Company Quick10K Filing
Cracker Barrel Old Country Store
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$0.00 24 $3,972
10-Q 2019-11-26 Quarter: 2019-11-01
10-K 2019-09-27 Annual: 2019-08-02
10-Q 2019-06-04 Quarter: 2019-05-03
10-Q 2019-02-26 Quarter: 2019-02-01
10-Q 2018-11-30 Quarter: 2018-11-02
10-K 2018-09-28 Annual: 2018-08-03
10-Q 2018-05-29 Quarter: 2018-04-27
10-Q 2018-02-20 Quarter: 2018-01-26
10-Q 2017-11-21 Quarter: 2017-10-27
10-K 2017-09-22 Annual: 2017-07-28
10-Q 2017-05-23 Quarter: 2017-04-28
10-Q 2017-02-21 Quarter: 2017-01-27
10-Q 2016-11-22 Quarter: 2016-10-28
10-K 2016-09-26 Annual: 2016-07-29
10-Q 2016-06-01 Quarter: 2016-04-29
10-Q 2016-02-23 Quarter: 2016-01-29
10-Q 2015-11-24 Quarter: 2015-10-30
10-K 2015-09-29 Annual: 2015-07-31
10-Q 2015-06-02 Quarter: 2015-05-01
10-Q 2015-02-24 Quarter: 2015-01-30
10-Q 2014-11-25 Quarter: 2014-10-31
10-K 2014-09-25 Annual: 2014-08-01
10-Q 2014-05-28 Quarter: 2014-05-02
10-Q 2014-02-25 Quarter: 2014-01-31
10-K 2013-09-26 Annual: 2013-08-02
10-Q 2013-06-03 Quarter: 2013-05-03
10-Q 2013-02-26 Quarter: 2013-02-01
10-Q 2012-11-29 Quarter: 2012-11-02
10-K 2012-09-25 Annual: 2012-08-03
10-Q 2012-05-22 Quarter: 2012-04-27
10-Q 2012-02-21 Quarter: 2012-01-27
10-Q 2011-11-22 Quarter: 2011-10-28
10-K 2011-09-27 Annual: 2011-07-29
10-Q 2011-06-03 Quarter: 2011-04-29
10-Q 2011-03-04 Quarter: 2011-01-28
10-Q 2010-12-06 Quarter: 2010-10-29
10-K 2010-09-28 Annual: 2010-07-30
10-Q 2010-06-08 Quarter: 2010-04-30
10-Q 2010-03-09 Quarter: 2010-01-29
8-K 2020-02-25 Earnings, Exhibits
8-K 2019-12-02 Officers
8-K 2019-11-26 Earnings, Exhibits
8-K 2019-11-21 Shareholder Vote
8-K 2019-09-26 Officers
8-K 2019-09-17 Earnings, Exhibits
8-K 2019-07-23 Regulation FD, Exhibits
8-K 2019-06-04 Earnings, Exhibits
8-K 2019-04-25 Officers
8-K 2019-02-26 Earnings, Exhibits
8-K 2019-01-14 Officers, Exhibits
8-K 2018-11-27 Earnings, Exhibits
8-K 2018-11-15 Shareholder Vote
8-K 2018-09-18 Earnings, Exhibits
8-K 2018-09-05 Enter Agreement, Leave Agreement, Off-BS Arrangement, Regulation FD, Exhibits
8-K 2018-07-27 Officers, Exhibits
8-K 2018-05-22 Earnings, Exhibits
8-K 2018-04-09 Enter Agreement, Shareholder Rights, Shareholder Rights, Exhibits
8-K 2018-02-20 Earnings, Exhibits
CBRL 2019-11-01
Part I - Financial Information
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 6. Exhibits
EX-31.1 ex31_1.htm
EX-31.2 ex31_2.htm
EX-32.1 ex32_1.htm
EX-32.2 ex32_2.htm

Cracker Barrel Old Country Store Earnings 2019-11-01

CBRL 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Comparables ($MM TTM)
Ticker M Cap Assets Liab Rev G Profit Net Inc EBITDA EV G Margin EV/EBITDA ROA
WEN 4,601 5,164 4,516 1,642 550 474 947 6,415 34% 6.8 9%
CBRL 3,972 1,581 977 3,072 2,141 223 399 4,335 70% 10.9 14%
TXRH 3,916 1,869 963 2,581 0 159 290 3,771 0% 13.0 9%
WING 2,808 150 366 175 138 20 30 3,104 79% 104.3 13%
JACK 2,127 831 1,412 906 540 89 167 3,086 60% 18.5 11%
SHAK 2,069 898 598 529 0 21 63 2,040 0% 32.1 2%
CNNE 1,974 1,872 620 1,269 300 73 150 2,103 24% 14.0 4%
CAKE 1,971 2,074 1,534 2,368 1,834 0 98 1,983 77% 20.2 0%
BLMN 1,807 3,512 3,353 4,128 2,843 112 374 2,862 69% 7.6 3%
DIN 1,695 2,041 2,256 874 388 104 232 2,804 44% 12.1 5%



UNITED STATES
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 November 1, 2019

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: 001-25225


Cracker Barrel Old Country Store, Inc.
(Exact name of registrant as specified in its charter)

Tennessee
(State or other jurisdiction of incorporation or organization)
 
62-0812904
(I.R.S. Employer Identification Number)
     
305 Hartmann Drive, Lebanon, Tennessee
(Address of principal executive offices)
 
37087-4779
(Zip code)

Registrant's telephone number, including area code: (615) 444-5533

Securities registered pursuant to Section 12(b) of the Act:

Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock (Par Value $0.01)
Rights to Purchase Series A Junior Participating
Preferred Stock (Par Value $0.01)
CBRL
The Nasdaq Stock Market LLC
(Nasdaq Global Select Market)

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     No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes     No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer 
Accelerated filer 
Non-accelerated filer 
Smaller reporting company 
Emerging growth company 
 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes     No

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.

23,980,825 Shares of Common Stock
Outstanding as of November 19, 2019




Index
CRACKER BARREL OLD COUNTRY STORE, INC.

INDEX

PART I. FINANCIAL INFORMATION
Page
 
 
ITEM 1. Condensed Consolidated Financial Statements (Unaudited)
 
 
 
3
 
 
4
 
 
5
 
 
6
 
 
7
 
 
8
 
 
20
 
 
29
 
 
30
 
 
PART II. OTHER INFORMATION
 
 
 
30
 
 
30
   
32
   
33

2

Index


PART I – FINANCIAL INFORMATION
ITEM 1.
Financial Statements

CRACKER BARREL OLD COUNTRY STORE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)

ASSETS
 
November 1,
2019
   
August 2,
2019*
 
Current Assets:
           
Cash and cash equivalents
 
$
43,209
   
$
36,884
 
Accounts receivable
   
22,104
     
22,757
 
Income taxes receivable
   
11,366
     
9,449
 
Inventories
   
188,719
     
154,958
 
Prepaid expenses and other current assets
   
28,015
     
18,332
 
Total current assets
   
293,413
     
242,380
 
Property and equipment
   
2,341,135
     
2,312,815
 
Less: Accumulated depreciation and amortization
   
1,163,166
     
1,143,850
 
Property and equipment – net
   
1,177,969
     
1,168,965
 
Operating lease right-of-use assets, net
   
473,488
     
 
Investment in unconsolidated subsidiary
   
83,120
     
89,100
 
Goodwill
   
6,364
     
 
Other assets
   
103,533
     
80,780
 
Total assets
 
$
2,137,887
   
$
1,581,225
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
               
Current Liabilities:
               
