Darden Restaurants Q3 Earnings Call Transcript

123jump.com Staff
29 Mar, 2009
New York City

The restaurateur total sales from continuing operations decreased 0.7% to $1.8 billion on same-restaurant sales fall of 3.2% in the quarter. Net quarterly earnings declined 6.4% to $108.1 million. Earnings per share decreased to 78 cents from 80 cents in the prior-year period.

Darden Restaurants, Inc. ((DRI))
Q3 2009 Earnings Call Transcript
March 18, 2009 8:30 a.m. ET

Executives

Matthew Stroud - Vice President of Investor Relations
C. Bradford Richmond - Senior Vice President and Chief Financial Officer
Andrew H. Madsen – President, Chief Operating Officer and Director
Eugene I. Lee, Jr. - President, Specialty Restaurant Group
Clarence Otis, Jr. – Chairman and Chief Executive Officer

Analysts

David Palmer - UBS Securities
David Tarantino - Robert W. Baird & Co.
Matthew DiFrisco - Oppenheimer & Co.
Brad Ludington - KeyBanc Capital Markets
John Glass - Morgan Stanley
Joseph Buckley - Bank of America/Merrill Lynch
Jason Whitmer - Cleveland Research Company
Robert Derrington - Morgan, Keegan & Company, Inc.
Jeffery Bernstein - Barclays Capital
John Ivankoe - JPMorgan

Presentation

Operator

Ladies and gentlemen, thank you for standing by and welcome to the Darden Restaurants third quarter earnings release conference call. At this time, all participant lines are in a listen-only mode. Later there will be an opportunity for your questions and instructions will be given at that time. As a reminder, today''s conference call is being recorded.

And I would now like to turn the conference over to the Vice President of Investor Relations, Matthew Stroud. Please go ahead.

Matthew Stroud

Thank you, Lea. Good morning, everyone. With me today are Clarence Otis, Darden''s Chairman and CEO; Drew Madsen, Darden''s President and COO; Brad Richmond, Darden''s CFO; and Gene Lee, President of Darden''s Specialty Restaurant Group. We welcome those of you joining us by telephone or the Internet.

During the course of this conference call, Darden Restaurants'' officers and employees may make forward-looking statements concerning the company''s expectations, goals or objectives. These forward-looking statements could address future economic performance, restaurant openings, various financial parameters or similar matters. By their nature, forward-looking statements involve risks and uncertainties that could cause actual results to materially differ from those anticipated in the statements. We wish to caution investors not to place undue reliance on any such forward-looking statement. Any forward-looking statements speak only as of on the date which such statements are made and we undertake no obligation to update such statements to reflect events or circumstances arising after such date. The most significant of these uncertainties are described in Darden''s Form 10-K, Form 10-Q, and Form 8-K reports, including all amendments to those reports.

These risks and uncertainties include the impact of intense competition, changing economic or business conditions, the price and availability of food, ingredients, and utilities, supply interruptions, labor and insurance costs, the loss or difficulties in recruiting key personnel, information technology failures, increased advertising and marketing costs, higher than anticipated costs to open or close restaurants, litigation, unfavorable publicity, a lack of suitable locations, government regulations, a failure to achieve growth objectives through the opening of new restaurants or the development or acquisition of new dining concepts, weather conditions, risks associated with Darden''s plans to expand, Darden''s newer concepts Bahama Breeze and Seasons 52, our ability to combine and integrate the business of RARE Hospitality International Incorporated, achieve synergies and develop new LongHorn Steakhouse and The Capital Grille restaurants, risks associated with incurring substantial additional debt, a failure of our internal controls over financial reporting, disruptions in the financial markets, possible impairment of goodwill or other assets, volatility in the market value of a derivatives and other factors and uncertainties discussed from time-to-time in reports filed by Darden with the Securities and Exchange Commission.

A copy of our press release announcing our earnings, the Form 8-K used to furnish the release to the Securities and Exchange Commission, and any other financial and statistical information about the period covered in the conference call, including any information required by Regulation G, is available under the heading Investor Relations on our website at www.darden.com.

We plan to release fiscal 2009 fourth quarter earnings and same-restaurant sales for fiscal March, April and May 2009 on Tuesday, June 23rd after the market close. We released third quarter earnings results yesterday afternoon; these results were available on PRNewswire-FirstCall, and other wire services. Let''s begin by reviewing our third quarter earnings result.

Third quarter net earnings from continuing operations were $108.1 million and diluted net EPS from continuing operations was $0.78, representing a 2.5% decrease in diluted net earnings per share from continuing operations. This includes the integration cost and purchase accounting adjustments related to the October 2007 acquisition of RARE Hospitality International Incorporated, which reduced diluted net earnings per share by approximately $0.02 in the third quarter.

Excluding estimated integration cost and purchase accounting adjustments for this year and last year, net earnings from continuing operations were $0.80 per diluted share in the third quarter this year, compared to $0.85 per diluted share last year or a 6% decrease. We are pleased to announce that, as a result of earnings for the quarter, that are significantly better than we assumed in our prior guidance and our continued success managing costs we are providing updated guidance that projects stronger full year earnings results.

Brad will now provide additional detail about our financial results for the third quarter and our updated outlook for the fiscal year. Drew will discuss the business results of Olive Garden, Red Lobster, and LongHorn Steakhouse. Gene will discuss the specialty restaurant group followed by Clarence who will add some final remarks.

We will then respond to your questions. Brad?

C. Bradford Richmond

Thank you Matthew and good morning. Darden''s total sales from continuing operations decreased 0.7% in the third quarter to $1.8 billion, reflecting a decline in same-restaurant sales that was partially offset by meaningful new restaurant sales growth at Olive Garden and LongHorn Steakhouse.

Let''s review the same-restaurant -- component of our total sales results. For context, industry same-restaurant sales as measured by Knapp-Track and excluding Darden were down an estimated 6.5% for the quarter.

On a blended basis, same-restaurant sales were down 3.2% at our three largest brands which is better than the Knapp-Track industry average by 3.3 percentage points. Olive Garden’s same-restaurant sales were down 1.4% for the quarter and while March to end at 57 consecutive quarters of growth, it is 5.1 percentage points above the Knapp-Track industry benchmark. Olive Garden’s total sales increased 3% with the addition of 36 net new restaurants.

Red Lobster had a same-restaurant sales decrease of 4.6% for the quarter which was 1.9 percentage points above the Knapp-Track industry benchmark. Although, the same-restaurant sales decline led to a total sales decline of 4.3%.

