Feb 21, 2012
Executives
Jill S. Peters - Vice President of Investor Relations W.
Douglas Benn - Chief Financial Officer and Executive Vice President
Analysts
Joseph T. Buckley - BofA Merrill Lynch, Research Division John S.
Glass - Morgan Stanley, Research Division Matthew J. DiFrisco - Oppenheimer & Co.
Inc., Research Division Matthew J. DiFrisco - Lazard Capital Markets LLC, Research Division Alexandra Chan - Jefferies & Company, Inc., Research Division Nicole Miller Regan - Piper Jaffray Companies, Research Division Michael Kelter - Goldman Sachs Group Inc., Research Division Sharon Zackfia - William Blair & Company L.L.C., Research Division Will Slabaugh - Stephens Inc., Research Division Bryan C.
Elliott - Raymond James & Associates, Inc., Research Division Mitchell J. Speiser - Buckingham Research Group Incorporated Jeffrey Andrew Bernstein - Barclays Capital, Research Division Karen Holthouse - Crédit Suisse AG, Research Division John W.
Ivankoe - JP Morgan Chase & Co, Research Division Jonathan R. Komp - Robert W.
Baird & Co. Incorporated, Research Division John Dravenstott - KeyBanc Capital Markets Inc., Research Division Greg Margolis Conrad Lyon - B.
Riley & Co., LLC, Research Division
Operator
. Good day, ladies and gentlemen, and welcome to the Fourth Quarter 2011 The Cheesecake Factory Earnings Conference Call.
My name is Melanie, and I'll be your coordinator today. [Operator Instructions] As a reminder, today's meeting will be recorded.
I would now like to turn the call over to Jill Peters. Please proceed.
Jill S. Peters
Thank you. Good afternoon, and welcome to our fourth quarter fiscal 2011 earnings call.
I'm Jill Peters, Vice President of Investor Relations. I'm here with Doug Benn, our Executive Vice President and Chief Financial Officer.
Unfortunately David Overton could not be with us on today's call. 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 www.thecheesecakefactory.com and 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.
We'll start off the call today with some opening remarks and then take you through our operating results in detail. Following that, we'll discuss our outlook for the first quarter of 2012 as well as the full year and then open the call to questions.
Now I'll turn the call over to Doug.
W. Douglas Benn
Thank you, Jill. The fourth quarter marked our highest comparable sales and guest traffic levels of the year with The Cheesecake Factory and Grand Lux Café both solidly positive.
We've now had 2 straight years of positive quarterly comparable sales. Each of our markets delivered positive comparable sales demonstrating the strength of our brand.
Consumers have many choices when it comes to dining out. Our guest counts rose solidly during the fourth quarter, one more measure that tells us we're doing many things very well for our guests.
Our operators continue to demonstrate their leadership in the industry, resulting in high guest satisfaction scores, and at the same time, a disciplined focus on margins. Over the past 3 years, our guest satisfaction scores increased by 20%, which is significant given that our base level score was already pretty high.
This improvement in guest satisfaction is clearly a key driver of our growth in guest traffic over the last 8 quarters. We saw our highest profitability levels of the year in the fourth quarter with an 8.3% operating margin.
Our long-standing goal is to recapture peak operating margins and deliver mid-teens earnings per share growth. And our performance this quarter illustrates our ability to effectively turn higher comparable sales into profit.
The latest example of our continued leadership in menu innovation is our SkinnyLicious menu. Without getting into too many details, I will tell you that guests love the new menu and they love having more options.
In Cheesecake Factory style, the flavors are big, the dishes are what people want to eat, the portions are generous and the items are priced to generate full margins. As to development, we expect to open as many as 7 to 8 new restaurants in the United States this year, including a new Grand Lux Café.
Our first opening of the year is scheduled for next month in Salt Lake City, Utah. We've tightened the range of our new unit openings as we know that some of our opening dates have shifted out a little bit.
Our desire to expand and our capabilities to do so haven't changed. We continue to be selective about choosing sites and taking the appropriate business risks to ensure we can hit our required returns.
In addition to our domestic expansion, we're also expecting that as many as 3 new restaurants will open in the Middle East this year under a license agreement. We're also continuing to explore other international opportunities.
We're in active dialogue with potential partners to further assess the market for our concept outside the United States as well as build relationships with established multi-brand operators in other countries. Our performance continues to be in line with our longer-term objectives for growth.
We are moving down the path to becoming a global brand and are confident in our ability to continue to expand The Cheesecake Factory and to deliver on our earnings growth targets. Now let's review our financial results for the fourth quarter and our thoughts about 2012.
Total revenues at The Cheesecake Factory for the fourth quarter increased 15% to $478 million. Restaurant revenues reflect an 11.7% increase in total restaurant operating weeks due to the extra week in the fourth quarter of 2011, the opening of 7 new restaurants during the trailing 15-month period, plus a 2.6% increase in average weekly sales.
Overall, comparable sales for the 14 weeks that ended on January 3, 2012, increased 2.7% at The Cheesecake Factory and 1.9% at Grand Lux Café. These comparable sales increases generated additional revenue for the quarter of over $11 million.
We had a very strong December helping drive comparable sales above our expected range of 1.5% to 2.5% for the quarter. At the bakery, external sales were $29.4 million, down about 7.8% from the prior year, primarily due to lapping a very successful product launch in the fourth quarter of 2010.
