Company Quick10K Filing
Cracker Barrel Old Country Store
Price164.57 EPS9
Shares24 P/E18
MCap3,967 P/FCF18
Net Debt442 EBIT279
TEV4,409 TEV/EBIT16
TTM 2019-11-01, in MM, except price, ratios
10-Q 2020-05-01 Filed 2020-06-02
10-Q 2020-01-31 Filed 2020-02-25
10-Q 2019-11-01 Filed 2019-11-26
10-K 2019-08-02 Filed 2019-09-27
10-Q 2019-05-03 Filed 2019-06-04
10-Q 2019-02-01 Filed 2019-02-26
10-Q 2018-11-02 Filed 2018-11-30
10-K 2018-08-03 Filed 2018-09-28
10-Q 2018-04-27 Filed 2018-05-29
10-Q 2018-01-26 Filed 2018-02-20
10-Q 2017-10-27 Filed 2017-11-21
10-K 2017-07-28 Filed 2017-09-22
10-Q 2017-04-28 Filed 2017-05-23
10-Q 2017-01-27 Filed 2017-02-21
10-Q 2016-10-28 Filed 2016-11-22
10-K 2016-07-29 Filed 2016-09-26
10-Q 2016-04-29 Filed 2016-06-01
10-Q 2016-01-29 Filed 2016-02-23
10-Q 2015-10-30 Filed 2015-11-24
10-K 2015-07-31 Filed 2015-09-29
10-Q 2015-05-01 Filed 2015-06-02
10-Q 2015-01-30 Filed 2015-02-24
10-Q 2014-10-31 Filed 2014-11-25
10-K 2014-08-01 Filed 2014-09-25
10-Q 2014-05-02 Filed 2014-05-28
10-Q 2014-01-31 Filed 2014-02-25
10-Q 2013-11-01 Filed 2013-11-26
10-K 2013-08-02 Filed 2013-09-26
10-Q 2013-05-03 Filed 2013-06-03
10-Q 2013-02-01 Filed 2013-02-26
10-Q 2012-11-02 Filed 2012-11-29
10-K 2012-08-03 Filed 2012-09-25
10-Q 2012-04-27 Filed 2012-05-22
10-Q 2012-01-27 Filed 2012-02-21
10-Q 2011-10-28 Filed 2011-11-22
10-K 2011-07-29 Filed 2011-09-27
10-Q 2011-04-29 Filed 2011-06-03
10-Q 2011-01-28 Filed 2011-03-04
10-Q 2010-10-29 Filed 2010-12-06
10-K 2010-07-30 Filed 2010-09-28
10-Q 2010-04-30 Filed 2010-06-08
10-Q 2010-01-29 Filed 2010-03-09
8-K 2020-06-02
8-K 2020-04-30
8-K 2020-03-20
8-K 2020-03-18
8-K 2020-03-07
8-K 2020-02-25
8-K 2019-12-02
8-K 2019-11-26
8-K 2019-11-21
8-K 2019-09-26
8-K 2019-09-17
8-K 2019-07-23
8-K 2019-06-04
8-K 2019-04-25
8-K 2019-02-26
8-K 2019-01-14
8-K 2018-11-27
8-K 2018-11-15
8-K 2018-09-18
8-K 2018-09-05
8-K 2018-07-27
8-K 2018-05-22
8-K 2018-04-09
8-K 2018-02-20

CBRL 10Q Quarterly Report

Part I - Financial Information
Item 1. Financial Statements (Unaudited)
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 5. Other Information
Item 6. Exhibits
EX-10.1 ex10_1.htm
EX-10.2 ex10_2.htm
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 2020-05-01

Balance SheetIncome StatementCash Flow
2.21.81.30.90.40.02012201420172020
Assets, Equity
0.90.70.50.40.20.02012201420172020
Rev, G Profit, Net Income
0.20.10.0-0.0-0.1-0.22012201420172020
Ops, Inv, Fin


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 May 1, 2020

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.

23,693,981 Shares of Common Stock
Outstanding as of May 20, 2020




CRACKER BARREL OLD COUNTRY STORE, INC.

