FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarterly Period Ended January 30, 1998
Commission file number 0-7536
CRACKER BARREL OLD COUNTRY STORE, INC.
A Tennessee Corporation I.R.S. EIN: 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
61,892,157 Shares of Common Stock
Issued and Outstanding as of February 27, 1998
1
PART I
Item 1. Financial Statements
CRACKER BARREL OLD COUNTRY STORE, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(In thousands, except share data)
January 30, August 1,
1998 1997
____ ____
ASSETS (Unaudited) (Audited)
Current assets:
Cash and cash equivalents $ 66,460 $ 64,933
Short-term investments -- 1,666
Receivable 3,752 4,836
Inventories 65,010 73,269
Prepaid expenses 3,648 4,707
________ ________
Total current assets 138,870 149,411
________ ________
Property and equipment, net 744,426 678,167
Other assets 2,128 1,127
________ ________
Total assets $885,424 $828,705
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 28,091 $ 27,422
Accrued expenses 58,000 57,669
Current portion of long-term debt 2,500 3,500
Current portion of capital lease
obligations 166 166
________ ________
Total current liabilities 88,757 88,757
________ ________
Long-term debt 59,500 62,000
Capital lease obligations 1,237 1,302
Deferred income taxes 16,214 16,214
Stockholders' equity:
Common stock - $.50 par value, 30,889 30,533
authorized 150,000,000 shares,
issued and outstanding 61,778,720
at January 30, 1998 and 61,065,306
at August 1, 1997
Additional paid-in capital 227,435 211,850
Retained earnings 461,392 418,049
________ ________
Total stockholders' equity 719,716 660,432
________ ________
Total liabilities and stockholders'
equity $885,424 $828,705
======== ========
See notes to condensed consolidated financial statements.
2
CRACKER BARREL OLD COUNTRY STORE, INC.
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(In thousands, except per share data)
(Unaudited)
Quarter Ended Six Months Ended
_______________________ _______________________
January 30, January 31, January 30, January 31,
1998 1997 1998 1997
____ ____ ____ ____
Net sales:
Restaurant $232,137 $194,737 $474,367 $397,265
Retail 89,653 73,117 160,178 129,491
________ ________ ________ ________
Total sales 321,790 267,854 634,545 526,756
Cost of goods sold 116,636 97,572 223,127 186,887
________ ________ ________ ________
Gross profit on sales 205,154 170,282 411,418 339,869
Labor & related
expenses 106,615 89,171 212,715 176,396
Other store operating
expenses 49,652 41,065 96,141 79,034
________ ________ ________ ________
Store operating income 48,887 40,046 102,562 84,439
________ ________ ________ ________
General and
administrative 16,666 14,752 32,548 29,106
________ ________ ________ ________
Operating income 32,221 25,294 70,014 55,333
Interest expense 838 358 1,898 358
Interest income 697 523 1,517 887
________ ________ ________ ________
Pretax income 32,080 25,459 69,633 55,862
Provision for income
taxes 11,806 9,471 25,626 21,024
________ ________ ________ ________
Net income $ 20,274 $ 15,988 $ 44,007 $ 34,838
======== ======== ======== ========
Earnings per share:
Basic $ .33 $ .26 $ .72 $ .57
======== ======== ======== ========
Diluted $ .32 $ .26 $ .70 $ .57
======== ======== ======== ========
Weighted average shares:
Basic 61,607 60,766 61,443 60,687
======== ======== ======== ========
Diluted 62,760 61,286 62,543 61,185
======== ======== ======== ========
Dividends per share $ .005 $ .005 $ .010 $ .010
======== ======== ======== ========
See notes to condensed consolidated financial statements.
