Cracker Barrel Old Country Store Inc (CBRL) 2003 Q1 法說會逐字稿

完整原文

使用警語:中文譯文來源為 Google 翻譯,僅供參考,實際內容請以英文原文為主

  • Operator

  • Good morning everyone and welcome to the CBRL group 1st quarter earnings conference call.

  • Today's call is being recorded and will be available for replay starting today at 2 p.m. eastern and running through November 27 until 8 p.m. eastern by dialing 888-203-1112 and entering confirmation code 386170.

  • At this time, for opening remarks and introductions, I would like to turn the conference over to the Chairman of the Board, Mr. Dan Evins.

  • Please go ahead, sir.

  • - Chairman

  • Thanks, Chris.

  • Good morning.

  • We appreciate all of y'all being here for yet another, what we believe to be a very positive earnings release conference.

  • With me is a group that's doing a super job with the CBRL Group.

  • Mike Woodhouse is our President and CEO, Jim Blackstock, our Senior Vice President and Chief Counsel and Larry White, our Senior Vice President and Chief Financial Officer.

  • I see this morning that our stock is up a little.

  • I think we probably influenced the markets up 100 and something points.

  • That's because we are on NASDAQ and that's the DOW.

  • But, in any event, we are very pleased that our shares are up a little, for more reasons than one.

  • We are glad it's up for sure, but I personally was beginning to think the marketplace was a little dyslexic out there.

  • Maybe I've been reading things backwards.

  • You guys have reaffirmed our belief in the marketplace.

  • Thank you very much and I will turn this over to Larry White.

  • - Chief Financial Officer, Sr. Vice President-Finance

  • Thanks, Dan.

  • Thank you to our listeners on the conference call webcast for your interest and participation this morning.

  • Hopefully, everyone has had the opportunity to see this morning's press release announcing our 1st quarter results for the fiscal year and providing an update on current trends and our guidance for earnings for the second fiscal quarter and the full fiscal year.

  • As a reminder and in compliance with regulation FD, we don't review or comment on earnings estimates made by other parties nor do we provide continuing updates of or expressed continuing comfort with our own guidance and trends, except in broad public disclosure such as we have done this morning.

  • We urge caution to our listeners and readers in considering the information on current trends and earnings guidance.

  • The restaurant industry is highly competitive and trends and guidance are subject to numerous factors and influences that can cause future actual results to differ materially from those trends and guidance.

  • Some of those factors are described in the cautionary description of risks and uncertainties found at the end of this morning's press release and we urge you to read that language carefully.

  • The Company assumes no obligation to update disclosed information on trends or guidance and should we provide any updates after today, they will be made only by press release or in periodic filings with the SEC under forms 10-K, 10-Q and 8K.

  • With those caveats and disclaimers aside, let's review this mornings good news and, again, we think it's really good news.

  • The bottom line, we recorded diluted earnings per share for our first fiscal quarter of 45 cents compared with 35 cents a year ago.

  • It was an increase of 28.6%.

  • We were 4 cents above first call consensus and we certainly were at the strong end of our own guidance, which most recently was greater than 40 cents per share.

  • We are very pleased to have achieved these results and what's clearly a highly uncertain economic and consumer confidence environment.

  • We also reported positive restaurant sales trends at this very early stage of the second fiscal quarter and we indicated our present guidance for earnings per share growth of 10 to 15% for the 2nd quarter which will end on January 31 of 2003.

  • We also indicated our guidance of 15% or better for the full fiscal year.

  • We think that's a lot of good news.

  • Let's take a look at some of the details.

  • Revenue in our fiscal first quarter ended November 1, 2002 increased 6.3% from last years first quarter.

  • That's almost $528 million compared with $496 million.

  • The increase derived primarily from new unit openings and from positive comparable store restaurant sales in our Cracker Barrel Country Store.

  • Partly offsetting these gains were lower comparable store sales for Cracker Barrel retail and Logan's compared with the prior years first fiscal quarter.

  • Cracker Barrel comparable store restaurant sales were up 1.5% from a year ago.

  • That was a quarter in which we had strong comps of positive 4.8%.

  • So, that's positive on top of a strong year ago quarter in spite of difficult consumer sentiment and uncertain economic conditions.

  • The improvement reflected 1.5% higher average check in flat guest traffic.

  • That marks 11 consecutive quarters of positive comparable store sales in our Cracker Barrel restaurants.

  • I'll note also that our check average was up more than the approximately 8/10 of a percent.

  • Pro forma affected our actual menu price increases reflecting continued favorable mix trends.

  • Both sales and guest traffic were positive in the final weeks of the quarter after our previous sales trend update in our October 17 press release.

  • Weekday sales were up across all three day parts, breakfast, lunch, and dinner, as weekend breakfast and lunch but we experienced some softness in weekend dinner sale which we believe reflects the present uncertain consumer and economic environment.

  • Regionally, same-store restaurant sales were up in all eight of our operating regions in the 1st quarter.

  • Not unexpectedly, Cracker Barrel comparable store retail sales in the first fiscal quarter were down 1% compared with the year ago quarter.

  • That marks an improvement, however, on the quarter-to-date trends reported on our October 17th press release, when we reported the comparable store retail sales were down approximately 1 to 1.5%.

  • And we can report that comparisons were positive for the remainder of the quarter.

  • As I will discuss later, the trend has softened in the early part of the 2nd fiscal quarter, however.

  • Rounding out our comparable store sales results, our Logan's Roadhouse concept recorded a slight decrease of 1/10 of 1% in comparable restaurant sales, reflecting a 1% decrease in guest traffic partly offset by a 9/10% increase in average check.

  • As with Cracker Barrel, this reflected an improvement from trends reported in our October 17th press release when quarter-to-date comparables store sales reported down 0 to a half percent.

  • I will just conclude my comparable store sales discussion by noting that these results came in a quarter where the economic and consumer confidence environments were poor at best.

  • We think we offer a value and comfort proposition that helped us turn in good sales results in some tough times.

  • During the 1st quarter we opened 4 near Cracker Barrel Country Store units and 5 new Company operated Logan's Roadhouse restaurants.

  • We presently expect to open 5 Cracker Barrel units in this quarter, 2 of which are open so far, and a total of 23 for the full fiscal year.

  • Logan's has already opened 2 of 4 restaurants expected this quarter and a total of 12 are planned for the full fiscal year.

  • As of today, we have 463 Cracker Barrel's and in 41 states and 91 Company operated and 12 franchise Logan's Roadhouse restaurants in 17 states.

  • Let's continue on down the income statement.

  • Store operating income for the 1st quarter was up almost 14% on a 6.3% revenue increase.

  • And store operating margins improved 90 basis points from 12.7% to 13.6% for the 1st quarter.

  • As we indicated in our guidance during the quarter, the improvements primarily reflected lower cost of goods sold in all three areas of our business.

  • Cracker Barrel restaurant and retail and Logan's.

  • Improvements compared with last year in food cost reflected lower beef, primarily in Logan's butter, margarine, cheese, coffee, bread, catfish and certain pork products.

  • So while it's been a favorable commodity cost environment, you should also know that some of these improvements came from vendor reviews by our margin initiatives team at Cracker Barrel.

