Texas Roadhouse Inc (TXRH) 2014 Q1 法說會逐字稿

Good day and welcome to the Texas Roadhouse Incorporated first-quarter 2014 earnings conference call.

Today's call is being recorded.

(Operator Instructions)

I would now like to introduce Tonya Robinson, Director of Financial Reporting. You may begin your conference.

Thank you, Vickie, and good evening, everyone. By now, you should have access to our earnings release for the first quarter ended April 1, 2014. It may also be found on our website at Texas Roadhouse.com in the investors 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 may be found under the investors section of our website.

On the call with me today is Kent Taylor, our Founder and Chief Executive Officer; Scott Colosi, our President; and Price Cooper, our Chief Financial Officer. Following their comments we will open the call for questions. Now I'd like to turn the call over to Kent.

Thanks, Tonya.

We are pleased to report another quarter of opening new restaurants and growing sales. During the quarter, we opened six Company restaurants and one franchise restaurant.

Our same-store sales increased 2.8% with about half of the increase coming from guest counts. This resulted in our 16th consecutive quarter of positive guest count growth. Thank you to all of our operators for that. That was awesome. In spite of a little calendar shift with Easter holiday, our comps were positive in the month of April, increasing 1.6% for the first four weeks of our of our second quarter.

Thanks to our sales growth and less than 1% food inflation, we were able to grow both restaurant margin dollars and percents. From an overall profitability perspective, we gave back some money as we continued to make long-term investments for the success of our future. Price will give more details on this in his financial update.

We are still targeting 25 to 30 new Company openings this year. On top of the new Company-owned restaurants, it looks like we could see as many as five franchise locations open this year, with three of these being international.

Lastly, I want to congratulate Scott Schraeger of Toledo, Ohio for being named our 2013 Managing Partner of the Year at our conference last week in Florida. This honor is very well deserved. Thanks to everyone who attended our conference this year, including our great vendor partners.

Now, I will turn the call over to Price to walk you through our financial update.

Thanks, Kent. Good evening, everyone. From a big-picture perspective for the first quarter of 2014, as compared to the first quarter of 2013, top-line sales grew slightly over 10%. With expanding restaurant margins, restaurant level profitability increased closer to 12%.

However, diluted earnings per share were flat with the prior year due to a few things. First, our tax rate was considerably higher this year, due to the expiration of the work opportunity tax credit at the end of 2013, and the fact that last year included some catch up from when this tax credit was retroactively reinstated. Overall, the increased tax rate negatively impacted diluted earnings per share growth of 4% to 5%.

Secondly, pre-opening G&A and depreciation all grew at greater than 12% rate of growth we experienced in terms of restaurant margin dollars. Some of this was due to timing, while some was the result of continuing to invest in the business. I will get into more detail on these after I discuss our store level performance.

For the first quarter of 2014, restaurant sales increased 10.5%, as a result of an 8.4% increase in store weeks and a 2.2% increase in average unit volumes. As has been the case for several quarters, top sales growth out-paced average unit volume growth, with comp sales increasing 2.8% during the quarter. Comp sales growth was comprised of a 1.3% increase in traffic and a 1.5% increase in average check.

By month, comparable sales increased 1.1%, 2.6%, and 4% for the January, February and March periods, respectively. As Ken mentioned, comps were up 1.6% in April.

As worth noting, the Easter weekend calendar shift from March to April positively impacted March results by approximately 1%, and negatively impacted April comps by closer to 1.5%, due to the fact March is a five-week period and April is a four-week period. So, netting this out, our comp sales trends for the last few months has been a positive 2.5% to 3% with roughly half being check and half being traffic driven.

Restaurant operating profit increased 11.9% or $8.1 million for the quarter compared to the prior year. This out-paced our sales growth as restaurant level margins increased 25 basis points for the quarter.

We did lose some leverage on the labor line due to three things: higher healthcare costs, reclassifying some costs between the other operating and the labor line, and experiencing more labor inefficiencies associated with new store openings, given the increase in these year-over-year. However, we were able to more than offset the deleverage on the labor line with leverage on the cost of sales line. The approximately 1.5% menu price increase taken in late December more than offset food inflation of approximately of 0.5 point for the quarter.

As it relates to food inflation, it is worth noting that our beef costs were actually slightly lower for the quarter than during the first quarter last year. In terms of the other operating cost line, much higher natural gas prices prevented us from gaining additional leverage here, as we continued to make good headway on reducing some of our non-guest interfacing cost.