LongHorn Steakhouse same-restaurant sales decreased 5.4% for the quarter, which was 1.1 percentage points above the Knapp-Track industry benchmark while total sales increased 1.4% with the addition of 19 net new restaurants.

The quarter was adversely affected by the Thanksgiving holiday week shift. This holiday week shifted from the second quarter in fiscal 2008 to the third quarter in fiscal 2009. As a result, same-restaurant sales were negatively impacted by approximately 70 basis points in the current quarter.

The quarter was also adversely affected by more severe winter weather than last year and by shift in the Lenten holiday. Weather had a negative 30 basis points impact on same-restaurant sales at Olive Garden and LongHorn Steakhouse. However, because of its geographical footprint, less severe winter weather favorably affected Red Lobster’s same-restaurant sales by approximately 60 basis points. Although, this benefit was fully offset by the later start to the Lenten season this year.

Diluted net EPS from continuing operations of $0.80 which excludes integration cost and purchase accounting adjustments of $0.02 was $0.05 short of last year''s comparatively adjusted third quarter diluted EPS of $0.85.

The aggressive cost reductions, we spoke about in the past saved us approximately $10 million in expenses this quarter, contributing meaningfully to the strong earnings performance. We achieved these savings much sooner than we originally anticipated and the level of savings is higher than we expected. As a result of this and somewhat better than initially anticipated sales results for the second half of the year, we have increased our full year earnings guidance which I''ll comment on shortly.

Now, let''s discuss the margin analysis for the third quarter. As a reminder, we are comparing results from continuing operations this year and last year. That''s results from Smokey Bones which was sold in December of 2007 are not included for the third quarter of fiscal 2008.

Food and beverage expenses were 7 basis points lower than last year on a percentage of sales basis primarily due to reduced waste. Our outlook for the fiscal year is that food and beverage expenses as a percentage of sales will be approximately 40 basis points unfavorable to last year on an as reported basis. This would include the full year impact of the RARE acquisition in fiscal 2009 but only eight months of the impact in fiscal 2008.

Excluding the mixed changes associated with the acquisition, food and beverage expenses as a percentage of sales should be approximately 10 basis points favorable to last year, which primarily reflects both the cost saving initiatives we have undertaken and the improving cost environment we see today.

Third quarter, restaurant labor expenses were 47 basis points higher than last year on a percentage of sales basis, due primarily to wage rate inflation of 2% to 3%, increased major compensation, and the impact of sales de-leverage.

Our outlook for the year is that labor expense as a percentage of sales will be approximately 10 to 20 basis points favorable to last year on an as reported basis. Excluding the mixed changes associated with the acquisition, we expect restaurant labor as a percentage of sales to be approximately flat to unfavorable 10 basis points for the year.

Restaurant expenses in the quarter were 10 basis points lower than last year on a percentage of sales basis. This reflects savings and credit card fees, pre-opening expenses and a number of other areas.

Our outlook for the fiscal year is that restaurant expenses as a percentage of sales will be approximately 40 basis points unfavorable to last year on an as reported basis. Excluding the mixed changes associated with the acquisition, we expect restaurant expenses as a percentage of sales to be approximately 30 basis points unfavorable to last year as a result of the effects of sales de-leveraging and higher utility cost earlier in the fiscal year.

Selling, general and administrative expenses were 11 basis points lower as a percentage of sales for the third quarter due primarily to acquisition synergies and cost savings initiatives throughout the organization and a favorable comparison to the Foundation expense incurred last year. And this is despite additional media at Red Lobster for wood fire grills and the launch of the new lunch menu.

Our outlook for the fiscal year is that selling, general and administrative expenses as a percentage of sales will be approximately 50 basis points favorable to last year on an as reported basis. Excluding mixed changes and integration cost associated with the acquisition, we expect selling, general and administrative expenses as a percentage of sales to be approximately 25 basis points favorable to last year.

To summarize, operating profit or EBIT was 47 basis points lower as a percentage of sales for the third quarter. Our outlook for the fiscal year is that operating profit as a percentage of sales will be approximately 40 to 50 basis points unfavorable to last year on an as reported basis.

Again excluding the mixed changes and integration costs associated with the acquisition, we expect operating profit as a percentage of sales to be approximately 10 to 20 basis points unfavorable to last year.

The effective tax rate for the third quarter of 27.2% was inline with our previous guidance and higher than last year''s rate. Last year''s rate benefit from the resolution of prior year''s tax matters, and we anticipate an annual effective rate of 28% to 29% for fiscal 2009.

While we experienced some sales de-leveraging this quarter, the adverse effect on operating profit was mitigated this quarter by the cost synergies we realized as a result of the RARE acquisition and by our aggressive cost savings efforts.

As we discussed in January, we expect annual net acquisition synergies to level out at approximately $55 million, and we''re nearing that amount on a current run rate basis. There are structural benefits from these synergies not only in the P&Ls of LongHorn Steakhouse and the Capital Grille, but also in those of Red Lobster, Olive Garden, Bahama Breeze and Seasons 52 as well as Darden''s income tax line.

In addition, as I mentioned our aggressive cost management initiatives saved us over $10 million in the third quarter and much of these savings are ongoing. Also in the quarter, we repurchased approximately 200,000 shares for $6 million. We have 11 million shares remaining in our current authorization and depending on market and business conditions we may repurchase up to an aggregate of 200,000 million of shares in fiscal 2009.

And yesterday, we announced a dividend of $0.20 per share payable on May 1, 2009 to shareholders of record on April 10, 2009. Based on the $0.20 quarterly dividend declaration our indicated annual dividend is $0.80 per share.

Our revised outlook for the fiscal year anticipates blended U.S. same-restaurant sales for Red Lobster, Olive Garden and LongHorn Steakhouses are flat to down 2.5% for the last quarter of the year, which implies a fiscal 2009 same-restaurant sales decline of approximately 1¼% to 1¾% as we stated in our press release yesterday.

We continue to expect to open approximately 70 net new restaurants in fiscal 2009. As a result, we anticipate total sales growth of between 9% and 9.5% in fiscal 2009 compared to reported sales from continuing operation of $6.63 billion in fiscal 2008. This total sales growth includes the approximate 2 percentage point''s impact of a 53rd week in fiscal 2009. Excluding the 53rd week, the expected total sales growth would be approximately 7% to 7.5%.

