Cracker Barrel Old Country Store Inc (CBRL) 2012 Q1 法說會逐字稿

Good day and welcome to the Cracker Barrel Old Country Store fist-quarter 2012 conference call.

Today's call is being recorded and will be available for replay today from 2 p.m.

Eastern Time through December 7, 2011 at 12.59 a.m.

Eastern by dialing 719-457-0820 and entering the pass code 4262177.

At this time for opening remarks and introductions I would like to turn the call over to Mr.

David Mallicoat.

Please go ahead, sir.

Thanks, Nancy.

Good morning and welcome to Cracker Barrel's first-quarter fiscal 2012 conference call webcast.

This morning we issued a press release announcing our first-quarter results and outlook for the 2012 fiscal year.

In that press release and during this call, statements may be made by management of their beliefs and expectations of the Company's future operating results or expected future events.

These are what are known as forward-looking statements which involve risk and uncertainties and in many cases are beyond management's control and may cause actual results to differ materially from expectations.

We caution to our listeners and readers in considering forward-looking statements and information.

Many of the factors that could affect results are summarized in the cautionary description of risk and uncertainties found at the end of this morning's press release and are described in detail in our reports that we file with or furnish to the SEC.

We urge you to read this information carefully.

We also remind you that we do not comment on earnings estimates made by other parties.

In addition, any guidance or outlook we provide or statements we make regarding trends speak only as of the date they are given and we do not update or express continuing comfort with our guidance, outlook, or trends except in broadly disseminated disclosures such as this morning's press release, filings with the SEC, or otherwise required by law.

On the call with me this morning are Cracker Barrel's President and CEO, Sandy Cochrane, and Senior Vice President and CFO, Larry Hyatt.

Sandy will begin with a review of the business and Larry will review the financials and outlook.

We will then open up the call for questions and Sandy will return to close.

We ask that you please limit your questions to matters relating to the Company's performance, outlook, and plans and we do not intend to discuss matters relating to the proxy contest with Biglari Holdings today.

Thanks in advance for your cooperation.

With that, I will turn the call over to Cracker Barrel's President and CEO, Sandy Cochran.

Sandy?

Thanks, Dave.

Good morning, everyone.

Thanks for joining us today.

I am pleased to report that our fiscal year is off to a good start.

Our earnings per diluted share for the first quarter of $1.03 were significantly ahead of consensus estimates, ahead of the prior year, and ahead of our previous expectations.

During the quarter, we incurred charges of $0.06 a share because of the proxy fight we are having to engage in as a result of Mr.

Biglari's attempts to gain a seat on our Board.

Our sales results in the first quarter were encouraging as both restaurant and retail sales improved sequentially.

We are further encouraged by our sales results through the first three weeks of November, which saw continued sequential improvement from October.

Larry will discuss our financial results for the first quarter in detail, but before he does, I would like to comment on the impact of our initiatives and update you on our plans for the balance of the fiscal year.

When we last spoke in September, I outlined our six strategic priorities aimed at driving traffic, growing sales, and controlling costs, which I will recap briefly.

First, introduce new marketing messaging to better connect with our current and potential guests and to reinforce our authentic value.

Second, implement refined menu and pricing strategies to increase the variety and everyday affordability of our menu.

Third, enhance our restaurant operating platform to generate meaningful and sustainable improvements in the guest experience.

Fourth, drive retail sales growth by continuing to improve assortments and deliver great value.

Fifth, implement initiatives to reduce costs to offset at least a portion of the impact of higher food commodity costs.

And sixth, leverage our strong cash flow generation to both reinvest in the business and increase our return of capital to shareholders.

We believe our results for the first quarter demonstrate the early success of our focus on these priorities.

In particular, we think that the improvements we have made to the restaurant operating platform and our marketing messaging and menu strategies were key drivers of the improvement in sales and traffic trends.

Let me start with the progress we have made on our operating platform.

