Dine Brands Global Inc (DIN) 2004 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the fourth-quarter and fiscal-2004 IHOP conference call. My name is Angela and I will be your coordinator for today. (OPERATOR INSTRUCTIONS) As a reminder, this conference is being recorded for replay purposes. I would now like to turn the call over to your host for today's presentation, Ms. Stacy Roughan. Please proceed, Ma'am.

Good morning, and thank you for participating on IHOP's fourth-quarter and fiscal-2004 conference call. Today with us from management are Julia Stewart, President and CEO, and Tom Conforti, CFO.

Before I turn call over to Julia and Tom, I would like to inform you that today's conference call contains forward-looking statements. These forward-looking statements include such words as "may", "will", "expect", "believe", "anticipate", "plan", or other similar terminology. These statements involve known and unknown risks, uncertainties, and other factors which may cause the actual results to be materially different from those expressed or implied in such statements. These factors include, but are not limited to -- risks associated with the implementation of the Company's strategic growth plans; the availability of suitable location and terms of the sites designated for development; the ability of franchise developers to fulfill their commitments to build new IHOP restaurants in the numbers and timeframes covered by their development agreement; legislation and government regulation, including the ability to obtain satisfactory regulatory approvals; conditions beyond IHOP's control, such as weather, natural disasters or acts of war or terrorism; availability and cost of materials and labor; cost and availability of capital' competition; continuing acceptance of the IHOP brand and concept by guests and franchisees; IHOP's overall marketing, operational and financial performance; economic and political conditions; adoption of new or changes in accounting policies and practices; and other factors discussed from time to time and IHOP's filings with the Securities and Exchange Commission, news releases and future conference calls.

Forward-looking information is provided by IHOP pursuant to the Safe Harbor established under the Private Securities Litigation Reform Act of 1995 and should be evaluated in the context of these factors. In addition, IHOP disclaims any intent or obligation to update these forward-looking statements.

Now I would like to turn the call over to Julia Stewart.

Welcome to everyone participating on the call.

2004 was a great year for IHOP. We will share the details of that performance with you, and we will also provide you with an update on our efforts to energize the brand, improve operational performance, and maximize franchise development as all of these strategies worked together to sustain strong system momentum in 2004.

2004 was the last year of our transition from our old business model to our new business model. During the year we experienced many of the benefits of our model shift and met our performance expectations. In 2004 our profit performance was driven by higher profits in the franchise operations and rental operations segments due to strong same-store sales results and growth in the total number of effective restaurants. We also benefited from significantly reduced losses in Company operations due to the refranchising of many Company-operated restaurants and selective restaurant closures.

Cash from operations results were better than our expectations and CapEx was dramatically reduced from prior years. In 2004 we began to generate significant free cash flow -- that is cash from operations, less CapEx-- of $50.4 million as we held capital expenditures to $16.6 million. This performance reflects a two year turnaround in free cash flow of $114 million.

We returned cash to shareholders through dividend payments totaling $20.7 million last year. We also continued to make progress on our share buyback activities as well. During fiscal 2004 we bought back approximately 1.8 million shares at an average price of $36.45. Since the announcement of the share repurchase authorization in January 2003, we have bought back approximately 2.3 million shares, of which approximately 160,000 shares were bought in the fourth quarter of 2004.

Now let's take a closer look at our EPS performance. In the fourth quarter we reported a 19 percent increase in net income to $10.5 million, or an increase of 26.8 percent in diluted income per share to 52 cents. Excluding charges related to the onetime repositioning of Company-operated restaurants and a gain from the sale of real estate, net income for the fourth quarter of 2004 would have increased 14.8 percent to $10 million, or an increase of 22.5 percent in diluted net income per share to 49 cents. This increase was primarily attributable to the impact of a 53rd week for the fiscal year, which fell in the fourth quarter of 2004, adding approximately $4 million on a pre-tax basis.

