Good day, and welcome to the Cracker Barrel Fiscal 2014 Third Quarter Earnings Conference Call. Today's conference is being recorded and will be available for replay today from 2:00 p.m. Eastern through June 12 at 11:59 p.m. Eastern by dialing (888) 203-1112 and entering passcode 6983800. At this time, for opening remarks and introductions, I would like to turn the call over to Josh Greear. Please go ahead, sir.

Thanks, Eli. Good morning, and welcome to Cracker Barrel's third quarter fiscal 2014 conference call and webcast. This morning, we issued a press release announcing our third quarter and outlook for the 2014 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 proxy contest expenses and the related tax effects. We will also refer to non-GAAP financial measures for the prior year, adjusted to exclude charges and tax effects related to severance and prior year proxy contests, as well as adjustments related to the retroactive reinstatement of the work opportunities tax credit. 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 on the Investors section of our website, crackerbarrel.com. In the 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 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 the call up for questions for Sandy, Larry and Chris. We ask that you please limit your questions to matters related 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?

Thank you, Josh. Good morning, everyone. This morning we announced our sales and earnings for the third quarter. During the quarter we improved our operating margins and outperformed the restaurant industry as measured by the Knapp-Track casual dining index for the 10th consecutive quarter, despite our comparable store traffic and retail sales being down on a year-over-year basis. This was performance was achieved against the backdrop of a challenging consumer environment, increasing promotional behavior by our competitors and severe winter weather, all of which we believe negatively impacted our store traffic in sales. I'm pleased with the performance of our field teams and their ability to preserve margins during this challenging quarter. Looking at our retail business during the quarter, we increased comparable store retail sales by 0.9%, while improving our retail gross margin by 140 basis points. As a result of the Board and management's confidence in the company's strategy and in keeping with our focus on delivering shareholder value, during the quarter we declared a $1 per share of quarterly dividend reflecting an increase of 33% over the previous quarter's dividend. This morning, I will update you on the progress we've made around our 2014 business priorities and then Larry will provide more detail on the financial results for the quarter. To reiterate, our 2014 business priorities include the following. First, a focus on better-for-you menu additions and reinforcing everyday value on our menu. Second, continue messaging in support of the brand, menu and merchandize. Third, drive retail sales with improved quality and breadth of our merchandize assortment. Fourth, improve operations and margins by applying technology and process improvements. And fifth, to maximize long-term total shareholder returns. Starting with the menu. During the third quarter we built upon the Wholesome Fixin's platform by offering five new better-for-you promotional…

Good morning, everyone, and thank you, Sandy. I would like to begin by discussing our financial performance for the third quarter of fiscal 2014 and then our outlook for the 2014 fiscal year. For the third quarter of fiscal 2014, we reported net income of $28.7 million or $1.20 per diluted share. When adjusted for charges related to the April special meeting of shareholders, our adjusted net income was $1.23 per diluted share, a 20.6% increase over earnings per diluted share of $1.02 in the prior year quarter. Our revenue in the quarter was $643.3 million, a 0.5% increase over the $640.4 in the prior year third quarter. Our restaurant revenues were $523.6 million and retail revenues $119.7 million. Our comparable store restaurant sales decreased 0.6% as average check increased 2.3% and traffic declined 2.9%. The increase in average check reflects menu price increases of approximately 1.8% and a favorable mix impact of 0.5%. Our comparable store retail sales increased 0.9% for the quarter. Our total cost of goods sold in the quarter was 31.3% of revenue, a reduction of 20 basis points from the prior year quarter. Our restaurant cost of goods was 27.1% of restaurant sales which is flat to the prior year quarter. On a constant mix basis, our commodity costs declined 0.6% in the quarter compared to the prior year quarter, as increases in beef and seafood were offset by reductions in most other areas. This reduction in commodity costs and the impact of higher menu prices were offset by the mix shift to higher cost menu items and increases in food waste. We believe that the increase in the food waste was caused by the unpredictable weather and traffic patterns in the quarter which made it difficult for our stores to accurately forecast production. Our…

Thank you. (Operator Instructions). We'll be going to first question today from Alton Stump with Longbow Research. Please go ahead.

Thank you and good morning.

Good morning.

Thanks Sandy for all the color on the new product front in your opening remarks. Obviously you guys are going to be wrapping up I guess Wholesome Fixin's launch a bit later on this summer. Just want to get an idea of as you look at your new product endeavor over the next six to 12 months, how much of that do you think will be adding lines to the Wholesome Fixin's portfolio versus possibly some new categories?

Well, I'm going to let Chris add the detail but in general we've got a number of initiatives focused on our menu that address generally what we continue to see which is a need to reinforce our value position and to offer value to our guests and then secondly to broaden our reach through a variety of programs. So let me let Chris sort of expand on that.

