UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10‑K
(Mark One)
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☒
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Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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For the fiscal year ended August 3, 2018
OR
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☐
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Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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For the transition period from _________ to ___________
Commission file number: 000‑25225
Cracker Barrel Old Country Store, Inc.
(Exact name of registrant as specified in its charter)
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Tennessee
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62‑0812904
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification Number)
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305 Hartmann Drive
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37087-4779
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Lebanon, Tennessee
(Address of principal executive offices)
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(Zip code) |
Registrant's telephone number, including area code: (615) 444-5533
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class
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Name of each exchange on which registered
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Common Stock (Par Value $0.01)
Rights to Purchase Series A Junior Participating
Preferred Stock (Par Value $0.01)
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The Nasdaq Stock Market LLC
(Nasdaq Global Select Market)
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Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☑ No
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Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐
No ☑
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 ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant
to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) 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 or any amendment to this Form 10-K. ☑
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller
reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, ”smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer ☑
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Accelerated filer ☐
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Non-accelerated filer ☐
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Smaller reporting company ☐
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Emerging growth company ☐
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes ☐ No ☑
The aggregate market value of voting stock held by nonaffiliates of the registrant as of January 26, 2018 (the last business day of the
registrant’s most recently completed second fiscal quarter) was $4,213,396,663.
As of September 20, 2018, there were 24,011,550 shares of common stock outstanding.
Documents Incorporated by Reference
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Document from which Portions
are Incorporated by Reference
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Part of Form 10‑K
into which incorporated
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1.
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Proxy Statement for Annual Meeting of
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Part III
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Shareholders to be held November 15, 2018
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(the “2018 Proxy Statement”)
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2
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4
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ITEM 1.
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BUSINESS |
5
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ITEM 1A.
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RISK FACTORS |
10
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ITEM 1B.
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UNRESOLVED STAFF COMMENTS |
23
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ITEM 2.
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PROPERTIES |
23
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ITEM 3.
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LEGAL PROCEEDINGS |
23
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| EXECUTIVE OFFICERS OF THE REGISTRANT |
24
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PART II
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ITEM 5.
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25
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ITEM 6.
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SELECTED FINANCIAL DATA |
26
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ITEM 7.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
27
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ITEM 7A.
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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. |
40
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ITEM 8.
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FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |
41
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ITEM 9.
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CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
67
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ITEM 9A.
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CONTROLS AND PROCEDURES |
68
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ITEM 9B.
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OTHER INFORMATION |
70
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PART III
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ITEM 10.
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71
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ITEM 11.
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EXECUTIVE COMPENSATION |
72
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ITEM 12.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
72
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ITEM 13.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE |
72
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ITEM 14.
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PRINCIPAL ACCOUNTING FEES AND SERVICES |
72
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PART IV
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ITEM 15.
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EXHIBITS, AND FINANCIAL STATEMENT SCHEDULES |
72
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73
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76
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General
This report contains references to years 2018, 2017 and 2016, which represent our fiscal years ended August 3, 2018, July 28, 2017 and
July 29, 2016, respectively. All of the discussion in this report should be read with, and is qualified in its entirety by, the Consolidated Financial Statements and the notes thereto. All amounts other than share and certain statistical
information (e.g., number of stores) are in thousands unless the context clearly indicates otherwise. Similarly, references to a year or quarter are to our fiscal year or quarter unless expressly noted or the context clearly indicates otherwise.
Forward-Looking Statements/Risk Factors
Except for specific historical information, many of the matters discussed in this Annual Report on Form 10-K, as well as other documents
incorporated herein by reference, may express or imply projections of items such as revenues or expenditures, estimated capital expenditures, compliance with debt covenants, plans and objectives for future operations, store economics, inventory
shrinkage, growth or initiatives, expected future economic performance or the expected outcome or impact of pending or threatened litigation. These and similar statements regarding events or results that Cracker Barrel Old Country Store, Inc. (the
“Company”) expects will or may occur in the future are forward-looking statements that, by their nature, involve risks, uncertainties and other factors which may cause our actual results and performance to differ materially from those expressed or
implied by such forward-looking statements. All forward-looking information is provided pursuant to the safe harbor established under the Private Securities Litigation Reform Act of 1995 and should be evaluated in the context of these risks,
uncertainties and other factors. Forward-looking statements generally can be identified by the use of forward-looking terminology such as “trends,” “assumptions,” “target,” “guidance,” “outlook,” “opportunity,” “future,” “plans,” “goals,”
“objectives,” “expectations,” “near-term,” “long-term,” “projection,” “may,” “will,” “would,” “could,” “expect,” “intend,” “estimate,” “anticipate,” “believe,” “potential,” “regular,” “should,” “projects,” “forecasts” or “continue” (or the
negative or other derivatives of each of these terms) or similar terminology. We believe the assumptions underlying any forward-looking statements are reasonable; however, any of the assumptions could be inaccurate, and therefore, actual results
may differ materially from those projected in or implied by the forward-looking statements. In addition to the risks of ordinary business operations, and those discussed or described in this report or in information incorporated by reference into
this report, factors and risks that may result in actual results differing from this forward-looking information include, but are not limited to, those contained in Part I, Item 1A of this report below, as well as the factors described under
“Critical Accounting Estimates” in Part II, Item 7 of this report below or, from time to time, in our filings with the Securities and Exchange Commission (“SEC”), press releases and other communications.
Readers are cautioned not to place
undue reliance on forward-looking statements made in this report, since the statements speak only as of the report’s date. Except as may be required by
law, we have no obligation or intention to publicly update or revise any of these forward-looking statements to reflect events or circumstances occurring after the date of this report or to reflect the occurrence of unanticipated events. Readers
are advised, however, to consult any future public disclosures that we may make on related subjects in reports that we file with or furnish to the SEC or in our other public disclosures.
PART I
OVERVIEW
Cracker Barrel Old Country Store, Inc. (“we,” “us,” “our” or the “Company,” which reference, unless the context requires otherwise, also
includes our direct and indirect wholly-owned subsidiaries), is principally engaged in the operation and development of the Cracker Barrel Old Country Store® concept (“Cracker Barrel”). We are headquartered in Lebanon, Tennessee and were
originally founded in 1969. We are organized under the laws of the State of Tennessee.
We maintain a website at crackerbarrel.com. We make available free of charge through our website our periodic and other reports filed
with or furnished to the SEC pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as soon as reasonably practicable after we file such material with, or furnish it to, the SEC. Information on our website is not deemed
to be incorporated by reference into this Annual Report on Form 10-K or any other filings that we make from time to time with the SEC.
Cracker Barrel Old Country Store Concept
As of September 20, 2018, we operated 655 Cracker Barrel stores in 45 states. None of our stores are franchised. Our stores are
intended to appeal to both the traveler and the local customer, and we believe they have consistently been a consumer favorite. We pride ourselves on our consistent quality, value and friendly service.
Store Format: The format of our stores consists of a
trademarked rustic old country-store design offering a full-service restaurant menu that features home-style country food and a wide variety of decorative and functional items such as rocking chairs, holiday and seasonal gifts, toys, apparel,
cookware and foods. All stores are freestanding buildings and consist of approximately 20% of gift shop space with the remainder dedicated to our restaurant, training and storage space. Our stores have stone fireplaces and 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 traditional old country stores. The front porch of each store features rows of the signature Cracker Barrel
rocking chairs that can be used by guests while waiting for a table in our dining room or after enjoying a meal and are sold by the gift shop.
Products: Our restaurants, which generated approximately
80% of our total revenue in 2018, offer home-style country cooking featuring many of our own recipes that emphasize authenticity and quality. Our restaurants serve breakfast, lunch and dinner daily. Menu items are moderately priced. The
restaurants do not serve alcoholic beverages.
Breakfast items can be ordered at any time throughout the day and include juices, eggs, pancakes, fruit and yogurt parfaits, meat,
grits, and a variety of biscuit specialties, such as gravy and biscuits and country ham and biscuits. Lunch and dinner items include chicken and dumplings, chicken fried chicken, meatloaf, country fried steak, pork chops, fish, steak, roast beef,
vegetable plates, sandwiches and a variety of salads. Additionally, we may from time to time feature new items as off-menu specials or in test menus at certain locations to evaluate possible ways to enhance customer interest and identify potential
future additions to the menu. We offer weekday lunch specials, which include some of our favorite entrées in lunch-sized portions. Our menu also features weekday and weekend dinner specials that showcase a popular dinner entrée. There is some
variation in menu pricing and content in different regions of the country for both breakfast and lunch/dinner. The average check per guest during 2018 was $10.48, which represents a 2.5% increase over the prior year. We served an average of
approximately 6,900 restaurant guests per week in a typical store in 2018.
The following table highlights the price ranges for our meals in 2018:
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Price Range
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Breakfast
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$
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3.99 to $12.49
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Lunch and Dinner
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$
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4.79 to $17.49
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The following table highlights each day-part’s percentage of restaurant sales in 2018:
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Percentage of
Restaurant
Sales in 2018
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Breakfast Day-Part (until 11:00 a.m.)
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24
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%
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Lunch Day-Part (11:00 a.m. to 4:00 p.m.)
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39
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%
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Dinner Day-Part (4:00 p.m. to close)
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37
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%
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We also offer items for sale in our gift shops that are featured on, or related to, the restaurant menu, such as pies, cornbread mix,
coffee, syrups and pancake mixes. Our gift shops offer a wide variety of decorative and functional items such as rocking chairs, seasonal gifts, apparel, toys, music CDs, cookware and various other gift items, as well as various candies, preserves
and other food items.
The following table highlights the five categories which accounted for the largest shares of our retail sales in 2018:
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Percentage of
Retail Sales in
2018
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Apparel and Accessories
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31
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%
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Food
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18
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%
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Décor
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12
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%
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Toys
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11
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%
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Media
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8
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%
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Our typical gift shop features approximately 4,100 stock keeping units. A selection of the food items are sold under the “Cracker
Barrel Old Country Store” brand name. We believe that we achieve high retail sales per square foot of retail selling space (approximately $434 per square foot in 2018) as compared to mall stores both by offering appealing merchandise and by having
a significant source of customers who are typically our restaurant guests.
Product Development and Merchandising: We maintain a
product development department, which develops new and improved menu items either in response to shifts in customer preferences or to create customer interest. We use a formal development and testing process, which includes guest research and
in-store market tests to ensure products brought to market have a greater likelihood of meeting our goals. Menu-driven growth is built through three areas: enhancements to our current core menu offerings, the addition of new core menu offerings
and limited time offer promotions we call seasonal events. Our merchandising department selects and develops products for our gift shop. We are focused on driving retail sales by converting those customers who come to us for a restaurant visit.
Our assortment includes core and seasonal themes. Our seasonal themes are designed to create interest and excitement in our stores by providing our guests with additional choices. Our licensees develop new licensed food products under our
direction for consideration and approval.
Store Management and Quality Controls: At each store, our
store management typically consists of one general manager, four associate managers and one retail manager. Our store management is responsible for an average of 102 employees operating two shifts. The relative complexity of operating one of our
stores requires an effective management team at the individual store level. To motivate store managers to improve sales and operational performance, we maintain bonus plans designed to provide store managers with an opportunity to share in the
profits of their store. The bonus plans also reward managers who achieve specific operational targets. Each store is assigned to both a restaurant and a retail district manager which each report to a regional vice president.
To ensure that individual stores operate at a high level of quality, we focus significant attention on the selection and training of
store managers. The store management recruiting and training program begins with an evaluation and screening process. In addition to multiple interviews and verification of background and experience, we conduct assessments designed to identify
those applicants most likely to be best suited to manage store operations. Candidates who successfully pass this screening process are then required to complete a training program. We believe that our training programs develop managers who
effectively deliver a great employee and guest experience through the leadership and execution of our operating systems. We provide our managers and hourly employees with ongoing training through various development courses taught through a
blended learning approach, including a mix of hands-on, traditional classroom, written and cloud-based training. Each store is equipped with dedicated training computers and cloud-based proprietary eLearning instruction programs. Additionally,
each store typically has an employee training coordinator who oversees the training of the store’s hourly employees.
Purchasing and Distribution: We negotiate directly with
food vendors as to specification, price and other material terms of most food purchases. We have a contract with an unaffiliated distributor with custom distribution centers in Lebanon, Tennessee; McKinney, Texas; Gainesville, Florida; Elkton,
Maryland; Kendallville, Indiana; Rock Hill, South Carolina; and Shafter, California. We purchase the majority of our food products and restaurant supplies on a cost‑plus basis through this unaffiliated distributor. The distributor is responsible
for placing food orders, warehousing and delivering food products to our stores. Deliveries are generally made once per week to individual stores. Produce is purchased through a national program and is delivered three times a week through a
network of approximately fifty independent produce suppliers. Fluid dairy is delivered three times a week through approximately fifty regional dairies, the majority of which are under the ownership of two separate companies.
The following table highlights the five food categories which accounted for the largest shares of our food purchasing expense in 2018:
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Percentage of
Food Purchases
in 2018
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Beef
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14
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%
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Dairy (including eggs)
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13
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%
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Fruits and vegetables
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12
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%
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Poultry
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11
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%
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Pork
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11
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%
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Each of these categories includes several individual items. The single food item within these categories that accounted for the largest
share of our food purchasing expense in 2018 was bacon at approximately 5% of total food purchases. Dairy, fruits and vegetables are purchased through numerous vendors, including local vendors. Eggs are purchased through three vendors. We
purchase our pork through six vendors, poultry through nine vendors and beef through eight vendors. Should any food items from a particular vendor become unavailable, we generally believe that these food items could be obtained, or alternative
products substituted, in sufficient quantities from other sources at competitive prices to allow us to avoid any material adverse effects that could be caused by such unavailability.
We purchase the majority of our retail items (approximately 80% in 2018) directly from domestic and international vendors and warehouse,
or crossdock, such items at our retail distribution center in Lebanon, Tennessee, which we lease. The distribution center fulfills retail item orders generated by our automated replenishment system and generally ships the retail orders once a week
to the individual stores by a third-party dedicated freight line. Certain retail items, not centrally purchased and warehoused at the distribution center, are drop-shipped directly by our vendors to individual stores.
Approximately one-third of our 2018 retail items were purchased directly from vendors in the People’s Republic of China. We have
relationships with several foreign buying agencies to source product, monitor quality control and supplement product development.
Operational and Inventory Controls: Our information
technology and telecommunications systems and various analytical tools are used to evaluate store operating information and provide management with reports to support prompt detection of unusual variances in food costs, labor costs or operating
expenses. 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 information technology and
telecommunication systems, analysis tools and monitoring processes is used to manage the operations of each store, replenish retail inventory levels and facilitate retail purchasing decisions. These systems and processes also are used in the
development of forecasts, budget analyses and planning.
Guest Satisfaction: We are committed to providing our
guests a home-style, country-cooked meal, and a variety of retail merchandise served and sold with genuine hospitality in a comfortable environment. Our commitment to offering guests a quality experience begins with our employees. Our mission
statement, “Pleasing People,” embraces guests and employees alike, and our employees are trained on the importance of that mission in a culture of mutual respect. We also are 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 district managers and operational vice presidents, management receives valuable feedback that is used in our ongoing efforts
to improve the stores and to demonstrate our continuing commitment to pleasing our guests. We have 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. We use Internet and interactive voice response systems to monitor operational performance and guest satisfaction at all stores on an ongoing basis. We have public notices in our menus, on our website and posted in our stores
informing customers and employees about how to contact us by Internet or toll-free telephone number with questions, complaints or concerns regarding services or products. We conduct training on how to gather information and investigate and resolve
customer concerns. This is accompanied by comprehensive training for all store employees on our public accommodations policy and commitment to “Pleasing People.”
Marketing: We employ multiple media to reach and engage our
guests. Outdoor advertising (i.e., billboards and state department of transportation signs) is the largest advertising vehicle we use to reach our traveling and local guests. In 2018, we had over 1,600 billboards and this expenditure accounts for
approximately one-third of total advertising spend annually. Our use of non-billboard media has increased in recent years as we look to build market awareness for local
occasions. This increased support has used broadcast television, national cable, Web, mobile, social, email and search marketing. We continued to increase our efforts in the digital space to drive preference and engagement with the brand. We now
have properties on multiple social media sites, an e-commerce platform and our brand site. Our exclusive music program drives awareness for the brand and builds cultural relevance and affinity with our guests.
Store Development: We opened eight new stores in 2018. We
plan to open eight new stores during 2019. As of September 20, 2018, approximately 83% of our stores are located along interstate highways. Our remaining stores are located off-interstate or near tourist destinations. We believe we should pursue
development of both interstate locations and off-interstate locations to capitalize on the strength of our brand associated with travelers on the interstate highway system and by locating in certain local markets where our guests live and work,
including locations outside of our existing core markets and in states where we currently do not operate.
Of the 655 stores open as of September 20, 2018, we own the land and buildings for 421, while the other 234 properties are either ground
leases or ground and building leases. Land costs for stores opened during 2018 averaged $1,164 per site if owned. Building, site improvement, furniture, equipment and related development costs for stores opened during 2018 averaged $4,356.
Pre-opening costs averaged $579 per store in 2018.
Our current store prototype is approximately 9,000 square feet, including approximately 2,100 square feet of retail selling space, and
has dining room seating for approximately 180 guests. Our capital investment in new stores may differ in the future due to changes in our store prototype, building design specifications, site location and site characteristics.
Holler & Dash Concept
In 2016, the Company launched its new fast casual concept, Holler & Dash Biscuit HouseTM. The concept offers
biscuit-inspired entrées and a unique portfolio of alcoholic and non-alcoholic beverage options. We opened three new locations in 2018. We currently do not plan to open any new locations in 2019. At September 20, 2018, seven Holler & Dash
locations were open - all leased properties in Alabama, Florida, Tennessee, Georgia and North Carolina. The new concept operates in a smaller footprint and has operating hours limited to the breakfast and lunch day parts.
EMPLOYEES
As of August 3, 2018, we employed approximately 73,000 people, of whom 571 were in advisory and supervisory capacities, 3,677 were
in-store management positions and 40 were officers. Many store personnel are employed on a part‑time basis. None of our employees is represented by any union, and management considers its employee relations to be good.
COMPETITION
The restaurant and retail industries are intensely competitive with respect to the type and quality of food, retail merchandise, price,
service, location, personnel, concept, attractiveness of facilities and effectiveness of advertising and marketing. We compete with a significant number of national and regional restaurant and retail chains, some of which have greater resources
than us, as well as locally owned restaurants and retail stores. We also face growing competition from the supermarket industry, which offers “convenient meals” in the form of improved entrées and side dishes from the deli section; fast casual
restaurants; quick-service restaurants; and highly promotional casual and family dining restaurants. We expect competition to continue in all of these areas, which could cause consumers to choose less expensive alternatives. The restaurant and
retail businesses are also often affected by changes in consumer taste and preference; national, regional or local economic conditions; demographic trends; traffic and weather patterns; the type, number and location of competing restaurants and
retailers; and consumers’ discretionary purchasing power. In addition, factors such as inflation, increased food, labor and benefits costs and the lack of experienced management and hourly employees may adversely affect the restaurant and retail
industries in general and our stores in particular. We believe we compete effectively and have successfully differentiated ourselves from many of our competitors in the restaurant and retail industries through a unique brand and guest experience,
which offers a diversified full service menu and a large variety of nostalgic and unique retail items. For further information regarding competition, see Item 1A. Risk Factors.
RAW MATERIALS SOURCES AND AVAILABILITY
Essential restaurant supplies and raw materials are generally available from several sources. Generally, we are not dependent upon
single sources of supplies or raw materials. However, in our stores, certain branded items are single source products or product lines. Our ability to maintain consistent quality throughout our store system depends in part upon our ability to
acquire food products and related items from reliable sources. When the supply of certain products is uncertain or prices are expected to rise significantly, we may enter into purchase contracts or purchase bulk quantities for future use.
Adequate alternative sources of supply, as well as the ability to adjust menus if needed, are believed to exist for substantially all of
our restaurant products. Our retail supply chain generally involves longer lead-times and, often, more remote sources of product, including the People’s Republic of China, and most of our retail product is distributed to our stores through a
single distribution center. Although disruption of our retail supply chain could be difficult to overcome, we continuously evaluate the potential for disruptions and ways to mitigate such disruptions should they occur.
ENVIRONMENTAL MATTERS
Federal, state and local environmental laws and regulations have not historically had a significant impact on our operations; however,
we cannot predict the effect of possible future environmental legislation or regulations on our operations.
TRADEMARKS
We deem the various Cracker Barrel trademarks and service marks that we own to be of substantial value. Our policy is to obtain federal
registration of trademarks and other intellectual property whenever possible and to pursue vigorously any infringement of our trademarks and service marks.
RESEARCH AND DEVELOPMENT
While research and development is important to us, these expenditures have not been material due to the nature of the restaurant and
retail industries.
SEASONAL ASPECTS
Historically, our revenue and profits have been lower in the first and third fiscal quarters and higher in the second and fourth fiscal
quarters. We attribute these variations primarily to the holiday shopping season and the summer vacation and travel season. Our gift shop sales, which are made substantially to our restaurant guests, historically have been highest in our second
quarter, which includes the holiday shopping season. Historically, interstate tourist traffic and the propensity to dine out have been much higher during the summer months, thereby generally contributing to higher profits in the Company’s fourth
quarter. We also generally open additional new stores throughout the year. Therefore, the results of operations for any interim period cannot be considered indicative of the operating results for an entire year.
WORKING CAPITAL
In the restaurant industry, substantially all sales are either for cash or third-party credit card. Therefore, like many restaurant
companies, we are able to, and often do operate with negative working capital. Restaurant inventories purchased through our principal food distributor are on terms of net zero days, while other restaurant inventories purchased locally generally
are financed through trade credit at terms of 30 days or less. Because of our gift shop, which has a lower product turnover than the restaurant, we carry larger inventories than many other companies in the restaurant industry. Retail inventories
are generally financed through trade credit at terms of 60 days or less. These various trade terms are aided by rapid product turnover of the restaurant inventory. Employees generally are paid on weekly or semi-monthly schedules in arrears of
hours worked except for bonuses that are paid either quarterly or annually in arrears. Many other operating expenses have normal trade terms and certain expenses, such as certain taxes and some benefits, are deferred for longer periods of time.
Investing in our securities involves a degree of risk. Persons buying our securities should carefully consider the
risks described below and the other information contained in this Annual Report on Form 10-K and other filings that we make from time to time with the SEC, including our consolidated financial statements and accompanying notes. If any of the
following risks actually occurs, our business, financial condition, results of operations or cash flows could be materially adversely affected. In any such case, the trading price of our securities could decline and you could lose all or part of
your investment.
General economic, business and societal conditions as well as those specific to the restaurant or retail industries
that are largely out of our control may adversely affect our business, financial condition and results of operations.
Our business results depend on a number of industry-specific and general economic factors, many of which are beyond our control. These
factors include consumer income, interest rates, inflation, consumer credit availability, consumer debt levels, tax rates and policy, unemployment trends and other matters that influence consumer confidence and spending. The full-service dining
sector of the restaurant industry and the retail industry are affected by changes in national, regional and local economic conditions, seasonal fluctuation of sales volumes, consumer preferences, including changes in consumer tastes and dietary
habits and the level of consumer acceptance of our restaurant concept and retail merchandise, and consumer spending patterns.
Discretionary consumer spending, which is critical to our success, is influenced by general economic conditions and the availability of
discretionary income. Global economic factors and a weak economic recovery may reduce consumer confidence and affected consumers’ ability or desire to spend disposable income. A deterioration in the economy or other economic conditions affecting
disposable consumer income, such as unemployment levels, reduced home values, investment losses, inflation, business conditions, fuel and other energy costs, consumer debt levels, lack of available credit, consumer confidence, interest rates, tax
rates and changes in tax laws, may adversely affect our business by reducing overall consumer spending or by causing customers to reduce the frequency with which they shop and dine out or to shift their spending to our competitors or to products
sold by us that are less profitable than other product choices, all of which could result in lower revenues, decreases in inventory turnover, greater markdowns on inventory, and a reduction in profitability due to lower margins.
In addition, many of the factors discussed above, along with the current economic environment and the related impact on available
credit, may affect us and our suppliers and other business partners, landlords, and customers in an adverse manner, including, but not limited to, reducing access to liquid funds or credit (including through the loss of one or more financial
institutions that are a part of our revolving credit facility), increasing the cost of credit, limiting our ability to manage interest rate risk, increasing the risk of bankruptcy of our suppliers, landlords or counterparties to or other financial
institutions involved in our revolving credit facility and our derivative and other contracts, increasing the cost of goods to us, and other adverse consequences which we are unable to fully anticipate.
We also cannot predict the effects of actual or threatened armed conflicts or terrorist attacks, efforts to combat terrorism, military
action against any foreign state or group located in a foreign state or heightened security requirements on the economy or consumer confidence in the United States. Any of these events could also affect consumer sentiment and confidence that in
turn affect consumer spending patterns or result in increased costs for us due to security measures.
Unfavorable changes in the factors described above or in other business and economic conditions affecting our customers could increase
our costs, reduce traffic in some or all of our locations or impose practical limits on pricing, any of which could lower our profit margins and have a material adverse effect on our financial condition and results of operations.
There can be no assurance that the economic conditions that have adversely affected the restaurant and retail industries, and the
capital, credit and real estate markets generally or us in particular will remain static in 2019, or thereafter, in which case we could experience declines in revenues and profits, and could face capital and liquidity constraints or other
business challenges.
A privacy breach could adversely affect our
business.
The protection of customer, employee and company data is critical to us. We are subject to laws relating to information security,
privacy, cashless payments, consumer credit, and fraud. Additionally, an increasing number of government and industry groups have established laws and standards for the protection of personal and health information. The regulatory environment
surrounding information security and privacy is increasingly demanding, with the frequent imposition of new and constantly changing requirements. Compliance with these requirements may result in cost increases due to necessary system changes and
the development of new administrative processes. In addition, customers and employees have a high expectation that we will adequately protect their personal information. For example, in connection with credit and debit card sales, we transmit
confidential card information. Third parties may have the technology or know-how to breach the security of this customer information, and our security measures and those of our technology vendors may not effectively prevent others from obtaining
improper access to this information. If we fail to comply with the laws and regulations regarding privacy and security or experience a security breach, we could be exposed to risks of data loss, regulatory investigations and/or penalties, a loss
of the ability to process credit and debit card payments, substantial inconvenience or harm to our guests, litigation and serious disruption of our operations. Additionally, any resulting negative publicity could significantly harm our
reputation and damage our relations with our guests. As privacy and information security laws, regulations and practices change and cyber risks continue to evolve, we may incur additional costs to ensure we remain in compliance and protect
guest, employee and Company information.
Our reported results can be affected adversely and unexpectedly by the implementation of new, or changes in the
interpretation of existing, accounting principles or financial reporting requirements.
Our financial reporting complies with the United States generally accepted accounting principles (“GAAP”), and GAAP is subject to change
over time. If new rules or interpretations of existing rules require us to change our financial reporting (including the upcoming lease accounting changes), our reported results of operations and financial condition could be affected
substantially, including requirements to restate historical financial reporting.
We face intense competition, and if we are unable to continue to compete effectively, our business, financial
condition and results of operations would be adversely affected.
The restaurant and retail industries are intensely competitive, and we face many well-established competitors. We compete within each
market with national and regional restaurant and retail chains and locally-owned restaurants and retailers. Competition from other regional or national restaurant and retail chains typically represents the more important competitive influence,
principally because of their significant marketing and financial resources. We also face competition as a result of the convergence of grocery, deli, retail and restaurant services, particularly in the supermarket industry. We also face
competition from various off premise meal replacement offerings including, but not limited to, home meal kits delivery, third party meal delivery and catering and the rapid growth of these channels by our competitors. Moreover, our competitors can
harm our business even if they are not successful in their own operations by taking away customers or employees through aggressive and costly advertising, promotions or hiring practices. We compete primarily on the quality, variety and perceived
value of menu and retail items. The number and location of stores, the growth of e-commerce, type of concept, quality and efficiency of service, attractiveness of facilities and effectiveness of advertising and marketing programs also are important
factors. We anticipate that intense competition will continue with respect to all of these factors. We also compete with other restaurant chains and other retail businesses for quality site locations, management and hourly employees, and
competitive pressures could affect both the availability and cost of these important resources. If we are unable to continue to compete effectively, our business, financial condition and results of operations would be adversely affected.
The price and availability of food, ingredients, retail merchandise, transportation, distribution and utilities used
by our stores could adversely affect our revenues and results of operations.
We are subject to the general risks of inflation, and our operating profit margins and results of operations depend significantly on our
ability to anticipate and react to changes in the price, quality and availability of food and other commodities, ingredients, retail merchandise, transportation, distribution, utilities and other related costs over which we have limited control.
Fluctuations in economic conditions, weather, demand and other factors affect the availability, quality and cost of the ingredients and products that we buy. Furthermore, many of the products that we use and their costs are interrelated. Changes
in global demand for corn, wheat and dairy products could cause volatility in the feed costs for poultry and livestock. The effect of, introduction of, or changes to tariffs or exchange rates on imported retail products or food products could
increase our costs and possibly affect the supply of those products. Changes in demand for over the road transportation and distribution services could cause volatility, increase our costs and affect our operating margins. In addition, food safety
concerns, widespread outbreaks of livestock and poultry diseases, such as, among other things, the Avian Flu, and product recalls, all of which are out of our control, and, in many instances, unpredictable, could also increase our costs and
possibly affect the supply of livestock and poultry products. Our operating margins are also affected, whether as a result of general inflation or otherwise, by fluctuations in the price of utilities such as natural gas and electricity, on which
our locations depend for much of their energy supply. Our inability to anticipate and respond effectively to one or more adverse changes in any of these factors could have a significant adverse effect on our results of operations. In addition,
because we provide a moderately-priced product, we may not seek to or be able to pass along price increases to our customers sufficient to completely offset cost increases.
Our plans depend significantly on our strategic priorities and business initiatives designed to enhance our menu and
retail offerings, support our brand, improve operating margins and improve the efficiencies and effectiveness of our operations. Failure to achieve or sustain these plans could adversely affect our results of operations.
We have had, and expect to continue to have, priorities and initiatives in various stages of testing, evaluation and implementation,
upon which we expect to improve our results of operations and financial condition. These priorities and initiatives include, but are not limited to, tiered menu and retail pricing, evolving our marketing messaging to support the brand, improving
the quality and breadth of retail assortments, evolving our menu, re-engineering store processes to reduce costs and improve store margins, applying technology to improve the employee and guest experience, expanding our store footprint, focusing on
our new fast casual concept, focusing on our off premise business and transactions such as joint ventures and acquisitions. It is possible that our focus on these priorities and initiatives and constantly changing consumer preferences could cause
unintended changes to our current results of operations. Additionally, many of these initiatives are inherently risky and uncertain in their application to our business in general, even when tested successfully on a more limited scale. It is
possible that successful testing can result partially from resources and attention that cannot be duplicated in broader implementation. Testing and general implementation also can be affected by other risk factors described herein that reduce the
results expected. Successful system-wide implementation across hundreds of stores and involving tens of thousands of employees relies on consistency of training, stability of workforce, ease of execution and the absence of offsetting factors that
can adversely influence results. Failure to achieve successful implementation of our initiatives could adversely affect our results of operations.
Our annual and quarterly operating results may fluctuate significantly and could fall below the expectations of
investors and securities analysts due to a number of factors, some of which are beyond our control, resulting either in volatility or a decline in the price of our securities.
