Good day, everyone, and welcome to the Cracker Barrel Third Quarter 2012 Conference Call. Today's call is being recorded and will be available for replay today from 2:00 p.m. Eastern Time through June 5, 2012, at 11:59 p.m. Eastern by dialing (719)457-0820 and entering passcode 3974901. At this time, for opening remarks and introductions, I'd like to turn the call over to Coco Kyriopoulos. Please go ahead.

Thanks, Vicky. Good morning, and welcome to Cracker Barrel's Third Quarter Fiscal 2012 Conference Call and Webcast. This morning, we issued a press release announcing our third quarter results and outlook for the fiscal 2012 year. In this press release and on this call, we will refer to non-GAAP financial measures for the current fiscal year and third quarter, adjusted to exclude charges and tax effects related to severance from our recently announced reorganization, and to the proxy contest concluded at the company's Annual Meeting of Shareholders last December. We will also refer to non-GAAP financial measures for the previous fiscal year and third quarter, adjusted to exclude a gain on a sale of a property and related tax effects. The company believes that excluding these charges, gains 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 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 filed with or furnished 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 the call with me this morning are Cracker Barrel's President and CEO, Sandy Cochran; 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. With that, I'll now turn the call over to Cracker Barrel's President and CEO, Sandy Cochran. Sandy?

Thanks, Coco. And good morning, everyone. I'm pleased to report strong third quarter results, which exceeded our previously stated expectations. The business initiatives that we outlined in September of last year continued to gain traction. And for the second consecutive quarter, we outperformed the industry by beating the Knapp-Track Index for sales and traffic. Despite continued increases in commodity costs, we also posted improvements in our profit and profit margins, which resulted in a nearly 50% increase in EPS from last year on an adjusted basis. Overall, we're encouraged with the pace of our progress and pleased to report that Mother's Day, which occurred early in the fourth quarter, was the highest combined restaurant and retail sales day in the history of the company. As a result of our continued success, we are again raising our earnings guidance for the fiscal year. During our Analyst and Investor Day on April 26, we shared consumer research highlighting the strength of our highly differentiated and unique brand. We noted that the Cracker Barrel brand has high reach among boomers and the millennial generation. Recent research by Technomic, a well respected restaurant industry firm, indicates that members of the millennial generation considered Cracker Barrel to be among the top restaurant brands for food quality and social responsibility. We also presented our 3-year strategy, which consists of enhancing our core business, expanding our store footprint and extending the Cracker Barrel brand. The first element of our strategy, enhancing the core business, includes the 6 business priorities that I focused on since becoming CEO. We've made significant strides in these initiatives and we'll continue to work to improve operations, drive profitable traffic growth and expand our margins. With regard to the second component of our strategy, expanding our footprint, we expect to add between 12…

Good morning, everyone. And thank you, Sandy. I would like to discuss our financial performance for the third quarter of fiscal 2012. I'll update our outlook for the fourth quarter and 2012 fiscal year, and provide some initial thoughts for the 2013 fiscal year. In this mornings release, we reported our financial performance for the quarter and year-to-date on a GAAP basis, and adjusted for charges related to the recently announced field reorganization. Adjusted for those charges, we reported net income for the third quarter of $20.1 million or $0.86 per diluted share. In comparison, our net income in the prior-year quarter adjusted for a gain on a property sale, was $13.6 million or $0.58 a diluted share. Consequently, our adjusted net income per diluted share was 48.3% higher than in the prior-year quarter. Our revenue in the quarter was $608.5 million, compared to $582.5 million in last year's third quarter. Our restaurant revenues increased 5% to $500 million, and retail revenues increased 2.2% to $108.5 million. Our comparable store restaurant sales increased 3.1% as traffic increased 0.6% and average check increased 2.5%. The increase in average check reflected menu price increases of approximately 2.4% and a favorable mix impact of 0.1%. Our comparable store retail sales increased 0.3% in the third quarter. Our total cost of goods sold in the quarter was 31.2% 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 26.9% in the prior-year quarter. Our food commodity cost were 4.5% higher in the third quarter than in the prior-year quarter as costs for seafood, beef, cooking oils and coffee, were up sharply from last year. Our retail cost of goods was 50.1% of retail sales compared to 48.8% in the prior-year quarter.…

Vicky, we're ready for questions.

[Operator Instructions] We'll take our first question today from Jeff Omohundro from Davenport & Company.

My first question is related to the tenor of sales by month that was reported in the quarter and the deceleration. I'm just wondering in particular in April if you can comment on that. And what's the retail drop there, in particularly due to the prior year comparison or some promo timing? That's my first question. I have a follow-up.

