the second quarter? Without giving specifics on that, obviously.

Yes. We don't break out our comps monthly. So we don't get into that kind of forward or past looking. We gave our -- when we gave our guidance for our Q1 comps, we came squarely where we thought we would be and that was in February. So we kind of knew the dynamics of the weather.

So things played out for us pretty similarly to I am sure the cadence that weather impacted others as well. But we don't get into monthlies.

Okay. Thank you very much.

Andy Barish, Jefferies.

Good morning. On the domestic development side, are there any overall changes with the pullback in Carrabba's? Or do the Bonefish new units continue to earn good returns and you are stepping up a little bit there to make up for the Carrabba's pushback?

Yes. First of all our guidance on domestic development or on development side overall and on domestic development aren't changed. So basically what we have in our Company is we are really, Andy, strong stewards of capital. Bonefish returns -- or they continue to open up their volumes higher than our US average. Returns are good. It is all about getting the A sites, it is supply issue and getting the A sites.

We have talked about the Outback relocation opportunities, what we can do there.

But in our portfolio right now Bonefish new units, Outback relocations are top new priorities in the US. We still will be opening up Carrabba's restaurants, but at a slower rate. And right now is the competition in our Company, which is very healthy between our various brands and Bonefish right now provides the best returns.

So we are very pleased with their returns we have in that company. We are pleased with the opportunity in front of us on the Outback relocation sites and we continue to do work on the Carrabba's box as we go forward.

But I can assure you that we are very close stewards of capital as we finish this -- as we look at our overall portfolio.

And one quick follow-up on the potential debt refi. Is that now in your at least 121 thought process? Is that something new or is that still not in your earnings guidance until something actually gets done?

Yes, well, it's -- as I laid out in my prepared remarks, it -- should we be fortunate enough to get it, we are really excited about the second opportunity in Brazil. And so we just -- and some other international opportunities. So we will probably, Andy, spin back and invest in the business some of the interest cost savings as we go forward. And because of the opportunity we have in front of us in our business.

Okay. Thank you.

(Operator Instructions). John Ivankoe, JPMorgan.

Good morning, it is Amod Gautam filling in. Dave, I appreciated the color on the productivity pipeline.

How much flexibility is there in planning around those productivity initiatives? In other words, I think it might be more relevant for 2015 if commodity prices stay where they are. But is there an ability to pull maybe more levers sooner in response to things like commodity or healthcare pressures?

Yes. We basically -- an initiative this large, so in other words initiatives like rolling in a new labor model and the front of the house, (inaudible) new labor model in the back of the house or actual versus theoretical management. You have really got to plan it out, work both with operations and we have a very defined schedule across our Company as we do that.

Do we want to go faster? Sure. But it is not something that you can really pull a lever on and say, let's make this faster, let's make that faster. Because if you do it right the first time, we are going to end up getting a lot more savings and a lot better service to our customers than we would if we accelerated it too quickly.

There are some other things that we can do that are still smaller and some of our supply -- in our supply chain and also managing some of our workers comp and things like that. That is a little more turn on the switch and move faster. But the big initiatives I talked about in the productivity section, you have really got to lay out across the Company and train the people properly.

Okay, and you have talked a lot about putting technology on the operations side so it is kind of related to the last question. But I think it would be interesting to hear maybe what considerations there are on potential adoption of maybe consumer-facing technology especially with the increasing exposure in the lunch daypart where speed might be even more important.

Sure, no. That is a great point. I think we talked last time we spent a lot of time over the last year mapping out our long-term consumer digital roadmap because there's numerous places in the decision cycles from gee, I want to go out to lunch or dinner to I want to pay really fast and get out of there where technology can interact with a customer to improve that experience. Right?

But you have got to get it right. There's a lot of long, unintended consequences if you don't. So we are testing many different, what I would call intersection points of where technology can enhance the experience, all the way from the potential to put yourself on a wait list in advance to order at the table to pay and leave.

So across our 1400-restaurant footprint we have test going on in each and every one of that areas. Because we want to know exactly what enhances the customer experience, but also the law of unintended consequences for some of these things. So, we absolutely see and have -- feel a role for, but we are doing it very thoughtfully and very guided because it is kind of the go slow to go fast to make sure we get that right.

We are obviously doing a lot in the interim on digital marketing, whether it is website enhancement, whether it is being able now to do location-based messaging, interact with components that increase consumer engagement, our online ordering concepts have been upgraded a lot. We have a lot of exciting things happening in digital in our investment as we said on the last call and that has stepped up pretty decently this year, pretty significantly.

Thank you.

There are no further questions. I will now turn over the call to Liz Smith.

We thank you all for joining us and look forward to updating you on the progress of our portfolio in the Q2 call. Thank you.

This concludes the Bloomin' first-quarter 2014 results call. You may now disconnect.