Our business is not static – it changes periodically as a result of many factors, including, among other items discussed in other risk
factors, the following:
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increases and decreases in guest traffic, average weekly sales, restaurant and retail sales and restaurant profitability;
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the rate at which we open new stores, the timing of new store openings and the related high initial operating costs;
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changes in advertising and promotional activities and expansion into new markets; and
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impairment of long-lived assets and any loss on store closures.
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Our quarterly operating results and restaurant and retail sales may fluctuate as a result of any of these or other factors.
Accordingly, results for any one quarter are not necessarily indicative of results to be expected for any other quarter or for any year, and restaurant and retail sales for any particular future period may decrease. In the future, operating
results may fall below the expectations of securities analysts and investors. In such event, the price of our securities could fluctuate dramatically over time or could decrease generally.
Our reliance on certain significant vendors, particularly for foreign-sourced retail products, subjects us to
numerous risks, including possible interruptions in supply, which could adversely affect our business.
Our ability to maintain consistent quality throughout our operations depends in part upon our ability to acquire specified food and
retail products and supplies in sufficient quantities. Partly because of our size, finding qualified vendors and accessing food, retail products, supplies and certain outsourced services in a timely and efficient manner is a significant challenge
that typically is more difficult with respect to goods or services sourced outside the United States. In some cases, we may have only one supplier for a product or service. Our dependence on single-source suppliers subjects us to the possible
risks of shortages, interruptions and price fluctuations, and possible litigation when we change vendors because of performance issues. Global economic factors and the weak economic recovery continue to put significant pressure on suppliers, with
some suppliers facing financial distress and others attempting to rebuild profitability, all of which tends to make the supply environment more expensive. If any of these vendors is unable to fulfill its obligations, or if we are unable to find
replacement suppliers in the event of a supply disruption, we could encounter supply shortages and/or incur higher costs to secure adequate supplies, either of which could materially harm our business.
Additionally, we use a number of products that are or may be manufactured in a number of foreign countries. In addition to the risk
presented by the possible long lead times to source these products, our results of operations may be materially affected by risks such as:
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fluctuating currency exchange rates or control regulations;
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foreign government regulations;
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product testing regulations;
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foreign political and economic instability;
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disruptions due to labor stoppages, strikes or slowdowns, or other disruptions, involving our vendors or the transportation and handling industries; and
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tariffs, trade barriers and other trade restrictions by the U.S. government on products or components shipped from foreign sources.
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Possible shortages or interruptions in the supply of food items, retail merchandise and other supplies to our stores caused by inclement
weather, natural disasters such as droughts, floods and earthquakes, the inability of our vendors to obtain credit in a tightened credit market or other conditions beyond our control could adversely affect the availability, quality and cost of the
items we buy and the operations of our stores. Our inability to effectively manage supply chain risk could increase our costs and limit the availability of products that are critical to our store operations. If we temporarily close a store or
remove popular items from a store’s menu or retail product assortment, that store may experience a significant reduction in revenue during the time affected by the shortage or thereafter as a result of our customers changing their dining and
shopping habits.
Health concerns, government regulation relating to the consumption of food products and widespread infectious
diseases could affect consumer preferences and could negatively affect our results of operations.
The sale of food and prepared food products for human consumption involves the risk of injury to our customers. Such injuries may
result from tampering by unauthorized third parties, product contamination or spoilage, including the presence of foreign objects, substances, chemicals, other agents, or residues introduced during the growing, storage, handling and transportation
phases. Additionally, many of the food items on our menu contain beef and chicken. The preferences of our customers toward beef and chicken could be affected by health concerns about the consumption of beef or chicken or health concerns and
publicity concerning food quality, illness and injury generally. In recent years there has been publicity concerning E. coli bacteria, hepatitis A, “mad cow” disease, “foot-and-mouth” disease, salmonella, the bird/Avian Flu, peanut and other food
allergens, and other public health concerns affecting the food supply, including beef, chicken, pork, dairy and eggs. In addition, if a regional or global health pandemic occurs, depending upon its location, duration and severity, our business
could be severely affected. In the event a health pandemic occurs, customers might avoid public places, and local, regional or national governments might limit or ban public gatherings to halt or delay the spread of disease. A regional or global
health pandemic might also adversely affect our business by disrupting or delaying production and delivery of materials and products in our supply chain and by causing staffing shortages in our stores. In addition, government regulations or the
likelihood of government regulation could increase the costs of obtaining or preparing food products. A decrease in guest traffic to our stores, a change in our mix of products sold or an increase in costs as a result of these health concerns
either in general or specific to our operations, could result in a decrease in sales or higher costs to our stores that would materially harm our business.
We are dependent upon attracting and retaining qualified employees while also controlling labor costs.
Our performance is dependent on attracting and retaining a large and growing number of qualified store employees. Availability of staff
varies widely from location to location. Many staff members are in entry-level or part-time positions, typically with high rates of turnover. Even though recent trends in employee turnover have been favorable, if store management and staff
turnover were to increase, we could suffer higher direct costs associated with recruiting, training and retaining replacement personnel. Management turnover as well as general shortages in the labor pool can cause our stores to be operated with
reduced staff, which negatively affects our ability to provide appropriate service levels to our customers. Competition for qualified employees exerts upward pressure on wages paid to attract such personnel, resulting in higher labor costs,
together with greater recruiting and training expenses.
Our ability to meet our labor needs while controlling our costs is subject to external factors such as unemployment levels, minimum wage
legislation, health care legislation, payroll taxes and changing demographics. Many of our employees are hourly workers whose wages are affected by increases in the federal or state minimum wage or changes to tip credits. Tip credits are the
amounts an employer is permitted to assume an employee receives in tips when the employer calculates the employee’s hourly wage for minimum wage compliance purposes. Increases in minimum wage levels and changes to the tip credit have been made and
continue to be proposed at both federal and state levels. As minimum wage rates increase, we may need to increase not only the wages of our minimum wage employees but also the wages paid to employees at wage rates that are above minimum wage. If
competitive pressures or other factors prevent us from offsetting increased labor costs by increases in prices, our profitability may decline.
If we fail to execute our business strategy, which includes our ability to find new store locations and open new
stores that are profitable, our business could suffer.
One of the means of achieving our growth objectives is opening and operating new and profitable stores. This strategy involves numerous
risks, and we may not be able to open all of our planned new stores and the new stores that we open may not be profitable or as profitable as our existing stores.
A significant risk in executing our business strategy is locating, securing and profitably operating an adequate supply of suitable new
store sites. Competition for suitable store sites and operating personnel in our target markets is intense, and there can be no assurance that we will be able to find sufficient suitable locations, or negotiate suitable purchase or lease terms,
for our planned expansion in any future period. Recently, our target markets have been expanded to include markets that are outside of our existing core markets and in states where we currently do not have existing operations, which increases the
risk of executing our business strategy. Economic conditions may also reduce commercial development activity and limited the availability of attractive sites for new stores. New stores typically experience an adjustment period before sales levels
and operating margins normalize, and even sales at successful newly-opened stores generally do not make a significant contribution to profitability in their initial months of operation. Our ability to open and operate new stores successfully also
depends on numerous other factors, some of which are beyond our control, including, among other items discussed in other risk factors, the following: our ability to control construction and development costs of new stores; our ability to manage
the local, state or other regulatory approvals and permits, zoning and licensing processes in a timely manner; our ability to appropriately train employees and staff the stores; consumer acceptance of our stores in new markets; and our ability to
manage construction delays related to the opening of a new store. Delays or failures in opening new stores, or achieving lower than expected sales in new stores, or drawing a greater than expected proportion of sales in new stores from existing
stores, could materially adversely affect our business strategy and could have an adverse effect on our business and results of operations.
Our risks are heightened because of our single retail
distribution facility and our potential inability or failure to execute on a comprehensive business continuity plan following a major disaster at or near our corporate facility could adversely affect our business.
The majority of our retail inventory is shipped into, stored at and shipped out of a single warehouse located in Lebanon, Tennessee.
All of the decorative fixtures used in our stores are shipped into, stored at and shipped out of a separate warehouse that is also located in Lebanon, Tennessee. A natural disaster affecting either of these warehouses could materially adversely
affect our business. Additionally, our corporate systems and processes and support for our restaurant and retail operations are centralized on one campus in Tennessee. We have disaster recovery procedures and business continuity plans in place
to address most events and back up and offsite locations for recovery of electronic and other forms of data and information. However, if we are unable to implement our disaster recovery and business continuity plans, we may experience delays in
recovery of data, failure to support field operations, tardiness in required reporting and compliance and the inability to perform vital corporate functions which could adversely affect our business.
A material disruption in our information
technology, network infrastructure and telecommunication systems could adversely affect our business and results of operations.
We rely extensively on our information technology across our operations, including, but not limited to, point of sales processing,
supply chain management, retail merchandise allocation and distribution, labor productivity and expense management Our business depends significantly on the reliability, security and capacity of our information technology systems to process
these transactions, summarize results, manage and report on our business and our supply chain. Our information technology systems are subject to damage or interruption from power outages, computer, network, cable system, Internet and
telecommunications failures, computer viruses, security breaches, catastrophic events such as fires, floods, earthquakes, tornadoes, hurricanes, acts of war or terrorism, and usage errors by our employees. If our information technology and
telecommunication systems are damaged or cease to function properly, we may have to make a significant investment to repair or replace them, and we could suffer loss of critical data and interruptions or delays in our operations in the interim.
Any material interruption in our information technology and telecommunication systems could adversely affect our business or results of operations. In addition, some of these essential technology-based business systems are outsourced to third
parties. While we make efforts to ensure that our outsourced providers are observing proper standards and controls, we cannot guarantee that breaches, disruptions or failures caused by these providers will not occur.
Our ability to manage our retail inventory levels and changes in merchandise mix may adversely affect our business.
The long lead times required for a substantial portion of our retail merchandise and the risk of product damages or non-compliance with
required specifications could affect the amount of inventory we have available for sale. Additionally, our success depends on our ability to anticipate and respond in a timely manner to changing consumer demand and preferences for merchandise. If
we misjudge the market, we may overstock unpopular products and be forced to take significant markdowns, which could reduce our gross margin. Conversely, if we underestimate demand for our merchandise we may experience inventory shortages
resulting in lost revenues. Any of these factors could have an adverse effect on our results of operations, cash flows from operations and our financial condition.
Our capital structure contains significant indebtedness, which may decrease our flexibility, increase our borrowing
costs and adversely affect our liquidity. In addition, we cannot provide any guaranty of future cash dividend payments or that we will be able to actively repurchase our common stock pursuant to a share repurchase program.
Our consolidated indebtedness and our leverage ratio may have the effect, among other things, of reducing our flexibility to respond to
changing business and economic conditions and increasing borrowing costs. There are various financial covenants and other restrictions in our revolving credit facility. If we fail to comply with any of these requirements, the related indebtedness
(and other unrelated indebtedness) could become due and payable prior to its stated maturity. A default under our credit agreement may also significantly affect our ability to obtain additional or alternative financing. For example, the lenders’
ongoing obligation to extend credit under the revolving credit facility is dependent upon our compliance with these covenants and restrictions.
Our ability to make scheduled interest payments or to refinance our obligations with respect to indebtedness will depend on our
operating and financial performance, which, in turn, is subject to prevailing economic conditions and to financial, business and other factors beyond our control. Our inability to refinance our indebtedness when necessary or to do so upon
attractive terms would materially and adversely affect our liquidity and results of operations.
In recent years, we have increased the quarterly cash dividends on our common stock and, beginning in 2015, we have also declared
special dividends on our common stock. Any determination to pay cash dividends on our common stock in the future will be based primarily upon our financial condition, results of operations, business requirements and our Board of Directors’
conclusion that the declaration of cash dividends is in the best interest of our shareholders and is in compliance with all laws and agreements applicable to the payment of dividends. Furthermore, there can be no assurance that we will be able to
actively repurchase our common stock and we may discontinue plans to repurchase common stock at any time.
Our advertising is heavily dependent on billboards, which are highly regulated; and our evolving marketing strategy
involves increased advertising and marketing costs that could adversely affect our results of operations.
Historically, we have relied upon billboards as our principal method of advertising. A number of states in which we operate restrict
highway signage and billboards. Because many of our stores are located on the interstate highway system, our business is highly related to highway travel. Thus, signage or billboard restrictions or loss of existing signage or billboards could
adversely affect our visibility and ability to attract customers.
Additionally, as we continue to evolve our marketing strategy, we are increasingly utilizing more traditional and higher cost methods of
advertising, such as national cable television, radio and online and digital media. These types of advertising, their effects upon our revenues and, in turn, our profits, are uncertain. Additionally, if our competitors increased their spending on
advertising and promotions, we could be forced to substantially increase our advertising, media or marketing expenses. If we did so or if our current advertising and promotion programs become less effective, we could experience a material adverse
effect on our results of operations.
Our expansion into new geographic markets may present increased risks due to our relative unfamiliarity with these
markets.
Some of our new store locations may be located in areas where we have lower market presence and, as a result, less or no meaningful
business experience than in our traditional, existing markets. Those new markets may have different competitive conditions, consumer tastes and discretionary spending patterns than our traditional, existing markets, which may cause our new store
locations to be less successful than restaurants in our existing markets. An additional risk of expanding into new markets is the potential for lower or lacking market awareness of our brand in those areas. Stores opened in new markets may open
at lower average weekly sales volumes than stores opened in existing markets and may have higher store-level operating expense ratios than in existing markets. Sales at stores opened in new markets may take longer to reach average unit volume and
margins, if at all, thereby affecting our overall profitability.
Unfavorable publicity could harm our business. In addition, our failure to recognize, respond to and effectively
manage the impact of social media could materially impact our business.
Multi-unit businesses such as ours can be adversely affected by publicity resulting from complaints or litigation alleging poor food
quality, poor service, food-borne illness, product defects, personal injury, adverse health effects (including obesity) or other concerns stemming from one or a limited number of our stores. Even when the allegations or complaints are not valid,
unfavorable publicity relating to one or more of our stores, or only to a single store, could adversely affect public perception of the entire brand. Additionally, negative publicity from online social network postings may also result from actual
or alleged incidents taking place in our stores. Adverse publicity and its effect on overall consumer perceptions of food safety or customer service could have a material adverse effect on our business, financial condition and results of
operations.
Our business is somewhat seasonal and also can be affected by extreme weather conditions and natural disasters.
Historically, our highest sales and profits have occurred during the second and fourth quarters, which include the holiday shopping
season and the summer vacation and travel season. Retail sales historically have been seasonally higher between Thanksgiving and Christmas. Therefore, the results of operations for any quarter or period of less than one year cannot be considered
indicative of the operating results for an entire year.
Additionally, extreme weather conditions in the areas where our stores are located can adversely affect our business. For example,
frequent or unusually heavy snowfall, ice storms, rain storms, floods, droughts or other extreme weather conditions over a prolonged period could make it difficult for our customers to travel to our stores and can disrupt deliveries of food and
supplies to our stores and thereby reduce our sales and profitability. Our business is also susceptible to unseasonable weather conditions. For example, extended periods of unseasonably warm temperatures during the winter season or cool weather
during the summer season could render a portion of our retail inventory incompatible with those unseasonable conditions. Reduced sales from extreme or prolonged unseasonable weather conditions could adversely affect our business. These risks may
be exacerbated in the future as some climatologists predict that the long-term effects of climate change may result in more severe, volatile weather.
In addition, natural disasters such as hurricanes, tornadoes and earthquakes, or a combination of these or other factors, could
severely damage or destroy one or more of our stores, warehouses or suppliers located in the affected areas, thereby disrupting our business operations for a more extended period of time.
Individual store locations are affected by local conditions that could change and adversely affect the carrying value
of those locations.
The success of our business depends on the success of individual locations, which in turn depends on stability of or improvements in
operating conditions at and around those locations. Our revenues and expenses can be affected significantly by the number and timing of the opening of new stores and the closing, relocating and remodeling of existing stores. We incur substantial
pre-opening expenses each time we open a new store and other expenses when we close, relocate or remodel existing stores. The expenses of opening, closing, relocating or remodeling any of our stores may be higher than anticipated. An increase in
such expenses could have an adverse effect on our results of operations. Also, as demographic and economic patterns (e.g., highway or roadway traffic
patterns, concentrations of general retail or hotel activity, local population densities or increased competition) change, current locations may not continue to be attractive or profitable. Possible declines in neighborhoods where our stores are
located or adverse economic conditions in areas surrounding those neighborhoods could result in reduced revenues in those locations. The occurrence of one or more of these events could have a material adverse effect on our revenues and results of
operations as well as the carrying value of our individual locations.
We are subject to a number of risks relating to federal, state and local regulation of our business, including the
areas of minimum wage increases, health care reform and environmental matters, and an insufficient or ineffective response to government regulation may increase our costs and decrease our profit margins.
The restaurant industry is subject to extensive federal, state and local laws and regulations, including those relating to food safety,
minimum wage and other labor issues (such as unionization), health care, menu labeling and building and zoning requirements and those relating to the preparation and sale of food as well as certain retail products. The development and operation of
our stores depend to a significant extent on the selection and acquisition of suitable sites, which are subject to zoning, land use, environmental, traffic and other regulations and requirements. We are also subject to licensing and regulation by
state and local authorities relating to health, sanitation, safety and fire standards, federal and state laws governing our relationships with employees (including the Fair Labor Standards Act of 1938, the Immigration Reform and Control Act of
1986, the Patient Protection and Affordable Care Act, the Health Care and Education Reconciliation Act of 2010 and applicable requirements concerning minimum wage, overtime, healthcare coverage, family leave, medical privacy, tip credits, working
conditions, safety standards and immigration status), federal and state laws which prohibit discrimination and other laws regulating the design and operation of facilities, such as the Americans With Disabilities Act of 1990. In addition, we are
subject to a variety of federal, state and local laws and regulations relating to the use, storage, discharge, emission and disposal of hazardous materials. We also face risks from new and changing laws and regulations relating to gift cards,
nutritional content, nutritional labeling, product safety and menu labeling. Compliance with these laws and regulations can be costly and can increase our exposure to litigation or governmental investigations or proceedings.
Increases in state or federal minimum wage rates, including recent proposals to increase state or federal minimum wage rates and index
future increases to inflation, or other changes in these laws could increase our labor costs. Our ability to respond to minimum wage increases by increasing menu prices will depend on the responses of our competitors and customers. Our
distributors and suppliers also may be affected by higher minimum wage and benefit standards and tracking costs, which could result in higher costs for goods and services supplied to us.
The Patient Protection and Affordable Care Act and the Health Care and Education Affordability Reconciliation Act of 2010 require
restaurant companies such as ours to disclose calorie and nutritional information on their menus effective as of May 2018. We cannot fully predict the long-term changes, if any, in guest behavior that could result from the implementation of this
provision, which could have an adverse effect on our sales or results of operations.
There also has been increasing focus by U.S. and foreign governmental authorities on environmental matters, such as climate change, the
reduction of greenhouse gases and water consumption. This increased focus may lead to new initiatives directed at regulating an as yet unspecified array of environmental matters, such as the emission of greenhouse gases. Legislative, regulatory
or other efforts to combat climate change or other environmental concerns could result in future increases in taxes, the cost of raw materials, transportation and utilities, which could decrease our operating profits and necessitate future
investments in facilities and equipment.
The impact of current laws and regulations, the effect of future changes in laws or regulations that impose additional requirements and
the consequences of litigation relating to current or future laws and regulations could increase our compliance and other costs of doing business and therefore have an adverse effect on our results of operations. Failure to comply with the laws
and regulatory requirements of federal, state and local authorities could result in, among other things, revocation of required licenses, administrative enforcement actions, fines and civil and criminal liability. Compliance with these laws and
regulations can be costly and can increase our exposure to litigation or governmental investigations or proceedings. Also, the failure to obtain and maintain required licenses, permits and approvals could adversely affect our operating results.
Typically, licenses must be renewed annually and may be revoked, suspended or denied renewal for cause at any time if governmental authorities determine that our conduct violates applicable regulations, which could adversely affect our business and
results of operations.
Failure to maximize or to successfully assert our intellectual property rights could adversely affect our business
and results of operations.
We rely on trademark, trade secret and copyright laws to protect our intellectual property rights. We cannot guarantee that these
intellectual property rights will be maximized or that they can be successfully asserted. There is a risk that we will not be able to obtain and perfect our own, or, where appropriate, license intellectual property rights necessary to support new
product introductions or other brand extensions. We cannot be sure that these rights, if obtained, will not be invalidated, circumvented or challenged in the future. Our failure to perfect or successfully assert our intellectual property rights
could make us less competitive and could have an adverse effect on our business and results of operations.
We outsource certain business processes to
third-party vendors that subject us to risks, including disruptions in business and increased costs; our use of third party technologies has increased and
if we are unable to maintain our rights to these technologies our business may be harmed.
Some of our business processes are currently outsourced to third parties. Such processes include distribution of food and retail
products to our store locations, credit and debit card authorization and processing, gift card tracking and authorization, employee payroll card services, health care and workers’ compensation insurance claims processing, wage and related tax
credit documentation and approval, guest satisfaction survey programs, employee engagement surveys and externally hosted business software applications. We cannot ensure that all providers of outsourced services are observing proper internal
control practices, such as redundant processing facilities, and there are no guarantees that failures will not occur. Failure of third parties to provide adequate services could have an adverse effect on our financial condition and results of
operations.
We rely on certain technology licensed from third parties and may be required to license additional technology in the future for use in
managing our Internet sites and providing services to our guests and employees. These third-party technology licenses may not continue to be available to us on acceptable terms or at all. The inability to enter into and maintain these technology
licenses could adversely affect our business.
Litigation may adversely affect our business, financial condition and results of operations.
Our business is subject to the risk of litigation by employees, guests, suppliers, shareholders, governmental agencies, competitors or
others through private actions, class actions, administrative proceedings, regulatory actions or other litigation. These actions and proceedings may involve allegations of illegal, unfair or inconsistent employment practices, including wage and
hour violations and employment discrimination; guest discrimination; food safety issues, including poor food quality, food-borne illness, food tampering, food contamination, and adverse health effects from consumption of various food products or
high-calorie foods (including obesity); other personal injury; trademark and patent infringement; violation of the federal securities laws; or other concerns. The outcome of litigation, particularly class action lawsuits and regulatory actions, is
difficult to assess or quantify. Plaintiffs in these types of lawsuits may seek recovery of very large or indeterminate amounts and the magnitude of the potential loss relating to such lawsuits may remain unknown for substantial periods of time.
The cost to defend future litigation may be significant. There may also be adverse publicity associated with litigation that could decrease guest or consumer acceptance of our brand, regardless of whether the allegations are valid or we ultimately
are found liable. Litigation could adversely impact our operations and our ability to expand our brand in other ways as well. As a result, litigation may adversely affect our business, financial condition and results of operations.
The loss of key executives or difficulties in recruiting
and retaining qualified personnel could jeopardize our future growth and success.
We have assembled a senior management team which has substantial background and experience in the restaurant and retail industries.
Our future growth and success depends substantially on the contributions and abilities of our senior management and other key personnel, and we design our compensation programs to attract and retain key personnel and facilitate our ability to
develop effective succession plans. If we fail to attract or retain senior management or other key personnel, our succession planning and operations could be materially and adversely affected. We must continue to recruit, retain and motivate
management and other employees sufficiently to maintain our current business and support our projected growth. A loss of key employees or a significant shortage of high quality store employees could jeopardize our ability to meet our business
goals.
Our current insurance programs may expose us to unexpected costs, which could have a material adverse effect on our
financial condition and results of operations.
Our insurance coverage is structured to include deductibles, self-insured retentions, limits of liability, stop loss limits and similar
provisions that we believe prudent based on our operations. However, there are types of losses we may incur against which we cannot be insured or which we believe are not economically reasonable to insure, such as losses due to acts of terrorism
and some natural disasters, including floods. If we incur such losses, our business could suffer. In addition, we self-insure a significant portion of expected losses under our workers’ compensation, general liability and group health insurance
programs. Unanticipated changes in the actuarial assumptions and management estimates underlying our reserves for these losses, including unexpected increases in medical and indemnity costs, could result in materially different amounts of expense
than expected under these programs.
Failure of our internal control over financial reporting could adversely affect our business and financial results.
Our management is responsible for establishing and maintaining effective internal control over financial reporting. Internal control
over financial reporting is a process to provide reasonable assurance regarding the reliability of financial reporting for external purposes in accordance with GAAP. Because of its inherent limitations, internal control over financial reporting is
not intended to provide absolute assurance that we would prevent or detect a misstatement of our financial statements or fraud. Any failure to maintain an effective system of internal control over financial reporting could limit our ability to
report our financial results accurately and timely or to detect and prevent fraud. The identification of a material weakness could indicate a lack of controls adequate to generate accurate financial statements that, in turn, could cause a loss of
investor confidence and decline in the market price of our common stock. We cannot assure you that we will be able to timely remediate any material weaknesses that may be identified in future periods or maintain all of the controls necessary for
continued compliance. Likewise, we cannot assure you that we will be able to retain sufficient skilled finance and accounting personnel, especially in light of the increased demand for such personnel among publicly traded companies.
Our business could be negatively affected as a result of actions of activist shareholders.
The Lion Fund II, L.P., an affiliate of Biglari Holdings Inc. (“BH”), is the beneficial owner of approximately 19.7% of our outstanding
common stock. In the past, BH and its affiliates have nominated candidates for election to our board of directors at our annual meetings of shareholders, resulting in proxy contests, and called publicly for special meetings of shareholders to
consider other proposals. While BH and its affiliates have not nominated director candidates for election at our 2018 Annual Meeting of Shareholders, the actions of BH and its affiliates or another activist shareholder in the future could
adversely affect our business because:
| · |
responding to public proposals, special meeting requests and other actions by activist shareholders can disrupt our operations, be costly and time-consuming, and divert the
attention of our management and employees;
|
| · |
perceived uncertainties as to our future direction may result in the loss of potential business opportunities, and may make it more difficult to attract and retain
qualified personnel and business partners; and
|
| · |
pursuit of an activist shareholder’s agenda may adversely affect our ability to effectively implement our business strategy and create additional value for our
shareholders.
|
Provisions in our charter, Tennessee law and our shareholder rights plan may discourage potential acquirers of the
Company.
Our charter documents contain provisions that may have the effect of making it more difficult for a third party to acquire or attempt to
acquire control of the Company. In addition, we are subject to certain provisions of Tennessee law that limit, in some cases, our ability to engage in certain business combinations with significant shareholders. In addition, we have adopted a
shareholder rights plan, which provides, among other things, that when specified events occur, our shareholders will be entitled to purchase from us shares of junior preferred stock. The shareholder rights plan is currently scheduled to expire on
April 9, 2021, but would expire promptly following the 2018 Annual Meeting of Shareholders if the shareholder rights plan is not approved by our shareholders. The preferred stock purchase rights are triggered ten days after the date of a public
announcement that a person or group acting in concert has acquired, or obtained the right to acquire, beneficial ownership of 20% or more of our outstanding common stock. The preferred stock purchase rights would cause dilution to a person or
group that attempts to acquire the Company on terms that do not satisfy the requirements of a qualifying offer under the shareholder rights plan or are otherwise not approved by our Board of Directors.
These provisions, either alone or in combination with each other, give our current directors and executive officers a substantial
ability to influence the outcome of a proposed acquisition of the Company. These provisions would apply even if an acquisition or other significant corporate transaction was considered beneficial by some of our shareholders. If a change in
control or change in management is delayed or prevented by these provisions, the market price of our securities could decline.
None.
Our home office headquarters and warehouse facilities are located on approximately 90 acres of land owned by the Company in Lebanon,
Tennessee. We use approximately 250,000 square feet of office space for our home office headquarters and decorative fixtures warehouse. We also lease our retail distribution center, which consists of approximately 370,000 square feet of warehouse
facilities and an additional approximately 14,000 square feet of office and maintenance space.
In addition to the various corporate facilities, we have five owned properties for future development, a motel used for housing
management trainees and for the general public, and three parcels of excess real property and improvements that we intend to sell.
In addition to the properties mentioned above, we own or lease the following store properties (including both our 655 Cracker Barrel Old
Country Store locations and seven locations for our Holler & Dash brand) as of September 20, 2018:
|
State
|
Owned
|
Leased
|
State
|
Owned
|
Leased
|
|
|
Tennessee
|
37
|
16
|
New Jersey
|
2
|
4
|
|
|
Florida
|
40
|
20
|
Wisconsin
|
5
|
0
|
|
|
Texas
|
33
|
18
|
Colorado
|
3
|
1
|
|
|
Georgia
|
31
|
17
|
Kansas
|
3
|
1
|
|
|
North Carolina
|
24
|
17
|
Massachusetts
|
0
|
4
|
|
|
Kentucky
|
23
|
14
|
New Mexico
|
3
|
1
|
|
|
Alabama
|
22
|
11
|
Utah
|
4
|
0
|
|
|
Virginia
|
19
|
13
|
Idaho
|
2
|
1
|
|
|
Ohio
|
22
|
9
|
Iowa
|
3
|
0
|
|
|
Indiana
|
22
|
7
|
California
|
0
|
2
|
|
|
South Carolina
|
14
|
12
|
Connecticut
|
1
|
1
|
|
|
Pennsylvania
|
9
|
16
|
Montana
|
2
|
0
|
|
|
Illinois
|
19
|
2
|
Nebraska
|
1
|
1
|
|
|
Missouri
|
15
|
3
|
Nevada
|
0
|
2
|
|
|
Michigan
|
13
|
3
|
Delaware
|
0
|
1
|
|
|
Mississippi
|
10
|
4
|
Maine
|
0
|
1
|
|
|
Arizona
|
2
|
11
|
Minnesota
|
1
|
0
|
|
|
Arkansas
|
5
|
7
|
New Hampshire
|
1
|
0
|
|
|
Louisiana
|
8
|
2
|
North Dakota
|
1
|
0
|
|
|
Maryland
|
3
|
6
|
Oregon
|
0
|
3
|
|
|
New York
|
8
|
1
|
Rhode Island
|
0
|
1
|
|
|
West Virginia
|
3
|
6
|
South Dakota
|
1
|
0
|
|
|
Oklahoma
|
6
|
2
|
421
|
241
|
We believe that our properties are suitable, adequate, well-maintained and sufficient for the operations contemplated. See “Operations"
and "Store Development" in Item 1 of this Annual Report on Form 10-K for additional information on our properties.
The Company and its subsidiaries are party to various legal and regulatory proceedings and claims incidental to their business in the
ordinary course. In the opinion of management, based upon information currently available, the ultimate liability with respect to these proceedings and claims will not materially affect the Company's consolidated results of operations or financial
position.
Pursuant to Instruction 3 to Item 401(b) of Regulation S‑K and General Instruction G(3) to Form 10‑K, the following information is included in Part I of
this Form 10‑K.
