SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarterly Period Ended October 31, 1997
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_
61,497,866 Shares of Common Stock
Issued and Outstanding as of November 28, 1997
PART I
Item 1. Financial Statements
CRACKER BARREL OLD COUNTRY STORE, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(In thousands, except share data)
October 31, August 1,
1997 1997
____ ____
ASSETS (Unaudited) (Audited)
Current assets:
Cash and cash equivalents $ 66,655 $ 64,933
Short-term investments 1,349 1,666
Receivables 4,301 4,836
Inventories 86,428 73,269
Prepaid expenses 4,835 4,707
________ ________
Total current assets 163,568 149,411
________ ________
Property and equipment,net 707,986 678,167
Other assets 1,919 1,127
________ ________
Total assets $873,473 $828,705
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 27,467 $ 27,422
Accrued expenses 69,725 57,669
Current portion of long-term debt 3,500 3,500
Current portion of capital lease
obligations 166 166
________ ________
Total current liabilities 100,858 88,757
________ ________
Long-term debt 62,000 62,000
Capital lease obligations 1,269 1,302
Deferred income taxes 16,214 16,214
Stockholders' equity:
Common stock - $.50 par value, 30,737 30,533
authorized 150,000,000 shares,
issued and outstanding 61,474,674
at October 31, 1997 and 61,065,306
at August 1, 1997
Additional paid-in capital 220,919 211,850
Retained earnings 441,476 418,049
________ ________
Total stockholders' equity 693,132 660,432
________ ________
Total liabilities and stockholders'
equity $873,473 $828,705
======== ========
See notes to condensed consolidated financial statements.
CRACKER BARREL OLD COUNTRY STORE, INC.
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(In thousands, except per share data)
(Unaudited)
Quarter Ended
_______________________________
October 31, November 1,
1997 1996
____ ____
Net sales:
Restaurant $242,230 $202,528
Retail 70,525 56,374
________ ________
Total sales 312,755 258,902
Cost of goods sold 106,491 89,315
________ ________
Gross profit on sales 206,264 169,587
Labor & related expenses 106,100 87,225
Other store operating expenses 46,489 37,969
________ ________
Store operating income 53,675 44,393
General and administrative 15,882 14,354
________ ________
Operating income 37,793 30,039
Interest expense 1,060 --
Interest income 820 364
________ ________
Pretax income 37,553 30,403
Provision for income taxes 13,820 11,553
________ ________
Net income $ 23,733 $ 18,850
======== ========
Earnings per share $ .38 $ .31
======== ========
Weighted average common
shares and equivalents 62,288 61,107
======== ========
Dividends per share $ .005 $ .005
======== ========
See notes to condensed consolidated financial statements.
CRACKER BARREL OLD COUNTRY STORE, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended
__________________________
October 31, November 1,
1997 1996
____ ____
Cash flows from operating activities:
Net income $23,733 $18,850
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization of
property and equipment 10,464 8,983
Loss (gain)on disposition of property
and equipment 437 (56)
Changes in assets and liabilities:
Inventories (13,159) (16,479)
Other assets (792) 19
Accounts payable 45 (1,231)
Other current assets and liabilities 12,463 1,872
_______ _______
Net cash provided by operating activities 33,191 11,958
_______ _______
Cash flows from investing activities:
Proceeds from maturities of short-term
investments 317 3,380
Purchase of property and equipment (41,381) (39,537)
Proceeds from sale of property and equipment 661 815
_______ _______
Net cash used in investing activities (40,403) (35,342)
_______ _______
Cash flows from financing activities:
Proceeds from exercise of stock options 9,273 292
Principal payments under long-term debt
and capital lease obligations (33) (33)
Dividends on common stock (306) (303)
_______ _______
Net cash provided by (used in) financing
activities 8,934 (44)
_______ _______
Net increase (decrease) in cash and cash
equivalents 1,722 (23,428)
Cash and cash equivalents, beginning of period 64,933 28,971
_______ _______
Cash and cash equivalents, end of period $66,655 $ 5,543
======= =======
Supplemental disclosures of cash flow
information:
Cash paid during the three months for:
Interest $ 832 $ 8
Income taxes 6,092 5,326
See notes to condensed consolidated financial statements.