Accounts payable
 
$
145,945
   
$
132,221
 
Current operating lease liabilities
   
50,684
     
 
Other current liabilities
   
246,028
     
260,253
 
Total current liabilities
   
442,657
     
392,474
 
                 
Long-term debt
   
485,000
     
400,000
 
Long-term operating lease liabilities
   
467,085
     
 
Long-term interest rate swap liability
   
11,098
     
10,483
 
Other long-term obligations
   
70,079
     
129,439
 
Deferred income taxes
   
56,184
     
44,119
 
                 
Commitments and Contingencies (Note 13)
   
     
 
                 
Shareholders’ Equity:
               
Preferred stock – 100,000,000 shares of $0.01 par value authorized; 300,000 shares designated as Series A Junior Participating Preferred Stock; no shares issued
   
     
 
Common stock – 400,000,000 shares of $0.01 par value authorized; 23,975,958 shares issued and outstanding at November 1, 2019, and 24,049,240 shares issued and outstanding at August 2, 2019
   
240
     
241
 
Additional paid-in capital
   
35,349
     
49,732
 
Accumulated other comprehensive loss
   
(7,351
)
   
(6,913
)
Retained earnings
   
577,546
     
561,650
 
Total shareholders’ equity
   
605,784
     
604,710
 
Total liabilities and shareholders’ equity
 
$
2,137,887
   
$
1,581,225
 

See Notes to unaudited Condensed Consolidated Financial Statements.

* This Condensed Consolidated Balance Sheet has been derived from the audited Consolidated Balance Sheet as of August 2, 2019, as filed with the Securities and Exchange Commission in the Company’s Annual Report on Form 10-K for the fiscal year ended August 2, 2019.

3

Index

CRACKER BARREL OLD COUNTRY STORE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share data)
(Unaudited)

 
Quarter Ended
 
   
November 1,
2019
   
November 2,
2018
 
             
Total revenue
 
$
749,040
   
$
733,543
 
Cost of goods sold (exclusive of depreciation and rent)
   
219,814
     
222,293
 
Labor and other related expenses
   
263,314
     
258,159
 
Other store operating expenses
   
162,908
     
152,478
 
Store operating income
   
103,004
     
100,613
 
General and administrative expenses
   
39,631
     
38,935
 
Operating income
   
63,373
     
61,678
 
Interest expense, net
   
3,580
     
4,349
 
Income before income taxes
   
59,793
     
57,329
 
Provision for income taxes
   
10,590
     
10,122
 
Loss from unconsolidated subsidiary
   
(5,980
)
   
 
Net income
 
$
43,223
   
$
47,207
 
                 
Net income per share:
               
Basic
 
$
1.80
   
$
1.97
 
Diluted
 
$
1.79
   
$
1.96
 
                 
Weighted average shares:
               
Basic
   
24,038,354
     
24,022,586
 
Diluted
   
24,103,922
     
24,073,722
 
                 

See Notes to unaudited Condensed Consolidated Financial Statements.

4

Index

CRACKER BARREL OLD COUNTRY STORE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited and in thousands)

 
Quarter Ended
 
   
November 1,
2019
   
November 2,
2018
 
             
Net income
 
$
43,223
   
$
47,207
 
                 
Other comprehensive income (loss) before income tax expense:
               
Change in fair value of interest rate swaps
   
(545
)
   
1,699
 
Income tax expense (benefit)
   
(107
)
   
406
 
Other comprehensive income (loss), net of tax
   
(438
)
   
1,293
 
Comprehensive income
 
$
42,785
   
$
48,500
 

See Notes to unaudited Condensed Consolidated Financial Statements.


5

Index

CRACKER BARREL OLD COUNTRY STORE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(Unaudited and in thousands except share data)

 
Common Stock
   
Additional
Paid-In
   
Accumulated
Other
Comprehensive
   
Retained
   
Total
Shareholders’
 
   
Shares
   
Amount
   
Capital
   
Income (Loss)
   
Earnings
   
Equity
 
Balances at August 2, 2019
   
24,049,240
   
$
241
   
$
49,732
   
$
(6,913
)
 
$
561,650
   
$
604,710
 
Comprehensive Income:
                                               
Net income
   
     
     
     
     
43,223
     
43,223
 
Other comprehensive loss, net of tax
   
     
     
     
(438
)
   
     
(438
)
Total comprehensive income
   
     
     
     
(438
)
   
43,223
     
42,785
 
Cash dividends declared - $1.30 per share
   
     
     
     
     
(31,452
)
   
(31,452
)
Share-based compensation
   
     
     
1,798
     
     
     
1,798
 
Issuance of share-based  compensation awards, net of shares withheld for employee  taxes
   
18,466
     
     
(1,994
)
   
     
     
(1,994
)
Purchases and retirement of common stock
   
(91,748
)
   
(1
)
   
(14,187
)
   
     
     
(14,188
)
Cumulative-effect of change in accounting principle
   
     
     
     
     
4,125
     
4,125
 
Balances at November 1, 2019
   
23,975,958
   
$
240
   
$
35,349
   
$
(7,351
)
 
$
577,546
   
$
605,784
 

 
Common Stock
   
Additional
Paid-In
   
Accumulated
Other
Comprehensive
   
Retained
   
Total
Shareholders’
 
   
Shares
   
Amount
   
Capital
   
Income (Loss)
   
Earnings
   
Equity
 
Balances at August 3, 2018
   
24,011,550
   
$
240
   
$
44,049
   
$
4,685
   
$
532,807
   
$
581,781
 
Comprehensive Income:
                                               
Net income
   
     
     
     
     
47,207
     
47,207
 
Other comprehensive income, net of tax
   
     
     
     
1,293
     
     
1,293
 
Total comprehensive income
   
     
     
     
1,293
     
47,207
     
48,500
 
Cash dividends declared - $1.25 per share
   
     
     
     
     
(30,176
)
   
(30,176
)
Share-based compensation
   
     
     
2,089
     
     
     
2,089
 
Issuance of share-based  compensation awards, net of shares withheld for employee taxes
   
22,825
     
     
(2,016
)
   
     
     
(2,016
)
Balances at November 2, 2018
   
24,034,375
   
$
240
   
$
44,122
   
$
5,978
   
$
549,838
   
$
600,178
 

See Notes to unaudited Condensed Consolidated Financial Statements.

