SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarterly Period Ended January 29, 1999
Commission file number 0-7536
CBRL GROUP, INC.
A Tennessee Corporation I.R.S. EIN: 62-1749513
Hartmann Drive, P. O. Box 787
Lebanon, Tennessee 37088-0787
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
60,096,333 Shares of Common Stock
Outstanding as of February 26, 1999
PART I
Item 1. Financial Statements
CBRL GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(In thousands, except share data)
(Unaudited)
January 29, July 31,
1999 1998*
---- ----
ASSETS
Current assets:
Cash and cash equivalents $ 1,443 $ 62,593
Receivables 3,838 5,192
Inventories 101,087 91,609
Prepaid expenses 5,624 5,432
--------- ---------
Total current assets 111,992 164,826
--------- ---------
Property and equipment, net 853,078 812,321
Other assets 15,860 14,961
--------- ---------
Total assets $ 980,930 $ 992,108
========= =========
LIABILIIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 32,193 $ 38,212
Accrued expenses 56,308 63,110
Current portion of long-term debt 2,500 2,500
Current portion of other long-term obligations 200 200
--------- ---------
Total current liabilities 91,201 104,022
--------- ---------
Long-term debt 67,000 59,500
Other long-term obligations 25,135 25,212
Shareholders' equity:
Common stock - $.50 par value, authorized 31,261 31,240
150,000,000 shares, issued 62,522,116 at
January 29, 1999 and 62,480,775 at July 31, 1998
Additional paid-in capital 252,052 251,236
Retained earnings 563,446 520,898
--------- ---------
846,759 803,374
Less treasury stock, at cost, 2,067,500 and
0 shares, respectively (49,165) --
--------- ---------
Total shareholders' equity 797,594 803,374
--------- ---------
Total liabilities and shareholders' equity $ 980,930 $ 992,108
========= =========
See notes to condensed consolidated financial statements.
(*)This condensed consolidated balance sheet has been derived from the
audited consolidated balance sheet as of July 31, 1998.
CBRL GROUP, INC.
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(In thousands, except per share data)
(Unaudited)
Quarter Ended Six Months Ended
January 29, January 30, January 29, January 30,
1999 1998 1999 1998
---- ---- ---- ----
Net sales:
Restaurant $255,794 $232,137 $525,487 $474,367
Retail 112,133 89,653 193,936 160,178
-------- -------- -------- --------
Total net sales 367,927 321,790 719,423 634,545
Cost of goods sold 139,458 116,636 258,219 223,127
-------- -------- -------- --------
Gross profit 228,469 205,154 461,204 411,418
Labor & related expenses 124,116 106,615 242,497 212,715
Other store operating expenses 58,388 49,652 112,051 96,141
-------- -------- -------- --------
Store operating income 45,965 48,887 106,656 102,562
General and administrative 18,217 16,666 37,273 32,548
-------- -------- -------- --------
Operating income 27,748 32,221 69,383 70,014
Interest expense 911 838 1,696 1,898
Interest income 233 697 798 1,517
-------- -------- -------- --------
Pretax income 27,070 32,080 68,485 69,633
Provision for income taxes 9,987 11,806 25,269 25,626
-------- -------- -------- --------
Net income $ 17,083 $ 20,274 $ 43,216 $ 44,007
======== ======== ======== ========
Earnings per share:
Basic $ .28 $ .33 $ .70 $ .72
======== ======== ======== ========
Diluted $ .28 $ .32 $ .70 $ .70
======== ======== ======== ========
Weighted average shares:
Basic 60,936 61,607 61,543 61,443
======== ======== ======== ========
Diluted 61,254 62,760 61,961 62,543
======== ======== ======== ========
Dividends per share $ .005 $ .005 $ .010 $ .010
======== ======== ======== ========
CBRL GROUP, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended
January 29, January 30,
1999 1998
---- ----
Cash flows from operating activities:
Net income $ 43,216 $ 44,007
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 25,220 21,886
(Gain) loss on disposition of property and equipment (237) 534