Cost of sales decreased 20 basis points to 26.1% of revenue for the fourth quarter. Dairy cost mitigated on a comparative basis as we anticipated and we had some favorability at the bakery.
Labor was 31.7% of revenue in the quarter, up 90 basis points from the prior year. This was driven by higher payroll taxes and an unfavorable comparison to last year's fourth quarter, in which we saw a significant benefit from the HIRE Act.
Other operating cost and expenses were 21 point -- 24.1% of revenues for the fourth quarter, down 100 basis points from the fourth quarter of the prior year. There were a number of factors that benefited this line item, including favorability from comparable sales leverage and a reduction in debit card transaction fees resulting from federal legislation.
G&A was 5.1% of revenues for the fourth quarter, down 80 basis points from the prior year, primarily due to leveraging and managing our G&A effectively during the quarter. And depreciation expense for the fourth quarter of 2011 was 4.1% of revenues, down 20 basis points from the prior year period.
The favorability on this line item is primarily due to sales leverage. Following our asset impairment testing, we concluded that it was appropriate to write off the remaining carrying value of 3 previously impaired restaurants, including 2 Cheesecake Factory restaurants and 1 Grand Lux Café.
As a result, we recorded a noncash charge of approximately $1.5 million in the fourth quarter of 2011. Preopening expense was $3 million in the fourth quarter of 2011 versus about $900,000 in the same period last year in support of 2 additional restaurant openings in the fourth quarter of this year, as compared to the same period of last year.
Interest income was $730,000 in the fourth quarter of 2011 compared to $4,000 in the fourth quarter 2010. Both interest income and our tax rate were impacted by the favorable settlement of a lawsuit we filed against the IRS relating to the deductibility of certain executive compensation for the years 2003 and 2004.
As a result, we recorded interest income of $719,000 and a credit to our tax provision of $1.1 million relating to this settlement. In summary, we're very pleased with our performance.
We ended the year with a strong fourth quarter delivering $0.53 in pro forma earnings per share on a 2.7% increase in comparable sales. For the year in spite of food cost pressures that were much greater than originally expected at 60 basis points, equating to roughly $0.13 to $0.14 in earnings per share, we leveraged all other operating line items on our P&L to deliver 15% earnings per share growth on an increase of 1.8% in comparable sales.
Our performance is competitively very strong and we hit our targets for the year. Moving on, our liquidity position continues to be solid.
Cash flow from operations for the full year was approximately $196 million. Net of roughly $77 million of cash used for capital expenditures, we generated about $119 million in free cash flow in 2011.
During the fourth quarter, we used our free cash flow to repurchase about 973,000 shares at a total cost of approximately $27 million. Year-to-date, we returned about $172 million in cash to our shareholders through share repurchases, slightly above the range we last communicated to you.
That wraps up our business and financial review for the fourth quarter of 2011. Now I'll spend a few minutes on our outlook for the first quarter 2012 and an update on the full year.
As we've 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 weather influences, which is of positive relevance as we talk about our expectations for the first quarter, given how mild the weather has been so far this year.
For the first quarter of 2012 then, we estimate a range of comparable sales between 2% and 3%. Based on this assumption, our estimate for diluted earnings per share is between $0.34 and $0.36.
I will note that the 2% to 3% comparable sales range is an operating week comparison. This is always how we measure comparable sales, but due to the 53rd week last year, there is a one week shift inherent in the operating week comparison.
Because of this, and to assist you in your modeling, we are also providing an estimate of total sales for the first quarter, which is approximately $435 million to $440 million. I encourage analysts to review their revenue assumptions for both the first and fourth quarters as I expect the number of earnings models assumes -- assume too much revenue in the first quarter and not enough in the fourth.
For the full year, the one week calendar shift does not have an impact on total revenue. With respect to 2012, we are raising our comparable sales range by 50 basis points to between 1.5% and 2.5%, reflecting the health of our business and confidence in our ability to grow sales.
Based on this comparable sales assumption we estimate diluted earnings per share in a range of $1.80 to $1.90. While food cost inflation expectations have moderated some, we're anticipating higher minimum wage cost and higher payroll taxes.
In addition, our corporate tax rate will be somewhat higher this year in the range of 28% to 29% as we lap the benefit of some federal tax credits such as the HIRE Act. This represents our best estimate at this time and incorporates everything that we now as of today.
With that said, we'll take your questions. [Operator Instructions]
Operator
[Operator Instructions] Our first question comes from the line of Joe Buckley with Bank of America.
Joseph T. Buckley - BofA Merrill Lynch, Research Division
Just a question on the first quarter guidance again, then. It looks like you're forecasting kind of flattish EPS year-over-year, is that right?
And kind of what are the dynamics of that given the sales forecast?
W. Douglas Benn
Well, let's talk about just the comps and the revenues. It -- I think that what you say is true, but again we're going to be recording -- we're reporting our comps the same way that we always have, but in the first quarter alone, those -- you're going to see roughly an $8 million difference in the revenue that will generate in the quarter from what you'd expect based on that comp-store sales guidance.
Our best week of the year, Joe, is not in our revenue in the first quarter. It was captured in the 53rd week of 2011.
And it's replaced by an average week during the quarter. So a $43 million really good week is being replaced by a $35 million average week.
And that is a -- results in a difference of $0.04-plus in earnings per share for the first quarter alone. For the fourth quarter, as I mentioned in my prepared remarks, I think most people are probably understated on revenue for the same reason.
