FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarterly Period Ended January 31, 1997
Commission file number 0-7536
CRACKER BARREL OLD COUNTRY STORE, INC.
Incorporated in Tennessee I.R.S. Employer Identification
No. 62-0812904
Hartmann Drive, P.O. Box 787
Lebanon, Tennessee 37087
615-444-5533
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No_
60,877,240 Shares of Common Stock
Issued and Outstanding
Page 1 of 15
1
PART I
Item 1. Financial Statements
CRACKER BARREL OLD COUNTRY STORE, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(In thousands, except share data)
January 31, August 2,
1997 1996
____ ____
ASSETS (Unaudited) (Audited)
Current assets:
Cash and cash equivalents $ 47,961 $ 28,971
Short-term investments 866 4,735
Receivables 2,109 2,803
Inventories 62,131 61,470
Prepaid expenses 1,418 1,485
Deferred income taxes 6,972 6,972
________ ________
Total current assets 121,457 106,436
Property and equipment,net 627,422 568,573
Long-term investments 564 565
Other assets 658 805
________ ________
Total assets $750,101 $676,379
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 29,506 $ 30,565
Accrued expenses 39,972 48,452
Current portion of long-term debt 3,500 4,000
Current portion of capital lease
obligations 130 130
________ _________
Total current liabilities 73,108 83,147
________ _________
Long-term debt 62,000 15,500
Capital lease obligations 1,403 1,468
Deferred income taxes 10,043 10,043
Stockholders' equity:
Common stock - $.50 par value, 30,424 30,297
authorized 150,000,000 shares,
issued and outstanding 60,848,556
at January 31, 1997 and 60,594,353
at August 2, 1996
Additional paid-in capital 205,919 202,951
Retained earnings 367,204 332,973
________ ________
Total stockholders' equity 603,547 566,221
________ ________
Total liabilities and stockholders'
equity $750,101 $676,379
======== ========
See notes to condensed consolidated financial statements.
2
CRACKER BARREL OLD COUNTRY STORE, INC.
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(In thousands, except per share data)
(Unaudited)
Quarter Ended Six Months Ended
January 31, January 26, January 31, January 26,
1997 1996 1997 1996
____ ____ ____ ____
Net sales:
Restaurant $194,737 $162,593 $397,265 $337,150
Retail 73,117 56,891 129,491 103,345
________ ________ ________ ________
Total sales 267,854 219,484 526,756 440,495
Cost of goods sold 97,572 80,629 186,887 154,236
________ ________ ________ ________
Gross profit on sales 170,282 138,855 339,869 286,259
Labor & related expenses 89,171 72,347 176,396 146,296
Other store operating expenses 41,065 34,096 79,034 67,427
General and administrative 14,752 12,682 29,106 26,244
________ ________ ________ ________
Total expenses 144,988 119,125 284,536 239,967
________ ________ ________ ________
Operating income 25,294 19,730 55,333 46,292
Interest expense 358 82 358 261
Interest income 523 569 887 1,273
________ ________ ________ ________
Pretax income 25,459 20,217 55,862 47,304
Provision for income taxes 9,471 7,682 21,024 17,976
________ ________ ________ ________
Net income $ 15,988 $ 12,535 $ 34,838 $ 29,328
======== ======== ======== ========
Earnings per share $ .26 $ .21 $ .57 $ .48
======== ======== ======== ========
Weighted average common
shares and equivalents 61,256 60,630 61,182 60,626
======== ======== ======== ========
Dividends per share $ .005 $ .005 $ .010 $ .010
======== ======== ======== ========
See notes to condensed consolidated financial statements.
3
CRACKER BARREL OLD COUNTRY STORE, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended
January 31, January 26,
1997 1996
____ ____
Cash flows from operating activities:
Net income $34,838 $29,328
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization of
property and equipment 18,802 16,098
Gain on disposition of property
and equipment (27) (144)
(Increase) decrease in inventories (661) 2,187
Decrease (increase) in other assets 147 (40)
Decrease in accounts payable (1,059) (11,893)
Decrease in other current assets
and liabilities (7,719) (4,584)
_______ _______
Net cash provided by operating activities 44,321 30,952
_______ _______
Cash flows from investing activities:
Purchase of investments -- (1,937)
Proceeds from maturities of investments 3,870 2,680
Purchase of property and equipment (78,859) (61,672)
Proceeds from sale of property and equipment 1,235 837
_______ _______
Net cash used in investing activities (73,754) (60,092)
_______ _______
Cash flows from financing activities:
Proceeds from issuance of long-term debt 50,000 --
Proceeds from exercise of stock options 3,095 2,419
Principal payments under long-term debt
and capital lease obligations (4,065) (4,055)
Dividends on common stock (607) (602)
_______ _______
Net cash provided by (used in) financing
activities 48,423 (2,238)
_______ _______
Net increase (decrease) in cash and cash
equivalents 18,990 (31,378)
Cash and cash equivalents, beginning of year 28,971 48,124
_______ _______
Cash and cash equivalents, end of quarter $47,961 $16,746
======= =======
Supplemental disclosures of cash flow
information:
Cash paid during the six months for:
Interest $ 947 $ 1,139
Income taxes 23,345 23,915
See notes to condensed consolidated financial statements.
