Cheesecake Factory Inc (CAKE) 2014 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Q1 2014 the Cheesecake Factory earnings conference call.

My name is Kim and I will be your operator for today.

At this time, all participants are in listen-only mode.

Later we will conduct a question-and-answer session.

(Operator Instructions).

As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the conference over to your host for today, Ms. Jill Peters.

Please proceed.

Good afternoon and welcome to our first-quarter fiscal 2014 earnings call.

I'm Jill Peters, Vice President of Investor Relations.

On the call today are David Overton, our Chairman and Chief Executive Officer, David Gordon, our President, and Doug Benn, our Executive Vice President and Chief Financial Officer.

Before we begin, let me quickly remind you that, during this call, items may be discussed that are not based on historical fact and are considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Actual results could differ materially from those stated or implied in forward-looking statements as a result of the factors detailed in today's press release, which is available in the Investors section of our website at theCheesecakeFactory.com and in our filings with the Securities and Exchange Commission.

All forward-looking statements made on this call speak only as of today's date and the company undertakes no duty to update any forward-looking statements.

David Overton will start off the call today with some opening remarks.

Doug will then take you through our operating results in detail and provide our outlook for both the second quarter of 2014 as well as the full year.

Following that, we will open the call for questions.

And with that, I'll turn the call over to David.

Thank you Jill.

We are off to a solid start in 2014 in comparable sales in the first quarter that were considerably stronger than the industry overall.

We are into our fifth consecutive year of achieving positive quarterly comparable sales, and we are continuing to attract guests based on the strength of our brand, not through promotions or discounting.

Weather aside, we saw fairly consistent sales during the first quarter with positive comparable sales in each market.

In addition, we saw stability in weekdays versus weekends, across dayparts, and in malt versus non-mall locations.

In addition, our key performance indicators continue to track well as we maintain high guest satisfaction scores, solid manager retention, and excellent food efficiencies.

As to development, we opened one new restaurant in the first quarter in Syracuse, New York, which is performing quite well.

Our newer restaurants that have opened over the past three years continue to exceed the performance of our existing base of restaurants, which speaks to our selection of high quality sites.

This year, we now expect to open as many as 10 company-owned restaurants in a mix of new and existing markets, including one relocation.

Internationally, not much has changed since our update in February and we now expect three to four restaurants to open in the Middle East and Mexico under licensing agreements.

As we've said in the past, the number of international openings is subject to change for a variety of reasons, and we saw little movement in timing.

In closing, we again are honored to be named the most preferred casual dining restaurant for the third consecutive year by Nation's Restaurant News Consumers' Picks Report, a comprehensive study that rates restaurant chains based on customer preferences.

The results from the survey highlighted menu variety as one of our key strengths.

Relevance drives our success, and the evolution and innovation in our menu for more than 35 years has been and will remain a critical competitive advantage for us.

With that, I'll turn the call over to Doug.

Thank you David.

Total revenues at The Cheesecake Factory for the first quarter of 2014 were $481.4 million.

Revenues reflect an overall comparable sales increase of 0.9%, which was negatively impacted by severe winter storms affecting our restaurants in the mid-Atlantic, Northeast, Southeast and Midwest, and by a shift of the Easter holiday and the surrounding spring breaks into April of this year versus March of last year.

These impacts reduced comparable sales by approximately 200 basis points.

The magnitude was greater than we expected as the storms continued beyond our last reporting date in February and the effect of the spring break shift was more pronounced.

Comparable sales increased 1.2% at The Cheesecake Factory and declined 2.9% at Grand Lux Cafe.

We've said for some time now that The Cheesecake Factory is outperforming the industry while Grand Lux Cafe's performance is more in line with the industry, and this trend continued in the first quarter.

Cost of sales was up 10 basis points in the first quarter of 2014 at 24.8% of revenues versus 24.7% in the prior-year quarter, as expected.