The following table sets forth certain information concerning our executive officers:
|
Name
|
Age
|
Position with the Company
|
|
|
Sandra B. Cochran
|
60
|
President and Chief Executive Officer
|
|
|
Jill M. Golder
|
56
|
Senior Vice President and Chief Financial Officer
|
|
|
Laura A. Daily
|
54
|
Senior Vice President, Retail
|
|
|
Nicholas V. Flanagan
|
52
|
Senior Vice President, Operations
|
|
|
Donald H. Hoffman
|
61
|
Senior Vice President, Marketing
|
|
|
Richard M. Wolfson
|
52
|
Senior Vice President, General Counsel and Secretary
|
|
|
Doug Couvillion
|
54
|
Senior Vice President, Sourcing and Supply Chain
|
|
|
Jeffrey M. Wilson
|
43
|
Vice President, Corporate Controller and Principal Accounting Officer
|
The following information summarizes the business experience of each of our executive officers for at least the past five years:
Ms. Cochran has been employed with us since 2009 and assumed her current position as President and Chief Executive Officer in September
2011, when she also became a member of our Board of Directors. Prior to September 2011, Ms. Cochran served as our President and Chief Operating Officer since November 2010 and as our Executive Vice President and Chief Financial Officer from April
2009 to November 2010. Before joining us in April 2009, she was the Chief Executive Officer of Books-A-Million, Inc. Ms. Cochran has 25 years of experience in the retail industry and nine years of experience in the restaurant industry.
Ms. Golder has been employed with us since April 2016 and assumed the responsibilities of Senior Vice President and Chief Financial
Officer in June 2016. Prior to April 2016, she served as Executive Vice President and Chief Financial Officer of Ruby Tuesday, Inc. since June 2014, and as Senior Vice President, Finance from April 2013 to June 2014. Prior to her tenure with Ruby
Tuesday, Inc., she was Chief Financial Officer of Cooper’s Hawk Winery & Restaurants from December 2012 to April 2013. Before joining Cooper’s Hawk Winery & Restaurants, Ms. Golder spent 23 years at Darden Restaurants, Inc., where she held
progressively more responsible positions in finance, including Senior Vice President of Finance. Ms. Golder has almost 31 years of experience in the restaurant industry.
Ms. Daily has been employed with us as Senior Vice President, Retail since May 2012. Prior to May 2012, she served as Vice President
for Ballard Designs, an Internet and catalog home furnishings retailer that is part of HSN, Inc., where she was in charge of all merchandising and trends for the company. She has over 25 years of experience as a merchant with a number of retail
organizations.
Mr. Flanagan has been employed with us since 2004 and assumed his current position in November 2010. From 2004 to 2010, he served in
various capacities including Vice President of Restaurant Operations. Mr. Flanagan has over 29 years of experience in the restaurant industry.
Mr. Hoffman has been employed with us since November 2015 and assumed his current position in April 2017. Prior to April 2017, Mr.
Hoffman served as Vice President, Marketing. Before joining us in November 2015, Mr. Hoffman spent 20 years at DDB Worldwide Communications Group, where he held various positions including Executive Vice President. Mr. Hoffman has almost 30 years
of marketing and communications experience.
Mr. Wolfson has been employed with us in his current capacity since July 2017. From January 2006 to April 2017, he served as Vice
President, General Counsel and Corporate Secretary at CLARCOR Inc., a publicly traded (NYSE:CLC) industrial company. From 2001 to 2006, he was a partner of the InterAmerican Group, an advisory services and private equity firm. Mr. Wolfson has
over 26 years of legal experience.
Mr. Couvillion has been employed with us since 2001 and assumed his current position in November 2016. From 2001 to 2016, he served in
various capacities including Vice President of Supply Chain and Quality Assurance and Corporate Controller and Principal Accounting Officer. Mr. Couvillion has 24 years of experience in the restaurant industry and 17 years of experience in the
retail industry.
Mr. Wilson has been employed with us since 2007 and assumed his current position in June 2015. From 2007 to 2015, he served in various
capacities including Vice President, Operations Analysis. Mr. Wilson has 21 years of experience in the restaurant industry and seven years of experience in the retail industry.
PART II
|
ITEM 5.
|
Our common stock is traded on the Nasdaq Global Select Market (“Nasdaq”) under the symbol “CBRL.” There were 8,222 shareholders of
record as of September 20, 2018.
The following table indicates the high and low sales prices of our common stock, as reported by Nasdaq, and dividends declared and paid
for the quarters indicated.
|
Fiscal Year 2018
|
Fiscal Year 2017
|
|||||||||||||||||||||||||||||||
|
Prices
|
Dividends
Declared
|
Dividends
Paid
|
Prices
|
Dividends
Declared
|
Dividends
Paid
|
|||||||||||||||||||||||||||
|
High
|
Low
|
High
|
Low
|
|||||||||||||||||||||||||||||
|
First
|
$
|
157.87
|
$
|
141.75
|
$
|
1.20
|
$
|
1.20
|
$
|
162.33
|
$
|
130.15
|
$
|
1.15
|
$
|
1.15
|
||||||||||||||||
|
Second
|
177.34
|
144.76
|
1.20
|
1.20
|
175.04
|
131.74
|
1.15
|
1.15
|
||||||||||||||||||||||||
|
Third
|
179.12
|
153.51
|
1.20
|
1.20
|
169.07
|
154.79
|
1.15
|
1.15
|
||||||||||||||||||||||||
|
Fourth
|
167.06
|
143.00
|
5.00
|
4.95
|
170.50
|
154.46
|
4.70
|
4.65
|
||||||||||||||||||||||||
See Note 5 to Consolidated Financial Statements with respect to dividend restrictions.
See the table labeled “Equity Compensation Plan Information” to be contained in the 2018 Proxy Statement, incorporated by reference in
Part III, Item 12 of this Annual Report on Form 10-K.
Part III, Item 12 of this Annual Report on Form 10-K is incorporated herein by this reference.
Unregistered
Sales of Equity Securities
There were no equity securities sold by the Company during the period covered by this Annual Report on Form 10-K
that were not registered under the Securities Act of 1933, as amended.
Issuer Purchases of Equity Securities
On September 29, 2017, our Board of Directors approved the repurchase of up to $25,000 of our common stock, with such authorization to
expire on October 5, 2018 to the extent it remains unused. We did not repurchase any of our common stock in the fourth quarter ended August 3, 2018. On September 25, 2018, our Board of Directors extended this repurchase authorization for an
additional year.
|
(Dollars in thousands except percentages and share data)
For each of the fiscal years ended
|
||||||||||||||||||||
|
August 3,
2018(a)
|
July 28,
2017
|
July 29,
2016
|
July 31,
2015(b)
|
August 1,
2014(c) |
||||||||||||||||
|
Selected Income Statement Data:
|
||||||||||||||||||||
|
Total revenue
|
$
|
3,030,445
|
$
|
2,926,289
|
$
|
2,912,351
|
$
|
2,842,284
|
$
|
2,683,677
|
||||||||||
|
Net income
|
247,620
|
201,899
|
189,299
|
163,903
|
132,128
|
|||||||||||||||
|
Net income per share:
|
||||||||||||||||||||
|
Basic
|
10.31
|
8.40
|
7.91
|
6.85
|
5.55
|
|||||||||||||||
|
Diluted
|
10.29
|
8.37
|
7.86
|
6.82
|
5.51
|
|||||||||||||||
|
Dividends declared per share
|
8.60
|
8.15
|
7.70
|
7.10
|
3.25
|
|||||||||||||||
|
Dividends paid per share
|
8.55
|
8.10
|
10.65
|
4.00
|
3.00
|
|||||||||||||||
|
As Percent of Total Revenue:
|
||||||||||||||||||||
|
Cost of goods sold (exclusive of depreciation and rent)
|
30.9
|
%
|
30.5
|
%
|
31.9
|
%
|
32.5
|
%
|
32.5
|
%
|
||||||||||
|
Labor and related expenses
|
34.8
|
34.8
|
34.6
|
34.9
|
36.0
|
|||||||||||||||
|
Other store operating expenses
|
19.9
|
19.2
|
19.0
|
18.4
|
18.9
|
|||||||||||||||
|
Store operating income
|
14.4
|
15.5
|
14.5
|
14.2
|
12.6
|
|||||||||||||||
|
General and administrative expenses
|
4.7
|
4.8
|
4.9
|
5.2
|
4.8
|
|||||||||||||||
|
Operating income
|
9.7
|
10.7
|
9.6
|
9.0
|
7.8
|
|||||||||||||||
|
Income before income taxes
|
9.2
|
10.2
|
9.1
|
8.4
|
7.1
|
|||||||||||||||
|
Selected Balance Sheet Data:
|
||||||||||||||||||||
|
Working capital (deficit)
|
$
|
(57,867
|
)
|
$
|
(16,971
|
)
|
$
|
(13,077
|
)
|
$
|
11,213
|
$
|
(14,789
|
)
|
||||||
|
Total assets
|
1,527,355
|
1,521,942
|
1,497,664
|
1,576,208
|
1,432,248
|
|||||||||||||||
|
Long-term debt
|
400,000
|
400,000
|
400,000
|
400,000
|
375,000
|
|||||||||||||||
|
Long-term interest rate swap liability
|
--
|
6,833
|
22,070
|
8,704
|
3,239
|
|||||||||||||||
|
Other long-term obligations
|
128,794
|
129,353
|
126,608
|
133,594
|
123,221
|
|||||||||||||||
|
Shareholders’ equity
|
581,781
|
544,507
|
526,443
|
538,268
|
528,641
|
|||||||||||||||
|
Selected Cash Flow Data:
|
||||||||||||||||||||
|
Purchase of property and equipment, net
|
$
|
151,633
|
$
|
110,108
|
$
|
113,360
|
$
|
90,490
|
$
|
90,564
|
||||||||||
|
Share repurchases
|
14,772
|
--
|
14,653
|
-- |
12,473
|
|||||||||||||||
|
Selected Other Data:
|
||||||||||||||||||||
|
Common shares outstanding at end of year
|
24,011,550
|
24,055,682
|
23,956,134
|
23,975,755
|
23,821,227
|
|||||||||||||||
|
Stores open at end of year
|
660
|
649
|
641
|
637
|
631
|
|||||||||||||||
|
Average Unit Volumes(d):
|
||||||||||||||||||||
|
Restaurant
|
$
|
3,724
|
$
|
3,646
|
$
|
3,651
|
$
|
3,581
|
$
|
3,415
|
||||||||||
|
Retail
|
902
|
892
|
926
|
904
|
873
|
|||||||||||||||
|
Comparable Store Sales(e):
|
||||||||||||||||||||
|
Period to period increase (decrease) in comparable store sales:
|
||||||||||||||||||||
|
Restaurant
|
0.6
|
%
|
0.2
|
%
|
2.2
|
%
|
5.1
|
%
|
0.7
|
%
|
||||||||||
|
Retail
|
(0.1
|
)
|
(3.7
|
)
|
2.7
|
3.6
|
0.4
|
|||||||||||||
|
Number of stores in comparable base
|
635
|
632
|
623
|
621
|
609
|
|||||||||||||||
| (a) |
Fiscal 2018 consisted of 53 weeks while all other periods presented consisted of 52 weeks. The estimated impact of the additional week was to increase consolidated fiscal
2018 results as follows: total revenue, $58,353; store operating income, 0.1% of total revenue; operating income, 0.2% of total revenue; net income, 0.2% of total revenue; and diluted net income per share, $0.36. Additionally, as a
result of P.L. 115-97, the Tax Cuts and Jobs Act, which was enacted on December 22, 2017 by the U.S. government and lowered the federal corporate income tax rate to 21%, we recorded a provisional tax benefit in fiscal 2018 for the
re-measurement of deferred tax liabilities of $30,482.
|
| (b) |
We incurred approximately $3,500 in costs related to a litigation matter, which are included in general and administrative expenses. Our debt refinancing in the second
quarter of fiscal 2015 resulted in additional interest expense of $412 related to the write-off of deferred financing costs.
|
| (c) |
We incurred $4,313 in costs related to the November 2013 proxy contest and April 2014 special shareholders’ meeting, which are included in general and administrative
expenses.
|
| (d) |
Average unit volumes include sales of all stores. Fiscal 2018 consisted of 53 weeks while all other periods presented consisted of 52 weeks.
|
| (e) |
Comparable store sales consist of sales of stores open at least six full quarters at the beginning of the year and are measured on comparable calendar weeks.
|
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) provides information
which management believes is relevant to an assessment and understanding of our consolidated results of operations and financial condition. MD&A should be read in conjunction with the Consolidated Financial Statements and notes thereto.
Readers should also carefully review the information presented under the section entitled “Risk Factors” and other cautionary statements in this report. All dollar amounts (other than per share amounts) reported or discussed in this MD&A are
shown in thousands. References in MD&A to a year or quarter are to our fiscal year or quarter unless expressly noted or the context clearly indicates otherwise.
This overview summarizes the MD&A, which includes the following sections:
| · |
Executive Overview – a general description of our business, the restaurant and retail industries, our key performance indicators and the Company’s performance in 2018.
|
| · |
Results of Operations – an analysis of our consolidated statements of income for the three years presented in our Consolidated Financial Statements.
|
| · |
Liquidity and Capital Resources – an analysis of our primary sources of liquidity, capital expenditures and material commitments.
|
| · |
Critical Accounting Estimates – a discussion of accounting policies that require critical judgments and estimates.
|
EXECUTIVE OVERVIEW
Cracker Barrel Old Country Store, Inc. (the “Company,” “our” or “we”) is a publicly traded (Nasdaq: CBRL) company that, through its
operations and those of certain subsidiaries, is principally engaged in the operation and development of the Cracker Barrel Old Country Store® (“Cracker Barrel”) concept. Each Cracker Barrel store consists of a restaurant with a gift shop. The
restaurants serve breakfast, lunch and dinner. The gift shop offers a variety of decorative and functional items specializing in rocking chairs, holiday gifts, toys, apparel and foods. As of September 20, 2018, the Company operated 655 Cracker
Barrel stores located in 45 states.
Restaurant and Retail Industries
Our stores operate in both the restaurant and retail industries in the United States. The restaurant and retail industries are highly
competitive with respect to quality, variety and price of the food products and retail merchandise offered. We compete with a significant number of national and regional restaurant and retail chains. Additionally, there are many segments within
the restaurant industry, such as family dining, casual dining, full-service, fast casual and quick service, which often overlap and provide competition for widely diverse restaurant concepts. We primarily operate in the full-service segment of
the restaurant industry. Competition also exists in securing prime real estate locations for new stores, in hiring qualified employees, in advertising, in the attractiveness of facilities and with competitors having similar menu offerings or
convenience. The restaurant and retail industries are often affected by changes in consumer taste and preference; national, regional or local economic conditions; demographic trends; traffic patterns; the type, number and location of competing
restaurants and retailers; and consumers’ discretionary purchasing power.
Additionally, economic, seasonal and weather conditions affect the restaurant and retail industries. Adverse economic conditions and
unemployment rates affect consumer discretionary income and dining and shopping habits. Historically, interstate tourist traffic and the propensity to dine out have been much higher during the summer months, thereby contributing to higher
profits in our fourth quarter. Retail sales, which are made substantially to our restaurant guests, are strongest in the second quarter, which includes the holiday shopping season. Severe weather also affects restaurant and retail sales
adversely from time to time.
Key Performance Indicators
Management uses a number of key performance measures to evaluate our operational and financial performance, including the following:
Comparable store restaurant and retail sales and restaurant guest traffic consist of sales and calculated number of guests,
respectively, of stores open at least six full quarters at the beginning of the year and are measured on comparable calendar weeks. This measure excludes the impact of new store openings.
Retail conversion is the percentage of dine-in restaurant guest traffic that make a retail purchase. Management uses retail
conversion as its metric to analyze a store’s ability to convert restaurant traffic into a retail sales occasion.
Average check per guest is an indicator which management uses to analyze the dollars spent per guest in our stores on restaurant
purchases. This measure aids management in identifying trends in guest preferences as well as the effectiveness of menu price increases and other menu changes.
Store operating margins are defined as total
revenue less cost of goods sold (exclusive of depreciation and rent), labor and other related expenses and other store operating expenses, all as a percentage of total revenue. Management uses this indicator as a primary measure of operating
profitability.
Company Performance in 2018
Management believes that the Cracker Barrel brand remains one of the strongest and most differentiated brands in the restaurant
industry.
Our long-term strategy includes the following:
| · |
Enhancing the Core business to drive sustainable sales growth and continued business model improvements. During 2018, we laid the foundation for multiple long-term
sales growth opportunities. In addition to introducing new and unique menu offerings, such as our Southern Bowls and our Crafted Coffee program featuring specialty lattes and mochas, we implemented our enhanced off-premise platform
system wide. Also, during 2018, we further delivered on our commitment to achieve ongoing cost reductions through business model improvements.
|
| · |
Expanding the Footprint by building profitable stores in core and developing markets. In 2018, we opened eight new Cracker Barrel locations, including our first
location in California as part of our westward expansion.
|
| · |
Extending the Brand by optimizing on long-term drivers, such as Holler & Dash Biscuit HouseTM, to further drive shareholder value. In 2018, we opened
three new Holler and Dash Biscuit HouseTM locations as we continued to leverage our brand strengths through this brand.
|
Additionally, during 2018, we increased shareholder return by growing our regular quarterly dividend to $1.25 per share. Also reflecting our
commitment to a balanced approach to capital allocation, we declared a special dividend of $3.75 per share.
RESULTS OF OPERATIONS
The following table highlights operating results over the past three years:
|
Relationship to Total Revenue
|
||||||||||||
|
2018
|
2017
|
2016
|
||||||||||
|
Total revenue
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
||||||
|
Cost of goods sold (exclusive of depreciation and rent)
|
30.9
|
30.5
|
31.9
|
|||||||||
|
Labor and other related expenses
|
34.8
|
34.8
|
34.6
|
|||||||||
|
Other store operating expenses
|
19.9
|
19.2
|
19.0
|
|||||||||
|
Store operating income
|
14.4
|
15.5
|
14.5
|
|||||||||
|
General and administrative
|
4.7
|
4.8
|
4.9
|
|||||||||
|
Operating income
|
9.7
|
10.7
|
9.6
|
|||||||||
|
Interest expense
|
0.5
|
0.5
|
0.5
|
|||||||||
|
Income before income taxes
|
9.2
|
10.2
|
9.1
|
|||||||||
|
Provision for income taxes
|
1.0
|
3.3
|
2.6
|
|||||||||
|
Net income
|
8.2
|
6.9
|
6.5
|
|||||||||
Total Revenue
The following table highlights the key components of revenue for the past three years:
|
2018
|
2017
|
2016
|
||||||||||
|
Revenue in dollars(1):
|
||||||||||||
|
Restaurant
|
$
|
2,439,389
|
$
|
2,351,212
|
$
|
2,323,199
|
||||||
|
Retail
|
591,056
|
575,077
|
589,152
|
|||||||||
|
Total revenue
|
$
|
3,030,445
|
$
|
2,926,289
|
$
|
2,912,351
|
||||||
|
Total revenue percentage increase(1)
|
3.6
|
%
|
0.5
|
%
|
2.5
|
%
|
||||||
|
Total revenue by percentage relationships:
|
||||||||||||
|
Restaurant
|
80.5
|
%
|
80.3
|
%
|
79.8
|
%
|
||||||
|
Retail
|
19.5
|
%
|
19.7
|
%
|
20.2
|
%
|
||||||
|
Comparable number of stores
|
635
|
632
|
623
|
|||||||||
|
Comparable store averages per store: (2)
|
||||||||||||
|
Restaurant
|
$
|
3,762
|
$
|
3,669
|
$
|
3,670
|
||||||
|
Retail
|
903
|
890
|
925
|
|||||||||
|
Total
|
$
|
4,665
|
$
|
4,559
|
$
|
4,595
|
||||||
|
Restaurant average weekly sales (3)
|
$
|
70.3
|
$
|
70.1
|
$
|
70.2
|
||||||
|
Retail average weekly sales (3)
|
17.0
|
17.1
|
17.8
|
|||||||||
(1) 2018 consists of 53 weeks while the other periods presented consist of 52 weeks.
(2) 2018 is calculated on a 53-week basis while the other periods are calculated on a 52-week basis.
(3) Average weekly sales are calculated by dividing net sales by operating weeks and include all stores.
Total revenue benefited from the opening of eleven new stores in 2018, eight new stores in 2017 and six new stores in 2016. In
2018, total revenue also benefited by the additional week in 2018, which resulted in an increase in revenues of $58,353.
The following table highlights comparable store sales* results over the past two years:
|
Period to Period
Increase (Decrease)
|
||||||||
|
2018 vs 2017
|
2017 vs 2016
|
|||||||
|
(635 Stores)
|
(632 Stores)
|
|||||||
|
Restaurant
|
0.6
|
%
|
0.2
|
%
|
||||
|
Retail
|
(0.1
|
)
|
(3.7
|
)
|
||||
|
Restaurant & Retail
|
0.5
|
%
|
(0.6
|
)
|
||||
*Comparable store sales consist of sales of stores open at least six full quarters at the beginning of the year and are measured on
comparable calendar weeks.
Our comparable store restaurant sales increase from 2017 to 2018 resulted from a higher average check of 2.5%,
primarily attributable to a 2.4% average menu price increase, partially offset by a decrease in guest traffic of 1.9%. Our comparable store restaurant sales increase from 2016 to 2017 resulted from a higher average check of 1.6%, primarily
attributable to a 1.8% average menu price increase, partially offset by a decrease in guest traffic of 1.4%.
Our comparable store retail sales decrease from 2017 to 2018 resulted primarily from the decrease in guest traffic and lower
performance in décor, toys, and bed and bath merchandise categories partially offset by strong performance in the apparel and accessories merchandise category. Our comparable store retail sales decrease from 2016 to 2017 resulted primarily
from the decrease in guest traffic and lower performance in apparel and accessories, bed and bath, and toys merchandise categories.
Cost of Goods Sold (Exclusive of Depreciation and Rent)
The following table highlights the components of cost of goods sold in dollar amounts for the past three years:
|
2018
|
2017
|
2016
|
||||||||||
|
Cost of Goods Sold:
|
||||||||||||
|
Restaurant
|
$
|
625,999
|
$
|
595,186
|
$
|
627,713
|
||||||
|
Retail
|
309,398
|
296,107
|
300,463
|
|||||||||
|
Total Cost of Goods Sold
|
$
|
935,397
|
$
|
891,293
|
$
|
928,176
|
||||||
The following table highlights restaurant cost of goods sold as a percentage of restaurant revenue for the past three years:
|
2018
|
2017
|
2016
|
||||||||||
|
Restaurant Cost of Goods Sold
|
25.7
|
%
|
25.3
|
%
|
27.0
|
%
|
||||||
The increase from 2017 to 2018 was primarily the result of food commodity inflation of 3.3% and higher food waste partially
offset by our menu price increase referenced above. Higher food waste accounted for 0.1% in restaurant cost of goods sold as a percentage of restaurant revenue. The decrease from 2016 to 2017 was primarily the result of food commodity
deflation of 4.6%, our menu price increase referenced above and lower food waste. Lower food waste accounted for 0.1% in restaurant cost of goods sold as a percentage of restaurant revenue.
We presently expect the rate of commodity inflation to be approximately 2.0% in 2019 as compared to 3.3% in 2018.
The following table highlights retail cost of goods sold as a percentage of retail revenue for the past three years:
|
2018
|
2017
|
2016
|
||||||||||
|
Retail Cost of Goods Sold
|
52.3
|
%
|
51.5
|
%
|
51.0
|
%
|
||||||
The increase in retail cost of goods sold as a percentage of retail revenue in 2018 as compared to 2017 resulted from lower
initial margin, an increase in the provision for obsolete inventory, higher inventory shrinkage and higher freight expense partially offset by lower markdowns.
|
2017 to 2018
Increase (Decrease) a
Percentage of Total Revenue
|
||||
|
Lower initial margin
|
1.0
|
%
|
||
|
Provision for obsolete inventory
|
0.3
|
%
|
||
|
Inventory shrinkage
|
0.2
|
%
|
||
|
Freight expense
|
0.1
|
%
|
||
|
Markdowns
|
(0.8
|
%)
|
||
The increase in retail cost of goods sold as a percentage of retail revenue in 2017 as compared to 2016 resulted primarily from
higher markdowns, lower initial margin and an increase in the provision for obsolete inventory partially offset by higher retail credits.
|
2016 to 2017
Increase (Decrease) as a
Percentage of Total Revenue
|
||||
|
Markdowns
|
0.4
|
%
|
||
|
Lower initial margin
|
0.2
|
%
|
||
|
Provision for obsolete inventory
|
0.1
|
%
|
||
|
Retail credits
|
(0.3
|
%)
|
||
Labor and Related Expenses
Labor and other related expenses include all direct and indirect labor and related costs incurred in store operations. The
following table highlights labor and other related expenses as a percentage of total revenue for the past three years:
|
2018
|
2017
|
2016
|
||||||||||
|
Labor and other related expenses
|
34.8
|
%
|
34.8
|
%
|
34.6
|
%
|
||||||
Labor and other related expenses as a percentage of total revenue in 2018 remained flat to 2017 as a result of the following
offsetting percentage changes:
|
2017 to 2018
Increase (Decrease) as a
Percentage of Total Revenue
|
||||
|
Store hourly labor
|
0.3
|
%
|
||
|
Store bonus expense
|
(0.2
|
%)
|
||
|
Employee health care expenses
|
(0.1
|
%)
|
||
The increase in store hourly labor in 2018 as compared to 2017 resulted primarily from lower productivity and wage
inflation exceeding menu price increases.
The decrease in store bonus expense in 2018 as compared to 2017 resulted from lower performance against financial
objectives in 2018 as compared to 2017.
The decrease in employee health care expenses in 2018 as compared to 2017 resulted primarily from lower claims activity.
The year-to-year percentage change from 2016 to 2017 resulted primarily from the following:
|
2016 to 2017
Increase (Decrease) as a
Percentage of Total Revenue
|
||||
|
Store hourly labor
|
0.1
|
%
|
||
|
Store management compensation
|
0.1
|
%
|
||
|
Employee health care expenses
|
(0.1
|
%)
|
||
The increase in store hourly labor in 2017 as compared to 2016 resulted primarily from wage inflation partially offset by
improvements in productivity resulting from the continuation of our cost-saving initiatives.
The increase in store management compensation in 2017 as compared to 2016 was primarily the result of an increase in
variable costs resulting from a higher rate of vacancy in management headcounts.
The decrease in employee health care expenses in 2017 as compared to 2016 resulted primarily from lower claims activity.
Other Store Operating Expenses
Other store operating expenses include all store-level operating costs, the major components of which are utilities,
operating supplies, repairs and maintenance, depreciation and amortization, advertising, rent, credit card fees, real and personal property taxes, general insurance and costs associated with our store manager conference. The following
table highlights other store operating expenses as a percentage of total revenue for the past three years:
|
2018
|
2017
|
2016
|
||||||||||
|
Other store operating expenses
|
19.9
|
%
|
19.2
|
%
|
19.0
|
%
|
||||||
The year-to-year percentage change from 2017 to 2018 resulted from the following:
|
2017 to 2018
Increase as a Percentage
of Total Revenue
|
||||
|
Maintenance
|
0.3
|
%
|
||
|
Depreciation
|
0.2
|
%
|
||
|
Supplies
|
0.1
|
%
|
||
|
Store manager conference expense
|
0.1
|
%
|
||
The increase in maintenance expense as a percentage of total revenue for 2018 as compared to 2017 resulted primarily from
the implementation of previously announced initiatives, higher costs associated with snow removal due to adverse weather, higher costs associated with site maintenance and expenses associated with the related repair of certain building
components and kitchen equipment.
The increase in depreciation expense as a percentage of total revenue for 2018 as compared to 2017 resulted from higher
capital expenditures.
The increase in supplies expense as a percentage of total revenue for 2018 as compared to 2017 resulted primarily from
costs associated with growth in our off-premise business.
In the first quarter of 2018, we held a bi-annual manager conference and training event that was attended by our store
operations management team. We did not hold a manager’s conference and training event in 2017.
The year-to-year percentage change from 2016 to 2017 resulted from the following:
|
2016 to 2017
Increase (Decrease) as a
Percentage of Total Revenue
|
||||
|
Depreciation
|
0.3
|
%
|
||
|
Advertising
|
0.1
|
%
|
||
|
Maintenance
|
(0.2
|
%)
|
||
The increase in depreciation expense as a percentage of total revenue for 2017 as compared to 2016 resulted from higher
capital investments in 2016 and the capital additions in 2017.
The increase in advertising expense as a percentage of total revenue for 2017 as compared to 2016 is consistent with our
planned increase in advertising spend for 2017.
Lower maintenance expense as a percentage of total revenue for 2017 as compared to 2016 resulted primarily from reduced
spending on building repairs.
General and Administrative Expenses
The following table highlights general and administrative expenses as a percentage of total revenue for the past three
years:
|
2018
|
2017
|
2016
|
||||||||||
|
General and administrative expenses
|
4.7
|
%
|
4.8
|
%
|
4.9
|
%
|
||||||
The year-to-year percentage change from 2017 to 2018 resulted primarily from the following:
|
2017 to 2018
(Decrease) Increase as a
Percentage of Total Revenue
|
||||
|
Incentive compensation expense
|
(0.3
|
%)
|
||
|
Payroll and related expenses
|
0.2
|
%
|
||
The decrease in incentive compensation expense as a percentage of total revenue in 2018 as compared to 2017
resulted primarily from lower performance against financial objectives in 2018 as compared to 2017.
The increase in payroll and related expenses as a percentage of total revenue in 2018 as compared to 2017 resulted
primarily from more manager-in-training weeks and higher average wages.
The year-to-year percentage change from 2016 to 2017 resulted primarily from lower incentive compensation. Lower incentive
compensation in 2017 as compared to 2016 was driven by lower performance against financial objectives as compared to the prior year period.
Interest Expense
The following table highlights interest expense for the past three years:
|
2018
|
2017
|
2016
|
||||||||||
|
Interest expense
|
$
|
15,169
|
$
|
14,271
|
$
|
14,052
|
||||||
The year-to-year increases from 2017 to 2018 and from 2016 to 2017 resulted primarily from higher weighted average interest
rates. The additional week in 2018 also increased interest expense by $323.
Provision for Income Taxes
The following table highlights the provision for income taxes as a percentage of income before income taxes (“effective tax
rate”) for the past three years:
|
2018
|
2017
|
2016
|
||||||||||
|
Effective tax rate
|
11.1
|
%
|
32.4
|
%
|
28.9
|
%
|
||||||
The decrease in our effective tax rate from 2017 to 2018 reflected the significant impact of P.L. 115-97, the Tax
Cuts and Jobs Act (the “Tax Act”), enacted on December 22, 2017 by the U.S. government. The Tax Act made broad and complex changes to the U.S. tax code, including, but not limited to, reducing the U.S. federal corporate tax rate from
35% to 21% effective January 1, 2018. In accordance with Section 15 of the Internal Revenue Code, we used a blended rate of 26.9% for our fiscal 2018 tax year, by applying a prorated percentage of the number of days prior to and
subsequent to the January 1, 2018 effective date of the Tax Act.
We presently expect our effective tax rate for 2019 to be approximately 17% to 18%. While we are able to make reasonable
estimates of the impact of the reduction in corporate rate, the final impact of the Tax Act may differ from these estimates, due to, among other things, additional guidance that may be issued by the Internal Revenue Service, expected
state tax responses to either follow or reject the federal changes, and changes in our interpretations and assumptions. We continue to gather additional information to determine the final impact.
The increase in our effective tax rate from 2016 to 2017 resulted primarily from lower Work Opportunity Tax Credit
collections in 2017 than in the prior year and a reduction in certain reserves for uncertain tax positions in 2016.
