Whit Kincaid - Senior Director of Investor Relations John Miller - President and Chief Executive Officer Mark Wolfinger - EVP, CAO and Chief Financial Officer.

Will Slabaugh - Stephens Inc. Michael Gallo - CL King Associates Alton Stump - Longbow Research Tony Brenner - ROTH Capital Partners Nick Setyan - Wedbush Securities Mark Smith - Feltl and Company.

Good day and welcome to the Denny's Corporation First Quarter 2016 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Whit Kincaid, Senior Director of Investor Relations. Please go ahead, sir..

Thank you, Camile. Good afternoon. Thank you for joining us for Denny's first quarter 2016 earnings conference call. With me today from management are John Miller, Denny's President and Chief Executive Officer and Mark Wolfinger, Denny's Executive Vice President, Chief Administrative Officer and Chief Financial Officer.

Please refer to our website at investor.dennys.com to find our first quarter earnings press release along with any reconciliation of non-GAAP financial measures mentioned on the call. This call is being webcast and an archive of the webcast will be available on our website later today. John will begin today's call with his introductory comments.

Mark will then provide a recap of our first quarter results along with brief commentary on our annual guidance for 2016. After that, we will open it up for questions.

Before we begin, let me remind you that in accordance with the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995, the company knows that certain matters to be discussed by members of management during this call may constitute forward-looking statements.

Management urges caution in considering its current trends and any outlook on earnings provided on this call. Such statements are subject to risks, uncertainties and other factor that may cause the actual performance of Denny's to be materially different from the performance indicated or implied by such statements.

Such risks and factors are set forth in the company's most recent annual report on Form 10-K for the year ended December 31, 2015 and in any subsequent quarterly reports on Form 10-Q. With that, I will now turn the call over to John Miller, Denny's President and Chief Executive Officer..

Thank you, Whit and good afternoon, everybody. We are pleased to start off this year with another quarter of same-store sales growth as our domestic system wide same-store sales increased 2.5%. When you take into account that we were lapping one of our strongest quarters our two-year same-store sales growth was 9.7%.

Our revenue growth couple with our disciplined focus on cost resulted in margin improvement and led to approximately 20% growth in adjusted EBITDA and 21% growth in adjusted net income per share. Our consistent performance reflects the momentum generated by the brand revitalization initiatives launched in 2011.

Our vision is to become the world's largest, most admired and beloved family of local restaurants, certain classic American comfort food at a good price around the clock. With less than 40% of our system currently reflecting our successful heritage remodeling program, we are still in the early stages of our brand revitalization.

We remain focused on executing against four key strategic areas to drive our future success.

The first is to deliver a differentiated and relevant brand achieving consistent same-store sales growth supported by profitable gains in guest traffic, delivering systems same-store sales growth in 19 of the last 20 quarters is evidenced with our initiatives to enhance our food, service and atmosphere are working.

Our consistent strong performance against other full service and family dining benchmarks also demonstrate the success of current strategies. We will continue to optimize our menus to match our guest needs by responding to their desire for better quality and more favorable products.

Our latest limited time only menu called Red, White and Bacon features six breakfast, lunch and dinner entrees. We are adding variety to our side items with our new Bacon Cheddar Tots and of course we had to bring back the Maple Bacon Sundae.

We have an exclusive partnership with 20th Century Fox to promote the upcoming Independence Day Resurgence movie which will hit the theaters on June 24.

We will continue to drive food innovation and enhance our product quality while improving speed and consistency with an eye towards even bolder and more flavorful product enhancements as we work to update our core menu.

Our product enhancements will be supported by strong brand engagement initiatives and improving guest experience and enhanced atmosphere. Our Heritage Program continues to perform well. Each quarter takes us closer to our goal as 57 remodels were completed in the first quarter bringing the Heritage image to approximately 36% of the system.

This year over 200 remodels will be completed including 28 company restaurants. As a reminder, remodels will continue to be a significant tailwind for the brand over the next few years as we expect over 70% of the system to have a new image by the end of 2018.

