FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarterly Period Ended November 1, 1996
Commission file number 0-7536
CRACKER BARREL OLD COUNTRY STORE, INC.
Incorporated in Tennessee I.R.S. Employer Identification
No. 62-0812904
Hartmann Drive, P.O. Box 787
Lebanon, Tennessee 37087
615-444-5533
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No_
60,780,640 Shares of Common Stock
Issued and Outstanding
Page 1 of 14
1
PART I
Item 1. Financial Statements
CRACKER BARREL OLD COUNTRY STORE, INC.
CONDENSED BALANCE SHEET
(In thousands, except share data)
November 1, August 2,
1996 1996
____ ____
ASSETS (Unaudited) (Audited)
Current assets:
Cash and cash equivalents $ 5,543 $ 28,971
Short-term investments 1,356 4,735
Receivables 2,586 2,803
Inventories 77,949 61,470
Prepaid expenses 1,586 1,485
Deferred income taxes 6,972 6,972
________ ________
Total current assets 95,992 106,436
________ ________
Property and equipment,net 598,368 568,573
Long-term investments 564 565
Other assets 786 805
________ ________
Total assets $695,710 $676,379
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 29,334 $ 30,565
Accrued expenses 50,208 48,452
Current portion of long-term debt 4,000 4,000
Current portion of capital lease
obligations 130 130
________ ________
Total current liabilities 83,672 83,147
________ ________
Long-term debt 15,500 15,500
Capital lease obligations 1,435 1,468
Deferred income taxes 10,043 10,043
Stockholders' equity:
Common stock - $.50 par value, 30,308 30,297
authorized 150,000,000 shares,
issued and outstanding 60,615,628
at November 1, 1996 and 60,594,353
at August 2, 1996
Additional paid-in capital 203,232 202,951
Retained earnings 351,520 332,973
________ ________
Total stockholders' equity 585,060 566,221
________ ________
Total liabilities and stockholders'
equity $695,710 $676,379
======== ========
See notes to condensed financial statements.
2
CRACKER BARREL OLD COUNTRY STORE, INC.
CONDENSED STATEMENT OF INCOME
(In thousands, except per share data)
(Unaudited)
Quarters Ended
November 1, October 27,
1996 1995
____ ____
Net sales:
Restaurant $202,528 $174,557
Retail 56,374 46,454
________ ________
Total sales 258,902 221,011
Cost of goods sold 89,315 73,607
________ ________
Gross profit on sales 169,587 147,404
Labor & related expenses 87,225 73,949
Other store operating expenses 37,969 33,331
General and administrative 14,354 13,562
________ ________
Total expenses 139,548 120,842
________ ________
Operating income 30,039 26,562
Interest expense - 179
Interest income 364 704
________ ________
Pretax income 30,403 27,087
Provision for income taxes 11,553 10,293
________ ________
Net income $ 18,850 $ 16,794
======== ========
Earnings per share $ .31 $ .28
======== ========
Weighted average shares 61,107 60,621
======== ========
Dividends per share $ .005 $ .005
======== ========
See notes to condensed financial statements.
3
CRACKER BARREL OLD COUNTRY STORE, INC.
CONDENSED STATEMENT OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended
November 1, October 27,
1996 1995
____ ____
Cash flows from operating activities:
Net income $18,850 $16,794
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization of
property and equipment 8,983 7,863
(Gain)loss on disposition of property
and equipment (56) 9
Increase in inventories (16,479) (12,185)
Decrease(increase) in other assets 19 (101)
Decrease in accounts payable (1,231) (3,483)
Increase in other current assets
and liabilities 1,872 4,147
_______ _______
Net cash provided by operating activities 11,958 13,044
_______ _______
Cash flows from investing activities:
Purchase of short-term and long-term
investments -- (1,835)
Proceeds from maturities of short-term and
long-term investments 3,380 403
Purchase of property and equipment (39,537) (30,012)
Proceeds from sale of property and equipment 815 20
_______ _______
Net cash used in investing activities (35,342) (31,424)
_______ _______
Cash flows from financing activities:
Proceeds from exercise of stock options 292 2,164
Principal payments under long-term debt
and capital lease obligations (33) (28)
Dividends on common stock (303) (301)
_______ _______
Net cash (used in)provided by financing
activities (44) 1,835
_______ _______
Net decrease in cash and cash equivalents (23,428) (16,545)
Cash and cash equivalents, beginning of period 28,971 48,124
_______ _______
Cash and cash equivalents, end of period $ 5,543 $31,579
======= =======
Supplemental disclosures of cash flow
information:
Cash paid during the three months for:
Interest $ 8 $ 12
Income taxes 5,326 5,495
See notes to condensed financial statements.
