Cracker Barrel Old Country Store Inc (CBRL) 2013 Q4 法說會逐字稿

Good day, and welcome to the Cracker Barrel fiscal-2013 fourth-quarter earnings conference call.

Today's conference is being recorded, and will be available for replay starting today from 2 PM Eastern through October 2 at 11.59 PM.

You may access that playback by dialing 719-457-0820, and entering the passcode 6122389.

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

Please go ahead, sir.

Thanks, Beth.

Good morning, and welcome to Cracker Barrel's fourth-quarter fiscal-2013 conference call and webcast.

This morning we issued a press release announcing our fourth-quarter and fiscal year-end results, and outlook for the 2014 fiscal year.

In this press release, and on the call, we will refer to non-GAAP financial measures for the current fiscal year, adjusted to exclude severance and proxy contest expenses, and their related tax effects, as well as adjustments related to the retroactive reinstatement of the work opportunity tax credit.

We will also refer to non-GAAP financial measures for the prior year, and prior-year quarter, adjusted to exclude charges and tax effects related to severance and the prior-year proxy contest.

The Company believes that excluding these charges and tax effects from its financial results provides information that may be more indicative of the Company's ongoing operating performance while improving comparability to prior periods.

This information is not intended to be considered in isolation or as a substitute for financial information prepared in accordance with GAAP.

The last page of the press release includes a reconciliation from the non-GAAP information to the GAAP financials.

The press release can be found in the investor section of our website, crackerbarrel.com.

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

We urge 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 risks and uncertainties found at the end of this morning's press release, and are described in detail in our reports that we file 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 as otherwise required by law.

On this call with me this morning are Cracker Barrel's President and CEO, Sandy Cochran; Senior Vice President and CFO, Larry Hyatt; and Senior Vice President of Marketing, Chris Ciavarra.

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 for Sandy, Larry and Chris.

We ask that you please limit your questions to matters relating to the Company's performance, outlook and plans.

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

Sandy?

Thanks, Josh.

Good morning, everyone.

Tomorrow is the 44th anniversary of the founding of Cracker Barrel, and we're very pleased to celebrate this milestone by reporting positive news.

As you can see from today's press release, our fourth quarter and fiscal year were successes on many fronts.

We exceeded our previously stated expectations for the quarter, and concluded another strong year for Cracker Barrel Old Country Store and our shareholders.

Over the course of the last year, we remained focused, and executed remarkably well on the six business priorities that were laid out at the beginning of the year.

There were many accomplishments during fiscal 2013, and I'd like to share a few of our highlights.

We were voted number one in the 2013 consumer pick survey, family dining category, conducted by Nation's Restaurant News, and ranked first in 9 of the 10 categories.

We won first place for the food and beverage category in Technomic's inaugural Chain Restaurant Consumers Choice Awards.

In every quarter of the year, we achieved positive traffic, grew restaurant and retail sales, and beat Knapp-Track casual dining index.

We increased our employee satisfaction scores and retention rates among our store managers and hourly employees.

With excellent support from our information technology team, we rolled out several new systems to support operations and reduce cost.

We expanded our music program to appeal to younger audiences with our sponsorship of Brad Paisley's Beat This Summer tour.

We improved our operating margin -- profit and margins, despite continued food commodity pricing pressure.

We increased adjusted earnings per share by 14.5% for fiscal 2013 compared to fiscal 2012.

During 2013, we generated $200 million in cash from operations, which allowed us to pay down $125 million in debt, repurchase shares, increase our dividend to shareholders by 50%, and continue investing in our future.

Finally, our total shareholder return, as measured by the increase in our stock price and dividends paid during fiscal 2013, was approximately 65%.

On this call, I'll outline our business priorities for fiscal 2014, but first I'd like to briefly review the successful execution and continued progress on our long-term strategy to enhance the core business, expand the footprint, and extend the Cracker Barrel Old Country Store brand during the fourth quarter.

Specifically, we believe our national advertising, and the strong execution from our operations team, worked together to drive our seventh consecutive quarter of positive traffic, and a 19% increase in our adjusted earnings per share.