INDEX

PART I. FINANCIAL INFORMATION
Page
 
 
3
 
 
3
 
 
4
 
 
5
 
 
6
 
 
8
 
 
9
 
 
23
 
 
39
 
 
39
 
 
PART II. OTHER INFORMATION
 
 
 
40
 
 
43
   
43
   
44
   
44

2



PART I – FINANCIAL INFORMATION
ITEM 1.
Financial Statements (Unaudited)

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

ASSETS
 
May 1,
2020
   
August 2,
2019*
 
Current Assets:
           
Cash and cash equivalents
 
$
363,330
   
$
36,884
 
Accounts receivable
   
12,476
     
22,757
 
Income taxes receivable
   
8,122
     
9,449
 
Inventories
   
146,279
     
154,958
 
Prepaid expenses and other current assets
   
27,201
     
18,332
 
Total current assets
   
557,408
     
242,380
 
Property and equipment
   
2,361,489
     
2,312,815
 
Less: Accumulated depreciation and amortization
   
1,209,865
     
1,143,850
 
Property and equipment – net
   
1,151,624
     
1,168,965
 
Operating lease right-of-use assets, net
   
455,179
     
 
Investment in unconsolidated subsidiary
   
     
89,100
 
Goodwill
   
6,364
     
 
Other assets
   
65,304
     
80,780
 
Total assets
 
$
2,235,879
   
$
1,581,225
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
               
Current Liabilities:
               
Accounts payable
 
$
88,052
   
$
132,221
 
Taxes withheld and accrued
   
15,743
     
38,196
 
Accrued employee compensation
   
30,238
     
67,879
 
Current operating lease liabilities
   
44,373
     
 
Other current liabilities
   
175,020
     
154,178
 
Total current liabilities
   
353,426
     
392,474
 
                 
Long-term debt
   
940,000
     
400,000
 
Long-term operating lease liabilities
   
456,273
     
 
Long-term interest rate swap liability
   
26,716
     
10,483
 
Other long-term obligations
   
66,849
     
129,439
 
Deferred income taxes
   
406
     
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; 23,693,981 shares issued and outstanding at May 1, 2020, and 24,049,240 shares issued and outstanding at August 2, 2019
   
237
     
241
 
Additional paid-in capital
   
     
49,732
 
Accumulated other comprehensive loss
   
(19,454
)
   
(6,913
)
Retained earnings
   
411,426
     
561,650
 
Total shareholders’ equity
   
392,209
     
604,710
 
Total liabilities and shareholders’ equity
 
$
2,235,879
   
$
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


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

 
Quarter Ended
   
Nine Months Ended
 
   
May 1,
2020
   
May 3,
2019
   
May 1,
2020
   
May 3,
2019
 
                         
Total revenue
 
$
432,544
   
$
739,603
   
$
2,027,727
   
$
2,284,853
 
                                 
Cost of goods sold (exclusive of depreciation and rent)
   
137,138
     
217,073
     
629,159
     
704,545
 
Labor and other related expenses
   
189,118
     
267,641
     
737,209
     
802,574
 
Other store operating expenses
   
138,920
     
152,679
     
473,466
     
461,976
 
General and administrative expenses
   
28,008
     
37,125
     
106,025
     
112,284
 
Impairment
   
18,336
     
     
18,336
     
 
Operating income (loss)
   
(78,976
)
   
65,085
     
63,532
     
203,474
 
Interest expense, net
   
5,298
     
4,111
     
12,383
     
12,637
 
Income (loss) before income taxes
   
(84,274
)
   
60,974
     
51,149
     
190,837
 
Provision for income taxes (income tax benefit)
   
(55,220
)
   
10,560
     
(33,752
)
   
32,461
 
Loss from unconsolidated subsidiary
   
(132,878
)
   
     
(142,442
)
   
 
Net income (loss)
 
$
(161,932
)
 
$
50,414
   
$
(57,541
)
 
$
158,376
 
                                 
Net income (loss) per share:
                               
Basic
 
$
(6.81
)
 
$
2.10
   
$
(2.41
)
 
$
6.59
 
Diluted
 
$
(6.81
)
 
$
2.09
   
$
(2.41
)
 
$
6.57
 
                                 
Weighted average shares:
                               
Basic
   
23,777,916
     
24,041,673
     
23,922,360
     
24,034,878
 
Diluted
   
23,777,916
     
24,104,432
     
23,922,360
     
24,090,626
 

See Notes to unaudited Condensed Consolidated Financial Statements.
4



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

 
Quarter Ended
   
Nine Months Ended
 
   
May 1,
2020
   
May 3,
2019
   
May 1,
2020
   
May 3,
2019
 
                         
Net income (loss)
 
