SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark One)
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarterly Period Ended April 27, 2001
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
------- ----------
55,336,539 Shares of Common Stock
Outstanding as of May 25, 2001
PART I
Item 1. Financial Statements
CBRL GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(In thousands, except share data)
(Unaudited)
April 27, July 28,
2001 2000*
---- ----
ASSETS
Current assets:
Cash and cash equivalents ................................................. $ 10,127 $ 13,865
Receivables ............................................................... 9,743 11,570
Inventories ............................................................... 111,561 107,377
Prepaid expenses .......................................................... 7,743 6,916
Deferred income taxes ..................................................... 4,307 4,307
---------- ----------
Total current assets ................................................... 143,481 144,035
Property and equipment - net ................................................ 963,350 1,075,134
Goodwill - net .............................................................. 104,257 107,253
Other assets ................................................................ 10,327 8,601
---------- ----------
Total assets ................................................................ $1,221,415 $1,335,023
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable .......................................................... $ 59,821 $ 62,377
Accrued expenses .......................................................... 109,285 111,001
Current maturities of long-term debt and other long-term
obligations ............................................................ 200 200
---------- ----------
Total current liabilities ............................................. 169,306 173,578
---------- ----------
Long-term debt .............................................................. 150,000 292,000
---------- ----------
Other long-term obligations ................................................. 47,553 40,475
---------- ----------
Shareholders' equity:
Preferred stock - 100,000,000 shares of $.01 par
value authorized, no shares issued ...................................... -- --
Common stock - 400,000,000 shares of $.01 par
value authorized, at April 27, 2001, 55,690,902 shares issued and
outstanding and at July 28, 2000, 62,668,349 shares issued and 56,668,349
shares outstanding ...................................................... 557 627
Additional paid-in capital ................................................ 160,108 284,429
Retained earnings ......................................................... 693,891 648,489
---------- ----------
854,556 933,545
Less treasury stock, at cost, 0 and 6,000,000 shares,
respectively ............................................................. 0 (104,575)
---------- ----------
Total shareholders' equity .............................................. 854,556 828,970
---------- ----------
Total liabilities and shareholders' equity .................................. $1,221,415 $1,335,023
========== ==========
See notes to condensed consolidated financial statements.
(*) This condensed consolidated balance sheet has been derived from the audited
consolidated balance sheet as of July 28, 2000.
CBRL GROUP, INC.
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(In thousands, except per share data)
(Unaudited)
Quarter Ended Nine Months Ended
----------------------- ------------------------
April 27, April 28, April 27, April 28,
2001 2000 2001 2000
---- ---- ---- ----
Net sales .................... $ 467,911 $ 435,834 $1,419,068 $1,301,300
Franchise fees and royalties . 190 152 555 463
---------- ---------- ---------- ----------
Total revenue .............. 468,101 435,986 1,419,623 1,301,763
Cost of goods sold ........... 155,668 148,130 486,279 456,778
---------- ---------- ---------- ----------
Gross profit ................. 312,433 287,856 933,344 844,985
Labor & other related expenses 178,542 162,563 525,560 473,614
Other store operating expenses 81,970 72,745 245,524 221,655
---------- ---------- ---------- ----------
Store operating income ....... 51,921 52,548 162,260 149,716
General and administrative ... 24,657 22,284 75,256 72,571
Amortization of goodwill ..... 999 999 2,996 2,996
---------- ---------- ---------- ----------
Operating income ............. 26,265 29,265 84,008 74,149
Interest expense ............. 3,014 6,113 9,790 17,746
Interest income .............. 30 32 84 267
---------- ---------- ---------- ----------
Income before income taxes ... 23,281 23,184 74,302 56,670
Provision for income taxes ... 8,684 8,741 27,715 21,365
---------- ---------- ---------- ----------
Net income ................... $ 14,597 $ 14,443 $ 46,587 $ 35,305
========== ========== ========== ==========
Net earnings per share:
Basic .................. $ .26 $ .25 $ .83 $ .61
========== ========== ========== ==========
Diluted ................ $ .26 $ .25 $ .82 $ .60
========== ========== ========== ==========
Weighted average shares:
Basic .................. 56,016 57,704 56,450 58,322
========== ========== ========== ==========
Diluted ................ 56,911 57,762 57,113 58,393
========== ========== ========== ==========
See notes to condensed consolidated financial statements.