4
CRACKER BARREL OLD COUNTRY STORE, INC.
______________________________________
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
____________________________________________________
1. Condensed Consolidated Financial Statements
___________________________________________
The condensed consolidated balance sheet as of January 31, 1997 and the
related condensed consolidated statements of income and cash flows for the
quarters and six-month periods ended January 31, 1997 and January 26, 1996,
have been prepared by the Company, without audit; in the opinion of
management, all adjustments for a fair presentation of such condensed
consolidated financial statements have been made.
These condensed consolidated financial statements should be read in
conjunction with the financial statements and notes thereto contained in the
Company's Annual Report for the year ended August 2, 1996.
Deloitte & Touche LLP, the Company's independent auditors, have
performed a limited review of the financial information included herein.
Their report on such review accompanies this filing.
2. Income Taxes
____________
The provision for income taxes for the quarter and six-month period
ended January 31, 1997 has been computed based on management's estimate of
the tax rate for the entire fiscal year of 37.3%. The variation between the
statutory tax rate and the effective tax rate is due primarily to employer
tax credits for FICA taxes paid on tip income. The Company's effective tax
rates for the quarter and six-month period ended January 26, 1996 and for the
entire fiscal year of 1996 was 38.0%.
3. Accounting Pronouncements Adopted
_________________________________
The Company adopted Statement of Financial Accounting Standards ("SFAS")
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to Be Disposed Of", effective August 3, 1996. SFAS No. 121
requires that upon adoption companies must review all their assets and
determine under certain circumstances if an asset has been impaired, in which
case the asset is written down to a new carrying amount that is less than the
remaining cost and a loss is recognized. After adoption, companies must
review assets for impairment whenever events or circumstances indicate that
the carrying amount of an asset may not be recoverable. Upon adoption, the
Company reviewed all its assets as required by SFAS No. 121 and no loss was
required to be recognized in the first quarter.
The Company adopted SFAS No. 123, "Accounting for Stock-Based
Compensation", effective August 3, 1996. SFAS No. 123 establishes a "fair
value" based method for stock compensation plans. The Company has elected to
continue to account for its stock-based employee compensation arrangements
under Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees", as permitted by SFAS No. 123. However, the Company
will comply with the disclosure requirements of SFAS No. 123 in its fiscal
1997 Annual Report.
5
4. Seasonality
___________
The sales and profits of the Company are affected significantly by
seasonal travel and vacation patterns because of its interstate highway
locations. Historically, the Company's greatest sales and profits have
occurred during the period of June through August. Early December through
the last part of February, excluding the Christmas holidays, has historically
been the period of lowest sales and profits. Therefore, the results of
operations for the quarter and six-month period ended January 31, 1997 cannot
be considered indicative of the operating results for the full fiscal year.
6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (In thousands)
Certain statements in Management's Discussion and Analysis constitute
"forward looking statements" and involve known and unknown risks,
uncertainties and other factors which may cause the actual performance or
achievements of Cracker Barrel Old Country Store, Inc. to be materially
different from those expressed or implied by such statements. Such factors
include, among others; competition; success of operating initiatives; food
costs, including but not limited to, hog complex prices; labor costs;
advertising and promotional efforts; availability, locations and terms of
sites for development; acceptance by new guests of the Cracker Barrel Old
Country Store brand and concept as the Company continues to expand into new
regions of the country; and other factors previously referenced in the
Company's Securities and Exchange Commission filings, including but not
limited to, the Company's Annual Report on Form 10-K for the fiscal year
ended August 2, 1996. The success of the Company may also be affected by the
manner in which it operates and develops its restaurant and retail stores and
the possible development or acquisition of new concepts.
