Chris Meyer – Vice President-Investor Relations Elizabeth A. Smith – Chairman & Chief Executive Officer David J. Deno – Chief Financial Officer & Executive Vice President.

John S. Glass – Morgan Stanley Joseph Buckley – BofA Merrill Lynch Andrew Barish – Jefferies John W. Ivankoe – JPMorgan Chase & Co Howard Penney – Hedgeye Management Matthew J. DiFrisco – Buckingham Research Group Jeffrey Andrew Bernstein – Barclays Capital Sharon Zackfia – William Blair & Company L.L.C., Michael W.

Gallo – CL King & Associates, Inc., Alton Stump – Longbow Research.

Good day, everyone, and welcome to the Bloomin’ Brands Incorporated Third Quarter 2014 Results Conference Call. Today’s conference is being recorded. At this time, I’m pleased to turn the conference over to Chris Meyer, Vice President of Investor Relations. Please go ahead, sir..

Thanks, Jennifer. Good morning, everyone, and thank you for joining us. With me on today’s call are Liz Smith, our CEO; and Dave Deno, Executive Vice President and Chief Financial & Administrative Officer. By now, you should have access to our fiscal third quarter 2014 earnings release.

It can also be found on our website at www.bloominbrands.com in the Investors section. Throughout this conference call, we will be presenting non-GAAP financial measures, including adjusted restaurant-level operating margin, adjusted income from operations, adjusted net income and adjusted diluted earnings per share.

This information is not calculated in accordance with U.S. GAAP and may be calculated differently than other companies’ similar non-GAAP information. Quantitative reconciliations of our non-GAAP financial measures to their most directly comparable GAAP measures appear in our earnings release on our website, as previously described.

Before we begin our formal remarks, I’d like to remind everyone that part of our discussion today will include forward-looking statements, including our discussion of growth strategies and financial guidance. Such forward-looking statements are not guarantees of future performance, and therefore, you should not put undue reliance on them.

These statements are subject to numerous risks and uncertainties that could cause actual results to differ from our forward-looking statements. Some of these risks are mentioned in our earnings release. Others are discussed in our Form 10-K filed with the SEC on March 3, 2014, and subsequent filings, which are available at www.sec.gov.

During today’s call, we’ll provide a recap of our financial performance for the fiscal third quarter 2014, an overview of company highlights, a discussion regarding progress on key strategic objectives and an update on annual guidance. Once we’ve completed these remarks, we’ll open up the call for questions.

With that, I would now like to turn the call over to Liz Smith..

at Outback comp sales grew 4.8% in the third quarter. This was an impressive 440 basis points better than Knapp. All aspects of the Outback business performed extremely well in the quarter. As a reminder, last quarter, we discussed our intention to reclaim our steak authority.

While we are pleased with results of our multi-year effort to expand occasions through a broadened menu, it was time to remind customers of our category leading steak credentials.

We started this work in the third quarter and for the balance of 2014 and into 2015, you will see an increased focus on strategies and initiatives that celebrate our steak leadership, including new steak-centric LTOs, plate presentations and advertising.

We will still continue to broaden occasions with ideas like $4 Finds menu, but our messaging will balance steak innovations with exploration. At Carrabba’s, our comp sales were down 1.2% in Q3, which was consistent with the second quarter. While this result is disappointing, it was not entirely unexpected.

As we made clear on the Q2 call, our challenge at Carrabba’s is not just the marketing issue that has a short-term fix. We acknowledged that our new menu was an improvement, but did not go far enough.

We are working on the next innovation of our core menu that will expand lighter options, increased variety and provide a better range of affordable price points. You can expect this new menu to roll out in the back half of 2015. In the interim, we will use LTOs and marketing programs to add variety and affordability to drive traffic.

We remain confident in the long-term health of this brand. Carrabba’s is the consumers number three overall favorite brand in casual dining and is the undisputed quality leader and consumer preference for authentic Italian dining. We have a strong foundation to build upon.

Bonefish Grills Q3 comp sales were 2.6%, which was a 230-basis-point improvement from the second quarter. We introduced our new core menu in the third quarter. And although it is still early, all of the initial metrics surrounding the menu launch and customers feedback have been very encouraging.

The introduction of new platforms such as our (indiscernible) sections have been particularly well received by our guests. The dinner revitalization strategy of Bonefish will not stop with the update to our core menu. We now have a robust pipeline which includes a new bar menu and seasonal menu changes. Continuous innovation is the DNA of this brand.

A culinary forward brand like Bonefish, which is more properly positioned as polished demands continuous innovation. Bonefish customers have higher expectations and you will see us move away from more CDR like promotional drivers such as Bang Wednesday.

Bang Wednesday has certainly driven traffic, but it was a more promotional crowd than the typical Bonefish customer. Our renewed focus will ensure that we provide the quality and food exploration opportunities that Bonefish customers love and expect from the brand at a compiling price.