Labor was 33.1% of revenues in the quarter as compared to 32.6% in the first quarter of the prior year.

Labor productivity was impacted by reduced efficiencies, in part due to the winter storms and the sales fluctuations resulting from the holiday shift as well.

In addition, we experienced some pressure from group medical costs as a result of higher claims activity.

Other operating costs and expenses were 24% of revenues for the first quarter.

Although this line was flat relative to the first quarter of the prior year, we did experience about 30 basis points of pressure from a spike in natural gas costs, which was primarily offset by lower rent expense.

G&A was 6.5% of revenues for the first quarter, up 30 basis points from the prior year.

The increase is primarily due to costs associated with an accrual for the pending settlement of a legal claim.

As noted in our press release, we recorded $186,000 in pretax charge during the first quarter related to the planned relocation of one Cheesecake Factory restaurant.

Preopening expense was $2.2 million in the first quarter of 2014 versus $1.3 million in the same period last year.

We had one restaurant opening in the first quarter of 2014, and none in the same period of the prior year.

Our tax rate this quarter was 28.9%, within our expected range.

Cash flow from operations for the first quarter of 2014 was approximately $77 million.

Net of roughly $30 million of cash used for capital expenditures, we generated about $47 million in free cash flow for the first quarter of 2014.

During the first quarter, we repurchased approximately 2.1 million shares of our common stock at a cost of $99 million, the majority of which was executed under our previously announced accelerated share repurchase program.

We utilized our revolving credit facility to fund a portion of the share repurchases during the quarter.

As a result, we now have a debt balance of $25 million on our balance sheet which we expect to repay by the end of the third quarter of 2014.

That wraps of our business and financial review for the first quarter of 2014.

Now I'll spend a few minutes on our outlook for the second quarter and an update on the full year.

As we've done in the past, we continue to provide our best estimate for earnings-per-share ranges based on realistic comparable sales assumptions.

These assumptions factor in everything we know as of today, which includes quarter-to-date trends, what we think will happen in the weeks ahead, the effect of any impacts associated with holidays, and known weather influences.

For the second quarter of 2014, we estimate diluted earnings per share of between $0.59 and $0.62 based on an assumed range of comparable sales between 1.5% and 2.5%.

For the full year 2014, we estimate diluted earnings per share in a range of $2.24 to $2.33, based on an assumed comparable sales range of between 1% and 2%.

Our comparable sales assumption for the full year is unchanged from our last update in February.

We expect that our trend of comparable sales outperformance relative to the industry will continue, and while at the high end -- while the high end of our range assumes that comparable sales accelerate relative to 2013, we believe it is reasonable and achievable based on our recent trends.

The change to our annual earnings-per-share estimate reflects the shortfall in earnings that we experienced in the first quarter as compared to the high end of the sensitivity range that we had provided.

Our earnings-per-share outlook for the balance of the year has not changed since February.

Our outlook for food cost inflation in 2014 remains between 3% and 4% for the year, driven by the higher shrimp and salmon costs that we previously discussed.

While our overall expectations have not changed since February, the makeup of our outlook has shifted slightly as we now expect higher meat and dairy costs, offset by lower costs in a couple of other areas.

As to our corporate tax rate, we continue to expect it to be about 29% for 2014.

Our total capital expenditures are now expected to be between $105 million and $115 million for planned 2014 openings as well as expected openings in early 2015.

With respect to capital allocation, our earnings-per-share sensitivity range for 2014 assumes that we will continue to use substantially all of our free cash flow for dividends and share repurchases.

With that said, we'll take your questions.

In order to accommodate as many questions as possible, please limit yourself to one question, and then re-queue with any additional questions.

(Operator Instructions).

Jeffrey Bernstein, Barclays.

Great, thank you.

Doug, one clarification from what you just said and then a question.

The legal settlement that I believe you mentioned was in the G&A.

I'm wondering if you can quantify that because we had assumed, just based on our estimates, that it was probably in the labor line because the labor line seemed a lot heavier than we were expecting.

