FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarterly Period Ended April 26, 1996
Commission file number 0-7536
CRACKER BARREL OLD COUNTRY STORE, INC.
Incorporated in Tennessee I.R.S. Employer Identification
No. 62-0812904
Hartmann Drive, P.O. Box 787
Lebanon, Tennessee 37087
615-444-5533
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No_
60,567,606 Shares of Common Stock
Issued and Outstanding
Page 1 of 13
1
PART I
Item 1. Financial Statements
CRACKER BARREL OLD COUNTRY STORE, INC.
CONDENSED BALANCE SHEETS
(In thousands, except share data)
April 26, July 28,
1996 1995
____ ____
ASSETS (Unaudited) (Audited)
Current assets:
Cash and cash equivalents $ 23,673 $ 48,124
Short-term investments 6,608 11,103
Receivables 3,284 3,193
Inventories 57,181 51,515
Prepaid expenses 318 912
Deferred income taxes 5,519 5,519
________ ________
Total current assets 96,583 120,366
________ ________
Property and equipment,net 548,135 479,518
Long-term investments 565 4,038
Other assets 729 593
________ ________
Total assets $646,012 $604,515
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 23,757 $ 29,751
Accrued expenses 45,911 42,904
Current portion of long-term debt 4,000 4,000
Current portion of capital lease
obligations 111 111
________ ________
Total current liabilities 73,779 76,766
________ ________
Long-term debt 15,500 19,500
Capital lease obligations 1,515 1,598
Deferred income taxes 10,568 10,568
Stockholders' equity:
Common stock - $.50 par value, 30,255 29,996
authorized 150,000,000 shares,
issued and outstanding 60,510,857
at April 26, 1996 and 59,992,047
at July 28, 1995
Additional paid-in capital 199,054 195,421
Retained earnings 315,341 270,666
________ ________
Total stockholders' equity 544,650 496,083
________ ________
Total liabilities and stockholders'
equity $646,012 $604,515
======== ========
See notes to condensed financial statements.
2
CRACKER BARREL OLD COUNTRY STORE, INC.
CONDENSED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
Quarters Ended Nine Months Ended
April 26, April 28, April 26, April 28,
1996 1995 1996 1995
____ ____ ____ ____
Net sales:
Restaurant $176,740 $151,576 $513,890 $435,313
Gift shop 43,839 36,730 147,184 126,564
________ ________ ________ ________
Total sales 220,579 188,306 661,074 561,877
Cost of goods sold 74,013 60,831 228,249 190,370
________ ________ ________ ________
Gross profit on sales 146,566 127,475 432,825 371,507
Labor & related expenses 74,542 63,828 220,838 186,097
Other store operating expenses 32,956 29,080 100,383 84,744
General and administrative 13,279 11,156 39,523 34,089
________ ________ ________ ________
Total expenses 120,777 104,064 360,744 304,930
________ ________ ________ ________
Operating income 25,789 23,411 72,081 66,577
Interest expense 7 200 268 723
Interest income 429 728 1,703 2,475
________ ________ ________ ________
Pretax income 26,211 23,939 73,516 68,329
Provision for income taxes 9,960 8,882 27,936 25,350
________ ________ ________ ________
Net income $ 16,251 $ 15,057 $ 45,580 $ 42,979
======== ======== ======== ========
Earnings per share $ .27 $ .25 $ .75 $ .71
======== ======== ======== ========
Weighted average shares 60,858 60,550 60,703 60,543
======== ======== ======== ========
Dividends per share $ .005 $ .005 $ .015 $ .015
======== ======== ======== ========
See notes to condensed financial statements.
3
CRACKER BARREL OLD COUNTRY STORE, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Nine Months Ended
April 26, April 28,
1996 1995
____ ____
Cash flows from operating activities:
Net income $45,580 $42,979
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization of
property and equipment 23,816 20,611
Gain on disposition of property
and equipment (63) (101)
Increase in inventories (5,666) (4,157)
Increase in other assets (136) (164)
Decrease in accounts payable (5,994) (2,993)
Increase(decrease) in other current
assets and liabilities 3,510 (225)
_______ _______
Net cash provided by operating activities 61,047 55,950
_______ _______
Cash flows from investing activities:
Purchase of short-term and long-term
investments (4,011) (4,280)
Proceeds from maturities of short-term and
long-term investments 11,979 25,150
Purchase of property and equipment (93,261) (85,594)
Proceeds from sale of property and equipment 891 897
_______ _______
Net cash used in investing activities (84,402) (63,827)
_______ _______
Cash flows from financing activities:
Proceeds from exercise of stock options 3,892 685
Principal payments under long-term debt
and capital lease obligations (4,083) (3,570)
Dividends on common stock (905) (899)
_______ _______
Net cash used in financing activities (1,096) (3,784)
_______ _______
Net decrease in cash and cash equivalents (24,451) (11,661)
Cash and cash equivalents, beginning of period 48,124 47,306
_______ _______
Cash and cash equivalents, end of period $23,673 $35,645
======= =======
Supplemental disclosures of cash flow
information:
Cash paid during the nine months for:
Interest $ 1,147 $ 1,381
Income taxes 28,185 29,316
See notes to condensed financial statements.
