Bloomin' Brands' (BLMN) CEO Elizabeth Smith on Q2 2015 Results - Earnings Call Transcript - wood burning fire pit grill

Bluming brand Co., Ltd.(Nasdaq: BLMN) Second Quarter 2015 Results Earnings call August4, 20159: zero o'clock A.M.Vice President, Elizabeth Smith Group, IR & financeDavid Deno, president and chief executive-EVP analysis of Chief Financial and Administrative OfficerBank of America-Merrill LynchMorgan Stanley Cullen ManorGoldman Sachs-BernsteinBarclays Capital BankDeutsche BankHedgeye ManagementMichael risk GaulJohn ivankeJeff FarmerWells Fargo Jason WestCredit for sacofiyaWilliam Blair Andrew stritzkerBMO Capital MarketHello everyone, welcome to bloom brand Co., Ltd.2015 performance conference call in the second quarter.Today's meeting is being recorded.At this time, I want to transfer the call to today's host, Sir.Chris Meyer, Vice President of Investor RelationsSir, please proceed.Thank you, Alan.Good Morning, everyone. thank you for joining us.Today's call is Liz Smith, our CEO.Dave Derno, executive vice president and chief finance and administration officer.So far, you should be able to get our revenue for fiscal 2015 in the second quarter.It can also be found on our website.bloominbrands.Com in the investor segment.Throughout the conference call, we will present our results on an adjusted basis.These non-GAAP financial measures are not calculated according to the us gaap, and may be similar to other companies.Information on accepted accounting principles.Our non-quantitative reconciliationGAAP Financial indicators are shown in the earnings release on our website with their most directly comparable GAAP indicators, as mentioned earlier.Before we begin, I would like to remind you that part of our discussion today will includeIncluding our discussion of growth strategies and financial guidance.Such forward-Forward-looking statements do not guarantee future performance, so you should not rely too much on them.These statements are affected by many risks and uncertainties that may lead to actual results that are different from our forward resultsLook at the report.Some of these risks are mentioned in our earnings report.Other issues were discussed in our Form 10.K filed a document with the SEC on February 24, 2015, and subsequent documents are available on www.sec.gov.At today's conference call, we will review the financial performance of the second fiscal quarter of 2015, outline the company's highlights, discussions on the progress of key strategic objectives and an update on the 2015 guidance.Once we have completed these comments, we will ask questions.With this, I want to transfer the phone to Liz Smith now.Thank you, Chris. welcome to listen today.We are pleased to share with you our performance in 2015.As noted in this morning's earnings report, our adjusted diluted earnings per share for the second quarter were $0.S. comp sales rose 2% in the second quarter.Overall, we are pleased with our performance for this quarter, as although Bonefish's sales were below our expectations, the portfolio achieved solid results.Inland and Fleming continue their strong performance.Carrabba has maintained a positive momentum, and despite the economic difficulties, Brazil's performance is in line with our high expectations.In addition, the efficiency of our work is still very high, which allows us to expand the profit of the restaurant.It is important that we are still working to achieve EPS performance this year.The advantage of having a dedicated portfolio is that the strength of our other brands allows us to take a long timeBonefish Grill's term view and implement the actions necessary to get back to our polished casual roots.Now, I'm going to take you through the concept to see how the second quarter is performing.In the inland region, comp sales rose 4% in the second quarter.As our focus on strengthening steak authority continues to resonate with consumers, this is another strong result.The steak-The center information also adds to our guest check average as we see a higher preference for steak entrees and steaks --Exclusive dedicated LTOs inland.In the past quarter, we have successfully launched a nationwide lunch ad.This is a key step in our multi-party cooperation.Years of hard work, using the lunch section of $25 billion.We have been strongly recognized by consumers, and we have seen meaningful improvements since the beginning of advertising.While we will not be advertising exclusively for lunch again this year, we will continue to support this part of advertising labels and digital media to help raise awareness.We are excited about this long game.Given our current penetration rate relative to the industry, long-term growth opportunities during lunch time.In the second quarter, we saw a softening of dinner trends in the outback, as we launched a highly promotional LTO calendar from 2014, and due to the success of our steak authority information, we chose notDinner is still our top priority and we are excited about the move for the rest of the year.At Carrabba's, our sales are 0.9% this quarter.This includes a 1.Traffic increased by 4%.This marks the third consecutive quarterly increase in sales and traffic as we continue to drive this frequency with LTOs that focus on value and frequency.Over the past few months, we have conducted extensive consumer research and testing on the next iteration of the core menu.We were very pleased with the results and were able to launch a new menu in the fourth quarter of this year.Subsequently, full media and advertising support will be provided at 2016 in the first quarter.You will see many major improvements to the core menu, including a more modern and attractive menu design.Our unique firewood BBQ and WoodThe burning oven allows us to choose lighter food and more options for daily dining.We will introduce some appetizers, small plates, main courses, pizzas and desserts that balance the Mediterranean style with the traditional Italian flavor.Of course, we will also keep the classic dishes of Kalaba for many years.The new menu will be complemented by ongoing work to modernize our restaurant and improve the overall dining experience.Carrabba remains the undisputed quality leader and consumer preference for authentic Italian restaurants.Menu and design work will enable us to take advantage of this preference to increase the frequency of our guests and continue to stand out from the Italian category.Bonefish Grill sales fell 4 in the second quarter.6%.This is driven by two root causes, which are related to Bonefish's return to its elegant leisure tradition and the brand asset pillar of the restaurant's culinary cutting-edge cuisine and fish expertise.First of all, as we discussed on our previous call, we are summarizing some more CDR-For example, promotion activities to promote transportationWhile we expect the move to put pressure on comp sales, the negative impact is beyond our expectations.Second, we add too much complexity to the restaurant.We have an innovation gap in Bonefish, which was addressed when the core menu was re-launched in July 2014.As a reminder, this is our first new menu in six years, well received by guests and performed as expected.We then started rotating the seasonal menu and launched the bar menu at the beginning of the year.The subsequent innovations have received a positive response in the testing market.However, when implemented on a large scale, they purchased a certain level of complexity, which compromised our ability to deliver a core dining experience and service.Our customer satisfaction dropped significantly in early 2015.In the March, Greg Scarlett, who