Matt Clarke - Vice President, Strategic Planning David Overton - Chairman of the Board, Chief Executive Officer Doug Benn - Chief Financial Officer, Executive Vice President David Gordon - President

Joe Buckley - Bank of America John Glass - Morgan Stanley Jeffrey Bernstein - Barclays Mike Tamas - Oppenheimer David Tarantino - Robert Baird Matt DiFrisco - Buckingham Research Sharon Zackfia - William Blair Keith Siegner - UBS Will Slabaugh - Stephens Andy Barish - Jefferies John Ivankoe - JPMorgan Bryan Elliott - Raymond James Peter Saleh - Telsey Advisory Group Steve Anderson - Miller Tabak

Thank you, operator. Good afternoon.

Welcome to our second quarter fiscal 2014 earnings call. I'm Matt Clarke, Senior Vice President of Finance and Strategy.

Joining me on the call today are David Overton, our Chairman and Chief Executive Officer; David Gordon, our President; and Doug Benn, our Executive Vice President and Chief Financial Officer. Before we begin, let me quickly remind you that during this call, items may be discussed that are not based on historical fact and are considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Actual results could differ materially from those stated or implied in forward-looking statements as a result of the factors detailed in today's press release, which is available in the Investors section of our website at thecheesecakefactory.com, and is in our filings with the Securities and Exchange Commission. All forward-looking statements made on this call speak only as of today's date, and the company undertakes no duty to update any forward-looking statements.

David Overton will begin today's call with some opening remarks. Doug will then take you through our operating results in detail and provide our outlook for both, the third quarter of 2014, as well as the full year.

Following that, we will open the call for questions. With that, I will turn the call over to David.

Thank you, Matt. We continued our trend of delivering positive comparable sales and outperforming the casual dining industry with another quarter of consistent sales results.

When we look at the first half of 2014, we delivered a stable 1% comparable sales increase in essentially a low growth GDP environment against the backdrop of negative casual dining industry sales for the first six months of the year. Our business is steady and we see ongoing consistency across most geographies in weekday versus weekend sales within day parts in-mall versus non-mall locations, so while the consumer environment remains restrained for restaurants generally, the fact that we continue to gain market share is positive.

In addition, our execution within the restaurants is strong. Our operations team delivered solid results across key performance indicators, including food efficiencies, guest satisfaction scores, management retention and labor productivity.

As for our development, we opened two new restaurants during the second quarter. One in Metairie, Louisiana, and the other relocation of our Atlanta Buckhead restaurants, both restaurants are enjoying strong sales trends demonstrating the enduring appeal of The Cheesecake Factory brand.

With the Atlanta location, seeing a healthy increase in sales relative to its previous location, it again validates to us that strategic relocations in certain case makes good business sense. Our restaurant openings during the past three years continued to exceed the performance of our existing base of restaurants.

While we are positioned to open restaurants at a faster pace, we remained focused on A+ premier sites that we believe can hit targeted returns. We continue to plan for as many as 10 company-owned restaurants to open this year in a mix of new and existing markets with two openings expected in the third quarter.

International growth continues to be an exciting area of opportunity for us, with the opening of the first Cheesecake Factory in Mexico, last week and the signing of our third license agreement this quarter. The agreement with Maxim’s Caterers Limited based in Hong Kong, represents the continuing execution of our global strategy.

Maxim's is a leading operator in Asia, with nearly 60 years of experience in operating restaurants. We anticipate Maxim's developing and operating a minimum of 14 restaurants in Hong Kong, Macao, Taiwan and China.

The agreement has also the potential to expand into other countries in Asia. We expect the first restaurant to open in fiscal 2015.

Our licensee in Latin America, Alsea opened the first Cheesecake Factory in Guadalajara last week in a premier shopping center in that market. The restaurant is approximately 8,500 square feet and opened to wait enjoying strong opening weekend sales.

In addition, Alsea has commenced development of the first location for the Cheesecake Factory in Mexico City. For 2014, we continue expect our licensees to open three to four restaurants in the Middle East, in Mexico.

