SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark One)
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarterly Period Ended November 1, 2002
or
Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Transition Period from ________ to _______.
Commission file number 000-25225
CBRL GROUP, INC.
(Exact Name of Registrant as
Specified in Its Charter)
Tennessee 62-1749513
- ------------------------------- -------------------
(State or Other Jurisdiction (IRS Employer
of Incorporation or Organization) Identification No.)
Hartmann Drive, P. O. Box 787
Lebanon, Tennessee 37088-0787
-----------------------------
(Address of Principal Executive Offices)
615-444-5533
------------
(Registrant's Telephone Number, Including Area Code)
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
------- ----------
49,766,950 Shares of Common Stock
Outstanding as of November 29, 2002
PART I
Item 1. Financial Statements
CBRL GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(In thousands, except share data)
(Unaudited)
November 1, August 2,
2002 2002*
---- ----
ASSETS
Current assets:
Cash and cash equivalents $ 14,941 $ 15,074
Receivables 8,644 8,161
Inventories 135,237 124,693
Prepaid expenses 15,257 12,022
Deferred income taxes 11,632 11,632
--------- ----------
Total current assets 185,711 171,582
Property and equipment - net 998,806 984,817
Goodwill - net 92,882 92,882
Other assets 15,956 14,550
---------- ----------
Total assets $1,293,355 $1,263,831
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 68,570 $ 73,806
Accrued expenses 170,583 159,276
Current maturities of long-term debt
and other long-term obligations 87 87
---------- ----------
Total current liabilities 239,240 233,169
---------- ----------
Long-term debt 210,777 194,476
---------- ----------
Other long-term obligations 53,115 53,192
---------- ----------
Shareholders' equity:
Preferred stock - 100,000,000 shares
of $.01 par value authorized, no
shares issued -- --
Common stock - 400,000,000 shares of
$.01 par value authorized, at
November 1, 2002, 49,622,460 shares
issued and outstanding and at
August 2, 2002, 50,272,459 shares
issued and outstanding 496 503
Retained earnings 789,727 782,491
---------- ----------
Total shareholders' equity 790,223 782,994
---------- ----------
Total liabilities and shareholders'
equity $1,293,355 $1,263,831
========== ==========
See notes to condensed consolidated financial statements.
(*) This condensed consolidated balance sheet has been derived from the audited
consolidated balance sheet as of August 2, 2002.
CBRL GROUP, INC.
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(In thousands, except per share data)
(Unaudited)
Quarter Ended
-----------------------------
November 1, November 2,
2002 2001
---- ----
Net sales $527,259 $496,136
Franchise fees and royalties 280 220
-------- --------
Total revenue 527,539 496,356
Cost of goods sold 165,965 163,200
-------- --------
Gross profit 361,574 333,156
Labor & other related expenses 199,267 186,895
Other store operating expenses 90,580 83,171
-------- --------
Store operating income 71,727 63,090
General and administrative 33,904 30,734
-------- --------
Operating income 37,823 32,356
Interest expense 2,261 1,753
Interest income 73 --
-------- --------
Income before income taxes 35,635 30,603
Provision for income taxes 12,650 10,956
-------- --------
Net income $ 22,985 $ 19,647
======== ========
Net income per share:
Basic $ .46 $ .36
======== ========
Diluted $ .45 $ .35
======== ========
Weighted average shares:
Basic 50,060 54,936
======== ========
Diluted 51,319 56,182
======== ========
See notes to condensed consolidated financial statements.
CBRL GROUP, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
(Unaudited)
Quarter Ended
----------------------------------
November 1, November 2,
2002 2001
---- ----
Cash flows from operating activities:
Net income $ 22,985 $ 19,647
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 16,191 14,760
Loss on disposition of property and equipment 103 33
Accretion on zero-coupon notes 1,302 --
Changes in assets and liabilities:
Inventories (10,544) (14,005)
Accounts payable (5,236) (2,593)
Other current assets and other current liabilities 7,589 (6,676)
Other assets and other long-term liabilities (1,993) 121
-------- --------
Net cash provided by operating activities 30,397 11,287
-------- --------
Cash flows from investing activities:
Purchase of property and equipment (30,891) (22,785)
Proceeds from sale of property and equipment 1,136 346
-------- --------
Net cash used in investing activities (29,755) (22,439)
-------- --------
Cash flows from financing activities:
Proceeds from issuance of long-term debt 142,500 145,000
Principal payments under long-term debt and other
long-term obligations (127,519) (135,025)
Proceeds from exercise of stock options 1,599 11,476
Purchases and retirement of common stock (17,355) (9,596)
-------- --------
Net cash (used in) provided by financing activities (775) 11,855
-------- --------
Net (decrease) increase in cash and cash equivalents (133) 703
Cash and cash equivalents, beginning of period 15,074 11,807
-------- --------
Cash and cash equivalents, end of period $ 14,941 $ 12,510
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the three months for:
Interest $ 415 $ 2,354
Income taxes 345 13,535
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 November 1, 2002 and the
related condensed consolidated statements of income and cash flows for the
quarters ended November 1, 2002 and November 2, 2001, have been prepared by CBRL
Group, Inc. (the "Company") without audit; in the opinion of management, all
adjustments (consisting of normal and recurring items) 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 August
2, 2002.
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 ended November 1, 2002
has been computed based on management's estimate of the tax rate for the entire
fiscal year of 35.5%. The variation between the statutory tax rate and the
effective tax rate is due primarily to employer tax credits for FICA taxes paid
on employee tip income. The Company's effective tax rates for the quarter ended
November 2, 2001 and for the entire fiscal year of 2002 were 35.8% and 35.6%,
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 although retail revenues historically have been
seasonally higher between Thanksgiving and Christmas. Therefore, the results of
operations for the quarter ended November 1, 2002 cannot be considered
indicative of the operating results for the full fiscal year.