As we look at the full-year, in terms of restaurant margins, I want to give you little more color to help everyone understand how we are looking at our business. While or beef costs were lower year over year for the first quarter, we do not expect this to be the case for all of 2014.

However, to be clear, we do not expect our 2014 beef costs to be up as much as the overall beef market. This is driven by the fact that in 2013, we experienced beef inflation of 14% to 15% versus the market being up low to mid single-digits. Overall, we can see leverage on the full-line with roughly 1.5% in check, low single-digit food inflation, and operator efficiencies.

Labor will be very difficult call to leverage this year with an additional $2.5 million to $3 million of healthcare costs, driven by expanded healthcare coverage. Also, our wage rate inflation continues running 1.5% or so. We are reclassifying some of our contract labor out of the other operating line into the labor line, which will create 15 to 20 basis points of headwind all year.

On the other operating cost line, we would expect to be able to leverage this for the year, even with higher natural gas prices, as we anticipate getting a few million dollars in savings from non-guest interfacing costs. I would remind everyone that the third quarter can be much tougher to leverage, as we are overlapping a $1.3 million credit related to our general liability self-insurance last year.

Preopening costs were up $1.5 million this quarter as compared to the prior year. The higher costs were primarily due to the opening of six restaurants this quarter compared to only three in the prior year. Preopening costs are running $550,000 to $600,000 per store right now and do vary depending on the timing of openings.

Depreciation costs were up $1.9 million this quarter compared to the prior year, primarily due to depreciation on new restaurants. In addition, the way depreciation was recorded in 2013, with 52 weeks of depreciation spread over 53 weeks, drove approximately $250,000 of this increase. We did make some changes at the end of 2013 to shorten some lives on various leasehold assets.

G&A costs were up $2.8 million, versus last year. The majority of this increase was due to increased investment in store level support in a few areas, such as training and facility support. In addition, we continue to invest in international expansion.

For the second quarter, we do not expect G&A to be up as much year over year, as we expect the spending associated with our annual managing partner conference to be down about $1 million versus the prior year. However, we do anticipate it will be difficult to leverage G&A for the year.

Tax rate for the quarter came in at 30.7%, which is considerably higher than the 27.9% rate last year, primarily due to the expiration of the work opportunity tax credits at the end of 2013. We continue to expect our full-year rate to be 30% to 31%, which is up a decent amount from the 2013 rate of 28.9%.

Moving to the balance sheet and cash flow, we ended the quarter with $91 million in cash, which was in line with our year-end balance. While we generated approximately $45 million in cash flow from operations, we spent $49 million in cash, primarily on capital expenditures and share repurchases.

During the quarter, we spent $24 million to repurchase 960,000 shares of our common stock. We are committed to repurchasing the diluted impact of our share-based compensation programs.

Actually, we've been a little more aggressive here in the first part of 2014, as we're working on buying in the dilutive impact for both 2013 and 2014. We will do this as long as the price is less than what we calculate as the value on a discounted cash flow basis. Finally, of the development front, we still expect our capital spending to be $100 million to $110 million for 2014.

With that said, I'd like to turn the call over to our President, Scott Colosi.

Thank you, Price, and good evening, everybody. While we are very encouraged by our current sales momentum, especially the continued traffic growth. With 16 straight quarters of traffic growth, we believe we're focused on many of the right things for the long-term success of our business.

On the development side, we continue to believe 25 to 30 new Company restaurants is a good growth rate for us for the next several years. While all-in development costs are back up to a bit over $4 million, we feel very good about the returns we are generating based on the continued solid sales for performance of new restaurants.

By keeping a good pace of new restaurants, we not only create shareholder value, but we also create opportunities for our people. This certainly helps us consistently recruit and retain high-quality team members who are so important to our ongoing success.

We don't take any future success for granted. We are always challenging ourselves to get better, or as we say internally to each other, bigger, stronger and faster. To support this effort, we will continue to make the necessary investments in our people and our infrastructure, particularly as it relates to food and service, to further ensure our furniture success.

And top of growth, we continue to generate solid operating cash flows and we put them to good use in the first quarter. As Price mentioned, along with our ongoing dividend program, we repurchased some of our common stock this quarter. Our focus on returning excess capital to shareholders is undeniable. Since the inception of these programs, we spent over $182 million through our authorized stock repurchase programs, and we've paid over $98 million in dividends to our shareholders.

