Chris Bremer - Vice President, Investor Relations Wyman Roberts - Chief Executive Officer and President of Brinker International, Inc. Guy Constant - Executive Vice President, Chief Financial Officer and President of Global Business Development

David Palmer - RBC Capital Markets Jeffrey Bernstein - Barclays Chris O'Cull - KeyBanc Capital Markets Michael Kelter - Goldman Sachs Jeff Farmer - Wells Fargo John Ivankoe - JPMorgan Sara Senatore - Sanford Bernstein Robert Derrington - Wunderlich Securities John Glass - Morgan Stanley Howard Penney - Hedgeye Risk Management Alvin Concepcion - Citi Joe Buckley - Bank of America Merrill Lynch

Good morning, ladies and gentlemen, and welcome to the Brinker International Second Quarter of 2014 Conference Call. [Operator Instructions] It is now my pleasure to turn the floor over to your host, Mr. Chris Bremer, VP of Investor Relations. Sir, the floor is yours.

Thank you, Kate. Good morning, everyone, and welcome to Brinker International's second quarter fiscal 2014 earnings call, which is also being broadcast live over the internet. Before turning the call over, let me quickly remind you of our Safe Harbor regarding forward-looking statements. During our management comments and in our responses to your questions, certain items may be discussed which are not based entirely on historical facts. Any such items should be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All such statements are subject to risks and uncertainties, which could cause actual results to differ from those anticipated. Such risks and uncertainties include factors more completely described in this morning's press release and the company's filings with the SEC. On the call, we may refer to certain non-GAAP financial measures that management uses in its review of the business and believes will provide insight into the company's ongoing operation. Reconciliations are provided in the tables in the press release and on Brinker's website under the Financials section of the Investor tab. Consistent with prior practice, we'll be silent on intra-period sales or other key operating results yet to be reported as the data may not accurately reflect the final results of the quarter referenced. On our call today you will hear from Wyman Roberts, Chief Executive Officer and President of Brinker International; and Guy Constant, Chief Financial Officer and President of Global Business Development. Following their remarks, we will take your questions. Now I will turn the call over to Wyman.

