UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark One)
X Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarterly Period Ended October 31, 2003
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
------- ----------
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes X No_____
-------
49,486,478 Shares of Common Stock
Outstanding as of November 28, 2003
PART I
Item 1. Financial Statements
CBRL GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(In thousands, except per share data)
(Unaudited)
October 31, August 1,
2003 2003*
---- ----
ASSETS
Current assets:
Cash and cash equivalents $ 16,122 $ 14,389
Receivables 9,830 9,150
Inventories 163,740 136,020
Prepaid expenses 12,657 8,932
Deferred income taxes 7,568 7,568
---------- ----------
Total current assets 209,917 176,059
Property and equipment - net 1,054,749 1,040,315
Goodwill 92,882 92,882
Other assets 19,432 17,067
---------- ----------
Total assets $1,376,980 $1,326,323
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 63,414 $ 82,172
Accrued expenses 183,715 164,442
Current maturities of long-term debt and other long-term
obligations 104 100
---------- ----------
Total current liabilities 247,233 246,714
---------- ----------
Long-term debt 196,068 186,730
---------- ----------
Other long-term obligations 97,330 97,983
---------- ----------
Commitments and Contingencies (Note 11)
Shareholders' equity:
Preferred stock - 100,000 shares of $.01 par
value authorized; no shares issued -- --
Common stock - 400,000 shares of $.01 par
value authorized; at October 31, 2003, 48,885
shares issued and outstanding and at August 1, 2003,
47,873 shares issued and outstanding 489 479
Additional paid-in capital 18,606 --
Retained earnings 817,254 794,417
---------- ----------
Total shareholders' equity 836,349 794,896
---------- ----------
Total liabilities and shareholders' equity $1,376,980 $1,326,323
========== ==========
See notes to unaudited condensed consolidated financial statements.
* This condensed consolidated balance sheet has been derived from the
audited consolidated balance sheet as of August 1, 2003.
CBRL GROUP, INC.
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(In thousands, except per share data)
(Unaudited)
Quarter Ended
---------------------------------------
October 31, November 1,
2003 2002
---- ----
Total revenue $576,365 $527,539
Cost of goods sold 185,900 165,965
-------- --------
Gross profit 390,465 361,574
Labor & other related expenses 214,303 199,267
Other store operating expenses 96,728 90,580
-------- --------
Store operating income 79,434 71,727
General and administrative expenses 33,417 33,904
-------- --------
Operating income 46,017 37,823
Interest expense 2,223 2,261
Interest income -- 73
-------- --------
Income before income taxes 43,794 35,635
Provision for income taxes 15,634 12,650
-------- --------
Net income $ 28,160 $ 22,985
======== ========
Net income per share:
Basic $ .59 $ .46
======== ========
Diluted $ .56 $ .45
======== ========
Weighted average shares:
Basic 48,122 50,060
======== ========
Diluted 50,036 51,319
======== ========
See notes to unaudited condensed consolidated financial statements.
CBRL GROUP, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
(Unaudited)
Quarter Ended
---------------------------
October 31, November 1,
2003 2002
---- ----
Cash flows from operating activities:
Net income $ 28,160 $ 22,985
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 15,191 16,191
Loss on disposition of property and equipment 238 103
Accretion on zero-coupon contingently convertible 1,338 1,302
senior notes
Changes in assets and liabilities:
Inventories (27,720) (10,544)
Accounts payable (18,758) (5,236)
Other current assets and other current liabilities 9,545 7,589
Other assets and other long-term liabilities (2,736) (1,978)
-------- --------
Net cash provided by operating activities 5,258 30,412
-------- --------
Cash flows from investing activities:
Purchase of property and equipment (29,683) (30,891)
Proceeds from sale of property and equipment 100 1,136
-------- --------
Net cash used in investing activities (29,583) (29,755)
-------- --------
Cash flows from financing activities:
Proceeds from issuance of long-term debt 130,000 142,500
Principal payments under long-term debt and other
long-term obligations (122,025) (127,519)
Deferred financing costs (533) (15)
Proceeds from exercise of stock options 18,616 1,599
Purchases and retirement of common stock -- (17,355)
-------- --------
Net cash provided by (used in) financing activities 26,058 (790)
-------- --------
Net increase (decrease) in cash and cash equivalents 1,733 (133)
Cash and cash equivalents, beginning of period 14,389 15,074
-------- --------
Cash and cash equivalents, end of period $ 16,122 $ 14,941
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the three months for:
Interest $ 344 $ 415
======== ========
Income taxes $ 250 $ 345
======== ========
See notes to unaudited condensed consolidated financial statements.
CBRL GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- ----------------------------------------------------
(In thousands, except per share data) (Unaudited)
1. Condensed Consolidated Financial Statements
The condensed consolidated balance sheet as of October 31, 2003 and the
related condensed consolidated statements of income and cash flows for the
quarters ended October 31, 2003 and November 1, 2002, have been prepared by CBRL
Group, Inc. (the "Company") in accordance with accounting principles generally
accepted in the United States of America and pursuant to the rules and
regulations of the Securities and Exchange Commission ("SEC") 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
1, 2003 ("2003 10-K") filed with the SEC on October 15, 2003.
Deloitte & Touche LLP, the Company's independent auditors, have performed a
limited review of the financial information included herein. Their report on
such review accompanies this filing.
2. Summary of Significant Accounting Policies
The significant accounting policies of the Company are included in the 2003
10-K. During the quarter ended October 31, 2003, there were no significant
changes to those accounting policies. References in these Notes to the Condensed
Consolidated Financial Statements ("Notes") to a year are to the Company's
fiscal year unless otherwise noted.