So I'm just wondering if you can clarify that legal settlement and the elevated labor, whether or not that is sustainable therefore, and then I had a follow-up.

We accrued those costs.

It's an employment related legal claim, and we do have other legal claims as we always do that are still ongoing.

So we are not going to disclose what the exact dollar amount of that pending settlement is.

However, Jeff, one way to think about the impact is to look at the G&A line, which ran about 30 basis points higher than last year, and the simple math then is that the higher overall G&A year-over-year cost us about $0.02 per share in earnings for this quarter.

Got it.

And the labor line then was elevated versus at least our expectations.

I know you said group medical and productivity.

Are those things that -- productivity I guess is due to weather, but the group medical, is that something unusual for the quarter?

Yes, let's talk about that first.

Group medical was higher year-over-year.

Since we are self-insured, our actual costs that we record in any given quarter are based on claims activity.

And the higher costs than weren't based on higher than expected benefit enrollment for 2014, for instance, under the Affordable Care Act, that turned out to be pretty much what we expected it to be.

But we did see higher claims activity in November, in December, and January last year, and these claims were recorded on a lag basis.

So that's what impacted the first quarter.

We don't really know what the underlying cause of that is, but maybe more staff members met their deductible by the end of the year and sought medical care.

But in any event, we experienced higher first-quarter claims activity.

And I wouldn't say that since it was higher than normal that we would expect that to continue.

Got it.

And then just my broader question was just on the comp.

Very impressive.

It looks like -- I know you reported the 1.2% with Cheesecake but it does seem like you had 200 basis points of unusuals, so you're looking at north of a 3. I think you mentioned that mall and non-mall were seeing similar trends.

I'm just wondering if you can comment on that.

I don't see you guys doing a 3% comp, looking back it looks over this decade.

So I'm just wondering what you attribute that to.

I know you mentioned something about gift cards, but just wondering if you can talk a little bit about that.

Then I'm assuming the Easter shift now goes the other way in the second quarter, so how much is that kind of helping in the second quarter?

Yes, that's the main thing.

There are a lot of nuances that would impact what we think we could do in the second quarter.

So if you kind of just did the pure math and added 2%, 200 basis points to the cost that we achieved in the first quarter, you'd get almost the 3% that you got.

So while we feel our sales trends are very solid, we don't think that they have changed from where they have been at all.

So when we look at the second quarter, there's about 70 basis points of pressure that impacted the first quarter that will positively impact the second-quarter comp store sales.

So if you take that from the 2.9%, if you will, and sort of factor in other nuances, there's all kinds of other nuances, you get roughly the 1.5% to 2.5% we are saying we think we can achieve in the second quarter.

Got it, thank you very much.

John Glass, Morgan Stanley.

Thanks very much.

Doug, can you just -- what, if anything, changed in the balance of your guidance?

I know there's components that shifted but was there anything or was the lower guidance simply a function of the first-quarter miss?

And then how does that square with I think the buyback was bigger than many of us thought.

Was that always the plan, to accelerate it, so there's going to be much less going forward or do you think the share count is going to be a lot lower than you initially thought when you provided guidance originally?

Okay, yes.

So I would say to the first one that -- sorry, I've forgotten what the question is.

What changed in your guidance, if anything, going forward?

Nothing changed in our guidance.

Basically for the second, third and fourth quarter of the year, we haven't changed a thing in our guidance.

So any change in the annual earnings-per-share guidance is only due to the first quarter.

And then buyback, what influence is that having on the share count that may have been different than you thought initially?

I don't think it should be different than what you thought.

It should be our guidance for the year assumed a strategy where we would do a heavier buyback in the first quarter of the year, and we did that, so we are on track to achieve from a WASO standpoint the number of shares that we thought we would have outstanding.

So nothing has really changed.

Okay, great.

Thank you.

Joe Buckley, Bank of America.

Thank you.

