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Operator
Please stand by.
We're about to begin.
Good day, everyone and welcome to the CBRL Group first quarter earnings conference call.
Today's conference is being recorded.
And will be available for replay starting today at 2:00 P.M.
Eastern time and run through May 29th until 8:00 P.M.
Eastern time by dialing 888-203-1112.
And entering confirmation code 582141.
At this time for opening remarks and introductions, I'd like to turn the conference over to the Chairman of the Board, Mr. Dan Evans.
Please go ahead, sir.
Dan Evans - Chairman
Thank you very much.
Good morning.
Correction.
It's third quarter report.
We appreciate you being with us this morning.
I know McDonald's is having their annual meeting on the web, and it's probably attracting quite a few people.
We trust you have a copy of our third quarter earnings release.
It would appear that we've slightly disappointed the street this morning.
But it reminds me of a funny story I heard the other day.
The situation seems appropriate.
It seems the Pope was visiting President Bush in Washington, and wound up taking a ride on the presidential yacht.
I guess that's the Sequoia or something probably on the Potomac River out there.
Sitting in the back of the boat and the wind piped up and the Pope's hat blew off.
They were scurrying around the boat, stopped the engines.
Bush says not to worry, opens the gate on the stern, steps out onto the water, walks over, picks up the Pope's hat, walks back to the boat, delivers the hat to the Pope who is very thankful.
Next morning, headlines in the papers, Bush can't swim.
Just a little funny aside.
In any event, with me is CBRL's CEO, Michael Woodhouse, our Senior Vice President, Chief Financial Officer, Larry White, our Senior Vice President and general council, Jim Blackstock.
Jim's also in charge of our department of Sarbanes-Oxley Act.
All that being said, much ado about nothing, I'll turn this over to Larry for some more details.
Lawrence White - SVP & CFO
Thanks, Dan.
And thank you to our listeners on the conference call webcast for your interest and participation this morning.
Hopefully everyone's had the opportunity to see this morning's press release announcing our fiscal third quarter results and providing an update on current trends and the company's guidance for earnings for the fourth fiscal quarter.
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 express continuing comfort with our own guidance and trends except in broad public disclosures such as we have done this morning.
We urge caution to our listeners and readers in considering information on current trends and earnings guidance.
The restaurant business 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.
We urge you to read that language carefully.
The company assumes no obligation to update disclosed information on trends or guidance.
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 morning's good news.
For still another quarter, we think it's really good news.
First, let's put the quarter in perspective.
We began this quarter with a burst of foul winter weather and some ugly related sales trends.
We disclosed that the weather as well as the changed timing of a couple of holidays, Valentine's Day and Ash Wednesday, Mardi Gras were making our trends look bad.
But we expected things to improve.
Our next update was on the morning after the first military action in Iraq.
Frankly, we had no way of knowing what the effect might be either in magnitude or duration.
Further clouding the issue was the three-week later timing of Easter with its affect on spring break travel as well as continued uncertainty and consumer sentiment and the economy.
Making matters more difficult, we were up against a pretty good quarter last year, one in which Cracker Barrel comparable store restaurant sales were up 4.7%, retail comparable store sales were up 1.1% and Logan's comparable store sales were up 3.4%.
In our store operating margins a year ago it improved by 110 basis points over the prior year on the strong sales and operational execution initiative.
So the question we're asking ourselves throughout this year's third fiscal quarter was how are we going to top that with all of these external factors going on?
Well, today we're reporting that we did.
Bottom line, we recorded diluted earnings per share for the third fiscal quarter of 46 cents versus 36 cents a year ago, an increase of 27.8%.
While sales were a little soft, we continually improved our reported trends in most respects throughout the quarter all in spite of the difficult comparison of a very strong year ago quarter and a lot of difficult external factors.
That's a lot of good news in our opinion.
We'd like to look at some of the details.
Revenue in our fiscal third quarter ended May 2nd, 2003, increased 4.2% from last year's third quarter.
That's $527 million compared to $506 million.
The increase came primarily from new unit openings partly offset by moderate declines and comparable store restaurant retail sales in our Cracker Barrel Old Country Stores concept and Logan's Roadhouse.
Cracker Barrel comparable store restaurant sales were down 1.7% from a year ago.
A quarter in which we had strong comps positive 4.7% as I mentioned earlier.
These results were in line with our most recent guidance of expecting to be down 1% to 2% and they reflected 1.8% higher average check, which included 1.1% higher menu pricing and guest traffic that was down about 3.5%.
Unfortunately this breaks the string of 12 consecutive quarters of increasing comparable store sales but it was a tough environment.
Softness was broad based across all-day parts, weekends and weekdays and geographical regions, which we believe reflects the present uncertain consumer and economic environment.
Dinner was our softest meal period and only the region that includes stores in Texas and the western states had positive comparable store restaurant sales.
Cracker Barrel comparable store retail sales on the third fiscal quarter were down 2.3% compared to the positive year ago quarter in which retail comparable store sales were up 1.1%.
When guests come to Cracker Barrel Store, the purpose primarily is to eat.
Retail purchases tend to be more discretionary.
Probably even more so in a tough economic environment.
Part of our developing retail strategy is to increase relatively the selection of lower price point merchandise.
Our average retail purchase is under $10 which isn't surprising considering the restaurant check average is just around $7.60.
We've shown some encouraging successes with this lower sales point pricing strategy.
Sales of our Easter seasonal merchandise with an average selling point under $5 were up over 40% this quarter over a year ago and represented over 10% of our sales for the quarter in retail.
Our targeted retail items which included such low price features as Jelly Bellies this quarter continue to do very well and were up substantially over last year.
We remain highly confident in our retail business and strategies, especially as economic conditions begin to improve.
Rounding out our comparable store sales results, our Logan's Roadhouse concept recorded a decrease of 1.1% in comparable restaurant sales reflecting a 3.1% decrease in guest traffic offset by a 2% increase in average check, which itself included 1.1% of menu pricing.
As with Cracker Barrel, this reflected a comparison with a strong year earlier quarter where comparable restaurant sales were up 3.4% and guest traffic was up 3%.
