Cracker Barrel 2010 Annual Report Download

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2010
ANNUAL REPORT
A Country Tradition of
Home-Style Food,
Unique Shopping and
HONEST VALUE.
est. Lebanon, Tennessee 1969
2 0 1 02 0 1 0
HONEST VALUE.HONEST VALUE.

Table of contents

  • Page 1
    2010 ANNUAL REPORT A Country Tradition of Home-Style Food, Unique Shopping and HONEST VALUE. est. Lebanon, Tennessee 1969

  • Page 2

  • Page 3
    ... 1969, Cracker Barrel Old Country Store, Inc. has welcomed travelers and neighbors alike with genuine country hospitality. Here they can enjoy fresh, new takes on classic comfort foods in our restaurant, or browse through the fond memories and unexpected surprises of our authentic country store. It...

  • Page 4
    59 locations states family, friends and guests welcomed for Good Country Cookin' each and every day.

  • Page 5
    ... ...New York ...North Carolina ... 9 5 4 16 1 11 17 2 2 1 6 4 8 35 North Dakota ...Ohio ...Oklahoma ...Pennsylvania ...Rhode Island ...South Carolina ...South Dakota ...Tennessee ...Texas ...Utah ...Virginia ...West Virginia ...Wisconsin ... 1 31 7 21 1 22 1 50 43 4 30 10 5 As of July 30, 2010

  • Page 6
    WHO SAYS NEW FLAVORS AND OLD FAVORITES CAN ' T BE GOOD FRIENDS? With over Whether it's breakfast, lunch or dinner, 56,000,000 pancakes served every year, it's safe to say we really flip for breakfast. Good Value is always on our menu.

  • Page 7
    Summer Breakfast Specials Country Fried Steak

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  • Page 9
    ... at Cracker Barrel last year. With over 25 branded food products-from Coffee to Corn Muffin Mix, Apple Butter to Peppermint Tins-it's easy to take a bit of Cracker Barrel anywhere you're headed. MoonPies Peg Games have been made exclusively for Cracker Barrel over the past 41 years. Puzzling, isn...

  • Page 10
    A welcome break for Travelers on the road. 2 A friendly hello for Neighbors stopping by. 2 A tradition of Pleasing People since 1969. 2 ...All made possible by the more than 67,000 hard-working Cracker Barrel employees we're proud to call family. ®

  • Page 11

  • Page 12
    ...In Zagat's 2010 consumer survey, Cracker Barrel was chosen as having the best breakfast at a full-service restaurant. In another survey by a nationally recognized research firm, we were ranked as number one in family dining in all Cracker Barrel Old Country Store, Inc. Diluted Income Per Share From...

  • Page 13
    ... our unique family dining concept to a whole new level of sales and profitability. Cracker Barrel Old Country Store, Inc. Cash Flow From Operations and Capital Expenditures Dividends on Common Stock (in millions) Cracker Barrel Old Country Store, Inc. Dividend Outlays and Dividends Per Share $25...

  • Page 14
    ... the year, we opened net five new Cracker Barrel Old Country Store locations, expanding our chain to 593 units at year-end. We improved our operating margins to 6.8 percent, compared with 6.0 percent in 2009. Effective execution of our purchasing strategies led to a 2.5 percent reduction in our food...

  • Page 15
    ...to expand our share of the full-service restaurant industry. We can accomplish this by generating higher sales per store and then by gradually increasing the rate at which we open new stores. Once you have a successful operating model, you grow by building more restaurants. Adding new units, however...

  • Page 16
    ...higher productivity per employee is a key factor in improving our profit margins. Our food management processes, from the sourcing to the preparation of each menu offering to the management Living and Giving in the Community We always strive to do better. This includes Cracker Barrel's programs for...

  • Page 17
    ... this year. We continue to support the Tom Joyner Family Reunion® and to fund scholarship programs at two Historically Black Colleges and Universities: Spelman College in Atlanta, Georgia and Fisk University in Nashville, Tennessee. Cracker Barrel was a sponsor of the Florida ProStart Management...

