UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
[Amendment No. 1]
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[x] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the fiscal year ended July 30, 2004
OR
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
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Commission file number
000-25225
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CBRL GROUP, INC.
(Exact name of registrant as specified in its charter)
Tennessee 62-1749513
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
305 Hartmann Drive, P.O. Box 787 37088-0787
Lebanon, Tennessee (Zip code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (615) 443-9869
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Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock
(Par Value $.01)
Common Stock Purchase Rights
(No Par Value)
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 _
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K/A or any amendment to
this Form 10-K/A. X
--
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2) Yes X No __
The aggregate market value of voting stock held by nonaffiliates of the
registrant, by reference to the price at which the common equity was last sold,
or the average bid and asked price of such common equity, as of the last
business day of the registrant's most recently completed second fiscal quarter
which ended January 30, 2004, was $1,855,515,626. For purposes of this
computation, all directors, executive officers and 10% beneficial owners of the
registrant are assumed to be affiliates. This assumption is not a conclusive
determination for purposes other than this calculation.
As of September 24, 2004, there were 48,859,733 shares of common stock
outstanding.
Documents Incorporated by Reference
-----------------------------------
Document from which Portions Part of Form 10-K/A
are Incorporated by Reference into which incorporated
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1. Annual Report to Shareholders Part II
for the fiscal year ended
July 30, 2004 (the "2004 Annual Report")
2. Proxy Statement for Annual Part III
Meeting of Shareholders to be held
November 23, 2004
(the "2004 Proxy Statement")
Explanatory Note
In accordance with our Current Report on Form 8-K, filed with the
Securities and Exchange Commission ("SEC") on February 17, 2005, regarding our
intent to restate our previously filed financial statements for corrections in
accounting for leases, we are filing this Amendment No. 1 on Form 10-K/A (the
"2004 Form 10-K/A") to our Annual Report on Form 10-K for the fiscal year ended
July 30, 2004, filed with the SEC on September 28, 2004 ("Original Filing" and
the "2004 Form 10-K"). This 2004 Form 10-K/A is being filed to reflect certain
restatements for changes in accounting for leases, in our i) consolidated
statements of income, statements of changes in shareholders' equity and
statements of cash flows for the years ended July 30, 2004, August 1, 2003 and
August 2, 2002, ii) balance sheets as of July 30, 2004 and August 1, 2003, and
iii) related footnote disclosures.
On February 17, 2005, the Company announced that it was restating certain
prior financial results because of changes it made in the way it accounted for
leases. The decision to restate was made following a review of its accounting
policies that was prompted by views expressed on February 7, 2005 by the staff
of the SEC (and similar restatements by numerous other companies in the
restaurant, retail and other industries) that indicated that the manner in which
the Company had been accounting for leases needed to be corrected.
Prior to this review, the Company had believed that its accounting was
consistent with generally accepted accounting principles in the United States
("GAAP"). For purposes of recognizing rental expense, the Company had
historically averaged its lease payments over the base term of the lease,
excluding the optional renewal periods and initial build-out periods, during
which it typically has not been required to make lease payments. For purposes of
depreciating leasehold improvements, the Company had historically amortized the
amounts over a longer period, including both the base term of the lease and the
optional renewal periods.
The Company has now determined that the period in which rental expense is
recognized on a straight-line, or average, basis should include any pre-opening
periods during construction for which the Company is legally obligated under the
terms of the lease, and any optional renewal periods, for which at the inception
of the lease, it is reasonably assured that the Company will exercise those
renewal options. This lease period will be consistent with the period over which
leasehold improvements are amortized. See Note 2 to the accompanying
consolidated financial statements for additional information on the restatement
for changes in accounting for leases.
In addition to the restatement for changes in accounting for leases, the
Company has also made additional corrections as described below:
The last paragraph in Part I, Item 3. Legal Proceedings, of the Original
Filing hereby is replaced in its entirety and should read as follows:
"See also Note 10 to the Company's Consolidated Financial
Statements filed or incorporated by reference into Part II,
Item 8 of this Annual Report on Form 10-K/A, which is also
incorporated herein by this reference."
Footnote (b) to Part II, Item 6. Selected Financial Data, of the Original
Filing hereby is replaced in its entirety and should read as follows:
"(b) Comparable store sales consist of sales of units open six
full quarters at the beginning of the year; and are measured
on calendar weeks. Average unit volumes are normalized to 52
weeks for fiscal 2001."
The description of the cash dividends declared line item on the face of the
2004 Consolidated Statement of Changes in Shareholders' Equity in Part II, Item
8. Financial Statements and Supplementary Data, of the Original Filing hereby is
replaced in its entirety and should read as follows:
"Cash dividends declared - $.33 per share"
The amount of "Other-net" for 2003 and 2002 in the reconciliation of the
provision for income taxes to the provision computed at federal statutory income
tax rate in Note 8 to the Consolidated Financial Statements in Part II, Item 8.
Financial Statements and Supplementary Data, of the Original Filing hereby is
replaced in its entirety and should read as follows:
2003 2002
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"Other - net" 804 96
For the convenience of the reader, the entire 2004 Form 10-K/A is being
filed herein. Except as required to reflect the effects of the restatement for
changes in accounting for leases and other modifications described above,
information not affected remains unchanged and reflects the disclosures made at
the time of the Original Filing of the Form 10-K on September 28, 2004. This
Form 10-K/A does not describe other events occurring after the Original Filing
or modify or update those disclosures affected by subsequent events. This Form
10-K/A should be read in conjunction with our filings made with the SEC
subsequent to the filing of the Original Filing. Accordingly, this Form 10-K/A
only amends and restates Item 9A of Part II and Item 15 of Part IV of the
Original Filing, in each case, solely as a result of, and to reflect, the
restatement, and no other information in the Original Filing is amended hereby.
Additionally, pursuant to the rules of the SEC, Item 6 of Part II of the
Original Filing has been amended to contain currently-dated certifications from
our Chief Executive Officer and Chief Financial Officer, as required by Sections
302 and 906 of the Sarbanes-Oxley Act of 2002 and rules promulated thereunder.
The certifications of our Chief Executive Officer and Chief Financial Officer
are filed as Exhibits 31(a) and (b) and 32 (a) and (b), respectively, to this
2004 Form 10-K/A.
We have not amended and do not intend to amend our previously-filed Annual
Reports on Form 10-K (other than the 2004 Form 10-K) or our Quarterly Reports on
Form 10-Q for the periods affected by the restatement that ended prior to
October 29, 2004. For this reason, the consolidated financial statements,
independent registered public accounting firm reports and related financial
information for the affected periods contained in such reports should no longer
be relied upon.
PART I
PAGE
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ITEM 1. BUSINESS 7
ITEM 2. PROPERTIES 17
ITEM 3. LEGAL PROCEEDINGS 19
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 19
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED
STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES 22
ITEM 6. SELECTED FINANCIAL DATA 22
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 22
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 22
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 22
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE 22
ITEM 9A. CONTROLS AND PROCEDURES 22
ITEM 9B. OTHER INFORMATION 23
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT 24
ITEM 11. EXECUTIVE COMPENSATION 24
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT 24
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 24
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES 24
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES 25
SIGNATURES 26
Except for specific historical information, the matters discussed in this
Form 10-K/A, as well as the 2004 Annual Report that is incorporated herein by
reference, are forward-looking statements that involve risks, uncertainties and
other factors which may cause actual results and performance of CBRL Group, Inc.
to differ materially from those expressed or implied by those statements. All
forward-looking information is provided by the Company pursuant to the safe
harbor established under the Private Securities Litigation Reform Act of 1995
and should be evaluated in the context of these factors. Forward-looking
statements generally can be identified by the use of forward-looking terminology
such as "assumptions," "target," "guidance," "outlook," "plans," "projection,"
"may," "will," "would," "expect," "intend," "estimate," "anticipate," "believe,"
"potential" or "continue" (or the negative or other derivatives of each of these
terms) or similar terminology. Factors which could materially affect actual
results include, but are not limited to: changes in or implementation of
additional governmental or regulatory rules, regulations and interpretations
affecting accounting (including but not limited to, accounting for convertible
debt under Emerging Issues Task Force ("EITF") Issue Abstract No. 04-08), tax,
wage and hour matters, health and safety, pensions, insurance or other
undeterminable areas; the effects of uncertain consumer confidence or general or
regional economic weakness on sales and customer travel activity; the ability of
the Company to identify, acquire and sell successful new lines of retail
merchandise; commodity and utility price changes; workers' compensation and
group health costs and liabilities; consumer behavior based on concerns over
nutritional or safety aspects of the Company's products or restaurant food in
general; competitive marketing and operational initiatives; the effects of plans
intended to improve operational execution and performance; the actual results of
pending or threatened litigation or governmental investigations or charges and
the costs and effects of negative publicity associated with these activities;
practical or psychological effects of terrorist acts or war and military or
government responses; the effects of increased competition at Company locations
on sales and on labor recruiting, cost, and retention; the ability of and cost
to the Company to recruit, train, and retain qualified restaurant hourly and
management employees; disruptions to the Company's restaurant or retail supply
chain; changes in foreign exchange rates affecting the Company's future retail
inventory purchases; the availability and cost of acceptable sites for
development and the Company's ability to identify such sites; changes in
accounting principles generally accepted in the United States of America or
changes in capital market conditions that could affect valuations of restaurant
companies in general or the Company's goodwill in particular; increases in
construction costs; changes in interest rates affecting the Company's financing
costs; and other factors described from time to time in the Company's filings
with the Securities and Exchange Commission ("SEC"), press releases, and other
communications. References to years (e.g. "2004") are to the Company's fiscal
year unless otherwise specified.
PART I
ITEM 1. BUSINESS
OVERVIEW
CBRL Group, Inc. (the "Company") is a holding company that, through certain
subsidiaries, is engaged in the operation and development of the Cracker Barrel
Old Country Store(R) and Logan's Roadhouse(R) restaurant and retail concepts.
The Company was organized under the laws of the state of Tennessee in August
1998 and maintains an Internet website at http://www.cbrlgroup.com. We make
available free of charge on or through our Internet website our periodic and
other reports filed or furnished pursuant to Section 13(a) or 15(d) of the
Securities and Exchange Act of 1934 (the "Exchange Act") as soon as reasonably
practicable after we file such material with, or furnish it to, the SEC.
CONCEPTS
Cracker Barrel Old Country Store
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Cracker Barrel Old Country Store, Inc. ("Cracker Barrel"), headquartered in
Lebanon, Tennessee, through its various affiliates, as of September 28, 2004,
operates 506 full-service "country store" restaurants and gift shops, which are
located in 41 states. Cracker Barrel stores are intended to appeal to both the
traveler and the local customer and consistently have been a consumer favorite.
Cracker Barrel was ranked as the top family dining chain for the 14th
consecutive year in the 2004 Restaurants & Institutions magazine "Choice in
Chains" annual consumer survey. Also, in J. D. Power and Associates' inaugural
study of customer satisfaction in the restaurant industry, Cracker Barrel scored
the highest among family dining chains in overall customer satisfaction in its
core market regions and the second highest in those regions among all family and
casual dining chains. Additionally, Cracker Barrel was named "Chain of the Year"
by Restaurant Hospitality magazine in its August 2003 issue. Except for
Christmas day, when they are closed, and Christmas Eve when they close at 2:00
p.m., Cracker Barrel restaurants serve breakfast, lunch and dinner daily between
the hours of 6:00 a.m. and 10:00 p.m. (closing at 11:00 p.m. on Fridays and
Saturdays) and feature home style country cooking from Cracker Barrel's own
recipes using quality ingredients and emphasizing authenticity. Menu items are
moderately priced and include country ham, chicken, fish, roast beef, beans,
turnip greens, vegetable plates, salads, sandwiches, pancakes, eggs, bacon,
sausage and grits among other items. The restaurants do not serve alcoholic
beverages. The stores are constructed in a trademarked rustic, old country store
design with a separate retail area offering a wide variety of decorative and
functional items featuring rocking chairs, holiday and seasonal gifts and toys,
apparel, cookware and foods, including various old fashioned candies and jellies
among other things. Cracker Barrel offers items for sale in the retail store
that are also featured on, or related to, the restaurant menu, such as pies or
cornbread and pancake mixes. A typical store will offer approximately
2,500-3,000 stock-keeping units (SKU's) for sale. The Company believes that
Cracker Barrel achieves high retail (over $470 of retail selling space annually)
sales per square foot both by offering interesting merchandise and by having a
significant source of retail customers from its high volume of restaurant
customers, an average of over 8,000 per week in an average store. Additionally,
Cracker Barrel offers gift cards and selected merchandise at an online store
accessible on the Internet at http://www.crackerbarrel.com.
Stores primarily are located along interstate highways; however, 65 stores
are located near "tourist destinations" or are considered "off-interstate"
stores. In 2005, Cracker Barrel intends to open up to 88% of its new stores
along interstate highways as compared to approximately 75% in 2004. The Company
believes that it should focus primarily on available interstate locations where
Cracker Barrel generates the greatest brand awareness. Off-interstate locations
are expected to represent a meaningful part of Cracker Barrel's future efforts
to expand the brand. The Company has identified approximately 500 potential
trade areas with characteristics that appear to be consistent with those
believed to be necessary to support a successful Cracker Barrel unit.
Logan's Roadhouse
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Logan's Roadhouse, Inc. ("Logan's"), headquartered in Nashville, Tennessee,
through its various affiliates, as of September 28, 2004, in 18 states operates
113 Logan's restaurants and franchises an additional 20 Logan's restaurants. The
Logan's concept is designed to appeal to a broad range of customers by offering
generous portions of moderately-priced, high quality food in a very casual,
relaxed dining environment that is lively and entertaining. Logan's restaurants
feature steaks, ribs, chicken, seafood dishes and combinations among other items
served in a distinctive atmosphere reminiscent of an American roadhouse of the
1930s and 1940s. The restaurants are open seven days a week, except for
Thanksgiving and Christmas days, for lunch and dinner, and offer full bar
service. Logan's serves lunch and dinner between the hours of 11:00 a.m. and
10:00 p.m. (closing at 11:00 p.m. on Fridays and Saturdays). The Logan's menu is
designed to appeal to a wide variety of tastes, and emphasizes extra-aged,
hand-cut on-premises, USDA choice steaks, and signature dishes such as baked
sweet potatoes and made-from-scratch yeast rolls. The fun atmosphere is enhanced
by display cooking of grilled items and buckets of complimentary roasted
in-shell peanuts on every table, which guests are encouraged to enjoy and let
the shells fall on the floor. Alcoholic beverages represented less than 9% of
Logan's net sales in 2004.
OPERATIONS
Cracker Barrel Old Country Store
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Store Format: The format of Cracker Barrel stores consists of a trademarked
rustic, old country-store style building. All stores are freestanding buildings.
Store interiors are subdivided into a dining room consisting of approximately
30% of the total interior store space, and a retail shop consisting of
approximately 22% of such space, with the balance primarily consisting of
kitchen, storage and training areas. All stores have stone fireplaces, which
burn wood except where not permitted. All are decorated with antique-style
furnishings and other authentic and nostalgic items, reminiscent of and similar
to those found and sold in the past in original old country stores. The front
porch of each store features a row of the signature Cracker Barrel rocking
chairs that are used by guests waiting for a table and are sold in the retail
shop. The kitchens contain modern food preparation and storage equipment
allowing for flexibility in menu variety and development.
Products: Cracker Barrel's restaurant operations, which generated
approximately 76% of Cracker Barrel's total revenue in 2004, offer home-style
country cooking featuring Cracker Barrel's own recipes emphasizing authenticity
and quality. The restaurants offer breakfast, lunch and dinner from a moderately
priced menu. Breakfast items can be ordered at any time throughout the day and
include juices, eggs, pancakes, bacon, country ham, sausage, grits, and a
variety of biscuit specialties, including gravy and biscuits and country ham and
biscuits. Prices for a breakfast meal range from $2.29 to $8.29, and the
breakfast day-part (until 11:00 a.m.) accounted for approximately 22% of
restaurant sales in 2004. Lunch and dinner items include country ham, chicken
and dumplings, chicken fried chicken, meatloaf, country fried steak, pork chops,
fish, steak, roast beef, vegetable plates, salads, sandwiches, soups and
specialty items such as pinto beans and turnip greens. Lunch (11:00 a.m. to 4:00
p.m.) and dinner (4:00 p.m. to close) day-parts reflected approximately 36% and
42% of restaurant sales, respectively, in 2004. The Company also periodically
features new items as off-menu specials to enhance customer interest and
identify potential future additions to the menu. Lunches and dinners range in
price from $3.19 to $12.99. In 2004, Cracker Barrel introduced a new menu
featuring several new products, including daily dinner features that showcase a
popular dinner entree for each day of the week and a low-carbohydrate section on
both its breakfast and lunch/dinner menus. The average check per guest for
fiscal 2004 was $7.68. Cracker Barrel from time to time adjusts its prices. A
price increase of approximately 1.7% was instituted in January 2004.
The retail operations, which generated approximately 24% of Cracker
Barrel's total revenue in 2004, offer a wide variety of decorative and
functional items such as rocking chairs, holiday gifts and toys, apparel, cast
iron cookware, old-fashioned crockery, handcrafted figurines, a book-on-audio
sale and exchange program and various other gift items, as well as various
candies, preserves, syrups and other food items. Many of the candy items,
jellies and jams, along with other high quality products, are sold under the
"Cracker Barrel Old Country Store" brand name. Cracker Barrel sometimes offers
items for sale in the retail store that are also featured on, or related to, the
restaurant menu, such as pies or cornbread and pancake mixes. The Company
believes that Cracker Barrel achieves high retail (over $470 of retail selling
space annually) sales per square foot both by offering interesting merchandise
and by having a significant source of retail customers from the high volume of
restaurant customers, an average of over 8,000 per week in a typical store. More
than 99% of sales in the retail shop are to customers who also are guests in the
restaurant.
Product Development and Merchandising: Cracker Barrel maintains a product
development department, which develops new and improved menu items in response
either to shifts in customer preferences or to create customer interest. Cracker
Barrel merchandising specialists are involved on a continuing basis in selecting
and positioning merchandise in the retail shop with an overall nostalgic theme
targeted to appeal to travelers. Cracker Barrel introduced the first editions of
the proprietary "American Music Legends" series of CD's featuring music stars
from Elvis, to Patsy Cline, to Louis Armstrong and other music celebrities in
the spring of 2004. This new introduction is in addition to its existing first
editions of proprietary "Heritage Music" CDs featuring various styles of
traditional American music from bluegrass, to blues, to Cajun, to gospel and
other styles. Management believes that Cracker Barrel has adequate flexibility
to meet future shifts in consumer preference on a timely basis, although there
can be no assurance that all of its merchandise selections will be successful.
Coordinated seasonal promotions are used regularly in the restaurants and retail
shops.
Store Management and Quality Controls: Cracker Barrel store management
typically consists of a general manager, four associate managers and a retail
manager, who are responsible for an average of 107 employees on two shifts. The
relative complexity of operating a Cracker Barrel store requires an effective
management team at the individual store level. As a motivation to store managers
to improve sales and operational performance, Cracker Barrel maintains a bonus
plan designed to provide store management with an opportunity to share in the
profits of their store. Additionally, Cracker Barrel has a supplemental bonus
plan, providing managers an opportunity to earn additional bonus amounts based
on achieving specific operational targets. To assure that individual stores are
operated at a high level of quality, Cracker Barrel emphasizes the selection and
training of store managers. It also employs district managers to support
individual store managers and regional vice presidents to support individual
district managers. Each district manager's individual span of control typically
is seven to eight individual restaurants, and regional vice presidents support
eight to ten district managers. Each store is assigned to both a restaurant and
a retail district manager and each district is assigned to both a restaurant and
a retail regional vice president. The various levels of restaurant and retail
management work closely together.
The store management recruiting and training program begins with an
evaluation and screening process. In addition to multiple interviews and
background and experience verification, Cracker Barrel conducts testing designed
to identify those applicants most likely to be best suited to manage store
operations. Those candidates who successfully pass this screening process are
then required to complete an 11-week training program consisting of eight weeks
of in-store training and three weeks of training at Cracker Barrel's corporate
facilities. This program allows new managers the opportunity to become familiar
with Cracker Barrel operations, culture, management objectives, controls and
evaluation criteria before assuming management responsibility. Cracker Barrel
provides its managers and hourly employees with ongoing training through its
various development courses taught through a blended learning approach,
including hands-on training, written and Internet-based training. During 2004,
the Company completed installing training computers in all stores and fully
implemented the Internet-based computer-assisted instruction program used to
train both hourly and management staff consistently at all locations.
Additionally, each store has an employee training coordinator who is dedicated
to training hourly employees in the store through the various training methods
mentioned above.
Purchasing and Distribution: Cracker Barrel negotiates directly with food
vendors as to specification, price and other material terms of most food
purchases. Cracker Barrel is a party to a prime vendor contract with an
unaffiliated distributor with custom distribution centers in Lebanon, Tennessee;
McKinney, Texas; Gainesville, Florida; Elkton, Maryland; and Ft. Mill, South
Carolina. In June 2003 this vendor's contract was renewed through 2007 with no
price increase from 2002 pricing until 2005. The contract does provide for fuel
cost adjustments under certain conditions. The contract will remain in effect
until both parties mutually modify it in writing or until terminated by either
Cracker Barrel or the distributor upon 180 days written notice to the other
party. Cracker Barrel purchases the majority of its food products and restaurant
supplies on a cost-plus basis through its unaffiliated distributor. The
distributor is responsible for placing food orders and warehousing and
delivering food products to Cracker Barrel's stores. Deliveries generally are
made once per week to the individual stores. Certain perishable food items are
purchased locally by Cracker Barrel stores.
Four food categories (dairy, including eggs, beef, pork and poultry)
account for the largest shares of Cracker Barrel's food purchasing expense at
approximately 15%, 14%, 13% and 11%, respectively, but each category does
include several individual items. The single food item within these categories
accounting for the largest share of Cracker Barrel's food purchasing expense was
chicken tenderloin at approximately 7% of food purchases in 2004. Cracker Barrel
presently purchases its beef through six vendors, pork through eight vendors,
and poultry through eight vendors. Cracker Barrel purchases its chicken
tenderloin through two vendors. Dairy and eggs are purchased through numerous
vendors including local vendors. Should any food items from these vendors become
unavailable, management believes that these food items could be obtained in
sufficient quantities from other sources at competitive prices.