We continue to view alcohol sales at Logan's as both a challenge and an opportunity with our alcoholic beverage mix off about 30 basis points from a year ago quarter.
Some of which reflects relatively weaker dinner versus lunch sales at Logan's.
Our alcohol mix is running just under 9%.
During the third quarter, we opened six new Cracker Barrel Old Country Store units and three new company operated Logan's Roadhouse restaurants.
Our Logan's franchisee in the Carolinas opened one restaurant this quarter.
We presently expect to open eight Cracker Barrel units this quarter, four of which have already been opened for a total of 23 Cracker Barrels for the full fiscal year.
Logan's completed its development schedule in the third quarter opening a total of 12 company-operated restaurants for the full fiscal year.
As of today, we have 476 Cracker Barrel Old Country Store restaurants and gift shops in 41 states.
And 96 company-operated and 13 franchise Logan's Roadhouse units in 17 states.
Let's continue on down the income statement.
Operating income for the third quarter was up almost 16% on the 4.2% revenue increase.
And operating margins improved 70 basis points from 6.6% to 7.3% in the revenues.
As we've seen in recent quarters, the improvements primarily reflected lower costs of goods sold with lower costs recorded in Cracker Barrel Restaurant and retail, but we also improved on labor and related expenses and held the line on year-over-year gna as a percent of revenues.
Improvements compared with last year in food costs reflected lower costs of ham, orange juice and potatoes as well as numerous other less significant items.
While it's been a favorable commodity cost environment, some of the improvements we've achieved also come from vendor reviews by our margin initiatives team in Cracker Barrel.
This group has been working with our vendors to find opportunities for savings while emphasizing maintaining or improving product quality.
They're working with vendors to improve everything from product specs to raw material purchasing to freight costs to packaging costs.
As well as contracting ahead to achieve price developing.
I think it also may be noteworthy to observe that while we had cost improvements in certain food items, others items such as margarine, meatloaf and eggs were up this quarter versus a year ago.
We benefit from having such a diversified menu with many supply contracts that we're often less sensitive to changes and product costs than some others in our industry.
Food cost management at Cracker Barrel was generally favorable to our allowed or targeted levels.
Logan's had higher product costs than a year ago reflecting primarily beef costs which are capped under a supply contract that runs through this calendar year.
But the costs this quarter were still above prior year even though we were limited in that by the caps in the contract.
Logan's also had lower alcohol mix which affected its overall product cost negatively.
Once again, retail cost of goods was improved year over year in the third quarter.
Retail benefited primarily from improved initial margins or mark-ons and lower accrued retail shrink partly offset by higher markdowns.
Labor costs, was 50 basis points lower than last year reflecting improvements in Cracker Barrel including lower worker's compensation expense and lower hourly labor costs as a percent of revenue.
The lower worker's compensation reflected high expenses a year ago rather than low expenses this year.
Wage inflation for our nontipped employees was down slightly at Cracker Barrel from a year ago reflecting the increased emphasis we 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 third fiscal quarter.
Group health expenses have been under some pressure but group health care costs while they're up so far have not been up as much as we originally expected.
Other store operating expenses in the third quarter were higher than a year ago by 30 basis points reflecting slightly higher costs in several areas including utilities.
Sales softness in the quarter also put pressure on the fixed portion of these expenses as a percent of revenue.
General and administrative expense was unchanged from a year ago from the third fiscal quarter as a percent of revenues.
Interest expense in the third quarter was slightly higher than a year ago, reflecting higher average outstanding borrowing, primarily representing the affect, including accretion of the zero coupon convertible debt we issued in the latter part of the year ago quarter.
This was partly offset by the lower interest rate environment that we're in.
As we have reported before, the higher debt levels reflected achievement during last fiscal year of our capital structure targets that when we include the effect of off balance sheet real estate operating leases, give us a total indebtedness to capitalization ratio of about 35%.
Wrapping up the third quarter, net income of 23.4 million dollars was approved 13.8% from 20.6 million dollars a year ago.
Diluted earnings per share of 46 cents were improved approximately 28% from 36 cents reported in a third quarter last year.
We're very pleased with the solid performance in the face of difficult economic and consumer confidence environment.
And after beginning the quarter with unexpectedly severe weather and facing the uncertainty of a weak economy and the war in Iraq during the quarter.
Earlier this fiscal year, our board of directors authorized share repurchase plans under which we were to repurchase up to 4 million shares of our common stock from time to time in open market transactions.
Year-to-date, we have repurchased 3.4 million shares under these authorizations for an aggregate outlay of $95 million or just under $28 per share.
During the third quarter, our repurchases were approximately 1.4 million shares or about $41 million which comes out to about $29 per share.
We presently have a remaining authorization to repurchase approximately 600,000 shares.
Since we began this share repurchase activity four years ago, we have spent over $450 million to purchase approximately 19 million shares.
Note again, this has been accomplished within our capital structure targets.
At the end of the quarter, we had approximately 48.4 million shares outstanding which were reduced during the quarter by the effect of the share repurchases net of option exercises during the quarter.
Finally, in this morning's press release, we updated our current sales trends and earnings guidance.
Again, I 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.
Furthermore, in today's unsettled economic and world environment, uncertainties may be even greater than at other times.
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.
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 earlier parts of today's discussion and press release contains 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.
Keeping in mind these uncertainties and recognizing the year ago sales comparisons were most difficult in the early part of the quarter, we also caution to you remember that we are presently less than three weeks into our final quarter of fiscal 2003.
At this very early stage, Cracker Barrel comparable store sales are down approximately 1% and retail is down approximately 4 to 4 1/2%.
Logan's comparable restaurant sales are up approximately half a percent.
The present guidance for diluted earnings per share for the fourth fiscal quarter is 56 to 68 cents compared with 56 cents a year ago.
We presently expect total revenue growth of approximately 6 1/2 to 7% in the fourth quarter and our guidance reflects achieving modest comparable store restaurant sales increases for the full fourth quarter with comparable store retail sales flat to down slightly.