played an important role in the rejuvenation of the inland and kalabans, returned as president to the bonfish grill.He has worked in Bonefish for 7 years, 3 of which are vice president of operations and no one knows the brand better than he does.In his short time back to the brand, we have eliminated significant complexity, re-invested in the field, and have seen a significant increase in customer satisfaction.Looking into the future, our focus is on re-engagement with less obvious [but it will take time.We will not speed up the process by using promotional strategies that are inconsistent with the brand.So we now expect Bonefish comp sales to drop at least 5% for the rest of the year.In addition, we will suspend the development of the new restaurant until our sales have improved, as we did at the Carrabba restaurant.For the past five years, we have been saying that our priority is to develop what we have.When we see that the existing bon fish shop is back to sustainable growth, we will open new restaurants again.During this period, we will continue to invest in our promising renovation projects.We believe that we are making the right decision for the long-term health of this brand.The good news is that we have a strong foundation to continue.Bonefish was once again selected by consumers as the #1 and #4 seafood restaurant in the CDR category of the National Restaurant News rating.Fleming's sales increased by 3 year on year.2%.This is Fleming performing well for 22 consecutive quarters.We expanded our workday to our Prime Days project to offer customizable three course dishes at an attractive entry level point.Fleming continues to share this unique value product with our more indulgent product.When it comes to our international business, Brazil has released a 3-pound compensation.The second quarter was 4%.This result is very impressive because they are a 12.2% comp in the second quarter of 2014.Despite concerns about the Brazilian economy, the performance of our restaurants is in line with our high expectations.Demand for our restaurant is far more than supply, so we remain insulated despite the slowdown.In the second quarter, we successfully opened the first two abbraccios in Brazil.Although it is still too early, we have received strong feedback from consumers and we are very satisfied with the initial performance.Italian food and beverage is the second largest segment in Brazil and there is no clear category leader, which provides an important runway for our growth.Shares of South Korean companies turning to Asia fell by 11.8%.These results were meaningfully affected by the Middle East Respiratory Syndrome or MERS virus, which hit the country in late June.Despite the sharp decline in sales during this period, our efforts to stop business development, coupled with the rapid response of our local team, helped to minimize the overall profit impact.The current business environment has improved and recent sales trends have exceeded expectationsMERS levels.In terms of development, we have developed 14 systems.A wide range of locations in the second quarter, including;Three grilled meat racks;two U.S.Outbacks;seven company-It has five international inland restaurants, five in Brazil and two in South Korea;Two companies.Restaurant with international Abbraccio.All in all, we are satisfied with our second quarter results.We remain flexible and agile in terms of our portfolio, as we have successfully passed through various adverse factors at home and abroad, such as double-digit beef inflation, significant current risks, exchange rate risk and the outbreak of MERS in South Korea.However, despite these challenges, the leverage given by the focused portfolio allows us to expand the profit of restaurants and achieve our EPS goals.Our productivity channels remain strong and we continue to make progress in eliminating waste.Our investment is ahead of international growth and promising domestic transformation projects;We are using part of the day of lunch to expand;And strengthen our contact with consumers through various digital programs;Of course, the best operational team in the business is supporting all this.We are still confident in the dynamism of our portfolio.With this, I'm going to transfer the call to Dave Deno to provide more details on the results of our second quarter operations.Dave?David DenoWell, thank you, Liz. good morning, everyone.I will discuss our sales and profit performance this quarter.As a reminder, when I talk about net income and earnings per share, I will mention adjustments that do not include certain costs and benefits.Please check our earnings release for our non-The GAAP indicator and its most direct [comparable] us gaap indicator.We also discussed the nature of each adjustment.With this in mind, our second quarter financial performance is as follows compared to the previous year.Adjusted diluted earnings per share are $0.28 versus $0.27 in 2014.GAAP diluted earnings per share for the quarter was $0.26 versus $0.21 last year.Adjusted net income was $35.$1 million to $34.The second quarter of last year was 2 million.GAAP net income is $32.$2 million to $26.2014 4 million.This performance is in line with our expectations and enables us to provide EPS guidance this year.US restaurant sales rose 2% year-on-year, while passenger traffic fell by 1.1%.For the domestic concept, the results of our comp sales are as follows.In the inland region, comps rose by 4% and traffic dropped by 0.8%.Comps rose 0 in Carrabba.9%, traffic increased by 1 year on year.4%.Comps has closed down in bonefish.6%, traffic decreased by 7.8%.At Fleming's restaurant, comps went up by 3.2%, traffic increased by 3 year on year.1%.We are pleased with the second quarter comp sales from Outback and fleing and the continued sales momentum from Carrabba.At Bonefish, as Liz mentioned, we are taking steps to return the concept to its polished leisure roots and restore growth.Speaking of our international business, comp sales increased by 3 in the second quarter.We have 4% inland restaurants in Brazil.The traffic was interrupted.The second quarter was 1%, in part because the Carnival holiday time moved from the second quarter of last year to the first quarter of this year.As a reminder, we have reported a result of Brazil --So our second quarter results include March 2015 to May 2015.Despite concerns about the Brazilian economy, the business has performed well in all measures.In South Korea, comps fell 11 in the second quarter.8%, traffic dropped by 12.6%.Although this result was down in turn from the first quarter, it was severely affected by the end of June and the MERS virus that affected the country.Due to the severity of the virus, many people avoid public places and have a significant impact on the already troubled South Korean economy.Due to our business relevance, despite the negative impact on sales, the impact on profitability was limited to about $950,000 in the second quarter.Over the past nine months, we have worked hard to isolate this business, making us more flexible in dealing with challenges like MERS.We have a strong dedicated team in Korea who have done a great job dealing with this difficult situation.The good news is that the virus seems to be under control and South Korea is returning to its pre-outbreak state.Although our policy is not to provide internationalQuarterly sales update, we thought it was appropriate to let you know that our restaurant responded well to the improvement and completed the growth in July.Comp sales of 6%.Back to our financial update, the total revenue of the bloom brand fell by 1% to $1.1 billion.The decrease