Cracker Barrel 2005 Annual Report Download

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Lebanon Charlotte Lancaster Jackson Fairmont Shelbyville Birmingham
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Seffner Pelham Charleston Kerrville Concord Perry Altoona Missoula Piqua
2005 Annual Report
CBRL Group, Inc. 2005 Annual Report

Table of contents

  • Page 1
    ... Saltillo Nashville Beaumont Decatur Alcoa Cleveland Sanford Calvert Gulfport Louisville Peoria Memphis Batesville Yuma Flagstaff Okemos Livonia 2005 Annual Report Amarillo Clarksville Elgin Janesville Lansing Cambridge Joplin Greenville Tampa Morton Alpharetta Summerville Traverse City Weatherford...

  • Page 2
    ...Report for CBRL Group, Inc. are just some of the cities and towns we call home. We're proud to be a part of these communities and hope that, if you happen to be passing through the neighborhood, you'll stop in to say hello to any one of the friendly, dedicated employees you'll meet at Cracker Barrel...

  • Page 3
    ... by family and friends, and staying true to your roots. From there, you can move forward, venture into new places, meet new people, and try out new things to see what fits. At CBRL Group, Inc. we find the same is true when it comes to our , two restaurant concepts, Cracker Barrel Old Country Store...

  • Page 4
    ... hardly a Cracker Barrel location in Florida that wasn't affected. The call went out for help, and Cracker Barrel employees nationwide responded. Supplies were gathered and sent to our Retail Distribution Center in Lebanon, Tennessee. Hundreds of tubs were filled with food, batteries, toothbrushes...

  • Page 5
    ...® Franchised As of July 29, 2005 Unless specifically noted otherwise, 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...

  • Page 6
    ... sales and the opening of 25 new Cracker Barrel units and 17 company-operated and three franchised Logan's restaurants. • Cracker Barrel recorded its sixth consecutive year of comparable store restaurant sales increases, and Logan's its fourth of sales being either flat or increased. CBRL Group...

  • Page 7
    ... out and, importantly in our Cracker Barrel stores, non-essential retail purchases. There have been several past periods in 15.6% (12.4% excluding the effect of last year's settlement charge) reflecting the revenue increase, margin performance, a lower tax rate and our ongoing share repurchase...

  • Page 8
    .... For the 15th year in a row, Cracker Barrel was named "Best Family Dining Chain in America" by Restaurants and Institutions magazine's annual "Choice in Chains" consumer survey. The rating categories are there for all to see, such as Food Quality, Menu Variety, Value and Service. However, the one...

  • Page 9
    ...We hired outside experts to analyze guest behavior following past price changes. We identified opportunities to adjust prices in those items with low sensitivity and put a new menu in test. We then studied guest traffic and product mix in Retail is critical to our success at Cracker Barrel. It sets...

  • Page 10
    ...make the retail purchase decision easier on our guest by having desirable products at a good value, just as we try to do with the food we serve in the restaurant. And, we have had some successes. Our sponsorship of the Alison Krauss and Union Station tour and the exclusive "Home on the Highways" CD...

  • Page 11
    .... Every day some 75,000 dedicated employees report to work at Cracker Barrel and Logan's, eager and proud to give our guests a great dining or retail experience. Whether it's engaging the guests in the dining room, preparing the food in the kitchen, or working behind the scenes at the home offices...

  • Page 12
    C r a c k e r B a r r e l 's P e c a n P a n c a k e B r e a k f a s t

  • Page 13
    Cracker Barrel Old Country Store 11

  • Page 14
    ...and dinners made from scratch following traditional recipes, but also one of the best breakfasts you'll find anywhere-all day, every day. We think it's our uncompromising commitment to service that keeps a daily average of over 1,100 guests coming to a typical Cracker Barrel location, day in and day...

  • Page 15
    ... A RO L I N A One morning, a regular guest in Charlotte, North Carolina, stood up from her usual seat, Table 241, to pay her check. Along the way, and for no particular reason, she decided she wanted to pay someone else's bill, too. So she told the cashier that she'd pay for a man sitting nearby at...

