Texas Roadhouse Inc (TXRH) 2011 Q4 法說會逐字稿

Good day and welcome, ladies and gentlemen. Thank you for standing by and welcome to the Texas Roadhouse fourth-quarter earnings 2011 earnings conference call. Just a quick reminder, today's call is being recorded. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session and instructions will be provided at that time for you to queue up for your questions.

And now I will turn things over to our host for today, Mr. Price Cooper, Chief Financial Officer of Texas Roadhouse, Inc. Please go ahead, Mr. Cooper.

Good evening and thank you, Beau. By now everyone should have access to our earnings announcement for the fourth quarter ended December 27, 2011. It may also be found on our website at TexasRoadhouse.com in the investor section.

Before we begin our formal remarks, I need to remind everyone that part of our discussion today will 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 earnings release and our recent filings with the SEC for a more detailed discussion of the relevant factors that could cause actual results to differ materially from those forward-looking statements. In addition, we may refer to non-GAAP measures. Reconciliations of the non-GAAP measures to the GAAP information can be found under the investor section of our website.

On the call with me today is Kent Taylor, our Founder and CEO, and Scott Colosi, our President. Kent is going to start the call off after which I will provide a financial update. Scott will then provide some insights on our performance and business direction. Afterwards we will all be available to answer any questions.

Now I would like to turn the call over to our Chief Executive Officer, Kent Taylor.

Thanks, Price and good evening, everyone. I'm very proud of our teams accomplishments this past year and I'm even more excited about what lies ahead for Texas Roadhouse. We finished 2011 with great momentum and 2012 has gotten off to a great start. In addition we are very excited to be increasing our number of restaurant openings for the second straight year. We believe that our disciplined approach of staying focused on providing legendary food and legendary service at a great price continues to drive our business forward.

We had a great sales year in 2011 with comp restaurant sales up 4.7%. This includes a very healthy 3% increase in guest count and, while we are certainly encouraged by these results, rest assured we're not taking our foot off the pedal when it comes to operations and challenging our operators to raise the bar another notch. In fact they continue to focus on key areas such as speed of food and service, which is critical to building traffic and continuing our momentum.

As I mentioned earlier, 2012 has gotten off to a very strong start with comparable sales up 6.7% for the first seven weeks.

We feel particularly good about our sales growth outlook for the year. However we do expect the cost side of our business to be challenging. In response to some of the inflationary pressures, primarily in food, we recently completed a rollout of an average menu price increase of 2.2%. In conjunction with our latest menu, we also added a 23-ounce porterhouse steak to about a third of our restaurants. This provides additional variety for our guests willing to spend more money, much like the bone-in ribeye we added to the menu last year.

In spite of these recent pricing actions we do not expect to completely offset the effect of 8% food cost inflation. In other words we are going to balance short-term profit growth pressures with protecting the long-term positioning of our concepts. We believe that has served us well in the past and will continue to do so in the future.

Now Price will walk you through our financial update and then Scott will provide some additional comments.

Thanks, Kent. During my review of the fourth 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.

Also please note that in the supplemental schedule we have begun breaking out Texas Roadhouse restaurant-only information this quarter, namely from an average weekly sales perspective. This information excludes the results of our three Aspen Creek restaurants.

Some details on the quarter. Our fourth quarter and overall 2011 results came in better than we had anticipated due to better than expected sales driven by traffic and slightly lower food inflation. Starting at the top of the income statement, total revenues increased 13.1% over the year ago period, driven by operating week growth of 7% and averaging a volume growth of 5.6%. For Texas Roadhouse restaurants, averaging a volume growth of 5.6% was in line with our same-store sales growth of 5.6%.

With regard to same-store sales, traffic increased over 3% while average check was up approximately 2.3%. By month, comparable sales increased 4.2%, 5.3%, and 6.9% for October, November and December, respectively. On the cost side of the P&L, restaurant margins as a percentage of sales decreased 25 basis points over the prior year.