$
(161,932
)
 
$
50,414
   
$
(57,541
)
 
$
158,376
 
                                 
Other comprehensive loss before income tax benefit:
                               
Change in fair value of interest rate swaps
   
(13,356
)
   
(2,957
)
   
(16,591
)
   
(6,629
)
Income tax benefit
   
(3,302
)
   
(737
)
   
(4,050
)
   
(1,663
)
Other comprehensive loss, net of tax
   
(10,054
)
   
(2,220
)
   
(12,541
)
   
(4,966
)
Comprehensive income (loss)
 
$
(171,986
)
 
$
48,194
   
$
(70,082
)
 
$
153,410
 

See Notes to unaudited Condensed Consolidated Financial Statements.

5



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

For the Nine Month Period Ended May 1, 2020
 
 
Common Stock
   
Additional
Paid-In
   
Accumulated
Other
Comprehensive
   
Retained
   
Total
Shareholders’
 
   
Shares
   
Amount
   
Capital
   
Loss
   
Earnings
   
Equity
 
Balances at August 2, 2019
   
24,049,240
   
$
241
   
$
49,732
   
$
(6,913
)
 
$
561,650
   
$
604,710
 
Comprehensive Income (Loss):
                                               
Net income
   
     
     
     
     
43,223
     
43,223
 
Other comprehensive loss, net of tax
   
     
     
     
(438
)
   
     
(438
)
Total comprehensive income (loss)
   
     
     
     
(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
 
Comprehensive Income (Loss):
                                               
Net income
   
     
     
     
     
61,168
     
61,168
 
Other comprehensive loss, net of tax
   
     
     
     
(2,049
)
   
     
(2,049
)
Total comprehensive income (loss)
   
     
     
     
(2,049
)
   
61,168
     
59,119
 
Cash dividends declared - $1.30 per share
   
     
     
     
     
(31,283
)
   
(31,283
)
Share-based compensation
   
     
     
2,122
     
     
     
2,122
 
Issuance of share-based compensation awards
   
4,867
     
     
     
     
     
 
Purchases and retirement of common stock
   
(37,577
)
   
     
(5,812
)
   
     
     
(5,812
)
Balances at January 31, 2020
   
23,943,248
   
$
240
   
$
31,659
   
$
(9,400
)
 
$
607,431
   
$
629,930
 
Comprehensive Loss:
                                               
Net loss
   
     
     
     
     
(161,932
)
   
(161,932
)
Other comprehensive loss, net of tax
   
     
     
     
(10,054
)
   
     
(10,054
)
Total comprehensive loss
   
     
     
     
(10,054
)
   
(161,932
)
   
(171,986
)
Cash dividends declared - $1.30 per share
   
     
     
     
     
(30,968
)
   
(30,968
)
Share-based compensation
   
     
     
251
     
     
     
251
 
Issuance of share-based compensation awards
   
382
     
     
(11
)
   
     
     
(11
)
Purchases and retirement of common stock
   
(249,649
)
   
(3
)
   
(31,899
)
   
     
(3,105
)
   
(35,007
)
Balances at May 1, 2020
   
23,693,981
   
$
237
   
$
   
$
(19,454
)
 
$
411,426
   
$
392,209
 

See Notes to unaudited Condensed Consolidated Financial Statements.

6



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

For the Nine Month Period Ended May 3, 2019
 
 
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
 
Comprehensive Income (Loss):
                                               
Net income
   
     
     
     
     
60,755
     
60,755
 
Other comprehensive income (loss), net of tax
   
     
     
     
(4,039
)
   
     
(4,039
)
Total comprehensive income (loss)
   
     
     
     
(4,039
)
   
60,755
     
56,716
 
Cash dividends declared - $1.25 per share
   
     
     
     
     
(30,279
)
   
(30,279
)
Share-based compensation
   
     
     
2,044
     
     
     
2,044
 
Issuance of share-based compensation awards, net of shares withheld for employee taxes
   
6,999
     
     
(41
)
   
     
     
(41
)
Balances at February 1, 2019
   
24,041,374
   
$
240
   
$
46,125
   
$
1,939
   
$
580,314
   
$
628,618
 
Comprehensive Income (Loss):
                                               
