Cracker Barrel 2010 Annual Report Download - page 46

xed and variable interest amounts calculated by reference to
the notional principal amount of $200,000. e interest rate
swap was accounted for as a cash ow hedge. e swapped
portion of the Company’s outstanding debt will be xed at a
rate of 2.73% plus the Company’s credit spread over the
2-year life of the interest rate swap.
e Company does not hold or use derivative instruments
for trading purposes. e Company also does not have any
derivatives not designated as hedging instruments and has
not designated any non-derivatives as hedging instruments.
See Note 6 for additional information on the Company’s
derivative and hedging activities.
Many of the food products purchased by the Company are
aected by commodity pricing and are, therefore, subject to
price volatility caused by market conditions, weather,
production problems, delivery diculties and other factors
that are outside the control of the Company and generally
are unpredictable. Changes in commodity prices aect the
Company and its competitors generally and, depending on
terms and duration of supply contracts, sometimes simulta-
neously. In many cases, the Company believes it will be able
to pass through some or much of increased commodity costs
by adjusting its menu pricing. From time to time, competi-
tive circumstances or judgments about consumer acceptance
of price increases may limit menu price exibility, and in
those circumstances, increases in commodity prices can
result in lower margins for the Company.
Comprehensive income – Comprehensive income
includes net income and the eective unrealized portion
of the changes in the fair value of the Company’s interest
rate swap.
Segment reporting – Operating segments are compo-
nents of an enterprise about which separate nancial
information is available that is evaluated regularly by the
chief operating decision maker in deciding how to allocate
resources and in assessing performance. Utilizing these
criteria, the Company manages its business on the basis of
one reportable operating segment (see Note 8).
Revenue recognition – e Company records revenue
from the sale of products as they are sold. e Company
provides for estimated returns based on return history and
sales levels. e Company’s policy is to present sales in the
Consolidated Statement of Income on a net presentation
basis aer deducting sales tax.
Unredeemed gi cards and certicates – Unredeemed
gi cards and certicates represent a liability of the Company
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 gi cards
or gi certicates are sold. For those states that exempt gi
cards and certicates from their escheat laws, the Company
makes estimates of the ultimate unredeemed (“breakage”)
gi cards and certicates in the period of the original sale
and amortizes this breakage over the redemption period that
other gi cards and certicates historically have been
redeemed by reducing its liability and recording revenue
accordingly. For those states that do not exempt gi cards
and certicates from their escheat laws, the Company records
breakage in the period that gi cards and certicates are
remied to the state and reduces its liability accordingly. Any
amounts remied to states under escheat or similar laws
reduce the Company’s deferred revenue liability and have no
eect on revenue or expense while any amounts that the
Company is permied to retain are recorded as revenue.
Changes in redemption behavior or management’s judg-
ments regarding redemption trends in the future may
produce materially dierent amounts of deferred revenue to
be reported.
Insurance – e Company self-insures a signicant
portion of its workers’ compensation, general liability and
health insurance programs. e Company has purchased
insurance for individual workers’ compensation claims that
exceed $250, $500 or $1,000 depending on the state in
which the claim originates. e Company has purchased
insurance for individual general liability claims that exceed
$500. Prior to January 1, 2009, the Company did not
purchase such insurance for its group health program, but
did limit its oered benets for any individual (employee or
dependents) in the program to not more than $1,000
lifetime, and, in certain cases, to not more than $100 in any
given plan year. Beginning January 1, 2009, the Company
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