The majority of retail items (approximately 69% in 2004) are centrally
purchased directly by Cracker Barrel from domestic and international vendors and
warehoused at the Company's owned Lebanon distribution center. Approximately 35%
of Cracker Barrel's retail purchases in 2004 were directly from the People's
Republic of China, and the Company believes that other of its retail merchandise
vendors may also make such purchases of items sold to Cracker Barrel. The
distribution center fulfills retail item orders generated by Cracker Barrel's
automated replenishment system and generally ships the retail orders once a week
to the individual stores. Certain retail items, not centrally purchased and
warehoused at the distribution center, are drop-shipped directly from Cracker
Barrel's vendors to its stores. The distribution center is a 367,200 square foot
warehouse facility with 36 foot ceilings and 170 bays, and includes an
additional 13,800 square feet of office and maintenance space. The facility
originally was built in 1993 and expanded in 1996. On occasion, other facilities
have been used for seasonal or temporary storage.
Cost and Inventory Controls: Cracker Barrel's computer systems and various
analysis tools are used to evaluate store operating information and provide
management with reports to determine if any unusual variances in food costs,
labor costs or operating expenses have occurred. Management also monitors
individual store restaurant and retail sales on a daily basis and closely
monitors sales mix, sales trends, operational costs and inventory levels. The
information generated by the computer systems, analysis tools and monitoring
processes are used to manage the operations of the store, replenish retail
inventory levels and to facilitate retail purchasing decisions. These systems
and processes also are used in the development of forecasts, budget analyses,
and planning.
Guest Satisfaction: Cracker Barrel is committed to providing its guests a
home-style, country-cooked meal, and a variety of retail merchandise served and
sold with genuine hospitality in a comfortable environment, in a way that evokes
memories of the past. Cracker Barrel's commitment to offering guests a quality
experience begins with its employees. Its mission statement, "Pleasing People",
means all people, guests and employees alike, and the Company's employees are
trained and reinforced on the importance of that mission in a culture of mutual
respect. Cracker Barrel also is committed to staffing each store with an
experienced management team to ensure attentive guest service and consistent
food quality. Through the regular use of guest surveys and store visits by its
district managers and regional vice presidents, management receives valuable
feedback, which it uses in its ongoing efforts to improve the stores and to
demonstrate Cracker Barrel's continuing commitment to pleasing its guests.
Cracker Barrel also has for many years had a guest relations call center that
takes comments and suggestions from guests and forwards them to operations or
other management for information and follow up. Cracker Barrel has public
notices in its menus, on its website and posted in its restaurants informing
customers and employees about how to contact Cracker Barrel by Internet or
toll-free telephone number with questions, complaints or concerns regarding
services or products. Cracker Barrel conducts training in how to gather
information and investigate and resolve all customer concerns. This is
accompanied by comprehensive training for all store employees on Cracker
Barrel's public accommodations policy and its commitment to "pleasing people."
In fiscal year 2005, the Company will implement an anonymous, unannounced,
third-party store testing program, to ensure compliance with its guest
satisfaction policies and commitments. In 2005, Cracker Barrel intends to
introduce an improved interactive voice response ("IVR") system to monitor all
stores on a monthly basis. Cracker Barrel has used an IVR system in the past to
monitor the performance of new restaurants and to provide insight into the
performance of poorer performing stores. The use of the IVR system will be
extended to provide information in a highly objective and consistent manner in
order for management to take appropriate action.
Marketing: Outdoor advertising (i.e., billboards and state department of
transportation signs) is the primary advertising medium utilized to reach
consumers in the primary trade area for each Cracker Barrel store and also to
reach interstate travelers and tourists. Outdoor advertising accounted for
approximately 60% of advertising expenditures, with approximately 1,730
billboards as of the end of 2004, of which 230 billboards were gratis to help
celebrate the Company's 35th anniversary. In recent years Cracker Barrel has
utilized other types of media, such as radio and print, in its core markets to
maintain customer awareness, and outside of its core markets to increase name
awareness and to build brand loyalty. Cracker Barrel defines its core markets
based on geographic location, longevity in the market and name awareness in each
market. Cracker Barrel plans to maintain its overall advertising spending at
approximately 2% of Cracker Barrel's revenues in 2005, as it has since 2000.
Outdoor advertising should continue to represent approximately 60% of
advertising expenditures in 2005. New store locations generally are not
advertised in the media until several weeks after they have been opened in order
to give the staff time to adjust to local customer habits and traffic volume,
after which time a full marketing plan may be implemented.
Logan's Roadhouse
Store Format: Logan's restaurants generally are constructed of rough-hewn
cedar siding in combination with bands of corrugated metal outlined in red neon.
Interiors are decorated with murals and other artifacts depicting scenes or
billboard advertisements reminiscent of American roadhouses of the 1930s and
1940s, concrete and wooden planked floors and neon signs. The lively, upbeat,
friendly, relaxed atmosphere seeks to appeal to families, couples, single adults
and business persons. The restaurants feature display cooking and an
old-fashioned meat counter displaying ribs and hand-cut USDA choice steaks, and
also include a spacious, comfortable bar area. While dining or waiting for a
table, guests may eat complimentary roasted in-shell peanuts and toss the shells
on the floor. In the waiting area they also may watch as cooks prepare steaks
and other entrees on gas-fired mesquite grills. Many of the restaurants feature
a complimentary Wurlitzer(R) jukebox in the waiting or bar area. All of these
features are intended to emphasize a relaxed, roadhouse-type environment.
Logan's is in the process of developing and designing a new prototype restaurant
that it expects to test with an opening in late 2005 or early 2006 and regularly
sometime thereafter.
Products: Logan's restaurants offer a wide variety of items designed to
appeal to a broad range of consumer tastes. Specialty appetizers include hot
wings "Roadhouse-style", baby back rib baskets and "Roadhouse" nachos. The
Logan's dinner menu features an assortment of specially seasoned USDA choice
steaks, extra-aged, and cut by hand on premises. Guests also may choose from
slow-cooked baby back ribs, seafood, mesquite-grilled shrimp, mesquite-grilled
pork chops, grilled chicken and an assortment of hamburgers, salads and
sandwiches. All dinner entrees include dinner salad, made-from-scratch yeast
rolls and a choice of brown sugar and cinnamon sweet potato, baked potato,
mashed potatoes, steamed vegetables, fries or other side items at no additional
cost. Less than 9% of Logan's net sales in 2004 were from alcoholic beverages.
In 2004, Logan's introduced a happy hour in most of its restaurants to increase
the incidence of alcohol sales. The happy hour was introduced with continued
emphasis on responsible alcohol service through training and operational
standards. Logan's express lunch menu provides specially priced items to be
served in less than 15 minutes. All lunch salads are served with
made-from-scratch yeast rolls, and all lunch sandwiches are served with
home-style potato chips at no additional cost. In 2004, lunch and dinner
accounted for approximately 35% and 65% of Logan's sales, respectively. Prices
range from $4.99 to $8.99 for lunch items and from $5.59 to $18.99 for dinner
entrees. Logan's generally targets to achieve value parity or advantage relative
to key competitors, especially on comparable menu items. The average check per
customer for 2004 was $11.85, including alcoholic beverages. A price increase of
0.2% was instituted on September 15, 2003, which affected only soft drinks. An
increase of 0.5% was instituted on October 27, 2003 and an increase of 2.3% was
also instituted on May 3, 2004.
Product Development: In 2004, Logan's hired its first full-time senior
director of food and beverage development to increase its focus on enhancing and
developing the brand through improved and appealing product offerings. Logan's
tests various new products in an effort to obtain the highest quality products
possible and to be responsive to changing customer tastes. In order to maximize
operating efficiencies and provide the freshest ingredients for its food
products, purchasing decisions are made by Logan's corporate management.
Management believes that Logan's has adequate flexibility to meet future shifts
in consumer preference on a timely basis.
Restaurant Management and Quality Controls: Logan's restaurant management
typically consists of a general manager, one kitchen manager and three to four
assistant managers who are responsible for approximately 78 hourly employees.
Each restaurant employs a skilled meat-cutter to cut steaks from USDA choice
beef. The general manager of each restaurant is responsible for the day-to-day
operations of the restaurant, including maintaining high standards of quality
and performance established by Logan's corporate management. The relative
complexity of operating a Logan's restaurant requires an effective management
team at the individual restaurant level. As a motivation to restaurant managers
to increase revenues and operational performance, Logan's maintains a bonus plan
that rewards managers for achieving sales and profit targets as well as key
operating cost measures. Logan's expects to increase the emphasis on overall
financial performance for its managers in 2005. Logan's restaurant management
teams typically are comprised of one to two persons who were promoted into
management positions from non-management positions and two to three managers
with previous management experience. To assure that individual restaurants are
operated at high standards of quality, Logan's has regional managers to support
individual restaurant managers and three regional vice presidents and a senior
vice president of operations to support individual regional managers. Each
regional manager supports 4 to 6 individual restaurants, and each regional vice
president supports 7 to 8 regional managers. Through regular visits to the
restaurants, the senior vice president of operations, the regional vice
presidents, the regional managers and other senior management ensure that the
Logan's concept, strategy and standards of quality are being adhered to in all
aspects of restaurant operations.
Logan's requires that its restaurant managers have significant experience
in the full-service restaurant industry. All new managers are required to
complete a comprehensive ten-week training course. This course is comprised of
eight weeks of training at a Logan's restaurant and two weeks of classroom
training conducted at the Logan's training facility in Nashville. The entire
course emphasizes the Logan's operating strategy, procedures and standards.
Logan's also has a specialized training program required for managers and hourly
service employees on responsible alcohol service.
Purchasing and Distribution: Logan's strives to obtain consistent quality
items at competitive prices from reliable sources. Logan's negotiates directly
with food vendors as to specifications, price and other material terms of most
food purchases. Where applicable, Logan's works with the purchasing function at
Cracker Barrel to seek possible synergies from combined activities. Logan's
purchases the majority of its food products and restaurant supplies on a
cost-plus basis through the same unaffiliated distributor that is used by
Cracker Barrel. The distributor is responsible for placing food orders and
warehousing and delivering food products for Logan's restaurants. Certain
perishable food items are purchased locally by the restaurants.
The single food item accounting for the largest share (approximately 35%)
of Logan's food cost is beef. Steaks are hand-cut on the premises, in contrast
to many in the restaurant industry that purchase pre-portioned steaks. Logan's
presently purchases its beef through one supply contract. Should any beef items
from this supplier become unavailable for any reason, management believes that
such items could be obtained in sufficient quantities from other sources at
competitive prices.
Cost and Inventory Controls: Management closely monitors sales, product
costs and labor at each of its restaurants. Daily sales and weekly restaurant
operating results are analyzed by management to detect trends at each location,
and negative trends are addressed promptly. Financial controls are maintained
through management of an accounting and information management system that is
implemented at the restaurant level. Administrative and management staff
prepares daily reports of sales, labor and customer counts. On a weekly basis,
condensed operating statements are compiled by the accounting department and
provide management a detailed analysis of sales, product and labor costs, with a
comparison to budget and prior year performance. These systems also are used in
the development of budget analyses and planning.
Guest Satisfaction: Logan's is committed to providing its guests prompt,
friendly, efficient service, keeping table-to-server ratios low and staffing
each restaurant with an experienced management team to ensure attentive guest
service and consistent food quality. Through the regular use of marketing
research, guest feedback to the managers while in the restaurant and an
outsourced "secret shoppers" program, management receives valuable feedback,
which it uses to improve restaurants and demonstrate a continuing interest in
guest satisfaction. Management frequently evaluates new technology and advanced
methods of studying and enhancing guest satisfaction on an ongoing basis.
Marketing: Logan's employs an advertising and marketing strategy designed
to establish and maintain a high level of name recognition and to attract new
customers. Logan's primarily uses radio advertising in selected markets.
Management's goal is to develop a greater number of restaurants in certain
markets to support and enhance the cost-efficient use of television, radio and
outdoor advertising. In past years Logan's has spent approximately 1.3% to 1.4%
of revenues on advertising and expects to do so in 2005 even though it only
spent 0.5% in 2004. With changes in Logan's management during 2004 and the
resulting refocus of management priorities on improving the brand and clarifying
the media message, Logan's accordingly reduced its advertising spending. Logan's
also engages in a variety of promotional activities, such as contributing time,
money and complimentary meals to charitable, civic and cultural programs, in
order to increase public awareness of Logan's restaurants. Logan's also has
certain relationships with the National Football League's Tennessee Titans,
including two concession facilities (named "Logan's Landing") inside the
Nashville, Tennessee Coliseum and various promotions during and around the games
as well as other events, such as home football games for Tennessee State
University. Additionally, Logan's roasted in-shell peanuts are sold at the
Gaylord Entertainment Center, home of the Nashville Predators of the National
Hockey League.
Franchising: Prior to the Company acquiring Logan's Roadhouse, Inc.,
Logan's entered into certain area development agreements and accompanying
franchise agreements. Two franchisees operate 20 Logan's restaurants in 4
states, and have rights under the existing agreements, subject to development
terms, conditions and timing requirements, to open up to 18 additional locations
in those same states plus parts of Oregon. Certain of the agreements provide for
the possible acquisition of the franchise locations by Logan's under specified
terms. Management is not currently planning any other franchising opportunities
in the near future beyond the current development agreements, although Logan's
believes additional franchising could become an opportunity in the future.
Logan's offers no financing, financial guarantees or other financial assistance
to its franchisees and has no ownership interest in any franchisee properties or
assets.
UNIT DEVELOPMENT
Cracker Barrel opened 24 new stores in 2004. Cracker Barrel plans to open
25 new stores during 2005, two of which already are open as of September 28,
2004.
Logan's opened 11 new company-operated restaurants and four franchised
restaurants in 2004. Logan's plans to open 18 new company-operated restaurants
and five franchised restaurants during 2005. Six of the planned company-operated
restaurants already are open as of September 28, 2004.
Of the 506 Cracker Barrel stores open as of September 28, 2004, the Company
owns 365, while the other 141 properties are either ground leases or ground and
building leases. The current Cracker Barrel store prototype is approximately
10,000 square feet including approximately 2,200 square feet in the retail
selling space. The prototype has 194 seats in the restaurant.
Of the 133 Logan's restaurants open as of September 28, 2004, 20 are
franchised restaurants. Of the remaining 113 Logan's restaurants, 58 are owned
and 55 are ground leases. The current Logan's restaurant prototype is
approximately 8,023 square feet with 286 seats, including 24 seats at the bar.
Logan's is in the process of developing and designing a new prototype restaurant
that it expects to test with an opening in late 2005 or early 2006 and regularly
sometime thereafter.
EMPLOYEES
As of July 30, 2004, CBRL Group, Inc. employed 30 people, of whom 12 were
in advisory and supervisory capacities and 7 were officers of the Company.
Cracker Barrel employed approximately 60,000 people, of whom 463 were in
advisory and supervisory capacities, 3,033 were in store management positions
and 36 were officers. Logan's employed approximately 9,200 people, of whom 79
were in advisory and supervisory capacities, 603 were in restaurant management
positions and 6 were officers. Many of the restaurant personnel are employed on
a part-time basis. Competition for and availability of qualified new employees
has always been difficult, contributing to increases in store labor expenses,
but general economic and labor market conditions have been relatively soft in
recent quarters, contributing to less wage pressure than in prior years. None of
the employees of the Company or its subsidiaries are represented by any union,
and management considers its employee relations to be good.
COMPETITION
The restaurant business is highly competitive and often is affected by
changes in the taste and eating habits of the public, local and national
economic conditions affecting spending habits, and population and traffic
patterns. Restaurant industry segments overlap and often provide competition for
widely diverse restaurant concepts. In exceptionally good economic times,
consumers can be expected to patronize a broader range of restaurants and the
breadth of competition at different restaurant segments is likewise increased.
The principal basis of competition in the industry is the quality, variety and
price of the food products offered. Site selection, quality and speed of
service, advertising and the attractiveness of facilities are also important.
There are many restaurant companies catering to the public, some of which
are substantially larger and have greater financial and marketing resources than
those of either Cracker Barrel or Logan's, and which compete directly and
indirectly in all areas in which either Cracker Barrel or Logan's operates.
TRADEMARKS
Cracker Barrel and Logan's deem the trademarks owned by them or their
affiliates to be of substantial value. Their policy is to obtain federal
registration of their trademarks and other intellectual property whenever
possible and to pursue vigorously any infringement of trademarks.
RESEARCH AND DEVELOPMENT
While research and development are important to the Company, these
expenditures have not been material due to the nature of the restaurant and
retail industry.
SEASONAL ASPECTS
Historically the profits of the Company have been lower in the first three
fiscal quarters and highest in the fourth fiscal quarter, which includes much of
the summer vacation and travel season. Management attributes these variations
primarily to the increase in interstate tourist traffic and propensity to dine
out during the summer months, whereas after the school year begins and as the
winter months approach, there is a decrease in interstate tourist traffic and
less of a tendency to dine out due to inclement weather. The Company's retail
sales historically have been highest in the Company's second fiscal quarter,
which includes the Christmas holiday shopping season.
SEGMENT REPORTING
The Company has one reportable segment. See Notes 3 and 9 to the
consolidated financial statements contained in the 2004 Annual Report
incorporated by reference in Part II of this 2004 Form 10-K/A for more
information on segment reporting.
WORKING CAPITAL
In the restaurant industry, substantially all sales transactions occur
either in cash or by third-party credit card. Like most other restaurant
companies, the Company is able to, and may often, operate with a working capital
deficit. Restaurant inventories purchased through the Company's principal food
distributor now are on terms of net zero days, while restaurant inventories
purchased locally generally are financed through normal trade credit. Because of
its retail operations, which have a lower product turnover than the restaurant
business, the Company carries larger inventories than many other companies in
the restaurant industry. Retail inventories purchased domestically generally are
financed from normal trade credit, while imported retail inventories generally
are purchased through letters of credit and wire transfers. These various trade
terms are aided by rapid product turnover of the restaurant inventory. Employee
compensation and benefits payable generally may be related to weekly, bi-weekly
or semi-monthly pay cycles, and many other operating expenses have normal trade
terms.
ITEM 2. PROPERTIES
The Company's corporate headquarters are located on approximately 10 acres
of land owned by Cracker Barrel in Lebanon, Tennessee. The Company utilizes
10,000 square feet of office space for its corporate headquarters.
The Cracker Barrel corporate headquarters and warehouse facilities are
located on approximately 120 acres of land owned by Cracker Barrel in Lebanon,
Tennessee. Cracker Barrel utilizes approximately 110,000 square feet of office
space for its corporate headquarters and decorative fixtures warehouse. Cracker
Barrel also utilizes 367,200 square feet of warehouse facilities and an
additional 13,800 square feet of office and maintenance space for its retail
distribution center.
The Logan's corporate headquarters and training facility are located in
approximately 25,000 and 6,000 square feet, respectively, in Nashville,
Tennessee, under two leases, both of which expire on April 1, 2010.
Cracker Barrel owns and operates a motel in Lebanon, Tennessee which is
used for housing its management trainees when they are in the classroom portion
of their training, and which also serves the general public.
In addition to the various corporate facilities, 33 properties owned or
leased for future development, motel, and 6 parcels of excess real property and
improvements including one leased property, which the Company intends to dispose
of, Cracker Barrel and Logan's own or lease the following store properties as of
September 28, 2004:
State Cracker Barrel Logan's Combined
- ----- -------------- ------------- -------------
Owned Leased Owned Leased Owned Leased
Tennessee 33 12 12 4 45 16
Florida 39 11 4 2 43 13
Texas 23 4 9 11 32 15
Georgia 26 8 7 3 33 11
Indiana 20 5 6 4 26 9
Ohio 22 9 1 2 23 11
Alabama 14 8 6 5 20 13
Kentucky 17 9 - 5 17 14
Michigan 14 3 2 10 16 13
North Carolina 20 7 - - 20 7
Virginia 15 3 6 1 21 4
Illinois 21 1 - - 21 1
Pennsylvania 8 10 - - 8 10
South Carolina 11 6 - - 11 6
Missouri 12 3 - 1 12 4
Mississippi 8 3 1 3 9 6
Louisiana 7 2 3 2 10 4
Arkansas 4 6 1 1 5 7
Arizona 2 7 - - 2 7
West Virginia 3 5 - 1 3 6
New York 7 1 - - 7 1
New Jersey 2 4 - - 2 4
Oklahoma 4 2 - - 4 2
Kansas 4 1 - - 4 1
Wisconsin 5 - - - 5 -
Colorado 3 1 - - 3 1
Massachusetts - 4 - - - 4
Maryland 3 1 - - 3 1
Iowa 3 - - - 3 -
New Mexico 2 1 - - 2 1
Utah 3 - - - 3 -
Connecticut 1 1 - - 1 1
Minnesota 2 - - - 2 -
Montana 2 - - - 2 -
Nebraska 1 1 - - 1 1
Delaware - 1 - - - 1
Idaho 1 - - - 1 -
New Hampshire 1 - - - 1 -
North Dakota 1 - - - 1 -
Rhode Island - 1 - - - 1
South Dakota 1 - - - 1 -
Total 365 141 58 55 423 196
See "Business-Operations" and "Business-Expansion" in Item I of this 2004
Form 10-K/A for additional information on the Company's and its subsidiaries'
properties.
ITEM 3. LEGAL PROCEEDINGS
Part I, Item 3 of the 2003 Form 10-K is incorporated herein by this
reference.
Part II, Item 1 of the Company's Quarterly Report on Form 10-Q for the
quarter ended October 31, 2003 and filed with the SEC on December 5, 2003 is
incorporated herein by this reference.
Part II, Item 1 of the Company's Quarterly Report on Form 10-Q for the
quarter ended January 30, 2004 and filed with the SEC on March 5, 2004 is
incorporated herein by this reference.