6

Index

CRACKER BARREL OLD COUNTRY STORE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited and in thousands)

 
Three Months Ended
 
   
November 1,
2019
   
November 2,
2018
 
Cash flows from operating activities:
           
Net income
 
$
43,223
   
$
47,207
 
Net loss from unconsolidated subsidiary
   
5,980
     
 
Adjustments to reconcile net income to net cash provided by operating activities:
               
Depreciation and amortization
   
28,678
     
24,838
 
Loss on disposition of property and equipment
   
1,740
     
3,056
 
Impairment
   
664
     
 
Share-based compensation
   
1,798
     
2,089
 
Noncash lease expense
   
15,330
     
 
Changes in assets and liabilities:
               
Inventories
   
(33,534
)
   
(25,316
)
Other current assets
   
(10,875
)
   
(6,691
)
Accounts payable
   
11,848
     
8,824
 
Other current liabilities
   
(18,000
)
   
3,633
 
Other long-term assets and liabilities
   
(2,017
)
   
1,987
 
Net cash provided by operating activities
   
44,835
     
59,627
 
Cash flows from investing activities:
               
Purchase of property and equipment
   
(27,901
)
   
(37,070
)
Proceeds from insurance recoveries of property and equipment
   
73
     
324
 
Proceeds from sale of property and equipment
   
1,534
     
80
 
Notes receivable from unconsolidated subsidiary
   
(16,000
)
   
 
Acquisition of business, net of cash acquired
   
(32,971
)
   
 
Net cash used in investing activities
   
(75,265
)
   
(36,666
)
Cash flows from financing activities:
               
Proceeds from issuance of long-term debt
   
129,000
     
400,000
 
Taxes withheld from issuance of share-based compensation awards
   
(1,994
)
   
(2,016
)
Principal payments under long-term debt
   
(44,000
)
   
(400,000
)
Purchases and retirement of common stock
   
(14,188
)
   
 
Deferred financing costs
   
     
(3,022
)
Dividends on common stock
   
(32,063
)
   
(30,948
)
Net cash provided by (used in) financing activities
   
36,755
     
(35,986
)
                 
Net increase (decrease) in cash and cash equivalents
   
6,325
     
(13,025
)
Cash and cash equivalents, beginning of period
   
36,884
     
114,656
 
Cash and cash equivalents, end of period
 
$
43,209
   
$
101,631
 
                 
Supplemental disclosures of cash flow information:
               
Cash paid during the period for:
               
Interest, net of amounts capitalized
 
$
4,174
   
$
2,570
 
Income taxes
 
$
167
   
$
219
 
                 
Supplemental schedule of non-cash investing and financing activities*:
               
Capital expenditures accrued in accounts payable
 
$
4,866
   
$
10,075
 
Change in fair value of interest rate swaps
 
$
(545
)
 
$
1,699
 
Change in deferred tax asset for interest rate swaps
 
$
107
   
$
(406
)
Dividends declared but not yet paid
 
$
32,248
   
$
31,010
 

*See Note 11 for additional supplemental disclosures related to leases

See Notes to unaudited Condensed Consolidated Financial Statements.


7

Index

CRACKER BARREL OLD COUNTRY STORE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except percentages, share and per share data)
(Unaudited)

1.
Condensed Consolidated Financial Statements


Cracker Barrel Old Country Store, Inc. and its affiliates (collectively, in these Notes to Condensed Consolidated Financial Statements, the “Company”) are principally engaged in the operation and development in the United States of the Cracker Barrel Old Country Store® (“Cracker Barrel”) concept.



The accompanying condensed consolidated financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) without audit.  In the opinion of management, all adjustments (consisting of normal and recurring items) necessary for a fair presentation of such condensed consolidated financial statements have been made.  The results of operations for any interim period are not necessarily indicative of results for a full year.



These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the Company's Annual Report on Form 10-K for the year ended August 2, 2019 (the “2019 Form 10-K”).  The accounting policies used in preparing these condensed consolidated financial statements are the same as described in the 2019 Form 10-K except for the newly adopted accounting guidance for leases discussed in Note 11.  References to a year in these Notes to Condensed Consolidated Financial Statements are to the Company’s fiscal year unless otherwise noted.

Recent Accounting Pronouncements Adopted


Leases


In February 2016, the FASB issued accounting guidance which requires the recognition of lease assets and lease liabilities on the balance sheet and disclosure of key information about leasing arrangements.  The Company adopted this accounting guidance as of August 3, 2019, using the modified retrospective approach.  Under this approach, existing leases were recorded at the adoption date rather than the beginning of the earliest comparative period presented.  This approach allows for a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption, and prior periods are not restated.   The Company elected the transition package of practical expedients permitted under this guidance, which among other things, allows the carryforward of historical lease classifications.  The Company elected to not separate lease and non-lease components for all classes of leased assets.  Additionally, the Company elected to apply the short-term lease exemption to all asset classes.  The Company chose not to elect the hindsight practical expedient.


Adoption of the accounting guidance for leases resulted in the recognition of right-of-use operating lease assets of $464,394 and total operating lease liabilities of $506,406 as of August 3, 2019.  At adoption, the lease liabilities were measured based upon the present value of remaining rental payments for existing operating leases primarily related to real estate leases.  The right-of-use assets were offset primarily by straight-line lease liabilities that existed at the adoption date. The cumulative-effect of applying the accounting guidance for leases resulted in an adjustment to retained earnings of $4,125 at August 3, 2019, related to the elimination of the deferred gains on the Company’s sale-leaseback transactions from 2000 and 2009.  See Note 11 for additional information regarding leases.


Accounting for Hedging Activities


In August 2017, the FASB issued accounting guidance which amends the recognition, presentation and disclosure requirements of hedge accounting in order to better portray the economics of entities’ risk management activities, increase transparency and understandability of hedging relationships and simplify the application of hedge accounting.  The recognition requirements for cash flow and net investment hedges existing at the date of adoption will be applied using a cumulative-effect adjustment to retained earnings.  The amended presentation and disclosure requirements will be applied on a prospective basis.  The adoption of this accounting guidance in the first quarter of 2020 did not have a significant impact on the Company’s consolidated financial position or results of operations, and the Company did not record a cumulative-effect adjustment to the opening balance of retained earnings.
8

Index



Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income


On December 22, 2017, the U.S. government enacted P.L. 115-97, the Tax Cuts and Jobs Act (the “Tax Act”).  In February 2018, the FASB issued accounting guidance which allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Act.  This accounting guidance was effective for the Company in the first quarter of 2020.  The Company did not elect this reclassification option.  As a result, this accounting guidance had no impact on the Company’s consolidated financial position or results of operations.


Share-Based Payment Arrangements With Nonemployees


In June 2018, the FASB issued accounting guidance in order to simplify accounting for share-based payments granted to nonemployees for goods and services.  This new guidance aligns most of the accounting requirements for share-based payments granted to nonemployees with the existing guidance for share-based payments granted to employees.  The adoption of this accounting guidance in the first quarter of 2020 had no impact on the Company’s consolidated financial position or results of operations.

2.
Acquisition
 

The Company accounts for all transactions that represent business combinations using the acquisition method of accounting, where the identifiable assets acquired and the liabilities assumed are recognized and measured at their fair values on the date the Company obtains control in the acquiree. Such fair values that are not finalized for reporting periods following the acquisition date are estimated and recorded as estimated amounts.  Adjustments to these estimated amounts during the measurement period (defined as the date through which all information required to identify and measure the consideration transferred, the assets acquired and the liabilities assumed has been obtained, limited to one year from the acquisition date) are recorded when identified. Goodwill is determined as the excess of the fair value of the consideration conveyed in the acquisition over the fair value of the net assets acquired.  Goodwill and other intangibles will be evaluated for impairment annually during each fourth quarter period and when an event occurs or circumstances change that, more likely than not, reduce the fair value of the reporting unit below its carrying value.