Delivering on the priorities that support our strategy to enhance the core business, we continued to reinforce the affordability of our menu by highlighting our Country Dinner Plates during the quarter.

Like our weekday lunch specials, which affirmed affordability at the lunch day part, we believe our Country Dinner Plate category is an opportunity to meet guest needs for value at the dinner day part.

The category provides our guests with over 10 entree choices, two sides and bread service for $7.69.

Throughout the quarter, we continued to drive excitement for our Country Dinner Plates with in-store advertising and seasonal additions to this category.

For example, our summer promotion included a Country Dinner Plate with a popular Pacific Salmon patty for a limited time.

Our summer promotion also included a delicious chicken and pineapple salad, and a Cracker Barrel favorite, berries and buttermilk pancakes.

Our value message was further supported with our Handcrafted by Cracker Barrel marketing campaign.

During our busy summer season, we promoted the Cracker Barrel brand through national cable TV, and we used spot radio in many of our markets to communicate menu updates.

Our new TV commercial highlighted the Country Dinner Plate value message, reminding our guests that our food is made from scratch, and served fresh for a reasonable price.

We continue to believe this media approach is working, and in concert with our more than 1,600 billboards and active digital media campaigns, we believe the TV and radio advertising contributed to our positive traffic performance in the quarter.

Another component of our strategy to enhance our core business is our priority to grow retail sales with unique merchandise.

As we've mentioned before, our traveling guest tends to buy more retail items than our local guest.

So, when the travel season started building momentum in July, we saw growth in our retail sales.

Top sellers for the quarter included kitchen items, such as table top and cooking accessories, and as we saw all year, women's clothing, accessories and jewelry continue to appeal to our guests.

For example, our broad selection of tunics and summer accessories sold especially well in the fourth quarter.

Our merchandising team remains focused on themes that work across multiple generations, such as our vintage white and coastal themes, which include a variety of women's clothing and home decor items that appeal to guests of all ages.

Also during the quarter, our team moved quickly to take advantage of opportunistic buys for current trends, like [License], Duck Dynasty, and Taylor Swift products.

I'd like to congratulate our operations team and employees in the field.

The fourth quarter capped off a very successful year for them.

They did a magnificent job of consistently delivering a phenomenal guest experience.

As we saw throughout the year, our guest survey scores for overall satisfaction and overall value were up in the fourth quarter.

As I've said before, we believe our guest experience begins with the employee experience, and once again we had year-over-year improvements in hourly labor and management retention in the quarter.

As the operations team continued delivering an outstanding guest experience, and increased employee satisfaction, they also reduced costs.

One of our priorities this year was to invest in, and leverage, technology and equipment to support operations and reduce costs.

Our financial results reflect reduced food waste and decreased hourly labor expense as a result of the roll-out of our production planning system, labor tools and efficiency improvements.

Given our operational success, we continue to be focused on enhancing shareholder returns through a balanced approach of investing in opportunities to drive future growth while returning cash to shareholders.

During the quarter, we opened two new Cracker Barrel Old Country Stores, and announced the increase of our quarterly dividend by 50% to $0.75 per share.

Finally, regarding our strategy to extend the brand outside of the Cracker Barrel Old Country Store, we continue to move forward with our licensing initiative.

But given the pending litigation with Kraft Foods, we're limited in what we can say at this time.

Our 2013 successes, as well as our longer-term strategy of continuing to enhance the core business with a focus on increasing sales and profitability within our stores, expand the footprint with new store openings, and to extend the Cracker Barrel Old Country Store brand beyond the physical stores with new revenue streams, help shape our priorities for the coming year.

Our priorities for fiscal 2014 are the following.

First, we'll focus on our menu, continuing to incorporate better-for-you additions, and reinforce everyday value.

Second, we'll continue messaging in support of the brand menu and merchandise.

Third, we'll drive retail sales with improved quality and breadth of our merchandise assortment.

Fourth, we'll apply technology and process enhancements to improve the employee experience, the guest experience and operating margins.