Changes in assets and liabilities:
Inventories (9,478) 8,259
Other assets (899) (1,001)
Accounts payable (6,019) 669
Other current assets and liabilities (5,640) 2,474
-------- --------
Net cash provided by operating activities 46,163 76,828
-------- --------
Cash flows from investing activities:
Proceeds from maturities of investments -- 1,666
Purchase of property and equipment (67,626) (89,381)
Proceeds from sale of property and equipment 1,886 702
-------- --------
Net cash used in investing activities (65,740) (87,013)
-------- --------
Cash flows from financing activities:
Treasury stock purchases (49,165) --
Proceeds from exercise of stock options 837 15,941
Principal payments under long-term debt and other
Long-term obligations (22,577) (3,565)
Proceeds from issuance of long-term debt 30,000 --
Dividends on common stock (668) (664)
-------- --------
Net cash (used in) provided by financing activities (41,573) 11,712
-------- --------
Net (decrease) increase in cash and cash equivalents (61,150) 1,527
Cash and cash equivalents, beginning of period 62,593 64,933
-------- --------
Cash and cash equivalents, end of period $ 1,443 $ 66,460
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the six months for:
Interest $ 2,247 $ 2,387
Income taxes 26,735 29,180
See notes to condensed consolidated financial statements.
CBRL GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands)
1. Condensed Consolidated Financial Statements
-------------------------------------------
The condensed consolidated balance sheet as of January 29, 1999 and the
related condensed consolidated statements of income and cash flows for the
quarters and six-month periods ended January 29, 1999 and January 30, 1998, 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 audited consolidated financial statements and notes thereto
contained in the Company's Annual Report on Form 10-K for the year ended July
31, 1998.
Deloitte & Touche LLP, the Company's independent accountants, 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 29, 1999 has been computed based on management's estimate of the
tax rate for the entire fiscal year of 36.9%. 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 rate for
both the quarter and six-month period ended January 30, 1998 and for the entire
fiscal year of 1998 was 36.8%.
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 29, 1999 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 ("FASB")
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. Outstanding stock options issued
by the Company represent the only dilutive effect reflected in diluted weighted
average shares. Weighted average basic shares for the quarters ended January 29,
1999 and January 30, 1998 were 60,935,624 and 61,606,857, respectively. Weighted
average basic shares for the six-month periods ended January 29, 1999 and
January 30, 1998 were 61,543,081 and 61,442,750, respectively. Weighted average
diluted shares for the quarters ended January 29, 1999 and January 30, 1998 were
61,254,090 and 62,759,943, respectively. Weighted average diluted shares for the
six-month periods ended January 29, 1999 and January 30, 1998 were 61,960,600
and 62,543,153, respectively.
5. Recent Accounting Pronouncements 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
adopted SFAS No. 130 in the first quarter of fiscal 1999. There is no difference
between comprehensive income and net income as reported by the Company for all
periods shown. 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. The 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 adopted SFAS No. 131 in the first quarter of fiscal 1999. SFAS
No. 131 requires no disclosure in interim periods in fiscal 1999, but will
require interim disclosure in fiscal 2000. SFAS No. 131 will require disclosure
in the Company's financial statements in its fiscal 1999 annual report.
