Cracker Barrel 2006 Annual Report Download

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Cracker Barrel Checkers Pecan Pancakes Candy Made-From-Scratch Travelers & Neighbors
Fireplace Apple Cider Rockers Grand Ole Opry®Front PorchEggs-In-The-Basket
Chicken n’ Dumplins Biscuits Golden DeliciousApples ChocolateCobbler Pleasing People
Sweet Whole Baby Carrots Harmonica Good Country Cookin’
Sunrise Sampler®Farm Raised Catfish Cracker Jack®Oil Lamp Old-Fashioned Lemonade
Meatloaf Yankee Candle®Smokehouse Breakfast®Corn Muffins Slinky®Raspberry Iced Tea
Jacks Lebanon, Tennessee Coca-Cola®Fried Okra Florida Orange Juice Turkey n’ Dressing
Chicken n’Dumplins Blackberry Cobbler Filling Mashed Potatoes
Homemade Macaroni n’ Cheese Baked Apple Dumplin Chow Chow Relish Turnip Greens
Chicken Pot Pie Grade A Eggs MoonPie®Preserves Fried Apples Antiques Apple Butter
Front Porch John Deere®Good Country Cookin’ Sweet Tea American Music LegendsTM
Thick Sliced Bacon Charles Chips®Highway109Breakfast Roast Beef 1969
Quilts Wild Maine Blueberry Pancakes French Toast Coffee Checkers MoonPie®Licorice
Turnip Greens Sugar Cured Ham Peg Game Hashbrown Casserole
Beans n’ Greens Smoked Sausage Front Porch Buttermilk Biscuits
Meatloaf Peach Cobbler Filling Corn Muffins Grilled Pork Chops
Sourdough Toast Comfort Food Kazoo Quilts Grits Slinky®
Uncle Herschel’s Favorite®Yankee Candle®Fried Okra Country Fried Steak Highway 109
Heritage Music Baked Apple Dumplin Freestone Peach Buttermilk Biscuits Dumplins
Hickory Smoked Country Ham Sourdough Toast Jacks Apple Cider Blackberry Cobbler
Oil Lamp Pancakes Grits Whole Kernel Corn Turnip Greens BLT Sandwich
American Music LegendsTM Meatloaf Sunday Homestyle Chicken Licorice Chicken n’ Rice
Tootsie Roll® Charles Chips®Country Chef Salad 1969 Cracker Jack®Front Porch Puzzles
Eggs-In-The-Basket Country Ham Harmonica Fried Apples Country Store Peanut Brittle
100
%
Pure Maple Syru Antiques Roast Beef Biscuits Peg Game
Vidalia Onion Rings Raspberry Lemonade Frozen Mug Sundaes Dubble Bubble®Candy
Beans n’ Greens Mashed Potatoes Country Chef Salad Pinto Beans Jacks Books-On-Audio
Good Country Cookin’ Cherry Cobbler Filling Whole Kernel Corn Buttermilk Biscuits
Grade A Eggs Florida Grapefruit Juice Tootsie Roll®Made-From-Scratch Friday Fish Fry
Macaroni n’ Cheese Farm Raised Catfish Antiques Front PorchFrench Toast
Country Green Beans Grand Ole Opry®Quilts Buttermilk Pancakes Thick Sliced Bacon
Montmorency Cherry John Deere®Sugar Cured Ham Frozen Mug Sundaes Apple Butter
Grits Lodge Logic®Cast Iron Oil Lamp Licorice Slinky®Puzzles Rockers Sourdough Toast
Peanut Brittle Coca-Cola®Meatloaf Raspberry Iced Tea Travelers & Neighbors
Pecan Pancakes Chicken Pot Pie Florida Orange Juice Marion Blackberry Pleasing People
2006 Annual Report
100
%
Pure Maple Syrup

Table of contents

  • Page 1
    ... Fried Apples Antiques Apple Butter Front Porch John Deere ® Good Country Cookin' Sweet Tea American Music Legends Thick Sliced Bacon Charles Chips® Breakfast Roast Beef 1969 Quilts Wild Maine Blueberry Pancakes French Toast Coffee Checkers MoonPie® Licorice Turnip Greens Sugar Cured Ham Peg Game...