  • This groups has been working with our vendors to find opportunities for savings while emphasizing, maintaining or improving product quality.

  • The are working with vendors to improve everything from raw material purchasing to freight costs to packaging costs as well as contracting ahead to achieve price stability.

  • Food cost management in both concepts was generally favorable to our allowed or targeted levels although both concepts were off a little in October.

  • Retail benefited primarily from improved initial margins or markons.

  • Because retail sales carry a higher cost of goods sold than restaurant sales, our gross margin overall also benefited from an increased mix of restaurant sales.

  • Labor cost was slightly higher than last year at both Cracker Barrel and Logan's, including among other things, higher management expense and worker's compensation expense as well as higher year-over-year preopening labor related to timing of new unit openings.

  • It's interesting to note that hourly labor cost was actually lower than the year ago in Cracker Barrel as a percent of revenues.

  • Wage inflation for our nontipped employees was flat compared with last year and that reflected the increase emphasis we have put on hourly wage administration.

  • We also focused on overtime management through labor scheduling and staffing best practices initiatives and our overtime rates were improved from last year's 1st fiscal quarter also.

  • Other store operating expenses for the 1st quarter were higher than a year ago by 40 basis points, reflecting higher credit card fees, maintenance, preopening and insurance costs among other things.

  • Utilities costs were lower than a year ago and lower than we expected which contributed to our results being strong relative to our earlier guidance.

  • As noted in this mornings press release, this quarter we also began reclassifying the net return fee income we generate on Cracker Barrel's Book On Audio program from previous treatment as a miscellaneous income credit and the other store operation expense line to now being part of retail sales revenue.

  • It increases both lines by equal amounts and has no net impact on the bottom line.

  • And the amounts were 1.4 million in the this years 1st quarter and $1.1 million in last year's 1st quarter.

  • General and administrative expenses, as we indicated in our guidance during the quarter, was higher in the 1st quarter than a year ago by 20 basis points.

  • Included in the higher rates were increased professional fees which while high, were actually favorable to our earlier expectations as reflected in our earnings guidance during the quarter.

  • This also contributed to our results being of strong end of our guidance.

  • Much of this unexpected favorability was only a timing difference and we presently expect to incur these professional fees in the 2nd quarter and later in the year.

  • Interest expense in the 1st quarter was slightly higher than a year ago, reflecting higher standing borrowing, partly offset by lower interest rates.

  • As we have reported before, the higher debt levels reflect the achievement during fiscal 2002 last year of capital structure targets that including the effect of off balance sheet real estate operating leases, give us a total indebtedness to capitalization ratio of about 35%.

  • Wrapping up the 1st quarter, net income of $23 million was improved 17% from $19.6 million a year ago.

  • Diluted earnings per share of 45 cents were improved approximately 29% from 35 cents reported in the 1st quarter of last year.

  • As I said earlier, this was certainly at the strong end of our guidance during the quarter and the relative strength came primarily from favorable utilities, retail cost and professional fees.

  • We are very pleased with this solid performance in the phase of difficult economic and consumer confidence environment.

  • Earlier this year our board of directors authorized a new share repurchase plan under which we may repurchase up to two million shares from our common stock from time to time in open market transactions.

  • In the 1st quarter we have completed nearly 800,000 shares of that repurchase authorization for an aggregate outlay of about $17.3 million or just under $22.50 per share.

  • Now I note again that this was accomplished within our capital structure targets.

  • At the end of the quarter we had approximately 49.6 million shares outstanding.

  • Finally in this morning's press release, we updated our current sales trends and earnings guides.

  • I again urge you to consider the cautionary discussion of risks and uncertainties at the end of today's press release and to understand the inherent risks associated with trends, targets, guidance and estimates in a competitive industry such as ours.

  • We remind you that we assume no specific obligation to update this information, other than in periodic filings with the SEC from time to time.

  • Also, we will not offer any further guidance nor, after today, express continuing comfort with today's disclosure other than in public filings or by other broadly disseminated means such as press releases from time to time.

  • This discussion of trends and guidance, as does other earlier parts of today's discussion and press release, contains certain forward-looking statements provided pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995 and should be evaluated in the context of the uncertainties described in this morning's press release.

  • While we are less than three weeks into the quarter, restaurant sales trends at Cracker Barrel Old Country Store have continued to be positive.

  • Quarter-to-date same-store restaurant sales have been up compared with the year ago by 0 to a half percent, including a higher average check of approximately 2 to 2.5%.

  • Cracker Barrel same-store restaurant sales have softened from initial trends this quarter because the affect on the travel component of our business of Thanksgiving being one week later this year than last year.

  • So, we are getting less of the holiday travel business this week.

  • We expect to see that next week, of course.

  • We estimate the effect on quarter-to-date sales trends to have been unfavorable by approximately 1.5%.

  • Same-store retail sales have been down compared with a year ago by about 7%.

  • I will remind you that retail sales typically have greater uncertainty than restaurant sales and there is an undetermined effect of the change in holiday travel in these numbers as well.

  • Other effects on retail sales include tougher comparisons with last year's patriotic items and also a porch sale that we held in the early part of November last year.

  • Porch sales are those weekend events where we feature temporary discounts to help clear out miscellaneous merchandise and tend to give us a boost in sales on those weekends.

  • Logan's is starting the quarter with solid sales increases with quarter-to-date running up about 2.5 to 3%, including guest traffic increases of 0 to a half percent.

  • But again, I caution you, it's early in the quarter and trends are subject to a lot of influences that can cause changes as we get further along.

  • Our present guidance for diluted earnings per share for the 2nd fiscal quarter is for an improvement of 10 to 15% from the 37 cents a year ago.

  • And our present guidance for the full fiscal year continues to be an improvement of 15% or better from the $1.64 in fiscal 2002.

  • We presently expect total revenue growth of approximately 5% in the 2nd quarter, including comparable store restaurant sales approximately flat for Cracker Barrel and up 1 to 3% for Logan's.

  • Our guidance is based on comparable store retail sales being down 2 to 4% for the quarter, including the effect of the holiday shopping season of a -- on the holiday shopping season of a later Thanksgiving.

  • We remind you that once again, these presently expected sales comparisons are on top of a very strong year ago quarter when unusually mild winter weather contributed to comparable store sales increases of 7.8% and 4.3% respectively for Cracker Barrel restaurant and retail and 3.6% for Logan's.

  • Considering our tough sales comparison, we think our 10 to 15% present expectation of growth and diluted earnings per share is indicative of expected continued solid operating performance.

  • So, we are reporting good sales and earnings results this morning and we are disclosing positive guidance based on our present outlook.

  • Remember, however, the comparisons are expected to be tough as we enter the winter months against last year's unusually mild winter.

  • We think that apart from these expected unusual comparisons, our underlying trends and performance are mostly on track and we are optimistic about the remainder of the fiscal year.

  • With that, I thank you for your patience with my financial review.

  • Now, I would like to introduce Mike Woodhouse, our President and CEO, who has further remarks on operating trends and initiatives.

  • Mike?

  • - President, Chief Executive Officer, Director

  • Thanks, Larry and good morning everyone.