LIQUIDITY AND CAPITAL RESOURCES
The following table presents a summary of our cash flows for the last three years:
|
2018
|
2017
|
2016
|
||||||||||
|
Net cash provided by operating activities
|
$
|
330,620
|
$
|
320,767
|
$
|
271,378
|
||||||
|
Net cash used in investing activities
|
(151,222
|
)
|
(109,605
|
)
|
(112,515
|
)
|
||||||
|
Net cash used in financing activities
|
(225,743
|
)
|
(201,127
|
)
|
(273,352
|
)
|
||||||
|
Net (decrease) increase in cash and cash equivalents
|
$
|
(46,345
|
)
|
$
|
10,035
|
$
|
(114,489
|
)
|
||||
Our primary sources of liquidity are cash generated from our operations and our borrowing capacity under our revolving
credit facility. Our internally generated cash, along with cash on hand at July 28, 2017, was sufficient to finance all of our growth, dividend payments, working capital needs and other cash payment obligations in 2018.
We believe that cash at August 3, 2018, along with cash expected to be generated from our operating activities and the
borrowing capacity under our revolving credit facility, will be sufficient to finance our continuing operations, our continuing expansion plans, our expected share repurchases and our expected dividend payments for 2019.
Cash Generated from Operations
The increase in net cash flow provided by operating activities from 2017 to 2018 primarily reflected higher net income and
the timing of payments for accounts payable partially offset by lower income tax payments, the timing of payroll payments as compared to prior year as a result of our fiscal year end dates, lower spending on advertising and a lesser
increase in the sales of our gift cards in 2018 as compared to 2017.
The increase in net cash flow provided by operating activities from 2016 to 2017 primarily reflected the timing of payments
for income taxes, higher net income, the timing of payroll payments as compared to prior year due to our fiscal year end dates and lower incentive compensation payments made in 2017 as a result of the prior year’s performance partially
offset by the decrease in accounts payable. The decrease in accounts payable reflected the results of conversion to more electronic invoice methods and lower accounts payable related to retail inventory.
Capital Expenditures
The following table presents our capital expenditures (purchase of property and equipment), net of proceeds from insurance
recoveries, for the last three years:
|
2018
|
2017
|
2016
|
||||||||||
|
Capital expenditures, net of proceeds from insurance recoveries
|
$
|
151,633
|
$
|
110,108
|
$
|
113,360
|
||||||
Our capital expenditures consisted primarily of capital investments for existing stores, new store locations and strategic
initiatives. The increase in capital expenditures from 2017 to 2018 resulted primarily from an increase in the number of new store locations and capital expenditures for strategic initiatives. The increase in capital expenditures from
2016 to 2017 resulted primarily from capital for existing stores, as well as an increase in the number of new store locations.
We estimate that our capital expenditures during 2019 will be approximately $160,000 to $170,000. This estimate includes
the acquisition of sites and construction costs of eight new Cracker Barrel stores that we plan to open during 2019, as well as acquisition and construction costs for store locations to be opened in 2020. We also expect to increase
capital expenditures for equipment, technology and strategic initiatives, which are intended to improve the guest experience and improve margins. We intend to fund our capital expenditures with cash generated by operations and
borrowings under our revolving credit facility, as necessary.
Borrowing Capacity and Debt Covenants
In 2015, we entered into a five-year $750,000 revolving credit facility (the “2015 Revolving Credit Facility”). On
September 5, 2018, we entered into a five-year $950,000 revolving credit facility (the “2019 Revolving Credit Facility”) with substantially the same terms and financial covenants as the 2015 Revolving Credit Facility, which it
replaced. The 2019 Revolving Credit Facility also contains an option to increase the revolving credit facility by $300,000.
The following table highlights our borrowing capacity and outstanding borrowings under the 2015 Revolving Credit Facility,
our standby letters of credit and our borrowing availability under the 2015 Revolving Credit Facility as of August 3, 2018:
|
August 3, 2018
|
||||
|
Borrowing capacity under the 2015 Revolving Credit Facility
|
$
|
750,000
|
||
|
Less: Outstanding borrowings under the 2015 Revolving Credit Facility
|
400,000
|
|||
|
Less: Standby letters of credit*
|
9,455
|
|||
|
Borrowing availability under the 2015 Revolving Credit Facility
|
$
|
340,545
|
||
*Our standby letters of credit relate to securing reserved claims under workers’ compensation insurance and reduce our borrowing availability
under the 2015 Revolving Credit Facility.
We did not borrow or make any debt payments in 2018, 2017 or 2016.
See “Material Commitments” below and Note 5 to our Consolidated Financial Statements for further information on our
long-term debt.
Both the 2015 Revolving Credit Facility and 2019 Revolving Credit Facility contain customary financial covenants, which
include maintenance of a maximum consolidated total leverage ratio and a minimum consolidated interest coverage ratio. We were in compliance with the 2015 Revolving Credit Facility’s financial covenants at August 3, 2018, and we
presently expect to be in compliance with the 2019 Revolving Credit Facility’s financial covenants for the remaining term of the facility.
Dividends, Share Repurchases and Share-Based Compensation Awards
Our 2015 Revolving Credit Facility imposes restrictions on the amount of dividends we are permitted to pay and the amount of
shares we are permitted to repurchase. Under the 2015 Revolving Credit Facility, provided there is no default existing and the total of our availability under the 2015 Revolving Credit Facility plus our cash and cash equivalents on hand
is at least $100,000 (the “cash availability”), we may declare and pay cash dividends on shares of our common stock and repurchase shares of our common stock (1) in an unlimited amount if at the time the dividend or the repurchase is
made our consolidated total leverage ratio is 3.00 to 1.00 or less and (2) in an aggregate amount not to exceed $100,000 in any fiscal year if our consolidated total leverage ratio is greater than 3.00 to 1.00 at the time the dividend
or repurchase is made; notwithstanding (1) and (2), so long as immediately after giving effect to the payment of any such dividends, cash availability is at least $100,000, we may declare and pay cash dividends on shares of our common
stock in an aggregate amount not to exceed in any fiscal year the product of the aggregate amount of dividends declared in the fourth quarter of the immediately preceding fiscal year multiplied by four. These restrictions are the same
under the 2019 Revolving Credit Facility.
During each of the first three quarters of 2018, we declared a regular quarterly dividend of $1.20 per share of our common
stock. Each of these dividends was paid in the immediately following quarter. Additionally, during the fourth quarter of 2018, we increased our regular quarterly dividend by 4.2% by declaring a dividend of $1.25 per share and declared
a special dividend of $3.75 per share. The special dividend was paid on August 3, 2018 to shareholders of record on July 13, 2018. The regular quarterly dividend was paid on August 6, 2018 to shareholders of record on July 13, 2018.
The special dividend of $3.50 per share of common stock declared in the fourth quarter of 2017 was paid in 2017. Both special dividends of $3.00 and $3.25 per share of common stock declared in the fourth quarters of 2015 and 2016,
respectively, were paid in 2016.
The following table highlights the dividends per share we paid for the last three years:
|
2018
|
2017
|
2016
|
||||||||||
|
Dividends per share paid
|
$
|
8.55
|
$
|
8.10
|
$
|
10.65
|
||||||
Our criteria for share repurchases are that they be accretive to expected net income per share and are within the limits
imposed by our debt commitments. Subject to the limits imposed by our 2015 Revolving Credit Facility, in each of 2018, 2017 and 2016, we were authorized by our Board of Directors to repurchase shares at the discretion of management up
to $25,000. In 2018, we repurchased 100,000 shares of our common stock in the open market at an aggregate cost of $14,772. We did not repurchase any shares of our common stock in 2017. In 2016, we repurchased 100,000 shares of our
common stock in the open market at an aggregate cost of $14,653.
In 2018, 2017 and 2016, related tax withholding payments on certain share-based compensation awards exceeded proceeds
received from the exercise of stock options which resulted in a net use of cash of $3,816, $6,896, and $5,779, respectively.
Working Capital
In the restaurant industry, substantially all sales are either for cash or third-party credit card. Like many other
restaurant companies, we are able to, and often do, operate with negative working capital. Restaurant inventories purchased through our principal food distributor are on terms of net zero days, while other restaurant inventories
purchased locally are generally financed through trade credit at terms of 30 days or less. Because of our gift shop, which has a lower product turnover than the restaurant, we carry larger inventories than many other companies in the
restaurant industry. Retail inventories are generally financed through trade credit at terms of 60 days or less. These various trade terms are aided by rapid turnover of the restaurant inventory. Employees generally are paid on
weekly or semi-monthly schedules in arrears for hours worked except for bonuses that are paid either quarterly or annually in arrears. Many other operating expenses have normal trade terms and certain expenses such as certain taxes and
some benefits are deferred for longer periods of time.
The following table highlights our working capital deficit:
|
2018
|
2017
|
2016
|
||||||||||
|
Working capital deficit
|
$
|
(57,867
|
)
|
$
|
(16,971
|
)
|
$
|
(13,077
|
)
|
|||
The change in working capital at August 3, 2018 compared to July 28, 2017 primarily reflected the decrease in cash and the
timing of payments for income taxes partially offset by lower incentive compensation accruals based on lower performance against financial objectives in 2018 and lower payroll accruals due to the timing of payments. The decrease in
cash resulted primarily from higher spending for capital expenditures and the repurchase of shares in 2018 partially offset by an increase in cash generated by operations. The change in working capital at July 28, 2017 compared to July
29, 2016 primarily reflected the timing of payments for income taxes, an increase in deferred revenue related to the sale of our gifts cards and higher payroll accruals due to the timing of payments partially offset by lower accounts
payable and an increase in cash. The decrease in accounts payable reflected the results of conversion to more electronic invoice methods and lower accounts payable related to retail inventory. The increase in cash resulted primarily
from cash generated by operations partially offset by spending for capital expenditures and the payment of dividends.
Off-Balance Sheet Arrangements
Other than various operating leases, which are disclosed more fully in “Material Commitments” below and Notes 2 and 9 to our
Consolidated Financial Statements, we have no other material off-balance sheet arrangements.
Material Commitments
Our contractual cash obligations and commitments as of August 3, 2018, are summarized in the tables below:
|
Payments due by Years
|
||||||||||||||||||||
|
Contractual Obligations (a)
|
Total
|
2019
|
2020-2021
|
2022-2023
|
After 2023
|
|||||||||||||||
|
2015 Revolving Credit Facility(b)
|
$
|
400,000
|
$
|
--
|
$
|
400,000
|
$
|
--
|
$
|
--
|
||||||||||
|
Operating leases (c)
|
710,135
|
66,029
|
86,680
|
63,869
|
493,557
|
|||||||||||||||
|
Purchase obligations (d)
|
58,814
|
41,532
|
17,282
|
--
|
--
|
|||||||||||||||
|
Other long-term obligations (e)
|
39,067
|
51
|
4,440
|
163
|
34,413
|
|||||||||||||||
|
Total contractual cash obligations
|
$
|
1,208,016
|
$
|
107,612
|
$
|
508,402
|
$
|
64,032
|
$
|
527,970
|
||||||||||
|
Amount of Commitment Expirations by Years
|
||||||||||||||||||||
|
Total
|
2019
|
2020-2021
|
2022-2023
|
After 2023
|
||||||||||||||||
|
2015 Revolving Credit Facility(b)
|
$
|
750,000
|
$
|
--
|
$
|
750,000
|
$
|
--
|
$
|
--
|
||||||||||
|
Standby letters of credit(f)
|
9,455
|
9,455
|
--
|
--
|
--
|
|||||||||||||||
|
Guarantees (g)
|
717
|
236
|
432
|
49
|
--
|
|||||||||||||||
|
Total commitments
|
$
|
760,172
|
$
|
9,691
|
$
|
750,432
|
$
|
49
|
$
|
--
|
||||||||||
| (a) |
At August 3, 2018, the entire liability for uncertain tax positions (including penalties and interest) is classified as a long-term liability. At this time, we
are unable to make a reasonably reliable estimate of the amounts and timing of payments in individual years because of uncertainties in the timing of the effective settlement of tax positions. As such, the liability for
uncertain tax positions of $24,315 is not included in the contractual cash obligations and commitments table above.
|
| (b) |
Our 2015 Revolving Credit Facility expires on January 8, 2020. On September 5, 2018, we refinanced our debt for an additional five-year term. Using projected
interest rates, we anticipate having interest payments of $15,168, $30,865, $31,761 and $12,216 in 2019, 2020-2021, 2022-2023 and after 2023, respectively. The projected interest rates for our swapped portion of our
outstanding borrowings are our fixed rates under our interest rate swaps (see Note 6 to the Consolidated Financial Statements) plus our current credit spread of 1.25%. The projected interest rate for our unswapped portion
of our outstanding borrowings is the average of the three-year and five-year swap rates at August 3, 2018 of 2.94% plus our current credit spread of 1.25%. Based on our outstanding borrowings and our standby letters of
credit at August 3, 2018 and our current unused commitment fee as defined in both the 2015 Revolving Credit Facility and the 2019 Revolving Credit Facility, our unused commitment fees in 2019-2020 would be $988; however, the
actual amount will differ based on actual usage of the 2015 Revolving Credit Facility and the 2019 Revolving Credit Facility.
|
| (c) |
Includes base lease terms and certain optional renewal periods for which, at the inception of the lease, it is reasonably assured that we will exercise.
|
| (d) |
Purchase obligations consist of purchase orders for food and retail merchandise; purchase orders for capital expenditures, supplies, other operating needs and
other services; and commitments under contracts for maintenance needs and other services. We have excluded contracts that do not contain minimum purchase obligations. We excluded long-term agreements for services and
operating needs that can be cancelled within 60 days without penalty. We included long-term agreements and certain retail purchase orders 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 only can be cancelled in the event of an uncured material breach or with a penalty through the
entire term of the contract. Because of 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) |
Other long-term obligations include our Non-Qualified Savings Plan ($32,669, with a corresponding long-term asset to fund the liability; see Note 12 to the
Consolidated Financial Statements), Deferred Compensation Plan ($1,794) and our long-term incentive plans ($4,604).
|
| (f) |
Our standby letters of credit relate to securing reserved claims under workers’ compensation insurance and reduce our borrowing availability under the Revolving
Credit Facility.
|
| (g) |
Consists solely of guarantees associated with lease payments for two properties. We are not aware of any non-performance under these arrangements that would
result in us having to perform in accordance with the terms of these guarantees.
|
Recent Accounting Pronouncements Adopted and Not Yet Adopted
See Note 2 to the accompanying Consolidated Financial Statements for a discussion of recent accounting guidance adopted and
not yet adopted. The adopted accounting guidance discussed in Note 2 did not have a significant impact on our consolidated financial position or results of operations. The Company either expects that the accounting guidance not yet
adopted will not have a significant impact on the Company’s consolidated financial position or results of operations or is currently evaluating the impact of adopting the accounting guidance.
CRITICAL ACCOUNTING ESTIMATES
We prepare our Consolidated Financial Statements in conformity with GAAP. The preparation of these financial statements
requires us to make estimates and assumptions about future events and apply judgments that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures. We base our estimates and judgments on historical
experience, current trends, 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. However, because future events and their effects cannot be determined with certainty, actual results could differ from those
assumptions and estimates, and such differences could be material.
Our significant accounting policies are discussed in Note 2 to the Consolidated Financial Statements. Judgments and
uncertainties affecting the application of those policies may result in materially different amounts being reported under different conditions or using different assumptions. Critical accounting estimates are those that:
| · |
management believes are most important to the accurate portrayal of both our 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.
|
We consider the following accounting estimates to be most critical in understanding the judgments that are involved in
preparing our Consolidated Financial Statements:
| · |
Impairment of Long-Lived Assets
|
| · |
Insurance Reserves
|
| · |
Retail Inventory Valuation
|
Management has reviewed these critical accounting estimates and related disclosures with the Audit Committee of our Board of Directors.
Impairment of Long-Lived Assets
We assess the impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying value
of an asset may not be recoverable. Recoverability of assets is measured by comparing the carrying value of the asset to the undiscounted future cash flows expected to be generated by the asset. If the total expected future cash flows
are less than the carrying amount of the asset, the carrying value is written down, for an asset to be held and used, to the estimated fair value or, for an asset to be disposed of, to the fair value, net of estimated costs of
disposal. Any loss resulting from impairment is recognized by a charge to income. Judgments and estimates that we make related to the expected useful lives of long-lived assets and future cash flows are affected by factors such as
changes in economic conditions and changes in operating performance. The accuracy of such provisions can vary materially from original estimates and management regularly monitors the adequacy of the provisions until final disposition
occurs.
We have not made any material changes in our methodology for assessing impairments during the past three years and we do not
believe that there is a reasonable likelihood that there will be a material change in the estimates or assumptions used by us to assess impairment of long-lived assets. However, if actual results are not consistent with our estimates
and assumptions used in estimating future cash flows and fair values of long-lived assets, we may be exposed to losses that could be material.
Insurance Reserves
We self-insure a significant portion of our expected workers’ compensation and general liability programs. We purchase
insurance for individual workers’ compensation claims that exceed $250, $750 or $1,000 depending on the state in which the claim originated. We purchase insurance for individual general liability claims that exceed $500. We record a
reserve for workers’ compensation and general liability for all unresolved claims and for an estimate of incurred but not reported (“IBNR”) claims. These reserves and estimates of IBNR claims are based upon a full scope actuarial study
which is performed annually at the end of our third quarter and is adjusted by the actuarially determined losses and actual claims payments for the fourth quarter. Additionally, we perform limited scope actuarial studies on a quarterly
basis to verify and/or modify our reserves. The reserves and losses in the actuarial study represent a range of possible outcomes within which no given estimate is more likely than any other estimate. As such, we record the losses in
the lower end of that range and discount them to present value using a risk-free interest rate based on projected timing of payments. We also monitor actual claims development, including incurrence or settlement of individual large
claims during the interim periods between actuarial studies as another means of estimating the adequacy of our reserves.
Our group health plans combine the use of self-insured and fully-insured programs. Benefits for any individual (employee or
dependents) in the self-insured group health program are limited. We record a liability for the self-insured portion of our group health program for all unpaid claims based upon a loss development analysis derived from actual group
health claims payment experience. We also record a liability for unpaid prescription drug claims based on historical experience.
Our accounting policies regarding insurance reserves include certain actuarial assumptions and management judgments
regarding economic conditions, the frequency and severity of claims and claim development history and settlement practices. We have not made any material changes in the methodology used to establish our insurance reserves during the
past three years and do not believe there is a reasonable likelihood that there will be a material change in the estimates or assumptions used to calculate the insurance reserves. However, changes in these actuarial assumptions or
management judgments in the future may produce materially different amounts of expense that would be reported under these insurance programs.
Retail Inventory Valuation
Cost of goods sold includes the cost of retail merchandise sold at our stores utilizing the retail inventory method
(“RIM”). Under RIM, the valuation of our retail inventories is determined by applying a cost-to-retail ratio to the retail value of our inventories. Inherent in the RIM calculation are certain management judgments and estimates,
including initial markons, markups, markdowns and shrinkage, which may significantly impact the gross margin calculation as well as the ending inventory valuation.
Inventory valuation provisions are included for retail inventory obsolescence and retail inventory shrinkage. Retail
inventory is reviewed on a quarterly basis for obsolescence and adjusted as appropriate based on assumptions made by management and judgment regarding inventory aging and future promotional activities. Retail inventory also includes an
estimate of shrinkage that is adjusted upon physical inventory counts. Annual physical inventory counts are conducted throughout the third quarter based upon a cyclical inventory schedule. An estimate of shrinkage is recorded for the
time period between physical inventory counts by using a three-year average of the physical inventories’ results on a store-by-store basis.
We have not made any material changes in the methodologies, estimates or assumptions related to our merchandise inventories
during the past three years and do not believe there is a reasonable likelihood that there will be a material change in the estimates or assumptions in the future. However, actual obsolescence or shrinkage recorded may produce
materially different amounts than we have estimated.
We are exposed to market risk, such as changes in interest rates and commodity prices. We do not hold or use derivative
financial instruments for trading purposes.
Interest Rate Risk. We have interest rate risk relative to our outstanding borrowings under our revolving credit facility.
At both August 3, 2018 and July 28, 2017, our outstanding borrowings totaled $400,000 (see Note 5 to our Consolidated Financial Statements). Loans under our credit facility bear interest, at our election, either at the prime rate or
LIBOR plus a percentage point spread based on certain specified financial ratios. Our policy has been to manage interest cost using a mix of fixed and variable rate debt (see Notes 5, 6 and 9 to our Consolidated Financial Statements).
To manage this risk in a cost efficient manner, we have entered into interest rate swaps. A summary of our interest rate swaps at August 3, 2018 is as follows:
|
Trade Date
|
Effective Date
|
Term
(in Years)
|
Notional Amount
|
Fixed
Rate
|
|||||||||
|
June 18, 2014
|
May 3, 2015
|
4
|
$
|
160,000
|
2.51
|
%
|
|||||||
|
June 24, 2014
|
May 3, 2015
|
4
|
120,000
|
2.51
|
%
|
||||||||
|
July 1, 2014
|
May 5, 2015
|
4
|
120,000
|
2.43
|
%
|
||||||||
|
January 30, 2015
|
May 3, 2019
|
2
|
80,000
|
2.15
|
%
|
||||||||
|
January 30, 2015
|
May 3, 2019
|
2
|
60,000
|
2.16
|
%
|
||||||||
|
January 30, 2015
|
May 4, 2021
|
3
|
120,000
|
2.41
|
%
|
||||||||
|
January 30, 2015
|
May 3, 2019
|
2
|
60,000
|
2.15
|
%
|
||||||||
|
January 30, 2015
|
May 4, 2021
|
3
|
80,000
|
2.40
|
%
|
||||||||
At August 3, 2018 and July 28, 2017, our outstanding borrowings were swapped at a weighted average interest rate of 3.73%
and 3.21%, respectively, which are the weighted average fixed rates of our interest rate swaps plus our current credit spread. See Note 6 to our Consolidated Financial Statements for further discussion of our interest rate swaps.
Commodity Price Risk. Many of the food products that we purchase are affected by commodity pricing and are, therefore,
subject to price volatility caused by market conditions, weather, production problems, delivery difficulties and other factors which are outside our control and which are generally unpredictable.
The following table highlights the five food categories which accounted for the largest shares of our food purchases in 2018
and 2017:
|
Percentage of Food Purchases
|
||||||||
|
2018
|
2017
|
|||||||
|
Beef
|
14
|
%
|
14
|
%
|
||||
|
Dairy (including eggs)
|
13
|
%
|
12
|
%
|
||||
|
Fruits and vegetables
|
12
|
%
|
12
|
%
|
||||
|
Poultry
|
11
|
%
|
11
|
%
|
||||
|
Pork
|
11
|
%
|
10
|
%
|
||||
Other categories affected by the commodities markets, such as grains and seafood, may each account for as much as 8% of our
food purchases. While some of our food items are produced to our proprietary specifications, our food items are based on generally available products, and if any existing suppliers fail, or are unable to deliver in quantities required
by us, we believe that there are sufficient other quality suppliers in the marketplace that our sources of supply can be replaced as necessary to allow us to avoid any material adverse effects that could be caused by such
unavailability. We also recognize, however, that commodity pricing is extremely volatile and can change unpredictably even over short periods of time. Changes in commodity prices would affect us and our competitors generally, and
depending on the terms and duration of supply contracts, sometimes simultaneously. We enter into contracts for certain of our products in an effort to minimize volatility of supply and pricing. In many cases, or over the longer term,
we believe we will be able to pass through some or much of the increased commodity costs by adjusting our 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.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of Cracker Barrel Old Country Store, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Cracker Barrel Old Country Store, Inc. and subsidiaries (the “Company”) as of
August 3, 2018 and July 28, 2017, the related consolidated statements of income, comprehensive income, changes in shareholders’ equity, and cash flows, for each of the three years in the period ended August 3, 2018, and the related
notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of August 3, 2018 and July 28, 2017, and the
results of its operations and its cash flows for each of the three years in the period ended August 3, 2018, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s
internal control over financial reporting as of August 3, 2018, based on the criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated September 28, 2018, expressed an unqualified opinion on the Company’s internal control over
financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s
financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our
audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable
basis for our opinion.
/s/ Deloitte & Touche LLP
Nashville, Tennessee
September 28, 2018
We have served as the Company’s auditor since 1974.
CRACKER BARREL OLD COUNTRY STORE, INC.
CONSOLIDATED BALANCE SHEETS
|
(In thousands except share data)
|
||||||||
|
ASSETS
|
August 3, 2018
|
July 28, 2017
|
||||||
|
Current Assets:
|
||||||||
|
Cash and cash equivalents
|
$
|
114,656
|
$
|
161,001
|
||||
|
Accounts receivable
|
19,496
|
18,116
|
||||||
|
Income taxes receivable
|
--
|
4,265
|
||||||
|
Inventories
|
156,253
|
156,367
|
||||||
|
Prepaid expenses and other current assets
|
16,347
|
16,047
|
||||||
|
Deferred income taxes
|
--
|
3,061
|
||||||
|
Total current assets
|
306,752
|
358,857
|
||||||
|
Property and Equipment:
|
||||||||
|
Land
|
307,207
|
306,105
|
||||||
|
Buildings and improvements
|
861,949
|
837,804
|
||||||
|
Buildings under capital leases
|
3,289
|
3,289
|
||||||
|
Restaurant and other equipment
|
658,978
|
604,413
|
||||||
|
Leasehold improvements
|
353,329
|
326,750
|
||||||
|
Construction in progress
|
27,849
|
15,087
|
||||||
|
Total
|
2,212,601
|
2,093,448
|
||||||
|
Less: Accumulated depreciation and amortization of capital leases
|
1,063,466
|
995,351
|
||||||
|
Property and equipment – net
|
1,149,135
|
1,098,097
|
||||||
|
Other assets
|
71,468
|
64,988
|
||||||
|
Total
|
$
|
1,527,355
|
$
|
1,521,942
|
||||
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
||||||||
|
Current Liabilities:
|
||||||||
|
Accounts payable
|
$
|
122,332
|
$
|
118,395
|
||||
|
Taxes withheld and accrued
|
37,069
|
36,725
|
||||||
|
Accrued employee compensation
|
60,562
|
70,945
|
||||||
|
Accrued employee benefits
|
25,416
|
26,759
|
||||||
|
Deferred revenues
|
76,292
|
72,376
|
||||||
|
Dividend payable
|
31,117
|
30,639
|
||||||
|
Other current liabilities
|
11,831
|
19,989
|
||||||
|
Total current liabilities
|
364,619
|
375,828
|
||||||
|
Long-term debt
|
400,000
|
400,000
|
||||||
|
Long-term interest rate swap liability
|
--
|
6,833
|
||||||
|
Other long-term obligations
|
128,794
|
129,353
|
||||||
|
Deferred income taxes
|
52,161
|
65,421
|
||||||
Commitments and Contingencies (Notes 9 and 15)
|
Shareholders’ Equity:
|
||||||||
|
Preferred stock – 100,000,000 shares of $.01 par value authorized; 300,000 shares
designated as Series A Junior Participating Preferred Stock; no shares issued
|
--
|
--
|
||||||
|
Common stock –
400,000,000 shares of $.01 par value authorized; 2018 – 24,011,550 shares issued and outstanding; 2017 – 24,055,682 shares issued and outstanding
|
240
|
241
|
||||||
|
Additional paid-in capital
|
44,049
|
55,659
|
||||||
|
Accumulated other comprehensive income (loss)
|
4,685
|
(4,229
|
)
|
|||||
|
Retained earnings
|
532,807
|
492,836
|
||||||
|
Total shareholders’ equity
|
581,781
|
544,507
|
||||||
|
Total
|
$
|
1,527,355
|
$
|
1,521,942
|
||||
See Notes to Consolidated Financial Statements.
CRACKER BARREL OLD COUNTRY STORE, INC.
CONSOLIDATED STATEMENTS OF INCOME
|
(In thousands except share data)
Fiscal years ended
|
||||||||||||
|
August 3, 2018
|
July 28, 2017
|
July 29, 2016
|
||||||||||
|
Total revenue
|
$
|
3,030,445
|
$
|
2,926,289
|
$
|
2,912,351
|
||||||
|
Cost of goods sold (exclusive of depreciation and rent)
|
935,397
|
891,293
|
928,176
|
|||||||||
|
Labor and other related expenses
|
1,055,811
|
1,017,124
|
1,006,188
|
|||||||||
|
Other store operating expenses
|
601,889
|
563,300
|
554,534
|
|||||||||
|
Store operating income
|
437,348
|
454,572
|
423,453
|
|||||||||
|
General and administrative expenses
|
143,756
|
141,414
|
142,982
|
|||||||||
|
Operating income
|
293,592
|
313,158
|
280,471
|
|||||||||
|
Interest expense
|
15,169
|
14,271
|
14,052
|
|||||||||
|
Income before income taxes
|
278,423
|
298,887
|
266,419
|
|||||||||
|
Provision for income taxes
|
30,803
|
96,988
|
77,120
|
|||||||||
|
Net income
|
$
|
247,620
|
$
|
201,899
|
$
|
189,299
|
||||||
|
Net income per share - basic
|
$
|
10.31
|
$
|
8.40
|
$
|
7.91
|
||||||
|
Net income per share - diluted
|
$
|
10.29
|
$
|
8.37
|
$
|
7.86
|
||||||
|
Basic weighted average shares outstanding
|
24,011,161
|
24,031,810
|
23,945,041
|
|||||||||
|
Diluted weighted average shares outstanding
|
24,075,614
|
24,118,288
|
24,074,273
|
|||||||||
See Notes to Consolidated Financial Statements.
CRACKER BARREL OLD COUNTRY STORE, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
|
(In thousands)
Fiscal years ended
|
||||||||||||
|
August 3, 2018
|
July 28, 2017
|
July 29, 2016
|
||||||||||
|
Net income
|
$
|
247,620
|
$
|
201,899
|
$
|
189,299
|
||||||
|
Other comprehensive income (loss) before income tax expense (benefit):
|
||||||||||||
|
Change in fair value of interest rate swaps
|
13,103
|
15,402
|
(16,188
|
)
|
||||||||
|
Income tax expense (benefit)
|
4,189
|
5,891
|
(6,173
|
)
|
||||||||
|
Other comprehensive income (loss), net of tax
|
8,914
|
9,511
|
(10,015
|
)
|
||||||||
|
Comprehensive income
|
$
|
256,534
|
$
|
211,410
|
$
|
179,284
|
||||||
See Notes to Consolidated Financial Statements.
