Good day and welcome to the Cracker Barrel Old Country Store Second Quarter 2009 Conference Call. Today's call is being recorded and will be available for replay today from 2 p.m. Eastern Time through March 10th at mid-night Eastern, by dialing 719- 457-0820 and entering passcode 3754557. And now at this time for opening remarks and introductions I would like to turn the conference over to the Senior Vice President of Corporate Affairs, Ms. Diana Wynne. Please go ahead.

Thank you Dustin. Welcome to our second quarter 2009 conference call and webcast this morning. Our press release announcing our fiscal 2009 second quarter results and our updated outlook for fiscal 2009 was released before the market opened this morning. In our press release and during this call, statements may be made by management of their beliefs and expectation as to the company's future operating results. These are what are known as forward-looking statements which involve risk and uncertainties that in many cases are beyond the control of the company and may cause actual results to differ materially from management's expectations. We urge caution to our listeners and readers in considering forward-looking statements or information. Many of these factors that can affect results are summarized in the cautionary description of risk and uncertainties found at the end of this morning's press release, and are described in detail in our annual and quarterly reports that we file with the SEC, and we urge you to read this information carefully. We also remind you that we don't review or comment on earnings estimates made by other parties. In addition, any guidance that we give speaks only as of the date it is given. And we do not update our own guidance or express continuing comfort with it except as required by law and in broadly disseminated disclosures such as this morning's press release and this call. The Company disclaims any obligation to update both information on trends or guidance and should we provide any updates after today, they will be made only by broad dissemination such as press releases or in our filings with the SEC. We plan to release fiscal 2009 third quarter earnings and same store restaurant and retail sales for fiscal February, March, and April on Wednesday, May 27th before the market opens. On the call with me this morning our Cracker Barrel's Chairman, President and CEO, Mike Woodhouse; Interim CFO and General Counsel, Forrest Shoaf; and Senior Vice President of Finance, Doug Couvillion. Mike will begin with the review of the business, Doug will review the financials and outlook, and then Mike will return to close. We will then respond to your questions.

Thanks Diana. Good morning everyone and thanks for joining us this morning. A lot of things have changed since our last call on November 24th. For example once -- we're once again Cracker Barrel County Store, Inc. Our shareholders approved the name change at the Annual Meeting on November 25th and our new old name reinforces our commitment to focus on a single concept and seems especially appropriate as we continue through our 40th year of operation. In these turbulent times, we feel very good about putting our resources behind a single strong brand. In fact, the more time we spend on improving the Cracker Barrel experience the more we learn about what makes us unique and what keeps us -- what keeps our loyal customers coming back time and again. Some of these lessons we learnt the hard way. What seems good in theory doesn't always produce the desired results. For example, in our efforts to increase efficiency with the new menu, we discovered that many of our regular customers were disappointed to see their favorite food items no longer available. In hindsight this makes perfect sense. At Cracker Barrel comfort food is a hallmark. We're where comfort meets food. Comfort describes something familiar, something that helps people deal with stress and something that stirs a positive emotion. Cracker Barrel is a one of kind experience and the last thing we want to do is to upset the wining formula behind our continuing popularity. That's why at the end of the second quarter we decided not to roll out the best of the Barrel test menu across the entire system. Instead we're enhancing our current menu to reflect the benefits from our menu testing. For example, we've been able to speed up the order entry with a simplified point-of-sale…

