Cracker Barrel 2012 Annual Report Download - page 40

Unredeemed gi cards and certicates – Unredeemed
gi cards and certicates represent a liability of the Company
related to unearned income and are recorded at their
expected redemption value. No revenue is recognized in
connection with the point-of-sale transaction when gi cards
or gi certicates are sold. For those states that exempt gi
cards and certicates from their escheat laws, the Company
makes estimates of the ultimate unredeemed (“breakage”)
gi cards and certicates in the period of the original sale
and amortizes this breakage over the redemption period that
other gi cards and certicates historically have been
redeemed by reducing its liability and recording revenue
accordingly. For those states that do not exempt gi cards
and certicates from their escheat laws, the Company records
breakage in the period that gi cards and certicates 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
eect on revenue or expense while any amounts that the
Company is permied to retain are recorded as revenue.
Insurance – e Company self-insures a signicant
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 insur-
ance for individual general liability claims that exceed $500.
e Company records a reserve for workers’ compensation
and general liability for all unresolved claims and for an
estimate of incurred but not reported claims (“IBNR”).
ese reserves and estimates of IBNR claims are based upon
a full scope actuarial study which is performed annually at
the end of the Company’s third quarter and is adjusted by the
actuarially determined losses and actual claims payments for
the fourth quarter. e reserves and losses in the actuarial
study represent a range of possible outcomes within which
no given estimate is more likely than any other estimate. As
such, the Company records the losses at the lower end of that
range and discounts them to present value using a risk-free
interest rate based on projected timing of payments. e
Company also monitors actual claims development, includ-
ing incurrence or selement of individual large claims during
the interim periods between actuarial studies as another
means of estimating the adequacy of its reserves. Beginning
in the second quarter of 2011, the Company began perform-
ing limited scope actuarial studies on a quarterly basis to
verify and/or modify the Company’s reserves.
For the Company’s calendar 2009 health insurance plan,
benets 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, 2011 and 2012 health insurance plans,
benets 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 any
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. Beginning in the
rst quarter of 2012, the fully-insured portion of the Com-
pany’s health insurance program contains a retrospective
feature which could increase or decrease premiums based on
actual claims experience.
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 classied as either
capital or operating leases. e Company has ground leases
and oce space leases that are recorded as operating leases.
e Company also leases its advertising billboards which 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
specied levels. e Company records a contingent rent
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