4. Inventories
-----------
Inventories were comprised of the following at:
November 1, August 2,
2002 2002
---- ----
Retail $101,811 $ 93,066
Restaurant 17,585 16,799
Supplies 15,841 14,828
-------- --------
Total $135,237 $124,693
======== ========
5. Net Income Per Share and Weighted Average Shares
------------------------------------------------
Basic net income per share is computed by dividing income available to
common shareholders by the weighted average number of common shares outstanding
for the reporting period. Diluted net income per share reflects the potential
dilution that could occur if securities, options or other contracts to issue
common stock were exercised or converted into common stock. The Company's
zero-coupon convertible senior notes (see Note 4 to the Company's Consolidated
Financial Statements included in the Company's 2002 Annual Report filed on Form
10-K on October 25, 2002 for a description of these notes) represent potential
dilutive shares at the balance sheet date. The effect of the assumed conversion
of the zero-coupon convertible senior notes has been excluded from the
calculation of diluted net income per share for the quarter ended November 1,
2002, because none of the conditions that permit conversion had been satisfied
during the respective reporting period. Outstanding stock options issued by the
Company represent the only dilutive effect reflected in diluted weighted average
shares.
6. Comprehensive Income
--------------------
Comprehensive income is defined as the change in equity of a
business enterprise during a period from transactions and other events and
circumstances from non-owner sources. There is no difference between
comprehensive income and net income as reported by the Company for all periods
shown.
7. Segment Reporting
-----------------
The Company manages its business on the basis of one reportable
operating segment. All of the Company's operations are located within the United
States. The following data are presented in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 131 for all periods presented.
Quarter Ended
-------------------------------
November 1, November 2,
2002 2001
---- ----
Net sales:
Restaurant $423,742 $395,737
Retail 103,517 100,399
-------- --------
Total net sales $527,259 $496,136
======== ========
8. Recently Issued Accounting Pronouncements
-----------------------------------------
Effective August 3, 2002, the Company adopted SFAS No. 143, "Accounting
for Asset Retirement Obligations". SFAS No. 143 requires entities to record
obligations associated with the retirement of a tangible long-lived asset as a
liability upon incurring those obligations, with the amount of the liability
initially measured at fair value. Upon initially recognizing a liability for an
asset retirement obligation ("ARO"), an entity must capitalize the cost by
recognizing an increase in the carrying amount of the related long-lived asset.
Over time, the entity amortizes the liability to its present value each period,
and the entity depreciates the capitalized cost over the useful life of the
related asset. Upon settlement of the liability, an entity either settles the
obligation for its recorded amount or incurs a gain or loss upon settlement.
Upon adoption, an entity will use a cumulative-effect approach to recognize
transition amounts for existing ARO liabilities, asset retirement costs, and
accumulated depreciation. All transition amounts are to be measured using
current information known as of the adoption date, including current assumptions
and current interest rates. The adoption of SFAS No. 143 did not have a material
impact on the Company's consolidated results of operations or financial
position.
Effective August 3, 2002, the Company adopted SFAS No. 144 "Accounting
for the Impairment or Disposal of Long-Lived Assets". This statement supersedes
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of" and the accounting and reporting provisions
of Accounting Principles Board Opinion No. 30 "Reporting the Results of
Operations-Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions". SFAS
No. 144 retains the fundamental provisions of SFAS No. 121 but eliminates the
requirement to allocate goodwill to long-lived assets to be tested for
impairment. This statement also requires discontinued operations to be carried
at the lower of cost or fair value less costs to sell and broadens the
presentation of discontinued operations to include a component of an entity
rather than a segment of a business. The adoption of SFAS No. 144 did not have a
material impact on the Company's consolidated results of operations or financial
position.
Effective August 3, the Company adopted SFAS No. 145, "Rescission of
Financial Accounting Standards Board ("FASB") Statements No. 4, 44, 64,
Amendment of FASB Statement No. 13, and Technical Corrections". This statement
rescinds FASB Statement No. 4, "Reporting Gains and Losses from Extinguishment
of Debt", and an amendment of that Statement, FASB Statement No. 64,
"Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements". This
statement also rescinds FASB Statement No. 44, "Accounting for Intangible Assets
of Motor Carriers". This statement amends FASB Statement No. 13,"Accounting for
Leases", to eliminate an inconsistency between the required accounting for
sale-leaseback transactions and the required accounting for certain lease
modifications that have economic effects that are similar to sale-leaseback
transactions. This statement also amends other existing authoritative
pronouncements to make various technical corrections, clarify meanings, or
describe their applicability under changed conditions. The adoption of SFAS No.
145 did not have a material impact on the Company's consolidated results of
operations or financial position.
In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities". This statement nullifies Emerging
Issues Task Force ("EITF") Issue No. 94-3, "Liability Recognition for Certain
Employee Termination Benefits and Other Costs to Exit an Activity (including
Certain Costs Incurred in a Restructuring)". SFAS No. 146 addresses significant
issues regarding the recognition, measurement, and reporting of costs that are
associated with exit and disposal activities, including restructuring activities
that are currently accounted for pursuant to the guidance in EITF No. 94-3. The
scope of SFAS No. 146 also includes (1) costs related to terminating a contract
that is not a capital lease and (2) termination benefits that employees who are
involuntarily terminated receive under the terms of a one-time benefit
arrangement that is not an ongoing benefit arrangement or an individual
deferred-compensation contract. SFAS No. 146 is effective January 1, 2003. The
Company does not expect the adoption of this standard to have a material effect
on the Company's consolidated results of operations or financial position.
9. Impairment of Long-lived Assets
-------------------------------
The Company evaluates long-lived assets and certain identifiable
intangibles to be held and used in the business for impairment whenever events
or changes in circumstances indicate that the carrying amount of an asset may
not be recoverable. An impairment is determined by comparing estimated
undiscounted future operating cash flows to the carrying amounts of assets on a
store by store basis. If an impairment exists, the amount of impairment is
measured as the sum of the estimated discounted future operating cash flows of
such asset and the expected proceeds upon sale of the asset less its carrying
amount. Assets held for sale, if any, are reported at the lower of carrying
amount or fair value less costs to sell. The Company had no impairment loss
recorded for the quarters ended November 1, 2002 and November 2, 2001.