Part II, Item 1 of the Company's Quarterly Report on Form 10-Q for the
quarter ended April 30, 2004 and filed with the SEC on June 2, 2004 is
incorporated herein by this reference.
Item 7.01 of the Company's Current Report on Form 8-K filed with the
Commission on September 9, 2004 is incorporated herein by this reference.
See also Note 10 to the Company's Consolidated Financial Statements filed
or incorporated by reference into Part II, Item 8 of this Annual Report on Form
10-K/A, which also is incorporated herein by this reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
Pursuant to Instruction 3 to Item 401(b) of Regulation S-K and General
Instruction G(3), the following information is included in Part I of this 2004
Form 10-K/A.
Executive Officers of the Registrant
- ------------------------------------
The following table sets forth certain information concerning the executive
officers of the Company, as of September 28, 2004:
Name Age Position with Registrant
- ---- --- -----------------------------------
Dan W. Evins 69 Chairman of the Board
Michael A. Woodhouse 59 President & Chief Executive Officer
Lawrence E. White 54 Senior Vice President, Finance
& Chief Financial Officer
James F. Blackstock 57 Senior Vice President,
General Counsel and Secretary
Norman J. Hill 62 Senior Vice President, Human
Resources
Patrick A. Scruggs 40 Vice President, Accounting and Tax,
& Chief Accounting Officer
Donald M. Turner 56 President and Chief Operating
Officer of Cracker Barrel Old
Country Store, Inc.
Cyril J. Taylor 50 Executive Vice President of Cracker
Barrel Old Country Store, Inc.
David L. Gilbert 47 Chief Administrative Officer of
Cracker Barrel Old Country
Store, Inc.
G. Thomas Vogel 40 President and Chief Operating
Officer of Logan's Roadhouse, Inc.
The following information summarizes the business experience of each
executive officer of the Company for at least the past five years:
Prior to his employment with the Company in January 1999, Mr. Evins was
Chairman of the Board and Chief Executive Officer ("CEO") of Cracker Barrel
since its founding in 1969. He continued to serve as CEO of Cracker Barrel until
August 2001. Mr. Evins has 35 years of experience in the restaurant and retail
industries.
Prior to his employment with the Company in January 1999, Mr. Woodhouse was
Senior Vice President of Finance and Chief Financial Officer ("CFO") of Cracker
Barrel since December 1995. Mr. Woodhouse served the Company as Senior Vice
President of Finance and CFO from January 1999 to July 1999, as Executive Vice
President and Chief Operating Officer ("COO") from August 1999 until July 2000
and then as President and COO from August 2000 until July 2001 when he assumed
his current positions. Mr. Woodhouse has 20 years of experience in the
restaurant industry and 12 years of experience in the retail industry.
Prior to his employment with the Company in September 1999, Mr. White was
Executive Vice President and Chief Financial Officer of Boston Chicken, Inc.
from 1998 to 1999, where he was part of a new management team brought in for an
operational and financial turnaround. Mr. White has 17 years of experience in
the restaurant industry and 5 years of experience in the retail industry.
Mr. Blackstock served the Company as Vice President, General Counsel and
Secretary from January 1999 to February 2000 when he was promoted to Senior Vice
President. Prior to his employment with the Company in January 1999, Mr.
Blackstock was Vice President, General Counsel and Secretary of Cracker Barrel
from June 1997 until January 1999. Mr. Blackstock has 11 years of experience in
the restaurant and retail industries.
Prior to his employment with the Company in January 2002, Mr. Hill was
Senior Vice President of Human Resources for Cracker Barrel from October 1996.
Mr. Hill has 25 years of experience in the restaurant industry and 8 years of
experience in the retail industry.
Prior to his employment with the Company in January 1999, Mr. Scruggs was
employed by Cracker Barrel since April 1989. Mr. Scruggs has served as Assistant
Treasurer of Cracker Barrel since August 1993. Mr. Scruggs has 15 years of
experience in the restaurant and retail industries.
Mr. Turner returned to Cracker Barrel in December 1999, serving as
Executive Vice President and Chief Operations Officer until his promotion to
President and Chief Operating Officer in August 2001. Prior to his return to
Cracker Barrel in November 1999, Mr. Turner was retired. Mr. Turner retired from
Cracker Barrel as Senior Vice President and Chief Operations Officer in 1993,
prior to which he served in various capacities since 1976. Mr. Turner has 23
years of experience in the restaurant industry and 25 years of experience in the
retail industry.
Mr. Taylor started his career with Cracker Barrel in 1978 as a Restaurant
Management Trainee and has regularly been promoted to positions of increasing
responsibility and authority, becoming Senior Vice President of Operations in
July of 2003. Prior to becoming Senior Vice President of Operations, Mr. Taylor
was Senior Vice President of Restaurant Operations from August of 2002 to July
of 2003, Divisional Vice President of Restaurant Operations from August of 2000
to July of 2002 and Vice President of Operations Administration from August 1999
to July 2000. Mr. Taylor has 26 years of experience in the restaurant and retail
industries.
Prior to his employment with Cracker Barrel in July 2001, Mr. Gilbert was
employed by Shoney's Inc. as its Executive Vice President and Chief
Administrative Officer from January 1999 to July 2001 and its Senior Vice
President of Real Estate from January 1998 to January 1999. Mr. Gilbert has 26
years of experience in the restaurant industry and 3 years of experience in the
retail industry.
Prior to his employment with Logan's in August 2003, Mr. Vogel was with
Darden Restaurants Inc., since August 1991 serving in various capacities for its
Red Lobster concept, including Senior Vice President of Operations,
West/Southeast Divisions from June 1999 to August 2003, Vice President of Food
and Beverage from November 1997 to June 1999, and Concept Development Director
from March 1995 to November 1997. Mr. Vogel has 18 years of experience in the
restaurant industry.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
The Company's Common Stock is traded on The Nasdaq Stock Market (National
Market System) ("Nasdaq") under the symbol CBRL. There were 14,128 shareholders
of record as of September 24, 2004.
The table "Market Price and Dividend Information" contained in the 2004
Annual Report is incorporated herein by this reference. Item 12 of this 2004
Form 10-K/A is incorporated in this Item of this Report by this reference.
During the fourth quarter of the year ended July 30, 2004, the Company did
not acquire any of its own equity securities.
On May 28, 2004, the Company announced a 2,000,000 share common stock
repurchase program with no expiration date. As of July 30, 2004 the Company had
open authorizations to repurchase 2,892,000 shares.
ITEM 6. SELECTED FINANCIAL DATA
The table "Selected Financial Data," contained in the Exhibit 99 to this
Report, is incorporated into this Item of this Report by this reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," contained in Exhibit 99 to this Report, is incorporated into this
Item of this Report by this reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," contained in Exhibit 99 to this Report, is incorporated into this
Item of this Report by this reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements (and related footnotes) and Report of
Independent Registered Public Accounting Firm, contained in Exhibit 99 to this
Report, are incorporated into this Item of this Report by this reference.
See Quarterly Financial Data (Unaudited) in Note 13 to the Consolidated
Financial Statements.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
The Company's management, with the participation of its principal executive
and financial officers, including the Chief Executive Officer and the Chief
Financial Officer, evaluated the effectiveness of the Company's disclosure
controls and procedures (as defined in Rule 13a-15(e) promulgated under the
Exchange Act). Based upon this evaluation, the Chief Executive Officer and the
Chief Financial Officer concluded that as of July 30, 2004, the Company's
disclosure controls and procedures were effective for the purposes set forth in
the definition thereof in Exchange Act Rule 13a-15(e).
There have been no significant changes during the quarter ended July 30,
2004 in the Company's internal controls over financial reporting (as defined in
Exchange Act Rule 13a-15(f)) that have materially affected, or are reasonably
likely to materially affect, the Company's internal controls over financial
reporting.
On February 17, 2005, the Company announced that it was restating certain
prior financial results because of changes it made in the way it accounted for
leases. The decision to restate was made following a review of its accounting
policies that was prompted by views expressed on February 7, 2005 by the staff
of the SEC (and similar restatements by numerous other companies in the
restaurant, retail and other industries) that indicated that the manner in which
the Company had been accounting for leases needed to be corrected (see also Note
2 to the Consolidated Financial Statements). Prior to the Company's review, the
Company believed that such accounting was consistent with generally accepted
accounting principles. Some companies have indicated that such a change in
accounting and resulting restatement is a material weakness in disclosure
controls and procedures or in internal controls over financial reporting. The
Company does not believe this to have been the case in its situation as of July
30, 2004, and the effects of the restatement were not material to the Company's
financial position or the results of operations for any prior annual or
quarterly period. The Company has discussed its conclusion with its independent
registered public accounting firm. However, the Company is discussing the
restatement in question in this Part I, Item 9A of this Annual Report out of an
abundance of caution.
ITEM 9B. OTHER INFORMATION
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item with respect to directors of the
Company is incorporated into this Item of this Report by this reference to the
section entitled "Proposal 1: Election of Directors" in the 2004 Proxy
Statement. The information required by this Item with respect to executive
officers of the Company is set forth in Part I of this 2004 on Form 10-K/A.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated into this Item of
this Report by this reference to the sections entitled "Board of Directors and
Committees" and "Executive Compensation" in the 2004 Proxy Statement. The
matters labeled "Report of the Compensation and Stock Option Committee" and
"Shareholder Return Performance Graph" are not, and shall not be deemed to be,
incorporated by reference into this 2004 Form 10-K/A.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is incorporated into this Item of
this Report by this reference to the sections entitled "Stock Ownership of
Management and Certain Beneficial Owners" and "Equity Compensation Plan
Information" in the 2004 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated into this Item of
this Report by this reference to the section entitled "Certain Transactions" in
the 2004 Proxy Statement.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by this Item is incorporated into this Item of
this Report by this reference to the sections entitled "Fees Paid to Auditors"
and "What is the Audit Committee's pre-approval policy and procedure with
respect to audit and non-audit services provided by our auditors?" in the 2004
Proxy Statement. The remainder of the section entitled "Audit Committee Report"
is not, and shall not be deemed to be, incorporated by reference into this 2004
Form 10-K/A.
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) List of documents filed as part of this report:
1. The following Consolidated Financial Statements (as
restated) and the Report of Independent Registered
Public Accounting Firm of Deloitte & Touche LLP are
included within Exhibit 99 to this 2004 Form 10-K/A
and are incorporated into this Item of this Report by
this reference:
Report of Independent Registered Public Accounting
Firm dated September 23, 2004 (March 31, 2005 as to
the effects of the restatement discussed in Note 2)
Consolidated Balance Sheet (As Restated) as of July 30, 2004
and August 1, 2003
Consolidated Statement of Income (As Restated) for
each of the three fiscal years ended July 30, 2004,
August 1, 2003 and August 2, 2002
Consolidated Statement of Changes in Shareholders'
Equity (As Restated) for each of the three fiscal
years ended July 30, 2004, August 1, 2003 and August 2, 2002
Consolidated Statement of Cash Flows (As Restated)
for each of the three fiscal years ended July 30,
2004, August 1, 2003 and August 2, 2002
Notes to Consolidated Financial Statements
2. All schedules have been omitted since they are either
not required or not applicable, or the required
information is included in the consolidated financial
statements or notes thereto.
3. The exhibits listed in the accompanying Index to Exhibits
are filed as part of this Report.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
CBRL GROUP, INC.
By: /s/Michael A. Woodhouse
-----------------------
Michael A. Woodhouse
Chairman, President and Chief Executive
Officer
March 30, 2005
INDEX TO EXHIBITS
Exhibit
- -------
3(I), 4(a) Charter (1)
3(II), 4(b) Bylaws (1)
4(c) Shareholder Rights Agreement dated 9/7/1999 (2)
4(d) Indenture, dated as of April 3, 2002, among the Company,
the Guarantors (as defined therein) and Wachovia Bank,
National Association, as trustee, relating to the Company's
zero-coupon convertible senior notes (the "LYONs Indenture")
(3)
4(e) Form of Certificate for the Company's zero-coupon convertible
senior notes (included in the Indenture filed as Exhibit 4(e)
hereof) (3)
4(f) Form of Guarantee of the Company's zero-coupon convertible
senior notes (included in the Indenture filed as Exhibit 4(e)
hereof) (3)
4(g) First amendment, dated June 19, 2002, to the LYONs Indenture
4(h) Second amendment, dated July 30, 2004, to the LYONs Indenture
4(i),10(a) Credit Agreement dated 2/21/2003, relating to the $300,000,000
Revolving Credit Facility (4)
10(b) Lease dated 8/27/1981 for lease of Macon, Georgia store
between Cracker Barrel Old Country Store, Inc. and B. F.
Lowery, a director of the Company (5)
10(c) The Company's 1987 Stock Option Plan, as amended (6)
10(d) The Company's Amended and Restated Stock Option Plan, as
amended (7)
10(e) The Company's 2000 Non-Executive Stock Option Plan (8)
10(f) The Company's 1989 Non-Employee Director's Stock Option Plan,
as amended (9)
10(g) The Company's Non-Qualified Savings Plan, effective 1/1/1996,
as amended (6)
10(h) The Company's Deferred Compensation Plan, effective 1/1/1994
(5)
10(i) The Company's 2002 Omnibus Incentive Compensation Plan (10)
10(j) Executive Employment Agreement executed January 15, 2002
between Dan W. Evins and the Company (3)
10(k) Executive Employment Agreement executed July 25, 2002
between Michael A. Woodhouse and the Company (8)
10(l) Change-in-control Agreement for Dan W. Evins dated
10/8/1999 (7)
10(m) Change-in-control Agreement for Michael A. Woodhouse dated
10/8/1999 (7)
10(n) Change-in-control Agreement for Lawrence E. White dated
10/8/1999 (7)
10(o) Change-in-control Agreement for James F. Blackstock dated
10/8/1999 (7)
10(p) Change-in-control Agreement for Norman J. Hill dated
10/13/1999 (8)
10(q) Change-in-control Agreement for Donald M. Turner dated
12/6/1999 (11)
10(r) Change-in-control Agreement for David L. Gilbert dated
10/3/2001 (8)
10(s) Change-in-control Agreement for George T. Vogel dated
October 3, 2003 (10)
10(t) Change-in-control Agreement for Patrick A. Scruggs dated
October 13, 1999 (10)
10(u) Master Lease dated July 31, 2000 between Country Stores
Property I, LLC ("Lessor") and Cracker Barrel Old Country
Store, Inc. ("Lessee") for lease of 21 Cracker Barrel Old
Country Store(R) sites (12)
10(v) Master Lease dated July 31, 2000 between Country Stores
Property I, LLC ("Lessor") and Cracker Barrel Old Country
Store, Inc. ("Lessee") for lease of 9 Cracker Barrel Old
Country Store(R) sites*
10(w) Master Lease dated July 31, 2000 between Country Stores
Property II, LLC ("Lessor") and Cracker Barrel Old Country
Store, Inc. ("Lessee") for lease of 23 Cracker Barrel Old
Country Store(R) sites*
10(x) Master Lease dated July 31, 2000 between Country Stores
Property III, LLC ("Lessor") and Cracker Barrel Old Country
Store, Inc. ("Lessee") for lease of 12 Cracker Barrel Old
Country Store(R) sites*
10(y) CBRL Group, Inc. Long-Term Incentive Plan Cover Letter (3)
10(z) CBRL Group, Inc. Long-Term Incentive Plan (3)
10(aa) CBRL Group, Inc. Long-Term Incentive Summary Plan
Description (3)
21 Subsidiaries of the Registrant (13)
23 Consent of Independent Registered Public Accounting Firm -
Deloitte & Touche LLP
31 Rule 13a-14(a)/15d-14(a) Certifications
32 Section 1350 Certifications
99 Information required by Part II, Items 6, 7, 7A and 8 of this
Annual Report on Form 10-K/A.
*Document not filed because essentially identical in terms and conditions to
Exhibit 10(u).
(1) Incorporated by reference to the Company's Registration Statement on Form
S-4/A under the Securities Act of 1933 (File No. 333-62469).
(2) Incorporated by reference to the Company's Forms 8-K and 8-A under the
Securities Exchange Act of 1934, filed September 21, 1999
(File No. 000-25225).
(3) Incorporated by reference to the Company's Quarterly Report on Form 10-Q
under the Securities Exchange Act of 1934 for the quarterly period ended
May 3, 2002 (File No. 000-25225).
(4) Incorporated by reference to the Company's Quarterly Report on Form 10-Q
under the Securities Exchange Act of 1934 for the quarterly period ended
January 31, 2003 (File No. 000-25225).
(5) Incorporated by reference to the Company's Registration Statement on Form
S-7 under the Securities Act of 1933 (File No. 2-74266).
(6) Incorporated by reference to the Company's Registration Statement on Form
S-8 under the Securities Act of 1933 (File No. 33-45482).
(7) Incorporated by reference to the Company's Annual Report on Form 10-K under
the Securities Exchange Act of 1934 for the fiscal year ended July 30, 1999
(File No. 000-25225).
(8) Incorporated by reference to the Company's Annual Report on Form 10-K under
the Securities Exchange Act of 1934 for the fiscal year ended August 2,
2002 (File No. 000-25225).
(9) Incorporated by reference to the Company's Annual Report on Form 10-K under
the Securities Exchange Act of 1934 for the fiscal year ended August 2,
1991 (File No. 0-7536).
(10) Incorporated by reference to the Company's Annual Report on Form 10-K under
the Securities Exchange Act of 1934 for the fiscal year ended August 1,
2003 (File No. 000-25225).
(11) Incorporated by reference to the Company's Annual Report on Form 10-K under
the Securities Exchange Act of 1934 for the fiscal year ended August 3,
2001 (File No. 000-25225).
(12) Incorporated by reference to the Company's Annual Report on Form 10-K under
the Securities Exchange Act of 1934 for the fiscal year ended July 28,
2000 (File No. 000-25225).
(13) Incorporated by reference to the Company's Annual Report on Form 10-K under
the Securities Exchange Act of 1934 for the fiscal year ended July 30, 2004
(File No. 000-25225).
FIRST SUPPLEMENT TO INDENTURE
THIS FIRST SUPPLEMENT TO INDENTURE, is dated as of June 19, 2002 (the
"Supplement"), by and among CBRL Group, Inc., a Tennessee corporation (the
"Company"), LRI Gift Card Management Co., a Colorado corporation ("LRI Gift Card
Management"), and Wachovia Bank, National Association, as trustee (the
"Trustee").
W I T N E S S E T H:
WHEREAS, the Company, the Guarantors (as defined therein) which are party
thereto, and the Trustee executed that certain Indenture dated as of April 3,
2002 (the "Indenture"), providing for the issuance of certain Liquid Yield
Option(TM) Notes due 2032 (Zero Coupon-Senior) in the principal amount at
maturity of up to Four Hundred Twenty-Two Million Fifty Thousand and 00/100
Dollars ($422,050,000) (the "Securities"), all of which currently are issued and
outstanding; and
WHEREAS, the Securities are fully guaranteed, on an unsecured senior basis,
as to the payment of principal and interest by the Guarantors (as defined in the
Indenture); and
WHEREAS, Logan's Roadhouse, Inc., a Tennessee corporation and a Subsidiary
(as defined in the Indenture) of the Company, is a Guarantor (as defined in the
Indenture) under the Indenture; and
WHEREAS, Logan's Roadhouse, Inc. formed LRI Gift Card Management, a
"domestic Subsidiary" (as defined in the Indenture), on June 6, 2002; and
WHEREAS, Section 13.03 of the Indenture provides that any "domestic
Subsidiary" (as defined in the Indenture) formed by a Subsidiary (as defined in
the Indenture) of the Company must execute and deliver to the Trustee a
supplement to the Indenture pursuant to which such "domestic Subsidiary" (as
defined in the Indenture) shall guarantee all of the obligations on the
Securities; and
WHEREAS, because LRI Gift Card Management must become a Guarantor (as
defined in the Indenture) of the Securities in compliance with Section 13.03 of
the Indenture, this Supplement is required by the terms of the Indenture; and
WHEREAS, all acts and proceedings necessary have been done to make this
Supplement, when executed and delivered by the Company, LRI Gift Card Management
and the Trustee, the legal, valid and binding agreement of the Company and LRI
Gift Card Management in accordance with its terms;
NOW, THEREFORE, for good and valuable consideration, the sufficiency and
receipt of which are hereby acknowledged, the parties, intending to be legally
bound, agree as follows:
Section 1. Confirmation of the Indenture; Definitions. Except as amended
and supplemented hereby, the Indenture is hereby confirmed and reaffirmed in all
respects. Capitalized defined terms not otherwise defined herein shall have the
meanings ascribed to them in the Indenture.
Section 2. Guarantee. LRI Gift Card Management does hereby guarantee all of
the obligations on the Securities, whether for principal, interest (including
contingent interest, and interest accruing after the filing of, or which would
have accrued but for the filing of, a petition by or against the Company under
Bankruptcy Law, whether or not such interest is allowed as a claim after such
filing in any proceeding under such law), if any and other amounts due in
connection therewith (including any fees, expenses and indemnities), on a senior
unsecured basis on the terms and subject to the limitations set forth in the
Indenture as if it were an original party thereto. On and after the date hereof,
the obligations of LRI Gift Card Management and the other Guarantors under the
Indenture under their respective Guarantees shall be joint and several, and each
reference in the Indenture to "Guarantor" shall be deemed to refer to all
Guarantors, including, without limitation, LRI Gift Card Management.
Section 3. Effectiveness of Supplement. This Supplement shall become
effective immediately upon the execution hereof by the Company, LRI Gift Card
Management and the Trustee.
Section 4. Counterparts. This Supplement may be executed in any number of
counterparts, each of which so executed shall be deemed to be an original, but
all such counterparts shall together constitute but one and the same instrument.
Section 5. Governing Law. This Supplement shall be governed by and
construed in accordance with the internal laws of the State of New York.
[The remainder of this page was intentionally left blank.]
IN WITNESS WHEREOF, the parties hereto have caused this Supplement to
be duly executed, all as of the date first above written.
LRI GIFT CARD MANAGEMENT CO.