Stock Based Compensation - The Company accounts for its stock based
compensation under the recognition and measurement principles of Accounting
Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to
Employees", and related interpretations, and has adopted the disclosure-only
provisions of Statement of Financial Accounting Standards ("SFAS") No. 123,
"Accounting for Stock-Based Compensation" and below is providing disclosures
required by SFAS No. 148, "Accounting for Stock-Based Compensation-Transition
and Disclosure". Under APB Opinion No. 25, no stock-based compensation cost is
reflected in net income for grants of stock options to employees because the
Company grants stock options with an exercise price equal to the market value of
the stock on the date of grant. The reported stock-based compensation expense,
net of related tax effects, in the table represents the amortization of
restricted stock grants to two executive officers of the Company.
Had the Company used the fair value based accounting method for stock
compensation expense prescribed by SFAS Nos. 123 and 148, the Company's
consolidated net income and net income per share would have been reduced to the
pro-forma amounts illustrated as follows:
Quarter Ended
October 31, November 1,
2003 2002
---- ----
Net income - as reported $28,160 $22,985
Add: Total stock-based employee
compensation included in reported
net income, net of related tax effects 19 (37)
Deduct: Total stock-based compensation
expense determined under fair-value
based method for all awards, net of
tax effects (2,715) (2,980)
------- -------
Pro forma, net income $25,464 $19,968
======= =======
Net income per share:
Basic - as reported $ 0.59 $ 0.46
======= =======
Basic - pro forma $ 0.53 $ 0.40
======= =======
Diluted - as reported $ 0.56 $ 0.45
======= =======
Diluted - pro forma $ 0.51 $ 0.39
======= =======
3. Recently Issued Accounting Pronouncements
In May 2003, the Financial Accounting Standards Board issued SFAS No. 150,
"Accounting for Certain Financial Instruments with Characteristics of both
Liabilities and Equity". SFAS No. 150 establishes standards for how a Company
classifies and measures certain financial instruments with characteristics of
both liabilities and equity. It requires that a Company classify a financial
instrument that is within its scope as a liability (or an asset in some
circumstances) because that freestanding financial instrument embodies an
obligation of the Company. SFAS No. 150 was effective for financial instruments
entered into or modified after May 31, 2003, and otherwise was effective on
August 2, 2003 for the Company. The adoption of SFAS No. 150 did not have a
material impact on the Company's consolidated results of operations or financial
position.
4. Income Taxes
The provision for income taxes for the quarter ended October 31, 2003 has
been computed based on management's estimate of the tax rate for 2004 of 35.7%.
The variation between the statutory tax rate and the effective tax rate is due
primarily to state income taxes offset partially by employer tax credits for
FICA taxes paid on employee tip income. The Company's effective tax rate for the
quarter ended November 1, 2002 and for 2003 was 35.5%.
5. Seasonality
Historically the consolidated net income of the Company has been lower in
the first three fiscal quarters and highest in the fourth fiscal quarter, which
includes much of the summer vacation and travel season. Management attributes
these variations primarily to the decrease in interstate tourist traffic and
propensity to dine out during the regular school year and winter months and the
increase in interstate tourist traffic and propensity to dine out during the
summer months. The Company's retail sales historically have been highest in the
Company's second fiscal quarter, which includes the Christmas holiday shopping
season. Therefore, the results of operations for the quarter ended October 31,
2003 cannot be considered indicative of the operating results for the entire
fiscal year.
6. Inventories
Inventories were comprised of the following at:
October 31, August 1,
2003 2003
---- ----
Retail $126,107 $101,955
Restaurant 19,095 17,091
Supplies 18,538 16,974
-------- --------
Total $163,740 $136,020
======== ========
7. Consolidated Net Income Per Share and Weighted Average Shares
Basic consolidated net income per share is computed by dividing
consolidated income available to common shareholders by the weighted average
number of common shares outstanding for the reporting period. Diluted
consolidated net income per share reflects the potential dilution that could
occur if securities, options or other contracts to issue common stock were
exercised or converted into common stock. The Company's zero-coupon convertible
senior notes (see Note 4 to the Company's Consolidated Financial Statements
included in the 2003 10-K for a description of these notes) represent potential
dilutive shares at October 31, 2003. 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 October 31, 2003 because none
of the conditions that permit conversion had been satisfied during the reporting
period. Outstanding stock options issued by the Company represent the only
dilutive security reflected in diluted weighted average shares.
8. 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 consolidated
comprehensive income and consolidated net income as reported by the Company for
all periods shown.
9. Segment Reporting
Cracker Barrel Old Country Store(R) ("Cracker Barrel") units represent a
single, integrated operation with two related and substantially integrated
product lines. The operating expenses of the restaurant and retail product line
of a Cracker Barrel unit are shared and are indistinguishable in many respects.
The chief operating decision-makers review operating results for both restaurant
and retail operations on a combined basis.
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 SFAS No. 131, "Disclosures
About Segments of an Enterprise and Related Information," for all periods
presented.
Quarter Ended
----------------------------
October 31, November 1,
2003 2002
---- ----
Net sales in Company-owned stores:
Restaurant $456,520 $423,742
Retail 119,439 103,517
-------- --------
Total net sales 575,959 527,259
Franchise fees and royalties 406 280
-------- --------
Total revenue $576,365 $527,539
======== ========
10. 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 value of an asset may not
be recoverable. An impairment is determined by comparing undiscounted future
operating cash flows that are expected to result from an asset to the carrying
values of an asset 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 the asset and the expected proceeds upon sale of the
asset less its carrying value. Assets held for sale, if any, are reported at the
lower of carrying value or fair value less costs to sell. The Company recorded
no impairment losses in the quarters ended October 31, 2003 and November 1,
2002. In addition, at least annually the Company assesses the recoverability of
goodwill and other intangible assets. The impairment tests require the Company
to estimate fair values of its related reporting units 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. The Company performed its annual assessment in the second quarter
ending January 31, 2003, and concluded at that time that there was no indication
of impairment. This annual assessment will be performed in the second quarter of
each year. Additionally, an assessment will be performed between annual
assessments if an event occurs or circumstances change that would more likely
than not reduce the fair value of a reporting unit below its carrying amount.