4
CRACKER BARREL OLD COUNTRY STORE, INC.
______________________________________
NOTES TO CONDENSED FINANCIAL STATEMENTS
_______________________________________
1. Condensed Financial Statements
______________________________
The condensed balance sheet as of November 1, 1996 and the related
condensed statements of income and of cash flow for the quarters ended
November 1, 1996 and October 27, 1995, have been prepared by the Company,
without audit; in the opinion of management, all adjustments for a fair
presentation of such condensed financial statements have been made.
These condensed financial statements should be read in conjunction with the
financial statements and notes thereto contained in the Company's annual
report for the year ended August 2, 1996.
Deloitte & Touche LLP, the Company's independent auditors, have performed
a limited review of the financial information included herein. Their report
on such review accompanies this filing.
2. Income Taxes
____________
The provision for income taxes for the quarter ended November 1, 1996 has
been computed based on management's estimate of the tax rate for the entire
fiscal year of 38.0%. The variation between the statutory tax rate and the
effective tax rate is due primarily to employer tax credits for FICA taxes
paid on tip income. The Company's effective tax rates for the quarter ended
October 27, 1995 and for the entire fiscal year of 1996 were 38.0%.
3. Accounting Pronouncements Adopted
_________________________________
The Company adopted Statement of Financial Accounting Standards
("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of", effective August 3, 1996. SFAS No. 121
requires that upon adoption companies must review all their assets and
determine under certain circumstances if an asset has been impaired, in which
case the asset is written down to a new carrying amount that is less than the
remaining cost and a loss is recognized. After adoption companies must
review assets for impairment whenever events or circumstances indicate that
the carrying amount of an asset may not be recoverable. Upon adoption, the
Company reviewed all its assets as required by SFAS No. 121 and no loss was
required to be recognized in the first quarter.
The Company adopted SFAS No. 123, "Accounting for Stock-Based
Compensation", effective August 3, 1996. SFAS No. 123 establishes a "fair
value" based method for stock compensation plans. The Company has elected to
continue to account for its stock-based employee compensation arrangements
under Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees", as permitted by SFAS No. 123. However, the Company
will comply with the disclosure requirements of SFAS No. 123 in its fiscal
1997 Annual Report.
5
4. Seasonality
___________
The sales and profits of the Company are affected significantly by seasonal
travel and vacation patterns because of its interstate highway locations.
Historically, the Company's greatest sales and profits have occurred during
the period of June through August. Early December through the last part of
February, excluding the Christmas holidays, has historically been the period
of lowest sales and profits. Therefore, the results of operations for the
quarter ended November 1, 1996 cannot be considered indicative of the
operating results for the full fiscal year.
6
Item 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition (In thousands)
Results of Operations
The following table highlights operating results for the quarter ended
November 1, 1996 as compared to the same period a year ago:
Quarters Ended
November 1, October 27,
1996 1995
____ ____
Net sales:
Restaurant 78.2% 79.0%
Retail 21.8 21.0
_____ _____
Total sales 100.0% 100.0%
Cost of goods sold 34.5 33.3
_____ _____
Gross profit on sales 65.5 66.7
Labor & related expenses 33.7 33.5
Other store operating expenses 14.7 15.1
General and administrative 5.5 6.1
_____ _____
Total expenses 53.9 54.7
Operating income 11.6 12.0
Interest expense 0.0 0.1
Interest income 0.2 0.4
_____ _____
Pretax income 11.8 12.3
Provision for income taxes 4.5 4.7
_____ _____
Net income 7.3% 7.6%
===== =====
Same Store Sales Analysis
214 Store Average
_________________
Restaurant $ 788.4 $778.1
Retail 218.5 207.9
________ ______
Restaurant & retail $1,006.9 $986.0
======== ======
Comparable 13-Week Periods Ended
Same Store Sales Analysis
214 Store Average
_________________
November 1, November 3,
1996 1995
____ ____
Restaurant $ 788.4 $766.6
Retail 218.5 207.3
________ ______
Restaurant & retail $1,006.9 $973.9
======== ======
7
Sales
_____
Net sales for the first quarter of fiscal 1997 increased 17% compared
to last year's first quarter. For the comparable 13-week period ended
November 1, 1996, same store restaurant sales increased 2.8% and same
store retail sales increased 5.4%, for a total same store sales
(restaurant and retail) increase of 3.4%. New stores and the effect of
a one-week shift in comparable 13-week periods accounted for the balance
of the first quarter net sales increase. The first quarter of fiscal
1997 was the 13 weeks beginning August 3, 1996, and ending November 1,
1996. Last fiscal year the first quarter was the 13 weeks beginning
July 29, 1995, and ending October 27, 1995. The two fiscal quarters do
not cover the comparable 13-week periods because fiscal 1996 was a 53-
week year. This is significant because the first quarter of fiscal 1996
included the week ending August 4, a seasonally busy time for Cracker
Barrel. The first quarter of fiscal 1997 did not include the
corresponding week.