  • Pleased to be here this morning to talk about another very positive quarter for CBRL.

  • Our number one financial goal is to deliver sustained annual growth and EPS of 15% or better.

  • And by achieving 29% EPS growth in the 1st quarter, we have started a new fiscal year on track to hit that goal again in fiscal 2003.

  • And, of course as Larry mentioned, we beat the 1st quarter consensus estimate by 4 cents and we were especially pleased with the earnings results in the quarter where the external environment was challenging from a sales point of view.

  • Our earnings growth continues to come from strong operating performance, coupled with the maintenance of our target capital structure.

  • On the operating side, our goal is a topline growth through positive comparable store sales and new store development combined with continued improvements in store operating margins.

  • In the 1st quarter we saw the 11th consecutive quarter of positive comparable store sales in Cracker Barrel and we continue to see strong sales in the new units open in both concepts.

  • Positive topline performance is always critical and our focus is always on continuous improvement of the guest experience.

  • However, we can't control the economy, or for that matter, the weather and certainly we can't control the politicians, so in addition to working on sales, we put a lot of focus on maximizing the benefit from those things we can control, among which are our operating costs.

  • As a result of those efforts, store operating margins in the quarter were up 90 basis points and that was on top of a 40 basis point improvement in same quarter a year ago.

  • Familiar food, made from quality ingredients and at an attractive price is key part of the Cracker Barrel experience.

  • Many development is playing a more and more important role in achieving sales increases and we will continue to development and test new menu items for seasonal promotions. he fall promotion this year was again turkey and dressing which is a tried and true Cracker Barrel favorite with all the attributes we look for in our featured products, be the service, attractive price point and strong dollar margin.

  • And, of course it's a product that fits well with our overall strategy of familiar comfort food.

  • This year we have made supporting promotions a priority throughout the organization.

  • So, the 100% operational support and our improved POP materials have seen promotional products deliver higher sales mix numbers than previously.

  • That was true of turkey and dressing.

  • It is also true with the return of home-style chicken.

  • This product was the most successful promotional product ever when we introduced it in the spring and it's back in the stores right now as our current promotion.

  • In addition to POP and operational focus, we are supporting the promotion with a home-style chicken spot in those markets where we are running radio and the product is consistently outperforming its spring sales mix numbers.

  • Following the promotion, home-style chicken will be on the menu permanently as our featured Sunday dinner and we expect it to become to Sunday's what fish fry is to Friday's.

  • As we head into Thanksgiving, we are getting ready for our annual Thanksgiving dinner special at Cracker Barrel and at the same time we are featuring our bulk Thanksgiving dinners-to-go.

  • These are complete meals for six, priced at 39.99 and we think they represent exceptional value for those people who want to combine the experience of Cracker Barrel food with the familiar surroundings of their own home.

  • We are also focusing on the sale of our fresh baked whole pies in the shop, which we believe is a meaningful incremental sales opportunity and also a good example of finding opportunities to leverage restaurant products in the retail side of the business.

  • In line with our ongoing strategy, we took a modest price increase last week.

  • This time the increase was 8/10 of 1% which means we are currently running at 1.6% calculated price increase until we [INAUDIBLE] the previous increase which we took back in February.

  • We will continue to run a check increase higher than the calculated price effect which means we are seeing ongoing benefit from mix as our Cracker Barrel guests trade up.

  • One more comment before I leave Cracker Barrel sales.

  • We pointed out the effect of the one-week shift in Thanksgiving dates in the press release this morning and I would like to re-emphasize that the current run rate in sales is more accurately reflected in the quarter-to-date sales through the end of last week than it is in the quarter-to-date sales through yesterday which was impacted by the Thanksgiving week travel last year.

  • And as Larry said, we estimate that effectively about 1.5 percentage points.

  • The improved margins are coming from a number of initiatives.

  • In Cracker Barrel, a new hourly wage management system has resulted in flat to slightly negative hourly wage inflation.

  • And, the ongoing effects of our new purchasing initiatives are showing up in lower food cost and regional cost of goods.

  • At the store level, reinforcement of our best practice initiatives developed and wrote out over the past two years are resulting in continued focus on managing food costs through management of waste and optimal labor scheduling to build sales and control labor costs.

  • Retail sales improved late in the 1st quarter, bringing the quarter to date from down 1 to 1.5% in our October 17th report to down 1% for the quarter as a whole.

  • The Christmas merchandise shortages, which we spoke about earlier and we experienced earlier in the quarter as a result of the west coast labor dispute, are now rectified and we have full inventories in time for the prime selling season.

  • In the first 2.5 weeks of the 2nd quarter, the retail sales softness is partly due to the lower sales of patriotic merchandise from last year and also the mismatch of the timing of the porch, which Larry spoke to, as well as the effect of the change in the timing of Thanksgiving.

  • We have a new retail planning function in place and we have developed a new markdown strategy to optimize sales and margins and we will be using this new strategy for the first time with our fall and holiday seasonal merchandise.

  • In addition to seasonal merchandise, we have a new exciting [INAUDIBLE] of Beanie Baby products which will be launched next.

  • It's an exclusive teddy bear named Hershel, after uncle Hershel.

  • It's the first time that [INAUDIBLE] has developed a product exclusively for an individual retailer.

  • And, it's to commemorate the 100th anniversary of the original teddy bear.

  • So, we are looking for positive sales from that product to kickoff our holiday season.

  • We also continue to work, as we said before, on broadening the appeal of our retail merchandise demographically and adding more items below the $20 price point.

  • We expect both of these initiatives to continue to have a growing impact as we move through fiscal 2003.

  • Management turnover in Cracker Barrel was 25% in the quarter compared to 25.4% last year, an hourly turn [INAUDIBLE] 121% down from 137% last year.

  • The turnover in the critical PAR 4 group of employees was 23% down from 24% last year.

  • The stability and depth of experience plated by these continuing low turnover rates at all levels we believe is a major contributing factor in our mission of achieving continuous improvement in the stores.

  • We changed some benefits for our PAR 4 employees in the quarter.

  • We have about 10,000 PAR 4 employees in the Cracker Barrel system.

  • Historically, we have granted stock options to this group of employees and these options represented roughly 1/3 of the annual option grant.

  • When we conducted a survey to determine which benefits were important to this critical group of employees, we found that stock options were less important to them than a number of other things with our group health plan being at the top of the list.

  • So, as a result, we have discontinued the option grant this year and added an improved discount program and made some plan design changes to the health plan to contain inflation and cost increases while protecting the basic integrity of the plan.

  • We opened a total of 4 new Cracker Barrel stores in the 1st quarter.

  • The new store review process, which I talked about at the last conference call, where we conduct a comprehensive review of every new store in the month of which it opens and again after three months, is having a positive impact on the quality of the new store openings and as a result of this and our continued focus on the quality of new sites, the fiscal 2003 openings, as a group, are performing better than the fiscal 2002 and 2001 new stores.

  • At Logan's, same-store sales trends in the 1st quarter were disappointing, but recent trends are improving and seasonal promotions, which was launched the beginning of November is proving very popular.