As we discussed last quarter, we have improved certain key areas of the guest experience by redefining roles and responsibilities in the grill and service areas and by refocusing our servers on providing exceptional service to our guests.

Because of our efforts, we continue to see sequential improvements in overall guest satisfaction scores.

Importantly, we have seen improvements in friendliness of server, server attentiveness, and order accuracy, which we believe were areas affected by the implementation of the seat to eat initiative.

We believe the refinements we have made to the operating platform to improve the guest experience are gaining traction and this will continue to be a priority for us.

Moving to menu strategy, we are focused on enhancing the affordability of our menu and its appeal to increasingly price-sensitive consumers.

In September we introduced our $5.99 weekday lunch specials supported by marketing messaging on 200 billboards and radio advertising.

I am pleased to report that the results from the program to date have been positive.

As we expected the weekday lunch specials increased traffic at weekday lunch.

We also believe that the enhanced value perception created somewhat of a halo effect which drove both guest scores for overall value and traffic higher in the breakfast and dinner meal periods as well.

We believe that these traffic gains had a positive impact on gross margin dollars in the quarter.

We plan to continue featuring weekday lunch specials as an ongoing traffic driver and will periodically update our offerings to keep the appeal fresh.

This winter for example, we will feature loaded baked potato options to maintain energy against the program.

In addition to the weekday lunch specials, we continue our strategy of seasonal offerings designed to appeal to both our regular and our less frequent guests.

Our fall promotion featured country meat and biscuits, apple streusel french toast, and wholesome morning sampler for breakfast and for lunch and dinner, we featured country fried steak, meatloaf, and roasted turkey and cranberry salad.

The fall promotion accounted for approximately 15% of sales mix, which was above our expectations and all of the items featured exceeded our internal guest satisfaction benchmarks.

As we transition to our holiday promotion, which starts next Monday, we will feature a similar range of offerings to appeal to both sets of guests.

For breakfast, we will feature pineapple wholesome morning sampler, cinnamon pancakes, and cinnamon streusel french toast.

And for lunch and dinner, our offerings will include homemade beef stew, apple herb roast chicken and dressing, and Southern pecan praline chicken salad.

This promotion will highlight products with accessible price points at a range of $5.99 to $8.69 and we are especially excited about our homemade beef stew offering at $7.49 which now includes 20% more beef than before.

Let me talk specifically now about advertising.

As previously announced, we retained one of the largest integrated marketing communications agencies in the world, Euro RSCG.

Together we have developed a new advertising campaign that we launched on November 14.

The campaign is Handcrafted by Cracker Barrel.

And it's designed to reinforce what we believe is our key consumer benefit, wholesome connections.

It celebrates the care, craft, and concern that go into making the Cracker Barrel experience special and unique.

This launch was supported with national TV advertising along with local radio impacting 400 of our stores and it will run for five weeks.

We believe this campaign will drive engagement with the brand and result in more local visits from our regular and less frequent guests.

It is important to note that with this program we are shifting the allocation and timing of our marketing spend by focusing our advertising on key sales periods, the holidays and summer travel season in order to increase our advertising support from around 25% of the system to the entire chain.

While we expect this year's advertising spend to continue at about 2% of sales, our expenses will be much more concentrated in the second and fourth quarters of our fiscal year.

The next strategic priority I would like to discuss is driving retail sales growth.

I am pleased to report that we are seeing early success as comparable store retail sales improved sequentially during the first quarter and turned positive in October.

We believe that our improved assortments and compelling value price points helped us deliver an improved sales performance.

We continue to see strong sales of women's and children's apparel and accessories.

Price points under $20 are still resonated with our guests, and we believe we are getting credit for the quality and value of our offerings.

One example is our women's wrap program.

Wraps have become a very popular trend in the marketplace and while many other retailers offer this piece of apparel for up to $40 or more, our quality line is value priced every day at an affordable $19.99.

We are also encouraged by the initial response we're getting to our great gifts program this holiday season.