We now anticipate reported diluted net earnings per share growth from continuing operations of 1% to 4% in fiscal 2009, which includes the impact of the 53rd week. This compares to reported diluted net earnings per share from continuing operations of $2.55 in fiscal 2008.

The additional week is expected to contribute approximately 2 percentage points or $0.06 per diluted share of growth in fiscal 2009. Exclude estimated integration cost and purchase accounting adjustments of approximately $0.19 in fiscal 2008; net earnings from continuing operations were $2.74 per diluted share.

In fiscal 2009, these costs and adjustments are expected to be approximately $0.10 per share. Excluding the impact of these costs and adjustments for both fiscal 2008 and fiscal 2009, the company now expects diluted net earnings per share to be flat to down 3% on a 53 week basis.

And let me finish by spending a minute to discuss our goodwill and intangible assets.

We reviewed goodwill and other indefinite-lived intangible assets primarily our trademarks for impairment annually as of the first day of our fourth fiscal quarter, but do so more frequently if indicators of potential impairment exist and a significant amount of judgment is involved in determining if the impairment has occurred. After a thorough analysis, with the support of third party valuation experts, we determine that there was no goodwill for indefinite-lived intangible asset impairment as of the first day of our fiscal fourth quarter.

If we had determined that impairment charge was required, this would have resulted in an increase in our leverage ratio as defined in our revolving credit agreement.

Under our credit agreement, our leverage ratio is limited to 0.75 to 1. As of February 22, 2009, it would have taken a write-down of goodwill and trademarks or any other asset in excess of $560 million on an after tax basis to cause our leverage ratio to reach their permitted maximum.

By the way that translates into approximately three quarters of the total goodwill and trademark value.

Going forward, we would continue to review our intangible assets for possible impairment at least annually, but potentially more frequently if indicators of potential impairment exist. However, as we go forward, we expect that the amount of impairment it would take to push our leverage ratio to the maximum permitted in our revolving credit facility will grow even larger because our overall leverage continues to decline into fiscal 2010.
So in summary, we had no impairment of goodwill or trademark assets in the third quarter and no individual restaurant level impairments as well.

And going forward, should there be an impairment in future quarters, it would have to be more than approximately 75% of the total value of our intangible assets to push our leverage ratio to the maximum permitted and that amount will continue to increase as we reduce our leverage over time.

And now, I''ll turn it over to Drew to comment on Olive Garden, Red Lobster, and LongHorn Steakhouse.

Andrew H. Madsen

Thank you, Brad. Our three large brands responded aggressively to the near-term challenges we have faced with selective value-oriented promotions and a disciplined cost management effort, both in our restaurants and at the restaurant''s support center. But just as importantly we''ve maintained our long term strategic direction, continued to invest in the highest priority business building opportunities and continued our transformational efforts at the enterprise level to strengthen organization capability and make our support platform even more cost effective.

Olive Garden''s key strategic priority this fiscal year is to sustain strong new restaurant growth while also maintaining same restaurant excellence and they continued to deliver against that priority during the third quarter.

As Brad mentioned, while same restaurant sales were down 1.4%, they exceeded the Knapp-Track competitive benchmark by more than five percentage points and total sales grew 3%.

Third quarter advertising at Olive Garden featured four exciting new dishes and strong value. They started the quarter advertising Shrimp Carbonara and Chicken Carbonara followed by a promotion that featured Shrimp Mezzaluna and Sausage Mezzaluna with a starting at 9.95 price point. Both of these promotions were supported with advertising for their unlimited soup, salad, and breadstick lunch priced at 6.95. In addition, a new chicken and gnocchi soup was recently added to provide even greater choice and variety for this signature offering.

Guest satisfaction remained at best ever levels, while controllable cost management especially in the areas of food waste, direct labor scheduling and wage rate management remained strong.

Olive Garden opened 9 net new restaurants during the third quarter and still expects to open 35 to 40 net new restaurants during fiscal 2009.

Red Lobster also delivered competitively superior results during the third quarter while continuing to make meaningful progress broadening the appeal of their brand. Same-restaurant sales declined 4.6% versus the prior year but exceeded the Knapp-Track industry benchmark by nearly 2 percentage points.

In November Red Lobster introduced wood-fire grilling and a new menu with eight new wood fire grill items. Introductory advertising through December was designed to broaden appeal of the Red Lobster brand, primarily by focusing more on our new wood grill cooking platform and improved culinary expertise and as a result spending less time on specific new dishes. Consequently, did not have the same short-term guest driving impact of a typical limited time-only promotion.

In late December, Red Lobster responded to the growing consumer need for affordability with advertising that featured their new quick catch lunch menu and starting at a 699 price point. These eight new items, six of which are prepared on our wood grills were designed to be affordable and facilitate the quicker meal experience that many guests look for at lunch.

In early January, Red Lobster introduced a new promotion called Island Tour that also leverages our wood grills with several new grill long trays inspired by the flavors of the Tropical Islands, Citrus Rum, Shrimp and Scallops, Caribbean Lobster and Shrimp and Hawaiian Isles Shrimp and Salmon. In mid-February, the lobster began its Signature Lobster press promotion that also features several new innovative wood grill lobster dishes.

The operating fundamental of the Red Lobster have never been stronger, guest satisfaction, labor productivity and food waste in particular, also meaningful improvements again during the third quarter. Red Lobster is on track to open approximately 10 net new restaurants this fiscal year.

LongHorn Steakhouse''s same-restaurant sales exceeded the Knapp-Track benchmark by slightly more than 1 percentage point finishing at minus 5.4% for the quarter, while total sales increased 1.4%.

With much of the integration work now behind us, we''re beginning to more fully capture the power of combining Darden''s brand management capabilities with LongHorn''s strength in restaurant operations. LongHorn started the third quarter advertising two new signatures stuffed fillet dishes, white cheddar and bacon, plus Fontina and Wild Mushroom. This is followed by a new Western values promotion that featured Sierra Chicken, Red Rock grilled shrimp and a new Parmesan-crusted Sirloin with the starting at 999 price point, the first price point promotion in LongHorn''s history.

LongHorn also implemented a new media strategy during the third quarter that increases the percentage of restaurants with advertising support from approximately 45% to 60%, increases media weight by 25% and increases the utilization of 30 second ads versus 15 second ads, all for the same dollar investment in media.

