Cracker Barrel 2008 Annual Report Download

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Table of contents

  • Page 1

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    ... folks pictured in this 2008 Annual Report for CBRL Group, Inc. are the genuine article- each one is a welcomed guest or valued employee of Cracker Barrel Old Country Store ® . And we just wanted to thank them for taking a moment out of their busy day to make this year's annual report such a nice...

  • Page 3
    ... Service Restaurant, while the independent research firm W Ratings ranked us in the Top 10 Most Competitive Companies among U.S. consumers. As Cracker Barrel enters its 40th year of operations, we're already looking ahead to the next 40-and to welcoming plenty of travelers, neighbors and lots of new...

  • Page 4

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    ...references in this annual report to "CBRL" or "The Company" refer to CBRL Group, Inc. and its subsidiaries; to "Cracker Barrel" refer to Cracker Barrel Old Country Store, Inc. or its Cracker Barrel Old Country Store® restaurant and gift shop concept. Cracker Barrel Old Country Store®, The Greatest...

  • Page 6
    ... review our financial results for the past fiscal year. Revenue from continuing operations grew 1.4 percent to $2.38 billion as we opened 17 new Cracker Barrel Old Country Store® locations. Comparable store restaurant sales increased 0.5 percent (including the effect of a 3.6% menu price increase...

  • Page 7

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    ... environment and hot food. Another survey, by W Ratings, an independent competitive research firm, ranked Cracker Barrel in the top ten of the most competitive companies among US consumers. W Ratings identifies the best-performing companies through a patented method that blends financial data with...

  • Page 9
    ... positive performance because Cracker Barrel retail shops are not typically destination shopping places, and restaurant traffic slowed as consumers' purchasing power declined in 2008. We are seeing these positive results as implementation of our new retail strategy, developed over the past year...

  • Page 10
    ... well as sourcing and supply chain costs. One example is women's apparel where we now have a much better understanding of customer preferences, how to best source that product across various locations, and when to reorder. We have adopted a similar process to improve our pricing. Other actions that...

  • Page 11
    ... involved in reviewing our corporate citizenship policies and activities to make sure that we carry out our mission of "pleasing people," both inside and outside the four walls of our stores. Our executive team members, who have an average tenure of 23 years in the restaurant industry, concern...

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    We Started Out On Highway 109 In Tennessee, And Just Kept Going. In 1969, we got an idea. In the grand scheme of things, it was a pretty simple one: to open a country store and restaurant alongside the new interstate highway traveling through Lebanon, Tennessee. We figured we'd offer folks a clean, ...

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    ... generations, it's nice to know that our guests see Cracker Barrel as more than just a place to enjoy a traditional Roast Beef Dinner or breakfast served all day-it's a true experience you can't quite find anywhere else. We're Always Looking For New Ways To Say Welcome Back." This summer, we hosted...

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  • Page 21
    ... employees to use- like a new meatloaf cradle which makes it easier to lift the product out of the dish with less breakage, saving us over $500,000 a year in food waste. Putting Our Best Barrel Forward. In 2008, our "Best of the Barrel" menu test expanded to include 30 stores. This simplified menu...

  • Page 22

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  • Page 24
    ... on bringing in fresh retail products that aligned with our seasonal restaurant specials-like the apple ceramic dishes featured during our fall Apple Cheddar Chicken promotion-while also offering items that were uniquely Cracker Barrel. Welcoming Old Friends And New Faces. This year, we updated the...

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    25

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    ... among our hourly restaurant employees, hiring 1/3 fewer people in fiscal 2008-with eight months and counting of improved guest satisfaction scores. In fact, PeopleMetrics ranked Cracker Barrel's customer engagement among the highest in the industry, a great signal of how valued our guests feel...

  • Page 30
    © Simon & Schuster, Inc. Licensed by United Media

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    29

  • Page 32
    ... you add in locations like McAllen, Texas, which set an opening day sales record-not to mention a five-day restaurant and combined sales record-it gets even better. We think stores like these prove that the Cracker Barrel brand is as strong as ever. And that our ongoing development plans continue...