Our second key strategic area is to consistently operate great restaurants with the primary goal of being the upper quartile of satisfaction scores of all full-service brands. With each every quarter we are getting better at delivering higher quality products with more consistent service standards.

Our new field training and coaching initiatives are critical to delivering our mission and to be a model franchisor which includes assessment and coaching to run great restaurants. We have completed over 3600 product reviews and are observing steady improvement in the scores.

Although we continue to be encouraged by our improvement, we recognize the need to continue to invest in strategies to further elevate the Denny's experience. In addition to enhancing our training efforts we are working to improve our speed of service, especially during our peak periods.

All of our company restaurants now have kitchen video systems to improve back of the house efficiencies. We have seen the improvements in table turn times which are key during the busy holiday and weekend periods. With less than 25% of franchise restaurants utilizing this technology we are working to build the investment case for our franchisees.

In summary, we believe our investments in training talent and systems to support our strategies will drive future sales growth over the coming years. Our third key strategic area is to grow the global franchise expanding Denny's geographic reach of domestic and international locations.

We opened 12 restaurants during the quarter including our fourth new company restaurant in partnership with Kwik Trip convenience stores. We continue to gain momentum with our international development as we followed a successful year with six openings in the first quarter.

The locations included our first in Trinidad, one in Mexico and Honduras and three in Canada. With a pipeline of approximately 90 new international restaurants, we look forward to gaining further momentum outside of North America.

Our strong performance continues to drive interest in the brand attracting new franchisees, building the real estate pipeline and adding new development commitments. Our four key strategic areas to drive profitable growth for all stakeholders with the goal of growing margins and profits.

Supporting these efforts is a disciplined focus on cost and capital allocation benefiting franchisees, employees and shareholders. Our first-quarter results demonstrate our ability to increase margins and grow key profitability metrics as we coupled revenue growth with a disciplined focus on cost.

We generate $14.4 million of free cash flow in the quarter after interest, taxes and capital expenditures. We will drive consistent profit growth by continuing to expand our highly franchised business which provides a low risk profile with upside from operating a meaningful base of high-volume company restaurants.

Most importantly, we have significant flexibility to support investments in the brand and our company restaurants while returning value to our shareholders. In closing, we remain focused on our brand transformation and building sustainable foundation to grow around the world.

By consistently growing same-store sales and expanding our global reach we will continue to grow the Denny's brand while returning cash to shareholders through our ongoing share repurchase program. With that, I'll turn the call over to Mark Wolfinger, Denny's Chief Financial Officer and Chief Administrative Officer.

Mark?.

Thanks John and good afternoon everyone. Our first quarter highlights include growing domestic system wide same-store sales by 2.5%, adjustment EBITDA by 19.7% and adjusted net income per share by 21%, while generating $14.4 million of free cash flow. During the quarter franchisees opened 11 restaurants including six international locations.

In addition, we opened one company restaurant in partnership with Kwik Trip convenience stores, acquired one franchise restaurant and re-franchised four company restaurants. Our system restaurant count increased by three to 1713 restaurants as nine franchise restaurants will close during the first quarter.

Denny's total operating revenue which includes company restaurant sales in franchise and licensing revenue increased by 3.7% to $124.6 million primarily due to higher company restaurant sales. Our domestic system wide same-store sales increase of 2.5% was primarily due to an increase in same-store guest check.

The increase in guest check average was driven by both favorable product mix and higher menu pricing.

Franchise operating margin of 70.8% increased by 290 basis points primarily due to $1 million in additional royalty revenue resulting from 2.3% increase in same-store sales at domestic restaurants, a higher average royalty rate and an increase in the number of franchise restaurants over the past 12 months.

Moving to our company restaurants, sales increased by 5.1% to $90.4 million due to growth in same-store sales of 3.5% and an increase in company restaurants over the past 12 months.

Company restaurant operating margin of 18.0% improved by 90 basis points primarily due to higher sales, lower workers compensation costs and lower incentive compensation partially offset by higher wage rates and group insurance expense.