CBRL GROUP, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
(Unaudited)
Nine Months Ended
----------------------
April 27, April 28,
2001 2000
---- ----
Cash flows from operating activities:
Net income .......................................................... $ 46,587 $ 35,305
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization ................................... 48,031 48,112
Loss on disposition of property and equipment ................... 80 1,461
Impairment loss ................................................. -- 3,887
Changes in assets and liabilities:
Inventories ..................................................... (4,184) 5,961
Accounts payable ................................................ (2,556) (2,162)
Other current assets and other current liabilities .............. (716) 22,317
Other assets and other long-term liabilities .................... 5,319 1,364
--------- ---------
Net cash provided by operating activities ........................... 92,561 116,245
--------- ---------
Cash flows from investing activities:
Purchase of property and equipment .................................. (74,624) (107,023)
Proceeds from sale of property and equipment ........................ 141,502 1,332
--------- ---------
Net cash provided by (used in) investing activities ................. 66,878 (105,691)
--------- ---------
Cash flows from financing activities:
Proceeds from issuance of long-term debt ............................ 253,700 148,500
Principal payments under long-term debt and other
long-term obligations .............................................. (395,876) (148,176)
Proceeds from exercise of stock options ............................. 4,007 40
Purchases and retirement of common stock ............................ (23,823) (14,279)
Dividends on common stock ........................................... (1,185) (637)
--------- ---------
Net cash used in financing activities ............................... (163,177) (14,552)
--------- ---------
Net decrease in cash and cash equivalents ............................ (3,738) (3,998)
Cash and cash equivalents, beginning of period ....................... 13,865 18,262
--------- ---------
Cash and cash equivalents, end of period ............................. $ 10,127 $ 14,264
========= =========
Supplemental disclosures of cash flow information:
Cash paid during the nine months for:
Interest ......................................................... $ 9,780 $ 16,758
Income taxes ..................................................... 30,162 15,811
See notes to condensed consolidated financial statements.
CBRL GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- ----------------------------------------------------
(In thousands)
1. Prior Year Charges
------------------
During the second quarter ended January 28, 2000 of the prior fiscal
year, the Company recorded charges of $8,592 before taxes principally as a
result of management changes and refocused operating priorities. These charges
consisted of $3,887 related to impairment of long-lived assets (see Note 10),
$1,995 for severance and related expenses and $2,750 for other charges primarily
related to properties and inventories no longer expected to be used in the
business and other obligations. These charges were recorded in the following
line items: cost of goods sold, $205; other store operating expenses, $6,149;
general and administrative expenses, $2,238.
2. Condensed Consolidated Financial Statements
-------------------------------------------
The condensed consolidated balance sheet as of April 27, 2001 and the
related condensed consolidated statements of income and cash flows for the
quarters and nine-month periods ended April 27, 2001 and April 28, 2000, have
been prepared by CBRL Group, Inc. (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 audited consolidated financial statements and notes thereto
contained in the Company's Annual Report on Form 10-K for the year ended July
28, 2000.
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.
3. Income Taxes
------------
The provision for income taxes for the nine-month period ended April
27, 2001 has been computed based on management's estimate of the tax rate for
the entire fiscal year of 37.3%. The variation between the statutory tax rate
and the effective tax rate is due primarily to employer tax credits for FICA
taxes paid on employee tip income. The Company's effective tax rates for the
nine-month period ended April 28, 2000 and for the entire fiscal year of 2000
were 37.7%.
4. Seasonality
-----------
The sales and profits of the Company are affected significantly by
seasonal travel and vacation patterns because of its interstate highway
locations. Historically, the Company's greatest sales and profits have occurred
during the period of June through August. Early December through the last part
of February, excluding the Christmas holidays, has historically been the period
of lowest sales and profits although retail revenues historically have been
seasonally higher between Thanksgiving and Christmas. Therefore, the results of
operations for the quarter and nine-month period ended April 27, 2001 cannot be
considered indicative of the operating results for the full fiscal year.
