Cracker Barrel 2014 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 (“U.S.”) of the Cracker Barrel Old Country Store®
(“Cracker Barrel”) concept.
2 SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
GAAP – e accompanying Consolidated Financial
Statements have been prepared in accordance with generally
accepted accounting principles in the U.S. (“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 2, 2013, property held
for sale consisted of oce space.
Accounts receivable – Accounts receivable represent
their estimated net realizable value. 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.
Approximately 70% to 75% of retail inventories are valued
using RIM and the remaining retail inventories 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, depre-
ciation and amortization on these assets are computed by
use of the straight line and double declining balance
methods over the estimated useful lives of the respective
assets, as follows:
Years
Buildings and improvements 30-45
Buildings under capital leases 15-25
Restaurant and other equipment 2-10
Leasehold improvements 1-35
Accelerated depreciation methods are generally used for
income tax purposes.
Total depreciation expense and depreciation expense
related to store operations for each of the three years are
as follows:
2014 2013 2012
Total depreciation expense $ 67,620 $ 65,351 $ 63,705
Depreciation expense related to
store operations* 62,746 60,574 58,423
* Depreciation expense related to store operations is included in other store
operating expenses in the Consolidated Statements of Income.
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