But on a full year basis, the revenue and the expected comps should line up with each other.
Joseph T. Buckley - BofA Merrill Lynch, Research Division
Okay. And from a margin standpoint, is there more cost pressures in the first quarter?
I mean related in part to that revenue differential?
W. Douglas Benn
Well, if you want to look at it just from a margin standpoint, couple of comments I'd make. There is -- the expectation of -- that the commodities, although down off their peak, or still modestly elevated, compared to the prior year first quarter, but really, the margins in the first quarter are much more a function of the shifting of that big week and the loss of the leverage on $8 million worth of sales.
So if you do some rough math, $8 million worth of sales times 40% to 50% flow-through will give you that kind of a profitability over the total sales that's going to be something in the neighborhood of 70 basis points of deleveraging from that alone. Now we would expect to see that, that deleveraging comes back in the fourth quarter and that for the year, we'd have margin improvement based on the same-store sales range that we gave.
Operator
Our next question comes from the line of John Glass with Morgan Stanley.
John S. Glass - Morgan Stanley, Research Division
Doug, could you just elaborate a little bit on the real estate pipeline and maybe what happened? And you said 7 to 10, and now I think you're saying 7 to 8, I think you did say 7 to 8.
And what the shortfall was? Was it developer-related, was it Cheesecake Factory?
I'm assuming it’s developer, and can you talk about is that a pattern you expect to continue in '13 or do you think you'd catch up? And then one last piece to that can, you talk about any some of the newer, smaller markets that are being slower, or maybe not as certain or is it just spread across the system and just a couple fell out of the count?
W. Douglas Benn
Well, nothing really fell out. It really, some of our opening dates shifted out a bit.
And as I said on my remarks, our desire and our capability to expand more restaurants has not changed. We are selective about choosing our sites and taking the appropriate business risks, but I don't think things have changed all that much from a real estate perspective.
While real estate development looks like it's starting to recover, landlords aren't quite in full gear yet. So we're the -- any kind of delay in openings is landlord and site availability related and has nothing to do with our capability or desire.
We're seeing some landlords starting to do more renovations, which is good for us because remember, we're not dependent on just new retail development. But they're moving slowly.
So I would expect this to get better as the economy improves and the landlords are more motivated to move faster on these A-plus sites that we're looking for.
John S. Glass - Morgan Stanley, Research Division
Okay. And is timing still back half-loaded?
Or do you -- is it more extreme that maybe even last year in terms of opening timing?
W. Douglas Benn
I would expect to 2 open in the first half of the year and 5 to 6 in the second half of the year. And we have 3 international openings as well and they're in the second half of the year.
Operator
Our next question comes from the line of Matthew DiFrisco with Lazard.
Matthew J. DiFrisco - Oppenheimer & Co. Inc., Research Division
Doug, just looking at the guidance -- the prior guidance, I guess you've nudged up the comp by a percent, and the EPS for the full year $1.80 to $1.90 sort of remain the same. And similar to follow on to Joe's question, in the context of the full year, I guess why aren't we seeing more upside on the earnings?
Is there G&A kicking up a little bit or beginning to grow again after a couple of quarters of contraction? Just missing where or what's the incremental, I guess, headwind on the margin front that wouldn't have given you better leverage with the comp upside that you're predicting?
W. Douglas Benn
Yes, I would tell you that there's probably 20 or 30 basis points of labor pressure that's coming from minimum wage cost in a number of states, primarily Florida, also Arizona and Washington, and I think that's probably about 10 basis points of pressure. In addition, unemployment taxes have increased, which impacted us in the fourth quarter, probably about $0.01 a share in the fourth quarter, and our ongoing for 2012 payroll taxes, I think, is what others that I've listened to were referring to them as, but the unemployment coffers in many states are empty, and they're asking companies to pay up.
And that's probably another 10, maybe 10 to 20 basis points of pressure on the labor line. And then I mentioned our corporate tax rate is going to be a little bit higher.
We're lapping the benefit of some federal tax credits that we were able to take last year and primarily related to the retention credits that are part of the HIRE Act.
Matthew J. DiFrisco - Lazard Capital Markets LLC, Research Division
Okay. And does that completely resolve, though, that they're not going to do a HIRE Act or are you just taking the conservative approach that they're not going to re-up it?
W. Douglas Benn
It's not re-upped it at this time. So I wouldn't forecast what the future legislation might be.
Operator
Our next question comes from the line of Andy Barish with Jefferies.
Alexandra Chan - Jefferies & Company, Inc., Research Division
This is Alex [ph] Chan for Andy. Just wondering a little bit about fourth quarter comps, maybe now you can maybe give us some on a 13 week basis.
And give a little bit more detail about SkinnyLicious and sort of what might have -- what lift that might have had.
W. Douglas Benn
Sure. Well, we talked about -- I talked about in my prepared remarks about the strength of December.
The additional week was one of our strongest weeks of the year and definitely helped during the quarter. But even without that week, we were at a -- about a 2.2% comp with about 1/2 of that being guest traffic, so about 1.1% of guest traffic.
So even without the additional week of $43 million in sales, we're at 2.2% comp. With respect to SkinnyLicious, as you know, one of the most important ways we differentiate ourselves in the industry is through our menu, and I would say the SkinnyLicious is really just the latest example of what we continue to do from a menu-innovation standpoint, guests love the menu as I mentioned, they love having more options.