Results of Operations
The following table highlights operating results for the quarter and
six-month period ended January 31, 1997 as compared to the same periods a
year ago:
Quarter Ended Six Months Ended
January 31, January 26, January 31, January 26,
1997 1996 1997 1996
____ ____ ____ ____
Net sales:
Restaurant 72.7% 74.1% 75.4% 76.5%
Retail 27.3 25.9 24.6 23.5
_____ _____ _____ _____
Total net sales 100.0 100.0 100.0 100.0
Cost of goods sold 36.5 36.7 35.5 35.0
_____ _____ _____ _____
Gross profit 63.5 63.3 64.5 65.0
Labor & related expenses 33.3 33.0 33.5 33.2
Other store operating
expenses 15.3 15.5 15.0 15.3
General and administrative 5.5 5.8 5.5 6.0
_____ _____ _____ _____
Total expenses 54.1 54.3 54.0 54.5
_____ _____ _____ _____
Operating income 9.4 9.0 10.5 10.5
Interest expense 0.1 0.0 0.1 0.1
Interest income 0.2 0.2 0.2 0.3
_____ _____ _____ _____
Pretax income 9.5 9.2 10.6 10.7
Provision for income taxes 3.5 3.5 4.0 4.0
_____ _____ _____ _____
Net income 6.0% 5.7% 6.6% 6.7%
===== ===== ===== =====
7
Same Store Sales Analysis
214 Store Average
_________________
Quarter Ended Six Months Ended
January 31, January 26, January 31, January 26,
1997 1996 1997 1996
____ ____ ____ ____
Restaurant $722.6 $698.1 $1,511.0 $1,476.2
Retail 268.0 244.0 486.5 451.9
______ ______ ________ ________
Restaurant & retail $990.6 $942.1 $1,997.5 $1,928.1
====== ====== ======== ========
Same Store Sales Analysis
214 Store Average
_________________
Comparable Comparable
13-Weeks Ended 26-Weeks Ended
January 31, February 2, January 31, February 2,
1997 1996 1997 1996
____ ____ ____ ____
Restaurant $722.6 $688.5 $1,511.0 $1,455.1
Retail 268.0 236.7 486.5 444.0
______ ______ ________ ________
Restaurant & retail $990.6 $925.2 $1,997.5 $1,899.1
====== ====== ======== ========
8
Sales
_____
Net sales for the second quarter of fiscal 1997 increased 22% compared
to last year's second quarter. For the comparable 13-week period ended
January 31, 1997, same store restaurant sales increased 5.0% and same store
retail sales increased 13.2%, for a total same store sales (restaurant and
retail) increase of 7.1%. Same store sales benefited from more normal
weather conditions in the current year compared to the extreme winter weather
conditions in the second quarter of fiscal 1996. Same store retail sales
also benefited from the reintroduction of the Christmas browsing book which
was not published for the Christmas season of fiscal 1996. Sales from new
stores, partially offset by the effect of a one-week shift in comparable 13-
week periods, accounted for the balance of the second quarter net sales
increase. The second quarter of fiscal 1997 was the 13 weeks beginning
November 2, 1996, and ending January 31, 1997. Last fiscal year the second
quarter was the 13 weeks beginning October 28, 1995, and ending January 26,
1996. The two fiscal quarters do not cover the comparable 13-week periods
because fiscal 1996 was a 53-week year.
Net sales for the six-month period ended January 31, 1997, increased 20%
compared to the six-month period ended January 26, 1996. For the comparable
26-weeks ended January 31, 1997, same store restaurant sales increased 3.8%
and same store retail sales increased 9.6%, for a total same store sales
(restaurant and retail) increase of 5.2%. Sales from new stores partially
offset by the effect of a one-week shift in comparable 26-week periods
accounted for the balance of the six-month period net sales increase. The
six-month period for fiscal 1997 was the 26 weeks beginning August 3, 1996
and ending January 31, 1997. The six-month period for fiscal 1996 was the 26
weeks beginning July 29, 1995 and ending January 26, 1996.
Cost of Goods Sold
__________________
Cost of goods sold as a percentage of net sales for the second quarter
of fiscal 1997 decreased to 36.4% from 36.7% in the second quarter of last
year. This decrease was primarily due to a significant reduction in the
post-Christmas markdowns of retail merchandise, partially offset by an
increasing mix of retail sales which have a higher cost of goods than
restaurant sales.