The Company does not believe any such events or changes in circumstances have
occurred since the annual assessment performed in the second quarter ending
January 31, 2003.
11. Commitments and Contingencies
The Company's Cracker Barrel Old Country Store, Inc. subsidiary ("Cracker
Barrel") is involved in certain lawsuits, four of which are filed by the same
plaintiffs' attorneys, among others, and are not ordinary routine litigation
incidental to its business: Serena McDermott and Jennifer Gentry v. Cracker
Barrel Old Country Store, Inc., 4:99-CV-0001-HLM, a collective action under the
federal Fair Labor Standards Act ("FLSA"), was served on Cracker Barrel on May
3, 1999; Kelvis Rhodes, Maria Stokes et al. v. Cracker Barrel Old Country Store,
Inc., 4:99-CV-217-HLM, an action under Title VII of the Civil Rights Act of 1964
and Section 1981 of the Civil Rights Act of 1866, was served on Cracker Barrel
on September 15, 1999; Flounice Stanley, Calvin Slack et al. v. Cracker Barrel
Old Country Store, Inc., 4:01-CV-326-HLM, a collective action under the FLSA,
was served on Cracker Barrel on April 12, 2002; and the National Association for
the Advancement of Colored People ("NAACP"), Betty Thomas et al. v. Cracker
Barrel Old Country Store, Inc., 4:01-CV-325-HLM, an action under Title II of the
Civil Rights Act of 1964 and Section 1981 of the Civil Rights Act of 1866, was
served on Cracker Barrel on April 12, 2002. These four cases are filed, and are
pending, in the United States District Court for the Northern District of
Georgia, Rome Division.
The McDermott case alleges that certain tipped hourly employees were
required to perform excessive non-serving duties without being paid the minimum
wage or overtime compensation for that work ("server claims") and that certain
hourly employees were required to wait "off the clock," without pay for the wait
("lock-in claims"). The McDermott case seeks recovery of unpaid wages and
overtime wages related to those claims. Following provisional class notice being
sent in 2000, 10,838 persons filed "opt in" forms. On November 21, 2003, the
Magistrate Judge in the McDermott case issued a 108 page report and
recommendation (the "Report") with respect to Cracker Barrel's motion for
de-certification. The Report was received by Cracker Barrel on November 25, 2003
and recommended granting the motion for de-certification as to the server claims
and denying the motion as to the lock-in claims. Under the order entered
concurrently with the Report, the parties have 10 business days after receipt to
file objections to the Report. If no objections are filed, the Report may be
adopted as the order of the Court. Cracker Barrel intends to object to that
portion of the Report that recommends denying the motion to decertify the
"lock-in" collective group. If the Magistrate's report is accepted as the order
of the Court, the two named plaintiffs who asserted server claims, if they
decide to proceed with those claims, now will be required to proceed
individually with respect to those claims. Server claims of any "opt-in"
plaintiffs are to be dismissed, without prejudice, if the Report is adopted by
the Court. As to the "lock-in" claims, 8,512 persons filed opt-in forms. The
Report indicates that the collective "lock-in" group will be allowed to present
their collective case through 216 representative plaintiffs in that group. In
order to receive statutory liquidated damages or to extend the period of the
statute of limitations from two to three years, the plaintiffs will be required
to show willfulness. A failure on the plaintiffs' part to show willfulness will
limit their claims to actual damages over a two-year time period. The Court
could subsequently amend the definition of the collective group, and if amended,
the scope of the collective action could either be reduced or increased or, if
appropriate, the Court could dismiss the collective aspects of the case
entirely. The Company does not know whether the plaintiffs intend to object to
the Report. Also, at this time, there is no schedule with respect to any
additional proceedings in the case.
The Stanley case initially was a purported FLSA collective action, but the
plaintiffs did not timely move the court for class certification. This case was
filed by current and former employees asserting three claims based upon alleged
violations of the FLSA: (1) that Personal Achievement Responsibility (PAR) IV
level employees are routinely required to perform quasi-managerial duties or
duties related to training without receiving minimum wage or overtime
compensation for that work, (2) that employees classified as trainers routinely
work off the clock to prepare for training sessions at home or on store premises
and to conduct pre-training activities, and (3) that store opener employees were
mis-classified as salaried exempt and are due overtime compensation. The
individual plaintiffs in Stanley seek unpaid compensation and back pay,
liquidated damages, prejudgment interest, attorneys' fees and costs, and
unspecified injunctive relief. No express amount of monetary damages is claimed
in the Stanley case and no substantial discovery has taken place in that case.
After rulings and consents dismissing certain plaintiffs, only three individuals
remain in this case.
The Rhodes case sought certification as a company-wide class action, a
declaratory judgment to redress an alleged systemic pattern and practice of
racial discrimination in employment opportunities, an order to effect certain
hiring and promotion goals and back pay and other related monetary damages. In
May 2002, the Rhodes plaintiffs filed a motion for class certification proposing
a class of all current and former employees and applicants for employment who
might have suffered discrimination in hiring, promotion, job assignment and
cross-training. The court has denied certification of a class in the Rhodes
case. The plaintiffs' appeal of this ruling was denied by the 11th Circuit Court
of Appeals. There are now 13 individual plaintiffs continuing the claims
asserted in the Rhodes case.
