Texas Roadhouse Inc (TXRH) 2007 Q3 法說會逐字稿

Good day and welcome. Today's call is being recorded. At this time, all participants are are in a listen-only mode. Following the presentation we will conduct a question-and-answer session. Instructions will be provided at that time for you to queue for your questions. I would now like to turn call over to Mr. Scott Colosi Chief Financial Officer of Texas Roadhouse Incorporated. Please go ahead sir.

Thank you Robbie, and good evening everybody. By now everyone should have access to our earnings announcement released this afternoon for the third quarter ended September 25, 2007. It may also be found on our website at texasroadhouse.com under the investor section. Before we begin our formal remarks, I need to remind everyone that part of our discussion today may include forward-looking statements. These statements are not guarantees of future performance, and therefore undue reliance should not be placed upon them. We refer all of you to our recent filings with the SEC for a me more details discussion of the risks that may impact the future operating results and financial condition of Texas Roadhouse. On the call with me today is G.J. Hart, our CEO. G.J. is going to provide some general comments on the business and then I'll walk you through the financials, and then we'll open it up for questions. G.J.?

Thank you, Scott, and good evening everyone. The third quarter another very good quarter for us. As we were able to generate 15% diluted earnings per share growth despite a very challenging overall environment. While 15% growth is less than our long term target of 20%, the quarter was impacted by a couple of unusual items. First our third quarter results included a $.5 million dollar charge related to our most recent franchise acquisition and second we lapped a $1.9 million favorable reserve adjustment from last year with a $600,000 favorable adjustment this year. These two items impacted our reported EPS growth by approximately 15%. Year to date however, our reported diluted earnings per share is up 22%, and we remain on track to achieve our original goal of at least 20% or at least $.53 a share for 2007.

Let me touch on a couple of the highlights from the quarter. Comparable restaurants sales increased 2.5% with traffic count increasing by .6% and our average check increasing 1.9%. We continue give up about a point of check to negative mix shift, most of which continues to be alcohol related with some trade down on higher priced menu items. We very much believe that consistent operational execution, supported by our solid value position is the best way to grow and sustain sales levels in the longer term. That said we are continuing to drive our locally driven, community based marketed efforts throughout the country. Our gift card promotion begins in early November and runs through the end of the year. It is our biggest promotion of the year. And even though we are in a tough consumer environment, we believe the gift card continues to offer substantial sales golden opportunity for us.

On the pricing front, we just overlapped about .8% of pricing from last year. We are currently testing a small price increase in select markets, but to date we have no definite plan regarding how much we will increase prices in 2008. On the margin side of things reported restaurant margins were 61 basis points lower than last year year's third quarter. Almost all of this difference was attributed to the lap in insurance reserve adjustments I mentioned earlier. On a year to year basis, restaurant margins are 20 basis points lower than the prior year. So our price has enabled us to hold in line on margins this year. From a G&A perspective, we continue to leverage our business as we had 27 basis points of leverage despite the noncash franchise acquisition charge of $.5 million and with 43 basis of leverage points year to date, we have been able to achieve the upper end of our leverage goal on G&A.

On the development side, we opened five new company restaurants during the quarter and are on schedule to open 31-32 company restaurants this year, 22 of those will open through the end of the third quarter and another three have opened since September 25. Our new restaurants continue to open with very healthy sales volumes. So with the first nine months of the year in line to slightly ahead of our internal plan, we are reiterating our original 2007 earnings guidance of at least $.53 per diluted share. With October sales starting a little softer than our prior trends, we have slightly moderated our sales growth for the year from approximately 2% to 1.5 to 2% for the year. Our development plan is in solid shape and we do not foresee any problems hitting our plan of 31 to 32 company restaurant openings.