Thanks, Sandy. Good morning. So on a value front we, as Sandy said, believe we need to continue to reinforce the marketplace, us being a destination for everyday values. So we have two main programs; our weekday lunch special program and our country dinner plates program. As Sandy indicated we are pushing a good portion of our billboards back to message on that. We have plans to kind of revitalize our weekday lunch special program within this fiscal year, add new products that will add reach on an everyday basis. So think of things like our LTO this past winter where we had a sandwich and soup offer and adding and reach. Our country dinner plates are in market right now. We'll continue to message against that. The second leg for us we continue to think about is better-for-you and as you noted, we did launch our Wholesome Fixin's category last fall. It's done a good job improving perceptions around offering fresh healthy options, if you will, fresh ingredients, restaurant I can trust, things like that. We've seen positive movements in those perceptual measures. We plan on continuing to add to that category. We've got a variety of new products coming that will add reach and margins. So, for example, in this spring promotion we had our Smoked Southern trout which we were very pleased with. You'll see that come back on the menu later in the year. It gave the operators a chance to get familiar with the product, so look for more of that. And then as Sandy said, certainly continuing to drive news in the marketplace with flavor and so looking to do that in two ways. One is through our limited time offers which give us guests some additional choice and drives a little more frequency. So this summer we're excited to bring back our campfire beef and chicken products as well as our multigrain pancakes. And then a little further out in the future we talked about in our Analyst Day sort of a midline dinner for lack of a different description for it at the moment, a category that would fit between our country dinner plates and our Fancy Fixin's that would pull from some existing products, some new products and feature bolder flavors. So that's what's on the horizon for us. Thank you for the question.

That's helpful. Thanks, Chris and Sandy. And then I guess just to follow-up, any idea on the weather front, how much of an impact there was in 3Q to comps?

Hi, Alton. Weather clearly had an impact on us in the second quarter and the third quarter, and in particular of course in the months of February and March and we also had the impact of the three-week shift of the Easter holiday from what was in the March month last year to the April month this year. As far as the specific quantification of the impact, we've not disclosed that.

Okay. Thanks, guys. I appreciate it.

We'll go to our next question from Joe Buckley with Bank of America Merrill Lynch Research. Please go ahead.

Thank you. I want to ask a question on sales as well, just what you said to the fourth quarter guidance. You're few weeks into the fourth quarter obviously and based on the guidance it seems like you're not seeing any real change in sales or any pickup in sales. I guess I'm curious, is there any residual effect from school holidays being shortened or things like that what you've seen so far in the fourth quarter or what you may be anticipating for the fourth quarter at large?

Joe, I'll make some general comments and we don't really give a whole lot of detail on forward-looking but we continue to be cautious about the consumer for a variety of reasons including we think many of our guests are still working through the impact of the weather and that could be absorbing the additional costs that they had in terms of heating bills and so on. And in some cases we do believe that school holidays were disrupted by the amount of winter weather. Now the bulk of that we thought was focused on the spring breaks which were many school districts were either abbreviated somewhat and to some degree we think people just didn't travel because they were so abbreviated or the consumer was absorbing these additional costs. We're also cautious about the level of promotional activity that's currently going on in the market. So I think both of those factors are impacting our outlook on the fourth quarter.

Just a question on the commodity outlook. Gave very detailed numbers and kind of the abrupt swing from I think you said modest deflation in the third quarter to 2.5% inflation in the fourth. Is it just the sudden changes in the pork market and you mentioned a supplier going bankrupt as well? Is it mostly around that? And I know this isn't the forum for guidance the next year, but at the Analyst Day you talked about food inflation for fiscal '15 possibly being a little bit of both what I think you laid out as a 2% to 3% kind of annualized outlook for that three-year timeframe?

Joe, we had said actually I believe as far back as the first quarter that we expected our commodity costs to sort of hit their cyclical low in the third quarter and to gradually increase in the fourth quarter. It turned out that they increased more than we had anticipated and as I noted, a lot of that, in fact well over half of the unanticipated increase in commodity costs is a result of the pork price increases which as we understand it is directly related to the PED virus. Additionally, the bankruptcy of a major supplier which was actually continuing to operate under Chapter 11 for a couple of months and converted that to a complete liquidation within just the past few weeks which resulted in a shutdown of their operations and of course our fixed price contracts aren't very valuable. So it's been possible thanks to the great work of our strategic sourcing team for us to find additional sources of supply, but those of course have been at higher prices. Additionally, there have been some unexpected movement in the liquid dairy market and the egg market which appears to be due largely to increases in export demand.

Okay. And is it too early to talk about fiscal '15 and just how it may be shaping up on the commodity front?

It is. We are continuing to contract as our strategic sourcing teams see the opportunities to lock in pricing for 2015, but our guidance for the 2015 fiscal year including our commodity guidance will be offered on our fourth quarter call in September.

Okay. Thank you.

We'll go to our next question from Michael Gallo with CL King. Please go ahead. Michael Gallo - CL King & Associates, Inc.: Hi. Good morning.

Good morning. Michael Gallo - CL King & Associates, Inc.: A couple of questions. I was wondering the four stores that will open in Q4, will those have the prototype kitchen or will the first stores in the prototype be 2015?

2015. Michael Gallo - CL King & Associates, Inc.: Okay. And then a follow-up question for Larry. How much was the change in bonus accrual year-over-year?