Overall, we feel very good about the momentum of the business. We believe strong comp sales performance and new unit growth, along with a strong balance sheet and disciplined capital allocation are the ingredients that set us up for continued success.

I'll end by echoing Kent's comments about our conference. Our culture of partnership and passion for Texas Roadhouse is very apparent at our conference. I look forward each year to spend time with all of our operators and vendor partners.

Thanks to all of you for your continued commitment to Texas Roadhouse. And I'd like to make one last shout out to our 2013 managing partner of the year, Scott Schraeger. Congratulations, Scott.

Vickie, you may now open the line up for questions.

(Operator Instructions)

Andrew Charles with Bank of America.

Can you talk about the dynamics of beef inflation during the quarter and why you think 1Q represents the low point of the year for beef inflation? And then separately, you were previously one-third contracted on beef. Is that still the case?

Andrew, this is Price. Thanks for your question. As far as how much we are contracted on specific commodities, we are not going to get specific into that for competitive reasons.

I will tell you, we utilize different methodologies for contracting. We do do some fixed-price contracting. Some of it's formula-based. Some is based on spot buying.

I'll tell you we are not 100% contracted on beef. Seasonally, beef is typically a little higher in the second quarter of the year.

So, that's why sitting here today, we think that beef will be up a little bit. That's one of the reasons we think beef will be up a little bit for the rest of the year, as compared to the first quarter.

Okay, great. Also, you mentioned also about the share repurchases, that they'd be loaded in the first half of this year. Are we correct to assume then -- I thought that you'd be more of a steady repurchaser of shares just given that you repurchased some last quarter, as well.

If the share price remains below your calculations, do you think that you will be a more consistent repurchaser going forward? Or is it more just a first-half repurchase impact?

We plan to be consistent, to some degree, throughout the year. We talked about we'd like to buy in at least the dilutive impact, which -- that's somewhere between 1 million and 1.2 million shares a year. So, between what we did in the fourth quarter, as well as what we did in the first quarter, we bought in roughly 50% of that, call it, at the end of the first quarter.

That's helpful. Thank you.

Brian Bittner with Oppenheimer and Company.

This is Mike Tamas on for Brian. You talked about some of the reasons for the labor deleverage. Can you talk a little bit about the new unit inefficiency and maybe how you think that's going to go, going forward? Thank you.

A large part of that new-unit inefficiency was driven by the fact that we had a pretty heavy new store opening schedule in the back part of last year, specifically November and December. As well as we opened up six in the first quarter of this year, as compared to three last year. So, that drove our labor inefficiencies up a little more this quarter.

As far as what it will be going forward, will depend somewhat on the timing of our openings as compared to last year. Because, in general -- let me back up a step. What typically happens at our newer locations, is they run at much higher sales volumes, but they also run a little higher on the cost side of the equation, in terms of cost percentages, as well. So, we expect to have some going forward, depending on the pace of our new store openings.

Just a follow-up on the inflation question as it relates to pricing. It seems to be a little bit better inflation-wise than where it has been. What are your thoughts on pricing for the rest of the year? Thank you.

We don't have any plans to take any more pricing right now. We are currently not testing any pricing. As we move throughout the year and get a little bit better handle on what we think 2015 will look like, then we will be evaluating what kind of testing should we be doing? What kind of pricing might we take? As you look forward into 2015, and when would we take that price?

Great. Thank you.

John Glass with Morgan Stanley.

First, just price -- back on the beef inflation and the contracted. You used to break that out. Why the change and you are not going to talk about how much you've contracted now?

I appreciate the question. And we did, used to be very specific on that. But, most of it's really driven from competitive and market reasons from our own internal purchasing perspective. We don't want to get specific with suppliers out there, as far as where we stand, relative to our beef pricing and needs for the year.

No, I can understand that. Are you willing to talk about what you think, what beef inflation you expect this year? The percentage inflation?

I'm sorry?

Did you say, or are you willing to say, what you think beef inflation specifically will be this year will be for you?

We're not willing to pinpoint a number. I'll tell you, we do expect to have some beef inflation.

Okay. You mentioned there was a couple of reasons why D&A didn't lever and one of them was that you changed the way -- the fixed asset register, the depreciation schedule for leasehold improvements. How impactful is that in 2014? How much is that?