Doug, could we dig back into the labor line again, because that seemed to be the biggest variance in the quarter.

So can you talk a little bit about was there pressure in minimum wage states that might have pushed that a little bit higher than you thought, or was it just difficulty to efficiently schedule labor due to the sales fluctuations?

Was that the primary problem?

The primary problem was labor productivity overall.

So weather events certainly affected our ability to manage labor as tightly as we normally do.

So do big fluctuations in traffic that occur with holiday shifts, for instance, such as the spring break shift into the second quarter.

I think there is an opportunity for us to manage labor tighter than we did in the first quarter, although it can be difficult when sales and traffic fluctuations are large and they are happening over a relatively short period of time.

So the primary pressure on the labor in addition to the medical expenses was the productivity.

Okay.

Were there any (inaudible) in the quarter on bakery sales of bakery profits that we should think about?

Bakery sales were a little bit lower than what they were last year at this time.

I would say that I would have you think about the bakery -- I think I said this last time, to think about the bakery and any decline in bakery sales as we talked about before being due to warehouse clubs.

Our bakery team is working on identifying different distribution channels that have a better mix between sales volumes and profits, sort of migrating to a broader sales portfolio with less concentration and higher profit margins.

So we would expect, under that strategy, that the approach, that we would stabilize our bakery sales year-over-year sometime in the second half of the year.

Okay.

Thank you.

David Tarantino, Robert W. Baird.

Good afternoon.

Doug, I wanted to come back to the question about the comps outlook.

And perhaps maybe I'm not understanding this correctly, but just to clarify, on your Q1 trends, you are saying that there's the two factors, Easter and weather, that hurt the trend by a couple hundred basis points.

So is it right to think that on kind of ex-those external factors, you ran close to 3%?

Is that the right way to think about it?

That's the right -- just straight math.

That's the right straight math.

So you added 2% and 2.9% -- 2% and 0.9%.

But again, there are other things that influenced the first quarter.

For instance, another thing to factor in is that we did have positive weather impacts that we don't factor into any of that 200 basis points.

So, when we give you the impact of weather, which was 130 of the 200 basis points, we give the impact of weather, that's all the impact of the weather this year.

There was a positive impact of weather from last year that we factored into our guidance.

So when trying to bridge the gap, if you will, between what we achieved and what our guidance was, that's why we give you the 1.3% weather impact.

But last year, there were other things, the bad weather last year that we had a positive comparison with this year, and some other nuances that really you can't really get 2.9% out of that.

So I guess my question, Doug, is when you net out all the positives and negatives, what do you think the underlying trend was in Q1?

Probably somewhere between 1% to 2%, maybe at the high end of that range.

Close to 2%.

And then so I guess the question on Q2 is you're getting an addback for Easter, it sounds like, so I guess why if you're running for closer to that 2% range and you get the Easter addback, is there something else in Q2 that might be laying on the trend, or are you just being conservative at that 1.5% to 2.5% range?

There's always something else that's in there weighing on the trend whether it's a shift in a holiday or some known weather influence or something else from the previous year.

But the main thing is the 70 basis point shift.

So absent that factor, you would come back to roughly 1.5% to 2.5%.

Great.

Okay, thank you very much.

Matt DiFrisco, Buckingham Research.

Doug, I have a question, but I'm sorry.

I'm going to have to beat the dead horse though.

You left me a little confused on that last comment.

You said 1.5% -- we go back to 1.5% and 2.5% after the 0.7%.

Does your guidance includes the benefit of the shift of Easter, or it does not include the benefit of the shift of Easter when you say 1.5%?

Sure.

Maybe I should use back, then.

Yes, it includes the benefit of the shift of Easter.

Okay.

So if we want to -- looking (inaudible) your year-ago compare, looking at the 0.7%, it looks as though the 1.5%, 2.5% is achievable if not maybe even conservative, some of us are I guess coming to the conclusion.

Yes.