And fifth, we'll continue to focus on increasing total shareholder return.

Let me describe each one of these in more detail.

Regarding the first priority, we continue to improve our menu offerings to better meet our guest needs.

Given the current marketplace and our guest feedback, and our brand positioning, we remain focused on satisfying the needs for affordable options and healthier items.

Our new menu category, Wholesome Fixin's, was introduced in August.

The category includes delicious, complete meals for under 600 calories at breakfast, lunch or dinner.

For example, breakfast options include our multigrained French toast with fruit, and it's served with our new honey citrus yogurt sauce.

The Good Morning breakfast with eggs, Turkey bacon, fruit and tomato slices.

There's a yogurt and granola parfait, and our egg and cheese sliders with a side of fruit.

We also offer six complete meals at lunch and dinner, including a grilled chicken and fresh vegetable salad, a wholesome vegetable plate, and entree choices of pepper grilled sirloin, spiced rubbed pork chops, pecan crusted catfish, and buttermilk oven fried chicken with two sides.

The results are early, but we're pleased with our guest reception of Wholesome Fixin's, and our operations teams' great execution of this roll-out.

We look forward to the longer-term impact Wholesome Fixin's will have on addressing guest needs by providing lighter, fresher options.

Additionally, during fiscal 2014, we will continue to reinforce the everyday value of Cracker Barrel with limited time offerings, in-store promotions, and advertising highlighting our affordable price points and menu options.

Leads to our second priority -- to continue messaging in support of the brand, menu and merchandise.

Our Handcrafted by Cracker Barrel theme will carry into the new fiscal year, and we have started off the year with additional TV and radio advertising to support the roll-out of Wholesome Fixin's.

Otherwise, we anticipate a similar fiscal-2014 media mix compared to the prior years, with TV and radio advertising promoting the brand, and encouraging traffic during the busy holiday and summer travel seasons.

And we'll utilize enhanced digital media year-round to support our menu offerings and merchandise selection.

Our next priority is to drive retail sales with improved quality and breadth of our merchandise assortment.

We'll build on the successes of the past year, focusing on unique assortments, especially those that sell across generations, by offering more themes with products that appeal to both our established guest and younger guest.

And we intend to continue growing our already strong categories, such as apparel and accessories.

Improved merchandising and space planning within the stores will allow our retail team to focus on optimizing the life cycle of products, and increasing the number of themes offered over the course of the year.

This provides our guests with more seasonal, timely, and fresher product offerings.

To further enhance our core business, our fourth priority focused on improving our operations by applying technology and process enhancements to improve the employee experience, our guest experience, and our margins.

We will continue to implement technology and processes in the stores to improve work flow efficiencies and food quality, including the roll-out of the second phase of our labor scheduling tools, which enhances the store manager's ability to project and schedule hourly labor, and the deployment of scanning and labeling technology in the kitchen to improve food quality.

In addition, we'll further enhance retail merchandising with an allocation and replenishment system to assist in managing retail inventory at the store level.

At our Company-wide managers' conference next month, we'll introduce several training and communications initiatives that we believe will improve both the employee experience and the guest experience.

Our final priority for fiscal 2014 is the continued focus on increasing total shareholder return.

Guided by careful analysis, we plan to expand our footprint by between seven and eight stores.

Other capital expenditures will be for store maintenance, equipment, and technology advancements.

And in the long term, we believe our shareholders will benefit from our strategy to extend the Cracker Barrel Old Country Store brand outside the walls of our stores.

With our strong cash flow, we anticipate future opportunities to directly impact total shareholder returns over the long time, like the dividend increase implemented this quarter to $0.75 per share.

In summary, I am incredibly proud of our leadership, home office team, and, most importantly, our employees in the field for successfully executing on our business initiatives in fiscal 2013.

I look forward to building on this success in the current year, and am confident that our focus on the fiscal-2014 priorities will enhance our performance throughout the year.

With that, I'll hand the call over to Larry Hyatt, our CFO, for more details on the quarter.

Larry?