Let's touch base on fiscal 2008. As we announced in our press release we expect to grow diluted earnings per share by approximately 20%. This excludes the impact of the additional operating week from which we may pick up $.01 to $0.02 per share or two to four points of EPS growth. As you are aware with our model, new restaurant growth drives the largest part of our EPS growth. We have identified all of our potential sites for 2008 and expect to open a number of restaurants in the first quarter, similar to 2007. So combined with the nine restaurants we acquired earlier this year, we could see as much as 20% growth in company owned restaurant operating weeks in 2008.

In terms of sale and margins, right now we are still working through our plans, as it relates to primarily commodity costs and pricing. As I mentioned earlier we are currently testing a small price increase in selected markets. We do not take pricing for granted and would prefer not to take any, the reality is there are inflationary pressures out there. For example we know we are going to have some labor inflation. We definitely believe that it will be less than what we experienced in 2007, but we will be impacted by state and federally mandated minimum wage increases. The most important thing here as I mentioned before, we are in no way asking our operators to cut back on hours to make up for the difference.

On the commodity front, the picture is somewhat of a mixed bag from a visibility standpoint. As far as pork is concerned, those markets look to be in reasonably good shape. Chicken, which only represents 4% of our food costs will likely be up somewhat. For beef our outlook is a little less certain. I can tell you we are not fully locked in to our proteins for next year but are evaluating the markets on a daily basis. The fact of the matter is that on beef there is so much of a premium in the futures market right now that we may end up floating a portion of our beef cost as opposed to contracting out 100% of our beef at a fixed rate. It does not make sense to pay up as much for that fixed pricing right now.

From a G&A standpoint, we absolutely expect to achieve some leverage in 2008, probably 25-30 basis points. Before I turn the call over to Scott, I do want to mention that we continue to evaluate franchise acquisitions. We have told our franchisees we would be willing to pay in the neighborhood of five to six times EBITDA for their restaurants. Of course they have a right to say no to these offers. However as many of you know we also have a call option in most of our franchise agreements, this call option gives us the right to acquire a restaurant at a predetermined formula which results in a certain number of shares. Given that our PE has contracted quite a bit over the past year, executing these call options is beginning to look pretty appealing from a multiple of EBITDA standpoint. A year ago the formula would have resulted in us paying very high acquisition multiples. Today they would be much lower, in the four to six times range depending in part on the share price at the time of the acquisition. In any event we will still only acquire restaurants when the returns are commencerate with those of developing new restaurants. If and when future deals do come to light we will let you know. I will now turn the call over to Scott to review the financials. Scott?

Thanks, G.J. During my review of the third quarter, please note that many of the numbers I will mention are listed in the schedule of supplemental financial and operating data that was included in the press release. So starting at the top of our income statement for the third quarter of 2007 as compared to the same period in 2006, revenue increased just under 28% while company owned restaurant sales increased just over 28%. The growth in company owned restaurant sales was primarily driven by operating growth. As G.J. mentioned earlier comparable restaurant sales in company owned restaurants increased 2.5% on top of a 2.3% increase last year. For the quarter traffic was positive .6% and our average check per person increased 1.9%. From a sales perspective I'll offer a little more color on average weekly sales.

For the quarter, the average weekly sales for restaurants opened during 2007, our newest group of restaurants was $78,000, which was about $2000 higher than the overall company average. For the year, year to date, average weekly sales at restaurants opened during 2007 are running just over $5000 higher than the overall company average. Admittedly the 2007 restaurants are at various points of their honeymoon curves, yet we are still encouraged with the new store volumes. Franchise royalties and fees were $2.6 million which was the same as last year. Increased royalty rates in conjunction with the renewal with certain franchise agreements and the impact of positive comparable sales growth offset as having seven less franchise restaurant opened as a result of the acquisition. In terms of costs as a percentage of sales, restaurant operating costs were 61 basis points higher and as G.J. mentioned earlier the lapping of insurance reserve adjustments was the main driver of this difference.