Operating fundamentals have remained strong with guest satisfaction as well as manager and employee retention rates at record levels. And controllable cost management continues to improve as the LongHorn team gains proficiency with some of the new tools implemented during integration. LongHorn opened four net new restaurants in the quarter and are on target to open 15 to 17 net new restaurants for fiscal 2009.

And now Gene will discuss our Specialty Restaurant Group.

Eugene I. Lee, Jr.

Thanks Drew. The current environment remains challenging, particularly for the upscale luxury brands and the specialty restaurant group. However, we''re confident that our strategic plans position our three brands to increasingly capture market share both in the near-term as the environment starts to improve. Each of our brands is focused on delivering exceptional dining experiences to our guest with a competitively superior service culture, developing creative brand appropriate sales building initiatives and continuing to strengthen their business models.

Now let''s go into little more detail on the third quarter performance for each of the specialty restaurant group''s brands. The Capital Grille had total sales of $60.9 million in the third quarter which was 10% below prior year. This was driven by same-restaurant sales decline of 19% including a three percentage point negative impact from the Thanksgiving holiday shift and was partially offset by additional four restaurants.

The sales decline reflects the continuing weakness in demand in the fine-dining steakhouse segment. Nevertheless, Capital Grille''s average unit volumes, restaurant level margins and return on invested capital remain at competitively superior and value creating levels, and our team continues to execute our promise of a personalized club like dining experience with excellence.

As part of the brand’s focus on increasing market share, Capital Grille continued to initiate sales building actions during the third quarter. In particular they sought to further differentiate the brand by offering a premium food and service experience at a unique brand appropriate value. An example of what we think is a brand appropriate way to offer value is a five-course pre-fixed wine dinner being offered from February 23rd to April 5th as part of a partnership with Italian winery, Castello Banfi. Capital Grille successfully opened its 35th restaurant in the third quarter in Rosemont, Illinois and are on track to open a total of five restaurants this fiscal year.

In the third quarter Bahama Breeze had total sales of $28.2 million, which was 9% below last year. Same-restaurant sales were also 9% below last year including negative Thanksgiving shift impact of 2%. The Bahama Breeze team continues to aggressively manage control over cost and has made key improvements to their business model. The brand remains focused on rebuilding sales momentum and they have implemented a number of sales building initiatives. Bahama Breeze successfully opened a new restaurant in Wayne, New Jersey last month and early sales and guest count results are encouraging.

The Seasons 52 team is also focused on growth as they too prepare to open a new restaurant in Cherry Hill, New Jersey next Monday. They continue to build the pipeline of sites to achieve their disciplined growth plan. At the same time, the team is continuing to strengthen organizational capabilities to support growth while maintaining operational excellence.

Now, I''ll hand it to Clarence for some final comments.

Clarence Otis, Jr.

Thank you Gene. At the risk of stating the obvious, obviously this was a very challenging quarter not just for our industry but also for the economy. And we think our financial performance in the face of that is really good evidence that we''re well prepared to weather the current storm. We also think it further demonstrates that we''ll emerge from this period an even stronger company, with wider positive gaps to industry benchmarks in both sales and earnings.

We''ve got a portfolio of brands that are proven, and that collectively have strong long term sales and earnings growth ahead of them. We also have the scale and all the advantages that scale brings and those advantages are reflected in the cost synergies that we''re realizing from the RARE acquisition. And then we''ve made some changes, as Drew mentioned, how we work, and as a result of that our scale is working even harder for us and that''s helping us limit the earnings erosion that we''re seeing as sales soften.

And finally, we''ve got some great teams, some outstanding teams in our restaurants, in our restaurant support center and these are teams that are working to successfully navigate the current environment and beyond that work as a creative lead company.

All of us are focused on creating in good times and bad a company that''s a leader in the full service restaurant industry known for generations.

And with that, we''re prepared to take your questions. Thank you.

Question-and-Answer Session

Operator

Ladies and gentlemen, if you would like to ask a question, please press “*” then “1” on your touchtone phone. You will hear a tone indicating you have been placed in queue. You may withdraw yourself from this queue at any time by de-pressing the “#” key. And we do ask that you please limit yourself to one question and one follow up question. You will need to re-queue for any further questions. And we first go to the line of David Palmer with UBS. Please go ahead.

David Palmer - UBS Securities

Thanks. Congratulations on a great quarter, guys. Wanted to ask you about what you see going on in calendar 2009 to date, obviously the two-year deterioration and one-year deterioration in same-store sales in January and February isn''t quite what it was in the fourth quarter. I know you guys are obviously very much the students of the industry and I wondered what you think is causing that slowing of same-store sales decline industry-wide and perhaps for you, obviously a lot of folks out there are doing a lot of value but there seems to be something else out there as well, even things like movie going is up that perhaps we''re getting some sort of level where casual dining is a cheap entertainment, almost a trade down in that sort of way but again more or less speculating because it seems not that bad, so any sort of thoughts about that would be helpful? Thanks.

Clarence Otis, Jr.

Thanks, John. This is Clarence, I''ll start and it''s difficult to say with certainty, so a lot of what we''re about to say is really theory as much as anything else. We do think, as we look at the fourth quarter last year, we are looking at an environment that as a lot of people have said, was unprecedented in a lot of ways and so, when you think about the financial crisis, you think about the wealth deterioration, how quickly it happened. Our sense is that people hit the pause button and said I need to really hunker down and understand what''s going on here. Stability started to come back in a little bit as we got past what at this point appears to be the worst of the concern about the basic financial institutions, deposits, those sorts of things and so, we think some of that got passed even though the job loss continued and headlines around job loss were there. I think people felt it wasn’t this crisis that they were unfamiliar with. We were back to economic cycles and sorts of things and so we think people hunkered down a lot. It culminated in December where sales really fell off a cliff not just in casual dining but across every consumer category. And we think as people got a little bit more confident that we started to see them return in January and February; what we''ve seen also in prior recessions is that as people get their minds around the fact that we are in a slowdown, it’s going to last for a while they tend to make that decision about the big ticket items and putting those off, so cars and appliances and those sorts of things and as a consequence to that, they start to treat themselves with the smaller ticket items and in the past that has included movies for sure but also dining out. So we think a lot of that was going on and that explains a little bit of the pattern. I don''t know if other people have other things to add.

Andrew H. Madsen

I just amplify the last point that Clarence made. This is Drew, as consumers got used to the environment and their position in it, not only were they treating themselves to say casual dining or movies, it just reflects our belief that casual dining is and full-service dining is part of how people live their lives and it''s a fundamental part of how they live their lives today and going forward, it’s at a somewhat lower level now but it’s still a meaningful part.

