Chuy's Holdings, Inc.
Q4 2016 Earnings Call Transcript

Published: 1 Mar 2017

[Operator:]

Good day, everyone, and welcome to the Chuy's Holdings Incorporated Fourth Quarter 2016 Earnings Call. Today's call is being recorded. At this time, all participants have been placed in a listen-only mode and lines will be opened for your questions following the presentation. On today's call, we have Steve Hislop, President and Chief Executive Officer; and Jon Howie, Vice President and Chief Financial Officer of Chuy's Holdings, Incorporated. At this time, I'll turn over the conference over to Mr. Howie. Please go ahead, sir.

[Jon W. Howie:]

Thank you, operator, and good afternoon. By now, everyone should have access to our fourth quarter 2016 earnings release. It can also be found on our website at www.chuys.com, in the Investors section. Before we begin our review of formal remarks, I need to remind everyone that part of our discussions today will include forward-looking statements. These forward-looking statements are not guarantees of future performance and, therefore, you should not put undue reliance on them. These statements are also subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect. We refer all of you to our recent SEC filings for a more detailed discussion of the risks that could impact our future operating results and financial condition. With that out of the way, I would like to turn the call over to Steve.

[Steven J. Hislop:]

Thank you, Jon, and thank you to everyone for joining us on the call today. 2016 was a very good year for Chuy's. We managed to grow our revenue over 15% for the year, maintained positive comparable restaurant sales for the seventh year in a row, and produced adjusted net income growth of 17%. Our average annual unit volumes of 4.6 million continue to remain some of the best in the industry. From a top line standpoint, our growth continued to be led by new unit development. During 2016, we successfully expanded our store base by approximately 17% with the addition of 12 new Chuy's locations during the year, including one relocation. While it's still early, we are pleased with the initial results of our 2016 class. We've also been keeping track of a growing desire for convenience from our customers. And during 2016, we continued to make progress adding more delivery service to our current locations. At present, over half the company's units offer delivery and we plan to introduce additional locations during 2017. We believe this helped drive double-digit growth in our to-go sales during 2016. The current restaurant environment remains challenging, and we felt the impact of that in the fourth quarter in addition to some external events beyond our control. We increased our revenues during the quarter by 11.4% to $79.1 million. However, negative comparable restaurant sales in December resulted in a 1.1% decrease for the full quarter. Fourth quarter sales were negatively impacted by weather and the calendar shift of Christmas, which John will provide more detail around in a moment. Adjusted net income for the quarter was $3.1 million or $0.18 per diluted share. We continue to believe in the long-term strength of our brand, which is driven by our people staying focused on our habits, routines and fundamentals to provide all our guests made-from-scratch food at a great value and the VIP experience they expect. During the fourth quarter, we opened three new Chuy's restaurants in Rockville, Maryland; Corpus Christi, Texas' and Charlotte, North Carolina as part of a relocation. During 2017, we have opened two restaurants to-date, one in Cedar Park, Texas, just northwest of Austin, and one in Cumberland, Georgia, our third restaurant in the Atlanta metropolitan area. For 2017, we expect to open 12 to 14 new restaurants, which will be somewhat back-end loaded. We're excited about our 2017 development plan, which includes a healthy blend of new and existing markets, including our first restaurants in Denver, Chicago and Miami. We continue to target blended new unit sales of $3.75 million on a modest investment of $2.0 million to $2.1 million, yielding a targeted cash on cash return of 30%, which is as good as you'll find in the industry. We believe we have a huge runway of profitable growth ahead of us. With that, I'd now like to turn the call over to our CFO, Jon Howie, for a more detailed review of our fourth quarter results.

[Jon W. Howie:]