We do face uncertainties as always as we enter this quarter and our guidance reflects a range that considers various areas of risk and opportunity.
As always, we expect to update this guidance periodically as the quarter progresses.
So we report a good results this morning.
Results that came against the very tough prior year comparison in an uncertain and difficult to operate environment.
We're reporting a 28% increase in diluted earnings per share, on top of last year's strong quarter that itself was increased 38% over the year earlier quarter.
And we're disclosing strong guidance based on our present outlook.
As I said at the beginning of my remarks, we think that's a lot of good news and we're very pleased to be reporting it this morning.
With that, I thank you for your patience with my financial review.
Now I'd like to introduce, Mike Woodhouse, our President and Chief Executive Officer who has further remarks on operating trends and initiatives.
Mike?
Michael Woodhouse - CEO
Thanks, Larry.
Good morning, everyone.
Pleased to be here again this morning to talk about another very positive earnings quarter for CBRL.
I think it's worth remembering that the 28% increase in EPS this quarter and 29% year-to-date are on top of a 39% increase in the same quarter year ago and 32% year-to-date.
As Larry indicated, we knew from the start of the quarter, this was going to be a very tough quarter from a sales point of view at the time of the last conference call, which was in the third week of the quarter, the restaurant comparable store sales at the Cracker Barrel were down 3 1/2% and down 2% at Logan's as a result of some severe weather.
So the quarter became a continuing struggle to overcome that week's start and we were faced with some more weather early on and the month of the war and throughout we had to deal with a weak economy and continuing weak consumer sentiment.
In this environment, our focus as always was on maintaining the quality of the guest experience which with soft sales means scheduling enough labor despite the cost impact and never compromising on the quality of the food and the service.
At the same time, we continue to focus on the behind the scenes cost opportunities such as improving purchasing and food and retail merchandise and using the tools we have available to schedule as accurately as possible and to hire the right mix of full and part-time employees.
Of course, we had to manage G&A appropriately.
We were successful in doing all of this in the quarter and we had improved costs to goods, improved labor costs as a percent of revenues and G&A was flat as a percent of revenues despite the soft comparable store sales.
Our goal continues to be EPS growth driven by improved operating performance combined with capital structure management.
On the operating side, the three critical elements as they always are, are positive comparable store sales, new unit performance and continuous improvement in margins.
So just described we underachieved in comparable store sales in the quarter as a result of the external environment but we were able to continue to open strongly performing new stores in both Cracker Barrel and Logan's and also reduced operating costs to grow the margins.
Looking forward into the fourth quarter, we expect the economy to continue to be weak but with the winter and war behind us, we expect modestly positive sales supported in the case of Cracker Barrel by reported expectations of stronger summer travel season than last year.
Although those of you who follow Cracker Barrel at the time know that the summer travel trend is never clear until we get through the Memorial Day weekend.
In the case of Logan's, we're encouraged by the positive sales early in the quarter and with the renewed focus in execution, we're looking for modestly positive sales for the quarter as a whole.
In Cracker Barrel, we continue to focus on serving familiar food made from quality ingredients at an attractive price as a key part of the Cracker Barrel experience.
This spring's feature promotion this year was a trial product that performed well up to expectations and the positive guest feedback suggests that this may be a candidate for the menu in the future.
We're currently running roast beef as a focus promotion.
Focus promotions are where we pull out popular high margin fast preparations item out from the menu and feature it on the menu insert.
And consistent with our recent experience, the roast beef is performing better than the last time we did the same product as a result of improved operational focus and the quality of the menu inserts and the posters that we have in the stores.
Looking forward to the remainder of the fourth quarter, we'll be running a new chicken product as our summer promotion.
This product came out of our new research development and testing process for new products.
And at least in tests, the product outperformed home style chicken, which to date has been our most successful promotional product.
For those of who you want to try the product, it will be in the stores starting on June 16th.
In retail, we'll continue to operate with a clearly defined strategy supported by our new planning function and with an increasing emphasis on operation execution.
The merchandising strategy is based on nostalgic and classic products at attractive price points.
Seasonal merchandise is a very important part of our business.
Easter this year as a good example of the strategy and the execution coming together to work very well.
The average price point for the Easter merchandise this year was about 4% lower than last year.
As Larry said, unit sales and dollar sales were both strongly up as a result of the improved merchandise selection, lower price points and more timely and lower markdowns than the previous year.
We'll continue to emphasize seasonal merchandise.
An example would be our new line of T-shirts which are in the stores now for the summer and sell for $12.99.
We're putting more emphasis in general on the newness and freshness of our nonseasonal merchandise to increase the overall appeal to the guests.
We're also rolling out a new heritage music program following a successful test over the past few months.
We've developed and produced this music ourselves in association with the National Council for the Traditional Arts.
This is a collection of initially 16 cds.
Each featuring a specific style of American music such as gospel, blue grass, the blues, et cetera.
And the cds are also going to be available on the web site.
Based on what we've seen so far, we expect a lot of interest in this new program.
Finally, as part of our efforts to broaden the appeal of our retail merchandise, we've just introduced a line of men's products in time for Father's Day.
These are tools and gadgets that we think will be very appealing to our male guests who typically don't show a lot of interest in shopping while they are waiting to eat.
The people side of the business, management turnover in Cracker Barrel was 26% of the quarter bringing the year-to-date turnover to 24%.
Year-to-date hourly turnover was 112% down from 120% a year ago and the turnover on the critical par four group of employees continues flat at 22%.
The stability and depth of experience created by the low turnover rates at all levels is a major contributing factor in our mission to achieve continuous improvement and operational execution.
As we've previously reported, we made some design changes to the group health plan this year to contain cost inflation while maintaining the integrity of the plan because we believe the plan gives us a strong competitive advantage in attracting and retaining quality employees.
As evidenced by the low turnover numbers especially among the par four group, we seem to be achieving that.
In addition to the low turnover numbers, we're also seeing the benefit from the health plan changes in the form of lower than expected health care cost increases.
We opened six new Cracker Barrels in the third quarter, and we continue to believe that the new store review process where we look at the store in the month in which it opens and again after three months continues to have a very positive impact on the quality of the new store openings.