Thanks Mike and thanks to out listeners on the conference call and webcast for your interest and participation in today's call. Let's review in more detail the results of the second quarter of fiscal 2009. For the second quarter of 2009, we reported diluted earnings per share of $0.81 compared with $0.85 per diluted share in the second quarter of last year. Income from continuing operations of 18.4 million was 1.9 million lower than last year reflecting lower operating income this year, partially offset by lower interest expense and a lower effective tax rate. Revenue from continuing operations, during our fiscal second quarter declined 0.7% to 630 million reflecting top line growth in restaurant revenues driven by store growth offset by a year-over-year decline in retail. Our decline in retail sales was generally inline with results posted by many other retailers. By the end of the second quarter, we had opened eight new Cracker Barrel units this year including four in the second quarter. These new units contributed to our revenue growth and although we continue to outpace the Knapp-Track Index, our comparable store restaurant sales and guest traffic declined 1.5 and 4.6% respectively. Comparable store restaurant sales benefited by approximately 0.5 to 1% during the quarter from shifts and the timing of holidays and the travel associated with these holidays. The shift affected sales unfavorably in December and favorably in November and January. The net effect of weather was minimal for the quarter. Our average check increased 3.1% reflecting a menu price increase of approximately 3.6%. Our average menu price in the second quarter more than offset the impact of food inflation and labor inflation. Our focus continues to be on maintaining the guest experience which includes providing good country cooking at a great value and not reducing portions…

Thanks Doug. I just like to comment on a couple of items in our guidance for fiscal 2009 and the new store opening target in fiscal 2010. We've opened the 11 new units that we committed to for fiscal 2009, the last unit of that group opened just this week. In fiscal 2010 we are planning to open only 7 stores and we are doing that although the performance of the 2009 stores is exceeding our expectation, want to be able to -- we need work on identifying the management skills that are going to make certain that we provide a guest experience -- a positive guest experience from day one and then we can move stores quickly to their projected profitability level. Our lower unit growth rate will give us some more time to continue to focus on that execution. As an example of the strong sales we're seeing when our new stores do open these days, our Stevensville, Maryland store set a record for combined sales in its first full week of operation in November. This tells us that dinners are still looking for good food and great value in a friendly family atmosphere. On the sales guidance, we're looking for slightly stronger sales in the remainder of the year as our new skillets and future promotions have a positive impact on sales. And we've reduced our comparable store sales for retail to down 4.5 to down 6% which is in line with our performance for the first half of the year. As I said earlier we're ahead in our action plans that are in place to minimize the deleveraging impact of lower sales on operating margin. Our outlook reflects the continued uncertainty in the economy and it's potential impact on casual dining. By limiting new store openings we can focus on executing the basics in order to maximize cash flows. At the same time we're committed to driving greater traffic to our restaurants and retail stores and improving profitability for the long-term. With demographic trends supporting the continued growth in our target customer base, we've every intention of maintaining our position as the customer -- consumer's choice when eating out. And with that, I'd like to open up the call for questions.

Thank you, sir. (Operator Instructions). We'll go first to Brad Ludington with KeyBanc Capital Markets.

Good morning. I have a question first and see if we can get any more clarification on the sales leaseback. On that is -- since the net proceeds are 55 to 60 million, is that the expected sale price or would that be selling a little bit of a loss in using a little bit of a tax benefit along with that?

That's just net proceeds, that does not include the tax effect or any gain with the transaction.

Okay. And do you expect to be able to sell it for cost or better or will there be impairment charge that goes along with that?

We expect to sell at a gain.

Okay. Good to hear, especially in this environment. What about -- do you know what kind of cap rate you expect out of that?

We're in the middle of negotiating, so we're not prepared to put a cap rate out just yet.

Okay. And looking after the financing is already in place or is that still being worked on as well?

That's being worked on, but we're quite confident we're going to be able to put this deal up, close this deal.

Okay. And last think; I know I'm hitting you for a lot of detail on this, is it third the party transaction or will it be an LLC that Cracker Barrel's involved with?

It's a third party transaction.

All right, thank you very much.

Welcome.

We'll go next to Joe Buckley with Bank of America.

Hi, it's actually Steven Barlow (ph) for Joe. On the sales leaseback again, how are the -- how were the proceeds spilt between the 15 stores and the distribution center?

Distribution center is about 12 million of the total.

Okay. And then on the covenants, what are the -- I guess with the timing in May, what are the ramifications if you break through them?

Well I don't think that's something that's relevant. We have no intention of breaking through. Our projection shows to be very comfortable relative to the covenants. The reason that we're doing the sale leaseback is to provide as more cushion, not to provide us the only cushion. We said at our last conference call, what we expected to be fine with our covenants based on our guidance. At that point our guidance, you will note, on earnings, has not changed. So we have -- we don't see any issues. We obviously have thought about what the implications might be but we don't think that's the topic that's worthy of discussion at this point.