Thanks, Chris. Good morning everyone. Thank you for joining us. Today I will share with you our company results for the second quarter, discuss some of the highlights from each of our brands as well as our domestic and international franchise business. And then I will turn the call over to Guy for in-depth look into the numbers. As noted in the press release this morning, Brinker reported second quarter earnings per share before special items of $0.59, representing 18% year-over-year increase in our 14th consecutive quarter of earnings growth. We also saw company-owned comp sales increase 0.8%. Overall traffic was down 1.5%. Before diving into the brand and results, I want to talk briefly about several dynamics we experienced as that related to space within the quarter. First, the timing of the holiday flip. The overall quarter was not impacted by the holiday flip. However within the quarter, the November period had one less close day than it did a year ago, making November sales higher than you would expect. And December's numbers were lower than you would expect because of one additional close day during the period. We also experienced some severe weather during the second quarter. The impact of more severe weather this year versus a year ago resulted in reduced sales by 50 basis points for the full quarter and by 150 basis points for December. So these challenges impacted the space as well. So that said, our sales results this quarter outperformed the competition, as measured by KNAPP-TRACK, by 60 basis points in October and as we implemented our more aggressive marketing plan at Chili's, that gap grew to more than 270 basis points on average for the November-December timeframe. So after tracking with the industry the back half of last fiscal year, we started to take share during the first quarter and have accelerated that trend in this quarter. Our ability to deliver positive sales, solid margin improvement and consistency across our three key businesses in the face of some extreme weather and continued mixed economic factors, is evidence that our strategies are working and the quality of the team is second to none. That coupled with our focus on spending our capital dollars wisely, is a key to the 18% earnings per share growth we delivered this quarter. Now let me touch on our three businesses. Second quarter is traditionally a busy time at Maggiano's and this year was no exception. As we wrapped up an impressive holiday season and delivered our 16th consecutive quarter of comp sales growth with 0.9% sales increase. Even with the previously outlined challenges and a shortened holiday season, Maggiano's saw record-breaking sales during this time, reporting the highest weekly numbers in the brand's history in the week of Christmas and breaking the all time daily sales record in mid-December. Banquets and delivery certainly contributed to this accomplishment as guests celebrated the season by dining with us at the restaurant or in the convenience of their homes and businesses. And as you know, we opened our newest Maggiano's in Annapolis last October and I am happy to say this location continues to deliver on our sales objectives as well as give us first hand working knowledge on what a smaller prototype can do for the brand. We have one more Maggiano's scheduled to open in the back half of this fiscal year and the development team is working hard and tracking to our goal to open six to eight new locations within the next two fiscal years. Our global business also saw another solid quarter with comp sales growth at positive 1.4%, marking a 3.5 year positive sales streak. We aggressively increased our presence around the world with new openings. During the second quarter our global partners opened seven new restaurants, expanding our international portfolio which currently stands at 291 restaurants in 32 countries and two territories outside the U.S. Additionally, we introduced our first street side street side Chili's Express to guests in Mexico City last month. Just a reminder, a Chili's Express is a unique prototype with a fast, casual look and feel. Because of the flexible business model, these restaurants are easily adaptable to various real estate opportunities. We currently have one Chili's Express in Canada located in the Edmonton airport and two more Chili's Express locations will open soon in the Middle East. We are excited about the additional growth potential this prototype could provide our international Chili's system. We are also encouraged by the enthusiasm our global partners have towards implementing key domestic initiatives. Kitchens of the Future, re-images and many of the labor efficiency programs are now being adopted overseas. Collectively, we believe these initiatives will ensure continued strong comp sales results as well as an improved business model leading to even greater desire to grow Chili's internationally. At Chili's, sales improved significantly from the first quarter, finishing the second quarter at plus 0.7%, traffic was down 1.9%. Our overall domestic franchise comp sales were down 0.7% for the second quarter. Even though many of our franchisees took a bigger hit due to weather with regard to their geography, they outperformed KNAPP by 1.1%. Midway through the second quarter we started to implement a more aggressive marketing strategy with multiple messages around innovation, value, and branding. And during our last call we outlined why we believe that increased media spend would be effective and our results in the second quarter kind of prove that out. We feel good about the messaging and the media mix we are now using and our current role out, which I will explain in just a moment, is supported by this new marketing plan. Our operations team led by Kelli Valade, continues to deliver a better dining out experience as evidenced by our record high satisfaction scores. And while the operators are managing the business as efficiently as ever, we are doing it without negatively impacting, or rather enhancing our guest experiences. Our overall value scores are also strengthening and that bodes well for future visitations. We continues our re-image program. We have completed 498 restaurants in 20-markets and we are seeing about a 4% sales lift. And that puts us above our hurdle levels for the invested capital. We are also progressing forward with the rollout of tabletop media and as of today, about 150 company-owned and 250 franchise restaurants are installed with this new technology. And we are still on track to complete a full rollout to the rest of our company-owned locations by the end of the fourth quarter. And we are excited to leverage this technology to enhance our current guest experience. Additionally, we are working with partners to rethink multiple aspects of our business with tabletop technologies. The possibilities are numerous and we are proud to be leading the way for the industry. We rolled out our delivery program to more than 450 restaurants identified as being located in trade areas that could support a delivery service. The program is focused on larger parties with a set minimum order. We are not delivering individual hamburgers. But while the base sales levels are modest, we believe with increased awareness and trial, delivery will become and nice ancillary business for Chili's much like it's become for Maggiano's. So we are still aggressively re-imaging restaurants, rolling out tabletop media, building delivery, as well as opening new restaurants. And even though it was a quite quarter for Chili's in regard to opening, we expect to open eight new restaurants this calendar year, ramping up to our long-term plan to open 10 to 12 new Chili's by the end of fiscal 2015. On the culinary side of the business, we are continuing our strategy of renovating our core menu and launching compelling food innovation for Chili's. Looking forward, we are excited by the launch of Fresh Mex, our enhanced Mexican platform which builds off core brand equity of Chili's highlighting the unique flavor profiles of our southwest heritage. Fresh Mex adds in freshness and quality in terms of ingredients and preparation to make it relevant for current guest needs. Today, Chili's Tex-Mex menu items like quesadillas, tacos and fajitas account for more than 15% of our entree mix. We are building from this position of strength and differentiation by adding some relevant new items such as two new Fresh Mex bowls, four new enchilada choices accompanied by the addition of tostadas and crispy tacos to our taco lineup. This breadth of new Fresh Mex items has also enabled us to feature some of these products as part of a pick two or three combination. And that’s offered at a very compelling price point. These new menu items deliver on key consumer benefits of great tasting, cravable flavors that are freshly prepared and customizable all at a great value. This product innovation is a benefit of our new kitchen equipment and also has very favorable cost to sales. We are excited by this innovation and the potential impact it can have on our top line, our guest food scores, and our cost to sales. Our operations team has spend the past several weeks preparing for the Fresh Mex rollout we introduced just two days ago and our marketing team has put all the media strategies behind it as well. And really the Mexican food category doesn’t come as a surprise to our guests. We have a lot of consumer acceptance with this category in Chili's. This isn't new territory for us, it's one of our biggest categories as well as differentiators of Chili's. So in closing, it was a solid quarter for Brinker despite some unforeseen challenges we faced along with the rest of the casual dining industry. As we look to the second half of this fiscal year, we are optimistic about the trajectory of our company because of the detailed strategies we have in place. Our momentum to drive earnings per share growth hasn’t wavered. We remained committed to stay in the course with concentrated focus on objectives to deliver top line growth, strong margins, and enhanced shareholder value. With that, I will turn it over to Guy to walk you through the financials.

