Cracker Barrel Old Country Store Inc (CBRL) 2015 Q2 法說會逐字稿

Good day, everyone, and welcome to today's program.

(Operator Instructions).

It is now my pleasure to turn the conference over to Ms. Jessica Hazel.

You may begin, ma'am.

Thank you, Steve.

Good morning and welcome to Cracker Barrel's second-quarter fiscal 2015 conference call and webcast.

This morning we issued a press release announcing our second-quarter results and our updated guidance for the 2015 fiscal year.

In this press release and on this call, we will refer to non-GAAP financial measures for the current quarter, adjusted to exclude a contingent liability accrual related to the previously disclosed Fair Labor Standards Act Litigation and a provision for taxes to exclude the prior year favorable impact of the retroactive reinstatement of the work opportunity tax credit.

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

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 Investors 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 and expected future events.

These are what 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 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 us this morning's press release, filings with the SEC or as otherwise required by law.

On the 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'll now turn the call over to Cracker Barrel's President and CEO Sandy Cochran.

Sandy?

Thanks, Jessica.

Good morning, everyone.

As you can see from today's press release, we had a very successful second quarter.

Our adjusted earnings per diluted share for the quarter of $1.93 were significantly ahead of consensus estimates, prior year and our previous expectations.

Our sales results in the second quarter exceeded our expectations, and I'm pleased to report that Thanksgiving Day was the highest combined restaurant and retail sales day in the history of the Company.

We believe that the strength of our second-quarter traffic and sales were driven largely by a relative mild winter weather compared to the prior year quarter and the impact of lower gasoline prices on consumer spending and travel.

We also believe we had success with our national advertising during the quarter and as well as consistent execution of the Cracker Barrel experience by our operations teams.

We, once again, outperformed the casual dining industry, beating than Knapp-Track Casual Dining Index for both sales and traffic by considerable margins.

And as a result of our continued success, we are again raising our earnings guidance for the fiscal year.

Larry will discuss our financial results for the second quarter in more detail, but before he does, I would like to comment in our fiscal 2015 priorities and update you on our plans for the balance of the fiscal year.

Our management team remains focused on our long-term strategic plan to enhance the core business, expand the footprint of our stores and extend the Cracker Barrel brand.

We laid out our priorities at the beginning of the fiscal year in support of this long-term plan.

These priorities were to drive traffic and sales in both our restaurant and retail businesses, optimize average guest check through the implementation of a geographic pricing structure, improve our operating margins through the application of technology and process enhancements and further grow our store base.

We made significant strides in these priorities over the past two quarters and will remain focused on them as we work to improve our profit and profit margins.

So first let me update you on our progress to drive traffic in restaurant and retail sales.

We remain focused on our strategy of seasonal menu offerings designed to appeal to both our regular and less frequent guests.

Our holiday menu promotion ran for the majority of the second quarter and featured core menu favorites like our Wholesome Fixin's apple cider bbq chicken with two country sides, as well as limited time only offerings such our triple-berry French toast, which exceeded our sales expectations.

Our seasonal promotions drove positive sales mix versus the prior year quarter, contributing approximately 70 basis points to restaurant sales growth.

Our second quarter is a busy to go season for us and as a result has expanded marketing and operational execution.

We increased sales of both our seasonal pies and our family sized meals to go by nearly 20% during the quarter.

Our spring promotion will begin in mid-March and run through Mother's Day.

We are featuring an expanded line of weekday lunch specials, which includes three new sandwiches each paired with a side salad or a cup of soup.

This everyday value offering will be available at a $6.99 price point.

Our dinner offerings will include two new core menu additions to our Wholesome Fixin's category, which was introduced in fiscal 2014.

Supported by these new additions, we're further expanding our selection of better for you meals providing lighter, lower calorie alternative for our guests.

Now let me shift to our unique retail business and our focus on growing retail sales.

As you may have noticed in this morning's release, our comparable-store retail sales were roughly flat during the November/December holiday period and were up strongly in January.

While the holiday season was as promotional we expected, we decided to moderate our holiday markdown cadence and then shift markdowns into January.

And for the quarter, this resulted in higher retail dollar and percentage gross margins.

Our retail sales results for the second quarter were driven by strong performances in the core categories of apparel and home decor.

Some of our top-selling merchandise during the holiday season were women's wraps and shawls, which we continue to offer at favorable value price points.

The great gifts program once again resonated with our guests, providing an outstanding value statement during a competitive holiday gifting season.

