Selected Financial Data
For each of the fiscal years ended
(In thousands except per share data)
July 28, July 29, July 30, July 31, August 2,
1995 1994 1993 1992 1991
________________________________________________________________________________
OPERATING RESULTS
Net sales $783,093 $640,899 $517,616 $400,577 $300,209
Cost of goods sold 264,809 215,071 171,709 130,885 100,720
Expenses:
Store operations:
Labor & other
related expenses 256,253 207,227 167,909 131,771 96,996
Other store
operating expenses 114,564 92,694 74,673 57,504 44,672
General and
administrative 44,746 36,807 30,096 25,186 20,131
Total expenses 415,563 336,728 272,678 214,461 161,799
Operating income 102,721 89,100 73,229 55,231 37,690
Interest expense 723 2,136 2,885 3,374 2,839
Interest income 3,335 3,604 2,600 2,365 1,700
Income before income
taxes 105,333 90,568 72,944 54,222 36,551
Provision for income
taxes 39,290 33,609 27,292 20,279 13,679
Income before change in
accounting principle 66,043 56,959 45,652 33,943 22,872
Cumulative effect of
change in accounting
principle** -- 988 -- -- --
Net income $ 66,043 $ 57,947 $ 45,652 $ 33,943 $ 22,872
SHARE DATA*
Earnings before change
in accounting principle
per share $1.09 $.94 $.78 $.60 $.44
Cumulative effect of
change in accounting
principle per share** -- .02 -- -- --
Net earnings per share 1.09 .96 .78 .60 .44
Dividends per share $ .02 $.02 $.02 $.02 $.02
Weighted average
shares outstanding 60,557 60,607 58,789 56,204 51,497
FINANCIAL POSITION
Working capital $ 43,600 $ 60,721 $ 76,115 $ 32,565 $ 50,280
Total assets 604,515 530,064 469,073 313,460 264,666
Property and equipment
additions-net 119,979 100,736 84,837 71,115 63,149
Property and equipment
-net 479,518 385,960 305,596 236,694 178,669
Long-term debt 19,500 23,500 36,576 41,449 42,516
Capital lease
obligations 1,598 1,709 1,802 1,876 2,032
Stockholders' equity $496,083 $429,846 $366,785 $222,110 $180,443
================================================================================
*Adjusted to give effect for the three-for-two stock splits in the form of 50%
stock dividends distributed to stockholders on March 19, 1993 and March 20,
1992.
**The Company adopted Statement of Financial Accounting Standards (SFAS) No.
109, "Accounting for Income Taxes", effective July 31, 1993. (See Note 7 to the
Company's Financial Statements.)
1
Market Price and Dividend Information
The following table indicates the high and low sales prices of the
Company's common stock as reported by The Nasdaq Stock Market (National
Market) and dividends paid.
Fiscal Year 1995 Fiscal Year 1994
________________ ________________
Prices Prices
_____________ Dividends _____________ Dividends
Quarter High Low Paid High Low Paid
________________________________________________________________________________
First $27.25 $20.00 $.005 $29.25 $22.50 $.005
Second 22.50 17.50 .005 29.75 24.50 .005
Third 23.75 20.50 .005 29.13 25.00 .005
Fourth 24.63 19.88 .005 28.00 21.25 .005
________________________________________________________________________________
2
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
The following table highlights operating results over the past three
fiscal years:
Period to Period
Relationship to Net Sales Increase(Decrease)
_________________________ __________________
1995 1994 1993 1995 vs 1994 1994 vs 1993
______________________________________________________________________________
Net Sales
Restaurant 77.9% 78.2% 78.8% 22% 23%
Gift shop 22.1 21.8 21.2 24 28
_____ _____ _____
100.0 100.0 100.0 22 24
Cost of goods sold 33.8 33.6 33.2 23 25
Expenses:
Store operations:
Labor & other
related
expenses 32.7 32.3 32.4 24 23
Other store
operating
expenses 14.6 14.5 14.4 24 24
General &
administrative 5.7 5.7 5.8 22 22
Operating income 13.1 13.9 14.1 15 22
Interest expense .1 .3 .6 (67) (26)
Interest income .4 .6 .5 (8) 39
Income before
income taxes 13.5 14.1 14.1 16 24
Provision for
income taxes 5.0 5.2 5.3 17 23
Income before change
in accounting
principle 8.4 8.9 8.8 16 25
Cumulative effect of
change in accounting
principle* -- .2 -- -- --
Net income 8.4 9.0 8.8 14 27
=============================================================================
*The Company adopted Statement of Financial Accounting Standards (SFAS) No.
109, "Accounting for Income Taxes", effective July 31, 1993. (See Note 7).