Thanks, Steve. Revenues increased 11.4% year-over-year to $79.1 million for the fourth quarter ended December 25, 2016. The increase included $10.9 million in incremental revenues from an additional 162 operating weeks produced by 16 new restaurants opened during and subsequent to the fourth quarter of last year. We had a total of approximately 1,019 operating weeks during the quarter of 2016. For the full year, revenue increased 15.2% year-over-year to $330.6 million. The increase included $47.0 million in incremental revenues from an additional 596 operating weeks produced by 22 new restaurants opened during and subsequent to fiscal 2015. We had a total of approximately 3,879 operating weeks during fiscal 2016. Comparable restaurant sales decreased 1.1% during the fourth quarter, a combination of a 1.3% increase in average check combined with a 2.4% decrease in traffic. Comparable restaurant sales were negatively affected by approximately 120 basis points due to unfavorable weather and the calendar shift of Christmas Day from a Friday to a Sunday. We also faced a 40 basis point headwind during the quarter from newer stores in our comp base that have not yet settled from their honeymoon into a normalized run rate. Effective pricing in the fourth quarter was approximately 1.5%. There were 61 restaurants in our comparable base at the end of the fourth quarter of 2016. As a reminder, we consider restaurants to be comparable in the first full quarter following 18 months of operation. Turning to a discussion of selected expense line items, cost of sales as a percentage of revenue improved 20 basis points year-over-year to 26.1%, driven largely by lower grocery, chicken and beef prices. Looking ahead, we expect cost of sales to be roughly flat for 2017 with the potential for more favorability earlier in the year versus later in 2017. Labor costs as a percentage of restaurant revenue increased 190 basis points to 35.3%, driven by ongoing wage rate pressures, operating inefficiencies from new unit development, and the deleverage of management labor, particularly our managers in training as a result of the back-end loaded nature of our 2016 restaurant opening schedule. Given the inflation in our hourly rates, we would expect labor pressure to continue in 2017. Restaurant operating cost as a percentage of revenue decreased 10 basis points to 14.3%. This decrease was a result of lower insurance cost, offset by higher general repairs and maintenance. Occupancy cost as a percentage of revenue increased approximately 10 basis points year-over-year to 7%, driven by higher rental expense as a percentage of sales in our newer locations, offset by lower real estate and personal property taxes in the current year. General and administrative expenses increased approximately $305,000 to $4 million in the fourth quarter. As a percentage of revenue, G&A decreased approximately 10 basis points year-over-year to 5.1%. This is primarily related to lower performance-based bonuses, offset by normal increases related to infrastructure to support our growth. Pre-opening expenses during the fourth of 2016 decreased approximately $340,000 to $1.2 million, resulting from the timing of expenses related to our new restaurant opening schedule. In summary, net income for the fourth quarter of 2016 increased to $2.3 million or $0.14 per diluted share compared to $0.2 million or $0.01 per diluted share in the year-ago period. This year's fourth quarter results includes store closure expenses of $1.1 million related to the lease termination, closure and relocation of one restaurant and the fourth quarter results for last year included an impairment charge of $4.4 million. Excluding the expenses related to the closure in the current year and the impairment in the prior year, adjusted net income increased to $3.1 million or $0.18 per diluted share in the fourth quarter of 2016 compared to adjusted net income of $3 million or $0.18 per diluted share in the fourth quarter of 2015. Our adjusted earnings for the fourth quarter reflects an effective tax rate of 19.8% compared to 30.7% in the same quarter last year. The lower rate reflects pending WOTC credits from prior years totaling approximately $167,000 after-tax, which were delayed prior to the PATH Act of the 2015 extending these lapsed credits through 2019. This resulted in a $0.01 per share benefit for the quarter and for the year. We have included a reconciliation from GAAP net income to adjusted net income in the accompanying financial tables of our earnings release. We ended the quarter with $13.7 million of cash on the balance sheet and we currently have no debt. With respect to our 2017 outlook, we are providing the following annual guidance. We would remind you that 2017 is a 53-week year and our guidance includes an extra week, which will occur in our fourth quarter. We currently expect annual diluted net income per share of $1.11 to $1.15. Included in our EPS expectation is a positive $0.05 per diluted share impact from the extra week in the fourth quarter. Our annual diluted net income per share guidance for 2016 includes the following assumptions. We expect comparable restaurant sales growth of 1% to 2% on a comparable 52-week basis. Incorporated in our full year comparable store sales growth is a negative 50 basis point impact resulting from the strategic cannibalizations of two high-volume restaurants in the Austin area with the opening of our Cedar Park restaurant in late January. While this will help our system both from an operational and a return standpoint over the long term, we expect it to have a near-term impact on comparable sales and profitability of approximately $0.03 a share. We expect restaurant pre-opening expenses of $6 million to $6.5 million. We expect G&A expenses between $20.6 million and $21.1 million. While the expected year-over-year growth in G&A dollars is greater than our historical run rate, our 2017 G&A guidance includes investment spending related to office space expansion which will include a new test kitchen, senior level personnel and several technology upgrades, which will all benefit our business over the long term. In addition, we are in our fifth year of being a public company which requires additional professional fee associated with becoming SOX compliant. Our effective tax rate is estimated to be between 29% and 31%. We expect annual weighted average diluted shares outstanding of 17 million to 17.1 million shares, and we expect to open 12 to 14 new Chuy's restaurants. Lastly, our capital expenditures, net of tenant improvement allowances, are projected to be between $39 million and $44 million. Now I'll turn the call back over to Steve to wrap up.