Overall, we remain highly confident in our ability to maintain our leadership position in casual dining and in our prospects for future growth both, domestically and abroad. As a result, we also announced that our board approved another significant increase in our quarterly dividend as we remain committed to returning substantially all of our excess cash to our shareholders.

With that, I will turn the call over to Doug.

Thank you, David. Total revenues The Cheesecake Factory for the second quarter 2014 were $496.4 million.

Revenues reflect in overall comparable sales increase of 1.2% maintaining a healthy gap between our performance and the industry's. As noted in our press release, comparable sales increased 1.5% of The Cheesecake Factory and declined 2.7% at Grand Lux Café.

External bakery sales were $11.1 million in the second quarter. As expected, cost of sales was up 30 basis points in the second quarter of 2014 at 24.3% of revenues versus 24% in the prior year quarter.

Higher diary, shrimp and salmon costs were partially offset by favorable poultry costs. Labor was 32.4% of revenues in the second quarter as compared to 32.2% in the second quarter of the prior year.

We continue to see an increase in group medical cost driven by both, higher claims activity and more participants staying on our medical plans. The group medical cost pressure of 60 basis points was partially offset by a combination of better labor productivity and lower payroll taxes.

Other operating costs were 24.1% of revenue down 10 basis points from the prior year's 24.2% and G&A was 5.9% of revenue in the quarter, flat relative to the second quarter of the prior year. Pre-opening expense was $2.6 million in the second quarter of 2014 versus $2.5 million in the same period last year.

We had one new restaurant opening and one relocation in the second quarter of 2014, compared to one opening in the same period of the prior year. Our tax rate this quarter was 27%, slightly better than our expectations due to greater leverage from FICA tip credit and gains on our investments used to support our deferred compensation plan, which are non-taxable.

Cash flow from operations for the first six months of 2014 was approximately $122 million net of roughly $58 million of cash used for capital expenditures. We generated about $64 million in free cash flow through the quarter of 2014.

During the second quarter, we repurchased approximately $528,000 shares of our common stock at a cost of $24.2 million. That wraps up our business and financial review for the second quarter.

Now, I will spend a few minutes on our outlook for the third quarter of 2014 and an update on the full-year. As we have done in the past, we continue to provide our best estimate for earnings per share ranges based on realistic comparable sales assumptions.

These assumptions factor in everything we know as of today which includes quarter-to-date trends, what we think will happen in the weeks ahead, the effect of any impacts associated with holidays and known whether influences. For the third quarter of 2014, we estimate diluted earnings per share of between $0.55 and $0.58 based on an assumed range of comparable sales of between 1% and 2%.

With comparable sales in the first half of 2014 at 1%, and while maintaining our comparable sales estimate for the second half of the year, mathematically that brings us to a full year 2014 comparable sales range of between 1% and 1.5%. Based on this assumption, we would estimate diluted earnings per share in a range of $2.19 to $2.25 for this year.

In addition to incorporating actual results from the second quarter, the change to our annual earnings per share estimate reflects two primary drivers. First, our expectations for the cost of cream cheese have increased measurably as the cost of butter which is a good proxy for cream cheese spiked to all-time highs in the late second quarter.

Secondly, we have factored in some additional costs in the third and fourth quarter related to our self-insured group medical coverage based on the claims activity and the number of participants observed in the second quarter. Although negatively impacting our earnings outlook for 2014 at this time, it is important to note that neither of these factors are associated with our operational execution or four-wall productivity which are running at historically high levels.

Our outlook specifically for food inflation in 2014 remains between 3% and 4% for the year, however based on the higher projected cream cheese and overall diary cost that I mentioned, we now expect to be towards the higher end of that range. As to our corporate tax rate, we now expect it to be about 28% for the full-year 2014, consistent with our year-to-date level.