The NAACP/Thomas case is an alleged race discrimination class action filed
by the NAACP and customers of Cracker Barrel alleging that Cracker Barrel has a
pattern and practice of race-based discriminatory treatment of African-American
customers and white customers when accompanied by African-American customers,
that sought certification as a class action. Plaintiffs and their counsel have
denied that they seek to recover compensatory damages, instead claiming to seek
only nominal, actual and punitive damages. Plaintiffs also seek unspecified
declaratory and injunctive relief and demanded an award of punitive and nominal
damages in the amount of $100,000, plus reasonable attorneys' fees and costs. On
October 1, 2002, the District Court granted defendant's Rule 23 (c) Motion and
denied class certification. The plaintiffs did not appeal this ruling. There are
now 34 individual plaintiffs continuing the claims they asserted in the Thomas
case.
In addition, lawsuits have been filed by individual plaintiffs in Arkansas,
Georgia, North Carolina and Mississippi, each alleging racial discrimination
toward guests. It appears that these lawsuits are related to the Thomas case,
because they involve a number of individuals who were witnesses or named
plaintiffs in that case and they state claims that are similar to those made in
the Thomas case on behalf of certain individuals in those states.
In August 2002, Cracker Barrel received a letter from the Department of
Justice ("DOJ") informing Cracker Barrel that it was the subject of a DOJ
investigation pursuant to Title II of the Civil Rights Act of 1964. On August
20, 2002, DOJ sent a request for information to Cracker Barrel seeking basic
information about locations of restaurants and broad based data about customer
complaints and company policies. The DOJ is empowered to investigate matters
under Title II of the Civil Rights Act of 1964, and since the initial notice of
the investigation, Cracker Barrel has provided all requested information to the
DOJ. Pursuant to Title II, DOJ remedies are limited to injunctive or preventive
relief. Remedies for public accommodation claims typically relate to
implementation or revision of policies and procedures for responding to, and
methods for monitoring, customer complaints. If the Company and DOJ were not
able to agree informally to resolve any concerns raised, then the DOJ could seek
to intervene in the pending Title II action. It is not possible at this time to
provide an opinion as to how likely it is that the DOJ will have any concerns or
will pursue them in court, or as to any other likely outcome of the
investigation.
The Company's subsidiary, Logan's Roadhouse, Inc. ("Logan's") is subject to
a lawsuit filed September 8, 2003, by an individual alleging various violations
of the federal FLSA at one Logan's restaurant in Macon, Georgia. The case,
styled Joey E. Barlow, on behalf of himself and all others similarly situated v.
Logan's Roadhouse, Inc., was filed in the United States District Court for the
Middle District of Tennessee (Case No. 3-03-0821). The case is a putative
collective action under the FLSA, although it has not yet been certified as
such. Since institution of the case, an additional two plaintiffs have indicated
that they intend to join the case. The complaint alleges that certain hourly
employees (including the plaintiff) at Logan's Macon, Georgia restaurant were
subjected to violations of the FLSA, including being required to work "off the
clock," having hours "shaved" (reduced in the computer), being required to
perform excessive non-server duties without being paid the minimum wage or
overtime compensation for that work, and that certain hourly employees were
required to wait "off the clock," without pay for the wait. The case seeks to
have all non-exempt employees who worked at the Macon, Georgia Logan's
restaurant for the last three years notified of the action and their right to
opt-in to the action, recovery of unpaid compensation, plus an equal amount of
liquidated damages, prejudgment interest, attorneys' fees and costs, and
unspecified injunctive relief. Although the case is in a very preliminary stage,
the Company denies that Logan's engaged in any unlawful employment practices as
alleged in the complaint and intends to vigorously defend the case.
The Company believes that its Cracker Barrel and Logan's subsidiaries have
substantial defenses to the claims made in each of these cases, and each of
these cases is being defended vigorously. Because discovery has not been
completed in some of these cases, and none of these cases are yet ready for
trial, neither the likelihood of an unfavorable outcome nor the amount of
ultimate liability, if any, with respect to these cases or the investigation can
be determined at this time. The Company accrued $3,500 with respect to the
Cracker Barrel/McDermott case based on offers of judgment to McDermott
plaintiffs. None of those offers of judgment was accepted. With the exception of
that reserve, no provision for any potential liability has been made in the
consolidated financial statements of the Company with respect to these lawsuits
or the DOJ investigation. In the event of an unfavorable result in any of these
cases or in the DOJ investigation, beyond amounts covered under various
insurance policies of the Company and its subsidiaries, if applicable, the
Company's consolidated results of operations and financial condition 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 businesses. 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.
The Company makes trade commitments in the course of its normal operations.
As of October 31, 2003 the Company was contingently liable for approximately
$1,449 under outstanding trade letters of credit issued in connection with
purchase commitments. These letters of credit have terms of 3 months or less and
are used to collateralize obligations to third parties for the purchase of a
portion of the Company's imported retail inventories. Additionally, the Company
was contingently liable pursuant to standby letters of credit as credit
guarantees to insurers. As of October 31, 2003 the Company had $15,725 of
standby letters of credit related to workers' compensation and general
liabilities. All standby letters of credit are renewable annually.
The Company is secondarily liable for lease payments under the terms of an
operating lease that has been assigned to a third party. The operating lease has
a remaining life of approximately 9.9 years with annual lease payments of
approximately $350. The Company's performance is only required if the assignee
fails to perform his obligations as lessee. At this time, the Company has no
reason to believe that the assignee will not perform and, therefore, no
provision has been made in the accompanying condensed consolidated financial
statements for amounts to be paid as a result of non-performance by the
assignee.