of $28 million was due to foreign currency exchange as the Brazilian Real continued to depreciate against the dollar.In addition, the closure of the restaurant and the sale of Roy's business had a negative impact on income.Those results were partially offset by newly opened restaurants and higher US comp sales.The adjusted restaurant-level operating profit margin is 16.This year is 2% to 16.1% a year ago.Our second-quarter profit benefited from the impact of the productivity plan and the increase in the average number of units in the United States.These effects were offset by rising goods and wages.Our restaurant has a profit margin of 16.This year is 5% to 16.1% a year ago.The difference between the adjusted restaurant profit margin and the GAAP restaurant profit margin is driven by the favorable resolution of our 2011 payroll tax audit.First, the cost of sales increased by 32.7% from 32.5% in 2014.This change is driven primarily by commodity inflation and the unfavorable portfolio of $14 in inland regions.99 steak and lobster promotion running in q2.This popular promotion has had a positive impact on the check average and profitability, but it does have a higher cost effect than the previous LTLs we ran in 2014.The increase in productivity plans and menu prices partially offset these items.On an adjusted basis, Labor and other related costs increased to 27.8% from 27.4% in 2014.This change is mainly due to rising wages, increased salaries for field managers and continued increases in health insurance costs.It is worth noting that the added value of field management compensation is 40 basis points.This is largely due to the fact that in the second quarter we reduced our performance expectations for the whole year and reversed some of the cumulative incentive pay, resulting in a 2014 gain.This is offset by an increase in the average number of units in the United States and the productivity plan.Labor and other related expenses increased to 27 in accordance with the GAAP.5% from 27.4% in 2014.The Labor line benefits $2.7 million from the favorable resolution of the 2011 IRF payroll tax audit.We excluded this item from the adjusted results.Finally, the operating expenses of the restaurant fell to 23.3% to 24% a year ago.The decline was driven primarily by an increase in the average number of units in the United States, favorable market expenses and productivity plans.This is partially offset by an increase in R & D, operating supplies and general liability insurance costs.As for G & A, the general and administrative costs for the second quarter were $76 million compared to $72.3 million a year ago.This growth was driven primarily by $6.1 million of incentive and stock compensation fees.On our last call to May, we discussed that in the second quarter of 2014, our incentive compensation costs were lower due to our performance contrary to the target.This goodwill in 2014 represents the headwinds of 2015.Finally, our tax rate for the second quarter was 26.Adjusted 6%, our GAAP Effective income tax rate for the second quarter was 29.9%.In terms of productivity, we have performed well in achieving our goal of saving at least $50 million in productivity in 2015.We have made great progress in the implementation of the practical and theoretical food cost initiative in terms of sales costs, and are expected to increase our sales costs in the second half and 2016.We expect sales costs to account for 50% of our overall productivity savings in 2015.In addition, as we become more and more proficient in using our labor scheduling tools, we see more and more benefits on the Labor line.These efforts will help us offset the wage inflation pressures we have seen this year.We do want to see an increase in profit margins in 2015 and continue to work to close the gap between margins and peers.As far as our reporting section is concerned, I would like to point out several considerations for our international section.As I mentioned earlier, we continue to be negatively affected by foreign currency translation.In the second quarter, the foreign exchange translation had a negative impact on our adjusted operating income of $2.4 million. most of them are related to our international business.In terms of profit performance, restaurant profits continue to be higher than in the United States, given our international business strength.However, in the second quarter, we had a greater impact on the investment in Abbraccio.This should not have much impact over time, and we expect international restaurant margins in the second half of 2015 to be better than last year.Speaking of our capital structure, we bought back $30 million in the second quarter.This completes our initial $100 million share buyback program.Yesterday, our board authorized another $100 million share buyback, which runs through 17 years in January 20.It is also worth noting that our board announced a cash dividend of $0 last week.A shares payable in August 28.In addition, we are pleased to announce that Moody's has upgraded our corporate home rating to Ba2.This gives us only two levels of investment from Moody's and S & P.This is a huge achievement for us, because since we are a private company, we have made great progress in proving the capital structure.Our goal is to achieve the status of the investment level.We continue to make progress on our balance sheet while being more active in returning cash to shareholders.Another thing to note is that our CMBS real estate financial instrument, PropCo, expired on April 2017.The loan is currently outstanding at $0.464 billion.PropCo has 258 properties.We are currently working with bank partners to help us explore strategic options for this property and we will report to you on our progress.Now, I would like to discuss some key projects related to our 2015 guidelines.First, we reiterate EPS guidance for at least $1 throughout the year.27.We now expect commodity inflation to be between three.5% and 4%.This is an improvement over our previous guidance of 4% to 6%, mainly due to seafood and dairy products.I can say that a lot of work has been done by our sourcing and supply chain team.We also updated comp sales guidance for at least 1 year.Between 5% and about 1.5%.This change is due to a reduction in sales expectations for Bonefish.Total revenue is expected to be around $4.Compared to the previous guidance of at least $4, 3 billion.43 billion.The last change in our guidance is capital expenditure.We now expect capital expenditure to be between $0.225 billion and $0.235 billion in 2015.When we focus on achieving our long-term goals and driving shareholder value, we still maintain strict regulation of capital.This means that we should properly prioritize our investments.At the moment, we will focus our investment on our international opportunities, the successful inland relocation initiative, the new units in inland and Fleming, and our latest [renovation] projects.As Liz said, we will resume the development of the Bonefish sector when the core business returns to growth.In addition to our updated guidance, it is important to say something related to the second half of 2015.First of all, in the second half of 2014, we have encountered very challenging problems in general liability insurance and health insurance.We are self-So it's hard to predict the cost of the claim.But given the exceptionally high level of fees in the second half of 2014, we should see some popular places this year.Second, as a reminder, in the second half of 2014, our US comp sales were 350 basis points higher than in the first half of the year, as we successfully transferred our information