5. Inventories
-----------
Inventories were comprised of the following at:
April 27, July 28,
2001 2000
---- ----
Retail $ 84,573 $ 81,200
Restaurant 15,771 16,083
Supplies 11,217 10,094
-------- --------
Total $111,561 $107,377
======== ========
6. Earnings per Share and Weighted Average Shares
----------------------------------------------
Basic earnings per share are computed by dividing income available to
common shareholders by the weighted average number of common shares outstanding
for the reporting period. Diluted earnings per share reflect the potential
dilution that could occur if securities, options or other contracts to issue
common stock were exercised or converted into common stock. Outstanding stock
options issued by the Company represent the only dilutive effect reflected in
diluted weighted average shares.
7. Comprehensive Income
--------------------
Comprehensive income is defined as the change in equity of a business
enterprise during a period from transactions and other events and circumstances
from non-owner sources. There is no difference between comprehensive income and
net income as reported by the Company for all periods shown.
8. Segment Reporting
-----------------
The Company manages its business on the basis of one reportable operating
segment. All of the Company's operations are located within the United States.
The following data are presented in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 131 for all periods presented.
Quarter Ended Nine Months Ended
---------------------- --------------------------
April 27, April 28, April 27, April 28,
2001 2000 2001 2000
---- ---- ---- ----
Net sales:
Restaurant $379,365 $348,877 $1,103,810 $1,003,582
Retail 88,546 86,957 315,258 297,718
-------- -------- ---------- ----------
Total net sales $467,911 $435,834 $1,419,068 $1,301,300
======== ======== ========== ==========
9. Recent Accounting Pronouncements Adopted
----------------------------------------
In June 1998, SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities," was issued, but was subsequently amended by SFAS Nos. 137
and 138. These statements specify how to report and display derivative
instruments and hedging activities and are effective for fiscal years beginning
after June 15, 2000. The Company adopted these statements on July 29, 2000. (See
Note 12). The adoption of these statements did not have a material effect on the
Company's consolidated financial statements. On December 3, 1999, the Securities
and Exchange Commission ("SEC") released Staff Accounting Bulletin ("SAB") No.
101, "Revenue Recognition in Financial Statements". Its effective date was
subsequently amended by the SEC through the issuance of SAB Nos. 101A and 101B.
SAB No. 101 must now be adopted by the fourth quarter of fiscal years beginning
after December 15, 1999. SAB No. 101 summarizes certain of the SEC's views in
applying generally accepted accounting principles to revenue recognition in
financial statements. The Company early adopted SAB No. 101 on July 29, 2000.
The adoption of SAB No. 101 did not have a material effect on the Company's
consolidated financial statements.
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 amount of an asset may
not be recoverable. An impairment is determined by comparing estimated
undiscounted future operating cash flows to the carrying amounts of assets on a
store by store basis. If an impairment exists, the amount of impairment is
measured as the sum of the estimated discounted future operating cash flows of
such asset and the expected proceeds upon sale of the asset less its carrying
amount. Assets held for sale are reported at the lower of carrying amount or
fair value less costs to sell. The Company had no impairment loss recorded for
the quarter or nine-month period ending April 27, 2001. During the third quarter
ended April 28, 2000, the Company recorded no impairment loss. During the
nine-month period ended April 28, 2000, the Company recorded an asset impairment
loss of $551 on the long-lived assets of Cracker Barrel's retail-only mall store
and impairment losses of $3,336 for certain properties no longer expected to be
used for future development.
11. Litigation
----------
As more fully discussed in Note 10 to the Consolidated Financial
Statements for the fiscal year ended July 28, 2000 contained in the Company's
Annual Report on Form 10-K filed on October 26, 2000, the Company is a defendant
in two lawsuits, one of which has been provisionally certified as a class
action. The Company believes it has substantial defenses in these actions and is
defending each of them vigorously. There currently is no provision for any
potential liability with respect to this litigation in the Consolidated
Financial Statements. There has been no material development in either of these
two lawsuits during the quarter or nine-month period ended April 27, 2001. If
there were to be an unfavorable outcome in either of these cases, the Company's
results of operations, financial position and liquidity could be materially and
adversely affected.
