Cracker Barrel 2009 Annual Report Download - page 43

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compliance with the Credit Facility’s financial covenants
for the remaining term of the facility.
Sale-leaseback Transactions
In the fourth quarter of 2009, we completed sale-
leaseback transactions involving 15 of our stores and our
retail distribution center. Under these transactions, the
land, buildings and improvements at the locations were
sold for pre-tax net proceeds of $56,260. The stores
and the retail distribution center have been leased back
for initial terms of 20 and 15 years, respectively.
Net proceeds from the sale-leaseback transactions, along
with excess cash from operations, were used to reduce
outstanding borrowings under the Credit Facility (See
“Borrowing Capacity and Debt Covenants” above). See
Note 9 to our Consolidated Financial Statements for
further information on our sale-leaseback transactions.
Share Repurchases, Dividends and Proceeds
from the Exercise of Options
On July 31, 2008, our Board of Directors approved share
repurchases of up to $65,000 of our common stock.
The principal criteria for share repurchases are that they
be accretive to expected net income per share, are within
the limits imposed by our Credit Facility and that they
be made only from free cash flow (operating cash flow
less capital expenditures and dividends) rather than
borrowings. During 2009, we did not make any share
repurchases owing to a suspension of our share
repurchase plans during the current economic climate.
During 2010, however, we have been authorized, and
intend, to repurchase shares to offset share dilution that
might result from employee option exercises or employee
share issuance.
Our Credit Facility imposes restrictions on the amount
of dividends we are able to pay. If there is no default
then existing and there is at least $100,000 then
available under our Revolving Credit Facility, we may
both: (1) pay cash dividends on our common stock if the
aggregate amount of such dividends paid during any
fiscal year is less than 15% of Consolidated EBITDA from
continuing operations (as defined in the Credit Facility)
during the immediately preceding fiscal year; and (2) in
any event, increase our regular quarterly cash dividend
in any quarter by an amount not to exceed the greater of
$.01 or 10% of the amount of the dividend paid in the
prior fiscal quarter.
During the first quarter of 2009, the Board declared a
quarterly dividend of $0.20 per common share (an annual
equivalent of $0.80 per share), an increase from the
quarterly dividend of $0.18 paid in 2008. We paid
dividends of $0.20 per share during the second, third and
fourth quarters of 2009. Additionally on September 11,
2009, the Board declared a dividend of $0.20 per share
payable on November 5, 2009 to shareholders of record
on October 16, 2009.
During 2009, we received proceeds of $4,362 from the
exercise of share-based compensation awards and the
corresponding issuance of 397,344 shares of our common
stock. The tax benefit realized upon exercise of share-
based compensation awards was $937.
Working Capital
We had negative working capital of $66,637 at July 31,
2009 versus negative working capital of $44,080 at
August 1, 2008. The change in working capital compared
with August 1, 2008 primarily reflected a reduction in our
retail inventories. In the restaurant industry,
substantially all sales are either for cash or third-party
credit card. Like many other restaurant companies, we
are able to, and often do operate with negative working
capital. Restaurant inventories purchased through our
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 domestically generally are financed from
normal trade credit, while imported retail inventories
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