I think that we believe that the desire to eat healthier as a big trend, and we think we have the best approach to that. And our approach in Cheesecake Factory style to have high flavor profiles, dishes that people really want to eat, still quite generous portions and to price them at full margin.
So all in all, we're very satisfied with how is SkinnyLicious is performing. I don't want to get into quoting a percentage of total sales or giving you anything like that with respect to a menu category because menu category is a -- it's simply what we do, is we come up with new menu categories and this is just the latest example.
Alexandra Chan - Jefferies & Company, Inc., Research Division
Okay, great. And then another quick one about uses of 2012 cash, what's left, sort of an authorization, and how you're thinking about that.
W. Douglas Benn
Well, as part of the guidance that we gave, it's assuming that we'll use $100 million to do share repurchases during the year, and I would say that that’s probably slightly front-end loaded.
Jill S. Peters
And then Alex [ph], just to the second part of your question we have 9.8 million shares left in the authorization.
Operator
Our next question comes from the line of Nicole Miller with Piper Jaffray.
Nicole Miller Regan - Piper Jaffray Companies, Research Division
I was wondering in the fourth quarter if there are any interesting trends you saw from gift card purchases or redemptions? And then also some of your casual dining peers are beginning to execute on loyalty programs and just wondering if you have anything in the works.
W. Douglas Benn
Sure. Our gift card sales were very good.
They were strong in both the fourth quarter and for the full year 2011, demonstrating, I guess, the strength of our brand. They were up not only on an absolute basis, but on a comp basis, they were up solidly as well.
We focused some of our marketing spend in the fourth quarter on gift card messaging, which was very effective for us, and it resulted in particularly strong sales of electronic gift cards. So those sales were up significantly.
We have looked at loyalty programs in the past and currently, we do not have one or have plans to implement one.
Operator
Our next question comes from the line of Michael Kelter with Goldman Sachs.
Michael Kelter - Goldman Sachs Group Inc., Research Division
I was curious about the 7 to 8 new units that you're going to build in the U.S., whether you could talk about where they're going to be, region-wise, are they in new cities for you? Are they secondary locations in existing cities, will they all be full-size or any of these going to be the smaller size?
And then related, you could talk about the 2 that you took the impairment on, what's cities were they in? And what's going on with those locations?
W. Douglas Benn
Sure. With respect to cities, these restaurants are located all around the country.
Many of them are in existing markets that we're in. Some new markets, but the size of them -- most of them will be the smaller sized format restaurants.
We mentioned one of them is going to be a Grand Lux, and that Grand Lux is going to open in the northeastern part of the United States next year. So that will be our look at the new designed Grand Lux decor and design.
The other part of the question, Jill, was?
Jill S. Peters
The 2 restaurants we impaired.
W. Douglas Benn
The 2 restaurants we impaired, while we're not going to say specifically where they were, I will say that they were previously impaired restaurants. A couple of years ago, we impaired some Grand Luxes and Cheesecake Factories, and this is just a further impairment of these restaurants.
Some of them are close to the end of their lease term.
Michael Kelter - Goldman Sachs Group Inc., Research Division
The other thing I wanted to ask on new unit development was you talked about looking for future partners in international markets. Are you considering any equity investments or 50-50 JVs, or full ownership or is everything going to be in the form of some royalty agreements?
W. Douglas Benn
I think that we would consider other forms of opening a restaurant other than simply licensing agreements. But that's our desired way of expanding.
So most countries you -- are best to be operated in initially with another partner. And I think that what we would consider we would -- while we consider making an equity investment, our desired way of doing it is through licensing.
Operator
Our next question comes from the line of Sharon Zackfia with William Blair.
Sharon Zackfia - William Blair & Company L.L.C., Research Division
Doug, I was hoping you could break down average ticket for us. I think you've seen that negative mix kind of persistent for the last few years.
I'm just curious if that continued. And then as you look forward, kind of what your thoughts are on commodity inflation, and your plans for pricing this year.
W. Douglas Benn
Okay, okay. First of all, in the average ticket, so 2.7% comps, 1.7% was traffic and 1% was average check.
We had about 1.9% of pricing in our menu, so the mix was about the same as it was last quarter, about 0.9% negative. We talked before about incident rates on nonalcoholic beverages, which is impacting almost all restaurant operators, and as we look forward to the guidance that we gave for 2012, it assumes that the mix will stay about the same, but I would expect that, as I think we've talked before that over time, we would get to keep a larger percentage of our menu pricing.
But I don't know that, that will happen quickly. The second part of was, I've already forgotten...
Jill S. Peters
Commodity.
W. Douglas Benn
Commodity inflation. Okay.
So I would say this about our purchasing for the year. We're currently about 50% contracted.
Fully contracted for us is about 60% contracted. We're still seeing some volatility in the commodities market, and we think the best approach right now is to wait on some of the remaining non-contracted items.
We have seen commodities come down a little bit, we're locked in on a number of our key products, poultry and bread, as examples. And we are comfortable with where we are, given what we're seeing in the commodities market.
We would currently expect food cost inflation for the year, based on our contracted items and our thoughts about non-contracted items to be about 3%, 2.5% to 3.5%, which is down a little bit from what we've previously talked about in October. And the last one is pricing.
Okay, so in February, Sharon, we have 0.7% of pricing rolling off of our menu. And I would think that while we'll continue to balance -- be enabled to leverage our margins as well as continue to grow guest count, I would think we're going to at least replace that 0.7%, such that we'll have about 2% of pricing in the menu, perhaps a little bit more, moving forward as we look towards our August menu change.