We’ve recently brought in Cliff Pleau from Seasons 52 to be our executive chef. Cliff brings an agility and expertise that will complement the brands continuous innovation philosophy. Fleming’s continues to perform at a very high level. Q3 comps were 4.8%, which was 140 basis points ahead of the KNAPP-TRACK high-end steakhouses index.

This is the 19th consecutive quarter that Fleming’s has had positive comps. Fleming’s continues to bring a high-level of innovation and indulgence to the table and is well positioned in the competitive high-end steak category. Overall, the improvement at dinner was complemented by continued success with our weekday lunch rolled out.

At the end of the third quarter, approximately 59% of Outback locations and 54% of Carrabba’s locations were offering weekday lunch. This is up from 56% for Outback and 51% for Carrabba’s in Q2.

Lunch sales continue to grow in restaurants that have had lunch for more than one year despite the lack of boarder marketing mediums, such as television and radio to promote the day part. We continue to evaluate our opportunities to expand the roll out to additional locations and this may ultimately allow us to further promote the lunch occasion.

To sum it up, we had a strong performance across the portfolio in the U.S. Now on the international front. Our business in Brazil continues to perform at a high level. Comp sales remain strong and cash flow continues to grow. We are opening new restaurants as quickly as possible and we will open 16 Outback this year.

We remain on track to open our first Carrabba’s next year at the end of the first quarter. Italian dining is the number two segment in Brazil and no clear category leader exists, providing us with significant runway for growth.

The entire team in Brazil is excited about this new venture and we look forward to updating you on our progress early next year. Turning to our strategic actions, our third quarter result also reflect the impact of several decisions. The first of these measures is the plan to close 34 underperforming restaurants in Korea.

The market in Korea started to softness last November and we began to examine all potential options to stabilize this business and establish a path for future growth. As part of this effort, we conducted extensive research and analysis to determine the appropriate geographic footprint, given the CDR industry dynamics.

This included determining the optimal asset base and trade areas that allow to move forward with a healthy business.

In addition, (indiscernible) our new President in Korea has surrounded himself with a world-class team that knows how to effectively ring fence and re-engineer a business that is facing significant headwinds and return it to stability and growth.

Although the decision to close restaurants is never easy, we identified 34 locations that were either currently under-performing or were poorly positioned in a mature and saturated CDR market. Our analytics suggest that the closure of these locations will remove the majority of our financial risk.

A smaller fleet of stronger restaurants provides with the best opportunity to strengthen the business while still maintaining an adequate market presence from which to leverage our economies of scale and consumer awareness. Dave will outline the financial implications of our actions in Korea.

In addition to our efforts in Korea, we have decided to sell our Roy’s business. Roy’s is a terrific founder-inspired brand that is constantly pushing the envelop with innovative Pacific Rim cuisine. The brand, however, is a small part of our portfolio and not a priority for investment, given competing opportunities.

Roy’s deserves to be in a situation where it can get it the time, attention and resources it needs to grow. We are confident that they will thrive under new ownership. Finally, we are committed to building a world-class infrastructure at our Home Office in Tampa that is capable of supporting a growing global business.

To that end, over the past year, we have added proven leaders in such areas as development, supply chain and IT technology. Their fresh perspectives on the business have allowed us to bring improved process and discipline to these critical areas.

In the third quarter, we made the decision to realign development and supply chain along with other parts of the Home Office to position us more effectively for long-term growth. As pat of the realignment process, we made the difficult decision to eliminate a significant number of positions.

The organizational changes enhance our agility and allow us to increase spending against key initiatives such as digital marketing without a corresponding increase in our overhead costs.

On the development front, we opened 16 system-wide locations in the third quarter consisting of three Bonefish Grill locations; three Carrabba’s locations; one company-owned domestic Outback restaurant; one franchised-domestic Outback restaurant; seven company-owned international Outback restaurants, four in Brazil and three in South Korea; and one franchised-international Outback restaurant.

These opening bought our year-to-date 2014 total to 37 locations on track to meet our expectations for the year of 55 to 60. Dave is going to take you through the financials in detail, but I want to comment on our full year guidance. Our full year expectations for core domestic comp sales are now up 1.5%.

This change in guidance reflects the improvement in sales trends in Q3. We are pleased with the improved casual dining sales in the third quarter, but [until] (ph) we can see a sustained uplift, we remain cautious on extrapolating this momentum too far into to the future.

Our goal remains to meaningfully outperform the industry and maintain the gap to KNAPP that we have enjoyed over the past five years. Now turning to full year EPS, giving the improvement in our comp sales, we expect to be at or above the mid-point of our $1.05 to $1.10 range. Should sale trends exceed our expectations, there is upside to our guidance.

We will post you on our progress at the Analysts and Investor Day on December 16. We also intend to use our meeting in December to provide a comprehensive update on the growth prospects of our portfolio and to lay out our financial expectations for the next three years.

We have moved the meeting to New York in consideration of logistics and hope to see many of you there. For those unable to attend the meeting in person, a webcast of the event will be available. In closing, we were pleased with our third quarter results.