  • The promotion features both new and on-menu items and is designed to offer high appeal items that provide a trade-off opportunity during the holiday season.

  • Two of the new items are a maple bourbon salmon entree and a 12 oz. prime rib.

  • Superior execution continues to be the number one priority at Logan's and along with execution, we are making clear concept differentiation in priority.

  • The new building prototype we introduced last year and the menu we designed, which we launched in July, are examples of making the Logan's identity clearer and more distinctive.

  • To support our branding activities, we are increasing the level of market research we conduct to make certain we are on the right track and as we learn more, we will be refining our marketing and menu development strategies as we go forward.

  • We continue to be pleased with our new alcoholic beverage strategy from an operational point of view.

  • We are seeing some improvement in the trends in liquor mix but we still have some way to go before we hit our targets.

  • The management turnover is also improving at Logan's.

  • The 1st quarter was 19% compared with 23% last year.

  • And, hourly turnover is holding at last year's level, which was a significant improvement over the prior year.

  • Beef prices are critical at Logan's and we have now signed our contracts for calendar 2003.

  • The CATS in those contracts are better than we had originally expected and are lower than the CATS in the contracts for 2002, so we feel that we are well positioned competitively for the next 12 months.

  • Logan's new restaurants are performing well, ahead of the new units opened last year and those opened the year before.

  • Sustaining those successful opening levels is important and we're implementing the same new unit review process as we use in Cracker Barrel to make certain that we sustain those positive openings.

  • In closing I would like to reiterate that we continue to look forward, with confidence, for the rest of fiscal 2003.

  • We do expect the 2nd quarter to be more challenging for sales comparisons because of the weather last year.

  • But, this isn't a surprise and our planning and earnings guidance recognize this.

  • We are currently on track with our projection and expect to continue to be on track as we work through the shift on Thanksgiving day.

  • As ever, we have plenty of challenges and I am confident that the momentum we have, which comes from the success of fiscal 2002 and the very positive start to fiscal 2003 is going to help us meet those goals for the rest of this year.

  • With that I would like to open up the call to questions.

  • - Chairman

  • Chris, would you open the call up to questions?

  • Operator

  • Thank you, sir.

  • Today's question and answer session will be conducted electronically.

  • If you would like to ask a question at this time, please press the star key, followed by the digit 1 on your touch tone telephone.

  • If you are using a speaker phone for today's conference, please make sure to unmute your phone in order for your signal to reach our equipment.

  • Once again, if you would like to ask a question at this time, please press star 1.

  • We will go first to Howard Penny with Suntrust Robinson Humphreys.

  • Thanks very much.

  • As you look at the improvement in your food costs, how much of the improvement was due to you operating stores better slash getting better prices from your vendors versus the lower commodity cost.

  • And if you can break that out, how does that look going forward in terms of the commodity side?

  • - Chairman

  • We don't have that broken out, Howard.

  • I think that the point we want to make is that we feel we are hitting on all those cylinders.

  • We expect to continue to do that.

  • We are optimistic about continued good -- cost of goods sold performance in all parts of our business.

  • How about an outlook for commodities for the rest of the year for the Cracker Barrel?

  • - Chairman

  • We don't see any unusual pressures.

  • Cracker Barrel, as I think you know, has a very diverse menu.

  • It's not highly reliant on one or two products.

  • For example, Logan's has probably about a 35% or so mix of steaks in their product mix.

  • Cracker Barrel's is much more diverse than that.

  • We don't have as much of an exposure to any one given item.

  • And even in a category of items, say in the pork products, we have numerous cuts and varieties of pork in many of these products are subject to contracts that expire at various times during the year, all of which tends to help us mitigate the exposure to swings in any given commodity cost.

  • Thank you.

  • Operator

  • We will go next to Matthew DeFrisco with GKM.

  • Hi guys.

  • Great quarter.

  • Just a couple of questions here.

  • Do you know the date or you can give us a date when the Beanie Baby teddy bear will be rolled out.

  • And then also how does that compare as -- on margin side to other products that you sell through the retail channel.

  • And then lastly, if you can give us a little bit of color on the new Logan's opening, if you can give us some numbers around that.

  • How do they compare in a range on weekly sales versus the older stores.

  • Thanks.

  • - President, Chief Executive Officer, Director

  • The Hershel bear will be in the stores next week.

  • It will be on our website, it will be on the [INAUDIBLE] website.

  • We really don't expect it to be there very long.

  • It will sell through, we think pretty quickly.

  • Margin on that is the same as the margin on all of the Beanie Babies.

  • In terms of the Logan's new store?

  • Larry, do you want to speak --

  • - Chief Financial Officer, Sr. Vice President-Finance

  • Well, we are, as with any new store, we run a honeymoon.

  • The way we track it is we track a honeymoon curve for all of our new stores and our fiscal '03 Logan stores are running in the neighborhood of 20% or approaching 20% higher than the prior year new store openings.

  • Now, I put a lot of caveats on that.

  • Those are -- because we are all in the fiscal year, those are early in their honeymoon curve and we don't know that we will continue to have that, but we think it's indicative of an improving process for selecting sites and reviewing these store opening decisions that we are seeing these better results.

  • In fact, last year's new store openings did better than the prior year and the prior year did better than the year before that, so we are seeing continual improvement in these honeymoon curves.

  • Okay.

  • Just following on a little bit with Howard's question there regarding the improvement on the cost of goods sold, can you comment on or give us some sort of a ballpark on how much of that was due to the stronger sales mix towards restaurant and away from the lower margin retail business?

  • - Chief Financial Officer, Sr. Vice President-Finance

  • I think the best way to say that is that we had significant improvements in both sides of the business.

  • The improvement in restaurant cost of goods was a little stronger than the improvement in retail cost of goods.

  • Both were substantial improvements of 100 basis points or more.

  • I guess my question was more so on the mix shift in that you had negative retail and you had faster growth at the restaurants.

  • So, your shift was more towards higher margin restaurant.

  • - Chief Financial Officer, Sr. Vice President-Finance

  • That caused us to have probably about 10 basis points higher gross margin than we would have had had it stayed the same.

  • Okay.

  • And can you give us an update on the Cap Ex outlook for '03 on what you're looking at now.

  • - Chief Financial Officer, Sr. Vice President-Finance

  • No changes, still in the $120 to 125 million range.

  • Thank you.

  • Operator

  • We'll take our next question from Janice Myer with Credit Suisse First Boston.

  • Hi there.

  • Yeah, could you talk a little about the retail side of the business and the new markon or markdown strategy and I think last year you did have a very strong holiday season and I think your markdowns -- and I may not be remembering this right, weren't very severe given the fewer days and so the slower start.

  • Do you anticipate markdowns being bigger potentially this year after Christmas than last year and if you could just also go over the GNA shift and, you know, how much pressure you are now expecting going through the year.

  • Thanks.

  • - President, Chief Executive Officer, Director

  • On the mark down strategy, as I said, the intent is to maximize sales and margins.

  • What we are looking at is marking down some seasonal product earlier than we have, but by a smaller amount and blending in markdown product, for example, going into Christmas with regular price product.