We think that's the right place for us to be, 1.5%, 2.5%, in the second quarter.

Okay.

My question is regarding pricing.

I'm sorry, you gave a very brief presentation in the beginning, and I do always appreciate that and you got to the Q&A quick.

But did you say pricing for the quarter?

If not, can you tell us what it was?

Pricing that we had in the menu chains that we just did, the February and March menu change, basically replaced what was rolling off.

It was about 1%, so there's about 2% of pricing in the menu.

And do we expect 2% to be a good proxy for the rest of the year, or with the California minimum wage going up July 1, do you expect that to have to be -- get a response as well?

Or is 2% the number?

I would think 2% is a good proxy for the rest of the year.

Does your guidance -- should we look at labor maybe getting a little heavier in the back half or do you think the comp environment that you have assumed of 2.5% or so or 1.5% to 2.5%, and then going for the full year to 1% to 2%, how should we think about labor when that price increase in California, which is an important state for you guys, or the labor goes up?

(multiple speakers)

We knew the labor was going up, and we know how much it's going up by, and we factored that into the guidance that we gave.

Do you employ minimum-wage employees that you would have to respond immediately or no?

You have to respond immediately because it's state minimum-wage, yes.

So, there are servers that are paid I think close to minimum wage.

Right?

Yes, we do have minimum-wage staff members.

That are tipped.

Okay.

Thank you.

Nicole Miller Regan, Piper Jaffray.

Great, thanks.

This is Josh on for Nicole.

Doug, I wanted to see if we might be able to dig into the COGS outlook.

And you had mentioned that it sounds like maybe the net results of things but maybe the pieces moved around.

So I was just curious if we might be able to run through those different moving pieces.

It sounded like maybe higher meats and higher dairy specifically.

Yes, that's about it.

There's not anything else really to run through.

We were -- and there are certain things that are offsetting that.

Anytime -- we are about 60%, 55% to 60% contracted.

So anytime we give a prognostication for how much we believe the commodity costs are going to go up, 40% of that prognostication, if you will, is based on our best estimate on what is going to transpire for the rest of the year for those items that aren't under contract.

So that's what we did again, so there's not a lot really to say other than there are some things in that estimate that went up, and others that went down.

That's helpful.

And then David, could you remind us or could we circle back to the strategy or the opportunity really around the lower -- the smaller footprint boxes?

Where are we with that, and is that something that is still on the table as we go forward with some of the new units on the schedule for this year?

Is that something we might see then show up in some of the smaller markets that we've talked about historically?

Yes.

We don't really look at them as big and small ourselves.

We just take the appropriate square footage for the appropriate city and the demographic there.

So in the smaller cities, we are opening anywhere from 7500, 8000 square feet, very appropriate for that size.

Again, our goal is to try to get $1000 a square foot or more, and so that's what we're doing.

And I think most of the sites, at least domestically, are in that range, and internationally they are bigger because we are the only one in those cities and we know we will be busier, and so we build larger restaurants.

But really it depends on the city, the demographic, and then we choose the appropriate square footage.

And that's just the way it is now.

I don't think it's anything you should think of as separately or another thing we are doing.

It's just business as usual.

Certainly, that's fair, elegant way to put it.

Thank you for the update.

Will Slabaugh, Stephens.

Thanks guys.

I want to ask you about development.

It looks like your updated unit development target for domestic units is at the bottom end of the 10% to 12% range you gave last quarter.

Wondering if you could give us a little insight into why that may be the case.

And then similarly internationally, it looks like you're going from three to four from three to five last quarter.

So if you could just comment on those moves, if there's anything to read into that beyond maybe delays into 2015 or something similar?

I think that's really it.

When we give a range, we are doing that because some of the sites, although they've been (technical difficulty) we've identified them and we hope to get them, then all the work starts with the landlord and construction and so on and so forth and sometimes they move.