The Company also is secondarily liable for lease payments under the terms
of another operating lease that has been sublet to a third party. The operating
lease has a remaining life of approximately 12.9 years with annual lease
payments of approximately $100. The Company's performance is only required if
the sublessee fails to perform his obligations as lessee. The Company has a
remaining liability of approximately $480 in the accompanying condensed
consolidated financial statements for estimated amounts to be paid in case of
non-performance by the sublessee.
12. Additional Paid-In Capital
During the first quarter of 2004, the Company received proceeds of $18,616
from the exercise of stock options on 980,845 shares of its common stock. These
stock option exercises created the additional paid-in capital of $18,606 on the
Company's October 31, 2003 consolidated balance sheet, since the Company had no
offsetting share repurchases to reduce this balance to zero as at August 1,
2003.
13. Reclassifications
Certain reclassifications have been made in the 2003 condensed consolidated
financial statements to conform to the classifications used in 2004.
INDEPENDENT ACCOUNTANTS' REPORT
To the 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 October 31, 2003, and the
related condensed consolidated statements of income and cash flows for the
quarters ended October 31, 2003 and November 1, 2002. 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 1, 2003, 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 10,
2003 (September 25, 2003 as to Note 13), 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 1,
2003 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, 2003
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
All 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.
References in management's discussion and analysis of financial condition and
results of operations to a year are to the Company's fiscal year unless
otherwise noted. 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 Quarterly Report on 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 CBRL Group, Inc. and its subsidiaries
(collectively, the "Company") to differ materially from those expressed or
implied by this discussion.
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", "outlook", "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 could materially affect actual
results include, but are not limited to: changes in commodity, workers'
compensation, group health and utility costs; competitive marketing and
operational initiatives; the ability of the Company to identify and acquire
successful new lines of retail merchandise, especially during the important
holiday selling season; the effects of plans intended to improve operational
execution and performance; the effects of uncertain consumer confidence or
general or regional economic weakness on sales and customer travel activity;
practical or psychological effects of terrorist acts or war and military or
government responses; consumer behavior based on concerns over nutritional or
safety aspects of the Company's products or restaurant food in general; 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;
changes in foreign exchange rates affecting the Company's future retail
inventory purchases; the availability and cost of acceptable sites for
development and the Company's ability to identify such sites; changes in
accounting principles generally accepted in the United States of America or
changes in capital market conditions that could affect valuations of restaurant
companies in general or the Company's goodwill in particular; 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; the actual
results of pending or threatened litigation or governmental investigations and
the costs and effects of negative publicity associated with these activities;
other undeterminable areas of government or regulatory actions or regulations;
changes in interest rates affecting the Company's financing costs; and other
factors described from time to time in the Company's filings with the SEC, press
releases, and other communications.
Results of Operations
The following table highlights operating results by percentage
relationships to total revenue for the quarter ended October 31, 2003 as
compared to the same period a year ago:
Quarter Ended
----------------------------
October 31, November 1,
2003 2002
---- ----
Total revenue 100.0% 100.0%
Cost of goods sold 32.2 31.5
----- -----
Gross profit 67.8 68.5
Labor & other related expenses 37.2 37.8
Other store operating expenses 16.8 17.1
----- -----
Store operating income 13.8 13.6
General and administrative expenses 5.8 6.4
----- -----
Operating income 8.0 7.2
Interest expense 0.4 0.4
Interest income -- --
----- -----
Income before income taxes 7.6 6.8
Provision for income taxes 2.7 2.4
----- -----
Net income 4.9% 4.4%
==== =====
The following table highlights the components of total revenue by
percentage relationships to total revenue for the quarter ended October 31, 2003
as compared to the same period a year ago:
Quarter Ended
-----------------------------
October 31, November 1,
2003 2002
---- ----
Net sales:
Cracker Barrel restaurant 66.5% 68.4%
Logan's 12.7 11.9
----- -----
Total restaurant 79.2 80.3
Cracker Barrel retail 20.7 19.6
----- -----
Total net sales 99.9 99.9
Franchise fees and royalties 0.1 0.1
----- -----
Total revenue 100.0% 100.0%
===== =====
Comparable Store Average Sales Analysis
Quarter Ended
---------------------------
October 31, November 1,
2003 2002
---- ----
Cracker Barrel (445 stores)
Net sales:
Restaurant $ 796.4 $ 785.9
Retail 246.5 223.4
-------- --------
Total net sales $1,042.9 $1,009.3
======== ========
Logan's (83 restaurants) $ 728.3 $ 716.5
======= ========
Total Revenue
Total revenue for the first quarter of 2004 increased 9.3% compared to last
year's first quarter. For the first quarter ended October 31, 2003, Cracker
Barrel Old Country Store(R) ("Cracker Barrel") comparable store restaurant sales
increased 1.3% and comparable store retail sales increased 10.3% resulting in a
combined comparable store sales (total net sales) increase of 3.3%. The
comparable store restaurant sales increase consisted of a 1.5% average check
increase for the quarter (including a 0.9% menu price increase) offset by a 0.2%
guest traffic decrease. We believe that the comparable store retail sales
increase is primarily related to the supply disruptions in the first quarter of
the prior year related to a threatened West Coast dock strike, improved
merchandise selection with broader appeal and greater variety at lower price
points and improved merchandise planning and retail operations. Logan's
Roadhouse(R) ("Logan's") comparable restaurant sales increased 1.7%, which
consisted of a 1.7% guest traffic increase. Sales from newly opened Cracker
Barrel stores and Logan's restaurants 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 2004 increased to 32.2% from 31.5% in the first quarter of last year. This
increase was due primarily to higher commodity costs for beef, eggs and bacon, a
higher mix of retail sales as a percent of total revenues (retail has a higher
product cost than restaurant) and higher markdowns of retail merchandise versus
the prior year. These increases were partially offset by higher menu pricing at
Cracker Barrel, higher initial mark-ons of retail merchandise and lower retail
shrink and in-store damages versus the prior year.