  • At the end of the day we think that we are going to come out with markdowns equal to or better than we had in the past doing that.

  • We still continue to feel good about the Christmas merchandise.

  • As I said, we don't control the overall external environment, but we think we are pretty well set with what we have and the approach we are taking with the markdowns.

  • - Chief Financial Officer, Sr. Vice President-Finance

  • And GNA, this quarter, we were about 20 basis points higher than a year ago -- the year ago's first quarter.

  • There is some uncertainty there.

  • As I indicated, our final results were actually favorable to our expectations because of some timing issues.

  • We, right now, don't expect to see much year-over-year -- certainly as much year-over-year pressure in GNA.

  • And last year in the second fiscal quarter we were at about 5.4% as a percent of revenues.

  • You said there was a favorable shift this quarter?

  • - Chief Financial Officer, Sr. Vice President-Finance

  • From our expectations.

  • Right.

  • - Chief Financial Officer, Sr. Vice President-Finance

  • During the quarter we indicated that we expected to have high GNA cost, but it wasn't quite as high as our expectations.

  • That's one of the reasons that we came in at the high end of our guidance.

  • That's just a timing issue.

  • We are going to spend that money later this year.

  • Well, and that's -- so you are saying in the 2nd quarter we won't see it, but in the second half your GNA would be higher?

  • - Chief Financial Officer, Sr. Vice President-Finance

  • No.

  • What I'm saying is that's incorporated into our expectations for the remainder of the year and for the 2nd quarter we don't expect to see the same sort of pressure that we saw in the 1st quarter.

  • In the 1st quarter we were 20 basis points higher than a year ago.

  • Right.

  • - Chief Financial Officer, Sr. Vice President-Finance

  • We don't expect to see that as much pressure in the 2nd quarter.

  • Okay.

  • Great.

  • Thank you.

  • - Chief Financial Officer, Sr. Vice President-Finance

  • You bet.

  • Operator

  • We will go next to Amy Green with Avendale Partners.

  • Just a quick question.

  • You guys had mentioned that you were doing some menu management especially with the home-style chicken and things like that.

  • Should we expect to see some more of that going through the remainder of the year?

  • - President, Chief Executive Officer, Director

  • Yes, in two ways.

  • One is the promotions continue to be designed to drive dollar margin.

  • So we should continue to expect to see that.

  • We are looking at a menu redesign which would go even further down the path of laying out the menu in a way that hopefully is more appealing but we'll also shift the mix in a direction that's favorable to us.

  • If you were to do a menu redesign, on the second half of the year, where were you looking for that to fall and then about the Hershel Beanie Baby, should we look to see some more of the Cracker Barrel-specific merchandise in the toys and things like that.

  • I know that there is a fair amount of the food items in the stores.

  • - President, Chief Executive Officer, Director

  • On the menu, we don't have anything built into our expectations or guidance to benefit from any new menu work beyond what we have already done.

  • We are going to be very careful with testing and rolling out any changes in the menu.

  • Obviously that is a very important part of the business.

  • We have had a menu in operational test and we like what we see so far and we will continue to work on that.

  • But, there is no defined date that we are committed to unless we continue to see successful results, which we hope we will and we expect to.

  • On the Hershel Beanie Baby, that's, as I said, it's the first time [INAUDIBLE] done that.

  • It's not something that they have ever done with anybody before.

  • I think we -- anything we identify with a Cracker Barrel brand an logo is going to be very special.

  • We are not going to brand everything in the shop so on a very selective basis we may continue -- we will continue to do that, but I don't expect it to be a bold scale kind of thing.

  • Okay.

  • Thanks, guys.

  • - President, Chief Executive Officer, Director

  • Thank you.

  • Operator

  • We will go next to Dennis Forced with McDonald Investments.

  • Yeah, Larry I had, very little I guess to ask about.

  • You laid everything out well.

  • I did want to clarify the GNA one more time.

  • You had said that you were not going to see the same 20 plus basis point increase.

  • Are we going to see any increase in the percentage cost to GNA to revenues going forward the rest of the year or is it going to be similar to the numbers a year ago in terms of percentage?

  • - Chief Financial Officer, Sr. Vice President-Finance

  • Okay.

  • I think that it will be minimal.

  • Our expectation right now -- we have a couple of big unknown factors in there which, you know, accounts for the fact that it came in lower in the 1st quarter than we expected even as we expected well into the quarter.

  • There are some potential timing issues that can make that swing by 10 basis points or so in any given quarter.

  • Apart from that, we don't expect to see a lot of pressure relative to last years numbers for the remainder of the year.

  • Okay.

  • What about next year?

  • Could there be some economies of scale and we would see the long-term trend of a declining percentage of GNA as a percent of revenues?

  • - Chief Financial Officer, Sr. Vice President-Finance

  • I think we can say that over time we do expect to see some leverage and improvement there, but at this point it's too early to speculate when we will begin to report that.

  • And then have there been price increases recently?

  • I think the last ones we have are some time in the last fiscal year?

  • - President, Chief Executive Officer, Director

  • Yes.

  • We just very recently took a price increase on Cracker Barrel.

  • It was 8/10 of 1%.

  • Okay, recently meaning November?

  • - President, Chief Executive Officer, Director

  • Yeah, November.

  • How about at Logan's?

  • - President, Chief Executive Officer, Director

  • Last price increase was in July with the new menu that went out.

  • Yeah, okay that one we have.

  • And tax rate guidance for the year?

  • - Chief Financial Officer, Sr. Vice President-Finance

  • The 35.5% that you see for this quarter.

  • Okay. 35.5.

  • You said shares outstanding are now 49.6 million outstanding.

  • And how many other common equivalents are there at the moment?

  • Is it around a million shares or so?

  • - Chief Financial Officer, Sr. Vice President-Finance

  • Well, you know, it really varies with what the share price does.

  • What we saw the share price doing this morning is going to have an effect on that.

  • I am being a little facetious there, but it does have an effect.

  • It's really impossible to make a judgment other than to say as the share price goes up, you have to expect for some additional common equivalents.

  • We started this quarter with about 50.3 million shares outstanding.

  • We ended the quarter with 49.6.

  • We averaged close to actual shares outstanding of about 50 million shares.

  • Then you had 1.3 million of equivalents?

  • - Chief Financial Officer, Sr. Vice President-Finance

  • Right.

  • You are just going to have to -- we have the same problem here in making our estimates.

  • You have got to make some estimates on how that number will move depending on how the share price changes.

  • Great.

  • That gives us a lot of help.

  • Thanks a lot, guys.

  • - Chief Financial Officer, Sr. Vice President-Finance

  • Thank you.

  • Operator

  • We will go next to Brian Elliott with Raymond James.

  • Good morning.

  • A couple of items.

  • One, I would like to followup on that share question.

  • In doing my calculations, it looks like there were some share equivalence that kind of went away.

  • Were there some departures or were there some options that were outstanding at the beginning of the quarter that were forfeited because of employee departures or anything like that?

  • - Chief Financial Officer, Sr. Vice President-Finance

  • There is always some of that, Brian, but it's nonmaterial and actually we award new options in the 1st quarter at the beginning of our fiscal year, actually in September.