[Steven J. Hislop:]

Thanks, Jon. In closing, we remain confident in our long-term plan. The broad appeal of the Chuy's concept, our historical unit economics and flexible real estate strategy, combined with our modest store base size, presents us with a large runway of opportunity for continued expansion. Before I turn the call back over to the operator for questions, I'd like to take a moment to thank all of our Chuy's employees. Our success has always been a testament to the hard work and dedication to earning the dollar every single day. With that, we are happy to answer any questions. Thank you.

[Operator:]

. And we'll take our first question from David Tarantino with Robert W. Baird. Please go ahead.

[David E. Tarantino:]

Hi, good afternoon. Jon, my first question is on the performance for the new units. It looks like the revenue contribution, at least the way we calculate it, came in a little soft in Q4. Yet, I think Steve mentioned that you're pleased with the 2016 class. So can you perhaps reconcile that and comment on how the new units are performing?

[Jon W. Howie:]

Sure, I think you're referring to the incremental sales versus incremental weeks. If you look at, we had that happen last quarter as well. Remember, this is our lowest indexing quarter for the year. But with that said, it is down over last year. If you go back and compare that to 2014 though, it's down a little bit, but not as much. It's down about 4.8%. And if you remember what we said last year, 2015 stores were performing a little above our target. If you look at that calculation for the full year, which I believe you can get to that in the full-year information that we gave you, that AUV is still over $4 million and we expect it to settle in that $3.7 million range.

[David E. Tarantino:]

Great. So was there anything unusual about Q4? I guess if I annualize Q4, I would come up with something lower than that. Is there something wrong with doing that calculation or perhaps something in the quarter?

[Jon W. Howie:]

Well, I think with the weather and Christmas both, I mean you're talking that alone was about 120 basis points. So I don't know that that makes sense doing that.

[Steven J. Hislop:]

And the key thing is, as we already mentioned to you, David, is our lowest indexing quarter for AUV average sales is the fourth quarter.

[David E. Tarantino:]

Understood, great. Thank you. And then, Steve, on the G&A investments that you're making, are those a new layer of costs that you're going to have going forward or is there anything in there that's maybe one-time that won't continue beyond 2017?

[Jon W. Howie:]

For the most part, it is some investment. This is Jon, I'm sorry David. For the most part, it's the expansion into the office space. I mean for those of you on the call that have visited our office, you know how packed it is here. We're just expanding next door. We're not going to a new office, so we're expanding next door to keep kind of our Chuy's fill here. So that alone is about $400,000 a year, and so that will continue on. We've brought in a internal counsel in the current year which will continue on. SOX will be an expense which will continue on, IT investments. So most of it, David, are expenses going on. The biggest item of that that I would say is more incremental this year than kind of our normal is again the option expense. I think for those of you on the phone, I've always talked about G&A. We kind of view that as 70% of our store growth. And if you do that calculation, we'd have about, at the high-end about 18% store growth. So it'd be about 13% on our G&A. We're obviously a little over that. But the investments that we're talking about are kind of the incremental variance related to that, and the biggest one is option which we've talked about. We're going to be in our fourth year of vesting for that this year. So next year that actually ought to come down a little bit. And so we'll see some leverage on that and we should get back to kind of that 70% of the growth rate next year.

[David E. Tarantino:]

Great. Thank you very much.

[Steven J. Hislop:]

Thanks, David.

[Operator:]

Moving along, we'll take our next question from Will Slabaugh with Stephens. Please go ahead.

[Will Slabaugh:]

Yeah. Thanks, guys. I had a question on to-go sales. You mentioned that side of your business was growing at a double-digit rate. So I wonder if you'd talk about what you've done historically to drive that business and what you see more as the opportunity. And then I had a follow-up on delivery as well.