inland to reclaim our steak authority.Although this news continues to resonate effectively, comp sales in the second half of the year will be below our level in the first half of the year, as our performance has reached that level.These 1.1 have been taken into consideration in our guidance, but it is worth repeating.Also, we now expect G & A fees to be flat to just over 2014 for the full year, except for any adjustments.We have found ways to improve cost structure efficiency while continuing to fund our growth investments.Finally, in the second quarter, we experienced $4 million in foreign exchange, and from the forward curve, we expect the foreign exchange risk to increase by $8 million for the rest of this year.This is our budget of at least $1.27 EPS guidance for 2015.All in all, our second-quarter results prove the strength of our portfolio.We have successfully met our challenges and we are still in a good position to meet our EPS commitments for the full year.With this I will open it for any problem.Question-and-Answer session operator [operator note] we will answer the first question from Joseph Barkley of Bank of America.Joseph Barkley, can you please take us through the inland domestic comp, the 4% figure, very strong compared to KnappTrack, you go back over 200 basis points and take us through the checkThe traffic numbers between lunch and dinner appeared again.I think in your opening remarks you mentioned that dinner traffic is negative, so if you can put more color on it than the color you see on lunch when you open the ad,David Dini took the number part and I handed it over to Liz.In the second quarter, our inland comps was 4% and our traffic dropped by 0.8%.Elizabeth Smith is just some color at this point, and the first one is that we did see some weakening of the dinner trend from the first quarter to the second, due to our purposeful focus on steak authority and leavingIf you remember last year, we had two real promotions.A steak-centric promotion for $11.99 and $10.99. the traffic was driven last year, but it was inconsistent with the news from the steak administration.We had steak and lobster for $14 this year.99, performed very well, but we knew it would not have the same traffic impact, although the quality of the dinner was much higher.We were very satisfied with the performance for lunch.LUNCH continues to grow in the inland and we continue to get a lot of positive feedback.The reward for advertising is that we see the elevator develop exactly in the direction we want, and as awareness grows, we see the elevator continue to grow year by year.So, again, when we look to the outback in the second half of the year, it's about trying to fight the steak authority message, which is very effective;This is about the momentum to continue lunch;it’s about re-Luo and remodeling.Our digital investment, we will launch our inland app in the fourth quarter, and we are very excited about it.So there's a lot to eat for dinner and lunch.Joseph Barkley, do you lose traffic during your energy dinner?A few percentage points down?Elizabeth Smith we don't have lunch and dinner, but what I'm going to tell you is that we feel it's worth mentioning from the first quarter to the second, but as expected.So, what I'm trying to say is, the dinner trends in the outback, we continue to see its positive response to the steak authority, but we know that when we cancel these promotional price points in the second quarter, you will see this.When we look at categories, we are always looking for information about the class execution.As you may see on the NPD Crest, this is the only way to break the category, what it has during the period of April and 5, dinner dropped by 4% and lunch rose by 4%.So we're not sure if this is a category dynamic, we certainly know what we're looking forward to and see that our dinner performance is in line with our expectations.David Dini would say, Joe, when we were at lunch, as we mentioned on our previous phone call, just one more thing, we have completed many different test scenarios, tested and lunch as we expected.So the lunch was well done and the dinner was as we expected.So, as we move on, I don't see much change.We will take the next question from John Glass of Morgan Stanley.John GlassI wants to startInland dynamics on comp.Is this a question of competition for dinner, in other words, is the competition for dinner more intense?I know the competition has always been fierce, so it's an understanding.Can you talk about the second half? You already have a large list of checks because of these more attractive offers.What do you expect from trade?Rest between check and traffic and work in the back half?Is it the opposite thing you saw in the first half?Can you briefly talk about your plan and how you can drive the business in the second half of the year in more difficult situations?Elizabeth Smith, we are very satisfied with the compensation of 4%.Q1 is 5% and Q2 is 4%, and the balance between dinner and lunch will continue to fluctuate over the course of the year, depending on our promotion.So what I would like to clarify is that the traffic for dinner is consistent with what we expected as we were deliberately giving up $10.99, last year's Moonlight barbecue was $11.$99, $14 more.The promotion of 99 steak and lobster is very good.So we were not happy with the trend of dinner, but as we lowered the promotional price to a very high price, it was in line with our expectations.Lunch continued to grow, continued to perform well and received very good feedback.So when we look to the second half of the year, we see that both trends have maintained momentum.Especially at dinner, you will see some very exciting steak-centric information and authoritative steak information.Tomorrow we start with a very successful steak promotion and I don't want to reveal the manpower that will last for about 13 weeks and then we will come back with additional steak innovations and information.So this is working and it continues to work.As we pointed out before, the confirmation of steak authority is not what you want, right.We see all of our inventory and brand strengthening and our brand is lifting so we know we're back where we need it and dinner is resonating.On the lunch side, we will continue to support lunch with increasing awareness and high satisfaction with lunch.So this will continue to happen.Our digital investment on Outback started in the fourth quarter and we have been working on this app for a long time and we are very excited about it.It will solve a lot of tricky issues and it will make it almost OK for you to check in, see where you are on the waiting list, pay at the table and go and we will have some support as well.Then, as usual, you know the reload continues to perform well and the re-modelling does well.We will be back to you next year, but the makeover test looks promising.So we felt very good about what happened in the first half inland and what was going to happen, but as Dave said, the base that drove us H1 and H2 this year was over 2014.I can follow John Gracie.Two unrelated questions.One is the development of bon fish, does it stop right away, or does it have a glide path where you will still continue to the back half and you will consider more pauses in 2016.How does this actually happen?Then Dave, you talked a little bit about real estate in your asset support Securities, is there anything that prevents you from refinancing by 2017, or what are you doing after 2017?You're just doing ground work right now.David DenoI will answer the first question here.On the Bonefish side, we do have sites in progress.We feel