Cracker Barrel Old Country Store, Inc.

Good morning and welcome to the Cracker Barrel's fiscal 2020 fourth quarter. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. I would now like to turn the conference over to Adam Hamm, Manager of Investor Relations. Please go ahead.

Good morning and welcome to Cracker Barrel's fourth quarter fiscal 2020 conference call and webcast. This morning, we issued a press release announcing our fourth quarter and full year results. In this press release and on this call, we will refer to non-GAAP financial measures for the fourth quarter and 12 months into July 31, 2020. The fourth quarter non-GAAP financial measures are adjusted to exclude the fees related to two-cell leaseback transactions The non-cash gain on sale of assets related to the sale leaseback transactions that occurred during the fourth quarter, non-cash impairment charges related to store assets, and their related tax impacts. The full fiscal year non-GAAP financial measures are adjusted for the items listed above, as well as expenses related to COVID-19, an impairment charge related to our equity investment in Punchbowl Social, and the related tax impacts of these items. The company believes that excluding these items from its financial results provides investors with an enhanced understanding of the company's financial performance. This information is not intended to be considered in isolation or as a substitute for net income or earnings per share 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. On the call with me this morning are Cracker Barrel's President and CEO, Sandy Cochran, Senior Vice President and CFO, Jill Golder, and Vice President of Finance, Jeff Wilson. Sandy will begin with a review of the business, and Jill will review the financials and outlooks. We will then open up the call for questions for Sandy, Jill, and Jeff. On this call, statements may be made by management of their beliefs and expectations regarding the company's future operating results or expected future events. These are known as forward-looking statements. which involve risks and uncertainties that in many cases are beyond management's control and may cause actual results to differ materially from expectations. We caution 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 the press release and are described in detail in our reports that we file with or furnish to the SEC. The information shared on this call is valid as of today's date, and the company undertakes no obligation to update it except as may be required under applicable law. I'll now turn the call over to Cracker Barrel's President and CEO, Sandy Cochran. Sandy?

Thanks, Adam. Good morning, everyone. Thank you for joining us, and I hope everyone's continuing to stay safe and healthy. Since we last spoke in early June, our business and the casual dining industry have unsurprisingly remained pressured due to the pandemic. But despite this, I'm very pleased with the progress we've made on our recovery and on key initiatives in recent months. While we anticipate dealing with pandemic-related challenges for some time, I believe the decisive actions we've taken to strengthen our business model, bolster liquidity, and adapt our operations have us well positioned to successfully navigate this environment. And I'm confident our fiscal 2021 business priorities and the corresponding plans will further strengthen our leadership position in casual dining and drive long-term value creation. I'll discuss some fourth quarter highlights and speak to you about our priorities and plans for fiscal 2021. Then Jill will review our fourth quarter financial results and our liquidity comment on our expectations for fiscal 21 as well as our sales performance quarter to date. Before I go on, I want to comment on our restaffing and our commitment to ensuring a safe and healthy environment in our stores. I remain pleased with our effectiveness in restaffing our stores, which I believe has been facilitated by our strong culture and the actions we've taken to support our hourly store employees in recent months. Through the fourth quarter, approximately 80% of our PAR 4s had returned to work. I'm also impressed with our operators' commitment to ensuring a safe environment for both our guests and our employees. I believe these factors have been and will continue to be important in the current environment. I'm especially proud of how our store managers and hourly team members continue to deliver our mission of pleasing people during these difficult times I want to again express my gratitude to all of our employees for the excellent job they've done over the past several months. We were pleased with our sales trend and the sequential monthly improvements we saw in the fourth quarter. Comparable store restaurant sales decreased 39.2% in the quarter, improving from down 59% in May to down 28.2% in July. and this improvement has continued into fiscal 21. We believe this trend has been driven by our reopened dining rooms, sales improvements at stores with open dining rooms, increased demand and the success of our off-premise and menu initiatives. Additionally, we believe these results reflect the strength of our brand, our