For fiscal 2004, we reported a decrease of 9.1 percent in net income to $33.4 million, or a decrease of 5.3 percent in diluted net income per share to $1.61. Excluding repositioning charges and real estate sales gains, net income for 2004 would have increased 6.7 percent to $40.7 million, or an increase of 10.7 percent in diluted net income per share to $1.96. This increase was primarily attributable to the 53rd week effect. Tom will walk you through a detailed discussion of the impact of the 53rd week in just a few minutes.

System-wide same-store sales increased 4.3 percent for the fourth quarter 2004 due to the success of Sweet Caramel Combos breakfast promotion in November and December and Never Ending Popcorn Shrimp, which finished its promotional run in October. For the second straight year we set a record for same-store sales growth, coming in at 5.3 percent for the full year. This is the highest level of same-store sales growth in the last 12 years.

Turning to traffic growth and guest check average, there approximately 200 restaurants for which we now have 18 months pullable data. From these restaurants we can tell you that the majority of our same-store sales increases for 2004 came from guest check average, while traffic growth remained positive throughout the year.

Turning to day part mix, based on weekly sales analyzed from approximately half our restaurants at the end of 2004, 36 percent of our sales occur at breakfast and approximately 27 percent occur at lunch. 6 percent of sales are generated in the carryover period between lunch and dinner, and dinner represents approximately 15 percent of sales. Late-night, which we defined as 8:30 PM to 10 PM, represents 5 percent of sales. For restaurants operated extended hours or some form of 24 hour operations, graveyard contributed 11 percent of sales between the hours of 10 PM and 6 AM. Regardless of the time of day ordered, approximately 71 percent of all items sold in IHOP today are breakfast.

One of our key longer-term goals is for guests to be just as eager to enjoy IHOP at lunch and dinner as they are at breakfast. We have a three-pronged strategy to grow beyond the breakfast day part, including promotions that feature lunch and dinner items, core menu enhancements, and our restaurant remodel package which will improve the overall guest experience throughout the day.

Our 2004 sales performance clearly demonstrates that our brand energizing strategies continue to produce solid results. Continuing a successful launch of network television media and our new advertising campaign, we implement three promotions in 2004 supported with network media and three others supported with local media. The combined impact of the media, the creative campaign, and the execution at the store level helped us achieve our 12 year record-high same-store sales increase of 5.3 percent in 2004.

Our dedication to operational excellence continued to produce meaningful improvements throughout our system in 2004. Nearly two years ago we established a ratings system whereby all franchisees were evaluated and rated on a quantifiable A through F scale. More then 70 percent of franchisees are now rated an A or B based on this systems. This reflects a marked improvement from the rating system's inception in 2003 when less than 50 percent of the Company's franchisees received an A or B rating. Additionally, we have been successful in removing many of our franchisees rated as a D or F operator.

In 2004, we redesigned our restaurant manager training program, which now includes a simulation that allows managers to gain deep insight in how decisions they make at their restaurants can affect the overall business. There is truly nothing like it in the industry today.

Also in 2004 we established a call center to improve our responsiveness to franchisee needs and guest inquiries. Our call center now fields all guests and franchisee calls for quick resolution or routing to the appropriate individual for resolution.

And last year we made statistically significant improvements in mystery shop scores, particularly in the area of hospitality. This included improvement greet and depart acknowledgment of our guests, as well as improved service level scores. Overall guest satisfaction also improved, which goes hand-in-hand with hospitality and service improvements within our restaurants.

And earlier this month we held our best national operations meeting ever. Our franchise business consultants experienced three days of learning, training and sharing best practices. As a result, our FBCs are better prepared than ever to partner with our franchisees in making their business more successful.

To take advantage of economies associated with system-wide volume purchasing, we developed an improved procurement process by collaborating with our franchisees. Now we can secure pricing agreement and ensure availability for most major products carried in IHOP restaurants, which we expect will generate approximately $5 million in system-wide cost of goods savings for our franchisees in 2005 alone.

2004 was a breakthrough deer for our IT department as they installed more than 270 MICROS point-of-sale systems. Now more than two-thirds of our restaurants have pullable POS systems. In 2005 we expect approximately 150 additional MICROS installations.