So I think domestically you're going to see some sites open earlier in 2015 because it's just a matter of timing and moving, and with all the many, many things that come up, because Cheesecake is very comfortable to build.

And it's really the same thing for international.

It just takes a little longer.

You identify the site, the landlord likes you, then all of a sudden there are some problems that arise that take time to settle.

And so it will move.

So one of the internationals for sure is moving, but we love the site and it's the same domestically.

So, I think you'll see those come up early in 2015, which is good for us, since most of the time most of our stuff comes at the end of the year.

Got you.

As a quick follow-up there internationally, can you give us an update on how those units are performing, and then any sort of feedback you've been getting from your licensees regarding unit development accelerating beyond what you see for 2014.

They are performed beautifully, much better than we thought.

They are some of our highest grossing restaurants in domestic that we have, period.

They are well beyond I think all of our hopes, so that is great, certainly in the Middle East.

We will see what happens in Mexico.

And in terms of our -- some of the problems are the laws of the country.

So beside them saying okay we're going to open, all of a sudden there's either new restrictions on food; you have to work on that.

There are many things that we have to work on to make sure we can function in those countries, and sometimes that takes a little longer.

But they are very, very positive on us, and there are offers on the table to move into other countries.

We just have to see if we can function there.

I think I would add that a good rule of thumb, if you what to think about it moving forward, is that three to five that we said at the beginning of the year is sort of good rule of thumb to use at least until we have another licensee that has ramped up.

So that's not anything you can cast in granite, but that's what I would use if you were just modeling it out.

Got it, thank you.

Brian Bittner, Oppenheimer.

Thank you.

I just want to go back to the capital allocation strategy.

Just thinking about share repurchases and dividends, you talked about using all free cash flow for such this year, and you guys obviously bought back a lot of stock in the first quarter, and dipped into the credit facility.

Just wondering I guess, one, why again was it so accelerated?

Why did you guys just not use free cash throughout the year to buy back stock?

And did this also possibly up your target for share repurchases for the year?

Or are you going to do more than the free cash flow you generate, in other words?

You know, one thing I will add is, in addition to the free cash flow we generate, we also receive cash from stock option exercises.

And that can be material.

Last year, I believe it was close to $70 million.

I think we have in our plan this year for $30 million to $40 million of stock option exercises.

So in addition to the free cash flow that we have, we can also use that cash.

And we have shown historically that we have returned that cash to our shareholders.

I believe last year it was $211 million was the total of share repurchases and dividends for the year.

So with respect to the acceleration, that was planned all along.

The part of the strategy for generating the earnings-per-share growth that we wanted to generate for 2014 was to get the share repurchases done earlier in the year so that they could have a bigger impact on earnings-per-share growth for the year 2014, nothing more than that.

It's the execution of a strategy that we planned out, and the borrowing is temporary, and as we said in our comments, we would expect to just have it repaid by the end of the third quarter.

Okay, thanks.

Jeff Farmer, Wells Fargo.

Just hearing all these development questions did have me rifling through my notes, so I apologize.

I'm going to test your memory a bit here.

But it looks like on analyst day, I don't know, 2004, 2005, you guys are pointing out that developers were offering you something like 1000, 1200 sites for the 15, 16, 17 units you plan to open in whatever year that was.

But fast-forward to today, recognizing retail landscapes dramatically changed, I still am going to assume that you're being offered more sites than anyone.

But the question is this.

How does this work now?

Do you guys, are you essentially picking the best sites available, or is there a bigger picture portfolio strategy?

So again, you just sort of boil that down, where does the development strategy stand today?

I understand the backfill, but is there more to it than that?

This is David Gordon.

Our strategy really hasn't changed.

Our strategy is to select eight site locations that we know will drive the traffic that we need for the returns that we need.

That was our strategy in 2004, as you mentioned, and that is still our strategy here 10 years later.

We really are very careful, and we are not going to compromise on site location.

We're going to pick the best sites that we know are going to get the returns that we need.