12. Derivative Financial Instruments and Hedging Activities
-------------------------------------------------------
The Company is exposed to market risk, such as changes in interest
rates and commodity prices. To manage the volatility relating to these
exposures, the Company nets the exposures on a consolidated basis to take
advantage of natural offsets. For the residual portion, the Company may enter
into various derivative financial instruments pursuant to the Company's policies
in areas such as counterparty exposure and hedging practices. The Company would
review these derivative financial instruments on a specific exposure basis to
support hedge accounting. The changes in fair value of these hedging instruments
would be offset in part or in whole by the corresponding changes in the fair
value or cash flows of the underlying exposures being hedged. The Company does
not hold or use derivative financial instruments for trading purposes. The
Company's historical practice has been not to enter into derivative financial
instruments.
The Company's policy has been to manage interest cost using a mix of
fixed and variable rate debt. The Company has accomplished this objective
through the use of interest rate swaps and/or sale-leaseback transactions. In an
interest rate swap, the Company agrees to exchange, at specified intervals, the
difference between fixed and variable interest amounts calculated by reference
to an agreed-upon notional amount. In a sale-leaseback transaction, the Company
finances its operating facilities by selling them to a third party and then
leasing them back under a long-term operating lease at fixed terms. See Note 13.
Many of the food products purchased by the Company are affected by
commodity pricing and are, therefore, subject to price volatility caused by
weather, production problems, delivery difficulties and other factors which are
outside the control of the Company and which are generally unpredictable.
Changes in commodity prices would affect the Company and its competitors
generally and often simultaneously. In many cases, the Company believes it will
be able to pass through any increased commodity costs by adjusting its menu
pricing. From time to time, competitive circumstances may limit menu price
flexibility, and in those circumstances increases in commodity prices can result
in lower margins for the Company. Some of the Company's purchase contracts are
used to hedge commodity prices and may contain features that could be classified
as derivative financial instruments under SFAS Nos. 133, 137 and 138. However,
these features that could be classified as derivative financial instruments are
exempt from hedge accounting based on the normal purchases exemption. The
Company presently believes that any changes in commodity pricing which cannot be
adjusted for by changes in menu pricing or other product delivery strategies
would not be material.
Upon adoption of SFAS Nos. 133, 137 and 138 on July 29, 2000 and at
April 27, 2001, the Company had no derivative financial instruments that
required hedge accounting.
13. Sale-Leaseback Transaction
--------------------------
On July 31, 2000, the Company, through its Cracker Barrel Old Country
Store, Inc. subsidiary, completed a sale-leaseback transaction involving 65 of
its owned Cracker Barrel Old Country Store units. Under the transaction, the
land, buildings and building improvements at the locations were sold for net
consideration of $138,325 and have been leased back for an initial term of 21
years. Equipment was not included. The leases include specified renewal options
for up to 20 additional years and have certain financial covenants related to
fixed charge coverage for the leased units. Net rent expense during the initial
term will be $14,965 annually, and the assets sold and leased back previously
had depreciation expense of $2,707 annually. The $5,069 gain on the sale and the
$1,295 deferred financing costs will be amortized over the initial lease term of
21 years and are included in the net rent expense. Net proceeds from the sale
were used to reduce outstanding borrowings under the Company's revolving credit
facility.
14. Retirement of Treasury Stock
----------------------------
During the second quarter ended January 26, 2001, the Board of
Directors authorized the retirement of the Company's treasury stock and
authorized the retirement of all future repurchases of the Company's Common
Stock. As a result of this retirement, the Company's Treasury Stock at cost was
reclassified to reduce Common Stock and Additional Paid-in Capital. These
retired shares will remain as authorized, but unissued shares.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
All dollar amounts reported or discussed in Part I, Item 2 of this
Quarterly Report on Form 10-Q are shown in thousands, except dollar amounts
per share. The following discussion and analysis provides information which
management believes is relevant to an assessment and understanding of the
Company's consolidated results of operations and financial condition. The
discussion should be read in conjunction with the condensed consolidated
financial statements and notes thereto. Except for specific historical
information, many of the matters discussed in this Form 10-Q may express or
imply projections of revenues or expenditures, statements of plans and
objectives or future operations or statements of future economic performance.
