Cracker Barrel 2006 Annual Report Download - page 59

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57
other factors which are outside the control of the
Company and generally are unpredictable. Changes in
commodity prices would affect the Company and its
competitors generally and, depending on terms and
duration of supply contracts, sometimes simultane-
ously. 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 circumstances or judgments
about consumer acceptance of price increases
may limit menu price flexibility, and in those circum-
stances, increases in commodity prices can result in
lower margins for the Company.
Use of estimates – Management of the Company
has made certain estimates and assumptions relating
to the reporting of assets and liabilities and the
disclosure of contingent liabilities at the date of the
Consolidated Financial Statements and the reported
amounts of revenues and expenses during the
reporting periods to prepare these Consolidated
Financial Statements in conformity with GAAP.
Management believes that such estimates have been
based on reasonable and supportable assumptions
and that the resulting estimates are reasonable for
use in the preparation of the Consolidated Financial
Statements. Actual results, however, could differ
from those estimates.
Recent Accounting Pronouncements Not Yet Adopted –
In June 2006, the FASB issued Interpretation No. 48,
“Accounting for Uncertainty in Income Taxes — an
interpretation of FASB Statement No. 109” (“FIN 48”),
which clarifies the accounting for uncertainty in
income taxes recognized in financial statements in
accordance with FASB No. 109, “Accounting for
Income Taxes.” FIN 48 prescribes a recognition thresh-
old and measurement attribute for the financial
statement recognition and measurement of a tax posi-
tion taken or expected to be taken in a tax return.
The provisions of FIN 48 are effective for fiscal years
beginning after December 15, 2006, with the
cumulative effect of the change in accounting principle
recorded as an adjustment to opening retained earn-
ings. The Company is currently evaluating the impact
of adopting FIN 48 and cannot yet determine the
impact of its adoption in the first quarter of 2008.
3INVENTORIES
Inventories were comprised of the following at:
July 28, July 29,
2006 2005
Retail $ 97,799 $101,604
Restaurant 19,930 21,588
Supplies 20,447 19,612
Total $138,176 $142,804
4CONSOLIDATED NET INCOME PER SHARE
AND WEIGHTED AVERAGE SHARES
Basic consolidated net income per share is computed
by dividing consolidated net income by the weighted
average number of common shares outstanding for the
reporting period. Diluted consolidated net income per
share reflects the potential dilution that could occur if
securities, options or other contracts to issue common
stock were exercised or converted into common stock.
Additionally, diluted consolidated net income per
share is calculated excluding the after-tax interest and
financing expenses associated with the Senior Notes
(as described in Notes 2 and 6) since these Senior
Notes are treated as if converted into common 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, July 29, July 30,
2006 2005 2004
Net income per share numerator:
Net income $116,291 $126,640 $111,885
Add: Interest and loan
acquisition costs
associated with
Senior Notes, net
of related tax effects 3,977 4,330 4,485
Net income available
to common
shareholders $120,268 $130,970 $116,370
Net income per share denominator:
Weighted average
shares outstanding
for basic net
income per share 42,917,319 47,791,317 48,877,306
Add potential dilution:
Senior Notes 4,582,788 4,582,788 4,582,788
Stock options and
restricted stock 544,333 1,007,902 1,492,539
Weighted average
shares outstanding
for diluted net
income per share 48,044,440 53,382,007 54,952,633