And as a result of this, and our continued focus on the quality of the new sites, the fiscal 2003 openings as a group continue to perform better than 2002 and 2001 stores.
At Logan's, while it was disappointing to see negative sales in the quarter, we're please to be on track with our most recent sales guidance.
Also pleased to start the new quarter with positive sales.
With two priorities for Logans, continuing to be execution and brand clarity.
The focus in execution is on the basics of the business.
We've updated the high fives priorities program which was originally rolled out last year.
The program was designed to reinforce the fundamentals of guest service using the twice a day premeal meetings with all team members.
The intent was to ensure the superior guest experience through constant repetition of the five key priorities in every guest experience.
Over time, the program had become unfocused and lost its impact so we're going to be rolling it out in its new form in the fourth quarter.
The bar program we rolled out a year ago had less impact than we'd hoped and intended at the time.
So we've overhauled that program and will be testing the new program during the fourth quarter at five locations.
The intent is to restore Logan's competitiveness and alcohol sales and I expect to be reporting on the results at the end of this current quarter.
On the menu front, the results of the spring promotional at Logan's has led to us re-examine our promotional strategy.
We're in an environment where our ability to support the promotions with media at this point is limited.
The sales were similar to previous promotions but until development gets to us a point where we have better advertising efficiency levels and we can use the promotions to drive the traffic, we going to revisit the cost effectiveness of limited time promotions that require development and training of multiple new products.
Meanwhile, the summer promotions already been developed and will feature a variety of barbecue-based items including a barbecue chicken salad.
We're also planning a systematic review of made to menu items in Logan's to make certain that we are executing and delivering optimum quality to the guest.
To support the brand clarity initiative, we'll be undertaking a comprehensive research project in the fourth quarter.
The results will be used among other things to validate and refine the brand positioning for Logans, to understand who the target audience is and should be and what the guest's expectations are of Logan's.
We're going to be using the information to develop a new marketing strategy as input to our future menu development and possibly to refine the building design.
In the interim, we've developed a new radio creative which is designed to do a better job of communicating Logan's and personality and positioning as we know it today.
This radio is currently on air in 28 markets to represent 47% of the system.
Management turnover at Logan's was 20% in the quarter compared to 25% at the same quarter last year.
And hourly turnover year-to-date is 136% down from 148% in the same period last year.
As Larry indicated, we continue to benefit from our beef contracts with the market for most of the cuts we buy well above the caps in our contract at the present time.
In the development area, we've opened 12 new restaurants this year, which represents the total schedule to open for the year, the fiscal 2003 stores as a group continue to perform better than the 2002 stores which in turn performed better than the 2001 group.
To reinforce this trend, we'll continue to work on improving the quality of the site selection process and refining the development strategy to ensure that we're achieving operational and marketing efficiency.
Before I close, I'd like to spend a minute on an update to the situation of our discrimination lawsuits.
In the Rhodes case, which is the employee discrimination case, as we've previously announced, the federal judge ruled to deny class certification in March.
Subsequently, the 11th Circuit refused an appeal by the plaintiffs on this case at the beginning of May.
In October, last year, as we've also previously announced, the federal judge denied class certification for the Thomas case which is the public accommodation case and the plaintiffs did not appeal in that case.
So in both of these major lawsuits, class certification has been denied and the lawsuits now consist of a small number of individual plaintiffs.
So in closing, just like to say what we said before, which is we recognize we're living through some very uncertain times.
We believe we're doing the right things to protect and strengthen both our businesses for the long term and the initiatives we have in place we believe will continue to deliver the earnings results in the short term.
We're looking forward with confidence to the rest of 2003.
We're going to deal with the challenges we face and very confident that the internal momentum that we have in both businesses will help us meet our goals in the fourth quarter.
And now I'd like to open up the call to questions.
Operator
Thank you.
The question and answer session will be conducted electronically.
If you wish to ask a question, press the star key followed by the digit one on your Touch-Tone phone.
If you are using a speaker phone, make sure your mute button is turned off to allow your signal to reach our equipment.
We'll take as many questions as time permits.
Once again that is star one on your Touch-Tone phone to signal for questions.
We'll pause for a moment.
Our first question will come from Matt DiFrisco with GKM.
Matt DiFrisco - Analyst
On your guidance for the fourth quarter, there seems to be, I guess, is it conservative or is there somewhat of a disconnect here?
You're expecting across the board better comp trends, although somewhat muted but still better comp trends than what you posted in the third quarter, yet your EPS growth is less.
I'd assume that the in the box sales in the box cost momentum and improvements you are making there are still in tact and we're not lacking any unless we're lacking severe changes.
I don't want to answer my own question but, to you, I guess, what is the difference there?
Why aren't we expecting equal or better EPS growth in 4 q that we just had in 3 q?
Lawrence White - SVP & CFO
I think for sometime now we've been accomplishing significant operating margin improvements that continues to be our expectation.
That we'll be having operating margin improvements, but obviously as you expect, they'll get tougher as time goes on as well.
Matt DiFrisco - Analyst
So then you're expecting not -- can you point to one particular or where you're seeing this where you are not going to have the same improvement on labor?
Is it not going to be the same improvement on [inaudible] or is it going to be across the board?
Lawrence White - SVP & CFO
Well, I'm not sure I want to get into any more specific guidance as to what we expect line item by line item.
As we've said before, when we look at the numbers, we look at the potential sensitivities and risks and opportunities that we have literally line item by line item.
And based on that judgment, we come up with our expectations and range of guidance that we communicate.
So I just think it's a matter of things are, you know, get a little tougher as time goes on.
We continue to be confident in our ability to deliver operating margin improvements, but we won't necessarily be as strong based on our expectations today as we have been the last several quarters.
Matt DiFrisco - Analyst
Okay.
And then I guess just below that on the g&a line.
This year, and even beginning last year, you had a lot of professional fees associated with these lawsuits and your g&a being at 5.6 stopped the trend of constantly improving your g&a or leveraging that.
Should we expect '04 to return to leveraging g & a and see that 5.6 sort of be the high water mark and come down from there?