Same Store Sales Analysis
Period to Period
Increase
__________________________
1995 vs 1994 1994 vs 1993
(152 Stores) (127 Stores)
____________________________________________________________________________
Restaurant 4% 4%
Gift shop 5 7
Restaurant & gift shop 4 4
============================================================================
Same store restaurant sales (which compares sales of stores open
throughout the periods under comparison) increased 4% in fiscal 1995. In
fiscal 1994 same store restaurant sales increased 4%.
3
Same store gift shop sales increased 5% in fiscal 1995 over 1994 while
sales increased 7% in fiscal 1994 over 1993.
In fiscal 1995 total sales (restaurant and gift shop) in the 152 same
stores averaged $3.92 million. Restaurant sales were 78.0% of total sales in
the 152 same stores in fiscal 1995 and 78.2% in fiscal 1994.
Total net sales, which increased 22% and 24% in fiscal 1995 and 1994,
respectively, benefited from comparable store sales growth and the opening of
36, 30 and 25 new stores in fiscal 1995, 1994 and 1993, respectively.
Cost of goods sold as a percentage of net sales increased in 1995 to
33.8% from 33.6% in 1994. This increase was primarily due to an increase in
shrinkage and markdowns on gift shop items. The increase in the mix of gift
shop sales which have a higher cost than restaurant sales also accounted for
part of the increase. Cost of goods sold increased in 1994 to 33.6% from
33.2% in 1993. This increase was primarily due to an increasing mix of gift
shop sales which have a higher cost than restaurant sales.
Labor and other related expenses include all direct and indirect labor
and related costs incurred in store operations. Labor expenses as a
percentage of net sales were 32.7%, 32.3% and 32.4% in fiscal 1995, 1994 and
1993, respectively. The year to year increase in fiscal 1995 over fiscal
1994 was attributable to an increase in labor costs due to the costs to hire
and retain employees as a result of increasing competition and a shrinking
labor market. The decrease in fiscal 1994 over fiscal 1993 was attributable
to improved volume and lower worker's compensation insurance expenses as a
result of various safety programs instituted in the stores. Other store
operating expenses include all other unit-level operating costs, the major
components of which are operating supplies, repairs and maintenance,
advertising expenses, utilities and depreciation and amortization. Other
store operating expenses as a percentage of net sales were 14.6%, 14.5% and
14.4% in fiscal 1995, 1994 and 1993, respectively. The year to year
increases were attributable to higher depreciation related to building 36, 30
and 25 new stores in fiscal 1995, 1994 and 1993, respectively.
General and administrative expenses as a percentage of net sales were
5.7% in fiscal 1995 and fiscal 1994 and 5.8% in fiscal 1993. The reduction
in 1994 was accomplished largely due to improved volume. The largest area of
increased spending in absolute dollars in fiscal 1995 was in the operations
services area relating to manager trainee costs due to an increase in the
number of trainees required to staff store expansion.
Interest expense decreased to $.7 million in fiscal 1995 from $2.1
million in fiscal 1994 and from $2.9 million in fiscal 1993 primarily due to
the prepayment of approximately $6.8 million in unsecured notes payable and
$3.5 million of Industrial Development Revenue Bonds in the second quarter of
fiscal 1994 (see Note 4) and an increase in capitalized interest related to
the increase in additional stores opened from 25 in 1993 to 30 in 1994 to 36
in 1995.
Interest income decreased in fiscal 1995 to $3.3 million from $3.6
million in fiscal 1994. The primary reason for the decrease in interest
income was lower average funds available for investment, which was partially
offset by higher interest rates in fiscal 1995. Interest income increased to
$3.6 million in fiscal 1994 from $2.6 million in fiscal 1993. The primary
reason for the increase was due to income received for a full fiscal year on
the remaining proceeds from the sale (after giving effect to the stock split
- - see Note 5) of 2,587,500 new common shares in January, 1993 and the
exercise of stock options (see Note 6) in fiscal 1993.
Provision for income taxes as a percent of pretax income was 37.3% for
fiscal 1995, 37.1% for fiscal 1994 and 37.4% for fiscal 1993. The Company
adopted SFAS No. 109, "Accounting for Income Taxes", effective July 31, 1993.
(See Note 7).
4
Liquidity and Capital Resources
The Company's cash generated from operating activities was $92.4 million
in fiscal 1995. Most of this cash was provided by net income adjusted by
depreciation and amortization. Increases in inventories were substantially
offset by increases in accounts payable, taxes withheld and accrued, income
taxes payable and other accrued expenses.
Capital expenditures were $121.1 million in fiscal 1995. Land purchases
and cost of new stores accounted for substantially all of these expenditures,
except for $8.2 million for the renovation of the old gift shop warehouse
into office space.
