Cracker Barrel 2005 Annual Report Download - page 44

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(b) Includes base lease terms and certain optional renewal periods
that have been exercised and are included in the lease term in
accordance with SFAS No. 13.
(c) Includes certain optional renewal periods that have not yet
been exercised, but are included in the lease term for the
straight-line rent calculation, since at the inception of the
lease, it is reasonably assured that the Company will exercise
those renewal options.
(d) Purchase obligations consist of purchase orders for food and
retail merchandise; purchase orders for capital expenditures,
supplies and other operating needs and other services; and
commitments under contracts for maintenance needs and other
services. We excluded long-term agreements for services and
operating needs that can be cancelled within 60 days without
penalty. We included long-term agreements for services and
operating needs that can be cancelled with more than 60 days
notice without penalty only through the term of the notice.
We included long-term agreements for services and operating
needs that can be cancelled with a penalty through the entire
term of the contract. Due to the uncertainties of seasonal
demands and promotional calendar changes, our best estimate
of usage for food, supplies and other operating needs and
services is ratably over either the notice period or the remaining
life of the contract, as applicable, unless we had better
information available at the time related to each contract.
(e) Other long-term obligations include the Company’s Non-
Qualified Savings Plan, Deferred Compensation Plan and the
FY2005 Mid-Term Incentive and Retention Plan. The obligation
for the Non-Qualified Savings Plan is $20,211 (see Note 11 to
the Consolidated Financial Statements and Exhibit 10(f)). The
Company has a corresponding long-term asset that is available
to fund the liability. The obligation for the Deferred Compen-
sation Plan is $2,399 (see Exhibit 10(g)). The obligation for
the FY2005 Mid-Term Incentive and Retention Plan is $210 (see
Note 7 to the Consolidated Financial Statements and Exhibit
10(x)).
(f) Consists solely of guarantees associated with properties that
have been subleased or assigned. The Company is not aware of
any non-performance under these arrangements that would
result in the Company having to perform in accordance with the
terms of those guarantees.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The Company prepares its Consolidated Financial
Statements in conformity with GAAP. The preparation
of these financial statements requires the Company
to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of
revenues and expenses during the reporting period
(see Note 2 to the Company’s Consolidated Financial
Statements). Actual results could differ from those
estimates. Critical accounting policies are those that
management believes are both most important to
the portrayal of the Company’s financial condition and
operating results, and require management’s most
difficult, subjective or complex judgments, often as a
result of the need to make estimates about the effect of
matters that are inherently uncertain. The Company
bases its estimates on historical experience, outside
advice from parties believed to be experts in such
matters, and on various other assumptions that are
believed to be reasonable under the circumstances,
the results of which form the basis for making judg-
ments about the carrying value of assets and liabilities
that are not readily apparent from other sources.
Judgments and uncertainties affecting the application
of those policies may result in materially different
amounts being reported under different conditions or
using different assumptions. The Company considers
the following policies to be most critical in under-
standing the judgments that are involved in preparing
its Consolidated Financial Statements.
IMPAIRMENT OF LONG-LIVED ASSETS AND
PROVISION FOR ASSET DISPOSITIONS
The Company assesses the impairment of long-lived
assets whenever events or changes in circumstances
indicate that the carrying value may not be recover-
able. Recoverability of assets is measured by
comparing the carrying value of the asset to the
undiscounted future cash flows expected to be gener-
ated by the asset. If the total expected future cash
flows are less than the carrying amount of the asset,
the carrying amount is written down to the estimated
fair value of an asset to be held and used or over
the fair value, net of estimated costs of disposal, of
an asset to be disposed of, and a loss resulting
from impairment is recognized by a charge to income.
Expected future cash flows are based on planning
estimates used for the Company’s related assets in
general and/or plans and objectives established for
the asset and responsible management specifically.
Judgments and estimates made by the Company
related to the expected useful lives of long-lived assets
are affected by factors such as changes in economic
conditions and changes in operating performance. As
the Company assesses the ongoing expected cash
flows and carrying amounts of its long-lived assets,
these factors could cause the Company to realize a
material impairment charge. During the third quarter
of 2005, the Company determined that an impairment