Cracker Barrel 2005 Annual Report Download - page 7

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5
•Operating margins increased approximately 20 basis
points (from 7.7% of revenue to 7.9%) reflecting
non-recurrence of last year’s litigation settlement
charge, and were flat year-over-year excluding
that charge.
•Diluted net income per share of $2.45 was up
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 strategy.
•Cash flow from operating activities of $280 million
was up from $200 million in fiscal 2004, the fifth
consecutive year in which it exceeded outlays for
purchase of property and equipment (capital
expenditures) by more than $50 million.
•We returned cash to shareholders in the form of
$23 million in dividend payments and $159 million
in share repurchases, up 41% and 130%, respectively,
from fiscal 2004.
So, while not completely up to plan, the results
were improved, and we think nicely so especially
given a lot of external pressures. Let’s examine some
of those pressures.
GASOLINE PRICES ARE DEFINITELY A FACTOR
A year ago, nobody seriously imagined gasoline
selling for more than $3.00 a gallon. While certain
industry watchers have long contended that we
must be disproportionately affected by rising gasoline
prices because of our Cracker Barrel presence on
the interstate highways, historically we have observed
little if any correlation with our sales. The notable
exception was during the oil-embargo periods of the
1970s when gasoline shortages, high prices and
long lines at service stations reduced travel and, with
it, our sales. But, generally speaking, the American
consumer has adapted by making room for both SUVs
and dining out in spite of fluctuations in the
price of gasoline. Today is different, however, and we
clearly see the impact on our business and our
industry. The difference, we believe, is both psycho-
logical ($3.00 gasoline!) and real, as discretionary
income gets squeezed. Headlines predict that further
pressure can be expected this winter from greatly
increased home-heating costs. Something’s got to give.
It appears that what has to give, at least for
the near term, includes dining out and, importantly
in our Cracker Barrel stores, non-essential retail
purchases. There have been several past periods in
which consumers temporarily pulled back their
restaurant spending due to economic conditions.
However, long-term trends point to growth in
dining out as a fundamental part of our lifestyle.
We remain confident that the current situation is
temporary, but the unknowns are the degree to which
spending will recover and when recovery will occur.
20052001 2002 2003 2004
Fiscal Year
CBRL Group, Inc. Diluted Net Income
Per Share Growth(“EPS”)
$2.50
$2.00
$1.50
$1.00
$0.50
$0
$ EPS