Great, thank you. Operator: Our next question comes from Larry Miller with RBC Capital Markets.

Yeah, thank you very much. I also have a couple of sale leaseback questions and there's something else I'd like to ask. But on the sale leaseback, are you considering any other units other than the 15 currently and can you talk about some of the restrictions that you have in a dead agreement that would prohibit you from selling real estate or any buildings and whatever your proceeds might have to be directed to? And then just on that as a closure loop, I know you didn't talk about the cap rates that you are seeing but what generally are the cap rates in the marketplace for transactions like this and how would you characterize just the overall appetite on the investment side?

Well the appetite for the specific transaction that we're interested in, and I don't really want to represent myself as an expert in say leaseback market generally, but we're pretty confident on our side. In terms of do we intend to do any more, no, we have no intentions, but we do have the ability. Our credit agreement has two baskets one allows us to do up to $100 million on a one-time basis, sale leaseback without -- with no restrictions on these proceeds and then we have a $150 million basket which can be used in three $50 -- $50 million trenches one year at a time and the proceeds must be used to pay down debt. So we have lots of flexibility if we wouldn't need to go back to that market. But we don't see that, we think that we are going to be in pretty good shape.

Right. And I just want to circle back. Kind of you've been testing a lot of same-store sales driving initiatives in the last 12 or 18 months. And I'm just curious if you were to prioritize based on all those results that you are getting, what's working, what's now working and what you've learned. I mean it sounds like the menu organization wasn't as important maybe as you thought it was. How about speed, value, table turns, all that -- and guest service, all that stuff that you are -- I mean, can you give us a relative rating on those things?

Well I think number one is our value and we would stress that we were not doing anything to our products -- all the experience -- the service experience, but we're not doing anything to our products to diminish the value of the products from a portion size or quality point of view and I will not comment on what we see elsewhere in the industry but we think that makes us somewhat distinctive in this environment. So, I think that is -- would be the reliability of the Cracker Barrel brand; you know what you're going to get when you come to Cracker Barrel, it's absolutely first and foremost. The speed is important to our guest and important to us from a throughput point of view. One of the things that we've been focusing on in was last quarters, I think what weekend execution. And that's not about new ways of doing things, that's about focusing on our current standards of how we sit, how we place tables, how we get food out of the kitchen, and it's called we have reason obviously Friday, Saturday, Sunday represent 60% of our week. So if we can improve speed in that, we're having a very big impact after seeing some good results, I personally being our stores at the weekends and seen how that execution can really help us. And then the new products also as escalate showing then, some innovative ideas give us under bread both boughs we have out there have shown that this is an appetite, serve this for new products. And we've seen some benefit, because we really haven't been in the new product business as much for quite a while. So I think that all of those things together all of that some newness, but mostly it's about the fact that our guest can term about and depend on us not to change the rules on in this difficult time.

Okay, thanks. Did you want to share any data with respect to skills given its importance in the second half sales guidance?

What I can say is this breakfast is freedom together than the four from the Santa Fe that we brought in recently outperformed any other breakfast proportion will be down and the stimulus (ph) test performed very strongly as a promoted item. So we're looking forward to seeing that happen when we put them in a national promotion. and since it's new news, the fact that we're using some TV to support, we're going to have TV and about 25% of the system. The ability to get new news outside of the box outside of the four walls should help us leverage the newness of that, because otherwise would depending on those who come to Crackle Barrel to discover from sale. So that combination of more broadcast support and new products that we think is going to be positive.

Thanks very much.

We'll go next to Chris O'Cull with SunTrust Bank.

Thanks guys. My question relates to the cost. Doug, last year, I know in the fourth quarter G&A was up quite a bit on a percentage of revenues, and I think also on absolute dollars. Was there any unusual expense last year in the fourth quarter in that line, or should we expect G&A to be lower in the fourth this year?