These, and similar statements are forward-looking statements concerning
matters that involve risks, uncertainties and other factors which may cause
the actual performance of the Company to differ materially from those
expressed or implied by these statements. All forward-looking information is
provided by the Company pursuant to the safe harbor established under the
Private Securities Litigation Reform Act of 1995 and should be evaluated in
the context of these factors. Forward-looking statements generally can be
identified by the use of forward-looking terminology such as "target",
"plans", "may", "will", "expect", "intend", "estimate", "anticipate",
"believe", or "continue" (or the negative of each of these terms) or similar
terminology. Factors which will affect actual results include, but are not
limited to: commodity, group health benefits and utility price increases; the
effects of plans intended to improve operational execution and performance;
the effects of increased competition at company locations on sales and on
labor recruiting, cost, and retention; the ability of and cost to the Company
to recruit, train, and retain qualified restaurant hourly and management
employees; the ability of the Company to identify successful new lines of
retail merchandise; the results of pending or threatened litigation; the
availability and costs of acceptable sites for development; adverse weather
conditions; the acceptance of the Company's concepts as the Company expands
into new markets and geographic regions; adverse general economic conditions
including escalating gasoline prices; changes in interest rates affecting the
Company's financing costs; changes in or implementation of additional
governmental rules and regulations affecting wage and hour matters, health and
safety, taxes, pensions and insurance; other undeterminable areas of
government actions or regulations; and other factors described from time to
time in the Company's filings with the Securities and Exchange Commission,
press releases and other communications.
Results of Operations
During the second quarter ended January 28, 2000 of the prior year, the
Company recorded charges of $8,592 before taxes principally as a result of
management changes and the resulting refocused operating priorities. These
charges consisted of $3,887 for the write-down of certain Cracker Barrel Old
Country Store, Inc. ("Cracker Barrel") properties no longer expected to be
used for future development and for Cracker Barrel's test, retail-only mall
store in accordance with Statement of Financial Accounting Standards No. 121,
$1,955 for severance and related expenses for a total of 20 corporate
employees, including 18 at Cracker Barrel, and $2,750 for other charges
primarily consisting of the accrual of future minimum lease payments on
certain properties no longer expected to be used for future development, the
write-down of certain abandoned property, inventory write-downs related to the
closing of Cracker Barrel's test outlet store and other contractual
obligations. These charges affect line items on the Company's Condensed
Consolidated Statement of Income in dollars and as a percent of total revenue
for the nine-month period ended April 28, 2000, as follows: Cost of goods sold
$205 and 0.0%; Other store operating expenses $6,149 and 0.5%; and General and
Administrative $2,238 and 0.2%.
The following table highlights operating results by percentage
relationships to total revenue for the quarter and nine-month period ended
April 27, 2001 as compared to the same periods a year ago:
Quarter Ended Nine Months Ended
-------------------- --------------------
April 27, April 28, April 27, April 28,
2001 2000 2001 2000
---- ---- ---- ----
Net sales .................... 100.0% 100.0% 100.0% 100.0%
Franchise fees and royalties . -- -- -- --
----- ----- ----- -----
Total revenue ............... 100.0 100.0 100.0 100.0
Cost of goods sold ........... 33.3 34.0 34.3 35.1
----- ----- ----- -----
Gross profit ................. 66.7 66.0 65.7 64.9
Labor & other related expenses 38.1 37.3 37.0 36.4
Other store operating expenses 17.5 16.7 17.3 17.0
----- ----- ----- -----
Store operating income ....... 11.1 12.0 11.4 11.5
General and administrative ... 5.3 5.1 5.3 5.6
Amortization of goodwill ..... 0.2 0.2 0.2 0.2
----- ----- ----- -----
Operating income ............. 5.6 6.7 5.9 5.7
Interest expense ............. 0.6 1.4 0.7 1.4
Interest income .............. -- -- -- --
----- ----- ----- -----
Income before income taxes ... 5.0 5.3 5.2 4.3
Provision for income taxes ... 1.9 2.0 1.9 1.6
----- ----- ----- -----
Net income ................... 3.1% 3.3% 3.3% 2.7%