10. Litigation
----------
In Note 9 to the Consolidated Financial Statements for the fiscal year
ended August 2, 2002 contained in the Company's Annual Report filed on Form 10-K
on October 25, 2002 (which is incorporated herein by this reference), the
Company reported that its Cracker Barrel Old Country Store, Inc. subsidiary
("Cracker Barrel") is a defendant in four pending lawsuits, one of which has
been provisionally certified as a collective action. The Company believes it has
substantial defenses in each of these actions and is defending each of them
vigorously. The Company recorded a provision of $3,500 in the consolidated
financial statements in the fourth quarter of fiscal 2001 with respect to one of
these lawsuits based on offers of judgment to those plaintiffs. None of those
offers of judgment was accepted.
As previously reported (see Note 9 to the Company's Annual Report for
the fiscal year ended August 2, 2002 filed on Form 10-K on October 25, 2002)
concerning the NAACP/Thomas public accommodations case, on October 1, 2002, a
Federal District Court issued its ruling, based on the law and the facts, and on
the failure of plaintiffs to comply with the Court's time deadline, granting
Cracker Barrel's Rule 23 (c) Motion for Denial of Class Certification.
Accordingly, there are now 42 individual public accommodation plaintiffs,
against whom the Company believes that its subsidiary has substantial defenses.
The Company has announced previously that the Housing and Civil Enforcement
Section of the Civil Rights Division of the Department of Justice (the
"Section") has begun an investigation with respect to the public accommodation
allegations. The Company continues a dialogue with the Section that, if
unsuccessful, could lead to the Section filing suit under Title II of the Civil
Rights Act of 1964 seeking injunctive relief against the Company's subsidiary
regarding its public accommodation compliance. The Section may not seek or
obtain monetary relief for alleged public accommodations non-compliance. At this
time, whether the Section will intervene in the public accommodations case, the
likelihood of an unfavorable outcome, and the amount of ultimate liability, if
any, with respect to these claims cannot be determined. Accordingly, no
provision for any potential liability has been made in the consolidated
financial statements of the Company. In the event of an unfavorable outcome in
any of the four lawsuits or the Section investigation discussed in this item,
the Company's consolidated results of operations or financial position could be
materially and adversely affected.
In addition to the litigation described in the preceding paragraphs,
the Company and its subsidiaries are parties to other legal proceedings
incidental to their business. In the opinion of management, based upon
information currently available, the ultimate liability with respect to these
other actions will not materially affect the Company's consolidated results of
operations or financial position.
11. Derivative Financial Instruments and Hedging Activities
-------------------------------------------------------
The Company is exposed to market risk, such as changes in interest
rates and commodity prices. To manage the volatility relating to these
exposures, the Company nets the exposures on a consolidated basis to take
advantage of natural offsets. For the residual portion, the Company may enter
into various derivative financial instruments pursuant to the Company's policies
in areas such as counterparty exposure and hedging practices. The Company would
review these derivative financial instruments on a specific exposure basis to
support hedge accounting. The Company currently has no derivative financial
instruments designated as hedges. The changes in fair value of these hedging
instruments would be offset in part or in whole by the corresponding changes in
the fair value or cash flows of the underlying exposures being hedged. The
Company does not hold or use derivative financial instruments for trading
purposes. The Company's historical practice has been not to enter into
derivative financial instruments.
The Company's policy has been to manage financing cost using a mix of
fixed and variable rate debt. The Company has accomplished this objective
through the use of sale-leaseback transactions, real estate operating leases
and/or zero-coupon convertible debt. In a sale-leaseback transaction, the
Company finances its operating facilities by selling them to a third party and
then leasing them back under a long-term operating lease at fixed terms. Other
real estate operating leases are transactions in which the Company obtains use
of a site location by agreeing to a future schedule of lease payments. The
Company's zero-coupon convertible debt is fixed-rate, long-term debt. See Notes
4 and 11 to the Company's Consolidated Financial Statements included in the
Company's 2002 Annual Report filed on Form 10-K on October 25, 2002 for a
further description of this zero-coupon convertible debt and the Company's
sale-leaseback transaction, respectively. The Company has borrowed under its
revolving credit facility at short-term interest rates, which typically can be
fixed only for periods of six months or less.
Many of the food products purchased by the Company are affected by
commodity pricing and are, therefore, subject to price volatility caused by
weather, production problems, delivery difficulties and other factors which are
outside the control of the Company and which are generally unpredictable.
Changes in commodity prices would affect the Company and its competitors
generally and often simultaneously. In many cases, the Company believes it will
be able to pass through any increased commodity costs by adjusting its menu
pricing. From time to time, competitive circumstances may limit menu price
flexibility, and in those circumstances increases in commodity prices can result
in lower margins for the Company. Some of the Company's purchase contracts are
used to hedge commodity prices and may contain features that could be classified
as derivative financial instruments under SFAS Nos. 133, 137 and 138. However,
these features that could be classified as derivative financial instruments are
exempt from hedge accounting based on the normal purchases exemption. The
Company presently believes that any changes in commodity pricing which cannot be
adjusted for by changes in menu pricing or other product delivery strategies
would not be material.
12. Subsequent Event
----------------
On November 27, 2002, the Company announced that its Board of Directors
had declared a two cents per share cash dividend on the Company's outstanding
common stock payable on January 2, 2003 to shareholders of record as of the
close of business on December 13, 2002.
13. Reclassifications
-----------------
Certain reclassifications have been made in the fiscal 2002 financial
statements to conform to the classifications used in fiscal 2003. Total revenues
in the first quarter of the prior year reflect a reclassification of $1,143 of
net return fees for the Cracker Barrel Old Country Store(R) Book-on-Audio
program to net sales from other store operating expenses, where the Company
historically had reported the fees as a miscellaneous income credit to other
store operating expenses. This reclassification had no effect on net income. The
amounts of this reclassification for the second, third and fourth quarters of
fiscal 2002, are $1,097, $1,077 and $1,575, respectively. Additionally, the
balance sheet at August 2, 2002 and the cash flow statement for the first three
months of the prior year reflect certain other reclassifications. These certain
other reclassifications caused a net increase of $94 to total current assets,
total assets, total current liabilities and total liabilities at August 2, 2002.