Cost of Goods Sold
__________________
Cost of goods sold as a percentage of net sales for the first quarter
of fiscal 1997 was 34.5% compared to 33.3% in the first quarter of last
year. The primary reasons for the increase in the first quarter were
substantial increases in dairy and hog complex prices.
Labor and Related Expenses
__________________________
Labor and related expenses include all direct and indirect labor and
related costs incurred in store operations. Labor and related expenses
as a percentage of net sales increased to 33.7% in the first quarter
this year from 33.5% in the first quarter of last year primarily due to
the introduction of a new store-level bonus program. The new plan is
intended to create greater incentive for managers and district managers
to improve the operating performance of existing stores and to bring
newer units in line with system averages sooner.
Other Store Operating Expenses
______________________________
Other store operating expenses include all unit-level operating costs,
the major components of which are operating supplies, repairs and
maintenance, advertising expenses, utilities and depreciation and
amortization. Other store operating expenses as a percentage of net
sales were 14.7% this year versus 15.1% during the same quarter last
year. The primary reason for the decrease in other store operating
expenses as a percentage of net sales was a decrease in operating
supplies expense as a result of returning to paper napkins from linen
napkins in the stores.
General and Administrative Expenses
___________________________________
General and administrative expenses as a percentage of net sales
decreased to 5.5% during the first quarter of this year from 6.1% during
the first quarter of last year. The primary reason for the decrease was
increased sales volume as compared to the first quarter of last year.
8
Interest Expense
________________
Interest expense decreased to $0 for the first quarter of this year
from $179 for the first quarter a year ago. The decrease was primarily
due to lower average debt outstanding during the quarter and capitalized
interest related to the construction of new stores, which combined to
reduce interest expense to $0 for the quarter.
Interest Income
_______________
Interest income decreased to $364 for the first quarter of this year
from $704 for the first quarter a year ago. The primary reason for the
decrease in interest income was lower average funds available for
investment.
Liquidity and Capital Resources
_______________________________
The Company's operating activities provided net cash of $11,958 for
the three months ended November 1, 1996. The cash provided by net
income adjusted by depreciation and amortization was partially offset by
increases in inventories.
Capital expenditures were $39,537 for the first three months of fiscal
1996. Land purchases and the construction of new stores accounted for
substantially all of these expenditures. Capitalized interest was $639
for the three months ended November 1, 1996 as compared to $451 for the
same period a year ago.
The Company's internally generated cash, short-term and long-term
investments were sufficient to finance all of its growth in the first
three months of fiscal 1997.
The Company estimates that its capital expenditures for fiscal 1997
will be approximately $180,000, substantially all of which will be land
purchases and the construction of new stores. As of December 2, 1996,
the Company received cash of $50,000 related to a promissory note signed
with a bank. This note represents a 5-year term loan commitment which
will become part of a larger bank loan facility of $125,000 anticipated
to be completed during the third quarter. The $125,000 facility will
consist of a $50,000 5-year term loan, a $25,000 5-year term loan and a
$50,000 3-year revolving credit line. Management believes that cash,
short-term and long-term investments at November 1, 1996, along with
cash generated from the Company's operating activities and the bank loan
facility discussed above, will be sufficient to finance its continued
expansion in fiscal 1997 and its continued expansion plans through
fiscal 1999. Presently, the Company also has an unused revolving credit
line of $15,000, which will expire on January 31, 1997.
9
INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Directors and Stockholders of
Cracker Barrel Old Country Store, Inc.
Lebanon, Tennessee
We have reviewed the accompanying condensed balance sheet of Cracker
Barrel Old Country Store, Inc. as of November 1, 1996, and the related
condensed statements of income and cash flows for the quarters ended
November 1, 1996 and October 27, 1995. These financial statements are
the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical
procedures to financial data and of making inquiries of persons
responsible for financial and accounting matters. It is substantially
less in scope than an audit conducted in accordance with generally
accepted auditing standards, the objective of which is the expression of
an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to such condensed financial statements for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the balance sheet of Cracker Barrel Old Country
Store, Inc. as of August 2, 1996, and the related statements of income,
stockholders' equity, and cash flows for the year then ended (not
presented herein); and in our report dated September 11, 1996, we
expressed an unqualified opinion on those financial statements. In our
opinion, the information set forth in the accompanying condensed balance
sheet as of August 2, 1996 is fairly stated, in all material respects,
in relation to the balance sheet from which it has been derived.