Thank you, Wyman. As you just heard, our second quarter earnings per share before special items was $0.59, representing an 18% increase over the same quarter last year and the 14th consecutive quarter of year-over-year EPS growth. Second quarter revenues were $704.4 million, an increase of 2.1% over prior year. Total company-owned comparable restaurant sales increased 0.8%, driven by a 1.5% price increase, a 0.8% improvement in mix. Partially offset by a decline in traffic of 1.5%. Capacity was up 1.6%, driven primarily by the addition of the company-owned Chili's restaurants in Canada at the end of fiscal 2013. Weather negatively affected the quarter by approximately 50 basis points primarily due to harsh winter weather in December. Franchise and other revenues were $20 million, a decrease of $625,000 from prior year. This decrease was driven by a franchise capacity decline due to the acquired Canada restaurants a U.S. franchise comparable restaurant sales decline of 0.7%, and lower franchise and development fees. These factors were favorably offset by an international franchise, comparable restaurant sales increase of 1.4%. Cost of sales improved 50 basis points from prior year to 27.1%, driven by 40 basis points of favorable mix associated with the year-over-year change in promotions, the introduction of new menu items, and better waste control resulting from our new point-of-sale and back office systems. These improvements coupled with the favorable impact of menu pricing and other items of 40 basis points were partially offset by unfavorable commodities of 30 basis points, stemming from higher meat and poultry costs. Currently, 75% of commodities are contracted through the end of fiscal 2014 and approximately 40% are contracted through the end of calendar 2014. Given this visibility, we project the rate of commodity inflation to remain flat throughout calendar 2014. Restaurant labor improved 40 basis points to 32.1%, driven primarily by 50 basis points of productivity associated with our new kitchen equipment and server initiatives along with leverage on higher sales. This favorability was partially offset by a ten increase in manager salaries and bonus. As previously indicated, we were not anticipating a material increase in our health insurance costs related to Affordable Care Act because we were already offering credible health plans to all of our team members. And our recent enrollment results have confirmed this. With only a small enrollment increase for calendar 2014 and an expected annual increase in health insurance costs for the company consistent with normal healthcare inflation. Restaurant expense was $170 million or 60 basis points higher than prior year, mainly as a result of increased accruals for future advertising spend and higher workers' compensation insurance expense, which was largely affected by the lapping of a sizable credit in the second quarter of fiscal 2013. Depreciation expense increased slightly to $33.5 million due to recent investments in capital initiatives and the addition of the 11 restaurants in Canada, partially offset by an increase in fully depreciated assets. General and administrative expenses were $30.4 million, a decrease of $670,000 versus prior year, driven primarily by lower performance-based and other compensation expenses partially offset by an increase in professional fees and higher stock-based compensation cost. Interest expense was essentially flat to prior year. The tax rate before special charges was 31.3% versus 32.7% in the prior year, a decrease of 140 basis points driven by the impact of tax credits for workforce programs and deductions related to increased stock option exercises. Capital expenditures for the quarter were $39.8 million, with year-to-date cash flow from operations at $147.3 million. As Wyman said, we have completed 498 Chili's re-images to date and are still on track to have completed a total of about 620 reimages or roughly 75% of our company-owned Chili's system by the end of fiscal 2014. And the rollout of our new fryers is also well underway with about 215 restaurants completed to date and the remainder of the Chili's company-owned system installations occurring by the end of the fiscal year. During the quarter, we bought about 600,000 shares for $26.8 million. This brings our year-to-date share repurchases to $93.1 million or $2.2 million shares, leaving and outstanding authorization of about $453 million. And we ended the quarter with approximately $63 million of available cash on our balance sheet. So with recent macroeconomic trends and continued moderate job growth, our sales have rebounded from the first quarter. We are beating Knapp considerably and we're highly focused on the investment and sales driving efforts that are underway. These investments made over the past three years have set us up to deliver on some exciting initiatives. With our team service model, our guests are exposed to our best performing team members more frequently, as evidenced by the all time high guest scores Wyman mentioned earlier. Because of our investment in new kitchen equipment at Chili's, we can now offer innovative menu items like those within our new Fresh Mex platform. And the introduction of tabletop media is a guest facing extension of the other work we have done to update the look of our restaurants and create a relevant and dynamic guest dining experience. These investments coupled with our continued margin improvements have created an industry leading business model, a model that not only facilitates targeted development of new restaurants but also enables us to deliver consistent, reliable, double-digit annual EPS growth and steadily return ongoing value to our shareholders. With that, we can now open the line for questions.

(Operator Instructions) Our first question today is coming from David Palmer at RBC. Your line is live. David Palmer - RBC Capital Markets: Two quick questions, one on media weight, I don't know what color you can give us. I think you said that the media weight started to increase in the fiscal second quarter, perhaps even more so in the back half of the quarter than the first half. And it was my understanding that, perhaps, that increase that you started to accrue for on the P&L in terms of actual media weight would ramp through the year. So any color on that would be helpful. And secondly, are there any learnings about the tabletop technology and how that is performing in, I think you said that was in a couple hundred company stores or so. How is that performing in terms of sales? Thanks.

Sure. Hey, David, it's Wyman. Yes, so with regard to the media, we started the accrual at the beginning of the year because we had this plan set but the media weight levels in the actual higher spending didn’t hit until late November. So November-December we started with the revised media plan. And that plan is really now scheduled to roll for the rest of this fiscal year. With regard to the tabletop media, what we are seeing really positive from the standpoint of our guest interactions. You know the acceptance of the device on the table and the enjoyment that the guests are getting out of it and their level of interaction with it is very high. It's like 80% of our guest. So we are excited about how they are just accepting it in the restaurant. It's early to talk about, kind of financial results with it. It really is a combination of things. When we put tabletop in, we did it because it does three things for us. It really enhances our marketing. We think with the visual that you get there and the video, we get a much better marketing opportunity there. It provides some entertainment for our guests in the form of gaming. Right now it's targeted primarily at families but we see opportunities there. And then it's got those guest enabling functions, specifically the ability to swipe your credit cards and checkout when you are ready to go without having to engage the guest. So that’s what's happening today and it's all working pretty much as we had planned.

Our next today is coming from Jeffrey Bernstein at Barclays. Your line is live. Jeffrey Bernstein - Barclays: Two questions, one just from a guidance perspective and then a question on the Fresh Mex. The first, guidance, I mean I know there was no mention in the release, so it sounds like it's still all intact and I guess there's no January color despite the volatility we've seen which is consistent with prior practice. But in terms of kind of the full year, just wondering if you can talk, I think your prior guidance was for earnings of 13% to 18%. I think it was going to be skewed to the first half. It looks like now with the first half complete you did, what looks like 17%. So it doesn't seem like there's much of a skew first half-second half. So just wanted to clarify that. And obviously with the extreme weather, just wondering, month-to-month, how do you monitor the P&L with the weather issues? How do you manage what we've seen in December and January? And then I had a follow-up.

All right, Jeff, it's Guy. I guess my commentary on guidance would be, it is all intact. And you are right, we won't be providing any color on January going forward. As to your questions on how we manage the P&L, clearly when you have weather events it can be challenging. If you get some idea of the weather coming and the predictions are somewhat are good then you can manage it a little bit. But it's very hard to predict what you will see in terms of volume of traffic during the weather event. And then on the backside of a weather event sometimes you can see higher spikes in traffic than you might expect. So it is very challenging for our operators to manage the P&L particularly around labor when they are dealing with a weather event. And so it is what it is. We have to deal with it. Our operators are experienced in dealing with it. While every weather event is different and the impact can change but it certainly will have an impact on our labor productivity, particularly as we deal with these weather events.

