Cracker Barrel 2011 Annual Report Download

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est. Lebanon, Tennessee 1969
Annual Report
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Table of contents

  • Page 1
    8@77 Annual Report (" !/01.*0E (" 0+.!E A(( Q+1*0.5 D® 2 est. Lebanon, Tennessee 1969

  • Page 2

  • Page 3
    ... named as having the best breakfast in Zagat's 2011 Fast Food/Full-service Chain Restaurants Survey. In addition, Cracker Barrel was elected as the most RV-friendly sit-down restaurant in America by members of the Good Sam Club for the tenth year in a row. is direct positive feedback from consumers...

  • Page 4
    ...accuracy of order and friendliness of server, declined somewhat. e Seat to Eat operating platform changed a number of processes in each restaurant including order taking, food preparation and how the food is served; it also introduced continuous monitoring of the time it takes to prepare orders for...

  • Page 5
    ...this strategy in September of fiscal 2012 with the introduction of new $5.99 daily lunch specials. Cracker Barrel participated in the launch of the voluntary Kids Live Well initiative, which is sponsored by the National Restaurant Association to offer healthful menu options for children. e program...

  • Page 6
    ... and our kids' vegetable plate, featuring corn and green beans with an eight-ounce apple juice box at 340 calories. Finally, we re-launched the Cracker Barrel Old Country Store® website this year. It now offers more options for on-line shopping, easier to view menus, a faster store locator page...

  • Page 7
    ... of retail sales, Cracker Barrel's exclusive music program provides an important public relations vehicle leveraging the unique connection between the artists and their music, our guests, and our brand. ),.+2%*# 0$! Q1/%*!// + !( We continued to work on improving the returns on our new store...

  • Page 8
    ... Woodhouse became Executive Chairman of the Board in September 2011. Ms. Cochran's experience in executive leadership, finance and retailing makes her the perfect fit to direct our future growth. ese promotions capped a year of important changes to the Company's leadership corporate staff which...

  • Page 9
    ...-focused real estate investment trust. Before founding DiamondRock, Mr. McCarten was Chief Executive Officer of HMS Host Corporation, a publicly-traded restaurant and retail company serving the traveling customer. Two of our board members are not standing for re-election at the 2011 Annual Meeting...

  • Page 10
    .... President, Corporate Communications, Inc., an investor/shareholder communications and public relations rm, Nashville, TN B.F. (Jack) Lowery A orney; Chairman and CEO, LoJac Companies, Inc., an asphalt manufacturing, paving, highway construction, building materials supplier and contractor, Lebanon...

  • Page 11
    ... 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 12
    ... food, ingredients, merchandise and utilities used by our stores could adversely affect our revenues and results of operations. r We are dependent on a racting and retaining qualified employees while also controlling labor costs. r Our risks are heightened because of our single retail distribution...

  • Page 13
    ... and the actions of activist shareholders. r We are a holding company and depend on our subsidiaries to generate sufficient cash ï¬,ow to pay dividends and meet our debt service obligations. r Provisions in our charter, Tennessee law and our shareholder rights plan may discourage potential acquirers...

  • Page 14
    ... Cost of goods sold Labor and related expenses Other store operating expenses Store operating income General and administrative expenses Impairment and store dispositions, net Operating income Income before income taxes SELECTED BALANCE SHEET DATA: Working capital (deficit) Total assets Long-term...

  • Page 15
    ... 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. e plo ed points represent the closing price on the last day of the fiscal year indicated and the reinvestment of dividends. e data set...

  • Page 16
    ...2011, the Company operated 604 Cracker Barrel stores located in 42 states. e restaurants serve breakfast, lunch and dinner. e retail area offers a variety of decorative and functional items specializing in rocking chairs, holiday gi s, toys, apparel and foods. Restaurant Industry Our stores operate...

  • Page 17
    ... 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 other store operating expenses, all as a percent of total revenue. Management uses this indicator as a primary...

  • Page 18
    ... the calendar 2010 group health plan design changes. e decrease in store hourly labor costs as a percentage of total revenue resulted from menu pricing being higher than wage inï¬,ation. Other Store Operating Expenses Other store operating expenses include all store-level operating costs, the major...

  • Page 19
    ... will generate annual pre-tax savings of approximately $10,000. is initiative resulted in the elimination of approximately 60 management and staff positions. Most of the employees affected worked in our headquarters in Lebanon, Tennessee, and the restructuring did not affect any store positions...