And finally, our commitment to maximize franchise development paid off as franchisees and our Florida area licensee opened 41 restaurants last year, in line with our expectations for 2004. IHOP Corp. also opened two new restaurants in our dedicated Company market of Cincinnati. We also developed our last four restaurants under the old model in 2004.

Our development pipeline continues to grow with signed franchise development agreements and options covering 287 new IHOP restaurants as of the end of 2004. We have an additional 41 IHOP restaurants for which legal agreements are being finalized. This gets us to the low-end of the 300 to 700 more restaurants we believe are possible in the domestic US. Finally, we are very excited about many deals currently being discussed in various parts of the country, which are expected to add to this amount.

We've affected dramatic change at IHOP over the past two years. We successfully changed our Company's formula for growth from a company-funded development approach to franchisee development effort. This has allowed us to focus on reenergizing unit-level growth, which we have accomplished over the past 24 months. Just yesterday, it was announced that the International Foodservice Manufacturers Association, IFMA, awarded IHOP its organization's prestigious Silver Plate Award. The award recognizes companies that have demonstrated leadership, notable achievements, and have made lasting contributions to the advancement of the foodservice industry. This is a coveted award that illustrates the industry's recognition of our success to date and how IHOP has come in just two years.

Now I would like to turn the call over to our Chief Financial Officer, Tom Conforti, for a more detailed discussion of our fourth-quarter and fiscal-2004 financial results.

Today I will walk you through our performance for the quarter and full-year 2004. First, let's begin with the bottom line.

As Julia mentioned, we reported a 19 percent increase in net income to $10.5 million, or an increase of 26.8 percent diluted income per share to 52 cents in the fourth quarter of 2004.

During the quarter IHOP's earnings were impacted by pre-tax impairment and closure charges of $982,000 related to the strategic repositioning of Company operated restaurants. In addition, we benefited from a gain of $1.8 million on the sale of real estate associated with former Company-operated units. Excluding these charges and the gain from the sale of real estate, net income for the fourth quarter of 2004 would have increased 14.8 percent to $10 million, or an increase of 22.5 percent and diluted net income per share to 49 cents.

This increase was also due to the impact of a 53rd week for the fiscal year, which fell in the fourth quarter of 2004. The impact on comparisons of this additional week totaled approximately $4 million on a pre-tax basis.

Turning to our performance for full-year 2004, we reported a decrease of 9.1 percent of net income to $33.4 million, or a decrease of 5.3 percent in diluted net income per share to $1.61.

Our bottom-line performance for fiscal 2004 was impacted by pre-tax impairment and closure charges of $14.1 million, which were primarily related to the strategic repositioning of Company-operated restaurants. Our fiscal 2004 results also benefited from a gain of $2.3 million recognized upon the sale of three real estate properties during the year. Excluding these charges and the gain from the sale of real estate, net income for 2004 would have increased 6.7 percent to $40.7 million, or an increase of 10.7 percent diluted net in income per share to $1.96.

This increase reflects the performance of our core businesses strong same-store sales results and growth in the total number of affected restaurants drove our profit performance in 2004. These two factors helped offset the expected decline in our business from exiting our old business model. The 53rd week in 2004 also contributed to overall profit growth.

Let me briefly cover our quarterly profit performance highlights by our four key reporting segments.

Franchise operations profit increased by 11.4 percent to $21.4 million for the fourth quarter and 8.1 percent to $82 million for fiscal year 2004. Segment revenue grew by 12.5 percent to $157.6 million for fiscal 2004. Aggregate profit for the year grew due to a 14.4 percent increase in franchise retail sales as a result of an 8.1 percent growth in effective units, as well as our exceptional 5.3 percent same-store sales performance for the year. The 53rd week in fiscal 2004 added approximately $1.5 million in pre-tax profit to the segment.

Franchise operations profit was partially offset by a decrease in core franchise fees associated with franchising 28 fewer units in 2004 than in 2003. Franchise operations expense grew 17.6 percent primarily due to increased sales. The Company also increased support of MICROS installations, our automated point-of-sale system, through a higher franchisee purchased subsidy. In addition, the Company increased its support of advertising through higher contributions in 2004 and in 2003.