CRACKER BARREL OLD COUNTRY STORE, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(In thousands except share data)
|
Common Stock
|
Additional
Paid-In
|
Accumulated
Other
Comprehensive
|
Retained
|
Total
Shareholders’
|
||||||||||||||||||||
|
Shares
|
Amount
|
Capital
|
Income (Loss)
|
Earnings
|
Equity
|
|||||||||||||||||||
|
Balances at July 31, 2015
|
23,975,755
|
$
|
240
|
$
|
56,066
|
$
|
(3,725
|
)
|
$
|
485,687
|
$
|
538,268
|
||||||||||||
|
Comprehensive Income:
|
||||||||||||||||||||||||
|
Net income
|
--
|
--
|
--
|
--
|
189,299
|
189,299
|
||||||||||||||||||
|
Other comprehensive income, net of tax
|
--
|
--
|
--
|
(10,015
|
)
|
--
|
(10,015
|
)
|
||||||||||||||||
|
Total comprehensive income
|
--
|
--
|
--
|
(10,015
|
)
|
189,299
|
179,284
|
|||||||||||||||||
|
Cash dividends declared - $7.70 per share
|
--
|
--
|
--
|
--
|
(186,505
|
)
|
(186,505
|
)
|
||||||||||||||||
|
Share-based compensation
|
--
|
--
|
13,202
|
--
|
--
|
13,202
|
||||||||||||||||||
|
Issuance of share-based compensation awards, net of shares withheld for employee taxes
|
80,379
|
1
|
(5,780
|
)
|
--
|
--
|
(5,779
|
)
|
||||||||||||||||
|
Tax benefit realized upon exercise of share-based compensation awards
|
--
|
--
|
2,626
|
--
|
--
|
2,626
|
||||||||||||||||||
|
Purchases and retirement of common stock
|
(100,000
|
)
|
(1
|
)
|
(14,652
|
)
|
--
|
--
|
(14,653
|
)
|
||||||||||||||
|
Balances at July 29, 2016
|
23,956,134
|
240
|
51,462
|
(13,740
|
)
|
488,481
|
526,443
|
|||||||||||||||||
|
Comprehensive Income:
|
||||||||||||||||||||||||
|
Net income
|
--
|
--
|
--
|
--
|
201,899
|
201,899
|
||||||||||||||||||
|
Other comprehensive income, net of tax
|
--
|
--
|
--
|
9,511
|
--
|
9,511
|
||||||||||||||||||
|
Total comprehensive income
|
--
|
--
|
--
|
9,511
|
201,899
|
211,410
|
||||||||||||||||||
|
Cash dividends declared - $8.15 per share
|
--
|
--
|
--
|
--
|
(197,544
|
)
|
(197,544
|
)
|
||||||||||||||||
|
Share-based compensation
|
--
|
--
|
8,458
|
--
|
--
|
8,458
|
||||||||||||||||||
|
Issuance of share-based compensation awards, net of shares withheld for employee taxes
|
99,548
|
1
|
(6,897
|
)
|
--
|
--
|
(6,896
|
)
|
||||||||||||||||
|
Tax benefit realized upon exercise of share-based compensation awards
|
--
|
--
|
2,636
|
--
|
--
|
2,636
|
||||||||||||||||||
|
Purchases and retirement of common stock
|
--
|
--
|
--
|
--
|
--
|
--
|
||||||||||||||||||
|
Balances at July 28, 2017
|
24,055,682
|
241
|
55,659
|
(4,229
|
)
|
492,836
|
544,507
|
|||||||||||||||||
|
Comprehensive Income:
|
||||||||||||||||||||||||
|
Net income
|
--
|
--
|
--
|
--
|
247,620
|
247,620
|
||||||||||||||||||
|
Other comprehensive income, net of tax
|
--
|
--
|
--
|
8,914
|
--
|
8,914
|
||||||||||||||||||
|
Total comprehensive income
|
--
|
--
|
--
|
8,914
|
247,620
|
256,534
|
||||||||||||||||||
|
Cash dividends declared - $8.60 per share
|
--
|
--
|
--
|
--
|
(207,649
|
)
|
(207,649
|
)
|
||||||||||||||||
|
Share-based compensation
|
--
|
--
|
6,977
|
--
|
--
|
6,977
|
||||||||||||||||||
|
Issuance of share-based compensation awards, net of shares withheld for employee taxes
|
55,868
|
--
|
(3,816
|
)
|
--
|
--
|
(3,816
|
)
|
||||||||||||||||
|
Tax benefit realized upon exercise of share-based compensation awards
|
--
|
--
|
--
|
--
|
--
|
--
|
||||||||||||||||||
|
Purchases and retirement of common stock
|
(100,000
|
)
|
(1
|
)
|
(14,771
|
)
|
--
|
--
|
(14,772
|
)
|
||||||||||||||
|
Balances at August 3, 2018
|
24,011,550
|
$
|
240
|
$
|
44,049
|
$
|
4,685
|
$
|
532,807
|
$
|
581,781
|
|||||||||||||
See Notes to Consolidated Financial Statements.
CRACKER BARREL OLD COUNTRY STORE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(In thousands)
Fiscal years ended
|
||||||||||||
|
August 3, 2018
|
July 28, 2017
|
July 29, 2016
|
||||||||||
|
Cash flows from operating activities:
|
||||||||||||
|
Net income
|
$
|
247,620
|
$
|
201,899
|
$
|
189,299
|
||||||
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
||||||||||||
|
Depreciation and amortization
|
93,692
|
86,319
|
78,223
|
|||||||||
|
Loss on disposition of property and equipment
|
7,119
|
5,585
|
7,146
|
|||||||||
|
Share-based compensation
|
6,977
|
8,458
|
13,202
|
|||||||||
|
Excess tax benefit from share-based compensation
|
--
|
(2,636
|
)
|
(2,626
|
)
|
|||||||
|
Changes in assets and liabilities:
|
||||||||||||
|
Accounts receivable
|
(1,380
|
)
|
1,273
|
(1,339
|
)
|
|||||||
|
Income taxes receivable
|
4,265
|
14,555
|
(13,558
|
)
|
||||||||
|
Inventories
|
114
|
(4,059
|
)
|
750
|
||||||||
|
Prepaid expenses and other current assets
|
(500
|
)
|
(1,274
|
)
|
(406
|
)
|
||||||
|
Other assets
|
(1,400
|
)
|
(4,344
|
)
|
130
|
|||||||
|
Accounts payable
|
3,937
|
(14,098
|
)
|
(624
|
)
|
|||||||
|
Taxes withheld and accrued
|
344
|
(836
|
)
|
(1,500
|
)
|
|||||||
|
Accrued employee compensation
|
(10,389
|
)
|
9,752
|
(6,246
|
)
|
|||||||
|
Accrued employee benefits
|
(1,343
|
)
|
(1,169
|
)
|
211
|
|||||||
|
Deferred revenues
|
3,916
|
8,348
|
5,048
|
|||||||||
|
Other current liabilities
|
(8,121
|
)
|
4,470
|
(3,705
|
)
|
|||||||
|
Other long-term obligations
|
157
|
3,461
|
(6,269
|
)
|
||||||||
|
Deferred income taxes
|
(14,388
|
)
|
5,063
|
13,642
|
||||||||
|
Net cash provided by operating activities
|
330,620
|
320,767
|
271,378
|
|||||||||
|
Cash flows from investing activities:
|
||||||||||||
|
Purchase of property and equipment
|
(152,249
|
)
|
(110,591
|
)
|
(114,022
|
)
|
||||||
|
Proceeds from insurance recoveries of property and equipment
|
616
|
483
|
662
|
|||||||||
|
Proceeds from sale of property and equipment
|
411
|
503
|
845
|
|||||||||
|
Net cash used in investing activities
|
(151,222
|
)
|
(109,605
|
)
|
(112,515
|
)
|
||||||
|
Cash flows from financing activities:
|
||||||||||||
|
(Taxes withheld) and proceeds from issuance of share-based compensation awards, net
|
(3,816
|
)
|
(6,896
|
)
|
(5,779
|
)
|
||||||
|
Purchases and retirement of common stock
|
(14,772
|
)
|
--
|
(14,653
|
)
|
|||||||
|
Dividends on common stock
|
(207,155
|
)
|
(196,867
|
)
|
(255,546
|
)
|
||||||
|
Excess tax benefit from share-based compensation
|
--
|
2,636
|
2,626
|
|||||||||
|
Net cash used in financing activities
|
(225,743
|
)
|
(201,127
|
)
|
(273,352
|
)
|
||||||
|
Net (decrease) increase in cash and cash equivalents
|
(46,345
|
)
|
10,035
|
(114,489
|
)
|
|||||||
|
Cash and cash equivalents, beginning of year
|
161,001
|
150,966
|
265,455
|
|||||||||
|
Cash and cash equivalents, end of year
|
$
|
114,656
|
$
|
161,001
|
$
|
150,966
|
||||||
|
Supplemental disclosure of cash flow information:
|
||||||||||||
|
Cash paid during the year for:
|
||||||||||||
|
Interest, net of amounts capitalized
|
$
|
17,272
|
$
|
12,847
|
$
|
12,752
|
||||||
|
Income taxes
|
43,471
|
78,092
|
84,868
|
|||||||||
|
Supplemental schedule of non-cash investing and financing activities:
|
||||||||||||
|
Capital expenditures accrued in accounts payable
|
$
|
8,183
|
$
|
6,743
|
$
|
6,379
|
||||||
|
Change in fair value of interest rate swaps
|
13,103
|
15,402
|
(16,188
|
)
|
||||||||
|
Change in deferred tax asset for interest rate swaps
|
(4,189
|
)
|
(5,891
|
)
|
6,173
|
|||||||
|
Dividends declared but not yet paid
|
31,784
|
31,296
|
30,625
|
|||||||||
See Notes to Consolidated Financial Statements.
CRACKER BARREL OLD COUNTRY STORE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share data)
|
1.
|
Description of the Business
|
Cracker Barrel Old Country Store, Inc. and its affiliates (collectively, in the Notes, the “Company”) are principally
engaged in the operation and development in the United States (“U.S.”) of the Cracker Barrel Old Country Store® (“Cracker Barrel”) concept.
|
2.
|
Summary of Significant Accounting Policies
|
GAAP – The accompanying Consolidated Financial Statements have been prepared in accordance with generally accepted
accounting principles in the U.S. (“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. The Company’s fiscal year ended August 3, 2018 consisted of 53 weeks and the fourth quarter of 2018 consisted of fourteen weeks. 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.
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.
Accounts receivable – Accounts receivable represent their estimated net realizable value. Accounts receivable are written
off when they are deemed uncollectible.
Inventories – In 2017, inventories were stated at the lower of cost or market. In the first quarter of 2018, the Company
adopted new accounting guidance which required companies to measure certain inventory at lower of cost and net realizable value (see section below entitled “Inventory” under “Recent Accounting Pronouncements Adopted”. Cost of
restaurant inventory is determined by the first‑in, first‑out (“FIFO”) method. Retail inventories are valued using the retail inventory method (“RIM”) except at the retail distribution center which are valued using moving average
cost. Approximately 80% of retail inventories are valued using RIM. Retail inventories valued using RIM are stated at the lower of cost or market. Cost of restaurant inventory and retail inventory valued using moving average cost are
stated at the lower of cost and net realizable value. See Note 4 for additional information regarding the components of inventory.
Valuation provisions are included for retail inventory obsolescence, retail inventory shrinkage, returns and amortization of
certain items. Retail inventory also includes an estimate of retail inventory shrinkage that is adjusted upon physical inventory counts. Annual physical inventory counts are conducted throughout the third quarter based upon a cyclical
inventory schedule. An estimate of shrinkage is recorded for the time period between physical inventory counts by using a three-year average of the physical inventories’ results on a store-by-store basis.
Property and equipment – Property and equipment are stated at cost. For 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
|
2-10
|
|||
|
Leasehold improvements
|
1-35
|
|||
Accelerated depreciation methods are generally used for income tax purposes.
Total depreciation expense and depreciation expense related to store operations for each of the three years are as follows:
|
2018
|
2017
|
2016
|
||||||||||
|
Total depreciation expense
|
$
|
93,266
|
$
|
85,912
|
$
|
77,816
|
||||||
|
Depreciation expense related to store operations*
|
86,913
|
79,214
|
71,382
|
|||||||||
*Depreciation expense related to store operations is included in other store operating expenses in the Consolidated Statements of Income.
Gain or loss is recognized upon disposal of property and equipment. 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 assesses the impairment of long-lived assets whenever events or changes in
circumstances indicate that the carrying value of an asset may not be recoverable. Recoverability of assets is measured by comparing the carrying value of the asset to the undiscounted future cash flows expected to be generated by the
asset. If the total expected future cash flows are less than the carrying value of the asset, the carrying value is written down, for an asset to be held and used, to the estimated fair value or, for an asset to be disposed of, to the
fair value, net of estimated costs of disposal. Any loss resulting from impairment is recognized by a charge to income.
Derivative instruments and hedging activities – The Company is exposed to market risk, such as changes in interest rates and
commodity prices. The Company has interest rate risk relative to its outstanding borrowings, which bear interest at the Company’s election either at the prime rate or LIBOR plus a percentage point spread based on certain specified
financial ratios under its revolving credit facility (see Note 5). The Company’s policy has been to manage interest cost using a mix of fixed and variable rate debt. To manage this risk in a cost efficient manner, the Company uses
derivative instruments, specifically interest rate swaps.
Companies may elect whether or not to offset related assets and liabilities and report the net amount
on their financial statements if the right of setoff exists. Under a master netting agreement, the Company has the legal right to offset the amounts owed to the Company against amounts owed by the Company under a derivative instrument
that exists between the Company and a counterparty. When the Company is engaged in more than one outstanding derivative transaction with the same counterparty and also has a legally enforceable master netting agreement with that
counterparty, its credit risk exposure is based on the net exposure under the master netting agreement. If, on a net basis, the Company owes the counterparty, the Company regards its credit exposure to the counterparty as being zero.
The Company does not hold or use derivative instruments for trading purposes. The Company also does not have any
derivatives not designated as hedging instruments and has not designated any non-derivatives as hedging instruments. See Note 6 for additional information on the Company’s derivative and hedging activities.
Segment reporting – Operating segments 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. Using these criteria, the Company manages its business on the basis of one reportable
operating segment (see Note 8 for additional information regarding segment reporting).
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. The Company’s policy is to present sales in the Consolidated Statements of Income on a net presentation basis after deducting sales tax.
Unredeemed gift cards and certificates – Unredeemed gift cards and certificates represent a liability of the Company related
to unearned income and are recorded at their expected redemption value. No revenue is recognized in connection with the point-of-sale transaction when gift cards or gift certificates are sold. For those states that exempt gift cards
and certificates from their escheat laws, the Company makes estimates of the ultimate unredeemed (“breakage”) gift cards and certificates in the period of the original sale and amortizes this breakage over the redemption period that
other gift cards and certificates historically have been redeemed by reducing its liability and recording revenue accordingly. For those states that do not exempt gift cards and certificates from their escheat laws, the Company records
breakage in the period that gift cards and certificates are remitted to the state and reduces its liability accordingly. Any amounts remitted to states under escheat or similar laws reduce the Company’s deferred revenue liability and
have no effect on revenue or expense while any amounts that the Company is permitted to retain are recorded as revenue.
Insurance – The Company self-insures a significant portion of its workers’ compensation and general liability programs. The
Company purchases insurance for individual workers’ compensation claims that exceed $250, $750 or $1,000 depending on the state in which the claim originates. The Company purchases insurance for individual general liability claims that
exceed $500.
The Company records a reserve for workers’ compensation and general liability for all unresolved claims and for an estimate
of incurred but not reported claims (“IBNR”). These reserves and estimates of IBNR claims are based upon a full scope actuarial study which is performed annually at the end of the Company’s third quarter and is adjusted by the
actuarially determined losses and actual claims payments for the fourth quarter. Additionally, the Company performs limited scope actuarial studies on a quarterly basis to verify and/or modify the Company’s reserves. The reserves and
losses in the actuarial study represent a range of possible outcomes within which no given estimate is more likely than any other estimate. As such, the Company records the losses at the lower end of that range and discounts them to
present value using a risk-free interest rate based on projected timing of payments. The Company also monitors actual claims development, including incurrence or settlement of individual large claims during the interim periods between
actuarial studies as another means of estimating the adequacy of its reserves.
The Company’s group health plans combine the use of self-insured and fully-insured programs. Benefits for any individual
(employee or dependents) in the self-insured program are limited. The Company records a liability for the self-insured portion of its group health program for all unpaid claims based upon a loss development analysis derived from actual
group health claims payment experience. The Company also records a liability for unpaid prescription drug claims based on historical experience.
Store pre-opening costs – Start-up costs of a new store are expensed when incurred, with the exception of rent expense under
operating leases, in which the straight-line rent includes the pre-opening period during construction, as explained further under the “Leases” section in this Note.
Leases – The Company’s leases are classified as either capital or operating leases. The Company has ground leases and
office space leases that are recorded as operating leases. The Company also leases its advertising billboards which are recorded as operating leases. A majority of the Company’s lease agreements provide renewal options and some of
these options contain rent escalation clauses. Additionally, some of the leases have rent holiday and contingent rent provisions. During rent holiday periods, which include the pre-opening period during construction, the Company has
possession of and access to the property, but is not obligated to, and normally does not, make rent payments. Contingent rent is determined as a percentage of gross sales in excess of specified levels. The Company records a contingent
rent liability and corresponding rent expense when it is probable sales have been achieved in amounts in excess of the specified levels.
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 rent holiday periods, and generally extends
through certain 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. This lease period is consistent with
the period over which leasehold improvements are amortized.
Advertising – The Company expenses the costs of producing advertising the first time the advertising takes place. Other
advertising costs are expensed as incurred.
Advertising expense for each of the three years was as follows:
|
2018
|
2017
|
2016
|
||||||||||
|
Advertising expense
|
$
|
83,448
|
$
|
83,623
|
$
|
79,409
|
||||||
Share-based compensation – The Company’s share-based compensation consists of nonvested stock awards and units and
performance-based market stock units (“MSU Grants”). Share-based compensation is recorded in general and administrative expenses in the Consolidated Statements of Income. Share-based compensation expense is recognized based on the
grant date fair value and the achievement of performance conditions for certain awards. The Company recognizes share-based compensation expense on a straight-line basis over the requisite service period, which is generally the award’s
vesting period, or to the date on which retirement eligibility is achieved, if shorter.
Certain nonvested stock awards and units and the Company’s MSU Grants contain performance conditions. Compensation expense
for performance-based awards is recognized when it is probable that the performance criteria will be met. If any performance goals are not met, no compensation expense is ultimately recognized and, to the extent previously recognized,
compensation expense is reversed.
If a share-based compensation award is modified after the grant date, incremental compensation expense is recognized in an
amount equal to the excess of the fair value of the modified award over the fair value of the original award immediately before the modification. Incremental compensation expense for vested awards is recognized immediately. For
unvested awards, the sum of the incremental compensation expense and the remaining unrecognized compensation expense for the original award on the modification date is recognized over the modified service period.
Additionally, the Company’s policy is to issue shares of common stock to satisfy exercises of share-based compensation
awards.
Income taxes – The Company’s provision for income taxes includes employer tax credits for FICA taxes paid on employee tip
income and other employer tax credits 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. The Company recognizes (or derecognizes) a tax position taken or expected to be taken in a tax return in the financial statements when it is more likely than not (i.e., a
likelihood of more than fifty percent) that the position would be sustained (or not sustained) upon examination by tax authorities. A recognized tax position is then measured at the largest amount of benefit that is greater than fifty
percent likely of being realized upon ultimate settlement. The Company recognizes, net of tax, interest and estimated penalties related to uncertain tax positions in its provision for income taxes. See Note 13 for additional
information regarding income taxes.
Comprehensive income – Comprehensive income includes net income and the effective unrealized portion of the changes in the
fair value of the Company’s interest rate swaps.
Net income per share – Basic consolidated net income per share is computed by dividing consolidated net income to common
shareholders by the weighted average number of common shares outstanding for the reporting period. Diluted consolidated 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 and is based upon the weighted average number of common and common equivalent shares outstanding during the year. Common equivalent shares related to stock options,
nonvested stock awards and units and MSU Grants issued by the Company are calculated using the treasury stock method. The outstanding stock options, nonvested stock awards and units and MSU Grants issued by the Company represent the
only dilutive effects on diluted consolidated net income per share. See Note 14 for additional information regarding net income per share.
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.
Recent Accounting Pronouncements Adopted
Inventory
In July 2015, the Financial Accounting Standards Board (“FASB”) issued accounting guidance which requires
companies to measure certain inventory at the lower of cost and net realizable value. This accounting guidance does not apply to inventories measured by using either the last-in, first-out method or the retail inventory method. This
accounting guidance is effective for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years on a prospective basis. The adoption of this accounting guidance in the first quarter of 2018 did not
have a significant impact on the Company’s consolidated financial position or results of operations.
Deferred Taxes
In November 2015, in order to simplify the presentation of deferred income taxes, the FASB issued accounting
guidance which requires deferred tax liabilities and assets to be classified as noncurrent in the balance sheet. This accounting guidance is effective for fiscal years beginning after December 15, 2016, and interim periods within those
fiscal years. This accounting guidance may be applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented. Other than the revised balance sheet presentation of deferred tax
liabilities and assets, the adoption of this accounting guidance on a prospective basis in the first quarter of 2018 did not have a significant impact on the Company’s consolidated financial position or results of operations. Prior
periods were not retrospectively adjusted for the adoption of this accounting guidance.
Share-Based Payments
In March 2016, the FASB issued accounting guidance in order to simplify certain aspects of the accounting and
presentation of share-based payments, including the income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. This accounting guidance is effective for fiscal
periods beginning after December 15, 2016, and interim periods within those fiscal years. This guidance may be applied either on a prospective basis, retrospective basis or a modified retrospective basis depending on the specific
accounting topic covered in the accounting guidance. The Company adopted this accounting guidance in the first quarter of 2018. The impact of recognizing excess tax benefits of $759 as a reduction to the provision for income taxes on
a prospective basis resulted in a benefit of $0.03 per diluted share in the first quarter of 2018. The Company elected to apply the presentation of excess tax benefits on the statement of cash flows on a prospective basis; prior
periods were not retrospectively adjusted. The Company also elected to continue estimating forfeitures of share-based awards.
Recent Accounting Pronouncements Not Yet Adopted
Revenue Recognition
In May 2014, the FASB issued accounting guidance which clarifies the principles for recognizing revenue and provides a
comprehensive model for revenue recognition. Revenue recognition should depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services.
The guidance also requires additional disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts. This accounting guidance is effective for fiscal years beginning after
December 15, 2017 and interim periods within those years. The Company is in the process of evaluating the Company’s current revenue recognition process in comparison to the adoption of this guidance. The Company plans to adopt this
accounting guidance using the modified retrospective transition method. The adoption of this accounting guidance in the first quarter of 2019 is not expected to have a material effect on the Company’s consolidated financial position or
results of operations, and the Company does not anticipate recording a cumulative catch-up adjustment to the opening balance of retained earnings.
Leases
In February 2016, the FASB issued accounting guidance which requires the recognition of lease assets and lease liabilities
on the balance sheet and disclosure of key information about leasing arrangements. The accounting guidance is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years on a modified
retrospective basis. Early adoption is permitted. The Company is in the process of implementing software to assist in the quantification of the impact on the Company’s consolidated financial position and results of operations related
to the adoption of this accounting guidance in the first quarter of 2020.
Recognition of Breakage for Certain Prepaid Stored-Value Products
In March 2016, in order to address diversity in practice related to the derecognition of a prepaid stored-value product
liability, the FASB issued accounting guidance requiring breakage for prepaid stored-value product liabilities to be accounted for consistent with the breakage guidance in the revenue recognition standard (see “Revenue Recognition”
above). This accounting guidance is effective for fiscal years beginning after December 15, 2017, and interim periods within those years. This accounting guidance may be applied either on a modified retrospective basis or on a
retrospective basis. The Company does not expect that the adoption of this accounting guidance in the first quarter of 2019 will have a significant impact on the Company’s consolidated financial position or results of operations.
Modification of Share-Based Payment Awards
In May 2017, the FASB issued accounting guidance to provide clarity, reduce the diversity in practice and to simplify the
accounting guidance related to a change to the terms or conditions of a share-based payment award. This new standard provides guidance for evaluating which changes to the terms or conditions of a share-based payment award are
substantive and require modification accounting to be applied. This accounting guidance is effective for fiscal periods beginning after December 15, 2017, and interim periods within those years on a prospective basis. The Company does
not expect that the adoption of this accounting guidance in the first quarter of 2019 will have a significant impact on the Company’s consolidated financial position or results of operations.
Accounting for Hedging Activities
In August 2017, the FASB issued accounting guidance which amends the recognition, presentation and disclosure requirements
of hedge accounting in order to better portray the economics of entities’ risk management activities, increase transparency and understandability of hedging relationships and simplify the application of hedge accounting. This
accounting guidance is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early application is permitted. The recognition requirements for cash flow and net investment hedges
existing at the date of adoption will be applied using a cumulative-effect adjustment to retained earnings. The amended presentation and disclosure requirements will be applied on a prospective basis. The Company is currently
evaluating the impact of adopting this accounting guidance in the first quarter of 2020.
Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income
On December 22, 2017, the U.S. government enacted P.L. 115-97, the Tax Cuts and Jobs Act (the “Tax Act”). In February 2018,
the FASB issued accounting guidance which allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulted from the Tax Act. This accounting guidance is effective for fiscal
years beginning after December 15, 2018, and interim periods within those fiscal years. If elected, this accounting guidance should be applied either in the period of adoption or retrospectively to each period in which the change in the
U.S. federal corporate rate in the Tax Act is recognized. Early application is permitted. The Company is currently evaluating the impact of adopting this accounting guidance in the first quarter of 2020.
Share-Based Payment Arrangements With Nonemployees
In June 2018, the FASB issued accounting guidance in order to simplify accounting for share-based payments granted to
nonemployees for goods and services. This new guidance aligns most of the accounting requirements for share-based payments granted to nonemployees with the existing guidance for share-based payments granted to employees. This
accounting guidance is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years, using a modified retrospective transition approach. Early adoption is permitted. The Company does not
expect that the adoption of this accounting guidance in the first quarter of 2020 will have a significant impact on the Company’s consolidated financial position or results of operations.
|
3.
|
Fair Value Measurements
|
Fair value for certain of the Company’s assets and liabilities is defined as the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining fair value, a three level hierarchy for inputs is used. These levels are:
| · |
Quoted Prices in Active Markets for Identical Assets (“Level 1”) – quoted prices (unadjusted) for an identical asset or liability in an active market.
|
| · |
Significant Other Observable Inputs (“Level 2”) – quoted prices for a similar asset or liability in an active market or model-derived valuations in which all
significant inputs are observable for substantially the full term of the asset or liability.
|
| · |
Significant Unobservable Inputs (“Level 3”) – unobservable and significant to the fair value measurement of the asset or liability.
|
The Company’s assets and liabilities measured at fair value on a recurring basis at August 3, 2018 were as follows:
|
Level 1
|
Level 2
|
Level 3
|
Total Fair
Value
|
|||||||||||||
|
Cash equivalents*
|
$
|
38,446
|
$
|
--
|
$
|
--
|
$
|
38,446
|
||||||||
|
Interest rate swap asset (see Note 6)
|
--
|
6,255
|
--
|
6,255
|
||||||||||||
|
Total
|
$
|
38,446
|
$
|
6,255
|
$
|
--
|
$
|
44,701
|
||||||||
|
Deferred compensation plan assets** measured at net asset value
|
32,669
|
|||||||||||||||
|
Total assets at fair value
|
$
|
77,370
|
||||||||||||||
|
Interest rate swap liability (see Note 6)
|
$
|
--
|
$
|
--
|
$
|
--
|
$
|
--
|
||||||||
|
Total liabilities at fair value
|
$
|
--
|
$
|
--
|
$
|
--
|
$
|
--
|
||||||||
The Company’s assets and liabilities measured at fair value on a recurring basis at July 28, 2017 were as follows:
|
Level 1
|
Level 2
|
Level 3
|
Total Fair
Value
|
|||||||||||||
|
Cash equivalents*
|
$
|
82,524
|
$
|
--
|
$
|
--
|
$
|
82,524
|
||||||||
|
Interest rate swap asset (see Note 6)
|
--
|
32
|
--
|
32
|
||||||||||||
|
Deferred compensation plan assets**
|
31,196
|
--
|
--
|
31,196
|
||||||||||||
|
Total assets at fair value
|
$
|
113,720
|
$
|
32
|
$
|
--
|
$
|
113,752
|
||||||||
|
Interest rate swap liability (see Note 6)
|
$
|
--
|
$
|
6,880
|
$
|
--
|
$
|
6,880
|
||||||||
|
Total liabilities at fair value
|
$
|
--
|
$
|
6,880
|
$
|
--
|
$
|
6,880
|
||||||||
*Consists of money market fund investments.
**Represents plan assets invested in mutual funds established under a Rabbi Trust for the Company’s non-qualified savings plan and is included
in the Consolidated Balance Sheets as other assets (see Note 12).
The Company’s money market fund investments are measured at fair value using quoted market prices. The fair values of the
Company’s interest rate swap assets and liabilities are determined based on the present value of expected future cash flows. Since the Company’s interest rate swap values are based on the LIBOR forward curve, which is observable at
commonly quoted intervals for the full terms of the swaps, it is considered a Level 2 input. Nonperformance risk is reflected in determining the fair value of the interest rate swaps by using the Company’s credit spread less the
risk-free interest rate, both of which are observable at commonly quoted intervals for the terms of the swaps. Thus, the adjustment for nonperformance risk is also considered a Level 2 input. The Company’s deferred compensation plan
assets are measured based on net asset value per share as a practical expedient to estimate fair value.
The fair values of accounts receivable and accounts payable at August 3, 2018 and July 28, 2017, approximate their carrying
amounts because of their short duration. The fair value of the Company’s variable rate debt, based on quoted market prices, which are considered Level 1 inputs, approximates its carrying amounts at August 3, 2018 and July 28, 2017.
|
4.
|
Inventories
|
Inventories were comprised of the following at:
|
August 3, 2018
|
July 28, 2017
|
|||||||
|
Retail
|
$
|
117,606
|
$
|
119,446
|
||||
|
Restaurant
|
20,659
|
20,252
|
||||||
|
Supplies
|
17,988
|
16,669
|
||||||
|
Total
|
$
|
156,253
|
$
|
156,367
|
||||
|
5.
|
Debt
|
On January 8, 2015, the Company entered into a five-year $750,000 revolving credit facility (the “2015 Revolving Credit
Facility”). At both August 3, 2018 and July 28, 2017, the Company had $400,000 in outstanding borrowings under the 2015 Revolving Credit Facility. On September 5, 2018, the Company entered into a five-year $950,000 revolving credit
facility (“2019 Revolving Credit Facility”) with substantially the same terms and financial covenants as the 2015 Revolving Credit Facility, which it replaced. The 2019 Revolving Credit Facility also contains an option to increase the
revolving credit facility by $300,000.
At August 3, 2018, the Company had $9,455 of standby letters of credit, which reduce the Company’s borrowing availability
under the 2015 Revolving Credit Facility (see Note 15). At August 3, 2018, the Company had $340,545 in borrowing availability under the 2015 Revolving Credit Facility.
In accordance with the 2015 Revolving Credit Facility, outstanding borrowings bear interest, at the Company’s election,
either at LIBOR or prime plus a percentage point spread based on certain specified financial ratios. At August 3, 2018 and July 28, 2017, the Company’s outstanding borrowings were swapped at a weighted average interest rates of 3.73%
and 3.21%, respectively (see Note 6 for information on the Company’s interest rate swaps).
The 2015 Revolving Credit Facility contains customary financial covenants, which include maintenance of a maximum
consolidated total leverage ratio and a minimum consolidated interest coverage ratio. At August 3, 2018 and July 28, 2017, the Company was in compliance with all debt covenants.