good about the website.We are very focused on the website.For the rest of 2015, they will play their part and there may be a couple going to 2016 as they have a commitment.But the suspension was in place before we saw Bonefish's base sales get better.We talked about things that worked so well for us, the new inland, the inland resettlement, and the restart of Fleming's international development.John, that's some of the details of how we balance capital expenditures and Bonefish articles.In terms of mortgage financing, we are working hard on real estate.The biggest thing we have to decide is that there is an advance payment fine, and we have to decide whether it is worth it to pay the advance payment fine, or it is better to wait for a while, but the people we really have to help us are very keen, we are very proactive in this opportunity.Because we know more.We will answer the next question from Karen holhouse at Goldman Sachs.Karen insists that when we look for the next few years in our annual guidance, we will consider the G & A controls for the quarter, should we change our thinking about our ability to use the cost base in the future, and in this regard, is there a factor to improve efficiency?David DenoLiz and I have talked many times and our goal is to manage our overhead structure as efficiently as possible, there is a magic in this regard, in our key initiatives (such as numbers) investment before growth.So we 've been thinking about it, Karen, making sure that our overhead is as efficient as possible, in our G & A, and then making sure that we're right using what we need to do to grow the business, whether it's our new international market or our digital market, but the team has responded well to G & A's initiatives, which is why you 've seen some of our performance.As Dave said, the only thing I would add to Elizabeth Smith is the persistent focus on zero indirect growth, which allows us to invest before the growth opportunities of these two core categories.We will answer the next question from Jeffrey Bernstein of Barclays Capital.Jeffrey Bernstein has only two questions.One of the commodity aspects, I mean lower guidance, seems to come from non-beef.You told us about beef 99%.Double digits.I don't think that's changing.Can you talk about the prospects you hear?Now, our initial thoughts on 2015 beef in the summer of 2016, probably not double digits, but from an internal and external perspective, what did you hear?My second question is about Brazil.The historical comp data is obviously limited.In your prepared comments, it sounds like we should really attribute comp acceleration to more difficult comparisons.If that's the case, I think comp should be back.Accelerate in the third and fourth quarters, or do you think there are other drivers?I feel from the comments that you have prepared, maybe the economic review-maybe you look more cautious than in the past.So, it's great for Brazil to predict the color in any direction in the latter half.First of all, in the Brazilian article, let me answer this question first and then discuss the goods.No, we are not more cautious than in the past.We did 3.The comp of 4% is based on 12.Last year's 2% comp and last year's comp had a carnival, not this year.When we look at the business and new unit development, when we look at the reaction of restaurants and their performance, we are very confident in Brazil.As we move forward, we are building a stronger business every quarter.So our results are on track.Brazil therefore has no caution in this regard.Our trend is very, very strong.When it comes to commodities, yes, 99% of us are locked in beef, which gives us time to think about next year.It's too early to make some kind of speculation about the cost of our beef next year, and we're doing our job.We'll make some decisions here later, but I don't want to give any more details about that.I would say that although we would like to go back to half of 2016, that is a hope, beef costs are starting to drop a bit in terms of growth rates.But this has not yet been included in our data, and we will wait and see.But most importantly, due to the excellent work of our sourcing and supply chain team, we have time to sit down and take a look and make some decisions about where we want to take beef in the future, because we have been locked 99%.Secondly, seafood and dairy products are good for us in the second half of the year.This is the answer to Brazil and commodities.Jeffrey Bernstein David, to clarify the modeling issue, you mentioned the G & A and profit margin for this year.I think G & A is flat as you say, slightly above the adjusted 14%.I would like to know what the number is so we are on the same page.When he said the profit would expand, are we talking about the restaurant profit or the operating profit?David DenoRestaurant's profit margin and operating margin were flat with G & A, rising slightly.What is the adjusted number?$0.29 billion for David DernoAdjusted basis.We will be a little flat compared to this number.We will answer Karen Short's next question at Deutsche Bank.Karen briefly turned to bonfish, Liz, and you gave some pretty big comments or ideas on how to help turn things around.I was wondering if you could give more specific details on what you think is going to happen next, and I think that moving into next year in the second half would help reverse that trend?Elizabeth Smith asked me to talk about this in detail.The place I want to jump on reminds me again that Bonefish Grill is leading again in consumer preferences.Seafood ranked first and fourth overall.So we're talking about a healthy trend brand.Let me talk specifically about what's going on and we're off our polished leisure roots too far, using more of the CDR proper promotional elements I'll say last year to bridge the innovation gap, we are doing two things.We are actively stopping the promotion for CDR, so we started talking about it a few quarters ago and canceled it.This definitely has an impact on traffic, so some discount impressions have declined.We moved Tuesday's class from $7 to $7.The price reached $14 last year.The price is 90 this year.We do nothing.Therefore, traffic that is inconsistent with the polished leisure brand and the profit is not high will appear.It is important that, as we turn, we work tirelessly to restore service and fish expertise at the restaurant level.Because we successfully launched our core menu in July, however, as the seasonal menu changes and the bar menu damages the core service, we add too much complexity to the restaurant.What you saw in the first quarter was that the core dinner consumer satisfaction you saw was affected by the complexity of the restaurant service.We have reduced this complexity and we are now relentlessly focused on providing a polished casual experience with Bonefish Grill.I can tell you that the good news is that we have seen a significant response to customer satisfaction in a short period of time.However, we will not do any accelerators to restore expired users.We will keep it consistent with polishing leisure, so we continue to focus on-house.I feel very fortunate that we have Greg Scarlett at the helm because frankly no one knows bonfish better than that.So we're back on track.We will definitely see Bonefish Grill resume its growth trajectory next year, but we are actively managing this traffic this year.Karen ShortI has a problem with the app, will it have full functionality when it comes out, which means paying for it at the table, and all you mentioned at the initial launchWill it have full functionality?Will it then continue to evolve in terms of