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 decreased to 37.2% in the first quarter this year
from 37.8% last year. This decrease was due primarily to lower workers'
compensation costs, lower group health costs, lower hourly labor expenses as a
percent of revenue and higher menu pricing versus the prior year. These
decreases were offset partially by increases in compensation under unit-level
bonus programs versus the prior year.
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 decreased to 16.8% in the
first quarter of fiscal 2004 from 17.1% in the first quarter of last year. This
decrease was due primarily to lower depreciation and advertising and higher menu
pricing versus the prior year. The lower depreciation is the result of the
Company's rapid Cracker Barrel store growth in the late 1990's which has been
reduced in recent years and the Company's accelerated depreciation methods for
certain asset categories in these new stores that are now fully depreciated.
These decreases in other store operating expenses were offset partially by
higher repairs and maintenance and utilities versus the prior year.
General and Administrative Expenses
General and administrative expenses as a percentage of total revenue
decreased to 5.8% in the first quarter of 2004 as compared to 6.4% in the first
quarter of last year. This decrease was due primarily to lower professional fees
and management training versus the prior year.
Interest Expense
Interest expense decreased to $2,223 in the first quarter of 2004 from
$2,261 in the first quarter of last year. The decrease resulted primarily from
lower average interest rates as compared to last year and was offset partially
by higher average outstanding debt during the first quarter of 2004 as compared
to last year.
Interest Income
The Company did not recognize any interest income in the first quarter of
2004. The Company's interest income was $73 in the first quarter of 2003. The
decrease was due primarily to lower average funds available for investment
during the first quarter of fiscal 2004 as compared to last year.
Provision for Income Taxes
The provision for income taxes as a percent of pre-tax income was 35.7% in
the first quarter of 2004 as compared to 35.5% during the first quarter a year
ago and which approximated the rate for the entire year of 2003. The variation
between the statutory tax rate and the effective tax rate is due primarily to
state income taxes offset partially by employer tax credits for FICA taxes paid
on employee tip income.
Liquidity and Capital Resources
The Company's operating activities provided net cash of $5,258 for the
quarter ended October 31, 2003, which represented a decrease from the $30,412
provided during the same period a year ago. This decrease was due primarily to
increases in inventories and decreases in accounts payable partially offset by
an increase in net income. The increase in inventories was due primarily to the
supply disruption in the first quarter of the prior year related to a threatened
west coast dock strike and increased seasonal merchandise buys in the current
year. The decrease in accounts payable was due primarily to timing of payments
versus the previous year. Cash provided by increases in other current
liabilities was offset partially by cash used for increases in other current
assets and other assets and decreases in other long-term liabilities.
The Company had negative working capital of $37,316 at October 31, 2003
versus negative working capital of $70,655 at August 1, 2003. In the restaurant
industry, substantially all sales are either for cash or credit card. Like many
other restaurant companies, the Company is able to, and may from time to time,
operate with negative working capital. Restaurant inventories purchased through
the Company's principal food distributor are on terms of net zero days, while
restaurant inventories purchased locally generally are financed from normal
trade credit. Retail inventories purchased domestically generally are financed
from normal trade credit, while imported retail inventories generally are
purchased through letters of credit and wire transfers. These various trade
terms are aided by rapid turnover of the restaurant inventory. Employees
generally are paid on weekly, bi-weekly or semi-monthly schedules in arrears of
hours worked, and certain expenses such as certain taxes and some benefits are
deferred for longer periods of time.
Capital expenditures were $29,683 for the quarter ended October 31, 2003 as
compared to $30,891 during the same period a year ago. Construction of new
locations and one replacement location accounted for most of these expenditures.
The decrease from the prior year is primarily due to the timing of maintenance
and replacement capital expenditures for existing stores versus the same period
a year ago. Capitalized interest was $124 for the quarter ended October 31,
2003, as compared to $121 for the quarter ended November 1, 2002. 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 presently expects to complete the remaining 661,300 shares of
its current repurchase authorization during 2004, although there can be no
assurance that such repurchase activity will be completed in that period of
time.
During the first quarter of 2004, the Company received proceeds of $18,616
from the exercise of stock options on 980,845 shares of its common stock. These
stock option exercises created the additional paid-in capital of $18,606 on the
Company's October 31, 2003 condensed consolidated balance sheet, since the
Company had no offsetting share repurchases to reduce this balance to zero as at
August 1, 2003. During the first quarter of 2004, the Company declared a
dividend of $0.11 per share paid on November 10, 2003.
The Company's internally generated cash and cash generated by option
exercises, along with cash at August 1, 2003, the Company's availability under
its revolving credit facility and its real estate operating lease arrangements,
were sufficient to finance all of its growth and working capital needs in the
first three months of 2004.
The Company estimates that its capital expenditures for 2004 will be
approximately $140,000 to $145,000, most of which will be related to the
construction of new Cracker Barrel and Logan's units. The Company, through
internally generated cash and available borrowing capacity, expects to be able
to meet its capital needs for the foreseeable future. The Company expects to
open 24 new Cracker Barrel units, six of which already have opened, in 2004. The
Company expects to open 11 new company-operated Logan's units, five of which
have already opened, in 2004.