Net income
   
     
     
     
     
50,414
     
50,414
 
Other comprehensive income (loss), net   of tax
   
     
     
     
(2,220
)
   
     
(2,220
)
Total comprehensive income (loss)
   
     
     
     
(2,220
)
   
50,414
     
48,194
 
Cash dividends declared - $1.25 per share
   
     
     
     
     
(30,165
)
   
(30,165
)
Share-based compensation
   
     
     
1,539
     
     
     
1,539
 
Issuance of share-based compensation awards, net of shares withheld for employee taxes
   
3,028
     
1
     
(164
)
   
     
     
(163
)
Balances at May 3, 2019
   
24,044,402
   
$
241
   
$
47,500
   
$
(281
)
 
$
600,563
   
$
648,023
 

See Notes to unaudited Condensed Consolidated Financial Statements.

7


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

 
Nine Months Ended
 
   
May 1,
2020
   
May 3,
2019
 
Cash flows from operating activities:
           
Net income (loss)
 
$
(57,541
)
 
$
158,376
 
Net loss from unconsolidated subsidiary
   
142,442
     
 
Adjustments to reconcile net income to net cash provided by operating activities:
               
Depreciation and amortization
   
88,292
     
78,499
 
Loss on disposition of property and equipment
   
5,083
     
7,522
 
Impairment
   
19,000
     
 
Share-based compensation
   
4,171
     
5,672
 
Noncash lease expense
   
47,045
     
 
Changes in assets and liabilities:
               
Inventories
   
8,906
     
3,671
 
Other current assets
   
3,075
     
(5,158
)
Accounts payable
   
(46,045
)
   
(7,015
)
Accrued employee compensation
   
(37,650
)
   
1,161
 
Other current liabilities
   
(11,759
)
   
5,661
 
Long-term operating lease liabilities
   
(36,350
)
   
 
Deferred income taxes
   
(39,544
)
   
(21
)
Other long-term assets and liabilities
   
(1,893
)
   
4,218
 
Net cash provided by operating activities
   
87,232
     
252,586
 
Cash flows from investing activities:
               
Purchase of property and equipment
   
(83,631
)
   
(103,862
)
Proceeds from insurance recoveries of property and equipment
   
986
     
603
 
Proceeds from sale of property and equipment
   
1,827
     
134
 
Notes receivable from unconsolidated subsidiary
   
(35,500
)
   
 
Acquisition of business, net of cash acquired
   
(32,971
)
   
 
Net cash used in investing activities
   
(149,289
)
   
(103,125
)
Cash flows from financing activities:
               
Proceeds from issuance of long-term debt
   
762,000
     
400,000
 
Taxes withheld from issuance of share-based compensation awards
   
(2,005
)
   
(2,220
)
Principal payments under long-term debt
   
(222,000
)
   
(400,000
)
Purchases and retirement of common stock
   
(55,007
)
   
 
Deferred financing costs
   
     
(3,022
)
Dividends on common stock
   
(94,485
)
   
(91,290
)
Net cash provided by (used in) financing activities
   
388,503
     
(96,532
)
                 
Net increase in cash and cash equivalents
   
326,446
     
52,929
 
Cash and cash equivalents, beginning of period
   
36,884
     
114,656
 
Cash and cash equivalents, end of period
 
$
363,330
   
$
167,585
 
                 
Supplemental disclosures of cash flow information:
               
Cash paid during the period for:
               
Interest, net of amounts capitalized
 
$
12,927
   
$
11,881
 
Income taxes
 
$
5,277
   
$
31,129
 
                 
Supplemental schedule of non-cash investing and financing activities*:
               
Capital expenditures accrued in accounts payable
 
$
2,159
   
$
4,980
 
Change in fair value of interest rate swaps
 
$
(16,591
)
 
$
(6,629
)
Change in deferred tax asset for interest rate swaps
 
$
4,050
   
$
1,663
 
Dividends declared but not yet paid
 
$
32,068
   
$
31,106
 

*See Note 11 for additional supplemental disclosures related to leases

See Notes to unaudited Condensed Consolidated Financial Statements.

8


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.