Our total capital expenditures are still expected to be between $105 million and $115 million for planned 2014 openings as well as expected opening in early 2015. As David mentioned, we are increasing our quarterly dividend quite significantly for the second year in a row.

Since the initiation of our dividend, we have successfully met our objective of increasing it meaningfully over time, helping to grow shareholder value. In total, we continue to expect to return substantially all of our free cash flow to shareholders in fiscal 2014, in the form of dividends and share repurchases, with approximately $150 million in share repurchases currently anticipated for the year.

With that said, we will take your questions. In order to accommodate as many questions as possible, please limit yourself to one question and then re-queue with any additional questions.

Hi. Thank you.

Just a couple of questions on same-store sales, here we have seen the Knapp-Track numbers that weakened in June. I guess, I am curious if your sales over the course the quarter showed a similar pattern.

Then, David, I know you said there wasn't much difference geographically, but I think last quarter that your kind of some of the bigger markets the California, Texas, Florida markets had done a little bit better. Had they kind of pulled back to be within the past now or are they still doing a little bit better than average?

Okay. Doug?

Yes. On the month-to-month changes within the quarter, you know, sales were mostly positive throughout the quarter, whereas I believe as you said the casual dining experienced some falloff, particularly in June.

We need to be careful, I think, in looking at month-to-month numbers for our results a little careful, because April was a very strong month for us as we expected it be because of the shift of spring break holiday and June month was negatively impacted by the World Cup, and both events don't seem to affect us the way that it necessarily affects the rest of the industry, so April was our best month in the quarter. May and June, after taking into account what the impact the World Cup was in June, we are about the same as each other, they are both positive and they are both about the same as each other.

Yes. Some restaurants, I think, did really well with the World Cup, but we are not that type of restaurant.

Geographically, I would say things were pretty much as they were in the previous quarter.

Yes. I don't think there is a lot of change.

I don't think we are trying to imply that. In fact, there continues to be a pretty tight distribution between the lowest performing markets and the best-performing markets, but our strongest markets continue to be some of the markets where we have a lot of restaurants California, Florida and in the Southwest.

Thank you.

You are welcome.

Thank you, Joe.

Thanks. First, the comp question, just if you could break down the traffic and ticket that would be helpful.

Then my main question is, this group medical that you have discussed, Doug, as being a pleasure. If I look back at my notes over the years, it's been a constant kind of discussion of line item.

Is that larger for you? Maybe if you could frame the size of that expense item?

Is it larger for you than, say, a typical restaurant? Are you seeing the significant changes as the healthcare laws change, are people just taking you up more often?

What's the underlying driver and how big an item actually is that?

Okay. Let me see if I can answer that.

First of all on the comp split at 1.2% comp, 2% was pricing and around 1%, right at 1%, negative traffic and a little bit of a positive menu mix is the way that shakes out.

Thank you.

With respect to the group medical, you know, that expense has had some variability over time with us. Sometimes it's very positive and sometimes it is negative.

In fact, we have had two years in a row where we were saying one of the things positively impacting our P&L was the fact that group medical was less, so we saw this quarter it came from as I said in my opening remarks this quarter and in the first quarter higher claims activity and more participants than we expected staying on our plan. You know, I think that neither of them necessarily has a lot to do with the new healthcare law.

They have to do with, it is hard to say specifically what is causing the higher claims activity, because we only have limited visibility, because of HIPAA, but suffice it to say as you might expect there were a higher number of larger claims during the quarter, but what I would say, it's difficult to predict the specific timing. We have seen variability of this expense in the past.

We don't believe it will continue forever or that has particularly related to the new healthcare law.

John, this is Matt Clarke. It's also not bigger than you would expect for any other restaurant company.

I think, maybe it's around 2% of sales. What Doug is talking about is really just quarterly variability too.

On a yearly basis it usually smooths out, but because were self-insured as you mentioned, then there are times when the claim activities are higher or lower versus a company that maybe fully insured and they are straight lining it in a more smooth fashion throughout the year.

Thank you.

Great. Thank you very much.