3
CRACKER BARREL OLD COUNTRY STORE, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended
_________________________
January 30, January 31,
1998 1997
____ ____
Cash flows from operating activities:
Net income $44,007 $34,838
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization
of property and equipment 21,886 18,802
Loss (gain) on disposition
of property and equipment 534 (27)
Changes in assets and liabilities:
Inventories 8,259 (661)
Other assets (1,001) 147
Accounts payable 669 (1,059)
Other current assets and liabilities 2,474 (7,719)
_______ _______
Net cash provided by operating activities 76,828 44,321
_______ _______
Cash flows from investing activities:
Proceeds from maturities of investments 1,666 3,870
Purchase of property and equipment (89,381) (78,859)
Proceeds from sale of property
and equipment 702 1,235
_______ _______
Net cash used in investing activities (87,013) (73,754)
_______ _______
Cash flows from financing activities:
Proceeds from issuance of long-term debt -- 50,000
Proceeds from exercise of stock options 15,941 3,095
Principal payments under long-term debt
and capital lease obligations (3,565) (4,065)
Dividends on common stock (664) (607)
_______ _______
Net cash provided by financing activities 11,712 48,423
_______ _______
Net increase in cash and cash equivalents 1,527 18,990
Cash and cash equivalents, beginning of year 64,933 28,971
_______ _______
Cash and cash equivalents, end of period $66,460 $47,961
======= =======
Supplemental disclosures of cash flow
information:
Cash paid during the six months for:
Interest $ 2,387 $ 947
Income taxes 29,180 23,345
See notes to condensed consolidated financial statements.
4
CRACKER BARREL OLD COUNTRY STORE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Condensed Consolidated Financial Statements
The condensed consolidated balance sheet as of January 30, 1998 and the
related condensed consolidated statements of income and cash flows for
the quarters and six-month periods ended January 30, 1998 and January
31, 1997, have been prepared by the Company, without audit; in the
opinion of management, all adjustments for a fair presentation of such
condensed consolidated financial statements have been made.
These condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes thereto
contained in the Company's Annual Report on Form 10-K for the year ended
August 1, 1997.
Deloitte & Touche LLP, the Company's independent auditors, have
performed a limited review of the financial information included herein.
Their report on such review accompanies this filing.
2. Income Taxes
The provision for income taxes for the quarter and six-month period
ended January 30, 1998 has been computed based on management's estimate
of the tax rate for the entire fiscal year of 36.8%. The variation
between the statutory tax rate and the effective tax rate is due
primarily to employer tax credits for FICA taxes paid on tip income.
The Company's effective tax rates for the quarter and six-month period
ended January 31, 1997 and for the entire fiscal year of 1997 were
37.2%, 37.6% and 37.0%, respectively.
3. Seasonality
The sales and profits of the Company are affected significantly by
seasonal travel and vacation patterns because of its interstate highway
locations. Historically, the Company's greatest sales and profits have
occurred during the period of June through August. Early December
through the last part of February, excluding the Christmas holidays, has
historically been the period of lowest sales and profits. Therefore, the
results of operations for the quarter and six-month period ended January
30, 1998 cannot be considered indicative of the operating results for
the full fiscal year.
4. Earnings per Share and Weighted Average Shares
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS No. 128"), "Earnings
Per Share," which requires presentation of basic and diluted earnings
per share. Basic earnings per share is computed by dividing income
available to common shareholders by the weighted average number of
common shares outstanding for the reporting period. Diluted earnings
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. As required, the Company
adopted the provisions of SFAS No. 128 in the quarter ended January 30,
1998. All prior year weighted average and per share information has
been restated in accordance with SFAS No. 128. Outstanding stock
options issued by the Company represent the only dilutive effect
reflected in diluted weighted average shares.
5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (In thousands)
All dollar amounts reported or discussed in Item 2 are shown in
thousands. Except for specific historical information, many of the
matters discussed in this Form 10-Q may express or imply projections of
revenues or expenditures, statements of plans and objectives or future
operations or statements of future economic performance. Those, and
similar statements are forward-looking statements that involve risks,
uncertainties and other factors which may cause the actual performance of
Cracker Barrel Old Country Store, Inc. to differ materially from those
expressed or implied by such statements. Factors which will affect actual
results include, but are not limited to: the availability and costs of
acceptable sites for development; the ability of the Company to retain
qualified employees, and to recruit and train restaurant personnel in its
expansion locations; the acceptance of the Cracker Barrel concept as the
Company continues to expand into new geographic regions; continued
successful development of new and regional menu items; the continued
success of the Company's frequency-based Cracker Barrel Old Country Store
Neighborhood program; changes in or implementation of additional
governmental rules and regulations affecting wage and hour matters, health
and safety and other areas affected by governmental actions, and other
factors described from time to time in the Company's filings with the
Securities and Exchange Commission, press releases and other
communications.