6. Subsequent Event
----------------
On February 16, 1999, the Company completed its merger and acquisition
of Logan's Roadhouse, Inc. (formerly traded on the Nasdaq National Market under
the symbol RDHS) for $24.00 cash per share of RDHS common stock. The total
acquisition cost was approximately $180 million which was net of approximately
$9 million received from the exercise of vested and accelerated Logan's
Roadhouse, Inc. employee and director stock options at the time of the
acquisition. The acquisition will be accounted for using the purchase method of
accounting by applying the applicable provisions of Accounting Principles Board
Opinion No. 16.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
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 CBRL Group, 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 Old Country Store(R), Logan's
Roadhouse(R) and Carmine Giardini's Gourmet Market(TM) and restaurant concepts
as the Company continues to expand into new geographic regions; continued
successful acquisition of additional concepts to expand; successful development
of new and regional menu items; the continued success of the Company's
frequency-based Cracker Barrel Old Country Store Neighborhood(R) 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. In addition, the Company discusses certain Year 2000
issues based on a "reasonably likely worst case." That discussion necessarily
relies on assumptions which are not related to existing facts, and it must be
expected that actual circumstances and their effects on the Company will differ.
Results of Operations
The following table highlights operating results by percentage
relationships to total net sales for the quarter and six-month period ended
January 29, 1999 as compared to the same periods a year ago:
Quarter Ended Six Months Ended
January 29, January 30, January 29, January 30,
1999 1998 1999 1998
---- ---- ---- ----
Net sales:
Restaurant 69.5% 72.1% 73.0% 74.8%
Retail 30.5 27.9 27.0 25.2
----- ----- ----- -----
Total net sales 100.0 100.0 100.0 100.0
Cost of goods sold 37.9 36.3 35.9 35.2
----- ----- ----- -----
Gross profit 62.1 63.7 64.1 64.8
Labor & related expenses 33.7 33.1 33.7 33.5
Other store operating expenses 15.9 15.4 15.6 15.2
----- ----- ----- -----
Store operating income 12.5 15.2 14.8 16.1
General and administrative 5.0 5.2 5.2 5.1
----- ----- ----- -----
Operating income 7.5 10.0 9.6 11.0
Income expense 0.3 0.2 0.2 0.3
Interest income 0.1 0.2 0.1 0.2
----- ----- ----- -----
Pretax income 7.3 10.0 9.5 10.9
Provision for income taxes 2.7 3.7 3.5 4.0
----- ----- ----- -----
Net income 4.6% 6.3% 6.0% 6.9%
===== ===== ===== =====
Same Store Sales Analysis
307 Store Average
Quarter Ended Six Months Ended
January 29, January 30, January 29, January 30,
1999 1998 1999 1998
---- ---- ---- ----
Restaurant $694.7 $719.1 $1,449.3 $1,489.2
Retail 294.1 276.4 516.9 499.8
------ ------ -------- --------
Restaurant & retail $988.8 $995.5 $1,966.2 $1,989.0
====== ====== ======== ========
Sales
- -----
Net sales for the second quarter of fiscal 1999 increased 14% compared
to last year's second quarter. Same store restaurant sales decreased 3.4% and
same store retail sales increased 6.3%, for a total same store sales (restaurant
and retail) decrease of 0.7%. Same store restaurant sales decreased primarily
due to decreases in customer traffic of approximately 7%, partially offset by an
effective 3.8% menu price increase for the quarter. Same store retail sales
increased primarily due to an improved assortment of retail items in the stores
versus the prior year and a significant increase in the sale of marked-down
seasonal merchandise after Christmas versus the prior year. This increase was
partially offset due to the decrease in restaurant customer traffic of
approximately 7%. New stores accounted for the balance of the second quarter net
sales increase.
Net sales for the six-month period ended January 29, 1999, increased
13% compared to the six-month period ended January 30, 1998. Same store
restaurant sales decreased 2.7% and same store retail sales increased 3.4%, for
a total same store sales (restaurant and retail) decrease of 1.1%. Same store
restaurant sales decreased primarily due to decreases in customer traffic of
approximately 7%, partially offset by an effective 4.0% menu price increase for
the six-month period. Same store retail sales increased primarily due to an
improved assortment of retail items in the stores versus the prior year and a
significant increase in the sale of marked-down seasonal merchandise after
Christmas versus the prior year. This increase was partially offset due to the
decrease in restaurant customer traffic of approximately 7%. 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 quarter ended
January 29, 1999 increased to 37.9% from 36.3% in the second quarter of last
year. This increase was primarily due to the significant increase in markdowns
of seasonal merchandise after Christmas versus the prior year, an increasing mix
of retail sales, which have a higher cost of goods than restaurant sales, higher
retail shrinkage in the second quarter of fiscal 1999 versus the same period a
year ago and increases in dairy prices.