Lawrence White - SVP & CFO
We haven't given any specific guidance on '04 yet.
We'll be doing that in our year end conference call.
Matt DiFrisco - Analyst
Okay, thanks.
Operator
Our next question will come from Amy Greene with Avondale Partners.
Amy Greene - Analyst
Hi, guys.
A couple of quick questions.
Number one, from a food cost standpoint, you said you locked in on beef.
Are there any other significant ones that you are locked in on and how long?
Lawrence White - SVP & CFO
We have a lot of contracts, Amy, with a lot of vendors on a lot of products.
And they go throughout the year, you know, they're continually expiring and being renewed for another year or six months or whatever the case may be.
The specific one we spoke to was the Logan's beef contract, which is a single supply contract.
Amy Greene - Analyst
Okay.
And then Mike, I guess this one's to you.
As far as hiring at Logan's, how's the executive search process going?
Michael Woodhouse - CEO
It's going fine.
We're going to make certain we get absolutely the right person for Logan's and will take the time necessary to do that.
Amy Greene - Analyst
Okay.
And last is another Logan's question.
As far as the brand initiative that you're taking on there is that the study that you're going to be doing there, are you going to be doing that internally or are you going to hire out for it?
Michael Woodhouse - CEO
We've hired a market research firm to help us with that.
And it's a single project but a number of different pieces to it.
It will take place over the next quarter or so.
Amy Greene - Analyst
Do you have -- are you close enough with the search process yet to have any kind of time frame or is that a hat you get to keep wearing for a while?
Michael Woodhouse - CEO
I'll keep wearing it until we hire the person and like I said, you know, we're really going to make certain we get the right person.
It's a process that we focus on.
I really don't want to put a time out there.
Amy Greene - Analyst
Okay.
Michael Woodhouse - CEO
Just if I may answer your other question as well on the contracts.
I think it's important as we said before to look at the bulk of the business is Cracker Barrel and Cracker Barrel has a very broad-based menu, so we don't have any significant exposure.
We're sort of self-hedged, if you will, across the [inaudible].
Amy Greene - Analyst
Okay, thanks, guys.
Michael Woodhouse - CEO
Thank you.
Operator
And our next question comes from David Schamus with Raymond James.
David Schamus - Analyst
Good morning.
Are you planning on taking any price increases in the fourth quarter?
Second question, wondering if you know the date of your next board of directors meeting.
If so, are you anticipating if you are confident that there will be new share repurchase program authorized at that point?
Thank you.
Michael Woodhouse - CEO
Let me answer the second one first.
Yes, we do know.
That is not something we publish ahead of time.
Anything coming out of our board meetings will be announced as soon as we can.
Lawrence White - SVP & CFO
The other question was price increases.
We never telegraph our price increases ahead of time.
Michael Woodhouse - CEO
Yeah.
We're following the same processes we have which is to make certain that we figured out what the next one would be when we get to it, but in this environment, as we have for the last two years or so we'll continue to be very cautious with pricing.
Our focus is on managing the margin through all of the things we talked about in terms of taking costs out without impacting the guests.
David Schamus - Analyst
Okay.
And no comments on if you are confident in the share repurchase program getting authorized?
Lawrence White - SVP & CFO
As I said, we still have several hundred thousand shares.
Almost 600,000 shares to repurchase under existing authorizations.
David Schamus - Analyst
Okay, thank you.
Lawrence White - SVP & CFO
Thank you.
Operator
We will take our next question from Robert Derrington with Morgan Keegan.
Robert Derrington - Analyst
Yeah, hey, Mike.
Record regarding the restaurant side of the business and the new product that you're introducing in June, typically, you test these things for a while.
Can you give us some kind of sense on how the product has tested out in the field?
How many stores you've had it in, et cetera?
Michael Woodhouse - CEO
It tested fine.
Like I said, it tested -- in tests it did better than our home style chicken product and we ran it a couple times.
And we've run our tests in a sufficient number of stores to get a pretty good sense of that.
Having said that there's no guarantee that when you take a product out of a limited test to the full system you'll see exactly the same results.
Robert Derrington - Analyst
Can you give us a price point?
Michael Woodhouse - CEO
It will be $7.99.
Robert Derrington - Analyst
On the gift shop side of the business, Mike, the fact that you are looking at kind of a broader audience to potentially use the gift shop, can you walk us through how you decided to make, you know, add this line of male gadgets I guess you call them and what kind of test results have been in that?
Michael Woodhouse - CEO
Well, the decision came out of our continued focus on, if you walk into a crowded Cracker Barrel when we're on a wait you'll see women browsing and shopping.
You'll see men standing around looking uncomfortable because they don't know what to do because they don't like to shop.
Our focus groups told us that men say they don't like to shop but when we asked them where would you like to shop, they talk about places like Home Depot and places they can pick up tools and play with them and maybe buy them.
So that's what focused [inaudible] in this whole particular area.
We sent our buyers out to to a couple of shows that carry those kind of things and they came back with some great relatively low priced point value kinds of things which all of our management teams have now bought.
Hopefully it will be some left.
Robert Derrington - Analyst
Great.
That's terrific.
Lastly, you know, looking at the search on Logan's, is it reasonable to assume you have a good group of lieutenants helping you manage that business in the interim while you conduct your search?
Michael Woodhouse - CEO
I think I mentioned it on the last conference call that we've got a core of a strong management team.
I have people really being very helpful and supportive to me personally as I do the Lebanon National commute on a regular basis.
Today's world, you don't actually have to be places all the time to be able to be effective in communicating.
David Schamus - Analyst
Great.
Congratulations.
Thank you again.
Operator
Our next question comes from Janice Meyer with CS First Boston.
Janice Meyer - Analyst
Hi, thanks.
Another question on Logan.
I apologize but you're doing a lot there, which is great.
What -- how would you characterize the differences in what you're doing now versus maybe what was being done there under [inaudible] in the past?
Not the specific programs because I'm sure he would do programs but can you characterize maybe is there a different approach at Logan's now?
