Cracker Barrel 2009 Annual Report Download - page 46

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food items prepared to our specifications, our food items
are based on generally available products, and if any
existing suppliers fail, or are unable to deliver in
quantities required by us, we believe that there are
sufficient other quality suppliers in the marketplace that
our sources of supply can be replaced as necessary. We
also recognize, however, that commodity pricing is
extremely volatile and can change unpredictably and over
short periods of time. Changes in commodity prices would
affect us and our competitors generally, and depending
on the terms and duration of supply contracts, sometimes
simultaneously. We enter into supply contracts for certain
of our products in an effort to minimize volatility of
supply and pricing. In many cases, or over the longer
term, we believe we will be able to pass through some
or much of the increased commodity costs by adjusting
our menu pricing. From time to time, competitive
circumstances, or judgments about consumer acceptance
of price increases, may limit menu price flexibility, and
in those circumstances increases in commodity prices can
result in lower margins, as happened to us in 2008.
RECENT ACCOUNTING PRONOUNCEMENTS
Fair Value Measurements
In September 2006, the Financial Accounting Standards
Board (“FASB”) issued Statement of Financial Accounting
Standards (“SFAS”) No. 157, “Fair Value Measurements”
(“SFAS No. 157”). SFAS No. 157 defines fair value,
establishes a framework for measuring fair value and
expands disclosures about fair value measurements for
financial assets and liabilities, as well as any other assets
and liabilities that are carried at fair value on a recurring
basis in the financial statements. Effective August 2,
2008, the first day of 2009, we adopted SFAS No. 157 on
a prospective basis. The adoption of SFAS No. 157
resulted in a $5,809 decrease in our interest rate swap
liability related to non-performance risk, in the first
quarter of 2009, with the offset reflected in accumulated
other comprehensive loss, net of the deferred tax asset,
on our consolidated balance sheet. See Note 3 to our
Consolidated Financial Statements for additional
information on our fair value measurements and Note 6
to our Consolidated Financial Statements for additional
information on our interest rate swap.
In February 2008, the FASB issued FASB Staff Position
(“FSP”) FAS No. 157-2, “Effective Date of FASB Statement
No. 157” (“FSP FAS No. 157-2”), which deferred the
effective date of SFAS No. 157 as it applies to certain
nonfinancial assets and liabilities to fiscal years
beginning after November 15, 2008. The deferral applies
to such items as nonfinancial long-lived asset groups
measured at fair value for an impairment assessment.
We elected the deferral for nonfinancial assets and
liabilities under FSP FAS No. 157-2. We do not expect the
adoption of FSP FAS No. 157-2 in the first quarter of
2010 will have a significant impact on our consolidated
financial statements.
In April 2009, the FASB issued FSP FAS No. 107-1 and
APB No. 28-1, “Interim Disclosures about Fair Value of
Financial Instruments” (“FSP FAS No. 107-1 and APB No.
28-1”), which amends SFAS No. 107, “Disclosures about
Fair Value of Financial Instruments” to require disclosures
about fair value of financial instruments for interim
reporting periods of publicly traded companies as well as
in annual financial statements. It also amends Accounting
Principles Board (“APB”) Opinion No. 28-1, “Interim
Financial Reporting” to require those disclosures in
summarized financial information at interim reporting
periods. FSP FAS No. 107-1 and APB No. 28-1 is effective
for interim reporting periods ending after June 15, 2009.
The adoption of FSP FAS No. 107-1 and APB No. 28-1
in the fourth quarter of 2009 had no impact on our
consolidated financial statements.
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