Strengthening our dinner business is our top priority and our out-performance versus the industry gives us confidence that our strategies are working. We also took several significant steps to better position our business for the future, including the restructuring action in Korea.

We will provide our initial thoughts on 2015 in December, but heading into next year, we remain confident in our growth strategies and believe that we are well positioned to deliver long-term sustainable growth. And with that, I’ll turn the call over to Dave Deno to provide more detail on our third quarter operating results and our updated guidance.

Dave?.

Our adjusted diluted EPS was $0.10 as noted above, included in our EPS was a $0.01 per share impact from income tax and a $0.01 per share impact from higher than anticipated general liability expenses. Both of these items are specific in third quarter; it will not continue going forward.

On the productivity front, we delivered another excellent quarter of results. We are on track to achieve our annual goal of at least $50 million in productivity savings. We continue to make progress at removing cost from our supply chain.

Our new front-of-the-house and back-of-the-house labor tools have been completely rolled out and we are seeing the benefits in reduced labor expense. We are also close to rolling out our actual versus theoretical food cost solution and we expect to start realizing the benefit from this tool next year.

Turning back to the quarter, we made a number of strategic decisions in the last few weeks to right-size our Korea business and optimize our infrastructure for growth. I will now take you through the financial impact of these decisions.

Please note that these actions are reflected as adjustments and have been removed from our Q3 adjusted net income and adjusted EPS. The first item related to our plan to close 36 underperforming international locations, 34 of which are in South Korea. In connections with these closures, we have incurred $11.6 million of pre-tax impairments during Q3.

We expect most of these closures will take place in Q4 of 2014 and Q1 of 2015. As we close these restaurants, we will record pre-tax restaurant closing cost of approximately $19 million to $29 million, including costs associated with lease obligations and employee terminations. The second adjustment relates to the decision to sell our Roy’s business.

In connection with the sale, we recorded pre-tax impairment and other charges of $6.1 million. In addition, as Liz mentioned we made some decisions in Q3 to increase the effectiveness and efficiency of our home office organization and to set us up for future growth.

As a result, we incurred $5.4 million of expense for severance and related items in Q3. And finally, we decided to sell both of our company airplanes. We recognized pre-tax impairment and other charges of $10.8 million. This charge reflects the difference between the book value of the airplanes and our estimate of their current market value.

Although financial impact of these actions in the quarter is significant, they have all been carefully evaluated and we are confident that they set us up for good, long term growth in our company. And importantly, these actions address some of our business issues and set us up for the future.

I would now like to take you through our updated thoughts on our 2014 guidance. Given the improvement in our comp sales, we are now raising our comp guidance for the year from 0% to 1%, to 1% to 1.5%. We also expect to be at or above the mid-point of our $5 to $10 EPS range.

Should sales trends continue to exceed our expectations, there could be upside to our guidance. We’ll provide an update on our progress at our Analyst and Investor Day on December 16. In addition to these updates we now expect the following changes to our previously communicated guidance.

Total company revenue is now expected to be between $4.40 billion and $4.45 billion for the year. Increases in domestic sales are being offset by sales declines in Korea. Adjusted EBITDA for the year is unchanged at $459 million to $470 million. Adjusted net income for the year is unchanged at $135 million to $141 million.

GAAP net income for the year is now expected to be between $87 million and $93 million and GAAP diluted EPS is expected to be between $0.68 and $0.73. Commodity inflation is expected to be approximately 3% and reflects the terrific work done by our supply chain team.

General and administrative expenses are still expected to be between $200 million and $290 million. We still anticipate an adjusted effective income tax rate in the range of 27% to 29% and system-wide new restaurant development in the range of 55 to 60 new units.

Capital expenditures are now expected to be between $215 million and $235 million for the year. We will have a few less new stores in remodel then was built into our previous CapEx guidance. In addition, our project expense is coming in lower.

At the upcoming Analyst Investor Day we will provide a perspective on 2015 including an update on all of our key financial measures. We will also discuss our long-term targets. As a result, we will not be commenting on 2015 expectations on today’s call.

In conclusion, we were pleased with our results for the quarter, as we had strong sales performance with continued progress in productivity. We also made several difficult but necessary actions that will better position us for the future. We look forward to sharing more with you in December. And with that, we will open up the call for questions..

Thank you. (Operator Instructions) We will hear first from John Glass with Morgan Stanley..

Thanks. Good morning. First, Liz, on the top-line, can you maybe at the Outback brand just sort of decompose a little bit the same store sales improvements that you saw. You said, dinner led the business or returns.

So was that equally balanced with strength in lunch? Did it happen in commensurate with the improvement we’ve seen in the category in the Knapp-track numbers or you know what was the cadence of improvement I guess through the quarter as well?.

Sure, John. So, this was Outback’s best sales quarter since 2012, and so what I would start by saying is that it was strong across all measures of the business. We talked to you guys about how we were starting to pivot in Q3 to really drive the dinner business by reclaiming our steak authority, and I think you saw that in our LTO and our adverting.