As has been the case in recent quarters, we experienced margin pressure and cost of sales and labor partially offset by leverage and other operating costs as a result of our strong comparable restaurant sales growth. Despite lower restaurant margins as a percentage of sales, restaurant margin dollars per store we grew 4.1% for the quarter and 2% compared to the prior year. So while we gave some margin percents back we were able to achieve solid restaurant margin dollar growth for the year.

Now a little color on some of the specific lines for the fourth quarter of 2011 as compared to the same period last year. Cost of sales increased 90 basis points versus the prior year driven by food inflation of approximately 4.6% for the quarter. For 2011, food inflation increased just over 3.5%.

Labor was up 18 basis points versus the prior year as the benefit of comparable restaurant sales growth was more than offset by the impact of increased payroll tax expense. This increased payroll tax expense was driven by the reclassification of the higher tax credit program incentives. This negatively impacted labor costs by 40 basis points as the credits were recorded as an offset to income tax expense in 2011 versus an offset to labor costs in 2010.

It's worth noting that, for the full year, labor as a percent of sales would have been close to flat excluding the impact of this reclassification.

Other operating costs were down 76 basis points during the quarter, thanks in large part to comparable restaurant sales growth of 5.6%. This enabled us to leverage several expense categories including utilities, supplies and property taxes. Additionally, we experienced lower credit card fees because of regulatory changes that took effect in October relating to debit card interchange fees.

Looking at costs below the restaurant margins, preopening expenses continue to be higher year over year in conjunction with increased development.

During the quarter, we recorded $1.1 million in impairment charges. $800,000 of this amount related to writing off some goodwill on a particular restaurant in conjunction with our annual goodwill impairment testing which occurs during the fourth quarter. With regard to G&A, we experienced a 30 basis point improvement during the quarter driven by leverage from a 13% plus increase in revenues.

Our tax rate for the year came in at 29.5%, leading to a 28.2% tax rate for the quarter. Both of these were a little lower than expected due to lower nondeductible officer compensation.

Our balance sheet remained strong as we ended the year with $74 million in cash and $62 million in debt. Once again, we generated positive free cash flow during the fourth quarter, bringing our total free cash flow for the year to $56 million.

During 2011 we utilized our free cash flow along with $8 million in cash from the prior year and $10 million in additional debt borrowings to pay $17 million in dividends and repurchase $59 million worth of stock. And as we announced our Board authorized an increase in quarterly dividend payment, taking it to $0.09 per share from $0.08 per share last year, which represents a 12.5% increase.

Additionally our Board approved a new $100 million share purchase program. The new organization replaces the previous repurchase program that had $40.9 million remaining at the end of 2011 fiscal year. We believe the increase in dividend payment along with our new share purchase program reflects our ongoing commitment to returning capital to shareholders.

Now on to our outlook on 2012. On the sales front, 2012 is off to a solid start with comparable sales of 6.7% for the first seven weeks compared to the prior year. While we do not specifically calculate the impact of inclement weather it is worth mentioning that we have had milder weather this year than in the prior year.

Regarding our outlook for 2012, diluted earnings per share, we expect to generate solid double-digit revenue growth. However we anticipate we will give back some margin percents and that a much higher tax rate resulting from the expiration of certain tax credits will negatively impact our diluted earnings per share growth by about 5%. Thus, we are expecting diluted earnings per share growth to be approximately 5% for the year.

Our 2012 expectations include the following assumptions. First, comparable restaurant sales growth of 4% to 5% was approximately 3% from pricing and 1% to 2% from traffic growth. While we are up more than that now we believe 4% to 5% is a reasonable assumption for the year.

Second, we expect 25 openings for 2012, which leads to high single-digit operating week growth.

Third, we expect approximately 8% food inflation in 2012, primarily due to higher beef costs. We currently have fixed price arrangements in place for 65% to 70% of our overall cost of sales for 2012. Keep in mind that 20% to 30% of our overall commodity costs typically float.