The Company's internally generated cash and short-term and long-term
investments were sufficient to finance all of its growth in fiscal 1995.
The Company estimates that its capital expenditures for fiscal 1996 will
be approximately $150 million, substantially all of which will be land
purchases and cost of new stores except for $7.6 million relating to the
expansion of the Gift Shop Distribution Center. The Company's cash, short-
term and long-term investments, along with internally generated cash from
operating activities should be sufficient to finance its continued expansion
in fiscal 1996 and its expansion plans through fiscal 1997. Presently the
Company has an unused revolving credit line of $15 million.
5
Balance Sheets
July 28, July 29,
Assets 1995 1994
________________________________________________________________________________
Current Assets:
Cash and cash equivalents (Note 1) $ 48,123,914 $ 47,305,523
Short-term investments (Notes 1 and 3) 11,103,625 31,275,819
Receivables 3,192,910 2,993,735
Inventories (Notes 1 and 2) 51,514,831 41,989,546
Prepaid expenses 912,481 1,094,862
Deferred income taxes (Notes 1 and 7) 5,518,702 3,220,016
________________________________________________________________________________
Total current assets 120,366,463 127,879,501
________________________________________________________________________________
Property and Equipment (Notes 1 and 9):
Land 135,081,516 107,000,664
Buildings and improvements 261,571,599 201,826,392
Buildings under capital leases 3,289,285 3,289,285
Restaurant and other equipment 147,673,134 114,633,996
Leasehold improvements 10,744,184 9,464,507
Construction in progress 18,494,720 23,919,637
________________________________________________________________________________
Total 576,854,438 460,134,481
Less: Accumulated depreciation 94,940,681 71,886,447
Accumulated amortization of
capital leases 2,395,776 2,288,229
________________________________________________________________________________
Property and equipment-net 479,517,981 385,959,805
________________________________________________________________________________
Long-Term Investments (Notes 1 and 3) 4,037,830 15,690,799
________________________________________________________________________________
Other Assets 593,117 533,622
________________________________________________________________________________
Total $604,515,391 $530,063,727
================================================================================
See notes to financial statements.
6
July 28, July 29,
Liabilities and Stockholders' Equity 1995 1994
________________________________________________________________________
Current Liabilities:
Accounts payable $ 29,750,675 $ 25,766,024
Current maturities of
long-term debt (Note 4) 4,000,000 3,500,000
Current portion of capital lease
obligations (Note 9) 110,526 93,781
Taxes withheld and accrued 10,823,656 7,407,263
Income taxes payable 5,588,188 5,039,688
Accrued employee compensation 13,681,921 13,187,656
Accrued employee benefits 7,102,093 7,882,069
Other accrued expenses 5,709,395 4,281,525
________________________________________________________________________
Total current liabilities 76,766,454 67,158,006
________________________________________________________________________
Long-Term Debt (Note 4) 19,500,000 23,500,000
________________________________________________________________________
Capital Lease Obligations (Note 9) 1,598,093 1,708,619
________________________________________________________________________
Deferred Income Taxes (Notes 1 and 7) 10,567,946 7,851,185
________________________________________________________________________
Commitments and Contingencies (Note 9)
Stockholders' Equity (Notes 4, 5 and 6):
Common stock - 150,000,000 shares of $.50
par value authorized; shares issued and
outstanding: 1995, 59,992,047; 1994,
59,901,316 29,996,023 29,950,658
Additional paid-in capital 195,420,664 194,073,393
Retained earnings 270,666,211 205,821,866
_______________________________________________________________________
Total stockholders' equity 496,082,898 429,845,917
_______________________________________________________________________
Total $604,515,391 $530,063,727
=======================================================================
See notes to financial statements.
7
Statements of Income
Fiscal years ended
July 28, July 29, July 30,
1995 1994 1993
________________________________________________________________________
Net sales $783,093,408 $640,898,529 $517,616,132
Cost of goods sold 264,809,544 215,071,169 171,708,439
________________________________________________________________________
Gross profit on sales 518,283,864 425,827,360 345,907,693
________________________________________________________________________
Expenses:
Store operations:
Labor & other related
expenses 256,253,406 207,226,795 167,908,893
Other store operating
expenses 114,563,975 92,693,864 74,673,421
General and administrative 44,746,182 36,806,415 30,096,037
________________________________________________________________________
Total expenses 415,563,563 336,727,074 272,678,351
________________________________________________________________________
Operating income 102,720,301 89,100,286 73,229,342
Interest expense 722,478 2,136,393 2,884,857
Interest income 3,334,854 3,603,983 2,600,000
________________________________________________________________________
Income before income taxes 105,332,677 90,567,876 72,944,485
Provision for income taxes
(Notes 1 and 7) 39,289,373 33,608,692 27,292,000
________________________________________________________________________
Income before change in
accounting principle 66,043,304 56,959,184 45,652,485
Cumulative effect of change
in accounting principle
(Note 7) -- 988,262 --
________________________________________________________________________
Net income $ 66,043,304 $ 57,947,446 $ 45,652,485
========================================================================
Earnings before change in
accounting principle per
share (Notes 1 and 5) $1.09 $.94 $.78
Cumulative effect of change
in accounting principle
per share (Note 7) -- .02 --
________________________________________________________________________
Net earnings per share
(Notes 1 and 5) $1.09 $.96 $.78
========================================================================
See notes to financial statements.