  • Page 33

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    ... you are encouraged to review that Annual Report on Form 10-K and all our SEC filings. RISKS RELATED TO OUR BUSINESS • • • • General economic and business conditions as well as those specific to the restaurant or retail industries that are largely out of our control may adversely affect...

  • Page 35
    ... open new restaurants that are profitable, our business could suffer. Individual restaurant locations are affected by local conditions that could change and affect the carrying value of those locations adversely. Health concerns and government regulation relating to the consumption of food products...

  • Page 36
    ... 69,206 Common shares outstanding at end of year Cracker Barrel stores open at end of year AVERAGE UNIT VOLUMES (k): 22,325,341 577 23,674,175 562 30,926,906 543 46,619,803 529 48,769,368 504 Cracker Barrel restaurant Cracker Barrel retail COMPARABLE STORE SALES (l): $ 3,282 898 $ 3,339...

  • Page 37
    ... composed of all companies listed with Nasdaq with the same two-digit SIC (Standard Industrial Classification) code (58-Eating and Drinking Places) as CBRL. The plotted points represent the closing price on the last day of the fiscal year indicated and the reinvestment of dividends. The data set...

  • Page 38
    ... 24, 2008, the Company operated 579 Cracker Barrel restaurants and gift shops located in 41 states. The restaurants serve breakfast, lunch and dinner. The retail area offers a variety of decorative and functional items specializing in rocking chairs, holiday gifts, toys, apparel and foods. Until...

  • Page 39
    ... product at Cracker Barrel stores and helps identify overall effectiveness of our retail operations. Management uses this measure to analyze a store's ability to convert restaurant traffic into retail sales since the substantial majority of our retail guests are also restaurant guests. Average check...

  • Page 40
    ... table highlights average weekly sales* over the past three years: 2008 2007 2006 Restaurant Retail $63.1 17.3 $63.0 17.3 $62.5 16.8 * Average weekly sales are calculated by dividing net sales by operating weeks and include all stores. Cost of Goods Sold Cost of goods sold as a percentage...

  • Page 41
    ... store hourly labor costs as a percentage of revenue versus the prior year and higher revenues driven by menu pricing. The increase in group health costs was due to higher medical and pharmacy claims and lower employee contributions. The decrease in restaurant and retail management bonus accruals...

  • Page 42
    ...driven by menu pricing and new unit openings. The decrease in incentive compensation accruals primarily reflected lower performance against financial objectives in 2008 versus 2007 and the non-recurrence of bonuses related to strategic initiatives and the additional share-based compensation recorded...

  • Page 43
    ... the timing of payments for estimated taxes. The increase in inventories is primarily due to higher retail receipts as compared with the prior year. During 2008, we repurchased 1,625,000 shares of our common stock in the open market at an aggregate cost of $52,380. On July 31, 2008, our Board of...

  • Page 44
    ... companies, we are able to, and often do operate with negative working capital. Restaurant inventories purchased through our principal food distributor are on terms of net zero days, while restaurant inventories purchased locally generally are financed from normal trade credit. Retail inventories...

  • Page 45
    ...07% interest rate is the same rate as our fixed rate under our interest rate swap plus our credit spread at August 1, 2008 of 1.50%. The projected interest rate of 5.68% was estimated by using the five-year swap rate at August 1, 2008 plus our credit spread of 1.50%. We had $3,200 outstanding under...

  • Page 46
    ... and are, therefore, subject to price volatility caused by market conditions, weather, production problems, delivery difficulties and other factors which are outside our control and which are generally unpredictable. Four food categories (dairy (including eggs), beef, poultry and pork) account for...

  • Page 47
    ...Insurance Reserves • Inventory Shrinkage • Tax Provision • Share-Based Compensation • Unredeemed Gift Cards and Certificates • Legal Proceedings Management has reviewed these critical accounting estimates and related disclosures with the Audit Committee of our Board of Directors. • fair...

  • Page 48
    ... group health claims payment experience provided by our third party administrator. Our accounting policies regarding insurance reserves include certain actuarial assumptions or management judgments regarding economic conditions, the frequency and severity of claims and claim development history...

