Cracker Barrel 2012 Annual Report Download - page 38

Notes To Consolidated Financial Statements
(In thousands except share data)
CRACKER BARREL OLD COUNTRY STORE, INC.
1 DESCRIPTION OF THE BUSINESS
Cracker Barrel Old Country Store, Inc. and its aliates
(collectively, in the Notes, the “Company”) are principally
engaged in the operation and development in the
United States of the Cracker Barrel Old Country Store®
(“Cracker Barrel”) concept.
On December 20, 2011, the Company’s shareholders
approved an agreement and plan of merger (the “merger
agreement”) eecting an internal restructuring of the
Company through the merger of Cracker Barrel Old Country
Store, Inc. (“Holdco”) with and into CBOCS, Inc., a wholly-
owned subsidiary of Holdco, eective as of December 23,
2011. At the eective time of the merger, the name of
CBOCS, Inc., the surviving corporation in the merger, was
changed to Cracker Barrel Old Country Store, Inc. Pursuant
to the merger agreement, the outstanding shares of Holdco’s
common stock, par value $0.01 per share, were converted
into an equivalent number of shares of the surviving corpora-
tion’s common stock and were owned directly by the
Company’s shareholders in the same proportion as their
ownership of Holdco immediately prior to the merger. e
Company’s common stock continues to be listed on e
NASDAQ Global Select Market under the same ticker
symbol, “CBRL.” e merger did not result in any material
changes in the business, oces, assets, liabilities, obligations,
net worth, directors, ocers or employees of Holdco.
2 SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
GAAP – e accompanying Consolidated Financial State-
ments have been prepared in accordance with generally
accepted accounting principles in the United States (“GAAP”).
Fiscal year – e Company’s scal year ends on the Friday
nearest July 31st and each quarter consists of thirteen weeks
unless noted otherwise. e Company’s scal year ended
August 3, 2012 consisted of 53 weeks and the fourth quarter
of 2012 consisted of fourteen weeks. References in these
Notes to a year or quarter are to the Company’s scal year or
quarter unless noted otherwise.
Principles of consolidation – e Consolidated Financial
Statements include the accounts of the Company and its
subsidiaries, all of which are wholly owned. All signicant
intercompany transactions and balances have been eliminated.
Cash and cash equivalents – e Company’s policy is to
consider all highly liquid 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 to sell. At August 3, 2012 and July 29,
2011, property held for sale consisted of oce space.
Accounts receivable – Accounts receivable, net of the
allowance for doubtful accounts, represents their estimated
net realizable value. Provisions for doubtful accounts are
recorded based on historical collection experience and the
age of the receivables. Accounts receivable are wrien o
when they are deemed uncollectible.
Inventories – Inventories are stated at the lower of cost or
market. Cost of restaurant inventory is determined by the
rst-in, rst-out (“FIFO”) method. Retail inventories are
valued using the retail inventory method (“RIM”) except at
the retail distribution center which uses average cost. In
2012, approximately 75% of retail inventories are valued
using RIM and the remaining 25% are valued using an
average cost method. In 2011, due to lower inventory levels
at the Company’s retail distribution center as compared to
prior years, approximately 80% of retail inventories are
valued using RIM and the remaining 20% are valued using an
average cost method. See Note 4 for additional information
regarding the components of inventory.
Valuation provisions are included for retail inventory
obsolescence, retail inventory shrinkage, returns and
amortization of certain items. Cost of goods sold includes an
estimate of retail inventory shrinkage that is adjusted upon
physical inventory counts. Annual physical inventory counts
are conducted throughout the third and fourth quarters
based upon a cyclical inventory schedule. An estimate of
shrinkage is recorded for the time period between physical
inventory counts by using a three-year average of the physical
inventories’ results on a store-by-store basis.
Property and equipment – Property and equipment are
stated at cost. For nancial reporting purposes, depreciation
and amortization on these assets are computed by use of the
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