I would just add, Jeff. I mean I just think our operators have become so good at getting themselves prepared, and then also getting themselves opened and ready for business, with weather and with other disasters that can kind of show up. So they are committed to making sure that there team members have jobs. You know that they are making money. So it's much as a business imperative for us but also it's what we need to do to make sure that our team members are able to come to work and make money. And so they really take that seriously and are really good at getting things up and running as quickly as possible. The good thing is, we hope that these weather events continue to happen on a Monday and Tuesday, like it look like it's going to happen this week. So that always helps. Jeffrey Bernstein - Barclays: Yes. And just the follow-up on the Fresh Mex. It's been in a full two days so I won't ask for too much sales color. But you mentioned that it is closer to your core, I guess, brand equity and I would seem to compare to last year which was pizza and flatbread, which as acknowledged, was a stretch for you. But when it's closer to your brand equity, I mean it would seem like you would view that as a positive because the consumer would trust the product. But yet there are plenty of people that would say there's just not as much incremental benefit because consumers already come for Mexican and I think you said it is more than a 15% of your mix. So whereas last year's pizza and flatbread you would think would drive much more incremental traffic because it was out of your core competency. So how do you think about the positives and the negatives of already offering such a big Mexican platform and how did perhaps the Fresh Mex perform in tests? Thanks.

Yeah. Well what we know from our research really and working with our guests as well as potential guests, is that when you are dealing with a concept that has better connectivity or relevance to the brand, you have got more credibility there, more willing or more likely to act on that then when you push yourself a little further out. And so with Fresh Mex we are pretty much in our wheelhouse. It's a product category that we get a lot of credibility for. Especially in various parts of the country, there is a little regionality here. And so we know based on the preferences that we will see with these new items that there is going to be big acceptance for it and that preference will drive some incremental traffic. And so we have known that Fresh Mex was a big idea since we -- and that the kitchens would allow us the potential to grow this category. Since we have rolled the kitchens, we have just been working very diligently for the last, really, almost 18 months to get it right. And to not just put new product out there but to renovate some of our current items, and that’s what we have done with this new category. And we are very proud of it. We would love to have you go out and try it and give us your feedback. Jeffrey Bernstein - Barclays: Any color on how it did in that 18 months worth of test? I know we tried it at your analyst day, but kind of early feedback from the testing that you did?

All our testing has been very positive, both in the preference that we have seen and the feedback. It's the value scores and food satisfaction scores have been significantly above what our hurdle levels are. So we are very optimistic about how it's going to play on the restaurants.

Thank you. Our next question today is coming from Chris O'Cull at KeyBanc. Your line is live. Chris O'Cull - KeyBanc Capital Markets: Just a follow up on the Fresh Mex question. Wyman, did you use any media during the test of those items or did people have to learn about the product when they came to the restaurant?

No media. So our testing model doesn’t use media. Just in-restaurant merchandizing and occasionally we will use direct mail or our email database to create some awareness levels outside the restaurant. But we don’t go with the on-air TV or other media. Chris O'Cull - KeyBanc Capital Markets: And just to follow up on your confidence around the traffic potential, could you measure guest frequency or intent to return during the test? Is there anything you can provide in terms of helping us understand where your confidence is coming from with traffic potential with this new....?

No, I think just from the overall preference. So it starts with, if you have got a lot of people eating something, that’s usually a pretty good indicator that you are going to drive some incremental with that even if you are working out for percentage basis. So just on the volume of the people that -- of our guests that chose those items. And then their scores relative to value, relative to flavor and taste, all were good indicators that they were going to be happy with this product and this introduction. That’s what we are basing our optimism on. Chris O'Cull - KeyBanc Capital Markets: Menu mix has benefited the comp the past few quarters, how will the new Mexican platform affect the check average?

It's going to have a lower check average but it's going to have a positive cost to sales percentage. And that margin should be pretty good. Chris O'Cull - KeyBanc Capital Markets: What type of traffic improvement do you need to see in order to offset, or do you need to see much of a traffic improvement to create positive profit contribution from the mix shift?

Well, because there will be slight impact to check, Chris, we obviously need to drive some incremental traffic. But we don’t believe it's material that we will need to drive in order to breakeven, so to speak. And obviously we believe the potential is even greater than that.

Thank you. Our next question today is coming from Michael Kelter at Goldman Sachs. Your line is live. Michael Kelter - Goldman Sachs: I wanted to ask about the tabletop devices. You mentioned on the guest satisfaction and positives on the top line. I want to ask about below the revenue line because if 50% of people are paying their own checks, why wouldn't you need less servers, in sense a good amount of a waiters time? And I ask partly because you guys have been so diligent in the past about taking advantage of opportunities to improve profitability, and this is one that seems you haven't fully explored yet.

Michael, this is Wyman. We are not -- we didn’t put tabletop media to work as a labor efficiency tool. That whole idea about guests swiping their checks, what we may see as we get more data and we get a better sense for how this is all working, is that that may get guests in and out of tables quicker which would improve throughput. Which would be a very positive thing to have in your restaurant obviously and also leverages your efficiency and leverages your labor model. So there is ways to get there without necessarily reducing the level of service. And so we think there is a lot of other opportunities that have that tabletop device will allow us to open up. Some of them may generate cost savings but we are much more focused right now on how we use that device to connect to our guests, to enable our servers to do a better job to drive traffic, to drive sales and to really grow the business that way. Michael Kelter - Goldman Sachs: And then switching gears, could you talk about how you think about the dividend and how that might evolve over the next one to two years as your CapEx around the remodels recedes. And I ask in light of comments you've made in the past about thinking of the dividend as a percent of free cash flow because to keep that current ratio intact, dividend to free cash flow, within the next two years you probably have to double your dividends. Is that something that's on the table?

Well, Michael, typically we have talked about it as a percent of EPS, that’s how we have targeted it over the past few years. But at the same time we do watch what percentage we spend on the dividend as a percent of our free cash flow. And you are correct to that, as our CapEx start to decline, the percent that we spent on the dividend as a percentage of free cash flow will start to go down. And I do think that’s an appropriate time for us to review the dividend policy and determine whether it's something that we want to change. It does present us with that opportunity and it's certainly something we will consider.

