Cracker Barrel 2009 Annual Report Download - page 60

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1DESCRIPTION OF THE BUSINESS
Cracker Barrel Old Country Store, Inc. and its affiliates
(collectively, in the Notes, the “Company”) are principally
engaged in the operation and development in the United
States of the Cracker Barrel Old Country Store®(“Cracker
Barrel”) restaurant and retail concept and, until December 6,
2006, the Logan’s Roadhouse®(“Logan’s”) restaurant
concept. The Company sold Logan’s on December 6, 2006
(see Note 16). As a result, Logan’s is classified as
discontinued operations for all periods presented in the
Consolidated Financial Statements. Effective December 8,
2008, the Company changed its name from “CBRL Group,
Inc.” to “Cracker Barrel Old Country Store, Inc.”
2SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GAAP – The accompanying Consolidated Financial Statements
have been prepared in accordance with generally accepted
accounting principles in the United States (“GAAP”).
Fiscal year – The Company’s fiscal year ends on the
Friday nearest July 31st and each quarter consists of
thirteen weeks unless noted otherwise. The Company’s fiscal
year ended August 3, 2007 consisted of 53 weeks and the
fourth quarter of 2007 consisted of fourteen weeks.
References in these Notes to a year or quarter are to the
Company’s fiscal year or quarter unless noted otherwise.
Principles of consolidation – The Consolidated Financial
Statements include the accounts of the Company and
its subsidiaries, all of which are wholly owned. All
significant intercompany transactions and balances have
been eliminated.
Financial instruments – The fair values of cash and
cash equivalents and deferred compensation plan assets
(included in other assets) are based on quoted market
prices. Accounts receivable and accounts payable at July 31,
2009 and August 1, 2008, approximate their carrying
amounts due to their short duration. The fair value of the
Company’s variable-rate Term Loan B, Delayed-Draw
Term Loan, and Revolving Credit facilities, based on quoted
market prices, totaled approximately $619,200 and
$728,677 on July 31, 2009 and August 1, 2008, respectively.
The estimated fair value of the Company’s interest rate
swap is the present value of the expected cash flows, which
is calculated by using the replacement fixed rate in the
then-current market, and incorporates the Company’s own
non-performance risk. See Note 3 for additional information
on the Company’s fair value measurements.
Cash and cash equivalents – The Company’s policy is
to consider all highly liquid investments purchased with
an original maturity of three months or less to be cash
equivalents.
Accounts receivable – Accounts receivable, net of the
allowance for doubtful accounts, represents their estimated
net realizable value. Provisions for doubtful accounts
are recorded based on historical collection experience and
the age of the receivables. Accounts receivable are written
off when they are deemed uncollectible.
Property held for sale – Property held for sale consists
of real estate properties that the Company expects to sell
within one year. The assets are reported at the lower of
carrying amount or fair value less costs to sell. Based on
current market conditions, the Company no longer expects
to sell any of its properties previously classified as held
for sale within a year. As a result, in the fourth quarter of
2009, the Company removed these properties from the
property held for sale classification and recorded the
properties as property and equipment in the Consolidated
Balance Sheet. At August 1, 2008, property held for sale
was $3,248 and consisted of closed Cracker Barrel stores.
Inventories – Inventories are stated at the lower of cost
or market. Cost of restaurant inventory is determined
by the first-in, first-out (“FIFO”) method. In 2009, due to
lower inventory levels at the Company’s retail distribution
center as compared to prior years, approximately 80% of
retail inventories were valued using the retail inventory
method and the remaining 20% were valued using an
average cost method. In prior years, approximately 70% of
retail inventories were valued using the retail inventory
method and the remaining 30% were valued using an
average cost method. Valuation provisions are included for
retail inventory obsolescence, returns and amortization
of certain items.
Cost of goods sold includes the cost of retail
merchandise sold at the Cracker Barrel stores utilizing the
retail inventory accounting method. It includes an estimate
of shrinkage that is adjusted upon physical inventory
CR AC KER BARR EL OLD COUN TRY STORE, I NC.
Notes to Consolidated Financial Statements
(In thousands except share data)
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