  • Page 18
    Cracker Barrel Old Country Store, Inc. Directors Robert V. Dale Lead Director; Retired; President, Windy Hill Pet Food Company, Nashville, TN; Chairman of Nominating and Corporate Governance Committee; Member of Executive, Audit, and Compensation Committees B.F. (Jack) Lowery Attorney; Chairman ...

  • Page 19
    ... Financial Data Shareholder Return Performance Graph Management's Discussion and Analysis of Financial Condition and Results of Operations Management's Report on Internal Control Over Financial Reporting Report Of Independent Registered Public Accounting Firm Report Of Independent Registered Public...

  • Page 20
    ...price and availability of food, ingredients, merchandise and utilities used by our restaurants or merchandise sold in our retail shop could adversely affect our revenues and results of operations. • We are dependent on attracting and retaining qualified employees while also controlling labor costs...

  • Page 21
    ... new restaurants that are profitable, our business could suffer. • Individual restaurant locations are affected by local conditions that could change and adversely affect the carrying value of those locations. • Health concerns, government regulation relating to the consumption of food products...

  • Page 22
    ... Common shares outstanding at end of year Cracker Barrel stores open at end of year avEragE unIT vOLumES (k): 22,732,781 593 $ 3,226 832 22,722,685 588 $ 3,209 841 22,325,341 577 $ 3,282 898 23,674,175 562 $ 3,339 917 30,926,906 543 $ 3,248 876 Cracker Barrel restaurant Cracker Barrel retail...

  • Page 23
    ... companies listed with Nasdaq with the same two-digit SIC (Standard Industrial Classification) code (58-Eating and Drinking Places) as Cracker Barrel Old Country Store, Inc. The plotted points represent the closing price on the last day of the fiscal year indicated and the reinvestment of dividends...

  • Page 24
    ...21, 2010, the Company operated 595 Cracker Barrel restaurants and gift shops located in 41 states. The restaurants serve breakfast, lunch and dinner. The retail area offers a variety of decorative and functional items specializing in rocking chairs, holiday gifts, toys, apparel and foods. Restaurant...

  • Page 25
    ... per guest on restaurant purchases. This measure aids management in identifying trends in guest preferences as well as the effectiveness of menu price increases and other menu changes. Store operating margins are defined as total revenue less cost of goods sold, labor and other related expenses and...

  • Page 26
    ...hourly labor costs. The decrease in healthcare costs resulted from lower medical claims and the benefit of the calendar 2010 group health plan design changes. The decrease in store hourly labor costs as a percentage of total revenue was due to menu pricing being higher than wage inflation. The year...

  • Page 27
    ... accruals, including share-based compensation, which reflected better performance against financial objectives in 2010 as compared to the prior year. The year-to-year decrease from 2008 to 2009 was due in equal parts to lower manager trainee salaries resulting from lower manager turnover in 2009...

  • Page 28
    ...in incentive compensation accruals reflects better performance against financial objectives in 2010 as compared to the prior year. The change in retail inventories is primarily due to the timing of seasonal inventory purchases. The increase in net cash flow provided by operating activities from 2008...

  • Page 29
    ... 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...

  • Page 30
    .... material Commitments For reporting purposes, the schedule of future minimum rental payments required under operating leases, excluding billboard leases, uses the same lease term as used in the straight-line rent calculation. This term includes certain future renewal options although we are not...

  • Page 31
    ... 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...

  • Page 32
    ... that are involved in preparing our Consolidated Financial Statements. • Impairment of Long-Lived Assets and Provision for Asset Dispositions • Insurance Reserves • Inventory Valuation • Tax Provision • Share-Based Compensation • Unredeemed Gift Cards • Legal Proceedings 30

  • Page 33
    ... and Store Closing Charges" under the section entitled "Results of Operations" presented earlier in the MD&A. Insurance Reserves We self-insure a significant portion of our expected workers' compensation, general liability and health insurance programs. We purchase insurance for individual workers...