Management believes that cash at October 31, 2003, 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, its dividends and its continued expansion plans
through fiscal 2005. At October 31, 2003, the Company had $285,000 available
under its then existing revolving credit facility. The Company estimates that
its net cash provided by operating activities in 2004 (most comparable measure
under accounting principles generally accepted in the United States of America)
less capital expenditures will generate excess cash of approximately $55,000 to
$60,000. The Company intends to use this excess cash along with proceeds from
the exercise of stock options in 2004 to apply toward completing its remaining
661,300 share repurchase authorization, possible future share repurchase
authorizations, dividend payments, and possible 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.
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 2003 10-K). 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
The Company assesses the impairment of long-lived assets whenever 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 are less than the
carrying amount of the asset, the carrying amount is written down to the
estimated fair value of an asset to be held and used or over the fair value, net
of estimated costs of disposal, of an asset to be disposed of, 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. In addition, at least annually the Company assesses the recoverability
of goodwill and other intangible assets. The impairment tests require the
Company to estimate fair values of its related reporting units 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. The Company performed its annual assessment in the
second quarter ending January 31, 2003, and concluded at that time that there
was no indication of impairment. This annual assessment will be performed in the
second quarter of each year. Additionally, an assessment will be performed
between annual assessments if an event occurs or circumstances change that would
more likely than not reduce the fair value of a reporting unit below its
carrying amount.
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 2003, but has
increased this amount to $500 for 2003 and to $1,000 for certain coverages for
2004 going forward. The Company elected not to purchase such insurance for its
primary group health program, but its offered benefits are limited to not more
than $1,000 lifetime for any employee (including dependents) in the 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 quarter and adjusting it by the actuarially
determined losses and actual claims payments for the subsequent 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 the
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. From time to time the Company has
performed limited scope interim updates of its actuarial studies to verify
and/or modify 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 periods shown. Actual shrinkage recorded upon physical inventory
counts may produce materially different amounts of shrinkage than estimated by
the Company for the first quarter ended on October 31, 2003.
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 with the relevant taxing
authority, either of which could result in material adjustments to the Company's
consolidated financial statements and its consolidated financial position. See
Note 4 to the Company's Condensed Consolidated Financial Statements filed herein
and Note 7 to the Company's Consolidated Financial Statements included in its
2003 10-K.
Legal Proceedings
As discussed in Note 11 to the Company's Condensed Consolidated Financial
Statements contained in this Quarterly Report and more fully discussed in Note 9
to the Company's Consolidated Financial Statements included in its 2003 10-K,
the Company reported that its principal subsidiaries are subject to certain
lawsuits, one of which has been provisionally certified as a collective action.
As is more fully discussed in the consolidated financial statement footnotes,
the Company believes its subsidiaries have substantial defenses in these
lawsuits and intends to continue to defend each of them vigorously. Except for a
$3,500 accrual, there currently is no provision for any potential liability with
respect to these matters in the Company's Condensed Consolidated Financial
Statements. However, future developments in any of these proceedings, if
adverse, and if beyond amounts covered under various insurance policies of the
Company and its subsidiaries, if applicable, could result in a material adverse
effect on the Company's consolidated financial condition or results of
operations.
In addition to the litigation described in the preceding paragraph, the
Company and its subsidiaries are parties to other legal proceedings incidental
to their businesses. 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.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 7A of the 2003 10-K, is incorporated in this item of this report by
this reference. There have been no material changes in the quantitative and
qualitative market risks of the Company since August 1, 2003.
Item 4. Controls and Procedures
The Company, under the supervision and with the participation of the
Company's management, including the Chief Executive Officer and the Chief
Financial Officer, evaluate the effectiveness of the Company's disclosure
controls and procedures (as defined in Rule 13a-15(e) promulgated under the
Securities Exchange Act of 1934 ("the Exchange Act")). Based upon this
evaluation, the Chief Executive Officer and the Chief Financial Officer have
concluded that as of October 31, 2003, the Company's disclosure controls and
procedures were effective for the purposes set forth in the definition thereof
in Exchange Act Rule 13a-15(e).
There have been no significant changes (including corrective actions with
regard to significant deficiencies and material weaknesses) during the quarter
ended October 31, 2003 in the Company's internal controls over financial
reporting (as defined in Exchange Act Rule 13a-15(f)).
PART II
Item 1. Legal Proceedings
Part I, Item 3 of the 2003 10-K, is incorporated herein by
this reference.
Item 5 of the Company's Current Report on Form 8-K dated
September 15, 2003 and filed with the SEC on October 1, 2003
is incorporated herein by this reference.
Item 5 of the Company's Current Report on Form 8-K dated
November 21, 2003 and filed with the SEC on November 28, 2003
is incorporated herein by this reference.
See also Note 11 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
by this reference.
Item 4. Submission of Matters to a Vote of Security Holders
(a) Although no items were submitted to a vote of
security holders during the quarter ended October 31,
2003, the annual meeting of shareholders (the "Annual
Meeting") was held on November 25, 2003.
(b) Proxies for the Annual Meeting were solicited in
accordance with Regulation 14 of the Exchange Act;
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 34,585,060 9,497,708
Robert V. Dale 34,585,378 9,497,390
Dan W. Evins 39,808,710 4,274,058
Robert C. Hilton 34,587,864 9,494,904
Charles E. Jones, Jr. 39,634,798 4,447,970
B. F. "Jack" Lowery 27,957,306 16,125,462
Martha M. Mitchell 26,803,867 17,278,901
Andrea M. Weiss 40,118,581 3,964,187
Jimmie D. White 22,762,050 21,320,718
Michael A. Woodhouse 39,831,263 4,251,505
Proposal 2 - To approve the selection of Deloitte &
Touche LLP as the Company's independent auditors for
the 2004 fiscal year.