4
CRACKER BARREL OLD COUNTRY STORE, INC.
______________________________________
NOTES TO CONDENSED FINANCIAL STATEMENTS
_______________________________________
1. Condensed Financial Statements
______________________________
The condensed balance sheet as of April 26, 1996 and the related condensed
statements of income and of cash flows for the quarters and nine-month
periods ended April 26, 1996 and April 28, 1995, have been prepared by the
Company, without audit; in the opinion of management, all adjustments for a
fair presentation of such condensed financial statements have been made.
These condensed financial statements should be read in conjunction with the
financial statements and notes thereto contained in the Company's annual
report for the year ended July 28, 1995.
Deloitte & Touche LLP, the Company's independent accountants, have
performed a limited review of the financial information included herein.
Their report on such review accompanies this filing.
2. Income Taxes
____________
The provision for income taxes for the quarter and nine-month period ended
April 26, 1996 has been computed based on management's estimate of the tax
rate for the entire fiscal year of 38.0%. The variation between the
statutory tax rate and the effective tax rate is due primarily to employer
tax credits for FICA taxes paid on tip income. The Company's effective tax
rate for the quarter and nine-month period ended April 28, 1995 was 37.1% and
for the entire fiscal year of 1995 was 37.3%.
3. Seasonality
___________
The sales and profits of the Company are affected significantly by seasonal
travel and vacation patterns because of its interstate highway locations.
Historically, the Company's greatest sales and profits have occurred during
the period of June through August. Early December through the last part of
February, excluding the Christmas holidays, has historically been the period
of lowest sales and profits. Therefore, the results of operations for the
quarter and nine-month period ended April 26, 1996 cannot be considered
indicative of the operating results for the full fiscal year.
4. Reclassifications
_________________
Certain reclassifications have been made in the quarter and nine-month
period ended April 28, 1995 condensed financial statements to conform to the
classifications used at fiscal year end 1995.
5
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition (In thousands)
Results of Operations
The following table highlights operating results for the quarter and nine
months ended April 26, 1996 as compared to the same periods a year ago:
Quarters Ended Nine Months Ended
April 26, April 28, April 26, April 28,
1996 1995 1996 1995
____ ____ ____ ____
Net sales:
Restaurant 80.1% 80.5% 77.7% 77.5%
Gift shop 19.9 19.5 22.3 22.5
_____ _____ _____ _____
Total sales 100.0 100.0 100.0 100.0
Cost of goods sold 33.6 32.3 34.5 33.9
_____ _____ _____ _____
Gross profit on sales 66.4 67.7 65.5 66.1
Labor & related expenses 33.8 33.9 33.4 33.1
Other store operating
expenses 14.9 15.5 15.2 15.1
General and administrative 6.0 5.9 6.0 6.1
_____ _____ _____ _____
Total expenses 54.7 55.3 54.6 54.3
_____ _____ _____ _____
Operating income 11.7 12.4 10.9 11.8
Interest expense 0.0 0.1 0.0 0.1
Interest income 0.2 0.4 0.2 0.4
_____ _____ _____ _____
Pretax income 11.9 12.7 11.1 12.1
Provision for income taxes 4.5 4.7 4.2 4.5
_____ _____ _____ _____
Net income 7.4% 8.0% 6.9% 7.6%
===== ===== ===== =====
Same Store Sales Analysis
181 Store Average
_________________
Restaurant $739.9 $728.9 $2,226.3 $2,189.2
Gift shop 183.0 176.4 634.5 637.1
______ ______ ________ ________
Restaurant & gift shop $922.9 $905.3 $2,860.8 $2,826.3
====== ====== ======== ========
6
Sales
_____
Net sales for the third quarter of fiscal 1996 increased 17% compared to
last year's third quarter. Same store restaurant sales increased 1.5% and
same store gift shop sales increased 3.7%. Total same store sales
(restaurant and gift shop) increased 1.9%. Sales from new stores opened in
fiscal 1995 and fiscal 1996 represented the remainder of the increase in net
sales for the third quarter. Net sales for the nine months ended April 26,
1996, increased 18% compared to the nine-month period ended April 28, 1995.