So that strategy really hasn't changed over time.

We used to say that there was 150 or 200 Cheesecake Factories of that size.

Once we went to the smaller unit, now we are saying there's at least 300 Cheesecake Factories, given the small unit.

So we've actually increased the number of potential Cheesecake Factories since that time.

I'm not exactly sure of some of the other things that were in your notes, but that's pretty much been our story the whole time.

But you're absolutely right, we do get offered a lot more sites than what we end up selecting.

So I don't know exactly what the ratio is, but virtually any landlord that wants to put a restaurant there is contacting us to see if we would consider putting a restaurant there.

So we are evaluating all of those, and we are only trying to pick the best sites that were highly selective, as David said, and only picking A+ locations.

And then just as a quick follow-up on that, as you look forward 2015, 2016, 2017, I know we've come off the trough point of 2008, 2009.

Have you seen an acceleration in be it lifestyle centers, remodeled AAA malls?

Does this continue to accelerate, or do think we're just going to sort of hum along at this level for the next few years?

I think they're accelerating right now.

I know that some of the larger groups out there are remodeling at least 20% of their spaces.

They are adding on.

There's lots of things happening.

They are adding condos; they are adding businesses; they are adding offices.

So a lot of these centers are going to be multiuse and they are going to be perfect for a restaurant like ours.

So the B and C malls are another story.

And because we are not in them, thank goodness, that's not our problem.

The A centers I think are going to change with the times, redo what they are doing, and so we feel it's picking up nicely.

Thank you.

Sharon Zackfia, William Blair.

Good afternoon.

A couple of follow-up questions, because most of my questions were answered.

But the two locations that are slipping this year, should we expect more of an acceleration and development in 2015?

I apologize if somebody already asked that.

And the preopenings (technical difficulty) I think originally, Doug, you were expecting $13 million to $14 million this year.

Is that a bit different, given we are at 10, up to 10 locations versus originally 10 to 12?

I would think that it would be.

We might have to give that number off-line, Sharon.

As far as the location slipping into next year, we would hope that those will be, as David said earlier, locations we would get open and the front half of the year versus the second half.

And next year is looking quite good.

I don't have the numbers yet, but I don't think I've ever felt so good about the number of deals that look positive.

Obviously, later in the year, we will give you a better number, but I am pretty happy with the development for 2015 at this moment.

Okay.

And I know you mentioned unit productivity was better than the overall base, but it looked really, really good if you backed into that this quarter, particularly (inaudible) the Easter shift.

Is there anything going on with those units that were opened particularly in the back half of last year?

I don't know if a little bit more California and that helps given the drier weather there, or what you're seeing in the new units, but they looked really really strong.

Yes, you are talking -- when you say productivity, you mean the sales volumes, right?

Correct.

Yes, so our newer units continue to perform very well.

And if you go back through the last three years worth of openings, it is certainly including those last year.

The restaurants where we relocated, all three of those are doing significantly higher volume than the restaurant they replaced and for different reasons.

So there has been very good -- sales metrics are about 10% better in sales per square foot and sales per seat in the newer restaurants open over the last three years than they are for the average as a whole.

And it's been that way for a while.

And it continues to be that way.

And even those we opened outside of California, where they even had inclement weather, opened very strong.

Okay, great.

Thank you.

Andy Barish, Jeffries.

Two quick questions.

Just can you quantify or give us what exceptional strength meant in a couple of the big markets, obviously not weather impact or maybe even benefiting from the season, strong season in Florida.

And then on the technology side, I think you were doing some online ordering testing with your fairly sizable to-go business.

Can you give us an update as to where that might stand for 2014?

I'll let David Gordon talk about what we're doing from a technology standpoint.

But with respect to the markets we had, we talked about our three largest markets, Florida, California, and Texas.

With that said, there is still not a great big difference between the lowest performing markets and the highest performing markets.

That's like -- 5% is about the difference between the best performing market and the worst performing market.