  • Page 16
    Cracker Barrel Old Country Store 14

  • Page 17
    ... pancakes. Over the years, we've expanded these offerings by featuring new items like our Homestyle Chicken, which now has a permanent home on our core menu. This year, we continued our "Best Practices" tradition by bringing our seasonal retail promotions strategy to our restaurant, introducing new...

  • Page 18

  • Page 19
    ... pick up some supplies and spend time gathered around a checkerboard or in a comfortable rocker, exchanging news and catching up on each other's lives. This is the experience we attempt to offer guests and was the foundation of the first store we opened alongside Highway 109 in Lebanon, Tennessee...

  • Page 20
    ...RY S T O R E N O . 4 4 2 L A N C A S T E R , PA Typically when we open a new Cracker Barrel location, we worry about how easy it is for cars to get to our parking lot from the highway. But when opening our Lancaster, Pennsylvania location, we were preoccupied with something else-where to set up the...

  • Page 21
    Cracker Barrel Old Country Store Back in 1991, Restaurants & Institutions magazine surveyed thousands of consumers to rate some of the nation's largest restaurant chains, looking for the ones folks considered the best. We surprised a few people that year by being named best in family dining. But it...

  • Page 22
    . H a l f R e s t a u r a n t. H a l f S t o r e. A l l C o u n t r y® . 20

  • Page 23
    ...a short drive down Interstate 40 from Music City, USA (a.k.a. Nashville, Tennessee). So it's no surprise that music has been an essential part of our lives-whether as a welcomed companion playing over the hi-fi, or as part of the growing Cracker Barrel Old Country Store Music Catalog . And this year...

  • Page 24

  • Page 25
    C r a c k e r B a r r e l 's S u m m e r t i m e C h i c k e n G r i l l

  • Page 26
    ... our same store sales growth, like testing a redesign of our restaurant layout to optimize our table set-up for better, more efficient service. And we'll continue to seek out new ways to expand our appeal over time, so that our new friends feel just as much at home at Cracker Barrel as we hope...

  • Page 27
    ... I N I A If you're ever driving through wild, wonderful West Virginia and see a car drive by with a license plate that reads "ILUVCBRL," we hope you'll give Phil Daniel a wave. We can just about guarantee that he'll wave back. Phil is one of our General Managers and perhaps one of the nicest people...

  • Page 28
    T h e R e a l A m e r i c a n R o a d h o u s e. SM

  • Page 29
    ... most dramatic changes were among appetizers where 75% of the items are now new or improved, including our Smokin' Hot Grilled Wings, Lightnin' Hot Shrimp Bucket and San Antonio Chicken Wrap. In fact, we were recognized by Nation's Restaurant News with their MenuMasters Award for "Best Menu Revamp...

  • Page 30

  • Page 31
    Logan's Kickin' Appetizers and Entrees

  • Page 32
    ...radio in about half the company-operated stores. But all this effort to broaden our appeal and reach new audiences means nothing if we can't deliver on the promises we make. That's where we turn to more than 11,000 hard-working Logan's employees to make sure guests feel at home, so they can see that...

  • Page 33
    ... was because he had become a regular of sorts during his nine-week stint. But then he observed something interesting. "I always saw [the staff] treat new people and strangers with exactly the same quick, courteous service." Although Joe's business in Jackson is finished, he wrote to let us know that...

  • Page 34
    ...,459 55,026,846 Cracker Barrel Logan's company-operated Logan's franchised COMPARABLE STORE SALES (b) : 529 124 23 504 107 20 480 96 16 457 84 12 437 75 8 Average Unit Annual Sales: Cracker Barrel restaurant Cracker Barrel retail Memo: Cracker Barrel number of stores in comparable base Logan...

  • Page 35
    ... lawsuits against the Company's Cracker Barrel Old Country Store, Inc. ("Cracker Barrel") subsidiary (see Note 10 to the Company's Consolidated Financial Statements). (d) Includes charges of $33,063 before taxes, principally as a result of exiting the Carmine Giardini's Gourmet Marketâ„¢ business...

  • Page 36
    ... for development and the Company's ability to identify such sites; the ability of the Company to open and operate new locations successfully; changes in foreign exchange rates affecting the Company's future retail inventory purchases; commodity, workers' compensation, group health and utility price...