The 2015 Revolving Credit Facility also imposes restrictions on the amount of dividends the Company is permitted to pay and
the amount of shares the Company is permitted to repurchase. Under the 2015 Revolving Credit Facility, provided there is no default existing and the total of the Company’s availability under the 2015 Revolving Credit Facility plus the
Company’s cash and cash equivalents on hand is at least $100,000 (the “cash availability”), the Company may declare and pay cash dividends on shares of its common stock and repurchase shares of its common stock (1) in an unlimited
amount if at the time such dividend or repurchase is made the Company’s consolidated total leverage ratio is 3.00 to 1.00 or less and (2) in an aggregate amount not to exceed $100,000 in any fiscal year if the Company’s consolidated
total leverage ratio is greater than 3.00 to 1.00 at the time the dividend or repurchase is made; notwithstanding (1) and (2), so long as immediately after giving effect to the payment of any such dividends, cash availability is at
least $100,000, the Company may declare and pay cash dividends on shares of its common stock in an aggregate amount not to exceed in any fiscal year the product of the aggregate amount of dividends declared in the fourth quarter of the
immediately preceding fiscal year multiplied by four.
|
6.
|
Derivative Instruments and Hedging Activities
|
For each of the Company’s interest rate swaps, the Company has agreed to exchange with a counterparty the difference between
fixed and variable interest amounts calculated by reference to an agreed-upon notional principal amount. The interest rates on the portion of the Company’s outstanding debt covered by its interest rate swaps are fixed at the rates in
the table below plus the Company’s credit spread. The Company’s credit spread was 1.25% at both August 3, 2018 and July 28, 2017. All of the Company’s interest rate swaps are accounted for as cash flow hedges.
A summary of the Company’s interest rate swaps at August 3, 2018 is as follows:
|
Trade Date
|
Effective Date
|
Term
(in Years)
|
Notional Amount
|
Fixed
Rate
|
|||||||||
|
June 18, 2014
|
May 3, 2015
|
4
|
$
|
160,000
|
2.51
|
%
|
|||||||
|
June 24, 2014
|
May 3, 2015
|
4
|
120,000
|
2.51
|
%
|
||||||||
|
July 1, 2014
|
May 5, 2015
|
4
|
120,000
|
2.43
|
%
|
||||||||
|
January 30, 2015
|
May 3, 2019
|
2
|
80,000
|
2.15
|
%
|
||||||||
|
January 30, 2015
|
May 3, 2019
|
2
|
60,000
|
2.16
|
%
|
||||||||
|
January 30, 2015
|
May 4, 2021
|
3
|
120,000
|
2.41
|
%
|
||||||||
|
January 30, 2015
|
May 3, 2019
|
2
|
60,000
|
2.15
|
%
|
||||||||
|
January 30, 2015
|
May 4, 2021
|
3
|
80,000
|
2.40
|
%
|
||||||||
The estimated fair values of the Company’s derivative instruments were as follows:
|
(See Note 3)
|
Balance Sheet Location
|
August 3, 2018
|
July 28, 2017
|
||||||
|
Interest rate swaps
|
Prepaid expenses and other current assets
|
$
|
169
|
$
|
32
|
||||
|
Interest rate swaps
|
Other assets
|
6,086
|
--
|
||||||
|
Total assets
|
$
|
6,255
|
$
|
32
|
|||||
|
Interest rate swaps
|
Other current liabilities
|
$
|
--
|
$
|
47
|
||||
|
Interest rate swaps
|
Long-term interest rate swap liability
|
--
|
6,833
|
||||||
|
Total liabilities
|
$
|
--
|
$
|
6,880
|
|||||
**These interest rate swap assets and liabilities are recorded at gross at both August 3, 2018 and July 28, 2017 since there
were no offsetting assets and liabilities under the Company’s master netting agreements.
The estimated fair values of the Company’s interest rate swap assets and liabilities incorporate the Company’s
non-performance risk. The adjustment related to the Company’s non-performance risk at August 3, 2018 and July 28, 2017 resulted in reductions of $213 and $103, respectively, in the total fair value of the interest rate swap assets and
liabilities. The offset to the interest rate swap assets and liabilities is recorded in accumulated other comprehensive income (loss) (“AOCIL”), net of the deferred tax assets, and will be reclassified into earnings over the term of
the underlying debt. As of August 3, 2018, the estimated pre-tax portion of AOCIL that is expected to be reclassified into earnings over the next twelve months is $533. Cash flows related to the interest rate swaps are included in
interest expense and in operating activities.
The following table summarizes the pre-tax effects of the Company’s derivative instruments on AOCIL for each of the three
years:
|
Amount of Income (Loss) Recognized in AOCIL
on Derivatives (Effective Portion)
|
||||||||||||
|
2018
|
2017
|
2016
|
||||||||||
|
Cash flow hedges:
|
||||||||||||
|
Interest rate swaps
|
$
|
13,103
|
$
|
15,402
|
$
|
(16,188
|
)
|
|||||
The following table summarizes the changes in AOCIL, net of tax, related to the Company’s interest rate swaps for the years
ended August 3, 2018, July 28, 2017 and July 29, 2016:
|
August 3,
2018
|
July 28,
2017
|
July 29,
2016
|
||||||||||
|
Beginning AOCIL balance
|
$
|
(4,229
|
)
|
$
|
(13,740
|
)
|
$
|
(3,725
|
)
|
|||
|
Other comprehensive income (loss) before reclassifications
|
11,274
|
12,082
|
(6,683
|
)
|
||||||||
|
Amounts reclassified from AOCIL into earnings
|
(2,360
|
)
|
(2,571
|
)
|
(3,332
|
)
|
||||||
|
Other comprehensive income (loss), net of tax
|
8,914
|
9,511
|
(10,015
|
)
|
||||||||
|
Ending AOCIL balance
|
$
|
4,685
|
$
|
(4,229
|
)
|
$
|
(13,740
|
)
|
||||
The following table summarizes the pre-tax effects of the Company’s derivative instruments on income for each of the three
years:
|
Location of Loss Reclassified from
AOCIL into Income (Effective Portion)
|
Amount of Loss Reclassified from AOCIL into
Income (Effective Portion)
|
||||||||||||
|
2018
|
2017
|
2016
|
|||||||||||
|
Cash flow hedges:
|
|||||||||||||
|
Interest rate swaps
|
Interest expense
|
$
|
3,398
|
$
|
4,163
|
$
|
5,395
|
||||||
The following table summarizes the amounts reclassified out of AOCIL related to the Company’s interest rate swaps for the
years ended August 3, 2018, July 28, 2017 and July 29, 2016:
|
Details about AOCIL
|
August 3, 2018
|
July 28, 2017
|
July 29, 2016
|
Affected Line Item in
the Consolidated
Statement of Income
|
|||||||||
|
Loss on cash flow hedges:
|
|||||||||||||
|
Interest rate swaps
|
$
|
(3,398
|
)
|
$
|
(4,163
|
)
|
$
|
(5,395
|
)
|
Interest expense
|
|||
|
Tax benefit
|
1,038
|
1,592
|
2,063
|
Provision for income taxes
|
|||||||||
|
$
|
(2,360
|
)
|
$
|
(2,571
|
)
|
$
|
(3,332
|
)
|
Net of tax
|
||||
Any portion of the fair value of the interest rate swaps determined to be ineffective will be recognized currently in earnings. No
ineffectiveness has been recorded in 2018, 2017 and 2016.
|
7.
|
Share Repurchases
|
In each of 2018, 2017 and 2016, subject to a maximum amount of $25,000 and the limits imposed by its credit facility, the
Company was authorized to repurchase shares at management’s discretion. In 2018, the Company repurchased 100,000 shares of its common stock in the open market at an aggregate cost of $14,772. The Company did not repurchase any shares
of its common stock in 2017. In 2016, the Company repurchased 100,000 shares of its common stock in the open market at an aggregate cost of $14,653.
|
8.
|
Segment Information
|
Cracker Barrel stores 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 store are shared and are indistinguishable in many respects. 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.
Total revenue was comprised of the following at:
|
2018
|
2017
|
2016
|
||||||||||
|
Restaurant
|
$
|
2,439,389
|
$
|
2,351,212
|
$
|
2,323,199
|
||||||
|
Retail
|
591,056
|
575,077
|
589,152
|
|||||||||
|
Total revenue
|
$
|
3,030,445
|
$
|
2,926,289
|
$
|
2,912,351
|
||||||
|
9.
|
Leases
|
As of August 3, 2018, the Company operated 240 stores in leased facilities and also leased certain land, a retail
distribution center and advertising billboards.
Rent expense under operating leases, including the sale-leaseback transactions discussed below, for each of the last three
years was:
|
Year
|
Minimum
|
Contingent
|
Total
|
|||||||||
|
2018
|
$
|
76,445
|
$
|
255
|
$
|
76,700
|
||||||
|
2017
|
75,000
|
252
|
75,252
|
|||||||||
|
2016
|
74,405
|
263
|
74,668
|
|||||||||
The following is a schedule by year of the future minimum rental payments required under the Company’s operating leases as
of August 3, 2018:
|
Year
|
Total
|
|||
|
2019
|
$
|
66,029
|
||
|
2020
|
53,510
|
|||
|
2021
|
33,170
|
|||
|
2022
|
31,763
|
|||
|
2023
|
32,106
|
|||
|
Later years
|
493,557
|
|||
|
Total
|
$
|
710,135
|
||
Sale-Leaseback Transactions
In 2009, the Company completed sale-leaseback transactions involving 15 of its owned stores and its retail distribution
center. Under the transactions, the land, buildings and improvements at the locations were sold and leased back for terms of 20 and 15 years, respectively. Equipment was not included. The leases include specified renewal options for
up to 20 additional years.
The Company leases 65 of its stores pursuant to a sale-leaseback transaction which closed in 2000. Under the transaction,
the land, buildings and building improvements at the locations were sold and leased back for a term of 21 years. The leases for these stores include specified renewal options for up to 20 additional years and have certain financial
covenants related to fixed charge coverage for the leased stores. At August 3, 2018 and July 28, 2017, the Company was in compliance with these covenants.
|
10.
|
Share-Based Compensation
|
Stock Compensation Plans
The Company’s employee compensation plans are administered by the Compensation Committee of the Company’s Board of Directors
(the “Committee”). The Committee is authorized to determine, at time periods within its discretion and subject to the direction of the Board of Directors, which employees will be granted awards, the number of shares covered by any
awards granted, and within applicable limits, the terms and provisions relating to the exercise and vesting of any awards.
The Company has one active compensation plan, the 2010 Omnibus Incentive Compensation Plan (the “2010 Omnibus Plan”), for
employees and non-employee directors which authorizes the granting of nonvested stock awards and units, performance-based MSU Grants, stock options and other types of share-based awards.
The 2010 Omnibus Plan allows the Committee to grant awards for an aggregate of 1,500,000 shares of the Company’s common
stock. However, this share reserve is increased by shares awarded under this and prior plans which are forfeited, expired, settled for cash and shares withheld by the Company in payment of a tax withholding obligation. Additionally,
this share reserve was decreased by shares granted from prior plans after July 30, 2010 until December 1, 2010. At August 3, 2018, the number of shares authorized for future issuance under the Company’s active plan is 1,020,477. At
August 3, 2018, the number of outstanding awards under the 2010 Omnibus Plan was 103,539.
Types of Share-Based Awards
Nonvested Stock Awards
Nonvested stock awards consist of the Company’s common stock, generally accrue dividend equivalents and vest over
1–5 years. The fair value of the Company’s nonvested stock awards which accrue dividends is equal to the market price of the Company’s stock at the date of the grant. Dividends are forfeited for any nonvested stock awards that do not
vest.
The Company’s nonvested stock awards include its long-term performance plans which were established by the Committee for the
purpose of rewarding certain officers with shares of the Company’s common stock if the Company achieved certain performance targets. The stock awards under the long-term performance plans are calculated or estimated based on achievement
of financial performance measures.
The following table summarizes the performance periods and vesting periods for the Company’s nonvested stock awards under
its long-term performance plans at August 3, 2018:
|
Long-Term Performance Plan (“LTPP”)
|
Performance Period
|
Vesting Period
(in Years)
|
|||
|
2018 LTPP
|
2018 – 2019
|
2 or 3
|
|||
|
2017 LTPP
|
2017 – 2018
|
2 or 3
|
|||
The following table summarizes the shares that have been accrued under the 2018 LTPP and 2017 LTPP at August 3, 2018:
|
2018 LTPP
|
8,892
|
|||
|
2017 LTPP
|
23,511
|
A summary of the Company’s nonvested stock activity as of August 3, 2018, and changes during 2018 are presented in the
following table:
|
Nonvested Stock
|
Shares
|
Weighted-Average Grant
Date Fair Value
|
||||||
|
Unvested at July 28, 2017
|
32,017
|
$
|
139.04
|
|||||
|
Granted
|
51,406
|
154.28
|
||||||
|
Vested
|
(38,889
|
)
|
153.66
|
|||||
|
Forfeited
|
(2,776
|
)
|
145.92
|
|||||
|
Unvested at August 3, 2018
|
41,758
|
$
|
143.73
|
|||||
The following table summarizes the total fair value of nonvested stock that vested for each of the three years:
|
2018
|
2017
|
2016
|
||||||||||
|
Total fair value of nonvested stock
|
$
|
5,976
|
$
|
14,700
|
$
|
8,418
|
||||||
Nonvested Stock Units
Beginning in 2017, the Company adopted long-term incentive plans that award nonvested stock units
based upon relative total shareholder return (“rTSR RSUs”). The number of nonvested stock units that will ultimately be awarded and will vest at the end of the applicable three-year performance period is based on relative total
shareholder return, which is defined as increases in the Company’s stock price plus dividends paid during the performance period as compared to the total shareholder return of a group of peer companies determined by the Committee. The
number of shares awarded at the end of the performance period for each nonvested stock unit may range from 75% to 125% of the target award. The probability of the actual shares expected to be earned is considered in the grant date
valuation; therefore, the expense will not be adjusted to reflect the actual units earned. In addition to a service requirement, the vesting of the nonvested stock units is also subject to the achievement of a specified level of
operating income during the performance period. If this performance goal is not met, no nonvested stock units will be awarded and no compensation expense will be recorded.
The fair value of the nonvested stock units is determined using the Monte-Carlo simulation model,
which simulates a range of possible future stock prices and estimates the probabilities of the potential payouts. This model uses the average prices for the 60 consecutive calendar days beginning 30 days prior to and ending 30 days
after the first business day of the performance period. This model also incorporates the following ranges of assumptions:
| · |
The expected volatilities are the historical volatilities of the Company’s stock and the members of the peer group over the period commensurate with the
three-year performance period.
|
| · |
The risk-free interest rate is based on the U.S. Treasury rate assumption commensurate with the three-year performance period. The risk-free rates for the
nonvested stock units granted in 2017 ranged from 1.0% to 1.4%. The risk-free interest rate for the nonvested stock units granted in 2018 was 1.6%.
|
| · |
The expected dividend yield is assumed to be zero since the award holders are entitled to any dividends paid over the performance period.
|
Dividends accrue on the nonvested stock units. Dividends will be forfeited for nonvested stock units that do not vest.
The following table summarizes the shares that have been accrued for rTSR RSUs awards under the 2018 and 2017 long-term
incentive plans at August 3, 2018:
|
Shares
|
||||
|
2018 rTSR RSUs
|
3,368
|
|||
|
2017 rTSR RSUs
|
5,676
|
|||
Performance-Based Market Stock Units
The number of MSU Grants (last granted in 2016) that will ultimately be awarded and will vest at the
end of the applicable three-year performance period for each annual plan is based on total shareholder return, which is defined as the change in the Company’s stock price plus dividends paid during the performance period. The number of
shares awarded at the end of the performance period will vary in direct proportion to a target number of shares set at the beginning of the period, up to a maximum of 150% of target, based on the change in the Company’s cumulative total
shareholder return over the performance period. The probability of the actual shares expected to be earned is considered in the grant date valuation; therefore, the expense will not be adjusted to reflect the actual units earned. In
addition to a service requirement, the vesting of the MSU Grants is also subject to the achievement of a specified level of operating income during the performance period. If this performance goal is not met, no MSU Grants will be
awarded and no compensation expense will be recorded.
The fair value of the MSU Grants was determined using the Monte-Carlo simulation model, which
simulated a range of possible future stock prices and estimated the probabilities of the potential payouts. This model used the average prices for the 60 consecutive calendar days beginning 30 days prior to and ending 30 days after the
first business day of the performance period. This model also incorporated the following ranges of assumptions:
| · |
The expected volatility was a blend of implied volatility based on market-traded options on the Company’s stock and historical volatility of our stock over the
period commensurate with the three-year performance period. The expected volatility for the 2016 MSU Grants ranged from 23% to 24%.
|
| · |
The risk-free interest rate was based on the U.S. Treasury rate assumption commensurate with the three-year performance period. The risk-free rates for the
2016 MSU Grants ranged from 0.9% to 1.0%.
|
| · |
The expected dividend yield was assumed to be zero since the award holders are entitled to any dividends paid over the performance period.
|
Dividends accrue on the 2016 MSU Grants. Dividends will be forfeited for any MSU Grants that do not vest. No MSU
Grants were awarded in 2017 or 2018. At August 3, 2018, 20,334 shares for the 2016 MSU Grants were accrued.
Stock Options
Prior to 2012, stock options were granted with an exercise price equal to the market price of the Company’s stock on the
grant date; those option awards generally vest at a cumulative rate of 33% per year beginning on the first anniversary of the grant date and expire ten years from the date of grant. No stock options were granted in 2016, 2017 or 2018.
A summary of the Company’s stock option activity as of August 3, 2018, and changes during 2018 are presented in the
following table:
|
Fixed Options
|
Shares
|
Weighted-
Average
Price
|
||||||
|
Outstanding at July 28, 2017
|
4,000
|
$
|
32.86
|
|||||
|
Exercised
|
(4,000
|
)
|
32.86
|
|||||
|
Outstanding at August 3, 2018
|
--
|
--
|
||||||
The following table summarizes the total intrinsic values of options exercised during each of the three years:
|
2018
|
2017
|
2016
|
||||||||||
|
Total intrinsic values of options exercised*
|
$
|
466
|
$
|
1,070
|
$
|
917
|
||||||
*The intrinsic value for stock options is defined as the difference between the current market value and the grant price.
Compensation Expense
The following table highlights the components of share-based compensation expense for each of the three years:
|
2018
|
2017
|
2016
|
||||||||||
|
Nonvested stock awards and units
|
$
|
6,052
|
$
|
6,654
|
$
|
10,277
|
||||||
|
MSU Grants
|
925
|
1,804
|
2,925
|
|||||||||
|
Total compensation expense
|
$
|
6,977
|
$
|
8,458
|
$
|
13,202
|
||||||
The following table highlights the total unrecognized compensation expense related to the outstanding nonvested stock awards
and nonvested stock units and the weighted-average periods over which the expense is expected to be recognized as of August 3, 2018:
|
Nonvested
Stock Awards
|
Nonvested
Stock Units
|
|||||||
|
Total unrecognized compensation
|
$
|
3,189
|
$
|
1,341
|
||||
|
Weighted-average period in years
|
1.82
|
1.71
|
||||||
The following table highlights the total income tax benefit recognized in the Consolidated Statements of Income for each of
the three years:
|
2018
|
2017
|
2016
|
||||||||||
|
Total income tax benefit
|
$
|
774
|
$
|
2,740
|
$
|
3,819
|
||||||
During 2018, the Company issued 55,868 shares of its common stock resulting from the vesting of share-based compensation
awards and stock option exercises. Related tax withholding payments on certain share-based compensation awards exceeded proceeds received from the exercise of stock options which resulted in a net reduction to shareholders’ equity of
$3,816.
|
11.
|
Shareholder Rights Plan
|
On April 9, 2018, the Company’s Board of Directors declared a dividend of one preferred share purchase right (a “Right”) for
each outstanding share of common stock, par value $0.01 per share, and adopted a shareholder rights plan, as set forth in the Rights Agreement dated as of April 9, 2018 (the “Rights Agreement”), by and between the Company and American
Stock Transfer & Trust Company, LLC, as rights agent. The dividend was payable on April 19, 2018 to the shareholders of record on April 19, 2018. The Rights Agreement replaced the Company’s previous shareholder rights plan adopted
in 2015 (the “2015 Plan”), and it became effective immediately following the expiration of the 2015 Plan at the close of business on April 9, 2018. The 2015 Plan and the preferred share purchase rights issued thereunder expired by
their own terms and shareholders of the Company were not entitled to any payment as a result of the expiration of the 2015 Plan. The Rights Agreement will terminate unless approved by shareholders at the Company’s 2018 annual meeting.
The Rights
The Rights initially trade with, and are inseparable from, the Company’s common stock. The Rights are evidenced only by the
balances indicated in the book-entry account system of the transfer agent for the Company’s common stock or, in the case of certificated shares, by certificates that represent shares of the Company’s common stock. New Rights will
accompany any new shares of common stock the Company issues after April 19, 2018 until the earlier to occur of the Distribution Date, redemption of the Rights by the Company’s Board of Directors or the final expiration of the Rights
Agreement, each as described below.
Exercise Price
Each Right will allow its holder to purchase from the Company one one-hundredth of a share of Series A Junior Participating
Preferred Stock (“Preferred Share”) for $600.00 (the “Exercise Price”), once the Rights become exercisable. This portion of a Preferred Share will give the shareholder approximately the same dividend and liquidation rights as would one
share of common stock. Prior to exercise, the Right does not give its holder any dividend, voting, or liquidation rights.
Exercisability
The Rights will not be exercisable until 10 days after the public announcement that a person or group has become an
“Acquiring Person” by obtaining beneficial ownership of 20% or more of the Company’s outstanding common stock.
Shares held by affiliates and associates of an Acquiring Person, and Notional Common Shares (as defined in the Rights
Agreement) held by counterparties to a Derivatives Contract (as defined in the Rights Agreement) with an Acquiring Person, will be deemed to be beneficially owned by the Acquiring Person. Certain synthetic interests in securities
created by derivative positions – whether or not such interests are considered to be ownership of the underlying common stock or are reportable for purposes of Regulation 13D of the Securities Exchange Act – are treated as beneficial
ownership of the number of shares of the Company’s common stock equivalent to the economic exposure created by the derivative.
The date when the Rights become exercisable is the “Distribution Date.” Until the Distribution Date, the common stock
certificates will also evidence the Rights, and any transfer of shares of common stock will constitute a transfer of Rights. After that date, the Rights will separate from the common stock and will be evidenced by book-entry credits or
by Rights certificates that the Company will mail to all eligible holders of common stock. Any Rights held by an Acquiring Person will be void and may not be exercised.
At August 3, 2018, none of the Rights were exercisable.
Consequences of a Person or Group Becoming an Acquiring Person
If a person or group becomes an Acquiring Person, after the Distribution Date, each Right will generally entitle the holder,
except the Acquiring Person or any associate or affiliate thereof, to acquire, for the exercise price of $600.00 per Right (subject to adjustment as provided in the Rights Agreement), shares of the Company’s common stock (or, in certain
circumstances, Preferred Shares) having a market value equal to twice the Right’s then-current exercise price (initially $1,200.00 per Right).
In addition, if, the Company is later acquired in a merger or similar transaction after the Distribution Date, each Right
will generally entitle the holder, except the Acquiring Person or any associate or affiliate thereof, to acquire, for the exercise price of $600.00 per Right (subject to adjustment as provided in the Rights Agreement), shares of the
acquiring corporation having a market value equal to twice the Right’s then-current exercise price (initially $1,200.00 per Right).
Shares held by affiliates and associates of an Acquiring Person, and Notional Common Shares (as defined in the Rights
Agreement) held by counterparties to a Derivatives Contract (as defined in the Rights Agreement) with an Acquiring Person, will be deemed to be beneficially owned by the Acquiring Person.
Preferred Share Provisions
Each one one-hundredth of a Preferred Share, if issued:
| · |
will not be redeemable;
|
| · |
will entitle holders to quarterly dividend payments of $0.01 per share, or an amount equal to the dividend paid on one share of common stock, whichever is
greater;
|
| · |
will entitle holders upon liquidation either to receive $1.00 per share or an amount equal to the payment made on one share of common stock, whichever is
greater;
|
| · |
will have the same voting power as one share of common stock; and
|
| · |
if shares of the Company’s common stock are exchanged via merger, consolidation, or a similar transaction, will entitle holders to a per share payment equal to
the payment made on one share of common stock.
|
The value of one one-hundredth of a Preferred Share will generally approximate the value of one share of common stock.
Redemption
The Board of Directors may redeem the Rights for $0.01 per Right at any time before any person or group becomes an Acquiring
Person. If the Board of Directors redeems any Rights, it must redeem all of the Rights. Once the Rights are redeemed, the only right of the holders of Rights will be to receive the redemption price of $0.01 per Right. The redemption
price will be adjusted if the Company has a stock split or stock dividends of its common stock.
Qualifying Offer Provision
The Rights would also not interfere with all-cash, fully financed tender offers for all shares of common stock that remain
open for a minimum of 60 business days, are subject to a minimum condition of a majority of the outstanding shares and provide for a 20-business day “subsequent offering period” after consummation (such offers are referred to as
“qualifying offers”). In the event the Company receives a qualifying offer and the Board of Directors has not redeemed the Rights prior to the consummation of such offer, the consummation of the qualifying offer will not cause the
offeror or its affiliates to become an Acquiring Person, and the Rights will immediately expire upon consummation of the qualifying offer.
Exchange
After a person or group becomes an Acquiring Person, but before an Acquiring Person owns 50% or more of the Company’s
outstanding common stock, the Board of Directors may extinguish the Rights by exchanging one share of common stock or an equivalent security for each Right, other than Rights held by the Acquiring Person.
Anti-Dilution Provisions
The Board of Directors may adjust the purchase price of the Preferred Shares, the number of Preferred Shares issuable and
the number of outstanding Rights to prevent dilution that may occur from a stock dividend, a stock split, a reclassification of the Preferred Shares or common stock. No adjustments to the Exercise Price of less than 1% will be made.
Amendments
The terms of the Rights Agreement may be amended by the Board
of Directors without the consent of the holders of the Rights. After a person or group becomes an Acquiring Person, the Board of Directors may not amend the agreement in a way that adversely affects holders of the Rights.
Expiration
If the Rights Agreement is approved by the Company’s shareholders at the 2018 annual meeting, the Rights will expire on
April 9, 2021. If shareholders do not approve the Rights Agreement, the Rights will expire immediately following certification of the vote at the 2018 annual meeting.
|
12.
|
Employee Savings Plans
|
The Company sponsors a qualified defined contribution retirement plan (“401(k) Savings Plan”) covering salaried and hourly
employees who have completed ninety days of service and have attained the age of twenty-one. This plan allows eligible employees to defer receipt of up to 50% of their compensation, as defined in the plan. The Company also sponsors a
non-qualified defined contribution retirement plan (“Non-Qualified Savings Plan”) covering highly compensated employees, as defined in the plan. This plan 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 plans may be invested in various investment funds at the employee’s discretion. Such
contributions, including the Company’s matching contributions described below, may not be invested in the Company’s common stock. In 2018, the Company matched 50% of employee contributions for each participant in the 401(k) Savings
Plan up to a total of 5% of the employee’s compensation and matched 25% of employee contributions in the Non-Qualified Savings Plan up to a total of 6% of the employee’s compensation. In 2017 and 2016, the Company matched 25% of
employee contributions for each participant in either plan up to a total of 6% of the employee’s compensation. Employee contributions vest immediately while Company contributions vest 20% annually beginning on the first anniversary of
a contribution date and are vested 100% on the fifth anniversary of such contribution date.
At the inception of the Non-Qualified Savings Plan, the Company established a Rabbi Trust to fund the plan’s obligations.
The market value of the trust assets for the Non-Qualified Savings Plan of $32,669 is included in other assets and the related liability to the participants of $32,669 is included in other long-term obligations in the Consolidated
Balance Sheets. Company contributions under both plans are recorded as either labor and other related expenses or general and administrative expenses in the Consolidated Statements of Income.
The following table summarizes the Company’s contributions for each plan for each of the three years:
|
2018
|
2017
|
2016
|
||||||||||
|
401(k) Savings Plan
|
$
|
3,812
|
$
|
2,501
|
$
|
2,528
|
||||||
|
Non-Qualified Savings Plan
|
342
|
291
|
296
|
|||||||||
|
13.
|
Income Taxes
|
The components of the provision for income taxes for each of the three years were as follows:
|
2018
|
2017
|
2016
|
||||||||||
|
Current:
|
||||||||||||
|
Federal
|
$
|
40,761
|
$
|
83,743
|
$
|
62,054
|
||||||
|
State
|
6,099
|
7,567
|
6,447
|
|||||||||
|
Deferred:
|
||||||||||||
|
Federal
|
(16,779
|
)
|
4,696
|
12,477
|
||||||||
|
State
|
722
|
982
|
(3,858
|
)
|
||||||||
|
Total provision for income taxes
|
$
|
30,803
|
$
|
96,988
|
$
|
77,120
|
||||||
A reconciliation of the Company’s provision for income taxes and income taxes based on the statutory U.S. federal rate of
26.9%, 35.0% and 35.0% in 2018, 2017 and 2016, respectively, was as follows:
|
2018
|
2017
|
2016
|
||||||||||
|
Provision computed at federal statutory income tax rate
|
$
|
74,859
|
$
|
104,611
|
$
|
93,247
|
||||||
|
State and local income taxes, net of federal benefit
|
5,066
|
5,856
|
1,427
|
|||||||||
|
Revaluation of deferred taxes due to a reduction in the federal tax rate at the enactment date of
the Tax Act
|
(26,772
|
)
|
--
|
--
|
||||||||
|
Revaluation of deferred taxes due to the impact of the change in rate on 2018 temporary items
|
(3,710
|
)
|
--
|
--
|
||||||||
|
Employer tax credits for FICA taxes paid on employee tip income
|
(13,707
|
)
|
(11,543
|
)
|
(11,048
|
)
|
||||||
|
Other employer tax credits
|
(4,476
|
)
|
(2,814
|
)
|
(7,326
|
)
|
||||||
|
Other-net
|
(457
|
)
|
878
|
820
|
||||||||
|
Total provision for income taxes
|
$
|
30,803
|
$
|
96,988
|
$
|
77,120
|
||||||
The decrease in the Company’s provision for income taxes from 2017 to 2018 reflected the significant impact of the Tax Act.
The Tax Act made broad and complex changes to the U.S. tax code, including, but not limited to, reducing the U.S. federal corporate tax rate from 35% to 21% effective January 1, 2018. In accordance with Section 15 of the Internal
Revenue Code, the Company used a blended rate of 26.9% for its fiscal 2018 tax year, by applying a prorated percentage of the number of days prior to and subsequent to the January 1, 2018 effective date of the Tax Act.
Significant components of the Company’s net deferred tax liability consisted of the following at:
|
August 3, 2018
|
July 28, 2017
|
|||||||
|
Deferred tax assets:
|
||||||||
|
Compensation and employee benefits
|
$
|
6,342
|
$
|
10,110
|
||||
|
Deferred rent
|
12,667
|
18,270
|
||||||
|
Accrued liabilities
|
8,546
|
13,233
|
||||||
|
Insurance reserves
|
7,291
|
12,401
|
||||||
|
Inventory
|
3,106
|
4,411
|
||||||
|
Other
|
--
|
2,767
|
||||||
|
Deferred tax assets
|
$
|
37,952
|
$
|
61,192
|
||||
|
Deferred tax liabilities:
|
||||||||
|
Property and equipment
|
$
|
75,433
|
$
|
100,373
|
||||
|
Inventory
|
7,448
|
10,906
|
||||||
|
Other
|
7,232
|
12,273
|
||||||
|
Deferred tax liabilities
|
90,113
|
123,552
|
||||||
|
Net deferred tax liability
|
$
|
52,161
|
$
|
62,360
|
||||
The decrease in the Company’s net deferred tax liability reflected the significant impact of the Tax Act on rate and
capitalization policies. While the Company is able to make reasonable estimates of the impact of both, the final impact of the Tax Act may differ from these estimates, due to, among other things, additional guidance that may be issued
by the Internal Revenue Service, expected state tax responses to either follow or reject the federal changes, and changes in our interpretations and assumptions. The Company continues to gather additional information to determine the
final impact.