Operator
Our next question comes from the line of Will Slabaugh with Stephens.
Will Slabaugh - Stephens Inc., Research Division
I was curious on the nonalcoholic beverage mix, you mentioned that you factored that into your guidance as of last quarter, that it not stave loss for the year along with alcohol as well, dessert mix, things like that. Just wondering how those fared during the quarter and if you still expect that slightly negative mix to continue throughout 2012?
W. Douglas Benn
Well, we haven't factored in that we're going to have a negative mix of something similar to that during 2012. That's what we factored in -- it's the nonalcoholic beverage sales have stabilized but they’re still not going up.
So until we see the nonalcoholic beverages lap around, such that we have higher incident rates in the current year than we have in the future year, it's just prudent, I think, from a modeling and guidance standpoint to not expect that the menu mix improves until it does.
Operator
Our next question comes from the line of Bryan Elliott with Raymond James.
Bryan C. Elliott - Raymond James & Associates, Inc., Research Division
I just missed a couple of disclosure items, Doug, when you were going through the historicals. The CapEx, and I think you gave cash flow from ops from '11?
W. Douglas Benn
Well, CapEx is for the year is expected to be between $100 million and $110 million, so we revised that downward just a little bit.
Bryan C. Elliott - Raymond James & Associates, Inc., Research Division
Yes, and what was it in '11?
W. Douglas Benn
What was it in '11?
Jill S. Peters
It was $77 million.
Bryan C. Elliott - Raymond James & Associates, Inc., Research Division
Okay. And did you give a cash flow from ops for '11?
Jill S. Peters
We did. It was $196 million for '11.
Bryan C. Elliott - Raymond James & Associates, Inc., Research Division
And on the fourth quarter, yes, the benefit of the extra week from the fourth quarter, have you attempted to quantify what the, maybe the EBIT contribution from the extra week was?
W. Douglas Benn
Well, it's really hard to estimate with any precision the earnings from that one week. But on a simple pro-rated basis, if you kind of think about it, it was a $43 million week, and if you take $43 million over the total sales for the quarter and multiply that by the EPS for the quarter, you'll get that it was $0.04 to $0.05.
Makes sense?
Bryan C. Elliott - Raymond James & Associates, Inc., Research Division
But essentially assumes full cost allocation? Weekly accruals for all of the costs?
W. Douglas Benn
That assumes a simple pro-rata basis as I described to you.
Bryan C. Elliott - Raymond James & Associates, Inc., Research Division
Yes, well I'm misunderstanding what -- when did you say pro rata, that there is no leverage assumption in that pro rata, right? You're just taking the...
W. Douglas Benn
There's no -- it's 43 divided by total sales xCPS. That’s kind of like -- because otherwise -- I started off saying that it's really impossible to really figure out exactly what the impact of that additional week is.
We've had ad nauseum discussions about that internally.
Bryan C. Elliott - Raymond James & Associates, Inc., Research Division
Okay, fair enough. Last question is on the tax credits that expired.
So it sounds like you booked some of those credits against labor expense and some of them in the tax line, historically. Is that true?
W. Douglas Benn
In 2010, the HIRE Act had -- when you hired someone you got a credit basically on payroll taxes, which was labor. In 2011, if you kept those people hired, you got a credit and it went to taxes.
So in 2012, we don't have the labor or the tax piece in litigation.
Bryan C. Elliott - Raymond James & Associates, Inc., Research Division
Got you. I didn't realize there was the credit against the payroll tax.
Operator
Our next question comes from the line of Mitch [ph] Speiser with Buckingham Research.
Mitchell J. Speiser - Buckingham Research Group Incorporated
Doug, can you give us a little more color on the food cost outlook as it relates to dairy? What has been locked, what hasn't been locked?
W. Douglas Benn
Well, what -- dairy's one of the more favorable items at least on a comparative basis with the prior year. On a comparative basis, dairy and cheese have come down from where they were last year and some other products as well.
Jill S. Peters
And it's just in terms of what we've contracted on dairy, fluid dairy is something that we are unable to contract on, and we have contracted some of our cheese and other pieces of dairy, some of our cream cheese, but as Doug mentioned, we are not fully contracted for the year, and that is part of our strategy.
Jeffrey Andrew Bernstein - Barclays Capital, Research Division
Okay. And another question on -- the competition has been, seems to be stepping it up in terms of, I call bundling-type meals, and just wondering when these new bundling offers do come out and they're nationally advertised, do you feel any impact, albeit even near term from these bundling meals being pushed from a lot of your peers?
W. Douglas Benn
I think that bundling, discounting, whatever you want to call it, has been going on for a long period of time. As you know, we're focused on driving full margin sales at a range of price points.
So I don't think that this is new. I don't think that the bundling and the deals ever really stopped, and so in spite of that, we've been comp-ing positive and growing our guest counts in the last couple of years, so I don't think that we're seeing a big impact from them or they're already factored into the sales that we're doing.
Mitchell J. Speiser - Buckingham Research Group Incorporated
Okay, great. And if I could just, if you don't mind, just on the extra week and as I look at the fourth quarter, it seems like the fourth quarter lines up very similar, fourth quarter '12 to fourth quarter '11, and I thought you mentioned maybe you'd get that $8 million back in the fourth quarter, or so.