  • Page 37
    ...of new store openings is excluded. Percentage of restaurant sales by day-part assists management in identifying the breakdown of sales provided by meals served for breakfast, lunch or dinner. This measure not only provides a financial measure of revenues by type of meal, but also assists operational...

  • Page 38
    ..., benefited from the opening of 25, 24 and 23 Cracker Barrel stores in 2005, 2004 and 2003, respectively, and the opening of 17, 11 and 12 company-operated and 3, 4 and 4 franchised Logan's restaurants in 2005, 2004 and 2003, respectively. Average weekly sales (net sales divided by operating weeks...

  • Page 39
    ... 2003 to 2004 was due to higher menu pricing, lower hourly labor, including wage rates and decreased workers' compensation and group health costs offset partially by increases in manager wages and bonuses versus the prior year. Other Store Operating Expenses Interest expense increased to $8,693 in...

  • Page 40
    ...25, "Accounting for Stock Issued to Employees." SFAS No. 123R requires that the cost of employee services received in exchange for equity instruments issued or liabilities incurred are recognized in the financial statements. Compensation cost will be measured using a fair-value-based method over the...

  • Page 41
    ... may from time to time, operate with negative working capital. Restaurant inventories purchased through the Company's principal food distributor are on terms of net zero days, while restaurant inventories purchased locally generally are financed from normal trade credit. Retail inventories purchased...

  • Page 42
    ... the credit rating of the Notes is reduced by Moody's and Standard and Poor's to or below both Ba3 and BB-, respectively; or 4) certain specified corporate events. The Company's closing share price, as reported by Nasdaq, on July 29, 2005 was $39.17. The holders of the Senior Notes had the option to...

  • Page 43
    ... 26 new Cracker Barrel stores and 22-24 new Logan's restaurants and openings that will occur during 2006, as well as for acquisition and construction costs for locations to be opened in early 2007. Management believes that cash at July 29, 2005, along with cash generated from the Company's operating...

  • Page 44
    ... and promotional calendar changes, our best estimate of usage for food, supplies and other operating needs and services is ratably over either the notice period or the remaining life of the contract, as applicable, unless we had better information available at the time related to each contract...

  • Page 45
    ... include employer tax credits for items such as FICA taxes paid on employee tip income, Work Opportunity and Welfare to Work credits, as well as estimates related to certain depreciation and capitalization policies. These estimates are made based on the best available information at the time of...

  • Page 46
    ... that time the Company will increase its liability for gift cards and certificates to offset the reduction to this same liability when the card was redeemed. LEGAL PROCEEDINGS In addition to the litigation discussed in Note 10 to the Company's Consolidated Financial Statements in the Annual Report...

  • Page 47
    ... our website. They set the tone for our organization and include factors such as integrity and ethical values. Our internal control over financial reporting is supported by formal policies and procedures, which are reviewed, modified and improved as changes occur in business condition and operations...

  • Page 48
    ... TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF CBRL GROUP, INC.: We have audited management's assessment, included in the accompanying Management's Report on Internal Control over Financial Reporting, that CBRL Group, Inc. and subsidiaries (the "Company") maintained effective internal control over...

  • Page 49
    ..., 2005 expressed an unqualified opinion on management's assessment of the effectiveness of the Company's internal control over financial reporting and an unqualified opinion on the effectiveness of the Company's internal control over financial reporting. Nashville, Tennessee September 23, 2005 47

  • Page 50
    ...issued Common stock - 400,000,000 shares of $.01 par value authorized; 2005 - 46,619,803 shares issued and outstanding; 2004 - 48,769,368 shares issued and outstanding Additional paid-in capital Retained earnings Total shareholders' equity Total See Notes to Consolidated Financial Statements. $ 97...

  • Page 51
    ... Consolidated Statement of Income (In thousands except share data) Fiscal years ended July 29, July 30, August 1, 2005 2004 2003 Total revenue Cost of goods sold Gross profit Labor and other related expenses Other store operating expenses Store operating income General and administrative Operating...