  • Page 2
    ...of this year's Annual Report for CBRL Group, Inc. are just a few of the countless authentic goods, nostalgic wares and menu favorites we offer our guests at Cracker Barrel Old Country Store® - along with some of the many places, histories and ideals that have combined to create the heritage that we...

  • Page 3
    ...-from family recipes for buttermilk biscuits and Homestyle Chicken, to lots of great nostalgic products like Slinky and Cracker Jack , to even a simple road sign that reads "Welcome to Lebanon, Tennessee"-is what makes Cracker Barrel Old Country Store such a unique concept in the restaurant industry...

  • Page 4
    ... American towns and communities had just one store for miles and miles, often called the general store or country store. Horse-drawn wagons would arrive here from far off, carrying goods and provisions packed in burlap sacks, boxes and-especially for more perishable items like crackers-big wooden...

  • Page 5
    ... 28, 2006 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 and gift shop concept...

  • Page 6
    ...CBRL Group, Inc. Revenue Growth commodity environment moderated, and we actually benefited from lower chicken, pork and dairy prices. Modest menu price increases allowed us to manage $2,000 $1,500 $1,000 $500 $0 2002 2003 2004 Fiscal Year 2005 2006 Cracker Barrel Restaurant Cracker Barrel Retail...

  • Page 7
    ... as we opened 21 new Cracker Barrel Old Country Store ("Cracker Barrel") locations and 20 new company-operated and two franchised Logan's Roadhouse ("Logan's") restaurants. • Diluted net income per share of $2.50 was up 2.0% in spite of having to expense stock options for the first time and absorb...

  • Page 8
    ... operational performance with the management of capital structure in order to grow shareholder value. In early fiscal 2006, we realized it was important to review our capital structure in light of industry developments as well as the favorable capital market conditions. Working with our financial...

  • Page 9
    ... shares, secured financing at favorable market rates, and expect to complete the divestiture of Logan's during our second quarter. We also had a number of unplanned changes. In July, Cy Taylor, President and Chief Operating Officer of Cracker Barrel, announced his plan to retire. As a 28-year...

  • Page 10
    ...and upgraded the quality of the products. We continue to introduce products unique to Cracker Barrel, including our collegiate rockers and a new line of designer quilts. We have added a Vice President, General Merchandise Manager and a Vice President of Retail Planning and Allocation, to ensure that...

  • Page 11
    ... customers are dedicated country music fans. Country music and Cracker Barrel are a natural fit. Since the beginning, our guests have enjoyed hearing country songs in our dining rooms, retail stores and on our front porches. We've been honored on our exclusive music label to feature Alison Krauss...

  • Page 12

  • Page 13
    Su nri s e S a m ple r Bre a k f a s t ®

  • Page 14
    Cracker Barrel Old Country Store 99 9, ba ck in 1 6 . 10 y a w h ig Jus t o ff H

  • Page 15
    ... timeless yet completely new every time loyal guests or new friends visit. In 2006, we highlighted this by exhibiting new Seasonal Store Decorations on our front porch and interior-to promote the new, brand-appropriate meals and retail products you'd find at Cracker Barrel each and every season. 13

  • Page 16
    ..., like working with a small, family supplier to bake traditional sourdough bread for our French toast, or serving only Florida Valencia orange juice and Florida grapefruit juice? Well, when you're known for offering one of the best country breakfasts around, all day, every day, we think it pays to...

  • Page 17
    ...Difference That's 100% Pure. Did you know that Cracker Barrel Old Country Store is the only major restaurant chain we know of that serves its guests 100% pure maple syrup? And when you consider the fact that we offer homemade country breakfasts all day, every day, that's bound to be a lot of maple...