Our overall sell-through improved for the holiday months and supported a higher gross margin for the quarter.

Many of our spring merchandise themes have been set, and we've seen positive guest response.

Our garden themes are off to a good start, and we believe we have solid assortments lined up for the spring.

As we look ahead to the third quarter, we anticipate continued strength in both our core retail and theme assortments.

So let me talk specifically now about advertising.

We are pleased with our second-quarter national cable advertising campaign, which featured new creative, focusing on our wide variety of handcrafted meals specifically during the lunch and dinner dayparts.

We, once again, directed advertising dollars to program stations popular with our media target audience of women ages 25 to 54.

However, this year our second-quarter TV advertising ran for six weeks as compared to five weeks in the prior year quarter.

We also utilized the pulsing schedule to stay engaged with our target guests over a longer period of time.

Another of our second-quarter marketing strategies was target alignment between our internal and external messaging across our social, digital and in-store creative.

We positioned ourselves as the holiday headquarters for all our guests needs, including in-store and family size to go dining, giftgiving, holiday decorating and tree trimming.

Through this continuity of messaging, we were able to leverage all of our unique holiday offerings.

Social media remains an important channel for us and is supported by both organic and paid social, and we continue to deliver strong social engagement ratings as compared to the prior-year quarter.

One of the more unique components of our marketing mix is our music program, which remains a success, creating brand impressions and building awareness.

During the third quarter, a key consumer engagement activity for the brand will be a promotion connecting the Academy of Country Music's 50th Award celebration show with an iconic element of our Cracker Barrel brand, Checkers.

The Country Checkers Challenge leverages an online digital checkers game with the opportunity to win a trip to the ACM Awards celebration to compete in a live checkers match against country artists, including Kellie Pickler and Thomas Rhett.

We anticipate that this promotion will drive growth in our social and digital platforms, generate media impressions and increase brand awareness.

We're also pleased with our efforts to expand our gift card business during the ever important holiday season, and gift card sales increased by more than 15% over the prior year's second quarter.

Turning to our second business priority, the implementation of geographic pricing tiers, we continue to take a very rigorous testing approach as we understand the pricing elasticity in each market.

Armed with the results from our initial implementation of tiered pricing, we're moving forward with our second market level pricing increase in March, and we maintain our belief that a tiered pricing structure will allow us to deliver 2% to 3% in price increases over the next few years.

We are making significant headway on our next strategic priority to reduce costs and improve our operating margins.

Through the application of improved operational processes, we remain on track to recognize $20 million in cost savings during the fiscal year.

We continue to benefit from the first-quarter implementation of our new plate presentation guidelines.

As a result of this process enhancement and the reduction in our total dish usage, we are realizing a decrease in our store labor costs.

We additionally expect to recognize savings in dish replacement costs moving forward.

Implementation of our dining room management system is well underway.

This host stand technology allows us to optimize our waitlist and seating process while reducing our overall costs.

We anticipate rolling out the system to four complete regions during the third quarter with the remainder of the system completed in the fourth quarter.

Second-quarter store labor productivity also approved as a result of the update to our retail labor scheduling process that was completed in the first quarter.

During the quarter, we maintained our priority for new store growth with the opening of our third new Cracker Barrel store for the fiscal year.

We expect to open a total of six new stores by the end of fiscal 2015 and continue to be pleased with the results of our new real estate site selection methodology.

Looking ahead, Larry will walk you through our guidance for the third quarter and updated expectations for the full fiscal year.

We remain focused on our key business priorities and on driving shareholder value by creating and providing a unique and welcoming experience for our guests.

I'm very pleased that we were able to deliver a solid quarter of strong operating performance, and with that, I'll hand the call over to Larry for more details.

Larry?

Good morning, everyone, and thank you, Sandy.

I would like to begin by discussing our financial performance the second-quarter fiscal 2015 and then our outlook for the 2015 fiscal year.

For the second quarter of fiscal 2015, we reported GAAP net income of $47.2 million or $1.96 per diluted share and adjusted net income of $46.3 million or $1.93 per diluted share compared with adjusted net income of $37.3 million or $1.56 per diluted share in the prior year quarter.

In the prior year quarter, GAAP net income was adjusted for the expenses and tax effects related to the prior year proxy contest.

In the current year quarter, we make two adjustments to GAAP net income.

First, during the second quarter, we accrued an additional $2.2 million to reflect the contingent liability associated with the previously disclosed Fair Labor Standards Act litigation.