Results of Operations
The following table highlights operating results for the quarter and
six-month period ended January 30, 1998 as compared to the same periods a
year ago:
Quarter Ended Six Months Ended
______________________ ________________________
January 30, January 31, January 30, January 31,
1998 1997 1998 1997
____ ____ ____ ____
Net sales:
Restaurant 72.1% 72.7% 74.8% 75.4%
Retail 27.9 27.3 25.2 24.6
_____ _____ _____ _____
Total net sales 100.0 100.0 100.0 100.0
Cost of goods sold 36.3 36.5 35.2 35.5
_____ _____ _____ _____
Gross profit 63.7 63.5 64.8 64.5
Labor & related expenses 33.1 33.3 33.5 33.5
Other store operating
expenses 15.4 15.3 15.2 15.0
_____ _____ _____ _____
Store operating income 15.2 14.9 16.1 16.0
General and
administrative 5.2 5.5 5.1 5.5
_____ _____ _____ _____
Operating income 10.0 9.4 11.0 10.5
Interest expense 0.2 0.1 0.3 0.1
Interest income 0.2 0.2 0.2 0.2
_____ _____ _____ _____
Pretax income 10.0 9.5 10.9 10.6
Provision for income
taxes 3.7 3.5 4.0 4.0
_____ _____ _____ _____
Net income 6.3% 6.0% 6.9% 6.6%
===== ===== ===== =====
6
Same Store Sales Analysis
257 Store Average
_________________
Quarter Ended Six Months Ended
_______________________ _______________________
January 30, January 31, January 30, January 31,
1998 1997 1998 1997
____ ____ ____ ____
Restaurant $ 736.2 $706.2 $1,521.6 $1,477.2
Retail 279.5 264.5 505.0 478.8
________ ______ ________ ________
Restaurant & retail $1,105.7 $970.7 $2,026.6 $1,956.0
======== ====== ======== ========
Sales
Net sales for the second quarter of fiscal 1998 increased 20%
compared to last year's second quarter. Same store restaurant sales
increased 4.2% and same store retail sales increased 5.7%, for a
total same store sales (restaurant and retail) increase of 4.6%.
Same store restaurant sales increased primarily due to an effective
2.3% menu price increase throughout the quarter and above normal
temperatures in several of our core markets during the month of
January which improved customer traffic. Same store retail sales
increased primarily due to customer count increases in the
restaurants and an improved assortment of retail items in the stores.
New stores accounted for the balance of the second quarter net sales
increase.
Net sales for the six-month period ended January 30, 1998,
increased 20% compared to the six-month period ended January 31,
1997. Same store restaurant sales increased 3.0% and same store
retail sales increased 5.5%, for a total same store sales (restaurant
and retail) increase of 3.6%. Same store restaurant sales increased
primarily due to an effective 2.6% menu price increase throughout the
six-month period and above normal temperatures in several of our core
markets during the month of January which improved customer traffic.
Same store retail sales increased primarily due to an improved
assortment of retail items in the stores and customer count increases
in the restaurants. New stores accounted for the balance of the six-
month period net sales increase.
Cost of Goods Sold
Cost of goods sold as a percentage of net sales for the second
quarter of fiscal 1998 decreased to 36.3% from 36.5% in the second
quarter of last year. This decrease was primarily due to improved
initial mark-ons for retail merchandise, partially offset by an
increasing mix of retail sales which have a higher cost of goods than
restaurant sales.
Cost of goods sold as a percentage of net sales for the six-
month period ended January 30, 1998 decreased to 35.2% from 35.5% for
the six-month period ended January 31, 1997. This decrease was
primarily due to improved initial mark-ons for retail merchandise and
decreases in dairy and hog complex prices from prior year levels,
partially offset by an increasing mix of retail sales which have a
higher cost of goods than restaurant sales.
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 decreased to 33.1% in the
second quarter this year from 33.3% last year. This decrease was
primarily due to the lower incremental labor expenses resulting from
opening eight stores in the second quarter of fiscal 1998 as compared
to 16 stores opened in the second quarter of fiscal 1997.