That was probably a couple hundred thousand for this quarter. So, maybe that's $0.5 million to $800,000 for the year.

Okay. The other piece of it, the G&A not leveraging and you talked about some investments. Can you break down the pieces for what you are spending G&A on?

It doesn't seem like it's levering and that's one of the reasons why, even though you got restaurant level market expansion, you are seeing compression in your overall operating margin. Is that investments that are going to be made throughout the year? Specific to the quarter? Is it stock comp? What are the big buckets that drive that?

The majority of it, about 70% of our G&A is people driven. What we are talking about that we are investing in, a lot of it is around our service training support. So, similar, we've talked about our product code structure on the food side of things.

We started, over the last six months, with a more intense focus on the investing on the service side of the business and in training folks on that, as well. Also, we've added some folks on the facilities side of the business. As our stores, our restaurants continue getting older, we want to make sure we are starting relevant, that we are keeping up and taking care of our assets.

One thing that we are doing this year, that we are about half the way through, is we are rolling out a new back-office package in all of our restaurants. So, we have hired a handful of more people to help get that done.

One last thing I'll mention is the international piece. We continue investing on the international front. So a lot of this is for continuing, one, either to drive sales at existing restaurants. And/or two, to drive overall profitability for the Company as a whole.

John, this is Kent. We've also hired some big dogs from some of our competitors that we brought over. They'll be future market players. We've added a bit of that as well.

I'm sorry. That's at the field level?

Yes.

Got you. Thank you.

David Tarantino with Robert W. Baird.

Price, just a question back on the cost outlook. I think everyone might be struggling with the degree of confidence you have in the low single-digit inflation outlook. Could you just maybe talk about that, given that you're not locked in on all your commodities?

How confident are you that you're going to end up in that level, given the markets today? And are you assuming that the markets today continue? Or are you assuming something gets better as you look out into the back half of the year?

Based on what we know today, we feel good about it. We had significant beef -- the beef market, anyway, there was significant inflation in the beef market during the first quarter.

As we mentioned, our beef was actually down year-over-year. It was down 1% or 2% for the quarter versus the market being up considerably more than that.

A big part of that is the fact that we had 14% or 15% beef inflation last year, as compared to the beef market being up in the low to mid single-digits. So, we do expect beef to begin to be up year-over-year for us.

We are expecting produce costs to be up for this year. The other side of the proteins on chicken and pork and seafood, we are expecting some of those to be up and some of those to be down.

We are locked on a good part of that side of our protein basket. We feel pretty good at where we are at and think we are being realistic about our expectations as it relates to the commodity outlook.

Great. That's helpful. A bigger picture question, as you look out over the next year or two. I think it's always tough to predict that far in advance.

But, what's your overall thought on where the beef market is heading? Do you think there's a chance we see a reversal here in the next 12 months? Or is that unlikely in your mind?

I guess there's a chance of anything. We don't have a crystal ball. We think a lot of it will depend on what plays out on the demand side of the equation.

Because certainly, anything, any of the data would point to as far as on the supply side of the equation, it would be a tight market likely into some time into 2016, at this point. So, any future pressure, if you will, a relief would likely come from a shift on the demand side of the equation.

Right now, you are seeing, when we talk about beef being up considerably, you're seeing increases on different cuts, as well. Different cuts are different, as well. Actually, the cuts we use, in general, aren't up as much of some of the outer cuts.

Got it. One more quick one on the cost side. G&A dollars were around $20 million in the first quarter. Is that a good number to think about, excluding the manager conference, for the rest of the year on a quarterly run-rate basis? Or, is there any seasonality that we need to take account for?

The biggest thing on the seasonality part, is as you mentioned, the second quarter tends to run higher with our managing partner conference.

Great. Thank you very much.

David Palmer with RBC.

A follow-up question on the labor line. It seems that labor costs were up for two reasons that you called out. One was the shift from the other line, an accounting change there, and the other was healthcare.

Beyond that, and correct me if I'm wrong, that could be maybe 30 basis points between the two of those. That deleverage would hold if your wages were up something like your comps on the underlying waiver.

Could you walk us through that? How that will play out through the rest of the year? What I'm thinking is that perhaps you would leverage better than the 30 basis points from here on out, given the fact that you have pricing in place. Thanks.