Yes. Jeff, the tenor of sales, and in particular, the tenor of comparable restaurant traffic was -- February was a very strong month. To some extent, we were going up against weather in February last year and some milder weather in February this year. The tenor of sales between March and April was, to some extent, the shift in the Easter holiday and spring break, and things to that nature. Third quarter retail sales, as Sandy noted and I'll ask her if she has any additional comments, we had a number of things that worked very well. Apparel worked well, accessories worked well. Some of the specific seasonal holiday things worked a little less well, Jeff.

Just let me add a little bit to that, Jeff. I think that it was, as Larry said, it was a choppy quarter. A lot was going on from month-to-month on the retail side and early Easter is always tough. We thought it would be, and we just weren't able to overcome it with the rest of our assortment. What we were pleased with, was that throughout the quarter, we had a consistent outperformance to Knapp-Track.

Then as a follow-up, with the reduced CapEx target of $85 million to $90 million, I just wondered if you could talk to spending going into 2013. Is your outlook there shifting a little bit? Is some moving there? And maybe, with the build up in cash, remind us once again about the priorities around deployment.

Yes. As far as CapEx spending, Jeff, we quoted in the Analyst and Investor Day meeting that we anticipate CapEx spend over the next 3 years to be in the range of $325 million to $350 million. And with that falling roughly, evenly across those 3 years and the number that you may recall for 2013 was in the range of about $105 million to $115 million. A couple of things, one is, as you may recall, 2 store openings that we have anticipated for the current fiscal year have now moved in to the -- in to subsequent fiscal year. And we anticipate some additional spending on various of our initiatives, which Sandy has been speaking about for the last year. As far as returning capital to shareholders, as we quoted, our model anticipates a gradual increase in the dividend payout beyond our recently announced $1.60 a year we -- and additionally anticipate over the 3 years that we'll both retire some debt and stay within our targeted leverage ratio and additionally buy back shares.

And we'll now go to Joe Buckley with Bank of America Merrill Lynch.

It's actually Steven Barlow for Joe. I guess, I'm curious on the fourth quarter implied retail same-store sales guidance. I guess it assumes kind of a pretty nice acceleration. Could you talk about some of the drivers and just your general thoughts there?

Well, last year as some of you may all recall, that we were particularly disappointed by our travel business in the fourth quarter, which has a higher portion of retail sales than our local guests. So what we're looking for this fourth quarter is some recovery with our, that portion of the business, which we hope will result in a disproportionate retail sales.

Great. And then, just any preliminary thoughts on food inflation for 2013? Have you allot a sizable portion of your basket?

Yes. As you may recall in our Analyst and Investor Day presentation, we were saying that we expected to see commodity inflation in the 4% to 6% range for fiscal '13. We are still thinking, we will be in that 4% to 6% range, although as a result of some commodity de-acceleration over just the past 30 days, we will likely be a little closer to the low end than we even anticipated at the time of our Analyst and Investor Day.

And our next question comes from Jeff Farmer with Wells Fargo.

You sound Sandy, a little bit reluctant to talk about this, it might be just a little bit too early. But with Country Dinner Plates this fall, can you provide any color on potential price point and media support for that?

Well, let's see. Not -- we will be supporting it on the radio. And so, what we intend to do is to go back on TV with same creative which we intend to use again and then we'll be able to use it on the radio and maybe some billboards. We did our daily lunch special. We did modify a couple of hundred of our billboards and we were pleased with that. So we're still putting that plan together. It'll be a similar price structure, and we're still having that discussion internally.

Okay. So in the release of the electronically media, it sounds like it's going to be all brand messaging, there's not going to be a price point popping up on TV?

Yes, that's right. Well the TV at the very end, that highlighted the affordability, but I think it's really about the brand.

Okay, and then you just touched on this. So it sounds like, you think at current sort of price points, you're not going to have to reengineer this product to be a little bit more margin-friendly, it's probably good to go, is as?

I think that, that's correct.

Okay. And then, sort of moving on to the $5.99 lunch special. Again having -- I guess, it was the fall that you introduced that so is there anymore additional learning in terms of the mix you're seeing on that product? Has it stabilized? What happens when you do have media around it, even if it's sort of billboard media? Any updated learnings there as you continue to be, I guess, what, 9 months deep into this right now?