8
Statements of Changes in Stockholders' Equity
Additional Total
Common Paid-In Retained Stockholders'
Stock Capital Earnings Equity
________________________________________________________________________________
Balances at July 31,1992 $18,259,301 $ 99,374,839 $104,475,582 $222,109,722
Cash dividends - $.02 a
share (1,058,562) (1,058,562)
Exercise of stock
options (Note 6) 785,674 12,354,441 13,140,115
Tax benefit realized upon
exercise of stock
options (Note 6) 17,610,000 17,610,000
Proceeds from issuance of
common stock, less
related expenses of
$221,087 862,500 68,468,413 69,330,913
Three-for-two stock split
(Note 5) 9,877,759 (9,877,759)
Net income 45,652,485 45,652,485
________________________________________________________________________________
Balances at July 30, 1993 29,785,234 187,929,934 149,069,505 366,784,673
Cash dividends - $.02 a
share (1,195,085) (1,195,085)
Exercise of stock
options (Note 6) 165,424 4,616,561 4,781,985
Tax benefit realized upon
exercise of stock
options (Note 6) 1,526,898 1,526,898
Net income 57,947,446 57,947,446
________________________________________________________________________________
Balances at July 29, 1994 29,950,658 194,073,393 205,821,866 429,845,917
Cash dividends - $.02 a
share (1,198,959) (1,198,959)
Exercise of stock
options (Note 6) 45,365 969,154 1,014,519
Tax benefit realized upon
exercise of stock
options (Note 6) 378,117 378,117
Net income 66,043,304 66,043,304
________________________________________________________________________________
Balances at July 28, 1995 $29,996,023 $195,420,664 $270,666,211 $496,082,898
===============================================================================
See notes to financial statements.
9
Statements of Cash Flows
Fiscal years ended
July 28, July 29, July 30,
1995 1994 1993
______________________________________________________________________________
Cash flows from operating activities:
Net income $ 66,043,304 $ 57,947,446 $ 45,652,485
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization
of property and equipment 26,487,617 20,401,401 15,802,481
(Gain) loss on disposition of
property and equipment (66,325) (29,697) 132,828
Increase in receivables (199,175) (556,817) (728,490)
Increase in inventories (9,525,285) (13,563,138) (5,234,298)
Decrease (increase) in
prepaid expenses 182,381 (262,600) (197,909)
(Increase) decrease in
other assets (59,495) 179,161 (11,141)
Increase in accounts payable 3,984,651 2,628,726 7,149,398
Increase in taxes withheld
and accrued 3,416,393 1,194,985 1,093,380
Increase in income taxes
payable 548,500 3,113,314 243,332
Increase in accrued employee
compensation 494,265 2,213,677 427,509
(Decrease) increase in accrued
employee benefits (779,976) (990,031) 2,586,738
Increase in other accrued
expenses 1,427,870 78,093 1,516,571
Increase (decrease) in
deferred income taxes 418,075 (51,762) 189,000
______________________________________________________________________________
Net cash provided by
operating activities 92,372,800 72,302,758 68,621,884
______________________________________________________________________________
Cash flows from investing activities:
Purchase of short-term and
long-term investments (7,169,121) (42,957,392) (73,695,573)
Proceeds from maturities of
short-term and long-term
investments 38,994,284 59,102,589 24,191,997
Purchase of property and
equipment (121,052,341) (101,944,923) (84,993,515)
Proceeds from sale of property and
equipment 1,072,873 1,209,280 156,263
______________________________________________________________________________
Net cash used in investing
activities (88,154,305) (84,590,446) (134,340,828)
______________________________________________________________________________
10
Cash flows from financing activities:
Proceeds from issuance of
capital stock -- -- 69,330,913
Proceeds from exercise of
stock options 1,014,519 4,781,985 13,140,115
Tax benefit realized upon
exercise of stock options 378,117 1,526,898 17,610,000
Principal payments under
long-term debt and capital
lease obligations (3,593,781) (13,477,052) (2,268,456)
Dividends on common stock (1,198,959) (1,195,085) (1,058,562)
______________________________________________________________________________
Net cash (used in) provided by
financing activities (3,400,104) (8,363,254) 96,754,010
______________________________________________________________________________
Net increase (decrease) in cash
and cash equivalents 818,391 (20,650,942) 31,035,066
Cash and cash equivalents,
beginning of year 47,305,523 67,956,465 36,921,399
______________________________________________________________________________
Cash and cash equivalents,
end of year $ 48,123,914 $ 47,305,523 $ 67,956,465
==============================================================================
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 2,512,957 $ 3,557,507 $ 3,325,044
Income taxes 37,944,681 28,126,949 9,249,668
See notes to financial statements.