  • Page 34
    ... and local income tax rates, employer tax credits for items such as FICA taxes paid on employee tip income, Work Opportunity and Welfare to Work credits, as well as estimates related to certain depreciation and capitalization policies. We recognize (or derecognize) a tax position taken or expected...

  • Page 35
    ... schedule on a straight-line basis over the requisite service period for the entire award. Additionally, our policy is to issue new shares of common stock to satisfy exercises of share-based compensation awards. The fair value of each option award granted was estimated on the date of grant using...

  • Page 36
    ...to changes in share-based compensation expense that could be material. unredeemed gift Cards Unredeemed gift cards represent liabilities related to unearned income and are recorded at their expected redemption value. No revenue is recognized in connection with the point-of-sale transaction when gift...

  • Page 37
    ... use or disposition. Our control environment is the foundation for our system of internal control over financial reporting and is embodied in our Corporate Governance Guidelines, our Financial Code of Ethics, and our Code of Business Conduct and Ethics, all of which may be viewed on our website...

  • Page 38
    ... Registered Public accounting Firm To the Board of Directors and Shareholders of Cracker Barrel Old Country Store, Inc. Lebanon, Tennessee We have audited the accompanying consolidated balance sheets of Cracker Barrel Old Country Store, Inc. and subsidiaries (the "Company") as of July 30, 2010...

  • Page 39
    ... Registered Public accounting Firm To the Board of Directors and Shareholders of Cracker Barrel Old Country Store, Inc. Lebanon, Tennessee We have audited the internal control over financial reporting of Cracker Barrel Old Country Store, Inc. and subsidiaries (the "Company") as of July 30, 2010...

  • Page 40
    ...debt and capital lease obligations Taxes withheld and accrued Income taxes payable Accrued employee compensation Accrued employee benefits Deferred revenues Accrued interest expense Other accrued expenses Total current liabilities Long-term debt Capital lease obligations Interest rate swap liability...

  • Page 41
    ... thousands except share data) Fiscal years ended July 31, 2009 August 1, 2008 July 30, 2010 Total revenue Cost of goods sold Gross profit Labor and other related expenses Impairment and store closing charges Other store operating expenses Store operating income General and administrative expenses...

  • Page 42
    ...income Cash dividends declared - $.80 per share Share-based compensation Exercise of share-based compensation awards Tax benefit realized upon exercise of share-based compensation awards Purchases and retirement of common stock Balances at July 30, 2010 See Notes to Consolidated Financial Statements...

  • Page 43
    ... Purchases and retirement of common stock Deferred financing costs Dividends on common stock Excess tax benefit from share-based compensation Net cash used in financing activities of continuing operations Cash flows from discontinued operations: Net cash (used in) provided by operating activities...

  • Page 44
    ...method. In 2010, approximately 70% of retail inventories are valued using the retail inventory method ("RIM") and the remaining 30% are valued using an average cost method. In 2009, due to lower inventory levels at the Company's retail distribution center as compared to prior years, approximately 80...

  • Page 45
    ... swap was accounted for as a cash flow hedge. The swapped portion of the Company's outstanding debt is fixed at a rate of 5.57% plus the Company's credit spread over the 7-year life of the interest rate swap. The Company's weighted average credit spreads at July 30, 2010 and July 31, 2009 were 1.90...

  • Page 46
    ..., subject to price volatility caused by market conditions, weather, production problems, delivery difficulties and other factors that are outside the control of the Company and generally are unpredictable. Changes in commodity prices affect the Company and its competitors generally and, depending...

  • Page 47
    ... a loss development analysis derived from actual group health claims payment experience. The Company records a liability for workers' compensation and general liability for all unresolved claims and for an actuarially determined estimate of incurred but not reported claims at the anticipated cost to...

  • Page 48
    ...a schedule by year of the future minimum rental payments required under operating leases for advertising billboards as of July 30, 2010: Year • The Company uses historical data to estimate option exercise and employee termination behavior within the valuation model; separate groups of employees...

