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 May 2, 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_
60,997,208 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)
May 2, August 2,
1997 1996
____ ____
ASSETS (Unaudited) (Audited)
Current assets:
Cash and cash equivalents $ 33,121 $ 28,971
Short-term investments 1,095 4,735
Receivables 3,824 2,803
Inventories 76,267 61,470
Prepaid expenses 4,073 1,485
Deferred income taxes 6,972 6,972
________ ________
Total current assets 125,352 106,436
________ ________
Property and equipment,net 657,160 568,573
Long-term investments 562 565
Other assets 954 805
________ ________
Total assets $784,028 $676,379
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 25,747 $ 30,565
Accrued expenses 55,121 48,452
Current portion of long-term debt 3,500 4,000
Current portion of capital lease
obligations 130 130
________ ________
Total current liabilities 84,498 83,147
________ ________
Long-term debt 62,000 15,500
Capital lease obligations 1,370 1,468
Deferred income taxes 10,043 10,043
Stockholders' equity:
Common stock - $.50 par value, 30,477 30,297
authorized 150,000,000 shares,
issued and outstanding 60,954,295
at May 2, 1997 and 60,594,353
at August 2, 1996
Additional paid-in capital 208,223 202,951
Retained earnings 387,417 332,973
________ ________
Total stockholders' equity 626,117 566,221
________ ________
Total liabilities and stockholders'
equity $784,028 $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 Nine Months Ended
May 2, April 26, May 2, April 26,
1997 1996 1997 1996
____ ____ ____ ____
Net sales:
Restaurant $216,355 $176,740 $613,620 $513,890
Retail 58,707 43,839 188,198 147,184
________ ________ ________ ________
Total sales 275,062 220,579 801,818 661,074
Cost of goods sold 92,447 74,013 279,333 228,249
________ ________ ________ ________
Gross profit on sales 182,615 146,566 522,485 432,825
Labor & related expenses 94,320 74,542 270,716 220,838
Other store operating expenses 40,491 32,956 119,525 100,383
General and administrative 14,904 13,279 44,011 39,523
________ ________ ________ ________
Total expenses 149,715 120,777 434,252 360,744
________ ________ ________ ________
Operating income 32,900 25,789 88,233 72,081
Interest expense 729 7 1,087 268
Interest income 501 429 1,387 1,703
________ ________ ________ ________
Pretax income 32,672 26,211 88,533 73,516
Provision for income taxes 12,154 9,960 33,178 27,936
________ ________ ________ ________
Net income $ 20,518 $ 16,251 $ 55,355 $ 45,580
======== ======== ======== ========
Earnings per share $ .33 $ .27 $ .90 $ .75
======== ======== ======== ========
Weighted average common
shares and equivalents 61,630 60,858 61,331 60,703
======== ======== ======== ========
Dividends per share $ .005 $ .005 $ .015 $ .015
======== ======== ======== ========
See notes to condensed consolidated financial statements.
3
CRACKER BARREL OLD COUNTRY STORE, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
(Unaudited)
Nine Months Ended
May 2, April 26,
1997 1996
____ ____
Cash flows from operating activities:
Net income $55,355 $45,580
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization of
property and equipment 27,995 23,816
Loss (gain) on disposition of property
and equipment 23 (63)
Increase in inventories (14,797) (5,666)
Increase in other assets (149) (136)
Decrease in accounts payable (4,818) (5,994)
Decrease in other current assets
and liabilities 3,060 3,510
_______ _______
Net cash provided by operating activities 66,669 61,047
_______ _______
Cash flows from investing activities:
Purchase of investments (603) (4,011)
Proceeds from maturities of investments 4,246 11,979
Purchase of property and equipment (117,946) (93,261)
Proceeds from sale of property and equipment 1,341 891
_______ _______
Net cash used in investing activities (112,962) (84,402)
_______ _______
Cash flows from financing activities:
Proceeds from issuance of long-term debt 50,000 --
Proceeds from exercise of stock options 5,452 3,892
Principal payments under long-term debt
and capital lease obligations (4,098) (4,083)
Dividends on common stock (911) (905)
_______ _______
Net cash provided by (used in) financing
activities 50,443 (1,096)
_______ _______
Net increase (decrease) in cash and cash
equivalents 4,150 (24,451)
Cash and cash equivalents, beginning of period 28,971 48,124
_______ _______
Cash and cash equivalents, end of period $33,121 $23,673
======= =======
Supplemental disclosures of cash flow
information:
Cash paid during the nine months for:
Interest $ 1,783 $ 1,147
Income taxes 25,359 28,185
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 May 2, 1997 and the
related condensed consolidated statements of income and cash flows for the
quarters and nine-month periods ended May 2, 1997 and April 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 nine-month period
ended May 2, 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 nine-month period ended April 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 and in
subsequent quarters, the Company has reviewed all its assets as required by
SFAS No. 121 and no loss was required to be recognized upon adoption or in
subsequent quarters.