11
NOTES TO FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Fiscal year - The Company's fiscal year ends on the Friday nearest July
31st and each quarter consists of thirteen weeks.
Start-up costs - Start-up costs of a new store are expensed in the
period in which the store opens.
Cash and cash equivalents - The Company changed its policy as of July
28, 1995 whereby it now considers all highly liquid investments purchased
with a maturity of three months or less to be cash equivalents. Cash
equivalents consist primarily of auction preferred stocks and commercial
paper. The carrying value of these instruments approximates market value due
to their very short maturities. The Company's prior method of accounting for
cash and cash equivalents considered only cash on hand, cash on deposit and
money market funds subject to withdrawal by check or wire.
Short-term investments - Short-term investments, primarily consisting of
federal government agency securities and commercial paper which the Company
intends to hold to maturity, are stated at amortized cost in accordance with
Statement of Financial Accounting Standards (SFAS) No. 115, "Accounting for
Certain Investments in Debt and Equity Securities". The Company adopted SFAS
No. 115 as of July 30, 1993. (See Note 3).
Inventories - Inventories are stated at the lower of cost or market.
Cost is determined by the first-in, first-out (FIFO) method.
Property and equipment - Property and equipment are stated at cost. For
financial reporting purposes depreciation and amortization on these assets
are computed by use of the straight-line and double-declining balance methods
over the estimated useful lives of the respective assets, as follows:
Years
________________________________________________________________________
Buildings and improvements 20-45
Buildings under capital leases 10-25
Restaurant and other equipment 5-10
Leasehold improvements 3-35
________________________________________________________________________
Accelerated depreciation methods are generally used for income tax
purposes.
Interest is capitalized in accordance with SFAS No. 34, "Capitalization
of Interest Costs". Capitalized interest was $2,072,360, $1,533,904 and
$1,362,460 for fiscal years 1995, 1994 and 1993, respectively.
Gain or loss is recognized upon disposal of property and equipment, and
the asset and related accumulated depreciation and amortization amounts are
removed from the accounts.
Maintenance and repairs, including the replacement of minor items, are
charged to expense, and major additions to property and equipment are
capitalized.
Income taxes - The Company adopted SFAS No. 109, "Accounting for Income
Taxes", effective July 31, 1993. This Statement supersedes Accounting
Principles Board Opinion No. 11, "Accounting for Income Taxes", which was the
Company's prior method of accounting for income taxes. Targeted jobs tax
credits and employer tax credits for FICA taxes paid on tip income are
accounted for by the flow-through method. Deferred income taxes reflect the
net tax effects of temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts used
for income tax purposes (see Note 7).
Earnings per share - The computation of earnings per share is based on
the weighted average number of outstanding common shares and equivalents
(stock options) adjusted for stock splits. The weighted average number of
outstanding common shares and equivalents were 60,556,977, 60,607,372 and
58,788,612 for 1995, 1994 and 1993, respectively.
12
Long-term investments - Long-term investments, primarily consisting of
federal government agency securities and commercial paper which the Company
intends to hold to maturity, are stated at amortized cost in accordance with
SFAS No. 115. (See Note 3).
Reclassifications - Certain reclassifications have been made in the
fiscal 1994 and 1993 financial statements to conform to the classifications
used in fiscal 1995.
2. Inventories
Inventories were composed of the following at:
July 28, July 29,
1995 1994
___________________________________________________________________________
Gift shop $42,247,885 $34,379,398
Restaurant 7,962,873 6,156,479
Supplies 1,304,073 1,453,669
___________________________________________________________________________
Total $51,514,831 $41,989,546
===========================================================================
3. Short-term and Long-term Investments
Effective July 30, 1993, the Company adopted SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities". The Company's
investment securities are classified as held-to-maturity under SFAS No. 115
and, as a result, are carried at amortized cost. Unrealized holding gains
and losses are not reported in the Company's financial statements, since the
investments are classified as held-to-maturity under SFAS No. 115. The
adoption of SFAS No. 115 had no effect on the Company's financial statements.