===== ===== ===== =====
Average Comparable Store Sales Analysis
Quarter Ended Nine Months Ended
-------------------- ---------------------
April 27, April 28, April 27, April 28,
2001 2000 2001 2000
---- ---- ---- ----
Cracker Barrel (396 and 380
stores for the quarter and nine
months, respectively)
Net sales:
Restaurant ............... $740.9 $712.5 $2,195.2 $2,095.5
Retail ................... 197.0 198.7 710.8 697.8
------ ------ -------- --------
Total net sales ........ $937.9 $911.2 $2,906.0 $2,793.3
====== ====== ======== ========
Logan's (53 and 41 restaurants
for the quarter and nine months,
respectively) .................. $743.2 $761.8 $2,229.3 $2,250.3
====== ====== ======== ========
Total Revenue
- -------------
Total revenue for the third quarter of fiscal 2001 increased 7.4%
compared to last year's third quarter. At the Cracker Barrel concept, comparable
store restaurant sales increased 4.0% and comparable retail sales decreased
0.8%, for a combined comparable store sales (total net sales) increase of 2.9%.
The comparable store restaurant sales increase consisted of a 2.8% average check
increase for the quarter and a 1.2% customer traffic increase. Comparable store
retail sales decreased primarily due to strong prior year sales of a popular
novelty item, apart from which, comparable store retail sales were up 3.1%. At
the Logan's Roadhouse, Inc. ("Logan's") concept, comparable store sales
decreased 2.4%, which consisted of a 1.0% average check increase and a 3.4%
customer traffic decrease. The customer traffic decrease was partly caused by
the opening of directly competitive restaurants in 12 of 53 of Logan's
comparable direct trade areas, which reduced overall comparable store sales by
almost 3%. Sales from new Cracker Barrel and Logan's stores primarily accounted
for the balance of the total revenue increase in the third quarter.
Total revenue for the nine-month period ended April 27, 2001, increased
9.1% compared to the nine-month period ended April 28, 2000. At the Cracker
Barrel concept, comparable store restaurant sales increased 4.8% and comparable
retail sales increased 1.9%, for a combined comparable store sales (total net
sales) increase of 4.0%. The comparable store restaurant sales increase
consisted of a 3.1% average check increase for the nine-month period and a 1.7%
customer traffic increase. Comparable store retail sales increased primarily due
to the restaurant customer traffic increase. At the Logan's concept, comparable
store sales decreased 0.9%, which consisted of 1.7% average check increase and a
2.6% customer traffic decrease. The customer traffic decrease was partly caused
by the opening of directly competitive restaurants in 11 of 41 of Logan's
comparable direct trade areas. Sales from new Cracker Barrel and Logan's stores
accounted for the balance of the total revenue increase in the nine-month period
ended April 27, 2001.
Cost of Goods Sold
- ------------------
Cost of goods sold as a percentage of total revenue for third quarter
of fiscal 2001 decreased to 33.3% from 34.0% in the third quarter of last year.
This decrease was primarily due to a lower mix of retail sales as a percent of
total revenues (retail has a higher cost of goods sold than restaurant), higher
menu pricing, lower bacon and potato prices, higher initial mark-ons of retail
merchandise and lower retail shrinkage. These decreases were partially offset by
higher beef, rib, butter and orange juice prices and higher retail freight
versus the prior year.
Cost of goods sold as a percentage of total revenue for the nine-month
period ended April 27, 2001 decreased to 34.3% from 35.1% in the nine-month
period ended April 28, 2000. This decrease was primarily due to higher menu
pricing, lower chicken, dairy and potato prices, improvements in Cracker Barrel
store level execution and higher initial mark-ons and lower markdowns of retail
merchandise versus the prior year. Additionally, the decline reflects the
non-recurrence of $205 in charges to cost of goods sold related to management's
decision during the second quarter of the prior year to close Cracker Barrel's
test outlet store. These decreases were partially offset by higher beef and rib
prices and higher retail freight 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 increased to 38.1% in the third quarter this
year from 37.3% last year. This increase was primarily due to increases in
Cracker Barrel's store manager staffing and wages; increased group health cost
and hourly wage inflation at Cracker Barrel and Logan's. These increases were
partially offset by higher menu pricing and improved volume at Cracker Barrel.