  • Page 20
    ...ective vendor terms management and improvements to disbursement cycles. e change in retail inventories was primarily related to the timing of seasonal inventory purchases. Borrowing Capacity and Debt Covenants On July 9, 2011, we entered into a five-year $750,000 credit facility (the "2011 Credit...

  • Page 21
    ... 15 of our stores and our retail distribution center. Net proceeds from the sale-leaseback transactions of $56,260, along with excess cash from operations, were used to reduce our outstanding borrowings (see "Borrowing Capacity and Debt Covenants" above). Share Repurchases, Dividends and Proceeds...

  • Page 22
    ...normal trade credit, while imported retail inventories generally are purchased through wire transfers. ese various trade terms are aided by rapid turnover of the restaurant inventory. Employees generally are paid on weekly or semi-monthly schedules in arrears for hours worked except for bonuses that...

  • Page 23
    ... interest rate swaps. Commodity Price Risk. Many of the food products that we purchase are affected by commodity pricing and are, therefore, subject to price volatility caused by market conditions, weather, production problems, delivery difficulties and other factors which are outside our control...

  • Page 24
    ..., may limit menu price ï¬,exibility, and in those circumstances, increases in commodity prices can result in lower margins. RECENT ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED Fair Value Measurement and Disclosure Requirements In May 2011, the Financial Accounting Standards Board ("FASB") issued...

  • Page 25
    ... and Store Dispositions, Net" under the section above 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...

  • Page 26
    ... or assumptions used to calculate the insurance reserves. However, changes in these actuarial assumptions or management judgments in the future may produce materially different amounts of expense that would be reported under these insurance programs. Retail Inventory Valuation Cost of goods sold...

  • Page 27
    ... for awards with only service conditions and a graded vesting 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. e fair value of each option...

  • Page 28
    ..., therefore, vest is based on a market condition, total shareholder return, which is defined as increases in our stock price plus dividends paid during the performance period. e target number of shares will be earned if there is no change in shareholder value during the performance period and the...

  • Page 29
    ... our website. ey set the tone for our organization and include factors such as integrity and ethical values. Our internal control over financial reporting is supported by formal policies and procedures, which are reviewed, modified and improved as changes occur in business condition and operations...

  • Page 30
    ... 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 29, 2011 and July 30, 2010, and the related...

  • Page 31
    ... 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 29, 2011...

  • Page 32
    ...except share data) July 29, 2011 July 30, 2010 ASSETS Current Assets: Cash and cash equivalents Property held for sale Accounts receivable Income taxes receivable Inventories Prepaid expenses and other current assets Deferred income taxes Total current assets Property and Equipment: Land Buildings...

  • Page 33
    ...of Income (In thousands except share data) (In thousands except share data) Fiscal years ended July 30, 2010 July 29, 2011 July 31, 2009 Total revenue Cost of goods sold Gross profit Labor and other related expenses Other store operating expenses Store operating income General and administrative...

  • Page 34
    ... compensation awards Purchases and retirement of common stock Balances at July 30, 2010 Comprehensive Income: Net income Change in fair value of interest rate swaps, net of tax expense of $3,860 (See Note 6) Total comprehensive income Cash dividends declared - $.88 per share Share-based compensation...

  • Page 35
    ... obligations 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 ï¬,ows from discontinued operations: Net cash used in operating activities...

  • Page 36
    ... Notes, the "Company") are principally engaged in the operation and development in the United States of the Cracker Barrel Old Country Store® ("Cracker Barrel") restaurant and retail concept. 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES GAAP - e accompanying Consolidated Financial Statements have...

  • Page 37
    ... as a cash ï¬,ow hedge and expires in May 2013. e rate on the portion of the Company's outstanding debt covered by the 2006 swap is fixed at a rate of 5.57% plus the Company's credit spread over the 7-year life of the 2006 swap. e Company's weighted average credit spreads at July 29, 2011 and July...

  • Page 38
    .... Many of the food products purchased by the Company are affected by commodity pricing and are, therefore, 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...

  • Page 39
    ... management's judgments regarding redemption trends in the future may produce materially different amounts of deferred revenue to be reported. Insurance - e Company self-insures a significant portion of its workers' compensation, general liability and health insurance programs. e Company purchases...