The amortized cost and fair values of securities held-to-maturity at July 28,
1995 were as follows:
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
____________________________________________________________________________
U.S. Treasury and U.S.
Government Agencies $11,167,970 -- $129,415 $11,038,555
Obligations of states
and political
subdivisions 806,948 $1,313 -- 808,261
Corporate debt
securities 3,166,537 889 22,703 3,144,723
____________________________________________________________________________
Short-term and long-term
investments $15,141,455 $2,202 $152,118 $14,991,539
============================================================================
The amortized cost and fair values of securities held-to-maturity at July 29,
1994 were as follows:
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
____________________________________________________________________________
U.S. Treasury and U.S.
Government Agencies $18,508,863 -- $322,412 $18,186,451
Obligations of states
and political
subdivisions 14,524,651 $139 29,978 14,494,812
Corporate debt
securities 8,733,104 540 83,120 8,650,524
Other securities 5,200,000 -- -- 5,200,000
____________________________________________________________________________
Short-term and long-term
investments $46,966,618 $679 $435,510 $46,531,787
============================================================================
13
The following table shows the maturity distribution of the Company's
investment securities at July 28, 1995:
Amortized Fair
Maturity (Fiscal Years) Cost Value
___________________________________________________________________________
1996 $11,103,625 $11,030,272
1997-2000 3,975,806 3,899,200
2001-2005 62,024 62,067
___________________________________________________________________________
Short-term and long-term investments $15,141,455 $14,991,539
===========================================================================
4. Debt
Long-term debt consisted of the following at:
July 28, July 29,
1995 1994
____________________________________________________________________________
9.53% Senior Notes Payable in annual
installments of varying amounts from
January 15, 1994 to January 15, 2002,
with a final installment of $2,000,000
due January 15, 2003 $23,500,000 $27,000,000
Less current maturities 4,000,000 3,500,000
___________________________________________________________________________
Long-term debt $19,500,000 $23,500,000
===========================================================================
The note agreements relating to the 9.53% Senior Notes placed in
January, 1991 in the original amount of $30,000,000 include, among other
provisions, requirements that the Company maintain minimum tangible net worth
of $70,000,000. The agreements also contain certain other restrictions
related to the payment of cash dividends and the purchase of treasury stock.
Retained earnings not restricted under the provisions of the agreements were
approximately $271,000,000 at July 28, 1995.
Based on discounted cash flows of future payment streams, assuming rates
equivalent to the Company's incremental borrowing rate on similar
liabilities, the fair value of the 9.5% Senior Notes approximates carrying
value as of July 28, 1995.
The Company has a revolving credit agreement with a maximum principal
amount of $15,000,000. No amounts were outstanding under the agreement at
July 28, 1995 or July 29, 1994.
The Company elected to prepay the following two outstanding debt issues
during the second quarter of fiscal year 1994, unsecured notes payable of
$6,800,000 and Industrial Development Revenue Bonds of $3,465,000.
The aggregate maturities of long-term debt subsequent to July 28, 1995
are as follows:
Fiscal year
___________________________________________________________________________
1996 $ 4,000,000
1997 4,000,000
1998 3,500,000
1999 2,500,000
2000 2,500,000
Later years 7,000,000
___________________________________________________________________________
Total $23,500,000
===========================================================================
5. Common Stock
On January 29, 1993 the Board of Directors declared a three-for-two
stock split in the form of a 50% stock dividend distributed to stockholders
on March 19, 1993.
The Board of Directors granted on August 30, 1993, an option for
1,000,000 shares at $25.00 per share to the Cracker Barrel Old Country Store
Foundation. The Board of Directors rescinded this option on December 20,
1994.
14
6. Stock Option Plans
The Company has two incentive stock option plans for key employees
(which includes store-level management and the highest level of hourly
employees in the stores) and one for non-employee directors. After giving
effect to the stock split (see Note 5), a total of 11,025,702 shares have
been reserved for the key employees plans. The Company has granted options
for 9,544,680 shares at purchase prices ranging from $.58 to $27.67 per
share. The options expire ten years from the date of the grant and are
exercisable each year, starting at the date of grant, on a cumulative basis
at the rate of 33% of the total number of shares covered by the option.