Effective October 10, 2019, the Company acquired 100% ownership of Maple Street Biscuit Company (“MSBC”), a breakfast and lunch fast casual concept, for a purchase price of $36,000, of which $32,000 was paid to the sellers in cash with the remaining $4,000 being held as security for the satisfaction of indemnification obligations.  The unused portion held as security, if any, will be paid in two installments with $1,500 due to the principal seller on the one-year anniversary of closing and the remaining amount due to the sellers on the two-year anniversary of closing.


The Company believes that this investment supports its strategic initiative to extend the brand by becoming a market leader in the breakfast and lunch-focused fast casual dining segment of the restaurant industry and by providing a platform for growth.  At November 1, 2019, MSBC had 28 company-owned and five franchised fast casual locations across seven states.


The goodwill of $6,364 arising from the acquisition consists largely of the Company’s determination of the value of MSBC’s future free cash flows less the value of the identifiable tangible and intangible assets and liabilities.  None of the goodwill recognized is expected to be deductible for income tax purposes.  Acquisition-related costs of $1,269 were recorded in general and administrative expenses in the condensed consolidated statement of income.
9

Index



The following table summarizes the consideration paid for MSBC and the amounts of the assets acquired and liabilities assumed recognized at the acquisition date:

Fair value of total consideration transferred
 
$
36,000
 
         
Recognized amounts of identifiable assets acquired and liabilities assumed
       
Financial assets
 
$
96
 
Property and equipment
   
13,580
 
Operating lease right-of-use assets, net
   
14,280
 
Indefinite-lived intangible asset*
   
19,460
 
Other current and noncurrent assets
   
394
 
Financial liabilities
   
(1,876
)
Operating lease liabilities
   
(15,973
)
Other noncurrent liabilities
   
(325
)
Total identifiable net assets
   
29,636
 
Goodwill
 
$
6,364
 


*Consists entirely of MSBC's Tradename



All amounts recorded during the quarter ended November 1, 2019 related to the assets acquired, liabilities assumed and goodwill are provisional due to the acquisition of MSBC occurring approximately three weeks’ prior the Company’s quarter end date of November 1, 2019.


The amounts of MSBC’s revenue and earnings included in the Company’s condensed consolidated statement of income for the quarter ended November 1, 2019, and the consolidated revenue and earnings had the acquisition date occurred on August 2, 2018, are as follows:


 
 
Revenue
   
Earnings
 
Actual from acquisition date of October 10, 2019 to the quarter ended November 1, 2019
 
$
1,208
   
$
58
 
Supplemental pro forma for the quarter ended November 1, 2019
   
752,891
     
43,017
 
Supplemental pro forma for the quarter ended November 2, 2018
   
738,222
     
46,876
 


3.
Equity Method Investment


Effective July 18, 2019, the Company purchased approximately 58.6% of the economic ownership interest, and approximately 49.7% of the voting interest, in PBS HoldCo, LLC (“PBS HC”).  PBS HC and its subsidiaries develop, own, and operate food, beverage and entertainment establishments under the name of Punch Bowl Social (“PBS”).  The Company does not have the power to unilaterally direct any activities of PBS HC, a variable interest entity, that most significantly impact PBS HC’s economic performance.  As a result, the Company’s investment in PBS HC, for which it has the ability to exercise significant influence, but not control and is not the primary beneficiary, is accounted for using the equity method.  Accordingly, the Company recognizes its proportionate share of the reported earnings or losses of PBS HC adjusted for basis differences on its consolidated statement of income and as an adjustment to the Company’s investment in unconsolidated subsidiary on the consolidated balance sheet.  The Company will assess the impairment of its equity investment whenever events or changes in circumstances indicate that a decrease in value of the investment has occurred that is other than temporary.  The Company’s investment in PBS HC was $83,120 and $89,100, respectively at November 1, 2019 and August 2, 2019, and is recorded on the Company’s condensed consolidated balance sheet as investment in unconsolidated subsidiary.


Additionally, as part of the purchase transaction, the Company purchased promissory notes of $6,900 along with the related interest on the notes and provided additional funding of $8,000 to PBS HC in exchange for a promissory note. As part of the purchase agreement with PBS HC, the Company agreed to fund PBS HC up to $51,000 through calendar 2020, of which the Company has funded $28,500 and $12,500, respectively, as of November 1, 2019 and August 2, 2019.  The related promissory notes are included in other assets on the condensed consolidated balance sheet. The Company’s exposure to risk of loss in PBS HC is generally limited to its investment in the ownership interest and its receivable related to the promissory notes.


10

Index

4.
Fair Value Measurements


The Company’s assets and liabilities measured at fair value on a recurring basis at November 1, 2019 were as follows:


 
Level 1
   
Level 2
   
Level 3
   
Total Fair
Value
 
Cash equivalents*
 
$
10,046
   
$
   
$
   
$
10,046
 
Interest rate swap asset (see Note 7)
   
     
189
     
     
189
 
Total
 
$
10,046
   
$
189
   
$
   
$
10,235
 
Deferred compensation plan assets**
         
31,765
 
Total assets at fair value
       
$
42,000
 
               
Interest rate swap liability (see Note 7)
 
$
   
$
11,098
   
$
   
$
11,098
 
Total liabilities at fair value
 
$
   
$
11,098
   
$
   
$
11,098
 


The Company’s assets and liabilities measured at fair value on a recurring basis at August 2, 2019 were as follows:



 
Level 1
   
Level 2
   
Level 3
   
Total Fair
Value
 
Cash equivalents*
 
$
46
   
$
   
$
   
$
46
 
Interest rate swap asset (see Note 7)
   
     
     
     
 
Total
 
$
46
   
$
   
$
   
$
46
 
Deferred compensation plan assets**
         
30,593
 
Total assets at fair value
       
$
30,639
 
               
Interest rate swap liability (see Note 7)
 
$
   
$
10,483
   
$
   
$
10,483
 
Total liabilities at fair value
 
$
   
$
10,483
   
$
   
$
10,483
 

*Consists of money market fund investments.
**Represents plan assets invested in mutual funds established under a rabbi trust for the Company’s non-qualified savings plan and is included in the Condensed Consolidated Balance Sheets as other assets.


The Company’s money market fund investments are measured at fair value using quoted market prices.  The fair values of the Company’s interest rate swap assets and liabilities are determined based on the present value of expected future cash flows.  Since the values of the Company’s interest rate swaps are based on the LIBOR forward curve, which is observable at commonly quoted intervals for the full terms of the swaps, it is considered a Level 2 input.  Non-performance risk is reflected in determining the fair value of the interest rate swaps by using the Company’s credit spread less the risk-free interest rate, both of which are observable at commonly quoted intervals for the terms of the swaps.  Thus, the adjustment for non-performance risk is also considered a Level 2 input.  The Company’s deferred compensation plan assets are measured based on net asset value per share as a practical expedient to estimate fair value.


The fair values of the Company’s accounts receivable and accounts payable approximate their carrying amounts because of their short duration.  The fair value of the Company’s variable rate debt, based on quoted market prices, which are considered Level 1 inputs, approximates its carrying amount at November 1, 2019 and August 2, 2019.