ATTEST:
/s/Mary Sample By:/s/Peter Kehayes
- -------------------------------------------- ---------------------------
Name: Mary Sample Name: Peter Kehayes
Title: Chief Financial Officer, Treasurer Title: President
and Secretary
WACHOVIA BANK, NATIONAL
ATTEST: ASSOCIATION, AS TRUSTEE
/s/Greta Wright By:/s/Susan K. Baker
- -------------------------------------------- -------------------------------
Name: Greta Wright Name: Susan K.Baker
--------------------------------------- -----------------------------
Title: Vice President Title: Vice President
-------------------------------------- ----------------------------
CBRL GROUP, INC.
ATTEST:
/s/ M. A. Woodhouse By: /s/J. F. Blackstock
- -------------------------------------------- ------------------------------
Name: Michael A. Woodhouse Name: James F. Blackstock
--------------------------------------- ----------------------------
Title: President & CEO Title: Senior Vice President
-------------------------------------- ---------------------------
SECOND SUPPLEMENT TO INDENTURE
THIS SECOND SUPPLEMENT TO INDENTURE, is dated as of July 30, 2004 (the
"Supplement"), by and among CBRL Group, Inc., a Tennessee corporation (the
"Company"), CBOCS Merger, Inc., a Tennessee corporation ("CBOCS Merger"), CBOCS
Supply, Inc., a Tennessee corporation ("CBOCS Supply"), and Wachovia Bank,
National Association, as trustee (the "Trustee").
W I T N E S S E T H:
WHEREAS, the Company, the Guarantors (as defined therein) which are party a
thereto, and the Trustee executed that certain Indenture dated as of April 3,
2002, as supplemented by that certain First Supplement to Indenture dated as of
June 19, 2002 (as so supplemented, the "Indenture"), providing for the issuance
of certain Liquid Yield Option(TM) Notes due 2032 (Zero Coupon-Senior) in the
principal amount at maturity of up to Four Hundred Twenty-Two Million Fifty
Thousand and No/100 Dollars ($422,050,000) (the "Securities"), all of which
currently are issued and outstanding; and
WHEREAS, the Securities are fully guaranteed, on an unsecured senior basis,
as to the payment of principal and interest by the Guarantors (as defined in the
Indenture); and
WHEREAS, Cracker Barrel Old Country Store, Inc., a Tennessee corporation
and a Subsidiary (as defined in the Indenture) of the Company, is a Guarantor
(as defined in the Indenture) under the Indenture; and
WHEREAS, Cracker Barrel Old Country Store, Inc. formed CBOCS Supply, Inc.,
a "domestic Subsidiary" (as defined in the Indenture), on July 23, 2004; and
WHEREAS, CBOCS West, Inc., a Nevada corporation and a Subsidiary (as
defined in the Indenture) of the Company, is a Guarantor (as defined in the
Indenture) under the Indenture; and
WHEREAS, CBOCS West, Inc. formed CBOCS Merger, Inc., a "domestic
Subsidiary" (as defined in the Indenture), on July 26, 2004; and
WHEREAS, Section 13.03 of the Indenture provides that any "domestic
Subsidiary" (as defined in the Indenture) formed by a Subsidiary (as defined in
the Indenture) of the Company must execute and deliver to the Trustee a
supplement to the Indenture pursuant to which such "domestic Subsidiary" (as
defined in the Indenture) shall guarantee all of the obligations on the
Securities; and
WHEREAS, CBOCS Supply and CBOCS Merger must each become a Guarantor (as
defined in the Indenture) of the Securities in compliance with Section 13.03 of
the Indenture, this Supplement is required by the terms of the Indenture; and
WHEREAS, all acts and proceedings necessary have been done to make this
Supplement, when executed and delivered by the Company, CBOCS Supply, CBOCS
Merger and the Trustee, the legal, valid and binding agreement of the Company,
CBOCS Supply and CBOCS Merger in accordance with its terms;
NOW, THEREFORE, for good and valuable consideration, the sufficiency and
receipt of which are hereby acknowledged, the parties, intending to be legally
bound, agree as follows:
Section 1. Confirmation of the Indenture; Definitions. Except as amended
and supplemented hereby, the Indenture is hereby confirmed and reaffirmed in all
respects. Capitalized defined terms not otherwise defined herein shall have the
meanings ascribed to them in the Indenture.
Section 2. Guarantee. CBOCS Supply and CBOCS Merger do each hereby
guarantee all of the obligations on the Securities, whether for principal,
interest (including contingent interest, and interest accruing after the filing
of, or which would have accrued but for the filing of, a petition by or against
the Company under Bankruptcy Law, whether or not such interest is allowed as a
claim after such filing in any proceeding under such law), if any and other
amounts due in connection therewith (including any fees, expenses and
indemnities), on a senior unsecured basis on the terms and subject to the
limitations set forth in the Indenture as if it were an original party thereto.
On and after the date hereof, the obligations of CBOCS Supply and CBOCS Merger
and the other Guarantors under the Indenture under their respective Guarantees
shall be joint and several, and each reference in the Indenture to "Guarantor"
shall be deemed to refer to all Guarantors, including, without limitation, CBOCS
Supply and CBOCS Merger.
Section 3. Effectiveness of Supplement. This Supplement shall become
effective immediately upon the execution hereof by the Company, CBOCS Supply,
CBOCS Merger and the Trustee.
Section 4. Counterparts. This Supplement may be executed in any number of
counterparts, each of which so executed shall be deemed to be an original, but
all such counterparts shall together constitute but one and the same instrument.
Section 5. Governing Law. This Supplement shall be governed by and
construed in accordance with the internal laws of the State of New York.
[The remainder of this page was intentionally left blank.]
IN WITNESS WHEREOF, the parties hereto have caused this Supplement to be
duly executed, all as of the date first above written.
CBOCS SUPPLY, INC.
ATTEST:
/s/J.F. Blackstock By:/s/Patrick A. Scruggs
- -------------------------------------------- ------------------------------
Name: J.F. Blackstock Name: Patrick A. Scruggs
-------------------------------------- ----------------------------
Title: General Counsel Title: Treasurer
------------------------------------- ---------------------------
CBOCS MERGER, INC.
ATTEST:
/s/J. F. Blackstock By:Patrick A. Scruggs
- -------------------------------------------- ------------------------------
Name: J.F. Blackstock Name:Patrick A. Scruggs
-------------------------------------- ----------------------------
Title: General Counsel Title:Treasurer
------------------------------------- ---------------------------
WACHOVIA BANK, NATIONAL
ASSOCIATION, AS TRUSTEE
ATTEST:
/s/Myra B. Staggs By:/s/Caroline R. Oakes
- -------------------------------------------- -----------------------------
Name: Myra Staggs Name: Caroline R. Oakes
-------------------------------------- ---------------------------
Title: Assistant Vice President Title: Vice President
------------------------------------- --------------------------
CBRL GROUP, INC.
ATTEST:
/s/ J. F. Blackstock By:/s/Patrick A. Scruggs
- -------------------------------------------- ----------------------------
Name: J. F. Blackstock Name: Patrick A. Scruggs
-------------------------------------- --------------------------
Title: Sr. VP General Counsel Title: VP Accounting and Tax
------------------------------------- -------------------------
The following selected financial data has been restated to reflect
adjustments to the Original Filing that are further discussed in the
"Explanatory Note" in the forepart of this Form 10-K/A and in Note 2 to the
accompanying consolidated financial statements.
CBRL Group, Inc.
Selected Financial Data
(Dollars in thousands except share data)
For each of the fiscal years ended
July 30, August 1, August 2, August 3, July28,
2004(c) 2003 2002 2001(d)(e)(f) 2000(g)
(As Restated, (As Restated, (As Restated, (As Restated) (As Restated)
see Note 2) see Note 2) see Note 2)
Selected Income Statement Data:
Total revenue $2,380,947 $2,198,182 $2,071,784 $1,967,998 $1,777,119
Net income 111,885 105,108 90,444 48,550 58,273
Net income per share:
Basic 2.29 2.13 1.67 0.86 1.01
Diluted 2.23 2.06 1.61 0.85 1.00
Dividends paid per share(a) $ 0.33 $ 0.02 $ 0.02 $ 0.02 $ 0.01
As Percent of Revenues:
Cost of goods sold 33.0% 32.0% 32.7% 33.8% 34.6%
Labor and related expenses 37.0 37.3 37.5 37.2 36.3
Other store operating expenses 17.0 17.3 17.1 18.2 16.9
Store operating income 13.0 13.4 12.7 10.8 12.2
General and administrative expenses 5.3 5.6 5.6 5.2 5.4
Operating Income 7.7 7.8 7.1 4.9 6.6
Income before income taxes 7.3 7.4 6.8 4.2 5.3
Memo: Depreciation and amortization 2.7 2.9 3.0 3.3 3.7
Selected Balance Sheet Data:
Working capital (deficit) $ (39,195) $ (66,880) $ (51,252) $ (34,701) $ (23,262)
Total assets 1,435,704 1,327,165 1,264,673 1,213,697 1,335,974
Long-term debt 185,138 186,730 194,476 125,000 292,000
Other Long-term obligations 36,225 30,454 25,992 19,697 11,053
Shareholders' equity 873,336 789,362 778,881 843,340 826,833
Selected Cash Flow Data:
Cash provided by operating activities $ 200,365 $ 240,586 $ 196,277 $ 147,859 $ 160,247
Purchase of property and equipment 144,611 120,921 96,692 91,439 138,032
Share repurchases 69,206 166,632 216,834 36,444 21,104
Selected Other Data:
Common Shares outstanding at end of year 48,769,368 47,872,542 50,272,459 55,026,846 56,668,349
Stores Open at End of Year:
Cracker Barrel 504 480 457 437 426
Logan's company-operated 107 96 84 75 65
Logan's franchised 20 16 12 8 7
Carmine Giardini's - - - - 3
Comparable Store Sales(b):
Average Unit Annual Sales:
Cracker Barrel restaurant $ 3,217 $ 3,157 $ 3,150 $ 3,082 $ 2,922
Cracker Barrel retail 988 939 945 946 930
Memo: Cracker Barrel number
of stores in comparable base 445 430 414 376 326
Logan's company-operated $ 3,040 $2,915 $2,959 $3,041 $3,157
Memo: Logan's number of
restaurants in comparable base 83 71 59 40 25
Period to period increase (decrease) in
comparable store sales:
Cracker Barrel restaurant 2.0% 0.5 % 5.3% 4.6 % 0.6 %
Cracker Barrel retail 5.3 (0.4) 2.3 1.1 (2.3)
Logan's company-operated 4.8 0.0 2.4 (1.1) 3.2
(a)On September 25, 2003, the Company's Board of Directors (the "Board") adopted
a new policy to consider and pay dividends, if declared, on a quarterly basis,
initially declared at $0.11 per share per quarter (an annual equivalent of $0.44
per share). During 2004, the Company paid such dividends of $0.11 per share
during the second, third and fourth quarters of 2004. On July 29, 2004, the
Board declared another dividend of $0.11 per share payable on September 1, 2004
to shareholders of record on August 9, 2004. Additionally, on September 23,
2004, the Board declared a dividend of $0.12 per share payable on November 1,
2004 to shareholders of record on October 8, 2004. This dividend reflects a 9.1%
increase from the previous quarterly dividend.
(b)Comparable store sales consist of sales of units open six full quarters at
the beginning of the year; and are measured on calendar weeks. Average unit
volumes are normalized to 52 weeks for fiscal 2001.
(c)Includes charges of $5,210 before taxes, as a result of settlement of certain
lawsuits against the Company's Cracker Barrel Old Country Store, Inc. ("Cracker
Barrel") subsidiary (see Note 10 to the Company's Consolidated Financial
Statements).
(d)Includes charges of $33,063 before taxes, principally as a result of exiting
the Carmine Giardini's Gourmet Market(TM) business and closing four Cracker
Barrel units and three Logan's Roadhouse(R) restaurants, as well as an accrual
for a settlement proposal for a collective action under the Fair Labor Standards
Act, which was later settled as noted in (b) above.
(e)The Company's fiscal year ended August 3, 2001 consisted of 53 weeks. As a
result, comparisons to fiscal 2002 and fiscal 2000 also reflect the impact of
having one more week in fiscal 2001 than in fiscal 2002 and fiscal 2000.
(f)Includes a sale-leaseback transaction under which $138,300 of long-term debt
was paid down.
(g)Includes charges of $8,592 before taxes, principally as a result of
management changes and the resulting refocused operating priorities.
MARKET PRICE AND DIVIDEND INFORMATION
The following table indicates the high and low sales prices of the
Company's common stock, as reported by The Nasdaq Stock Market (National
Market), and dividends paid.
Fiscal Year 2004 Fiscal Year 2003
---------------- ----------------
Prices Prices
---------------- Dividends ---------------- Dividends
Quarter High Low Paid High Low Paid
- -------------------------------------------------------------------------------
First $39.02 $32.25 -- $27.95 $19.54 --
Second 42.07 36.61 $.11 32.85 22.35 $.02
Third 41.24 37.09 .11 32.99 24.86 --
Fourth 38.11 30.55 .11 39.95 31.31 --
- -------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion and analysis provides information which management
believes is relevant to an assessment and understanding of the Company's
consolidated results of operations and financial condition. The discussion
should be read in conjunction with the Consolidated Financial Statements and
notes thereto. All applicable disclosures in the following discussion have been
modified to reflect the restatement described in Note 2 to the Consolidated
Financial Statements. Except for specific historical information, the matters
discussed in this Annual Report to Shareholders, as well as the Company's Annual
Report on Form 10-K/A filed with the Securities and Exchange Commission ("SEC")
for the year ended July 30, 2004, contain forward-looking statements that
involve risks, uncertainties and other factors which may cause actual results
and performance of the Company to differ materially from those expressed or
implied by these statements. All forward-looking information is provided by the
Company pursuant to the safe harbor established under the Private Securities
Litigation Reform Act of 1995 and should be evaluated in the context of these
factors. Forward-looking statements generally can be identified by the use of
forward-looking terminology such as "assumptions," "target," "guidance,"
"outlook," "plans," "projection," "may," "will," "would," "expect," "intend,"
"estimate," "anticipate," "believe," "potential" or "continue" (or the negative
or other derivatives of each of these terms) or similar terminology. Factors
which could materially affect actual results include, but are not limited to:
changes in or implementation of additional governmental or regulatory rules,
regulations and interpretations affecting accounting (including but not limited
to, accounting for convertible debt under Emerging Issues Task Force ("EITF")
Issue Abstract No. 04-08 of the Financial Accounting Standards Board ("FASB")),
tax, wage and hour matters, health and safety, pensions, insurance or other
undeterminable areas; the effects of uncertain consumer confidence or general or
regional economic weakness on sales and customer travel activity; the ability of
the Company to identify, acquire and sell successful new lines of retail
merchandise; commodity, workers' compensation, group health and utility price
changes; consumer behavior based on concerns over nutritional or safety aspects
of the Company's products or restaurant food in general; competitive marketing
and operational initiatives; the effects of plans intended to improve
operational execution and performance; the actual results of pending or
threatened litigation or governmental investigations or charges and the costs
and effects of negative publicity associated with these activities; practical or
psychological effects of terrorist acts or war and military or government
responses; the effects of increased competition at Company locations on sales
and on labor recruiting, cost, and retention; the ability of and cost to the
Company to recruit, train, and retain qualified restaurant hourly and management
employees; disruptions to the Company's restaurant or retail supply chain;
changes in foreign exchange rates affecting the Company's future retail
inventory purchases; the availability and cost of acceptable sites for
development and the Company's ability to identify such sites; changes in
generally accepted accounting principles in the United States of America
("GAAP") or changes in capital market conditions that could affect valuations of
restaurant companies in general or the Company's goodwill in particular;
increases in construction costs; changes in interest rates affecting the
Company's financing costs; and other factors described from time to time in the
Company's filings with the SEC, press releases, and other communications.
All dollar amounts reported or discussed in Management's Discussion and
Analysis of Financial Condition and Results of Operations are shown in
thousands. References in Management's Discussion and Analysis of Financial
Condition and Results of Operations to a year or quarter are to the Company's
fiscal year or quarter unless otherwise noted.
EXECUTIVE OVERVIEW
- ------------------
CBRL Group, Inc. (the "Company," "our" or "we") is a publicly traded
(Nasdaq: CBRL) holding company that, through certain subsidiaries, is engaged in
the operation and development of the Cracker Barrel Old Country Store(R)
("Cracker Barrel") and Logan's Roadhouse(R) ("Logan's") restaurant and retail
concepts. The Company was organized under the laws of the state of Tennessee in
August 1998 and maintains an Internet website at http://www.cbrlgroup.com.
------------------------
We are in the business of delivering excellent guest dining experiences,
and we strive to do that in 41 states at a collective total of 611 company-owned
units and an additional 20 franchised units as of July 30, 2004. While each
restaurant concept offers its own unique atmosphere and an array of distinct
menu items, both are equally committed to executing outstanding guest service
while focusing on delivery of high quality products at affordable prices. During
2004 we served approximately 206 million meals in Cracker Barrel and
approximately 27 million meals in Logan's.
Restaurant Industry
- -------------------
Our businesses operate in the full-service segment of the restaurant
industry in the United States. The restaurant business is highly competitive
with respect to quality, variety and price of the food products offered. The
industry is often affected by changes in the taste and eating habits of the
public, local and national economic conditions affecting spending habits, and
population and traffic patterns. There are many segments within the restaurant
industry, which overlap and often provide competition for widely diverse
restaurant concepts. Competition also exists in securing prime real estate
locations for new restaurants, in hiring qualified employees, in advertising, in
the attractiveness of facilities and among competitors with similar menu
offerings or convenience.
The restaurant industry has experienced sharp increases in the prices of
many key commodities over the last year, and commodity price pressures are
expected to continue for various beef, pork, poultry, dairy and egg products. We
have developed various initiatives to focus on purchasing of the same or higher
quality products more efficiently and at lower costs or to mitigate or manage
cost pressures.
Additionally, seasonal aspects also affect the restaurant business.
Historically, interstate tourist traffic and the propensity to dine out during
the summer months have been much higher, thereby attributing to higher profits
in our fourth quarter. While retail sales in Cracker Barrel are almost
exclusively to restaurant customers, such sales are strongest in the second
quarter, which includes the Christmas holiday shopping season.
Key Performance Indicators
- --------------------------
Management uses a number of key performance measures to evaluate the
Company's operational and financial performance, including the following:
Comparable store sales and traffic consist of sales and number of guests,
respectively, of units open six full quarters at the beginning of the year; and
are measured on comparable calendar weeks. This measure highlights performance
of existing stores as the impact of new stores openings are excluded.
Percentage of restaurant sales by day-part assists management in
identifying the breakdown of sales provided by meals served for breakfast, lunch
or dinner. This measure not only provides a financial measure of revenues by
type of meal, but also assists operational management in analyzing staffing
levels needed throughout the day.
Average check per person is an indicator which management uses to analyze
the dollars spent in our stores per guest. This measure aids management in
identifying trends in guest preferences as well as the effectiveness of menu
price increases and other menu changes.
Turnover rates are considered separately for both hourly turnover and
managerial turnover. These indicators help management to anticipate future
training needs and costs, as well as helping management to recognize trends in
staffing levels that would potentially affect operating performance.
Store Operating Margins are defined as total revenue less cost of goods
sold, labor and other related expenses and other store operating expenses.
Management uses this indicator as a primary measure of operating profitability.
Results of Operations
The following table highlights operating results over the past three years:
Relationship Period to Period
to Total Revenue Increase(Decrease)
---------------- ------------------
2004 2003 2002 2004 vs 2003 2003 vs 2002
- ---------------------------------------------------------------------------------------------
(As Restated) (As Restated)(As Restated) (As Restated) (As Restated)
Total revenue: 100.0% 100.0% 100.0% 8% 6%
Cost of goods sold 33.0 32.0 32.7 12 4
Gross profit 67.0 68.0 67.3 7 7
Labor and other related
expenses 37.0 37.3 37.5 7 5
Other store operating
expenses 17.0 17.3 17.1 6 7
Store operating income 13.0 13.4 12.7 5 12
General and administrative 5.3 5.6 5.6 4 6
Operating income 7.7 7.8 7.1 6 17
Interest expense 0.4 0.4 0.3 (5) 31
Interest income -- -- -- -- --
Income before income taxes 7.3 7.4 6.8 7 16
Provision for income taxes 2.6 2.6 2.4 8 16
Net income 4.7 4.8 4.4 6 16
=============================================================================================
The Company recorded charges of $5,210 before taxes, during the quarter
ended July 30, 2004, as a result of a settlement in principle of certain
previously reported lawsuits against its Cracker Barrel subsidiary (see Note 10
to the Company's Consolidated Financial Statements). The charge increased
general and administrative expense in the Company's Consolidated Statement of
Income in both dollars and as a percent of total revenue for the year ended July
30, 2004 by $5,210 and 0.2%, respectively.
Total Revenue
The following table highlights the components of total revenue by
percentage relationships to total revenue for the past three years:
2004 2003 2002
----------------------
Net sales:
Cracker Barrel restaurant 66.1% 67.3% 67.8%
Logan's company-operated 13.4 12.4 11.6
---- ---- ----
Total restaurant 79.5 79.7 79.4
Cracker Barrel retail 20.4 20.2 20.5
--------------------------------------------------------------------
Total net sales 99.9 99.9 99.9
Franchise fees and royalties 0.1 0.1 0.1
- ------------------------------------------------------------------------
Total revenue 100.0% 100.0% 100.0%
========================================================================
The following table highlights comparable store sales* results over the
past two years:
Cracker Barrel Logan's
Period to Period Period to Period
Increase(Decrease) Increase
------------------ --------
2004 vs 2003 2003 vs 2002 2004 vs 2003 2003 vs 2002
(445 Stores) (430 Stores) (83 Stores) (71 Stores)
- -----------------------------------------------------------------------------
Restaurant 2.0% 0.5% 4.8% 0.0%
Retail 5.3 (0.4) -- --
Restaurant & retail 2.8 0.3 4.8 0.0
=============================================================================
*Comparable store sales consist of sales of units open six full quarters at the
beginning of the year; and are measured on calendar weeks.