Total general and administrative expenses of $16.9 million were flat compared to the prior year quarter as lower incentive and deferred compensation costs offset higher share-based compensation and payroll and benefits expenses. Adjusted EBITDA increased by $3.7 million or 19.7% to $22.5 million.

Depreciation and amortization expense of $5.5 million increased by $500,000 primarily due to higher capital spending for remodels and new company restaurants. Interest expense increased by $700,000 to $2.8 million due to additional outstanding debt. The provision for income taxes was $5.5 million reflecting an effective tax rate of 35.5%.

Due to the use of net operating loss and tax credit carry forwards the company paid approximately $300,000 in cash taxes during the quarter. Adjust net income per share which excludes gains on the sale of assets grew 21% to $12 per share.

Free cash flow after capital expenditures, cash taxes and cash interest was $14.4 million compared to $13.2 million in the prior year quarter. Higher adjusted EBITDA was partially offset by higher capital expenditures and cash interest.

Capital expenditures of $5.3 million included the remodel of five company restaurants and the acquisition of one franchise restaurant. During the quarter we allocated $3.9 million towards share repurchases excluding the previously announced $50 million accelerated share repurchase agreement.

We ended the quarter with approximately $34 million in remaining share repurchase authorization. We expect the accelerated share repurchase program to be completed and to receive the remaining shares no later than July.

We ended the quarter with $221.5 million of total debt outstanding including $201 million under our revolving credit facility resulting in a leverage ratio of 2.4 times. In April following the quarter close we liquidated our pension plan which was closed to new participants at the end of 1999.

We made a required contribution of $9.5 million and expect to record an operating loss of approximately $24 million during the second quarter. Let me now take a few minutes to expand on the business outlook section of our earnings release which excludes any impact on the pension plan liquidation.

Based on our first quarter results and management's current expectations for the remainder of the year we are raising certain annual guidance parameters as follows. We expect total operating revenue of $500 to $505 million including franchise and licensing revenue of $139 million to $140 million.

Due in part to more favorable commodities costs we anticipate our company margin will range from 16.5% to 17.5%. Our franchise margin is anticipated to be between 68.5% and 69%.

Adjusted EBITDA is now estimated to be between $94 million and $96 million excluding the impact of the pension plan liquidation, while free cash flow is anticipated to be $60 million to $62 million the dollars.

Cash capital expenditures have been increased to between $19 million and $21 million primarily due to the acquisition of one franchise restaurant. We will continue to allocate cash towards investments in our brand and company restaurants while also returning cast to our shareholders through our ongoing share repurchase program.

That wraps up our guidance commentary and I'll turn the call over to the operator to begin the Q&A portion of the call..

[Operator Instructions] Our first question is from Will Slabaugh with Stephens Inc..

Yes, thanks guys.

I'm wondering if you could talk a little bit more about the sales trends you saw during the quarter referred to all of your previous reference to softness toward the end of the period and just generally increased volatility in periods if you saw any of that and if you felt like you did what you needed to do in terms of making any sort of changes in the period or if you are simply just pleased with how your everyday value on the menu performed in the current environment?.

Hey will, this is John, great questions. The softness was the middle of the quarter.

Remember January benefited from the new year flip and then the last month of the quarter benefited from the Easter flip, so that would have made February the softest of the three, so it would have been not a deceleration but maybe an artificial buoyancy because of the Easter flip. But all in all I'd say a pretty good quarter on a relative basis.

There have been questions about weather because of our overweighed Southwest and Western exposure, I'd say that weather was some, there is also doors have benefited from weather, so you could pretty much dial that out of the recap of the quarter as well. We did see a little bit of a tick up in our $2, $4, $6, $8 Value Menu during the quarter.

There was a lot of dealing going on with QSR sandwich and the like.