These certain other reclassifications had no net effect on net cash provided by
operating activities or the net increase in cash and cash equivalents for the
quarter ended November 2, 2001.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
All dollar amounts reported or discussed in Part I, Item 2 of this
Quarterly Report on Form 10-Q are shown in thousands, except dollar amounts per
share. The following discussion and analysis provides information which
management believes is relevant to an assessment and understanding of the
Company's consolidated results of operations and financial condition. The
discussion should be read in conjunction with the condensed consolidated
financial statements and notes thereto. 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.
These, and similar statements are forward-looking statements concerning matters
that involve risks, uncertainties and other factors which may cause the actual
performance of the Company to differ materially from those expressed or implied
by these statements. All forward-looking information is provided by the Company
pursuant to the safe harbor established under the Private Securities Litigation
Reform Act of 1995 and should be evaluated in the context of these factors.
Forward-looking statements generally can be identified by the use of
forward-looking terminology such as "assumptions", "target", "guidance",
"plans", "projection", "may", "will", "would", "expect", "intend", "estimate",
"anticipate", "believe", "potential" or "continue" (or the negative or other
derivatives of each of these terms) or similar terminology. Factors which will
affect actual results include, but are not limited to: adverse general economic
conditions including uncertain consumer confidence effects on sales, especially
during the Company's important Christmas retail-selling season; weather
conditions and customer travel activity and retail buying trends; practical or
psychological effects of terrorist acts or military or government responses; the
actual results of pending or threatened litigation or governmental
investigations and the costs and effects of negative publicity associated with
these activities; changes in generally accepted accounting principles or changes
in capital market conditions that could affect valuations of restaurant
companies in general or the Company's goodwill in particular; commodity,
workers' compensation, group health and utility price changes; the effects of
plans intended to improve operational execution and performance; the effects of
increased competition at Company locations on sales and on labor recruiting,
cost, and retention; the ability of and cost to the Company to recruit, train,
and retain qualified restaurant hourly and management employees; the ability of
the Company to identify successful new lines of retail merchandise; the
availability and cost of acceptable sites for development; the acceptance of the
Company's concepts as the Company continues to expand into new markets and
geographic regions; changes in interest rates affecting the Company's financing
costs; increases in construction costs; changes in or implementation of
additional governmental or regulatory rules, regulations and interpretations
affecting accounting, tax, wage and hour matters, health and safety, pensions
and insurance; other undeterminable areas of government or regulatory actions or
regulations; 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 by percentage
relationships to total revenue for the quarter ended November 1, 2002 as
compared to the same period a year ago:
Quarter Ended
------------------------------
November 1, November 2,
2002 2001
---- ----
Net sales 99.9% 100.0%
Franchise fees and royalties 0.1 --
----- -----
Total revenue 100.0 100.0
Cost of goods sold 31.5 32.9
----- -----
Gross profit 68.5 67.1
Labor & other related expenses 37.8 37.7
Other store operating expenses 17.1 16.7
----- -----
Store operating income 13.6 12.7
General and administrative 6.4 6.2
----- -----
Operating income 7.2 6.5
Interest expense 0.4 0.3
Interest income -- --
----- -----
Income before income taxes 6.8 6.2
Provision for income taxes 2.4 2.2
----- -----
Net income 4.4% 4.0%
===== =====
Average Comparable Store Sales Analysis
---------------------------------------
Quarter Ended
-------------------------------
November 1, November 2,
2002 2001
---- ----
Cracker Barrel (430 stores)
Net sales:
Restaurant $ 786.2 $ 774.4
Retail 223.4 225.7
-------- --------
Total net sales $1,009.6 $1,000.1
======== ========
Logan's (71 restaurants) $ 719.7 $ 720.2
======== ========
Total Revenue
Total revenue for the first quarter of fiscal 2003 increased 6.3%
compared to last year's first quarter. At the Cracker Barrel Old Country Store
("Cracker Barrel") concept, comparable store restaurant sales increased 1.5% and
comparable store retail sales decreased 1.0%, resulting in a combined comparable
store sales (total net sales) increase of 1.0%. The comparable store restaurant
sales increase consisted of a 1.5% average check increase for the quarter (on a
0.8% menu increase) and flat guest traffic. The comparable store retail sales
decrease is believed primarily to reflect the effect of the weak economic
environment on consumer sentiment. At the Logan's Roadhouse(R) ("Logan's")
concept, comparable restaurant sales decreased 0.1%, which consisted of a 0.9%
average check increase (on a 1.1% menu increase) and a 1.0% guest traffic
decrease. Sales from new Cracker Barrel and Logan's stores primarily accounted
for the balance of the total revenue increase in the first quarter.
Cost of Goods Sold
Cost of goods sold as a percentage of total revenue for the first
quarter of fiscal 2003 decreased to 31.5% from 32.9% in the first quarter of
last year. This decrease was due primarily to lower commodity costs for beef,
bacon, butter, orange juice and certain other pork products versus the prior
year, higher menu pricing, higher initial mark-ons of retail merchandise, a
lower mix of retail sales as a percent of total revenues (retail has a higher
cost of goods sold than restaurant) and improvements in Cracker Barrel
store-level execution.
Labor and Other Related Expenses
Labor and other related expenses include all direct and indirect labor
and related costs incurred in store operations. Labor and other related expenses
as a percentage of total revenue increased to 37.8% in the first quarter this
year from 37.7% last year. This increase was due primarily to increases in
restaurant and retail manager wages, increased workers' compensation costs and
higher retail hourly labor and pre-opening labor, which reflected differences in
the new unit opening schedules from last year. These increases were offset
partially by higher menu pricing, decreased payouts under unit-level bonus
programs and lower restaurant hourly labor at Cracker Barrel due to improved
labor productivity and flat hourly wage inflation versus the prior year, which
resulted from management efforts to control wage increases, new hire wages, and
overtime, as well as generally lower competitive wage increase pressure.
