Cracker Barrel 2005 Annual Report Download - page 6

To Our Shareholders:
4
It has been said that success in business comes not
from how well you execute Plan A, but how well you
adapt to Plan B. That clearly applies to fiscal 2005.
The good news is that we had another successful
year. We achieved solid diluted net income per share
growth, generated substantial cash flow from
operations, reinvested in the future growth of the
business, and returned capital to shareholders
through increased share repurchases and dividends.
Still, the year didn’t go according to plan.
Fortunately, our planning discipline helped us to
respond to the surprises and overcome a lot of
unexpected challenges.
Last year, in my letter to you, I remarked on how
we dealt with an extraordinary commodity cost
environment and the early stages of a squeeze on
consumers’ discretionary incomes led by high
gasoline and energy prices. In fiscal 2005, while
commodity costs did not continue to escalate as
they did in the prior year, they generally stayed at
very high levels. And consumer discretionary income
continues to be under pressure from high gasoline
prices and the expectation of high home-heating costs
this winter. With the possible added pressures of
high mortgage payments and, recently, new car pay-
ments, mounting evidence points to consumers
allocating greater parts of their budgets to higher
fixed expenditures.
Adding to the unplanned challenges of fiscal
2005, we experienced three major hurricanes in the
first quarter, and two accounting changes that
required us, and dozens of other companies in our
and other industries, to restate prior financial results.
We also saw pressures from new state-mandated
minimum wage increases, a potential trend that thus
far we have been able to mitigate with local
menu price increases. But, while we were able to react
successfully to some challenges, and we benefited
from other external factors such as retroactive
restoration of certain tax credits, we frankly didn’t
do as well as we would have liked in some areas,
such as retail sales performance.
Dealing with the unexpected is a basic part
of business, however, and we are pleased with
the net results for fiscal 2005 in the face of so
many challenges:
•Net revenue increased 7.8%, to $2.6 billion, on
increases in both Cracker Barrel Old Country Store
(“Cracker Barrel”) and Logan’s Roadhouse
(“Logan’s”) comparable store restaurant 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, Inc. Revenue Growth
$3,000
$2,500
$2,000
$1,500
$1,000
$500
$0
$ Millions
Cracker Barrel Restaurant Logan’s
Cracker Barrel Retail Carmine’s
20052001 2002 2003 2004
Fiscal Year