Cracker Barrel 2006 Annual Report Download - page 43

41
(a) The Convertible Debt was issued at a discount representing a
yield to maturity of 3.00% per annum. The $196,464 balance is
the accreted carrying value of the debt at July 28, 2006. The
Convertible Debt will continue to accrete at 3.00% per annum
and if held to maturity on April 2, 2032 the obligation will
total $422,050. The balance on the Term Loan B is $723,000 at
July 28, 2006. Using the minimum principal payment schedule
on the Term Loan B and a 7.07% interest rate, which is the
same rate as the Company’s fixed rate under its interest rate
swap plus its current credit spread of 1.50%, the Company will
have interest payments of $52,310, $100,938, $98,650 and
$84,582 in 2007, 2008-2009, 2010-2011 and after 2011,
respectively. The Company had no amounts outstanding under
its variable rate Revolving Credit facility as of July 28, 2006.
The Company paid $1,001 in non-use fees (also known as
commitment fees) on the Revolving Credit facility during 2006.
Based on no outstanding revolver balance at July 28, 2006 and
the Company’s current unused commitment fee as defined in
the Revolving Credit Agreement, the Company’s unused commit-
ment fees in 2007 would be $2,086; however, the actual
amount will differ based on actual usage of the Revolving Credit
facility in 2007.
(b) Includes base lease terms and certain optional renewal periods
that have been exercised and are included in the lease term in
accordance with SFAS No. 13.
(c) Includes certain optional renewal periods that have not yet
been exercised, but are included in the lease term for the
straight-line rent calculation, since at the inception of the lease,
it is reasonably assured that the Company will exercise those
renewal options.
(d) Purchase obligations consist of purchase orders for food and
retail merchandise; purchase orders for capital expenditures,
supplies and other operating needs and other services; and
commitments under contracts for maintenance needs and other
services. We excluded long-term agreements for services and
operating needs that can be cancelled within 60 days without
penalty. We included long-term agreements for services and
operating needs that can be cancelled with more than 60 days
notice without penalty only through the term of the notice.
We included long-term agreements for services and operating
needs that can be cancelled with a penalty through the entire
term of the contract. Due to the uncertainties of seasonal
demands 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.
(e) Other long-term obligations include the Company’s Non-
Qualified Savings Plan ($24,860, with a corresponding long-
term asset to fund the liability; see Note 13 to the Consolidated
Financial Statements), Deferred Compensation Plan ($2,573),
FY2005 and FY2006 Mid-Term Incentive and Retention Plans
($422, cash portion only; see Note 9 to the Consolidated
Financial Statements), FY2004, FY2005 and FY2006 Long-Term
Retention Incentive Plans ($2,192) and FY2006 SOX Retention
Plan ($155).
(f) 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 and any term
loans under this facility mature April 27, 2013.
(g) Consists solely of guarantees associated with properties that
have been subleased or assigned. The Company is not aware of
any non-performance under these arrangements that would
result in the Company having to perform in accordance with the
terms of those guarantees.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The Company prepares its Consolidated Financial
Statements in conformity with GAAP. The preparation
of these financial statements requires the Company
to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of
revenues and expenses during the reporting period
(see Note 2 to the Company’s Consolidated Financial
Statements). Actual results could differ from those
estimates. Critical accounting policies are those that
management believes are both most important to
the portrayal of the Company’s financial condition and
operating results, and require management’s most
difficult, subjective or complex judgments, often as a
result of the need to make estimates about the effect
of matters that are inherently uncertain. The Company
bases its estimates on historical experience, outside
advice from parties believed to be experts in such
matters, and on various other assumptions that are
believed to be reasonable under the circumstances, the
results of which form the basis for making judgments
about the carrying value of assets and liabilities that
are not readily apparent from other sources. Judgments
and uncertainties affecting the application of those
policies may result in materially different amounts being
reported under different conditions or using different
assumptions. The Company considers the following
policies to be most critical in understanding the judg-
ments that are involved in preparing its Consolidated
Financial Statements.
IMPAIRMENT OF LONG-LIVED ASSETS
AND PROVISION FOR ASSET DISPOSITIONS
Property and Equipment
The Company assesses the impairment of long-lived
assets whenever events or changes in circumstances
indicate that the carrying value may not be recoverable.
Recoverability of assets is measured by comparing the
carrying value of the asset to the undiscounted future
cash flows expected to be generated by the asset. If
the total expected future cash flows are less than the
carrying amount of the asset, the carrying amount is
written down to the estimated fair value of an asset to
be held and used or the fair value, net of estimated
costs of disposal, of an asset to be disposed of, and a