Well, for the whole fiscal year, we're projecting that G&A is going to be flat on a year-over-year basis. And we should be down when you compared our -- and depend the fourth quarter.

Okay. And that flat year-over-year that includes the one times that I think you had in the last year's number?

Includes what, Chris?

Were there are some onetime charges in 2008 in G&A last year?

Yes, and I think we also had some incentive comp kind of true ups as we rapped up the year.

Okay, great. And then the last question that relates to just, I guess the biggest surprise tells us some of the labor cost that you experienced during the quarter. Can you quantify the impact of the higher health insurance and worker's comp expense had on the quarter?

Give me just a second. We from a dollar perspective in the 3 to 4 million range. But you've got to understand that the worker's comp thing is really -- it was really great results last year --

And great result for this year, but --

-- great results for this year, but not to the some magnitude.

Right.

So we're still experiencing very favorable trends that are underlying loss rates per dollar a payroll, and so it's kind of misleading to call that bad news, I believe.

Okay. And was the health insurance -- was that increase related to just renewals?

No. Their health insurance is running inflation somewhere in the 7 to 10% range on a compounded basis and then we made some plan design changes effective to the first of the year. So we've got a small amount of transition costs that we incurred this quarter. We expect this plan design changes to really benefit us in the future.

Okay, great. Thanks.

Chris, just a follow-up on that the labor, not separate from the help from the workers comp. Labors and areas of significant focus for us and the underlying numbers we think were pretty good. Our hourly labor on an absolute basis, dollars was flat year-on-year at despite some wage inflation and some minimal wage increases has happened in January from various states. So, we're going to continue to really focus on all areas of labor. So, we feel pretty good. But that's not going to be an area of exposure to us for the remainder of the year relative to our guidance.

And the benefits you've seen in your hourly labor, that's really reflecting your focus on optimizing the labor hours by the peak sales period.

That's right.

Okay, thanks.

Thank you.

We'll go next to Stephen Anderson with MKM Partners.

Yes, good morning and congratulation on the quarter.

Thank you.

And just a follow up on the labor cost side. You anticipate additional transaction cost in the next couple of quarters going forward?

I think that we're going to be through most of those costs by the end of the third quarter. There is probably a slight risk that something occurs in Q3. But I think we're pretty comfortable with what we have in on outlook delay in the labor margins.

Okay, great. Thank you.

Thank you.

We'll go next to John Curti with Principal Global Investment (sic) [Investors].

Good morning. Question with respect to your annual guidance of 2.65 to $3, does that include or any gain from the sale and lease back?

It does not included any gain.

Okay. On the store openings of fiscal '10, the seven, what's kinds of the timing of those stores first half of the year?

Yeah. They were front end loaded, and they all will all occur in the first half.

Okay. So out of the 65 million in CapEx that's -- I realize that represents a reduction because of the reduction of source of 10, how much of the CapEx for those seven stores that will open in the first half of 2010 will be occurring in this back half of 2009, fiscal '09?

About $8 million.

Leaving roughly how much for the balance then in fiscal '10.

Probably 14 million to $17 million, I am not quite sure of the mix of land and all that, but --

Okay.

I don't really have that in front of me.

And then the interest expense and the depreciation expense guidance for this year reflects the sale and lease back of the properties either adjustments in there they would lower the depreciation because of the sale at least back?

Not significantly, they would only one quarters impact probably less than the quarters impact, which comes to two of the end of the year that we closes things, just not material.

Okay. And then with respect to your retail operation, you talked about a cost pressures on the product side as well as increased markdowns, what's kind of your outlook for the back half of the year even though you have kind of increased the amount of negatives same store sales guidance for the back half. What are you --

Well, as I said in my prepared remarks, one of the things we've been doing on retail is as we solved the slow down early in the year. And we do have pretty long lead time in retail is that we've been pulling back on our orders so that we should have our inbound retail product more on line with our expected sales. So we won't be doing what we had to do in the first half of the year, which was to unwind longer inventory positions than we would have liked in the sales. So we are in better shape from that point of view. Our goal and our plan is to have our retail inventories be inline with run rate or sales by the year-end. So, net of all that is we don't expect the mark downs to be such a significant tool in major inventories in the second half as during the first.