But I'll touch briefly on the specific line items. Cost of sales was up up ten basis points. Higher dairy costs more than offset the benefit we have had earlier in the year via our price increases. Labor costs were up 96 basis points. About half the increase was a result of our workers' compensation reserve unfavorable adjustment of approximately $.1 million, as compared to a favorable adjustment of approximately $.6 million last year. This accounted for 44 basis points of pressure on this line. Much of the remaining difference was driven by weigh trade inflation outpacing the benefit of pricing. Other restaurant operating expenses were down 24 basis points versus last year. We continue seeing the benefit on this line resulting from buying out some equipment leases over the last 10 to 11 months. So we continue to see lower equipment rent from this with the offset being interest in depreciation This and other smaller decreases were partially offset by a lower pickup on the general liability side of insurance. For this year we recorded a $.7 million favorable adjustment to our general liability insurance versus a $1.3 million favorable adjustment in the prior year and this difference negatively impacted the operating expense line by 55 basis points.

Pre-opening expenses were about $.3 million less than a year a go. Although we are opening more restaurants now, with our 2007 opening schedule being front end loaded, we ended up having about the same number of restaurants at that the same stages in development pipeline during the third quarter this year as compared to the prior year. As has been the case for several quarters, depreciation and amortization cost were 48 basis points higher than year, primarily driven by the cost of new restaurants. G&A expenses as a percentage of revenue were 27 basis points lower than last year due to leveraging of our base business and lower share base compensation expense. These decreases were partially offset by a $.512 million charge recorded in conjunction with the acquisitions of the nine franchise restaurants. Those of you that do not remember, when we acquire franchise restaurants, we will typically have some amount of a noncash charge based on the difference of the market royalty and what the franchisees is paying. Our effective tax rate for the quarter was 35.4% which is in line with last year's 35.3% rate. For the year we are targeting approximately 35.8%. And finally average diluted share count was 76.8 million, slightly lower than last quarter due to a lower average stock price for the quarter.

Now on to full year 2007 guidance As G.J. noted earlier we have reiterated our EPS guidance for 2007 diluted EPS growth of at least 20% or at least $0.53 per share based on the following two assumptions. First, we will open 31-32 new company restaurants and our franchise partners will open two restaurants. Second, we will generate comparable restaurant sales growth of 1.5-2% for the year. As you saw in our press release and as G.J. talked about earlier we also provided initial guidance for 2008. Our estimate is for diluted earning per share growth of approximately 20% prior to the impact of an extra week, which could add $0.01 to $0.02 per share or 2-4 points of EPS growth. Here are the key two assumptions First we''ll open approximately 35 company restaurants, the timing of these openings will likely be split somewhat evenly throughout the year and in addition we may open one new market next year, that being Nevada. The second assumption is that we expect to generate approximately 2 to 3% comparable restaurant sales growth. Now I would like to turn the call back over to G.J.

Thanks, Scott. While it does continue be a tough time for the industry we have been very fortunate in that our results have continued to relative strength. Let me assure you that no one at out company takes this for granted. We know it is a battle out there and I want to especially thank all the Texas Roadhouse team members for their continuing commitment to offering legendary food and legendary service to each and every guest that walk in our door. As I have said several times before, tough times give us the opportunity to take share from the competition and that is what we hope to achieve from our operations focussed execution. One final note before we open up the call for questions, I do want to remind investors that we will be hosting our first analyst day in New York City on December the 4th.. If anyone is interested and has not yet R.S.V.P.ed, please let us know, as space is limited. With that, that covers our prepared remarks so operator, if you would open the line for questions.

Absolutely. (OPERATOR INSTRUCTIONS). We will go first Jeff Farmer of CIBC World Markets.

Great, thank you. The majority of your national bar and grill competitors have been on national television over the last few months heavily promoting some of their low price point offerings. Obviously this is not sustainable for them. I was just curious what you can do, if anything over the next several quarters to help hold on to some of the market share while this continues?