I think it's tough to think that we would leverage that line throughout the year with only 1.5% in pricing. Our average wage rates, right now, our average hourly wage rates, are running up about 1.5%. And that's certainly a good portion of what hits in that labor line.

In addition to that, you've got the $2.5 million to $3 million of extra cost from rolling out expanded healthcare to those hourly employees. And then the 15 to 20 basis points of headwind, as we are reclassifying some of our -- what used to hit in the other operating expense line, that is now hitting in the labor line this year. So, it doesn't affect overall restaurant margins, but it affects both those two lines.

I guess I was unclear. I just was saying aside from those two line items, which might be 30, 35 basis points of deleverage, you might be able to leverage labor away from that. In other words, perhaps not do as badly as the first quarter deleverage.

But, correct me if I'm wrong. Is that labor line going to be looking like that on a year-over-year comp similarly to that first quarter?

Well, you do have the shift going on all year. So that 15 or 20 basis points, you will have every quarter. You do have the healthcare rolling in every quarter.

The difference on the labor line will be what happens on the inefficiency portion as it relates to new store openings. For this quarter, that was probably about 30 basis points. 25 to 30 basis points of it was driven by the labor inefficiencies. So, that will be the ex-factor. Does that help?

Yes, that's helpful. Thank you.

Jeff Farmer with Wells Fargo.

I do think we all understand your price value positioning advantage. Is there anything else you guys can point to that's been a driver of your traffic in recent quarters?

I think staying focused on the basics, number one. I think, as Kent mentioned, we are staffing up and hiring some folks. Not only are we doing at the market [boarder] level, but we truly do have the best of the best operators out there.

Jeff, this is Scott. I would say, certainly, we continue to get sharper over the years on our local store marketing efforts, our grassroots, guerilla marketing efforts. Our team continues to get stronger and stronger and more experienced in that regard.

There's been a lot of questions on the labor side of the P&L. I understand that. In some ways, think about our labor, we are on offense running our stores. We staff to win. We staff to do big volumes.

We have a lot of people working in our stores because we are so busy, and we are growing sales. I think that's a big help to us.

While we are very competitive internally on margins and managing labor and food costs and all that, at the same time, our guys really know you win the game by growing sales. They're prepared to make those investments in labor, whether it's staffing in the front of the house, whether it's a local store marketer to get out in the community, whatever those things are for the long-term success of the business.

That's why we're doing north of $4 million now in our average unit volumes. Which is a lot higher than most of the people that we compete directly against. We believe it, in part, is because of our offensive of nature, the way we staff our restaurants.

That's helpful. I realize you don't want to give away any trade secrets here, but are you doing anything, even slightly differently, on the local store marketing front? Any material change there?

It's just more of the same. I think Price is on the head. It's just the consistency. You know --

I'm sorry. Go ahead.

Go ahead, ask your question.

I was going to say, the last one, actually I don't know. You are rolling out this guest management system. I'm curious if there's been any throughput benefit from that? Or anything else that might be working on the throughput side for you?

I can't tell you anything conclusively on the throughput side of the guest management system. It still on less than half our restaurants today.

For the most part, it's a comfort level of the operators and the technologies that they want to use. They do believe it facilitates the folks working the host stand, where there's a gazillion people managing multiple lists of guests, where you've got a walk-in list. And of course, the call aheads.

Merging those lists together and keeping track of everybody. That's really a preference in the technology for the operator. It is hard to measure the ROI, if you will, on that stuff, just because there's so many other things going on in the world that impact sales.

Whether it be what the competition is doing, our other efforts inside the four walls or outside the four walls. Of course, there's always weather here and there. Competitive closings, competitive openings, there's all sorts of things going on, so it is hard to isolate something like that.

A lot of it is just the faith that our operators have that they think our folks are doing a better job in managing the flow-through of the guests. They're going to use that technology and it helps the overall execution of the restaurant.

Great. Thank you very much.

Jeffrey Bernstein with Barclays.

A couple of questions. One, on the real estate pipeline. I think you mentioned the next few years comfort doing 25 to 30. I guess that was US Company-operated.

I'm wondering, one, if you could talk about the availability or the quality of those sites that you see coming now versus a year or so ago. I think you mentioned now that the costs are now pushing up north of $4 million, and you've already used $4 million. I was wondering how that pans out in terms of your comfort level with the sales to investment ratio. And then I had one follow-up.