And given that you are still searching for a new head of that concept, you know, are there any programs that you might be more or less reluctant to put into Logan's until you have a more long-term head of that chain?
Michael Woodhouse - CEO
Well, rather than doing compare and contrasting, let me talk about what we're doing right now.
And we are -- several things.
We are identifying and focusing on on a small number of things that make a big difference.
Then making certain we execute, follow through and stay consistent with the programs.
High five is a good example.
That was a great program.
It became a little unfocused and was being used for different purposes.
We've got it back to what it should be.
That's all about everyday repetition, reminding the employee what their role is in providing great guest experiences.
A lot of this business is repetition.
Unfortunately it can be boring at times and people want to change things.
What's important is to do the right thing and keep doing it over and over again.
That's one example.
The alcohol program is another one where we've refocused on what we're trying to achieve which is to be competitive in terms of what other casual diners do in our alcohol offerings.
We've developed a new approach, changed out some things and how we execute that in the store and we're going to test it.
In terms of reluctance, to do anything before we find a new president, I think we've got enough things that are basic like that to work on and make certain we do right but the question of should we put something on hold really doesn't come up.
Janice Meyer - Analyst
Great.
Thank you.
Michael Woodhouse - CEO
Thank you.
Operator
Once again, as a reminder to our audience that is star one on your Touch-Tone phone to signal for questions.
We'll go now to Dennis Forst with McDonald Investments.
Dennis Forst - Analyst
Good morning.
I wanted to ask a couple of questions.
On store restaurant weeks, you had 6127 for the quarter for the Cracker Barrel.
That would indicate that, I think, almost all six of those stores would have opened up very early in the quarter.
Is that the case or do you give a week if it opens in a partial week?
How do you calculate that?
Lawrence White - SVP & CFO
Yeah, they get a part partial week.
We opened up really throughout the quarter.
Let me --
Dennis Forst - Analyst
I know you opened three in the early part of the quarter because that was in the second quarter release.
Lawrence White - SVP & CFO
Right.
And we had three that were in March, but a couple of them were at the very end of March.
So it was late in the -- well into the quarter before a couple of them opened.
Dennis Forst - Analyst
Yeah, because the indication of 21 or 6127 would show 69 restaurant weeks from the six stores that opened are almost at 11 1/2 weeks per restaurant.
Lawrence White - SVP & CFO
You've got to remember you've got some last year openings that are included in that as well.
That were opened for the full quarter this year.
Dennis Forst - Analyst
No, I have those.
I would take all of the stores opened at the beginning of the quarter times 13, and that would leave 69 extra weeks.
Lawrence White - SVP & CFO
Well, we opened three early in February.
We opened one in mid March and a couple at the end of March.
Dennis Forst - Analyst
Okay.
And then for this quarter you've already opened up four.
When will the last four open?
Lawrence White - SVP & CFO
We've got one next week, a couple at the end of June, and one early in July.
Dennis Forst - Analyst
Okay.
Great.
And then wanted to ask the fiscal years open -- ends August 1?
Lawrence White - SVP & CFO
Yes.
Dennis Forst - Analyst
And are you going to have another update mid quarter for us?
Lawrence White - SVP & CFO
We'll have our normal press release updates.
The next one would be in four weeks and then the final one four weeks after that.
Then we'll be silent until we do our year end fourth quarter earnings conference call which will be I don't have the specific date in front of me, but it's mid September.
Dennis Forst - Analyst
Okay.
So when you say four weeks, Larry, is it going to be four weeks from today or --
Lawrence White - SVP & CFO
Yes.
Four weeks from today.
Michael Woodhouse - CEO
And then another four weeks from that.
Lawrence White - SVP & CFO
Correct.
On a Thursday.
Dennis Forst - Analyst
Okay.
Very good.
Thanks a lot.
Keep up the good work.
Lawrence White - SVP & CFO
Thanks.
Operator
And we'll take our next question from Mark Sheridan with Rice Johnson.
Mark Sheridan - Analyst
Larry this might fall into the category of not having given '04 guide yet, but I was curious on Cap Ex for this year, are you still looking at 120 million and should we approximate something higher than that level next year with expectations of similar development?
Lawrence White - SVP & CFO
Multiple questions that affect there.
Yeah, we're still looking at being a little over $120 million this year in Cap Ex this fiscal year.
Next year, we have not disclosed our new store development expectations yet.
And we'll be doing that again in the year end conference call.
But we do expect to have more new store development next year as a consequence, we would expect higher capital expenditures in fiscal '04.
Mark Sheridan - Analyst
Mike, can you talk about the name of this new product or describe it or do you not want to do that yet?
Michael Woodhouse - CEO
No, I don't.
I'd love to, but it's our practice not to put out information on products before they're out.
On 11:00 a.m. on June 16th, it will be ready to order.
Mark Sheridan - Analyst
Well, I'm going to be on the road shortly after that so I have to try it.
Michael Woodhouse - CEO
Okay.
Operator
We'll take our next question from Howard Penney with Sun Trust.
Howard Penney - Analyst
Thanks very much.
Have I two questions.
First one is around the previous quarter in winter.
Is there any way you can quantify what the implications were for on your same-store sales given the winter weather?
In light of the fact that the economy continues to pose challenges as you said, and I think AAA put out a statement that they thought that the number of people traveling the roads would be down about 15% this coming weekend.
And the second question is on the labor costs, given the, you know, the soft same-store sales going forward, can you still expect to benefit or see the kind of leverage on labor costs you had given for the same-store sales trends are in the fourth quarter?
Lawrence White - SVP & CFO
Oh, there's again, multiple questions there.
We -- the winter weather question -- we did talk about how much that was impacting us early in the quarter.
And it was a bad start to the quarter but we haven't really calculated the impact it had on the whole quarter.
I'll just remind you throughout the quarter we were seeing improvement as we spread that negative impact over more and more days.
But it was still not a positive quarter apart from that.
I don't want to go into specific line item detail on the margin expectations other-than to say once again that we think that over time we continue to get margin improvements.
But our present outlook right now based on the sales guidance we've given and all that is that it won't be as significant as in this quarter.