Well, Jeff, I would just comment -- this is G.J. I would comment that a lot of these different promotions have gone on all yearlong. Quite frankly as you know we continue to just stay focused on the basics of running the restaurants and we will continue to do that. We think our value positioning has continued to strengthen over time. I will just tell you that we will continue to stay focused.

As it relates to October of 2007, the comparison got a little bit more challenging I guess relative to the third quarter but was there anything that you could point to from a competitive that would point to or drive that slow down for you in October?

No.

Okay. And then just quickly, you obviously gave us guidance on the '08 the growth, its basically right in the middle of that 16 to 18% long term range for the company. Do you think you will be able to maintain that rate as we get out to 2009, 2010? Or are looking to hold onto that 16 to 18% unit growth rate?

Jeff this is Scott. I think that is definitely the plan at least for the next few years.

Okay. And final question. Just on the interest expense, it obviously jumped a bit and you basically gave us warning that would happen. As you look out into 2008, whats a ballpark interest expense number for the full year assuming no change on the cap structure for you guys?

I would say its something similar to what we expense in the third quarter. Probably would be a pretty good run rate for us.

Okay. Thank you.

Thank you. We will go next to David Tarantino with Robert W. Baird

Hi, good afternoon. G.J. you mentioned that you are not fully contracted on proteins for next year, which might imply you have contracted some of the proteins or at least a percentage of your needs. Am I reading that correctly and if so could you give us an idea of what has been locked to date?

Yes, David. I will tell you, we have locked in a small portion of our product for next year. I will tell you that there is a lot of moving parts right now specifically in the beef industry. We have seen the futures markets continue to falter here lately and we continue to negotiate on a daily basis.

Okay. And just a follow up to that, if a spot prices that you are seeing today hold, could you give us an idea what kind of inflation you might see as you move out? If you were to let it float in 2008?

That is really tough to say. And I don't really think I could venture a guess on that at this point.

Okay. And Scott, could you remind us what type of labor inflation you are expecting in '08 and how that compares to 2007?

We had approximately five, around five and a half this year and it will probably be 60% of that next year so probably around 2.5 to 3.5% is probably a good range to assume at this point.

Okay. Thank you very much.

We will go next to Steven Rees with JPMorgan.

Hi thanks just on the 35 company owned restaurants that you planned for 2008, can you talk about what your expected increase if at all in investment costs are for those for units and what you are modeling in terms of sales for the new units next year?

Hey Steve, this is Scott, I will tell you that, our average cost is somewhere between $3.5 million to $4 million. I would expect next year, probably a good assumption would be assume that its going to be will be $.1 million higher. That is what we have tracked this year versus 2006. Inflation has definitely slowed down, but definitely we're not seeing a reduction in construction costs.

And then all the sales are you just expecting the new units to open in line with the system average, or premium or discount?

They are opening -- typically they are opening well above the system average. And then once they get out of the honeymoon they end up coming into our average line store base, 2, 3, $4000 below the company average and then start on the growth curve from there.

Okay. And in terms of a total CapEx estimate for 2008, both growth and maintenance.

Probably roughly about $120 million would be a sort of first stab number at that. Maintenance CapEx added to that would probably be around $10 million.

Great. Thank you very much.

We will go next to Jeff Omohundro with Wachovia.

Thanks I wonder if you could update us a bit on some of your throw put initiatives. Particular around technology such as the table management in test now. What kind of opportunities might you see with that?

Hey Jeff, this is Scott. We sort of have three main systems in play right now. One is a theoretical food costing system, which has been out nation-wide or pretty much nationwide for about 24 months and we are starting -- our guys are talking about it more than ever as far as results from that system. I think our guys are still getting their feet wet so to speak. Part of that is we are so focused on just executing our food and service aspects of our business. We are still getting into that. The second piece is we just rolled the labor modules that goes with that theoretical food piece. And there are better reporting that our guys are going to get as far as overtime and when people are clocking in and out better enforcement our labor schedules and so forth. That could help us a lot on the labor line. You are right ability we are testing a table management system, which certainly could make it a lot easier for our host folks to execute. They have a call ahead list, they have walk a in list. They could not put a four person check at a six top table, that kind of thing as well. So we are very excited about all of those. And we are making a lot of progress on them.