  • Page 40
    ... Company's policy is to issue new shares of common stock to satisfy exercises of share-based compensation awards. At July 29, 2011, the Company has one active compensation plan for employees and non-employee directors which authorizes the granting of stock options, nonvested stock and other types...

  • Page 41
    ... their fair value is equal to the market price of the Company's stock at the date of the grant. Dividends are forfeited for any nonvested stock awards that do not vest. Income taxes - e Company's provision for income taxes includes employer tax credits for FICA taxes paid on employee tip income and...

  • Page 42
    ...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 43
    ..., one leased store was determined to be impaired. Fair value of the leased store was determined by using a cash ï¬,ow model. Assumptions used in the cash ï¬,ow model included projected annual revenue growth rates and projected cash ï¬,ows, which can be affected by economic conditions and management...

  • Page 44
    ... default then existing and the total of our availability under the 2011 Revolving Credit Facility plus the Company's cash and cash equivalents on hand is at least $100,000, the Company may both: (1) pay cash dividends on its common stock if the aggregate amount of dividends paid in any fiscal year...

  • Page 45
    ...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 46
    ... required under operating leases for advertising billboards as of July 29, 2011: Year 2012 2013 2014 Total $18,372 9,314 3,310 $30,996 Sale-Leaseback Transactions In the fourth quarter of 2009, the Company completed sale-leaseback transactions involving 15 of its owned stores and its retail...

  • Page 47
    ...cash dividends on the 2010 LTPP nonvested stock earned will accrue from July 31, 2010 and will be 11 SHARE BASED COMPENSATION AND SHAREHOLDER RIGHTS PLAN Stock Compensation Plan e Company's employee compensation plans are administered by the Compensation Commi ee of the Company's Board of Directors...

  • Page 48
    ... the Cracker Barrel Old Country Store, Inc. 1989 Stock Option Plan for Non-employee Directors ("Directors Plan") expire one year from the retirement of the director from the Board of Directors. At July 29, 2011, there were outstanding awards for 49,734 shares under the Directors Plan. Stock options...

  • Page 49
    ... Transfer & Trust Company, LLC, as rights agent. Pursuant to the terms of the Rights Agreement, the Board of Directors declared a dividend of one preferred share purchase right (a "Right") for each outstanding share of common stock, par value $.01 per share. e dividend is payable on October 3, 2011...

  • Page 50
    ... annual shareholders' meeting if the rights plan is not approved by shareholders. A er a person or group becomes an Acquiring Person, but before an Acquiring Person owns 50% or more of the Company's outstanding common stock, the Board of Directors may extinguish the Rights by exchanging one share...

  • Page 51
    ... eliminated approximately 60 management and staff positions. Most of the employees affected worked in the Company's headquarters in Lebanon, Tennessee, and the restructuring did not affect any store positions. As a result, in the fourth quarter of 2011, the Company incurred severance charges...

  • Page 52
    ... 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 borrowing availability under its 2011 Revolving Credit facility (see Note 5). e Company currently expects to receive proceeds...

  • Page 53
    ...restaurants. At July 29, 2011, the operating leases had remaining lives of 0.4 and 8.7 years with annual payments of approximately $94 and $108, respectively, for a total guarantee of $1,021. e Company's performance is required only if Logan's fails to perform its obligations as lessee. At this time...

  • Page 54
    ... President, Retail Operations Norman J. Hill President, Cracker Barrel Foundation Catherine J. McCarthy Regional Vice President, Retail Operations Michael W. Mo Vice President, Human Resources Timothy W. Mullen Vice President, Information Services omas R. Pate Vice President, Training and Management...

  • Page 55
    .... Annual Meeting e annual meeting of shareholders will be held at 10:00 a.m. Tuesday, December 20, 2011, at the Cracker Barrel Old Country Store home office on Hartmann Drive, Lebanon, Tennessee. Dividend Reinvestment and Direct Stock Purchase Plan Although our company does not sponsor a dividend...

  • Page 56
    P.O. Box 787, Lebanon, TN 37088-0787 "Cracker Barrel Old Country Store" name and logo, "Pleasing People" and "Half Restaurant. Half Store. All Country" are trademarks of CBOCS Properties, Inc., Reg. USPTO. ©2011 CBOCS Properties, Inc.