Cracker Barrel 2008 Annual Report Download - page 64

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common stock (see Notes 6 and 8). Following the
redemption of 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 for employees and non-
employee directors, which authorize the granting of stock
options, nonvested stock and other types of awards
consistent with the purpose of the plans (see Note 10). The
number of shares authorized for future issuance under the
Stock options granted under these plans are granted with
an exercise price equal to the market price of the
Company’s stock on the date immediately preceding the
date of the grant (except grants made to employees under
the Company’s 2002 Omnibus Incentive Compensation Plan,
whose exercise price is equal to the closing price on the
day of the grant); those option awards generally vest at a
cumulative rate of 33% per year beginning on the first
anniversary of the grant date and expire ten years from the
date of grant.
The Company accounts for share-based compensation
in accordance with SFAS No. 123 (Revised 2004), “Share-
Based Payment” (“SFAS No. 123R”), which requires the
measurement and recognition of compensation cost at fair
value for all share-based payments. Share-based
compensation cost is measured at the grant date based on
the fair value of the award and is recognized as expense
over the requisite service period. The Company’s policy is to
recognize compensation cost for awards with only service
conditions and a graded vesting schedule on a straight-line
basis over the requisite service period for the entire award.
Additionally, the Company’s policy is to issue new shares
of common stock to satisfy stock option exercises or grants
of nonvested and restricted shares.
Segment reporting – The Company accounts for its
segment in accordance with SFAS No. 131, “Disclosure
About Segments of an Enterprise and Related Information.”
SFAS No. 131 requires that a public company report annual
and interim financial and descriptive information about
its reportable operating segments. Operating segments, as
defined, are components of an enterprise about which
separate financial information is available that is evaluated
regularly by the chief operating decision maker in deciding
how to allocate resources and in assessing performance.
Utilizing these criteria, the Company manages its business
on the basis of one reportable operating segment (see
Note 13).
Derivative instruments and hedging activities – The
Company accounts for derivative instruments and hedging
activities in accordance with SFAS No. 133, “Accounting
for Derivative Instruments and Hedging Activities,” and
its subsequent amendments. These statements specify how
to report and display derivative instruments and hedging
activities.
The Company is exposed to market risk, such as changes
in interest rates and commodity prices. The Company does
not hold or use derivative financial instruments for trading
purposes.
The Company’s policy has been to manage interest cost
using a mix of fixed and variable rate debt (see Notes 8, 14
and 16). To manage this risk in a cost efficient manner,
the Company entered into an interest rate swap on May 4,
2006 in which it agreed to exchange with a counterparty,
at specified intervals effective August 3, 2006, the
difference between fixed and variable interest amounts
calculated by reference to an agreed-upon notional
principal amount. The interest rate swap was accounted for
as a cash flow hedge under SFAS No. 133. The swapped
portion of the Company’s outstanding debt is fixed at a rate
of 5.57% plus the Company’s then current credit spread,
or 7.07% based on our credit spread at August 1, 2008, over
the 7-year life of the interest rate swap.
The swapped portion of the outstanding debt or notional
amount of the interest rate swap is as follows:
From August 3, 2006 to May 2, 2007 $ 525,000
From May 3, 2007 to May 5, 2008 650,000
From May 6, 2008 to May 3, 2009 625,000
From May 4, 2009 to May 2, 2010 600,000
From May 3, 2010 to May 2, 2011 575,000
From May 3, 2011 to May 2, 2012 550,000
From May 3, 2012 to May 2, 2013 525,000
Company’s plansas of August 1, 2008 totals 1,522,306.