Just two related questions on the comp. Just looking at the second quarter it seems like the comp came in slightly below what the lower end of what you had guided for.

I know you said April was the strongest, but it would seem to imply that May and June must have come in below your estimates. I am just wondering with that as a backdrop you, I think you mentioned that the second half comp assumptions were unchanged, so I am just wondering why you would leave your second half assumption unchanged if the second quarter effectively slowed from what you were thinking and as you mentioned the industry clearly slowed in the latter part of the quarter.

It would seem like you are setting yourself up for a more aggressive guidance when comparisons don't seem to get easier, so just some thoughts on the back half and then I have a follow-up.

Yes. As I think, if you look back at this quarter and at prior quarters, our comps have been running for about five quarters in a row at just right at about 1%, so that's where we are.

I mean, the pushes and pulls in this quarter had to do with the spring break shift into April, which was almost 60 basis points of increased sales and we factored that into our guidance, but also then on the negative side we had World Cup and that affected 20 basis points or so. I would say, we were a little bit below our range, but not materially below our range.

We are not concerned with what we are saying going forward at 1% to 2%, I think that that's right in where we think we are running right about there.

Right. Then just the follow-up with a clarification, I guess, from a restaurant margin perspective.

I know you gave the food cost details which seems like it's unchanged. Just wondering kind of the pushes and pulls with the remaining line items, would you expect the restaurant margin in the back half of for the year to see similar compression to the first half?

Is there any insight you can give on particular line items that might move unusually or broadly speaking, should we assume that restaurant margin is kind of in the same pressure point we are seeing in first half.

Yes. I would say, you know, if you want to just go right to the total operating margin expectation for 2014, I think the pressure that we are seeing this year, so if it's coming from healthcare, but it's really driven primarily from cost of sales shrimp, salmon and now the diary butter issue that kind of spiked a lot more than what we expected to see.

While we are managing, I think, the remaining at aspects of our business roughly in line with our sales growth in total, we would expect our operating margins for the year to be maybe two-tenths below what they were last year at the mid-point of their earnings sensitivity range that we gave and that's factoring into the second half of the year additionally to what we had before about $0.05 per share relating to continued group health pressure and higher diary cost than what we had originally thought. When we changed our guidance for the full-year, that's about a $0.05 of it, has to do with what we are factoring in to the back half of the year related to those to what I will refer to as temporary pressures that are there for 2014.

Got it. That seems to reflect the entire reduction then, because it seem like you brought down the full-year guidance at the mid-point maybe $0.05 or so and you are claiming that all of that was related group health and the dairy.

Well, you know, we brought the top-end down $0.08 and it was $0.03 related to the fact that we are $0.03 below the top-end of the range in the second quarter. Then the additional $0.05 for the top of the range and the $0.05 for the bottom end of the range.

Yes, so those two things. We didn't change anything else.

Understood. Thank you.

Great. Thanks.

This is Mike Tamas on for Brian. Related to the Grand Lux brand, you have only had a couple of quarters of positive same-store sales over the last couple of years, so the question is sort of how do you think about that brand?

What's the strategy that longer-term? Are there any thoughts of separating that piece of the business?

Thanks.

Well, not yet. We are opening a restaurant next year which again we are putting in all the best information that we have.

We are going to see how it's doing. Again, we had some very big restaurants in Las Vegas.

It's very hard to do better than the casinos that we are in, and that has greatly affected us. Overall, our competition is doing just not better as Cheesecake is, but at this moment we are still trying to get it right and we still have hope to grow it.

Yes. We would look Grand Lux's comps and say that of course we would want them to be positive, but they are not alarmingly negative any more so than really the rest of the industry and they are so impacted, because there are only 11 unit by greater variability in any location.

Great. Thanks.

Hi. Good afternoon.

My question is about the international growth, and I was just wondering if you could give us an update on how the international locations are performing both, from a sales and operations standpoint and how your partners in international are sort of gearing up for the growth as we move into 2015?