7
Additionally, this decrease was benefited by the net improvement in
store-level, hourly labor, resulting from enhanced operational
productivity, partially offset by store-level, hourly wage inflation
of approximately 3%. These decreases were partially offset by higher
bonus payouts under the store-level bonus program instituted in
fiscal 1997.
Labor and related expenses as a percentage of net sales remained
unchanged at 33.5% in the six-month period ended January 30, 1998 as
compared to the six-month period ended January 31, 1997. Higher
bonus payouts under the store-level bonus program instituted in
fiscal 1997 increased labor and related expenses. This increase was
offset by the lower incremental labor expenses resulting from opening
20 stores in the first six months of fiscal 1998 as compared to 26
stores opened in the same period a year ago and the net improvement
in store-level, hourly labor, resulting from enhanced operational
productivity, partially offset by store-level, hourly wage inflation
of approximately 3%.
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 increased to 15.4% in the second quarter of fiscal 1998 from
15.3% in the second quarter of last year. The primary reason for the
increase was the incremental advertising expense resulting from
increased general advertising and the rollout of the Cracker Barrel
Old Country Store Neighborhood Program. Additionally, other store
operating expenses increased due to the incremental depreciation
associated with the new point-of-sale system in the stores. These
increases were partially offset by the lower incremental other store
operating expenses resulting from opening eight stores in the second
quarter of fiscal 1998 as compared to 16 stores opened in the second
quarter of fiscal 1997.
Other store operating expenses as a percentage of net sales
increased to 15.2% in the six-month period ended January 30, 1998
from 15.0% in the six-month period ended January 31, 1997. The
primary reason for the increase was the incremental advertising
expense resulting from increased general advertising and the rollout
of the Cracker Barrel Old Country Store Neighborhood Program.
Additionally, other store operating expenses increased due to the
incremental depreciation associated with the new point-of-sale system
in the stores and the loss on disposal of surplus property in the
first quarter of fiscal 1998.
General and Administrative Expenses
General and administrative expenses as a percentage of net sales
decreased to 5.2% in the second quarter of fiscal 1998 from 5.5% in
the second quarter of last year. General and administrative
expenses as a percentage of net sales decreased to 5.1% in the six-
month period ended January 30, 1998 from 5.5% in the six-month period
ended January 31, 1997. The primary reason for these decreases was
increased sales volume as compared to the same periods last year.
Interest Expense
Interest expense increased to $838 in the second quarter of
fiscal 1998 from $358 in the second quarter of last year. Interest
expense increased to $1,898 in the six-month period ended January 30,
1998 from $358 in the six-month period ended January 31, 1997. These
increases were primarily due to the Company drawing on a $50,000 term
loan on December 2, 1996.
8
Interest Income
Interest income increased to $697 in the second quarter of
fiscal 1998 from $523 in the second quarter of last year. Interest
income increased to $1,517 in the six-month period ended January 30,
1998 from $887 in the six-month period ended January 31, 1997. These
increases were primarily due to higher average funds available for
investment.
Recent Accounting Pronouncements Not Yet Adopted
In June 1997, SFAS No. 130, "Reporting Comprehensive Income,"
was issued. SFAS No. 130 specifies how to report and display
comprehensive income and its components. This statement is effective
for fiscal years beginning after December 15, 1997, with restatement
of all prior periods shown. The Company will adopt SFAS No. 130 in
the first quarter of fiscal 1999. In June 1997, SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related
Information," was issued. SFAS No. 131 requires the disclosure of
certain information about operating segments in the financial
statements. This statement is effective for fiscal years beginning
after December 15, 1997, with restatement of all prior periods shown
if not impracticable to do so. The Company will adopt SFAS No. 131
in the first quarter of fiscal 1999. The Company does not expect the
adoption of SFAS Nos. 130 or 131 to have a material effect on the
Company's consolidated financial statements.
Liquidity and Capital Resources
The Company's operating activities provided net cash of $76,828
for the six-month period ended January 30, 1998. Most of this cash
was provided by net income adjusted by depreciation and amortization
and by decreases in inventories.