Sure, this is Kent. We are still finding sites. In 2014, we've got 16 states we will be opening in. We are still spread out quite a bit.

Alaska, the new location that we'll be at, our new state we'll be adding. Actually a little bit with the slowdown of some of our competitors' openings, some sites that currently were not available to us are now being sent to us. So, we feel really good about 2015, as well. I've actually looked at over 30 sites for 2015, so far.

The cost comment you guys made about going up. I don't know if there's any flexibility in managing that down? Or whether you are comfortable running that $4 million-plus investment cost relative the $4 million AUV?

I would say that will stay pretty much the same, as we like A sites. We don't want to go and look at B and C sites.

Jeff, I think in our AUVs are hitting close to $4.2 million. We're pretty close to 1.1 sales to investment ratio, which gets us to the mid to high teens IRRs that we're looking for. And we are still sticking to that model.

Having an investment costs now over $4 million, not such a big deal as it was six, seven years ago when we were over $4 million. With normal inflation, both in our per person check, which of course impacts our AUVs, and then overall investment cost, we kind of feel like we are in a good place right now.

As Kent mentioned, we are finding a number of sites that we feel comfortable with to hit our 25 to 30. It's kind of an advantage for us to grow at a rate of 25 to 30 versus 45 to 50. Because we can be choosier and we can say no to a lot of real estate, which is what happens. We do say no to a lot of things, and let the best sites shake out.

I would also tell of lot of you that while we've done a few one-off locations, let's say, and more urban location, if you will in a couple places. By and large we are still sticking to the same model of mid-size cities, mid-size trade areas, middle incomes, that kind of thing.

There will be a few exceptions each year. Again, in a more urban-type environment, maybe an end-cap type of environment. By and large it's traditional Texas Roadhouse.

Got it. Then a clarification, or two clarifications, on the comp. One, I think you talked about the Easter shift and ex-Easter it was relatively stable.

Just to clarify, the Easter weekend, did that not fall into the first month of your second quarter for both periods? Am I thinking about that wrong? I thought your quarter last year ended the 20s of March and therefore it would be in the --

Yes. Sorry, Jeff. This is Price. Actually, it fell into the second quarter of this year, whereas it was the first quarter of 2013. So, it fell into our March period last year versus April this year.

Okay. I was looking -- I know, in the press release, last year's quarter ended March 26. I don't know if you're using that as the benchmark? I thought the Easter holiday was March 31 -- the Easter weekend, I guess, last year.

I apologize. I don't have the date sitting in front of me. I know it was in our March period last year, where it was April of this year.

Got it. Any comment on the weather? I know obviously it's had an impact on everybody. I know you don't often quantify it.

We don't quantify it. You definitely seem like you had more this year than last year, for sure. But we don't track days closed. Honestly, it's hard to track it.

We can tell you that the Northeast and Midwest were definitely softer than their normal trends in the January-February timeframe. But we don't track it.

Got it. Thank you.

Will Slabaugh with Stephens.

I want to ask you about pricing. You mentioned the pricing you took in January. It doesn't look like it, but wondering if you saw any pushback at all? Or guest feedback, for that matter, on the pricing you did take? And if you took that fairly across the menu? Or if that was focused in one particular area?

Will, we took it for the most part across the menu. We didn't take all of our lower-priced items up. It's hard to tell. It's hard to say if you got any pushback or not.

In general, we took a little bit over 1.5%. What we are seeing this month and what we saw for first quarter, as well, is a couple of tenths not flowing through. Part of that is some shift in entree preferences.

And part of it is, it seems like we just continue losing a little bit on the alcohol side of the business every year. I would say, I don't know how we validated that we are not seeing a bit of pushback, but we hadn't seen any material shifts in mix.

Makes sense. I was going to ask about the mix as a follow-up there. You mentioned or alcohol as one piece that could be declining just a little bit, as it has been.

You mentioned your ticket overall grew by about 1.5 points, which is equal to you pricing. Wondering about that flat mix. Is there any other pieces that are moving in around in there outside of alcohol?

Not materially. The reason why that grew 1.5 points was a little bit was like the Valentine's Day shift, believe it or not. We were up a couple of tenths because of that.

Excluding that, that went from a Thursday to a Friday. Excluding that, our check would have been up more like 1.3%, something like that.

No, we've seen a little bit of slippage on the alcohol side, a little bit of trading down on the entree side. Selling a few more appetizers. All that nets to a couple of tenths of the pricing not flowing through.