Well, we continue to be pleased with it. We do believe that it continues to drive traffic and our lunch day-part. We really haven't had media really around it. We've had the same billboards then, since the beginning and we didn't have media in the last quarter. So we introduced some enhancements to the program last quarter, where we offered some enhancements to the baked potato and so on, and we're looking at how we might continue to do that, as we move on. But in general, we continue to be pleased with it.

Okay. And then, Larry, I apologize, I might have totally missed this, but as it relates to FY '13, so the outlook for that year, did you -- is there any same-store sales parameter that you've outlined for that year yet?

No. We've not specified. Obviously, there's a range of same-store sales that is anticipated in the earnings per share range of $4.50 to $4.70. And we spoke at, in the Analyst and Investor Day meeting that over 3 years we anticipate same-store sales in the 2% to 3% range compound annual growth. But we've not, at this point in time, offered anything more specific for 2013, Jeff.

Okay and then final question for me. It looks like you have roughly 2% pricing in FY '12. It looks like the most recent sort of outlook. Is it safe to assume a similar number in FY '13, even with -- while your still, a pretty material commodity inflation sell? Is that 2% number still pretty good?

That's a pretty reasonable range, yes.

Our next question comes from Bryan Elliott with Raymond James.

Just a couple of clarifications, Larry. The -- could you give us a little more, on what you call the favorable adjustment in the third quarter labor line? Kind of, what was it? How big was it? And just confirm that it's nonrecurring?

Yes. It's actually -- we've been speaking about it for a number of quarters now. What it is, is because of the favorable claims experience as compared with what was anticipated when our insurance rates for employee healthcare were initially established. Actually, believe it or not, at the beginning of last year, at the beginning of the last calendar year, that we've been receiving a favorable retro adjustment that we actually -- this is the third quarter, and we anticipate that we will continue to receive it, at least through the fourth quarter. This is the last one and the net...

I'm sorry, Q3 is the last one? Or fiscal Q4 will be the last one?

Three is the last one, Bryan.

Okay.

And the net of the retro adjustment and the claims experience, as noted, was in the third quarter on a year-over-year basis, its about 30 basis points.

Okay, all right. And the, just a clarification too, on the guidance for next year. So we've brought down the food outlook, food inflation outlook, towards the lower end of the range. What kind of pricing assumption underlies the guidance, to get a sense of what COGS in basis points we can calculate that?

Yes. As we said, we're anticipating for '13, menu price increases, roughly in the same range as the current year, 2%.

And we're doing a lot with the menu, which is going to make mix potentially meaningful and obviously unpredictable. Are you assuming static mix as well?

We're assuming more or less static. Bryan, yes.

[Operator Instructions] And we will now go to Steve Anderson with Miller Tabak.

I missed the tax rate assumption for future quarter, you said it's going back -- what was the tax rate you were assuming for the fourth quarter?

What we said and you really have to think of a tax rate on a full year basis, because it is calculated and it is estimated on a full year and then there's an ongoing adjustment on a quarterly basis. So allow me to walk you through that, Stephen. So last year, we had an effective tax rate of 26.3%. And we've said for the current fiscal year, it'll be in the 29% to 30% range. There are 3 reasons why that rate is higher this year than it was last year. First is since Congress didn't extend the work opportunities tax credit, so there's the advantage of that credit, which we had last year, won't have this year, and anyone's guess, if we're going to have it next year. And that's in round numbers about 1.5 percentage point of the rate change. Then as I noted, we've made some additional provisions for what the accountants refer to as uncertain tax provisions, which is again approximately 1.5% in the current fiscal year as compared with the amount we had last fiscal year. That one is very hard to actually estimate going forward. And third is, as noted in my remarks, we had some positive adjustments to deferred tax balances last year that we don't have this year and aren't likely to have next year and that's about 1 percentage point of the rate change.

Okay. Now going forward, going to fiscal '13, have you made any assumptions with tax rates for that?

You can probably take some of the information I just gave and depending upon what you think the Congress of the United States is likely to do, it would probably lead you to a tax rate that's around the current years maybe, if the work opportunities tax credit is extended a 1% to 1.5% lower.

And there are no other questions. So I'd like to turn the conference back to Sandy Cochran for any additional or closing remarks.

Well, thank you all for joining us today. As we head into the final quarter of the year, we're pleased with the progress we're making on our strategic priorities and the momentum that we're carrying in what remains, a very challenging and external environment. I'll look forward to building on this success, and fully executing the strategy, as we move into the next fiscal year. I'm 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, and thank you for being on the call today.

Thank you very much. That does conclude our conference for today. I'd like to thank everyone for your participation, and you may now disconnect.