So those markets are up in the neighborhood of 3%, and our worst markets that were slammed the hardest by weather are down in the neighborhood of 2%.

And to follow up on technology, we have been looking at the appropriate online ordering partner for the time that we do enter the market for online ordering.

We have to be very careful because the complexity of the menu.

It's important that the technology we choose can really handle the type of volume and the complexity of guest preferences etc.

with the menus.

So we are being careful there.

We haven't selected a partner yet and we are not moving forward immediately with online ordering.

However, it's a strategy we are looking to in the future.

And our technology strategy continues to be focused on enhancing the overall guest experience.

I think on the last call we talked a little bit about not moving forward with something like tablets on the table.

It's really not right for our brand and not particularly right for our guest and the guest experience we are looking for.

However, that doesn't exclude us from evaluating and testing other initiatives over the next couple of years that may be able to benefit the guest experience in different ways, whether that's mobile payments, mobile greeting, etc.

We are not starting any of those immediately.

However, we are starting to explore some of them.

Thank you.

Brian Vaccaro, Raymond James.

Good evening guys.

Just a couple of nitpicks for me, most of mine have been answered.

But I wanted to ask you about the back to the 2014 development outlook, can you remind us how many relocations there are going to be this year?

I think the one in Atlanta is going to open here in the next couple of weeks, but any beyond that?

That's the one.

Okay, so just that one.

Okay, great.

And then, Doug, real quick, I didn't get down fast enough, but you mentioned cash flow from ops in the quarter.

Was that $70 million you said?

I think I said it was $77 million?

$77 million.

Okay.

I'm just wondering.

Anything that stood out on the -- we will see it in the Q, but was there a big swing in net working capital or something there that -- I'm just having trouble getting to the $77 million based on where net income, D&A, etc., were.

Will get back to you on that, how's that?

Yeah, that's fine.

We will talk to you later on and give you some more details about the cash flow statement.

Okay.

And then just one last quick one for me, I think we've got it on past conference calls, the bakery dollar sales.

Do you happen to have that handy?

What we decided to do was we decided not to -- when last year, when we changed our segment reporting, frankly, the bakery external sales are not a material amount for us.

So, we used to just have the one liner where we reported what they were.

We're just not going to do that anymore.

But basically they were down around $2 million from last year.

Okay.

That's helpful, appreciate it.

Steve Anderson, Miller Tabak.

Good afternoon.

Just a quick question on Grand Lux.

You're looking at the deviation from the rest of The Cheesecake Factory, and that decline really reflected the weather in some of the locations in the Northeast where we had inclement weather also in Chicago was another case where the weather certainly had an impact.

Was it reflective of that or do you think there are locations like you did last a couple of years ago where you think you may have to impair those locations?

First of all, there's only 11 units in the Grand Lux system.

So -- and three of the units are very high volume locations.

Chicago and the two in Las Vegas, and then you mentioned it.

The Chicago restaurant was greatly impacted by weather.

They were slammed pretty hard with weather, and when there's only 11 restaurants and one of your highest volume restaurants is one that's greatly impacted by weather, that can be a big swing in the comp store sales report for the entire system.

Understood, thank you.

Karen Holthouse, Credit Suisse.

One of the things that came up when it came to weather issues in the second quarter last year was not being able to use patio space because of a cold start to the spring and the early part of April.

How has that compared year-over-year this year?

Are you talking about any specific geography?

Or just (multiple speakers)

One of the things -- last year just that because it was a pretty universally cold start to the spring, that it was headwind at least beginning of the second quarter for not being able to use patio space at the same sort of utilization as the prior year and how this year has been trending.

I would say that the way I would answer that is we know exactly what our sales are through yesterday, and we factored that into the guidance that we gave.

So, anything that was good or bad about patios or weather, we took that into account.

All right.

Thank you.

This concludes today's conference.

Thank you for your participation.

You may now disconnect.

Have a great day.