The Company believes that adequate amounts of tax, interest and penalties have been provided for potential tax
uncertainties; these amounts are included in other long-term liabilities in the Consolidated Balance Sheets. As of August 3, 2018 and July 28, 2017, the Company’s gross liability for uncertain tax positions, exclusive of interest and
penalties, was $18,634 and $20,731, respectively. Summarized below is a tabular reconciliation of the beginning and ending balance of the Company’s total gross liability for uncertain tax positions exclusive of interest and penalties:
|
August 3, 2018
|
July 28, 2017
|
July 29, 2016
|
||||||||||
|
Balance at beginning of year
|
$
|
20,731
|
$
|
21,899
|
$
|
25,507
|
||||||
|
Tax positions related to the current year:
|
||||||||||||
|
Additions
|
3,029
|
4,003
|
4,860
|
|||||||||
|
Reductions
|
--
|
--
|
--
|
|||||||||
|
Tax positions related to the prior year:
|
||||||||||||
|
Additions
|
610
|
582
|
2,186
|
|||||||||
|
Reductions
|
(575
|
)
|
(2,966
|
)
|
(6,896
|
)
|
||||||
|
Settlements
|
(3,878
|
)
|
(1,027
|
)
|
(2,324
|
)
|
||||||
|
Expiration of statute of limitations
|
(1,283
|
)
|
(1,760
|
)
|
(1,434
|
)
|
||||||
|
Balance at end of year
|
$
|
18,634
|
$
|
20,731
|
$
|
21,899
|
||||||
If the Company were to prevail on all uncertain tax positions, the reversal of this accrual would be a tax benefit to the
Company and impact the effective tax rate. The following table highlights the amount of uncertain tax positions, exclusive of interest and penalties, which, if recognized, would affect the effective tax rate for each of the three
years:
|
2018
|
2017
|
2016
|
||||||||||
|
Uncertain tax positions
|
$
|
14,721
|
$
|
13,475
|
$
|
14,234
|
||||||
The Company had $5,681, $6,128, and $5,497 in interest and penalties accrued as of August 3, 2018, July 28, 2017, and July
29, 2016, respectively.
The Company recognized accrued interest and penalties related to unrecognized tax benefits of $(447), $631 and $(4,256) in
its provision for income taxes on August 3, 2018, July 28, 2017 and July 29, 2016, respectively. The decrease from 2017 to 2018 was mostly attributable to audit settlements in 2018. The increase from 2016 to 2017 was attributable to
the Company’s revaluation of select reserves and audit settlements in 2016.
In many cases, the Company’s uncertain tax positions are related to tax years that remain subject to examination by the
relevant taxing authorities. Based on the outcome of these examinations or as a result of the expiration of the statutes of limitations for specific taxing jurisdictions, it is reasonably possible that the related uncertain tax
positions taken regarding previously filed tax returns could decrease from those recorded as liabilities for uncertain tax positions in the Company’s financial statements at August 3, 2018 by approximately $2,000 to $3,000 within the
next twelve months. At August 3, 2018, the Company was subject to income tax examinations for its U.S. federal income taxes after 2014 and for state and local income taxes generally after 2014.
|
14.
|
Net Income Per Share and Weighted Average Shares
|
The following table reconciles the components of diluted earnings per share computations:
|
2018
|
2017
|
2016
|
||||||||||
|
Net income per share numerator
|
$
|
247,620
|
$
|
201,899
|
$
|
189,299
|
||||||
|
Net income per share denominator:
|
||||||||||||
|
Basic weighted average shares outstanding
|
24,011,161
|
24,031,810
|
23,945,041
|
|||||||||
|
Add potential dilution:
|
||||||||||||
|
Stock options, nonvested stock awards and units and MSU Grants
|
64,453
|
86,478
|
129,232
|
|||||||||
|
Diluted weighted average shares outstanding
|
24,075,614
|
24,118,288
|
24,074,273
|
|||||||||
|
15.
|
Commitments and Contingencies
|
The Company and its subsidiaries are party to various legal and regulatory proceedings and claims incidental to their
business in the ordinary course. In the opinion of management, based upon information currently available, the ultimate liability with respect to these proceedings and claims will not materially affect the Company’s consolidated
results of operations or financial position.
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.
Related to its insurance coverage, the Company is contingently liable pursuant to standby letters of credit as credit
guarantees to certain insurers. As of August 3, 2018, the Company had $9,455 of standby letters of credit related to securing reserved claims under workers’ compensation insurance. All standby letters of credit are renewable annually
and reduce the Company’s borrowing availability under its Revolving Credit facility (see Note 5).
As of August 3, 2018, the Company is secondarily liable for lease payments associated with two properties. The Company is
not aware of any non-performance under these lease arrangements that would result in the Company having to perform in accordance with the terms of these guarantees, and therefore, no provision has been recorded in the Consolidated
Balance Sheets for amounts to be paid in case of non-performance by the third party by the primary obligor under such lease agreements.
The Company enters into certain indemnification agreements in favor of third parties in the ordinary course of business.
The Company believes that the probability of incurring an actual liability under other indemnification agreements is sufficiently remote so that no liability has been recorded in the Consolidated Balance Sheet.
|
16.
|
Quarterly Financial Data (Unaudited)
|
Quarterly financial data for 2018 and 2017 are summarized as follows:
|
1st Quarter
|
2nd Quarter
|
3rd Quarter
|
4th Quarter (a)
|
|||||||||||||
|
2018
|
||||||||||||||||
|
Total revenue
|
$
|
710,368
|
$
|
787,771
|
$
|
721,413
|
$
|
810,893
|
||||||||
|
Store operating income
|
107,731
|
112,686
|
98,718
|
118,213
|
||||||||||||
|
Income before income taxes
|
67,220
|
72,994
|
59,715
|
78,494
|
||||||||||||
|
Net income
|
46,380
|
91,139
|
48,747
|
61,354
|
||||||||||||
|
Net income per share – basic
|
1.93
|
3.80
|
2.03
|
2.56
|
||||||||||||
|
Net income per share – diluted
|
1.92
|
3.79
|
2.03
|
2.55
|
||||||||||||
|
2017
|
||||||||||||||||
|
Total revenue
|
$
|
709,971
|
$
|
772,682
|
$
|
700,410
|
$
|
743,226
|
||||||||
|
Store operating income
|
109,832
|
117,513
|
107,478
|
119,749
|
||||||||||||
|
Income before income taxes
|
72,068
|
79,058
|
68,089
|
79,672
|
||||||||||||
|
Net income
|
48,355
|
52,727
|
46,924
|
53,893
|
||||||||||||
|
Net income per share – basic
|
2.01
|
2.19
|
1.95
|
2.24
|
||||||||||||
|
Net income per share – diluted
|
2.01
|
2.19
|
1.95
|
2.23
|
||||||||||||
| (a) |
The Company’s fourth quarter of fiscal 2018 consisted of 14 weeks.
|
None.
Our management, with the participation of our principal executive and financial officers, including the Chief Executive
Officer and the Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Exchange Act) as of the end of the period covered by this
report. Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer each concluded that, as of August 3, 2018, our disclosure controls and procedures were effective.
There have been no changes (including corrective actions with regard to significant deficiencies and material weaknesses)
during the quarter ended August 3, 2018 in our internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)) that have materially affected, or are reasonably likely to materially affect, our internal control over
financial reporting.
Management’s Report on Internal Control over Financial Reporting
We are responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules
13a-15(f) and 15d-15(f) promulgated under the Exchange Act). We maintain a system of internal controls that is designed to provide reasonable assurance in a cost-effective manner as to the fair and reliable preparation and presentation
of the consolidated financial statements, as well as to safeguard assets from unauthorized use or disposition.
Our control environment is the foundation for our system of internal control over financial reporting and is embodied in our
Corporate Governance Guidelines, our Financial Code of Ethics, and our Code of Business Conduct and Ethics, all of which may be viewed on our website. They set the tone for our organization and include factors such as integrity and
ethical values. Our internal control over financial reporting is supported by formal policies and procedures, which are reviewed, modified and improved as changes occur in business conditions and operations. Neither our disclosure
controls and procedures nor our internal controls, however, can or will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the
objectives of the control system are met. Further, the design of a control system must reflect the benefits of controls relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can
provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.
We conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. This evaluation included
review of the documentation of controls, evaluation of the design effectiveness of controls, testing of the operating effectiveness of controls and a conclusion based on this evaluation. We have concluded that our internal control over
financial reporting was effective as of August 3, 2018, based on these criteria.
In addition, Deloitte & Touche LLP, an independent registered public accounting firm, has issued an attestation report
on our internal control over financial reporting, which is included herein.
|
/s/Sandra B. Cochran
|
|
|
Sandra B. Cochran
|
|
|
President and Chief Executive Officer
|
|
|
/s/Jill M. Golder
|
|
|
Jill M. Golder
|
|
|
|
Senior Vice President and Chief Financial Officer
|
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of Cracker Barrel Old Country Store, Inc.
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Cracker Barrel Old Country Store, Inc. and subsidiaries (the “Company”) as of
August 3, 2018, based on criteria established in Internal Control—Integrated Framework (2013) issued by
the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of August 3, 2018, based on criteria
established in Internal Control — Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the
consolidated financial statements as of and for the year ended August 3, 2018, of the Company and our report dated September 28, 2018, expressed an unqualified opinion on those financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control
over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the
risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances.
We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and
procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of
management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of
any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Deloitte & Touche LLP
Nashville, Tennessee
September 28, 2018
Cracker Barrel Old Country Store, Inc. and Subsidiaries
FY 2019 Annual Bonus Plan
On September 25, 2018, the Compensation Committee (the “Committee”) of the Board of Directors (the “Board”) of the Company
adopted the Cracker Barrel Old Country Store, Inc. and Subsidiaries FY 2019 Annual Bonus Plan (the “2019 Annual Bonus Plan”) in order to reward executive officers of the Company and its subsidiaries if the Company successfully meets
established performance targets, up to a maximum of 200% of target. The 2019 Annual Bonus Plan is substantially identical in form to the bonus plan that was in place in respect of 2018.
The Committee also approved target and maximum potential bonuses for each of the Company’s named executive officers (as
defined in Item 5.02 of Form 8-K promulgated under the Securities Exchange Act of 1934, as amended) under the 2019 Annual Bonus Plan, with the exception of the target and maximum potential bonuses for the Company’s President and Chief
Executive Officer, Sandra B. Cochran, which were approved by the independent members of the Board on the Committee’s recommendation. The following table indicates the target and maximum potential bonuses established for 2019,
expressed as a percentage of base salary, for which each of the named executive officers would be eligible depending on the Company’s performance in 2019:
|
Name
|
2019 Target
Bonus
Percentage
|
2019 Maximum
Bonus
Percentage
|
||||||
|
Sandra B. Cochran
|
120
|
%
|
240
|
%
|
||||
|
Jill M. Golder
|
75
|
%
|
150
|
%
|
||||
|
Nicholas V. Flanagan
|
70
|
%
|
140
|
%
|
||||
|
Richard M. Wolfson
|
65
|
%
|
130
|
%
|
||||
|
Laura A. Daily
|
65
|
%
|
130
|
%
|
||||
In no case can an executive’s actual award under the 2019 Annual Bonus Plan exceed the maximum potential award, regardless
of the Company’s 2019 performance.
A copy of the 2019 Annual Bonus Plan is filed as Exhibit 10(x) to this Annual Report on Form 10-K and incorporated herein
by reference. The foregoing description is qualified in its entirety by reference to such exhibit.
Cracker Barrel Old Country Store, Inc. and Subsidiaries FY 2019 Long-Term
Incentive Program
On September 25, 2018, the Committee adopted the Cracker Barrel Old Country Store, Inc. and Subsidiaries FY 2019 Long-Term
Incentive Program (the “2019 Long-Term Incentive Program”) to govern long-term incentive equity awards designed to reinforce alignment of the interests of the Company’s executive officers with those of shareholders and to serve as a
retention tool. The 2019 Long-Term Incentive Program is substantially identical in form to the long-term incentive program that was in place in respect of 2018 and consists of three components: (i) the 2019 Long-Term Performance Plan
(the “2019 LTPP”); (ii) the 2019 Performance-Based Restricted Stock Unit Award (the “2019 Performance-Based RSU Award”); and (iii) the 2019 Time-Based Restricted Stock Unit Award (the “2019 Time-Based RSU Award”). The 2019 LTPP
provides for awards of performance shares tied to the Company’s successful achievement of a target return on invested capital goal over fiscal years 2019 and 2020 (the “LTPP Performance Goal”). The 2019 Performance-Based RSU Award
provides for awards of performance-based restricted stock units, with cliff vesting after three years from the date of grant, that may be increased or decreased by 25% of the target award amounts depending on the Company’s total
shareholder return (“Relative TSR”) relative to a peer group of companies approved by the Committee (the “Peer Group”) over fiscal years 2019, 2020 and 2021. The 2019 Time-Based RSU provides for awards of time-based restricted stock
units that cliff-vest after three years from the date of grant, subject to the executive’s continued employment with the Company on the vesting date. At the time of grant, the value of each eligible participant’s target awards under
the 2019 Long-Term Incentive Program were allocated approximately as follows: 50% under the 2019 LTPP, 25% under the 2019 Performance-Based RSU Award, and 25% under the 2019 Time-Based RSU Award.
The Committee also approved equity award percentages for each of the named executive officers that represent his or her
target opportunities for awards under the 2019 LTPP (the “LTPP Percentage”) and the 2019 Performance-Based RSU Award (the “Performance-Based RSU Percentage”) as well as the amount of his or her 2019 Time-Based RSU Award (the
“Time-Based RSU Percentage”), in each case expressed as a percentage of the named executive officer’s base salary. The LTPP Percentage, Performance-Based RSU Percentage and Time-Based RSU Percentage for the named executive officers
were established by the Committee simultaneously with the establishment of the 2019 LTPP, 2019 Performance-Based RSU Award and 2019 Time-Based RSU Award, respectively, with the exception of Ms. Cochran’s LTPP Percentage,
Performance-Based RSU Percentage and Time-Based RSU Percentage, which were approved by the independent members of the Board on the Committee’s recommendation. Set forth below are each named executive officer’s LTPP Percentage,
Performance-Based RSU Percentage and Time-Based RSU Percentage, as well as total target award opportunity, under the 2019 Long-Term Incentive Program:
|
Name
|
LTPP
Percentage
|
Performance-
Based RSU
Percentage
|
Time-Based
RSU
Percentage
|
Total
|
||||||||||||
|
Sandra B. Cochran
|
190
|
%
|
95
|
%
|
95
|
%
|
380
|
%
|
||||||||
|
Jill M. Golder
|
70
|
%
|
35
|
%
|
35
|
%
|
140
|
%
|
||||||||
|
Nicholas V. Flanagan
|
60
|
%
|
30
|
%
|
30
|
%
|
120
|
%
|
||||||||
|
Richard M. Wolfson
|
60
|
%
|
30
|
%
|
30
|
%
|
120
|
%
|
||||||||
|
Laura A. Daily
|
37.5
|
%
|
18.75
|
%
|
18.75
|
%
|
75
|
%
|
||||||||
Under the 2019 LTPP, each named executive officer’s realized award, if any, relative to the target award based on the LTPP
Percentage will be determined based on the Company’s performance relative to the LTPP Performance Goal during the performance period.
Under the 2019 Performance-Based RSU Award, the Company’s Relative TSR over the three-year performance period will be
measured against an under/overachievement scale with specified thresholds and may result in an adjustment to the realized award relative to the target award based on the Performance-Based RSU Percentage, as set forth in the table
below (there is no interpolation within the percentile ranges):
|
Performance Range of
Company’s Relative TSR versus
Peer Group
|
Percentage Adjustment in Number of
Target Performance-Based RSU
Shares
|
|
|
75th Percentile or Above (Maximum)
|
+25%
|
|
|
Between 25th and 75th Percentile
|
No adjustment
|
|
|
25th Percentile or Below
|
-25%
|
A copy of the 2019 Long-Term Incentive Program is filed as Exhibit 10(y) to this Annual Report on Form 10-K and
incorporated herein by reference. The foregoing description is qualified in its entirety by reference to such exhibit.
PART III
The information required by this Item with respect to directors of the Company is incorporated herein by this
reference to the following sections of the 2018 Proxy Statement: “Board of Directors and Committees,” “Proposal 1: Election of Directors,” “Section 16(a) Beneficial Ownership Reporting Compliance” and “Certain Relationships and
Related Transactions—Code of Ethics.” The information required by this Item with respect to executive officers of the Company is set forth in Part I of this Annual Report on Form 10-K under the heading “Executive Officers of the
Registrant.”
The information required by this Item is incorporated herein by this reference to the following sections of the
2018 Proxy Statement: “Executive Compensation” and “Board of Directors and Committees—Compensation of Directors.” The “Compensation Committee
Report” set forth in the section of the 2018 Proxy Statement entitled “Executive Compensation” is deemed to be “furnished” and is not, and shall not be deemed to be, “filed” for purposes of Section 18 of the Exchange Act.
The information required by this Item is incorporated herein by this reference to the sections entitled “Stock
Ownership of Certain Beneficial Owners and Management” and “Equity Compensation Plan Information” in the 2018 Proxy Statement.
The information required by this Item is incorporated herein by this reference to the sections entitled "Certain
Relationships and Related Transactions” and “Director Independence” in the 2018 Proxy Statement.
The information required by this Item is incorporated herein by this reference to the sections entitled “Fees Paid
to Auditors” and “Audit Committee Report” in the 2018 Proxy Statement. No other portion of the section of the 2018 Proxy Statement entitled “Audit Committee Report” is, nor shall it be deemed to be, incorporated by reference into this
Annual Report on Form 10-K.
PART IV
| (a) |
List of documents filed as part of this report:
|
| 1. |
All financial statements – see Item 8.
|
| 2. |
All schedules have been omitted since they are either not required or not applicable, or the required information is included.
|
| 3. |
The exhibits listed in the accompanying Index to Exhibits immediately prior to the signature page to this Annual Report on Form 10-K.
|
|
Exhibit
|
|
|
Amended and Restated Charter of Cracker Barrel Old Country Store, Inc.
(1)
|
|
|
Amended and Restated Bylaws of Cracker Barrel Old Country Store, Inc.
(2)
|
|
|
Credit Agreement, dated as of January 8, 2015, among Cracker Barrel Old
Country Store, Inc., the Subsidiary Guarantors named therein, the Lenders party thereto, and Wells Fargo Bank, National Association as Administrative Agent and Collateral Agent (3)
|
|
|
Credit Agreement, dated as of September 5, 2018, among Cracker Barrel Old
Country Store, Inc., the Subsidiary Guarantors named therein, the Lenders party thereto, and Bank of America, N.A., as Administrative Agent and Collateral Agent (4)
|
|
|
Rights Agreement, dated as of April 9, 2018, between Cracker Barrel Old
Country Store, Inc. and American Stock Transfer & Trust Company, LLC, as rights agent (5)
|
|
|
Form of Stock Option Award under the CBRL Group, Inc. 2002 Omnibus
Incentive Compensation Plan† (6)
|
|
|
Master Lease, dated July 31, 2000, between Country Stores Property I, LLC,
as Lessor, and Cracker Barrel Old Country Store, Inc., as Lessee, for lease of 21 Cracker Barrel Old Country Store® sites (7)
|
|
|
Master Lease, dated July 31, 2000, between Country Stores Property I, LLC,
as Lessor, and Cracker Barrel Old Country Store, Inc., as Lessee, for lease of nine Cracker Barrel Old Country Store® sites (8)
|
|
|
Master Lease, dated July 31, 2000, between Country Stores Property II, LLC,
as Lessor, and Cracker Barrel Old Country Store, Inc., as Lessee, for lease of 23 Cracker Barrel Old Country Store® sites (9)
|
|
|
Master Lease, dated July 31, 2000, between Country Stores Property III,
LLC, as Lessor, and Cracker Barrel Old Country Store, Inc., as Lessee, for lease of 12 Cracker Barrel Old Country Store® sites (10)
|
|
|
Cracker Barrel Old Country Store, Inc. Amended and Restated Stock Option
Plan (as amended to date)† (11)
|
|
|
Cracker Barrel Old Country Store, Inc. Corporate Policy—Severance Benefits
Policy (as amended to date)† (12)
|
|
|
Cracker Barrel Old Country Store, Inc. 2002 Omnibus Incentive Compensation
Plan (as amended to date)† (13)
|
|
|
Cracker Barrel Old Country Store, Inc. 2010 Omnibus Stock and Incentive
Plan† (14)
|
|
|
Cracker Barrel Old Country Store, Inc. Form of Performance-Based Stock Unit
Award† (15)
|
|
|
Cracker Barrel Old Country Store, Inc. Non-Qualified Savings Plan (as
amended to date)† (16)
|
|
|
Cracker Barrel Old Country Store, Inc. Deferred Compensation Plan† (17)
|
|
|
Amendment to Deferred Compensation Plan†(18)
|
|
|
Cracker Barrel Old Country Store, Inc. Form of Restricted Stock Award
Notice† (19)
|
|
Cracker Barrel Old Country Store, Inc. and Subsidiaries FY 2016 Long-Term
Incentive Program† (20)
|
|
|
Cracker Barrel Old Country Store, Inc. and Subsidiaries FY 2017 Long-Term
Incentive Program† (21)
|
|
|
Cracker Barrel Old Country Store, Inc. and Subsidiaries FY 2018 Annual
Bonus Plan† (22)
|
|
|
Cracker Barrel Old Country Store, Inc. and Subsidiaries FY 2018 Long-Term
Incentive Program† (23)
|
|
|
Form of Severance Agreement between Cracker Barrel Old Country Store, Inc.,
and certain of its named executive officers† (24)
|
|
|
Form of Change of Control Agreement between Cracker Barrel Old Country
Store, Inc., and certain of its named executive officers† (25)
|
|
|
Employment Agreement with Sandra B. Cochran, dated as of July 27, 2018† (26)
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| 10(x) |
Cracker Barrel Old Country Store, Inc, and Subsidiaries FY 2019 Annual Bonus Plan† (filed herewith) |
| 10(y) | Cracker Barrel Old Country Store, Inc, and Subsidiaries FY 2019 Long-Term Incentive Program† (filed herewith) |
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Subsidiaries of the Registrant (filed herewith)
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Consent of Independent Registered Public Accounting Firm - Deloitte & Touche LLP (filed herewith)
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Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
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Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
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Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith)
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Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith)
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101.INS
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XBRL Instance Document (filed herewith)
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101.SCH
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XBRL Taxonomy Extension Schema (filed herewith)
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101.CAL
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XBRL Taxonomy Extension Calculation Linkbase (filed herewith)
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101.LAB
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XBRL Taxonomy Extension Label Linkbase (filed herewith)
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101.PRE
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XBRL Taxonomy Extension Presentation Linkbase (filed herewith)
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101.DEF
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XBRL Taxonomy Extension Definition Linkbase (filed herewith)
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(1)
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Incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed under the Exchange Act on April 10, 2012
(Commission File No. 000-25225).
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(2)
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Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed under the Exchange Act on February 24, 2012
(Commission File No. 000-25225).
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(3)
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Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed under the Exchange Act on January 9, 2015.
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(4)
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Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed under the Exchange Act on September 10, 2018.
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(5)
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Incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed under the Exchange Act on April 9, 2018.
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(6)
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Incorporated by reference to Exhibit 10(l) to the Company’s Annual Report on Form 10-K filed under the Exchange Act for the fiscal year
ended July 29, 2005 (Commission File No. 000-25225).
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(7)
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Incorporated by reference to Exhibit 10(r) to the Company’s Annual Report on Form 10-K filed under the Exchange Act for the fiscal year
ended July 28, 2000 (Commission File No. 000-25225).
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(8)
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Incorporated by reference to Exhibit 10(d) to the Company’s Annual Report on Form 10-K filed under the Exchange Act for the fiscal year
ended July 28, 2017.
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(9)
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Incorporated by reference to Exhibit 10(e) to the Company’s Annual Report on Form 10-K filed under the Exchange Act for the fiscal year
ended July 28, 2017.
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(10)
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Incorporated by reference to Exhibit 10(f) to the Company’s Annual Report on Form 10-K filed under the Exchange Act for the fiscal year
ended July 28, 2017.
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(11)
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Incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed under the Exchange Act for the quarterly
period ended January 30, 2009 (Commission File No. 000-25225).
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(12)
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Incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed under the Exchange Act for the quarterly
period ended May 1, 2009 (Commission File No. 000-25225).
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(13)
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Incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed under the Exchange Act for the quarterly
period ended January 29, 2010 (Commission File No. 000-25225).
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(14)
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Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed under the Exchange Act on December 7, 2010
(Commission File No. 000-25225).
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(15)
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Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed under the Exchange Act on December 7, 2010
(Commission File No. 000-25225).
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(16)
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Incorporated by reference to Exhibit 10(aa) to the Company’s Annual Report on Form 10-K filed under the Exchange Act for the fiscal year
ended July 29, 2011 (Commission File No. 000-25225).
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(17)
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Incorporated by reference to Exhibit 10(bb) to the Company’s Annual Report on Form 10-K filed under the Exchange Act for the fiscal year
ended July 29, 2011 (Commission File No. 000-25225).
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(18)
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Incorporated by reference to Exhibit 10(cc) to the Company’s Annual Report on Form 10-K filed under the Exchange Act for the fiscal year
ended July 29, 2011 (Commission File No. 000-25225).
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(19)
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Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed under the Exchange Act on July 31, 2013
(Commission File No. 000-25225).
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(20)
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Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed under the Exchange Act on September 30, 2015.
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(21)
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Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed under the Exchange Act on October 28, 2016.
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(22)
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Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed under the Exchange Act on October 3, 2017.
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(23)
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Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed under the Exchange Act on October 3, 2017.
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(24)
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Incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed under the Exchange Act for the quarterly
period ended April 27, 2018.
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(25)
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Incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed under the Exchange Act for the quarterly
period ended April 27, 2018.
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(26)
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Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed under the Exchange Act on July 30, 2018.
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†Denotes management contract or compensatory plan, contract or
arrangement.
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 on this 28th day of September, 2018.
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CRACKER BARREL OLD COUNTRY STORE, INC.
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By:
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/s/Sandra B. Cochran
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Sandra B. Cochran,
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President and Chief Executive Officer
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Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of
the registrant in the capacities on this 28th day of September, 2018.
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Name
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Title
|
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/s/Sandra B. Cochran
Sandra B. Cochran
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President, Chief Executive Officer and Director
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/s/Jill M. Golder
Jill M. Golder
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Senior Vice President and Chief Financial Officer (Principal Financial Officer)
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/s/Jeffrey M. Wilson
Jeffrey M. Wilson
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Vice President, Corporate Controller (Principal Accounting Officer)
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/s/Thomas H. Barr
Thomas H. Barr
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Director
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/s/James W. Bradford
James W. Bradford
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Director and Chairman of the Board
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/s/Meg G. Crofton
Meg G. Crofton
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Director
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/s/Richard J. Dobkin
Richard J. Dobkin
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Director
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/s/Norman E. Johnson
Norman E. Johnson
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Director
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/s/William W. McCarten
William W. McCarten
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Director
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/s/Coleman H. Peterson
Coleman H. Peterson
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Director
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/s/Andrea M. Weiss
Andrea M. Weiss
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Director
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76
Exhibit 10(x)
CRACKER BARREL OLD COUNTRY STORE, INC.
and
SUBSIDIARIES
FY 2019 Annual Bonus
Plan
ARTICLE I
General
1.1 Establishment of the Plan. Pursuant to the Cracker Barrel Old Country Store, Inc. 2010 Omnibus Stock and Incentive Plan ( the “Omnibus Plan”), the Compensation Committee (the “Committee”) of the Board of Directors of
Cracker Barrel Old Country Store, Inc. (the “Company”) hereby establishes this FY 2019 Annual Bonus Plan (the “ABP”).
1.2 Plan Purpose. The purpose of this ABP is to specify appropriate opportunities to earn a bonus with respect to the Company’s 2019 fiscal year in order to reward officers of the Company and of its subsidiaries for the
Company’s financial performance during fiscal year 2019 and to further align their interests with those of the shareholders of the Company.
1.3 ABP Subject to Omnibus Plan. This ABP is established pursuant to, and it comprises a part of, the Omnibus Plan. Accordingly, all of the terms of the Omnibus Plan are incorporated in this ABP by reference as if
included verbatim. In case of a conflict between the terms and conditions of this ABP and the Omnibus Plan, the terms and conditions of the Omnibus Plan shall supersede this ABP and control the issue. It is intended that the ABP shall in all
respects be subject to and governed by the provisions of the Omnibus Plan.
ARTICLE II
Definitions
2.1 Omnibus Plan Definitions. Capitalized terms used in this ABP without definition have the meanings ascribed to them in the Omnibus Plan, unless otherwise expressly provided.
2.2 Other Definitions. In addition to those terms defined in the Omnibus Plan and elsewhere in this ABP, whenever used in this ABP, the following terms have the meanings set forth below:
| (a) |
“Affiliate” means of any corporation, partnership, limited liability company, association, trust or other entity or organization that, directly or indirectly through one
or more intermediaries, controls, is controlled by, or is under common control with, the Company, and “control” has the meaning specified in Rule 405 under the Securities Act of 1933, as amended.
|
| (b) |
“Annual Bonus” means the Award to be paid to a Participant based on the Performance Curve after the Committee determines the level of 2019 Operating Income that was
achieved (or such lesser amount as the Committee may determine in its discretion).
|
| (c) |
“Employment Agreement” means (i) a written employment agreement (not including an offer letter) pursuant to which a Participant is employed by the Company or an
Affiliate, or (ii) a written agreement that governs the employment relationship between a Participant and the Company or an Affiliate in respect of a Change in Control or similar transaction affecting the Company.
|
| (d) |
“Operating Income” means operating income for a fiscal year of the Company as calculated consistent with past practice and presented in the audited financial statements
of the Company, subject to adjustment as follows: excluding (i) extraordinary gains or losses and the effects of any sale of assets (other than in the ordinary course of business), (ii) litigation claims, settlements and expenses,
(iii) the effects of any changes in accounting principles, (iv) the effects of any charges or expenses related to extraordinary, non-operational charges or expenses relating to stockholder demands, inquiries or events and related
governance and other responses, (v) the effects of charges or expenses related to an organizational restructuring of the Company or one or more Subsidiaries, (vi) the effects of charges or expenses related to any severance event,
(vii) any other income or expenses which the Committee, in its discretion, determines are exceptional in nature.
|
| (e) |
“Performance Curve” means the range of potential payouts of Annual Bonuses to Participants, expressed as a multiple of Target Bonus and based on the achievement of
various levels of 2019 Operating Income, as established and approved by the Committee by resolution with respect to the Performance Period.
|
|
(f)
|
“Performance Period” means the Company’s 2019 fiscal year.
|
| (g) |
“Target Bonus” means an Award equal to a percentage of a Participant’s applicable base salary, which percentage is established or approved by the Committee or its duly
authorized delegate within the Performance Period.
|
| (h) |
“Target Level” means the amount of 2019 Operating Income established by the Committee that needs to be achieved by the Company in order for Target Bonuses to be paid to
Participants under the Performance Curve.
|
| (i) |
“Threshold Level” means the minimum amount of 2019 Operating Income established by the Committee that needs to be achieved by the Company in order for Annual Bonuses to
be paid to Participants under the Performance Curve.
|
ARTICLE III
Eligibility; Calculation and Payment of Awards
3.1 Plan Eligibility. The Participants in the ABP shall be those persons designated by the Committee or its authorized delegate.