We finished 15, somewhere in the 16% incidence range down from 19 Q1 of the year before 2014 and then we started out Q1 of 2016, strategically getting behind our $8 Slugger breakfast which includes a beverage, but it moves a few people off of the $2, $4, $6, $8 items, but it raised the incidence interest rate up to about 17% on the value menu.

So it does seem to, I think more noise on value than anything else in the quarter. I think all in all we came in about where would have guidance and I will leave you to the follow up question if that didn’t answer your full question..

Yes, that's great. I appreciate it. One more thing I was curious about on sales, I didn’t know if you really want to speak to sort of how things played geographically. I assume California remained strong and the Texas weakness commentary probably continues, we just wanted to verify that..

That's correct. So California was one of the best states 14 consecutive positive quarters in traffic out there, but it was a little bit more choppy across the country. Our 10 most populated states were some of the best performing states overall, so our geographical footprint I think certainly does favor us.

We still have about 25, about a quarter of our restaurants are in California. The system, California, Nevada, Indiana were some of the best traffic states and then for company New York, Virginia, Hawaii for the California also performed well. And then the Texas story is one of, it depends on how you read it.

We remained positive there during the quarter, but about 200 basis points behind the rest of the system. It did improve Q4 to Q1 in traffic trends, but negative in the state of Texas. And we are having high single digit to low double-digit declines in some of the outer markets.

And in the big cities that represents about two thirds of our total Texas footprints, Houston was 61 stores, Dallas was 51, St. Antonio was 18. They tended to fare much better. Texas represents about 11% of our total system Will and but it was still positive, but even with a soft Texas week we had I'd say a fairly good quarter.

We are bullish on the state long-term, but they've got – as the oil economy transforms itself over time to be less and less old dependent, but for now you still kind of feel it when there's an oil recession..

Understood, thanks and congrats on the quarter..

Thank you..

Our next question is from Michael Gallo with CL King..

Hi good afternoon. Again congratulations on another good quarter..

Yes, thank you..

My question John is on the labor line. You are able to actually bring the labor payroll benefits down by 50 basis points year-over-year that was despite having the dollar increase in the minimum wage in the State of California.

I was wondering if you can speak to whether that was a function of some of those initiatives or other initiatives on labor because that was I thought quite a strong performance given what we’ve seen from peers and others? Thanks..

Hi Mike, it’s Mark Wolfinger, how are you? So I thought I'd take this, the labor question from you. It was down about 50 basis points I think year-over-year when you look at the line item in labor. Now that was really a combination of sales leverage, so certainly the comp sales that we saw on the company side, the 3.5% that we mentioned.

We also got a benefit from Workers Comp and actually we've continued to see, I would say some pretty decent benefits over the last 12 months on Workers Comp are the programs that we put in place at the store level.

Then additionally some of our field bonus accruals are down as well, so really all of those items sort of fell through that and fortunately as you really what your question points out might fortunately offset wage inflation and obviously we’re seeing around the country certainly specifically in California with the latest minimum wage increase, but really a combination of all those events went through the labor line..

Okay, great. And then just a follow up on kitchen display, I think you talked about it in the company stores.

I was wondering as franchisees kind of rolled that out whether that may ultimately become part of the remodel package or how you plan to kind of move that more aggressively into the franchise stores because obviously it seems you’re getting a pretty big benefit of out it? Thanks..

That’s right, we are in and for our franchise community there are sort of three different ways to look at it, one is whenever there is new store development it’s a little bit easier install and little more economical, when you come in post, it has created little bit of headwind with higher average unit volumes of the company stores, it is easier for us to tackle this and then commit to it and move through our entire company system.

Now I think what you’ll see is the higher volume franchisees benefit and/or the whole system benefiting from the learning even without the install. So there are some benefits that we can extrapolate even without the installation of the equipment at every single business unit.

But it’s proving to be a benefit to the system regardless of those categories that you fall in..

Thank you..

Our next question is from Alton Stump with Longbow Research..

Good afternoon and good job from me as well on the quarter.