Cost of goods sold as a percentage of net sales for the six-month period
ended January 31, 1997 increased to 35.5% from 35.0% for the six-month period
ended January 26, 1996. This increase was primarily due to substantial
increases in dairy and hog complex prices and due to an increasing mix of
retail sales which have a higher cost of goods than restaurant sales. These
increases were partially offset by a significant reduction in post-Christmas
markdowns of retail merchandise.
Labor and Related Expenses
__________________________
Labor and related expenses include all direct and indirect labor and
related costs incurred in store operations. Labor and related expenses as a
percentage of net sales increased to 33.3% in the second quarter this year
from 33.0% last year primarily resulting from the introduction of a new
store-level bonus program. Additionally, labor and related expenses
increased due to the incremental labor expenses resulting from opening
sixteen new stores during the second quarter of fiscal 1997 compared to nine
new stores opened in the second quarter last year. Such increases were
9
partially offset by the net effect of reduced hourly labor costs resulting
from enhanced operational productivity and sales increases, partially offset
by wage inflation of approximately 2.5%.
Labor and related expenses as a percentage of net sales increased to
33.5% in the six-month period ended January 31, 1997 from 33.2% in the six-
month period ended January 26, 1996. The increase primarily resulted from
the introduction of a new store-level bonus program at the beginning of
fiscal 1997.
Other Store Operating Expenses
______________________________
Other store operating expenses include all unit-level operating costs,
the major components of which are operating supplies, repairs and
maintenance, advertising expenses, utilities and depreciation and
amortization. Other store operating expenses as a percentage of net sales
decreased to 15.3% in the second quarter of fiscal 1997 from 15.5% in the
second quarter of last year. The primary reasons for the decrease were a
decrease in operating supplies expense resulting from the return to paper
napkins from linen napkins in the stores and the one-time charge of $500 for
the closure of one store in Memphis, TN in the second quarter of fiscal 1996.
These decreases were partially offset by the incremental operating expenses
which resulted from opening sixteen new stores in the second quarter of
fiscal 1997 as compared to only nine in the second quarter of last year.
Other store operating expenses as a percentage of net sales decreased to
15.0% in the six-month period ended January 31, 1997 from 15.3% in the six-
month period ended January 26, 1996. The primary reason for the decrease was
a decrease in operating supplies expense resulting from the return to paper
napkins from linen napkins in the stores.
General and Administrative Expenses
___________________________________
General and administrative expenses as a percentage of net sales
decreased to 5.5% in the second quarter of fiscal 1997 from 5.8% in the
second quarter of last year. The primary reason for the decrease was
increased sales volume as compared to the second quarter of last year.
General and administrative expenses as a percentage of net sales
decreased to 5.5% in the six-month period ended January 31, 1997 from 6.0% in
the six-month period ended January 26, 1996. The primary reason for the
decrease was increased sales volume as compared to the same six-month period
last year.
Interest Expense
________________
Interest expense increased to $358 in the second quarter of fiscal 1997
from $82 in the second quarter of last year. The increase resulted from the
Company drawing on its $50,000 term loan on December 2, 1996, partially
offset by increased capitalized interest during the quarter as a result of
the increase in the number of new stores under construction as compared to
last year.
10
Interest expense increased to $358 in the six-month period ended January
31, 1997 from $261 in the six-month period ended January 26, 1996. The
increase resulted from the Company drawing on the $50,000 term loan on
December 2, 1996, partially offset by increased capitalized interest during
the six-month period resulting from the increase in the number of new stores
under construction as compared to last year.
Interest Income
_______________
Interest income decreased to $523 in the second quarter of fiscal 1997
from $569 in the second quarter of last year. The decrease was primarily due
to lower average funds available for investment.
Interest income decreased to $887 in the six-month period ended Janaury
31, 1997 from $1,273 in the six-month period ended January 26, 1996. The
decrease was primarily due to lower average funds available for investment.
Liquidity and Capital Resources
_______________________________
The Company's operating activities provided net cash of $44,321 for the
six-month period ended January 31, 1997. The cash provided by net income
adjusted by depreciation and amortization was partially offset by increases
in inventories and decreases in accounts payable and other current assets and
liabilities.
Capital expenditures were $78,859 for the six-month period ended January
31, 1997. Land purchases and the construction of new stores accounted for
substantially all of these expenditures. Capitalized interest was $715 and
$1,354 for the quarter and six-month period ended January 31, 1997,
respectively, as compared to $527 and $978 for the quarter and six-month
period ended January 26, 1996, respectively.
