Cracker Barrel 2015 Annual Report Download - page 34

Download and view the complete annual report

Please find page 34 of the 2015 Cracker Barrel annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 52

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52

reducing its liability and recording revenue accordingly. For
those states that do not exempt gi cards andcerticates
from their escheatlaws,the Companyrecords breakage in
the period that gicards andcerticates areremied to
the state and reducesits liability accordingly. Any amounts
remied to statesunder escheator similarlaws reduce the
Company’sdeferred revenue liability and haveno eect
on revenue or expense while any amounts that the Company
is permied to retain are recorded as revenue.
Insurance–e Companyself-insures a signicant
portion of its workers’ compensation and generalliability
programs.e Companypurchases insurance for individual
workers’ compensation claims that exceed $250, $500 or
$1,000 depending on the statein which the claim originates.
e Companypurchases insurance for individual general
liability claims that exceed $500.
e Companyrecords a reserve for workers’ compensation
andgeneral liability for allunresolved claims and for an
estimate of incurredbut not reported claims (“IBNR”).
ese reservesand 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. Additionally, the Companyperforms
limited scope actuarial studies on a quarterly basis to verify
and/or modify the Company’s reserves.e reservesand
losses in the actuarial study represent a rangeof possible out-
comes within which no given estimateis more likely than any
other estimate. As such, the Companyrecords the losses at
the lower end of that rangeand discounts them to present
value using a risk-free interest rate based on projected timing
of payments. e Companyalso monitors actual claims
development, including incurrence or selement of
individual large claims during the interim periods between
actuarialstudies as another meansof estimating the
adequacy of its reserves.
e Company’s group health plans combine the use of
self-insuredand fully-insuredprograms. Benets for any
individual (employeeor dependents) in the self-insured
program are limited.e Companyrecords a liability for the
self-insuredportion 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 also records a liability for unpaid prescription drug
claims based on historical experience. e fully-insured
portion of the Company’s calendar 2013 and 2014 health
insuranceprogram containsa retrospectivefeaturewhich
could increase or decreasepremiums based on actual
claims experience.
Store pre-opening costs – Start-upcosts of a new store are
expensedwhen 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 areclassied as either
capital or operating leases. e Companyhas ground leases
and oce space leases that are recorded as operating leases.
e Companyalso 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 Companyhas 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
specied levels. e Companyrecords a contingent rent
liability and corresponding rent expense when it is probable
sales have been achieved in amounts in excess of the
specied levels.
e liabilities under these leases arerecognized on
the straight-line basis over the shorterof the useful life,
with a maximum of 35 years, or the relatedlease life.
32