Cracker Barrel 2009 Annual Report Download - page 61

59
counts. Physical inventory counts are conducted throughout
the third and fourth quarters of the fiscal year based upon
a cyclical inventory schedule. An estimate of shrinkage
is recorded for the time period between physical inventory
counts by using a three-year average of the physical
inventories’ results on a store-by-store basis.
Property and equipment – Property and equipment are
stated at cost. For financial reporting purposes, depreciation
and amortization on these assets are computed by use
of the straight-line and double-declining balance methods
over the estimated useful lives of the respective assets,
as follows:
Years
Buildings and improvements 30-45
Buildings under capital leases 15-25
Restaurant and other equipment 2-10
Leasehold improvements 1-35
Depreciation expense was $57,706, $56,149 and
$55,331 for 2009, 2008 and 2007, respectively. Accelerated
depreciation methods are generally used for income
tax purposes.
Capitalized interest, excluding discontinued operations,
was $445, $682 and $890 for 2009, 2008 and 2007,
respectively.
Gain or loss is recognized upon disposal of property and
equipment and the asset and related accumulated
depreciation and amortization amounts are removed from
the accounts.
Maintenance and repairs, including the replacement of
minor items, are charged to expense and major additions to
property and equipment are capitalized.
Impairment of long-lived assets – The Company assesses
the impairment of long-lived assets whenever events or
changes in circumstances indicate that the carrying value
may not be recoverable. Recoverability of assets is
measured by comparing the carrying value of the asset to
the undiscounted future cash flows expected to be
generated by the asset. If the total expected future cash
flows are less than the carrying amount of the asset, the
carrying amount is written down to the estimated fair value
of an asset to be held and used or the fair value, net of
estimated costs of disposal, of an asset to be disposed of,
and a loss resulting from impairment is recognized by a
charge to income. Judgments and estimates made by the
Company related to the expected useful lives of long-lived
assets are affected by factors such as changes in economic
conditions and changes in operating performance. The
accuracy of such provisions can vary materially from
original estimates and management regularly monitors the
adequacy of the provisions until final disposition occurs.
The Company incurred impairment charges in 2009 and
2008. These impairments were recorded based upon the
lower of unit carrying amount or fair value less costs to
sell. The fair values were determined based upon estimates
provided by outside parties using market comparables.
During 2009, the Company incurred impairment charges of
$2,088. During 2009, one owned Cracker Barrel store was
determined to be impaired, resulting in charges of $933.
This store was impaired due to lower cash flow projections.
Additionally, during 2009, the Company recorded a total
impairment of $1,155 on office space, property adjacent to
the office space and the Company’s management trainee
housing facility. The decision to impair these properties
was due to changes in the Company’s planned use of
these properties.
During 2008, the Company incurred impairment and
store closing costs resulting from the closing of Cracker
Barrel stores. In 2008, the Company closed one leased
Cracker Barrel store and one owned Cracker Barrel store,
which resulted in impairment charges of $532 and store
closing charges of $345. The decision to close the leased
store was due to its age, the expiration of the lease and
the proximity of another Cracker Barrel store. The decision
to close the owned location was due to its age, expected
future capital expenditure requirements and changes in
traffic patterns around the store over the years. The store
closing costs, which included employee termination
benefits and other costs, are included in the impairment
and store closing costs line on the Consolidated Statement
of Income. At August 1, 2008, no liability was recorded for
store closing costs. The financial information related to all
restaurants closed in 2008 is not material to the Company’s
consolidated financial position, results of operations
or cash flows, and, therefore, have not been presented as
discontinued operations.
6948Financials.qxd:Layout 1 10/6/09 3:10 PM Page 59