If you'll hold on for one second just so I can give you an appropriate answer to that question. Our change in incentive compensation between third quarter last year and third quarter this year was between 70 and 80 basis points. Michael Gallo - CL King & Associates, Inc.: Okay. Thanks very much.

We'll go to our next question from Imran Ali with Wells Fargo. Please go ahead.

Good morning. Thanks for taking my questions. Just recapping, at your Analyst Day you talked about your plans to increase your advertising expenditures with some changes coming over the next three years. Can you just remind us about what some of these changes might be?

Yes, good morning, Imran. We did talk about that and I'll ask Chris actually to expand on what he plans to do.

Good morning, Imran. Yes, in the Analyst Day we did talk about the success we've seen over the past few years and our shift into national advertising and the various looks we've done and the fact that we believe it's had a positive impact on a financial basis and certainly in terms of being able to drive a different portion of our guest space. Our plan over the next three years calls for us to lay in, in each year sort of stair-step our way into this; and so it's not going to go all in, in year one. So it will come in each year. We'll be looking at it each year to understand its impact, make certain that's delivering what we want. And if it is continue to move forward.

Okay, great. And sort of a slightly different tack. In terms of expanding and you talked about this as well your Analyst Day, but in terms of expanding into new markets just the B2B market and catering and other opportunities, do you have a timeline established for those opportunities too or an updated timeline?

Well, we do internally, Imran, in terms of our B2B. That's a business that we currently do and what we plan to do over the next three years is to introduce technology offerings, packaging and so on marketing all to do a better job of delivering the business that we currently have and to hopefully grow that business. So, I think what we announced in Analyst Day as one of the first steps is an online ordering platform which should be this fall and then we'll be sort of adding different elements as we go. There will be more on that in our September guidance for '15.

Okay. Thanks very much. I appreciate it.

Thank you, Imran.

We'll go to our next question from Chris O'Cull with KeyBanc.

Thanks. Good morning, guys.

Good morning.

Larry, the restaurant margin fallen in the past four quarters and it looks like you expect it may fall in the fourth. So my question is what comp increase do you think you need to keep the margin flat year-over-year?

Chris, it's a difficult question to answer because of course there's a lot of factors that go into those store margins. As we've said, there are going to be quarterly fluctuations in our retail cost of goods sold. We have seen that. There can be some unanticipated changes in our restaurant cost of goods sold. Typically, if our pricing increases pulls through even with traffic flat, you should see store margins constant to slightly increasing.

Okay, great. And then can you remind us where you are in terms of reducing the plate ware and maybe help us ballpark, what's the impact of that change?

Chris, we will be sorting that initiative rolling out in the beginning of the next fiscal year. We haven't yet – we've quantified, we haven't yet laid out the specific numbers. That will be part of our guidance in September but that's actually a project that will – I think we anticipate some benefit in FY '15 and in FY '16.

Chris, just to remind those on the call who may not have had an opportunity to go through our Analyst and Investor Day information, we anticipate that between now and 2017 that we will identify and will implement about $50 million of annual cost savings. 20 billion of that's expected to come out of labor costs, 20 million of that out of store management, about 5 million out of utilities and 5 million out of various other things. The plate ware initiative will be a meaningful part of that $20 million of labor cost savings and will also be a part of the utility cost savings although most of the utility cost savings is expected to come from the installation of energy management systems in our stores.

Just as a follow-up, is it reasonable to assume that plate ware changes will be the most meaningful cost cutting improvement or opportunity in the next 12 months?

We certainly expect it to be a meaningful opportunity in 2015 fiscal year. I don't know if I would necessarily say the most meaningful.

Okay. Thanks.

Thanks, Chris.

We'll go to our next question from Steve Anderson with Miller Tabak Research Firm. Please go ahead.

Yes. Good morning and actually we spoke earlier but I want to touch now on the retail side of the business and wanted to see where you're markdowns were relative to the year ago basis? I have a follow-up on inventories.

Good morning, Steve. I'll let Larry summarize what part of that he discloses.

Hi, Stephen. As noted, our retail cost of goods margin improved 140 basis points in the third quarter versus the prior year's third quarter and that improvement was a result of having prior initial markups. We're continuing to see reductions in our paid expense as a result of our transportation management system. We are controlling shrinkage and we saw some meaningful benefit there. And as you know that was partially offset by higher markdowns. In terms of the specific, markdowns weren't that much more significant in the aggregate in the third quarter of this year than they were in the prior year and you really have to offset those against the fact that our initial markups were higher.

I understand. And with regard to your increase in inventories, I noticed there in the categories where you've seen stronger sales, I mean is that reflective of any other inventory overhang?

No. Our sales of women's apparel and accessories in particular have been very strong and that is a place a lot of the retail inventory increase has come. If there is one area that we perhaps are a little heavier in inventory than we might like, it would be in toys.

All right, thank you.

It appears there are no further questions at this time. I would like to turn the conference back over to Susan Cochran for any additional remarks or closing.

Thank you all for joining us today. I continue to be pleased with our ability to manage through a challenging period. We look forward to the summer travel period and continued progress on our business priorities during the last half of the year. We appreciate your interest and support and look forward to talking to you next quarter. Thank you.

That concludes today's conference. We appreciate your participation.