Assets Measured at Fair Value on a Nonrecurring Basis


As part of the Company’s acquisition of MSBC effective October 10, 2019, the Company recorded MSBC’s property and equipment and the MSBC tradename at fair value.  The remaining identifiable assets and liabilities acquired were recorded at carrying value, which approximated their fair value at October 10, 2019.  Additionally, goodwill was recorded as the excess of fair value of the consideration conveyed in the acquisition over the fair value of the net assets acquired.  The fair value of MSBC’s property and equipment, tradename and the related goodwill are considered Level 3 inputs.  The valuation method used by the Company depends on the type of asset and the availability of data.
11

Index



The Company’s assets measured at fair value on a nonrecurring basis as of October 10, 2019 were as follows:


 
 
Level 1
   
Level 2
   
Level 3
   
Total Fair
Value
 
Property and equipment
 
$
   
$
   
$
13,580
   
$
13,580
 
Tradename*
   
     
     
19,460
     
19,460
 
Goodwill
   
     
     
6,364
     
6,364
 
Total
 
$
   
$
   
$
39,404
   
$
39,404
 

*Included in the Condensed Consolidated Balance Sheets as other assets.


As noted in Note 2 above, the amounts recorded for these assets are estimated.  See Note 2 for further information in regards to the determination of goodwill.


The fair value of the property and equipment was determined by using the cost approach.  Assumptions used in the cost method included estimates of replacement costs for similar property and equipment.   Replacement cost was estimated to be approximately $500 per MSBC store.



The fair value of MSBC’s tradename was determined by using the present value of estimated cash flows from comparable industry royalty rates for MSBC’s estimated future revenue streams.  Assumptions used under this approach included an approximate 2.5% royalty rate and a discount rate of 12.0%.

5.
Inventories



Inventories were comprised of the following at:



 
November 1, 2019
   
August 2, 2019
 
Retail
 
$
145,273
   
$
116,990
 
Restaurant
   
25,168
     
20,648
 
Supplies
   
18,278
     
17,320
 
Total
 
$
188,719
   
$
154,958
 

6.
Debt


On September 5, 2018, the Company entered into a five-year $950,000 revolving credit facility (“2019 Revolving Credit Facility”).   The 2019 Revolving Credit Facility also contains an option to increase the revolving credit facility by $300,000.


At November 1, 2019 and August 2, 2019, the Company had $485,000 and $400,000, respectively, of outstanding borrowings under the 2019 Revolving Credit Facility.  At November 1, 2019, the Company had $6,879 of standby letters of credit, which reduce the Company’s borrowing availability under the 2019 Revolving Credit Facility (see Note 13 for more information on the Company’s standby letters of credit).  At November 1, 2019, the Company had $458,121 in borrowing availability under the 2019 Revolving Credit Facility.


In accordance with the 2019 Revolving Credit Facility, outstanding borrowings bear interest, at the Company’s election, either at LIBOR or prime plus a percentage point spread based on certain specified financial ratios under the 2019 Revolving Credit Facility.  At November 1, 2019, $350,000 of the Company’s outstanding borrowings were swapped at a weighted average interest rate of 3.49% (see Note 7 for information on the Company’s interest rate swaps).  At November 1, 2019, the weighted average interest rate on the remaining $135,000 of the Company’s outstanding borrowings was 3.11%.


The 2019 Revolving Credit Facility contains customary financial covenants, which include maintenance of a maximum consolidated total leverage ratio and a minimum consolidated interest coverage ratio.  At November 1, 2019, the Company was in compliance with all financial covenants.
12

Index



The 2019 Revolving Credit Facility also imposes restrictions on the amount of dividends the Company is permitted to pay and the amount of shares the Company is permitted to repurchase.  Under the 2019 Revolving Credit Facility, provided there is no default existing and the total of the Company’s availability under the 2019 Revolving Credit Facility plus the Company’s cash and cash equivalents on hand is at least $100,000 (the “cash availability”), the Company may declare and pay cash dividends on shares of its common stock and repurchase shares of its common stock (1) in an unlimited amount if, at the time such dividend or repurchase is made, the Company’s consolidated total leverage ratio is 3.00 to 1.00 or less and (2) in an aggregate amount not to exceed $100,000 in any fiscal year if the Company’s consolidated total leverage ratio is greater than 3.00 to 1.00 at the time the dividend or repurchase is made; notwithstanding (1) and (2), so long as immediately after giving effect to the payment of any such dividends, cash availability is at least $100,000, the Company may declare and pay cash dividends on shares of its common stock in an aggregate amount not to exceed in any fiscal year the product of the aggregate amount of dividends declared in the fourth quarter of the immediately preceding fiscal year multiplied by four.

7.
Derivative Instruments and Hedging Activities


The Company has interest rate risk relative to its outstanding borrowings (see Note 6 for information on the Company’s outstanding borrowings).  The Company’s policy has been to manage interest cost using a mix of fixed and variable rate debt.  To manage this risk in a cost-efficient manner, the Company uses derivative instruments, specifically interest rate swaps.


For each of the Company’s interest rate swaps, the Company has agreed to exchange with a counterparty the difference between fixed and variable interest amounts calculated by reference to an agreed-upon notional principal amount.  The interest rates on the portion of the Company’s outstanding debt covered by its interest rate swaps are fixed at the rates in the table below plus the Company’s credit spread.  The Company’s credit spread at November 1, 2019 was 1.00%.


All of the Company’s interest rate swaps are accounted for as cash flow hedges.  For derivative instruments that are designated and qualify as a cash flow hedge, the gain or loss on the derivative instrument is reported as a component of other comprehensive income and reclassified into earnings in the same period during which the hedged transaction affects earnings and is presented in the same statement of income line item as the earnings effect of the hedged item.  Gains and losses on the derivative instrument representing hedge components excluded from the assessment of effectiveness, if any, will be recognized currently in earnings in the same statement of income line item as the earnings effect of the hedged item.


The Company does not hold or use derivative instruments for trading purposes.  The Company also does not have any derivatives not designated as hedging instruments and has not designated any non-derivatives as hedging instruments.


Companies may elect to offset related assets and liabilities and report the net amount on their financial statements if the right of setoff exists.  Under a master netting agreement, the Company has the legal right to offset the amounts owed to the Company against amounts owed by the Company under a derivative instrument that exists between the Company and a counterparty.  When the Company is engaged in more than one outstanding derivative transaction with the same counterparty and also has a legally enforceable master netting agreement with that counterparty, its credit risk exposure is based on the net exposure under the master netting agreement.  If, on a net basis, the Company owes the counterparty, the Company regards its credit exposure to the counterparty as being zero.
13

Index



A summary of the Company’s interest rate swaps at November 1, 2019 is as follows:



Trade Date
 
Effective Date
 
Term
(in Years)
   
Notional Amount
   
Fixed
Rate
 
January 30, 2015
May 3, 2019
   
2.0
   
$
60,000
     
2.16
%
January 30, 2015
May 4, 2021
   
3.0
     
120,000
     
2.41
%
January 30, 2015
May 3, 2019
   
2.0
     
60,000
     
2.15
%
January 30, 2015
May 4, 2021
   
3.0
     
80,000
     
2.40
%
January 16, 2019
May 3, 2019
   
3.0
     
115,000
     
2.63
%
January 16, 2019
May 3, 2019
   
2.0
     
115,000
     
2.68
%
August 6, 2019
November 4, 2019
   
1.5
     
50,000
     
1.50
%
August 7, 2019
May 3, 2021
   
1.0
     
35,000
     
1.32
%
August 7, 2019
May 3, 2022
   
2.0
     
100,000
     
1.40
%
August 7, 2019
May 3, 2022
   
2.0
     
100,000
     
1.36
%



The estimated fair values of the Company’s derivative instruments as of November 1, 2019 and August 2, 2019 were as follows:

