Cracker Barrel 2010 Annual Report Download - page 52

6 DERIVATIVE INSTRUMENTS AND
HEDGING ACTIVITIES
e estimated fair values of the Company’s derivative
instrument were as follows:
July 30, July 31,
2010 2009
Balance Sheet Location Fair Value Fair Value
Interest rate swap
(See Note 3) Interest rate swap liability $ 66,281 $ 61,232
e estimated fair value of the Company’s interest rate
swap liability incorporates the Company’s own non-perfor-
mance risk. e adjustment related to the Company’s
non-performance risk at July 30, 2010 and July 31, 2009
resulted in reductions of $3,915 and $5,372, respectively, in
the fair value of the interest rate swap liability. e oset to
the interest rate swap liability is recorded in accumulated
other comprehensive loss (“AOCL”), net of the deferred tax
asset, and will be reclassied into earnings over the term of
the underlying debt. As of July 30, 2010, the estimated
pre-tax portion of AOCL that is expected to be reclassied
into earnings over the next twelve months is $29,270. Cash
ows related to the interest rate swap are included in interest
expense and in operating activities.
e following table summarizes the pre-tax eects of the
Company’s derivative instrument on income and AOCL for
the years ended July 30, 2010 and July 31, 2009:
Amount of Loss Recognized
in AOCL on Derivative
(Eective Portion)
July 30, 2010 July 31, 2009
Cash ow hedge:
Interest rate swap $ (5,049) $ (21,614)
Amount of Loss Reclassied
Location of Loss Reclassied from AOCL into Income
from AOCL into Income (Eective Portion)
(Eective Portion) July 30, 2010 July 31, 2009
Interest expense $ 30,722 $ 19,469
Any portion of the fair value of the swap determined to
be ineective will be recognized currently in earnings. No
ineectiveness has been recorded in 2010, 2009 and 2008.
7 SHARE REPURCHASES
In 2010, the Company was authorized to repurchase shares
to oset share dilution that might result from share issuances
pursuant to its equity compensation plans. e Company
repurchased 1,352,000 shares of its common stock in the
open market at an aggregate cost of $62,487. Related
transaction costs and fees that were recorded as a reduction
to shareholders’ equity resulted in the shares being repur-
chased at an average cost of $46.22 per share. In 2011,
subject to a maximum amount of $65,000, the Company has
been authorized to repurchase shares to oset share dilution
that might result from share issuances pursuant to its equity
compensation plans.
8 SEGMENT INFORMATION
Cracker Barrel stores represent a single, integrated operation
with two related and substantially integrated product lines.
e operating expenses of the restaurant and retail product
lines of a Cracker Barrel store are shared and are indistin-
guishable 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 was comprised of the following at:
2010 2009 2008
Revenue:
Restaurant $ 1,911,664 $ 1,875,688 $ 1,872,152
Retail 492,851 491,597 512,369
Total revenue $ 2,404,515 $ 2,367,285 $ 2,384,521
9 IMPAIRMENT OF LONGLIVED ASSETS
AND STORE CLOSING CHARGES
e Company incurred impairment charges in 2010, 2009
and 2008. During 2010, one leased store was determined to
be impaired resulting in an impairment charge of $2,263.
is store was impaired due to declining operating perfor-
mance and resulting negative cash ow projections.
Additionally, on July 26, 2010, the Company closed one
owned store, which resulted in an impairment charge of $409
and store closing charges of $128. e Company expects to
incur an additional $91 in store closing costs in 2011. e
decision to close the store was due to its age, expected future
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