  • Page 52
    ... 48,769,368 Cash dividends declared - $.48 per share Exercise of stock awards 1,921,354 Tax benefit realized upon exercise of stock options - Purchases and retirement of common stock (4,070,919) Net income - Balances at July 29, 2005 See Notes to Consolidated Financial Statements. $503 - 29 - (53...

  • Page 53
    ...to net cash provided by operating activities: Depreciation and amortization 67,321 Loss on disposition of property and equipment 3,654 Impairment 431 Accretion on zero-coupon contingently convertible senior notes 5,579 Tax benefits realized upon exercise of stock options 12,990 Changes in assets and...

  • Page 54
    ...% are valued using an average cost method. Valuation provisions are included for retail inventory obsolescence, returns and amortization of certain items. Store pre-opening costs - Start-up costs of a new store are expensed when incurred, with the exception of rent expense under operating leases, in...

  • Page 55
    ... to a Cracker Barrel store that was approved to relocate to a stronger site in the same market and recorded a charge of $431 in other store operating expenses. Operating leases - The Company has ground leases and office space leases that are recorded as operating leases. Most of the leases have rent...

  • Page 56
    ... on return history and sales levels. Initial fees received from a franchisee to establish a new franchise are recognized as income when the Company has performed all of its obligations required to assist the franchisee in opening a new franchise restaurant, which is generally upon the opening of...

  • Page 57
    ... no stock-based compensation cost is reflected in net income for grants of stock options to employees because the Company grants stock options with an exercise price equal to the market value of the stock on the date of grant. The reported stock-based compensation expense, net of related tax effects...

  • Page 58
    ... 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 59
    ...,640 $111,885 $105,108 Add: Interest and loan acquisition costs associated with Senior Notes, net of related tax effects 4,330 4,485 4,408 Net income available to common shareholders $130,970 $116,370 $109,516 Net income per share denominator: Weighted average shares outstanding for basic net income...

  • Page 60
    ...Omnibus Plan, non-employee directors are granted annually on the day of the annual shareholders meeting an option to purchase up to 5,000 shares of the Company's common stock, or awards of up to 2,000 shares of restricted stock or restricted stock units. If an option is granted, the option price per...

  • Page 61
    ... rate of 33% per year and expire ten years from the date of grant. In 1989, 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...

  • Page 62
    ... imposed by the Internal Revenue Code, upon exercise of non-qualified stock options in an amount equal to the difference between the option price and the fair market value of the common stock on the date the option is exercised. These tax benefits, when realized, are credited to additional paid...

  • Page 63
    ... evaluate the Cracker Barrel and Logan's restaurant and retail components in determining how to allocate resources and in assessing performance. Accordingly, the Company manages its business on the basis of one reportable operating segment. All of the Company's operations are located within the...

  • Page 64
    ..., the Company operated 148 Cracker Barrel stores and 62 Logan's Roadhouse restaurants in 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...

  • Page 65
    ... operating leases for billboards for each of the three years was: Minimum Contingent Total 2005 2004 2003 $23,374 23,042 22,811 - - - $23,374 23,042 22,811 11 EMPLOYEE SAVINGS PLANS The Company sponsors a qualified defined contribution retirement plan ("Plan I") covering salaried and hourly...

  • Page 66
    ... Retired, Senior Vice President and Chief Financial Officer, Cracker Barrel Old Country Store, Inc. Stanley T. Warner Regional Vice President/Restaurant Operations Carol L. Norman Vice President/General Merchandise Manager Thomas R. Pate Vice President/Management Training and Development Michael...

  • Page 67
    ... annual meeting of shareholders will be held at 10:00 a.m. Tuesday, November 22, 2005, at the Cracker Barrel Old Country Store offices on Hartmann Drive, Lebanon, Tennessee. There were 13,289 shareholders of record as of September 23, 2005. DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN CBRL Group...

  • Page 68
    ... Fogelsville Cartersville Emporia Morristown Anderson Mt. Laurel Cross Lanes Austin Burleson Fredericksburg Texarkana Jonesboro Lubbock North Charleston Rock Hill Durham Franklin Chattanooga Madison Ferguson Summerville Junction City St. Joseph Belleville Roanoke Forest Park Fresno McDonough Ashland...