Cracker Barrel 2004 Annual Report Download - page 49

CBRL GROUP, INC.
Notes to Consolidated Financial Statements
(In thousands except share data)
1. DESCRIPTION OF THE BUSINESS
CBRL Group, Inc. and its affiliates (collectively, in the Notes, the “Company”) are principally engaged in the
operation and development in the United States of the Cracker Barrel Old Country Store® (“Cracker Barrel”) restaurant
and retail concept and the Logan’s Roadhouse® (“Logan’s”) restaurant concept. Logan’s has two non-affiliated area
development agreements and accompanying franchise agreements covering development of its concept in all or part
of five states. CBRL Group, Inc. Common Stock is traded on The Nasdaq Stock Market (National Market) under the
symbol CBRL.
2. RESTATEMENT OF FINANCIAL STATEMENTS
On February 17, 2005, the Company announced that it was restating certain prior financial results because
of changes it made in the way it accounted for leases. The decision to restate was made following a review of its
accounting policies that was prompted by views expressed on February 7, 2005 by the staff of the SEC (and similar
restatements by numerous other companies in the restaurant, retail and other industries) that indicated that the
manner in which the Company had been accounting for leases needed to be corrected.
Prior to this review, the Company had believed that its accounting was consistent with generally accepted
accounting principles. For purposes of recognizing rental expense, the Company had historically averaged its lease
payments over the base term of the lease, excluding the optional renewal periods and initial build-out periods,
during which it typically has not been required to make lease payments. For purposes of depreciating leasehold
improvements, the Company had historically amortized the amounts over a longer period, including both the base
term of the lease and the optional renewal periods.
The Company has now determined that the period in which rental expense is recognized on a straight-line,
or average, basis should include any pre-opening periods during construction for which the Company is legally
obligated under the terms of the lease, and any optional renewal periods, for which at the inception of the lease, it is
reasonably assured that the Company will exercise those renewal options. This lease period will be consistent with
the period over which leasehold improvements are amortized.
As a result, the Company has restated its historical consolidated financial statements for years ended July
30, 2004, August 1, 2003 and August 2, 2002. These effects are summarized below:
CBRL GROUP, INC.
CONSOLIDATED STATEMENT OF INCOME
(In thousands, except share data)
Total
Revenue
Operating
income
Income
before
income
taxes Net income
Basic net
income per
share
Diluted net
income per
share
Basic
weighted
average
shares
Diluted
weighted
average
shares
Year Ended July 30, 2004
As Previously Reported $2,380,947 $185,136 $176,697 $113,262 $2.32 $2.25 48,877,306 50,369,845
Lease Adjustment -- (2,149) (2,149) (1,377) (0.03) (0.02) -- --
As Restated $2,380,947 $182,987 $174,548 $111,885 $2.29 $2.23 48,877,306 50,369,845
Year Ended August 1, 2003
As Previously Reported $2,198,182 $174,081 $165,262 $106,529 $2.16 $2.09 49,274,373 50,998,339
Lease Adjustment -- (2,203) (2,203) (1,421) (0.03) (0.03) -- --
As Restated $2,198,182 $171,878 $163,059 $105,108 $2.13 $2.06 49,274,373 50,998,339
Year Ended August 2, 2002
As Previously Reported $2,071,784 $149,300 $142,531 $ 91,789 $1.69 $1.64 54,198,845 56,090,940
Lease Adjustment -- (2,090) (2,090) (1,345) (0.02) (0.03) -- --
As Restated $2,071,784 $147,210 $140,441 $ 90,444 $1.67 $1.61 54,198,845 56,090,940