Second, in December the federal government retroactively reinstated the Work Opportunity Tax Credit or WOTC for the period of January 1 to December 31 of 2014.

It expired again at the end of the 2014 calendar year.

While the full benefit of the WOTC reinstatement on our second-quarter GAAP earnings was $0.13 per diluted share, the $0.10 per diluted share that relates to the prior fiscal year is excluded from our adjusted EPS.

Our revenue in the quarter was $756 million, an 8.2% increase over the $698.5 million in the prior year second quarter.

Our restaurant revenues were $577.6 million, and retail revenues were $178.4 million.

Our comparable-store restaurant sales increased 7.9% as traffic increased 4.7% and average check increased 3.2%.

The increase in average check reflects menu price increases of approximately 2.5% and a 70 basis point favorable mix impact from our seasonal menu promotions.

Our comparable-store retail sales increased 3.2% for the quarter.

Our total cost of goods in the quarter was 34.7% of revenue, a 10 basis point decrease from the prior-year quarter.

Our restaurant cost of goods was 28.4% of restaurant sales compared to 28.1% in the prior year quarter.

This 30 basis point increase was primarily a result of increased commodity costs, partially offset by a reduction in waste.

On a constant mix basis, our commodity costs were up approximately 4% in the quarter compared to the prior year quarter as increases in beef, dairy and seafood costs were partially offset by reductions in sweeteners and brands.

Our retail cost of goods sold was 55.2% of retail sales, an improvement of 40 basis points compared to the prior year quarter.

This year-over-year improvement was primarily the result of reduced markdown activity versus the prior year quarter, particularly during the holiday season.

Our retail inventories at the end of the quarter were $102.2 million compared to $110.9 million at the end of the prior-year second quarter.

Our labor and related expenses were $251.7 million or 33.3% of sales, a reduction of 90 basis points compared to 34.2% of sales in the prior year quarter.

This year-over-year improvement is due primarily to improvements in store labor productivity driven by the successful implementation of cost savings initiatives in the first quarter and the leverage of sales increases, partially offset by increased store manager incentive compensation.

Our other store operating expenses in the quarter were $133.7 million or 17.7% of revenues compared with $128.1 million or 18.3% of revenue in the prior year quarter.

This year-over-year reduction of 60 basis points is due primarily to decreases in maintenance, utilities and supplies expenses as a percent of sales, partially offset by an increase in advertising spending.

Our store operating income was $108.4 million or 14.3% of revenue compared with $88.6 million or 12.7% of revenue in the prior year quarter, an increase of 160 basis points.

On a GAAP basis, our general and administrative expenses in the quarter were $37.2 million or 4.9% of revenue.

Adjusted to exclude the second-quarter impact of the litigation accrual, our G&A expenses were $35 million or 4.6% of revenue compared with adjusted G&A expenses of $29.6 million or 4.2% of revenue in the prior year quarter.

This 40 basis point increase was the result of higher incentive compensation.

On a GAAP basis, our operating income was $71.2 million or 9.4% of revenue.

Adjusted operating income was $73.4 million or 9.7% of revenue compared with adjusted operating income in the prior year quarter of $59.1 million or 8.5% of revenue.

Our interest expense in the quarter was $4.7 million compared to $4.5 million in the prior year quarter.

During the second quarter, we refinanced our $750 million bank credit facility.

Our interest expense in the quarter includes $0.4 million of additional interest charges resulting from the write-off of the unamortized portion of deferred financing costs related to the prior credit facility.

As we noted in our January release, we expect the new bank facility to reduce our ongoing interest expense by approximately $1 million per year on an ongoing basis.

Our effective income tax rate was 29.1% for the quarter compared to 31.7% in the prior year quarter.

As noted previously, this decrease was due to the retroactive reinstatement of the WOTC for the 2014 calendar year.

Our capital expenditures for the quarter were $19.2 million compared to $21.4 million in the prior year quarter, reflecting lower new store capital investment, partially offset by maintenance capital expenditures and increased spending on our strategic initiatives.

Our balance sheet continues to be strong.

We ended the quarter with $182.6 million of cash and equivalents, and our total debt is $400 million.

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.

So bearing that in mind and based upon our year-to-date financial performance, we are revising our previous full-year guidance.

We now expect total revenue for fiscal 2015 of between $2.8 billion and $2.85 billion, reflecting anticipated increases in comparable-store restaurant sales of between 3.5% and 4.5%; anticipated increases in comparable-store retail sales of between 2.5% and 3.5%; and the expected opening of six new Cracker Barrel stores.