But it looks like your fourth quarter this year ends on January 1 to maybe for the fourth quarter '11, ended on January 3, so are those 2 extra days extremely meaningful? Or can you just explain why you think you might make up that $8 million in the fourth quarter when the 13-week periods kind of lined up a little more similar this year?
W. Douglas Benn
Yes, the math is complicated. So I'm probably not going to do it justice, and we might have to sit down offline with a calculator.
But here's what I would say to you. I would say that the last fourth quarter was a 14-week quarter.
It had the huge week in it. This year's fourth quarter will also have the huge week in it, but that huge week will be spread for the quarter over a 13-week period of time, which is going to have a significant bearing on margins for the quarter.
And as far as just the math goes, I would like to just work through that with you offline, absent that. But we've gone through this.
We know that we're going to -- we feel comfortable with our guidance that we've given for the year, and it comes back, some in the third quarter and some in the fourth quarter from a margin standpoint and a revenue standpoint.
Operator
And our next question comes from the line of Keith Siegner with The Cheesecake Factory.
Karen Holthouse - Crédit Suisse AG, Research Division
It's with Crédit Suisse. This is actually Karen Holthouse for Keith today.
One quick, just bookkeeping question. When you gave the -- talking about how comps are actually on a comparable sales week basis, is that the same for the average weekly sales number?
Jill S. Peters
Karen, do you mean is the average weekly sales number on a 14-week basis?
Karen Holthouse - Crédit Suisse AG, Research Division
Yes, is it on when you say like the comp is on a comparable week, so, yes, comparable week basis so does it really pull in that for -- or yes, I guess a 14 to 14 week basis is another way of saying it.
Jill S. Peters
Right, so that 2.6% increase in average weekly sales is on a 14-week.
W. Douglas Benn
It's computed in the same manner comparing the same weeks that the comp-store sales number is. So it's apples-to-apples.
Karen Holthouse - Crédit Suisse AG, Research Division
Okay. And then could you help us understand just what the 14th week in the fourth quarter, how much that might have helped kind of restaurant margins for some of the areas where you only -- you're really accruing cost on a 13-week basis or quarterly?
W. Douglas Benn
Well we don't accrued -- we accrued cost for every week, so we didn't drop a week of labor or not accrue for G&A, or -- so all -- the accruals were all done. With that said, there might be some small margin benefit from having that extra week, but generally all the costs are accrued.
The big benefit was because it's such a big week. In fact, it was at $43 million of the biggest week in the history of the company.
So it had significant leverage created on the fixed and semi-fixed costs that we have on our income statement just from the fact it was such a big week.
Karen Holthouse - Crédit Suisse AG, Research Division
Okay. And then one other quick one.
What are you seeing in terms of turnover right now kind of versus the same period last year or last quarter, increasing or decreasing or anything there?
W. Douglas Benn
Management and crew turnover, I -- it's -- we're -- our retention rates are, for people, are very good right now. They continue to be good.
Operator
Our next question comes from the line of John Ivankoe with JPMorgan.
John W. Ivankoe - JP Morgan Chase & Co, Research Division
Just really quickly. I don't -- I'm not sure you answered the question that was asked earlier about the mix of kind of the smaller format versus bigger format units in 2012 and whether you think that might have a averaging unit volume impact, for the new units, I'm referring to.
W. Douglas Benn
Yes, the new units will be -- the majority of the units we'll build for 2012 will be the smaller format, and it shouldn't have any impact -- it depends on how you look at volumes. On a sales per square foot basis, we would expect that not to be impacted.
If you build an 8,000 square foot restaurant that does $1000 a square foot, that's obviously $8 million, as opposed to a 10,000 square foot restaurant at $1000 a square foot. So $1,000 a square foot is what it really takes, John, to be able to drive the returns that we're looking for on these restaurants.
John W. Ivankoe - JP Morgan Chase & Co, Research Division
Of course, understood. And with, I guess, you being a large number of smaller format restaurants, is there an opportunity to reduce the preopening per unit?
And on that basis, what's in guidance for preopening in 2012 on a dollar basis, if you have that?
W. Douglas Benn
Yes, the -- what's in preopening is roughly -- Jill, make sure I get this right -- $10.5 million somewhere, $10 million to $11 million. And I think that you might have slightly less preopening but really, not really.
We go into a restaurant and have to -- there's, I guess, a few less people to train because maybe you don't need as many people on a smaller restaurant as a bigger one. But generally our preopening expenses are not going to be less for a smaller restaurant.
Jill S. Peters
And when you look at preopening costs, 70% of the costs to open a restaurant is related to training the staff there, so we're not going to invest any less in the smaller format restaurant that we would in a larger restaurant.
John W. Ivankoe - JP Morgan Chase & Co, Research Division
Of course, understood on a per square foot basis, but maybe I thought on an -- just an absolute restaurant basis, but okay. I hear you and understand you.
And then finally, if I may, again just really tightening up some loose ends here. That the G&A in dollars in the fourth quarter giving the extra week maybe, was a little bit light for what I have thought, but can you just help us look what the '12 number would be?
W. Douglas Benn
For G&A?
John W. Ivankoe - JP Morgan Chase & Co, Research Division
Yes.
W. Douglas Benn
I would say that when the dust settles that we'll be somewhere just north of $100 million.