Cost of goods sold as a percentage of net sales for the six-month
period ended January 29, 1999 increased to 35.9% from 35.2% for the six-month
period ended January 30, 1998. This increase was primarily due to the
significant increase in markdowns of seasonal merchandise after Christmas versus
the prior year, an increasing mix of retail sales, which have a higher cost of
goods than restaurant sales, higher retail shrinkage in the first six months of
fiscal 1999 versus the same period a year ago and increases in dairy prices.
This increase was partially offset due to improved initial mark-ons for retail
merchandise.
Labor and Related Expenses
- --------------------------
Labor and related expenses include all direct and indirect labor and
related costs incurred in store operations. Labor and related expenses as a
percentage of net sales increased to 33.7% in the second quarter this year from
33.1% last year. This increase was primarily due to increased restaurant labor
hours to improve guest service and hourly wage inflation at the stores of
approximately 4%. This increase was partially offset by lower bonus payouts
under the store-level bonus program.
Labor and related expenses as a percentage of net sales increased to
33.7% in the six-month period ended January 29, 1999 from 33.5% in the six-month
period ended January 30, 1998. This increase was primarily due to increased
restaurant labor hours to improve guest service and hourly wage inflation at the
stores of approximately 4%. This increase was partially offset by lower bonus
payouts under the store-level bonus program.
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 15.9% in the second
quarter of fiscal 1999 from 15.4% in the second quarter of last year. This
increase was primarily due to higher maintenance and manager moving costs versus
the prior year.
Other store operating expenses as a percentage of net sales increased
to 15.6% for the six-month period ended January 29, 1999 from 15.2% in the
six-month period ended January 30, 1998. This increase was primarily due to
higher maintenance and manager moving costs versus the prior year.
General and Administrative Expenses
- -----------------------------------
General and administrative expenses as a percentage of net sales
decreased to 5.0% in the second quarter of fiscal 1999 from 5.2% in the second
quarter of last year. The primary reason for the decrease was a decrease in
corporate bonus accruals versus the prior year partially offset by increased
general and administrative expenses from the Company's recent acquisition of
Carmine Giardini's Gourmet Market and La Trattoria Ristorante.
General and administrative expenses as a percentage of net sales
increased to 5.2% for the six-month period ended January 29, 1999 from 5.1% in
the six-month period ended January 30, 1998. The primary reasons for the
increase were the increased general and administrative expenses from the
Company's recent acquisition of Carmine Giardini's Gourmet Market and La
Trattoria Ristorante and the costs related to the holding company formation.
This increase was partially offset by the decrease in corporate bonus accruals
versus the prior year.
Interest Expense
- ----------------
Interest expense increased to $911 in the second quarter of fiscal 1999
from $838 in the second quarter of last year. The increase primarily resulted
from lower capitalized interest during the quarter as compared to last year due
to the decrease in the number of stores under construction in the second quarter
of fiscal 1999 versus the prior year. The decrease in stores under construction
resulted from the Company's decision to decrease the new stores opened from 50
in fiscal 1998 to 40 in fiscal 1999.
Interest expense decreased to $1,696 for the six-month period ended
January 29, 1999 from $1,898 in the six-month period ended January 30, 1998. The
decrease primarily resulted from lower average debt outstanding during the
six-month period ended January 29, 1999 as compared to last year.
Interest Income
- ---------------
Interest income decreased to $233 in the second quarter of fiscal 1999
from $697 in the second quarter of last year. The decrease was primarily due to
lower average funds available for investment.