Michael Woodhouse - CEO
Just on the winter weather thing it's more difficult in Cracker Barrel than other chains to quantify that because in other chains, you typically look for the stores that shut down or don't open up or significant changes.
Cracker Barrel, if it snows in city a, city b may be affected because the person is not on the trip.
It's much more difficult to quantify that.
Howard Penney - Analyst
That seems fair.
Thanks very much.
Michael Woodhouse - CEO
Okay, thank you.
Operator
We will take a follow-up question from Matt DeFrisco with GKM.
Matt DiFrisco - Analyst
Hi, guys.
Just wanted to give you an opportunity to also follow up on the same-restaurant sales.
Can you give us a absolute number of what or how many stores were in the base?
And then also, given the success of second question here.
Given the success of Logan's menu, it seems like since that you launched in March, could we be seeing a rollout of a new menu in Cracker Barrel soon as well?
Lawrence White - SVP & CFO
I'll take the store count question.
For the quarter, there were 437 Cracker Barrels in the comparable store base and 75 Logan's.
For the year-to-date, it's a smaller number. 430 Cracker Barrels and 71 Logans.
Matt DiFrisco - Analyst
Okay.
Michael Woodhouse - CEO
On the menu question, obviously, the two concepts are totally separate from a menu development point of view.
We have a menu that we've had in tests for a period of time at Cracker Barrel.
We've learned a lot from that.
We are working on what would a new menu or what could a new menu look like.
That's going to continue for a while.
I think a couple of things about Cracker Barrel menus.
One is obviously to a lot of people, Cracker Barrel is an unchanging concept even though things do change over time.
We have to be careful with menu changes.
The other is, we have an unusually high number of guests who are regular and just never open a menu.
They just know what they want when they walk in.
So the menu in that regard maybe has little less of an impact than other places.
So we'll work on it and still see opportunity.
Matt DiFrisco - Analyst
Okay.
Thank you.
And actually, can you give us an update knowing that you guys are out on the highway there.
Have you seen -- you gave us a three-week trend but what have you seen, I guess, leading up to or what are your expectations for Memorial Day compared to what you had last year?
I think AAA was saying actually that it's supposed to be up, road traffic up roughly .3% versus other forms of travel also year-over-year.
Michael Woodhouse - CEO
I just heard two different numbers in the last few minutes, down 15 and up .3.
Matt DiFrisco - Analyst
Well, they did a release on the 15th is what I'm reading here.
So have you guys seen car travel?
Lawrence White - SVP & CFO
I saw some information from AAA Southeast which is our core market that said they expect to see highway travel up this summer.
We don't really give specific time frame projections as we said, so we're not going to do a projection for Memorial Day weekend.
But we do expect over the quarter to see improvements from these initial trends.
And we think for the quarter on both Cracker Barrel and Logan's, we can be up slightly in comparable store sales for Cracker Barrel retail right now we're thinking flat to down slightly.
Matt DiFrisco - Analyst
Okay.
Michael Woodhouse - CEO
I'm looking at a piece now from USA Today last week where the prediction was U.S. summer travel projected to rise by 2.5%.
We're expecting a modest increase in travel which will support a modest increase in our sales.
Matt DiFrisco - Analyst
Great.
Thanks, guys.
Operator
We'll take a follow-up from Janice Meyer from CS First Boston.
Janice Meyer - Analyst
Hi, thanks.
Again on the labor side, you had said that worker's comp last year what high.
If we x out the worker's comp benefits given the soft same-store sales would labor have been up this quarter as a percent of sales or still down?
Could you also comment on the turnover trends.
It seems like they're actually better at Logan's than Cracker Barrel so maybe why.
Thirdly, I remember last year Memorial Day weekend sort of surprisingly wasn't as strong as people expected and at the time, the speculation in the restaurant industry was that maybe as the first post 9/11 Memorial Day, people stayed home more.
Any more postmortem on why you think Memorial Day weekend might have been soft last year and are you a little more optimistic this year?
Lawrence White - SVP & CFO
First of all, labor was good in spite of the worker's comp.
So the worker's comp was just an area that -- I know there's been a lot of talk throughout the industry of pressures there, and I just wanted to mention worker's comp specifically in that regard, and the fact that the year ago was really higher for us.
Michael Woodhouse - CEO
On the turnover, obviously there are four pieces to this, hourly and management in each of the two concepts.
Cracker Barrel year-to-date management is pretty much flat for the year ago of about 24%.
That's about our holding level.
We don't see it necessarily going much below that.
Because a substantial portion of that is involuntary and will continue to be based on performance.
Logan's we're pleased in getting it down.
I think the low 20s to 20 is where that will settle out as well over time again based on performance.
I see them being about the same over time.
On the hourly, Cracker Barrel is continuing on down as is Logan's.
Cracker Barrel is at a lower level than Logan's, but at some point it will bottom out.
I think 112% for hourly turnover in this industry and the par fours, who are 25% of the hourly's and 22% are pretty remarkable numbers.
I don't expect us to -- we're not betting on, you know, in our forecast doing a whole lot better than that.
We'll be happy if we do.
Logan's is coming down in hourly 136 this year versus 148 last year.
That has room still to continue on down as we focus on it.
We're pleased with all of the pieces and I guess what I'd say net-net is that Logan's had a little more opportunity to improve.
Cracker Barrel got there a little earlier and Logan's is catching up.
Lawrence White - SVP & CFO
The request was from a year ago Memorial Day?
Janice Meyer - Analyst
Right.
Michael Woodhouse - CEO
No, I think looking back on that it's still the same thought.
It was a somewhat unique occasion following all of the emotional stuff after September 11th.
I don't quite know what that means for this year but I would expect a little more normal activity.
Janice Meyer - Analyst
Could you just clarify on the labor.
You pointed out that you had negative comps really for the first time in a long time at Cracker Barrel yet labor's down as a percent of sales actually for the long time at Cracker Barrel.
Can you give me a little more information as to how you are able to achieve that?
Michael Woodhouse - CEO
Yeah.
Several pieces to that.
One is the one I mentioned.
On scheduling focusing on a more precise blend of part-time and full time.