I think that we are still really confident with what's happening internationally. In the Middle East, sales continue to remain strong and all the locations are currently opened.

We are excited that our opening weekend Guadalajara was as strong as it was. We opened the waits and lines and typically what we would see here is a strong [NR] in the States, so we felt very good about that.

As we moving into 2015, we are excited to kick-off our partnership with Maxim’s and again start the brand strong in Asia as well. So far, we feel great about it that we know our partners feel very good.

They continue to work with us side-by-side to ensure the operations and the brand remained strong and consistent and sales reflect that. Thus far the guests in those markets are returning and I think that certainly shows the Middle East.

We have been open now long enough to know that we have some strong repeat business and our partners are operating the brand really well.

Great. Then maybe one more on the domestic growth outlook, I know David you mentioned that you would like to grow the pace of openings a little faster and I was just wondering if you have any early reads related to your ability to do that next year based on the pipeline that you have?

I certainly think it's possible. You know things move around so much right up to the last minute, it really drives us all crazy when we put out a number.

The way it looks right here is that we can do more next year than this year and we would like to. Although, we usually give you more of an idea at the end of the third quarter, right now I would just say you are right in what I said is that I am confident that we can do more next year than we didn't do this year.

Great. Thank you.

Thank you. Doug, I am sorry, the pricing you said, I think, you said 2%.

Was that in the quarter or is that current and going forward?

I think, it would apply to both.

Okay, because you normally take…

Around 2% in the quarter, so we are doing a menu change in August and 1% is rolling off and another 1% moving along, so it will remain at right around 2%.

That was the root of my question, great. New Year's Eve not occurring in the fourth quarter, is that a net negative to 2014 or positive?

New Year's Eve is busy for us in total, but the way the holiday moves around with Christmas or way that the shoppers are, you know, it's hard to tell exactly how that plays out, but I don't think it's significant in either event.

Okay. It's something that would be a little bit meaningful, but okay so that's factored into the guidance that is presumed.

It's a little bit, but it's in the guidance already. That's an accurate way of thinking about it.

Then relocations, when you gave the 10 number, that's still a gross number 10 and then you are expecting two relocations?

One relocation, so we have already done it. We have opened three restaurants so far this year of the 10, one of them was a relocation.

We don't have any relocations planned for next year.

Okay, so we are going to have a net of nine stores is how we would look at it?

If you look at it that way?

If you want to we look at it that way, one thing to realize is that these relocations of every one that we have done, the three last year, the one this year are all immensely successful and that's what, for instance, the one we did this year, the Atlanta location, the new one is up somewhere between 35% and 40% more sales volume than the prior one, so it's not really a net of 9. It's net of 9.3 or 9.4.

You are anticipating every single one of my follow-up questions. That's exactly what I was trying to get on to.

Well, how about that?

I know. Great minds think alike, so 35% to 40% jump that's great on a relocation, I guess, if you were to look at the next three to five years is this something that you think is now the lifecycle of where the brand is that maybe you can get, I don't know, 2%, 3%, 4%, 5% of the brand every year or so relocations, so maybe two to three stores that you could relocate?

The rest of the leases up, it would be very expensive to do that. We are up to store who was losing money and we had to get out of it or something, which we really don't have, but no I don't think you can think that.

I think that as leases come up, we make a decision and see what the landlord wants to charge and what's nearby, so we don't lose those particular guests and we will look at it, but for the next year as we don't see very, many coming up at all.

We might want to say after we evaluate it we might we want to stay exactly where we are and work out some kind of negotiated renewal with the landlord.

Okay. Great.

Last question, the new prototype and a little bit trimmed down version. I guess as you look ahead, the percentage of the stores that are going to be sort of at 8,000 square-foot store versus the 10,000 square-foot store, would it be 75% of them or so?

Well, I think that's probably a good guess. Again, this thing is four years old already.