John W. Ivankoe - JP Morgan Chase & Co, Research Division
Okay. So really, I mean, some very, very good cost control in G&A in '12 versus '11, that's basically flat, I mean where I guess I'll maybe from -- I'm looking at my old model, maybe at 4% or so?
W. Douglas Benn
In great leverage, I don't know if you're talking about margins or you're talking about dollars.
John W. Ivankoe - JP Morgan Chase & Co, Research Division
Dollars.
W. Douglas Benn
Okay. Yes, and some of it, John, last year we had a very -- we had a year where we earned over 100% bonus payout this year.
Not as much partially impacted by the 60 basis points of cost sales pressure that hit us, so there's a little bit less bonus accrual in this fourth quarter as well.
John W. Ivankoe - JP Morgan Chase & Co, Research Division
Okay. But importantly, as we go into '12, I mean, you're kind of thinking, you're just over $100 million?
W. Douglas Benn
Yes.
Operator
Our next question comes from the line of John [ph] Komp with Robert Baird.
Jonathan R. Komp - Robert W. Baird & Co. Incorporated, Research Division
Just one clarification question on Q4, Doug. On the tax rate, on a non-GAAP basis, the tax rate looked a little bit lower than where you had anticipated, so just want to confirm my math is correct there.
And then, also I asked, what drove the variance?
W. Douglas Benn
Yes, on taxes on a quarter-to-quarter basis, there's often timing issues with respect to items that are impacting that line, and if you exclude the impact from the IRS settlement, which we carved out in the press release, the rate was a little bit lower than what we expected. And that was in part due to another smaller settlement that was favorable to us, a better read, I would tell you John [ph], of our tax provision is to look at the full year number, which we thought would be, for the year between 27% and 28%, and it was pretty close to 27% for the year.
Jonathan R. Komp - Robert W. Baird & Co. Incorporated, Research Division
Okay, that's helpful. And then maybe just one more, longer-term picture.
I know in the press release, I think David actually mentions being more confident in achieving mid-teens EPS growth as we begin the global expansion. So just wondering if you can give any more color on the contribution that the algorithm as you look ahead, how meaningful that international piece could be?
W. Douglas Benn
Well, 3 restaurants we're opening this year, and next year in 2013, we really don't know, but let's assume that in 2013 that 2 other ones could open. Either that we thought we signed another deal or that we have continued growth from our current partner in the Middle East.
If there are 5 restaurants opened for -- close to the entire year 2013, each restaurant just roughly, rough rule of thumb, could equate to about $0.01 in earnings per share. So you could get $0.04 or $0.05 in earnings per share out of the international growth in 2013, which, on just a base of, let's say, $2 is about 2% more growth out of the international piece on an earnings per share basis.
Operator
Our next question comes from the line of John Dravenstott with KeyBanc.
John Dravenstott - KeyBanc Capital Markets Inc., Research Division
You mentioned the favorable weather to start the year here, and you guided to 2% to 3% same-store sales for the 1Q. Is it fair to assume that your trend to date is above that 2% to 3% range given that favorable weather?
W. Douglas Benn
Well, certainly we have -- we're trending very positively right now. Without giving a real number to you, here's what we've done.
We've gone, looked at the comp-store sales that we have to date. We haven't factored in that the weather is going to be better or worse than normal for the rest of the quarter, right?
So if it's better, if it's worse than normal, then I guess we could be impacted. But it's fair to say that our comps are strong right now today, yes.
Operator
Our next question comes from line of Greg Margolis with BNP.
Greg Margolis
You mentioned on the call your long-standing goal is to recapture peak operating margins, which was 11%. Can you just sort of talk about that time frame that it takes to get there?
And perhaps any more color on what needs to happen for you to get there?
W. Douglas Benn
Okay, sure. Now, let me just kind of correct the 11%.
11% was back when they didn't make us expense stock options. So to put it on an apples-to-apples basis, the operating margin number that we're looking at is 9%.
Okay, so to get the 9%, we've got to really be able to continue to drive comparable-store sales like we have been doing. The good news today, Greg [ph], is that we're at the average unit volumes, our sales per square foot that we're at today, we have higher operating margins than we -- when we were last at that level of sales per square foot.
So the cost management initiatives that we implemented in 2009 and in 2010 primarily have brought our cost structure down such that at a lower sales volume, we can achieve peak margins. So our peak margins were at a sales volume per restaurant, we really -- we have -- we really have to start talking about it on a per square foot basis, but on per restaurant of around $11 million.
So we're 10 or so today. So if you assume comp-store sales increases of 2% to 3% over the next few years, you can add a couple hundred thousand to that per year.
And before we get to $11 million, if the -- if it holds like it is today, which there's no reason to expect that it wouldn't, that at a volume less than $11 million we should be at 9 -- at close to peak margins.
Operator
Our next question comes from the line of Conrad Lyon with B. Riley.
Conrad Lyon - B. Riley & Co., LLC, Research Division
Doug, I think earlier you alluded to that some of the impaired stores may be near their lease term, just want a clarification to that mean that you might consider closing a store?
W. Douglas Benn
Well, if it's near the end of the lease term, we might move it to another location. We might open another one close to it.
Conrad Lyon - B. Riley & Co., LLC, Research Division
Got you. Okay.
Second question, just because some of the new units will be smaller in square footage, could you provide any color with the opening schedule for the year? I just don't want to overestimate sales for a particular quarter.
W. Douglas Benn
Yes, 2 in the first half of the year, and 5 to 6 in the second half.