Good morning, everyone, and thank you, Sandy.

I would like to begin by discussing our financial performance for the fourth quarter of fiscal 2013 and the full fiscal year, and then our outlook for the 2014 fiscal year.

As I discuss our results, I will refer to adjusted financial information for the 2013 fiscal year, as well as for the 2012 fourth quarter and fiscal year.

For the 2013 fiscal year, we made adjustments to GAAP operating and net income in the first and second quarters to exclude the impact of proxy contest and severance expenses, and their related tax effects.

We also made an adjustment to the income tax provision to exclude the prior-year benefit of the reinstatement of the work opportunity tax credit.

For the 2012 fiscal year, we made adjustments to GAAP operating and net income to exclude the impact of proxy contest, severance and restructuring expenses, and their related tax effects.

We also made adjustments to revenue, operating and net income to exclude the impact of an additional 53rd week.

The last page of this morning's press release contains a reconciliation from our GAAP financial results to this non-GAAP adjusted information.

In this morning's release, we reported fourth-quarter net income of $34.3 million, or $1.43 per diluted share, representing a 19.2% increase over prior-year adjusted earnings per diluted share of $1.20.

For the full fiscal year, we reported adjusted net income of $119.1 million, or $4.97 per diluted share, representing a 14.5% increase over the prior year's adjusted EPS of $4.34.

Our revenue in the quarter was $674.1 million, an increase of 3.9% compared to adjusted revenue of $649 million in the prior-year quarter.

Our restaurant revenues increased 4.3% to $549.7 million, and our retail revenue increased 2% to $124.4 million.

Our comparable-store restaurant sales in the quarter increased 2.6%, as traffic increased 0.6% and average check increased 2%.

The increase in average check reflected menu price increases of approximately 1.9%, and a favorable mix impact of 0.1%.

Our comparable-store retail sales increased 1.1%.

Our total cost of goods sold in the quarter was 31.3% of revenue, a 30-basis-point increase over the prior-year quarter.

Our restaurant cost of goods was 27.1% of restaurant sales compared to 26.7% in the prior-year quarter.

Our food commodity costs were approximately 4.7% higher in this quarter than in the prior-year quarter, as costs for pork, beef, poultry and eggs were up sharply from last year.

These commodity cost increases were partially offset by increases in menu prices, and reductions in food waste as a result of the continued success of our food production initiatives.

Our retail cost of goods was 49.8% of retail sales compared to 49.2% in the prior-year quarter.

This 60-basis-point increase was the result of lower initial markups and higher markdowns, partially offset by an improvement in shrinkage.

Our retail inventories at year end were $112.7 million compared to $108.8 million at the prior year end.

Our store payroll and related expenses were $243.1 million, or 36.1% of revenue, a decrease of 110 basis points compared to the prior-year quarter.

This year-over-year improvement as a percentage of revenue was primarily the result of a reduction in store hourly labor expense as a percent of sales due to our productivity initiatives and the leverage of menu price increases, and reductions in employee benefits and workers' compensation expenses.

Our store operating expenses in the quarter were $127.7 million, or 18.9% of revenue, compared with other store operating expenses of $126 million, or 18% of revenues, in the prior-year quarter.

This 90-basis-point increase was primarily a result of increases in advertising expense, asset write-offs relating to ongoing maintenance, and the impact of the 53rd week in the prior-year quarter.

Store operating income was $92.6 million in the fourth quarter, or 13.7% of revenue, compared to adjusted store operating income of $86.5 million, or 36.3% of revenue, in the prior-year quarter.

Our general and administrative expenses in the quarter were $37.8 million, or 5.6% of revenue, compared to adjusted G&A of $36.3 million, or 5.5% of revenue, in the prior-year quarter.

This 10-basis-point increase is due primarily to increases in incentive compensation resulting from the Company's performance in fiscal 2013.

Our operating income was $54.8 million, or 8.1% of revenue, compared to adjusted operating income of $50.2 million, or 7.8% of revenue, in the prior-year quarter.