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, rent, depreciation, general insurance, credit
card fees and pre-opening expenses other than labor-related. Other store
operating expenses as a percentage of total revenue increased to 17.1% in the
first quarter of fiscal 2003 from 16.7% in the first quarter of last year. This
increase was due primarily to higher credit card fees, maintenance, pre-opening
and general insurance costs versus the prior year. This increase was offset
partially by higher menu pricing and lower utility costs versus the prior year.
General and Administrative Expenses
General and administrative expenses as a percentage of total revenue
increased to 6.4% in the first quarter of fiscal 2003 from 6.2% in the first
quarter of last year. This increase was due primarily to higher professional
fees versus the prior year, bonus accruals reflective of performance
improvements and higher costs for store manager conferences versus a year ago
offset partially by higher menu pricing.
Interest Expense
Interest expense increased to $2,261 in the first quarter of fiscal
2003 from $1,753 in the first quarter of last year. The increase resulted
primarily from higher average outstanding debt during the first quarter as
compared to last year and was offset partially by lower average interest rates
as compared to last year.
Interest Income
Interest income increased to $73 in the first quarter of fiscal 2003
from $0 in the first quarter of last year. The increase was due primarily to
higher average funds available for investment during the first quarter as
compared to last year.
Provision for Income Taxes
The provision for income taxes as a percent of pre-tax income decreased
to 35.5% in the first quarter of fiscal 2003 from 35.8% during the same period a
year ago and from 35.6% for the entire fiscal year of 2002. The variation
between the statutory tax rate and the effective tax rate is due primarily to
employer tax credits for FICA taxes paid on employee tip income.
Critical Accounting Policies
- ----------------------------
The Company prepares its consolidated financial statements in
conformity with accounting principles generally accepted in the United States of
America. The preparation of these financial statements requires the Company to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of revenues and expenses
during the reporting period (see Note 2 to the Company's Consolidated Financial
Statements included in the Company's 2002 Annual Report filed on Form 10-K on
October 25, 2002). Actual results could differ from those estimates. Critical
accounting policies are those that management believes are both most important
to the portrayal of the Company's financial condition and operating results, and
require management's most difficult, subjective or complex judgments, often as a
result of the need to make estimates about the effect of matters that are
inherently uncertain. The Company bases its estimates on historical experience
and on various other assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying value of assets and liabilities that are not readily apparent from
other sources. Judgments and uncertainties affecting the application of those
policies may result in materially different amounts being reported under
different conditions or using different assumptions. The Company considers the
following policies to be most critical in understanding the judgments that are
involved in preparing its consolidated financial statements.
Impairment of Long-Lived Assets and Provision for Asset Dispositions
The Company assesses the impairment of long-lived assetswhenever events
or changes in circumstances indicate that the carrying value may not be
recoverable. Recoverability of assets is measured by comparing the carrying
value of the asset to the undiscounted future cash flows expected to be
generated by the asset. If the total future cash flows were less than the
carrying amount of the asset, the carrying amount is written down to the
estimated fair value, and a loss resulting from value impairment is recognized
by a charge to earnings. Judgments and estimates made by the Company related to
the expected useful lives of long-lived assets are affected by factors such as
changes in economic conditions and changes in operating performance. As the
Company assesses the ongoing expected cash flows and carrying amounts of its
long-lived assets, these factors could cause the Company to realize a material
impairment charge. From time to time the Company has decided to exit from or
dispose of certain operating units. Typically, such decisions are made based on
operating performance or strategic considerations and must be made before the
actual costs or proceeds of disposition are known, and management must make
estimates of these outcomes. Such outcomes could include the sale of a property
or leasehold, mitigating costs through a tenant or subtenant, or negotiating a
buyout of a remaining lease term. In these instances management evaluates
possible outcomes, frequently using outside real estate and legal advice, and
records in the financial statements provisions for the effect of such outcomes.
The accuracy of such provisions can vary materially from original estimates, and
management regularly monitors the adequacy of the provisions until final
disposition occurs. The Company also has adopted SFAS 143, under which it must
record asset retirement obligations based on estimates of future costs and
probabilities that such costs will be incurred for certain of its operating
leases. Adoption of SFAS 143 did not have, and is not expected to have, a
material impact on the consolidated results of operations or financial position
of the Company (see Note 8 - Recently Issued Accounting Pronouncements to the
Condensed Consolidated Financial Statements for the period ended November 1,
2002 filed herein). In addition, at least annually the Company assesses the
recoverability of goodwill and other intangible assets related to its restaurant
concepts. The impairment tests require the Company to estimate fair values of
its restaurant concepts by making assumptions regarding future cash flows and
other factors. This valuation may reflect, among other things, such external
factors as capital market valuation for public companies comparable to the
operating unit. If these assumptions change in the future, the Company may be
required to record material impairment charges for these assets. This annual
assessment will be performed in the second fiscal quarter ending January 31,
2003 and in the fiscal second quarter of each year in the future.
Insurance Reserves
The Company self-insures a significant portion of expected losses under
its workers' compensation, general liability and health insurance programs. The
Company has purchased insurance for individual claims that exceed $250 for
workers' compensation and general liability insurance prior to fiscal 2003, but
has now increased this amount to $500. The Company has decided not to purchase
such insurance for its primary group health program. The Company records a
liability for workers' compensation and general liability for all unresolved
claims and for an estimate of incurred but not reported claims at the
anticipated cost to the Company based upon an actuarially determined reserve as
of the end of the Company's third fiscal quarter and adjusting it by the
actuarially determined losses and actual claims payments for the subsequent
fiscal quarters until the next annual, actuarial study of its reserve
requirements. Those reserves and these losses are determined actuarially from a
range of possible outcomes within which no given estimate is more likely than
any other estimate. In accordance with SFAS No. 5, the Company records the
losses at the low end of that range and discounts them to present value using a
risk-free interest rate based on actuarially projected timing of payments. The
Company also monitors actual claims development, including incurrence or
settlement of individual large claims during the interim period between
actuarial studies as another means of estimating the adequacy of its reserves.
The Company records a liability for its group health program for all unpaid
claims based primarily upon a loss development analysis derived from actual
group health claims payment experience provided by the Company's third party
administrator. The Company's accounting policies regarding insurance reserves
include certain actuarial assumptions and management judgments regarding
economic conditions, the frequency and severity of claims and claim development
history and settlement practices. Unanticipated changes in these factors may
produce materially different amounts of expense that would be reported under
these insurance programs.