In 2005 franchise operations segment profit is expected to range between 88 and $92 million. Increasing same-store sales and new unit franchising will be this segment's primary profit performance drivers this year.

Rental operations profit increased by 35.5 percent to $10.3 million for the fourth quarter and by 18.7 percent to $36.4 million for fiscal 2004. Aggregate profit for the year grew primarily due to an increase in effective operating subleases of 11.3 percent to 561 in 2004 compared to 504 in 2003. This drove rental operations revenue 12.4 percent higher in 2004 than in 2003.

The 53rd week in fiscal 2004 also added $2 million in pre-tax profit to this segment. Essentially the 53rd week effect came about due to our collecting an extra week of rent in 2004 with no offsetting expenses because we pay our rent obligations on a monthly basis. Rental operations expense grew 10.1 percent due to this increase in the number of operating leases.

In 2005 rental operations aggregate profit is expected to decline to between 33 and $37 million. This decline is exclusively due to the effect of the 53rd week in 2004. Taking out the affect of 2004's 53rd week, the profit performance of rental operations would essentially be flat in 2005.

Turning to Company operations, our loss in this segment decreased 79.1 percent to $600,000 in the fourth quarter and decreased 54.3 percent to a loss of $3.1 million in fiscal 2004. For the year, this improvement reflects a 59.7 percent decrease in effective Company restaurants due to our successful refranchising efforts. Additionally, we closed 11 Company-operated restaurants, 9 of which were related to our repositioning efforts. We ended 2004 with 10 Company-operated restaurants versus 44 at the end of 2003.

In 2005, Company operations performance will continue to improve as we expect an aggregate loss of approximately 1 to $1.5 million in this segment. This improvement is expected to come about as we effectively refranchise all of our Company-operated restaurants by the end of March 2005 and we benefit from the annualized effort of 2004's successful refranchising efforts.

Finally, let's turn to financing operations. Financing operations segment profit decreased, as expected, by 56.8 percent to $3 million for the fourth quarter and by 45.9 percent to $15.7 million in fiscal 2004. These decreases were primarily due to our decision to exit our old business model. In 2004, IHOP developed and financed 4 restaurants versus 48 restaurants in 2003 as we transitioned the way from Company-led development efforts. As a result, revenue in this segment decreased 47.5 percent to $38.1 million. In addition, due to the declining long-term note balances at the end of 2004 versus 2003, the Company recognized less interest income in this segment.

In 2005, financing operations segment profit is expected to be approximately 10 to $14 million. Profit will be impacted by the elimination of extraordinary franchise fees related to development under our old model in 2005 versus the four restaurants we developed under the old model last year. (technical difficulty) no interest will continue to decline in 2005 as notes continue to be paid off by our franchisees.

Moving to general and administrative expenses, G&A increased 9.7 percent to $59.9 million for fiscal 2004. The primary drivers of G&A growth were increased depreciation expense related to new information technology projects and increased travel and convention expense for our national franchisee and operations meetings in 2004. Additionally, we incurred increased recruiting and relocation expenses associated in part with the development of our dedicated market in Cincinnati. Finally, as with most public companies, increased professional services expenses were incurred due to the implementation of Sarbanes-Oxley.

In summarizing our P&L for 2004, you can see we had a number of onetime financial events which ought to be considered when evaluating 2005 targets. As I mentioned, there was $14.1 million in onetime impairment and closure charges primarily associated with the Company restaurant repositioning effort. In addition, the 53rd week effect approximately $4 million pre-tax in 2004. And finally, the Company recognized a $2.3 million pre-tax gain in 2004 on the sale of real estate.

Excluding these extraordinary 2004 events, our bottom-line profit expectation for fiscal 2005 of $2.02 to $2.12 per diluted share represents a 10 to 15 percent growth in 2005 versus 2004. We believe this comparison provides the most appropriate view of our comparable earnings growth in 2005.