David Palmer - UBS Securities

Thanks very much guys.

Operator

And next we move to the line of David Tarantino with Robert W. Baird. Please go ahead.

David Tarantino - Robert W. Baird & Co.

Hi, good morning. Congratulations. My question is really on the cost outlook as you look to Q4 and fiscal 2010. What are you expecting on the commodity side of the equation and where are you in terms of your contracts, if there is any update since the Analyst Day? Would you give a little bit more color on that?

C. Bradford Richmond

This is Brad. And since the meeting in January, we had covered a very large portion of our food and beverage costs through the end of the fiscal year as well as utility cost and then regulate markets but halfway through our business, we''d covered those costs and pretty much through the fiscal year. So, we have pretty clear visibility over those costs as we look at the remainder of fiscal 2009.

We did provide some color though for fiscal 2010; some of those major items that we have covered but right now, I''d say we''re in the midst to working on our 2009 plan and so, probably can''t share much more at this time as we''re still putting those pieces together.

David Tarantino - Robert W. Baird & Co.

Okay, just a follow-up to that. I think the information you shared at the Analyst Day suggest that you might have favorable commodity cost. Just if you could talk a little bit about what your pricing philosophy would be in an environment where you might see a favorable cost picture? Thanks.

C. Bradford Richmond

Well in general, our pricing strategy over time is to do two things - maintain our relative positioning in the market versus key competitors and to maintain broad price point accessibility on the one hand. And on the second hand, we want to make sure that we price to capture, to fully cover net cost pressures so that the strength of our underlying unit economics and business models is maintained over time.

This is an environment where value is increasingly important to consumers. And as a result, we''ve really elevated our efforts to find lasting structural cost improvement opportunities that can reduce the need for us to take pricing and as a result maintain a price point accessibility and value even more. So, those are the things I guess we''re trying to balance and we''re elevating the cost management side and I would say, I mean as you look back over time, you know pricing is 2 to 3 percentage points and so we sort of bounce between that range. I don''t know that our thinking has changed a lot, we''ll update in June on sort of where we think we might be in that range.

David Tarantino - Robert W. Baird & Co.

Okay. Thank you.

Operator

And next, we move to the line of Matthew DiFrisco from Oppenheimer & Co. Please go ahead.

Matthew DiFrisco - Oppenheimer & Co.

Thank you. Can you give us some color on the regions and perhaps Florida, I think looking at the LongHorn trends and their exposure, can we read into that there might be, I''m not going to call it a floor but maybe some stability, maybe in Florida already?

Andrew H. Madsen

Brad is looking for his notes.

Matthew DiFrisco - Oppenheimer & Co.

Okay. The more he is looking for those notes, can you give us some insight into what your philosophy is on pricing for the rest of calendar ''09. So, maybe the first half of 2010 is at 3% at the big 3 something that is sort of the benchmark or sustaining around 3 or 2.5 to 3?

Andrew H. Madsen

Yeah. I mean we aren’t prepared to get specific but I would tell that likely to be in the lower half of that 2 to 3 percentage range, not in the higher half of it given the environment that we''re in with the value consciousness on the consumer side and as we have mentioned the softening on the cost side.

C. Bradford Richmond

And if you look at sequentially over time, I mean in Florida, it has been fairly weak area for some time and pretty much staying at that level so you did say it stabilizing but stabilizing at a pretty low level, if you go to the West Coast, the California, Washington, Oregon also a weak area and continues to remain so but again you guess may be it’s stabilizing at these lower areas. We have seen some strength though in the Upper Midwest area on a relative basis and part of the other emerging trend as Texas continues to be the strongest area but it''s also starting to slow a little bit as we get into this most recent quarter.

Matthew DiFrisco - Oppenheimer & Co.

That''s very helpful and then I guess just a follow up on your point that you made about the lower cost you''re getting, it sounds like per MH for the media buy, could this be something that might make it more economical to get into national or cable advertising for the LongHorn brand earlier than say prior plans on gaining media efficiency only through expansion?

C. Bradford Richmond

The media efficiency that LongHorn has experienced in the third quarter and will experience going forward is more a result of incorporating thereby into the media buying group that handles Olive Garden and Red Lobster. So there is some scale there. It also was driven by some refinement in their media strategy, the dayparts they use and the way they flight it. So, we think we''re just able to strengthen what they had today by adjusting their plans and buying little more effectively.

Going forward, media rates are softening just like everything else in the spot market and anything that makes it less expensive to buy media is going to help us get to national penetration faster but it is going to cut it from four years to next year, it’s going to take a little while.

Matthew DiFrisco - Oppenheimer & Co.

Thanks. That''s very helpful.

C. Bradford Richmond

Yeah, I think just a reminder, as we''ve talked about in January, it''s not a thing where you cut it on immediately where you sort of scale up. So Drew talked about going from 45% of the restaurants covered to 60% and we would hope to continue to increase that percentage.

Operator

And next, we go to the line of Brad Ludington from KeyBanc Capital Markets. Please go ahead.

Brad Ludington - KeyBanc Capital Markets

Good morning. I just had a couple quick questions. First, can you comment on what the CapEx was in the third quarter, and what we expect for the full year now? Hello?

C. Bradford Richmond

Sorry. CapEx expectations really have not changed for the particular year, and so being in the 525, 575 million for the year is where we are. The third quarter and again, you have to be a little bit careful because of the seasonality obviously and it’s the boarding restaurants, the first quarter, second quarter are very big periods for us, does slowdown in the third quarter, because we haven''t really got the restaurant closed, there is not much work you can be doing on that, so it does spike up in the third quarter, but when we get to (inaudible) just see around $135 million of CapEx in the third quarter.

Brad Ludington - KeyBanc Capital Markets

Thank you. And then just talking about, I know you''ve talked about some of the commodities but, lower lobster prices that we''ve been hearing so much about, is that translate to just a lower price on your lobster fest and lobster offerings, or does that translate to a little higher margin on the product?

Andrew H. Madsen

Well, there is a little of both but in particular it’s helped us to feature some signature lobster dishes, many of them new wood fire grill dishes that are lower, more approachable price point than last year.

Brad Ludington - KeyBanc Capital Markets

Okay. Thank you very much.

Operator

And next, we go to the line of John Glass with Morgan Stanley. Please go ahead.