Thank you. Our next question today is coming from Karen Holthouse at Credit Suisse. Your line is live.

Hi, this is Alex [ph] filling in for Karen today. I have two questions. One, do you think you could better quantify what units you are seeing in deliveries per unit and add anything more specific about plans to drive awareness and the timing of the delivery rollout?

Yes. The delivery business right now is relatively small. I mean it's not a significant driver of our overall comp sales growth, so I wouldn’t. Now, we think the way we are going to grow awareness is first just almost organically, as people become aware of it in the restaurants. Then we have got in-restaurant merchandizing as well as we are leveraging our online and email databases that that awareness level we grow. We also have some grassroots efforts that we are using our management team to go out and really market to the community about this opportunity. So it's going to be a slower growth vehicle for us. But again we see it as being a real nice, an ancillary line of revenue that will work in these 450 or so restaurants that have primarily businesses around and that need this kind of service. And it doesn’t require us to add a lot of incremental cost, so again it's purely incremental.

And then just you had mentioned server initiatives as a driver of labor declines. Can you give a little more color about where exactly that’s coming from.

Yeah, Alex, this is Guy. So what the operations team has done, and they have really done it very very well, is this idea. And it's really what team service enabled us to do which was the ability for us to get our best servers in front of more guests as often as we can. And so as we look at the opportunity to help our guests or help our servers as a best job in the industry and touch more guests, giving our best servers the opportunity to work the best shifts and to cover larger table stations is something that we wanted to. Because we think it has all the three wins that we typically like. It's great for the guests because they get served by our best servers in the restaurants. It's great for the servers themselves because they earn more money through increased tips, and it's great for the company because it improves our labor productivity. And so the operations team in addition to all the benefit that they generated on the labor productivity side with the new kitchen equipment has also remained highly focused on driving that with our server group too and has driven excellent labor productivity gains in the front of house that we expect we will be able to continue.

Thank you. Our next question today is coming from Jeff Farmer at Wells Fargo. Your line is live. Jeff Farmer - Wells Fargo: Thank you. Just wanted to follow up on some of the earlier questions. So it looks like Mexican, third largest, it's actually your third major platform test in as many years, I followed pizza and flatbread last year and then steak, I think, two years ago. So with that just really two questions. Are your testing efforts proving to be any more predictive and could you remind us of what type of incremental transaction the steak platform drove two years ago? I think that was a pretty differentiated product for you guys and my memory serves to tell me that that was a pretty meaningful traffic driver for you guys?

Hey, Jeff, it's Guy. So you are right. This is really the fifth year in a row, Jeff, if you include lunch combos and 2 for 20 that rolled in the previous two years. But if you are talking about a unique single item platform, you are right. Steaks two years ago, pizza and flatbread last year, a little bit later last year than the steaks were and then Mexican this year. Steaks for us, we were running mix of steaks in the 2% range prior to rolling out the new stake platform which included more offerings and a better quality cut of beef. Another area where we were investing some of the margins improvements back in the food quality which we have consistently done over this time. Took that mix from 2% into the 7% or 8% range, and it was an offering that worked very very well for us. We saw a great traffic lift and sales performance a couple of years ago. Pizzas and flatbreads for us, to some extent people have indicated that it was a disappointment. We don’t feel that way. We feel like flatbreads are an item that we think will live on our menu for a long time. We think it's very attractive to guests that were lapsing or lapsed users of Chili's or perhaps don’t think casual dining as relevant as it might have been historically. Which we also think by the way is the type of guests we will attract with the bowls that we rolled out. So what we think about as we roll these items out is the idea that we get some short-term more immediate traffic benefit from an item like the enchiladas or the combos which are right center of the fairway, right in our wheelhouse, as Wyman said earlier, attractive to loyal Chili's guests. But then we can also add items like flatbreads and balls that while they might be longer-term traffic drivers, they are bringing back the types of guests that we think are important if we are going to see consistent, stable, long-term traffic growth of the brand which is obviously what our goal is. So we feel very good about the ability now as to add that, those two types of items onto our menu supported with media and to be able to execute it because of the increased capacity we have with the new kitchen equipment. Jeff Farmer - Wells Fargo: Thank you. And then just a quick follow up on that. You did touch on it, but just because as you said this is the fifth time you've been sort of testing these new platforms. Do you think that you've gotten a lot better at this or are your test results in fact more predictive of what you'll actually be seeing moving forward? And does that give you greater confidence in Mexican?

Yes. We have obviously, for the last five years, have been very aggressive at understanding how to evaluate innovation and how to take the research process, move it into test restaurants and then project what it's going to do when we roll it nationally. We think we have gotten better at it and that’s why we have this confidence in this latest rollout.

Thank you. Our next question today is coming from John Ivankoe at JPMorgan. Your line is live. John Ivankoe - JPMorgan: A couple of, I think pretty quick ones, if I may? First, we often times seems fast casual copy or adopt from casual dining, if you will. And this is one of the few examples that I can think of where maybe casual dining you guys have kind of dipped down to fast casual with a menu opportunity like Fresh Mex. So I'll ask the question directly. Did you benchmark against fast casual around price, quality, even quantity for example with the new Fresh Mex bowls. And I specifically ask that a lot of your consumers might be consuming at lunch and that lunch ticket for a Chili's customer might be a little bit higher than what it would normally be. And then I have some follow-ups.

John, it's Wyman. Yes, absolutely. We have benchmarked against the competition. And in this category there is some fast casual players as the competition. A good example is this isn't those items. We reintroduced or reformulated our tortilla, bringing in a new tortilla with this Mexican rollout and it's been benchmarked against what we consider the best in the industry. And it's not only a new product but it's new process for us and how we prepare our tortillas for our guests. And so we are benchmarking our food against what we consider the best in the industry and in some cases that is fast casual now. John Ivankoe - JPMorgan: Okay, and secondly, unrelated. I don't remember if you quantified what the new fryer benefit might be on a per store basis, but is that something that you could provide as we think about calendar '14?

