Cracker Barrel 2008 Annual Report Download - page 61

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over the estimated useful lives of the respective assets,
as follows:
Years
Buildings and improvements 30-45
Buildings under capital leases 15-25
Restaurant and other equipment 2-10
Leasehold improvements 1-35
Depreciation expense was $56,149, $55,331 and
$56,030 for 2008, 2007 and 2006, respectively.
Accelerated depreciation methods are generally used for
income tax purposes.
Capitalized interest, excluding discontinued operations,
was $682, $890 and $384 for 2008, 2007 and 2006,
respectively.
Gain or loss is recognized upon disposal of property and
equipment and the asset and related accumulated
depreciation and amortization amounts are removed from
the accounts.
Maintenance and repairs, including the replacement of
minor items, are charged to expense and major additions to
property and equipment are capitalized.
Impairment of long-lived assets – The Company assesses
the impairment of long-lived assets whenever events or
changes in circumstances indicate that the carrying value
may not be recoverable. Recoverability of assets is
measured by comparing the carrying value of the asset to
the undiscounted future cash flows expected to be
generated 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 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. 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. The
accuracy of such provisions can vary materially from
original estimates and management regularly monitors the
adequacy of the provisions until final disposition occurs.
In 2008 and 2006, the Company incurred impairment
and store closing charges resulting from the closing
of Cracker Barrel stores. These impairments were recorded
based upon the lower of unit carrying amount or fair value
less costs to sell. In 2008, the Company closed one leased
Cracker Barrel store and one owned Cracker Barrel store,
which resulted in impairment charges of $532 and store
closing charges of $345. The decision to close the leased
store was due to its age, the expiration of the lease and
the proximity of another Cracker Barrel store. The decision
to close the owned location was due to its age, expected
future capital expenditure requirements and changes in
traffic patterns around the store over the years. During
2006, the Company closed seven Cracker Barrel stores,
which resulted in impairment charges of $3,795 and store
closing costs of $736. The locations were closed due to
weak financial performance, an unfavorable outlook and
relatively positive prospects for proceeds from disposition
for certain locations. Additionally, during 2006, the
Company recorded an impairment of $838 on its Cracker
Barrel management trainee housing facility. During 2007,
the Company did not incur any impairment losses or store
closing costs.
The Company expects to sell within one year the
property relative to the owned store closed in 2008 and the
two remaining owned properties relative to the 2006
store closures (see “Property held for sale” in this Note).
The store closing charges, which included employee
termination benefits and other costs, are included in the
impairment and store closing charges line on the
Consolidated Statement of Income. At August 1, 2008 and
August 3, 2007, no liability has been recorded for store
closing charges.
The financial information related to all restaurants
closed in 2008 and 2006 is not material to the Company’s
consolidated financial position, results of operations or
cash flows, and, therefore, have not been presented as
discontinued operations.
Property held for sale – Property 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 2006 (see
“Impairment of long-lived assets” in this Note). The