We don't look at it as a new prototype. We have so many of 7,500 8,000, even 8,500 whatever we can fit in there and we really build very 10,000 footers these days, because we found that at 8,500 we can do just as much business than we could do $10 million and over, so it just made sense to build somewhere in let's say 75% to 8,500 square feet if that's in fact square footage we can take, so I think that is correct.

It allows us to go into smaller markets, it allows us to get up to that number of 300 restaurants and that will be the way I see it in the future. As we said before, there might be 50 or 60 sites out there that would build 10,000 square feet or 12,000 square feet.

I think the rest, we are going to build again as I said the 7,500 to 8500.

Then just a question, I guess, longer-term about the trends you have had as far as traffic and negative traffic. As it looks when you report sort of your comp.

Is that a legitimate trend that you are seeing a consistent falloff in physical bodies coming into your store or is it more a little bit of a SKU, because of how comps are measured in entrée talents and not maybe accurately capturing everybody at the bar. Do you feel or are you seeing less physical demand in your store and people are paying up a higher check or is it just the business is migrating more to the way they account for small plates and the bar business that might be making up for center of the dining room entrée business?

We really haven't changed the way that we count our entrée, so we count our entrées the same way. I wouldn't attribute it to counting out.

Just say that it is only 1%, so it's not like - that's how many guests?

18 a day.

Yes. It's you wouldn't notice going to the restaurant that there less people in the restaurant, but it's around 1%, so we haven't changed the way we account for.

Yes. Technically, we actually capture the number of bodies.

I know a lot of our companies will use the entrée as some sort of a proxy, but we actually in our system capture the number of bodies, so it's accurately reflected.

Okay. Perfect.

Thank you.

Hi. Good afternoon.

Just a few questions, I think on the first quarter you talked about some labor inefficiencies. I know part of that was due to the Easter shift, but just curious as to how you feel, you managed labor this past quarter?

Then secondarily, I know shrimp cost has started to come down, Doug. I don't remember if you are locked in for this year already on shrimp, but if you can give us an update on that that would be helpful.

Yes. First of all, with respect to labor productivity, we did talk in the first quarter about the spring break ship and whether causing us to have a little problem with managing labor productivity, but that wasn't the case at all in the second quarter.

The second quarter basically our labor 20 basis points higher than it was in the previous year, but 60 basis points, so more than that difference was the group medical. The fact that the group medical, we actually made up some of the difference between last year and this year with a better labor productivity, so that was really a positive for us on the quarter and the way that we were running these restaurants.

With respect to shrimp were now contracted for the majority of our expected shrimp needs for the rest. We expected to be able to do that when we provided our update for you in April.

We continue to believe that the shrimp supply issue in the near-term issue for 2014, maybe a little bit into 2015, but we are seeing some other countries India would be an example of that increased their shrimp production in the meat demand and they are producing a very high quality product, which will I think slowly help to resolve the problem. In fact there has already been some slight moderation in shrimp prices, but at this point in time we are locked in with that.

Is shrimp and salmon still kind of a $0.04 to $0.07 hit this year? I know that was the initial guidance, so I just don't know if you have ever updated it.

Yes. That's accurate, Sharon.

It's in that same ballpark for the full year.

Okay. Thank you.

Thank you. You mentioned during the call the desire to look for the A+ premier sites.

I was just wondering if you could talk a little bit about the accessibility or the ability to find to find those A+ premier sites. As you do find them, what type of, say, landlord investment and/or rates are you finding?

How are you finding these real estate parcels these days? Are price is going up or the price is going down?

Anything along those lines would be helpful.

The price is about the same as it's always been for us. They might go up for others, but we are still considered a mini anchor, because of the people we bring in, so I would say they that is very stable.

The second half of the question, yes, we are finding them. Obviously, I would like to find more of them, but it's all about the demographics, it's all about what's in the area, it's all about other restaurants comps.

It's all about, you know, the actual retail area and what is there. We have about 20,25 different factors we look at when we chose a site.

