Cracker Barrel 2004 Annual Report Download - page 58

2004 2003 2002
Net sales in Company-Owned stores:
Restaurant $1,892,487 $1,753,361 $1,645,696
Retail 486,433 443,397 424,949
Total net sales 2,378,920 2,196,758 2,070,645
Franchise fees and royalties 2,027 1,424 1,139
Total revenue $2,380,947 $2,198,182 $2,071,784
10. COMMITMENTS AND CONTINGENCIES
On September 8, 2004, Cracker Barrel agreed in principle to settle certain litigation alleging violations of the
Fair Labor Standards Act as well as allegations of discrimination in employment and public accommodations. The
total payment agreed by Cracker Barrel was $8,720 (including $3,500 accrued in 2001), in full satisfaction of all
claims, including attorneys’ fees and costs.
The Company and its subsidiaries are parties to other legal proceedings incidental to its business. In the
opinion of management, based upon information currently available, the ultimate liability with respect to these other
actions will not materially affect the Company's Consolidated Financial Statements.
The Company makes trade commitments in the course of its normal operations. As of July 30, 2004 the
Company was contingently liable for approximately $7,497 under outstanding trade letters of credit issued in
connection with purchase commitments. These letters of credit have terms of three months or less and are used to
collateralize obligations to third parties for the purchase of a portion of the Company's imported retail inventories.
Additionally, the Company was contingently liable pursuant to standby letters of credit as credit guarantees to
insurers. As of July 30, 2004, the Company had $17,830 of standby letters of credit related to workers'
compensation and commercial general liability insurance. All standby letters of credit are renewable annually.
The Company is secondarily liable for lease payments under the terms of an operating lease that has been
assigned to a third party. The operating lease has a remaining life of approximately 9.2 years with annual lease
payments of $361. The Company's performance is required only if the assignee fails to perform the obligations as
lessee. At this time, the Company has no reason to believe that the assignee will not perform and, therefore, no
provision has been made in the accompanying consolidated financial statements for amounts to be paid as a result
of non-performance by the assignee.
The Company also is secondarily liable for lease payments under the terms of another operating lease that
has been sublet to a third party more than one year ago. The operating lease has a remaining life of approximately
12.2 years with annual lease payments of $96. The Company's performance is required only if the sublessee fails to
perform the obligations as lessee. The Company has a liability of $447 in the accompanying consolidated financial
statements for estimated amounts to be paid in case of non-performance by the sublessee.
The Company maintains insurance coverage for various aspects of its business and operations. The Company has
elected, however, to retain all or a portion of losses that occur through the use of various deductibles, limits and
retentions under its insurance programs. This situation may subject the Company to some future liability for which it is
only partially insured, or completely uninsured. The Company intends to mitigate any such future liability by continuing
to exercise prudent business judgment in negotiating the terms and conditions of its contracts. See Note 3 for a further
discussion of insurance and insurance reserves.
As of July 30, 2004, the Company operated 141 Cracker Barrel stores and 51 Logan’s Roadhouse restaurants from
leased facilities and also leased certain land and advertising billboards (see Note 12). These leases have been
classified as either capital or operating leases. The interest rates for capital leases vary from 5% to 17%. Amortization
of capital leases is included with depreciation expense. A majority of the Company's lease agreements provide for
renewal options and some of these options contain escalation clauses. Additionally, certain store leases provide for
percentage lease payments based upon sales volume in excess of specified minimum levels.
The following is a schedule by year of future minimum lease payments under capital leases, together with the
present value of the minimum lease payments as of July 30, 2004:
Year
2005 $ 235
2006 235
2007 124
2008 43
2009 --
Total minimum lease payments 637
Less amount representing interest 81
Present value of minimum lease payments 556
Less current portion 189
Long-term portion of capital lease obligations $ 367