COVID-19 Impact


In March 2020, the World Health Organization declared the novel coronavirus (“COVID-19”) to be a pandemic.  In an effort to contain and mitigate the spread of COVID-19, federal, state and local governmental authorities have imposed unprecedented restrictions on travel, group gatherings and non-essential activities, such as “social distancing” guidance, shelter-in-place orders and limitations on or full prohibitions of dine-in services.


In response to the business disruption caused by the COVID-19 pandemic, the Company has taken the following actions.


Operating Initiatives


In response to the COVID-19 pandemic and the orders and guidance from U.S. federal and applicable state and local governmental authorities, in March 2020, the Company temporarily closed the dining rooms in all of its restaurants and operated with pick-up or delivery only.  As part of the Company’s efforts to support an off-premise-only business model, the Company implemented various changes to its Cracker Barrel offerings, including a limited menu and multi-serving takeout Family Meal Baskets, the expansion of third-party delivery services and the implementation of various operating model changes, including contactless curbside delivery.  As of the end of March 2020, all of the Company’s restaurant operations were limited to pick-up and delivery only with no dine-in service.  In late April 2020, certain state and municipal authorities began to remove or modify existing restrictions on dine-in restaurant operations in certain jurisdictions, and the Company has been able to resume dine-in services at a limited number of its restaurants; however, the Company’s dine-in services have been and continue to be limited to occupancy levels well below capacity, and some are yet to open at all for dine-in service.  The Company is taking a cautious approach to reopening dining rooms and is instituting operational protocols to comply with applicable regulatory requirements and to monitor developing health authority recommendations in order to protect the health and foster the confidence of employees and guests in these communities.  The adverse impacts of the COVID-19 pandemic resulted in the Company testing its restaurant long-lived assets for recoverability.  As a result of this analysis, the Company recorded impairment charges of $18,336 due to the expected deterioration in operating performance of certain Cracker Barrel stores.

9



Expense Reductions


The Company has made significant reductions in operating expenses to reflect reduced operations and sales levels as well as eliminating non-essential spending where feasible.   The Company furloughed employees and eliminated a significant number of positions at all levels of the Company, both at the corporate headquarters and in the field.  Severance expenses of $3,122 related to the elimination of 450 positions were recorded in the third quarter of 2020. The Company also implemented pay reductions for the remainder of the fiscal year for corporate officers and reduced cash retainers payable to the Company’s Board of Directors.  Additionally, the Company has adapted its labor model, instituted inventory management measures and negotiated revised terms with landlords and vendors.


Liquidity Initiatives


As a precautionary measure and in order to increase the Company’s cash position and provide financial flexibility given the uncertainty in the market caused by the COVID-19 pandemic, the Company borrowed $415,000 under the Company’s 2019 Revolving Credit Facility (as defined herein), leaving approximately $3,271 in borrowing availability.  To further preserve available cash, the payment of the dividend that was declared on March 3, 2020 was deferred until September 2, 2020 and the Company has suspended all further dividend payments until further notice.  The Company has also temporarily suspended all future share repurchases under its previously announced $25,000 share repurchase program.  In keeping with the Company’s strategy of concentrating its resources on its core business during the COVID-19 pandemic, the Company has decided not to invest further resources or otherwise provide additional funding to PBS HoldCo, LLC (see Note 3, “Equity Investment” for further information regarding the Company’s strategic relationship with PBS HoldCo, LLC).  The Company continues to explore additional measures to enhance liquidity as the COVID-19 pandemic and related events develop.


Additionally, on March 27, 2020, P.L. 116-136, the Coronavirus Aid, and Economic Security Act (the “CARES Act”) was enacted in response to the COVID-19 pandemic.  The CARES Act, among other things, contains several provisions offering liquidity to businesses.  The Company has benefited and will continue to benefit from two of these provisions, including recovering a portion of qualifying retention pay and health expenses paid to furloughed employees, and deferring a portion of employment taxes until calendar 2021 and calendar 2022.

Recent Accounting Pronouncements Adopted


Leases


In February 2016, the Financial Accounting Standards Board (“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.

10



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 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. The amended presentation and disclosure requirements were applied on a prospective basis.


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 the 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.