I guess two quick questions, first off and I think it is on this, some of your comments earlier John, but just with the whole volume message obviously of your peers particularly in a catalyst space had not done as well as recently as guys have, if I guess focus more on value in coming quarters, is there any plans whether it is for the $2, $4, $6, $8 menu and/or otherwise to push value more aggressively at Denny's next 3, 6 months here?.

I think the, it’s a great question. Our basically our Value Menu is ever present. We've spent a lot of time over starting in the fourth quarter of 2014 to reengineer that which propelled fairly substantial guest check average increase throughout most of 2015.

We'll be lapping those throughout Q2, Q3 and the balance of this year and then we have a little more favorable comparisons toward the end of the year.

So for us the, having that high awareness of that one in five consumers using it roughly, we are I think we've learned how to within each module with each quarters strategy to have prepared, we are always prepared to push that lever if we need it.

But we seem to be getting our initiatives lined up for 2016 tend to be a little bit more investments in quality here. You might have heard us share in recent quarterly discussions about how over half of the menu has been touched our changed in one form or another over just the last few years. So, we’re pleased with the consumers' response to that.

You might also take not of the fact that throughout all of last year, while we are growing traffic and with fairly substantial growth in check, people were, the mix was trading toward more the premium offers available on the menu and $2, $4, $6, $8 was actually going down a little bit.

So, we think it's always important to have a value strategy, but value as defined by cleanliness or better environment or better investments in taste or ethnic foods or different kinds of directions that are available to the Denny's brand now as we continue to build the credibility throughout the entire menu..

That’s good, that is very helpful, thanks John for that.

And I guess secondly and if I missed this I apologize, but did you breakout the, I’m talking about front ticket versus traffic and then if you guys include leap day, if that was any benefit in the quarter?.

I have to think about how to answer that, so are you talking about total pricing, traffic or you’re really just asking a traffic question for Q1?.

Right, yes, you’re talking about process [indiscernible]..

Yes so the company traffic was positive slightly about 0.3 which represents a two-year increase of better than 2% overall.

And the guest check grew about 3.2%, franchise about 3.5%, we had a little positive mix benefit in Q1 and I think I would guide here for the full year roughly flat in overall mix benefit as we are lapping some big mix changes from 2015..

It makes sense and then any benefit from leap day on the comp front?.

Don’t think so, no..

Okay, all right, great. Thank you..

[Operator Instructions] And our next question comes from Tony Brenner with ROTH Capital Partners..

Thank you very much. I would like to get back to the labor issue for a moment if I could.

A large portion of your company stores are in California and over the next five years wages in California are mandated to increase by 50%, I wonder if you could talk about how you plan to offset that cost?.

Yes Tony this is John. That is well stated to your question, we currently have 400 restaurants there, 59 company stores about nearly a quarter of the system and there isn’t - it is one of eight, nine wage dates first to pass $15 minimum wage. That minimal wage goes to $15 by 2022.

So for all of those that have not paid close attention to this, the first dollar took place in 2014, when we went from eight to nine and our January 2015. So this year goes up another dollar.

It’s going to go, the next increment is it goes from $10 to $10.50 in 2017, $11 in 2018 and then a dollar increase a year all the way to 2020 which gets you to $15. So it does create a headwind in percent margins, there is no question about that.

You will see both an exuberant consumer reach out at Denny’s we believe based on what has happened so far, we believe it is one of those states that has more tolerance for the wage, inflation than the average of the whole country, but it does create a headwind.

If you look at where we were just first quarter of this year, it’s about two points little greater than 2% wage growth for the company restaurants and for the full company fleet about 50 to 70 basis points inside the quarter.

So it creates a little headwind, but it creates a benefit to sales and then you’re usually able to price around it through time. So it’s going to be interesting to watch.

I think lot of other states will be paying close attention, but with our modest check and we believe we have the room for guest check expansion that people will not convert all meals to a drive through because wage inflation associated with full service restaurants.

So we do think it stresses the percent margin, but on the pennies per guests we think we can hold the line fairly consistently through the course of time..

Are you doing anything in other areas such as retention for example to reduce labor?.