Finally we expect our income tax rate to be 32.5% to 33% vs. 29.5% in 2011 because of expiring credits.

As I mentioned, this significantly impacts our earnings per share growth potential in 2012.

A couple of additional comments relating to 2012. On the G&A front we expect to continue to leverage driven by double-digit revenue growth, and we also expect to continue returning capital to shareholders through dividends and ongoing share purchases.

With that said let me turn the call over to our President, Scott Colosi.

Thanks, Price, and good evening, everybody. We are very pleased with our 2011 results as we grew diluted earnings per share doubled digits while investing in 20 new restaurants and returning over $75 million in capital to our shareholders in the form of share purchases and dividends. We've also entered 2012 with very strong topline momentum. And although we expect to give back some margin this year and an increased tax rate will certainly impact to earnings growth, we remain focused on doing the right things for the long-term success of Texas Roadhouse and its employees, guests, and shareholders.

To that extent we feel very confident about our positioning and, in particular, our growth prospects.

In addition to the positive sales results we're experiencing at existing restaurants that Kent mentioned earlier, we continue to experience solid performance from our newer restaurants giving us confidence they will continue to generate positive incremental returns.

70% of the restaurants we opened in 2011 did over $100,000 in sales during their first week. Furthermore, our development costs continue to be a few hundred thousand dollars lower than they were several years ago. Taken together, these results are very encouraging for the future growth of Texas Roadhouse.

Our development plans for the remainder of the year, of this year are complete and we are already well on our way to building the pipeline for 2013. At this point our goal is to put ourselves in a position to target at least the same number of openings in 2013 as the 25 we are doing this year and possibly a few more.

We believe that demand certainly exists for many more Texas Roadhouse restaurants and are seeing great new store performance from both the sales and cost side to make us feel encouraged about continuing to increase our unit growth on an annual basis.

While our primary focus for growth will continue to be on the domestic side of Texas Roadhouse, we're certainly excited about what we perceive as long-term prospects for international growth. Our franchise restaurant in Dubai which opened during the third quarter of 2011 continues to perform very well and we are optimistic we could have additional openings in the Middle East this year.

We're also focusing on introducing the Texas Roadhouse brand in other parts of the world including Mexico, Canada, Russia, and China.

As always, our goal is to create value for our employees, our guests, our local communities and our shareholders. We will continue to challenge ourselves to be the best we can be in terms of providing a great place to work and a great place to dine.

I want to take a moment to thank all of our team members, particularly our managing partners, for a great 2011 and a very solid start to 2012. You all have done a traffic fantastic job exhibiting our core values of passion, partnership, integrity and fun to drive our business forward in a very tough economic compartment. Kent, Price, and I congratulate all of you for your outstanding results and we look forward to seeing all of you at our upcoming annual conference.

With that, we've concluded our prepared remarks. So operator could you please open the lines for questions?

(Operator Instructions). Jason West. Deutsche Bank.

Thanks, guys, and congrats on a good finish to the year. I just want to follow up on the pricing. Just can you talk a little bit about how you came to the decision to take the 2.2 -- I mean, I guess that's what you were testing just if you could talk about how that performed in tasks and why 2 was the right number?

Hi Jason, this is Scott. You know we had it in tests. 2% is the number that we are comfortable with competitively. Certainly we have got to think about what inflation we have and we've also got to think in terms of really what's going on competitively, what we think that our concept can bear, and be fair to our guests and fair to our employees and everybody in our system. And we felt that was a good number for us, good, reasonable number for us.

Jeff, this is Kent. I personally spoke to all 40 of our market partners and gotten feedback from them and our managers in making our pricing decisions as we do every year.

Okay. That's helpful, guys, and then just to follow up on that. The guidance that you said around 3 points of price is assumed in the comp guidance. Does that require you to take any more or is it kind of 3 with what you have now in the menu for the rest of the year?