Once we get pretty much all of them then that's what we consider any an A+ site, and that's when we are willing to move forward and that's really how it works. You are maintaining that same very high standard of or a high figure in terms of…

Yes. You know there's nothing worse than operating losses and you take these sites and you guys are happier or other people are happy, then you know over the next couple years to your profit start to whittle away.

It gets very hard to operate, your best people go to your worst stores. It's a vicious cycle and we've always been nothing, but have A +, there almost everyone is successful and we would like to keep it that way.

I think that it's conservative, but that's really the way we want to Cheesecake.

If you looked at the past 12 quarters, we have exceeded our own expectations at every opening. Higher sales per square foot that we were expecting and really it has worked.

Strategies really worked especially for the three years.

Thanks. Doug, one question for you, last quarter you had mentioned how SG&A most likely would not lever in 2014, and given some changes to the rest of the guidance, just wondering if you could give us an update in terms of how we should be thinking about SG&A or G&A, I should say into the back half?

Thanks.

Yes. I would say that we would expect G&A for the year to be about flat, so won't lever, won't go up, we are continuing to make appropriate investments in our infrastructure to support our growth, particularly international growth, but we are also ensuring that our entire business is being run effectively in this cost environment and that's, what I would call slow growth sales environment, so close to flat is what we would expect for G&A.

Thank you very much.

You are welcome.

Yes. Thanks, guys.

Can you touch a little on the cost of goods? First off on poultry, Doug, you mentioned some favorability there, so can you talk to what that may look like in the back half of the year, especially given the rise that we have seen across all proteins including poultry.

Then also in cream cheese, you have contracted a lot of that in the past, so I was wondering was that not the case in the first half of 2014, and does it make sense to begin locking in if you are not already locked for the back half of '14 or even into '15?

Yes. With respect to poultry, we are contracted and it's just a favorable thing for us for the entire year, so there is not a big changed in your thoughts about poultry.

It's just that that has something that is offsetting the things that are higher like shrimp and salmon and diary cost. With respect to cream cheese in our expectations changed measurably this past quarter.

Generally what you see with cream cheese is it usually slacks off from a pricing standpoint in early spring and that's when we generally lock-in the rest of our cream cheese purchases, but it didn't slack off. In fact it remained high and then when to all time highs from there, so it didn't act like it did before.

The export demand for cream cheese, particularly in China is very high right now. We expect though that that will moderate over time with additional suppliers continue to ramp up such as in New Zealand, but we included it in the our second half guidance.

You know we already see the possibility of entering into futures contract that could be significantly less than this, but not probably right now or for this year. I think it's a temporary thing.

It's really unusual. Butter was really again the proxy for cream cheese pricing, was an all-time high.

That's why didn't like the top quartile. This was the highest ever.

Got it. Thank you.

You are welcome.

Guys, a couple of questions, with the Maxim’s deal in the quarter, was there anything kind of one-time in there, and just overall are you making more money than you were a year ago sort of internationally now you have got a handful of units know up and running overseas or your partners do. Then secondly, just on the return of cash to shareholders in terms of free cash, it actually looks like you are going to be returning more than just free cash meaning you have to borrow some money this year or burn down the rest of your cash balances.

Is that a little bit of a change in philosophy or am I missing something on my cash flow here?

Let me see if I can remember all this. I am going to start with the last one then you may have to remind me again.

On that one, we haven't changed anything in our philosophy. We are going to return our free cash flow and plus included in that are proceeds from stock option exercises, so that's not included on the operations cash flow line, but the last year that number was $70 million, 70-something million dollars, so this year we don't expect it to be near that high.

We expect to maybe $20 million or $30 million, but anyway that's additional cash flow that we distribute to our shareholders, so we don't see any need for there to be any long-term continuing borrowing associated with our share repurchase program. We did borrow $25 million in the first quarter of the year to execute the accelerated share repurchase plan that we put in then, but we would expect that to be paid off before or by the end of the year.

Then on international, so don't comment obviously on what the puts and takes of the international deal are the royalties that there are some fees that are upfront. I don't know that moves the quarter enough to swing a model, but certainly as we continue to ramp up our sites it will become more meaningful.