Interest income decreased to $798 for the six-month period ended
January 29, 1999 from $1,517 in the six-month period ended January 30, 1998. The
decrease was primarily due to lower average funds available for investment.
Recent Accounting Pronouncements Not Yet Adopted
- ------------------------------------------------
In June 1998, SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities," was issued. SFAS No. 133 specifies how to report and
display derivative instruments and hedging activities. This statement is
effective for fiscal years beginning after June 15, 1999. The Company will adopt
SFAS No. 133 in the first quarter of fiscal 2000. The Company is currently
evaluating the effect that SFAS No. 133 will have on the Company's consolidated
financial statements upon adoption. In March 1998, the American Institute of
Certified Public Accountants issued Statement of Position ("SOP") 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use." SOP 98-1 provides guidance on when costs incurred for
internal-use computer software are capitalized or expensed and guidance on
whether computer software is for internal use. SOP 98-1 is effective for fiscal
years beginning after December 15, 1998 and applies to internal-use software
costs incurred for all projects, including those in progress upon initial
application of the SOP. The Company is currently evaluating the effect that SOP
98-1 will have on the Company's consolidated financial statements upon adoption.
In April 1998, SOP 98-5, "Reporting of the Costs of Start-up Activities," was
issued. SOP 98-5 requires that the Company expense start-up costs of new stores
as incurred rather than when the store opens as is the Company's current
practice. SOP 98-5 is effective for fiscal years beginning after December 15,
1998. The Company is currently evaluating the effect that SOP 98-5 will have on
the Company's consolidated financial statements upon adoption. The Company does
not expect the adoption of either SOP 98-1 or SOP 98-5 to have a material effect
on the Company's consolidated financial statements.
Year 2000
- ---------
Many software applications and computer operational programs written in
the past were not designed to recognize calendar dates beginning in the Year
2000. The failure of such applications or systems used by the Company or by its
material suppliers to properly recognize the dates beginning in the Year 2000
could result in miscalculations or systems failures which potentially could have
an adverse effect on the Company's operations.
The Company's Year 2000 preparations began in fiscal 1998. The
preparations include identification, assessment, and testing of all Company
software, hardware and equipment that could be affected by the Year 2000 issue
and remedial action, where necessary, followed by further testing. Analysis to
identify internal Year 2000 deficiencies is in process and an inventory of
systems designated as critical has been developed. As the Year 2000 remediation
efforts progress, the Company will first focus, wherever possible, on those
systems designated critical. The Company has completed the Year 2000 analysis
and has begun correction of deficiencies found with completion of the
remediation efforts anticipated by September 30, 1999. The Company's estimated
total cost of analysis and remediation of the Year 2000 issues is not
anticipated to have a material adverse effect on the Company's consolidated
financial position, results of operations or cash flows.
The Company has also contacted critical suppliers of products and
services to determine the extent to which the Company may be vulnerable to such
suppliers' failures to resolve their own Year 2000 compliance issues. To assess
the Year 2000 risks to the Company's continuity of supply of products and
services, an inventory of significant vendors has been compiled. These vendors
were sent letters and questionnaires requesting information as to the status of
their Year 2000 readiness and certification that their information systems are
Year 2000 compliant. Based on responses received from most of these vendors, it
appears that Year 2000 issues are being addressed. The Company has not verified
the contents, nor is it the source, of Year 2000 statements incorporated, or
relied upon by the Company, in this disclosure from persons or entities other
than the Company. The Company is continuing to pursue responses from significant
vendors that have not responded to date and will discuss with them any material
Year 2000 concerns that are identified.
The Company anticipates timely completion of the internal Year 2000
readiness efforts. However, if new systems cannot be implemented on a timely
basis, modifications to existing systems cannot be accomplished on a timely
basis, information technology resources do not remain available, or other
unanticipated events occur, there could be material adverse effects on the
Company's consolidated financial position, results of operations and cash flows.