  • We have those awards so there actually were additional option shares out there on a net basis.

  • Okay.

  • So that we are not in the table and the 10-K then?

  • - Chief Financial Officer, Sr. Vice President-Finance

  • The table and the 10-K relates to fiscal year end and we always have our award in September.

  • I will do some more number crunching on that.

  • A couple other miscellaneous questions.

  • The depreciation was up a lot more than store count.

  • Is there anything going on there?

  • What would cause that?

  • - Chief Financial Officer, Sr. Vice President-Finance

  • I'm not sure whether people focus on it or not, but we had a pretty conservative depreciation policy.

  • We use double decline balance on our -- most of our FF&E and so as we add new stores, the new equipment in those stores gets depreciated at a faster rate probably then in many in our industry did.

  • Okay, fair enough.

  • Could you quickly review -- I missed -- broke up a little bit -- the number of Logan's for this year you said again is what for '03?

  • - Chief Financial Officer, Sr. Vice President-Finance

  • 12, 12.

  • Okay.

  • And preliminary '04 would be a few more each Cracker Barrel and Logan's?

  • - Chief Financial Officer, Sr. Vice President-Finance

  • What we have said is that we see Cracker Barrel settling at about the 25 new stores per year.

  • We might get a couple more than that one of these years.

  • That's basically the kind of rate we see at the present time.

  • In Logan's we have been ramping back up toward a 20% unit growth rate.

  • Would you expect to be there for fiscal '04 at that 20% rate?

  • - Chief Financial Officer, Sr. Vice President-Finance

  • It's a little early to say.

  • There is a good likely hood of that.

  • We have not fairly completed our planning for fiscal '04, but we are on track to get toward that.

  • Okay.

  • Very good.

  • The last question on the guidance.

  • Understanding and hearing loud and clear the conservatism and uncertainty about the sales environment particularly this quarter with the weather.

  • But, it seems to imply some, you know, negative margin comparisons at the store level, you know, to kind of get to the 15% full year.

  • Is that the message you are trying to send?

  • Or is that now sort of an implicit?

  • - Chief Financial Officer, Sr. Vice President-Finance

  • No.

  • I'm not sure how the assumptions work on that.

  • But, no, we continue to expect margin improvements.

  • That's a key focus and a key part for our business plan.

  • We continue to think we have opportunities.

  • At the same time, we don't feel like we are going to make some sort of a quantum leap in marginal improvement.

  • The focus is on continual margin improvement so that we do it in a wise way and a appropriate ways to get continual growth and earnings.

  • Sustainable -- Okay.

  • Thank you very much.

  • - Chief Financial Officer, Sr. Vice President-Finance

  • Thank you.

  • Operator

  • We will go next to Bob [INAUDIBLE] with Morgan Keegan.

  • Yeah, hi.

  • Mike, could you give us some perspective on how the off-interstate development is going.

  • What percent of the restaurants are on versus off.

  • How are they doing off interstate?

  • - President, Chief Executive Officer, Director

  • We continue to open off-interstate with seeing high volumes.

  • As we said before, the dynamics shift a little between restaurant and retail.

  • We think because the travel component drives retail on inter-state so we are typically seeing right now that our off-interstate stores open at similar volumes to on-interstate but with higher restaurant and lower retail.

  • So, the numbers workout pretty well with that.

  • We continue to work on how -- the opportunity of increasing the retail of off-interstate which we see as a net additional opportunity and that's a focus on the merchandise and the reason for people to use us for shopping off-interstate.

  • We have been conducting or are in the process of conducting focus groups to address that and expect to have some answers relatively soon and start moving things to reflect what we learned in the focus groups.

  • In terms of the mix, we have a total of -- how many now? 30.

  • - Chief Financial Officer, Sr. Vice President-Finance

  • Mid-30s sounds right.

  • - President, Chief Executive Officer, Director

  • In the mid-30's.

  • So, year-over-year you anticipate in this fiscal year, a similar number that will be off-interstate as last year?

  • - Chief Financial Officer, Sr. Vice President-Finance

  • Our kind of long-term target right now is that about -- if you'll bear with me on this -- about 80% of our new store development overtime is going to be in our core markets.

  • Half of that will be on-interstate and half of that will be off-interstate.

  • And about the remaining 20% will be in developmental markets.

  • Typically, places where we just have limited penetration, not so much brand-new markets, those will tend to all be on-interstate.

  • This year it looks like we are going to do a little more off-interstate than that rate, but that's kind of our long-term view of the world right now.

  • Larry, in the past you guys have talked about the potential for off-interstate and how it could further boost the number of potential Cracker Barrel's we could see.

  • Can you give us some kind idea on, you know, a potential universe, you know, in core markets?

  • - Chief Financial Officer, Sr. Vice President-Finance

  • Frankly, we don't like to do that.

  • I know that a lot of companies do.

  • We have our studies that we update from time to time.

  • Basically, what I can say is that we don't see any real limitations in that regard for many years.

  • We have a five year planning horizon and we don't see any issues with that at all.

  • It does not appear to be an imminent problem by any means.

  • Last question, if I could.

  • On the marketing, you used some radio I know here in the Nashville market during this past quarter - last couple of weeks or so.

  • How many other markets -- what percent of the Company stores are getting benefit to some, you know, media, radio?

  • - President, Chief Executive Officer, Director

  • It's about 25% of the Cracker Barrel system.

  • Great.

  • Is that a plan to continue to use through the balance of the year, Mike?

  • - President, Chief Executive Officer, Director

  • Yes.

  • Okay.

  • Great.

  • Thanks, guys.

  • - President, Chief Executive Officer, Director

  • Thank you.

  • Operator

  • We will go next to Joe Buckley with Bear Stearns.

  • Thank you.

  • I have just got a couple questions.

  • The Cap Ex budget of the 120 to 125, it's up significantly from last year with openings up just slightly.

  • Does that reflect some mix in real estate ownership or some other factor?

  • - Chief Financial Officer, Sr. Vice President-Finance

  • No, not really.

  • It's primarily just the fact that we do have additional store openings this year.

  • It also relates to the timing of expected openings in fiscal '04.

  • There is no departure being signaled there.

  • We intend to continue to do more ground leases than we had done historically but not a departure from what we have done in the last year or two.

  • Okay.

  • Thanks.

  • A question on the GNA again.

  • The professional fees that you refer to, what are they for?

  • - Chief Financial Officer, Sr. Vice President-Finance

  • They are for various things.

  • They are including the defense of our lawsuits.

  • Okay.

  • And lastly, the change in option compensation for the PAR 4 employees, was that effective this September with the option grant for this year and is that change being made sort of in preparation for expensing stock options at some point?

  • - President, Chief Executive Officer, Director

  • The answer to the first half is yes, it was effective with the grant that took place in September and the answer to the second half is no, it was focused on what benefits do we want to give our PAR 4's, what are they looking for and when we did the survey I talked about, I talked to a lot of PAR 4 employees we found they really didn't value the stock options.

  • They were -- in essence, as soon as they were vesting cash [INAUDIBLE] basically a cash bonus, which didn't -- our end was to increase as it is will all options, increase ownership [INAUDIBLE] and upside.