I don't think that we decided yet what level we will start reporting that out yet, but it's probably a little ways off.

Thank you.

Great. Hi.

Thanks. Two questions if I may.

First, Doug, there has been kind of illusion throughout the call of a number of different commodities and kind of '14 in terms of how may think they may trend over time including, 15%, so it too early to just give us a broad sense is it too early to just give us a broad sense of what you think the basket '15 relative to '14 with everything that you know today and what features markets might be indicating? Then I have a follow-up.

Yes. I think it is too early, John.

I wouldn't. Our purchasing people wouldn't even give that to us and they are lot closer to it than I am, so I don't think that I can do that.

I would say that I would certainly expect the cream cheese would be lower next year than what it is this year. I don't know about anything else.

I think you mentioned that shrimps could be lower for example next year versus this year

Well, again, it cost us a lot money, shrimp and salmon cost a lot of money, so just based on the fact we paid a lot for cream cheese and a lot for shrimp this year and we are contract for the rest of the year, but not at a particularly low price that you might just intuitively think that should be lower next year. In total less or less of an increase?

Less of an increase, John, I think that's a good way of framing the question, but those are only are couple of the variables that are involved in certainly dairy is a lot harder to hedge, so even though there is a futures curve on that, it's not going to be as indicative of where Mr. might, so it just feels a little bit early to us, to give more specific on that.

Okay, but still very helpful. Thank you.

David, maybe a question for you, Obviously you have the right customer base and a lot of the right trade areas that are seeing a pickup in relevant independent restaurants that maybe have seen some competitive intrusion in some of the higher profile trade areas that your operating in? I mean, do you think that that's an issue at all or is the brand still immune in total?

I wouldn't say it's immune. We have no head-to-head competitors, yet everybody can take a little nip out of you here and there.

It takes an awful lot of restaurants to open around the cheesecake too take bites out, but no there is nothing in particular that we are seeing and there is no place that we stay out of. We are just all site-based and so there's nothing out there that I am seeing that's different than it's been in the last few years.

Okay. Thank you.

Thanks. All I got left actually is, Doug, maybe just little help with what the underlying pre-openings is in the Q3 guidance and if $14 million-ish is still a good number for this year?

In the Q3 guidance, okay. Let me see if can.

Bryan, $14 million is still a pretty good number the for the full-year.

I would say that pre-opening in the third quarter, we would say somewhere around the $3.8 million to $4 million.

Okay. Great.

Thanks a lot.

Great. Thank you.

I just wanted to ask about the going back to the Grand Lux, have you considered at all in the locations where it would make sense that maybe just swapping out the name to The Cheesecake Factory, do you think that would help? Think it's an operational issue more and more just in terms of brand and awareness?

No. They are all too close.

I don't think there is. I have to think, but I think there is no Grand Lux that we could swap out that would either be allowed by our radius restrictions or by our landlord, so of the 11 we have there, I don't that be possible.

All right, then Dough on the World Cup impact, most of the World Cup games hit in the month of July, so just wondering if you could just - should we expect that July would be a little bit weaker as well? Similar impact to what you saw in June.

Most of the U.S. games happened in June, so there was some World Cup in July, the biggest impact to us was when the U.S.

team was playing.

Great. Thank you very much.

Yes. Good evening.

You have answered most of my questions, but one question I think as it relate to your presence in malls is your proximity to a movie theaters is a press today talking about there is a 15% to 20% decline expected of the summer box-office season, and just wanted to see if you feel any that decline in traffic to a movie theaters maybe being contributing factor to your performance in recent months?

Steve, that's an interesting question and we do want that, but I think that's actually going on for the past couple of months, so our understanding is that the movie season starts after Memorial Day. From the get-go it's been down at those levels, really if you think about what our Q2 reported comp is, it's already in there, right?

I don't think that there would be any new news for us to talk about with the movie trends that would impact the guidance that we are providing.

Understand. Thank you.