Cracker Barrel 2010 Annual Report Download - page 58

17 COMMITMENTS AND CONTINGENCIES
e Company and its subsidiaries are parties to various legal
and regulatory proceedings and claims incidental to and
arising out of the ordinary course of its business. In the
opinion of management, based upon information currently
available, the ultimate liability with respect to these proceed-
ings and claims will not materially aect the Company’s
consolidated results of operations or nancial position.
e Company is contingently liable pursuant to standby
leers of credit as credit guarantees related to insurers. As of
July 30, 2010, the Company had $30,346 of standby leers of
credit related to securing reserved claims under workers’
compensation insurance. All standby leers of credit are
renewable annually and reduce the Company’s availability
under its Revolving Credit facility (see Note 5).
e Company is secondarily liable for lease payments
under the terms of an operating lease that has been assigned
to a third party. e lease has a remaining life of approxi-
mately 3.2 years with annual lease payments of approximately
$361 for a total guarantee of $1,142. e Company’s
performance is required only if the assignee fails to perform
its obligations as lessee. At this time, the Company has no
reason to believe that the assignee will not perform and,
therefore, no provision has been made in the Consolidated
Balance Sheet for amounts to be paid in case of non-perfor-
mance by the assignee.
Upon the sale of Logan’s, the Company rearmed its
guarantee of the lease payments for two Logan’s restaurants.
At July 30, 2010, the operating leases had remaining lives of
1.4 and 9.7 years with annual payments of approximately $94
and $108, respectively, for a total guarantee of $1,222. e
Company’s performance is required only if Logan’s fails to
perform its obligations as lessee. At this time, the Company
has no reason to believe Logan’s will not perform, and
therefore, no provision has been made in the Consolidated
Balance Sheet for amounts to be paid as a result of non-per-
formance by Logan’s.
e Company enters into certain indemnication agree-
ments in favor of third parties in the ordinary course of
business. e Company believes that the probability of
incurring an actual liability under such indemnication
agreements is suciently remote so that no liability has been
recorded. In connection with the divestiture of Logan’s (see
Note 15), the Company entered into various agreements to
indemnify third parties against certain tax obligations, for
any breaches of representations and warranties in the
applicable transaction documents and for certain costs and
expenses that may arise out of specied real estate maers,
including potential relocation and legal costs. With the
exception of certain tax indemnications, the Company
believes that the probability of being required to make any
indemnication payments to Logan’s is remote. erefore, at
July 30, 2010 and July 31, 2009, the Company has recorded a
liability of $20 and $72, respectively, in the Consolidated
Balance Sheet for these potential tax indemnications, but
no provision has been recorded for potential non-tax
indemnications.
e Company maintains insurance coverage for various
aspects of its business and operations. e Company has
elected, however, to retain all or a portion of losses that occur
through the use of various deductibles, limits and retentions
under its insurance programs. is situation may subject the
Company to some future liability for which it is only partially
insured, or completely uninsured. e Company intends to
mitigate any such future liability by continuing to exercise
prudent business judgment in negotiating the terms and
conditions of its contracts. See Note 2 for a further discus-
sion 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).
Rent expense under operating leases, excluding leases
for advertising billboards (see Note 2) for each of the three
years was:
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