Our interest expense for the quarter was $4.5 million compared to adjusted interest expense of $10.5 million in the prior-year quarter.

This year-over-year decrease is the result of the expiration of our swaps, and reduction in borrowings at the end of the third quarter, as well as a lower credit spread on our bank facility.

Our effective tax rate for the fourth quarter was 31.8% compared to an effective tax rate of 28.3% in the prior-year quarter.

For the full fiscal year, our adjusted tax rate was 30.5% compared to an adjusted tax rate of 29.5% in fiscal 2012.

Our capital allocation during the 2013 fiscal year reflected our focus on continuing to deliver long-term value for all of our shareholders.

We invested $74.4 million in our Business, including $19 million in new stores, as compared to $80.9 million of capital investment in the prior year.

We increased our quarterly dividend by 50%, and paid a total of $45.4 million in dividends to our shareholders.

We reduced our debt outstanding by a total of $125.1 million, and we repurchased 44,300 shares to partially offset the impact of dilution.

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.

We expect a total revenue for fiscal 2014 of between $2.7 billion and $2.75 billion, reflecting anticipated increases in comparable-store restaurant and retail sales in the range of 2% to 3%, and the expected opening of seven or eight new Cracker Barrel stores.

We also expect to report earnings per diluted share for the fiscal year of between $5.60 and $5.80.

We expect increases in food commodity costs on a constant-mix basis of approximately 2% for the fiscal year, with commodity inflation over 4% in the first quarter, and tapering off through the course of the year.

We have locked in our pricing on approximately 56% of our commodity requirements for fiscal 2014, as compared to 45% at this time last year.

We expect our operating margin for the year to be in the range of 7.8% to 8% of revenue.

We expect depreciation expense of between $68 million and $70 million for the year, and net interest expense of between $16 million and $18 million.

We expect an effective tax rate for the year of between 31% and 32%.

We anticipate that capital expenditures for the year will be in the range of $90 million to $100 million, including new store investments of approximately $35 million, and maintenance CapEx of approximately $45 million.

For the first quarter of fiscal 2014, we expect to report earnings per diluted share of between $1.05 and $1.15.

Our first-quarter guidance reflects higher commodity costs, the projected training and other expenses related to the roll-out of Wholesome Fixin's, and the cost of our bi-annual general managers' conference in October.

Our guidance for the year and for the first quarter does not reflect any expenses related to a potential proxy contest at our annual shareholders' meeting on November 13, nor any severance or other charges that are related to any organizational changes.

And with that, I will turn the call back over to the operator for your questions.

Thank you very much.

(Operator Instructions)

Joe Buckley, Bank of America-Merrill Lynch.

Larry, these questions are probably for you.

They're on the cash and CapEx numbers.

If you're opening seven to eight new units, I think you said the new unit CapEx was $35 million.

Why so high or is that some spending anticipation of openings beyond fiscal '14?

Joe, couple of things.

One is since the anticipated openings in 2014 are expected to be relatively back-end loaded in the course of 2014, so that more of that capital expenditure related to those stores is going to occur in the 2014 year, as compared to what we have seen in some of the prior years where the CapEx is spread among the opening year and the prior year.

Additionally, we are working to identify stores for potential 2015 openings and we are anticipating some CapEx related to those stores in the 2014 fiscal year.

Okay.

And then are there any technology equipment CapEx programs included in that $90 million to $100 million?

We said that we anticipate CapEx of $90 million to $100 million, including about $35 million in new stores, $45 million in maintenance CapEx, which anticipates another $10 million to $20 million that will be spent in a combination of technology enhancements and sales-driving initiatives and margin-driving initiatives.

Okay.

And then just one quick follow-up.

The cash balance at year-end, is that the seasonal high point for cash?

It's what typically happens, Joe.

If you look at the pattern of the prior years, typically our cash balance from the fourth quarter to the first quarter will go down as a result of the seasonal build of the holiday inventories.

It tends to then to go back in the second quarter, as we have had the cash benefit of those holiday sales.

Okay.

Thank you.