The Company's internally generated cash, short-term and long-term
investments were not sufficient to finance all of its growth in the first six
months of fiscal 1997. As planned, the Company established a $50,000 term
loan in the second quarter of fiscal 1997.
The Company estimates that its capital expenditures for fiscal 1997 will
be approximately $180,000, substantially all of which will be land purchases
and the construction of new stores. On December 2, 1996 the Company received
the proceeds from a $50,000 5-year term loan bearing interest at a three-
month LIBOR-based rate ("London Interbank Offered Rate"). Concurrently, the
Company entered into a swap agreement with a bank to fix the interest rate at
6.36% for the life of the term loan. This $50,000 term loan is part of a
$125,000 bank credit facility that also includes a $75,000 revolver.
Management believes that cash, short-term and long-term investments at
January 31, 1997, along with cash generated from the Company's operating
activities, will be sufficient to finance its continued expansion plans into
fiscal 1998. Further, the Company's available $75,000 revolver should be
sufficient to provide the Company with the financial flexibility for its
continued expansion plans through fiscal 1999.
11
INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Directors and Stockholders of
Cracker Barrel Old Country Store, Inc.
Lebanon, Tennessee
We have reviewed the accompanying condensed consolidated balance sheet of
Cracker Barrel Old Country Store, Inc. as of January 31, 1997, and the
related condensed consolidated statements of income and cash flows for the
quarters and six-month periods ended January 31, 1997 and January 26, 1996.
These financial statements are the responsibility of the Company's
management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and of making inquiries of persons responsible for
financial and accounting matters. It is substantially less in scope than an
audit conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to such condensed consolidated financial statements for them
to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the balance sheet of Cracker Barrel Old Country Store, Inc. as of
August 2, 1996, and the related statements of income, stockholders' equity,
and cash flows for the year then ended (not presented herein); and in our
report dated September 11, 1996, we expressed an unqualified opinion on those
financial statements. In our opinion, the information set forth in the
accompanying condensed balance sheet as of August 2, 1996 is fairly stated,
in all material respects, in relation to the balance sheet from which it has
been derived.
DELOITTE & TOUCHE LLP
Nashville, Tennessee
March 13, 1997
12
PART II
Item 1. Legal Proceedings
_________________
None.
Item 2. Changes in Securities
_____________________
None.
Item 3. Defaults Upon Senior Securities
_______________________________
None.
Item 4. Submission of Matters to a Vote of Security Holders
___________________________________________________
A. The annual meeting of shareholders was held November 26,
1996.
B. Election of Directors: Previously reported.
C. Other Matters: Previously reported.
Item 5. Other Information
_________________
None.
Item 6. Exhibits and Reports on Form 8-K
________________________________
Letter regarding unaudited financial information.
13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CRACKER BARREL OLD COUNTRY STORE, INC.
Date: 3/13/97 By /s/Michael A. Woodhouse
__________ _____________________________________________
Michael A. Woodhouse, Chief Financial Officer
Date: 3/13/97 By /s/Patrick A. Scruggs
__________ _____________________________________________
Patrick A. Scruggs, Assistant Treasurer
14
March 13, 1997
Cracker Barrel Old Country Store, Inc.
Hartmann Drive
Lebanon, Tennessee 37088-0787
We have made a review, in accordance with standards established by the
American Institute of Certified Public Accountants, of the unaudited interim
financial information of Cracker Barrel Old Country Store, Inc. for the
quarters and six-month periods ended January 31, 1997 and January 26, 1996,
as indicated in our report dated March 13, 1997; because we did not perform
an audit, we expressed no opinion on that information.
We are aware that our report referred to above, which is included in your
Quarterly Report on Form 10-Q for the quarter ended January 31, 1997, is
incorporated by reference in Registration Statement Nos. 2-86602, 33-15775,
33-37567, 33-45482 and 333-01465 on Forms S-8 and Registration Statement No.
33-59582 on Form S-3.
We also are aware that the aforementioned report, pursuant to Rule 436(c)
under the Securities Act of 1933, is not considered a part of the
Registration Statement prepared or certified by an accountant or a report
prepared or certified by an accountant within the meaning of Sections 7 and
11 of that Act.
DELOITTE & TOUCHE LLP
Nashville, Tennessee
15
5
1,000
6-MOS
AUG-1-1997
AUG-3-1996
JAN-31-1997
47961
866
2109
0
62131
121457
769340
141918
750101
73108
62000
0
0
30424
573123
750101
526756
526756
186887
255430
29106
0
358
55862
21024
34838
0
0
0
34838
0.57
0.57