John Glass - Morgan Stanley

Thanks. First question is why do you think the GAAP, Darden''s GAAP to the Knapp-Track Index narrow this quarter; I think it was like 5% last quarter, 3% this quarter, is that evidence maybe of competitive discounting eating away a little bit at your market share?

C. Bradford Richmond

It’s probably a reflection of a couple of things, first the discounting that you mentioned is part of it, but second, Olive Garden in particular was wrapping on a quarter where they were up maybe 5.5% in same-restaurant sales while the industry was wrapping on their quarter where they were down maybe 2.5% roughly in same-restaurant sales. So it was an exceptionally strong quarter for Olive Garden last year, and obviously that''s a very big piece of our portfolio. So I think discounting and year-ago comparisons are the two key things.

John Glass - Morgan Stanley

And then one of the outperformance this quarter really was driven by outstanding margin control, not really a sales went early. What about at the restaurant level? So when did you first start this process of hunkering down at the restaurant level, and so when do we expect to lap that or begin to lap that process in fiscal ''010.

And then, I think the number of $10 million came up in cost savings, I wasn''t sure if those were discrete cost savings in addition to what we saw at the restaurant level, but that''s really just 50 basis points. So that doesn''t really explain the de-leveraging, you would really see on a 3% negative comp so, maybe where else are you getting cost savings besides those 10 million or maybe you could quantify where else you''re getting?

Clarence Otis, Jr.

Yes, this is Clarence, I''ll let Brad take the bulk of that question, but when we completed the acquisition of RARE in October 2007 and we''ve been talking about the cost synergies from the acquisition and those flows across the enterprise, also at the restaurant level. And so clearly, we''re benefiting from some of that as Brad has said. We''re getting them faster to a higher level; I think when we talked about a run rate at the time of the acquisition we''re talking about $40 million annually. Now we''re talking about 55 million and so, much of that is in place now and so that''s certainly helping. The other piece of it is as we started this fiscal year, we really started pretty immediately in the first month of the year, June to see some serious spikes in a number of areas, utilities in particular, and so re-doubled efforts beyond the acquisition to contain cost.

C. Bradford Richmond

I think Clarence covered it pretty well, but let me just emphasize a couple of points there is the acquisition synergies, those are very significant, very meaningful and occur basically every line item on our P&L. So those are - fundamentally change our cost structure for the entire organization. You''re seeing some of the benefits in Red Lobster and Olive Garden, our existing Darden brand is a part of that as well as if you look at the acquired brands, it''s pretty significant too.

One of the items I like to look at is if you think of the cost synergies and just apply those to the RARE brand that was 4% of their sale. So that''s a meaningful improvement and if you associate to them like I said though in our P&L appears across all of our businesses, so that''s significant.

And then the first part of the year there were some pretty challenging cost environments. We redirected some of our energies and efforts to tackle these costs. We called our business strengthening initiatives. We talked about that some in our January meeting and basically we''re pursuing those very same items that we talked about then. We are having quicker success in capturing those than we had originally thought and they''re turning out to a little bit higher than we thought as well.

And then I think partially when you are looking at year-over-year comparisons and looking at sequentially to the previous quarters, it was incorporated in our cost expectations, but we are seeing a meaningful improvement in many of the commodity cost, the grains that affect the feed, the grains that come to us in the form of pasta and all that, as well as well some of the other cost components that we''ve talked about. So that was all up to a pretty full, pretty powerful impact to our business that we''ve been able to address and to capture.

Clarence Otis, Jr.

I think the last point would be one that Drew made, when we talk about the acquisition, a lot of it was about introducing systems that we were using at legacy Darden into Capital Grille and LongHorn. And the longer the restaurant teams live with those systems, the more proficient they get with them. And so those are around forecasting volumes, labor scheduling for managing labor expense, forecasting food usage and therefore managing food cost.

John Glass - Morgan Stanley

Thank you.

Operator

Next we go to the line of Joe Buckley with Bank of America. Please go ahead.

Joseph Buckley - Bank of America/Merrill Lynch

Thank you. Just a couple of clarifications on the cost. So you gave us, I guess, at the Analyst Meeting in January some pretty good details on what you had covered through calendar year-end and I think have been a little bit more favorable since then, is that part of the message on the cost outlook?

Andrew H. Madsen

Well on the cost outlook, when you''re talking about the items that we have, got forward coverage on it, now those really haven''t changed much at all from our original expectations there. There are some around the edges because we didn''t 100% contract or forward hedge all those items. So there is some and you can see that we talked about the remainder of the calendar year, past our fiscal year, we had little less coverage. So there is opportunity to still capture declining commodity prices there. I think the bigger difference though is around our initiatives to reduce costs by how do we run our businesses, particularly, as we look at the importance of developing good labor schedules and how that''s just so fundamental in our restaurants in terms of, you get the guests, forecast right, you can build a proper labor schedule so that you can take care of the guests when they are there and give a high level of service to them while keeping a good control on cost. It helps in your food production as well. So you''re not only preparing food, you''re investing the labor that you potentially won’t use and have to fill it out. So, it''s really just focusing our efforts and attention on many of those items. It''s also about some of the decisions we''re making right now.

I think we''re pretty more of our attention than we typically would at cost reduction versus the opportunity of building sales for the longer-term. We realized that the best priority, the best opportunity for us to improve our earnings. I think that we''re going to see our sales environment sometime, not too far out where it is more appropriate for us to look at opportunities to build our sales even greater than we have today. So we won''t redirect that but that''s probably little ways out.
Clarence Otis, Jr.

I just think Brad makes a very good point which is that it takes a lot of organizational capacity and focus to manage cost the way we''re managing. The opportunity cost of that is that same organizational capacity and focus could go towards sales building. But we''re in an environment that we''re in, that opportunity cost is lower. And so, we lose a lot less by redirecting that time and attention.

Joseph Buckley - Bank of America/Merrill Lynch

Okay. And then, on the margin this quarter, the restaurant expense line, everything but food and labor. That was what was more surprising versus our expectations and I think you mentioned credit card fees, you mentioned for your opening expenses. I know it’s lots of things in that line. Is there anything else that will leap out? Is that where some of the synergies from the RARE deal surface in that line?

C. Bradford Richmond

Yeah, there is a fair number of synergies that do occur in that line but I would say it''s more broadly to focus on attention at just being very mindful of all of our cost because that''s a category that collects a number of different expenses in there and so it is true there are a lot of little things that add up to big things when it''s all said and done. One example of that is in our proactive cost management efforts has been more sustainable practices as it relates to energy usage, water usage, chemical usage and restaurants and we''re just starting that effort and just started early, a quarter or so ago, but we''ve already seen meaningful improvements in those areas in restaurants and you''d see some of that in the restaurant expense line.