  • Page 18

  • Page 19
    ...Voice Response phone surveys about their visit. Today, store managers receive monthly reports to help them constantly improve guest experiences. While Cracker Barrel has always been about letting folks relax, we take the speed of our service very seriously. This year, we tested a new Kitchen Display...

  • Page 20

  • Page 21
    Me a t l o a f Di n n e r

  • Page 22
    ... start offering them for sale in our retail store. And Ollie kept delivering. Today, Qualls and Sons still drill, stamp and pack our Peg Games by hand, even though we sell nearly 500,000 every year. But most of all, that handcrafted quality has become one of our best-known ways of saying "Welcome."

  • Page 23
    ... Hymns for the Journey CD has sold more than 97,000 copies to date. We also added compilations, like Cracker Barrel's Songs of the Year, featuring classic and current artists performing songs that have won Song of the Year from the Grammy Awards TM ® the Country Music Association or the Academy...

  • Page 24
    ... we've learned that the key to running a retail store, just like a restaurant, is keeping things fresh. So, year in and year out, we work hard to continually evaluate our selection of retail products and to improve our inventory management process by identifying Best Practices on the store level and...

  • Page 25
    Cracker Barrel Old Country Store

  • Page 26
    ... n t r y. TM From a single store in Lebanon, Tennessee, Cracker Barrel Old Country Store has grown to include 543 locations around the country. It's something that we could not have accomplished without the dedication and hard work of our Cracker Barrel family-all 62,000 of them-who made every one...

  • Page 27
    ...because we spend months every year hunting for hidden gems and forgotten memories at flea markets and fairs across the country-then painstakingly cleaning, repairing and restoring them. Often, it's a piece of community history-like the genuine soap box racer that hangs in our Akron, Ohio store (that...

  • Page 28

  • Page 29
    C h i c k e n n' D u m p l i n s P l a t t e r

  • Page 30
    ...spending. Our business is seasonal. We face intense competition, and if we are unable to continue to compete effectively, our business, financial condition and results of operations would be adversely affected. Our plans depend significantly on initiatives designed to improve the efficiencies, costs...

  • Page 31
    ... may increase our costs and decrease our profit margins. We depend on key personnel for our success. The price and availability of food, ingredients and utilities used by our restaurants or merchandise sold in our retail shop could adversely affect our revenues and results of operations. Our heavy...

  • Page 32
    ...Common shares outstanding at end of year STORES OPEN AT END OF YEAR: 30,926,906 46,619,803 48,769,368 47,872,542 50,272,459 Cracker Barrel Logan's company-operated Logan's franchised AVERAGE UNIT VOLUMES (b) : 543 141 25 529 124 23 504 107 20 480 96 16 457 84 12 Cracker Barrel restaurant...

  • Page 33
    ...Barrel Old Country Store, Inc. ("Cracker Barrel") subsidiary. MARKET PRICE AND DIVIDEND INFORMATION The following table indicates the high and low sales prices of the Company's common stock, as reported by the NASDAQ Global Market (NASDAQ), and dividends paid. Fiscal Year 2006 Prices Low Dividends...

  • Page 34
    ... estate locations for new restaurants, in Management uses a number of key performance measures to evaluate the Company's operational and financial performance, including the following: Comparable store sales and traffic consist of sales and calculated number of guests, respectively, of units open...

  • Page 35
    ..., and the opening of 20, 17 and 11 company-operated and 2, 3 and 4 franchised Logan's restaurants in 2006, 2005 and 2004, respectively, partially offset by the closing of 7 Cracker Barrel stores and 3 company-owned Logan's restaurants in February 2006. Average weekly sales (net sales divided by...

  • Page 36
    ... to 2006 was due to higher average menu prices versus the prior year and lower workers' compensation expense and group health costs partially offset by higher hourly wages and store management salaries versus the prior year. The year to year decrease from 2004 to 2005 was due to lower bonuses under...