[Steven J. Hislop:]

Yeah. The big thing is, as you know, when I first got here, we didn't have really any delivery services. I think our first one came in around 2009. So over the years, we've actually added on as we started getting into these markets and having multiple stores in the market. Where it made sense, we started adding on some delivery services that we vetted out, made sure that they represent us very, very well. So that's a big thing. And from their perspective, we use websites, their social and e-blast to get those out. We also have the magnets on our own doors. But as I mentioned to you, we're continuing that and you'll see us continue to roll more stores into the delivery side of the business.

[Will Slabaugh:]

Okay. And then on pre-opening, that was – looks to be just a little bit higher on a per restaurant basis for 2017 as well. So I'm curious if that has to do with the new markets. And then also could you talk a little bit more about what you're doing in some of these newer markets to help ensure some stronger unit openings?

[Jon W. Howie:]

Hey, Will, this is Jon. Yeah, that does have to do with the some of the new markets, some of the higher rents. Obviously a lot of that has to do with non-cash rents, is up a little bit than what it's been in prior years. We look at – it normally takes from when we take over the store about four months to build that. So we've got that non-cash rent and it's been higher this year than it has been in the past. And also in these new markets, we don't have any stores nearby, like in Chicago and Denver. So our travel cost is going to be a little higher for our trainers.

[Steven J. Hislop:]

Yeah. And as far as, David, going to new markets, obviously with our growth, we're kind of used to going into new markets over time. But obviously, it's always evolving with us. You know a couple years ago at the beginning of 2015, you saw us put all our defining differences on our menu. Some of the basics that we still do all the time as we go in there, we've already engaged three PR firms in each of these three areas that is a boutique PR firm that is already talking about the local management that's bringing Chuy's to their town. We start with each of them at the Redfish Rally six months before we've ever opened with them where we deal with a lot of Texas Exes, we deal with a lot of bloggers. We do get on all the cooking shows. We have Elvis driving around in the area in a pink Cadillac, so people write about it. So we're very well versed in getting in in front of the market and trying to really introduce our defining differences especially compared to anybody in the casual segment that's up there. And again, why we chose these markets were of three basic reasons. Number one, the propensity for Mexican food and eating it, it's very good. It's also a great competition up there, which we like. We like going right next to it. And then the population bases are so strong for us. So those are the three main reasons we decide there. We've been working on these three markets from a PR standpoint for at least the last three months.

[Will Slabaugh:]

Okay. Thanks guys.

[Steven J. Hislop:]

Thanks, Will.

[Operator:]

Our next question comes from Chris O'Cull with KeyBanc.

[Chris O'Cull:]

Thanks, good afternoon guys.

[Steven J. Hislop:]

Hi, Chris.

[Chris O'Cull:]

Jon, would you walk us through the primary puts and takes that help us understand how you get the relatively flat earnings in 2017 when you exclude the extra operating week?

[Jon W. Howie:]

Sure. I mean, basically the extra operating week, we also have the, let's just take the high side of that range. 115, you take the operating week as 10. So let's take the low end, for instance, 111, take the operating week, you get to 106 and then that's the cannibalization of the 183 and the Round Rock is about $0.03 a share because we plan on we're going to lose about 4% in one store and about 8% in the other is what we're thinking. And that's pretty significant given those volumes of stores. And then the other significant, I guess, decrease or decrease in our EPS is our extra investment in the G&A cost. That's probably another about $0.03 to $0.04.

[Chris O'Cull:]

What do you think labor inflation, at the store level, what kind of impact do you think it's going to have on year-over-year earnings?

[Jon W. Howie:]

Currently, we're estimating about 2.5% inflation is what we're thinking. We're thinking it's a little abnormally high this year. It's running around 4%, just a tad under there for the year. We did see a drop off a little in the fourth quarter from the third quarter. So that's why we think kind of our estimate is going to come to fruition because what we found was we were little under market in some of these locations. We're losing a lot of long-term employees. So we needed to bump up those dollars to get some market adjustment. So we believe that 4% last year was more related to that and we will have some more normalized inflation next year because we're not in the markets where we're having to deal with the minimum wage increases, substantial increases. If that's the case, with a 1.5% increase, we're looking at 40 basis points to 50 basis points when you're looking at our labor increase.

[Chris O'Cull:]

Okay. That's really helpful. And then, Jon, can you walk us through the profitability of a delivery order compared to a carryout order. I wasn't sure if you guys subsidized some of the charge, the third-party delivery charge for the consumer or is it all passed on to the consumer?