Votes cast for 37,439,107
Votes cast against 6,591,949
Votes cast to abstain 51,712
Item 6. Exhibits and Reports on Form 8-K
(a) See Exhibit Index immediately following the signature
page hereto.
(b) Current Reports on Form 8-K during the quarter for
which this report is filed:
Form 8-K dated July 30, 2003 and filed August 6,
2003, reporting under Items 5 and 9 the issuance of a
press release announcing developments in certain
litigation.
Form 8-K dated and filed August 21, 2003, reporting
under Item 9 the election of Andrea M. Weiss to the
Company's Board of Directors.
Form 8-K dated and filed September 11, 2003,
reporting under Items 9 and 12 the issuance of a
press release announcing the Company's 2003 fourth
fiscal quarter and fiscal year end earnings, current
sales trends and earnings guidance for the first
fiscal quarter of 2004 and the entire fiscal year
2004.
Form 8-K dated September 15, 2003 and filed October
1, 2003, reporting under Item 5 developments in
litigation involving the Company's subsidiaries and
under Item 9 the issuance of a press release
announcing the Company's $.11 per share quarterly
dividend.
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: 12/5/03 By /s/Lawrence E. White
------- --------------------
Lawrence E. White, Senior Vice President, Finance
and Chief Financial Officer
Date: 12/5/03 By /s/Patrick A. Scruggs
------- ---------------------
Patrick A. Scruggs, Vice President, Accounting and Tax
and Chief Accounting Officer
EXHIBIT INDEX
Exhibit No. Description
15 Letter regarding unaudited financial information
31 Rule 13a-14(a)/15d-14(a) Certifications
32 Section 1350 Certifications
Exhibit 15 December 5, 2003 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 October 31, 2003 and November 1, 2002, as indicated in our report dated December 5, 2003; 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 October 31, 2003, 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 31 A CERTIFICATION
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 report does not contain any
untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in
light of the circumstances under which such statements were
made, not misleading with respect to the period covered by
this report;
3. Based on my knowledge, the financial statements, and other
financial information included in this report, fairly
present in all material respects the financial condition,
results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are
responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e) for the registrant and have:
(a) Designed such disclosure controls and procedures, or
caused such disclosure controls and procedures to be
designed under our supervision, to ensure that
material information relating to the registrant,
including its consolidated subsidiaries, is made
known to us by others within those entities,
particularly during the period in which this report
is being prepared;
(b) Evaluated the effectiveness of the registrant's
disclosure controls and procedures and presented in
this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the
end of the period covered by this report based on
such evaluation; and
(c) Disclosed in this report any change in the
registrant's internal control over financial
reporting that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth fiscal
quarter in the case of an annual report) that has
materially affected, or is reasonably likely to
materially affect, the registrant's internal control
over financial reporting; and
5. The registrant's other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant's
auditors and the audit committee of registrant's board of
directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses
in the design or operation of internal control over
financial reporting which are reasonably likely to
adversely affect the registrant's ability to record,
process, summarize and report financial information;
and
(b) Any fraud, whether or not material, that involves
management or other employees who have a significant
role in the registrant's internal control over
financial reporting.
Date: December 5, 2003
/s/ Michael A. Woodhouse
------------------------
Michael A. Woodhouse, President and
Chief Executive Officer
EXHIBIT 31 B CERTIFICATION
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 report does not contain any
untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light
of the circumstances under which such statements were made,
not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other
financial information included in this report, fairly present
in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for,
the periods presented in this report;
4. The registrant's other certifying officer(s) and I are
responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e) for the registrant and have:
(a) Designed such disclosure controls and procedures, or
caused such disclosure controls and procedures to be
designed under our supervision, to ensure that
material information relating to the registrant,
including its consolidated subsidiaries, is made
known to us by others within those entities,
particularly during the period in which this report
is being prepared;
(b) Evaluated the effectiveness of the registrant's
disclosure controls and procedures and presented in
this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the
end of the period covered by this report based on
such evaluation; and
(c) Disclosed in this report any change in the
registrant's internal control over financial
reporting that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth fiscal
quarter in the case of an annual report) that has
materially affected, or is reasonably likely to
materially affect, the registrant's internal control
over financial reporting; and
5. The registrant's other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant's
auditors and the audit committee of registrant's board of
directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses
in the design or operation of internal control over
financial reporting which are reasonably likely to
adversely affect the registrant's ability to record,
process, summarize and report financial information;
and
b) Any fraud, whether or not material, that involves
management or other employees who have a significant
role in the registrant's internal control over
financial reporting.
Date: December 5, 2003
/s/ Lawrence E. White
---------------------
Lawrence E. White, Senior Vice President, Finance and
Chief Financial Officer
Exhibit 32 A
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of CBRL Group, Inc. (the "Issuer")
on Form 10-Q for the fiscal quarter ended October 31, 2003, as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, Michael
A. Woodhouse, President and Chief Executive Officer of the Issuer, certify,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d)
of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Issuer.
Date: December 5, 2003 By: /s/ Michael A. Woodhouse
------------------------
Michael A. Woodhouse,
President and Chief Executive Officer
Exhibit 32 B
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of CBRL Group, Inc. (the "Issuer")
on Form 10-Q for the fiscal quarter ended October 31, 2003, as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I,
Lawrence E. White, Senior Vice President and Chief Financial Officer of the
Issuer, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d)
of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Issuer.
Date: December 5, 2003 By: /s/ Lawrence E. White
---------------------
Lawrence E. White,
Senior Vice President, Finance and
Chief Financial Officer