Has there much seasonality in the retail business? I mean is the second quarter using one of the high points of quarters?

Yes, it is. On the retail side, we would like every other retailer that the holiday seasons to be part of the year.

Okay. Thank you very much.

Thank you. Just to quickly clarify the capital spending, the balance of the capital spending on the 10 stores probably about $15 million.

And we'll go next to Jake Crandlemire with Ramsey Asset Management.

Hi guys, thanks for taking my question. Can you just give us a sense maybe on per-store basis regarding the sale-leaseback, the impact to the P&L from the higher rent expense, but also the offsetting depreciation and other expenses that you may incur? Thanks.

We really don't do that until the terms are finalized.

Got it, okay. And then could you also give us sense maybe going forward? Have you seen the sales trends that you saw in January continue over in the February?

We would love to talk as ever with that current month for that our policy is that we only give quarterly guidance. So, sorry we can't tell you about that.

Okay. Thanks guys.

Thank you.

(Operator Instructions). And we'll go next to Cris Blackman with Imperial Capital.

Yeah, I appreciate it. Can you hear me?

Yes, we can hear you.

Okay. I hate keep coming back to the sale-leaseback, but under that transaction, I assume the land, the building and building improvements are included in that.

Yes.

And the equipment is not included; would that be right?

That's right.

If I take the low end of what you are suggesting you are going to back from the sale-leaseback of, and subtract the distribution center that would suggest that those 15 stores are going to generate about 43 million in sale-leaseback, which is roughly about 35% higher than the sale-leasebacks you did back in 2000 on the 65 units you did then. I think you are bringing in an average of about 2.8 million, 2.86 million per store. I guess you answer the gain and the amortization and depreciation, but I was curious the age of those units, those 15 units. Can you give us an average eight of those units?

It would be a mix, but they will be newer stores probably in the 2004 to 2008 timeframe.

Okay, somewhere will be 2000 toward 2008. And --

That's the pool that we are looking at, yeah.

Okay. And is the lease term is going to be -- do you expect initial term to be 21 years or do you have a timetable on --

That's part of the negotiations right now.

Okay.

We don't want to publicly negotiate against ourselves.

Okay. Any thoughts on the increase in value from 2000 to 2008 average per store; any -- is that just general inflation or --

A part of it is sales for store, higher than what back then.

Okay, that's helping drive it.

Yeah.

Are you seeing any leverage on advertising with this comparative environment out there, the economy the way it is, do you see any opportunities to rain in advertising or to get more out of your advertising or possibly to renegotiate better contract on some of your good would cost and such?

Well, we're seeing on the billboards, we aren't seeing some opportunities as we're always on the process of renewing with 1,500 billboards out there. And the same leases come up that are lower than the previous rent on that particular billboard by a little bit. So that's certainly an opportunity. We've got the agency, who works on that directed to -- we're not going to give out on the quality of the boards, where we've certainly opportunities to reduce at least cost on global, so we're focused on that. And then as we buy or have radio and TV, we certainly are looking at the fact that there is an opportunity. We generally approach everything in the business today that the marketplace in the world has changed out there, and we're looking for opportunities to benefit from that. We are seeing a reason why we shouldn't take benefits economic side of the economy while we are taking the negative side on the sales line.

Very good. With this capital transaction you are doing on the sales-leaseback in the reduction in CapEx, can you give us anymore guidance on how much debt you expect to pay off by the end of the year?

No, that would get us into giving guidance on cash flow that we will give the earnings guidance and the other components. So you can probably get there if you walk way through the numbers.

Yeah, you've said in conference call, I think your range has been stayed at 2.65 to 3. I was just reading through the preliminary transcripts from one of the services, and it gets you quoted as saying in 2.55 to 3. I just want to confirm you said 2.65 --

I said 2.65 just as it is in the release.