Operator
Our next question comes from the line of Matthew DiFrisco with Lazard.
Matthew J. DiFrisco - Lazard Capital Markets LLC, Research Division
Doug, just looking at the price increase, and I think you have something rolling off in the first quarter, here. You're maintaining 1.9, I think, you said earlier in the call.
I think I have down that you had a 0.7 that you took in 1Q '11. What are your plans for that price increase, or the timing of that to re-up it or maybe even raise it a little bit?
W. Douglas Benn
The timing is the same, so when the old one rolls off, then approximately will be -- the new one will come on, and what I said is what -- is that we would at least replace what is rolling off, and perhaps -- which will give us about 2% of pricing in the menu, perhaps a little bit better than that. But I would guide you to think it that we'll have at least 2% of pricing in menu.
Matthew J. DiFrisco - Lazard Capital Markets LLC, Research Division
Okay. And then just putting into everything that you gave us as far as G&A, the tax rate and the labor deleverage and your comp, if the math looks right, look like even on the low end of your EPS guidance of $1.80 to $1.90, that you're implying about 50 or so basis points of restaurant operating margin leverage.
Would that be correct?
W. Douglas Benn
At the low end, I don't think it's that big, but we could talk through -- you have to -- I don't think it's that big at the low end. I would say that somewhere between anywhere from roughly 20 basis points to 50 or something like that is at the high and the low end.
I don't think it's 50 at the low end.
Matthew J. DiFrisco - Lazard Capital Markets LLC, Research Division
But that would then be the leveraging itself, not only from COGS but also coming from other operating expenses given the current comp environment?
W. Douglas Benn
It would have considered leverage on all the line items on our P&L.
Jill S. Peters
And Matt, Doug's talking about operating margins. He's not looking at on a restaurant margin basis.
The [indiscernible] they gave you is...
W. Douglas Benn
Yes, it's operating margins. Yes, that's right.
You were -- okay. What were you are asking about?
Matthew J. DiFrisco - Lazard Capital Markets LLC, Research Division
I was asking about restaurant margins.
W. Douglas Benn
Okay.
Matthew J. DiFrisco - Lazard Capital Markets LLC, Research Division
Okay, so you gave the G&A, so I see that --
W. Douglas Benn
Okay, that's it.
Matthew J. DiFrisco - Lazard Capital Markets LLC, Research Division
G&A looks like it's flat or almost slight deleveraged, and then I might have missed this but did you say where -- is David abroad did you say? Or I missed that, sorry.
W. Douglas Benn
He's traveling today, so he wasn't able to be in California for the call.
Operator
And our final question comes from the line of John Glass with Morgan Stanley.
John S. Glass - Morgan Stanley, Research Division
That last year you quantified the weather in the fourth quarter, the benefit or the detriment to weather, and I'm sorry if you didn't -- if I misheard or didn't hear you, did you quantify what the benefit you thought in the fourth quarter weather was?
W. Douglas Benn
All right, yes, last year, what we said was it cost us about 1%, so I would say that when we did our guidance for the fourth quarter, we were -- for this year, we factored in the fact that we didn't expect that awful weather from last year to continue, so we factored in more normalized weather, which is what we got. So you can look at roughly, maybe our comps had a 1% weather benefit compared to last year.
John S. Glass - Morgan Stanley, Research Division
Okay. And then just thinking about driving traffic in this business, a lot of your peers have seen the acceleration in traffic but of course on smaller volumes.
In the past you've talked about things such as maybe bounce back promotions, for example, or you've talked about promoting curbside or whatever you've done in the past in your way of promoting or driving traffic. What are you thinking about for '12 that will be incremental in terms of traffic generation?
W. Douglas Benn
Let me tell you that our -- so if you look at our traffic, it's been -- the thing that impresses me about it, it's been so steady. In fact, if you look at it on a 2-year basis, it's right around 2.2%, somewhere in that range.
The things that we do, I'll mention a couple of things. Our guest satisfaction scores, I talked about on the call, they continue to rise.
We set ourselves apart on food and service, and I think the guests see that. And our execution is very good.
So we're -- we work on those types of things. We work on retention and training of our people, but we also make investments in infrastructure.
So a good example of that, and of -- that I've talked about before is, in the investments and infrastructure are meant to improve the guest experience, and hence drive traffic in that manner. And one of the things that we've done, I mentioned the front desk system before.
Our BI tool allows us to analyze information from the front desk system from abandons, for instance, people that take a pager and don't ever wait around for their table, or it helps us analyze at what time, what quote time people walk away. And we use that information then to be able to hone our experience and give better guest experiences.
The other thing we use is we use marketing to support and build our brand. Our goal in marketing is really to convey to our guests and audience that quality above all else it is how we're run, and that we're a chain in name, but we're not a chain in practice.
And a good recent example of something that we've done associated with marketing is to put our Chief Culinary Officer on The Martha Stewart Show, really to show the seriousness of our food and that this -- he made a recipe on the show that showed that we had 3 sauces that were made from scratch and really helped solidify what made from scratch really means. So marketing has been -- we’re very focused on our brand building and that has been what has helped us drive sales.
And we're using social and digital media to help do that from a marketing standpoint. So those are a couple of things I think of right away.
Operator
Ladies and gentlemen that does conclude the time that we have available for questions. We'd like to thank you for participation in today's conference.
You may now disconnect and have a wonderful day.