(See Note 4)
Balance Sheet Location
 
November 1, 2019
   
August 2, 2019
 
Interest rate swaps
Other assets
 
$
189
   
$
 
Total assets
   
$
189
   
$
 
                   
Interest rate swaps
Long-term interest rate swap liability
 
$
11,098
   
$
10,483
 
Total liabilities
   
$
11,098
   
$
10,483
 


The following table summarizes the offsetting of the Company’s derivative assets in the Condensed Consolidated Balance Sheets at November 1, 2019 and August 2, 2019:



 
Gross Asset Amounts
   
Liability Amount Offset
   
Net Asset Amount Presented
in the Balance Sheets
 
 
(See Note 4)
 
November 1,
2019
   
August 2,
2019
   
November 1,
2019
   
August 2,
2019
   
November 1,
2019
   
August 2,
2019
 
Interest rate swaps
 
$
189
   
$
   
$
   
$
   
$
189
   
$
 


The following table summarizes the offsetting of the Company’s derivative liabilities in the Condensed Consolidated Balance Sheets at November 1, 2019 and August 2, 2019:



 
Gross Liability Amounts
   
Asset Amount Offset
   
Net Liability Amount Presented
in the Balance Sheets
 
 
(See Note 4)
 
November 1,
2019
   
August 2,
2019
   
November 1,
2019
   
August 2,
2019
   
November 1,
2019
   
August 2,
2019
 
Interest rate swaps
 
$
11,241
   
$
10,483
   
$
(143
)
 
$
   
$
11,098
   
$
10,483
 


The estimated fair value of the Company’s interest rate swap assets and liabilities incorporate the Company’s non-performance risk (see Note 4).  The adjustment related to the Company’s non-performance risk at November 1, 2019 and August 2, 2019 resulted in reductions of $297 and $399, respectively, in the fair value of the interest rate swap assets and liabilities.  The offset to the interest rate swap assets and liabilities are recorded in accumulated other comprehensive loss (“AOCL”), net of the deferred tax asset, and will be reclassified into earnings over the term of the underlying debt.  As of November 1, 2019, the estimated pre-tax portion of AOCL that is expected to be reclassified into earnings over the next twelve months is $1,176.  Cash flows related to the interest rate swaps are included in interest expense in the Condensed Consolidated Statements of Income and in operating activities in the Condensed Consolidated Statements of Cash Flows.
14

Index



The following table summarizes the pre-tax effects of the Company’s derivative instruments on AOCL for the three months ended November 1, 2019 and the year ended August 2, 2019:


 
Amount of Loss Recognized in
AOCL on Derivatives
 
   
Three Months Ended
November 1, 2019
   
Year Ended
August 2, 2019
 
Cash flow hedges:
           
Interest rate swaps
 
$
(545
)
 
$
(15,466
)


The following table summarizes the pre-tax effects of the Company’s derivative instruments on income for the quarters ended November 1, 2019 and November 2, 2018:


Location of Gain Reclassified
from AOCL into Income 
 
Amount of Gain Reclassified
from AOCL into Income
 
     
Quarter Ended
 
     
November 1,
2019
 
 November 2,
2018
 
Cash flow hedges:
   
  
 
  
 
Interest rate swaps
Interest expense
 
$
(82)
 
$
 


The following table summarizes the amounts reclassified out of AOCL related to the Company’s interest rate swaps for the quarter ended November 1, 2019:

 Details about AOCL
 
Amount Reclassified
from AOCL
 
Affected Line Item in the
Condensed Consolidated
Statement of Income
Gain on cash flow hedges:
     
    
Interest rate swaps
 
$
82
 
Interest expense
Tax expense
   
(20
)
Provision for income taxes
 
 
$
62
 
Net of tax


No gains or losses representing amounts excluded from the assessment of effectiveness were recognized in earnings for the three-month period ended November 1, 2019.


The following table summarizes the changes in AOCL, net of tax, related to the Company’s interest rate swaps for the three months ended November 1, 2019:



 
Changes in AOCL
 
AOCL balance at August 2, 2019
 
$
(6,913
)
Other comprehensive income before reclassifications
   
(500
)
Amounts reclassified from AOCL
   
62
 
Other comprehensive income, net of tax
   
(438
)
AOCL balance at November 1, 2019
 
$
(7,351
)

8.
Seasonality


Historically, the net income of the Company has been lower in the first and third quarters and higher in the second and fourth quarters.  Management attributes these variations to the holiday shopping season and the summer vacation and travel season.  The Company's retail sales, which are made substantially to the Company’s restaurant customers, historically have been highest in the Company's second quarter, which includes the holiday shopping season.  Historically, interstate tourist traffic and the propensity to dine out have been higher during the summer months, thereby contributing to higher profits in the Company’s fourth quarter.  The Company generally opens additional new locations throughout the year.  Therefore, the results of operations for any interim period cannot be considered indicative of the operating results for an entire year.

9.
Segment Information



Cracker Barrel stores represent a single, integrated operation with two related and substantially integrated product lines.  The operating expenses of the restaurant and retail product lines of a Cracker Barrel store are shared and are indistinguishable in many respects.  Accordingly, the Company currently manages its business on the basis of one reportable operating segment.  All of the Company’s operations are located within the United States.

10.
Revenue Recognition



Revenue consists primarily of sales from restaurant and retail operations. The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a restaurant guest, retail customer or other customer.  The Company’s policy is to present sales in the Condensed Consolidated Statements of Income on a net presentation basis after deducting sales tax.
15

Index


Disaggregation of revenue


Total revenue was comprised of the following for the specified periods:


 
Quarter Ended
 
   
November 1,
2019
   
November 2,
2018
 
Revenue:
           
Restaurant
 
$
607,079
   
$
590,978
 
Retail
   
141,961
     
142,565
 
Total revenue
 
$
749,040
   
$
733,543
 

Restaurant Revenue


The Company recognizes revenues from restaurant sales when payment is tendered at the point of sale, as the Company’s performance obligation to provide food and beverages is satisfied.

Retail Revenue


The Company recognizes revenues from retail sales when payment is tendered at the point of sale, as the Company’s performance obligation to provide merchandise is satisfied.  Ecommerce sales, including shipping revenue, are recorded upon delivery to the customer. Additionally, estimated sales returns are calculated based on return history and sales levels.