That works extremely well, was based on a lot of research and analytics and so we were very happy with the improvement and the strength of the dinner business on Outback. Particularly, when you look at the decomposition of the [MP] (ph) the crest breaks out, which always lagged by a month with June, July, and August.

They said that the dinner traffic in June, July and August was down 3%. And so, Outback had a very, very strong dinner performance.

And that was driven by what we did; we were pleased of course to see Knapp-track getting some tailwinds, but it really had to do with kind of the resonance of our positioning and our new focus on reclaiming steak authority. At the same time, lunch continued to perform extremely well.

We had growth on a year-over-year basis with stores that have been open more than a year. We continue to have a lot of encouraging signs from this. And as I mentioned in my prepared remarks, we look forward to getting to that point when we can actually have enough of the fleet with weekday lunch where you can really turn on the awareness.

So this growth is happening without any national medium that is tagging it and saying, “We’re open for lunch.” So, very strong across all day parts and across all of our initiatives for Outback in Q3. And that focus on that balance will continue into next year. .

Thank you. And David, if I could just follow up.

On the three things you announced, the Korea closures, the G&A reductions, and the plane, how much of an ongoing annualized savings do you think that realizes? I know you won’t talk about 2015, can you at least [dimensionalize] (ph) how much money you think those things saved ongoing?.

Yeah, what we’ll do is, John, is we’ll lay that out in a more fulsome update in 2015 for our G&A outlook for the year. The one thing that I can tell you is, our goal is to hold core G&A flat year-on-year and then make investments behind it. But we’ll lay out all the pieces prior to that G&A looking to 2015 as we go forward..

Okay and that’s quite enough..

The only other thing I’d add is, one of our key tenets is always to invest ahead of growth..

Right..

So by kind of having that discipline on the G&A infrastructure allows us to invest ahead of growth and technology and international, which has always been our philosophy..

Okay.

And you mean flat dollars or do you mean flat percentages?.

Flat dollars year-on-year John, and then invest it behind our big ideas such as technology and international. But this is all part of our effort to be flat year-on-year in dollars in our core business..

Yeah, thank you..

And now, we’ll move to a question from Joseph Buckley with Bank of America.

Thank you. I’d like to go back to the sales for Outback as well if I could. So Dave, I think you said the traffic increase at Outback was 0.4%..

Correct..

So could you give us an idea around the check, how much was price, how much was mix and could you say that traffic increase occurred in both day parts, lunch and dinner?.

Yeah, so what we have Joe is two things; one, the Outback pricing is consistent with our long-term approach of approximately 2.5% in pricing. It’s a little lumpy quarter-to-quarter but that’s where Outback will finish the year.

But secondly, as Liz mentioned, Joe, the dinner business trends were stronger in the third quarter, were good, and as a result, that helped our overall PPA. So, strong dinner business helped us with our growth overall..

Okay, and then you’ve just given the updated and slightly raised full year same store sales guidance. Just by your calculations what does that imply for a blended same store sales number in the fourth quarter and maybe if you want to comment at all, what you’ve seen in October or, you know be part of the fourth quarter that’d be helpful too..

Yeah, so that implies I think roughly a 1.5% to 2% comp for Q4 within that new range. And Joe, we were delighted like everybody else that Knapp had a [terse] (ph) positive sales in two years on a comp basis. As a reminder, traffic was down though, was 2.2% for them. So we really feel like it’s prudent to be cautious.

There has been some false positives on the industry in the past, so while we are encouraged and we really like what we are seeing, we think that it would be imprudent to extrapolate those trends into November and December.

And November and Decembers make up such a large part of our business, but all of casual dinings business that I think we’re taking an appropriately cautious stance on whether those – trends.

What I can tell you is that we feel very good about where the business is and we also feel very good that we will continue to outperform and meaningfully outperform the Knapp-track segment and that all the fundamentals are in place. So, you can characterize our stance on the industry as perhaps cautiously, but I would say appropriately cautious..

Thanks. That’s helpful..

And Joe, just to add to our long-standing policy not to provide intra-quarter, the sales. So….

Okay, thank you..

Thanks Joe..

Our next question comes from Andy Barish with Jefferies..

Hey guys, can you give us sort of the update on where productivity is kind of hitting in the various line items this year and any surprises I guess on the, maybe on the food cost line getting a little bit more in this kind of inflationary environment?.

Yeah, Andy, a couple things; we were very pleased with food cost in the quarter, especially when we see what’s going on in the industry. So our productivity, like I mentioned in my remarks will achieve at least $50 million. We are on track there certainly. We’ve got a fantastic pipeline for this – the balance of this year and into next.

Let me talk a little bit more about that. The two big buckets continue to be food cost, if you saw in our P&L, but also labor. Food cost at this point is still pretty much around maximizing our supply chain, really working with our vendors, working on costs associated in our supply chain. That is number one.