Hey Jason, this is Price. And that does not require us to take anymore. It's what we have in the menu and what we have already taken this year and factoring in what is carrying over from 2011.

Are you testing anything incremental already or is that really kind of on hold and wait and see at this moment?

We are not right now. We just completed the rollout of the 2.2% two weeks ago. So we haven't begun any further testing.

Jeffrey Bernstein. Barclays Capital.

Great. Thank you. A couple of questions, just first on the comp side of things. Obviously very strong comps for the first seven weeks. Just wondering, you mentioned weather being favorable -- just wondering, seems like the first few days of your seven weeks would still be the last few days of calendar 2011. So I'm wondering can you talk about the sequential trends whether we should assume that those first few days are as strong in terms of the holiday? And if you can also talk broadly, it seems the broader industry is seeing a nice uptick. Just wondering whether you can make any comment on what you see the underlying trend is for your business. And then I have a follow-up.

Hey, Jeff, it's Price here. We did have a good holiday season for sure. Some calendar shifts did help us a little bit during the holiday season. Christmas was on a -- changed up for a day, from -- went from a Saturday to Sunday this year. New Year's helped us into 2012 a little bit.

You know, I'd say the biggest thing that's helped us is first and foremost operationally I think we've got a lot of momentum. We feel like we've got a lot of momentum in our business and then on top of that we've been helped by at least a few percentage points from having less inclement weather year over year.

So if it's a weather, the weather, you think, is a few percentage points?

It's probably a couple of percentage points. Yes.

Okay. Any pushback on the pricing? I know it's early on, but I know that was historically the fear was that you would get some pushback. Are you seeing anything like that thus far?

No but in truthfulness it's been out there two weeks. So it's early on.

Got it. And then just on the food inflation side of things, it looks like -- I think you previously told us you were 40% locked. Now it sounds like you're 65% to 70% and you're still kind of zoning in on that 8%. Just wondering if you could talk about the beef component of that, how much you have got secured and maybe just more, broadly speaking, it seems like commodities across much of the spectrum are easing. But beef obviously have a longer-term cycle, so I'm just wondering how you balance -- you often talk about the long-term positioning versus the short-term pressures, if you could just talk about beef inflation in terms of at what point you would expect that to ease, or whether we should assume these type of levels for the next couple of years?

I will try and tackle that. Jeff, on the beef side we do have fixed price -- pricing arrangements in effect for over 90% of our beef costs in 2012. So we feel very good on where we are there. The volatility around that 8% estimate for food cost inflation would really be driven by produce and dairy. Those are of the biggest components we float around the market and that's about 15% to 20% of our total cost of sales.

I think you asked as well on beef. It's a little early to tell about beef going forward. At this point, again, we feel very good and are very pleased by the fact that we have got almost all of our needs locked in pricing wise for 2012.

Got it and then just lastly you had mentioned labor inflation. I think last quarter you thought it was going to be like a 2% to 3% basket. Is that still reasonable for 2012 at this point?

Yes, that's our underlying estimate for 2012 right now, yes.

Thank you very much.

David Tarantino. Robert W. Baird.

Hi, good afternoon and congrats on a good finish to the year. Just a question on -- first question is on 2012 guidance. And you mentioned that you're expecting to give up some margin percentage this year. So could you maybe quantify the level of margin compression that is embedded in the guidance, both at the restaurant level and at the operating income level?

Hey David, it's Price. With the range itself, we don't want to get specific on the margin compression and we did give up about 40 basis points on margins in 2011. Right now embedded in our plan is giving back more than that in 2012. The biggest component of that would definitely be on the food cost side of things. We expect to get back margin there and make up a little bit of margin on the -- in terms of labor and on the other operating side of things.

Okay, that's helpful. I guess if you take a look at where you might end the year if you hit that guidance towards maybe the low end of your historical range on restaurant margin percentage. I was just wondering if you could maybe talk philosophically about how you think margins could trend on a long-term basis, whether the idea would be to recoup some of that margin as you look out several years from now? And what are the factors that will drive that?