As part of the Year 2000 readiness efforts, the Company is developing
contingency plans to identify activities which will need to be performed in the
event of internal systems failures. The contingency plans are expected to be
completed by July 31, 1999. Although the Company has not yet been informed of
material Year 2000 issues by its significant vendors, there is no assurance that
these vendors will be Year 2000 compliant on a timely basis. Similarly, the
Company has no reliable information concerning the expected Year 2000 effects on
the nation's securities markets, banking system, utilities and other
infrastructure. The Company therefore relies generally on the ability of the
federal government and its agencies, such as the Internal Revenue Service and
Securities and Exchange Commission to effectively address such issues on a
national scale. Unanticipated failures or significant delays in furnishing
products or services by significant vendors or general public infrastructure
service providers could have a material adverse effect on the Company's
consolidated financial position, results of operations and cash flows. Where
practicable, the Company is assessing and attempting to mitigate its risks with
respect to the failure of its significant vendors and public infrastructure to
be Year 2000 ready as part of its contingency planning. In the worst case
reasonably to be expected, assuming that the nation's financial system and
overall public infrastructure continues to operate substantially as they had
prior to the Year 2000, some of the Company's internal systems may fail to
operate properly and some of its significant vendors may fail to perform
effectively or may fail to timely or completely deliver products. In those
circumstances, the Company expects to be able to conduct all of its necessary
business operations manually and to obtain necessary products from alternative
vendors and business operations would generally continue; however, there would
be some disruption which could have a material adverse effect on the Company's
consolidated financial position, results of operations and cash flows. The
Company has no basis upon which to reasonably analyze the psychological or other
direct or indirect effects on its guests, and consumers generally, from Year
2000 issues or experiences unrelated to the Company. The actual effect, if any,
on the Company's consolidated financial position, results of operations or cash
flows from the failure of its internal systems or of its significant vendors to
be Year 2000 ready can not be reasonably predicted.
Liquidity and Capital Resources
- -------------------------------
The Company's operating activities provided net cash of $46,163 for the
six-month period ended January 29, 1999. All of this cash was provided by net
income adjusted for depreciation and amortization. Such cash provided was
reduced by increases in inventories, increases in other current assets,
increases in other assets, decreases in accounts payable and decreases in other
current liabilities.
Capital expenditures were $67,626 for the six-month period ended
January 29, 1999. Land purchases and the construction of new stores accounted
for substantially all of these expenditures. Capitalized interest was $397 and
$801 for the quarter and six-month period ended January 29, 1999 as compared to
$599 and $986 for the quarter and six-month period ended January 30, 1998,
respectively. This difference was primarily due to the decrease in the number of
stores under construction in the second quarter of fiscal 1999 versus the prior
year. The decrease in stores under construction resulted from the Company `s
decision to slow its expansion to 40 new stores opened in fiscal 1999 as
compared to 50 new units opened in fiscal 1998.
The Company's internally generated cash along with cash at July 31,
1998 and a $10,000 net draw under the revolver were sufficient to finance all of
its stock buyback program and all of its growth in the first six months of
fiscal 1999.
On September 9, 1998, the Company announced that the Board of Directors
had authorized the repurchase of up to 3 million shares of the Company's common
stock. This will allow the Company to repurchase approximately 5% of the 62.5
million shares outstanding. The purchases are to be made from time to time in
the open market at prevailing market prices. One effect of the share repurchase
will be to minimize dilution to existing shareholders as shares are issued under
the Company's Stock Option Plan. As of January 29, 1999, the Company has
purchased a total of 2,067,500 shares. The Company expects to complete the
purchase of substantially all of the remaining 932,500 shares authorized by the
Board of Directors by the end of March 1999. On February 26, 1999, the Company
announced that the Board of Directors had authorized the repurchase of up to an
additional 3 million shares of the Company's common stock. This authorization
increases the Company's stock buyback program to a total of approximately 10% of
the approximately 60 million shares outstanding. The Company plans to begin
repurchases under this second authorization upon completion of the first 3
million share buyback program. The Company estimates that its capital
expenditures for fiscal 1999 will be approximately $165,000, substantially all
of which will be land purchases and the construction of new stores. On February
16, 1999, the Company completed its merger and acquisition of Logan's Roadhouse,
Inc. for $24 cash per share or approximately $179,000, excluding deal costs.