Around the holidays we feature items that make great gifts for under $20 and we display these items front and center in every store.

The toys category, which was down in the first quarter compared to a year ago, has been a challenge for us as we lapped strong performances in Webkinz, Silly Bandz and musical toys.

To strengthen our toy business, we launched an exclusive private label line of dolls called Butterflies on November 1.

The line features eight dolls and each comes in a uniquely designed box with the doll's personal story on it and is priced at an affordable $19.99.

We also offer a collection of Butterflies branded accessories and apparel including matching girl doll outfits.

We are very excited about this exclusive product line.

It's created quite a social media buzz especially among the mommy bloggers.

And while it's still early in the holiday season, we are encouraged by our Butterflies sales results to date.

Next I would like to give you an update on the work we are doing to reduce costs.

Larry will discuss the impact of our cost savings initiatives on the quarter but I would like to highlight some of our current initiatives.

In late September, we began the rollout of the first phase of our enhanced labor management system to all stores.

While it will take some time to fully realize the financial benefits which we estimate to be between 10 and 20 basis points, we are encouraged by the initial results.

We began implementation of a new transportation management system in the first quarter to help us optimize routing schedules for delivery of retail merchandise from our retail distribution center to our stores.

We continue to estimate savings from this initiative to be approximately $1 million in the first year and that those savings will grow to between $2 million and $3 million annually in subsequent years.

We have also tightened our cost controls at the store level and we are seeing positive results particularly in maintenance and supplies expense.

In G&A, we are realizing the cost savings we expected from the organizational realignment we announced last July, which we estimate to be approximately $10 million annually.

Despite the current challenges we and the industry face, we continue to generate significant levels of cash flow from the business.

As we noted in September, we have a balanced approach to capital allocation.

We will gradually increase our return of capital to shareholders while also reinvesting to grow our brand.

We are on track to open 15 new stores in fiscal 2012 and we will also continue to work to evolve our prototype in order to further drive down investment costs and expand margins in order to improve its potential for creating shareholder value.

In conclusion, let me say again that our fiscal year is off to a good start.

We are seeing early success from our strategic initiatives aimed at driving improvements in traffic, sales, and margins and while the health of the economy and consumer spending in particular remain a challenge, I am confident that we are focused on the right strategic priorities and have the right management team and Board leadership in place to continue moving the brand forward and delivering solid returns for our shareholders.

With that, I will turn the call over to Larry to review our financials.

Good morning, everyone, and thank you, Sandy.

I would like to begin by discussing our financial performance for the first quarter of fiscal 2012 and then our outlook for the 2012 fiscal year.

For the first quarter of fiscal 2012, we reported net income of $23.8 million or $1.03 per diluted share.

Charges in the quarter related to the proxy contest with Biglari Holdings reduced net income by $1.4 million or $0.06 per diluted share.

In comparison, our net income in the prior year quarter was $23.7 million or $1.01 per diluted share.

Revenue in the quarter was $598.4 million compared to $598.7 million in last year's first quarter.

Restaurant revenues fell 0.1% to $481.5 million and retail revenues were flat to the prior year at $116.9 million.

Comparable store restaurant sales decreased 1.6% as a 2.2% increase in average checks was offset by a 3.8% decline in traffic.

The increase in average check reflected menu price increases of approximately 2.1% and a favorable mix impact of 0.1% due primarily to a shift into seasonal breakfast offerings.

Comparable store retail sales fell 1.3% for the quarter.

Our total cost of goods sold in the quarter was 31.1% of revenue, a 110 basis point increase over the prior year quarter.

Our restaurant cost of goods was 26.5% of restaurant sales compared to 25.4% in the prior year quarter.

Food commodity costs were up approximately 5.5% in the quarter compared to the prior year, which was more than 2.5 times our menu price increases.

Costs for beef, dairy and coffee were up sharply from last year.

Our retail cost of goods sold was 50.1% of retail sales compared to 49.1% in the prior year quarter.