Don't know exactly. Our margins will bounce around a little bit year to year, driven primarily from what food inflation is. You know, when we had a couple of years of deflationary environment, we were able to pick up good margin percents in those years. We've given back a little bit in 2011; expect to again in 2012.

Our real focus is consistently being able to grow those restaurant margin dollars on a consistent basis. And we, overall, we have been able to do that if you look back over a five- or six-year period we've been successful in being able to consistently average low single-digit restaurant margin dollar growth on a per store week basis.

So I would expect during years when we have a little lighter food inflation gives us an opportunity to pick up a little bit on the restaurant margin percents. And in years where we have got 3.5% like we did last year, a little over 3.5% food inflation and certainly this year with about 8% food inflation, we will get back some margin.

Great. That's helpful. Thank you, good luck.

Destin Tompkins. Morgan Keegan.

Thank you. Just a couple of additional questions on kind of that margin compression issue. I guess specifically on labor leverage, you're looking at the fourth-quarter had it not been for the payroll tax item I think you maybe would've had 10 to 20 basis points of leverage.

Is that maybe a good basis point for us to look at as we project 2012? Were there any other moving parts we should be aware of?

No, that's probably fair.

Okay. And then on the 8% food cost inflation number, as we look at that through the year, is it 8% quarter by quarter? Can you kind of help us with the cadence of that cost inflation? And given that you're going to have a little more pricing in the first half of the year -- well, maybe in the second quarter at least -- how we should be thinking of that kind of cost of sales year over year as it goes through the year.

Sure. For the most part the inflation, we expect it to be pretty even through the year maybe about a point higher in the first half of the year than the second half of the year is our best guess there. And to your point, the pricing -- on the pricing side we expect to have a little more price increase in the first half of the year and then not as much in the back half of the year, as we start to overlap some of our pricing actions from last year.

Okay, and then lastly just as a clarification. On the timing of the 2012 development I thought I remembered it being more front end loaded this year than last year. And you may have said, forgive me if you did, but can you just remind us what the timing of development looks like this year?

I would say half of our stores will be open by the first half of the year.

Phillip Juhan. BMO Capital Markets.

Thanks, guys. It looks like your CapEx came in a little bit higher than planned, about $10 million. You last guided to about $70 million based on our notes and you guys came in at about $81 million. Can you talk to us a little bit about that variance in CapEx actual versus planned and what's driving that? Thank you.

Yes, this is Price. On the CapEx side, the $80 million is really driven by where we are on our new development, our new restaurant development. We spent last year -- of that $81 million we spent just under $20 million on maintenance CapEx, I believe it was $18 million to $19 million on maintenance CapEx remodel of existing restaurants. And the rest of the CapEx went to new restaurant development.

So it's really a function of where we are in the development pipeline on new restaurants. And this year is much more evenly weighted through the year than 2011 was.

Okay. And, Price, was that maintenance CapEx number in line with your plan at the beginning of the year?

Yes, generally we plan, we expect to spend $15 million to $20 million a year on remodel and maintenance CapEx. So the increase from our initial plan back in the year had to do with the fact that we got in -- we're much more evenly load weighted as far as new restaurant openings. We are in very good shape in our development pipeline.

Bart Glenn. D.A. Davidson.

Thank you. I was just curious in terms of your earnings guidance what assumptions do you have in terms of how much share repurchase you might do during the year?

Bart, we are assuming we are going to buy in at least dilution, the dilution for us is 1 million to 1.5 million shares a year. So we're assuming will buy it at least that. Obviously with this recent Board authorization it frees us up to you know certainly have the flexibility to buy in more than that.

And then just one follow-up question as well. With a lot of competitors focusing on opening price points, you know, you tend to have like lower average ticket than a lot of your competitors. It doesn't seem like it's had any impact in the results but now, are you doing anything strategically just to make sure you don't feel pressure from the efforts of some competitors? Thank you.