  • Page 49
    ...the weighted average number of common and common equivalent shares outstanding during the year. Common equivalent shares related to stock options and nonvested stock and stock awards issued by the Company are calculated using the treasury stock method. Outstanding employee and director stock options...

  • Page 50
    ... to be impaired. Fair value of the leased store was determined by using a cash flow model. Assumptions used in the cash flow model included projected annual revenue growth rates and projected cash flows and are impacted by economic conditions and management's expectations. The Company has determined...

  • Page 51
    ... available under the Revolving Credit Facility, the Company may both: (1) pay cash dividends on its common stock if the aggregate amount of dividends paid in any fiscal year is less than 15% of Consolidated EBITDA from continuing operations (as defined in the Credit Facility) during the immediately...

  • Page 52
    ...the restaurant and retail product lines of a Cracker Barrel store are shared and are indistinguishable in many respects. Accordingly, the Company manages its business on the basis of one reportable operating segment. All of the Company's operations are located within the United States. Total revenue...

  • Page 53
    ...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. Equipment was not included. 12 ShaRE-BaSED COmPEnSaTIOn Stock Compensation Plans The Company's employee compensation plans...

  • Page 54
    ... approved the Cracker Barrel Old Country Store, Inc. 1989 Stock Option Plan for Non-employee Directors ("Directors Plan"). Stock options granted under the Directors Plan had an exercise price equal to the fair market value of the Company's common stock on the date of grant and expire one year from...

  • Page 55
    ... compensation cost related to stock options that is expected to be recognized over a weighted-average period of 1.72 years. nonvested Stock A summary of the Company's nonvested stock activity as of July 30, 2010, and changes during 2010 is presented in the following table: 13 EmPLOYEE SavIngS PLanS...

  • Page 56
    ... at: July 30, 2010 July 31, 2009 Provision computed at federal statutory income tax rate State and local income taxes, net of federal benefit Employer tax credits for FICA taxes paid on employee tip income Other employer tax credits Section 162(m) non-deductible compensation Other-net Total income...

  • Page 57
    ... statutes of limitations for specific taxing jurisdictions, the related uncertain tax positions taken regarding previously filed tax returns could decrease from those recorded as liabilities for uncertain tax positions in the Company's financial statements at July 30, 2010 by approximately $3,000 to...

  • Page 58
    ... in negotiating the terms and conditions of its contracts. See Note 2 for a further discussion of insurance and insurance reserves. As of July 30, 2010, the Company operated 193 Cracker Barrel stores in leased facilities and also leased certain land and advertising billboards (see Notes 2 and 10...

  • Page 59
    ... 669 $ 40,312 34,464 32,693 The following is a schedule by year of the future minimum rental payments required under operating leases, excluding leases for advertising billboards (see Note 2), as of July 30, 2010. Year 2011 2012 2013 2014 2015 Later years Total $ 36,078 36,248 36,557 36,988 37...

  • Page 60
    ...Vice President, Retail Operations J. Larry Jones, Jr. Vice President, Innovation Peter B. Keiser Vice President, Marketing Timothy W. Mullen Vice President, Information Services Thomas R. Pate Vice President, Training and Management Development John W. Rains Vice President, Compensation and Benefits...

  • Page 61
    ... Transfer agent American Stock Transfer & Trust Company 59 Maiden Lane Plaza Level New York, NY 10038 Independent Registered Public accounting Firm Deloitte & Touche LLP Nashville, Tennessee 10-K Report A copy of the Cracker Barrel Old Country Store, Inc. Form 10-K Annual Report for Fiscal 2010...

  • Page 62
    P.O. Box 787, Lebanon, TN 37088-0787 "MoonPie" is a registered trademark of Chattanooga Bakery, Inc. "Cracker Barrel Old Country Store" name and logo, "Pleasing People" and "Rockin' Reader" are trademarks of CBOCS Properties, Inc., Reg. USPTO. ©2010 CBOCS Properties, Inc.