And then, I guess as a bit of a follow up on this start to the Q4 period, I'm just wondering what is your current thinking about pursuing some sort of traffic building initiatives? How much weight are you giving to that?

Jeff its G.J. I would tell you that we have completed doing about, I think it is 21-city tour of really intensifying our local store efforts and really getting out through to address the folks that we may not be reaching. We continue to build on our permission based marketing program. We have well in excess of a million names now that we can tap into. It has been very successful for us. Our call ahead program, we recognize we need to reach out to the folks that may not come into a Texas Roadhouse largely because of our long waits. And we are going to continue to focus some efforts, particularly locally driven around that. Really all of it is consistent with what we have done in the past and that is the local effort, ultimately gaining that guest loyalty.

Very good. Thanks.

Next we will go Andrew Barish with Banc of America.

Hey guys, nice job. Do you have the monthlies in front of you, Scott, for last year? I am trying to gather the pick up for the rest of the fourth quarter. Do compares get easier or are you looking at maybe a little bit more normal spending in the holiday season at approaches?

You talking about the fourth quarter comparisons?

Yes.

About 3.9 in October, 2.2 in November and 3.7 December.

Excellent. And on food costs, I know there are a lot of, obviously two big moving pieces, commodities and pricing right now which we don't know about, but this year you were able to keep food costs flattish. Were new menu items that you introduced a benefit or just not big enough on the mix to really help overall, or more the pricing you were able to push through?

Not big enough on the mix. The biggest thing would be shrimp for us. From about the fourth quarter last year has done well but still a small mix item, it woudn't have a material impact on food cost. We have almost 3% pricing, so that goes a long ways to cover inflation. The dairy piece is a big number. That number by itself is 55 basis points.

Okay. Thank you very much.

Next we will go Paul Westra with Cohen and Company.

It is [Collin] calling in for Paul. Just a question on the beef and the scenario that you do ride spot. Would you be able to lock in later in the year or progressively lock in parts of your commitment for the year?

Hey Collin, it G.J. We could do all of the above. We could lock in if it seems appropriate and do it progressively. We are just really working on that on a daily basis.

Could you lock in for a smaller time than a year so next year at this time you could look to sign a year contract? Is it that flexible?

Yes, it is.

You gave 2 to 3% comp guidance for next year. I guess just than looking at pricing if you are riding spot, will you be re-evaluating pricing more often?

That is yet to be determined. We really have some things to figure out first before we look at the pricing scenario.

Okay. Thank you.

Thank you. Next we will go Matt Defrisco with Thomas Weisel Partners

Hi, I might have missed this in the pricing. I think you said the quarter was 2.9%, correct?

That is right.

And you than you said you just cycled off 0.8%. So that is 0.3 you're saying that quarter to date it will only get 2.1 benefit from price and probably the same negative mix effect?

The .8% drop off throughout the month so probably more like it was .4%or less or 2.5% pricing for the most of the month of October.

But going ahead to interpret underlying traffic trends -- I just don't want to over exaggerate the traffic slow down if you do have a price fall off pretty meaniful for 0.8%.

Our check in October was only up 1.3%, something like that. Our traffic was down 1%

Ok, traffic is down one And you are getting -- going forward, though you don't know what you will take incrementally, you expect to maintain 2.1% of price increase?

That would at least flow through the end of the year.

Okay. And then, you mentioned a little bit about the bar mix being a little bit of a by-product of the economy or slowing a little bit. What do you mean by the bar mix? A guy sitting down at the table and having a dinner and is trading or opting out of the beer? Do you have that granularity or are you seeing the exact weakness in the day parts that are bar driven like happy hour after hours?