functionality? Will you use your dining rewards in the app?The first of Elizabeth Smith is that it will have full functionality.Release one will have a click-Through the seat, my position on the waiting list, my table is ready and has the ability to pay at the table.Posted 2 and after that we will have something cooler and I don't want to do it for competitive purposes so it should be great.As far as the loyalty program is concerned, as you know, we are far ahead in that regard.This is indeed one of the advantages of our portfolio.We really enjoyed our meal rewards program.Having four brands allows us to have a loyalty program and people don't get bored with being able to dine among the four brands.This year, we have expanded to Georgia in five test markets in Georgia.It will be a thing worth goingWhen we finish this task, we will move forward.But so far, we really like what we see.Any app we launch in the future will be very consistent with the loyalty program.We will answer the next question from Howard Penney of Hedgeye Risk Management.The answer to Howard penney's question is mine and it can go into the portfolio.I heard you say that there are many times the benefits of having a portfolio of brands.But in fact, you have to spend so much time talking about the existence of bon fish, the problem of bon fish, and get it fixed, which was Carrabba's before the last quarter or two.I don't understand the benefits of having multiple brands.Can you explain why multiple brands can drive your growth from one concept more than focusing on inland concepts?Elizabeth Smith believes very much that our portfolio, which works closely with four brands that scale up to $1, is an advantage.Let me talk about a few reasons.The first is what you said, in an unstable economy, in markets and commodities, we do see that the diversity of the vast areas of CDR is a real advantage in turbulent times.This quarter is a good example because your performance on our three brands is very good, which helps us to do it in the medium and long term.The fulcrum of short-term Barracuda.So they really have such diversified cooperation.You saw it on the goods, right?For some years we were talking about early death syndrome with shrimp, and for some years we were talking about the beef cycle.We feel that this heavily edited portfolio and diversity does help us do the right thing by the brand in the short, medium and long termterm.The second thing I want to say is that there is indeed scale leverage in this competitive environment, which is very important.There is no doubt that we will benefit from it.You see this in our revised commodity guide using purchasing power.We are also able to take advantage of our infrastructure investments and you can see a little bit about loyalty.But when we invest, we can benefit from it and move the process forward.The loyalty program is a good example.Loyalty will wear you out as you go back to the same restaurant and with our dining rewards you can adjust around the portfolio.The third thing I'm going to tell you is that we have a very strong internal competition for capital.You heard me say it before.We think it really makes our capital managers stronger because you have to make money-the competition for the last dollar is very fierce.Finally, I would like to say that, perhaps most importantly, it gives us the world.Class resources.I can't have the level of market research and analysis we're building here, or supply chain and R & D innovation without the leverage of this $4 billion brand.I think it is this combination that has given us a share in the last 22 or 23 quarters, which is very consistent.We will always be very flexible and agile in evaluating our portfolio structure.This is the name of the game in this unstable environment.You see we sell Roy, you see our focus.We will always be flexible and agile in evaluating the best market strategy.I would like to assure you that, in addition to seeing these benefits, we combine these benefits with a true bias towards flexibility and agility.We will answer Michael Gallo's next question with CL King.Michael Gallo is just a few questions.I want to study bon fish in depth.I know you 've talked about some technical plans and some things that you can do at the back of the house.I know you're doing tests, kitchen displays, stuff like that.You mentioned that you added a lot of complexity.I was wondering, with this, do you consider speeding up the rollIn these initiatives, what are the plans for this as we move towards 2016?David DenoLiz solved some of the menu complexity issues.Let me talk about high performance kitchen as it is not only related to Bonefish but also to all of our brands as we bring it into the portfolio.Our initial goal in productivity this year and next year is to continue labor cost management and food cost management.We started working at the top.The performance kitchen, as we said.We will promote it to our brand.We saw very positive results because weComplicated some things.As we test further, you can expect to hear more from us.But our priority is to go through highNot only in Bonefish, but also in each of our brands, it is especially suitable for that brand.Then there's a follow-up question, and I'm not sure if you can answer that question.Can you at least talk through the range of options you might be looking for to replace CMBS?Is it using a more traditional way of financing, maybe doing something with real estate, or is it all the above, just keeping an eye on it?What are some of the options you are looking at, because going back into the envelope, it looks like your rates are all at a low of 6.Given where the balance sheet is, you seem to be doing better than traditional financing?David DenoWe is looking for all the alternatives besides owning the property.We are looking at all the different structures in financing, sales and leasing --Back in the past, who we did it with, we are far ahead of it, and we will seek the best economic options for us.Yes, there will be more.It's too early to say which structure we're going to choose, but I can assure you and our investors and analysts that we're way ahead in that and look at a variety of different alternatives.Yes, we believe we can do better at interest rates, but I still say so.We will answer the next question from John Ivankoe of JPMorgan Chase.John ivanikoy has a group of followers.Ups at this point.Let's start with CMBS.Dave, the balance is about $0.468 billion and you mentioned that you want to be an investorgrade company.Should we automatically assume full refinancing of nominal amounts?Does it have an opportunity to rise, or will you consider an opportunity to lower CMBS in terms of debt and make more concerted efforts to reach the level of investment as soon as possible?So, from the next nominal value of the securities, how should we consider refinancing?David Dino John, as I said before, I can't say it in more detail because we haven't done enough work yet.But we will have the choice.Do we accept it and refinance it, do we do anything about equity, and do we do anything about our debt.It is still too early, John, but I am pleased to say that we will make progress before that.There are many economic choices here, and we will pursue them.So it's too early to guess if this is going to be this or that, or if we're going to spend on that, but as we move forward, investors and analysts will have more money.John IvankoeIn slowed down capital expenditure in fiscal 2015, and in fact, you are still opening bon fish in fiscal 2015, and bon fish is rarely opened in fiscal 2015.So, how should we interpret the capital expenditure for