Sure, I wouldn’t say that to reduce, I think what happens is you want to build profitable transactions, we think we have a lot of room to continue to build momentum. A lot of people are talking about how you run the line with fewer people or robots or manufacture food. That is QSR efficiency. This is full service order. There are some efficiencies.

There are some pieces of equipment that are being investigated. And then there is also for the house devices, tabletop devices that help with payment and self-ordering for desserts and beverages and then some simple menu operations full self-service which sort of nullifies the server to some degree.

But then wall you've done is replicate the counter service restaurant at each table. So we’re going to be careful to commit to how this might evolve, read the customer very carefully and run as tight a shop as we can. Tony, we believe we’re going to be just fine..

Thank you..

Our next question comes from Nick Setyan with Wedbush Securities..

Thank you and congrats on another great quarter guys.

To me I guess the labor was as big as a positive surprise as the commodity and going forward, I guess on broad lines how we should be thinking about it? Are there any moving parts especially with I guess the Workers Comp and healthcare, I mean are there any kind of bulkier quarters perhaps that we should watch out for? And then on the commodity side, I guess what do you guys now think commodity inflation is going to be for the year and is there any kind of maybe some marketing modules or the mix should be a little bit more beneficial versus some other ones in terms of quarter-to-quarter? How should we think about both I guess lines going forward?.

Hi Nick, it’s Mark.

How are you?.

Good..

So first on the commodity side, you’re right, I think when we did our year end call in mid-February, we talked about flat to slightly negative inflation that we thought we have in 2016. We still continue to see improvement from the standpoint of more of a deflationary environment.

We’re thinking now right now for the full year that commodity deflation, annual deflation will probably be somewhere between 2% and 3%. And we look at that as it’s today, we are probably about 70% committed for the year 2016.

And then obviously what we’re seeing here is significant deflation in the areas of both of beefs and eggs because when you look at it truly beef, pork and eggs that are, call it nearly 40% of our basket. But that deflationary environment is really being led by both beef and eggs.

Now in the first quarter you didn’t see that kind of deflationary impact yet, really if you think about the issue with egg inflation, price inflation last year, it really started towards late spring last year, early summer.

So that deflationary impact overall is really going to come into play we think towards, I will say the back half of the year, certainly the final two quarters if not this quarter coming up, but again overall deflation in that 2% to 3% range right now from commodities.

On the labor side, we've continue to see as I mentioned, we have seen significant benefits rolling through workers comp over the last 12 months and we continue to put, I think a lot of, I would say the right focus on the right kind of programs inside the four walls, so at this point in time we think that that piece for us is something that at least the pattern is in the first quarter was it was certainly a benefit to the P&L.

On the labor side, John talked about cost of labor and wage inflation and we have almost 60 of our 160 somewhat company restaurants in the State of California obviously minimum wage just went up by a dollar an hour there, so we’re feeling that reverse inflation and labor. But and then the other side is obviously sales leverage.

So it gives you the general rule of how we’re looking at it and the other piece obviously is in our latest guidance settlement for company margins, we tweak those company margins up slightly. I think it was 50 basis points versus what our originally aimed guidance was in February.

And again a reflection, strong reflection obviously of what is going on in the commodity basket for us in our food basket..

Great, and then I didn’t catch whether you guys broke out the mix versus menu price your company owned?.

Yes price is call it little over two company franchises just slightly higher around two, three. So systems is low north of two, mix about 1% or slightly above 1% positive benefit in Q1 and full year guidance is pretty flat..

And I guess the mix to me was – is also pretty surprising given the fact that it was such a huge contributor last year, so I guess going forward, is that going to continue to be that kind of a benefit or shall we start seeing that kind of I guess weigh in a little bit as the year progresses?.

No I think the full year guidance of flat would be waning as the year progresses. So because we’re lapping such a big mix benefit from last year, we would caution the – this is really going to be more about just comp pricing story this year.