Capital expenditures were $89,381 for the six-month period ended
January 30, 1998. Land purchases and the construction of new stores
accounted for substantially all of these expenditures. Capitalized
interest decreased to $599 and $986 for the quarter and six-month
period ended January 30, 1998, respectively, as compared to $715 and
$354 for the quarter and six-month period ended January 31, 1997,
respectively. These decreases were primarily due to the timing of
new store construction in fiscal 1998 as compared to the same period
a year ago.
The Company's internally generated cash and short-term
investments were sufficient to finance all of its growth in the first
six months of fiscal 1998.
The Company estimates that its capital expenditures for fiscal
1998 will be approximately $190,000, substantially all of which will
be land purchases and the construction of new stores. On December 2,
1996 the Company received the proceeds from a $50,000 5-year term
loan bearing interest at a three-month LIBOR-based rate ("London
Interbank Offered Rate"). Concurrently, the Company entered into a
swap agreement with a bank to fix the interest rate at 6.36% for the
life of the term loan. This $50,000 term loan is part of a $125,000
bank credit facility that also includes a $75,000 revolver.
Management believes that cash at January 30, 1998, along with cash
generated from the Company's operating activities, will be sufficient
to finance its continued expansion plans through fiscal 1999.
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 consolidated balance sheet of
Cracker Barrel Old Country Store, Inc. as of January 30, 1998, and the
related condensed consolidated statements of income and cash flows for the
quarters and six-month periods ended January 30, 1998 and January 31, 1997.
These financial statements are the responsibility of the Company's
management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical
procedures to financial data and of making inquiries of persons responsible
for financial and accounting matters. It is substantially less in scope
than an audit conducted in accordance with generally accepted auditing
standards, the objective of which is the expression of an opinion regarding
the financial statements taken as a whole. Accordingly, we do not express
such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to such condensed consolidated financial statements for them
to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Cracker Barrel Old Country
Store, Inc. as of August 1, 1997, and the related consolidated statements
of income, stockholders' equity, and cash flows for the year then ended
(not presented herein); and in our report dated September 9, 1997, we
expressed an unqualified opinion on those financial statements. In our
opinion, the information set forth in the accompanying condensed
consolidated balance sheet as of August 1, 1997 is fairly stated, in all
material respects, in relation to the balance sheet from which it has been
derived.
DELOITTE & TOUCHE LLP
Nashville, Tennessee
March 12, 1998
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
25, 1997.
(b) Election of Directors: Reported in the
Registrant's Form 10-Q quarterly report for the
period ended October 31, 1997.
(c) Other Matters: Reported in the Registrant's Form 10-Q
quarterly report for the period ended October 31, 1997.
Item 5. Other Information
_________________
None.
Item 6. Exhibits and Reports on Form 8-K
________________________________
(a) The following exhibits are filed pursuant to Item 601
of Regulation S-K
(15)Letter regarding unaudited financial information.
(b) No reports on Form 8-K have been filed during the
quarter for which this report is filed.
11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CRACKER BARREL OLD COUNTRY STORE, INC.
Date: 3/12/98 By /s/Michael A. Woodhouse
_______ _____________________________________________
Michael A. Woodhouse, Chief Financial Officer
Date: 3/12/98 By /s/Patrick A. Scruggs
_______ _____________________________________________
Patrick A. Scruggs, Assistant Treasurer
12
March 12, 1998
Cracker Barrel Old Country Store, Inc.
Hartmann Drive
Lebanon, Tennessee 37088-0787
We have made a review, in accordance with standards established by the
American Institute of Certified Public Accountants, of the unaudited
interim financial information of Cracker Barrel Old Country Store, Inc. for
the quarters and six-month periods ended January 30, 1998 and January 31,
1997, as indicated in our report dated March 12, 1998; because we did not
perform an audit, we expressed no opinion on that information.
We are aware that our report referred to above, which is included in your
Quarterly Report on Form 10-Q for the quarter ended January 30, 1998, 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
13
5
1,000
6-MOS
JUL-31-1998
AUG-2-1997
JAN-30-1998
66,460
0
3,752
0
65,010
138,870
915,998
171,572
885,424
88,757
59,500
0
0
30,889
688,827
885,424
634,545
634,545
223,127
308,856
32,548
0
1,898
69,633
25,626
44,007
0
0
0
44,007
.72
.70