  • Page 49
    ... 2008 retained earnings. Our estimates are made based on current tax laws, the best available information at the time of the provision and historical experience. We file our income tax returns many months after our year end. These returns are subject to audit by various federal and state governments...

  • Page 50
    ... period, discounted using an appropriate risk-free interest rate. All of our nonvested stock grants are time vested except the nonvested stock grants of one executive that also were based upon Company performance against a specified annual increase in earnings before interest, taxes, depreciation...

  • Page 51
    ..., the related uncertain tax positions taken regarding previously filed tax returns could decrease from those recorded as liabilities for uncertain tax positions in our financial statements at August 1, 2008 by approximately $3,400 to $4,000 within the next twelve months. As of August 1, 2008, we...

  • Page 52
    ... be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with GAAP. SFAS No. 162 is effective sixty days following the SEC's approval of the Public Company Accounting Oversight Board amendments to AU Section 411, "The Meaning of Present Fairly...

  • Page 53
    ... statements, as well as to safeguard assets from unauthorized use or disposition. Our control environment is the foundation for our system of internal control over financial reporting and is embodied in our Corporate Governance Guidelines, our Financial Code of Ethics, and our Code of Business...

  • Page 54
    ... of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the...

  • Page 55
    ... responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit...

  • Page 56
    ... Deferred income taxes Commitments and Contingencies (Note 14) Shareholders' Equity: Preferred stock - 100,000,000 shares of $.01 par value authorized; no shares issued Common stock - 400,000,000 shares of $.01 par value authorized; 2008 - 22,325,341 shares issued and outstanding; 2007 - 23...

  • Page 57
    ..., 2008 2007 2006 Total revenue Cost of goods sold Gross profit Labor and other related expenses Impairment and store closing charges Other store operating expenses Store operating income General and administrative expenses Operating income Interest expense Interest income Income before income taxes...

  • Page 58
    ... - Change in fair value of interest rate swap, net of tax benefit of $2,691 (See Notes 2 and 8) - Total comprehensive income - Cash dividends declared - $.52 per share - Share-based compensation - Exercise of stock awards 1,057,103 Tax benefit realized upon exercise of stock options - Purchases and...

  • Page 59
    ... of stock options Principal payments under long-term debt and other long-term obligations Purchases and retirement of common stock Dividends on common stock Excess tax benefit from share-based compensation Deferred financing costs Net cash used in financing activities of continuing operations Cash...

  • Page 60
    ... 30% are valued using an average cost method. Valuation provisions are included for retail inventory obsolescence, returns and amortization of certain items. Cost of goods sold includes the cost of retail merchandise sold at the Cracker Barrel stores utilizing the retail inventory accounting method...

  • Page 61
    ... held for sale consists of real estate properties that the Company expects to sell within one year. The assets are reported at the lower of carrying amount or fair value less costs to sell. At August 1, 2008, property held for sale was $3,248 and consisted of Cracker Barrel stores closed in 2008 and...

  • Page 62
    ...insurance for its primary group health program, but its offered benefits are limited to not more than $1,000 lifetime for any employee (including dependents) in the program, and, in certain cases, to not more than $100 in any given plan year. The Company records a liability for workers' compensation...

  • Page 63
    ... the year. Common equivalent shares related to stock options, nonvested stock and stock awards issued by the Company are calculated using the treasury stock method. During 2007, a portion of the Company's zero-coupon contingently convertible notes ("Senior Notes") were exchanged for a new issue...

  • Page 64
    ... the Senior Notes and New Notes, outstanding employee and director stock options and nonvested stock and stock awards issued by the Company represent the only dilutive effects on diluted consolidated net income per share. Share-based compensation - The Company has four share-based compensation plans...

  • Page 65
    ... the Company and its competitors generally and, depending on terms and duration of supply contracts, sometimes simultaneously. In many cases, the Company believes it will be able to pass through some or much of increased commodity costs by adjusting its menu pricing. From time to time, competitive...

  • Page 66
    ...the consideration was funded by a real estate sale-leaseback transaction, which required the Company to retain three Logan's restaurant locations at that time. The Company leased these three properties to Logan's under terms and conditions consistent with the sale-leaseback transaction. Two of these...