Jeff Omohundro with Davenport & Company.

This question's on the Wholesome Fixin's and the roll-out.

Wonder if you could talk a little bit about the test market results.

Just any details in day part preference on the items, your expectations on mix and check impact and then I have a follow-up on that.

Well, first let me reiterate what -- it's a new menu category featuring over 10 options, breakfast, lunch and dinner, where you can find items with a specific calorie claim.

We did test it.

We had about 60 stores with it over a number of weeks.

We're not going to disclose the results of that specifically, other than to say, Jeff, that we used the results of that test to fine-tune the assortment, improve the operational training program and so on and to fine-tune our advertising strategy.

I'll ask Chris to speak to what we were looking to accomplish through that in terms of moving people thought about the brand and we are comfortable that the program will do that over the long term.

So, Chris?

Sure.

Thanks, Sandy.

Over two years ago we identified better for you as a need that we wanted to focus on and since then we've been introducing a variety of items like our refreshed salad category and additional sides, which include more fresh ingredients.

The third phase of that focus has been Wholesome Fixin's.

And as Sandy said, Wholesome Fixin's is a new menu category featuring over 10 options of breakfast, lunch and dinner where the guest can find options below a specific calorie claim.

We view this as a long-term move to help broaden consideration for visits and as a reminder, close to 50% of the people in the markets we operate use us once a year or more often.

So, when we spoke to those guests they told us that they're restricting some of their visits because they perceived our foods as rich, fried and heavy.

We worked to build a statement to address this by providing that guest with more options.

As Sandy said, we launched the program on August 26.

We began media support, which included national cable and spot radio, last week.

And as Sandy also indicated, we've been very pleased with how the operators have brought it to market and guest reaction to it so far.

I guess as a follow-up to that, you mentioned the step-up in media support around this new program.

Could you quantify that, the year over year change in spend, particularly fiscal Q1.

Sure.

Jeff, first I'll speak to what is reflected in the Company's guidance for an annual spend.

Over the past two years we've spent in the range of 2.2% to 2.3% of sales on advertising.

We anticipate a similar number in 2014.

Yet, the timing of that spend may be a little different than in the prior year.

We anticipate that because of the media spend in support of the Wholesome Fixin's roll-out that our advertising spend in the first quarter as compared to the prior year's first quarter will be about $3 million higher.

So, that's roughly $0.08 to $0.09 a diluted share.

And are you thinking about this as investment spending in fiscal Q1 rather than necessarily spending that you would expect the immediate traffic response to?

Looking at the fiscal Q1 guidance, I know you're having the manager's meeting this year.

You didn't have it last year, you had it the year before.

And I think that's $0.05 to $0.06.

Just trying to deconstruct some of these drags on Q1.

That's my last question.

Sure.

Let me talk about our financial guidance for Q1 and then I will turn it over to Chris to talk some about the anticipated impact of that media spend in the first quarter.

Four things are largely driving the guidance in the first quarter.

One is that because of the higher commodity cost, we have calculated that the difference between 2% commodity cost increases, which is our anticipated range for the year, and the above 4% in the first quarter is a drag on first quarter earnings on a pretax basis of about $3 million.

The general manager's conference, we anticipate a comparable spend to the one that we did in the 2012 fiscal year first quarter, which is in the range of $2 million, and then the additional training labor that is associated with the Wholesome Fixin's roll-out, as compared to what our normal training labor has been in the past in the first quarter, would be about $1 million.

So, if you add up the difference in cost of goods, the general manager conference, the advertising and the labor in support of the Wholesome Fixin's roll-out, that adds up to about $9 million pretax, which is in the range of $0.25.

And I'll now turn it over to Chris to talk about that advertising in the first quarter.

Thank you, Larry.

So, Wholesome Fixin's is certainly new for Cracker Barrel and different in terms of what the offering is relative to what the guest can expect today.

We recognize we needed to design something to introduce it into the marketplace and to really let people know it's there.

Our thinking is that this will broaden consideration over time and that's our expectation for this.

Very helpful.

I appreciate the granularity on all that.