Yes, we did John. The investment in the fryers is in the $17 million-$18 million range for the entire company on system. We expect to see $7 million to $8 million of benefit on the cost to sales line as a result. So call it 30 basis points or so benefit. John Ivankoe - JPMorgan: Okay, apologies for missing that. And then finally, Guy, and I think the question was asked earlier. How your free cash generation is expected to change and I think most of us are modeling that. But as you think about calendar '15, are there any projects that kind of replace the various kitchen of the futures, the technology, the fryers, what have you? Or should we be in our models and our expectations be thinking about a sub-$100 million CapEx number in the long term? Just trying to get a gauge of maybe some opportunities might be changing there.

No. I think as we sit right now, John, 150 to 160 in capital this year. Call it 125 to 130 range for the next year and then at or below $100 million fiscal '16. Based on the visibility we have today, we see that playing out. You know the one caveat I will always put on that is you know before we started this year we were thinking 130 to 140 and then this prior opportunity came up and it was a very high returning initiative for us, so we went ahead and did that. I guess what we would say is, we have reserved the rights that if we see a high return opportunity like that, that might involve some capital spent, that we would absolutely go ahead and do that if it's above the hurdle to the extent that we have been seeing with these latest investments. If we don’t, I think our track record over the last few years has shown that if we can't generate the kinds of returns for investments, we are happy to return it to shareholders.

Thank you. Our next question today is coming from Sara Senatore at Sanford Bernstein. Your line is live. Sara Senatore - Sanford Bernstein: Question about sort of the margins and the top line. Which is to say you've done an excellent job of managing costs, expanding margins substantially and ahead of even your targets that you laid out a few years ago. But if I look at this quarter, 30 basis points of margin expansion, essentially what I would probably expect to see on a, let's call it a plus 1 comp. So the puts and takes were, you're still getting a lot of the labor improvement but offsetting with a little bit more marketing and maybe some incentive compensation. Can you kind of characterize, going forward should we expect going forward that a more what I would call normalized relationship between margins and comps, such that a point of comp is somewhere in the, let's call it 30 basis points to margin. Or was this quarter somehow anomalous and we'll get back to -- and there's still plenty of room from your initiatives that we could get back to a place where the margin expansion is outsized relative to topline?

So thanks for the question Sara. I still think you should expect a better than normalized relationship between margin improvement and sales going forward. And here's some of the reasons why. So we do still have the momentum coming from the prior investment we talked about earlier. That we are really only just starting to do that and we won't be finished rolling that out till the end of the quarter. Menu platforms like Fresh Mex that carry a much lower cost of sales than the rest of our menu. As that platform gets traction and as mix settles in, we should see a benefit to the cost of sales line as a result. And of course, as I mentioned in my prepared remarks, we are seeing really a benign commodity inflation environment. Essentially expecting flat commodity inflation. So we should see benefit from a cost to sales line from all those. In labor, and again as I mentioned earlier, what the operators have been able to deliver in terms of front house productivity at the same time that they have been delivering on hard house productivity, I think just exemplifies the focus now that they have on margins and on leveraging this better business model going forward, demonstrating that they can handle multiple initiatives at the same time in delivering. So I would expect that to continue mostly due to the fact that it's good for our team members too. So the type of margin improvement we have been generating over the last few years has the full engagement all the way down to those who are taking care of the guests because they are winning as a result of these as well. So I think that environment that we have created has resulted in our operators continuing to search for other ways to continue to improve the business model and they have been very successful at doing that and deserve all the credit for doing so. Sara Senatore - Sanford Bernstein: Understood. And just so I can clarify to, I guess to the extent that we've had. So you'll have more tailwinds and then potentially things like the incentive comp or the marketing step up we wouldn't expect to see those potentially be as pronounced?

Yes, I would agree with that. Sara Senatore - Sanford Bernstein: Okay.

And I think the other thing that we feel like differentiates us, Sara, is the focus we have on returns when we make investments. And I don’t think that’s widespread across the industry. I think we have uniquely done that over the last three or four years and I think that’s part of the reason. We look at every single one of these initiates, just to reiterate, that it has to have those three wins. It has to be good for our team members, it has to be good for the guest and it has to be good for the company. And each of these initiatives has done that which I think is why they are sticking and they have traction when you might have seen historically that you can pick something for a while but when you get distracted and take your eye off of it, it tends to fall [ph] back down.

Thank you. Our next question today is coming from Robert Derrington at Wunderlich Securities. Your line is live. Robert Derrington - Wunderlich Securities: Guy, I've got a question. The other day at this industry conference we were at down in Florida, your tabletop partner made some optimist -- or what seemed to be some pretty optimistic comments about the contribution that they thought the Ziosk, the tabletop device, could add to sales. Can you give us your perspective on those?

Sure. Sure. Well, first we have a great partnership with Ziosk and we are glad to have them as a partner. I will also say they are selling a product, so you want to keep that in mind. And we have kind of outlined for you what we have seen and we have been in restaurant with this product now for over two years. So we have got a lot of experience. We think it does have the potential to be additive to check. There are some revenue opportunities there, but again, a lot of the focus and a lot of the reason and rationale we have put it in, is really because of the opportunity we see it having to help us to connect better with our guests and to drive a better relationship. Which will obviously we think drive traffic and frequency down the road but it's not as immediate as you put the thing on the table and immediately giving it the significant sales growth. So that’s kind of how I temper that. Robert Derrington - Wunderlich Securities: Wyman, if I understand it correctly, you essentially don't have much in the way of a CapEx spend for this. It essentially is covered by the game fees, is that right?