Cracker Barrel comparable store restaurant sales increased 2.0% for 2004
versus 2003. Comparable store restaurant sales increased 0.5% in 2003 versus
2002. The increase in comparable store restaurant sales from 2003 to 2004 was
due to an increase in average check of 1.7%, including 1.0% of menu pricing and
0.7% of product mix changes, and an increase in guest traffic of 0.3%.
Cracker Barrel comparable store retail sales increased 5.3% for 2004 versus
2003. Comparable store retail sales decreased 0.4% in 2003 versus 2002. The
comparable store retail sales increase from 2003 to 2004 was due to improved
merchandise selection with broader appeal and greater variety at lower price
points, improved merchandise planning, and retail staff sales training as well
as the restaurant guest traffic increase.
In 2004 total net sales (restaurant and retail) in the 445 Cracker Barrel
comparable stores averaged $4,206. Restaurant sales were 76.5% of total net
sales in the comparable 445 stores in 2004 and 77.1% in 2003.
Logan's comparable store sales increased 4.8% for 2004 versus 2003 at an
average of $3,040 per restaurant. Comparable store sales were flat in 2003
versus 2002. The increase in comparable store sales from 2003 to 2004 was due to
an increase in guest traffic of 3.1% and an increase in average check of 1.7%.
The higher check included 1.1% of menu pricing and 0.6% lower sales deductions
for complimentary meals (resulting from focus on execution and less need to
resolve guest product and service issues).
Total revenue, which increased 8.3% and 6.1% in 2004 and 2003,
respectively, benefited from the opening of 24, 23 and 20 Cracker Barrel stores
in 2004, 2003 and 2002, respectively, and the opening of 11, 12 and 9
company-operated and 4, 4 and 4 franchised Logan's restaurants in 2004, 2003 and
2002, respectively. Average unit volumes, based on weeks of operation, were
approximately $61.7 per week for Cracker Barrel restaurants in 2004 (compared
with $60.9 in 2003 and $60.6 in 2002), $19.1 for Cracker Barrel retail (compared
with $18.2 for 2003 and $18.3 for 2002), and $59.5 for Logan's (compared with
$57.0 for 2003 and $56.6 for 2002).
Cost of Goods Sold
Cost of goods sold as a percentage of total revenue increased in 2004 to
33.0% from 32.0% in 2003. This increase was due to higher commodity costs for
beef, butter, bacon and other dairy, including eggs, all of which had high
single-digit percentage increases due to unfavorable market conditions. Also
affecting cost of goods sold in 2004 was a higher mix of retail sales as a
percent of total revenue (retail has a higher product cost than restaurant) and
higher markdowns of retail merchandise versus the prior year. Management
believes that increases in 2004 were unusual in both magnitude and the breadth
of commodities affected. These increases were partially offset by higher menu
pricing and higher initial mark-ons of retail merchandise.
Cost of goods sold as a percentage of total revenue decreased in 2003 to
32.0% from 32.7% in 2002. Cracker Barrel has had various focused initiatives
aimed at improving cost of product from vendors. This decrease was due to lower
commodity costs for orange juice and certain pork and dairy products versus the
prior year, higher menu pricing, higher initial mark-ons of retail merchandise,
lower retail shrink and in-store damages, a lower mix of retail sales as a
percent of total revenues (retail has a higher product cost than restaurant) and
improvements in restaurant-level execution. These decreases were offset
partially by higher markdowns of retail merchandise and higher commodity costs
for beef, eggs and butter versus the prior year.
Labor and Related Expenses
Labor and other related expenses include all direct and indirect labor and
related costs incurred in store operations. Labor expenses as a percentage of
total revenue were 37.0%, 37.3% and 37.5% in 2004, 2003 and 2002, respectively.
The year to year decrease from 2003 to 2004 was due to higher menu pricing,
lower hourly labor, including wage rates, and decreased workers' compensation
and group health costs offset partially by increases in manager wages and
bonuses versus the prior year. The year to year decrease from 2002 to 2003 was
due to higher menu pricing, lower hourly labor, including wage rates, decreased
compensation under unit-level bonus programs and decreased workers' compensation
costs offset partially by increases in manager wages and increased group health
costs versus the prior year.
Other Store Operating Expenses
Other store operating expenses include all unit-level operating costs, the
major components of which are operating supplies, utilities, repairs and
maintenance, advertising, rent, depreciation and amortization. Other store
operating expenses as a percentage of total revenue were 17.0%, 17.3% and 17.1%
in 2004, 2003 and 2002, respectively. The year to year decrease from 2003 to
2004 was due to lower advertising and depreciation and higher menu pricing
versus the prior year offset partially by higher losses on disposition of
property and equipment versus the prior year. The increase from 2002 to 2003 was
due to higher maintenance versus the prior year offset partially by higher menu
pricing versus the prior year.
General and Administrative Expenses
General and administrative expenses as a percentage of total revenue were
5.3%, 5.6% and 5.6% in 2004, 2003 and 2002, respectively. The year to year
decrease from 2003 to 2004 was due to lower professional fees and the decrease
in bonus accruals reflective of lower performance against financial objectives
versus the prior year offset partially by the legal settlement discussed
earlier. Higher professional fees, higher costs for store manager conferences
and higher corporate bonuses reflective of performance improvements in 2003
versus 2002 were offset by higher revenues from menu pricing and new stores in
2003 versus 2002.
Interest Expense
Interest expense decreased to $8,444 in 2004 from $8,892 in 2003, which
represented an increase from $6,769 in 2002. The year to year decrease from 2003
to 2004 was due to lower average outstanding debt versus the prior year. The
increase from 2002 to 2003 resulted from higher average outstanding debt as
compared to the prior year offset partially by lower average interest rates as
compared to the prior year.
Provision for Income Taxes
Provision for income taxes as a percent of income before income taxes was
35.9% for 2004, 35.5% for 2003 and 35.6% for 2002. The reason for the increase
in the tax rate from 2003 to 2004 was the expiration of certain federal tax
credit legislation on January 1, 2004. The reason for the decrease in the tax
rate from 2002 to 2003 was a decrease in effective state tax rates.
Quantitative and Qualitative Disclosures about Market Risk
Interest Rate Risk. With certain instruments entered into for other than
trading purposes, the Company is subject to market risk exposure related to
changes in interest rates. As of September 28, 2004, the Company has in place a
$300,000 revolving credit facility, which matures February 21, 2008. The
facility bears interest, at the Company's election, either at the prime rate or
a percentage point spread from LIBOR based on certain financial ratios set forth
in the loan agreement. At July 30, 2004, the Company had no outstanding
borrowings under the Revolving Credit Facility, and the Company's percentage
point spread from LIBOR was 1.25%, as it was through all of 2004. The percentage
point spread will decrease to 1.0% for the first quarter of 2005 then increase
to 1.25% in the second quarter of 2005. The percentage point spread from LIBOR
for the third and fourth quarters of 2005 remains to be determined. While
changes in the prime rate or LIBOR would affect the cost of funds borrowed in
the future, the Company believes that the effect, if any, of reasonably possible
near-term changes in interest rates on the Company's consolidated financial
position, results of operations or cash flows would not be material.
Commodity Price Risk. Many of the food products purchased by the Company
are affected by commodity pricing and are, therefore, subject to price
volatility caused by weather, production problems, delivery difficulties and
other factors which are outside the control of the Company and which are
generally unpredictable. Four food categories (beef, dairy, including eggs, pork
and poultry) account for the largest shares of the Company's food purchases at
approximately 18%, 13%, 11% and 10%, respectively. Other categories affected by
the commodities markets, such as produce, seafood and coffee, may each account
for as much as 9% of the Company's food purchases. While the Company has some of
its food items prepared to its specifications, the Company's food items are
based on generally available products, and if any existing suppliers fail, or
are unable to deliver in quantities required by the Company, the Company
believes that there are sufficient other quality suppliers in the marketplace
that its sources of supply can be replaced as necessary. The Company also
recognizes, however, that commodity pricing is extremely volatile and can change
unpredictably and over short periods of time. Changes in commodity prices would
affect the Company and its competitors generally, and depending on the terms and
duration of supply contracts, sometimes simultaneously. The Company also enters
into supply contracts for certain of its products in an effort to minimize
volatility of supply and pricing. In many cases, or over the longer term, the
Company believes it will be able to pass through some or much of the increased
commodity costs by adjusting its menu pricing. From time to time, competitive
circumstances, or judgments about consumer acceptance of price increases, may
limit menu price flexibility, and in those circumstances increases in commodity
prices can result in lower margins for the Company, as happened in 2004. Some of
the Company's purchase contracts are used to hedge commodity prices and may
contain features that could be classified as derivative financial instruments
under Statement of Financial Accounting Standards ("SFAS") Nos. 133, "Accounting
for Derivative Investments and Hedging Activities," 137, "Accounting for
Derivative Investments and Hedging Activities - Deferral of the Effective Date
of FASB Statement No. 133," 138, "Accounting for Certain Derivative Instruments
and Certain Hedging Activities, an Amendment of FASB Statement No. 133," and
149, "Amendments of Statement 133 on Derivative Instruments and Hedging
Activities." However, these features that could be classified as derivative
financial instruments are exempt from fair value accounting based on the normal
purchases exemption.
Liquidity and Capital Resources
The following table presents a summary of the Company's cash flows for the
last three years:
2004 2003 2002
- ------------------------------------------------------------------------------
Net cash provided by operating activities $200,365 $240,586 $196,277
Net cash used in investing activities (143,666) (118,953) (90,879)
Net cash used in financing activities (42,313) (122,318) (102,131)
- ------------------------------------------------------------------------------
Net increase (decrease) in cash
and cash equivalents $ 14,386 $ (685) $ 3,267
==============================================================================
The Company's cash generated from operating activities was $200,365 in
2004. Most of this cash was provided by net income adjusted by depreciation and
amortization, the tax benefit realized upon exercise of stock options, accretion
on zero coupon contingently convertible senior notes and loss on disposition of
property. Increases in deferred income taxes, income taxes payable, other
accrued expenses, deferred revenues, other long-term obligations, taxes withheld
and accrued and accrued employee benefits and decreases in prepaid expenses were
partially offset by decreases in accounts payable and accrued employee
compensation and increases in inventories, other assets and receivables.
The Company had negative working capital of $39,195 at July 30, 2004 versus
negative working capital of $66,880 at August 1, 2003. In the restaurant
industry, substantially all sales are either for cash or third-party credit
card. Like many other restaurant companies, the Company is able to, and may from
time to time, operate with negative working capital. Restaurant inventories
purchased through the Company's principal food distributor are on terms of net
zero days, while restaurant inventories purchased locally generally are financed
from normal trade credit. Retail inventories purchased domestically generally
are financed from normal trade credit, while imported retail inventories
generally are purchased through letters of credit and wire transfers. These
various trade terms are aided by rapid turnover of the restaurant inventory.
Employees generally are paid on weekly, bi-weekly or semi-monthly schedules in
arrears for hours worked, and certain expenses such as certain taxes and some
benefits are deferred for longer periods of time.
Capital expenditures (purchase of property and equipment) were $144,611,
$120,921 and $96,692 in 2004, 2003 and 2002, respectively. Costs of new
locations accounted for the majority of these expenditures.
The Company's internally generated cash, along with cash at August 1, 2003,
the Company's new operating leases, proceeds from stock option exercises and,
for interim periods of time, the Company's available revolver, were sufficient
to finance all of its growth, share repurchases and other cash payment
obligations in 2004.
In 2002, the Company issued $422,050 (face value at maturity) of Notes,
maturing on April 2, 2032, and received proceeds totaling approximately $172,756
prior to debt issuance costs. The Notes require no cash interest payments and
were issued at a discount representing a yield to maturity of 3.00% per annum.
The Notes are redeemable at the Company's option on or after April 3, 2007, and
the holders of the Notes may require the Company to redeem the Notes on April 3,
2005, 2007, 2012, 2017, 2022 or 2027, and in certain other circumstances. In
addition, each $1 (face value at maturity) Note is convertible into 10.8584
shares of the Company's common stock (approximately 4.6 million shares in the
aggregate) if any of the following conditions occur: 1) the closing price of the
Company's common stock exceeds a specified price (initially, 120% of the
accreted conversion price, and declining .08474% per quarter thereafter to
approximately 110% of the accreted conversion price on the last day of the
quarter ending January 30, 2032, with a specified price of $48.21 at July 30,
2004); 2) the Company exercises its option to redeem the Notes; 3) the credit
rating of the Notes is reduced by Moody's and Standard and Poor's to or below
both Ba3 and BB-, respectively; or 4) certain specified corporate events. The
accreted conversion price is equal to the issue price of the Note plus accrued
original issue discount divided by 10.8584 shares, and was $40.40 per share at
July 30, 2004. The Company's closing share price, as reported by Nasdaq, on July
30, 2004 was $33.22. Although the holders of the Notes have the ability to
require the Company to repurchase the Notes on April 3, 2005, the Company has
classified this debt as long-term due to its intent and ability, in the event of
a requirement to repurchase any portion of the Notes by the holders, to
refinance this indebtedness on a long-term basis through borrowings under the
Revolving Credit Facility. In addition to the many risks and uncertainties
listed above, the Company notes a certain specific risk that would have a
material impact on future results if it occurred. This risk is the potential
effect of a change in accounting rules for convertible debt proposed by the EITF
Issue Abstract No. 04-08, that would require the use of "if-converted"
accounting for contingently convertible debt regardless of whether the
contingency allowing debt holders to convert is met. Under current rules (SFAS
No. 128, "Earnings Per Share"), contingently issuable shares should be included
as diluted shares outstanding only when the contingency (i.e., when the common
stock trades for a specified period of time at or above the specified contingent
conversion price, $48.21 as of July 30, 2004) is met. Should the rule change be
adopted, the Company would be required, among other things, to include
approximately 4.6 million shares in its diluted shares outstanding related to
its convertible debt. The likelihood and timing of implementation of the rule
change is uncertain. The Company noted that, if implemented, the change would
have no economic effect because the terms of the Notes would be unchanged. The
Company has not yet determined what response or change in policy, if any, it
would make if the new accounting took effect.
On February 21, 2003, the Company entered into a new five-year $300,000
Revolving Credit Facility and terminated its previous $250,000 Revolving Credit
Facility, which was set to expire on December 31, 2003. The new facility has
substantially the same terms as the prior facility; however, there is a slightly
more favorable credit spread grid, as well as certain less restrictive
covenants. The new $300,000 revolving credit facility will expire on February
21, 2008. At July 30, 2004, the Company had no outstanding borrowings under the
Revolving Credit Facility.
During 2004, the Company's Board of Directors (the "Board") authorized the
repurchase of up to 4 million shares of the Company's common stock under two
separate repurchase authorizations. The repurchases are to be made from time to
time in the open market at prevailing market prices. The Company completed
repurchases of 1,769,300 shares of its common stock for a net expenditure of
$69,206, or approximately $39.11 per share. The total 2004 share repurchases
were made up of the following: 661,300 shares were repurchased under a
repurchase authorization previously in effect at the end of fiscal 2003 and
1,108,000 shares were repurchased under the first 2004 repurchase authorization.
The Company presently expects to complete the remaining 892,000 shares of the
first repurchase authorization and the 2 million shares of the second repurchase
authorization during 2005, although there can be no assurance that such
repurchases actually will be completed in that period of time. The Company's
principal criteria for share repurchases are that they be accretive to net
income per share and that they do not unfavorably affect the Company's
investment grade debt rating and target capital structure.
During 2004 the Company received proceeds of $50,210 from the exercise of
stock options on 2,634,126 shares of its common stock and tax benefit upon
exercise of stock options of $12,641.
During the first quarter of 2004, the Board approved a quarterly dividend
policy declaring a quarterly dividend of $0.11 per common share (an annual
equivalent of $0.44 per share), an increase from an annual dividend of $0.02
paid in 2003. The Company paid such dividends of $0.11 per share during the
second, third and fourth quarters of 2004. Additionally, on July 29, 2004, the
Board declared another dividend of $0.11 per share payable on September 1, 2004
to shareholders of record on August 9, 2004. Additionally, on September 23,
2004, the Board declared a dividend of $0.12 per share payable on November 1,
2004 to shareholders of record on October 8, 2004. This dividend reflects a 9.1%
increase from the previous quarterly dividend.
The Company estimates that its capital expenditures (purchase of property
and equipment) for 2005 will be approximately $160,000 to $165,000, most of
which will be related to the acquisition of sites and construction of 25 new
Cracker Barrel stores and 18 new Logan's restaurants and openings that will
occur after 2005.
Management believes that cash at July 30, 2004, along with cash generated
from the Company's operating activities, stock option exercises and its
available Revolving Credit Facility, will be sufficient to finance its continued
operations, its remaining share repurchase authorization, its continued
expansion plans and its dividend payments through 2005. At July 30, 2004, the
Company had $300,000 available under its Revolving Credit Facility. The Company
estimates that it will generate excess cash of approximately $100,000 to
$110,000, which it defines as net cash provided by operating activities less
cash used for purchase of property and equipment (the most comparable measure
under GAAP). The Company intends to use this excess cash along with proceeds
from the exercise of stock options in 2005 to apply toward completing its
remaining 2,892,000 share repurchase authorization, possible future share
repurchase authorizations and dividend payments or other general corporate
purposes.
Material Commitments
For reporting purposes, the schedule of future minimum rental payments
required under operating leases, excluding leases for advertising billboards,
has been restated to conform the lease term to that used in the straight-line
rent calculation as described in Note 2 to the Consolidated Financial
Statements, and correct miscellaneous errors due to keying mistakes and
summation errors, omission of certain leases and miscalculation of certain lease
terms. Although the Company is not currently legally obligated for all optional
renewal periods, this method was deemed appropriate under SFAS No. 13,
"Accounting for Leases," to be consistent with the lease term used in the
straight-line rent calculation.
The Company's contractual cash obligations and commitments as of July
30, 2004, are summarized in the tables below:
Payments due by Year
2006- 2008- After
Total 2005 2007 2009 2009
- -------------------------------------------------------------------------------------------------------------
(As Restated) (As Restated) (As Restated) (As Restated) (As Restated)
Convertible debt $ 185,138 -- -- -- $185,138
Revolving credit facility -- -- -- -- --
- -------------------------------------------------------------------------------------------------------------
Long-term Debt (a) 185,138 -- -- -- 185,138
Operating lease base term and
exercised options - excluding
billboards (b) 439,482 $30,174 $59,318 $59,068 290,922
Operating lease renewal periods
not yet exercised - excluding
billboard (c) 284,057 -- 563 1,498 281,996
Operating leases for billboards 39,489 20,218 19,162 109 --
Trade letters of credit 7,497 7,497 -- -- --
Capital leases 637 235 359 43 --
Purchase obligations (d) 330,271 253,268 77,003 -- --
- -------------------------------------------------------------------------------------------------------------
Total contractual cash
obligations $1,286,571 $311,392 $156,405 $60,718 $758,056
=============================================================================================================
Amount of Commitment Expirations by Year
2006- 2008- After
Total 2005 2007 2009 2009
- -------------------------------------------------------------------------------------------------------------
Revolving credit facility $300,000 -- -- $300,000 --
Standby letters of credit 17,830 $17,830 -- -- --
Guarantees (e) 4,473 457 $913 913 $2,190
- -------------------------------------------------------------------------------------------------------------
Total commitments $322,303 $18,287 $913 $300,913 $2,190
=============================================================================================================
(a) The convertible debt was issued at a discount representing a yield to
maturity of 3.00% per annum. The $185,138 balance is the accreted carrying
value of the debt at July 30, 2004. The convertible debt will continue to
accrete at 3.00% per annum and if held to maturity on April 2, 2032 the
obligation will total $422,050. Additionally, since the Company had no
amounts outstanding under its variable rate Revolving Credit Facility as of
July 30, 2004 interest is excluded from the contractual cash obligations
table.
(b) Includes base lease terms and certain optional renewal periods that have
been exercised and are included in the lease term in accordance with SFAS
No. 13 (see Note 2).
(c) Includes certain optional renewal periods that have not yet been exercised,
but are included in the lease term for the straight-line rent calculation,
since at the inception of the lease, it is reasonably assured that the
Company will exercise those renewal options (see Note 2).
(d) Purchase obligations consist of purchase orders for food and retail
merchandise; purchase orders for capital expenditures, supplies and other
operating needs and other services; and commitments under contracts for
maintenance needs and other services. We excluded long-term agreements for
services and operating needs that can be cancelled within 60 days without
penalty. We included long-term agreements for services and operating needs
that can be cancelled with more than 60 days notice without penalty only
through the term of the notice. We included long-term agreements for
services and operating needs that can be cancelled with a penalty through
the entire term of the contract. Due to the uncertainties of seasonal
demands and promotional calendar changes, our best estimate of usage for
food, supplies and other operating needs and services is ratably over
either the notice period or the remaining life of the contract, as
applicable, unless we had better information available at the time related
to each contract.
(e)Consists solely of guarantees associated with properties that have been
subleased or assigned. The Company is not aware of any non-performance
under these arrangements that would result in the Company having to perform
in accordance with the terms of those guarantees.
Critical Accounting Policies
The Company prepares its Consolidated Financial Statements in conformity
with GAAP. The preparation of these financial statements requires the Company to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of revenues and expenses
during the reporting period (see Note 3 to the Company's Consolidated Financial
Statements). Actual results could differ from those estimates. Critical
accounting policies are those that management believes are both most important
to the portrayal of the Company's financial condition and operating results, and
require management's most difficult, subjective or complex judgments, often as a
result of the need to make estimates about the effect of matters that are
inherently uncertain. The Company bases its estimates on historical experience,
outside advice from parties believed to be experts in such matters, and on
various other assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying value of assets and liabilities that are not readily apparent from
other sources. Judgments and uncertainties affecting the application of those
policies may result in materially different amounts being reported under
different conditions or using different assumptions. The Company considers the
following policies to be most critical in understanding the judgments that are
involved in preparing its Consolidated Financial Statements.