fiscal 2016?Obviously, you will spend a lot less on bonfish, but maybe you will spend more on external remodeling, etc.Any preliminary reading we can get in this very important spending figure is great.David DenoOn on capital expenditure, we will provide any 2016 guidance by November.Our call for November will start and then we will provide more later.Let me talk -- go back, John.The smooth progress of new relocation projects in inland areas will be a priority.We are testing the external model now.We like what we see.We will announce something soon, but hopefully we will be able to launch something in 2016.We started with Fleming's new sites because they are AAA sites and we are excited about Fleming's new site.As we look at this business, we continue to be very enthusiastic about our international opportunities.Also, we know we can no longer lag behind in re-modeling.So we will continue to update all of our concepts, Bonefish, Carrabba, Outback, everyone we are here to make sure our concepts are fresh --Look as much as possibleJohn, these are the 2016 capital we will focus on.John IvankoeI is not trying to say something in your mouth, but it sounds like 2016 is probably at least on the field in 2015, because we obviously have to choose something for next year's numbers.David DenoJohn?John Ivan.I tried my best.David denoway has been working together for a long time and there is more to be done.I asked another 2016 questions.Dave, you are well aware of the $50 million in structural cost savings in 2015.You will have some actual and theoretical spills.Between 2015 and 2016.So this will bring us a bit of wind in 2016.Assuming the high performance kitchen can't be prepared for 2016, I don't think that's what I remember, do you have any other expenses? You don't have to say what they are, but have you identified the full $50 million for £ 2016?We have David Dino.It is very strong.There are more practical and theoretical opportunities ahead of us.As we mentioned earlier, turning on these systems over time is like getting to a higher and higher level.So, in 2016, we did have an opportunity to overlap in both practical and theoretical terms.This will be an important part of our productivity plan.Second, we also have the opportunity to arrange shifts manually.We have made great progress this year.In the second quarter, labor costs were in excellent condition.In particular, if you still remember my early comments on the headwind 40 basis points in the labor incentive reversal last year, then basically our labor costs are flat year-on-year.We still have opportunities in labor cost management.We still have many opportunities in practice and theory.We have a chance on other line items of profit and loss, and I really don't want to join for competitive reasons.Finally, we review half of the end of 2016, and of course 2017, and we will see some of the benefits of high-performance kitchen work.Elizabeth Smith we use baseball as a metaphor, John, what I'm trying to say is that the market has proven that.We still see ourselves in the middle of what is already in the market and we are catching up with it.So we feel very good about our pipes.It is clear that in the inland area you are experiencing significant changes in the average fare for the second half of 2014 and the first half of 2014.It is clear that we have heard some companies talking about wage inflation, or just an increase in wage costs, which is also driven by turnover.So, to what extent will you use direct pricing as a tool for the future?Could this be substantial for this brand?Is there anything to discuss nearby?Semester, perhaps from a different perspective of pricing in the second half of the Year --over-Pricing than the first half?Elizabeth Smith John, our pricing philosophy is that you have to provide the superior Brown value of the overall benefits by price.You can't keep pricing because your salary is up.So we will continue this very responsible, properly priced, cost-free mindset --Plus the Foundation, will never go back to that.This is our consistent policy for five years.So I call it responsible pricing, which you have seen with us in the last five years, plus a lot of innovation and service improvements.This idea of value will always be at the forefront and center and will never lag behind any type of cost --plus situation.David DenoIf I can add John and link this issue to your first question, which is why the productivity plan is so important because if you look at our next pricing for the second quarter, the cost of our goods has not increased.So we got a lot of questions about when I will see some bottom line?You will, we have been offering.At the same time, it gives us the opportunity to not necessarily take any measures on the price of the goods.We will answer the next question from Jeff Farmer of Wells Fargo.Jeff Farmer, a few quick follow-up-ups.One problem earlier was that you lowered the price of the itemThe scope of inflation guidance is 3.5% to 4% throughout the year.But I just wanted you to put it in our context, so what level of inflation did you see in the first half of this year?Dave, what do you expect to see in the second half?David denoway has seen the rise below 4 and we will see a little less than that in the second half of the year.Mainly because of the seafood and dairy products I said.Jeff FarmerAnd and you, John, have just talked about this, but in terms of productivity savings, it was $65 million last year and at least $50 million this year.You make it clear that you do reinvest some of these to offset food inflation, some restaurants to fund investment and technology, etc.But from the profit flow of these productivity-saving initiatives, should we consider the rule of thumb?How many of these actually reach the bottom line?David DenoNo.Due to changes in the cost of some commodities, and some of our investments prior to growth, it will vary quarterly.These things are not linear.We can tell you that our commitment is at least $50 million a year.These two things.I think the other thing is that as we move forward, we just want to keep closing the gap with our peers.We see this opportunity, and when I talk about the statements that I am prepared for, we expect that margins in the US and international will increase as we move forward.This is the result of our efforts to improve productivity.So I can't give you the specific process.I can tell you that investing before growth is a big time funder, which also helps us to mitigate some of the commodity cost changes that occur quarterly.We will answer the next question from Jason west of Credit Suisse.Jason West is just a few follow-up.ups.Regarding the price, Dave, I don't know if you gave the price for the quarter just to let us know about the mix of the company?In the first quarter, David DenoOur posted a net US price of 2% and 2 inland.6%.Jason West2.6%.Is this related to a change in the promotion strategy or is it similar to the actual pricing inflation?This is net pricing, David deno, so it will have promotional items.Jason WestAnd was quick to fix the salary issue.You mentioned this.We heard the news from many people.Can you give the magnitude you see in wage inflation, the percentage you 've been running and what you're running on that project now?David DenoWe expects to have 2% people this year.Wages have expanded to 2.5%.We are looking at 3% to 3 now.5%.We will be working with William Blair to answer the next question from Sharon zafia.My question was answered, but there are a few more questions.Guidance means dull in the second half of the year.I know there are some holiday shifts in the fourth quarter.So I