The increase was primarily the result of freight charges due to fuel cost increases, a change in retail inventory valuation reserves, and design costs related to a proprietary product line.

Our retail inventories at the end of the quarter were $125.3 million, representing a reduction of $7.3 million compared to the prior year quarter due primarily to the timing of the receipt of spring seasonal merchandise.

Our store payroll and related expenses were $221 million or 37% of sales, a reduction of $3.6 million or 60 basis points compared to the prior year quarter.

A number of factors contributed to this reduction in payroll and related expenses.

Workers compensation expense declined by 50 basis points as a result of continued favorable claims experience due to improvements in claims management over the life of the claims.

These improvements were reflected in our quarterly actuarial valuation of workers compensation reserves.

We do not expect to see a continuation of this favorable year-over-year comparison in the remaining quarters of 2012.

Employee benefits expense declined by 30 basis points due to improvements in claims experience in the current plan year.

We do expect to see a continuation of this favorable year-over-year experience in 2012.

Hourly wage expense decreased by 10 basis points as productivity increases due to our enhanced labor management system were partially offset by a 1.6% increase in hourly wages.

The increase in hourly wages was the result of a 0.8% average rate increase and a shift between tipped and non-tipped employees.

These reductions to payroll and related expenses were partially offset by increases in payroll taxes due primarily to higher state unemployment tax rates and increases in store management expense related to new store openings.

Other store operating expenses in the quarter were $109 million or 18.2% of revenue compared with $112 million or 18.7% of revenue in the prior year quarter.

We received $3 million as a litigation settlement for a matter which previously increased other store operating expenses.

This settlement was anticipated in our prior guidance.

Additionally a 20 basis point decrease in maintenance expense was partially offset by higher advertising expenses.

Store operating income was $82.1 million or 13.7% of revenues compared with $82.4 million or 13.7% of revenues in the prior year quarter.

Our general and administrative expenses in the quarter were $37.5 million or 6.2% of revenue compared with $36.9 million or 6.1% of revenue in the prior year quarter.

Our G&A expenses in the quarter included $2 million or 0.3% of revenue related to the proxy contest and $2.6 million or 0.4% of revenue for a companywide manager's conference.

This was the first such conference held in several years and the meeting expense was included in our prior guidance.

Payroll and related costs in G&A were $2.6 million lower than the prior year quarter due primarily to the reduction of management and staff positions announced in July.

Operating income in the quarter was $44.6 million or 7.5% of revenue compared to $45.4 million or 7.6% of revenue in the prior year quarter.

Our interest expense in the quarter was $11.1 million compared to $11.7 million in the prior year quarter.

Under our new credit agreement, our interest rate is calculated at 200 basis points over LIBOR.

In 2006, the Company entered into a seven-year interest rate swap which fixed our LIBOR rate at 5.57% on a notional amount that is now $550 million.

Therefore, the interest rate on our outstanding borrowings not including deferred financing costs is 7.57%.

The interest rates -- this interest rate swap expires in May of 2013 and we have entered into forward swaps starting at that time on a notional amount of $350 million that fix our LIBOR rate at an average of 2.35%.

Assuming current forward rates on the currently unswapped balance, we expect our annual interest expense starting in May 2013 to decline by approximately $20 million or $0.60 per diluted share.

Our effective income tax rate was 28.9% for the quarter compared to 29.6% in the prior year quarter.

Capital expenditures for the quarter were $18.8 million compared to $18.2 million in the prior year quarter.

Our balance sheet continues to be strong.

At the end of the quarter, our long-term debt including current portion was $550.2 million and we have unused capacity on our revolver in excess of $150 million.

We did not repurchase any shares during the first quarter and we ended the quarter with $49.8 million of cash and equivalents, an increase of $25.1 million since the end of the prior year's first quarter.

With respect to our outlook, everyone should be mindful of the risks and uncertainties associated with this outlook as described in today's earnings release and in our reports filed with the SEC.