We now expect increases in food commodity costs on a constant mix basis of between 3.5% and 4% for the fiscal year with the largest year-over-year increase occurring in the third quarter.

We have locked in our pricing on approximately 67% of our expected commodity requirements for the remaining two quarters of fiscal 2015 compared with 70% at this time last year.

We expect our adjusted operating margin for the year to be approximately 8.5% of revenues, depreciation expense of between $71 million and $73 million, and net interest expense of approximately $17 million.

With the WOTC reinstatement, we expect our effective tax rate for the year to be between 31% and 32%, and we expect our capital expenditures for the year to be approximately $100 million.

For the fiscal year, we now expect to report adjusted earnings per diluted share of between $6.40 and $6.50.

For the third quarter, we expect to report earnings per diluted share of between $1.30 and $1.40.

Our earnings guidance for the quarter and for the full year assumes normal weather patterns for the balance of the third quarter.

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

Thank you very much.

(Operator Instructions).

Joseph Buckley, Bank of America.

Thank you.

A couple of questions.

Sales numbers looked absolutely terrific as did earnings, of course.

The question on the to go sales, you mentioned that being up 20% year over year.

And I'm curious if you did anything to promote or highlight that to drive that kind of an increase?

Maybe could share what your to go mix is as a percent of restaurant sales, that would be helpful too.

Good morning, Joe.

I'm going to let Chris Ciavarra take that question.

Good morning, Joe.

It's an important day for us obviously, and over the past few years, we've continued to put more and more focus on it.

So, certainly within the store, we have a fair amount of merchandising leading up to the day whether that's through in-store tactics, and then we become more aggressive outside of the store in the digital channels of being able to communicate that we have to these offers available for us.

I'll let Larry speak to the percentage of sales.

Chris, maybe you've answered my question, although I would like to hear what Larry has to say.

But so is that Thanksgiving Day only, or was that to go number for the quarter?

It's for the whole quarter.

(multiple speakers)

Okay.

So then my question stands.

Our percentage of to go sales had historically run in the 5% to 6% range, Joe, I believe, but I would be happy to confirm that in the third quarter it got as high as in the range of -- I'm sorry -- just to point it out, we are not in the third quarter yet.

But the second quarter it got in the range of 7%.

Okay.

And then just a question on retail.

The cadence of same-store sales in the quarter with the big January increase, like if you didn't report a retail gross margin number, I would've thought that was a lot of merchandise moving out of low margin.

Obviously, the retail margin was terrific.

So just talk a little bit more about that like how do you view the sales number for the quarter on retail, and I think prior to this, kind of the strategy was to take markdowns early if I'm not mistaken, and it seems like you definitely got off that and pushed whatever markdowns were taken into January.

But, again, the monthly sales cadence is sort of surprising, I guess.

Well, first of all, let me say I'm very, very proud of the job that retail team was able to do in the second quarter, managing sales margin and inventory in a very uncertain and promotional retail environment.

So, if you recall, last year, the environment was even more difficult with the weather and the government shutdown and the initial implementation of the ACA.

And, as a result, we like many retailers got very aggressive very early in the season.

And so we took markdowns in November and December.

This year the team focused on having the appropriate inventory levels in the appropriate places and trying to manage the sales to maximize margin, particularly during the very high volume November and December period.

So what you saw is a moderated promotional agenda during that period.

But then when we hit January, our inventories were in a good position.

We were comping sort of easier numbers on the prior year.

We took advantage of our traffic in January which was very high, but as a result for the overall holiday season, they were able to deliver, I think, very good sales, increased margin, percentage and dollars, reduced inventories against a backdrop that was very challenging in the retail industry.

There were a number of areas that were strong for us.

I pointed out a couple of my remarks.

The women's apparel was good.

Our Christmas decor was very strong this year, and we exceeded our expectations in our Christmas themes, and our great gifts were, as I mentioned, were strong.

We had a plush assortment that was very popular with our guests.

We had a keyboard in that theme that we had actually highlighted in analyst day, and that sold out almost one of the first items.

So we just had a lot of things that they managed quite well through the season.

Okay.

Thank you.

Jeff Farmer, Wells Fargo.

Larry, you touched on it, but you saw 80 basis points of college pressure in Q1.

I think something closer to a 10 basis point benefit in Q2, and it sounds like you're pointing to a peak level of inflation in Q3.

