Cracker Barrel 2012 Annual Report Download

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Table of contents

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    ®

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    ... of Cracker Barrel and whose work every day is dedicated to this great company's success. ending the year with 616 stores in 42 states. We added new depth in our executive leadership team and continued our board succession. All the while, we focused on increasing shareholder returns. Financial Pe...

  • Page 4
    ... Dividends Per Share Market on August 3, 2012), reï¬,ecting a 34.6% percent increase from the closing stock price on July 29, 2011. firm serving the food industry, found that consumers view Cracker Barrel as unique when compared to our competitors. They rank Cracker Barrel as the leader in Guest...

  • Page 5
    ... the restaurant operating platform; (4) drive retail sales growth with innovative tactics; (5) reduce cost; and (6) apply a balanced approach to capital allocation. The first business priority was to introduce new marketing messaging to reinforce the authentic value provided by Cracker Barrel. To...

  • Page 6
    ...fining our menu and pricing strategies with a focus on value, affordability and variety. Last September, we introduced the weekday $5.99 Daily Lunch Specials, which include the option of a lunch time daily entree special or a better-for-you grilled chicken salad with a baked potato. The program was...

  • Page 7
    ... of our restaurant and retail field leadership in April 2012. We also completed the first phase of implementation of a labor management system for store managers to improve their direction of weekly Our fourth priority was to employ innovative tactics to drive retail sales, with a focus...

  • Page 8
    ... guest experience that aligns with their expectations for a great Cracker Barrel visit. and its successes during a year of much change. For many of our team members, fiscal 2012 was the first full year in their current roles, and we also added a new Senior Vice President of Retail, Laura Daily...

  • Page 9
    ...poised to capitalize on this success with our strategy to enhance the core business, expand the footprint with new stores, and extend the Cracker Barrel brand. Above all, we will continue to provide value to our shareholders and guests, staying true to our mission of Pleasing People. Reflection and...

  • Page 10
    ... Food Company, Nashville, TN Charles E. Jones, Jr. President, Corporate Communications, Inc., Nashville, TN B.F. (Jack) Lowery Attorney, Chairman and CEO, LoJac Companies, Inc. Lebanon, TN Michael A. Woodhouse Executive Chairman and former CEO of Cracker Barrel Old Country Store Inc., Nashville...

  • 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
    ... to review that Annual Report on Form 10-K and all our SEC filings. Risks Related to Our Business • General economic, business and societal conditions as well as those specific to the restaurant or retail industries that are largely out of our control may adversely affect our business, financial...

  • Page 13
    ... open new stores that are profitable, our business could suffer. • Individual store locations are affected by local conditions that could change and adversely affect the carrying value of those locations. • Health concerns, government regulation relating to the consumption of food products and...

  • 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 Current...

  • Page 15
    .... are reported in discontinued operations in fiscal 2008 and fiscal 2009. ( f) In the first quarter of 2013, our Board of Directors declared a dividend of $0.50 per share payable on November 5, 2012 to shareholders of record on October 19, 2012. (g) Average unit volumes include sales of all stores...

  • Page 16
    ... with a gift shop. The restaurants serve breakfast, lunch and dinner. The gift shop area offers a variety of decorative and functional items specializing in rocking chairs, holiday gifts, toys, apparel and foods. As of September 18, 2012, the Company operated 620 Cracker Barrel stores located in 42...

  • Page 17
    ... per guest in our stores on restaurant purchases. This measure aids management in identifying trends in guest preferences as well 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...

  • Page 18
    ... a balanced approach to capital allocation. We repaid $25,100 in long term debt. Direct shareholder return was enhanced by the repurchase of 265,538 shares of our common stock and an 80% increase in our quarterly dividend to $0.40 per quarter. During 2012, we opened 13 new Cracker Barrel locations...

  • Page 19
    ..., accessories and proprietary product lines. We believe that the comparable store retail sales increase from 2010 to 2011 resulted from a more appealing retail merchandise selection and a higher average retail selling price than in the prior year partially offset by a decrease in restaurant guest...