Impairment of Long-Lived Assets and Provision for Asset Dispositions
The Company assesses the impairment of identifiable intangibles, long-lived
assets and goodwill whenever events or changes in circumstances indicate that
the carrying value may not be recoverable. Recoverability of assets is measured
by comparing the carrying value of the asset to the future cash flows expected
to be generated by the asset. If the total expected future cash flows were less
than the carrying amount of the asset, the carrying amount is written down to
the estimated fair value, and a loss resulting from impairment is recognized by
a charge to earnings. Judgments and estimates made by the Company related to the
expected useful lives of long-lived assets are affected by factors such as
changes in economic conditions and changes in operating performance. As the
Company assesses the ongoing expected cash flows and carrying amounts of its
long-lived assets, these factors could cause the Company to realize a material
impairment charge. From time to time the Company has decided to exit from or
dispose of certain operating units. Typically such decisions are made based on
operating performance or strategic considerations and must be made before the
actual costs of proceeds of disposition are known, and management must make
estimates of these outcomes. Such outcomes could include the sale of a property
or leasehold, mitigating costs through a tenant or subtenant, or negotiating a
buyout of a remaining lease term. In these instances management evaluates
possible outcomes, frequently using outside real estate and legal advice, and
records in the financial statements provisions for the effect of such outcomes.
The accuracy of such provisions can vary materially from original estimates, and
management regularly monitors the adequacy of the provisions until final
disposition occurs. In addition, at least annually, the Company assesses the
recoverability of goodwill and other intangible assets related to its restaurant
concepts with assistance from an outside expert. The impairment tests require
the Company to estimate fair values of its restaurant concepts by making
assumptions regarding future cash flows and other factors. This valuation may
reflect, among other things, such external factors as capital market valuation
for public companies comparable to the operating unit. If these assumptions
change in the future, or if operating performance declines, the Company may be
required to record impairment charges for these assets and such charges could be
material.
Insurance Reserves
The Company self-insures a significant portion of expected losses under its
workers' compensation, general liability and health insurance programs. The
Company has purchased insurance for individual claims that exceed $250 for
workers' compensation and general liability insurance prior to 2003, but
increased this amount to $500 for 2003 and to $1,000 for certain coverages for
2004 going forward. The Company has decided not to purchase such insurance for
its primary group health program, but its offered benefits are limited to not
more than $1,000 during the lifetime of any employee (including dependents) in
the program. The Company records a liability for workers' compensation and
general liability for all unresolved claims and for an actuarially determined
estimate of incurred but not reported claims at the anticipated cost to the
Company as of the end of the Company's third quarter and adjusting it by the
actuarially determined losses and actual claims payments for the fourth quarter.
Those reserves and losses are determined actuarially from a range of possible
outcomes within which no given estimate is more likely than any other estimate.
In accordance with SFAS No. 5, "Accounting for Contingencies," the Company
records the losses at the low end of that range and discounts them to present
value using a risk-free interest rate based on actuarially projected timing of
payments. The Company records a liability for its group health program for all
unpaid claims based primarily upon a loss development analysis derived from
actual group health claims payment experience provided by the Company's third
party administrator. The Company's accounting policies regarding insurance
reserves include certain actuarial assumptions or management judgments regarding
economic conditions, the frequency and severity of claims and claim development
history and settlement practices. Unanticipated changes in these factors may
produce materially different amounts of expense that would be reported under
these insurance programs.
Tax Provision
The Company must make estimates of certain items that comprise its income
tax provision. These estimates include employer tax credits for items such as
FICA taxes paid on employee tip income, Work Opportunity and Welfare to Work, as
well as estimates related to certain depreciation and capitalization policies.
These estimates are made based on the best available information at the time of
the provision and historical experience. The Company files its income tax
returns many months after its year end. These returns are subject to audit by
various federal and state governments years after the returns are filed and
could be subject to differing interpretations of the tax laws. The Company then
must assess the likelihood of successful legal proceedings or reach a
settlement, either of which could result in material adjustments to the
Company's Consolidated Financial Statements and its consolidated financial
position. The Internal Revenue Service ("IRS") completed its examination of the
Company's federal income tax returns for 1997 through 2001. On August 1, 2002
the Company reached a settlement with the IRS for these tax periods. Adjustments
related primarily to temporary or timing differences. The settlement had no
material effect on the Company's Consolidated Financial Statements.
Additionally, the IRS has examined the Company's federal payroll tax filings for
the calendar years ended December 31, 1997 through December 31, 2001. This
examination was completed on July 21, 2003 resulting in no adjustment to the
payroll taxes originally reported by the Company (see Note 8 to the Company's
Consolidated Financial Statements).
Legal Proceedings
As more fully discussed in Note 10 to the Consolidated Financial
Statements, the Company's Cracker Barrel subsidiary, on September 8, 2004,
agreed in principle to settle certain litigation alleging violations of the Fair
Labor Standards Act as well as allegations of discrimination in employment and
public accommodations. The total payment agreed to by Cracker Barrel was $8,720
(including $3,500 accrued in the fourth quarter of 2001), in full satisfaction
of all claims, including attorneys' fees and costs. The effects of this charge
upon net income and earnings per share in both the fourth quarter of and the
entire 2004 year are discussed above.
The Company and its subsidiaries are party to other legal proceedings
incidental to their business. In the opinion of management, based upon
information currently available, the ultimate liability with respect to these
other actions will not materially affect the Company's Consolidated Financial
Statements.
CONSOLIDATED BALANCE SHEET
(In thousands except share data)
July 30, August 1,
Assets 2004 2003
- -------------------------------------------------------------------
(As Restated, (As Restated,
see Note 2) see Note 2)
Current Assets:
Cash and cash equivalents $ 28,775 $ 14,389
Receivables 9,802 9,150
Inventories 141,820 136,020
Prepaid expenses 8,369 8,932
Deferred income taxes 14,274 7,568
- -------------------------------------------------------------------
Total current assets 203,040 176,059
- -------------------------------------------------------------------
Property and Equipment:
Land 298,233 273,831
Buildings and improvements 662,682 625,541
Buildings under capital leases 3,289 3,289
Restaurant and other equipment 315,512 331,065
Leasehold improvements 193,859 164,937
Construction in progress 28,739 19,268
- -------------------------------------------------------------------
Total 1,502,314 1,417,931
Less: Accumulated depreciation and
amortization of capital leases 383,741 377,616
- -------------------------------------------------------------------
Property and equipment - net 1,118,573 1,040,315
- -------------------------------------------------------------------
Goodwill 93,724 93,724
Other Assets 20,367 17,067
- -------------------------------------------------------------------
Total $1,435,704 $1,327,165
===================================================================
Liabilities and Shareholders' Equity
- -------------------------------------------------------------------
Current Liabilities:
Accounts payable $ 53,295 $ 82,172
Current maturities of long-term debt
and other long-term obligations 189 100
Taxes withheld and accrued 34,539 32,103
Income taxes payable 18,571 8,177
Accrued employee compensation 49,466 50,153
Accrued employee benefits 39,290 38,782
Deferred revenues 19,347 15,634
Other accrued expenses 27,538 15,818
- -------------------------------------------------------------------
Total current liabilities 242,235 242,939
- -------------------------------------------------------------------
Long-term Debt 185,138 186,730
- -------------------------------------------------------------------
Other Long-term Obligations 36,225 30,454
- -------------------------------------------------------------------
Deferred Income Taxes 98,770 77,680
- -------------------------------------------------------------------
Commitments and Contingencies (Note 10)
Shareholders' Equity:
Preferred stock - 100,000,000 shares of
$.01 par value authorized; no shares
issued -- --
Common stock - 400,000,000 shares of $.01
par value authorized; 2004 - 48,769,368
shares issued and outstanding; 2003 -
47,872,542 shares issued and outstanding 488 479
Additional paid-in capital 13,982 --
Retained earnings 858,866 788,883
- -------------------------------------------------------------------
Total shareholders' equity 873,336 789,362
- -------------------------------------------------------------------
Total $1,435,704 $1,327,165
===================================================================
See Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENT OF INCOME
(In thousands except share data)
Fiscal years ended
July 30, August 1, August 2,
2004 2003 2002
- -----------------------------------------------------------------------
(As Restated, (As Restated, (As Restated,
see Note 2) see Note 2) see Note 2)
Total revenue $2,380,947 $2,198,182 $2,071,784
Cost of goods sold 785,703 703,915 677,738
- -----------------------------------------------------------------------
Gross profit 1,595,244 1,494,267 1,394,046
- -----------------------------------------------------------------------
Labor & other related expenses 880,617 819,957 777,617
Other store operating expenses 405,139 380,534 354,040
- -----------------------------------------------------------------------
Store operating income 309,488 293,776 262,389
General and administrative 126,501 121,898 115,179
- -----------------------------------------------------------------------
Operating income 182,987 171,878 147,210
Interest expense 8,444 8,892 6,769
Interest income 5 73 --
- -----------------------------------------------------------------------
Income before income taxes 174,548 163,059 140,441
Provision for income taxes 62,663 57,951 49,997
- -----------------------------------------------------------------------
Net income $ 111,885 $ 105,108 $ 90,444
=======================================================================
Net income per share - basic $ 2.29 $ 2.13 $ 1.67
=======================================================================
Net income per share - diluted $ 2.23 $ 2.06 $ 1.61
=======================================================================
Basic weighted average shares
outstanding 48,877,306 49,274,373 54,198,845
=======================================================================
Diluted weighted average shares
Outstanding 50,369,845 50,998,339 56,090,940
=======================================================================
See Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(In thousands except share data)
Additional Total
Common Stock Paid-In Retained Shareholders'
Shares Amount Capital Earnings Equity
Balances at August 3, 2001
(previously reported) 55,026,846 $550 $149,073 $696,485 $846,108
Prior year adjustment
(see Note 2) -- -- -- (2,768) (2,768)
- ----------------------------------------------------------------------------------
Balances at August 3, 2001
(As Restated, see Note 2) 55,026,846 550 149,073 693,717 843,340
Cash dividends declared -
$.020 per share -- -- -- (1,163) (1,163)
Exercise of stock options 2,878,567 29 53,074 -- 53,103
Tax benefit realized upon
exercise of stock options -- -- 9,991 -- 9,991
Purchases and retirement of
common stock (7,632,954) (76) (212,138) (4,620) (216,834)
Net income
(As Restated, see Note 2) -- -- -- 90,444 90,444
- ----------------------------------------------------------------------------------
Balances at August 2, 2002
(As Restated, see Note 2) 50,272,459 503 -- 778,378 778,881
Cash dividends declared -
$.020 per share -- -- -- (1,043) (1,043)
Exercise of stock options 2,938,783 29 59,620 -- 59,649
Tax benefit realized upon
exercise of stock options -- -- 13,399 -- 13,399
Purchases and retirement of
common stock (5,338,700) (53) (73,019) (93,560) (166,632)
Net income
(As Restated, see Note 2) -- -- -- 105,108 105,108
- ----------------------------------------------------------------------------------
Balances at August 1, 2003
(As Restated, see Note 2) 47,872,542 479 -- 788,883 789,362
Cash dividends declared -
$.33 per share -- -- -- (21,556) (21,556)
Exercise of stock options 2,666,126 27 50,183 -- 50,210
Tax benefit realized upon
exercise of stock options -- -- 12,641 -- 12,641
Purchases and retirement of
common stock (1,769,300) (18) (48,842) (20,346) (69,206)
Net income
(As Restated, see Note 2) -- -- -- 111,885 111,885
- ----------------------------------------------------------------------------------
Balances at July 30, 2004
(As Restated, see Note 2) 48,769,368 $488 $ 13,982 $858,866 $873,336
==================================================================================
See Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
Fiscal years ended
July 30, August 1, August 2,
2004 2003 2002
- ------------------------------------------------------------------------------------
(As (As (As
Restated, Restated, Restated,
see Note 2) see Note 2) see Note 2)
Cash flows from operating activities:
Net income $111,885 $105,108 $ 90,444
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 63,868 64,376 62,759
Loss (gain) on disposition of property
and equipment 3,334 903 (781)
Accretion on zero-coupon contingently
convertible senior notes 5,408 5,254 1,720
Tax benefit realized upon
exercise of stock options 12,641 13,399 9,991
Changes in assets and liabilities:
Receivables (652) (691) 2,281
Inventories (5,800) (11,327) (8,103)
Prepaid expenses 563 2,792 (2,161)
Other assets (4,863) (3,136) (813)
Accounts payable (28,877) 8,366 17,108
Taxes withheld and accrued 2,436 3,422 (1,153)
Income taxes payable 10,394 (7,349) (3,891)
Accrued employee compensation (687) 6,691 7,169
Accrued employee benefits 508 5,361 7,871
Deferred revenues 3,712 2,673 3,921
Other accrued expenses 6,356 928 1,848
Other long-term obligations 5,755 4,562 6,322
Deferred income taxes 14,384 39,254 1,745
- -----------------------------------------------------------------------------------
Net cash provided by
operating activities 200,365 240,586 196,277
- -----------------------------------------------------------------------------------
Cash flows from investing activities:
Purchase of property and
equipment (144,611) (120,921) (96,692)
Proceeds from sale of property and
equipment 945 1,968 5,813
- -----------------------------------------------------------------------------------
Net cash used in investing activities (143,666) (118,953) (90,879)
- -----------------------------------------------------------------------------------
Cash flows from financing activities:
Proceeds from issuance of long-term debt 150,000 353,200 591,756
Proceeds from exercise of stock options 50,210 59,649 53,103
Principal payments under
long-term debt and other
long-term obligations (157,125) (366,287) (524,140)
Purchases and retirement of common stock (69,206) (166,632) (216,834)
Deferred financing costs (1) (1,205) (4,853)
Dividends on common stock (16,191) (1,043) (1,163)
- -----------------------------------------------------------------------------------
Net cash used in financing activities (42,313) (122,318) (102,131)
- -----------------------------------------------------------------------------------
Net increase (decrease) in cash
and cash equivalents 14,386 (685) 3,267
Cash and cash equivalents,
beginning of year 14,389 15,074 11,807
- -----------------------------------------------------------------------------------
Cash and cash equivalents,
end of year $ 28,775 $ 14,389 $ 15,074
===================================================================================
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 1,108 $ 1,604 $ 4,839
Income taxes 26,501 15,229 43,340
See Notes to Consolidated Financial Statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share data)
1. Description of the Business
CBRL Group, Inc. and its affiliates (collectively, in the Notes, the
"Company") are principally engaged in the operation and development in the
United States of the Cracker Barrel Old Country Store(R) ("Cracker Barrel")
restaurant and retail concept and the Logan's Roadhouse(R) ("Logan's")
restaurant concept. Logan's has two non-affiliated area development agreements
and accompanying franchise agreements covering development of its concept in all
or part of five states. CBRL Group, Inc. Common Stock is traded on The Nasdaq
Stock Market (National Market) under the symbol CBRL.
2. Restatement of Financial Statements
On February 17, 2005, the Company announced that it was restating certain
prior financial results because of changes it made in the way it accounted for
leases. The decision to restate was made following a review of its accounting
policies that was prompted by views expressed on February 7, 2005 by the staff
of the SEC (and similar restatements by numerous other companies in the
restaurant, retail and other industries) that indicated that the manner in which
the Company had been accounting for leases needed to be corrected.
Prior to this review, the Company had believed that its accounting was
consistent with generally accepted accounting principles. For purposes of
recognizing rental expense, the Company had historically averaged its lease
payments over the base term of the lease, excluding the optional renewal periods
and initial build-out periods, during which it typically has not been required
to make lease payments. For purposes of depreciating leasehold improvements, the
Company had historically amortized the amounts over a longer period, including
both the base term of the lease and the optional renewal periods.
The Company has now determined that the period in which rental expense is
recognized on a straight-line, or average, basis should include any pre-opening
periods during construction for which the Company is legally obligated under the
terms of the lease, and any optional renewal periods, for which at the inception
of the lease, it is reasonably assured that the Company will exercise those
renewal options. This lease period will be consistent with the period over which
leasehold improvements are amortized.
As a result, the Company has restated its historical consolidated financial
statements for years ended July 30, 2004, August 1, 2003 and August 2, 2002.
These effects are summarized below:
CBRL GROUP, INC.
CONSOLIDATED STATEMENT OF INCOME
(In thousands, except share data)
Income Basic Diluted
before Basic net Diluted weighted weighted
Total Operating income income per net income average average
Revenue income taxes Net income share per share shares shares
------- ------ ----- ---------- ----- -------- ------ ------
Year Ended July 30, 2004
As Previously Reported $2,380,947 $185,136 $176,697 $113,262 $2.32 $2.25 48,877,306 50,369,845
Lease Adjustment -- (2,149) (2,149) (1,377) (0.03) (0.02) -- --
---------- -------- -------- -------- ----- ----- ---------- ----------
As Restated $2,380,947 $182,987 $174,548 $111,885 $2.29 $2.23 48,877,306 50,369,845
========== ======== ======== ======== ===== ===== ========== ==========
Year Ended August 1, 2003
As Previously Reported $2,198,182 $174,081 $165,262 $106,529 $2.16 $2.09 49,274,373 50,998,339
Lease Adjustment -- (2,203) (2,203) (1,421) (0.03) (0.03) -- --
---------- -------- -------- -------- ----- ------ ---------- ----------
As Restated $2,198,182 $171,878 $163,059 $105,108 $2.13 $2.06 49,274,373 50,998,339
========== ======== ======== ======== ===== ===== ========== ==========
Year Ended August 2, 2002
As Previously Reported $2,071,784 $149,300 $142,531 $ 91,789 $1.69 $1.64 54,198,845 56,090,940
Lease Adjustment -- (2,090) (2,090) (1,345) (0.02) (0.03) -- --
---------- -------- -------- -------- ----- ----- ---------- ----------
As Restated $2,071,784 $147,210 $140,441 $ 90,444 $1.67 $1.61 54,198,845 56,090,940
========== ======== ======== ======== ===== ===== ========== ==========
CBRL GROUP, INC.
CONSOLIDATED BALANCE SHEET
(In thousands)
July 30, July 30, August 1, August 1,
2004 2004 2003 2003
---- ---- ---- ----
(As Previously Lease (As Previously Lease
Reported) Adjustment (As Restated) Reported) Adjustment (As Restated)
ASSETS
Total current assets $ 203,040 $ -- $ 203,040 $ 176,059 $ -- $ 176,059
Net property and equipment 1,118,573 -- 1,118,573 1,040,315 -- 1,040,315
Total other assets 113,249 842 114,091 109,949 842 110,791
---------- ------- ---------- ---------- ------- ----------
Total assets $1,434,862 $ 842 $1,435,704 $1,326,323 $ 842 $1,327,165
========== ======= ========== ========== ======= ==========
LIABILITIES AND SHAREHOLDERS'
EQUITY
Total current liabilities $ 246,782 $(4,547) $ 242,235 $ 246,714 $(3,775) $ 242,939
Long-term debt 185,138 -- 185,138 186,730 -- 186,730
Other long-term obligations 122,695 12,300 134,995 97,983 10,151 108,134
Total shareholders' equity 880,247 (6,911) 873,336 794,896 (5,534) 789,362
---------- ------ ---------- ---------- ------ ----------
Total liabilities and
shareholders' equity $1,434,862 $ 842 $1,435,704 $1,326,323 $ 842 $1,327,165
========== ======= ========== ========== ====== ==========
Certain amounts and disclosures in Notes 3, 8, 10 and 13 have been restated
to reflect the restatement adjustments described above. The restatement
adjustments did not affect net cash provided by or used in operating, investing
or financing activities.
3. Summary Of Significant Accounting Policies
GAAP - The accompanying Consolidated Financial Statements have been
prepared in accordance with generally accepted accounting principles in the
United States ("GAAP").
Fiscal year - The Company's fiscal year ends on the Friday nearest July
31st and each quarter consists of thirteen weeks unless noted otherwise.
References in these Notes to a year or quarter are to the Company's fiscal year
or quarter unless noted otherwise.
Principles of consolidation - The Consolidated Financial Statements include
the accounts of the Company and its subsidiaries, all of which are wholly owned.
All significant intercompany transactions and balances have been eliminated.
Financial instruments - The fair values of cash and cash equivalents,
accounts receivable, and accounts payable as of July 30, 2004, approximate their
carrying amounts due to their short duration. The carrying value and fair value
of the Company's zero-coupon contingently convertible senior notes (the "Notes")
in long-term debt at July 30, 2004 were $185,138 and $194,671, respectively. The
fair value of the Notes in long-term debt is determined based on market prices
using the average of the bid and ask prices as of July 30, 2004.
Cash and cash equivalents - The Company's policy is to consider all highly
liquid investments purchased with an original maturity of three months or less
to be cash equivalents.
Inventories - Inventories are stated at the lower of cost or market. Cost
of restaurant inventory is determined by the first-in, first-out (FIFO) method.
Approximately 70% of retail inventories are valued using the retail inventory
method and the remaining 30% are valued using an average cost method. Valuation
provisions are included for retail inventory obsolescence, returns and
amortization of certain items.
Start-up costs - Start-up costs of a new store are expensed when incurred.
Property and equipment - Property and equipment are stated at cost. For
financial reporting purposes, depreciation 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 3-10
Leasehold improvements 1-35
- -------------------------------------------------------------------------------
Depreciation expense was $62,304, $62,552 and $61,883 for 2004, 2003 and
2002, respectively. Accelerated depreciation methods are generally used for
income tax purposes.
Capitalized interest was $615, $463 and $364 for 2004, 2003 and 2002,
respectively.
Gain or loss is recognized upon disposal of property and equipment, and the
asset and related accumulated depreciation and amortization amounts are removed
from the accounts.
Maintenance and repairs, including the replacement of minor items, are
charged to expense, and major additions to property and equipment are
capitalized.
Impairment of long-lived assets - The Company evaluates for possible
impairment of long-lived assets and certain identifiable intangibles to be held
and used in the business whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. An impairment is
determined by comparing estimated undiscounted future operating cash flows to
the carrying amounts of assets on a location by location basis. If an impairment
exists, the amount of impairment is measured as the sum of the estimated
discounted future operating cash flows of such asset and the expected proceeds
upon sale of the asset less its carrying amount. If applicable, assets held for
sale are reported at the lower of carrying amount or fair value less costs to
sell.