Same store restaurant sales increased 1.7% and same store gift shop sales
decreased .4%. Total same store sales (restaurant and gift shop) increased
1.2%. Sales from new stores opened in fiscal 1995 and fiscal 1996, partially
offset by the closing of one store in Memphis, TN during the second quarter
of fiscal 1996, represented the remainder of the increase in net sales for
the nine months. Sales were negatively impacted from December fiscal 1996
through the early part of the third quarter by extreme winter weather
conditions.
Cost of Goods Sold
__________________
Cost of goods sold as a percentage of net sales for the third quarter of
fiscal 1996 was 33.6% compared to 32.3% in the third quarter of last year.
The primary reasons for the increase in the third quarter were a new menu
which was implemented in May 1995 and operating inefficiencies in the
restaurants due to the extreme winter weather conditions in the early part of
the quarter this year. For the nine months ended April 26, 1996, cost of
goods sold as a percentage of net sales was 34.5% compared to 33.9% for the
same period a year ago. Cost of goods sold as a percentage of sales
increased from the same period last year primarily due to a new menu which
was implemented in May 1995 and to operating inefficiencies in the
restaurants due to the extreme winter weather conditions as compared to the
same period last year.
Labor and Related Expenses
__________________________
Labor and related expenses include all direct and indirect labor and
related costs incurred in store operations. Labor and related expenses as a
percentage of net sales decreased to 33.8% in the third quarter this year
from 33.9% in the third quarter of last year primarily due to increased
productivity in the stores. For the nine months ended April 26, 1996, labor
and related expenses as a percentage of net sales increased to 33.4% compared
to 33.1% for the same period last year primarily due to the continuing labor
cost pressures as the costs to hire and retain employees continued to
increase, unemployment rates remained low, and competition remained high in
the industry.
Other Store Operating Expenses
______________________________
Other store operating expenses include all unit-level operating costs, the
major components of which are operating supplies, repairs and maintenance,
advertising expenses, utilities and depreciation and amortization. Other
store operating expenses as a percentage of net sales were 14.9% this year
versus 15.5% during the same quarter last year. The primary reason for the
decrease in other store operating expenses as a percentage of net sales was
a decrease in general liability expenses because of better claims experience
versus the prior year. For the nine months ended April 26, 1996, other store
operating expenses as a percentage of net sales were 15.2% compared to 15.1%
7
for the same period last year. The primary reasons for the increase in other
store operating expenses as a percent of net sales were a $500 charge for the
closure of one store in Memphis, Tennessee during the second quarter and the
continued expenses of marketing initiatives such as television advertising,
the "Cracker Barrel Neighborhood" frequency program and a revised menu.
These increases were partially offset by a decrease in general liability
expenses because of better claims experience versus last year.
General and Administrative Expenses
___________________________________
General and administrative expenses as a percentage of net sales increased
to 6.0% during the third quarter of this year from 5.9% during the third
quarter of last year. The primary reasons for the increase were additions to
the complement in the information services and marketing departments to
support the continued growth of the business. For the nine months ended
April 26, 1996, general and administrative expenses were 6.0% of net sales as
compared to 6.1% during the same period last year. The primary reasons for
the decrease during the nine months ended April 26, 1996 were increased sales
volume and lower management turnover at the store level which reduced
management training costs.
Interest Expense
________________
Interest expense decreased to $7 and $268 for the quarter and nine-month
periods ended April 26, 1996 from $200 and $723, respectively, for the same
periods a year ago. The decrease was primarily due to lower average debt
outstanding during the quarter and nine-month periods ended April 16, 1996
and an increase in capitalized interest related to the increase in new stores
opened from 9 and 29 for the quarter and nine-month periods ended April 28,
1995, respectively, to 13 and 33 for the same periods this year.
Interest Income
_______________
Interest income decreased to $429 and $1,703 for the quarter and nine-month
periods ended April 26, 1996 from $728 and $2,475, respectively, for the same
periods a year ago. The primary reason for the decrease in interest income
was lower average funds available for investment.