Labor and related expenses as a percentage of total revenue increased
to 37.0% in the nine-month period ended April 27, 2001 from 36.4% in the
nine-month period ended April 28, 2000. This increase was primarily due to
hourly wage inflation at Cracker Barrel and Logan's, increases in Cracker
Barrel's store manager staffing and wages, increased payouts under the Cracker
Barrel store-level bonus program and increased group health costs. These
increases were partially offset by higher menu pricing and improved volume at
Cracker Barrel.
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 and depreciation. Other store operating
expenses as a percentage of total revenue increased to 17.5% in the third
quarter of fiscal 2001 from 16.7% in the third quarter of last year. This
increase was primarily due to higher utility costs and the net effect of the
Company's sale-leaseback transaction, which increased rent expense and decreased
depreciation expense, partially offset by decreases in general liability
insurance costs and property tax accruals versus the prior year.
Other store operating expenses as a percentage of total revenue
increased to 17.3% for the nine-month period ended April 27, 2001 from 17.0% in
the nine-month period ended April 28, 2000. Other store operating expenses as a
percentage of total revenue increased primarily due to higher utility costs and
the net effect of the Company's sale-leaseback transaction, which increased rent
expense and decreased depreciation expense for the nine-month period ended April
27, 2001, partially offset by the non-recurrence of $6,149 in charges during the
second quarter of the prior year (see Note 10).
General and Administrative Expenses
- -----------------------------------
General and administrative expenses as a percentage of total revenue
increased to 5.3% in the third quarter of fiscal 2001 from 5.1% in the third
quarter of last year. This increase was primarily due to various new initiatives
begun at Cracker Barrel in fiscal 2001.
General and administrative expenses as a percentage of total revenue
decreased to 5.3% for the nine-month period ended April 27, 2001 from 5.6% in
the nine-month period ended April 28, 2000. This decrease was primarily due to
the non-recurrence of $2,238 in charges during the second quarter of the prior
year and improved volume.
Interest Expense
- ----------------
Interest expense decreased to $3,014 in the third quarter of fiscal
2001 from $6,113 in the third quarter of last year. The decrease primarily
resulted from lower average debt outstanding during the third quarter as
compared to last year, reflecting net revolving principal payments from the
proceeds of the Company's sale-leaseback transaction.
Interest expense decreased to $9,790 for the nine-month period ended
April 27, 2001 from $17,746 in the nine-month period ended April 28, 2000. The
decrease primarily resulted from lower average debt outstanding during the
nine-month period ended April 27, 2001 as compared to the same period last year,
reflecting net revolving principal payments from the proceeds of the Company's
sale-leaseback transaction.
Interest Income
- ---------------
Interest income decreased to $30 in the third quarter of fiscal 2001
from $32 in the third quarter of last year. The decrease was primarily due to
lower rates on average funds available for investment.
Interest income decreased to $84 for the nine-month period ended April
27, 2001 from $267 in the nine-month period ended April 28, 2000. The decrease
was primarily due to lower average funds available for investment.
Provision for Income Taxes
- --------------------------
The provision for income taxes as a percent of pre-tax income decreased
to 37.3% in the first nine months of fiscal 2001 from 37.7% during the same
period a year ago. The decrease in tax rate was primarily due to decreases in
effective state tax rates.
Liquidity and Capital Resources
- -------------------------------
The Company's operating activities provided net cash of $92,561 for the
nine-month period ended April 27, 2001. Most of this cash was provided by net
income adjusted for depreciation and amortization. Increases in inventories and
other assets and decreases in accounts payable and other current liabilities
were partially offset by decreases in other current assets and increases in
other long-term obligations.