Conditions in the US economy and the prices and supply of food and oil continue to be concerns.

Bearing that in mind, we expect total revenue for fiscal 2012 of between $2.55 billion and $2.6 billion.

As noted in our pre-release on November 7, we are raising our full-year guidance range by $0.05 and now expect earnings per diluted share of between $4.10 and $4.25 excluding proxy contest expenses, which we estimated between $0.11 and $0.14 per diluted share.

The 2012 fiscal year is a 53-week and we expect the impact of the 53rd week, which is included in our guidance to be additional revenue of approximately $50 million and additional earnings per diluted share of approximately $0.25.

The revenue projection for 2012 reflects the expected opening of 15 new Cracker Barrel stores and a forecast of comparable-store restaurant and retail sales in the range of flat to up 1.5% with menu price increases of between 2% and 3%.

We expect increases in food commodity costs on a constant mix basis of between 5.5% and 6.5% for the fiscal year with the most significant increases in seafood, oils, coffee, eggs, and beef.

We have locked in our pricing on approximately 63% of our commodity requirements for the remaining three quarters of fiscal 2012 compared to 60% at this time last year.

We expect our operating margin for the year to be between 7% and 7.2% of revenues.

We expect depreciation expense of between $66 million and $68 million for the year, net interest expense of approximately $45 million, and an effective tax rate of between 28% and 29%.

The Company had stronger financial results in the first half of 2011 than in the second half and as we saw with the sequential traffic improvement in the first quarter, we expect our year-over-year traffic comparisons to improve as the year progresses.

Therefore our year-over-year financial performance is likely to be stronger in the second half of 2012 than in the first.

Given our change in advertising strategy as described by Sandy, the quarterly pattern of advertising spending will be different this year than last with relatively higher spending levels in the second and fourth quarters.

We expect our year-over-year commodity costs comparisons to be more challenging in the second quarter than in the other quarters of 2012 due to the expiration of certain favorable contracts and an unusual and relatively short-lived decline in egg prices in last year's first second quarter.

While we do not offer specific financial guidance on a quarterly basis, we expect our second quarter earnings per diluted share to be below the prior year quarter.

We anticipate capital expenditures for the year to be between $90 million and $100 million including new store investments of between $45 million and $50 million and maintenance CapEx of between $30 million and $35 million.

With that, I will now turn the call back over to Sandy.

Thank you very much.

Thanks, Larry.

Before we begin the Q&A session, we again ask you that you limit your questions to matters pertaining to the Company's performance, outlook, and plans as we will not be discussing matters related to the proxy content.

With that, we will open up the call for questions.

(Operation Instructions).

Jeff Omohundro, Wells Fargo Securities.

Thanks, I would appreciate if you could elaborate a bit more on the retail outlook through the holiday period both in terms of the expectations around the great gifts and value initiative and also how you expect to integrate retail with the Handcrafted by Cracker Barrel advertising strategy?

Thanks.

Thank you, Jeff.

We are encouraged by our initial reaction we have to the Christmas assortment that we have; our great gifts category is delivering as we had hoped.

We are excited about the response we have seen to our Butterflies assortment.

We anticipate this being though, a promotional Christmas with a very challenged consumer and we were committed to delivering value consistent with the brand and with -- both in our assortment and through our advertising.

We will be connecting as we can our retail offerings in our messaging that we have got in our current advertising and so far we are pleased with the response.

Thank you.

Brad Ludington, KeyBanc Capital Markets.

Thank you.

Sandy, I wanted to ask on the success of the lunch offering and the value focus that you have, has there been an improvement in beverage incidence or has that remained kind of constant?

That has been constant, Brad, but we have -- we're working hard on the beverage category.

We are -- we have recently introduced some new news in there.

We have rolled out Dr Pepper and diet Dr Pepper and we were very pleased with the results we got on our apple cranberry iced tea, which was part of our fall promotion.

So we are optimistic about the progress that we are -- and the energy that we are putting in the beverage section and we hope to drive incidents.