3.2 Calculation and Payment of Awards. After the close of the Performance Period, the Committee shall determine the achievement of 2019 Operating Income of at least the Threshold Level and the level of Annual Bonuses, if
any, to be paid to Participants based on the Performance Curve. The Committee shall expressly approve the amount of any payment of Annual Bonus to any Participant who is an executive officer of the Company. Any Annual Bonus payable to a
Participant shall be paid in cash within a reasonable time after determination of the achievement of the Performance Goal by the Committee and, in any event, on or prior to March 15, 2020.
3.3 Limitation. In no event may any Participant receive an Annual Bonus that exceeds 200% of his or her Target Bonus.
2
ARTICLE IV
Termination of Employment
Except upon death or disability, if, prior to the certification of the Award as set forth in Section 3.2, a Participant’s employment
is terminated or the Participant voluntarily resigns, all of the Participant’s rights to an Annual Bonus shall be forfeited. If a Participant’s employment is terminated because of a Participant’s death or disability, the Participant’s Annual
Bonus shall be reduced to reflect only the period of employment prior to termination. The adjusted Award shall be based upon the number of days of employment during the Performance Period. In the case of a Participant’s disability, the employment
termination shall be deemed to have occurred on the date the Committee determines that the disability has occurred, pursuant to the Company’s then-effective group long-term disability insurance benefit for officers. Any Annual Bonus thereafter
determined by the Committee shall be payable at the time specified in Section 3.2.
ARTICLE V
Change in Control
Subject to Section 7.1, if a Change in Control takes place during fiscal 2019, (i) the Target Level of 2019 Operating Income under the
Performance Curve shall be deemed to have been met if the Company’s Operating Income through the end of the fiscal month preceding the Change in Control equals or exceeds 50% of the Company’s Operating Income for the comparable period in the 2018
fiscal year, (ii) all Annual Bonuses established by the Committee shall be immediately payable in cash to Participants upon the date of the Change in Control (subject to any election previously made by a Participant to defer receipt of such
Annual Bonus), and (iii) unless expressly terminated, this ABP shall continue in effect throughout the remainder of fiscal 2019 with the amount of any Annual Bonuses payable at the end of fiscal 2019 reduced by the amount of any Bonuses paid upon
the Change in Control.
ARTICLE VI
Recoupment Policy
6.1 General Recoupment Policy. The Company may recover any incentive compensation awarded or paid pursuant to this ABP based on (i) achievement of financial results that were subsequently the subject of a restatement due
to material noncompliance with any financial reporting requirement under either GAAP or the federal securities laws, other than as a result of changes to accounting rules and regulations, or (ii) a subsequent finding that the financial
information or performance metrics used by the Committee to determine the amount of the incentive compensation were materially inaccurate, in each case regardless of individual fault. In addition, the Company may recover any incentive
compensation awarded or paid pursuant to this ABP based on a Participant’s conduct which is not in good faith and which materially disrupts, damages, impairs or interferes with the business of the Company and its affiliates. The provisions of
this Article VI shall apply to any incentive compensation earned or paid to a Participant pursuant to this ABP. Subsequent changes in status, including retirement or termination of employment, do not affect the Company’s rights to recover
compensation under this policy.
6.2 Administration of Policy. The Committee will administer this policy and exercise its discretion and business judgment in the fair application of this policy based on the facts and circumstances as it deems relevant in
its sole discretion. More specifically, the Committee shall determine in its discretion any appropriate amounts to recoup, the officers from whom such amounts shall be recouped (which need not be all officers who received the bonus compensation
at issue) and the timing and form of recoupment; provided, that only compensation paid or settled within three years prior to the Committee taking action under this Article VI shall be subject to recoupment; provided further, that any recoupment
pursuant to clause (i) or (ii) of the first sentence of this paragraph shall not exceed the portion of any applicable bonus paid hereunder that is in excess of the amount of performance-based or incentive compensation that would have been paid or
granted based on the actual, restated financial statements or actual level of the applicable financial or performance metrics as determined by the Committee in its sole discretion.
3
6.3 Setoff. For avoidance of doubt, the Company may set off the amounts of any such required recoupment against any amounts otherwise owed by the Company to a Participant as determined by the Committee in its sole
discretion, solely to the extent any such offset complies with the requirements of Section 409A of the Code and the guidance issued thereunder.
6.4 Other Adjustments. If any restatement of the Company’s financial results indicates that the Company should have made higher performance-based payments than those actually made under the ABP for a period affected by
the restatement, then the Committee shall have discretion, but not the obligation to cause the Company to make appropriate incremental payments to affected Participants then-currently employed by the Company. The Committee will determine, in its
sole discretion, the amount, form and timing of any such incremental payments, which shall be no more than the difference between the amount of performance-based compensation that was paid or awarded and the amount that would have been paid or
granted based on the actual, restated financial statements.
ARTICLE VII
Employment Agreements
7.1 Precedence of Employment Agreement. In case of a conflict between the terms and conditions of this ABP and those of a Participant’s Employment Agreement(s) relating to the Annual Bonus covered hereby—including,
without limitation, regarding the level at which the Annual Bonus shall be calculated, the effect of a termination of the Participant’s employment upon his or her rights with respect to the Annual Bonus or the payment of the Annual Bonus upon or
following a Change in Control—the provisions of such Participant’s Employment Agreement(s) shall remain in full force and effect and shall supersede this ABP and control the issue with respect to such conflict.
4
Exhibit 10(y)
CRACKER BARREL OLD COUNTRY STORE, INC.
and
SUBSIDIARIES
FY 2019 Long-Term
Incentive Program
ARTICLE I
General
1.1 Establishment of the Program. Pursuant to the Cracker Barrel Old Country Store, Inc. 2010 Omnibus Stock and Incentive Plan (the “Omnibus
Plan”), the Compensation Committee (the “Committee”) of the Board of Directors of Cracker Barrel Old Country Store, Inc. (the “Company”) hereby establishes this FY 2019 Long-Term Incentive Program (the “Program”).
1.2 Purpose. This Program consists of three forms of long-term incentive awards: (a) an LTPP Award, (b) a TSR-Variable RSU Award, and (c) a Time-Based RSU Award. The purposes of the Program are to
reward officers of the Company and its subsidiaries for the Company’s financial and stock performance during fiscal years 2019, 2020 and/or 2021, as applicable, and to retain them during this time. The Program is also intended to attract and
retain the best possible executive talent to the Company, to motivate officers to focus attention on long-term objectives and strategic initiatives, and to further align their interests with those of the shareholders of the Company.
1.3 Program Subject to Omnibus Plan. This Program is established pursuant to, and it comprises a part of, the Omnibus Plan. Accordingly, all of the terms and conditions of the Omnibus Plan are
incorporated in this Program by reference as if included verbatim. In case of a conflict between the terms and conditions of the Program and the Omnibus Plan, the terms and conditions of the Omnibus Plan shall supersede and control the issue.
ARTICLE II
Definitions
2.1 Omnibus Plan Definitions. Capitalized terms used in this Program without definition have the meanings ascribed to them in the Omnibus Plan, unless otherwise expressly provided.
2.2 Other Definitions. In addition to those terms defined in the Omnibus Plan and elsewhere in this Program, whenever used in this Program, the following terms have the meanings set forth below:
(a) “Affiliate” means of any
corporation, partnership, limited liability company, association, trust or other entity or organization that, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, the Company, and
“control” has the meaning specified in Rule 405 under the Securities Act of 1933, as amended.
(b) “Cause,” in addition to those
reasons specified in the Omnibus Plan, also includes unsatisfactory performance or staff reorganizations.
(c) “Employment Agreement” means
(i) a written employment agreement (not including an offer letter) pursuant to which a Participant is employed by the Company or an Affiliate, or (ii) a written agreement that governs the employment relationship between a Participant and the
Company or an Affiliate in respect of a Change in Control or similar transaction affecting the Company.
(d) “Grant Date” means the date on
which an Award under this Program is granted by the Company to a Participant.
(e) “LTPP Award” means an Award
granted as an “LTPP Award” hereunder that is denominated in either cash or Shares, including any cash dividend equivalent rights related thereto, as determined by the Committee. An LTPP Award denominated in Shares shall be considered an Award of
“Performance Shares” within the meaning of the Omnibus Plan, and an LTPP Award denominated in cash shall be considered an Award of a “Performance Unit” within the meaning of the Omnibus Plan.
(f) “Operating Income” means
operating income for a fiscal year of the applicable Performance Period, as calculated consistent with past practice and presented in the audited financial statements of the Company, subject to adjustment as follows: excluding (i) extraordinary
gains or losses and the effects of any sale of assets (other than in the ordinary course of business), (ii) litigation claims, settlements and expenses, (iii) the effects of any changes in accounting principles, (iv) the effects of any charges or
expenses related to extraordinary, non-operational charges or expenses relating to stockholder demands, inquiries or events and related governance and other responses, (v) the effects of charges or expenses related to an organizational
restructuring of the Company or one or more Subsidiaries, (vi) the effects of charges or expenses related to any severance event, (vii) any other income or expenses which the Committee, in its discretion, determines are exceptional in nature.
(g) “Performance Period” (i) with
respect to LTPP Awards hereunder means the Company’s 2019 and 2020 fiscal years and (ii) with respect to TSR-Variable RSU Awards hereunder means the Company’s 2019, 2020 and 2021 fiscal years.
(h) “Performance Shares” means
the Shares payable pursuant to the settlement of an LTPP Award denominated in Shares.
(i) “Relative TSR” means the change
in the price of a Share (comparing the beginning Share price to the ending Share price, as calculated below), plus dividends paid, during the applicable Performance Period (“TSR”)
as compared to the TSR of a group of peer companies as determined by the Compensation Committee. The beginning Share price shall be determined by averaging the applicable closing Share prices as reported by NASDAQ (or such other exchange or
market on which the Shares are traded) during the 60-calendar day period on either side of the start of the Company’s 2019 fiscal year (last 30 days of FY19 and first 30 days of FY20). The ending Share price shall be determined by averaging the
applicable closing Share prices as reported by NASDAQ (or such other exchange or market on which the Shares are traded) during the 60-calendar day period on either side of the end of the Company’s 2021 fiscal year (last 30 days of FY21 and first
30 days of FY22.
2
(j) “Retirement” (or the
correlative “Retire” or “Retires”) means the voluntary termination of employment by a Participant in good standing under this Program at a time when the Participant meets the definition of Retirement Eligible.
(k) “Retirement Eligible” means
that a Participant:
1. shall have achieved the age of 60, and
2. has five (5) or more years of service with the Company, its predecessors or
Subsidiaries, and
3. provides at least 60 days’ notice prior to the intended retirement date.
(l) “Return on Invested Capital” means the quotient of the following, as calculated consistent with past practice and the audited financial statements: (i) the average of Operating Income for each year of the Performance Period plus the
average of rent paid during each year of the Performance Period, divided by (ii) the average end of year balances for the 2017, 2018 and 2019 fiscal years of the sum of the following balance sheet items: inventory, net property held for sale, net
property, plant & equipment and capitalized leases reduced by accounts payable.
(m) “Target LTPP Award” means the
target LTPP Award to which a Participant would be entitled if the Company achieves the applicable target performance determined by the Committee with respect to the applicable Performance Period.
(n) “Target TSR-Variable RSU
Award” means the target number of Shares payable pursuant to a TSR-Variable RSU Award to which a Participant would be entitled if the Company achieves the applicable target performance determined by the Committee with respect to the applicable
Performance Period.
(o) “Time-Based RSU Award” means an
Award of Restricted Stock Units subject to time-based vesting requirements granted to a Participant hereunder.
(p) “TSR-Variable RSU Award” means
an Award granted as a “TSR-Variable RSU Award” hereunder that is denominated in Shares, including any cash dividend equivalent rights related thereto. TSR-Variable RSU Awards represent notional units of measurement each having a value equivalent
to one Share, subject to the terms hereof. TSR-Variable RSU Awards are unfunded, unsecured obligations of the Company. A TSR-Variable RSU Award shall be considered an Award of “Performance Shares” within the meaning of the Omnibus Plan.
3
ARTICLE III
LTPP Awards
3.1 Eligibility. Participants eligible to receive an LTPP Award shall be those persons designated by the Committee or its duly authorized delegate. No new Participants are eligible after the third
fiscal quarter of the Company’s 2019 fiscal year. The Company will provide each Participant with an Award Notice, in such form as the Company shall determine, setting forth such Participant’s Target LTPP Award.
3.2 Award Eligibility. The actual number of Performance Shares or amount of cash earned by a Participant pursuant to his or her LTPP Award shall be determined by multiplying the Target LTPP Award by a
multiplier established by the Committee, which multiplier shall be determined based on the Company’s achievement of Return on Invested Capital during the Performance Period. The actual number of Performance Shares or amount of cash to be paid to
a Participant pursuant to an LTPP Award may range from 0% to 200% of the Participant’s Target LTPP Award.
3.3 Settlement. Any LTPP Award made by the Committee shall be settled or paid promptly following the determination by the Committee of the level of achievement of Return on Invested Capital during the
Performance Period, but in no event after March 15 of the calendar year following the calendar year in which the applicable Performance Period ends.
3.4 Restrictions; Cash Dividend Equivalent Rights. The Performance Shares (or cash) with respect thereto shall not vest or otherwise become payable to a Participant, nor shall a Participant have any of
the rights of a shareholder of the Company with respect to any Performance Shares, until the end of the Performance Period to which the LTPP Award relates; provided, however, that Participants shall receive dividend equivalent rights in respect
of the Performance Shares covered by the LTPP Award (if any) at the time of any payment of dividends to stockholders on Shares. The Performance Shares covered by a Participant’s LTPP Award will be credited with a cash amount equal to the amount
that would be payable to the Participant as a stockholder in respect of a number of Shares equal to the maximum number of Performance Shares that could be issued to the Participant pursuant to the Participant’s LTPP Award as of the dividend
record date. Each cash dividend equivalent right will vest and be payable at the time and only to the extent the Performance Shares to which it relates vest, and only those cash dividend equivalent rights that relate to Performance Shares covered
by the earned LTPP Award shall be paid. No dividend equivalent rights will accrue with respect to LTPP Awards denominated in cash.
ARTICLE IV
TSR-Variable RSU Awards
4.1 Eligibility. Participants eligible to receive a TSR-Variable RSU Award shall be those persons designated by the Committee or its duly authorized delegate. No new Participants are eligible after the
third fiscal quarter of the Company’s 2019 fiscal year. The Company will provide each Participant with an Award Notice, in such form as the Company shall determine, setting forth such Participant’s Target TSR-Variable RSU Award.
4
4.2 Award Eligibility. The actual number of Shares payable to a Participant pursuant to his or her TSR-Variable RSU Award shall be determined by multiplying the Target TSR-Variable RSU Award by a
multiplier established by the Committee, which multiplier shall be determined based on the achievement of the Company’s Relative TSR during the applicable Performance Period. The actual number of Shares payable pursuant to a TSR-Variable RSU
Award awarded to a Participant hereunder may range from 75% to 125% of the Participant’s Target TSR-Variable RSU Award.
4.3 Settlement. Settlement of vested TSR-Variable RSU Awards shall be made by delivering the applicable number of Shares to the Participants promptly following the date on which the Committee
determines the achievement of Relative TSR during the Performance Period; but in no event after March 15 of the calendar year following the calendar year in which the applicable Performance Period ends.
4.4 Restrictions; Cash Dividend Equivalent Rights. No TSR-Variable RSU Award shall vest or otherwise become payable to a Participant prior to the expiration of the applicable Performance Period, nor
shall a Participant have any of the rights of a shareholder of the Company with respect to any TSR-Variable RSU Award until the end of the applicable Performance Period; provided, however, that Participants shall receive dividend equivalent
rights in respect of the Shares issued under the TSR-Variable RSU Award at the time of any payment of dividends to stockholders on Shares. The Shares subject to a Participant’s TSR-Variable RSU Award will be credited with a cash amount equal to
the amount that would be payable to the Participant as a stockholder in respect of a number of Shares equal to the maximum number of Shares that could be issued to the Participant pursuant to the Participant’s TSR-Variable RSU Award as of the
dividend record date. Each cash dividend equivalent right will vest and be payable at the time and only to the extent the Shares to which it relates vest, and only those cash dividend equivalent rights that relate to Shares covered by the earned
TSR-Variable RSU Award shall be paid.
ARTICLE V
Time-Based RSU Awards
5.1 Eligibility. Participants eligible to receive a Time-Based RSU Award under this Program shall be those persons designated by the Committee or its duly authorized delegate. No new Participants are
eligible after the third fiscal quarter of the Company’s 2019 fiscal year. The Company will provide each Participant with an Award Notice, in such form as the Company shall determine, setting forth such Participant’s Target Time-Based RSU Award.
5.2 Limitations. Awards of Time-Based RSUs shall be subject to all the restrictions, limitations and other terms and provisions of the Omnibus Plan and this Program. Each Time-Based RSU shall be a
notional unit of measurement denominated in Shares (i.e., one Time-Based RSU being equivalent in value to one Share, subject to the terms hereof). Time-Based RSUs shall represent an unfunded, unsecured obligation of the Company. A bookkeeping
account will be maintained by the Company to keep track of the Time-Based RSUs and any dividend equivalent rights that may accrue as provided hereunder.
5
5.3 Vesting. Awards of Time-Based RSUs, subject to all of the restrictions, limitations and other terms and provisions of the Omnibus Plan
and this Program, shall become 100% vested on the third anniversary of the Grant Date (such date, the “Vesting
Date”) so long as the Participant has been continuously employed by the Company or its Affiliates from the Grant Date until such Vesting Date.
5.4 Restrictions; Cash Dividend Equivalent Rights. A Participant shall not have any of the rights of a shareholder of the Company with respect to any Time-Based RSU Award until the end of the
applicable Vesting Period; provided, however, that Participants shall receive dividend equivalent rights in respect of the Shares issued under the Time-Based RSU Award at the time of any payment of dividends to stockholders on Shares. The Shares
subject to a Participant’s vested Time-Based RSU Award will be credited with a cash amount equal to the amount that would be payable to the Participant as a stockholder in respect of a number of Shares equal to the number of Shares covered by the
Time-Based RSU Award outstanding and unpaid as of the dividend record date. Each cash dividend equivalent right will vest and be payable at the time and only to the extent the Time-Based RSU Award to which it relates is paid, and only those cash
dividend equivalent rights that relate to Shares issued under the vested Time-Based RSU Award shall be paid.
5.5 Settlement. A Participant shall be entitled to settlement of an Award of Time-Based RSUs on the Vesting Date. Such settlement shall be
made as promptly as practicable thereafter (but in no event after the thirtieth day following the applicable Vesting Date). Any settlement of Time-Based RSUs granted pursuant to an Award thereof shall be made in Shares through the issuance to
the Participant of a stock certificate (or evidence such Shares have been registered in the name of the Participant with the relevant stock agent) for a number of Shares equal to the number of such vested Time-Based RSUs; provided, that any
cash-based dividend equivalent rights granted pursuant to Section 5.4 hereof shall be paid in
cash when (and only if) the Time-Based RSUs to which they relate are settled.
ARTICLE VI
Additional Vesting Conditions
Applicable to Awards
6.1 Service Requirements. In addition to the performance and/or time-based vesting requirements set forth in this Program, but subject to the remaining provisions of this Article VI, the right of any Participant to receive settlement or payment of an Award granted hereunder shall become vested only if he or she remains continuously employed by the Company or an
Affiliate from the grant date of the Award until the end of the applicable Performance Period or Vesting Period, as the case may be. Subject to Sections 6.2 to 6.5 hereof, if the service vesting requirements of this Section 6.1 are not satisfied, all of
the Shares (including any cash dividend equivalent rights related thereto) or cash subject to Awards granted hereunder shall be immediately forfeited and the Participant’s rights with respect thereto shall cease.
6
6.2 Death, Disability or Retirement. If, prior to the end of the Performance Period or the Vesting Date, as the case may be, a Participant’s employment is terminated because of death, disability or
Retirement, any Award of such Participant shall be reduced pro rata to reflect only employment prior to that termination. The reduced Award shall be based upon the number of calendar days of employment from the beginning of the applicable
Performance Period or Grant Date, as the case may be (or, if later, the date of the Participant’s hire) until the date of such termination. In the case of a Participant’s disability, the employment termination shall be deemed to have occurred on
the date the Committee determines that the disability has occurred, pursuant to the Company’s then-effective group long-term disability insurance benefit for officers. The Award shall otherwise be determined and settled or paid (including any
cash dividend equivalent rights related thereto) on the same schedules set forth in Section 3.3, Section
4.3, or Section 5.5, as the case may be, including being conditioned upon the achievement of any applicable performance goals.
6.3 Termination Following Performance Period. If a Participant ceases to be employed by the Company (or any Affiliate) for any reason other than for Cause following the close of the applicable
Performance Period, the Participant shall be entitled to payment or settlement of his or her LTPP Award and/or TSR-Variable RSU Award at the time and on the basis specified in Section
3.3 or Section 4.3, as the case may be.
6.4 Termination of Employment For Cause. If, prior to the date on which any Award is finally paid or settled, a Participant’s employment is terminated for Cause, all of the Participant’s rights to any
Awards hereunder shall be forfeited.
6.5 Effect of Change in Control. In the event of a Change in Control, any Awards granted hereunder shall vest and otherwise be handled pursuant to the terms of a Participant’s Employment Agreement,
or, if the Participant does not have an Employment Agreement, as the Committee in its discretion shall determine in accordance with the Omnibus Plan.
6.6 Tax Withholding. Except as otherwise provided by the Committee, upon the settlement of any Award, the Company shall reduce the number
of Shares (and the amount of cash, in the case of cash-based dividend equivalent rights) that would otherwise be issued to the Employee upon settlement of the Award by a number of Shares (and cash, if applicable) having an aggregate Fair Market
Value on the date of such issuance equal to the payment to satisfy at least the minimum withholding tax obligation (or such other withholding amount as determined by the Committee or the Participant that would not exceed the maximum withholding
obligation provided by law or that otherwise would not result in adverse accounting treatment of the Award to the Company) of the Company with respect to which the Award is being settled.
ARTICLE VII
Recoupment Policy
7.1 General Recoupment Policy. The Company is entitled to recover any incentive compensation awarded or paid pursuant to this Program based on (i) achievement of financial results that were
subsequently the subject of a restatement due to material noncompliance with any financial reporting requirement under either GAAP or the federal securities laws, other than as a result of changes to accounting rules and regulations, or (ii) a
subsequent finding that the financial information or other performance metrics not derived from audited GAAP financial statements used by the Committee to determine the amount of the incentive compensation were materially inaccurate, in each case
regardless of individual fault. The provisions of this Article VII shall apply to any incentive compensation earned or paid to a Participant pursuant to this Program,
including compensation paid in Shares and any cash dividend equivalent rights related thereto. Subsequent changes in status, including retirement or termination of employment, do not affect the Company’s rights to recover compensation under this
policy.
7
7.2 Administration of Policy. The Committee will administer this policy and exercise its discretion and business judgment in the fair application of this policy based on the relevant facts and
circumstances. More specifically, the Committee shall use its reasonable best efforts to determine any appropriate amounts to recoup, the officers from whom such amounts shall be recouped (which need not be all officers who received the bonus
compensation at issue) and the timing and form of recoupment; provided, that only compensation paid or settled within three years prior to the Committee taking action under this Article
VII shall be subject to recoupment; provided further, that any recoupment pursuant to Section 7.1 shall not exceed the portion of any applicable bonus
paid hereunder that is in excess of the amount of performance-based or incentive compensation that would have been paid or granted based on the actual, restated financial statements or actual level of the applicable financial or performance
metrics as determined by the Committee.
7.3 Setoff. For avoidance of doubt, the Company may set off the amounts of any such required recoupment against any amounts otherwise owed by the Company to a Participant, solely to the extent any such
offset complies with the requirements of Section 409A of the Code and the guidance issued thereunder.
7.4 Other Adjustments. If any restatement of the Company’s financial results indicates that the Company should have made higher performance-based payments than those actually made under the Program for
a period affected by the restatement, then the Committee shall have discretion, but not the obligation to cause the Company to make appropriate incremental payments to affected Participants then-currently employed by the Company. The Committee
will determine the amount, form and timing of any such incremental payments, which shall be no more than the difference between the amount of performance-based compensation that was paid or awarded and the amount that would have been paid or
granted based on the actual, restated financial statements.
ARTICLE VIII
Miscellaneous
8.1 Restrictions on Transfer. No Award covered hereby may be sold, assigned, transferred, encumbered, hypothecated or pledged by
voluntary or involuntary act or by operation of law, other than by testamentary bequest or devise or the laws of descent or distribution. Distribution of Shares to which any Awards relate (including any dividend equivalent rights) will be made only to the Participant; or, if the Committee has been provided with evidence acceptable to it that the
Participant is legally incompetent, the Participant’s personal representative; or, if the Participant is deceased, to the beneficiaries or personal representative that the Participant has designated in the manner
required by the Committee. The Committee may require personal receipts or endorsements of a Participant's personal representative or beneficiaries. Any effort to assign or
transfer the rights will be wholly ineffective, and will be grounds for termination by the Committee of all rights of the Participant and his/her beneficiary in and under
this Program.
8
8.2 Effect of Employment Agreement. Any provisions of a Participant’s Employment Agreement relating to the effect of a termination of the Participant’s employment upon his or her rights with respect to
the Awards covered hereby, including, without limitation, any provisions regarding acceleration of vesting and/or payment of the Awards in the event of termination of employment, shall be fully applicable and supersede any provisions hereof with
respect to the same subject matter.
8.3 No Right of Employment. Nothing in this Program shall confer upon any Participant any right to continue as an employee of the Company or an Affiliate or interfere in any way with the right of the
Company or an Affiliate to terminate a Participant’s employment at any time or to change the terms and conditions of such employment.
8.4 Governing Law. This Program and the Awards issued hereunder shall be construed and enforced in accordance with the laws of the State of Tennessee, without giving effect to the choice of law
principles thereof.
8.5 Section 409A.
(a) Notwithstanding the other
provisions hereof, the Awards issued hereunder are intended to comply with or be exempt from the requirements of Section 409A of the Code, to the extent applicable, and this Program shall be interpreted to avoid any penalty sanctions under
Section 409A of the Code. Accordingly, all provisions herein, or incorporated by reference, shall be construed and interpreted to comply with Section 409A of the Code and, if necessary, any such provision shall be deemed amended to comply with
Section 409A of the Code and regulations thereunder. If any payment cannot be provided or made at the time specified herein without incurring sanctions under Section 409A of the Code, then such payment shall be provided in full at the earliest
time thereafter when such sanctions will not be imposed. Except to the extent permitted under Section 409A of the Code, in no event may a Participant, directly or indirectly, designate the calendar year of any payment under this Award.
(b) Notwithstanding any provision
to the contrary in this Program and to the extent that Section 409A of the Code (including Section 409A(a)(2)(b) of the Code) is applicable to this Program, if on the date of a Participant’s termination of employment, he or she is a “specified
employee” (as such term is defined in Section 409A(a)(2)(B)(i) of the Code and its corresponding regulations) as determined by the Board (or its delegate) in accordance with its “specified employee” determination policy, then the amount of an
Award that constitutes deferred compensation subject to the requirements of Section 409A of the Code that are payable within the six (6) month period following such Participant’s separation from service shall be postponed for a period of six (6)
months following the “separation from service” with the Company (or any successor thereto). Any payments delayed pursuant to this Section 8.5(b) will be made in a lump
sum on the Company’s first regularly scheduled payroll date that follows such six (6) month period or, if earlier, the date of the Participant’s death.
9
(c) Notwithstanding any other
provision to the contrary, a termination of employment shall not be deemed to have occurred for purposes of any provision of this Program providing for the payment of “deferred compensation” (within the meaning of Section 409A of the Code) upon
or following a termination of employment unless such termination is also a “separation from service” from the Company within the meaning of Section 409A of the Code and Section 1.409A-1(h) of the Treasury Regulations and, for purposes of any such
provision of this Program, references to a “separation,” “termination,” “termination of employment” or like terms shall mean “separation from service.”
(d) For the avoidance of doubt, any
payment due pursuant to this Program within a period following an applicable payment event, shall be made on a date during such period as determined by the Company in its sole discretion.
10
EXHIBIT 21
Subsidiaries of the Registrant
The following is a list of the significant subsidiaries of the Registrant as of August 3, 2018, all of which are wholly-owned:
|
Parent
|
State of
Incorporation
|
|
Cracker Barrel Old Country Store, Inc.
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Tennessee
|
|
Subsidiaries
|
|
|
CBOCS Distribution, Inc.
|
|
|
(dba Cracker Barrel Old Country Store)
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Tennessee
|
|
CBOCS Properties, Inc.
|
|
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(dba Cracker Barrel Old Country Store)
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Michigan
|
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CBOCS West, Inc.
|
|
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(dba Cracker Barrel Old Country Store)
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Nevada
|
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Rocking Chair, Inc.
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Nevada
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Exhibit 23
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in Registration Statement Nos. 33-37567, 33-45482, 333-63442, 333-71384, 333-81063, 333-111364 and
333-174744 on Form S-8 of our reports dated September 28, 2018 relating to the consolidated financial statements of Cracker Barrel Old Country Store, Inc., and the effectiveness of Cracker Barrel Old Country Store, Inc.’s internal control over
financial reporting, appearing in this Annual Report on Form 10-K of Cracker Barrel Old Country Store, Inc. for the year ended August 3, 2018.
/s/Deloitte & Touche LLP
Nashville, Tennessee
September 28, 2018
|
EXHIBIT 31.1
|
CERTIFICATION
|
I, Sandra B. Cochran, certify that:
| 1. |
I have reviewed this Annual Report on Form 10-K of Cracker Barrel Old Country Store, 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
| (c) |
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
|
| (d) |
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 the 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: September 28, 2018
/s/Sandra B. Cochran
Sandra B. Cochran, President and
Chief Executive Officer
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EXHIBIT 31.2
|
CERTIFICATION
|
I, Jill M. Golder, certify that:
| 1. |
I have reviewed this Annual Report on Form 10-K of Cracker Barrel Old Country Store, 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
| (c) |
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
|
| (d) |
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 the 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: September 28, 2018
/s/Jill M. Golder
Jill M. Golder, Senior Vice President
and Chief Financial Officer
Exhibit 32.1
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 the Annual Report of Cracker Barrel Old Country Store, Inc. (the “Issuer”) on Form 10-K for the fiscal year ended August 3, 2018,
as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Sandra B. Cochran, 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: September 28, 2018
|
By:
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/s/Sandra B. Cochran |
|
Sandra B. Cochran
|
||
|
President and Chief Executive Officer
|
Exhibit 32.2
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 the Annual Report of Cracker Barrel Old Country Store, Inc. (the “Issuer”) on Form 10-K for the fiscal year ended August 3, 2018, as filed
with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jill M. Golder, 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: September 28, 2018
|
By:
|
/s/Jill M. Golder |
|
Jill M. Golder,
|
||
|
Senior Vice President and Chief Financial Officer
|