Gift Card Breakage


Included in restaurant and retail revenue is gift card breakage.  Customer purchases of gift cards, to be utilized at the Company's stores, are not recognized as sales until the card is redeemed and the customer purchases food and/or merchandise.   Gift cards do not carry an expiration date; therefore, customers can redeem their gift cards indefinitely. A certain number of gift cards will not be fully redeemed. Management estimates unredeemed balances and recognizes gift card breakage revenue for these amounts in the Company's Condensed Consolidated Statements of Income over the expected redemption period.  Gift card breakage is recognized when the likelihood of a gift card being redeemed by the customer is remote and the Company determines that there is not a legal obligation to remit the unredeemed gift card balance to the relevant jurisdiction. The determination of the gift card breakage rate is based upon the Company’s specific historical redemption patterns. The Company recognizes gift card breakage by applying its estimate of the rate of gift card breakage over the period of estimated redemption.  For the quarter ended November 1, 2019, gift card breakage was $1,238. For the quarter ended November 2, 2018, gift card breakage was $1,341.


Deferred revenue related to the Company’s gift cards was $76,147 and $80,073, respectively, at November 1, 2019 and August 2, 2019.  Revenue recognized in the Condensed Consolidated Statements of Income for the quarters ended November 1, 2019 and November 2, 2018, respectively, for the redemption of gift cards which were included in the deferred revenue balance at the beginning of the fiscal year was $17,947 and $18,139.

11.          Leases


The Company has ground leases for its leased stores and office space leases that are recorded as operating leases under various non-cancellable operating leases.  The Company also leases advertising billboards, vehicle fleets, and certain equipment under various non-cancellable operating leases.  Additionally, the Company also completed sale-leaseback transactions in 2000 and 2009.  In 2009, the Company completed sale-leaseback transactions involving 15 of its owned stores and its retail distribution center.  Under the transactions, the land, buildings and improvements at the locations were sold and leased back for terms of 20 and 15 years, respectively.  Equipment was not included.  The leases include specified renewal options for up to 20 additional years.  In 2000, the Company completed a sale-leaseback transaction involving 65 of its owned stores.  Under the transaction, the land, buildings and building improvements at the locations were sold and leased back for a term of 21 years.  The leases for these stores include specified renewal options for up to 20 additional years and certain financial covenants which include maintenance of a minimum fixed charge coverage for the leased stores.  At November 1, 2019 and August 2, 2019, the Company was in compliance with these covenants.




 To determine whether a contract is or contains a lease, the Company determines at contract inception whether it contains the right to control the use of an identified asset for a period of time in exchange for consideration. If the contract has the right to obtain substantially all of the economic benefit from use of the identified asset and the right to direct the use of the identified asset, the Company recognizes a right-of-use asset and lease liability. The Company’s leases all have varying terms and expire at various dates through 2055. Restaurant leases typically have base terms of ten years with four to five optional renewal periods of five years each.  The Company uses a lease life that generally begins on the commencement date, including the rent holiday periods, and generally extends through certain renewal periods that can be exercised at the Company’s option. The Company has included lease renewal options in the lease term for calculations of the right-of-use asset and liability for which at the commencement of the lease it is reasonably certain that the Company will exercise those renewal options.  Additionally, some of the leases have contingent rent provisions and others require adjustments for inflation or index. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.


The Company has entered into agreements for real estate leases that are not recorded as right-of-use assets or lease liabilities as we have not yet taken possession. These leases are expected to commence in the third quarter of 2020 and in 2021 with undiscounted future payments of $17,300.


As further discussed in Note 1 under the lease discussion in the “Recent Accounting Standards Adopted” section, the Company has elected to not separate lease and non-lease components. Additionally, the Company has elected to apply the short term lease exemption to all asset classes and the short term lease expense for the period reasonably reflects the short term lease commitments. As the Company’s leases do not provide an implicit rate, the Company uses the incremental borrowing rate based on the information available at the time of commencement or modification date in determining the present value of lease payments. For operating leases that commenced prior to the date of adoption of the new lease accounting guidance, we used the incremental borrowing rate as of the adoption date.  Assumptions used in determining the Company’s incremental borrowing rate include the Company’s implied credit rating and an estimate of secured borrowing rates based on comparable market data.


The following table summarizes the components of lease cost for operating leases for the quarter ended November 1, 2019:


Operating lease cost
 
$
19,856
 
Short term lease cost
   
384
 
Variable lease cost
   
451
 
Total lease cost
 
$
20,691
 


The following table summarizes supplemental cash flow information and non-cash activity related to the Company’s operating leases for the three months ended November 1, 2019:


Operating cash flow information:
     
Cash paid for amounts included in the measurement of lease liabilities
 
$
19,546
 
Noncash information:
       
Right-of-use assets obtained in exchange for new operating lease liabilities
   
3,838
 
Lease modifications granting additional right-of-use assets
   
6,826
 
Lease modifications removing right-of-use assets
   
(649
)


The following table summarizes the weighted-average remaining lease term and the weighted-average discount rate for operating leases as of November 1, 2019:


Weighted-average remaining lease term
 
18.11 Years
 
Weighted-average discount rate
   
3.85
%

17

Index

The following table summarizes the maturities of undiscounted cash flows reconciled to the total lease liability as of November 1, 2019:

Year
 
Total
 
Remainder of 2020
 
$
58,082
 
2021
   
46,975
 
2022
   
40,480
 
2023
   
36,676
 
2024
   
36,530
 
Thereafter
   
532,648
 
Total future minimum lease payments
   
751,391
 
Less imputed remaining interest
   
(233,622
)
Total present value of operating lease liabilities
 
$
517,769
 


 The following table summarizes the maturities of lease commitments as of August 2, 2019, prior to the adoption of the new lease guidance, as previously disclosed in our 2019 Form 10-K:


Year
 
Total
 
2020
 
$
69,249
 
2021
   
40,962
 
2022
   
36,280
 
2023
   
33,639
 
2024
   
34,020
 
Thereafter
   
515,169
 
Total
 
$
729,319
 

12.
Net Income Per Share and Weighted Average Shares


Basic consolidated net income per share is computed by dividing consolidated net income available to common shareholders by the weighted average number of shares of common stock outstanding for the reporting period.  Diluted consolidated net income per share reflects the potential dilution that could occur if securities, options or other contracts to issue shares of common stock were exercised or converted into shares of common stock and is based upon the weighted average number of shares of common stock and common equivalent shares outstanding during the reporting period. Common equivalent shares related to nonvested stock awards and units issued by the Company are calculated using the treasury stock method.  The outstanding nonvested stock awards and units, issued by the Company represent the only dilutive effects on diluted consolidated net income per share.


The following table reconciles the components of diluted earnings per share computations:


 
Quarter Ended
 
   
November 1,
2019
   
November 2,
2018
 
Net income per share numerator
 
$
43,223
   
$
47,207
 
                 
Net income per share denominator:
               
Weighted average shares
   
24,038,354
     
24,022,586
 
Add potential dilution:
               
Nonvested stock awards and units
   
65,568
     
51,136
 
Diluted weighted average shares
   
24,103,922
     
24,073,722
 

13.
Commitments and Contingencies


The Company and its subsidiaries are party to various legal and regulatory proceedings and claims incidental to their business in the ordinary course.  In the opinion of management, based upon information currently available, the ultimate liability with respect to these contingencies will not materially affect the Company’s financial statements.
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Related to its workers’ compensation insurance coverage, the Company is contingently liable pursuant to standby letters of credit as credit guarantees to certain insurers.  As of November 1, 2019, the Company had $6,879 of standby letters of credit related to securing reserved claims under workers’ compensation insurance.  All standby letters of credit are renewable annually and reduce the Company’s borrowing availability under its 2019 Revolving Credit Facility (see Note 6).