We did see some improvement in retail connected with the daily lunch specials?

Okay and Larry just briefly, I kind of missed part of the information you were giving on the swap.

Did you say that will be a $350 million notional amount at 2.35% fixed rate from May of 2013 to May of 2018?

Did I get that right?

Brad, we have entered into a series of two- and three-year swaps which have a notional value of $350 million at the present time and swaps three-month LIBOR for 2.35%.

If you assume that the balance of the $200 million that we currently have outstanding has the rate that currently is indicated in the forward markets for May of 2013, we will see a reduction in our annual interest costs starting in 2013 of about $20 million or $0.60 per diluted share.

Bryan Elliott, Raymond James.

Good morning, thanks.

Larry, you mentioned a couple times the advertising shift.

I just want to confirm I heard correctly that the spending for the full year remain around 2% at 2% of sales but the shift to Q2, Q4 will change how it optically appears.

Could you give us a sense of magnitude of what to expect from that timing shift?

Yes, Bryan, without getting too specific, of our 2% of advertising spend, 1% of the 2% is billboard advertising, which roughly remains ratable through the course of the entire fiscal year.

So the change in the pattern of the advertising spend is the other 1% of sales where we will be shifting more into the second quarter and the fourth quarter than in the prior year to reflect the fact that we are focusing on the holiday season and the travel season with this combination of national TV and radio.

Okay, that's helpful.

Thank you.

(Operator Instructions) Bob Derrington, Morgan Keegan.

Yes, if I could follow-up, Larry, on that question about the advertising -- and Sandy, maybe you can help here.

When we look at the ad spend roughly 2% of sales is approximately $50 million.

Historically the Company has used a little bit of local TV I think typically but now you are using some national TV spend.

Is that a cable spend?

How is it that you found the economies now to make that make sense versus in prior years where it may or may not have generated a sufficient return?

Bob, it's national cable TV, local radio.

With the change in the advertising message, with the focus both on the loyal Cracker Barrel customer and the light user and the nonuser, we think the expanded but targeted reach of cable and concentrated in the holiday period and the travel period will be an effective way of driving sales.

Is it price point advertising that's focused on a certain food offering or are we talking brand advertising?

What should we expect?

It's brand-based and it has -- it does have a price point in it so that the guest and the viewer does understand what kind of occasion they are looking at.

But it is largely to reinforce our key brand attributes, welcoming authentic, helpful, honest, handcrafted, handmade and to reinforce those attributes.

One of the things we talked about in September when we hired Euro was that we challenged them to help us rethink the way we were deploying our dollars and our intent was to increase the reach of our advertising both by moving to a message that activated users and nonusers and to increase the reach of the advertising by maybe by narrowing the windows but that reaching more stores to both build the brand, drive traffic.

It also -- we will be and we have been increasing the reach by moving into digital, so our e-mails, our Web, social media, and so on.

Has -- given the fact that you typically are pretty focused about getting a sufficient return, have you tested the TV?

Are you satisfied with what it can do with your expected return and traffic trends, etc.?

Well, by concentrating the spend during the periods where we have the most sales, what we intend to do is impact the business -- impact the most sales dollars during that window and we believe we will be happy with the results.

We just started the campaign last Monday, so the results are still out but we believe we are resonating with our guests.

Got you.

Thank you.

I will jump back in the queue.

Bryan Elliott, Raymond James.

A couple questions.

Sandy, one for you.

The Company has I believe been pretty innovative on the menu side for at least a few years now without evidence of a lot of traction there and it seems like we're starting to get some on the most recent ones.

Could you kind of compare and contrast what you think is new and different about the current range of menu innovations relative to previous years?

Sure.

We did -- we are proud of the fact that for 18 consecutive quarters we did outperform KNAPP-TRACK.