CRACKER BARREL OLD COUNTRY STORE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Condensed Consolidated Financial Statements
___________________________________________
The condensed consolidated balance sheet as of October 31, 1997 and
the related condensed consolidated statements of income and cash flows
for the quarters ended October 31, 1997 and November 1, 1996, have
been prepared by the Company, without audit; in the opinion of
management, all adjustments for a fair presentation of such condensed
consolidated financial statements have been made.
These condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes
thereto contained in the Company's Annual Report on Form 10-K for the
year ended August 1, 1997.
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. Income Taxes
____________
The provision for income taxes for the quarter ended October 31, 1997
has been computed based on management's estimate of the effective tax
rate for the entire fiscal year of 36.8%. 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 rates for the quarter ended November 1, 1996 and for the
entire fiscal year of 1997 were 38.0% and 37.0%, respectively.
3. Seasonality
___________
The sales and profits of the Company are affected significantly by
seasonal travel and vacation patterns because of its interstate
highway locations. Historically, the Company's greatest sales and
profits have occurred during the period of June through August. Early
December through the last part of February, excluding the Christmas
holidays, has historically been the period of lowest sales and
profits. Therefore, the results of operations for the quarter ended
October 31, 1997 cannot be considered indicative of the operating
results for the full fiscal year.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
All dollar amounts reported in Item 2 are shown in thousands.
Except for specific historical information, many of the matters
discussed in this Form 10-Q are forward-looking statements that
involve risks, uncertainties and other factors which may cause the
actual performance of Cracker Barrel Old Country Store, Inc. to
differ materially from those expressed or implied by such statements.
Factors which will affect actual results include, but are not limited
to: the availability and costs of acceptable sites for development;
the ability of the Company to recruit and train restaurant personnel
in its expansion locations; the acceptance of the Cracker Barrel
concept as the Company continues to expand into new geographic
regions; continued successful development of new and regional menu
items; the continued success of the Company's recently rolled out
frequency-based Cracker Barrel Old Country Store Neighborhood
program; changes in or implementation of additional governmental
rules and regulations; and other factors described from time to time
in the Company's filings with the Securities and Exchange Commission,
press releases and other communications.
Results of Operations
The following table highlights operating results for the quarter
ended October 31, 1997 as compared to the same period a year ago:
Quarter Ended
_________________________________
October 31, November 1,
1997 1996
____ ____
Net sales:
Restaurant 77.5% 78.2%
Retail 22.5 21.8
_____ _____
Total net sales 100.0 100.0
Cost of goods sold 34.0 34.5
_____ _____
Gross profit on sales 66.0 65.5
Labor & related expenses 33.9 33.7
Other store operating expenses 14.9 14.7
_____ _____
Store operating income 17.2 17.1
General and administrative 5.1 5.5
_____ _____
Operating income 12.1 11.6
Interest expense 0.3 0.0
Interest income 0.2 0.2
_____ _____
Pretax income 12.0 11.8
Provision for income taxes 4.4 4.5
_____ _____
Net income 7.6% 7.3%
===== =====
Same Store Sales Analysis
257 Store Average
_________________
Quarter Ended
________________________________
October 31, November 1,
1997 1996
____ ____
Restaurant $ 785.3 $770.9
Retail 225.6 214.3
________ ______
Restaurant & retail $1,010.9 $985.2
======== ======
Sales
Net sales for the first quarter of fiscal 1998 increased 21%
compared to last year's first quarter. Same store restaurant sales
increased 1.9% and same store retail sales increased 5.2%, for a
total same store sales (restaurant and retail) increase of 2.6%.
Same store restaurant sales increased primarily due to an effective
2.9% menu increase throughout the quarter. Same store retail sales
increased primarily due to an improved assortment of retail items in
the stores. New stores accounted for the balance of the first quarter
net sales increase.