This is Scott. We have been very, very focused on executing our food and service at a very high level. That is number one. And number two, we still stream a lot of value on our menu and that continues to bring in our guests as well.

So, we have got -- we're very, very well positioned right now. At least we believe that, and we think it's showing in our results certainly. Again we continue to maintain a lot of value on our menu that I think is as competitive if not more than the majority of our competitors.

This is Kent. We have not compromised the quality of our ingredients nor have shortchanged our service levels in the restaurants either.

(Operator Instructions). Andy Barish. Jefferies.

Hey guys. Just on the porterhouse rollout as you continue to push on the higher end as well, is that a supply constraint going into one third of the restaurants? Or is it more kind of a demographic willing to accept that price point? And just not to get too granular but in the comp expectations for the year, are you assuming mix is relatively flattish, i.e., some of the higher price point stakes offset some non-alcoholic beverage mix or something like that?

Andy, this is Kent. Supply is the issue on the porterhouse; we would love to have done the whole system.

And, Andy, on the second part of your question on the mix, I have assumed a little bit of negative mix because part of the pricing we took late last year was a little bit on our alcoholic beverage tiers. And so typically when we do that we see a little bit of negative mix from that. So I have assumed a little bit of negative mix for 2012.

David Dorfman. Morgan Stanley.

Thanks, guys. I just have a couple of questions. One is just to clarify on the pricing. In this window we are in now for example between when you added the 2.2% in before we sort of anniversaried the 1% from March last year, are you now running 4.2%? Is that where we are at now? And that sort of comes down throughout the year?

Yes, that is correct.

Okay and then just the last two quick things. Is the higher sort of tax credits shift in the labor line -- that was still a -- that did not affect the first quarter 2011, right? So, you have one more quarter to cycle that and then it will be sort of a wash in the second quarter?

We have cycled it now, David, so now the ongoing effect from that will be a much higher tax rate. So (multiple speakers) labor line but it will be -- will result in a much higher tax rate.

So you're saying you might start seeing some leverage that could happen in the first quarter?

Correct.

Okay and the last question is just related to some comments you made last year, just sort of anecdotally, that you saw some bit of a trade down, a little bit more white-collar crowd in the restaurants. Is that something that is still going on? Are you still seeing sort of maybe sort of a higher demographic moving in?

This is Scott, I don't think we know that, really what that trend is or we have that specificity on our data. We do know that rolling out the bone-in, ribeye product -- higher priced product that's been very successful for us and the porterhouse in the stores we tested it and also had a lot of success. So we are optimistic that there are folks out there that have a demand for some of the higher price stuff and we will continue to buy it.

Do you have a sense of where you may be taking some of -- I mean with your comps where the share might be coming from?

I think it's coming from everywhere really. I mean you know, smaller [votes], bigger votes, I think it's all over the board.

John Ivankoe. JPMorgan.

Thanks. It is Amod Gautam on for John. You talked a little bit about mix already. I was just curious, it sounds like with the check growth you mentioned for the fourth quarter and what I think is about 2 points of pricing that mix has been relatively stable. Do you think that has been sustained into that [6%, 7%] comp that you mentioned for the first seven weeks?

Yes. For the fourth quarter, mix was basically flat and it's been about flat for this for the first period anyway, first part of 2012. It's been down slightly again due to the fact that we took a little pricing on alcohol and beverages and we're not seeing necessarily all of that flowthrough.

Okay. And then you have talked about pulling out costs out of development. Do you think you're pretty much at the bottom end of the investment costs at this point? And then, somewhat related to that what is kind of the dollar pre-opening expenses that you expect the dollar increase in 2012, relative to 2011?

This is Scott. I would say we are at the bottom of the development costs cycle if you will from the changes that we've made the last few years. So I don't think we're going to go down much more than we already have, and then, inflation is going to start to hit us on certain things whether it's building construction with the cost of materials or the cost of equipment or whatnot. We actually -- you may see us continue to build slightly larger restaurants, just have more tables and seats and so forth, since we have bumped out quite a bit of stores over the last few years and we continue to do that program. So I see that continuing to happen.