We will get the actual versus theoretical and I will talk more about that in just a minute. So supply chain was still a big part of it. Labor, we have now rolled out the back-of-the-house labor tool, the front-of-the-house labor tool; people are using it and we are seeing demonstrable improvement in our labor results as a result of this new tool.

So that’s been very good this year. We’ll continue to see some of it in the next year because we rolled it up during this year and people are getting better and better and better. So for next year, the thing that is a big part of our business will be centralized inventory management and actual versus theoretical food costing. That will be closed.

There’ll be probably 30% to 40% of our productivity opportunity next year is that – those two things. We’ve rolled out centralized inventory management to our people. Everybody can see now, inventory at all of our restaurants and where they stand, that’s helping us manage inventory.

And then secondly, we’ll be rolling out the actual versus theoretical tool which is in test right now and working very well. We’ll roll that out the beginning of next year.

As you think about your modeling, it will be – like anything else people will learn it, they’ll get better and better during the year, so we’ll see more and more benefits as the year moves along. So continued labor productivity and continued food cost opportunity in our P&L as we look into next year..

And could you just give us the basket commodity inflation in the 3Q say versus your 3% expectations for the full year..

We’re pretty much right on – right spot on, Andy. We really don’t get into specific product lines, but we’re pretty much spot on what we talked about the entire year..

Thank you..

Our next question comes from John Ivankoe with JPMorgan..

Hi, thank you. A couple of follow-ups to the different question, firstly, just from a housekeeping perspective, weekday lunch as a percentage of the overall system at Outback and Carrabba’s in the third quarter? I’m sorry if I missed that..

Yeah, no problem. So, 59% of Outback’s fleet and 54% of Carrabba’s fleet..

So, the question is, versus the third quarter of 2013, at least if my notes are correct, I think it was 26% of the system at Outback and 28% at Carrabba’s.

So that’s a really big jump year-over-year, and obviously understanding that Carrabba’s traffic is negative and the Outback traffic is up, you know something less than 1%, just you kind of help juxtapose your satisfaction with lunch and your satisfaction with dinner, given the percentage of the fleet that had seen weekday lunch added on a year-over-year basis, if that’s a fair question..

Yeah. So what I’d say is that when we put lunch in, we’re very happy with the performance and as we’ve said a number of times it continues to grow from there. So I think the most important thing is, is that lunch isn’t finished after a year, right? When you do it right, it continues to grow.

And I think importantly, as we approach that threshold which we think is about 70% of the fleet, that allows you then to talk about lunch and to really drive awareness. So we think that there is a lot. We are happy with lunch and how it’s going in. We think there is a lot of opportunity ahead of us to continue to grow lunch.

On the dinner side, over the last five years we have been very happy with how we’ve kind of broadened and gained and driven traction there. And we are pretty transparent about how in Q2 we saw the dinner business traffic weaken.

Trends in dinner traffic meaningfully contributed to our comp in Q3 on a quarter-over-quarter basis, and we like the momentum that we are seeing. And so, I would say that we feel like our strategy on dinner and how do we vitalize each is showing signs of working and continued belief in our lunch business and how it’s going in..

Okay..

Go ahead, John. I’m sorry, didn’t mean to cut you off..

I didn’t mean to cut you off, I’m – if there is anything else?.

No, I think….

Okay..

I think Liz captured it, and I think the change in dinner trends – in the dinner business quarter-to-quarter was a big piece of our comp improvement..

Okay, understood. And secondly, David, this is in response to the first question. I just wanted to make sure that I got it. Core G&A is flat in dollars in fiscal 2015. And then did you talk about other investments being in addition to that core G&A being flat year-over-year, just the – I got a little bit confused in the language..

Sorry, John. Let me make sure I’m clear on that. Core G&A, which is all part of some of the work that we did this quarter, will be flat in dollar terms year-on-year. On the same time though, we will be investing in our international markets and continuing to make even more investments in technology going forward.

So, as a result, we will see some increase in G&A, but it’s all behind our investment ideas and our growth opportunities..

Thank you for that clarification. And then, finally, in a separate new question is about, the reduction in CapEx for the year, especially considering we have one quarter less, it’s actually pretty beg at $35 million.

So is it just a timing issue where that G&A is going to get pushed in fiscal 2015 or might you be backing of some other previously discussed projects like Carrabba’s unit development or perhaps Outback relocations that will lead to a structurally lower CapEx levels that what we’ve previously seen?.

No, we don’t. Our strategic initiatives behind Bonefish development, Outback relocations and those kind of things John, (indiscernible) development are all clearly in place. So that is not – that’s not a big change I think.

I think the only thing that I would say is – kind of during the middle of the year people are little more bullish on the ability to spend the capital they need to spend. And so, when we get to this time of year, things do tend to drop a little bit.

So we may see a couple of few restaurants fall into next year, we may see some projects fall into next year, but nothing in our strategy has changed. We are just trying to do some housecleaning on the Outlook for the year..

Thank you.

Your next question comes from Howard Penney with Hedgeye Management. .