strong everyday value and the trust our loyal guests have in us to deliver a great We also believe we've benefited from summer travel. The demand for off-premise dining has remained strong. In the fourth quarter, we leveraged successful initiatives such as third-party delivery and curbside pickup, and our family meal baskets offering maintained its popularity with our guests. Supported by our work to further enhance our off-premise operations, these sales grew approximately 145% over the prior year quarter and represented approximately 35% of fourth quarter restaurant sales compared to approximately 8.6% in the prior year quarter. During the fourth quarter, we rolled out the new lunch and dinner menu that is part of our menu evolution initiative. The menu includes new craveable offerings such as Chicken Pot Pie and Maple Bacon Grilled Chicken, which are available every day, as well as new daily specials such as Saturday Country Fried Pork Chops and Sunday Pot Roast Supper. Additionally, we believe the new simplified menu results in increased consistency and execution and that it better highlights our signature offerings, value, and variety. This is a significant initiative which we've been taking a phased approach and I continue to be pleased with the results. It began with the introduction of our signature fried chicken platform in fiscal 2019 and I'm looking forward to the future menu innovation we have planned as part of this initiative in fiscal 21. Continue to make progress on the addition of a beer and wine program. As a reminder, at the time of our last earnings call, this test was in approximately 20 stores. Currently, these offerings are available in approximately 100 stores. Based on the favorable results, we'll be introducing the beer and wine program to the majority of our system in fiscal 21, and we expect it to be in approximately 600 stores by the end of the fiscal year. I remain excited about this initiative, and in addition to the financial benefits, We believe these offerings support the guest experience by providing additional variety. The performance of this initiative has been in line with our expectation, and while it is mostly targeted at enhancing the dinner day part, our mimosas have proven to be quite popular in the breakfast and lunch day parts. I was also pleased with our retail performance this quarter, especially considering the headwinds our retail business is facing as a result of our dining room closures and capacity restrictions. Teams were focused on managing inventories, and strong sales in categories such as furniture, decor, and accessories contributed to top-line retail performance that exceeded our internal expectations. We believe consumers are looking for affordable ways to improve and update their homes during the pandemic, and that our offerings in these categories strongly appeal to guests and provided a compelling price-value relationship. Fiscal 2020 was unlike any year we've ever experienced and the challenges presented by the pandemic have and will persist into our Fiscal 21. Fortunately, I believe our existing business priorities around menu innovation, growing off-premise and enhancing the guest experience had us well positioned going into the crisis, and they remain highly relevant. We'll build on these priorities to drive performance and long-term value creation amid this challenged environment. Our fiscal 21 priorities include the following. First and most importantly, ensuring the health and safety of our guests and employees. Second, driving restaurant sales by leveraging our new menu, introducing additional craveable offers, and further growing our off-premise business. Third, driving retail sales by increasing off-premise attachment and optimizing our floor space for the current reduced capacity environment. Fourth, enhancing our digital infrastructure and evolving our digital strategy to drive sales and improve the guest experience across all channels. And last, accelerating the growth of Maple Street Biscuit Company. Now I want to speak to some highlights of our fiscal 21 business plans and priorities. Our first and top priority is ensuring the health and safety of our guests and employees. Our elevated health and safety measures remain in place and our teams continue to do an excellent job diligently executing the procedures and protocols and adapting to a dynamic situation. We're committed to prioritizing and will be investing in health and safety over the long term and we believe this emphasis has and will continue to strengthen the trust that both guests and employees have in our brand. Culinary plans are focused on driving frequency by leveraging our new menu and introducing new craveable offerings during the fiscal year. For example, our Q1 menu promotion features our new chicken pot pie, a highlight of our new menu, and is being supported by an integrated marketing campaign that includes national TV. Looking ahead, I'm excited about future menu innovations, such as the hand-breaded chicken tenders we'll be introducing to the core menu later in the year as we build on the success of our signature fried chicken platform. And I'm also looking forward to the continued rollout of