Liquidity and Capital Resources
_______________________________
The Company's operating activities provided net cash of $61,047 for the
nine months ended April 26, 1996. Net income adjusted by depreciation and
amortization provided most of the cash. Increases in inventories and
decreases in accounts payable were partially offset by increases in other
current assets and liabilities.
Capital expenditures were $93,261 for the first nine months of fiscal 1996.
Land purchases and the construction of new stores accounted for substantially
all of these expenditures, except for approximately $3,500 for the expansion
of the gift shop distribution center. Capitalized interest was $528 and
$1,507 for the quarter and nine months ended April 26, 1996, respectively, as
compared to $444 and $1,432 for the same periods a year ago.
The Company's internally generated cash, short-term and long-term
investments were sufficient to finance all of its growth in the first nine
months of fiscal 1996.
8
The Company estimates that its capital expenditures for fiscal 1996 will be
approximately $140,000, substantially all of which will be land purchases and
the construction of new stores, except for $8,000 relating to the expansion
of the gift shop distribution center to meet the increased demand from new
stores. Management believes that cash, short-term and long-term investments
at April 26, 1996, along with cash generated from the Company's operating
activities, will be sufficient to finance its continued expansion in fiscal
1996 and its continued expansion plans through most of fiscal 1997.
Presently, the Company has an unused revolving credit line of $15,000.
9
INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Directors and Stockholders of
Cracker Barrel Old Country Store, Inc.
Lebanon, Tennessee
We have reviewed the accompanying condensed balance sheet of Cracker Barrel
Old Country Store, Inc. as of April 26, 1996, and the related condensed
statements of income and cash flows for the quarters and nine-month periods
ended April 26, 1996 and April 28, 1995. These financial statements are the
responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and of making inquiries of persons responsible for
financial and accounting matters. It is substantially less in scope than an
audit conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to such condensed financial statements for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the balance sheet of Cracker Barrel Old Country Store, Inc. as of
July 28, 1995, and the related statements of income, stockholders' equity,
and cash flows for the year then ended (not presented herein); and in our
report dated September 6, 1995, we expressed an unqualified opinion on those
financial statements. In our opinion, the information set forth in the
accompanying condensed balance sheet as of July 28, 1995 is fairly stated, in
all material respects, in relation to the balance sheet from which it has
been derived.
DELOITTE & TOUCHE LLP
Nashville, Tennessee
June 5, 1996
10
PART II
Item 1. Legal Proceedings
_________________
None.
Item 2. Changes in Securities
_____________________
None.
Item 3. Defaults Upon Senior Securities
_______________________________
None.
Item 4. Submission of Matters to a Vote of Security Holders
___________________________________________________
A. The annual meeting of shareholders was held November 28,
1995.
B. Election of Directors: Previously reported.
C. Other Matters: Previously reported.
Item 5. Other Information
_________________
None.
Item 6. Exhibits and Reports on Form 8-K
________________________________
Letter regarding unaudited financial information.
11
SIGNATURES
__________
Pursuant to the requirements of the Securities Exchange Act of
1934 the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
CRACKER BARREL OLD COUNTRY STORE, INC.
Date: 6/7/96 By /s/Michael A. Woodhouse
______ _____________________________________________
Michael A. Woodhouse, Chief Financial Officer
Date: 6/7/96 By /s/Patrick A. Scruggs
______ _____________________________________________
Patrick A. Scruggs, Assistant Treasurer
12
June 5, 1996
Cracker Barrel Old Country Store, Inc.
Hartmann Drive
Lebanon, Tennessee 37088-0787
We have made a review, in accordance with standards established by
the American Institute of Certified Public Accountants, of the
unaudited interim financial information of Cracker Barrel Old
Country Store, Inc. for the quarters and nine-month periods ended
April 26, 1996 and April 28, 1995, as indicated in our report dated
June 5, 1996; 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 April
26, 1996, is incorporated by reference in Registration Statement
Nos. 2-86602, 33-15775, 33-37567, 33-45482 and 333-01465 on Forms
S-8 and Registration Statement No. 33-59582 on Form S-3.
We also are aware that the aforementioned report, pursuant to Rule
436(c) under the Securities Act of 1933, is not considered a part
of the Registration Statement prepared or certified by an
accountant or a report prepared or certified by an accountant
within the meaning of Sections 7 and 11 of that Act.
DELOITTE & TOUCHE LLP
Nashville, Tennessee
13