Hi, thanks very much for taking the question. I can appreciate the difficult decisions that you made this quarter and that if I substitute the rationale for selling of [relays] (ph), you could pretty much search another brand or a couple of more brands in there.

How do we know that you’ve gone far enough in this restructuring and [flash] (ph) asset sales Thank you..

Yes. So, Howard, the first thing I’d say is that one of our core [tenants] (ph) is to be ruthlessly disciplined, okay, in our use of capital. And every single one of our brands has to earn the right to be invested behind [or else keep] (ph) in the portfolio.

So the first I want to [assure] (ph) is that we are constantly evaluating the portfolio to make sure that we are excellent stewards of capital. I actually – when we think about – we’ve talked about the core for some time. So (indiscernible) I think is not too much as a surprise that we think that would be better outside the portfolio.

When I look at our core brands though that you mentioned and maybe, we could substitute one, between Outback, Carrabba’s, Fleming’s and Bonefish, if you look over the last five years, we’ve significantly outperformed the category and gained over 25 points of traffic versus a category.

And frankly, until this year on Carrabba’s, every single one of those brands have outperformed the category year after year, quarter after quarter.

So I think Outback, if you had said anyone five years ago that Outback is after losing share for ten years, that Outback’s best days were in front of it, from 2009 to 2014, I don’t think they would have agreed with you.

I think that it’s pretty incontrovertible that it is had a terrific five-year run and we feel great about the prospects for it and we love how it plays internationally, If you look at Bonefish, it’s number two – number two brand in the entire segment.

We’re pleased with how it’s opening, we’re pleased with how it’s performing, we got behind on innovation, we fix that. If you look at Fleming’s, it could not be in a sweeter spot with the high-end recovering that’s happening in the U.S. and we continue to just absolutely perform above market for the past five years for that.

So that’s a real keeper and there’s tremendous opportunity to expand that brand as well. And so, then there is Carrabba’s which has had a tough year and is down about 1.2%, but I’d just remind you that I don’t think you make asset decisions and portfolio decisions based on annual performance.

I think you have look at the long-term health of the brand and the fit and what I tell you is that in 2010, 2011, or 2012 Carrabba’s significantly outperformed Knapp and took share.

Now it is in a difficult moment right now and we have to own that, because we did not go far enough in what we needed to do when the consumer told us that we needed to do on Carrabba’s, right? Carrabba’s is the number three brand requested overall in the category and the top preference for Italian.

But we needed to take that menu into lighter, more variety and we didn’t go far enough. And probably, I’ll be honest, our success us a bit too cautious in evolving the menu to drive more every day occasion and usage.

We’re going back and doing that, but the brand health of Carrabba’s is excellent, it’s one of the highest-rated brands in the category and so it’s a real foundation of strength to build on. We’re always with a very, very different animal, if you will.

The final thing I’d say about Carrabba’s is that Italian is the number two segment in so many key markets globally and all of our research in these key markets shows terrific opportunity for Carrabba’s and we are really excited and believe that Carrabba’s success in Brazil can be very similar to the success of Outback.

So, we will always be disciplined stewards of capital, we will keep it tightly [edited] (ph), but we feel that we do have conferred portfolio that confers advantage..

Thank you so much for that answer..

Sure..

Our next question comes from Matt DiFrisco with Buckingam Research..

Thank you.

I just had one follow-up on a question, with respect to, I think you guys when you were talking about the fourth quarter and your – what’s behind your comp guidance, I just want to clear, I know you made a effort to highlight on the third quarter, heading into, you were going to pull some advertising forward to rejuvenate your brand equity and reidentify yourselves with the steak [stake] (ph) authority.

Can you talk about or comment about the year-over-year comparisons of marketing spend in the fourth quarter, how that might have been effected or how that factors into your guidance and then I just wanted to also a question on South Korea, would it be correct to assume the closures of those stores would be accretive on an operating income basis once they are done behind us as far as the costs associated with and the one-time nature with the closures?.

Sure. A couple of things, on the third quarter, yes, that’s correct, with the Bonefish Grill menu launch, we had an advertising cost fall into the third quarter (indiscernible) above this year. So we did – in our result, we did overcome that as well. Fourth quarter, there really isn’t a big difference in media spending year on year.

The main thing was the pull-ahead of the Bonefish Grill advertising to get menu launched properly.

Now on Korea, the main thing there is we believe that, as Liz has mentioned, we’ve significantly downsized the financial risks there as we went through each and every trade area and looked at the performance of the restaurant and the future opportunity for the restaurant. So we went through each one and determined these 34.

We’ll provide more color commentary around 2015 in our guidance for – at the Analyst Day, but we do not expect at this point – is we’re going to take a conservative planning posture and assume that Korea doesn’t markedly improve next year.

If it does, that’s upside to what we anticipate, but we want to make sure we stabilize the business and grow it from there, Matt. So we basically de-risk the marketplace, hopefully we can grow from there, I think our guidance for 2015 will call for flattish to up modestly profits in Korea..