don't know if you can give us any comments about what you think the cadence might be in the second half, and the impact this move and Christmas or Halloween have on you?Since Christmas is on Friday or Saturday, there is a trading day impact.So this will affect us in the fourth quarter.I don't have this number on top of my head, but this is the reverse wind in the second half.I think Liz raised some of the questions in her guidance for the second half of the year.Last year we did have a stronger second half than the first, especially in the interior.This is our guidance.Secondly, Liz talked about our efforts at Bonefish Grill to get us back to the polished casual restaurant.This is also under our guidance.These two factors have led us to give guidance on comps in the second half of this year.Elizabeth Smitti believes that when we talk about the salon, we think it is a prudent way to look at it because we have laid out the latter half.Sharon Zac Felix I also have a problem with Kalaba and bonfish.Can you talk, first of all, what did you learn from Bonefish menu startup when you went through the menu launch of Carrabba, so that when the problem with Carrabba came up, we don't have a problem with complexity?Secondly, when you start and stop the development process of Carrabba or Bonefish, can you talk about what (if any) disruption will be brought to your system?What if you decide to restart lag before we start seeing development start again?Elizabeth Smith salon, the lesson learned for Bonefish at the Bonefish barbecue menu innovation Carrabba restaurant in July 2014, this is a big menu redo, we haven't done the core menu renovation for six years and performed well, meet our expectations.This was the result of a later shift to seasonal menus and bar menus, creating the complexity of the core dining experience.That's not what we did in Kalaba.This is a core menu refresh.So where innovation is truly critical and critical, we overload Bonefish's systems with an assisted innovation based on core experiences.The good news is that we have taken out the menu.We will focus on core execution and you will see customer satisfaction return to a high level.But it takes time to re-engage overlapping users.On Carrabba's, there is no plan to roll out any type of seasonal menu or follow-up menu, and there is no plan.So we took the time to get the next core menu update correct and we were very happy with that.Dave, would you like to comment on the second part?David DenoYes, this has to do with Liz's earlier discussion about the portfolio.We have a very strong US development team and we will basically transfer them to our other opportunities, especially the new and inland relocation in the interior.So it's good to have a team that covers the whole company.From the point of view of time, we will continue to look for the location of bon fish.We will not sign any agreement, but it will take about a year or so to be ready.But this is not the beginning of a standing, and it may be the beginning of a walk when we start.So this is our plan.The benefits of having a strong US and international development team enable us to turn to our priorities.Sharon ZackfiaDave, I'm also thinking about talent because you're hiring some people who want to be promoted, and if you stop developing, there seems to be fewer opportunities for people at the restaurant level to move up.I don't know if people are going to move between Carrabba and Bonefish or maybe inland, does that have any impact on developing talent or upgrading talent?David DenoYes, they can certainly move around from a development perspective.Secondly, from an operational point of view, yes, we do have some people moving from partner level to JVP or other brands.But we will consider our staff plan very carefully.One of the things that Elizabeth Smith and I are going to build on is that Sharon, you know our partner program, how successful it is to reward what you have and grow --store sales.A few years ago, we launched a very unique incentive program called the President's Club, which has a huge opportunity to deliver the same service in addition to our partner programSales target above restaurant.So you will see a large portion of compensation aligned with our primary goal to grow what we have.Second, there will continue to be domestic opportunities and then new stores will be opened.We always have the key lens in it.Then, from the success we have seen there so far, the international community speaks for itself.So I just want to reiterate that these compensation is always focused on the number one priority that we develop what you have, and that is a success for us.We will answer the next question from Andrew Strelzik of BMO Capital Markets.Andrew strelzik when I thought about your comments on Bonefish, had to go back to the roots of the concept and sound like what you did in the US inland a few quarters ago.So I want to know that when I consider coming out of this weaker period, there is no reason for parallel?Elizabeth Smidi believes that we are inland for 22 consecutive quarters.This is a balance for the interior.Our appeal must be wider and we need to balance the steak authority better.So you don't see the size of the pivot we do on Bonefish.I think you saw the end of the steak authority, which is why Outback continued to grow sales and traffic at the comp store during that time as we changed our focus.So I think the return of Bonefish may be more noticeable as it is a polished casual and we are taking a more casual approach to dining.We feel we are actively managing these more promotional elements.We put the polished casual elements back in place.Very good welcome.It shows in customer satisfaction and is the number one brand.We are restoring our brand health.But what I want to say is that the situation is different because of the fulcrum.Andrew StrelzikAnd, I just wanted to ask a quick question again about beef, or maybe it's just your attitude towards beef in 2016, and obviously you locked in the double digits of 2015It doesn't look like the underlying beef fundamentals are-or the growth in the second half may not be as big as I had expected before.So I was wondering if you can't lock 2016 on the level you like, would you be willing to let the beef float or would you be sure to lock?David DenoWe adopts a mixed strategy based on the market situation before us.I think the team did a good job last year and we locked us in when things looked at least a little bit good.But we are looking for a hybrid strategy to lock or float in the market.We will make this decision in the coming months, and obviously I will not go any further for competitive reasons.Last question, we will get it from Matt DiFrisco and Guggenheim.Matthew KirschnerThis was prepared by Matt Kirschner for Matt.If you can go back inland for lunch time, is there any clear percentage of sales related to lunch now?David deno our approach is that lunch and dinner sales are not usually interrupted.I can say that, as I mentioned earlier, the lunch conference exceeded our expectations.We will be back here in the coming quarters.It did a good job for us.Elizabeth Smith believes that this continues to grow as awareness grows.Operator, there seems to be no further problem at this time.Ms.Liz Smith, I would like to transfer the meeting back to you to add or conclude.Thank you, Andy.We thank you all for joining us today and we look forward to updating our portfolio to you at the third quarter conference call on November.Thanks a lot.This concludes today's meeting, ladies and gentlemen.We would like to thank all of you for your participation.You can disconnect now.