Thanks.

Michael Gallo with CL King Financial.

Just want to drill down a little bit in the advertising commentary.

Larry, I think you said $3 million higher in the first quarter, but relatively flattish spend for the year.

So, do you expect the advertising spending year on year to be down in quarters [Q2 through Q4]?

Is there a shift in how you're going to spend that, billboard versus national?

How should we think about kind of Q2 through Q4?

Obviously, you have more difficult comparisons.

If I heard your commentary correctly it sounds like there's going to be less media weight behind those quarters.

Thank you.

Yes.

Michael, we anticipate, as I said in response to an earlier question, that our spend for the year will be in the range of 2.2% to 2.3% of revenues.

We are anticipating and have built into that number the same anticipated national television and radio spend in the holiday season in the second quarter, in the travel season in the fourth quarter.

We are anticipating that we'll be maintaining our 1600 billboards.

And, so, the $3 million of media spend to support the wholesome fixings roll-out, we have basically one, been able to reallocate that from some other places.

Second is 2.2% to 2.3% of a higher sales number is more dollars.

In terms of the specific implication on the second, third and fourth quarters, since the Company has not offered specific guidance for the second, third and fourth quarter, I'd rather not be specific on that.

Okay.

Thank you.

Jay Donnelly with Wells Fargo.

Hi.

This is Jay Donnelly on for Jeff Farmer.

I was just curious kind of as you've changed your menu and promotional strategy over the last 24 months or so, have you seen evidence that your customer mix has changed?

I guess I mean local versus travel customers or slightly younger demographic?

Well, we are seeing that though our advertising program is delivering what we wanted -- so, let me back up.

We looked at that three ways, awareness, attitudes and change in behavior and we do believe we're seeing improvements in unaided awareness, in how the guests perceive the brand and increased frequency across all the user groups.

So, we were looking to build frequency.

And so, some of the programs we're looking to build it at lunch, the CDPs was in particular trying to drive it at the dinner day part and we believe we were able to do that.

Okay.

Thank you very much.

And then just a second question.

Kind of given the current competitive environment, if you do have any thoughts and could share them, what your thoughts are on menu pricing power.

Our menu pricing strategy has not changed.

So, over the last I don't know how many years, a decade, I think, our strategy has been to raise prices modest single digits.

We've done that over a variety of commodity environments.

We're very thoughtful about the way we do it.

We test into it.

After we implement a price increase we have holdback stores so that we can evaluate the degree to which we're able to pull the price through and how it may have shifted behavior.

Larry told you what our guidance was for the year, which we think is consistent with that philosophy.

The only thing I'd add is that this year, as last year and really the year before, we're being very, very thoughtful and careful about the way what we're doing and how, given what we believe to be is a continued very challenged consumer.

Okay.

Thank you very much.

Amit Kapoor with Gabelli & Company.

Could you guys refresh us on how you think about capital allocations, specifically or free cash flow used for a dividend versus share buybacks and then I have an unrelated follow-up question, please.

Sure.

Good morning, Amit.

As both Sandy mentioned in her comments this morning and as I mentioned in my comments this morning, we remain committed to a balanced approach to capital allocation and we are focused on increasing total shareholder returns, which as we noted increased by about 65% in the last fiscal year, which includes evaluating all of our options on an ongoing basis.

In the 2013 fiscal year, we paid out approximately $45 million in dividends and on the basis of the announced dividend increase, we anticipate that we'll be paying approximately $72 million in dividends in 2014 fiscal year.

And as I mentioned in our guidance, we are anticipating capital expenditures in the $90 million to $100 million range.

Great.

Thank you.

Just switching gears, on the Affordable Care Act, is there any additional color that you might have from being closer to implementation and any impact that it might have on the long-term perspective that you take on the business, I'd appreciate any color there.

Thank you.

Amit, I'm not sure there's much color we can add.

We do intend to have our enrollment, as we always do, during the month of November.

We don't anticipate a material increase in our cost and we expect to comply with the law.

Okay.

Thank you.