Can I just follow up on that? I just want to, are they – in your process, I guess, most restaurants are closed when they’re cash flow negative? Would it be correct to assume that those are cash flow negative?.

Yeah. No, we had, not all of them are cash flow negative. As Liz has mentioned, we are very disciplined stewards of capital. Seven, around seven would have been cash flow – would be cash flow negative this year.

If we extended the trends, we would get to about half of those for next year, so in other words, we’d be at about – 17 of the 34 would be cash flow negative if you assume the conservative trend and in the remaining 17, either didn’t fit the trade area, they were old restaurants, they didn’t deserve the capital, so when you looked at the future of that and the capital spending needed for those remaining 17 resturants, that so how we got to our number, site by site, bit by bit.

.

Great and then just you said the third quarter, so you did not spend more money on Outback in the third quarter. Then – so you didn’t really pull forward ad dollars from the fourth quarter to drive that great comp at Outback.

You did it on a apples-to-apples spend basis from 2013 to 2014?.

Pretty much, yes, pretty much. I mean the pivot was as we talked about the shift towards steak authority and how the LTOs and the new positioning worked and that continues into what you’ll see in our promotions in Q4, that dedication to celebrating steak authority and celebrating the center of the [plate] (ph)..

That’s all, thank you..

We’ll now move to Jeffrey Bernstein with Barclays..

Great, thank you very much.

Just two questions, one, Dave, I think you mentioned kind of the normalized menu pricing would be in that 2.5% range, albeit lumpy quarter to quarter, but as we look out to next quarter and then next year, I know you’re going to give specific guidance in December, but is the goal to protect the existing restaurant margin percentage and therefore, would you consider taking more than 2.5% or is that your framework to consider taking more of that if commodities and labor were higher versus 2014, it seems like that’s what is looking to be happening in 2015 in terms of both commodities and labor.

So just wondering, wonder if you can comment on either of those in terms of directional for 2015 versus 2014? But two, would you consider taking more than 2.5% if necessary to [draw the line, protect] (ph) the margin or whether you would rather not do that and therefore, you’d let margins take a little bit of a hit? And then I have a follow-up..

Jeff, we are going to protect our margins. First of all, we have to [get] (ph) the productivity. We have a lot of opportunities in our business, which I outlined on a previous question on productivity and we’ll be turning to that again in 2015.

So pricing, plus productivity will offset commodity inflation and protect our margins because of the work that we are doing. I also wanted again give out a call-off to our supply chain team who continue to do a terrific job purchasing our products and everything else and working with our vendors.

So our supply chain capability, the productivity that we have, even though we are facing some commodity headwinds in 2015, will help us preserve and grow our margins going forward..

And the other thing I would add is on the labor front, even with any type of kind of labor inflation, as Dave said, are rolling out the labor tool and we have that kind of opportunity that has efficiencies coming through the labor line as well.

And so, I think that productivity runway that we have is something that puts us in good standing even in a rising cost environment..

Is there any directional color in terms of that commodity basket for next year, either how much you’ve lost or what it might be up year on year even directional?.

Yes, Jeff, we are going to see it in just over a month and we’ll give you a fulsome update. We are proceeding, I can give you, we are proceeding along our typical plans on how much we have locked during the year.

So we are in good shape there, but I’d really like to give you a fulsome review of what the year – what next year looks like we are together in [last six weeks] (ph).

Understood.

And the only other question was the Bonefish versus Carrabba’s, I think, Liz, you kind of mentioned that until the back half of 2015, Carrabba’s, you’d like to see more of the same, so maybe you do more limited time offers, but should we therefore assume that Carrabba’s comps run negative the next few quarters, whereas Bonefish seems like traction is building and therefore, we should assume kind of that positive trajectory of Bonefish just directionally for those two brands, is that fair?.

Well, I think two things I would say, Jeff, I think it’s always fair – I think it’s fair to say that the menu work and the momentum and the reception on what we did on Bonefish Grill was certainly, we were very successful versus Carrabba’s where we didn’t go far enough.

We are not satisfied with negative [1.2%] on Carrabba’s, right? So – and we think there is a lot of opportunity not to wait for the core menu, but to have interesting LTOs that celebrate variety, that bring the lighter, but the [salt], if you will, the core menu [salt] will the back half of next year.

So I think we need to continue – we are going to continue on the renovations of the Carrabba’s. That makes sense. You are going to see new advertising that – and a mix in LTOs that celebrate that more variety that more affordable price point, but the structural change in the core menu will be the back of the next year.

On Bonefish, it’s about as I said, returning to our roots of continuous innovation. So this was the first step, the core menu, we are going to follow up with a new bar menu.

I mean Bonefish has a 25% liquor mix and we need to just celebrate that, you are going to see a very innovative bar menu than we are going to doing seasonal menus, is a wave of innovation going forward and a lot of that pipeline is in front of us on Bonefish as well..

Great, thank you..

Our next question will be Sharon Zackfia, William Blair..

Hi, good morning..