Joseph Buckley - Bank of America/Merrill Lynch

And then switching to marketing just for a moment. Are you getting more banking apart from the marketing? Are media rates coming down?

C. Bradford Richmond

Well, a lot of our media for Olive Garden and Red Lobster was already bought in the up front market last April and it takes us through this coming August. For LongHorn, where we are buying a little more in the spot market and have the ability to shift their schedules over more easily we have seen more of an efficiency improvement there. Looking forward, as I mentioned though earlier, there is reason to believe that the cost of media next year is going to be different than it was in this year and we''ll know more in a couple of months but it''s like everything else.

Joseph Buckley - Bank of America/Merrill Lynch

So then just one last question. I didn’t quite get the detail on the sales number. Did Valentine Day’s shift into Saturday matter much in the February numbers that was not mentioned?

C. Bradford Richmond

Joe, it does. I don''t remember the exact impact, but it does clearly make a difference when you pile on a special occasion day until the weekend but when you look across the quarter you also had some shifts with New Year’s Day and some of those that over the cost to the quarter that pretty much minimized or offset each other.

And just to be clear the difference it makes is it’s the negative difference. We’d rather have Valentine Day’s on Monday than Saturday where we''ve already got restaurants that are relatively full.

Joseph Buckley - Bank of America/Merrill Lynch

Got it. Thank you.

Operator

And next we go to the line of Jason Whitmer of Cleveland Research Company. Please go ahead.

Jason Whitmer - Cleveland Research Company

Thanks, good morning. Curious thoughts on the dynamics of the increased discounting within the channel overall, particularly all these fixed price (inaudible) bundles or buy one get one in not just chain but also independent. What are you thinking about either the competitive dynamics from that? Or overall is anything going to be helping drive a little bit of traction on traffic directionally? I just am not sure what implications might be for the profitability of such deals. Any thoughts how they consider that either within your portfolio or competitively speaking?

Andrew H. Madsen

Well, consumers, they''re clearly looking for value and it''s a challenging sales environment, so our approach to that environment has been to add some selective discounts, selective value offers that are designed to specifically be consistent with the brand to deliver an acceptable margin. So, we root for people to buy them and not to do them so often that consumers begin to expect it month after month or quarter after quarter. So, you essentially over time train them what your experiences were if you continue to discount. So, we are trying to respond aggressively internally but balancing with all those things that I just mentioned competitively. We don''t have a lot of visibility on whether they are profitable for our competitors or not, but it’s at levels we haven''t seen before, that''s for sure.

C. Bradford Richmond

And our guess based on our model is buy one get one free is not particularly profitable. They don’t do much for the margins but to some degree you’ve got people that have to manage their business for cash given leverage levels.

Jason Whitmer - Cleveland Research Company

And I think, sort of my thinking is it gets to the point of desperation from other competitors out there, again chain or independent and also how does that lead to increased rationalization. I don’t know if you have seen any, either anecdotal or data support that accelerating trend?

C. Bradford Richmond

No, I mean I think it’s not very sustainable but in terms of rationalization at the unit level I think in this business if you''ve got a unit that''s producing cash it''s hard to close it. If you''ve got a unit that even might be cash flow negative and it''s a least unit, it''s still hard to close it because that forces an upfront payment that maybe a lot bigger than the negative cash mill. So it takes a while for unit rationalization I think to play out, would be how we think about it. The more restaurant impairments as opposed to other things but individual restaurant impairments that you see, the closer we''re getting to seeing people with units that are having challenges generating positive cash and that will put us closer to some closings.

Jason Whitmer - Cleveland Research Company

Great. Thank you.

Operator

And next we go to the line of Robert Derrington with Morgan Keegan. Please go ahead.

Robert Derrington - Morgan, Keegan & Company, Inc.

Yes, thank you. Brad, if you could help clarify a couple of housekeeping points for me. One, I thought you mentioned in your last call, you expected a fiscal year tax rate in the vicinity of 27% to 28% and I think you said 28 to 29 now, is that correct?

C. Bradford Richmond

Yes, what we see right now is about 28% to 29%, what''s involved in that is, there are a varying number of tax credits, some of those vary with the net activity in the restaurant, the greatest one and there being FICA tip credits, on wages paid to server, so those have tended to move around a little bit, as well as various tax items we have out there, how they may subsequently be resolved, so the way it has moved up a little bit 28%, 29% is what we''re looking at now.

Robert Derrington - Morgan, Keegan & Company, Inc.

Okay. And then on the G&A front. I think last quarter you mentioned G&A you expected to be down roughly 70 to 80 basis points, yet the guidance now implies that it won''t be down that much, can you kind of give us a little bit of - in the last couple of quarters the company has done a very commendable job with G&A down on an absolute basis year-over-year. How should we think about the fourth quarter and what''s driving that, either the percent and the absolute?

C. Bradford Richmond

Yeah, I think there is two things that are really driving that is the cost savings and where those are actually appearing on the P&L from what we initially thought, and how we''re pursuing those and prioritizing. It causes some movement around on the P&L, some geography, if you will. The other thing that moves in there is that all of our individuals are on an incentive plan of some sort and those are highly variable pace So as our performance has improved that mitigates some of the improvement that we would expect there as well.

And I think the other item as we see it is really SG&A is the marketing piece as well and so we''ve made some adjustments particularly for Red Lobster as they have made progress in some of their initiatives to launch those earlier than originally was intended, the big one being their - most recently is their introduction of their lunch program, which we feel is very appropriate in this time but very appropriate in that it has price points but equally is how it positions the brand to be more appropriate at the lunch time occasion for folks to come in, because it is not by any means just a price point promotion, it is about a new offering, new steps of service, lot of things have gone in to that that we think positions it to be in a better spot.

Robert Derrington - Morgan, Keegan & Company, Inc.

Got you. Thanks for the color.

Operator

And next we go to the line of Jeffery Bernstein with Barclays Capital. Please go ahead.