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
In February 1997, SFAS No. 128, "Earnings per Share", was issued. This
statement is effective for both interim and annual periods ending after
December 15, 1997, with restatement of all prior periods shown. Earlier
application is not permitted. The effective date of SFAS No. 128 for the
Company is for the quarter and six-month period ending January 30, 1998.
SFAS No. 128 specifies the computation, presentation and disclosure
requirements for earnings per share. This statement will require the Company
to present both a basic earnings per share and a diluted earnings per share.
The concept of basic earnings per share does not include the impact of common
stock equivalents, such as stock options. The Company believes that, upon
adoption, diluted earnings per share will approximate earnings per share as
previously reported and basic earnings per share will not be significantly
higher than diluted earnings per share.
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 nine-month period ended May 2, 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 and coffee 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
nine-month period ended May 2, 1997 as compared to the same periods a year
ago:
Quarter Ended Nine Months Ended
May 2, April 26, May 2, April 26,
1997 1996 1997 1996
____ ____ ____ ____
Net sales:
Restaurant 78.7% 80.1% 76.5% 77.7%
Retail 21.3 19.9 23.5 22.3
_____ _____ _____ _____
Total net sales 100.0 100.0 100.0 100.0
Cost of goods sold 33.6 33.6 34.8 34.5
_____ _____ _____ _____
Gross profit 66.4 66.4 65.2 65.5
Labor & related expenses 34.3 33.8 33.8 33.4
Other store operating
expenses 14.7 14.9 14.9 15.2
General and administrative 5.4 6.0 5.5 6.0
_____ _____ _____ _____
Total expenses 54.4 54.7 54.2 54.6
_____ _____ _____ _____
Operating income 12.0 11.7 11.0 10.9
Interest expense 0.3 0.0 0.1 0.0
Interest income 0.2 0.2 0.2 0.3
_____ _____ _____ _____
Pretax income 11.9 11.9 11.1 11.2
Provision for income taxes 4.4 4.5 4.1 4.2
_____ _____ _____ _____
Net income 7.5% 7.4% 7.0% 7.0%
===== ===== ===== =====
7
Same Store Sales Analysis
214 Store Average
_________________
Quarter Ended Nine Months Ended
May 2, April 26, May 2, April 26,
1997 1996 1997 1996
____ ____ ____ ____
Restaurant $763.5 $733.8 $2,274.4 $2,210.0
Retail 204.5 182.0 691.1 633.9
______ ______ ________ ________
Restaurant & retail $968.0 $915.8 $2,965.5 $2,843.9
====== ====== ======== ========
Same Store Sales Analysis
214 Store Average
_________________
Comparable Comparable
13-Weeks Ended 39-Weeks Ended
May 2, May 3, May 2, May 3,
1997 1996 1997 1996
____ ____ ____ ____
Restaurant $763.5 $744.5 $2,274.4 $2,199.7
Retail 204.5 188.8 691.1 632.8
______ ______ ________ ________
Restaurant & retail $968.0 $933.3 $2,965.5 $2,832.5
====== ====== ======== ========
8
Sales
_____
Net sales for the third quarter of fiscal 1997 increased 25% compared to
last year's third quarter. For the comparable 13-week period ended May 2,
1997, same store restaurant sales increased 2.5% and same store retail sales
increased 8.3%, for a total same store sales (restaurant and retail) increase
of 3.7%. Same store retail sales benefited from the introduction of a new
Spring browsing book which had not been published previously. Sales from new
stores and the effect of a one-week shift in comparable 13-week periods,
accounted for the balance of the third quarter net sales increase. The third
quarter of fiscal 1997 was the 13 weeks beginning February 1, 1997, and
ending May 2, 1997. Last fiscal year the third quarter was the 13 weeks
beginning January 27, 1996, and ending April 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 nine-month period ended May 2, 1997, increased 21%
compared to the nine-month period ended April 26, 1996. For the comparable
39-weeks ended May 2, 1997, same store restaurant sales increased 3.4% and
same store retail sales increased 9.2%, for a total same store sales
(restaurant and retail) increase of 4.7%. Sales from new stores partially
offset by the effect of a one-week shift in comparable 39-week periods
accounted for the balance of the nine-month period net sales increase. The
nine-month period for fiscal 1997 was the 39 weeks beginning August 3, 1996
and ending May 2, 1997. The nine-month period for fiscal 1996 was the 39
weeks beginning July 29, 1995 and ending April 26, 1996.