Got you. Thanks, Price.

Andy Barish with Jefferies.

A couple of quick ones on the cost side. I'm trying to follow the logic on beef purchasing. It would seem as if you were worse than the market in 2013, better than the market in 2014. What does that mean for 2015?

Then, were there any rebates in the first quarter? I think this is the time of the year where you guys tend to see some of the rebates coming in?

Andy, this is Price. Nothing on the rebate side. We don't receive any rebates like that. So, that has no effect on business.

But, what you are talking about on the beef side, as far as overpaying and then being under the market, is exactly what's happening. We paid a decent amount, what turned out to be a decent amount above the market last year.

So you can look at it, in a way, as we paid up for a little bit of insurance last year or we paid up for a lot of this year's inflation last year. Because the market wasn't up near what our pricing was. Consequently, that's why when we talked about it, we were actually down in the first quarter, which is well below what the market was. The market was up a good deal in the first quarter.

Certainly. Okay. Then trying to jive the thoughts on the non-guest facing. I know it's not big dollars, $2.5 million, $3 million or so. Should we now think about that as being reinvested in some of these additional support functions and fields? Or is some of that still flowing through to the earnings line?

I'm sorry, Andy, can you repeat that?

Just trying to match up the non-guest facing saves that you are realizing versus some of the incremental infrastructure and field support. At least first time I've heard you talk about it. Are they offsetting each other this year? Or are you still getting some net savings from the non-guest facing programs you put in place?

Non-guest, I think will get to somewhere in the $3 million range this year on that, as well. A lot of that will be in the other line. Some of that will actually be in the food line, because we're doing some more routes on the consolidated buying power on the procurement side.

So, that kind of all falls under that category. I think we will get a couple of million there. Conversely, you can look at it in say that it enables us to take less pricing.

To your point, what you were talking about, maybe that's more investment that we are able to make in the G&A side of the business on more service training or facilities managers. So, to us, you can look at it either way. But it all goes in the same bucket.

Thank you.

Brett Levy with Deutsche Bank.

There's not really much more to touch on. Just a clarification on pricing, first. You said you are at 1% and that's going to be consistent each quarter rolling off in 4Q. Is that about right?

That's about right. It's more like 1.5%. We think our check will be up a little less than that, but we took 1.5% back in late December.

Okay. Last quarter you had discussed roughly $1 million hit that you are expecting from higher wages, due to minimum wage. Is that still about right?

That's probably about right. That's probably not that dissimilar to what it was in 2013. We are in 14 states now, where the minimum and/or tip wage is subject to annual changes. So, that's just a constant headwind, which I don't think that $1 million as a whole lot different than it was in 2013.

On ACA, the rising cost, how much of that is coming from more people signing up? And how much is coming from higher cost per claim?

I would say it's 80% from more people signing up. And the rest from general increase in the cost of insurance.

Do you have a number? Can you quantify what percentage of your hourlies are taking advantage of it?

I don't. I don't have that.

Okay, gentlemen. Thank you.

(Operator Instructions)

John Ivankoe with JPMorgan.

It's Matt Galton filling in for John. The first question was, the average unit volume for stores opened less than six months look very, very high on a dollar basis. I think maybe the highest since you've been breaking it out.

Was there anything interesting you could tell us in terms of where those units opened? Some of those urban locations you are mentioning? Is it something else that might be driving the level of volumes that you are getting, like the throughput execution is better at those restaurants? Just trying to get a sense for how we should think about the honeymoon periods going forward.

I don't remember anything specific about them being in different locations per se, than when we've opened in the past. I will tell you, in general, our new store openings have been very, very strong.

Also, what can affect that, is how long they've been a new store. So, that category of restaurants include restaurants that are open six months or less.

With us being heavily back-end weighted in 2013, some of those stores were a little earlier in their honeymoon during the first quarter. So, that will tend to weight that number up a little bit.

I think that's probably more the reason why. That, combined with the fact that we are opening up and strong volumes.

Okay, very helpful. Can you give us an update where you are on the number of bump outs you've done and how many more could be done?

Maybe more broadly, Scott talked a little bit about the guest management system. You obviously have maybe an issue in some of your restaurants that a lot of other restaurant companies would be envious of, which is wait times and getting guests through the door.