Inventory Shrinkage
Cost of sales includes the cost of retail merchandise sold at the
Cracker Barrel stores utilizing the retail inventory accounting method. It
includes an estimate of shortages that are adjusted upon physical inventory
counts in subsequent periods. This estimate is consistent with Cracker Barrel's
historical practice in all fiscal periods shown. Actual shrinkage recorded upon
physical inventory counts may produce materially different amounts of shrinkage
than estimated by the Company as of the end of its first fiscal quarter on
November 1, 2002.
Tax Provision
The Company must make estimates of certain items that comprise its
income tax provision. These estimates include effective state and local income
tax rates, employer tax credits for items such as FICA taxes paid on tip income,
Work Opportunity and Welfare to Work, as well as estimates related to certain
depreciation and capitalization policies. These estimates are made based on the
best available information at the time of the provision and historical
experience. The Company files its income tax returns many months after its
fiscal year end. These returns are subject to audit by various federal and state
governments years after the returns are filed and could be subject to differing
interpretations of the tax laws. The Company then must assess the likelihood of
successful legal proceedings or reach a settlement, either of which could result
in material adjustments to the Company's consolidated financial statements and
its consolidated financial position. See Note 2 to the Company's Condensed
Consolidated Financial Statements filed herein and Note 7 to the Company's
Consolidated Financial Statements included in the Company's 2002 Annual Report
filed on Form 10-K on October 25, 2002.
Legal Proceedings
As discussed in Note 10 to the Company's Condensed Consolidated
Financial Statements filed herein and more fully discussed in Note 9 to the
Company's Consolidated Financial Statements included in the Company's 2002
Annual Report filed on Form 10-K on October 25, 2002, the Company reported that
its Cracker Barrel Old Country Store, Inc. subsidiary is a defendant in four
lawsuits, one of which has been provisionally certified as a collective action,
and in one of which a Federal District Court has issued its ruling denying class
certification. The Company believes it has substantial defenses in these actions
and intends to continue to defend each of them vigorously. Nevertheless, the
Company established a reserve of $3,500 with respect to one of the cases based
on offers of judgment to those plaintiffs. None of those offers of judgment was
accepted. As a result, the Company recorded an accrual of this amount in the
fourth quarter of fiscal 2001 in accordance with SFAS No. 5. The Company has
announced previously that the Housing and Civil Enforcement Section of the Civil
Rights Division of the Department of Justice (the "Section") has begun an
investigation, with respect to the public accommodation allegations. The Company
continues a dialogue with the Section that, if unsuccessful, could lead to the
Section filing suit under Title II of the Civil Rights Act of 1964 seeking
injunctive relief against the Company's subsidiary regarding its public
accommodations compliance. The Section may not seek or obtain monetary relief
for alleged public accommodations non-compliance. At this time, whether the
Section will intervene in the public accommodations case, the likelihood of an
unfavorable outcome and the amount of ultimate liability, if any, with respect
to these claims cannot be determined. Except for that $3,500 accrual, there
currently is no provision for any potential liability with respect to these
lawsuits or the Section investigation in the Consolidated Financial Statements.
If there were to be an unfavorable outcome in any of these cases, the Company's
consolidated results of operations or financial position could be materially and
adversely affected.
In addition to the litigation described in the proceeding paragraph,
the Company and its subsidiaries are party to other legal proceedings incidental
to their business. In the opinion of management, based upon information
currently available, the ultimate liability with respect to these other actions
will not materially affect the Company's consolidated results of operations or
financial position.
Impact of Recent Accounting Pronouncements Not Yet Adopted
- ----------------------------------------------------------
In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities". This statement nullifies Emerging
Issues Task Force ("EITF") Issue No. 94-3, "Liability Recognition for Certain
Employee Termination Benefits and Other Costs to Exit an Activity (including
Certain Costs Incurred in a Restructuring)". SFAS No. 146 addresses significant
issues regarding the recognition, measurement, and reporting of costs that are
associated with exit and disposal activities, including restructuring activities
that are currently accounted for pursuant to the guidance in EITF No. 94-3. The
scope of SFAS No. 146 also includes (1) costs related to terminating a contract
that is not a capital lease and (2) termination benefits that employees who are
involuntarily terminated receive under the terms of a one-time benefit
arrangement that is not an ongoing benefit arrangement or an individual
deferred-compensation contract. SFAS No. 146 is effective January 1, 2003. The
Company does not expect the adoption of this standard to have a material effect
on the Company's consolidated results of operations or financial position.
Liquidity and Capital Resources
- -------------------------------
The Company's operating activities provided net cash of $30,397 for the
quarter ended November 1, 2002 increased from the $11,287 provided during the
same period a year ago. This increase was due primarily to increases in net
income and depreciation and amortization and decreases in income tax payments
for the quarter ended November 1, 2002 as compared to the same period a year
ago. Most of the $30,397 in net cash from operating activities was provided by
net income adjusted for depreciation and amortization. Cash used for increases
in inventories, other current assets and other assets and decreases in accounts
payable and other long-term liabilities were offset partially by increases in
other current liabilities.
Capital expenditures were $30,891 for the quarter ended November 1,
2002 as compared to $22,785 during the same period a year ago. This increase
was due primarily to an increase in the average number of new locations
under construction versus the same period a year ago. Construction of new
locations accounted for most of these expenditures. Capitalized interest was
$121 for the quarter ended November 1, 2002 as compared to $110 for the quarter
ended November 2, 2001. This difference was due primarily to an increase in the
average number of new locations under construction versus the same period a year
ago offset partially by lower borrowing costs as compared to a year ago.
The Company's internally generated cash, along with cash at August 2,
2002, the Company's available revolver and real estate operating lease
arrangements, were sufficient to finance all of its growth in the first three
months of fiscal 2003.
The Company estimates that its capital expenditures for fiscal 2003
will be approximately $120,000 to $125,000, most of which will be related to the
construction of new Cracker Barrel stores and new Logan's restaurants. The
Company intends to open 23 new Cracker Barrel stores and 12 new Logan's
restaurants in fiscal 2003.