  • Page 37
    ... volatility using only its historical share price performance over the expected life of the option. However, under SFAS No. 123R the expected volatility is estimated using a blend of implied volatility based on market-traded options on the Company's common stock and historical volatility of the...

  • Page 38
    share-based compensation arrangements that is expected to be recognized over a weighted-average period of 2.10 years. No restricted stock grants vested during 2006. Rental Costs In October 2005, the Financial Accounting Standards Board (the "FASB") issued Staff Position No. FAS 13-1, "Accounting ...

  • Page 39
    ... caused by weather, production problems, delivery difficulties and other factors which are outside the control of the Company and which are generally unpredictable. Four food categories (beef, dairy (including eggs), pork and poultry) account for the largest shares of the Company's food purchases at...

  • Page 40
    ...'s Investor Service ("Moody's") changed the Company's outlook to "developing" when the Review was disclosed. Subsequently in March 2006, Moody's downgraded the Company's corporate family rating to Ba1 from Baa3, resulting from the Company's entering into the 2006 Credit Facility. At that time, Moody...

  • 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
    ... be related to the acquisition of sites and construction of 19-20 new Cracker Barrel stores and openings that will occur during 2007, as well as for acquisition and construction costs for locations to be opened in 2008. Due to the uncertain timing of a possible Logan's divestiture, the Company is...

  • Page 43
    ... 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 44
    ... Barrel management trainee housing facility. As of July 28, 2006, the Company had sold three Cracker Barrel stores and one Logan's restaurant and expects the sale of the remaining four owned properties to be completed within one year. The store closing charges included employee termination benefits...

  • Page 45
    ... 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 the provision and historical experience. The Company files its income tax returns many months after its year end...

  • Page 46
    ... opinion of management, however, based upon information currently available, the ultimate liability with respect to these actions will not materially affect the Company's consolidated results of operations or financial position. The Company reviews outstanding claims and proceedings internally and...

  • Page 47
    ... included review of the documentation of controls, evaluation of the design effectiveness of controls, testing of the operating effectiveness of controls and a conclusion on this evaluation. We have concluded that our internal control over financial reporting was effective as of July 28, 2006, based...

  • Page 48
    ...the Company changing the method in which it accounts for share-based compensation. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Company's internal control over financial reporting as of July 28, 2006...

  • Page 49
    ... opinions. A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management, and other...

  • Page 50
    ... share data) July 28, July 29, 2006 2005 ASSETS Current Assets: Cash and cash equivalents Property held for sale Receivables Inventories Prepaid expenses Deferred income taxes Total current assets Property and Equipment: Land Buildings and improvements Buildings under capital leases Restaurant...

  • Page 51
    ...thousands except share data) Fiscal years ended July 28, July 29, July 30, 2006 2005 2004 Total revenue Cost of goods sold Gross profit Labor and other related expenses Impairment and store closing charges (see Note 2) Other store operating expenses Store operating income General and administrative...

  • Page 52
    ... - Change in fair value of interest rate swap, net of tax benefit of $2,691 (See Notes 2 and 6.) - Total comprehensive income - Cash dividends declared - $.52 per share - Share-based compensation - Exercise of stock awards 1,057,103 Tax benefit realized upon exercise of stock options - Purchases and...

  • Page 53
    ... on zero-coupon contingently convertible senior notes Share-based compensation Excess tax benefit from share-based compensation Changes in assets and liabilities: Receivables Inventories Prepaid expenses Other assets Accounts payable Taxes withheld and accrued Income taxes payable Accrued employee...

  • Page 54
    ...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...

  • Page 55
    ... Barrel management trainee housing facility. As of July 28, 2006, the Company had sold three Cracker Barrel stores and one Logan's restaurant and expects the sale of the remaining four owned properties to be completed within one year. The store closing charges included employee termination benefits...

  • Page 56
    ... analysis derived from actual group health claims payment experience provided by the Company's third party administrator. The Company's accounting policies regarding insurance reserves include certain actuarial assumptions or management judgments regarding economic conditions, the frequency and...