Broadly speaking, are there other initiatives that you're thinking about from the throughput standpoint? Or something with lower wait times, et cetera?

I will start off on the bump out and the we'll all jump in on initiatives. From a bump out perspective, we've done right at 125 stores in the system so far. We are doing them at a rate, it looks like we will get about 30 of them done this year.

We're looking internally on how far that can go throughout the system. We feel pretty comfortable that we can get at least halfway through the system with that. Maybe it applies to three-quarters of the system.

And then as our restaurants continue to grow their volumes, ultimately we are able to filter that more and more throughout the system.

I want to start off, a big thing we are doing on the throughput side of things. One, as we mentioned, we are adding seats. We also continue to remain focused on the speed of service.

Whether that be what we call the butt-to-butt times in between table turns. Whether that be in the kitchen, or the back of the house, trying to figure out a way to take 30 seconds or a minute off a ticket time by the logistical method and the way the food goes down our line. Those are couple of things that we're doing to improve our throughput.

This is Scott. I would just say, in addition to everything Price just mentioned, I mentioned this earlier, it really comes down to staffing. First, hiring the right people. People who can work in an environment where we are so busy and we're so running and gunning, whether you're in the front of the house or the back of the house. We are so busy.

You've got to staff the right number of people who can handle that kind of volume. If you try to understaff and cut corners, you just get run over. It definitely hurts your guest loyalty.

That's why we err on the side of maybe even staffing too much sometimes, because we are just so busy. The training piece is so important and the cross training piece.

It always comes down to people in our business and the people make it go. That's always been our number-one focus, to get the results.

Helpful color. Thank you, guys.

David Carlson with KeyBanc.

A real quick question. I think if I'm the last question on the call, that means it's probably going to be the last beef question you guys get.

Just trying to get a sense of how it looked during the quarter. If I remember correctly, I think your contract ended in January. Is it safe to assume that the deflation you saw in February and March was greater than the overall 1% to 2% beef deflation that you saw in the first quarter?

Year-over-year, we definitely saw inflation in period one. You are exactly right. Our contract ran January through December, but with aging, that takes you through that January period. In that period, we were definitely were higher and beef year over year.

Great. Thank you, guys.

Steve Anderson with Miller Tabak.

Regarding your comments on throughput and in light of some of the decisions by some of the peers of casual dining to implement more technology, is this something that you will be looking at at this time? To maybe further improve some of the throughput and pacing?

This is Scott. We are looking at everything. We don't have any one particular item in test right now on that kind of scale.

But we're looking at everything. We're watching closely what our competition is doing. We don't mind if they go first sometimes on some of these things.

We're just going to keep our eyes open and the technology is changing so fast. It's one of the biggest challenges that we have.

I can tell you, that we are very close to all the credit card-related stuff. Especially post target and chip technology and all the changes to the credit card standards, which are coming down the road. We are very close to that and we'll be all over that.

The other technological piece, whether it's ordering at the table or paying at the table. We have been testing a little bit online to go. We don't do a whole lot to go. Is some of the stores, where it's a bigger deal, we've got a couple of hand-held ordering portable devices.

But, it's really a small, small test for us. We are really more watching to see what other folks do and how it goes for them.

Thank you.

Real quick, I want to go back to the question on the timing of Easter and make sure we fully explained that to everybody. With having a 53 week year last year, from a same-store sales basis, you are comparing weeks 1 through 13 of this year to weeks 2 through 14 of last year. So that Easter was in the first week of our second quarter last year.

But, that's the week we compare to the last week of our first quarter this year. So, hopefully that clears it up, versus confuse it. Call us if there's any questions.

Thank you all very much for being on the call. We definitely appreciate your interest and look forward -- oh, wait we got one more call.

One last question from Brett Levy with Deutsche Bank.

Since you brought up Easter again, what was the quarterly impact into 1Q and out of 2Q?

I'm sorry, as it related to what?

What was the whole quarter impact?

With Easter. You talked about 100 basis points into 1Q and 150 out of Q2 for the month. What was if for the quarter?

It's probably in the neighborhood of 30 basis points, roughly. I didn't do the math on the weight on that. Just dividing that by 3 is close.

Okay. Thank you.

At this time, we have no further questions. I turn the conference back over to Tonya Robinson for any additional or closing remarks.

We want to thank you guys for joining us tonight and we will talk to you soon. Have a great night

That does conclude today's conference. We thank you for your participation.