Capital expenditures were $74,624 for the nine-month period ended April
27, 2001. Land purchases and the construction of new stores accounted for
substantially all of these expenditures. Capitalized interest was $148 and $731
for the quarter and nine-month period ended April 27, 2001 as compared to $314
and $1,178 for the quarter and nine-month period ended April 28, 2000,
respectively. These differences were primarily due to the reduction in Cracker
Barrel new store construction in fiscal 2001 as compared to the same periods a
year ago.
The Company's internally generated cash, along with cash at July 28,
2000 and the Company's available revolver, were sufficient to finance all of its
growth in the first nine months of fiscal 2001.
The Company estimates that its capital expenditures for fiscal 2001
will be approximately $91,000, substantially all of which will be land purchases
and the construction of 15 new Cracker Barrel stores and 13 new Logan's
restaurants, including one replacement for a unit destroyed by fire in fiscal
2000. On July 31, 2000, the Company completed a sale-leaseback transaction
involving 65 of its owned Cracker Barrel Old Country Store units. Under the
transaction, the land, buildings and improvements at the locations were sold for
net consideration of $138,325 and have been leased back for an initial term of
21 years. Net proceeds from the sale were used to reduce outstanding borrowings
under the Company's revolving credit facility, and the commitment under that
facility was reduced by $70,000 to $270,000.
On November 22, 2000, the Company announced that the Board of Directors
had authorized the repurchase of up to 2 million shares of the Company's common
stock. The purchases are to be made from time to time in the open market at
prevailing market prices. During the third quarter, the Company repurchased
676,700 shares of its common stock for total consideration of $12,972 or $19.17
per share. As of April 27, 2001, the Company had repurchased a total of
1,274,200 shares of its common stock under the current 2 million share
repurchase authorization for total consideration of $23,823 or $18.70 per share.
The Company presently expects to complete this share repurchase authorization by
the end of fiscal 2001.
Management believes that cash at April 27, 2001, along with cash
generated from the Company's operating activities, will be sufficient to finance
its continued operations, its remaining share repurchase authorization and its
continued expansion plans through fiscal 2002. At April 27, 2001, the Company
had $170,000 available under its revolving credit facility following the
completion of the sale-leaseback transaction. The Company estimates that it will
generate excess cash of approximately $70,000 in fiscal 2001 which it intends to
use to complete its current share repurchase authorization and to reduce
borrowings under the revolving credit facility. 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.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 7A of the Company's Annual Report on Form 10-K for the fiscal year
ended July 28, 2000, and filed with the Commission on October 26, 2000, is
incorporated in this item of this report by this reference.
INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Directors and Shareholders of
CBRL Group, Inc.
Lebanon, Tennessee
We have reviewed the accompanying condensed consolidated balance sheet of CBRL
Group, Inc. and subsidiaries as of April 27, 2001, and the related condensed
consolidated statements of income and cash flows for the quarters and nine-month
periods ended April 27, 2001 and April 28, 2000. 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 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 July 28, 2000, and the related consolidated
statements of income, shareholders' equity, and cash flows for the year then
ended (not presented herein); and in our report dated September 7, 2000, 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 July 28, 2000 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
June 4, 2001
PART II
Item 1. Legal Proceedings
-----------------
Part I, Item 3 of the Company's Annual Report on Form
10-K filed October 26, 2000, is incorporated in this
Form 10-Q 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 of
this report by this reference.
Item 2. Changes in Securities
---------------------
None.
Item 3. Defaults Upon Senior Securities
-------------------------------
None.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None.
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) None.
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: 6/4/01 By /s/Lawrence E. White
-------- ------------------------------------------------
Lawrence E. White, Senior Vice President/Finance
and Chief Financial Officer
Date: 6/4/01 By /s/Patrick A. Scruggs
-------- ------------------------------------------------
Patrick A. Scruggs, Assistant Treasurer
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
15 Letter regarding unaudited financial information
June 4, 2001
CBRL Group, Inc.
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. for the quarters and nine-month periods ended
April 27, 2001 and April 28, 2000, as indicated in our report dated June 4,
2001; 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 27, 2001, is
incorporated by reference in Registration Statement Nos. 2-86602, 33-15775,
33-37567, 33-45482, 333-01465 and 333-81063 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