[Jon W. Howie:]

You know it really depends on the delivery service. But right now, we are charged. We kind of take that that burden on ourselves for the most part. It ranges anywhere from 20% to 30%. We kind of treat that as the labor costs associated with delivering that. We do have in some of our markets a little less charge just for delivery, just for the packaging, but not in all markets. But the delivery is just, like I say, it's a charge that we bear for the customer. We're looking at possibly consolidating some of that and seeing if we can get better pricing, but currently it's about 20% to 30%.

[Steven J. Hislop:]

And that's pretty traditional out there, Chris. That's what they all are.

[Chris O'Cull:]

Are you making – I mean, it would seem like that would erode a lot of your profitability on those orders. I mean, do you feel like you're getting enough incremental traffic to support that low margin on those orders? Are you concerned at all about cannibalization on carry out?

[Steven J. Hislop:]

Well, Chris, at the end of the day, for a company like us, that we have about $4.7 million, $4.6 million AUV. Our comp stores are over 10%. When I think I joined the company, we were more in that 5.5% to 6% level. So you definitely need to see the increased traffic for it to make sense and we're seeing that as we add them on.

[Chris O'Cull:]

Okay. Okay great. Thanks guys. I appreciate it.

[Steven J. Hislop:]

Thanks Chris.

[Operator:]

And we will take our next question from Nick Setyan with Wedbush Securities. Please go ahead.

[Nick Setyan:]

Hi, thank you. So I know it's early but is there actually like – what kind of cannibalization are you actually seeing from Round Rock location thus far. I mean, I know there is big lines in those other two locations. So are you actually seeing a big impact or maybe some of those customers are actually now getting in without as big of a wait?

[Jon W. Howie:]

Actually, it's been quite choppy to be quite honest, Nick, since we've opened it. And we did open it right at the end of January. So, we really don't have much experience yet, but we are seeing some cannibalization in those two stores currently.

[Steven J. Hislop:]

Right around what we projected.

[Jon W. Howie:]

Yeah.

[Nick Setyan:]

Okay. And what about the actual performance of the new unit? Is that the in line or above your expectation at least early on?

[Steven J. Hislop:]

We're pleased with it.

[Jon W. Howie:]

We are very pleased with it, yeah.

[Nick Setyan:]

Okay. You've talked about the back-end nature of the opening. Do you mind maybe giving us what the cadence, early cadence is going to look like?

[Jon W. Howie:]

Yeah. We are thinking about a third of the stores are going to be opened in the first half and two-thirds in the back half. There is currently quite honestly with some of the new markets we're going in and some of the permitting, it's jostling around a little bit but I'll give you some of the cadence. We think there is going to be five stores in the first half of the year with two in the first quarter, three in the second quarter and then four to five in each of the third and fourth quarters, depending upon how that flows.

[Nick Setyan:]

Got it. And you've talked about the impact of the Round Rock store on the comps. Could you maybe comment on the start to the year, and I know December was soft and industry data or a lot of the restaurants that are reporting, they are talking about the softness in January. How does that color your annual comp guidance?

[Steven J. Hislop:]

You know, we we're at real quick, we are nine weeks into our year and we did have the, like we talked about in December, and we're basically flat to a little down as we've rolled into this year right now.

[Jon W. Howie:]

And how it got done in the guidance, Nick, is we're going to be kind of flattish in the first quarter because we're rolling over 3.2%, but as we progress during the year, we are rolling over some easier comps. So I have that built in a little bit in the back half.

[Nick Setyan:]

Perfect. Thank you.

[Steven J. Hislop:]

Thanks, Nick.

[Operator:]

Our next question comes from Andrew Strelzik with BMO Capital Markets. Please go ahead.

[Andrew Strelzik:]

Hey, good afternoon. First on the comp guidance, appreciate the color you just provided. It does imply still once you back out some of the weather stuff, in two years that would be a little lower than what you'd been doing before and I appreciate the cannibalization that you mention. I'm wondering how you're thinking about that though in the context of the industry. Are you just assuming kind of flattish industry trends or do you not really contemplate that when you're thinking about the guidance?

[Jon W. Howie:]

Yeah, I mean we contemplate that for sure, but from what we're seeing, it's soft and we're saying 1% to 2%. Currently with the cannibalization, we're probably looking on the lower end of that, to be quite honest, given the situation with the industry. But no, we take that in consideration.

[Andrew Strelzik:]

Okay. And on the food costs, sounds like you're coming in a little on the low end maybe of what you had previously expected. We're also hearing some concerns about avocado supply and prices spiking there. So I guess, just wondering what's changed and how are thinking about the avocados or what are you seeing in the avocado market and how does that play into your expectation on food costs?