So given sort of all that volatility there, how should we be thinking about COGS as a percent of revenue in Q3 and even into Q4?

Jeff, looking at Q3, we are anticipating with peak commodity cost increases on the food side that we will continue to see sequentially and year over year in pieces in our restaurant COGS.

We expect our retail COGS to be flat to slightly down for the third quarter as compared to the prior year third quarter.

All right.

That's helpful.

Thank you very much.

And then I think you said that gift card sales were up 15% in Q2.

So assuming some of those consumers were able to turn around and use them pretty quickly in January, did you see gift card redemption have an impact on your January same-store sales number?

We believe that we did.

The January gift card redemptions as compared to the prior year January were approximately $5 million higher, Jeff.

And then can you do the math for me, what does that equate to roughly in terms of comparable sales?

In terms of comparable restaurant sales, $5 million on what -- it was probably in the range of 1% to 2%, Jeff.

Okay.

That's very helpful.

And then last one, look, just in terms of seeing how the same-store sales have moved around some nice profit flow through, especially in the January quarter, is there any sort of updated rule of thumb you have in terms of EPS sensitivity to point of same-store sales growth?

It doesn't have to be that, but any rule of thumb we should think about as you continue to either hold onto some nice same-store sales or potentially see them slow down a little bit but still be pretty robust?

Jeff, that's a tough question to answer because it typically depends upon how we drive those incremental sales dollars.

One of the rules of thumb that we have used and that we have said publicly is that an incremental sales dollar will on average contribute in the range of $0.35 to $0.40 to our operating income.

Now the sensitivities is there is that that margin tends to be higher if it comes from incremental pricing than if it comes from traffic.

It tends to be sensitive to the day of the week, the time of the day.

It tends to be sensitive to what's happening at that time in terms of the labor markets and commodity markets obviously, but the basic rule of thumb that we use internally and have spoken about externally is the range of $0.35 to $0.40 on a purely incremental dollar.

Great.

Thank you, Larry.

(Operator Instructions).

Robert Derrington, Wunderlich.

Thank you.

Larry, I'm trying to understand your guidance for second as we look out through the fiscal year.

Your fiscal year guidance for restaurant same-store sales of 3.5% to 4.5%, on a two-year basis, that kind of implies that the second half of the year is about a 400 basis point slowdown.

So I'm trying to understand whether that's conservatism on the Company's part or whether there's something in your outlook that you see that makes you a lot more cautious in your expectation as we go through the balance of the year.

Bob, the second-quarter guidance does contemplate a deceleration of same-store sales increases as compared to our performance in the first and the second quarters.

Again, particularly our same-store sales performance in the second quarter was driven by comping severe weather in the prior year second quarter.

Gasoline prices, which bottomed out in the second quarter at cyclical lows, and although they are down on a year-over-year basis have begun to rebound off of those cyclical lows.

Additionally, the weather of the last 1.5 to 2 weeks, particularly in the southeastern United States and in the Midwest, has had a meaningful impact on our February sales, and the concern is, as we've seen a lot of school districts that have been closed for five, six, now going on seven days, in the core southeastern region, we are having some concern that that may have a negative impact on the scheduling of spring breaks, which is an important travel season for Cracker Barrel.

So I don't know I would necessarily say that the guidance reflects conservativism.

I'd say it reflects caution.

Got you.

Thanks, Larry, for that color.

I don't think there's ever been a time that more of us need a spring break.

But anyway, looking at your COGS outlook, your food inflation to guidance has been tightened up from the annual guidance was 4% to 4.5%, now it's 3.5% to 4%.

What's changed within the commodity profile, if I understand it correctly?

COGS guidance has gone from a range of 4% to 5% to a range of 4% to 4.5% so that we have tightened it up at the top and bottom.

And the reason if I basically had to say it in a single word, it is pigs.

(laughter) Terrific.

That's very simplistic.

And then one last one, if I could.

As we look at the development that the Company has considered of another concept fast casual brand, Sandy, any kind of color you can provide on where that process is at this point?

Well, it's a little too early to discuss any details still, but we continue to believe that we have a very strong brand and an opportunity to reach some trade areas that we are currently not able to serve with our footprint and size of the traditional Cracker Barrel Old Country Store.

So we intend for this new concept to have a clear affiliation with the brand and to be fast casual format.

We plan to have the first one open by the end of fiscal 2016 and more to come.

Great.

Thank you.

I appreciate it.

Michael Gallo, CL King & Associates.