Correct, correct. Robert Derrington - Wunderlich Securities: Okay.

I mean the gaming revenue offset the capital expenditure. Robert Derrington - Wunderlich Securities: Okay. And then one last question, if I may. Looking at some of the marketing that you've done, especially some of the email information that you've directed towards your loyalty guests, your email users, seems to have a different element to it. Kind of an experiential marketing as opposed to just a fueling stop, you know moms and sons dinners, things like that. Can you give us any kind of a sense of kind of what the thought is there?

Yes. We are absolutely -- we are several years now into that email database, this larger commitment connecting with our guests at a deeper level. We are being smarter about that and we are better understanding how we work within the lives of our guests. And our tagline, more life happens here, is based on the truth that they told us that Chili's really does make things happen for them that are special. And so as we do events like these daddy-daughter nights, which have been unbelievably successful in our restaurants. We are tapping into that opportunity that Chili's provides that a lot of other competitors in this space don’t and can't. Where you get not only food but you get an emotional connection with those that you care about and that’s really what differentiates Chili's from a lot of other places when it happens at the table. And that’s why the campaign focuses on, hey, this is what happens at this table. Because that’s where our guests tell us makes Chili's so special for them. And the more we learn about them the more they share with us in the database, that opportunity to have an interaction where we understand that, hey, you have children, or you tend to come to Chili's for more of a social night out with friends, the more we will communicate to you in a relevant way around those experiences. And that’s kind of what you should be seeing as you engaged with us in the databases that messages are more appropriate for whatever your life needs are. Robert Derrington - Wunderlich Securities: One last thing if I could offer it. I would tell you that I visited a number of your restaurants recently, there's an awful lot of folks trying this Fresh Mex food.

Did you try it? Robert Derrington - Wunderlich Securities: Absolutely. It's terrific.

Thanks for the plus [ph].

Thank you. Our next question today is coming from John Glass at Morgan Stanley. Your line is live. John Glass - Morgan Stanley: First, just on the advertising, would you remind us are you ramping still into this higher spend rate? In other words, is what we saw in November and December a run rate or is it going to increase in the future? And could you also just remind me what the increase in GRPs or whatever, however you're measuring it, experienced in those first couple of months of the higher advertising?

Yes, it's a run rate. So we are not accelerating it. It is the new plan. It takes us up about 10% John, overall. But the weight levels, again, without giving you too much details that we wouldn’t want to share with competitors, the plan has got more intricacies than that in it that we think make it even more effective with regard to where we are spending the money, how we are sliding the weight. But it's roughly a 10% increase. John Glass - Morgan Stanley: Okay, not for the full year but just for the new portion of the year?

For the back half. John Glass - Morgan Stanley: Got it. Okay. And then just two of the, sort of more mundane questions. Guy, first of all, do you still feel comfortable that you can hit the $200 million in buyback this year? And I guess more importantly, that you can still reduce the shares to 66 -- to 68 million, which I think was the initial guidance, given that you're above that now, share price is more than it was before, maybe you bought a little less back at least that I had thought this quarter?

Yes. Two factors, John. The one you pointed out, we are probably buying back shares at a little higher price than we had originally planned. But my guess is that those on the call are probably okay with that circumstance. The second aspect would be that the second quarter for us, which I think is true of most restaurant companies, tends to be the lowest cash quarter of the year. So all along we had expectations that we might not get as much share purchase done in the second quarter as we might through other quarters. So we do still feel very comfortable that the dollars that were available that we thought at the start of the year will be available for the full year. John Glass - Morgan Stanley: Okay, and can G&A run down for the full year? I don't know if you've given specific guidance before, it's down first half. The performance of the company has been good although you cite maybe lower performance accruals, maybe that's from a year ago not on an absolute basis. But where do you expect G&A to shake out for the full year?

I think we still feel fairly comfortable, John, when we said flat at the start of the year. We still feel pretty comfortable that approximately flat is the right number.

Thank you. Our next question today is coming from Howard Penney at Hedgeye Risk Management. Your line is live. Howard Penney - Hedgeye Risk Management: I wanted to ask a question about something that I like to keep my integrity with, in issues that I've put forward to every company, and that's the declining traffic that you saw. I understand that you're outperforming KNAPP-TRACK, which might not really be the best benchmark for you to compare yourself, but that's a different and separate issue. But you're now down traffic, on down traffic this quarter versus a year ago. And I'm just wondering when you might -- I know you're not taking it seriously, but when we might see those trends begin to improve because at some point the alarm bells need to go off with the declining traffic. Thanks, those are my questions.

Sure, Howard, absolutely. And I think the alarm bells are going off. When you factor in the weather, we feel better about November-December when you factor in weather, that we are making progress on that issue. But when take Fresh Mex, for example. I mean it's a lower check average. It's in our wheelhouse. It's got broad preference and all of that is designed to drive traffic and to bring the traffic into the positive, state and grow it from there. So we absolutely have it as a top priority. We are not just looking at sales and we think our focus on margins has been very good and appropriate, but our focus on growing top line now through traffic improvements is really key going forward. So we hear you. Howard Penney - Hedgeye Risk Management: So, I mean you've done a better job than most in offsetting 'the macro-environment' with your initiatives that you started four or five years ago. But when we look at your trends should we -- I mean you use KNAPP-TRACK, and I just want to get back to this benchmark. KNAPP-TRACK is not the best benchmark for you to measure yourself against, I would think. And you've got other concepts out there that are doing a little bit better for you. Should we change our view as to what the right benchmark is? I mean I know you do that. You haven't used you pick two, I think, in your comments, Guy, in terms of a new product. And it has a strange eerie sound to Panera So I just, I don't know maybe I'm beating a drum that I don't need to beat but thank you.