Cost of Goods Sold
__________________
Cost of goods sold as a percentage of net sales for the third quarter of
fiscal 1997 and the third quarter of last year was 33.6%. Cost of goods sold
as a percentage of net sales remained unchanged, primarily due to an
increasing mix of retail sales which have a higher cost of goods than
restaurant sales offset by a significant reduction in the post-Easter
markdowns of retail merchandise.
Cost of goods sold as a percentage of net sales for the nine-month
period ended May 2, 1997 increased to 34.8% from 34.5% for the nine-month
period ended April 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 significant reductions in post-Christmas
and post-Easter 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 34.3% in the third quarter this year
from 33.8% 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
fifteen new stores during the third quarter of fiscal 1997 compared to
thirteen new stores opened in the third quarter last year. Such increases
9
were 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 2.9%.
Labor and related expenses as a percentage of net sales increased to
33.8% in the nine-month period ended May 2, 1997 from 33.4% in the nine-month
period ended April 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 14.7% in the third quarter of fiscal 1997 from 14.9% in the
third quarter of last year. 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. This decrease was partially offset
by the incremental operating expenses which resulted from opening fifteen new
stores in the third quarter of fiscal 1997 as compared to only thirteen in
the third quarter of last year.
Other store operating expenses as a percentage of net sales decreased to
14.9% in the nine-month period ended May 2, 1997 from 15.2% in the nine-month
period ended April 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 5.4% in the third quarter of fiscal 1997 from 6.0% in the third
quarter of last year. The primary reason for the decrease was increased
sales volume as compared to the third quarter of last year.
General and administrative expenses as a percentage of net sales
decreased to 5.5% in the nine-month period ended May 2, 1997 from 6.0% in the
nine-month period ended April 26, 1996. The primary reason for the decrease
was increased sales volume as compared to the same nine-month period last
year.
Interest Expense
________________
Interest expense increased to $729 in the third quarter of fiscal 1997
from $7 in the third 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 $1,087 in the nine-month period ended May
2, 1997 from $268 in the nine-month period ended April 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 nine-month period resulting from the increase in the number of new stores
under construction as compared to last year.
Interest Income
_______________
Interest income increased to $501 in the third quarter of fiscal 1997
from $429 in the third quarter of last year. The decrease was primarily due
to higher average funds available for investment.
Interest income decreased to $1,387 in the nine-month period ended May
2, 1997 from $1,703 in the nine-month period ended April 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 $66,669 for the
nine-month period ended May 2, 1997. The cash provided by net income
adjusted by depreciation and amortization was partially offset by increases
in inventories and decreases in accounts payable.
Capital expenditures were $117,946 for the nine-month period ended May
2, 1997. Land purchases and the construction of new stores accounted for
substantially all of these expenditures. Capitalized interest was $545 and
$1,899 for the quarter and nine-month period ended May 2, 1997, respectively,
as compared to $528 and $1,507 for the quarter and nine-month period ended
April 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
nine 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 $170,000, 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 May 2,
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 May 2, 1997, and the related
condensed consolidated statements of income and cash flows for the quarters
and nine-month periods ended May 2, 1997 and April 26, 1996. These
consolidated 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
June 4, 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: 6/4/97 By /s/Michael A. Woodhouse
_________ _____________________________________________
Michael A. Woodhouse, Chief Financial Officer
Date: 6/4/97 By /s/Patrick A. Scruggs
_________ _____________________________________________
Patrick A. Scruggs, Assistant Treasurer
14
June 4, 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 nine-month periods ended May 2, 1997 and April 26, 1996, as
indicated in our report dated June 4, 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 May 2, 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
9-MOS
AUG-1-1997
AUG-3-1996
MAY-2-1997
33,121
1,095
3,824
0
76,267
125,352
808,102
150,942
784,028
84,498
62,000
0
0
30,477
595,640
784,028
801,818
801,818
279,333
390,241
44,011
0
1,087
88,533
33,178
55,355
0
0
0
55,355
0.90
0.90
