Cracker Barrel 2011 Annual Report Download - page 39

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with the point-of-sale transaction when gi cards or gi
certificates are sold. For those states that exempt gi cards
and certificates from their escheat laws, the Company makes
estimates of the ultimate unredeemed (“breakage”) gicards
and certificates in the period of the original sale and amortizes
this breakage over the redemption period that other
gicards and certificates historically have been redeemed by
reducing its liability and recording revenue accordingly.
For those states that do not exempt gicards and certificates
from their escheat laws, the Company records breakage in the
period that gicards and certificates 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 effect 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 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 insurance for
individual workers’ compensation claims that exceed $250,
$500 or $1,000 depending on the state in which the claim
originates. e Company purchases 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 offered benefits 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 split its group health program into two
programs. efirst program is fully insured and as such has
no liability for unpaid claims. e second program is self-
insured. For the Company’s calendar 2009 plan, benefits for
any individual (employee or dependents) in the self-insured
program were limited to not more than $1,000 lifetime, $100
in any given plan year and, in certain cases, to not more than
$15 in any given plan year. For the Company’s calendar 2010
and 2011 plans, benefits for any individual (employee or
dependents) in the self-insured program are limited to not more
than $20 in any given year, and, in certain cases, to not more
than $8 in given year. e Company records a liability for the
self-insured portion of its group health program for all unpaid
claims based upon a loss development analysis derived from
actual group health claims payment experience.
e Company records a liability for workers’ compensation
and general liability for all unresolved claims and for an
actuarially determined estimate of incurred but not reported
claims at the anticipated cost to the Company based upon an
actuarially determined reserve as of the end of the Company’s
third quarter and adjusts it by the actuarially determined
losses and actual claims payments for the fourth quarter. e
reserves and losses are determined actuarially from a range
of possible outcomes within which no given estimate is more
likely than any other estimate. As such, the Company records
thelosses at thelower end of that range and discounts them to
present value using a risk-free interest rate based on actuari-
ally projected timing of payments.e Company’s accounting
policies regarding insurance reserves include certain actuarial
assumptions or management judgments regarding economic
conditions, the frequency and severity of claims and claim
development history and selement practices. Unanticipated
changes in these factors may produce materially different
amounts of expense.
Store pre-opening costs – Start-up costs of a new store are
expensed when incurred, with the exception of rent expense
under operating leases, in which the straight-line rent includes
the pre-opening period during construction, as explained
further under the “Leases” section in this Note.
Leases – e Company’s leases are classified as either
capital or operating leases. e Company has ground leases
and office space leases that are recorded as operating leases.
A majority of the Company’s lease agreements provide renewal
options and some of these options contain rent escalation
clauses. Additionally, some of the leases have rent holiday and
contingent rent provisions. During rent holiday periods,
which include the pre-opening period during construction,
the Company has possession of and access to the property,
but is not obligated to, and normally does not, make rent
payments. Contingent rent is determined as a percentage of
gross sales in excess of specified levels. e Company records
a contingent rent liability and corresponding rent expense
when it is probable sales have been achieved in amounts in
excess of the specified levels.
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