Long-term debt outstanding consisted of the following at:
November 1, August 2,
2002 2002
- -------------------------------------------------------------------------------
Revolving Credit Facility payable on or before
December 31, 2003 (rates ranging from 3.05% to
3.07% at November 1, 2002 and 3.06% to 4.75%
at August 2, 2002) $ 35,000 $ 20,000
3.0% Zero-Coupon Contingently Convertible Senior
Notes payable on or before April 2, 2032 175,777 174,476
-------- --------
Long-term debt $210,777 $194,476
======== ========
On September 12, 2002, the Company announced that the Board of
Directors had authorized the repurchase of up to 2 million shares of the
Company's common stock. The purchases are to be made from time to time in the
open market at prevailing market prices. During the first quarter, the Company
repurchased 772,000 shares of its common stock for total consideration of
$17,355 or $22.48 per share. The Company presently expects to complete this
share repurchase authorization during fiscal 2003.
During the first quarter of fiscal 2003, the Company received
proceeds of $1,599 from the exercise of stock options on 122,001 shares of its
common stock.
Management believes that cash at November 1, 2002, along with cash
generated from the Company's operating activities and its available revolving
credit facility, as well as financing obtained through real estate operating
leases, will be sufficient to finance its continued operations, its remaining
share repurchase authorization and its continued expansion plans through fiscal
2004. At November 1, 2002, the Company had $215,000 available under its
revolving credit facility. The Company estimates that it will generate excess
cash of approximately $55,000 to $60,000 before proceeds from the exercise of
stock options and after capital expenditures in fiscal 2003 which it presently
intends to apply toward its current share repurchase authorization, future share
repurchase authorizations, debt reduction or other purposes. The Company's
principal criteria for share repurchases are that they be accretive to earnings
per share and that they do not unfavorably affect the Company's investment grade
debt rating and target capital structure. The Company's target capital structure
includes the estimated effect of off-balance sheet real estate operating leases
on its long-term debt and its total capitalization. The Company's target capital
structure is approximately 35% for the ratio of lease-adjusted debt to
lease-adjusted total capitalization.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 7A of the Company's Annual Report on Form 10-K for the fiscal year
ended August 2, 2002, and filed with the Commission on October 25, 2002, is
incorporated in this item of this report by this reference.
Item 4. Controls and Procedures
Within the 90-day period prior to the filing of this report, an
evaluation was carried out under the supervision and with the participation of
the Company's management, including its Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the design and operation of its
disclosure controls and procedures, as defined in Rule 13a-14(c) promulgated
under the Securities Exchange Act of 1934 (the "Exchange Act"). Based upon that
evaluation, the Chief Executive Officer and Chief Financial Officer concluded
that the design and operation of these disclosure controls and procedures are
effective for the purposes set forth in the definition of "disclosure controls
and procedures" in Exchange Act Rule 13a-14(c). There have been no significant
changes in the Company's internal controls or in other factors that could
significantly affect these controls subsequent to the date of their evaluation.
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. and subsidiaries ("the Company") as of November 1, 2002, and the
related condensed consolidated statements of income and cash flows for the
quarters ended November 1, 2002 and November 2, 2001. 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 auditing standards generally accepted in the United States of America, 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 accounting principles generally accepted in the United States of
America.
We have previously audited, in accordance with auditing standards generally
accepted in the United States of America, the consolidated balance sheet of CBRL
Group, Inc. and subsidiaries as of August 2, 2002, and the related consolidated
statements of income, changes in shareholders' equity, and cash flows for the
year then ended (not presented herein); and in our report dated September 12,
2002, 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 August 2, 2002 is fairly stated, in
all material respects, in relation to the consolidated balance sheet from which
it has been derived.
DELOITTE & TOUCHE LLP
Nashville, Tennessee
December 5, 2002
PART II
Item 1. Legal Proceedings
-----------------
Part I, Item 3 of the Company's Annual Report on Form
10-K filed October 25, 2002, is incorporated in this
Form 10-Q by this reference. See also Note 10 to the
Company's Condensed Consolidated Financial Statements
filed in Part I, Item I of this Quarterly Report on
Form 10-Q, which also is incorporated in this item of
this report by this reference.
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 on November 26, 2002.
(b) Proxies for the meeting were solicited in accordance
with Regulation 14 of the Securities Exchange Act of
1934: there was no solicitation in opposition to
management's nominees and all of management's
nominees were elected. Each director is elected to
serve for a 1-year term.
(c) The following sets forth the results of voting on each matter at
the annual meeting:
Proposal 1 - Election of Directors.
WITHHOLD
FOR AUTHORITY
James D. Carreker 40,879,096 2,547,623
Robert V. Dale 40,342,556 3,084,163
Dan W. Evins 41,056,158 2,370,561
Robert C. Hilton 40,142,303 3,284,416
Charles E. Jones, Jr. 40,127,902 3,298,817
B. F. "Jack" Lowery 40,135,517 3,291,202
Gordon L. Miller 40,125,816 3,300,903
Martha M. Mitchell 40,155,790 3,270,929
Jimmie D. White 40,131,188 3,295,531
Michael A. Woodhouse 41,061,493 2,365,226
Proposal 2 - To approve the CBRL Group 2002 Omnibus Stock and
Option Incentive Compensation Plan.
Votes cast for 23,433,054
Votes cast against 19,775,167
Votes cast to abstain 218,498
Proposal 3 - To approve the selection of Deloitte and Touche LLP
as the Company's independent auditors for
the 2003 fiscal year.
Votes cast for 39,133,043
Votes cast against 4,197,604
Votes cast to abstain 96,072
Proposal 4 - To consider and take action on a shareholder
proposal, requesting that the Board of Directors implement
non-discriminatory policies relating to sexual orientation.
The proponent did not attend the meeting and present the
shareholder proposal, but the vote on that proposal was as
follows:
Votes cast for 18,220,892
Votes cast against 13,124,683
Votes cast to abstain 1,131,460
Broker non-votes 10,949,684
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.