It is all across the board Matt and it is more of the guy either coming in and not ordering a beer or margarita or some other liquor drink or ordering less. So instead of ordering two bears ordering one beer and we havent got to that level of granularity yet. We have not gotten to that level yet. It has been very consistent all year, the slower pace of alcohol sales that we've seen it really hasn't changed all year.

Okay. And then, looking at your confidence level in your '08, it sounds like you pretty confident that you have it all booked up and in the pipeline to 35. Some of your peers, whether in the upper scale steak houses, or more broader guys like cheesecake or bistro, they seem to be either delaying or slowing some development for '08. What is the difference there in that the brand that you are doing, or is it your locations in that you are not as dependent on your surrounding malls? It seems that you are one of the few concepts out there still growing the square footage. I'm just wondering what could be the differentiating feature. Is it something regionally your growing in, your regional positioning or is it also you are looking for different trade centers?

Hey Matt its G.J., I would tell you a couple of things. By the method of the way we grow, which is really people driven, we are growing all over the country, so it is nothing regionally. Number two is we tend to have the ability to have some flexibility on our real estate give the fact that we are not open for lunch. In many cases we can get a little closer to the rooftops, we know that 80% plus of our people go home first. So in some cases that does give us flexibility and opportunity to get additional sites.

Excellent. Thank you very much.

Thank you. Next we will go Barry Stouffer with BB&T Capital Markets.

Good afternoon gentleman just two questions, where was the acquisition charge recorded and than also could you give us the debt balance at then end of the quarter?

Barry its Scott, the acquisition charge was recorded in G&A and the debt balance at the end of the quarter was $75 million.

Thank you.

Next we will go Chris O'Cull with SunTrust.

Good afternoon. My question is regarding pricing. G.J. I know you evaluate the competitive set when you consider pricing. Are you seeing competitors like Logan' or Outback or some of the guys that have gone private change their strategies in this environment?

No. We really aren't. At this point we have not seen anything significant.

Okay. And just when you consider pricing for 2008, would the objective be to offset the margin dollar impact of the higher cost inflation, or do you expect to try to offset the margin percent impact.

Chris this is Scott. Absolutely we look at dollars. We look at both. Realistically we take dollars to the bank, not percentages. Ultimately that is what we look at.

Okay. And quick question on the menu mix. Is the negative mix shift, are you seeing that in certain markets or states, or is that happening across the system?

It is very much across the system.

Ok, great. Thanks guys.

(OPERATOR INSTRUCTIONS). We will take our next question from Destin Tomkins with Morgan Keegan.

Thanks. Good afternoon. I wanted to ask a question. G.J. you talked about the the menu pricing test you have in place currently. What are you looking for from that test? Are you hoping that the average check moves up in line with the price increase? If you see a bit of a push back, would you still consider it a success? What do think would qualify it ass a success?

It is all those things you just said. First and foremost we want to see will we pull through on the price and will we capture it all and what kind of resistance is out there to that pricing? You need to have it out there long enough to really get that gut feedback,. And based on that we would evaluate whether we do that particular price test. Actually we have a couple of price tests going on and we find what balance seems to be working for us.

And Scott, you mentioned the sales expectation for the year of 1.5 to 2%. Did you say whether that assumes a flat trend from the October results or if you are projecting a pick up from November and December?

It assumes a slight pick up from October to November and December.

And Scott, can you update us on what your thoughts would be in tapping in the balance sheet for some share repurchases?