At November 1, 2019, the Company is secondarily liable for lease payments associated with two properties occupied by a third party.  The Company is not aware of any non-performance under these lease arrangements that would result in the Company having to perform in accordance with the terms of these guarantees; and therefore, no provision has been recorded in the Condensed Consolidated Balance Sheets for amounts to be paid in case of non-performance by the primary obligor under such lease arrangements.


The Company enters into certain indemnification agreements in favor of third parties in the ordinary course of business.  The Company believes that the probability of incurring an actual liability under such indemnification agreements is sufficiently remote that no such liability has been recorded in the Condensed Consolidated Balance Sheet as of November 1, 2019.

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ITEM 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations

Cracker Barrel Old Country Store, Inc. and its subsidiaries (collectively, the “Company,” “our” or “we”) are principally engaged in the operation and development in the United States of the Cracker Barrel Old Country Store® (“Cracker Barrel”) concept.  At November 1, 2019, we operated 660 Cracker Barrel stores in 45 states and seven Holler & Dash Biscuit HouseTM locations (“Holler & Dash”) in five states.  Additionally, effective October 10, 2019, we acquired Maple Street Biscuit Company (“MSBC”).  As of November 1, 2019, MSBC had 28 company-owned and five franchised fast casual locations across seven states.

All dollar amounts reported or discussed in this Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) are shown in thousands, except per share amounts and certain statistical information (e.g., number of stores).  References to years in MD&A are to our fiscal year unless otherwise noted.

MD&A provides information which management believes is relevant to an assessment and understanding of our consolidated results of operations and financial condition.  MD&A should be read in conjunction with the (i) condensed consolidated financial statements and notes thereto included in this Quarterly Report on Form 10-Q and (ii) audited consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended August 2, 2019 (the “2019 Form 10-K”).  Except for specific historical information, many of the matters discussed in this report may express or imply projections of items such as revenues or expenditures, estimated capital expenditures, compliance with debt covenants, plans and objectives for future operations, inventory shrinkage, growth or initiatives, expected future economic performance or the expected outcome or impact of pending or threatened litigation. These and similar statements regarding events or results which we expect will or may occur in the future are forward-looking statements that, by their nature, involve risks, uncertainties and other factors which may cause our actual results and performance to differ materially from those expressed or implied by such statements.  All forward-looking information is provided pursuant to the safe harbor established under the Private Securities Litigation Reform Act of 1995 and should be evaluated in the context of these risks, uncertainties and other factors. Forward-looking statements generally can be identified by the use of forward-looking terminology such as “trends,” “assumptions,” “target,” “guidance,” “outlook,” “opportunity,” “future,” “plans,” “goals,” “objectives,” “expectations,” “near-term,” “long-term,” “projection,” “may,” “will,” “would,” “could,” “expect,” “intend,” “estimate,” “anticipate,” “believe,” “potential,” “should,” “projects,” “forecasts” or “continue”  (or the negative or other derivatives of each of these terms) or similar terminology.  We believe the assumptions underlying any forward-looking statements are reasonable; however, any of the assumptions could be inaccurate, and therefore, actual results may differ materially from those projected in or implied by the forward-looking statements.  In addition to the risks of ordinary business operations, and those discussed or described in this report or in information incorporated by reference into this report, factors and risks that may result in actual results differing from this forward-looking information include, but are not limited to, those contained in Part I, Item 1A of the 2019 Form 10-K, as well as the factors described under “Critical Accounting Estimates” on pages 27-29 of this report or, from time to time, in our filings with the Securities and Exchange Commission (“SEC”), press releases and other communications.

Readers are cautioned not to place undue reliance on forward-looking statements made in this report because the statements speak only as of the report’s date.  Except as may be required by law, we have no obligation or intention to update or revise any of these forward-looking statements to reflect events or circumstances occurring after the date of this report or to reflect the occurrence of unanticipated events.  Readers are advised, however, to consult any future public disclosures that we may make on related subjects in reports that we file with or furnish to the SEC or in our other public disclosures.
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Overview
 
Management believes that the Cracker Barrel brand remains one of the strongest and most differentiated brands in the restaurant industry, and we plan to continue to leverage that strength throughout 2020 to grow sales and profits.  Our priorities for 2020 consist of the following:

Enhancing the core business by introducing craveable, signature food, accelerating our off-premise business, improving the employee and guest experience and by achieving ongoing cost reductions through business model improvements;
 
Expanding the footprint in new and developing markets while replenishing our store opening pipeline.  We anticipate opening six Cracker Barrel stores during 2020; and
 
Extending the brand to further drive shareholder value by developing new platforms to drive growth, such as our acquisition of Maple Street Biscuit Company (“MSBC”) and through our strategic relationship with Punch Bowl Social (“PBS”).
 
We continued to be focused on the delivery of our three-year strategic priorities.
 
Results of Operations
 
The following table highlights our operating results by percentage relationships to total revenue for the quarter ended November 1, 2019 as compared to the same period in the prior year:

 
 
Quarter Ended
 
 
 
November 1,
2019
 
 
November 2,
2018
 
Total revenue
 
 
100.0
%
 
 
100.0
%
Cost of goods sold (exclusive of depreciation and rent)
 
 
29.3
 
 
 
30.3
 
Labor and other related expenses
 
 
35.2
 
 
 
35.2
 
Other store operating expenses
 
 
21.7
 
 
 
20.8
 
Store operating income
 
 
13.8
 
 
 
13.7
 
General and administrative expenses
 
 
5.3
 
 
 
5.3
 
Operating income
 
 
8.5
 
 
 
8.4
 
Interest expense
 
 
0.5
 
 
 
0.6
 
Income before income taxes
 
 
8.0
 
 
 
7.8
 
Provision for income taxes
 
 
1.4
 
 
 
1.4
 
Net loss from unconsolidated subsidiary
 
 
(0.8
)
 
 
 
Net income
 
 
5.8
%
 
 
6.4
%

The following table sets forth the number of Cracker Barrel and Holler & Dash stores in operation at the beginning and end of the quarters ended November 1, 2019 and November 2, 2018:

 
Quarter Ended
 
November 1,
2019
 
November 2,
2018
Open at beginning of period
667
 
660
Opened during period
 
3
Open at end of period
667
 
663

Additionally, effective October 10, 2019, we acquired MSBC.  At November 1, 2019, MSBC had 28 company-owned and five franchised fast casual locations.  We plan to convert our existing Holler & Dash locations into MSBC locations during 2020.

Total Revenue

Total revenue for the first quarter of 2020 increased 2.1% compared to the first quarter of 2019.
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The following table highlights the key components of revenue for the quarter ended November 1, 2019 as compared to the quarter ended November 2, 2018:

 
 
Quarter Ended
 
 
 
November 1,
2019
   
November 2,
2018
 
Revenue in dollars:
           
Restaurant
 
$
607,079
   
$
590,978
 
Retail
   
141,961
     
142,565
 
Total revenue
 
$
749,040
   
$
733,543
 
Total revenue by percentage relationships:
               
Restaurant
   
81.0
%
   
80.6
%
Retail
   
19.0
%
   
19.4
%
Average unit volumes(1):
               
Restaurant
 
$