(See Note 6.) In order to finance this acquisition and the Company's additional
3 million share buyback authorization, the Company refinanced its $50,000 term
loan and $75,000 revolving credit facility which increased the rate on the
Company's $50,000 term loan to a fixed interest rate of 7.11% based on a 75
basis point increase in the Company's credit spread, but still due on its
original maturity date of December 1, 2001. The credit spread increase is
primarily due to changes in the credit markets as compared to the credit spread
environment two years ago when the Company entered into the $125,000 bank credit
facility. As part of the February 16, 1999 bank facility refinancing, the
Company increased the total bank credit facility to $350,000 from $125,000. On
February 16, 1999, the Company received net proceeds of $200,000 from its
revolving credit facility at a variable rate of approximately 6%. Management
believes that cash at January 29, 1999, along with cash generated from the
Company's operating activities and its available $90,000 revolver, will be
sufficient to finance its continued operations, the completion of its combined 6
million share stock buyback program and its continued expansion plans through
fiscal 2000.
INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Directors and Shareholders of
CBRL Group, Inc.
Lebanon, Tennessee
We have reviewed the accompanying condensed consolidated balance sheet of CBRL
Group, Inc. as of January 29, 1999, and the related condensed consolidated
statements of income and cash flows for the quarters and six-month periods ended
January 29, 1999 and January 30, 1998. 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 CBRL Group, Inc. (formerly Cracker
Barrel Old Country Store, Inc.) as of July 31, 1998, and the related
consolidated statements of income, shareholders' equity, and cash flows for the
year then ended (not presented herein); and in our report dated September 9,
1998, we expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the accompanying
condensed consolidated balance sheet as of July 31, 1998 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 11, 1999
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 24,
1998.
(b) Election of Directors: Reported in the Registrant's
Form 10-Q quarterly report for the period ended
October 30, 1998.
(c) Other Matters: Reported in the Registrant's Form 10-Q
quarterly report for the period ended October 30, 1998.
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) The Company filed a Current Report on
Form 8-K on December 17, 1998 pursuant to Item 5 of
such form to announce an agreement to purchase all of
the issued and outstanding capital stock of Logan's
Roadhouse, Inc. The Company filed a Current Report on
Form 8-K on January 15, 1999 pursuant to Item 5 of
such form to announce the completion of the formation
of the Company's holding company structure.
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.
CBRL GROUP, INC.
Date: 3/11/99 By /s/Michael A. Woodhouse
------- ---------------------------------------------
Michael A. Woodhouse, Chief Financial Officer
Date: 3/11/99 By /s/Patrick A. Scruggs
------- ---------------------------------------------
Patrick A. Scruggs, Assistant Treasurer
March 11, 1999
CBRL Group, 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 CBRL Group, Inc. for the quarters and six-month periods ended
January 29, 1999 and January 30, 1998, as indicated in our report dated March
11, 1999; 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 29, 1999, 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 Nos.
33-59582 and 333-74363 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
5
0001067294
CBRL GROUP, INC.
1,000
6-MOS
JUL-30-1999
AUG-1-1998
JAN-29-1999
1,443
0
3,838
0
101,087
111,992
1,048,215
195,137
980,930
91,201
67,000
0
0
31,261
766,333
980,930
719,423
719,423
258,219
354,548
37,273
0
1,696
68,485
25,269
43,216
0
0
0
43,216
.70
.70