As we have reduced our costs on opening these stores we have added seats so that's an additional benefit.

Now on the preopening side we're looking at probably in the range of [$450,000] per store somewhere thereabouts. It moves around quite a bit depending upon the store and who's going to run that store if it's an internal or external hire for that restaurant. But $450,000 is probably a good number, somewhere in that range.

And just to tag onto that depending on where we are in our development pipeline if we end up continuing down this path for 2013 and potentially open up more restaurants for 2012 we could have more than say 450 times 25 unit restaurants in preopening costs for this year.

I understand, thanks guys.

Keith Siegner. Credit Suisse.

Thanks, guys. Just a bigger picture question. These are really strong traffic numbers you're putting up on a one-year and two-year and you've way surpassed kind of the traffic pressures of 2008 and 2009 so you are kind of like all-time peaks now. Where is the traffic coming from? You've got long lines, have a lot of the weekend nights. Where is the capacity for such big traffic growth? Is it weekdays? Is it shoulder periods? Kind of where is it coming in? And how much capacity do you have kind of say at the peak hours? Like how much more room for traffic is there in the current system?

I'll start off as far as where the traffic is coming from we continue to see all days of the week doing well. It's pretty much across the board in regards to that. We continue to -- our operators continue to challenge themselves on speed initiatives, how to increase the opportunity for more throughput in the restaurants. On top of that we continue adding seats at restaurants. We're up to just shy of 70 restaurants where we've added additional seating capacity too and we've got another 25 to 30 on tap to complete this year. And in those locations we're adding anywhere from 22 to 35 additional seats.

Another thing we're working on, this is Kent, is just eliminating tables sitting there idle and trying to turn the tables much quicker during the peak times that we have which has definitely been successful for us.

(Operator Instructions). Peter Saleh. Telsey Advisory Group.

Great, thanks. Just a quick question on just if you guys could give us an update on your initiatives to reduce wait times, call ahead seating, and maybe an update on pay at the table?

Call ahead seating. We have got a few different hosts related systems we have been testing and the various ways to how we collect the data for call ahead and also walk-ins and mesh that data together and so forth. And we've got different things as far as using pages or reader boards, stuff like that. As far as pay at the table we had a test last year, we decided to end that test and we're looking at some other things so we may test something in the future. We continue to get pitched a lot of different programs from people but we have have not settled in on anything quite yet.

Brian Bittner. Oppenheimer.

Thank you. Just to elaborate a little bit more on this incremental traffic you're seeing. Is there anything incremental versus 2011 that you're doing on a marketing basis maybe enhancing global marketing program. Or in other words is there any anything you could say, these top two initiatives are what's really these top two internal initiatives is really what's helping drive this traffic?

This is Scott. Not really. I mean, we continue to strengthen our local store marketing team, meaning that we got more experienced people, we've got more training classes, and those kind of things basically but very fundamental blocking and tackling kind of stuff but it continues to evolve and strengthen over time.

As Kent mentioned we continue to focus on speed because we do have very long waits in our restaurants and so we want to make it tougher to lose people, if you will, because the waits are so long. So, just really getting stronger and maintaining a disciplined focus on the business is really what is driving results for us.

And then our new openings, we're allowing our trainers, a few trainers to stay on longer which definitely helps us with our curve when we lose some sales after the honeymoon period.

Gentlemen, it appears we have no further questions this afternoon. I would like to turn the conference back to you for any closing remarks.

All right, well, thank you all for joining us this afternoon and feel free to call us with any questions. Thank you and have a good evening.

Thank you. That does conclude today's Texas Roadhouse fourth-quarter earnings conference call. We'd like to thank you all so much for joining us and wish you all a great afternoon. Goodbye.