That's something that's been a big initiative for us.
The other one we did not mention this time but I think we did last time is that we've taken hourly wage inflation down.
It's actually running slightly negative in Cracker Barrel right now.
That's a function of both the part-time full-time mix and also the tool that we put out there for the managers to more precisely control and the district managers to more precisely control the new higher wage rates and the increases.
But more so the new higher wage rates so that we're not perpetuating any given level but we're taking an opportunity of the somewhat depressed labor market when we hire new people.
Lawrence White - SVP & CFO
The Cracker Barrel concept has been so powerful, so strong that we really haven't had to do things in here in some areas of managing costs and margins.
They've been common to the industry for many years both the restaurant industry and the retail industry.
And our objectives are -- our objective of continuous improvement, incremental improvement and operating margins comes out of the idea that we're introducing things that have been pretty common in our industry.
So historically, we've made greater use of full-time employees and we're -- we've done a lot in the last year or so to look at staffing initiatives and use of part-time people so that we can minimize our overtime and schedule more effectively.
And these are the kind of things.
We view them as proven and low risk having been done in many other places, and we're just introducing them and introducing them at a prudent rate in Cracker Barrel.
Janice Meyer - Analyst
Great, thank you.
Lawrence White - SVP & CFO
Thank you.
Operator
We'll go now to Dennis Forst with McDonald Investors.
Dennis Forst - Analyst
Yeah, I had a follow-up on depreciation and amortization.
If I back out the three-month number for the April quarter, it shows depreciation and amortization about $15.8 million, which is the lowest number in the current fiscal year.
And I'm wondering why it would be lower in the third quarter than the first or second given that net property and equipment keeps growing?
Lawrence White - SVP & CFO
Well, I think what you're beginning to see is the effect of us lapping some high expansion rates back in the mid and late '90s and all and some things coming off of the depreciation schedule.
Especially when we have -- we've made use of accelerated depreciation as a policy for sometime.
So that's essentially what you are seeing.
Dennis Forst - Analyst
Okay.
So we'll continue to see depreciation and amortization running closer to 3% than the 3.1 it was earlier?
Lawrence White - SVP & CFO
I mean, I do expect over time, again, not specifically forecasting this for the fourth quarter, but over time, we will be increasing our rate of new unit expansion and modestly from where we are.
So there will be two dynamics going on there.
Dennis Forst - Analyst
Okay.
And there's not much amortization in that number?
Lawrence White - SVP & CFO
Well, when you say amortization what are you referring to specifically, Dennis?
Dennis Forst - Analyst
Anything that's not a depreciating asset .
It's the cash flow line item depreciation and amortization.
And I'm wondering what kind of amortization is there some financing costs or any other amortization costs?
Good will from the Logan's acquisition?
Probably not that but is there any significant amortization going on right now?
Lawrence White - SVP & CFO
Technically speaking, you amortize leasehold improvements but those are fixed assets.
So that's in there.
It's just depreciation and amortization of property, plant and equipment.
Dennis Forst - Analyst
And the only other question, I wanted to remember the price increases from the last fiscal year.
I have it down that you had a price increase in November for Cracker Barrel?
Lawrence White - SVP & CFO
Yeah, we did.
That was about .9 of a percent.
That is what we're running today.
That's the only actual menu price increase that we have in Cracker Barrel numbers today.
Logan's was last summer and it was about 1.1%.
Dennis Forst - Analyst
So once we lap that, it will be at zero.
So right now it's at 1.1%?
Lawrence White - SVP & CFO
At Logan's yes.
Dennis Forst - Analyst
They're both at about 1% price increases going?
Lawrence White - SVP & CFO
Yes.
The reason the effect on the third quarter was 1.1% for Cracker Barrel is we lapped a February price increase early in the quarter.
So there was a period of time when we had two price increases in the Cracker Barrel numbers.
So at the beginning of the quarter, Cracker Barrel was at about 1.7% pricing menu pricing.
Then that changed in February and came down to about 9/10 and the average of the quarter was 1.1.
So we're running about 9/10 now and will be running that here until we either lap or have a future price increase.
And then in Logan's, we've only had the last increase that we've had, the only thing that's affected our numbers is the 1.1% last summer.
Dennis Forst - Analyst
Thanks a lot.
Operator
We'll go now to Robert Derrington with Morgan Keegan.
Robert Derrington - Analyst
Hey, Larry, based on your comment about depreciation, is it safe to assume that there's been no change in the depreciable life of your assets?
Lawrence White - SVP & CFO
No, we had a very minor change in Logan's on leaseholds.
But we've done this year but it's very minor.
Robert Derrington - Analyst
Okay.
But that wouldn't account for the change in the percent of depreciation.
Lawrence White - SVP & CFO
No.
Robert Derrington - Analyst
Okay.
As far as the anecdotically looking at the AAA web site, they mentioned that this year versus last year Memorial Day highway traffic is expected to be up about .1% and they also talked about Florida being one of the top two destinations in the country with a disproportionate amount of travel increase based in the southeast.
They also mentioned that this summer highway travel is expected to be up roughly 2 1/2 percent versus last year.
Just to try to clarify.
That information is on their web site.
Lawrence White - SVP & CFO
Thank you.
Operator
And our final question will come from Howard Penney with Sun Trust.
Howard Penney - Analyst
Well, thanks very much.
And also on their web site is a 29.4 million people on the nation's road this weekend versus 35.2 million last year.
So Larry, I will forward that article to you as well.
Lawrence White - SVP & CFO
Thank you.
Operator
And at this time, we have no further questions standing by on our question roster.
I'd like to turn the conference back to our speakers for additional or closing comments.
Michael Woodhouse - CEO
Well we'd like to thank you for joining us.
It's been interesting to hear all the information about travel.
We'll rush upstairs and check the web sites.
Thanks for joining us to talk about the quarter which we regarded as a successful quarter.
We look forward to talking to you at the end of this quarter.
Thank you.
Lawrence White - SVP & CFO
Thanks, everyone.
Operator
Thank you for your participation on today's conference call.
Up may disconnect at this time.