Stephen Anderson with Miller Tabak.

Just taking a look at -- going back to the Analyst Day you had back in April of 2012 in which you look for about a 2% to 3% new unit growth pace.

In the last couple years that pace has really generally been in that 1% range.

Given the refreshes you've done really in the last two years to stimulate same restaurant sales growth, do you think there's a time which you could get back to that 2% to 3% range that you had mentioned back at Analyst Day?

Stephen, one of our long-term strategies is to expand the footprint of the existing Cracker Barrel Old Country Store brand.

We also said in that Analyst and Investor Day that we were using new analytical tools to guide us to invest in those locations that will be accretive to long-term shareholder value.

In the 2013 fiscal year we opened eight stores.

We anticipate that we'll open seven or eight stores in the 2014 fiscal year.

As to what the potential pipeline is, is beyond that at this point.

It's very difficult to say.

Okay.

Thank you.

Bob Derrington with Wunderlich Securities.

Larry, can you give us a little bit of color on when you talk about your interest expense guidance, the net interest expense guidance of $16 million to $18 million, does that anticipate any material change in the Company's long-term debt outstanding between now and the end of the year?

We currently have $400 million of swaps and, so, that we therefore don't anticipate a reduction in our debt balance below its current level of $400 million.

That's no reduction.

What about on the other side?

Is there any anticipation that that level will go up materially?

On the basis of what we have currently in our guidance, no, sir.

All right.

Very good.

Thank you, Larry.

I appreciate it.

Joe Buckley with Bank of America-Merrill Lynch.

Just a couple of follow-ups.

Could you talk about the new store performance over the last year or so?

Joe, we have now have just started opening the first new stores that we have fully applied our site selection, our new site selection methodology to and I can say we've been pleased with the results of those stores.

Okay.

And is that very recent?

Is that more like the fourth quarter openings or the second half openings?

I'd prefer to not get specific.

It's approximately 50% of the stores that we opened in 2013.

Okay.

And then secondly, the Wholesome Fixin's sounds like a bigger initiative than perhaps I understood when I read the press release.

And can you talk a little bit about like the $1 million of training, what's kind of different in the preparation and then can you just talk about a little bit about the emphasis on it, with some of the menu mix changes around some of the other better-for-you items growing and kind of pushing in this direction?

What the training was, Joe, this is really the first sort of substantive change to our core menu in 10 years, I would guess.

The difference between this and our LTOs is that those, obviously, we do five a year and -- but this was broader in terms of the number of items and designed to go on the menu.

And we wanted to be sure our servers and all of our field employees were familiar with the program so that they could help guests navigate through the offering.

So, our investment in training was every single cook and grill cook and server and manager had to be familiarized with it and trained on it and able to answer questions.

In terms of the items, the preparation is not dissimilar.

There's a number of proteins that we do on the grill.

We may put, for example, on the chicken it's a buttermilk kind of crust on it that's been baked.

Breakfast, it's a number of egg items but the sides are fruit and cheese grits and maybe Turkey bacon versus our more traditional sides of biscuits and traditional bacon and so on.

So, there is a lot of similarity in terms of the preparation.

We wanted to be sure we got it right.

In addition, as Chris mentioned, during the summer we actually rolled out some healthier side items which were complementary and part of Wholesome Fixin's but many of our guests are ordering them with just their standard offerings.

For example, we added steamed broccoli and a steamed mixed vegetable, which is available now for the first time at Cracker Barrel.

So, there was training associated and learnings associated with that.

Okay.

Thank you.

And that does conclude today's question-and-answer session.

At this time I will turn the conference back over to Sandy Cochran for closing remarks.

Thank you all for joining us today.

We head into the first quarter of the fiscal year, I'm pleased with the progress that we made on our strategic priorities in 2013 and with the momentum that's carrying us into fiscal 2014.

I look forward to building on this success and executing our new priorities.

I remain confident that we have the right strategy and the right leadership in place to move the brand forward and drive shareholder value.

We appreciate your interest and support.

That does conclude today's program.

Thank you all for joining.