Jeffery Bernstein - Barclays Capital

Great, thank you. A couple of brand specific questions, first on LongHorn you talked a lot about new ads and more recent price points I guess first ever, just wonder if you can give some feedback on that perhaps with a more of a geographic lift in the area as well over certain areas now more ad spending, you mentioned an increased reach wondering what the future spend might be, and what do you examine kind of the disparity and maybe the strongest and weakest markets maybe versus an outback or a Texas road how it’s kind of, how LongHorn is comparing depending on the market, and the push that you are doing in terms of advertising at price points?

Andrew H. Madsen

Well, if you look at LongHorn over say the last two or three quarters, they''ve gone from roughly a point below the Knapp-Track average on same-restaurant sales to roughly a point above the Knapp-Track average on same-restaurant sales. So we''re very pleased with that trend and there is a number of things that are behind that, as the integration -- as the work of integration begins to subside, obviously, restaurant managers and restaurant teams have even more energy and more time to running restaurants at a high level and we see that at LongHorn. We see their guest experience which was good before continuing to improve. We see controllable cost management improving. So, that''s part of it.

Second, the improved stronger media plan, which really incorporates some of the principles that have helped Olive Garden and Red Lobster over time in terms of the number of points you need to be on a week to breakthrough at an effective reach., frequency level, but not waste money, more 30s which we think payoff versus more 15s. The way they''re using their dayparts, all of that has begun to help and that was in the last quarter.

And then the price point ad that you mentioned, while that''s not something we intend to do on a continuous basis, we think occasionally, value-oriented promotion for a brand like LongHorn is appropriate just like it is for Olive Garden and Red Lobster. And we do think that had a positive impact during the third quarter.

And more broadly to your question, we did see restaurants with television support, which increased from the mid-40% of all the restaurants to 60%. We did see them outperform restaurants without television support.

So we think as we get closer to media efficiency, we''re going to see more of that benefit and that''s a big part of our development strategy.

As the LongHorn team is looking for new sites as they find sites that they have a high degree of confidence in and if one site would get into media efficiency in a local market sooner, so they could turn on television that supports three or four other units and another site which also is a good site doesn''t help get them the media efficiency, we''re always going to open the site that will help us turn on television sooner. So, we''re incrementally, gradually going to get that benefit.

Jeffery Bernstein - Barclays Capital


Okay. And then just one question on Red Lobster, since there was lot of focus the past quarter on the wood fire grill, the additional spend in marketing, just wondering whether we should expect further additional push perhaps where that wood fire grill is coming out above, below targets in terms of sales mix, how perhaps that value push of the 6.99 level is doing in terms of driving traffic at the lunch daypart?

Eugene I. Lee, Jr.

Well those are two very, very different initiatives. On wood fire grill, the thrust behind that is broadening appeal of the Red Lobster brand, both for current users who lever at Lobster today and for prospective users who haven''t been for, they both are attracted by a fresh seafood restaurant that offers increased variety and increased culinary expertise. That''s really what today''s fresh fish is all about, that''s really what wood-fire grill is all about and we''re going to continue to prominently feature wood-fire grills on the menu. We''re going to continue to develop items, develop for the wood-fire grill, have at least one wood-fire grill item in promotions. We''ve seen the percent of many long trays go up from - increased about 60% basically in terms of wood-fire grill preference. So it''s something that is resonating with guests. So that''s a fundamental building block of a refreshed Red Lobster brand long-term.

The quick catch lunches is very different. That''s designed to really address affordability, particularly at the lunch daypart and 6.99 really isn''t a short-term discounted price. That''s the everyday price on the menu and the dishes have been developed to make that an appropriate price and an appropriate margin for us. It has been very effective at driving profitable traffic in the short-term and it''s something we''ll continue to use occasionally going forward.

Matthew Stroud

We have time for one more question please.

Operator

And very good that comes from the line of John Ivankoe with JPMorgan. Please go ahead.

John Ivankoe - JPMorgan

Thanks. Actually it''s somewhat of a follow-up on the previous question on Red Lobster. Whether you ran a price point or you didn''t or you had the lunches or you didn''t, I mean mix looked like it was fairly unaffected in the past three months, which I think is an interesting phenomenon and so what kind of analysis should we do on that? And what''s really the intention for the Red Lobster customer base in 2009? I mean is it still kind of a market move to try to move the customer up or it’s just a kind of environment where you want to broaden, in other words, try to basically attract all customers to your stores as opposed to the higher end customer?

Andrew H. Madsen

Yes, I''ll let Brad answer that what to expect on menu mix, I''ll follow up on that in a second but we are not trying to move the customer up. We''re trying to make Red Lobster increasingly relevant for more guests on more occasions and essentially broadening appeal as you said and we think in addition to what guests love about Red Lobster today, the addition of our wood fire grill and items from that grill that are a little more refined, a little more culinary for it, sometimes they are slightly higher priced, sometimes they are not, just gives guests more reason to come to Red Lobster and in combination with those things were helping offset any increased preference from lower priced dishes at lunch and our menu mix as you said was pretty benign.

Now, I think John if you go back to the Analyst Conference that we had in January. Kim talked about customer segmentation and there are two biggest customer sets, he described as sophisticates and indulgence, and the sophisticates actually the biggest one would have higher income demos. And the point there is simply to increase frequency among that base, that''s already their biggest base because they can afford increased frequency. So, that''s clearly what we want to do and we wan to do that while also making sure that we continue to be relevant to that second group of indulgence. And I think what they found is the changes they are making are appealing to both.

C. Bradford Richmond

Yeah, this is Brad. Kind of repeating some, but for us it really builds a better platform for Red Lobster to operate off/on and in terms of the wood grill or the statement it makes about the brand, it would appeals too I believe approximately a third of their items recently are coming from the wood grill through a combination, or direct plate and through their fresh fish offering. And so, it speaks a lot about the brand and how it can grow from there. In terms of the near-term expectations though, in terms of sales and all that I think we''ve mentioned, we didn''t expect it to be hard hitting driving promotion, it''s more about gaining brand position for future growth. But that being said, in the near term that fully met our expectations in terms of how the mix would occur, the impact of that mix would occur which I will tell you the mix impact was very slight because it''s how they''re (inaudible) more so than what was sold, if you would. And, so, when you look at that, it’s short term but over the course of the quarter we had, we fully met our expectations for the impact of the introduction of the wood fire grill.

John Ivankoe - JPMorgan

Okay, great. Thank you.

Matthew Stroud

We would like to thank everybody for joining us this morning. If you have further questions and follow ups, please contact us here at Orlando and we wish everybody a great day and a great week.

Operator

Ladies and gentlemen, this conference is available for digitalized replay af