The first quarter however still had some carryover benefit from that mix and we had $2, $4, $6, $8 popped up on $8 side with the strong value promotion for the $8 end of the menu and then in value season Q1, our some of our $2 strategies on the $2, $4, $6, $8 menu became add-ons more than orders by themselves.

So there is little bit of a benefit to the quarter. But full year again I think your instincts are right..

Okay.

And then just lastly on the remodel still driving kind of a bigger comp doing your dinner day parts?.

They are, they are still benefiting the most and then system-wide our initiative seemed to be driving breakfast as the strongest day part right now. We might be benefiting from 14,000 unit chain talking about it quite but.

But breakfast has been strong for us followed closely by lunch and then in the remodel stores we’re getting a nice dinner trial and retentions in that effort..

Perfect, thank you..

[Operator Instructions] And our next question comes from Mark Smith with Feltl and Company..

Good afternoon guys.

Can you guys just walk us through your thoughts on acquiring franchisees, what type of thresholds you look for on that and maybe how many opportunities there maybe look for next 12 to 24 months?.

Hi Mark, it’s Mark Wolfinger. So I will answer the last part of your question first as far as how many opportunities. We obviously as the franchisor we have a right of first refusal on every franchise to franchise transactions. So these occur relatively frequently. We take a hard look in each transaction and decide.

Our parameters obviously are not just financially driven but certainly from a multiple standpoint, it has to make sense. But also for us, it’s very important that that location or locations to be in a market where we already have significant field management presence to be able to operate those restaurants.

And we tend to focus on I would say a stronger trade areas if you recall that is really what our company base is made up of, that is why there is a significant difference in average unit volume between the franchise and the company base. So that criteria also has to fit for us, but we view it as a good use of our cash.

We did one acquisition in the first quarter, I think I mentioned in my comments upfront and we continue to see opportunities out there that is again with the right parameters we believe that is a good way to grow earnings and make investments in the brand.

That hopefully answers your question?.

Yes it does and one more thing on there, will you be looking at once that most likely have not been remodeled and then being able to do that remodeling and get that sales done, however cleaner units….

Yes, I would say Mark, we’ve actually done both historically and again we obviously factor, if the store has a remodel that is coming up relatively soon, let’s say in the next 12 to 18 months, we obviously factor that capital cost into the overall equation, but at the same time, we have also purchased stores that have been recently remodeled.

So again the numbers have to make sense to us, but we will go in either direction there. But a large part of the proposition is to make sure geographically it fits into where we have company operations structured already..

And then just looking at travel center locations, I know it’s early but can you give us any update on how the Kwik Trip once we are able to visit a few of those, impressed with those during the quarter.

But any update there would be great and then maybe potential future opportunities if you have any of the companies that you have dealt with in travel centers?.

Sure Mark. On the Kwik Trip piece, we did three of those conversions in Wisconsin in 2015 fiscal year, no latter part of the 2015 and then we did one here most recently in the first quarter which was in Iowa, so we have had the four conversions, we’ve done.

I think as we mentioned in the past, those capital costs were sort of $500,000 to $600,000 range not that different actually, very similar to what a Flying J conversion was when we did the Flying J program back in 2010 and 2011. Now I think earlier results, I think certainly we were pretty satisfied with it.

We've seen range of volumes, but I would say in general we’re getting pretty good return on capital given the investments there. We know that there is a ramp-up time involved, so clearly the fact that we had four new store openings was a normal ramp up time. But I think out of the gate we are reasonably satisfied at this point in time.

And as far as the partnership, we continue certainly to work positively along those lines with Kwik Trip and without knowing what those long terms opportunities might me that partnership could very well result in future openings, but at this point I don’t have anything that we can quantify..

Excellent, thank you..

That does conclude our question-and-answer session. I would like to turn the call over to Whit Kincaid for closing remarks..

Thank you, Camile. I'd like to thank everyone for joining us on today's call. We look forward to our next earnings call in early August to discuss our second quarter results. Thank you and have a great evening..

And once again, that does conclude our call. We appreciate your participation..