Okay, perfect. Thank you very much.

Thank you.

Moving next to Brian Elliott with Raymond James.

Hi, this is Brian Mitchell (ph) filling in for Brian Elliott. I was hoping if you can gives us a little bit more color on the change to the interest coverage ratio that you mentioned, the change in the calculation, and then I just have a one quick follow-up.

Yeah, if I can speak to that, that's simply adjusting to a correct interpretation of the document. We had in fact been using a GAAP interpretation, but the document itself has a non-GAAP interpretation. So that has nothing to do with -- having issues with the covenant, the way we are doing. And we just think we should be interpreting the document correctly and the banks when the council all support that. So I think just a mechanical correction.

Okay, fair enough. And what was the inventory balance sheet number at the end of the quarter for retail specifically?

Well, just a second.

Okay, no problem.

Approximately $140 million, we typically don't breakout and disclose separately our restaurant inventories from our retail inventories.

That 140. Okay, thank you.

Thank you.

And we have a follow-up from Jake Crandlemire with Ramsey Asset Management.

Hey guys, just one more on the sale-leaseback. I know last year that different points in time when people had talked about the value of your restaurant. You'd always kind of use the 3 million per site number, the rule of thumb. And if you do the math at the midpoint of your current guidance extra distribution center, it's about 2.9, so little under 3. I am just curious with the deterioration of the credit markets and financing and just commercial real estate in general, I mean I am just trying to get a sense of your thought process and whether or not how prudent you guys have been with kind of a similar 3 million number per site?

We don't normally throw our numbers. We normally have some pretty good substance behind them, but in this case, we have good substance behind our numbers. We just not finalized on the negotiations. So we don't want -- I guess as a normal way, I'd say we're highly confident that we are going to get the deal done and get to the numbers we have out there.

Got it, okay. Thanks.

Okay.

And we return to John Curti from Principal Global.

Yes, follow up on the balance sheet, the assets held for sale of $5.5 million, what is that please?

We have couple of locations that we closed several years ago that are still currently being marketed for sale and we have one property -- a corporate property in the local market that we're trying to dispose off as well.

The corporate property; is that an improved property or is that just a parcel of land?

It's an improved property, it's just excess capacity.

And do you have any vacant parcels that may be coming up for sale little later time as a result of reduced store opening plans or anything like that?

No, no. We don't.

Okay. Thank you.

Thank you. Operator: And we'll go next to Brad Ludington with KeyBanc Capital Markets.

Thank you. I just wanted to follow-up. Just looking into fiscal 2010, if I was trying to estimate CapEx, I mean I would assume you use roughly the 28 million maintenance again, and then what number should I use per store in development?

Well we haven't spoken about the 2011 new store count and we're not in the position to do that just yet. So it's difficult to get a number or to give you a number that would be helpful at this point. Our normal protocol is to announce on development plans that with our yearend earnings release every year for the New Year. We just accelerated that this time to give some visibility into our capital expenditures for the remainder of this year, so that there would be greater visibility into our comfort level with our covenant calculation. So we really can't give you anything that would help at this point. But we will certainly be doing that in September.

Okay. And just last thing; this may fall in that same bucket, the -- not ready to comment. Should we expect that the seat-to-eat initiative goes -- hits CapEx in fiscal 2010?

Yes, that's reasonable at this time.

Okay. Thank you.

Thank you. Operator: And there appear to be no further question at this time. I'd like to turn the call back over to Mr. Woodhouse for any additional or closing comments.

Okay, well thanks again everybody for joining us. I'd like to say in closing that we are pleased with the -- all of the aspects of our performance as represented in the quarter. We're very pleased that our brand is so strong that we are able to attract the traffic that we do in these very difficult times, but at the same time, we're able to get on top of our cost and be able to sustain our earnings guidance and hopefully we've given more visibility into the covenant questions and we're going to have a little insurance with the sale leaseback. So appreciate all the questions and we'll be here next quarter. Thanks. Operator: That does conclude today's conference call. Again, we thank you for your participation. You may disconnect at this time.