Operating leases - The Company has ground leases and office space leases
that are recorded as operating leases. Most of the leases have rent escalation
clauses and some have rent holiday and contingent rent provisions. In accordance
with FASB Technical Bulletin ("FTB") No. 85-3, "Accounting for Operating Leases
with Scheduled Rent Increases," the liabilities under these leases are
recognized on the straight-line basis over the shorter of the useful life, with
a maximum of 35 years, or the related lease life. The Company uses a lease life
that generally begins on the date that the Company becomes legally obligated
under the lease, including the pre-opening period during construction, when in
many cases the Company is not making rent payments, and generally extends
through certain of the renewal periods that can be exercised at the Company's
option, for which at the inception of the lease, it is reasonably assured that
the Company will exercise those renewal options.
Certain leases provide for rent holidays, which are included in the lease
life used for the straight-line rent calculation in accordance with FTB No.
88-1, "Issues Relating to Accounting for Leases." Rent expense and an accrued
rent liability are recorded during the rent holiday periods, during which the
Company has possession of and access to the property, but is not required or
obligated to, and normally does not, make rent payments.
Certain leases provide for contingent rent, which is determined as a
percentage of gross sales in excess of specified levels. The Company records a
contingent rent liability and corresponding rent expense when sales have been
achieved in amounts in excess of the specified levels.
The same lease life is used for reporting future minimum lease commitments
as is used for the straight-line rent calculation. The Company uses a lease life
that extends through certain of the renewal periods that can be exercised at the
Company's option.
Advertising - The Company expenses the costs of producing advertising the
first time the advertising takes place. Net advertising expense was $38,442,
$39,782 and $37,423 for 2004, 2003 and 2002, respectively.
Insurance - The Company self-insures a significant portion of expected
losses under its workers' compensation, general liability and health insurance
programs. The Company has purchased insurance for individual claims that exceed
$250 for workers' compensation and general liability insurance prior to 2003,
but has increased this amount to $500 for 2003 and $1,000 for certain coverages
for 2004 going forward. The Company has decided not to purchase such insurance
for its primary group health program, but its offered benefits are limited to
not more than $1,000 during the lifetime of any employee (including dependents)
in the program. The Company records a liability for workers' compensation and
general liability for all unresolved claims and for an actuarially determined
estimate of incurred but not reported claims at the anticipated cost to the
Company as of the end of the Company's third quarter and adjusting it by the
actuarially determined losses and actual claims payments for the fourth quarter.
The reserves and losses are determined actuarially from a range of possible
outcomes within which no given estimate is more likely than any other estimate.
In accordance with Statement of Financial Accounting Standards ("SFAS") No. 5,
"Accounting for Contingencies," the Company records the losses at the low end of
that range and discounts them to present value using a risk-free interest rate
based on actuarially projected timing of payments. The Company records a
liability for its group health program for all unpaid claims based primarily
upon a loss development analysis derived from actual group health claims payment
experience provided by the Company's third party administrator. The Company's
accounting policies regarding insurance reserves include certain actuarial
assumptions or management judgments regarding economic conditions, the frequency
and severity of claims and claim development history and settlement practices.
Unanticipated changes in these factors may produce materially different amounts
of expense that would be reported under these insurance programs.
Goodwill - Goodwill represents the excess of the cost over the net tangible
and identifiable intangible assets from the acquisition of Logan's in 1999.
Effective August 4, 2001, the Company elected early adoption of SFAS No. 142,
"Goodwill and Other Intangible Assets." SFAS No. 142 eliminated the amortization
for goodwill and other intangible assets with indefinite lives. Intangible
assets with lives restricted by contractual, legal, or other means will continue
to be amortized over their useful lives. Goodwill and other intangible assets
not subject to amortization are tested for impairment annually or more
frequently if events or changes in circumstances indicate that the asset might
be impaired. SFAS No. 142 requires a two-step process for testing impairment.
First, the fair value of each reporting unit is compared to its carrying value
to determine whether an indication of impairment exists. This valuation may
reflect, among other things, such external factors as capital market valuation
for public companies comparable to the operating unit. If an impairment is
indicated, then the implied fair value of the reporting unit's goodwill is
determined by allocating the unit's fair value to its assets and liabilities
(including any unrecognized intangible assets) as if the reporting unit had been
acquired in a business combination. The amount of impairment for goodwill and
other intangible assets is measured as the excess of its carrying value over its
implied fair value. The Company conducted the initial test of the carrying value
of its goodwill, as required by SFAS No. 142, during the second quarter of 2002
and concluded that there was no current indication of impairment to goodwill.
The Company performed its annual assessment with assistance from an outside
expert in the second quarters of 2003 and 2004, and concluded that there was no
current indication of impairment. This annual assessment is performed in the
second quarter of each year. Additionally, an assessment is performed between
annual assessments if an event occurs or circumstances change that would more
likely than not reduce the fair value of a reporting unit below its carrying
amount.
Revenue recognition - The Company records revenue from the sale of products
as they are sold. The Company provides for estimated returns based on return
history and sales levels. Initial fees received from a franchisee to establish a
new franchise are recognized as income when the Company has performed all of its
obligations required to assist the franchisee in opening a new franchise
restaurant, which is generally upon the opening of that restaurant. Continuing
royalties, which are a percentage of net sales of franchised restaurants, are
accrued as income when earned.
Deferred revenue - Unredeemed gift certificates and cards represent the
Company's only liability related to unearned income and are recorded at their
expected redemption value. When gift certificates and cards are redeemed, the
Company recognizes revenue and reduces the liability.
Income taxes - Employer tax credits for FICA taxes paid on employee tip
income are accounted for by the flow-through method. Deferred income taxes
reflect the net tax effects of temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the
amounts used for income tax purposes (see Note 8).
Net income per share - Basic net income per share is computed by dividing
income available to common shareholders by the weighted average number of common
shares outstanding for the reporting period. Diluted net income per share
reflects the potential dilution that could occur if securities, options or other
contracts to issue common stock were exercised or converted into common stock.
The Notes had no effect on diluted shares in 2004, 2003 or 2002, since none of
the contingencies that would allow conversion had occurred (see Note 5).
Outstanding employee and director stock options and restricted stock issued by
the Company represent the only dilutive effects reflected in diluted weighted
average shares.
Comprehensive income - Comprehensive income is defined as the change in
equity of a business enterprise during a period from transactions and other
events and circumstances from non-owner sources. Comprehensive income for 2004,
2003 and 2002 is equal to net income as reported.
Stock-based compensation - The Company accounts for its stock based
compensation under the recognition and measurement principles of Accounting
Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to
Employees," and related interpretations, and has adopted the disclosure-only
provisions of SFAS No. 123, "Accounting for Stock-Based Compensation," (see Note
7) and below is providing disclosures required by SFAS No. 148, "Accounting for
Stock-Based Compensation-Transition and Disclosure." Under APB Opinion No. 25,
no stock-based compensation cost is reflected in net income for grants of stock
options to employees because the Company grants stock options with an exercise
price equal to the market value of the stock on the date of grant. The reported
stock-based compensation expense, net of related tax effects, in the table
represents the amortization of restricted stock grants to three executive
officers of the Company.
Had the Company used the alternative fair value based accounting method for
stock compensation expense prescribed by SFAS Nos. 123 and 148, the Company's
net income and earnings per share for the past three years would have been
reduced to the pro-forma amounts illustrated in the following table:
2004 2003 2002
---- ---- ----
(As Restated, (As Restated, (As Restated,
see Note 2) see Note 2) see Note 2)
Net income - as reported $111,885 $105,108 $90,444
Add: Total stock-based employee
compensation included in reported
net income, net of related tax effects 74 298 397
Deduct: Total stock-based compensation
expense determined under fair-value based
method for all awards, net of tax effects (10,900) (11,496) (12,709)
-------- -------- -------
Pro forma, net income $101,059 $ 93,910 $78,132
======== ======== =======
Net income per share:
Basic - as reported $2.29 $2.13 $1.67
==== ==== ====
Basic - pro forma 2.07 1.91 1.44
==== ==== ====
Diluted - as reported 2.23 2.06 1.61
==== ==== ====
Diluted - pro forma 2.01 1.84 1.39
==== ==== ====
Segment Reporting - The Company accounts for its segment in accordance with
SFAS No. 131, "Disclosure About Segments of an Enterprise and Related
Information." SFAS No. 131 requires that a public company report annual and
interim financial and descriptive information about its reportable operating
segments. Operating segments, as defined, are components of an enterprise about
which separate financial information is available that is evaluated regularly by
the chief operating decision maker in deciding how to allocate resources and in
assessing performance. SFAS No. 131 allows aggregation of similar operating
segments into a single operating segment if the businesses are considered
similar under the criteria established by SFAS No. 131. Utilizing these
criteria, the Company manages its business on the basis of one reportable
operating segment (see Note 9).
Derivative instruments and hedging activities - The Company adopted SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities," in 2000
and its subsequent amendments, SFAS Nos. 137, "Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective Date of FASB
Statement No. 133," and 138, "Accounting for Certain Derivative Instruments and
Certain Hedging Activities, an Amendment of FASB Statement No. 133," in 2001 and
SFAS No. 149, "Amendments of Statement 133 on Derivative Instruments and Hedging
Activities," in the fourth quarter of 2003. These statements specify how to
report and display derivative instruments and hedging activities. The adoption
of these statements did not have a material effect on the Company's Consolidated
Financial Statements. During 2004, 2003 and 2002, the Company had no derivative
financial instruments that required fair value accounting treatment.
The Company is exposed to market risk, such as changes in interest rates
and commodity prices. To manage the volatility relating to these exposures, the
Company nets the exposures on a consolidated basis to take advantage of natural
offsets. For the residual portion, the Company may enter into various derivative
financial instruments pursuant to the Company's policies in areas such as
counterparty exposure and hedging practices. The Company reviews these
derivative financial instruments on a specific exposure basis to support hedge
accounting. The changes in fair value of these hedging instruments are offset in
part or in whole by the corresponding changes in the fair value or cash flows of
the underlying exposures being hedged. The Company does not hold or use
derivative financial instruments for trading purposes. The Company's historical
practice has been not to enter into derivative financial instruments.
The Company's policy has been to manage interest cost using a mix of fixed
and variable rate debt (see Notes 5, 10 and 12).
Many of the food products purchased by the Company are affected by
commodity pricing and are, therefore, subject to price volatility caused by
weather, production problems, delivery difficulties and other factors which are
outside the control of the Company and generally are unpredictable. Changes in
commodity prices would affect the Company and its competitors generally and,
depending on terms and duration of supply contracts, sometimes simultaneously.
In many cases, the Company believes it will be able to pass through some or much
of increased commodity costs by adjusting its menu pricing. From time to time,
competitive circumstances or judgments about consumer acceptance of price
increases may limit menu price flexibility, and in those circumstances,
increases in commodity prices can result in lower margins for the Company as
occurred in 2004. Some of the Company's purchase contracts are used to hedge
commodity prices and may contain features that could be classified as derivative
financial instruments under SFAS Nos. 133, 137, 138 and 149. However, these
features that could be classified as derivative financial instruments are exempt
from fair value accounting based on the normal purchases exemption.
Use of estimates - Management of the Company has made certain estimates and
assumptions relating to the reporting of assets and liabilities and the
disclosure of contingent liabilities at the date of the Consolidated Financial
Statements and the reported amounts of revenues and expenses during the
reporting periods to prepare these Consolidated Financial Statements in
conformity with GAAP. Management believes that such estimates have been based on
reasonable and supportable assumptions and that the resulting estimates are
reasonable for use in the preparation of the Consolidated Financial Statements.
Actual results, however, could differ from those estimates.
Reclassifications - Certain reclassifications have been made in the 2002
and 2003 financial statements to conform to the classifications used in 2004.
The balance sheet at August 1, 2003 and the cash flow statement for 2003 and
2002 reflect certain reclassifications that increased receivables and decreased
prepaid expenses.
4. Inventories
Inventories were composed of the following at:
July 30, August 1,
2004 2003
- ------------------------------------------------------------------------------
Retail $104,148 $101,955
Restaurant 19,800 17,091
Supplies 17,872 16,974
- ------------------------------------------------------------------------------
Total $141,820 $136,020
==============================================================================
5. Debt
Long-term debt consisted of the following at:
July 30, August 1,
2004 2003
- --------------------------------------------------------------------------------
$300,000 Revolving Credit Facility payable on or before
February 21, 2008 (rate at 2.36% at August 1, 2003) $ -- $ 7,000
3.0% Zero-Coupon Contingently Convertible Senior
Notes payable on or before April 2, 2032 185,138 179,730
- --------------------------------------------------------------------------------
Long-term debt $185,138 $186,730
================================================================================
At July 30, 2004, the Company had no outstanding borrowings under the
Revolving Credit Facility, which bears interest, at the Company's election,
either at the prime rate or a percentage point spread from LIBOR based on
certain financial ratios set forth in the loan agreement. At July 30, 2004, the
Company's percentage point spread from LIBOR was 1.25% and will decrease to 1.0%
for the first quarter of 2005 then increase to 1.25% in the second quarter of
2005. The percentage point spread from LIBOR for the third and fourth quarters
of 2005 remains to be determined.
The financial covenants related to the Revolving Credit Facility require
that the Company maintain an interest coverage ratio (as defined in the
Revolving Credit Facility) of 2.5 to 1.0, a lease adjusted funded debt to total
capitalization ratio (as defined in the Revolving Credit Facility) not to exceed
0.5 to 1.0 and a lease adjusted funded debt to EBITDAR (earnings before interest
expense, income taxes, depreciation and amortization and rent expense) ratio (as
defined in the Revolving Credit Facility) not to exceed 3.0 to 1.0. At July 30,
2004 and August 1, 2003, the Company was in compliance with all of those
covenants.
In 2002, the Company issued $422,050 (face value at maturity) of Notes,
maturing on April 2, 2032, and received proceeds totaling approximately $172,756
prior to debt issuance costs. The Notes require no cash interest payments and
were issued at a discount representing a yield to maturity of 3.00% per annum.
The Notes are redeemable at the Company's option on or after April 3, 2007, and
the holders of the Notes may require the Company to redeem the Notes on April 3,
2005, 2007, 2012, 2017, 2022 or 2027, and in certain other circumstances.
Although the holders of the Notes have the ability to require the Company to
repurchase the Notes on April 3, 2005, the Company has classified this debt as
long-term due to its intent and ability, in the event it were required to
repurchase any portion of the Notes, to refinance this indebtedness on a
long-term basis through borrowings under the Revolving Credit Facility. In
addition, each $1 (face value at maturity) Note is convertible into 10.8584
shares of the Company's common stock (approximately 4.6 million shares in the
aggregate) if any of the following conditions occur: 1) the closing price of the
Company's common stock exceeds a specified price (initially, 120% of the
accreted conversion price, and declining .08474% per quarter thereafter to
approximately 110% of the accreted conversion price on the last day of the
quarter ending January 30, 2032, with a specified price of $48.21 at July 30,
2004); 2) the Company exercises its option to redeem the Notes; 3) the credit
rating of the Notes is reduced by Moody's and Standard and Poor's to or below
both Ba3 and BB-, respectively; or 4) certain specified corporate events. The
accreted conversion price is equal to the issue price of the Note plus accrued
original issue discount divided by 10.8584 shares, and was $40.40 per share at
July 30, 2004. The Company's closing share price, as reported by Nasdaq, on July
30, 2004 was $33.22.
All subsidiaries of the Company have fully and unconditionally guaranteed
on a joint and several basis the obligations under the Revolving Credit Facility
and the Notes. Each guarantor is, directly or indirectly, a wholly-owned
affiliate of the parent company, CBRL Group, Inc., which has no independent
assets or operations.
The aggregate maturities of long-term debt subsequent to July 30, 2004 are
as follows:
Year
- --------------------------------------------------------------------------------
2005 --
2006 --
2007 --
2008 --
2009 --
2010 and thereafter $185,138
- --------------------------------------------------------------------------------
Total $185,138
================================================================================
6. Common Stock
During 2000 two executive officers were granted, respectively, 20,000 and
19,000 restricted shares of the Company's common stock that were to vest over
five years. In 2002 one executive officer was granted 48,000 restricted shares
of the Company's common stock that were to vest over three years, subject to
certain early vesting provisions which did occur and resulted in early vesting
at the end of 2003. In 2004, one executive officer was granted 7,500 restricted
shares which will vest one-third each year starting three years from the date of
the grant. The executive officer granted 19,000 restricted shares in 2000 left
the company in 2003 and forfeited 9,500 restricted shares. The Company's
compensation expense, net of forfeitures, for these restricted shares was $116,
$462 and $616 in 2004, 2003 and 2002, respectively.
7. Stock Compensation Plans
The Company's employee compensation plans are administered by the
Compensation and Stock Option Committee (the "Committee") of the Board. The
Committee is authorized to determine, at time periods within its discretion and
subject to the direction of the Board, which employees will be granted options
and other awards, the number of shares covered by any awards granted, and within
applicable limits, the terms and provisions relating to the exercise of any
awards.
On September 26, 2002, the Board approved the CBRL Group 2002 Omnibus
Incentive Compensation Plan ("Omnibus Plan") for all employees and non-employee
directors of the Company. That Omnibus Plan was subsequently approved by
shareholders at the Company's 2002 Annual Shareholders Meeting. The Omnibus Plan
allows the Committee to grant awards for an aggregate of 2,500,000 shares of the
Company's common stock. The Omnibus Plan authorizes the following types of
awards to all eligible participants other than non-employee directors: stock
options, stock appreciation rights, stock awards, performance shares, cash
bonuses, qualified performance-based awards or any other type of award
consistent with the Omnibus Plan's purpose. Under the Omnibus Plan, non-employee
directors are granted annually on the day of the Annual Shareholders Meeting an
option to purchase 5,000 shares of the Company's common stock with an option
price per share of at least 100% of the fair market value of a share of the
Company's common stock based on the closing price on the day preceding the day
the option is granted. Additionally, non-employee directors newly elected or
appointed between the Annual Shareholders Meeting and July 31 of the next year
receive an option to purchase 5,000 shares of the Company's common stock with an
option price per share of at least 100% of the fair market value of a share of
the Company's common stock based on the closing price on the day preceding the
day the option is granted. Options granted to date under the Omnibus Plan become
exercisable each year on a cumulative basis at a rate of 33% of the total shares
covered by the option beginning one year from the date of grant, expiring ten
years from the date of grant and are non-transferable. At July 30, 2004, there
were 2,108,515 shares of the Company's common stock reserved for issuance under
the Omnibus Plan.
On May 25, 2000, the Board approved the CBRL Group, Inc. 2000 Non-Executive
Stock Option Plan ("Employee Plan") for employees who are not officers or
directors of the Company. The Employee Plan allows the Committee to grant
options to purchase an aggregate of 4,750,000 shares of the Company's common
stock. The option price per share under the Employee Plan must be at least 100%
of the fair market value of a share of the Company's common stock based on the
closing price on the day preceding the day the option is granted. Options
granted to date under the Employee Plan become exercisable each year on a
cumulative basis at a rate of 33% of the total shares covered by the option
beginning one year from the date of grant, to expire ten years from the date of
grant and are non-transferable. At July 30, 2004, there were 159,428 shares of
the Company's common stock reserved for issuance under the Employee Plan.
The Company also has an Amended and Restated Stock Option Plan (the "Plan")
that originally allowed the Committee to grant options to purchase an aggregate
of 17,525,702 shares of the Company's common stock. At July 30, 2004, there were
1,519,603 shares of the Company's common stock reserved for issuance under the
Plan. The option price per share under the Plan must be at least 100% of the
fair market value of a share of the Company's common stock based on the closing
price on the day preceding the day the option is granted. Options granted to
date under the Plan generally have been exercisable each year on a cumulative
basis at a rate of 33% of the total number of shares covered by the option
beginning one year from the date of grant, expire ten years from the date of
grant and are non-transferable. Beginning in 2000, a long-term incentive award
was granted to certain officers, which included stock options. The options
granted under this award would vest at the end of five years after the grant
(subject to earlier vesting upon accomplishments of specified Company
performance goals) and are non-transferable. As of August 1, 2003, options to
purchase 261,826 shares of the Company's common stock vested early and options
to purchase 255,050 shares vested on July 30, 2004 under the long-term incentive
award. The options have a six-month life following confirmation of vesting by
the Committee.
In 1989, the Board adopted the Cracker Barrel Old Country Store, Inc. 1989
Stock Option Plan for Non-employee Directors ("Directors Plan"). The stock
options were granted with an exercise price equal to the fair market value of
the Company's common stock as of the date of grant and expire one year from the
retirement of the director from the Board. An aggregate of 1,518,750 shares of
the Company's common stock were authorized by the Company's shareholders under
this plan. Due to the overall plan limit, no shares have been granted under this
plan since 1994.
A summary of the status of the Company's stock option plans for 2004, 2003
and 2002, and changes during those years follows:
(Shares in thousands) 2004 2003 2002
- -----------------------------------------------------------------------------
Weighted- Weighted- Weighted-
Average Average Average
Fixed Options Shares Price Shares Price Shares Price
- -----------------------------------------------------------------------------
Outstanding at
beginning of year 7,599 $20.73 9,504 $20.23 10,504 $19.77
Granted 1,146 38.35 1,907 23.85 2,506 20.13
Exercised (2,634) 19.68 (2,922) 20.90 (2,869) 18.67
Forfeited or canceled (294) 23.76 (890) 21.54 (637) 19.33
----- ----- -----
Outstanding at
end of year 5,817 24.52 7,599 20.73 9,504 20.23
===== ===== =====
Options exercisable
at year-end 3,011 20.62 3,696 20.69 5,148 22.58
Weighted-average fair
value per share of
options granted
during the year $14.14 $10.20 $ 9.46
- -----------------------------------------------------------------------------
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in 2004, 2003 and 2002:
2004 2003 2002
- -------------------------------------------------------------------------------
Dividend yield range 0.1% - 1.4% 0.1% 0.1%
Expected volatility range 22% - 42% 41% - 45% 43%
Risk-free interest rate range 1.3% - 4.0% 2.2% - 3.8% 4.0% - 4.9%
Expected lives (in years) 1-8 5-8 6
- -------------------------------------------------------------------------------
Expected volatility has been measured based on an average of past daily
fluctuations in the share price of the Company's common stock.