Moving to our cash-flow statement, total cash flow from operations decreased slightly in 2004 to $67 million compared to 71.3 million in fiscal 2003. In addition, we substantially reduced capital expenditures from $80.5 million in 2003 to $16.6 million in 2004 as we see the significant benefit of the shift of franchisee-funded development of new restaurants.

Free cash flow, which Julia defined earlier as cash from operations less CapEx, came in at the high end of our expectations at a positive $50.4 million in fiscal 2004. This compares to a -63.6 million in 2002, which was the last full year of development under our old business model. As Julia mentioned, that's a phenomenal $114 million turnaround in just two years.

In 2005 we expect cash from operations to range between 55 and $65 million, and CapEx is expected to range between 11 and $13 million. That makes our 2005 free cash flow range between 42 and $54 million. We also expect to generate an additional 15 to 20 million in cash from the pay down of franchise and equipment notes. When combined with our cash from operations, these two combined sources of cash are expected to generate 70 to $85 million in 2005. In addition, debt repayment will be approximately $9 million.

Turning to the balance sheet, the balance of cash, cash equivalents and marketable securities at the end of fiscal 2004 decreased by 20.4 percent to $58.5 million from 73.5 million at the end of 2003, primarily due to our share repurchase activity.

Our longer-term asset categories showed a continual, gradual decline, as expected, due to our business model change. Long-term receivables decreased to $337.2 million in 2004 from $354 million at the end of 2003. This had two components. First, franchisees paid off $22.1 million in note and equipment principle. Offsetting this was an increase of about $11 million in franchise fee and equipment note balance additions brought about through our refranchising of Company-operated restaurants. The balance of property and equipment decreased 2.6 percent to $318.9 million from the end of last year.

Now I would like to make a brief update on the progress of our refranchising Company-operated restaurants in 2004.

Last year we successfully refranchised 37 restaurants and closed 11 restaurants, 9 of which were related to our repositioning efforts. There are six Company-operated restaurants remaining, which we believe we will franchise by the end of March. We will continue to operate two restaurants with short-term lease obligations and close them upon lease expiration.

Our Board of Directors declared a quarterly cash dividend of 25 cents per common share paid on February 22, 2005 to shareholders of record as of February 1, 2005. Since we began paying a dividend in May 2003, we have returned $36.8 million of cash to our shareholders through regular dividend payments.

Now I would like to turn the call back to Julia.

Before I open the call to your questions, I would like to reiterate our key performance guidance and assumptions for 2005.

In 2005 we expect earnings per diluted share to range between $2.02 and $2.12. We expect same-store sales to be in the range of 2 percent to 4 percent. And we expect our franchisees and area licensee in Florida to develop and open 60 to 68 restaurants this year.

Our commitment to investors is that G&A growth will not exceed the growth of our core business revenue. We established a strategic framework that limits G&A spending to only those initiatives that will support same-store sales growth and momentum, enhance the IHOP brand, and drive operational and food safety improvements throughout our system.

In 2005, we will remain committed to our three core strategies -- energize the brand, improve operational performance, and maximize franchise development. Key brand energizing initiatives include the addition of a fourth flight of network advertising, the introduction of 6 unique product promotions, the completion of 225 to 250 remodels at franchise restaurants, and the rollout of a new core menu in May. Additionally, we are hopeful to release our new prototype building to the IHOP system by the end of 2005.

In 2005 as well we will support operational excellence with a focus on improving C operators. We have a tremendous opportunity to impact and influence the C operators to improve their restaurant operations by providing new and better tools for improved execution at franchise restaurants. We will maximize franchise development by continuing to recruit new and existing franchisees for restaurant development. Additionally, we are examining ways to unlock larger franchise opportunities in underdeveloped markets, and we are looking at expansion opportunities outside the US in Canada and Mexico. However, both of these initiatives are in very early stages.