The following is a schedule by years of the activity of the key
employees plans adjusted for the stock split (see Note 5):
Exercise Price
Shares (Range) per Share
___________________________________________________________________________
Outstanding at July 31, 1992
(2,750,041 shares exercisable) 3,817,875 $ 1.19 - $16.61
Granted 1,030,273 $27.67
Exercised 1,972,490 $ 1.19 - $27.67
Expired 46,485 $16.61 - $27.67
___________________________________________________________________________
Outstanding at July 30, 1993
(1,845,387 shares exercisable) 2,829,173 $ 1.51 - $27.67
Granted 825,825 $25.75
Exercised 330,848 $ 5.38 - $27.67
Expired 168,813 $16.61 - $27.67
___________________________________________________________________________
Outstanding at July 29, 1994
(2,342,912 shares exercisable) 3,155,337 $ 1.51 - $27.67
Granted 955,500 $25.25
Exercised 90,731 $ 1.51 - $16.61
Expired 251,880 $16.61 - $27.67
___________________________________________________________________________
Outstanding at July 28, 1995
(3,003,673 shares exercisable) 3,768,226 $ 1.51 - $27.67
===========================================================================
After giving effect to the stock split (see Note 5), a total of
1,518,750 shares have been reserved for the Non-employee Directors Plan. The
Company has granted options for 1,518,746 shares at purchase prices ranging
from $5.09 to $29.50 per share. The options are exercisable six months from
the date of grant.
The following is a schedule by years of the activity of the Non-
employee Directors Plan adjusted for the stock split (see Note 5):
Exercise Price
Shares (Range) per Share
___________________________________________________________________________
Outstanding at July 31, 1992
(588,738 shares exercisable) 588,738 $ 5.09 - $16.56
Granted 253,120 $29.50
Exercised 234,370 $ 5.09 - $16.56
___________________________________________________________________________
Outstanding at July 30, 1993
(607,488 shares exercisable) 607,488 $ 5.09 - $29.50
Granted 278,432 $25.38
Exercised 0 --
___________________________________________________________________________
Outstanding at July 29, 1994
(885,920 shares exercisable) 885,920 $ 5.09 - $29.50
Granted 177,210 $25.00
Exercised 0 --
___________________________________________________________________________
Outstanding at July 28, 1995
(1,063,130 shares exercisable) 1,063,130 $ 5.09 - $29.50
===========================================================================
15
The Company recognizes a tax deduction upon exercise of non-qualified
stock options in an amount equal to the difference between the option price
and the fair market value of the common stock. These tax benefits are
credited to Additional Paid-In Capital.
7. Income Taxes
The Company adopted SFAS No. 109, "Accounting for Income Taxes",
effective July 31, 1993. This Statement supersedes Accounting Principles
Board Opinion No. 11, "Accounting for Income Taxes", which was the Company's
prior method of accounting for income taxes. The cumulative effect of
adopting SFAS No. 109 in the Company's financial statements decreased income
taxes by $988,262 ($.02 per share) for fiscal 1994. The adjustment primarily
represents the impact of adjusting deferred taxes to new rates as opposed to
the higher tax rates in effect when the deferred taxes originated. The
adoption of SFAS No. 109 had no impact on the Company's effective tax rate.
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes.
Significant components of the Company's net deferred tax liability
consisted of the following at:
July 28, July 29,
1995 1994
_____________________________________________________________________________
Deferred tax assets:
Financial accruals without
economic performance $ 4,998,345 $ 4,527,953
Other 2,113,736 1,751,543
_____________________________________________________________________________
Deferred tax assets 7,112,081 6,279,496
_____________________________________________________________________________
Deferred tax liabilities:
Excess tax depreciation over book 11,169,495 9,710,701
Other 991,830 1,199,964
_____________________________________________________________________________
Deferred tax liabilities 12,161,325 10,910,665
_____________________________________________________________________________
Net deferred tax liability $ 5,049,244 $ 4,631,169
=============================================================================
The Company provided no valuation allowance against deferred tax assets
recorded as of July 28, 1995 and July 29, 1994, as the "more-likely-than-not"
valuation method determined all deferred assets to be fully realizable in future
taxable periods.
The components of the provision for income taxes for each of the three
fiscal years were as follows:
1995 1994 1993
__________________________________________________________________________
Current:
Federal $31,284,067 $29,253,272 $23,088,000
State 7,587,231 5,141,920 4,015,000
Deferred 418,075 (786,500) 189,000
__________________________________________________________________________
Total income tax provision $39,289,373 $33,608,692 $27,292,000
==========================================================================
A reconciliation of the provision for income taxes as reported and the
amount computed by multiplying the income before the provision for income taxes
by the U.S. federal statutory rate of 35% for fiscal years 1995 and 1994 and 34%
for fiscal 1993 was as follows:
1995 1994 1993
__________________________________________________________________________
Provision computed at federal
statutory income tax rate $36,866,437 $31,698,757 $24,801,125
State and local income taxes,
net of federal benefit 4,198,945 3,255,457 2,647,885
Jobs credit (786,628) (487,500) (462,000)
16
Employer tax credits for FICA taxes
paid on tip income (1,193,760) (571,002) --
Retroactive change in income tax
rate to 35% from January 1, 1993 -- -- 422,838
Other-net 204,379 (287,020) (117,848)
__________________________________________________________________________
Total income tax provision $39,289,373 $33,608,692 $27,292,000
==========================================================================
8. Segment Information
The Company operates stores which provide a combination of restaurant
and gift shop services to the motoring public. This combination of services
is considered to be one industry segment.