The following table summarizes information about fixed stock options
outstanding at July 30, 2004:
(Shares in thousands)
Options Outstanding Options Exercisable
- ----------------------------------------------------------------------------------------
Number Weighted-Average Weighted- Number Weighted-
Range of Outstanding Remaining Average Exercisable Average
Exercise Prices at 7/30/04 Contractual Life Exercise Price at 7/30/04 Exercise Price
- ----------------------------------------------------------------------------------------
$ 5.09 - 10.00 38 1.93 $ 7.63 38 $ 7.63
10.01 - 20.00 1,186 5.50 14.94 1,186 14.94
20.01 - 30.00 3,181 6.45 22.83 1,495 23.38
30.01 - 40.00 970 7.37 35.28 292 31.28
40.01 - 41.25 442 9.32 40.26 -- --
----- -----
$ 5.09 - 41.25 5,817 5.89 24.52 3,011 20.62
========================================================================================
The Company recognizes a tax deduction, subject to certain limitations
imposed by the Internal Revenue Code, upon exercise of non-qualified stock
options in an amount equal to the difference between the option price and the
fair market value of the common stock on the date the option is exercised. These
tax benefits, when realized, are credited to additional paid-in capital.
8. Income Taxes
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.
Significant components of the Company's net deferred tax liability
consisted of the following at:
July 30, August 1,
2004 2003
- ------------------------------------------------------------------------------
Deferred tax assets:
Financial accruals without
economic performance $24,818 $20,252
Other 3,637 8,284
-----------------------------------------------------------------------------
Deferred tax assets 28,455 28,536
-----------------------------------------------------------------------------
Deferred tax liabilities:
Excess tax depreciation over book 89,627 72,846
Other 23,324 25,802
-----------------------------------------------------------------------------
Deferred tax liabilities 112,951 98,648
-----------------------------------------------------------------------------
Net deferred tax liability $ 84,496 $70,112
=============================================================================
The Company provided no valuation allowance against deferred tax assets
recorded as of July 30, 2004 and August 1, 2003, as the "more-likely-than-not"
valuation method determined all deferred assets to be fully realizable in future
taxable periods.
The components of the provision for income taxes for each of the three
years were as follows:
2004 2003 2002
----------------------------------------------------------------------------
(As Restated, (As Restated, (As Restated,
see Note 2) see Note 2) see Note 2)
Current:
Federal $44,006 $17,214 $45,223
State 4,273 1,483 3,029
Deferred 14,384 39,254 1,745
----------------------------------------------------------------------------
Total income tax provision $62,663 $57,951 $49,997
============================================================================
A reconciliation of the provision for income taxes and the amount computed
by multiplying the income before the provision for income taxes by the U.S.
federal statutory rate of 35% was as follows:
2004 2003 2002
------------------------------------------------------------------------------
(As Restated, (As Restated, (As Restated,
see Note 2) see Note 2) see Note 2)
Provision computed at federal
statutory income tax rate $61,092 $57,071 $49,154
State and local income taxes,
net of federal benefit 5,578 4,399 4,622
Employer tax credits for FICA taxes
paid on employee tip income (4,781) (4,323) (3,875)
Other-net 774 804 96
-----------------------------------------------------------------------------
Total income tax provision $62,663 $57,951 $49,997
=============================================================================
The Internal Revenue Service ("IRS") has completed its examinations of the
Company's federal income tax returns for 1997 through 2001. Additionally, the
IRS has completed its examinations of the Company's federal payroll tax filings
for the calendar years ended December 31, 1997 through December 31, 2001.
9. Segment Information
Cracker Barrel units represent a single, integrated operation with two
related and substantially integrated product lines. The operating expenses of
the restaurant and retail product lines of a Cracker Barrel unit are shared and
are indistinguishable in many respects. Likewise, Logan's units are restaurant
operations with investment criteria and economic and operating characteristics
similar to those of Cracker Barrel. The chief operating decision makers
regularly evaluate the Cracker Barrel and Logan's restaurant and retail
components in determining how to allocate resources and in assessing
performance. Accordingly, the Company manages its business on the basis of one
reportable operating segment. All of the Company's operations are located within
the United States. The following data are presented in accordance with SFAS No.
131 for all periods presented.
2004 2003 2002
- --------------------------------------------------------------------------------
Net sales in Company-Owned stores:
Restaurant $1,892,487 $1,753,361 $1,645,696
Retail 486,433 443,397 424,949
- --------------------------------------------------------------------------------
Total net sales 2,378,920 2,196,758 2,070,645
- --------------------------------------------------------------------------------
Franchise fees and royalties 2,027 1,424 1,139
- --------------------------------------------------------------------------------
Total revenue $2,380,947 $2,198,182 $2,071,784
================================================================================
10. Commitments and Contingencies
On September 8, 2004, Cracker Barrel agreed in principle to settle certain
litigation alleging violations of the Fair Labor Standards Act as well as
allegations of discrimination in employment and public accommodations. The total
payment agreed by Cracker Barrel was $8,720 (including $3,500 accrued in 2001),
in full satisfaction of all claims, including attorneys' fees and costs.
The Company and its subsidiaries are parties to other legal proceedings
incidental to its business. In the opinion of management, based upon information
currently available, the ultimate liability with respect to these other actions
will not materially affect the Company's Consolidated Financial Statements.
The Company makes trade commitments in the course of its normal operations.
As of July 30, 2004 the Company was contingently liable for approximately $7,497
under outstanding trade letters of credit issued in connection with purchase
commitments. These letters of credit have terms of three months or less and are
used to collateralize obligations to third parties for the purchase of a portion
of the Company's imported retail inventories. Additionally, the Company was
contingently liable pursuant to standby letters of credit as credit guarantees
to insurers. As of July 30, 2004, the Company had $17,830 of standby letters of
credit related to workers' compensation and commercial general liability
insurance. All standby letters of credit are renewable annually.
The Company is secondarily liable for lease payments under the terms of an
operating lease that has been assigned to a third party. The operating lease has
a remaining life of approximately 9.2 years with annual lease payments of $361.
The Company's performance is required only if the assignee fails to perform the
obligations as lessee. At this time, the Company has no reason to believe that
the assignee will not perform and, therefore, no provision has been made in the
accompanying consolidated financial statements for amounts to be paid as a
result of non-performance by the assignee.
The Company also is secondarily liable for lease payments under the terms
of another operating lease that has been sublet to a third party more than one
year ago. The operating lease has a remaining life of approximately 12.2 years
with annual lease payments of $96. The Company's performance is required only if
the sublessee fails to perform the obligations as lessee. The Company has a
liability of $447 in the accompanying consolidated financial statements for
estimated amounts to be paid in case of non-performance by the sublessee.
The Company maintains insurance coverage for various aspects of its
business and operations. The Company has elected, however, to retain all or a
portion of losses that occur through the use of various deductibles, limits and
retentions under its insurance programs. This situation may subject the Company
to some future liability for which it is only partially insured, or completely
uninsured. The Company intends to mitigate any such future liability by
continuing to exercise prudent business judgment in negotiating the terms and
conditions of its contracts. See Note 2 for a further discussion of insurance
and insurance reserves.
As of July 30, 2004, the Company operated 141 Cracker Barrel stores and 51
Logan's Roadhouse restaurants from leased facilities and also leased certain
land and advertising billboards (see Note 12). These leases have been classified
as either capital or operating leases. The interest rates for capital leases
vary from 5% to 17%. Amortization of capital leases is included with
depreciation expense. A majority of the Company's lease agreements provide for
renewal options and some of these options contain escalation clauses.
Additionally, certain store leases provide for percentage lease payments based
upon sales volume in excess of specified minimum levels.
The following is a schedule by year of future minimum lease payments under
capital leases, together with the present value of the minimum lease payments as
of July 30, 2004:
Year
- --------------------------------------------------------------------------------
2005 $235
2006 235
2007 124
2008 43
2009 --
- --------------------------------------------------------------------------------
Total minimum lease payments 637
Less amount representing interest 81
- --------------------------------------------------------------------------------
Present value of minimum lease payments 556
Less current portion 189
- --------------------------------------------------------------------------------
Long-term portion of capital lease obligations $367
================================================================================
For reporting purposes, the schedule of future minimum rental payments
required under operating leases, excluding leases for advertising billboards,
has been restated to conform the lease term to that used in the straight-line
rent calculation as described in Note 2, and correct miscellaneous errors due to
keying mistakes and summation errors, omission of certain leases and
miscalculation of certain lease terms.
The following is a schedule by year of the future minimum rental payments
required under operating leases, excluding leases for advertising billboards, as
of July 30, 2004. Included in the amounts below are optional renewal periods
associated with such leases that the Company is currently not legally obligated
to exercise; however, it is reasonably assured that the Company will exercise
these options.
Base term and Renewal periods
Year exercised options* not yet exercised** Total
- -------------------------------------------------------------------------------
(As Restated, (As Restated, As Restated,
see Note 2) see Note 2) see Note 2)
2005 $30,174 $ -- $ 30,174
2006 29,741 206 29,947
2007 29,577 357 29,934
2008 29,578 612 30,190
2009 29,490 886 30,376
Later years 290,922 281,996 572,918
- -------------------------------------------------------------------------------
Total $439,482 $284,057 $723,539
===============================================================================
*Includes base terms and certain optional renewal periods that have been
exercised and are included in the lease term in accordance with SFAS No. 13 (see
Note 2).
**Includes certain optional renewal periods that have not yet been exercised,
but are included in the lease term for the straight-line rent calculation. Such
optional renewal periods are included because it is reasonably assured by the
Company that it will exercise such renewal options (see Note 2).
The following is a schedule by year of the future minimum rental payments
required under operating leases for advertising billboards as of July 30, 2004:
Year
- -----------------------------------------------------------------------------
2005 $20,218
2006 13,604
2007 5,558
2008 109
- -----------------------------------------------------------------------------
Total $39,489
=============================================================================
Rent expense under operating leases, excluding leases for advertising
billboards are recognized on a straight-line, or average, basis and include any
pre-opening periods during construction for which the Company is legally
obligated under the terms of the lease, and any optional renewal periods, for
which at the inception of the lease, it is reasonably assured that the Company
will exercise those renewal options. This lease period is consistent with the
period over which leasehold improvements are amortized. Rent Expense for each of
the three years was:
Minimum Contingent Total
- -------------------------------------------------------------------------------
(As Restated, (As Restated, (As Restated,
see Note 2) see Note 2) see Note 2)
2004 $33,111 $852 $33,963
2003 31,084 753 31,837
2002 28,248 776 29,024
- -------------------------------------------------------------------------------
Rent expense under operating leases for billboards for each of the three
years was:
Minimum Contingent Total
- -------------------------------------------------------------------------------
2004 $23,042 -- $23,042
2003 22,811 -- 22,811
2002 21,442 -- 21,442
- -------------------------------------------------------------------------------
11. Employee Savings Plans
The Company sponsors a qualified defined contribution retirement plan
("Plan I") covering salaried and hourly employees who have completed one year of
service and have attained the age of twenty-one. Plan I allows eligible
employees to defer receipt of up to 16% of their compensation, as defined in the
plan.
The Company also sponsors a non-qualified defined contribution retirement
plan ("Plan II") covering highly compensated employees, as defined in the plan.
Plan II allows eligible employees to defer receipt of up to 50% of their base
compensation and 100% of their eligible bonuses, as defined in the plan.
Contributions under both Plan I and Plan II may be invested in various
investment funds at the employee's discretion. Such contributions, including the
Company matching contribution described below, may not be invested in the
Company's common stock. The Company matches 25% of employee contributions for
each participant in either Plan I or Plan II up to a total of 6% of the
employee's compensation. Employee contributions vest immediately while Company
contributions vest 20% annually beginning on the participant's first anniversary
of employment. In 2004, 2003, and 2002, the Company contributed approximately
$1,321, $1,524 and $1,609, respectively, under Plan I and approximately $345,
$280 and $203, respectively, under Plan II. At the inception of Plan II, the
Company established a Rabbi Trust to fund Plan II obligations. The market value
of the trust assets of $12,479 is included in other assets and the liability to
Plan II participants of $12,479 is included in other long-term obligations.
Company contributions under Plan I and Plan II are recorded as other store
operating expenses.
12. Sale-Leaseback
On July 31, 2000, Cracker Barrel completed a sale-leaseback transaction
involving 65 of its owned units. Under the transaction, the land, buildings and
building improvements at the locations were sold for net consideration of
$138,325 and were leased back for an initial term of 21 years. Equipment was not
included. The leases include specified renewal options for up to 20 additional
years and have certain financial covenants related to fixed charge coverage for
the leased units. At July 30, 2004 and August 1, 2003, the Company was in
compliance with all those covenants. Net rent expense during the initial term is
$14,963 annually, and the assets sold and leased back previously had
depreciation expense of approximately $2,707 annually. The gain on the sale is
being amortized over the initial lease term of 21 years.
13. Quarterly Financial Data (Unaudited)
Quarterly financial data for 2004 and 2003 are summarized as follows:
1st Quarter 1st Quarter
----------- -----------
(As Previously Lease (As Restated,
Reported) Adjustment see Note 2)
2004
Total revenue $576,365 -- $576,365
Gross profit 390,465 -- 390,465
Income before income taxes 43,794 (481) 43,313
Net income 28,160 (309) 27,851
Net income per share - basic $0.59 (0.01) $0.58
Net income per share - diluted $0.56 (0.01) $0.55
- ----------------------------------------------------------------------------------------------------------------
2003
Total revenue $527,539 -- $527,539
Gross profit 361,574 -- 361,574
Income before income taxes 35,635 (638) 34,997
Net income 22,985 (412) 22,573
Net income per share - basic $0.46 (0.01) $0.45
Net income per share - diluted $0.45 (0.01) $0.44
- ----------------------------------------------------------------------------------------------------------------
2nd Quarter 2nd Quarter
----------- -----------
(As Previously Lease (As Restated,
Reported) Adjustment see Note 2)
2004
Total revenue $612,801 -- $612,801
Gross profit 399,274 -- 399,274
Income before income taxes 45,381 (553) 44,828
Net income 29,001 (353) 28,648
Net income per share - basic $0.59 (0.01) $0.58
Net income per share - diluted $0.57 (0.01) $0.56
- ----------------------------------------------------------------------------------------------------------------
2003
Total revenue $563,119 -- $563,119
Gross profit 373,007 -- 373,007
Income before income taxes 38,181 (583) 37,598
Net income 24,626 (376) 24,250
Net income per share - basic $0.50 (0.01) $0.49
Net income per share - diluted $0.48 (0.01) $0.47
- ----------------------------------------------------------------------------------------------------------------
3rd Quarter 3rd Quarter
----------- -----------
(As Previously Lease (As Restated,
Reported) Adjustment see Note 2)
2004
Total revenue $584,282 -- $584,282
Gross profit 393,564 -- 393,564
Income before income taxes 40,845 (572) 40,273
Net income 26,182 (367) 25,815
Net income per share - basic $0.53 -- $0.53
Net income per share - diluted $0.52 (0.01) $0.51
- ----------------------------------------------------------------------------------------------------------------
2003
Total revenue $527,189 -- $527,189
Gross profit 361,811 -- 361,811
Income before income taxes 36,277 (517) 35,760
Net income 23,399 (333) 23,066
Net income per share - basic $0.48 (0.01) $0.47
Net income per share - diluted $0.46 (0.01) $0.45
- ----------------------------------------------------------------------------------------------------------------
4th Quarter 4th Quarter*
----------- ------------
(As Previously Lease (As Restated,
Reported) Adjustment see Note 2)
2004
Total revenue $607,499 -- $607,499
Gross profit 411,941 -- 411,941
Income before income taxes 46,677 (543) 46,134
Net income 29,919 (348) 29,571
Net income per share - basic $0.61 -- $0.61
Net income per share - diluted $0.60 (0.01) $0.59
- ----------------------------------------------------------------------------------------------------------------
2003
Total revenue $580,335 -- $580,335
Gross profit 397,875 -- 397,875
Income before income taxes 55,169 (465) 54,704
Net income 35,519 (300) 35,219
Net income per share - basic $0.74 (0.01) $0.73
Net income per share - diluted $0.70 -- $0.70
- ----------------------------------------------------------------------------------------------------------------
*The Company recorded charges of $5,210 before taxes during the quarter ended
July 30, 2004, as a result of a settlement in principle of certain previously
reported lawsuits against its Cracker Barrel subsidiary (see Note 10).
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of CBRL Group, Inc.:
We have audited the accompanying consolidated balance sheets of CBRL Group, Inc.
and subsidiaries (the "Company") as of July 30, 2004 and August 1, 2003, and the
related consolidated statements of income, changes in shareholders' equity, and
cash flows for each of the three fiscal years in the period ended July 30, 2004.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company at July 30, 2004 and
August 1, 2003, and the results of its operations and its cash flows for each of
the three fiscal years in the period ended July 30, 2004, in conformity with
accounting principles generally accepted in the United States of America.
As discussed in Note 2, the accompanying consolidated financial statements have
been restated.
/s/Deloitte & Touche LLP
Nashville, Tennessee
September 23, 2004 (March 30, 2005 as to the
effects of the restatement discussed in Note 2)
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in Registration Statement Nos.
2-86602, 33-15775, 33-37567, 33-45482-99, 333-01465, 333-63442, 333-71384,
333-81063 and 333-111364 of CBRL Group, Inc. on Form S-8 and Registration
Statement Nos. 33-59582, 333-90996-02 and 333-90996-13 on Form S-3 of our report
relating to the financial statements of CBRL Group, Inc. dated September 23,
2004 (March 30, 2005, as to the effects of Note 2), which expresses an
unqualified opinion and includes an explanatory paragraph relating to a
restatement as discussed in Note 2, appearing in and incorporated by reference
in this amended Annual Report on Form 10-K/A of CBRL Group, Inc. for the year
ended July 30, 2004.
/s/ DELOITTE & TOUCHE LLP
Nashville, Tennessee
March 30, 2005
EXHIBIT 31 A CERTIFICATION
I, Michael A. Woodhouse certify that:
1. I have reviewed this Amendment No. 1 to Annual Report on Form 10-K/A of
CBRL Group, Inc.;
2. Based on my knowledge, this report does not contain any
untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in
light of the circumstances under which such statements were
made, not misleading with respect to the period covered by
this report;
3. Based on my knowledge, the financial statements, and other
financial information included in this report, fairly
present in all material respects the financial condition,
results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are
responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e) for the registrant and have:
(a) Designed such disclosure controls and procedures, or
caused such disclosure controls and procedures to be
designed under our supervision, to ensure that
material information relating to the registrant,
including its consolidated subsidiaries, is made
known to us by others within those entities,
particularly during the period in which this report
is being prepared;
(b) Evaluated the effectiveness of the registrant's
disclosure controls and procedures and presented in
this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the
end of the period covered by this report based on
such evaluation; and
(c) Disclosed in this report any change in the
registrant's internal control over financial
reporting that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth fiscal
quarter in the case of an annual report) that has
materially affected, or is reasonably likely to
materially affect, the registrant's internal control
over financial reporting; and
5. The registrant's other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant's
auditors and the audit committee of registrant's board of
directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses
in the design or operation of internal control over
financial reporting which are reasonably likely to
adversely affect the registrant's ability to record,
process, summarize and report financial information;
and
(b) Any fraud, whether or not material, that involves
management or other employees who have a significant
role in the registrant's internal control over
financial reporting.
Date: March 30, 2005
/s/ Michael A. Woodhouse
------------------------
Michael A. Woodhouse, Chairman, President and
Chief Executive Officer
EXHIBIT 31 B CERTIFICATION
I, Lawrence E. White certify that:
1. I have reviewed this Amendment No. 1 to Annual Report on Form 10-K/A of
CBRL Group, Inc.;
2. Based on my knowledge, this report does not contain any
untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light
of the circumstances under which such statements were made,
not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other
financial information included in this report, fairly present
in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for,
the periods presented in this report;
4. The registrant's other certifying officer(s) and I are
responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e) for the registrant and have:
(a) Designed such disclosure controls and procedures, or
caused such disclosure controls and procedures to be
designed under our supervision, to ensure that
material information relating to the registrant,
including its consolidated subsidiaries, is made
known to us by others within those entities,
particularly during the period in which this report
is being prepared;
(b) Evaluated the effectiveness of the registrant's
disclosure controls and procedures and presented in
this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the
end of the period covered by this report based on
such evaluation; and
(c) Disclosed in this report any change in the
registrant's internal control over financial
reporting that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth fiscal
quarter in the case of an annual report) that has
materially affected, or is reasonably likely to
materially affect, the registrant's internal control
over financial reporting; and
5. The registrant's other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant's
auditors and the audit committee of registrant's board of
directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses
in the design or operation of internal control over
financial reporting which are reasonably likely to
adversely affect the registrant's ability to record,
process, summarize and report financial information;
and
(b) Any fraud, whether or not material, that involves
management or other employees who have a significant
role in the registrant's internal control over
financial reporting.
Date: March 30, 2005
/s/ Lawrence E. White
---------------------
Lawrence E. White, Senior Vice President, Finance and
Chief Financial Officer
Exhibit 32 A
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with Amendment No. 1 to the Annual Report of CBRL Group, Inc. (the
"Issuer") on Form 10-K/A for the fiscal year ended July 30, 2004, as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), I,
Michael A. Woodhouse, President and Chief Executive Officer of the Issuer,
certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d)
of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Issuer.
Date: March 30, 2005 By: /s/ Michael A. Woodhouse
------------------------
Michael A. Woodhouse,
Chairman, President and
Chief Executive Officer
Exhibit 32 B
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES OXLEY ACT OF 2002
In connection with Amendment No. 1 to the Annual Report of CBRL Group, Inc. (the
"Issuer") on Form 10-K/A for the fiscal year ended July 30, 2004, as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), I,
Lawrence E. White, Senior Vice President and Chief Financial Officer of the
Issuer, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d)
of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Issuer.
Date: March 30, 2005 By: /s/Lawrence E. White
--------------------
Lawrence E. White,
Senior Vice President, Finance
and Chief Financial Officer