  • Page 57
    ... 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 58
    ... No. 131, "Disclosure About Segments of an Enterprise and Related Information." SFAS No. 131 requires that a public company report annual and interim financial and descriptive information about its reportable operating segments. Operating segments, as defined, are components of an enterprise about...

  • Page 59
    ... stock. The Senior Notes, outstanding employee and director stock options and restricted stock issued by the Company represent the only dilutive effects on diluted net income per share. The following table reconciles the components of the diluted net income per share computations: July 28, 2006...

  • Page 60
    ... to pay for the shares accepted in the Tender Offer, fees associated with the 2006 Credit Facility and the related transaction costs. The $200,000 Delayed-Draw Term Loan facility can be used any time prior to October 27, 2007 to refinance the Company's Senior Notes or for general corporate purposes...

  • Page 61
    .... In addition, each $1 (face value at maturity) Senior Note is convertible into 10.8584 shares of the Company's common stock (approximately 4.6 million shares in the aggregate). During the quarter ended April 28, 2006, the Company's credit ratings decreased below the thresholds defined in the...

  • Page 62
    ... Plan are required to be at least 100% of the fair market value of a share of the Company's common stock based on the closing price on the day the option is granted. Under the Omnibus Plan, nonemployee directors are granted annually on the day of the annual shareholders meeting an option to purchase...

  • Page 63
    ... 2005 Dividend yield range Expected volatility range Risk-free interest rate range Expected lives (in years) 1.1% -1.3% 33% - 38% 3.3% -4.1% 5 Under the Black-Scholes option-pricing model, the Company estimated volatility using only its historical share price performance over the expected life of...

  • Page 64
    ... cost related to unvested share-based compensation arrangements that is expected to be recognized over a weighted-average period of 2.10 years. No restricted stock grants vested during 2006. During 2006, cash received from options exercised was $27,283 and the actual tax benefit realized for the tax...

  • Page 65
    ... 2005 and in the future. Upon meeting the stock ownership levels at an earlier date than required and upon approval by the Committee, the Company will award unrestricted shares to those certain officers on the first Monday of the next fiscal year. The Stock Ownership Plan reward is expensed over the...

  • Page 66
    ... evaluates 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 67
    ..., 2006, the Company operated 153 Cracker Barrel stores and 73 Logan's Roadhouse restaurants in leased facilities and also leased certain land and advertising billboards (see Note 14). These leases have been classified as either capital or operating leases. The interest rates for capital leases vary...

  • Page 68
    ... for up to 20 additional years and have certain financial covenants related to fixed charge coverage for the leased units. At July 28, 2006 and July 29, 2005, the Company was in compliance with all those covenants. Net rent expense during the initial term is $14,963 annually, and the assets sold and...

  • Page 69
    .... (public relations firm) William H. Crayton Vice President/Retail Planning and Allocation Bart F. Vig Regional Vice President/Restaurant Operations Erik Vonk(d) Chairman and Chief Executive Officer, Gevity HR, Inc. (human resources services management firm) Craig R. Davis Vice President/General...

  • Page 70
    ...at the Cracker Barrel Old Country Store offices on Hartmann Drive, Lebanon, Tennessee. There were 12,503 shareholders of record as of September 29, 2006. DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN CBRL Group, Inc. offers shareholders a Dividend Reinvestment and Common Stock Purchase Plan. If you...

  • Page 71
    © 2006 CBOCS Properties, Inc.

  • Page 72
    ... Pie Sunday Homestyle Chicken Rockers Apple Butter Breakfast Hickory Smoked Country Ham 100% Pure Maple Syrup Vidalia Onion Rings Lodge Logic® Cast Iron Roast Beef Farm Raised Catfish Buttermilk Pancakes Pinto Beans Thick Sliced Bacon Biscuits American Music Legends Highway 109 French Toast Books...