Well, Howard, the way we look at it, so I think it's helpful on a broad call like this to use metrics that people are familiar with. And so Black Box, KNAPP-TRACK are ones that much of the industry is familiar with. Internally though, however, and I mean we also look at a set of benchmark competitors, I guess the way I would phrase it across, fast food across fast casual and casual dining. We think that group of more elite well run restaurant companies that are generating the kind of results that we would like to compare ourselves to. And so KNAPP's a benchmark but as we have said many times, our expectation is we should be beating that. We don’t want to be in there with the rest of the category, we want to be in there with the rest of those more elite benchmark competitors. Howard Penney - Hedgeye Risk Management: Perfect.

And we look at those brands, Howard. We do a lot of custom research and we look at them not just on sales but also on the strength of the brands. You know how are they winning, not just that they are winning. And so we study the category and the key competitors and benchmark competitors, as Guy said, very carefully. We absolutely don’t think that we have it all figured out and we look at the competitive set to help us understand exactly where we need to be moving as well.

Thank you. Our next question today is coming from Alvin Concepcion with Citi. Your line is live. Alvin Concepcion - Citi: Just another question related to fast casual. As you think about gaining share from fast casual at lunch time you've got several tools in your belt. You've got to go, delivery, value offerings, product innovations. I realize success will be based on a combo of those, but how would you rank them in terms of likely to be the most impactful and what has gained the most traction so far?

With regard to lunch, Alvin, I think product offering is the key. And a couple of years ago when we introduced our lunch menus, that made a big difference. So we are really addressing first and foremost the product offering that the guest is looking for. I think we are now looking at other guest needs like speed. So if you think about tabletops, it's putting that experience more in the hands of our guests with regard to checking out. That helps them getting out a little quicker at lunch and that will make us more competitive there. We also think there is technology that we can bring to bear with our online and our phone apps that will allow us to compete on that aspect of convenience and speed better. So we are working multiple angles to understand what it is that’s making fast casual work better for consumers and how do we make that -- how do we address those needs in our way, not copying somebody but address those fundamental needs in a way that resonates and fits within our brand and our business models. And we think we have got some good things in the mix right now. We have got some pretty exciting things in the hopper as well. Alvin Concepcion - Citi: Okay, great. And have you seen a major change in the promotional environment in the industry since the quarter ended, or if you're more comfortable talking about it since last quarter?

Hey, Alvin, it's Guy. No, not really. I mean I think one of the things that, and we have talked this before, is that in the casual dining space, there have been players in the space that have been discounting for quite some time. Others have entered into the fray in the last six to 12 months, call it. And it's not really working. The traction, if they see any at all, is short lived. And so I think most of the space has not dialed up on the discounting because it's really not working. We think this approach that we are following, which is providing value on our menu that guests can rely and trust and know is there every day, at food cost that makes sense for the company while still allowing our value scores to increase, is a better approach than offering short-timer yields or limited time offers. Alvin Concepcion - Citi: Great. Just one more, on your same-store sales guidance which was minus 1 to plus 1 for the year. It looks like you're on track to hitting the top end of that assuming weather doesn't continue to be a factor and you've also got easier comparisons over the next two quarters. So do you think guidance is conservative at this point?

We are not updating the guidance, Alvin, if that’s your question. Alvin Concepcion - Citi: No, not an update, but I mean do you feel like there is -- I mean historically, have you been conservative at this point of the year and in terms of guidance or pretty much....?

I think I would just reiterate what Wyman talked about, we are very excited about what we are doing with Fresh Mex and optimistic about where it could go and that’s our focus right now.

Thank you. Our next question today is coming from Joe Buckley of Bank of America. Your line is live. Joe Buckley - Bank of America Merrill Lynch: I just have two clarification questions. Firstly, at spend, I thought on prior calls you had indicated it would be up 10% for the full year, and I think in response to a question you indicated you're up 10% year-over-year in the second half. So wondering if you could clarify that for starters.

Yes, I can clarify that, Joe. The overall accrual is up 10% for the full year. So we are spending on basically seven or eight months so the weight is probably a little bit higher than that if you are looking at it for just the back half of the year. But the accrual is up 10% for the full year. Joe Buckley - Bank of America Merrill Lynch: Okay. And then, Guy, just to follow up on this share repurchase. I understand kind of the cash, the seasonal flow of the cash, the 600,000 shares looks low versus other second quarters. Just curious if there's anything else that factored into that number, if you are ahead of the market for some reason during the quarter or if you could comment on anything special that affected it?

What may be different, Joe, is we are a lot closer to the line on investment grade now than we have been for the past couple of years. So we have been able to aggressively add a little more debt in past years than we were able to this year. And obviously we are still drawing on our revolver to do some of the share repurchase. But we were further away from that line in past years, which I think, so we have been ticking up and getting closer to that line. Now we are a lot closer to the line so we don’t have as much opportunity on the debt side although there is still some opportunity there.

Thank you. Our next question today is coming from Nicole Miller-Regan at Piper Jaffray. Your line is live.

This is Josh [ph] on for Nicole. Guy, just wanted to circle back to your commentary on the COGS outlook. I understand that’s fairly benign. Is that across the entire basket or there some pockets of weakness buoyed [ph] by their -- offset by some pockets of strength. I think you had highlighted maybe beef and poultry as being on the upside. So just trying to get a sense of how that basket bounces to get back to the flat for the year.

Well, not surprisingly, Josh, seafood is the one commodity that’s under the most pressure right now but we use very little of that in our commodity basket, so it's not having as great an impact on us as it's having on others. And you are right, beef and poultry, and even dairy for us, are showing somewhat favorable. So we feel now we are in a good spot in terms of commodity. We are probably a little more locked in now than we have been historically at this time of the year. I think that’s a reflection of where we think prices are and where they might go going forward.

Thank you. Ladies and gentlemen, that is all time we have for questions. We will now return the floor for closing comments.

This concludes the call for today and we look forward to your participation in our third quarter earnings call on April 23. Thank you.

Thank you, ladies and gentlemen. This concludes today's conference call. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.