[Jon W. Howie:]

Well, I think we said that and we've been saying, we thought it was flat to up. We still think it's the – contrary to what some others are saying, we think it's going to be, maybe, flat to slightly up from a commodity inflation standpoint. What we're seeing is obviously we have, with our contract in with meat, we're down a pretty good percentage high-single digits in beef cost going into next year. But we are being some increases in our groceries. So we had some long-term contracts in those groceries, when we brought in our new Director of Culinary and those are rolling out and they're going to be – we're going to have new contracts with much higher prices on those areas. And produce is realty the wild card out there. There's no way that we can hedge that. And as you know, with, like you just mentioned, the avocado prices and in lime prices, we factor in some definitely inflation in the produce section.

[Andrew Strelzik:]

Okay. If I could squeeze one more in, in the quarter, the other operating cost line, on a per store basis at least, the way that we look at it came in much better than it had been in the last couple of quarters. I know you mentioned insurance favorability, was there anything else kind of impacting that to the favorable side or was there an effort made, maybe, with the comps to manage that line better?

[Jon W. Howie:]

Basically just kind of our best practices in managing that line. But, yeah, the insurance, we had quite a bit of adjustments in the management – or the insurance. We had some rebates with the Texas Restaurant Association workers comp and some other credit associated with that. So those alone were probably $300,000.

[Andrew Strelzik:]

All right. Great. Thank you very much.

[Steven J. Hislop:]

Thanks, Andrew.

[Operator:]

We will take our next question from Brian Vaccaro with Raymond James.

[Brian M. Vaccaro:]

Thank you and good evening. Steve, I just wanted to ask you about the real estate environment. What are you seeing in terms of the availability of sites as you build out the pipeline into 2018 and beyond? And then also if you could just it seems that development cost continue to increase for the industry. It sounds like your cash investments sticking in that $2.0 million to $2.1 million range you said. So, what are some of the initiatives that you're employing to keep those development costs in check? The

[Steven J. Hislop:]

Well, the key thing for us as we are very chameleon-like in our approach. We want always going to have to find the best site but that best site might be an existing restaurant that's already there. It might be bottom of an office building, bottom of a residential building. It might be NCAP Center. So that helps us to be very chameleon-like in our approach and we've been able to really work on that. But as far as the availability you know it's always been tough fight to find great real estate and all the players are out there still. This is the first time I've seen anything loosen up a little bit on some renegotiating or negotiating on an existing prices down a little bit, which has been good for us. But that's how we've been able to do it specifically being very chameleon-like in our approach. So as I've mentioned to everybody the one thing that we'll not change as we grow, we can deal with dining rooms that might be different sizes, but our kitchen has to fit perfectly if that's a remodel type thing and that's always we've been able to do.

[Brian M. Vaccaro:]

Okay, that's helpful. I wanted to circle back just on the off premise sales question, what's the percent of sales off premise at the end of 2016?

[Steven J. Hislop:]

It goes a little over 10%, comp.

[Brian M. Vaccaro:]

A little over 10%.

[Jon W. Howie:]

10% for comp stores, yeah.

[Steven J. Hislop:]

Yeah, 10.5%.

[Brian M. Vaccaro:]

10.5%, okay, great. And then Jon just last one, on the extra week can you remind us where that shows up in terms of incremental leverage of costs that are accrued for weekly versus monthly?

[Jon W. Howie:]

It'll show up a little bit on the operating line. Obviously, there's some variable comp there that will show up a little bit on the G&A line although the biggest portion of that is your labor. So it's not going to show as much there and then occupancy.

[Brian M. Vaccaro:]

Okay. And then depreciation I would assume as well?

[Jon W. Howie:]

Yes. And quite, honestly, there is a little bit in labor as well.

[Brian M. Vaccaro:]

Okay, all right. That's helpful. Thank you.

[Jon W. Howie:]

Very little.

[Operator:]

It appears there are no further questions at this time. Mr., Hislop, I would like to turn the conference back over to you for any additional or closing remarks.

[Steven J. Hislop:]

Thank you so much. Jon and I appreciate your continued interest in Chuy's and we will always be available to answer any and all questions. Again, thank you again and have a good evening.

[Operator:]

That does conclude today's presentation. Thank you for your participation. You may now disconnect.