I've been with IHOP for a little more than three years now, and we've made a tremendous amount of progress during this time. I want to recognize the integral role our franchisees have in our success. Their contribution has been invaluable, and the support they've provided us has transformed our Company. Much of our success would not have been possible without their dedication and effort. We look forward to continuing to work together as one team to make IHOP and the system the best it can be, and to become number one in family dining.

With that, Tom and I wouldn't be happy to answer any questions you may have. Operator?

(OPERATOR INSTRUCTIONS) Bryan Elliott, Raymond James.

A couple of housekeeping questions. Where is the gain in the fourth quarter; what line item on the income statement? And the tax rate increase, was that just the fact that profits were at the high end or a little above expectations? Or is there something more long lasting and fundamental? What kind of tax rate outlook do you have for '05?

To answer your first question, it is in the other income and expense line, the gain on the sale of real estate.

And the second question is our average tax rate is a little higher. Some of the tax advantages that we benefited from associated with operating Company restaurants, as we exit a Company restaurants that benefit became smaller. So in fact, that has sort of increased our effective tax rate. We're obviously looking for ways to bring that rate down in '05.

What would your at this point reasonable expectation range be for '05, maybe 38 to 39?

It is in the 38 to 39 range, I think is the guidance that we gave.

Thank you.

(OPERATOR INSTRUCTIONS) Michael Gallo, CL King.

I guess my question first question is just on the financing revenue line. It was a little higher than it has been running the last few quarters. I was wondering what drove the difference of the 7.5, $8 million in the second and third quarter to the $12.6 million in the fourth quarter.

I don't really -- we didn't notice that the revenue trend was increasing. I'm going to probably have to get back to you with an answer on that. It wasn't discernible to us (multiple speakers) big enough shift to us.

Second question I have is just as you look at the stock price now, certainly you have been pretty aggressive buyers of the stock over the last year or so, albeit a lot of it at lower prices. I was wondering what your outlook on the share repurchase plan is for '05 in light of where the stock is trading today; whether you plan to be as aggressive, less aggressive, just opportunistic, just any color you can give on that.

We like the term opportunistic. We view share repurchase as an opportunistic activity. We do want to point out that we did buy back 1.8 million shares in 2004, which is really significantly higher than the Company had never done before. We have less cash on our balance sheet and we have this IRS issue looming that we hope will be settled in our favor. So I think on our guidance call we mentioned that we expect to continue to do share repurchases; we weren't sure that it was going to be at the same level as last year.

And then just final question. When I look at your comp guidance of the 2 to 4 percent in fiscal '05, obviously a lot of the same-store sales increase in '04 came from increases in price. I was wondering what kind of mix of price versus traffic increases we should expect in 2005.

Obviously we want as much traffic increase as we can get in '05, and all of the strategies we've put in place are geared toward that. Part of 2004's increase is not necessarily pricing; it is average check as well. And so if you begin to think about the suggestive selling that the crews are now taught to do and you think about the mix, some of that is not about pricing. It is also about average check, the mix, some of the effective pricing of some of the new items. So it's a real mix, and I think what we're looking for in 2005 is a continuation of both average check, as well as traffic. To the degree we will be able to get both, that remains to be seen. But the programs we've put in place are designed to do both.

Thanks a lot.

(OPERATOR INSTRUCTIONS) Bryan Elliott, Raymond James.

I'm not sure I got all of the extra week components. The contributions from the extra week by division again, Tom, were?

Franchise operations because we had another week of royalty was $1.5 million.

That's both revenue and segment profit contributions?

That's correct, because that goes directly to the bottom line. 2 million in rental. The numbers that I'm giving you are sort of the pre-tax profit equivalent. So assume that if there are any expenses associated, which there are not, the $4 million would be net of that number. So 1.5 million, that's the equivalent of one week of royalty in franchisees segment. 2 million in rental, that's the equivalent of one week of rental payments with zero rental payment obligations that we have because we do pay on a monthly basis. So we pick up an extra week of rental payments from our franchisees without paying our eventual leaseholders. And then about $450,000 in our financing segment, and the reason that is is that we got an extra week of interest income.

Thank you.

Mark Smith, Sidoti & Co.

