Cracker Barrel 2009 Annual Report Download - page 45

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credit spread at July 31, 2009 of 1.50%. The projected interest rate of
4.12% was estimated by using the average of the three-year and five-
year swap rates at July 31, 2009 plus our credit spread of 1.50%.
(c) The note payable consists of a five-year note with a vendor in the
original principal amount of $507 and represents the financing of
prepaid maintenance for telecommunications equipment. The note
payable is payable in monthly installments of principal and interest of
$9 through October 16, 2013 and bears interest at 2.88%. Principal
and interest payments for the note payable are included in the
contractual cash obligations and commitments table above.
(d) Includes base lease terms and certain optional renewal periods, for
which at the inception of the lease, it is reasonably assured that we
will exercise.
(e) 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 have excluded
contracts that do not contain minimum purchase obligations. We
excluded long-term agreements for services and operating needs that
can be cancelled within 60 days without penalty. We included long-
term agreements and certain retail purchase orders 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 only can be
cancelled in the event of an uncured material breach or 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.
(f) Other long-term obligations include our Non-Qualified Savings Plan
($22,583, with a corresponding long-term asset to fund the liability;
see Note 13 to the Consolidated Financial Statements), Deferred
Compensation Plan ($3,798), FY2007, FY2008 and FY2009 Long-Term
Retention Incentive Plans ($2,158), and FY2009 District Manager Long-
Term Performance Plan ($463).
(g) We did not have any outstanding borrowings under our Revolving Credit
Facility as of July 31, 2009. We paid $493 in non-use fees (also known
as commitment fees) on the Revolving Credit Facility during 2009.
Based on having no outstanding borrowings at July 31, 2009 and our
current unused commitment fee as defined in the Credit Facility, our
unused commitment fees in 2010 would be $545; however, the actual
amount will differ based on actual usage of the Revolving Credit
Facility in 2010.
(h) Consists solely of guarantees associated with properties that have been
assigned. We are not aware of any non-performance under these
arrangements that would result in us having to perform in accordance
with the terms of those guarantees.
Quantitative and Qualitative Disclosures
about Market Risk
We are exposed to market risk, such as changes in
interest rates and commodity prices. We do not hold or
use derivative financial instruments for trading purposes.
Interest Rate Risk. We have interest rate risk relative
to our outstanding borrowings under our Credit Facility.
At July 31, 2009, our outstanding borrowings under
our Credit Facility totaled $645,000 (see Note 5 to our
Consolidated Financial Statements). Loans under the
Credit Facility bear interest, at our election, either at
the prime rate or LIBOR plus a percentage point spread
based on certain specified financial ratios.
Our policy has been to manage interest cost using a
mix of fixed and variable rate debt (see Notes 5, 6, 9 and
18 to our Consolidated Financial Statements). To manage
this risk in a cost efficient manner, we entered into an
interest rate swap on May 4, 2006 in which we agreed to
exchange with a counterparty, at specified intervals
effective August 3, 2006, the difference between fixed
and variable interest amounts calculated by reference to
an agreed-upon notional principal amount. The swapped
portion of our outstanding debt is fixed at a rate of 5.57%
plus our current credit spread, or 7.07% based on today’s
credit spread, over the 7-year life of the interest rate swap.
See Note 6 to our Consolidated Financial Statements for
further discussion of our interest rate swap.
The impact on our annual results of operations of a
one-point interest rate change on the outstanding
balance of our unswapped outstanding debt as of July 31,
2009, would be approximately $554.
Commodity Price Risk. Many of the food products that
we purchase are affected by commodity pricing and are,
therefore, subject to price volatility caused by market
conditions, weather, production problems, delivery
difficulties and other factors which are outside our control
and which are generally unpredictable. Four food
categories (dairy (including eggs), beef, poultry and pork)
account for the largest shares of our food purchases at
approximately 14%, 12%, 11% and 10%, respectively.
Other categories affected by the commodities markets,
such as grains and seafood, may each account for as much
as 7% of our food purchases. While we have some of our
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