  • So, it was focused on that.

  • Now, obviously, as a side benefit from making that change, we are going to have less options out there, less overhang as we go forward [INAUDIBLE].

  • - Chief Financial Officer, Sr. Vice President-Finance

  • And we presently, as I think you know, account for stock options under the principle [INAUDIBLE] 25 and we have made no determination to change from that at this point.

  • Okay.

  • One final question.

  • You mention the retail inventories being in good shape.

  • Is there any change in the cost in terms of accomplishing that given the west coast issues?

  • - President, Chief Executive Officer, Director

  • No, in fact, it cost us less in inbound freight to bring stuff around to east coast than through the west coast.

  • Okay, thank you.

  • - President, Chief Executive Officer, Director

  • Thank you.

  • Operator

  • We will go next to Mark Sheridan with Johnson Rice.

  • Mike, there was a fair amount of discussion, some from Larry and some from you on labor.

  • One of you made the comment that -- you know, about wages and administration.

  • What do you mean about better wage administration.

  • I heard you that wage rates look better year-over-year than they have in while and that turnover continues to improve.

  • Does wage rate administration have to do with scheduling and turnover and training and retention.

  • And then, if you could tie in with that, I mean I know labor was up a little bit in the quarter year-over-year.

  • Is that a function of the, you know, worker's comp and other costs and some of the changes you have talked about on benefits for PAR 4's because, you know, if you look at the biggest change in your business over the last, you know, seven or eight years, volumes are back to kind of all time high levels and cost of goods are at close to all time low levels.

  • But, labor is still 4 or 500 basis points, you know, higher than it was at its lowest level in the earlier and mid-90s.

  • And, I realize that that level is probably unapproachable, but you know, it seems to, you know, a big factor kind of going forward.

  • If you could kind of tie all the different discussions you have had about labor together a little bit for me.

  • - President, Chief Executive Officer, Director

  • Okay.

  • I think the starting point is that there are several components to the control of labor [INAUDIBLE].

  • They are all to do with very strong focus on controlling those things that we can control more effectively than we perhaps have in the past.

  • Specifically, the wage rate administration we talked about is focused on wage rates.

  • It's not to do with scheduling, hiring or training.

  • Those are separate initiatives that we are focused on as well in terms of optimum scheduling.

  • But on the wage rates, we put in a system into Cracker Barrel which operates at the store level where each store has a range for each skill code.

  • We have a wage range for that skill code that the general manager can operate within.

  • If he or she wishes to go outside of that, for, obviously, can be good reasons, needs a second level of approval.

  • We have also tightened up on where those wage ranges are tied to the market.

  • They are a market-by-market and with this recessionary environment, we have seen an opportunity to tighten up on the hiring wages so that we are not perpetuating the higher wages that we had to pay when the labor market was much more difficult.

  • So, by putting in a system and focusing it on where the market is, we have taken that opportunity and as we both said, we have got our wage rate inflation in Cracker Barrel down to essentially flat.

  • In terms of the PAR 4 benefits, we continue to be challenged, as everybody is, with the cost of health program.

  • As I said, we put in changes which were aimed at driving cost out of that program and we're asking our employees to pay a little more in their contributions to help balance that.

  • And the other thing to talk about the discount plan, have no effect on the labor line.

  • Thank you.

  • That is helpful.

  • - President, Chief Executive Officer, Director

  • Okay, thanks.

  • Operator

  • We will take our next question from Peter Oaks with Merrill Lynch.

  • Hi.

  • Good morning.

  • Actually I had a few questions.

  • First, you have raised your profile to gift cards.

  • Can you give us an update as to how that is performing?

  • - President, Chief Executive Officer, Director

  • Well, we have now gift cards in both concepts.

  • We have them in Cracker Barrel since October of last year.

  • We are [INAUDIBLE] that introduction and we are still running positive.

  • In the first year our gift card sales were up more than 30%.

  • - Chief Financial Officer, Sr. Vice President-Finance

  • About 40%.

  • - President, Chief Executive Officer, Director

  • Close to 40% above our gift certificate sales in the equivalent year before and we will continue to run, not as positive as that, but we will continue to run positive.

  • And, we have just introduced gift cards at Logan's a few weeks ago.

  • It's too early to really read [INAUDIBLE], but they seem to be going pretty well.

  • Okay.

  • Mike, you went into a little bit of color there about the menu redesign.

  • Is that going to be geared exclusively towards the dinner day part or you also looking at, you know, lunch and breakfast?

  • - President, Chief Executive Officer, Director

  • No, it's all day parts.

  • We will continue to have a -- the two menu approach that we have now, a breakfast menu which is available all day and then the lunch/dinner menu which is available from 11.

  • We are tackling several things with the menu redesign.

  • One is simple readability.

  • The current menu is more difficult to read especially when we have the lighting set at the level we want.

  • What we find is that guests complain about the menu, so the managers to respond to that will turn the lights up to the highest level which makes the ambience nowhere near what we wanted.

  • We are dealing with the readability and we are dealing with an update in line with all of our brand creative right now.

  • So, the look and feel is more in line with the other stuff we have out there, the menu inserts, the posters and so on and then the whole question of engineering and focusing on improving the dollar margin per guest by moving the mix around.

  • So, all of those are in.

  • As I said, we have a menu out there in test.

  • We are very confident we are going to be successful.

  • Until we have run the test long enough, I'm not willing to commit to a date on which we are going to roll it out.

  • Are you considering any reformulation of existing menu items?

  • - President, Chief Executive Officer, Director

  • No.

  • We have some new menu items on the menu.

  • One of the things we have stuck through all the way through the last three years is we are not in any way going to compromise the quality of the products we have.

  • We have been focusing from a purchasing point of view at lowering our cost for the same quality and we have done that by developing [INAUDIBLE] specs so that we can take the spec out and bid it out with competitive vendors and get competitive prices on that rather than looking for a fixed price on a finished product, but we are not looking to rethink our current recipes.

  • Okay.

  • About a year ago if I remember correctly, I think you were focusing on speed of service.

  • Can you share with us what kind of success you have seen with that and possibly has that shown up in table terms -- table turns [INAUDIBLE] helping with the comp performance?

  • - President, Chief Executive Officer, Director

  • Yeah, that was the first of the best practices we wrote up and we have been reinforcing that recently.

  • We are seeing success on the system in total and on a store-by-store basis.

  • It is one of the drivers of continuing improvement in comps.

  • Okay.

  • Just a couple more, if I may.

  • Management staffing levels, can you share with us where you are relative to where you would like to be?

  • - President, Chief Executive Officer, Director

  • We're fully staffed.

  • Okay, that's good to hear.

  • - President, Chief Executive Officer, Director

  • That's where we want to be.

  • - Chief Financial Officer, Sr. Vice President-Finance

  • That's where we have been.

  • - President, Chief Executive Officer, Director

  • That's where we have been for -- I lost track. [INAUDIBLE].

  • Two years?

  • Yeah.

  • We are consistently keeping it fully staffed.

  • And that's probably the highest staffing, certainly higher than I've seen anywhere else in this industry where typically there's sort of a national vacancy level.