  • Page 67
    ...and common equivalent shares outstanding during the year. Common equivalent shares related to stock options and nonvested stock and stock awards issued by the Company are calculated using the treasury stock method. During 2007, a portion of the Company's Senior Notes was exchanged for New Notes (see...

  • Page 68
    ... common stock in the open market at an aggregate cost of $52,380. Related transaction costs and fees that were recorded as a reduction to shareholders' equity resulted in the shares being repurchased at an average cost of $32.23 per share. On July 31, 2008, the Company's Board of Directors approved...

  • Page 69
    ... added to the interest rates according to a defined schedule based on the Company's consolidated total leverage ratio as defined in the 2006 Credit Facility, 1.50% as of August 1, 2008 and August 3, 2007. The Company's policy is to manage interest cost using a mixture of fixed-rate and variable-rate...

  • Page 70
    ..., the Board adopted the Cracker Barrel Old Country Store, Inc. 1989 Stock Option Plan for Non-employee Directors ("Directors Plan"). The stock options were granted with an exercise price equal to the fair market value of the Company's common stock as of the date of grant and expire one year from the...

  • Page 71
    .... The option price per share will be at least 100% of the fair market value of a share of the Company's common stock based on the closing price on the day preceding the day the option is granted. Additionally, non-employee directors newly elected or appointed between an annual shareholders meeting...

  • Page 72
    ... to the Omnibus Plan, for the purpose of rewarding certain officers with shares of the Company's common stock if the Company achieved certain performance targets. During 2008, the 2008 LTPP was rescinded and replaced with discretionary cash bonuses for all non-executive team members to be paid...

  • Page 73
    ..., discounted using an appropriate risk-free interest rate. Certain nonvested stock grants accrue dividends and their fair value is equal to the market price of the Company's stock at the date of the grant. On August 1, 2008, the Company awarded 196,525 shares of stock less shares withheld for taxes...

  • Page 74
    ... for financial reporting purposes and the amounts used for income tax purposes. Provision computed at federal statutory income tax rate State and local income taxes, net of federal benefit Employer tax credits for FICA taxes paid on employee tip income Federal reserve adjustments Other employer tax...

  • Page 75
    ...product lines. The operating expenses of the restaurant and retail product lines of a Cracker Barrel unit are shared and are indistinguishable in many respects. Accordingly, the Company manages its business on the basis of one reportable operating segment. All of the Company's operations are located...

  • Page 76
    ... business judgment in negotiating the terms and conditions of its contracts. See Note 2 for a further discussion of insurance and insurance reserves. As of August 1, 2008, the Company operated 168 Cracker Barrel stores in leased facilities and also leased certain land and advertising billboards...

  • Page 77
    ...operating leases, excluding leases for advertising billboards, is recognized on a straight-line, or average, basis and includes any pre-opening periods The Company sponsors a qualified defined contribution retirement plan ("Plan I") covering salaried and hourly employees who have completed one year...

  • Page 78
    ... of approximately $2,707 annually. The gain on the sale is being amortized over the initial lease term of 21 years. 2008 Total revenue $581,165 $634,453 $567,138 Gross profit 400,937 410,718 386,550 Income before income taxes 21,170 31,095 13,527 Income from continuing operations 13,983 20,234...

  • Page 79
    ...and Tax and Chief Accounting Officer Deborah M. Evans Vice President, General Merchandise Manager/ Product Development Laura E. Murchison Regional Vice President, Retail Operations Nicholas V. Flanagan Vice President, Restaurant Operations Beth J. Quinn Regional Vice President, Retail Operations...

  • Page 80
    ... President, Corporate Communications, Inc., an investor/shareholder communications and public relations firm, Nashville, TN; Member of Compensation and Nominating and Corporate Governance Committees Jimmie D. White Retired; Senior Vice President - Finance and CFO of Cracker Barrel Old Country Store...

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    P.O. Box 787, Lebanon, TN 37088-0787 ©CBOCS Properties, Inc. 2008