  • Page 20
    ... hourly labor costs as a percentage of total revenue resulted from improved productivity due to our enhanced labor management system and menu price increases being higher than wage inflation. The decrease in our health care costs from 2011 to 2012 resulted from a change in our group policy. Employee...

  • Page 21
    ... candidates for election to our board of directors at the 2012 Annual Meeting of Shareholders in In 2011, we recorded impairment charges of $1,044 and $2,175, respectively, for office space classified as property held for sale and a leased store. The leased store was impaired because of declining...

  • Page 22
    ... to finance our continuing operations, our continuing expansion plans, our share repurchase plans and our expected dividend payments for 2013. Cash generated from Operations The increase in net cash flow provided by operating activities from 2011 to 2012 reflected lower annual bonus payments made...

  • Page 23
    ... total of our availability under our Revolving Credit Facility plus our cash and cash equivalents on hand is at least $100,000 (the "liquidity requirements"), we may declare and pay cash dividends on shares of our common stock if the aggregate amount of dividends paid during any fiscal year is less...

  • Page 24
    ... credit, while imported retail inventories generally are purchased through wire transfers. These 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 are paid...

  • Page 25
    ...methods and lower accounts payable related to retail inventory. Lower incentive compensation accruals resulted from the payment of annual bonuses in the first quarter of 2011 that were earned for 2010. Off-Balance Sheet arrangements Other than various operating leases, which are disclosed more fully...

  • Page 26
    ...Provision for Asset Dispositions • Insurance Reserves • Retail Inventory Valuation • Tax Provision • Share-Based Compensation Management has reviewed these critical accounting estimates and related disclosures with the Audit Committee of our Board of Directors. Impairment of Long-Lived...

  • Page 27
    ... 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 includes the cost...

  • Page 28
    ... state and local income tax rates, employer tax credits for items such as FICA taxes paid on employee tip income, Work Opportunity and Welfare to Work credits, as well as estimates related to certain depreciation and capitalization policies. Our estimates are made based on current tax laws, the best...

  • Page 29
    ... service, MSU Grants contain both a market condition, total shareholder return, and a performance condition. Total shareholder return is defined as increases in our stock price plus dividends paid during the performance period. The number of shares awarded may increase up to 150% of target in direct...

  • Page 30
    ...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 and...

  • Page 31
    ... our website. They 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 32
    ... T RY STOR E, I NC. Report Of Independent Registered Public accounting 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...

  • Page 33
    ... NC. Report Of Independent 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...

  • Page 34
    ... T RY STOR E, I NC. Consolidated Balance Sheets (In thousands except share data) August 3, 2012 July 29, 2011 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...

  • Page 35
    ... COUN T RY STOR E, I NC. Consolidated Statements of Income (In thousands except share data) August 3, 2012 Fiscal years ended July 29, 2011 July 30, 2010 Total revenue Cost of goods sold Gross profit Labor and other related expenses Other store operating expenses Store operating income General and...

  • Page 36
    ... Tax benefit realized upon exercise of share-based 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...

  • Page 37
    ... and other long-term 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 Net increase in cash and cash equivalents Cash and cash equivalents, beginning of year...

  • Page 38
    ...investments purchased with an original maturity of three months or less to be cash equivalents. Property held for sale - Property held for sale consists of real estate properties that the Company expects to sell within one year and is reported at the lower of carrying amount or fair value less costs...

  • Page 39
    ... prime rate or LIBOR plus a percentage point spread based on certain specified financial ratios under its credit facility (see Note 5). The Company's policy has been to manage interest cost using a mix of fixed and variable rate debt. To manage this risk in a cost efficient manner, the Company uses...

  • Page 40
    ... verify and/or modify the Company's reserves. For the Company's calendar 2009 health insurance 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...

  • Page 41
    ... service period. Additionally, the Company's policy is to issue new shares of common stock to satisfy exercises of share-based compensation awards. Income taxes - The Company's provision for income taxes includes employer tax credits for FICA taxes paid on employee tip income and other employer tax...