  • We are not doing that.

  • We are aiming to have all management responsible at all times..

  • You had suggested that there were some wage pressures with that category.

  • So, I was interpreting that maybe you were still trying to fill some slots there.

  • - Chief Financial Officer, Sr. Vice President-Finance

  • No, they're just making more money with good performance.

  • It's our impression that your demographic basis is showing some expansion here.

  • Do you have any research that suggests that you are starting to broaden your appeal?

  • - President, Chief Executive Officer, Director

  • We would like to see your research.

  • It sounds like you have some good information out there.

  • Broadening the appeal is [INAUDIBLE], but one of the things that's happening is that the average age, [INAUDIBLE] of our customers remaining constant all the time, so we are not dealing with a aging cohort which I think is sometimes the concern of people who aren't close to the business.

  • That means we are bringing people in younger to maintain that average and, of course, with the boomers moving through that average, the target is expanding all the time and then we continue to look at ways to bring in people on the younger age end.

  • Okay.

  • Just one last one, Worker's Comp.

  • Are you anticipating there is still going to be pressure throughout the remainder of the fiscal year or are we starting to get to a point where that is starting an anniversary?

  • - Chief Financial Officer, Sr. Vice President-Finance

  • I think we are getting to the point where that's beginning to anniversary.

  • It was not a huge number from the quarter, but it was one of the various components that contributed to labor being up.

  • I think we are doing a better job than that all the time and in the last year -- less than a year, this calendar year, we have added claims manager positions in both Cracker Barrel and Logan's .

  • We recently changed our third party administrator for claims management.

  • We are, I think, more on top of it than ever and it's just one of those things we have to have continual work and improvement on.

  • Okay.

  • Thanks a lot, gentlemen.

  • Operator

  • We will go next to Mike Smith with [INAUDIBLE].

  • Your share repurchase, what is the remaining authorization that you have and is it your intention to basically take your free cash flow and direct it to share repurchase?

  • - Chief Financial Officer, Sr. Vice President-Finance

  • We have just over 1.2 million shares authorized to repurchase.

  • It has been our strategy and our practice to apply free cash flow towards share repurchases while maintaining that target capital structure that I spoke of.

  • At this time that continues to be our intention.

  • We do these authorizations -- kind of a bite of the time.

  • The one that we are in the midst of now is a 2 million share authorization and we just take it step by step as we go.

  • Thanks.

  • Operator

  • We will take our next question from Jonathan Waite with McDonald Investments.

  • Yeah, hi.

  • Just a quick question on the margins and then also just going forward, as we get more off-interstate sites, what kind of contribution will that have for margin improvement going forward?

  • - Chief Financial Officer, Sr. Vice President-Finance

  • I don't expect, Jonathan, that they are going to perform all that differently net, net to on-interstate.

  • I don't see that creating a change.

  • Okay.

  • Then just on -- let me just phrase kind of some of the same margin questions we have heard on this call already maybe a different way.

  • The 90 basis points we saw in the 1st quarter, I guess with your earnings guidance going forward, that would possibly suggest that we are not going to see as good improvement as we saw in the 1st quarter and the remaining quarters in the fiscal year?

  • - Chief Financial Officer, Sr. Vice President-Finance

  • We are only speaking in some detail to the 2nd quarter.

  • Our full year guidance continues to be at or above our long-term growth rate of 15%.

  • That's our expectation.

  • In the 2nd quarter, we don't expect to see the same sort of improvement in margin.

  • I reiterate, this is not really a surprise to us.

  • It's a tough comparison quarter in terms of sales.

  • Because of that, we are not going to get the same sort of margin improvement.

  • If we did maybe 90 basis points in the 3rd & 4th quarter then you would probably be looking 20% plus in EPS.

  • - Chief Financial Officer, Sr. Vice President-Finance

  • I think it's fair to say that that would be more aggressive than we are looking at right now.

  • Okay.

  • Any particular reason why.

  • - Chief Financial Officer, Sr. Vice President-Finance

  • No.

  • Okay.

  • All right, thanks.

  • Operator

  • Next we will take a follow-up question from Brian Elliott with Raymond James.

  • A couple questions.

  • On the Workers Comp clarification, we had -- Workers Comp there was an extra accrual this time last year.

  • When you talk about we are up year-over-year, are you counting that extra accrual last year or are we up on sort of a normalized non special accrual basis?

  • - Chief Financial Officer, Sr. Vice President-Finance

  • No, we are looking all [INAUDIBLE] at both years.

  • Okay.

  • With respect to the menu testing that you are doing, the menu modifications that have been referred to a couple of times, you deferred --.

  • On the first question, let me ask it a different way.

  • Mike, you said that you are pleased with the test results so far.

  • If we postulate that you continue to be pleased with the test results what might be a ballpark timeframe.

  • Is it an '04, a fiscal '04 if we continue to see good results or, you know, help us a little bit narrow that down a bit.

  • - President, Chief Executive Officer, Director

  • As I said earlier, we don't have any benefit from a new menu [INAUDIBLE] our guidance for this year.

  • We will continue to test.

  • And when we are satisfied, we will roll it.

  • So, I guess thinking about it that way, the first time we will see benefit in the numbers will be '04.

  • If it could be earlier, we will do that.

  • Okay, that's helpful.

  • Thank you.

  • Last question, I don't know if you have it with you, if not, I will get it offline.

  • Do you have the amount of op shares granted -- options granted in September and the average price that we can [INAUDIBLE] in our models

  • - Chief Financial Officer, Sr. Vice President-Finance

  • All I can say is, as Mike pointed, our grants to our PAR 4 is represented about a third or so of the grants historically and those have gone away and that's the way to look at the number of new options that are out there.

  • Okay.

  • And from a price standpoint, would the grant have been middle of month, early?

  • Do you have a date.

  • - Chief Financial Officer, Sr. Vice President-Finance

  • Toward the end of the month.

  • Thank you.

  • Operator

  • Next, we will take a follow-up question from Bob [INAUDIBLE] with Morgan Keegan.

  • Yeah, I'm just wondering, how many Beanie Babies have you been able to secure with uncle Hershel's name on it and what is the expected retail on that relative to the typical Beanies?

  • - President, Chief Executive Officer, Director

  • Same price, 5.99 and I won't disclose the number.

  • It's probably not enough, but it's a fair quantity.

  • So, we better get out there quick, right?

  • - President, Chief Executive Officer, Director

  • You better be out there next week.

  • Okay.

  • Thank you.

  • Operator

  • This concludes today's question and answer session.

  • At this time, I would like to turn the conference back over to Michael Woodhouse for any additional or closing comments.

  • - President, Chief Executive Officer, Director

  • I would like to thank you for joining us again this quarter.

  • As we tried to express, we had a very positive quarter.

  • We feel confident about where we are headed for the rest of the year.

  • We will be providing our updates -- regular updates in December and January and we look forward to speaking with you all again at the end of the quarter.

  • Thank you very much.

  • - Chief Financial Officer, Sr. Vice President-Finance

  • Thanks, everyone.

  • Operator

  • This concludes today's conference call.

  • We thank you for your participation.

  • You may disconnect at this time.