Cracker Barrel 2011 Annual Report Download - page 16

Management’s Discussion and Analysis of Financial Condition and Results of Operations
e following Management’s Discussion and Analysis of
Financial Condition and Results of Operations (“MD&A”)
provides information which management believes is relevant
to an assessment and understanding of our consolidated
results of operations and financial condition. MD&A should
be read in conjunction with the Consolidated Financial
Statements and notes thereto. Readers also should carefully
review the information presented under the section entitled
“Risk Factors” in our Annual Report on Form 10-Kfiled with
the Securities and Exchange Commission (“SEC”) and
other cautionary statements in this report. All dollar amounts
(other than per share amounts) reported or discussed in this
MD&A are shown in thousands. References in MD&A to a
year or quarter are to our fiscal year or quarter unless
expressly noted or the context clearly indicates otherwise.
is overview summarizes the MD&A, which includes the
following sections:
rExecutive Overview – a general description of our business,
the restaurant industry and our key performance indicators.
rResults of Operations – an analysis of our consolidated
statements of income for the three years presented in our
Consolidated Financial Statements.
rLiquidity and Capital Resources– an analysis of our primary
sources of liquidity, capital expenditures and material
commitments.
rCritical Accounting Estimates – a discussion of accounting
policies that require critical judgments and estimates.
EXECUTIVE OVERVIEW
Cracker Barrel Old Country Store, Inc. (the “Company,” “our”
or “we”) is a publicly traded (Nasdaq: CBRL) company
that, through certain subsidiaries, is engaged in the operation
and development of the Cracker Barrel Old Country Store®
(“Cracker Barrel”) restaurant and retail concept. As of
September 20, 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 in the full-service segment of the
restaurant industry in the United States. e restaurant
business is highly competitive with respect to quality,
variety and price of the food products offered. e restaurant
business is oen affected by changes in consumer taste;
national, regional or local economic conditions; demographic
trends; traffic paerns; the type, number and location of
competing restaurants; and consumers’ discretionary
purchasing power. ere are many segments within the
restaurant industry, such as family dining, casual dining, fast
casual and quick service, which oen overlap and provide
competition for widely diverse restaurant concepts. Competi-
tion also exists in securing prime real estate locations for new
stores, in hiring qualified employees, in advertising, in the
aractiveness of facilities and with competitors having similar
menu offerings or convenience.
Additionally, economic, seasonal and weather conditions
affect the restaurant business. Adverse economic conditions
affect consumer discretionary income and dining and
shopping habits. Historically, interstate tourist traffic and the
propensity to dine out have been much higher during the
summer months, thereby contributing to higher profits in our
fourth quarter. Retail sales, which are made substantially
to our restaurant guests, are strongest in the second quarter,
which includes the Christmas holiday shopping season.
Severe weather also affects restaurant and retail sales adversely
from time to time.
Key Performance Indicators
Management uses a number of key performance measures to
evaluate our operational and financial performance, including
the following:
Comparable store restaurant sales and restaurant guest traffic
consist of sales and calculated number of guests, respectively,
of stores open at least six full quarters at the beginning of the
year and are measured on comparable calendar weeks. is
measure highlights performance of existing stores because it
excludes the impact of new store openings.
Percentage of retail sales to total sales indicates the relative
proportion of spending by guests on retail product at our
stores and helps identify overall effectiveness of our retail
operations. Management uses this measure to analyze a store’s
ability to convert restaurant traffic into retail sales since we
believe that the substantial majority of our retail guests are
also guests in our restaurants.
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