Rate Reform


In March 2020, the FASB issued optional accounting guidance in order to ease the potential burden in accounting for contracts, hedging relationships and other transactions that reference London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform.  The expedients and exceptions provided by this accounting guidance do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022 if certain criteria are met.  The Company has certain contracts and hedging relationships which reference LIBOR for which the Company has elected to use the optional accounting guidance.  The Company elected to apply this accounting guidance for contract modifications prospectively as of February 1, 2020.  Additionally, the Company elected to apply this accounting guidance to eligible hedging relationships existing as of February 1, 2020 and to any new hedging relationships entered into during the effective period of the accounting guidance.  The adoption of this accounting guidance in the third quarter of 2020 had no impact on the Company’s consolidated financial position or results of operations.

Recent Accounting Pronouncements Not Adopted


Goodwill Impairment


In January 2017, the FASB issued accounting guidance related to the subsequent measurement of goodwill. Under this new guidance, an entity will perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. This guidance is effective for public business entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years.  Early adoption is permitted.  This guidance should be applied on a prospective basis.  The Company is currently evaluating the impact of adopting this accounting guidance in the first quarter of 2021.

11



Accounting for Income Taxes


In December 2019, the FASB issued accounting guidance in order to simplify the accounting for income taxes.  This new guidance eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences.  This guidance also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill.  This accounting guidance is effective for public business entities for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years.  Early adoption is permitted.  In general, entities will apply the new guidance on a prospective basis, except for certain items such as the guidance on franchise taxes that are partially based on income.  The guidance on franchise taxes that are partially based on income will be applied either retrospectively for all periods presented or using a modified retrospective approach through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption.  The Company is currently evaluating the impact of adopting this accounting guidance in the first quarter of 2022.

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 of the sellers.  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 May 1, 2020, MSBC had 28 company-owned and six 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 the general and administrative expenses line in the Condensed Consolidated Statement of Income (Loss) in the quarter ended November 1, 2019.

12



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 for the assets acquired, liabilities assumed and goodwill are provisional and are subject to revision as additional information about the fair value of assets acquired and liabilities assumed becomes available.  We expect the final purchase price allocation to be completed in the first quarter of 2021.

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”). Prior to suspending all restaurant operations in response to the COVID-19 pandemic as further detailed below, PBS HC and its subsidiaries developed, owned, and operated 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, was accounted for using the equity method.  Accordingly, the Company recognized its proportionate share of the reported earnings or losses of PBS HC adjusted for basis differences on its consolidated statements of income (loss) and as an adjustment to the Company’s investment in unconsolidated subsidiary on the consolidated balance sheet.  The Company’s investment in PBS HC was valued at $89,100 at August 2, 2019, and was 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 PBS HC in principal amount 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 had funded $48,000 and $12,500, respectively, as of May 1, 2020 and August 2, 2019.  The related promissory notes were included in the other assets line 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.


The Company assesses 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.  As a result of the COVID-19 pandemic, PBS HC’s wholly-owned subsidiary, in March 2020, PBS BrandCo, LLC (“Brandco”) suspended all operations at each of its 19 locations and laid off substantially all restaurant and corporate employees.  On March 20, 2020, the primary lender under Brandco’s secured credit facility provided notice of the lender’s intention to foreclose on its collateral interest in all equity and/or assets of Brandco unless the Company repaid or unconditionally guaranteed the indebtedness.

13



In keeping with the Company’s strategy of concentrating its resources on its core business during the COVID-19 pandemic, and in light of the substantial uncertainties surrounding the PBS business coming out of the COVID-19 pandemic, the Company decided not to invest further resources to prevent foreclosure or otherwise provide additional capital to PBS HC.  In the third quarter of 2020, the Company recorded a loss of $132,878, which represented its equity investment in PBS HC and its receivable related to the principal and accumulated interest amounts related to the promissory notes.  This loss was recorded in the net loss in unconsolidated subsidiary line on the Condensed Consolidated Statement of Income (Loss) in the third quarter of 2020.

4.
Fair Value Measurements


The Company’s assets and liabilities measured at fair value on a recurring basis at May 1, 2020 were as follows:

 
Level 1
   
Level 2
   
Level 3
   
Total Fair
Value
 
Cash equivalents*
 
$
100,001
   
$
   
$
   
$
100,001
 
Deferred compensation plan assets**
         
25,958
 
Total assets at fair value
       
$
125,959
 
                                 
Interest rate swap liability (see Note 7)
 
$
   
$
26,716
   
$
   
$
26,716
 
Total liabilities at fair value
 
$
   
$
26,716
   
$
   
$
26,716
 


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
 
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
   
$