Good morning..

Most of my questions were answered, but I guess two quick ones.

On Carrabba’s, I guess I’m a little surprised that the new menu would be second half of next year, just curious as to why that, can it be pulled forward earlier? And then secondarily on Bonefish, there was a little bit of negative (indiscernible) it looks like in the quarter, I am assuming that something in the way that customers are using the new menu, maybe can you give us some color on that..

Yeah. So, I was – on Carrabba’s first, I want to stress what I said before is that we’re not going to wait to have product news on Carrabba’s that addresses variety. So you are going to see LTOs and menu news, but in terms of core menu, when I say back half of the year, it’s basically we’re talking about nine or 10 months from now.

Believe – when you think about and we really want to nail this, and as said, we didn’t go far enough and so we already have several pilots going right now on the new menu because we’re make – the new menu, we’re going all the way to bright and so we really need to read it.

We need to leave time, we need do see what it’s doing and so that’s why we’ve targeted the back half. But I don’t want you to confuse that with and I am glad you asked the question that we’re not going to do anything on the food front before that, because we are.

On the question on Bonefish Grill, it was really about the Saturday lunch mix that came in on the new menu, we’re very pleased with how it’s tracking and our return to assumptions. It did have some more attractive price points on it, but the whole menu is performing well. So you had [bold] (ph) platform which is on the new menus, that’s lower price.

At the same time, we had premium size introduced, at the same time, we had a steak and chop [section] (ph). So we feel very good about how the menu is playing out, but I think more seeing the Saturday lunch contribution versus year ago..

Great, thank you..

And now from Michael Gallo, CL King..

Hi, good morning..

Good morning..

Good morning..

Just a follow-up on actual versus theoretical, Dave, when will that system actually be in and fully operational and then can you remind us, Dave, I think when you’re at [Yum] (ph), you rolled us actual verse theoretical out of Pizza Hut. Remind us what kind of improvements you’ve seen in the path when using actual versus theoretical systems. Thanks..

Okay. Thank you. Yeah, I was at Pizza Hut at that time. We will roll the actual versus theoretical food cost system in late January; it will build during the year. [If] (ph) like anything, people have to train it, they have to learn it. So as we look at our cadence during the year, that will come and deploy.

We’ve already rolled through our central (indiscernible) inventory management system, which is the first step in that. Secondly, the old story of about cash performance does not [dictate] (ph) future performance, but let me at lease answer the question.

We saw about a 200 basis point improvement in that, what we rolled in Pizza Hut many, many years ago, as we looked at our business at that time. So we are not committing to that in 2015 guidance. But that’s the size of the price potentially..

Thanks very much..

And now our last question will come from Alton Stump with Longbow Research. .

Yes, thank you and good morning..

Good morning..

Good morning..

(indiscernible) on a quarter, I’ll keep it short, as we’re obviously at the end of the hour here. But just, as you look at the (indiscernible) raw initiative traffic trends, obviously has improved. As you kind of think back to, how you guys managed to some fall starts that we’ve just in the past.

How does this feel to you, does it feel like, we could indeed see this becoming new trend last couple of quarter anyway.

And or does it feel like much like the last couple of positive (indiscernible) surprises we’ve seen?.

Yeah, it a great question because I think, as we look at it, there’s been – as you said on the number of false stocks. Here is what I will say is that – for the quarter, traffic was down 2.2% in Q3 and Q2 was down 2.5%. And so, you had a strengthening of the overall comp, but traffic has been down for nine years now in casual dining.

And so, but – what I will tell you though is that we are encouraged by some of the signs that we are seeing, right. And no one wants to bet against the nine-year trend, but I will tell you that when you look at the consumer confidence measures, which have really helped very nicely since August.

It appears that this – kind of fear of that might have been an issue the last four, five years. When you see a stabilization at nice rate of consumer confidence, that feels really good. The challenge though, until you extrapolate this further is one, we need to see more of it, right. So let’s play this through.

But two, until you see meaningful growth in disposable income which is the most highly correlated thing with traffic growth in CDR, in our core target of CDR, which is that 55,000 plus, you are not going to see in my judgment a return to positive low single-digit traffic numbers and we just currently haven’t seen that structural change an improvement in consumer disposable income with this target.

So I think there is very definite green shoots and bright spots, we’d like to see consumer disposable income at that 55,000 to 65,000 level start to grow to really believe that we can kind of project out to days of increasing.

So I’m going to go back to my original statement, which is we are cautiously optimistic, but we are prudent in our assumptions..

That’s great. Thanks so much for the color. That’s helpful..

Thanks..

And that does conclude our question-and-answer session for today. At this time, I’m pleased to turn the call back over to Liz Smith for additional or closing remarks..

Thanks. We appreciate everybody for joining us today and we look forward to updating you on our portfolio and our thoughts on 2015 and long-term growth at our Analyst and Investor day in December. So we hope to see you then. Thanks, everybody..

Thank you, ma’am. That does conclude our call for today. We do thank you all for your participation..