What we talked about at the last call that we saw in particular in the fourth quarter of last year, was the consumer increasingly concerned about affordability and value and we were committed to ensuring that what we were reinforcing both the existing menu items and the value on our menu as well as introducing new ones, which is really what led to the daily lunch, the $5.99 daily lunch special initiative.

So in the first quarter what our focus was to improve the affordability and the perception of affordability in the menu, we attacked -- that it's actually the local use and midweek, which was the weakest source and the most competitive at launch.

At the same time, we were working hard to maintain the check through the initiatives I spoke about earlier with beverage and we were happy actually with our seasonal desert in the fall.

Our pumpkin custard was a big hit.

So our focus in particular in the short term was about perceived value.

Over the balance of the year, as I mentioned in the last conference call, we have a number of initiatives designed to continue to improve the reach and to maintain the check.

So we are working on testing a new menu design that will be we think better communicating the affordability of the offering, better address and give us more credit for the quality of our ingredients and the preparation in the products that we do produce.

We've got a lot of work going on about more options at breakfast that signal health.

We are going to be attacking dinner, reworking the promotions to ensure that we continue to offer attractive options for both the traditional user and the either new user or somebody looking for something different and lighter, but we will be focused very heavily on ensuring that we do that at accessible price points particularly in entry-level.

So we've got a lot of activity going on now and we will be looking forward to talking about it as we go forward.

Is it fair to characterize without having a chance to go back and look at my notes and all that the last few years were kind of slotting new products in at kind of existing price points and we have a broader range of particularly the entry-level pricing on the menu now?

Is that -- that's definitely different, isn't it?

It sounds like it is.

I think we are focused more on ensuring that we are both offering things at affordable price point and communicating that so that our guests know that it's there and that we have it and that they can enjoy Cracker Barrel at whatever price point they need to.

So I think we're much more focused on that than we have been recently.

And a quick numbers question.

Labor turnover, hourly and then management, sort of where are we now and how does that compare to year ago, recent trends in that line item?

Thank you.

Yes, management turnover, we have recently seen sequential improvement in the quarter.

We are still a little above the prior year, Bryan.

But our trends are good.

Actually our recent trends, we have been focused on this.

We had a little disruption when the third and fourth quarters through the seat to eat.

We have been very focused on and I'm pleased with the progress the field teams are making in terms of controlling turnover.

Great, thank you.

Bob Derrington.

Thanks.

Sandy and maybe, Larry, you can help a little bit on this question as well.

When we look at -- I guess there's been some grumblings in past times about the store level unit economics and I know that the Company has been working to try and improve those.

I think you've got a slightly smaller prototype that you have been developing.

How do we look at the mix of the stores you are developing this year?

Will we be seeing some of those being a little bit smaller than the traditional prototype?

Are there other ways that you can reduce the cost, maintain the sales?

Can you give us a little bit of color there?

Bob, certainly.

First, I will start off by noting as we mentioned in the release that we issued yesterday morning that of the 116 new stores that the Company built between 2004 and 2009 so that those would be the ones in the comp store base, that the return on investment for those stores in the 2011 fiscal year was above 16% cash on cash and we think that's a reasonably attractive return but that's not a return that we are necessarily satisfied with.

All of the 15 stores we expect to be opening in the current fiscal year will be the smaller 177 seat prototype and we have an ongoing process to both find opportunities to continue to bring the investment costs down in ways that do not negatively impact guest experience and we are additionally looking at ways to operate those stores more efficiently and effectively in terms of designing in labor savings, designing in utility cost savings, etc.

Great.

Thank you, Larry.

I appreciate it.

At this point, we have no further questions.

I would like to turn the conference back over to our speakers for any additional or closing remarks.

Thank you all for joining us today.

The environment remains challenging but we are encouraged by the early success of our strategic initiatives.

Cracker Barrel remains one of the strongest and most highly differentiated brands in the industry and we will continue to leverage that strength to drive solid returns for our shareholders.

We appreciate your interest and your support and we thank you for your time this morning.

That concludes today's presentation.

Thank you for your participation.