Cracker Barrel 2010 Annual Report Download - page 31

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 beer information available at the time related to each contract.
(f) Other long-term obligations include our Non-Qualied Savings Plan
($25,935, with a corresponding long-term asset to fund the liability; see
Note 13 to the Consolidated Financial Statements), Deferred
Compensation Plan ($4,068), FY2008, FY2009 and FY2010
Long-Term Retention Incentive Plans ($2,000), FY2010 District
Manager Long-Term Performance Plan ($1,145) and FY2010
Long-Term Performance Plan ($5,781).
(g) We did not have any outstanding borrowings under our Revolving
Credit Facility as of July 30, 2010. We paid $619 in non-use fees (also
known as commitment fees) on the Revolving Credit Facility during
2010. Based on having no outstanding borrowings at July 30, 2010 and
our current unused commitment fee as dened in the Credit Facility, our
unused commitment fees in 2011 would be $701; however, the actual
amount will dier based on actual usage of the Revolving Credit Facility
in 2011.
(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
nancial instruments for trading purposes.
Interest Rate Risk. We have interest rate risk relative to
our outstanding borrowings under our Credit Facility. At July
30, 2010, our outstanding borrowings under our Credit
Facility totaled $580,144 (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 specied
nancial ratios.
Our policy has been to manage interest cost using a mix of
xed and variable rate debt (see Notes 5, 6, 10 and 17 to our
Consolidated Financial Statements). To manage this risk in a
cost ecient manner, we entered into an interest rate swap on
May 4, 2006 in which we agreed to exchange with a counter-
party, at specied intervals eective August 3, 2006, the
dierence between xed and variable interest amounts
calculated by reference to an agreed-upon notional principal
amount. e swapped portion of our outstanding debt is xed
at a rate of 5.57% plus our current credit spread over the
7-year life of the interest rate swap. Our current weighted
average credit spread is 1.90%. Additionally, we entered into
an interest rate swap on August 10, 2010 in which we agreed
to exchange with a counterparty, eective May 3, 2013, the
dierence between xed and variable interest amounts
calculated by reference to the notional principal amount of
$200,000. e swapped portion of our outstanding debt will
be xed at a rate of 2.73% plus our credit spread over the
2-year life of the interest rate swap. See Notes 2 and 6 to our
Consolidated Financial Statements for further discussion of
our interest rate swaps.
e 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 30, 2010, would
be approximately $152.
Commodity Price Risk. Many of the food products that
we purchase are aected by commodity pricing and are,
therefore, subject to price volatility caused by market
conditions, weather, production problems, delivery dicul-
ties 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 13%,
12%, 11% and 10%, respectively. Other categories aected 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 food items prepared to our specica-
tions, 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
sucient 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 aect us and our
competitors generally, and depending on the terms and
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