  • 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
    ... Company's money market fund investments and deferred compensation plan assets are measured at fair value using quoted market prices. The fair value of the Company's interest rate swap liability is determined based on the present value of expected future cash flows. Since the Company's interest rate...

  • Page 44
    ... impaired. Fair value of the leased store was determined by using a cash flow model. Assumptions used in the cash flow model included projected annual revenue growth rates and projected cash flows, which can be affected by economic conditions and management's expectations. The Company has determined...

  • Page 45
    ... compensation plans up to the same maximum aggregate purchase price amount. In 2013, the Company has been authorized to repurchase shares at management's discretion up to a maximum aggregate purchase price of $100,000. 43 Interest rate swap Interest rate swaps Total (See Note 3) Current interest...

  • Page 46
    .... The operating expenses of 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...

  • Page 47
    ... for the leased stores. At August 3, 2012 and July 29, 2011, the Company was in compliance with all those covenants. 11 ShaRe-BaSeD COmPenSaTIOn Stock Compensation Plans The Company's employee compensation plans are administered by the Compensation Committee of the Company's Board of Directors (the...

  • Page 48
    ... annual plan is based on total shareholder return, which is defined as increases in the Company's stock price plus dividends paid during the performance period. The number of shares awarded may increase up to 150% of target in direct proportion to any percentage increase in total shareholder return...

  • Page 49
    ...summary of the Company's stock option activity as of August 3, 2012, and changes during 2012 are presented in the following table: (Shares in thousands) WeightedAverage Weighted- Remaining Aggregate Average Contractural Intrinsic Price Term Value Fixed Options Shares Dividend yield range Expected...

  • Page 50
    ... between the Company and American Stock Transfer & Trust Company, LLC, as rights agent. Pursuant to the terms of the April 9, 2012 Rights Agreement, the Board of Directors declared a dividend of one Right for each outstanding share of common stock, par value $0.01 per share. The dividend was payable...

  • Page 51
    ... Rights by the Board of Directors or the final expiration date of the April 9, 2012 Rights Agreement, each as described below. exercise Price Each Right will allow its holder to purchase from the Company one one-hundredth of a share of Series A Junior Participating Preferred Stock ("Preferred Share...

  • Page 52
    ... the close of business on the day following certification of the vote at the 2012 annual meeting. 13 emPLOYee SavIngS PLanS The Company sponsors a qualified defined contribution retirement plan ("401(k) Savings Plan") covering salaried and hourly employees who have completed ninety days of service...

  • Page 53
    ... In April 2012, the Company restructured and streamlined its field organization to better align its restaurant and retail operations under central leadership. The restructuring of the field organization and related changes in the Company's headquarters in Lebanon, Tennessee, resulted in...

  • Page 54
    ...taxing jurisdictions, the related uncertain tax positions taken regarding previously filed tax returns could decrease from those recorded as liabilities for uncertain tax positions in the Company's financial statements at August 3, 2012 by approximately $5,000 to $7,000 within the next twelve months...

  • Page 55
    ...related to securing reserved claims under workers' compensation insurance. All standby letters of credit are renewable annually and reduce the Company's borrowing availability under its Revolving Credit facility (see Note 5). As of August 3, 2012, the Company is secondarily liable for lease payments...

  • Page 56
    ...Vice President, Restaurant and Retail Operations Support Brenda L. Cool Regional Vice President, Retail Operations P. Doug Couvillion Vice President, Corporate Controller and Principal Accounting Officer Leon De Wet Vice President, Information Services and CIO Robert F. Doyle Vice President, Product...

  • Page 57
    ...-K Annual Report are available for a reasonable fee. Annual Meeting e annual meeting of shareholders will be held at 10:00 a.m. ursday, November 15, 2012, at the Cracker Barrel Old Country Store home office on Hartmann Drive, Lebanon, Tennessee. Dividend Reinvestment and Direct Stock Purchase Plan...

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