(99) Sarbanes-Oxley Certifications.
(b) The following Current Reports on Form 8-K have been filed or
furnished during the quarter for which this report is filed:
September 12, 2002: Form 8-K, Item 5 to report that
the Company is responding to questions posed by the
U.S. Department of Justice ("DOJ") in an investigation
of its subsidiary Cracker Barrel Old Country Store, Inc.
The Company also furnished in this same Current Report
on Form 8-K under Item 9, Regulation FD Disclosure, its
September 12, 2002, press release, with respect to certain
2002 fiscal year-end and 2002 fourth quarter-end financial
and other information, recent sales trends, and earnings
guidance for the first fiscal quarter and full year
of 2003. In addition, the Company reported under Item
9 that its Chief Financial Officer stated the following at
a previously disclosed conference call, open to the public,
held on September 12, 2002; "We do expect to file the required
CEO and CFO certifications under both SEC Order 4-460 and under
Sarbanes-Oxley on time. Our due date for filing our Form 10-K
is October 31, 2002."
October 4, 2002: Form 8-K, Item 5 to report that the
Company had issued a press release announcing that a
federal judge in the Northern District of Georgia had
denied certification of a class action in a claimed
$100 million racial discrimination in public
accommodation lawsuit against Cracker Barrel Old
Country Store, Inc., a subsidiary of the Company.
(See Note 10 - Litigation and Critical Accounting
Policies - Legal Proceedings contained in this Form
10-Q.)
October 7, 2002:Form 8-K, Item 9 to report that the
Company had issued a press release announcing that
the Company would be presenting at the McDonald
Investments Consumer Conference and noted that the
Company's presentation at the conference would be
available to the public simultaneously over the
Internet, and for 14 days thereafter.
October 7, 2002: Form 8-K, Item 5 to report that the
Company had issued a press release announcing the
election of James D. Carreker to the Company's board
of directors and the upcoming retirement of two
existing members of the board.
October 17, 2002: Form 8-K, Item 9 to report the
issuance of a concurrent press release reporting the
Company's fiscal 2003 first quarter-to-date sales
trends and to update its earnings guidance for the
first quarter of fiscal 2003.
October 25, 2002:, Form 8-K, Item 9 to report that
the Company's Chief (Principal) Executive Officer and
Chief (Principal) Financial Officer had delivered to
the Secretary of the Securities and Exchange
Commission in accordance with SEC Order No.4-460
statements under oath regarding facts and
circumstances related to the Annual Report of the
Registrant on Form 10-K for the fiscal year ended
August 2, 2002.
October 25, 2002: Form 8-K, Item 9 to report that the
Company had issued a press release stating that its
Chief Executive Officer and Chief Financial Officer
had filed the required certifications under both SEC
Order No.4-460 and under the Sarbanes-Oxley Act of
2002.
CERTIFICATIONS
I, Michael A. Woodhouse, certify that:
1. I have reviewed this quarterly report on Form 10-Q of CBRL Group, Inc.;
2. Based on my knowledge, this quarterly 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 quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a. Designed such disclosure controls and procedures 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 quarterly report
is being prepared;
b. Evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c. Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons performing the
equivalent function):
a. All significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b. Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: December 5, 2002 By: /s/Michael A. Woodhouse
---------------------------
Michael A. Woodhouse,
President and Chief Executive Officer
as Principal Executive Officer
I, Lawrence E. White, certify that:
1. I have reviewed this quarterly report on Form 10-Q of CBRL Group, Inc.;
2. Based on my knowledge, this quarterly 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 quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a. Designed such disclosure controls and procedures 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 quarterly report
is being prepared;
b. Evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c. Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons performing the
equivalent function):
a. All significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b. Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: December 5, 2002 By: /s/Lawrence E. White
------------------------
Lawrence E. White,
Senior Vice President, Finance and
Chief Financial Officer as
Principal Financial Officer
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: 12/5/02 By /s/Lawrence E. White
------- -------------------------------------------------
Lawrence E. White, Senior Vice President, Finance
and Chief Financial Officer
Date: 12/5/02 By /s/Patrick A. Scruggs
------- -------------------------------------------------
Patrick A. Scruggs, Assistant Treasurer
and Chief Accounting Officer
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
15 Letter regarding unaudited financial information
99 Sarbanes-Oxley certifications
Exhibit 15
December 5, 2002
CBRL Group, Inc.
106 Castle Heights Avenue North
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. and subsidiaries for the quarters ended November
1, 2002 and November 2, 2001, as indicated in our report dated December 5, 2002;
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, 2002, is
incorporated by reference in Registration Statement Nos. 2-86602, 33-15775,
33-37567, 33-45482, 333-01465, 333-71384 and 333-81063 on Forms S-8 and
Registration Statement Nos. 33-59582, 333-90996-02 and 333-90996-13 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
Exhibit 99 Certifications EXHIBIT 99
WRITTEN STATEMENT BY THE CHIEF EXECUTIVE OFFICER AND THE CHIEF FINANCIAL OFFICER
REGARDING PERIODIC REPORT CONTAINING FINANCIAL STATEMENTS
1. Michael A. Woodhouse, chief executive officer and Lawrence E. White, chief
financial officer, each certify that:
(a) The Quarterly Report on Form 10-Q ("periodic report") of CBRL Group, Inc.
(the "issuer"), for the quarter ended November 1, 2002, as filed with the
Securities and Exchange Commission on the date of this certificate, which
this statement accompanies, fully complies with the requirements of section
13(a) or 15(d) of the Securities Exchange Act of 1934, and
(b) the information contained in that periodic report fairly presents, in all
material respects, the financial condition and results of operations of the
issuer.
2. This statement is provided pursuant to the requirements of Section 906 of
the Sarbanes - Oxley Act of 2002, codified as Section 1350 of Chapter 63 of
Title 18 USC.
Date: December 5, 2002 By: /s/ Michael A. Woodhouse
------------------------
Michael A. Woodhouse,
President and Chief Executive Officer
By: /s/ Lawrence E. White
------------------------
Lawrence E. White,
Senior Vice President, Finance and
Chief Financial Officer