I think we are talking about it. We have to have a lot of discussions about it. We have, changed our credit facility. We increased it by $100 million in the summer and eliminated one of the covenants that now allows us buy back stock if we wanted to borrow money to do that. We are using all of our free cash flow now to develop restaurants and we think that is where we get the best return is developing restaurants. We don't see that changing. Meaning we think in 2008, we will probably be close to self-funding if not a bit negative on cash flow, maybe a few million. Probably the same in 2009 and 2010. If we continue to add 16-18% company restaurants. So, the question then becomes is how comfortable are we with taking on debt to buy back stock. I can tell you I think we like to maintain a relatively conservative balance sheet, overall, I think whatever we do, we're going to try to make sure that our balance sheet is relatively conservative going forward.

Great. Thank you.

We will go next to Bill Gilcrest with Westfield Capital Management.

Thank you for the call. G.J. could you tell me how you are looking at the future prices for beef? Where they are too high, what are they factoring in that you guys disagree with? Any color there would be helpful.

Sure. Well, I will tell you that the futures markets, which I think are largely impacted by a lot of financial players. Not just the packing companies and the disparity between that and the spot prices is just very large right now. In the last week or so, you have seen the futures markets come down pretty significantly. We think there is opportunity maybe that in the next few weeks there might be continued weakness. I will tell you that disparity just is too high from what we've seen in previous years when we look in for the year.

Okay. Thanks a lot.

Thank you, next we will go to [Kevin Wanck] with (inaudible) Capital Management..

The comp goal for 2008 was mentioned for 2-3%. Maybe you can give us more color as to how much of that is traffic, how much of that is check, and how much of that is pricing. It seemed that you did not want to answer pricing questions earlier on the call, so I respect that. And then, of the overall color behind that comp goal, what parts do you feel more confident about and less confident about?

This is Scott. We have assumed about 1.5% pricing going into next year and we think we will capture the majority of that in check. That would imply guest count up 1.5% in that range. If we take less pricing, that changes some dynamics for that. Chance are we do not want to take less pricing if there is less inflation. That would change some of our cost assumptions. That is really where we are now. We are fairly confident about our cost assumptions. We think our value positioning is as strong as ever and continues to get stronger. We have held back on the pricing front as long as we can. We continue to execute we believe at a pretty high level. Because even as times have gotten tougher we have not attempted to take shortcuts, or if you will be become more productive in our restaurants which usually means the guest is getting less of an experience. So we stay focused on doing what we always do and running the business.

Okay. And what opportunities do you think there may be for further acquisitions of franchises in 2008? The CapEx comments for possible 2008 CapEx , that of course is exclusive of any possible

That excludes any acquisitions. The franchise acquisition depends on two fronts, where we feel like our stock price may be over a given time frame if we want to execute roll up agreement, thats in our franchise agreements. If we continue on the negotiating path of five to six times EBITDA that will be very opportunistic and very hit or miss depending on the negotiations with every specific franchisees. We are talking to people and continue to have dialogue with different folks. We're not in a position right now to comment further.

As you noted yourself, you are probably approaching cash flow break even with the current CapEx plan for next year. With borrowing to buy out franchisees, are there any contains to do that? Or are you happy to borrow as much as you can depending on t he opportunities.

We are happy to borrow what we need to buy back franchisees

One more general question. You got a company with superior growth characteristics, great unit economics but in a current stock market environment where people apparently are focusing on negatives instead of positives, what, in your opinion, are the larger misunderstandings about the company at this point in the investment community?

Well, you know, I would share some of that -- those issues. We certainly get a little frustrated that we continue to outperform what we said we would do in light of this tough environment. I think that people miss the biggest part of Texas Roadhouse is the quality of the food and how much food you get for the dollar that we're asking you to pay and the experience the overall. And you know that is why we continue to say so focused on our operational objectives. We know this is a marathon, not a 100-yard sprint. We have a long runway to go and we believe sooner or later people will recognize us for the performance that we've achieved.

All right. Thank you for your help.

Thank you. At this time we have no further questions. I would like to turn the call back over the Mr. Hart for any additional or closing comments.

We appreciate you hearing us out today. We look forward to sharing with you our year end results in February. Thank you.

That does conclude today's calls. You may disconnect your lines at this time.