Cost of Goods Sold
Cost of goods sold as a percentage of net sales for the first
quarter of fiscal 1998 decreased to 34.0% from 34.5% in the first
quarter of last year. The decrease was primarily due to decreases in
dairy and hog complex prices from prior year levels. This decrease
was partially offset by an increase in the mix of retail sales from
21.8% last year to 22.5% this year, since retail sales carry a higher
cost of goods than restaurant sales.
Labor and Related Expenses
Labor and related expenses include all direct and indirect labor
and related costs incurred in store operations. Labor and related
expenses as a percentage of net sales increased to 33.9% in the first
quarter this year from 33.7% in the first quarter last year. The
increase was primarily due to higher bonus payouts under the store-
level bonus program instituted in fiscal 1997. These higher bonus
payouts resulted from the significant improvements in store-level
operating income in the first quarter of fiscal 1997 versus the prior
year. This increase was partially offset by the net improvement in
store-level, hourly labor, resulting from enhanced operational
productivity partially offset by store-level, hourly wage inflation
of approximately 2.9%.
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 14.7% during the same quarter last
year. Other store operating expenses as a percentage of net sales
increased primarily due to the loss on the disposal of surplus
property and the incremental depreciation associated with the new
point-of-sale system in the stores.
General and Administrative Expenses
General and administrative expenses as a percentage of net sales
decreased to 5.1% during the first quarter of this year from 5.5%
during the first quarter of last year. The primary reason for the
decrease was increased sales volume as compared to the first quarter
of last year.
Interest Expense
Interest expense increased to $1,060 for the first quarter of
this year from $0 for the first quarter a year ago. The increase was
primarily due to the Company drawing on a $50,000 term loan on
December 2, 1996.
Interest Income
Interest income increased to $820 for the first quarter of this
year from $364 for the first quarter a year ago. The primary reason
for the increase in interest income was higher average funds
available for investment.
Recent Accounting Pronouncements Not Yet Adopted
In February 1997, SFAS No. 128, "Earnings per Share," was issued.
SFAS No. 128 specifies the computation, presentation and disclosure
requirements for earnings per share. This statement is effective for both
interim and annual periods ending after December 15, 1997, with
restatement of all prior periods shown. Earlier application is not
permitted. The effective date of SFAS No. 128 for the Company is for the
quarter and six-month period ending January 30, 1998. In June 1997, SFAS
No. 130, "Reporting Comprehensive Income," was issued. SFAS No. 130
specifies how to report and display comprehensive income and its
components. This statement is effective for fiscal years beginning after
December 15, 1997, with restatement of all prior periods shown. The
Company will adopt SFAS No. 130 in the first quarter of fiscal 1999. In
June 1997, SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information," was issued. SFAS No. 131 requires the disclosure of
certain information about operating segments in the financial statements.
This statement is effective for fiscal years beginning after December 15,
1997, with restatement of all prior periods shown if not impracticable to
do so. The Company will adopt SFAS No. 131 in the first quarter of fiscal
1999. The Company does not expect the adoption of SFAS Nos. 128, 130 or
131 to have a material effect on the Company's consolidated financial
statements.
Liquidity and Capital Resources
The Company's operating activities provided net cash of $33,191
for the three months ended October 31, 1997. Most of the cash was
provided by net income adjusted by depreciation and amortization.
Increases in inventories were substantially offset by increases in
other accrued expenses.
Capital expenditures were $41,381 for the first three months of
fiscal 1998. Land purchases and the construction of new stores
accounted for substantially all of these expenditures. Capitalized
interest decreased to $387 for the first quarter of fiscal 1998 from
$639 for the same period a year ago. This decrease was primarily due
to the timing of new store construction in fiscal 1998 as compared to
the same period a year ago.
The Company's internally generated cash and short-term
investments were sufficient to finance all of its growth in the first
three months of fiscal 1998.
The Company estimates that its capital expenditures for fiscal
1998 will be approximately $190,000, substantially all of which will
be land purchases and the construction of new stores. On December 2,
1996 the Company received the proceeds from a $50,000 5-year term
loan bearing interest at a three-month LIBOR-based rate ("London
Interbank Offered Rate"). Concurrently, the Company entered into a
swap agreement with a bank to fix the interest rate at 6.36% for the
life of the term loan. This $50,000 term loan is part of a $125,000
bank credit facility that also includes a $75,000 revolver.