our beer and wine program to our stores. Turning to off-premise, we've been pleased with the growth of this business in recent years, which was further accelerated by the pandemic, and we anticipate that off-premise will remain elevated for some time. Fiscal 21, we're focused on growing our various off-premise channels by building brand awareness and affinity, optimizing off-premise operations, and leveraging initiatives such as curbside pickup and third-party delivery. Additionally, we'll be testing two new off-premise formats, grab-and-go and a dedicated catering kitchen. We believe Grab and Grow will drive incremental to-go purchases from our dining guests and can build off-premise behaviors in guests that may not use the to-go channel as often. Our dedicated catering kitchen is designed to improve our ability to meet demand in high-volume markets and drive productive growth in catering. These tests are launching this month and I'll share additional details in future updates. I continue to be impressed with the adaptability of our teams, and I'm pleased with how we've been able to quickly and successfully introduce initiatives such as front porch dining. This is currently available in approximately 350 stores and has helped mitigate the impacts of the capacity restrictions. Additionally, in certain locations, we've also set up tables beneath tents in our parking lots. Teams are focused on ensuring we deliver hospitality to our guests, whether they're dining in our stores, on our front porch, picking up in order to go, and we continue to adjust our operations to support the guest experience for all of these occasions. In retail, we're currently focused on our core holiday business, which accounts for a significant portion of our annual retail sales, and our retail stores are presently set with fall and holiday assortments. We're encouraged by the early performance of these assortments and believe our affordable and unique holiday decor and merchandise will resonate with guests in the current environment. Our teams continue to work on optimizing the floor space in response to the capacity restrictions. Additionally, we're focused on driving higher retail attachment for off-premise occasions, and this will be a key priority for the teams throughout the fiscal year as we evolve our assortments and the location of merchandise targeted for off-premise guests. In fiscal 21, we'll be enhancing our digital infrastructure and evolving our digital strategy to drive sales and improve the guest experience across all channels. In the coming weeks, we'll be launching our digital store to our system, which is a new digital platform that provides an integrated and improved user experience for guests ordering food in retail. It is foundational for future planned initiatives that we believe will further enhance the guest experience and empower guests by giving them more control over their journey. In addition to increasing convenience, we believe the digital store and these initiatives allow us to extend our hospitality in new ways. The digital store is already live in approximately 150 stores and the initial response has been positive. as we've seen strong user engagement. The digital store will also support sales driving opportunities such as bundled restaurant and retail offerings, a loyalty program, and increased personalization and customization as well as it will result in richer guest data and support of deeper analytical insights. Another technology initiative that will provide additional guest experience enhancements as well as cost savings opportunities is our new POS system. We had suspended our rollout due to the pandemic and I'm looking forward to resuming the implementation. Approximately 175 stores currently have the new POS and we plan for approximately 500 stores to have it by the end of the fiscal year. I continue to be impressed with how the Maple Street team is navigating the difficult environment and I'm excited about the brand's future. The resilience they've demonstrated during the pandemic has reinforced the attractiveness of the concept and their business model. We have a high degree of confidence in this brand and we're anticipating opening up to 15 new units this year. In addition to opening these new locations, the Maple Street team is focused on developing replicable processes and on leadership development, staffing, and training to support the successful scaling of the brand as we accelerate their growth. Lastly, before turning it over to Jill, I'll update you on our capital allocation strategy. Continue to work closely with the board to ensure we have the appropriate capital allocation strategy. We believe we're well positioned from a liquidity standpoint and remain committed to our highly disciplined and balanced approach to capital allocation. Top priority is investing in Cracker Barrel and Maple Street. Regarding the regular dividend, our board continues to evaluate the environment and intends to reinstate the dividend as soon as it is prudent to do so. And lastly, we're evaluating our debt levels and we'll be normalizing our leverage both by reducing debt and by increasing EBITDA. With that, I'll now turn it over to Jill.