A couple of questions that we didn't touch on.

Can you talk about the opportunity that you might have on the new prototype in terms of a potential retrofit when you might put some in test and how we should think about that going forward?

We have a number of potential projects that have been identified as part of the design work on the new prototype as possibilities for retrofits, and we are in the process of fleshing out how big the opportunities are, prioritizing them, and we'll be moving certain ones of those into test in existing stores as early as the second half of this year and into the next fiscal year.

It's too early to identify any of them specifically.

I can tell you some of the projects like we talked about like the dining room management program, it was a piece of the work we did on the new prototype.

And so I am optimistic that we will be able to identify some retrofit opportunities going forward, which will help drive improved efficiency in our current boxes.

Okay.

Great.

And then I had a follow-up question on the advertising.

I think you had one extra week of TV advertising this quarter.

Was that in January, or where did that fall versus last year?

Hey, Michael.

It's Chris.

I believe that fell in November.

Okay.

So January was same number year on year.

The schedule fell in November and December.

Okay.

And then in terms of just the TV advertising going forward, do you expect any other mismatches?

Do you had expect to have more weeks through second half of the year, or do you expect it to be level versus last year?

So I think as we've talked about in the Analyst Day, we are slowly working ourselves up to a higher level of spend and are testing our way through this.

So, as we move through it, we are contemplating adjustments as we've done this past summer and then again this holiday to both weeks and flighting and things like that.

And so, as we move into the second half of this year, for this year we are at least contemplating the same number of weeks, but it will be flighted differently much like we did this past holiday.

Okay.

Thanks a lot.

[Michael Halin], Bloomberg.

Hi.

Thanks for taking my questions.

What percentage of total sales do you think you can grow carryout to in the next few years, and what kind of impact might that have on restaurant level margins?

Michael, we've not spoken publicly about long-term goals for to go sales.

To go sales tend to be at a slightly lower margin as a result of the cost of the incremental packaging.

Great.

Thanks.

One more if you don't mind.

You mentioned in your prepared comments that you are happy with the new site selection process.

Is there any updated sales data on the newer stores that you can share with us?

In terms of specific sales data on the stores, no, but the thing that we can say is the performance of the stores is far more consistent with the projections of our site selection model than was the case with our old methodology.

We showed some of that at our Analyst and Investor Day meeting on May 1. That presentation is still available on our Investor Relations webpage, and our experience with the model continues to be consistent with that result.

Great.

Thank you very much.

Robert Derrington, Wunderlich.

Thank you.

Larry, a couple of things.

One, could you refresh us for a second on your new credit facility, what's the additional borrowing capacity that you have available where you want to draw on that?

Sure, Bob.

We had previously had a facility that was originally a $750 million facility, which was comprised of a revolving line of credit of $500 million and a $250 million amortizing term loan, which at the time of the refinancing had a balance of about $185 million.

The facility that we now have is an all-revolver $750 million facility so that there is no amortization.

We currently have about $400 million drawn as utilized about another $25 million for letters of credit associated with our worker's compensation self-insurance.

So that means that we currently have capacity under this facility of $325 million).

In the event that the board thought it was in the Company's interest to borrow further given that we currently have a leverage ratio, which is in the 1.3% to 1.4% range, the Company believes that our borrowing capacity is in excess of the capacity of the current facility.

Terrific.

And then you have got a nice problem year over year, Sandy, looking at the amount of cash that you have on hand.

Last year at this point, the balance sheet shows there's $91.5 million.

Currently I think Larry said it was $182.6 million.

Can you give us a perspective on what the plan is for that? ?

Bob, a couple of observations there.

The first observation is that the end of the second quarter has a tendency to be this cyclical high, and the Company's cash balances as would come off of the holiday selling season, that's particularly so given the Company's recent performance and as far as possible uses of that cash.

As the Company has said, we believe it is in the long-term interest of the shareholders to gradually increase our regular quarterly dividend over time, although obviously any specific decisions on that are decisions of the board.

Got it.

Just curious on that point because last year at the same time, it was also the cyclical high, and it was, again, $91.5 million at the time, and literally you are twice that.

So congrats on the quarter.

Thank you.

At this time, we have no further questions, and I'll turn the call back over to our speakers for closing remarks.

Well, thank you for joining us today.

We are pleased with our financial performance for the first half of fiscal 2015, and we've made significant progress on our business 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.

Thank you.

This does conclude today's program.

You may now disconnect, and have a wonderful day.