Management believes that cash and short-term investments at October
31, 1997, along with cash generated from the Company's operating
activities, will be sufficient to finance its continued expansion
plans through fiscal 1999.
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 consolidated balance
sheet of Cracker Barrel Old Country Store, Inc. as of October 31,
1997, and the related condensed consolidated statements of income and
cash flows for the quarters ended October 31, 1997 and November 1,
1996. These financial statements are the responsibility of the
Company's management.
We conducted our review in accordance with standards established by
the American Institute of Certified Public Accountants. A review
of interim financial information consists principally of applying
analytical procedures to financial data and of making inquiries of
persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications
that should be made to such condensed consolidated financial
statements for them to be in conformity with generally accepted
accounting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheet of Cracker Barrel
Old Country Store, Inc. as of August 1, 1997 and the related
consolidated statements of income, stockholders' equity, and cash
flows for the year then ended (not presented herein); and in our
report dated September 10, 1997, we expressed an unqualified opinion
on those financial statements. In our opinion, the information set
forth in the accompanying condensed consolidated balance sheet as of
August 1, 1997 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 10, 1997
PART II
OTHER INFORMATION
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
25, 1997.
B. Election of Directors: The following directors were
re-elected for one-year terms of office: James C.
Bradshaw, Robert V. Dale, Dan W. Evins, Edgar W.
Evins, William D. Heydel, Robert C. Hilton,
Charles E. Jones, Jr., Charles T. Lowe, Jr.,
B. F. Lowery, Ronald N. Magruder, Gordon L.
Miller, Martha M. Mitchell and Jimmie D. White.
C. Other Matters:
Proposal 1 - Election of Directors.
FOR ABSTAIN
___ _______
James C. Bradshaw 50,334,175 273,892
Robert V. Dale 50,348,089 259,978
Dan W. Evins 50,345,771 262,296
Edgar W. Evins 50,331,606 276,461
William D. Heydel 50,336,734 271,333
Robert C. Hilton 50,348,820 259,247
Charles E. Jones, Jr. 49,628,760 979,307
Charles T. Lowe, Jr. 50,331,487 276,580
B. F. Lowery 49,608,952 999,115
Ronald N. Magruder 50,346,652 261,415
Gordon L. Miller 50,340,309 267,758
Martha M. Mitchell 50,344,480 263,587
Jimmie D. White 50,350,307 257,760
Proposal 2 - To consider and vote upon the adoption of
a proposed amendment to the Cracker Barrel Old
Country Store, Inc. Amended and Restated Stock
Option Plan, to increase the number of shares of
Company Common Stock available under the Plan from
14,025,702 to 17,525,702.
Affirmative votes cast 21,761,087
Negative votes cast 15,204,336
Votes cast to abstain 313,734
Broker non-votes 13,328,910
Proposal 3 - To approve the selection of Deloitte and
Touche LLP as the Company's independent auditors for
the 1998 fiscal year.
Affirmative votes cast 50,376,521
Negative votes cast 107,828
Votes cast to abstain 123,718
Proposal 4 - To consider and take action on a shareholder
proposal, requesting that the Compensation and Stock Option
Committees link executive compensation to social policy goals.
Affirmative votes cast 2,300,968
Negative votes cast 32,144,123
Votes cast to abstain 2,834,066
Broker non-votes 13,328,910
Item 5. Other Information
_________________
None.
Item 6. Exhibits and Reports on Form 8-K
________________________________
A. The following exhibits are filed pursuant to Item 601
of Regulation S-K:
(15) Letter regarding unaudited financial information.
B. No reports on Form 8-K have been filed during the
quarter for which this report is filed.
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: 12/10/97 By /s/Michael A. Woodhouse
________ _____________________________________________
Michael A. Woodhouse, Chief Financial Officer
Date: 12/10/97 By /s/Patrick A. Scruggs
________ _____________________________________________
Patrick A. Scruggs, Assistant Treasurer
December 10, 1997
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 ended October 31, 1997 and November 1,
1996, as indicated in our report dated December 10, 1997; 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,
1997, 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