Quick question today. Just wanted to check on your promotions, how those are going; kind of the breakdown of what the shrimp promotion did for you; how much of your 4.3 percent same-store sales came from shrimp, and what you expect that to do for your other day parts going forward.

In the individual product promotions by quarter we just simply list how each promotion in combination they gave us the increase for the fourth quarter. We have not historically broken out each of the product promotions because it's very difficult to do that, because they carry over between quarters.

But for the quarter we did well. Part of that growth came from Never Ending Popcorn Shrimp and part of that growth came from Sweet Caramel Combos. And I'm looking at the individual line items, and they all did well. All of it contributed.

Again, we saw more increase in fourth quarter from average check than we did from traffic. Traffic was also positive as well, but I think that's a real focus for us.

And then we don't break out for breakfast, lunch and dinner. We saw growth in all three day parts, although again it was more average check at breakfast, lunch and dinner and slight positive growth at breakfast, lunch and dinner in traffic.

But I really think in '05 we're going to continue that strategy of driving it, not just at lunch and dinner, but at all three day parts. The good news is we're seeing that. Even though I would like to see more traffic, we have seen increase.

Will we continue to see the breakdown of breakfast, lunch dinner and carryover times?

We can continue to provide that every quarter. We have been asked a lot this year by our investment group if we could do more of that, and so in every call we will give you that. We will continue to give that break out and that progress. And over time we will begin to see that shift.

Bryan Elliott, Raymond James.

Actually, following up on that, just reviewing that new information you gave us, make sure I got it right. You said you have about 200 restaurants now that you have good 18 months pullable data from?

Absolutely.

And what would you expect or hope that number might be, say, 12 months from now?

This year we had a big breakthrough, as Julia mentioned, on MICROS installations. So it just takes 18 months from the time we install the MICROS to be able to report that individual unit's comp performance in various ways. So we expect that by the end of '05 you probably had -- that number would probably be around 300. And that into the middle of '04 -- excuse me, into the middle of '06. I apologize (multiple speakers) backwards there -- it would probably be closer to 5 or 600.

And did I hear correctly that 71 percent of all items sold are breakfast items throughout the day?

Yes, in the week that we measured it it was 71 percent. In various weeks it's been around 65 to 70 percent.

So that would be like take your kids in there and they insist on pancakes for dinner? That's what that would be reflected as, correct?

Absolutely. Or at lunch people will often order a sandwich, but they will also order the Sweet Caramel Combos. A lot of people will do it as they consider some of those items desert items they're having at lunch and dinner, or they're combining, or you've got -- you're getting (indiscernible). It's a variety of combinations. But yes, in total, to Tom's point in any given week we've seen it be from anywhere from 65. In the week he measured it was 71.

Was the week that that was measured a week that college is in session generally or not?

That's a good question. It was in December, end of December so --

Probably not.

It's hard to measure. As we give you these numbers routinely, we could even go back and look at a more representative week and share that publicly if that will be helpful. If not, we will just get it the next time.

My point is the best news of the day is we're able to provide more insight than we've ever been able to do because we're finally getting this pullable data. I think we're going to be rich throughout the year with data and be able to give you a much better trend and indicator, which is a good thing.

I was just corrected by a more knowledgeable individual on this side. He said it was the first week of December. So maybe a little more representative than sort of the holiday period.

Very good. Thanks a lot.

Now I would like to turn the call back over to Ms. Julia Stewart for closing remarks.

Thanks again for joining us today. Should you have any follow-up questions, as always you know Tom and I are available. Just give us a buzz.

Also, I'd like to remind you about our first investor day which will be held in Cincinnati at our new company restaurant on May 12th, which is a Thursday. For more information feel free to contact Stacy Roughan, who is our Director of Investor Relations, here at the restaurant support center in Glendale.

We look forward to speaking with all of you on our first-quarter 2005 investor call on Thursday, April 28th. Thanks again.

Thank you all for your participation in today's conference. This concludes your presentation. You may now disconnect. Everyone, have a wonderful day and thank you.