DELOITTE & TOUCHE LLP
Nashville, Tennessee
December 12, 1996
10
PART II
Item 1. Legal Proceedings
_________________
None.
Item 2. Changes in Securities
_____________________
None.
Item 3. Defaults Upon Senior Securities
_______________________________
None.
Item 4. Submission of Matters to a Vote of Security Holders
___________________________________________________
A. The annual meeting of shareholders was held November 26,
1996.
B. Election of Directors - The following represents
directors whose terms of offices continued after the
meeting: James C. Bradshaw, Robert V. Dale, Dan W.
Evins, Edgar W. Evins, William D. Heydel, Robert C.
Hilton, Charles E. Jones, Jr., Charles T. Lowe, Jr.,
B. F. Lowery, Ronald N. Magruder, Gordon L. Miller,
Martha M. Mitchell and Jimmie D. White. James H. Stewart
reached the mandatory retirement age of 70 for board
members and, therefore retired from the board effective
with the shareholders meeting.
C. Other Matters:
Proposal 2 - To consider and vote upon the adoption of
the Cracker Barrel Old Country Store Amended and Restated
Stock Option Plan, to replace the Company's 1987 Stock
Option Plan which will expire on June 25, 1997.
Affirmative votes cast 26,046,610
__________
Negative votes cast 10,283,639
__________
Votes cast to abstain 512,112
__________
Broker non-votes 15,113,073
__________
Proposal 3 - Approval of appointment of auditors. This
proposal was to approve the selection of Deloitte and
Touche LLP as the Company's independent auditors for the
1997 fiscal year.
Affirmative votes cast 51,491,675
__________
Negative votes cast 251,408
__________
Votes cast to abstain 212,351
__________
11
Proposal 4 - Shareholder proposal. This shareholder
proposal requested the Board of Directors to consider and
take action on a proposal of certain shareholders,
requesting that the Compensation and Stock Option
Committees link executive compensation to social issues.
Affirmative votes cast 2,722,681
__________
Negative votes cast 30,183,846
__________
Votes cast to abstain 1,841,123
__________
Broker non-votes 17,207,784
__________
Proposal 5 - Shareholder proposal. This shareholder
proposal requested the Board of Directors to consider and
take action on a proposal of a certain shareholder,
requesting that the Board of Directors prepare a report
ascertaining the costs incurred by the Company due to the
alleged "continuing controversy" regarding its policies
towards gay men and lesbians.
Affirmative votes cast 3,320,826
__________
Negative votes cast 28,964,502
__________
Votes cast to abstain 2,462,322
__________
Broker non-votes 17,207,784
__________
D. None
Item 5. Other Information
_________________
None.
Item 6. Exhibits and Reports on Form 8-K
________________________________
Letter regarding unaudited financial information.
12
SIGNATURES
__________
Pursuant to the requirements of the Securities Exchange Act of
1934 the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
CRACKER BARREL OLD COUNTRY STORE, INC.
Date: 12/12/96 By /s/Michael A. Woodhouse
________ _____________________________________________
Michael A. Woodhouse, Chief Financial Officer
Date: 12/12/96 By /s/Patrick A. Scruggs
________ _____________________________________________
Patrick A. Scruggs, Assistant Treasurer
13
December 12, 1996
Cracker Barrel Old Country Store, Inc.
Hartmann Drive
Lebanon, Tennessee 37088-0787
We have made a review, in accordance with standards established by
the American Institute of Certified Public Accountants, of the
unaudited interim financial information of Cracker Barrel Old
Country Store, Inc. for the quarters ended November 1, 1996 and October
27, 1995, as indicated in our report dated December 12, 1996; because we
did not perform an audit, we expressed no opinion on that information.
We are aware that our report referred to above, which is included
in your Quarterly Report on Form 10-Q for the quarter ended November 1,
1996, is incorporated by reference in Registration Statement Nos.
2-86602, 33-15775, 33-37567, 33-45482 and 333-01465 on Forms S-8 and
Registration Statement No. 33-59582 on Form S-3.
We also are aware that the aforementioned report, pursuant to Rule
436(c) under the Securities Act of 1933, is not considered a part
of the Registration Statement prepared or certified by an accountant or
a report prepared or certified by an accountant within the meaning of
Sections 7 and 11 of that Act.
DELOITTE & TOUCHE LLP
Nashville, Tennessee
14
5
1,000
3-MOS
AUG-3-1997
AUG-3-1996
NOV-1-1996
5543
1356
2586
0
77949
95992
730525
132157
695710
83672
15500
0
0
30308
554752
695710
258902
258902
89315
125194
14354
0
0
30403
11553
18850
0
0
0
18850
.31
.31