9. Leases
The Company operates seventeen stores, as well as three Cracker Barrel
Old Country Store Corner Markets, from leased facilities and also leases
certain land and advertising billboards. These leases have been classified
as either capital or operating leases in accordance with the criteria
contained in SFAS No. 13, "Accounting for Leases". The interest rates for
capital leases vary from 10% to 17%. Amortization of capital leases is
included with depreciation expense. A majority of the Company's lease
agreements provide for renewal options and some of these options contain
escalation clauses. Certain store leases provide for contingent lease
payments based upon sales volume in excess of specified minimum levels.
The following is a schedule by years of future minimum lease payments
under capital leases together with the present value of the minimum lease
payments as of July 28, 1995:
Fiscal year
____________________________________________________________________________
1996 $ 360,135
1997 360,135
1998 368,122
1999 370,785
2000 370,785
Later years 1,227,893
____________________________________________________________________________
Total minimum lease payments 3,057,855
Less amount representing interest 1,349,236
____________________________________________________________________________
Present value of minimum lease payments 1,708,619
Less current portion 110,526
____________________________________________________________________________
Long-term portion of capital lease obligations $1,598,093
============================================================================
The following is a schedule by years of the future minimum rental
payments required under noncancelable operating leases as of July 28, 1995:
Fiscal year
____________________________________________________________________________
1996 $ 7,627,612
1997 2,136,107
1998 2,138,187
1999 1,127,663
2000 918,989
Later years 6,821,751
____________________________________________________________________________
Total $20,770,309
============================================================================
Rent expense under operating leases for each of the three fiscal years was:
Minimum Contingent Total
___________________________________________________________________________
1995 $9,717,400 $685,000 $10,402,400
1994 7,799,700 634,200 8,433,900
1993 6,313,800 539,800 6,853,600
17
10. Employee Savings Plan
The Company has an employee savings plan, which provides for
retirement benefits for eligible employees. The plan is funded by elective
employee contributions up to 16% of their compensation and the Company
matches 25% of employee contributions for each participant up to 6% of the
employee's compensation. The Company expensed contributions of $713,961,
$540,469 and $482,446 for fiscal 1995, 1994 and 1993, respectively.
11. Quarterly Financial Data (Unaudited)
Quarterly financial data for fiscal 1995 and 1994 are summarized as
follows:
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter
____________________________________________________________________________
1995
Net sales $184,947,701 $188,622,981 $188,306,113 $221,216,613
Gross profit on
sales 123,557,763 120,473,940 127,474,951 146,777,210
Income before income
taxes 24,800,137 19,590,669 23,938,581 37,003,290
Net income 15,599,286 12,322,531 15,057,367 23,064,120
Net earnings per share .26 .20 .25 .38
____________________________________________________________________________
1994
Net sales $152,498,897 $150,831,678 $155,368,895 $182,199,059
Gross profit on
sales 102,105,597 96,775,494 104,610,016 122,336,253
Income before income
taxes 21,456,461 15,911,622 20,221,158 32,978,635
Income before change
in accounting
principle 13,367,375 9,912,941 12,597,781 21,081,087
Cumulative effect of
change in accounting
principle* 988,262 -- -- --
Net income 14,355,637 9,912,941 12,597,781 21,081,087
Earnings before change
in accounting
principle per share .22 .16 .21 .35
Cumulative effect of
change in accounting
principle per share* .02 -- -- --
Net earnings per share .24 .16 .21 .35
*(See Note 7).
18
INDEPENDENT AUDITORS' REPORT
Cracker Barrel Old Country Store, Inc.:
We have audited the accompanying balance sheets of Cracker Barrel Old Country
Store, Inc. (the "Company") as of July 28, 1995 and July 29, 1994, and the
related statements of income, changes in stockholders' equity, and cash flows
for each of the three fiscal years in the period ended July 28, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company at July 28, 1995 and July 29,
1994, and the results of its operations and its cash flows for each of the
three fiscal years in the period ended July 28, 1995 in conformity with
generally accepted accounting principles.
Deloitte & Touche LLP
Nashville, Tennessee
September 6, 1995